Le Serve v Great Wall Resources Pty Ltd

AW and LM Forrest Pty Ltd v Beamish (27 August 1998, unreported) Dew v Richardson (Supreme Court of Queensland, Chesterman J, 18 August 1999 unreported) CASES CITED : Equuscorp Pty Ltd v Wilmoth Field Warne (No 3) [2004] VSC 164 Griffiths v Evans [1953] 1 WLR 1424 O'Sullivan v Great Wall Resources Pty Ltd [2006] NSWSC 1268

First Plaintiff - Michel Joseph Le Serve PARTIES : Second Plaintiff - Christina Le Serve Defendant - Great Wall Resources Pty Ltd

COUNSEL : Plaintiffs - Mr G McGrath Defendant - Mr J O'Sullivan

SOLICITORS : Plaintiffs - Ryan Grove of RMB Lawyers, Wollongong Defendant - Renata Matyear Autore & Anthony Autore of Autore & Associates Solicitors, Wollongong

• 7 - IN THE SUPREME COURT OF NEW SOUTH WALES EQUITY DIVISION

2008/277902 Michael Joseph Le Serve and Christina Le Serve v Great Wall Resources Pty Ltd JUDGMENT 1 HIS HONOUR: This is a suit for specific performance of a contract for the sale of land ("the contract"), being a contract by which the defendant sold to the plaintiffs Lot 111 Yallah Rd, Yallah ("Lot 111"). The contract bears date 23 January 2003 and on the front page there is specified: " Price $325,000.00 Deposit $32,500.00 Balance $292,500.00 "

2 No deposit was paid when the contract was said to have been entered into. The plaintiffs claim that the contract should be rectified by specifying the deposit as nil rather than $32,500. They also claim an inquiry as to damages if the right of way specified in special condition 42 remains on the property at settlement (see below). 3 The contract contains the following special conditions:

" 41(d) The Director of the Vendor company namely Francesco Saverio Capocchiano and by [sic] his wife Italia Capocchiano agrees to grant the Purchaser consent to lodge a caveat over his own property known as 149 Croome Road Albion Park Rail and agrees to hand over on exchange a Caveat in registerable form to enable the Purchaser to lodge a Caveat with the LPI and such Caveat is provided as a form of surety to the Purchaser for releasing the deposit as referred to in paragraph a hereto.

42 The Vendors warrants [sic] that the right of way affecting the part of the land noted on title number A769744 will be extinguished prior to completion of the matter and in the event that the vendor fails to extinguish the said easement then the purchaser shall be at liberty to rescind the contract whereby the provision of clause 19 hereof shall apply.

44 The Purchaser agrees to pay in addition to the purchase price referred to herein interest at the rate of 7% per annum calculated up until the date of completion of the principal sum of $245,000.00 representing the balance of the purchase price payable herein. All interest payable must be paid on completion of the matter and adjusted in the final figures.

45 The Purchaser discloses to the vendor that he is a proprietor of the business noted herein as the vendor's agent." 4 Lot 111 was one of a number of lots into which the defendant subdivided a larger property for resale. As indicated in special condition 45, the male plaintiff acted as the defendant's agent on the sale of lots in the subdivision. He sold six or seven lots including Lot 111. In most cases the contract required the large deposit of $255,000 to be released to the defendant to finance the subdivision. 5 Vic Cuoco acted as solicitor for both sides in relation to the formation of the contract. 6 The defendant denies that the contract was in fact entered into and denies that it dispensed with the requirement for a deposit. 7 On 12 July 2004 the plaintiffs paid to the defendants $145,000, which was in some places described as a deposit, although the plaintiffs gave in evidence a different explanation for the payment. 8 On 6 March 2007, the plaintiffs gave the defendant notice to complete on 20 March 2007, with which the defendant did not comply. 9 This case largely turns on the version that is accepted of conversations which took place amongst the male plaintiff, Vic Cuoco and Mr Capocchiano, the principal of the defendant, before the contract was entered into. Each of these gave evidence both by affidavit and orally. 10 There seems little doubt that there was an initial interview between Vic Cuoco and Mr Capocchiano in 2002. In relation to this there is in evidence a file note of Vic Cuoco which indicates that he was told that a number of lots were to be sold on a deposit of $255,000, including the sale of Lot 111 to the plaintiffs ("the file note"). 11 Much more confused is the evidence concerning further conversations as to the terms on which Lot 111 was to be sold. 12 The most cogent account is the account in affidavit evidence of Vic Cuoco. He deposed that contracts were exchanged on 23 January 2003. His affidavit account of the antecedent conversation is as follows:

