Laffer v Michelmore Real Estate Group Pty Ltd

REASONS FOR JUDGMENT 1 This is an interlocutory application brought by the second and third respondents, Mr and Mrs Ansaar, in a proceeding in this Court in which final judgment was entered against them in favour of the applicants, Mr and Mrs Laffer, on 6 August 2011. On that day, a judge of this Court made the following orders: 1. Pursuant to the agreement between the parties, which is recorded in the Court's notes of 8 December 2011, judgment be entered in favour of the applicants against the second and third respondent, Mr and Mrs Ansaar, in the sum of $429,606.35. 2. There be no order for costs of this application. 2 The application by Mr and Mrs Ansaar is to have the judgment set aside under r 39.05 of the Federal Court Rules 2011 (Cth). The paragraph in that rule which is relied upon by Mr and Mrs Ansaar is paragraph (c), that is to say, a judgment may be set aside if it was obtained by fraud. They also rely on the implied power of this Court to prevent an abuse of its processes and, in this context, they refer to s 23 of the Federal Court of Australia Act 1976 (Cth). 3 The judgment was pronounced on 6 August 2013 and entered on 4 September 2013. As will be apparent from the judgment, it is based upon a compromise reached between the parties on 8 December 2011. The compromise came about in the following way. Mr and Mrs Laffer's claim in the proceeding related to a piece of land at McLaren Vale in South Australia (Lot 101 Stump Hill Road ("the land")). The land was purchased by Mr and Mrs Laffer from Mr and Mrs Ansaar. A contract was signed on 14 May 2010 and settlement took place on 23 July 2010. The land was vacant land at the time the contract was signed. The first respondent in the proceeding, Michelmore Real Estate Group Pty Ltd, trading as Michelmore Ollwitz First National McLaren Vale, was engaged by Mr and Mr Ansaar as their agent for the sale of the land. There was an existing development plan consent for a land division and the construction of a cellar door and vineyard. The land was in a "one in a 100 year flood plain". Mr and Mrs Laffer said that they purchased the land to construct a dwelling thereon as a place for them and their family to live. They said that they told the agent and Mr and Mrs Ansaar that that is what they proposed to do prior to signing the contract and prior to settlement, and that neither the agent nor Mr and Mrs Ansaar advised them that the land was in a flood plain. In addition to these facts, Mr and Mrs Laffer claimed that, by a brochure, statements and omissions Mr and Mrs Ansaar represented to them that the land was suitable for the construction of a residential dwelling. On 21 March 2011, the relevant council, the City of Onkaparinga ("the council"), refused Mr and Mrs Laffer's application for development approval for the construction of a residential dwelling on the land, giving as one of the reasons for refusal the unacceptable risk of flooding of the land. Mr and Mrs Laffer brought this proceeding against the agent and Mr and Mrs Ansaar. They obtained evidence from a lawyer with expertise in planning law to the effect that the council would not consent to the construction of a detached dwelling. 4 Mr and Mrs Laffer's claim proceeded to trial in this Court on 5, 6, 7 and 8 December 2011. Mr and Mrs Ansaar represented themselves. Evidence was adduced and closing submissions were made. A compromise was reached on 8 December 2011, and the judge made a number of orders after being told of the compromise. The compromise also involved the agent, but it is not a party to the present application. The judge was told of the terms of the compromise between Mr and Mrs Laffer and Mr and Mrs Ansaar, and he noted the terms of the compromise in the orders. Mr and Mrs Ansaar agreed to pay Mr and Mrs Laffer the sum of $425,000, inclusive of costs, in settlement of Mr and Mrs Laffer's claim against them, and, in consideration of Mr and Mrs Laffer not prosecuting their claim any further against them. 5 The compromise included terms as to the payment of the sum of $425,000. The sum of $50,000 was to be paid within seven days. Mr and Mrs Ansaar owned a licence, business and assets known as the Fonthill Cellars ("the business"). They agreed with Mr and Mrs Laffer that they would, by 15 January 2012, appoint a reputable agent to market and sell the business. They agreed with Mr and Mrs Laffer that they would use their best endeavours to sell the business for a fair market value. They agreed with Mr and Mrs Laffer that, if settlement of the sale of the business did not occur within 15 months after 8 December 2011, and unless extended by agreement, then Mr and Mrs Laffer may apply to the Court for judgment against them for the amount of the unpaid balance then outstanding, together with interest at the rate of 8.75% per annum accruing over the period since 8 December 2011. They agreed with Mr and Mrs Laffer that they would promptly respond to any request for a report from Mr and Mrs Laffer as to the progress of the marketing of the sale of the business. They agreed with Mr and Mrs Laffer that they would inform them when a contract for the sale of the business had been executed. They agreed with Mr and Mrs Laffer that they would give them five business days notice of the settlement of the sale of the business. They agreed with Mr and Mrs Laffer that they would direct the purchaser to deliver a bank cheque to Mr and Mrs Laffer in the sum of $375,000. They agreed with Mr and Mrs Laffer that, upon payment of the further sum of $375,000, Mr and Mrs Laffer would file and serve a notice of discontinuance of the proceeding against them. They further agreed that, if they defaulted in any of the terms of the agreement, Mr and Mrs Laffer would be entitled to apply to the Court for judgment for the amount of the sum then unpaid. 