Luxury Homes P/L v Danieli & Anor

Townsend v Coyne (1995) 6 BPR 13,935 Redglove Projects Pty Ltd v Ngunnawal Aboriginal Council [2004] NSW SC 880 Epple v Wilson [1972] VR 440 CASES CITED : Simons v David Benge Motors Pty Limited [1974] VR 585 Davies v Uratoriu (1995) 6 BPR 13,917 Appleton Papers Inc v Tomasetti Paper Pty Ltd [1983] 3 NSWLR 208 Films Rover International Ltd v Cannon Film Sales Ltd [1986] 3 All ER 772

Luxury Homes Pty Ltd PARTIES : v Benito Danieli & Anor

Plaintiff: V R Gray COUNSEL : Defendants: L Einstein

Plaintiff: McCoy, Grove & Atkinson SOLICITORS : Defendant: Wight & Strickland

IN THE SUPREME COURT OF NEW SOUTH WALES EQUITY DIVISION

2268/05 LUXURY HOMES PTY LTD v DANIELI & Anor JUDGMENT 1 HIS HONOUR: In these proceedings, the plaintiff seeks an order extending the operation of caveat number AB 358190 until further order, and an interlocutory injunction restraining the defendants from selling or contracting to sell land at 180 Wyadra Avenue, North Manly, being Lot 19 in DP 9853, or land at 51 Corrie Road, North Manly, being Lot 16 in DP 9853 or any part of it, or otherwise acting inconsistently with obligations which it is alleged they have under an agreement with the plaintiff. 2 As part of its final relief, the plaintiff will seek a declaration that there is in force an agreement between it and the defendants, under which the plaintiff is entitled to proceed with all reasonable diligence to obtain the consent of the Warringah Council for the development of the two parcels of land, in accordance with the proposal described in a development application lodged with the Warringah Council on or about 28 November 2003 or so close to that application as the Council may approve, to develop the land in accordance with that consent, and to sell or to procure the sale of the land as developed. 3 The defendants are the registered proprietors of the two parcels of land. They have listed their property at 51 Corrie Road, North Manly, for sale. The agents acting on the sale have obtained an offer from a Mr Grant Williams for the purchase of that property for a price of $780,000. The defendants wish to accept that offer. On or about 1 October 2002, the plaintiff and the defendants entered into an agreement in relation to the development of the two parcels of land. The agreement is very short and it provides as follows: "Whereas the developer wants to develop the land described as 180 Wyadra Avenue and 51 Corrie Road, North Manly by constructing townhouses for sale and the owner agrees to sell the land with a delayed settlement, is now agreed; 1. The owner will permit the developer to lodge a development application for the construction of townhouses. 2. If development consent is not granted within 12 months of the commencement of this agreement it will lapse. 3. The developer agrees to pay the owner $2,200,000 for the land with settlement delayed until the proposed townhouses are sold. 4. As the development of the townhouses will be adding value to the owners land the owner agrees to allow the property to be used as security for the borrowing to finance the development. 5. On completion of the project the owner will execute transfers of the strata units to the people nominated by the developer. 6. The net proceeds of the sales shall be distributed in the following order. (a) Repayment of all borrowed money in respect of the land and development. (b) Payment to the owner of the equity in the land calculated by deducting from the amount in clause 3, any mortgage on the property at the commencement of this agreement. (c) Payment of the balance representing the profit to the developer. "