"6. I recall a meeting held with Michel Le Serve and Mr Capocchiano prior to exchange of contracts. At that meeting Michel Le Serve said to me and Mr Capocchiano words to the effect of:

"Due to my current financial position I will not be able to pay a deposit and release the sum of $255,000.00 for Lot 111 Yallah Road"

8. [sic] Mr Capocchiano instructed me to proceed with the sale of Lot 111 Yallah Road regardless of this as he said to me words to the effect:

"Due to Michel putting in so much time and hard work over the sale of the Lots at Yallah I agree to Michel not paying a deposit as required under the other contracts for sale at the Yallah subdivision."

7. [sic] At the same meeting Mr Capocchiano said words to the effect of:

"Due to the help Michel has given me he does not need to pay a deposit upon exchange. We have agreed that Michel will pay interest at a rate of 7% per annum calculated up until the date of completion on the principle [sic] sum of $245,000.00."

8. [sic] Upon these instructions I inserted special condition 44 into the Contract for Sale to represent that Michel would pay interest on the amount of $245,000.00 from the date of exchange till date of completion in lieu of a deposit

9. At the time I stated to Mr Capocchiano words to the effect:

"By removing the deposit upon exchange you open yourself up potentially to not recovering from the purchasers any money if the purchasers defaults [sic] under the contract"

"I am ok with Michel cause he is working hard to sell the land and I will have to pay him the commission anyway. I trust him."