6 Mr and Mrs Ansaar paid the sum of $50,000, but they did not pay the balance. I was told on this application by counsel for Mr and Mrs Ansaar that there were difficulties in disposing of the business. At all events, the period of 15 months referred to in the terms of compromise expired in March 2013 and the balance had not been paid. 7 Mr and Mrs Laffer moved to enter judgment against Mr and Mrs Ansaar and their interlocutory application filed on 22 March 2013 came on before a judge of this Court on 4 April 2013. The judge adjourned the hearing of the application to August 2013 to give the parties further time to see if they could resolve the dispute between them. 8 As I have said, a judge of this Court entered the judgment on 6 August 2013. At the hearing on that day, Mr and Mrs Laffer appeared by counsel and Mr Ansaar appeared in person. 9 Mr and Mrs Ansaar did not pay the judgment sum and a bankruptcy notice claiming a debt of $434,343.79 was issued on 23 September 2013. It was served on Mr and Mrs Ansaar on 9 October 2013. They issued this interlocutory application on 25 October 2013. 10 The interlocutory application came before me on 19 November 2013. Mr and Mrs Ansaar represented themselves on that occasion. I made various orders about the filing and serving of affidavit evidence, and I fixed 17 January 2014 as the date for the hearing of the application. 11 On 17 January 2014, Mr and Mrs Ansaar were represented by counsel and solicitors and they made an application for an adjournment of the hearing. They sought further discovery from Mr and Mrs Laffer. After hearing submissions, I made the following orders: 1. The applicants to the proceeding make discovery and produce to the second and third respondents to the proceeding, if requested, all documents in their possession, custody or control arising out of or in connection with or relating to any application for approval of a building on the subject land between April 2010 and June 2012, save for documents already discovered, within 7 days of the date hereof. 2. The second and third respondents to the proceeding pay the costs of the applicants occasioned by the adjournment of today's hearing assessed on an indemnity basis in any event. 3. The hearing of the second and third respondents' interlocutory application be fixed for 7 February 2014 at 9:30am. 4. Liberty to apply. 12 I heard submissions on the interlocutory application on 7 February 2014. Mr and Mrs Laffer were represented by counsel, as were Mr and Mrs Ansaar. 13 At the hearing, Mr and Mrs Ansaar relied on an affidavit sworn by Mr Ansaar. He was authorised to make the affidavit on Mrs Ansaar's behalf, as well as on his own behalf. In his affidavit, he referred to the general nature of the proceeding by Mr and Mrs Laffer against them. He said that, despite the nature of that case, Mr and Mrs Laffer had applied for and been granted development plan consent for a residential dwelling on the land. He said that Mr and Mrs Laffer were advertising the land for sale as residential land for $545,000. He referred to the claims made by Mr and Mrs Laffer during the proceeding and he said that, on the basis of those allegations, he and Mrs Ansaar had agreed to a settlement compromise with Mr and Mrs Laffer. He said that he and Mrs Ansaar paid the sum of $50,000 to Mr and Mrs Laffer on 13 December 2011. 14 Mr Ansaar said that, on 27 February 2013, Mr and Mrs Laffer lodged a development application with the council for a residential dwelling on the land and he gave the development application number. The precise use applied for, according to Mr Ansaar, was for a single storey detached dwelling with a garage and deck. Mr Ansaar said that, on 26 August 2013, the council granted development plan consent for that application. He produced a letter from the council dated 26 August 2013 that referred to the approval for development plan consent for a single storey detached dwelling with a garage, deck and veranda on the land. He produced the plans "associated" with the development application. He said that, on 19 September 2013, he became aware that Mr and Mrs Laffer were advertising the land for sale as residential land for $545,000, and he produced copies of various advertisements. 15 Mr Ansaar said that, on 9 October 2013, he and Mrs Ansaar were served with a bankruptcy notice which was based on the judgment. Mr Ansaar asserts: 23. In light of the matters referred to in this affidavit the basis of the Applicants' claims in these proceedings are false and without foundation and accordingly the basis upon which the Compromise was entered into was therefore invalid. 24. The Compromise was entered into on the basis of a mistake of fact in that I and the Third Respondent were misled by the Applicants to believe that there was no possibility of obtaining a development approval for any form of residential or dwelling on the land. 25. The Compromise should therefore be set aside and accordingly the Judgment should be set aside. 