4 A day or two after that agreement was made, the parties entered into a further agreement which is undated which provides as follows: "Whereas the parties entered into an agreement dated 1-10-02 in relation to the property at 180 Wyndra (sic) Avenue and 57 (sic) Corrie Road North Manly and they now wish to amend that agreement it is now agreed: 1. Clause 3 of that agreement referred to an amount payable of $2,200,000 Clause 6 (c) referred to the balance being paid to the developer. 2. The intention is the amount payable under clause 3 should be $1,400,000 greater than the amount arrived at in clause 6 (c). To the extent that that relationship does not exist the amount payable under clause 3 is increased or decreased as the case may be with the consequent adjustment also of the balance payable under 6 (c)." 5 Both agreements have been signed by the defendants and by Mr Alcock, the director of the plaintiff. No development consent was granted within 12 months of the agreement of 1 October 2002. There is nothing in the agreement which suggests that its commencement would not coincide with the date on which the parties entered into it. Hence, the defendants submitted that by 1 October 2003, the agreement, as amended, had lapsed automatically. There was, therefore, they submitted no agreement on foot of the kind which the plaintiff now seeks to enforce. 6 It was submitted for the plaintiff that clause 2 should be read as a provision which entitled either party after 12 months to bring the agreement to an end by giving appropriate notice to the other, at least, if reasonable notice of termination was provided. I do not think it is reasonably arguable that clause 2 can be construed in that way. It provides for the automatic termination of the agreement after 12 months, if the development consent has not been granted. 7 However, in the alternative, the plaintiff submits that the parties waived the necessity for the timeframe provided for in clause 2, I do not consider that the effect of the lapse of time without development consent having been granted can be addressed in terms of the parties waiving their rights under the contract. The suggested waiver of the time stipulation is really, I think, a contention that the parties agreed, or it should be inferred that they agreed, to vary the provisions of the agreement, or that after the agreement came to an end on 1 October 2003 it should be inferred that they made a fresh agreement in terms of the document which they had signed earlier. (Townsend v Coyne (1995) 6 BPR 13,935 at 13,939). 8 The conduct from which it is contended that there was such a variation, or that the parties made a new agreement, or from which it should be inferred that there was such a variation or new agreement, is that after October 2003 the plaintiff, with the authority of the defendants, lodged with the Warringah Council a second development application for the development of the defendants' land. 9 An earlier application had been lodged on 7 April 2003, and the Warringah Council had responded to that application by saying that a preliminary assessment of it had disclosed that it was deficient in a number of respects which were enumerated by the Council. 10 The development application which was lodged on 28 November 2003, included revised plans for the development of the two blocks of land by the construction on those blocks of five townhouses. On 28 January 2004, the council wrote to the plaintiff in relation to the development application received on 28 November 2003. It required that the application be advertised so the persons who were likely to be affected by the proposed development could have the opportunity of commenting on it. A mediation was conducted on 24 March 2004, which was attended by Mr Alcock and the defendants, as well as by neighbours and a mediator appointed by the Council. 11 On 31 March 2004, SEPP 5 was repealed and a new policy, State Environment Policy (Seniors Living) Policy was gazetted. It appears that this delayed the Council's consideration of the development application. 12 In about September 2004, the Council advised the plaintiff that it would recommence its assessment of the second development application. 13 In February 2005, an adjoining property known as 178 Wyadra Avenue, North Manly was advertised for sale. Mr Alcock proposed to the defendants that they should buy that land to protect the parties against any loss of development rights, and to ensure that the defendants' land could be developed in a way which complied with the new State Environmental Planning Policy relating to seniors living. 14 According to Mr Alcock's evidence, Mrs Danieli agreed to that course and he arranged finance for the purchase of the adjoining property, which finance would also be secured over the defendants' home at 180 Wyadra Avenue. However, on 24 February 2005, Mrs Danieli told Mr Alcock's son that they did not want to go ahead with the purchase of that property and they have not done so. 15 At about the beginning of March 2005, the defendants arranged for their property at 51 Corrie Rd, North Manly to be listed for sale with Raine & Horne at Balgowlah. Mr Alcock deposes that on about 14 March 2005, he telephoned Mrs Danieli and told her that it would be best for the defendants to obtain the development approval which had been applied for which would enhance the value of the defendants' property. According to him, Mrs Danieli said, "Yes, I suppose that is right. We will not exchange any contract for sale until we know what is going to happen to the development application." 16 However, on 16 March 2005, the defendants' solicitors wrote to the plaintiff. They said that they had advised their clients that there was no enforceable agreement in place between them and the plaintiff, in relation to the sale of the property at 51 Corrie Rd, North Manly, and that the defendants were free to sell the property as they chose. 17 The plaintiff contends that this was a repudiation of an agreement between the parties over the development of the two blocks of land. It says, however, that it has not accepted the repudiation and that the agreement remains in force. If there is an enforceable agreement now on foot in terms of the documents signed on 1 October 2002, and a few days after that date, then it would be an implied term of that agreement that whilst it remained on foot, the defendants would not dispose of either of the blocks of land which were to be the subject of the development. 