Plaintiff v Defendant

CONTRACT - Whether plaintiff's beneficial interest in property extinguished on entry into of deed - Whether deed obliged defendant to pay moneys beyond period identified in contract.

LIMITATION PERIODS - Where plaintiff has a right to sell if defendant does not comply with its obligations to sell - Whether plaintiff statute barred from obtaining equitable relief - Whether claim for equitable relief is founded upon breach of contract - Whether plaintiff prevented from obtaining relief because of laches - Limitation of Actions Act 1958 (Vic) ss 5(1)(a) and 5(8).

PROPERTY - Where plaintiff seeks sale of property and division of proceeds - Whether plaintiff 'co-owner of land' - Property Law Act 1958 (Vic) ss 228(2)(a) and 234D.

1 Mr Salvatore Chiodo is a building designer and Mr John Alessi is a builder. Mr Chiodo is the director of and owns the shares in Chiodo Investments Pty Ltd, the plaintiff. Mr Alessi and his wife are the directors of and own the shares in Rilac Pty Ltd, the defendant. Mr Chiodo was married to Mr Alessi's daughter.

2 In about 2002, Mr Chiodo and Mr Alessi, or their companies, entered into a business arrangement in relation to a property at 66 River St, South Yarra. They built a unit on that property, and, when it did not sell, rented it out. The property was purchased by and remains registered in the name of Rilac Pty Ltd. It is common ground that, until December 2012, Rilac Pty Ltd held the property on trust, Chiodo Investments Pty Ltd had a 50% interest in the property, and Chiodo Investments Pty Ltd and Rilac Pty Ltd were to share the rental income and expenses of owning the property equally. Up until December 2012, Chiodo Investments Pty Ltd managed the property and the rental income was paid to it, and Rilac Pty Ltd, as the registered proprietor, paid most of the expenses of holding the property. From about 2007 and 2008, Chiodo Investments Pty Ltd stopped paying half the expenses and stopped forwarding half the rent to Rilac Pty Ltd. For some time, presumably because of the familial relationship, no one raised any concern. The amount owing was readily identifiable because Rilac Pty Ltd sent regular invoices to Chiodo Investments Pty Ltd for half the expenses and for half the rent (or what Rilac Pty Ltd believed was the rent).

3 Then, in late 2012, an agreement was reached that involved the payment of money by Rilac Pty Ltd to Chiodo Investments Pty Ltd. On 10 December 2012, Mr Chiodo and Mr Alessi both signed a document headed 'Declaration of Trust' (which I will hereafter refer to as 'the deed' because that is what it was referred to during the trial, although it may not be a deed). The property was then worth approximately $1.5 million. The amount paid was calculated by assuming the property was worth that amount and then adjusting the value of a half-share in the property by the outstanding net amount owed by Chiodo Investments Pty Ltd to Rilac Pty Ltd for rent and expenses.[1] The dispute in this proceeding relates to this agreement. Rilac Pty Ltd contends, in broad terms, that it bought out Chiodo Investments Pty Ltd and that as from December 2012 Chiodo Investments Pty Ltd ceased to have any interest in the property. Rilac Pty Ltd contends that there was an oral agreement to this effect and that the deed is not binding on it. Chiodo Investments Pty Ltd denies that there was an oral agreement and contends that the agreement was as set out in the deed. Although there are some peculiarities about the deed's wording, to which I will have to return, it seems that the deed, as well as imposing the obligation to pay the sum referred to derived from a valuation of $1.5 million, also obliged Rilac Pty Ltd to sell the property within three years and to pay to Chiodo Investments Pty Ltd 50% of any amount by which the sale price exceeded $1.5 million, imposed an obligation on Rilac Pty Ltd to pay 10% of the rental income to Chiodo Investments Pty Ltd, and, on one view, gave Chiodo Investments Pty Ltd the right to sell the property if Rilac Pty Ltd did not do so within three years.

4 Rilac Pty Ltd also contends, in the alternative, that if the deed were binding then it is now too late for Chiodo Investments Pty Ltd to obtain relief.

5 The deed has a typed execution clause that states it was 'executed' by Rilac Pty Ltd in accordance with s 127 of the Corporations Act 2001 (Cth) and has space for the signature of two directors or a director and the secretary. Rilac Pty Ltd had two directors, Mr Alessi and his wife. Ms Alessi was also the company's secretary. The company seal was not affixed. Mr Alessi signed the deed and wrote down, in his own handwriting, his name and address underneath his signature. He also initialled changes to figures in the body of the deed.

6 Chiodo Investments Pty Ltd signed the deed in the typed execution clause that mirrored the clause executed by Rilac Pty Ltd. Mr Chiodo signed the deed, and wrote down, in his own handwriting, his name and address underneath his signature. He, like Mr Alessi, also initialled changes to figures in the body of the deed.

7 Mr Alessi says that he signed the deed without first reading it. Rilac Pty Ltd does not, however, seek to escape the deed for that reason or on the grounds that Mr Chiodo misrepresented the effect of the deed or engaged in unconscionable behaviour. Rilac Pty Ltd instead denies that the deed is binding on the grounds that it was signed only by Mr Alessi and not also by his wife.