16 Mr Ansaar then referred to matters which he contends support the conclusion that, if the judgment is not set aside, Mr and Mrs Laffer will obtain a windfall. 17 Mr and Mrs Laffer relied on two affidavits. The first affidavit is an affidavit sworn Mr Laffer on 17 December 2013. Mr Laffer said that, on 20 August 2013, development plan consent was granted by the council for a single storey detached dwelling with a garage, deck and veranda on the land. He said that the council has not granted development approval for the construction of the dwelling on the land because, in order to obtain development approval, building rules consent must also be obtained. 18 Mr Laffer said that he and Mrs Laffer have submitted a number of development applications for a dwelling on the land and that, except for the most recent development application, all other applications have either been unsuccessful or withdrawn at the recommendation of representatives of the council. He said that he and Mrs Laffer have been unable to obtain development approval to build a dwelling on the section of the land that they initially intended to build at the time they signed the contract to purchase the land. Mr Laffer said that he and Mrs Laffer engaged the services of Mr Darren Wise of Wise Drafting Pty Ltd to prepare, submit and negotiate applications for development plan consent and development approval with the council. Mr Wise has advised him that a prior development application lodged in November 2012 should be withdrawn and a new development application submitted. Mr Laffer adopted Mr Wise's advice and instructed him to withdraw the application lodged in November 2012. 19 Mr Laffer said that he has been informed by his solicitor that, on or about 27 June 2013, his solicitor met with Mr Ansaar and during that meeting Mr Ansaar put a proposal to buy back the land at a price of $500,000. On 31 July 2013, Mr Ansaar sent an email to Mr and Mrs Laffer's solicitor regarding the proposal and requesting an adjournment of the application to enter judgment in the proceeding. The email is attached to his affidavit and it states, among other things, that Mr Ansaar had arranged a meeting with the chief executive officer of the council to discuss the usage of the land and that he would forward "this info" after this email. Mr and Mrs Laffer rejected Mr Ansaar's proposal. 20 Mr Laffer sets out the loss and damage he and Mrs Laffer have suffered with respect to the land. 21 Mr Laffer said that a Mr John Morgan gave expert evidence as a valuer as to the value of the land. Mr Morgan swore an affidavit on 26 July 2011, and in that affidavit he expressed an opinion that the market value of the land was approximately $300,000. Mr and Mrs Ansaar were in court when Mr Morgan gave this evidence. 22 Mr Laffer said that Mr George Manos gave expert evidence as a planning lawyer regarding the grounds and prospects of success of an appeal to the Environment, Resources and Development Court ("ERD Court") in relation to a decision by the council to refuse approval for the construction of a residential dwelling on the land. Mr and Mrs Ansaar were in court when Mr Manos gave his evidence. 23 Mr Laffer said that the compromise reached on 8 December 2011 was negotiated and concluded after all the evidence had been presented in the trial of the proceeding and after closing submissions. Mr and Mrs Ansaar were present during the trial, including closing submissions. Mr Laffer said that, in negotiations leading to the compromise, a number of offers and counter-offers were put by the parties and that one of the offers was an offer by Mr and Mrs Ansaar that the land be transferred back to them. 24 Mr Laffer said that, at the time the compromise was negotiated, a development application lodged by him and Mrs Laffer for a dwelling on the land had been refused by written notice dated 21 March 2011, and that Mr George Manos had provided an expert opinion in relation to the refusal to grant development approval to the effect that he did not believe that there was a reasonable prospect that the appeal to the ERD Court would be successful. 25 Mr Laffer said that Mr Ansaar was previously employed as a planner with the council. That fact is not denied by Mr and Mrs Ansaar. 26 Mr Laffer said that he and his wife applied for and obtained development plan consent on the recommendation of Mr Mike Cross, who was the real estate agent engaged to sell the land, for the purpose of achieving the best possible sale price for the land. Mr Laffer said that, at the time he swore his affidavit on 17 December 2013, he and Mrs Laffer had not received any offers for the purchase of the land. He said that the asking price for the land had been reduced to $495,000. He said that the compromise he and Mrs Laffer reached with Mr and Mrs Ansaar did not contain any restriction on the use of the land or the price that he and Mrs Laffer could obtain under a contract for the sale of the land. 27 At the hearing on 7 February 2014, counsel for Mr and Mrs Laffer informed the Court that two offers had been received to purchase the land and that each of these offers had been rejected. After the hearing, the solicitors for Mr and Mrs Laffer advised the Court that further negotiations had taken place for the sale of the land after 7 February 2014. Mr and Mrs Laffer had not been able to obtain an increase in the offer of $400,000 previously received and rejected. That offer was repeated and Mr and Mrs Laffer decided to accept the offer. However, the purchasers later exercised their right to rescind the contract under s 5 of the Land and Business (Sale and Conveyancing) Act 1994 (SA). 