18 In these proceedings, the plaintiff seeks to enforce by injunction that implied negative stipulation. It also contends that the agreement gives it a caveatable interest. In that respect, the plaintiff does not contend that it has a caveatable interest by reason of the implied negative stipulation that the defendants would not dispose of their land (see Redglove Projects Pty Ltd v Ngunnawal Aboriginal Council [2004] NSW SC 880). 19 I will deal first with the claim that the plaintiff has a caveatable interest. Subsection 74F(1) of the Real Property Act, 1900 provides: "74F Lodgment of caveats against dealings, possessory applications, plans and applications for cancellation of easements or extinguishment of restrictive covenants (1) Any person who, by virtue of any unregistered dealing or by devolution of law or otherwise, claims to be entitled to a legal or equitable estate or interest in land under the provisions of this Act may lodge with the Registrar-General a caveat prohibiting the recording of any dealing affecting the estate or interest to which the person claims to be entitled." 20 The estate or interest in the land which the plaintiff claims is either that of purchaser, or, that by the agreements, the parties entered into a partnership under which the defendants would contribute their land and the plaintiff would contribute its services in arranging for the obtaining of development approvals and in constructing the townhouses and, perhaps, in arranging for sale of the townhouses once constructed, with the resulting profits of the sale from the completed townhouses to be shared between the parties. 21 The caveat which was lodged on 18 March 2005 on the title to the land at 51 Corrie Rd, North Manly claimed an estate or interest in the land as being, "The right to develop the land, to have the land sold and to have a portion of the proceeds of sale." The caveat claims that an estate or interest arose from the agreement of 1 October 2002, which was described as a joint venture agreement, and by the plaintiff acting on that agreement as varied as joint venturer, and with the defendants' consent undertaking action in incurring expenses for the development of the land in preparation for sale for the benefit of the defendants and the plaintiff. 22 Although counsel for the defendants was inclined to characterise the agreement as one for the purchase by the plaintiff of the land, I do not consider that it admits of that construction. The agreement provides for the construction and sale of the proposed townhouses. It is only after the sale of the proposed townhouses that the plaintiff is obliged to pay any moneys pursuant to clause 3. How clause 3 should be read after its amendment by the later agreement is, I think, obscure, but that does not convert the agreement into one under which the plaintiff has agreed to purchase the land, or any part of it. Rather, the agreement contemplates that the defendants, as owners, will sell the townhouses to purchasers nominated by the plaintiff. The agreement then provides for the distribution of the net proceeds of sale. The plaintiff's interest is an interest in the net proceeds of sale, and not in the land. 23 In Epple v Wilson [1972] VR 440, it was held that an interest in the proceeds of the sale of land does not necessarily involve an interest in the land itself, even where there is a trust for sale. In Simons v David Benge Motors Pty Limited [1974] VR 585, it was held, following Epple v Wilson, that an agreement to share the profits of resale of land, did not confer on the lender of the moneys an interest sufficient to support a caveat. The position may be different if the plaintiff has a right to have the land sold and to have the proceeds divided, being a right which the plaintiff could enforce by an order for specific performance (Davies v Uratoriu (1995) 6 BPR 13,917 at 13,923). 24 It is clear that the plaintiff is not presently entitled to an order of specific performance by reason of which he could be put in a position to compel the sale of the land. Hence, I do not consider that the plaintiff presently has a caveatable interest in the land, even if the agreement in question is still on foot, or even if a new agreement has been entered into in the same terms as that agreement. 25 The question, therefore, is whether there is a serious question to be tried that the parties have made a new agreement after the lapsing of the old, or whether they have agreed to vary the old agreement, by removing the clause which provided for its lapsing after 12 months if development consent was not granted. 26 As the agreement is not one for the disposition of land, or an interest in land, it is not required to be in writing. It was submitted for the plaintiff that it should be inferred from the conduct of the parties, that there was such an agreement to vary the old agreement, or to make a new agreement in the same terms as the old agreement. After 1 October 2003, the plaintiff, with the consent of the defendants, continued to pursue the obtaining of development consent and took steps to arrange finance to enable the property at 178 Wyadra Avenue to be purchased. The defendants submitted that that conduct was at least equally consistent with the agreement having being terminated and the defendants keeping their options open without commitment to the plaintiff to proceed with the development. 27 In my view, the material in the affidavit of Mr Alcock does not provide a sufficient basis from which I could find that there was a serious question to be tried, that the parties had impliedly agreed to proceed with the development on the terms of the agreement which had lapsed. There is no suggestion in the plaintiff's evidence that after October 2003, the parties specifically adverted to the terms of the agreement made in October 2002. 28 The plaintiff's conduct is entirely explicable by its acting in the hope or expectation that if a satisfactory development approval were forthcoming, a new agreement for the development of the land could be negotiated with the defendants. Indeed, given the many things which were left unresolved by the 2002 agreement, that is, to my mind, the overwhelming inference. Amongst the matters with which the 2002 agreement did not deal, are the following:

1. how, or by what criteria, the parties would determine whether any development consent granted was appropriate;

2. related to the first matter, whether either of the parties would be entitled not to proceed with the agreement once a development consent was granted and having regard to the terms of that consent, the then anticipated contractual costs, and market conditions;

3. the shares in which profit from the proposed development would be divided, or any losses borne. 29 It is unnecessary to decide on this application whether the 2002 agreement was unenforceable, because it was incomplete. What I think is clear, is that once that agreement came to an end, it cannot be inferred from the subsequent conduct of the parties that they intended to revive or make a new agreement in which these matters were not addressed. 30 I am, therefore, not satisfied that there is a serious question to be tried such as would warrant the grant of interlocutory relief. If I am wrong about that matter, I would nonetheless characterise the strength of the plaintiff's case as being, on the material before me, a weak one. 31 The strength of the plaintiff's case is a matter to be considered along with matters relating to the balance of convenience, to determine what order carries the lower risk of injustice, (Appleton Papers Inc v Tomasetti Paper Pty Ltd [1983] 3 NSWLR 208 at 216 and Films Rover International Ltd v Cannon Film Sales Ltd [1986] 3 All ER 772). 32 There is substance in the plaintiff's contention that if the plaintiff's claim succeeds at trial and it is remitted to a claim for damages, the quantification of those damages will be a very difficult exercise. I accept that if an interlocutory injunction were granted and the defendants succeeded at trial, it would be a much easier task to assess the damages which the plaintiff would then be required to pay pursuant to its undertaking as to damages. 33 However, there are other matters to be considered. One of these is that the first defendant has health problems and there is evidence that the continuance of the proceedings is putting pressure and stress on him to the detriment, or further detriment, of his health. Whilst it is true that the disposition of this application will not bring the proceedings to an end, I do infer that the grant of an interlocutory injunction and the consequent restraint upon the defendants from selling their property at 51 Corrie Road, would be detrimental to the first defendant's health. Secondly, whilst the defendants have substantial assets in the form of the two properties, their income is only in the order of about $36,000 per annum. This income consists of $26,000 per annum which Mrs Danieli earns from her employment in the dry cleaning company and about $10,000 per annum in rent from 51 Corrie Road, North Manly. 34 It is clear that if the defendants are permitted to sell their property 51 Corrie Road, North Manly and invest the proceeds of sale, the returns on the investment will generate a significantly higher income from that which they are presently obtaining. Mrs Danieli wants to be in the position where she can retire and spend more time at home caring for her husband. I think that is a substantial matter to be taken into account on the balance of convenience. 35 There is no indication on the evidence how long it may take for the proposed development to be carried out, the town houses sold, and any profit divided. 36 Even if I had been of the view that there was a serious question to be tried, I would have concluded, having regard to the balance of convenience and my assessment of the strength of the plaintiff's case, that the interests of justice would have required that the application for an interlocutory injunction be refused. 37 For those reasons I refuse the plaintiff's application.

(Counsel addressed on costs.) 38 The defendant asks for an order for costs and submits that costs should follow the event. Whilst it is often the practice that costs of an application for interlocutory relief be costs in the cause, in the circumstances of this case, I think the appropriate order is that the costs of the application for interlocutory relief be the defendants' costs in the proceedings.

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.