10. I then, in front of Mr Capocchiano deleted special condition 41 by placing a line through it.

11. I was then instructed by the Vendor to exchange contracts without a deposit."

The meeting deposed to I refer to as "the interview". 13 The male plaintiff's evidence is much more diffuse. He deposed to various conversations with Mr Capocchiano in 2002. These were to the effect that he said to Mr Capocchiano that, although he was interested in buying Lot 111, he would not be able to come up with the $255,000 and that Mr Capocchiano agreed to exchange contracts without a deposit in consideration of the plaintiffs paying interest at the rate of 7% on $245,000. As appears above, this term as to interest was included in special condition 44. In cross examination the male plaintiff adhered to the proposition that Mr Capocchiano had agreed to dispense with a deposit. The male plaintiff did not depose to being present at the interview as deposed to by Vic Cuoco. 14 Mr Capocchiano denied in his affidavit that he ever instructed the male plaintiff or Vic Cuoco that he would sell the plaintiffs a lot without the advance payment. In cross examination he denied that there was a meeting with the male plaintiff or Vic Cuoco as deposed to by Vic Cuoco. 15 As will be apparent from the foregoing, the credit of these three witnesses is of the utmost importance in determining the question of what conversations took place. None of the evidence concerning these conversations was entirely satisfactory. 16 Mr O'Sullivan, of counsel for the defendant, casts doubt on Vic Cuoco's version that there was a meeting at which Mr Capocchiano was present. He points to the absence of initials on various alterations to the contract which could have easily been obtained if he were. He claims that Vic Cuoco's recollection was vague and that his evidence was largely a reconstruction, which is likely to have created a version favourable to his own conduct in the circumstances. He draws attention to the absence of file notes relating to the interview and suggests that, if such file notes existed, they could easily have been recovered from Vic Cuoco's files that were held on subpoena in other matters in this Court or the Federal Court. On the other hand, Vic Cuoco deposed to efforts to gain access to those files, which could not be located. 17 Despite the foregoing, I was reasonably impressed with Vic Cuoco as a witness. He was responsive to questions and prepared to make concessions as to his own conduct when they seemed to be required. The level of his recollection I thought appropriate to events that took place seven years ago. Although there may have been an element of reconstruction, I thought he had a real recall of the events. 18 The evidence of the other witnesses was on a descending scale of satisfactoriness. 19 The male plaintiff talked too much, was very diffuse in his evidence and did not answer questions that were squarely put to him. I regarded his evidence as quite unsatisfactory. 20 Even less satisfactory was the evidence of Mr Capocchiano. It is true that he did face substantial difficulties in giving evidence. He has had a stroke and his speech is impaired. He gave evidence in English, but English is not his first language. But by far the least satisfactory aspect of his evidence was the manner in which he gave it. Mr O'Sullivan described his manner as vehement. I describe it as hysterical. He had fixed ideas about what had occurred and about wrongs that had been done to him. These ideas he repeated and adhered to. Even the meeting recorded in the file note he appeared reluctant to concede as having occurred, although the contents of the file note were favourable to his case. I am able to place no credit whatsoever on the evidence that he gave. 21 The question really becomes whether I am prepared to accept Vic Cuoco's account of the interview as sufficiently credible to establish that that was what occurred. Mr O'Sullivan attacked the dispensation with a deposit to be paid by the plaintiffs as inherently improbable in light of the defendant's quest for monies to be used in the development. On the other hand, I regard it as inherently improbable that Vic Cuoco would have proceeded to an exchange without deposit unless he had instructions from the defendant to that effect. In addition to my being reasonably impressed with Vic Cuoco's presentation as a witness, I regard his account of the interview as inherently probable. It is unsatisfactory that it is not directly corroborated by the male plaintiff, who is said to have been there, but my reservations as to the quality of his evidence diminish the significance of this. 22 It was pressed on me that in matters relating to a solicitor's retainer, in light of the absence of a file note, "the word of the client is to be preferred to the word of the solicitor, or, at any rate, more weight is to be given to it": per Denning LJ in Griffiths v Evans [1953] 1 WLR 1424 at 1428; and see per Young J (as his Honour then was) in AW and LM Forrest Pty Ltd v Beamish (27 August 1998, unreported) at 17. However, in my view it is not the rule that in such circumstances the client must be accepted rather than that the determination of the question must be based on a careful and objective examination of the evidence adduced: Dew v Richardson (Supreme Court of Queensland, Chesterman J, 18 August 1999, unreported) at [10]; Equuscorp Pty Ltd v Wilmoth Field Warne (No 3) [2004] VSC 164 per Byrne J at [10]. It is in accordance with this latter principle that I intend to proceed. 23 It is said that the payment of $145,000 by the plaintiffs should be taken as an indication that they regarded themselves as obliged to pay a deposit. But this payment was made some 18 months down the track. Although the word deposit was used in connection with the payment, the amount paid does not correspond with either of the sums in which the plaintiffs may have been liable to pay a deposit under the contract. Despite my difficulties with the male plaintiff's evidence in other regards, I find his account of the circumstances in which the $145,000 was paid, namely, that the plaintiffs feared the collapse of the development through lack of funds, to be inherently probable. 24 In all the circumstances I accept Vic Cuoco's evidence that the interview took place substantially as he deposed and that the requirement of a deposit under the contract was dispensed with. That evidence also supports the rectification sought. I also accept that the contract was entered into on 23 January 2003 as Vic Cuoco deposed. 25 A last objection that was taken to the establishment of the contract was that the plans that were annexed to it did not exist as at 23 January 2003. Neither Vic Cuoco nor the male plaintiff was able to say how those plans reached Vic Cuoco. Furthermore the defendant led evidence from David Yates, who was the surveyor who drew the plans. Mr Yates deposed in his affidavit that he sent the plans to Vic Cuoco on 10 March 2003. More importantly, he deposed that the plans were not created in that form before 3 March 2003. However, when he was called as a witness, he immediately said that the last piece of evidence was incorrect and that he created the plans before the end of January 2003. There are many ways other than by direct conveyance by Mr Yates the plans could have reached Vic Cuoco by the time the contract was entered into and I accept that the plans attached to the contract were attached to it at the time it was entered into. 26 Late in the day the defendant propounded defences of statutory illegality, but it turned out that the requisite statutory provisions were not in force at the relevant time. At the very heel of the hunt, during submissions after the close of evidence, the defendant attempted to propound a defence of illegality said to arise from the fact that the male plaintiff was in breach of fiduciary duties he was under towards the defendant. It does not seem to me that this was an appropriate basis for the defence of illegality at law that was sought to be put forward. It was not pleaded and the plaintiffs had no opportunity of dealing with it. I refused to allow that defence to be propounded. 27 In the result I am of the view that the plaintiffs are entitled to have the contract rectified to show a nil deposit and are entitled to specific performance of the contract as so rectified. 28 As to the claim for damages for breach of the warranty that the right of way would be removed by the time of settlement, I am prepared to order that, if it is still upon the property at that time, there should be an inquiry as to damages. I do not accept the defendant's argument that the plaintiffs' only remedy in respect of that breach is termination as provided for in the special condition: see the judgment of Palmer J in O'Sullivan v Great Wall Resources Pty Ltd [2006] NSWSC 1268. 29 I am prepared to make orders as propounded by the plaintiffs.

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.