28 Mr David Elix is Mr and Mrs Laffer's solicitor and he swore an affidavit which was relied upon by them. He detailed various circumstances dealing with the request for discovery made by Mr and Mrs Ansaar before the hearing on 17 January 2014. 29 Mr Elix said that, on 13 August 2009, and prior to the date upon which Mr and Mrs Laffer purchased the land, a development plan consent had been obtained to build a cellar door and vineyard on the land. By letter dated 20 August 2010, the council granted an extension of time to 13 August 2011 for the development plan consent granted on 13 August 2009. A copy of the letter dated 20 August 2010 was annexed to the affidavit of Mr Laffer sworn on 3 June 2011 and filed in the proceeding. 30 Mr Elix said that, during the course of the proceeding, both prior to the trial in the proceeding and prior to the compromise reached on 8 December 2011, Mr and Mrs Ansaar were aware that Mr and Mrs Laffer had previously applied for and obtained an extension of time of the development plan consent for the construction of a cellar door and vineyard on the land. 31 Mr Elix said that Mrs Laffer advised him in August 2011 that she attended at the offices of the council and requested that the development plan consent for the cellar door and vineyard on the land be extended for a further 12 months. That request was refused by the council. 32 Mr Elix said that, on 17 August 2011, he wrote to the council and requested a further extension of time of the development plan consent for the cellar door and vineyard on the land. Prior to the commencement of the trial in the proceeding, Mr Elix contacted the council a number of times by telephone and asked for an update on the progress of Mr and Mrs Laffer's request for an extension of time. He did not receive a response. 33 Mr Elix said that, on 16 December 2011, he provided copies of documents relating to the cellar door and vineyard to Mr Darren Wise by email and in that email he informed Mr Wise that he had requested an extension of time of the development plan consent for the cellar door and vineyard on the land, and that he had not been able to obtain confirmation as to whether an extension had been granted. On 10 January 2012, Mr Elix provided a copy of his letter dated 17 August 2011 to Mr Wise and he explained to Mr Wise his attempts, prior to the trial in the proceeding, to obtain confirmation as to whether the development plan consent for the cellar door and vineyard extension had been obtained. 34 Mr Elix said that, by letter dated 8 February 2012, the council confirmed that the application for an extension of the development plan consent for the cellar door and vineyard on the land had not been granted. 35 Mr Elix said that, by letter dated 16 February 2012, he sought expert advice from a planning lawyer in relation to the prospects of an appeal to the ERD Court in relation to the decision by the council not to grant an extension of time of the development plan consent for the cellar door and vineyard on the land. On 27 February 2012, Mr George Manos provided a draft letter of advice in response to Mr Elix's request and in that letter Mr Manos advised that he could not recommend an appeal to the ERD Court. 36 This is a summary of the evidence put forward on the application. 37 When the matter came before the Court on 17 January 2014, counsel for Mr and Mrs Ansaar said that the evidence then available to Mr and Mrs Ansaar was not sufficient to support an allegation that Mr and Mrs Laffer had acted fraudulently in connection with the compromise reached on 8 December 2011. At the hearing on 7 February 2014, he said that Mr and Mrs Ansaar were not making that allegation. They had pursued the council "through freedom of information", spoken to the planner and obtained further documents from Mr and Mrs Laffer, and they were not alleging fraud in relation to the compromise reached on 8 December 2011. 38 Mr and Mrs Ansaar allege, as was the fact, that as at 6 August 2013, Mr and Mrs Laffer had an outstanding or pending application for development plan consent for a single storey detached dwelling with a garage, deck and veranda on the land. They allege that Mr and Mrs Laffer should have informed them and the Court on 6 August 2013 of that fact. They further allege that Mr and Mrs Laffer should have informed them and the Court that the application was well advanced and approval was likely to be granted, or that approval was pending, or that approval was imminent. 39 The evidence which I have summarised was put forward by way of affidavits in which the parties addressed certain issues. Neither party made an application to cross-examine the other party's witness(es). I do not have direct evidence on the following matters. I have no evidence of Mr Laffer's state of mind on 6 August 2013 as to the likelihood of his application being approved. I think I can infer that he must have considered (at least) that there was a fair chance of approval, bearing in mind that development plan consent was granted two weeks later. There is no direct evidence of Mr Ansaar's state of mind on 6 August 2013. He had arranged a meeting with the chief executive officer of the council about the usage of the land and, indeed, had offered to buy the land back from Mr and Mrs Laffer for $500,000. Finally, other than a passing reference in Mr Laffer's affidavit to changes to the types of developments allowed to take place in McLaren Vale, there is no evidence as to the reasons the council apparently changed its approach to a residential dwelling being constructed on the land. 40 I have read the transcript of the hearing before the judge on 6 August 2013. It was noted that the application for judgment had been adjourned from 4 April 2013 to 6 August 2013 in light of ongoing discussions between the parties. Mr Ansaar advised the judge of the difficulties he and Mrs Ansaar encountered in selling their business. He advised the judge that it only became clear in April 2012 that they could not sell the business. They took action in the Licensing Court but were unsuccessful. He submitted that they had lost over half a million dollars in buying the liquor licence. He submitted that what he and Mrs Ansaar had said was that they would like to buy the land back and go to the bank to seek a loan application. He also submitted that he and his wife were pursuing a claim against the council. The judge raised with him the fact that the payment to Mr and Mrs Laffer was not conditional upon the sale of the business. Mr Ansaar submitted that he and his wife did not have any assets at that time to sell or capacity to raise the necessary funds. The judge took the view that Mr and Mrs Ansaar were under an obligation to pay the amount claimed by Mr and Mrs Laffer and he entered the judgment previously referred to. 41 The principles which govern an application to set aside a judgment on the ground that it was obtained by fraud were stated by Kirby P (as his Honour then was) in Wentworth v Rogers (No 5) (1986) 6 NSWLR 534, at 538-539. One of the matters which must be established before a judgment will be set aside on the ground that it was obtained by fraud is that the successful party was responsible for the fraud which taints the judgment under challenge. The principles were reiterated by French J (as his Honour then was) in Spalla v St George Motor Finance Ltd (ACN 007 656 555) (No 5) [2004] FCA 1262, at [60]. 42 In the context of applications to set aside judgments, the importance of the finality of litigation has been emphasised on many occasions (see, for example, Owens Bank Ltd v Bracco [1992] 2 AC 443, at 483 per Lord Bridge; Monroe Schneider Associates (Inc) and Another v No 1 Raberem Pty Ltd and Others (No 2) (1992) 37 FCR 234, at 240). 43 In Wentworth v Rogers (No 5) and Spalla v St George Motor Finance Ltd (No 5), the judgments were judgments of the Court entered after a hearing and a decision by the Court on the issues between the parties were to be resolved. 44 In this case, the judgment was entered based on or pursuant to a compromise reached between the parties. Nevertheless, there must be some relevant fraud on behalf of the successful party. That might consist of a misrepresentation or non-disclosure relevant to whether or not judgment is entered. There is no suggestion of a misrepresentation by Mr and Mrs Laffer on or about 6 August 2013. Nor can it be said that there was any non-disclosure by them relevant to whether or not judgment was entered. The compromise reached on 8 December 2011 is not challenged. Under that compromise, Mr and Mrs Laffer retained ownership of the land and they were free to do with it as they pleased, at least as far as Mr and Mrs Ansaar were concerned. The fact that they had an outstanding or pending planning application for a residential dwelling on the land, and that there was a fair chance it would be approved, or even that it would be approved (if that be assumed), was not material to whether judgment or not was entered. All that was relevant to the parties was that there was a binding compromise of which the judge was aware because he had noted the terms of the compromise in his orders of 8 December 2011, and the fact, which was not disputed, that the balance of the monies due under the compromise had not been paid. There is no basis upon which to set aside the judgment of 6 August 2013 under r 39.05 of the Federal Court Rules 2011 (Cth). 45 The scope of what was alleged by Mr and Mrs Ansaar to be an alternative basis for setting aside the judgment - the implied power of the Court - was not the subject of detailed submissions. At the very least, and I would not wish to be taken to laying down a test, there would need to be some impropriety on the part of Mr and Mrs Laffer. There was no impropriety by Mr and Mrs Laffer and there is no basis to set aside the judgment by reference to the implied power of the Court. 46 Mr and Mrs Ansaar's interlocutory application dated 25 October 2013 must be dismissed. I will hear the parties as to any other orders. I certify that the preceding forty-six (46) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Besanko.

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