8 The company seal was not affixed, and there is no suggestion that there was any formal resolution of the board of directors authorising the entry into of the deed. Accordingly, the deed was not executed by Rilac Pty Ltd itself as a legal person.[2] The question therefore becomes whether, in the circumstances, Mr Alessi had actual or apparent authority as Rilac Pty Ltd's agent to commit Rilac Pty Ltd to the agreement constituted by the deed.[3] Rilac Pty Ltd's constitutional documents vest its management in its board of directors, as is usual. They do not otherwise create and give management power to a particular position to which Mr Alessi was appointed, such as might be the case with a managing director. Accordingly, Mr Alessi, did not have authority, acting alone, simply by reason of his being one of two directors, to bind Rilac Pty Ltd to the deed.[4]

9 Equally, however, there was nothing pointed to in Rilac Pty Ltd's constitution or its earlier articles of association that would prevent the board (Mr and Ms Alessi) from authorising an individual director (Mr Alessi) to contract on its behalf. That authority might be express or it might be implied. Whether it exists is a question of fact. It is a question directed at the real-world situation: was the arrangement between Mr and Ms Alessi, as the two directors of Rilac Pty Ltd, such that Mr Alessi was authorised to bind Rilac Pty Ltd to transactions with Chiodo Investments Pty Ltd that involved payments for or dispositions of trust property? The authority must reflect their mutual intention, but there is no requirement that they subjectively appreciate that a formal agency relationship is being established and the test is, as with any other form of agreement, an objective one.

10 The question might, conceivably, be answered by direct evidence. One or the other of the Alessis might have given evidence of a discussion (or meeting) whereby it was expressly agreed that Mr Alessi would, or would not, have that authority. In the absence of direct evidence, a conclusion that there was actual authority may be established by inference. Whether such an inference should be drawn will depend on a consideration of all the circumstances surrounding the management of the company's business. An inference of implied authority may be drawn, in particular, if the company, or Ms Alessi (being the balance of the board of directors), acquiesced in a course of dealing by Mr Alessi where he entered into arrangements on behalf of the company.[5] Alternatively, even if there were no actual authority, the circumstances might justify a conclusion that Rilac Pty Ltd held Mr Alessi out as someone having authority to enter into agreements on its behalf. If that is so, and Chiodo Investments Pty Ltd relied on that fact when it entered into the agreement, then Rilac Pty Ltd will be bound by the agreement on the basis that it clothed Mr Alessi with ostensible, or apparent, authority and that it is now estopped from denying that he had that authority.

11 Rilac Pty Ltd denied, in submissions, that Mr Alessi had authority to bind it to the deed. It accepted that Mr Alessi had authority to enter into agreements on its behalf in the ordinary course of its business - the leasing out and management of the property - but not otherwise, and submitted that the transaction reflected in the deed was not within the ordinary course of Rilac Pty Ltd's business because it involved the transfer of the trust property and the creation of obligations between it and Chiodo Investments Pty Ltd. It pointed out that a 24 April 2002 memorandum of understanding that in effect established the trust and the 9 April 2002 transfer of land were both executed by the affixing of the company seal and a 12 April 2002 mortgage was signed by both Mr and Ms Alessi.

12 Notwithstanding that the 2002 documents referred to were executed by affixing the company seal or also being signed by Ms Alessi, I conclude, on the balance of probabilities, that Mr Alessi had implied authority to enter into agreements on the part of Rilac Pty Ltd relating to the disposition of interests in the property including the obligations contained within the deed. I draw this inference because:

(a) Rilac Pty Ltd asserts some authority at this level. It was part of Rilac Pty Ltd's case that Mr Alessi was authorised to conclude on its behalf, and did conclude on its behalf, an oral agreement in December 2012 by which Rilac Pty Ltd bought out Chiodo Investments Pty Ltd's interest in the property. If Mr Alessi had authority to commit Rilac Pty Ltd to a 'buy-out' of Chiodo Investments Pty Ltd's interest in the property and the amount to be paid, that is, a transaction that brought the trust relationship to an end, it is difficult to see why he would not also have had the authority to commit Rilac Pty Ltd to a transaction that involved the sale of the property and the division of the proceeds; the existence of the agreement that Rilac Pty Ltd alleges would be irreconcilable with Rilac Pty Ltd's stance that Mr Alessi had no authority to enter into the agreement constituted by the deed.[6] Or, at least, some evidentiary foundation would have to be laid to explain why Mr Alessi had authority to make the oral agreement it contends was made but not the written agreement in order to avoid the inference being drawn that if he had authority to agree to one, then he had the authority to agree to both.

(b) Neither Mr Alessi nor Ms Alessi gave evidence on the point. Mr Alessi gave evidence. He did not say that Ms Alessi was not involved in or aware of the decision to buy-out the Chiodo Investments Pty Ltd's interest in the property or that he was otherwise not authorised by her to enter into the deed. Ms Alessi, who was present in Court during the hearing, did not give evidence. Were it the case that Ms Alessi, as the only other director of Rilac Pty Ltd, had not authorised Mr Alessi to enter into contracts such as the deed on Rilac Pty Ltd's behalf, I would have expected her and him to have given evidence to that effect. They alone know what the true arrangement was between them. 'All evidence is to be weighed according to the proof which it was in the power of one side to have produced, and in the power of the other side to have contradicted.'[7] I infer that neither of them could have given evidence that would have helped Rilac Pty Ltd's case as to the arrangements made between them that related to the authority given to Mr Alessi to manage Rilac Pty Ltd's business including the entry into of contracts on its behalf.[8] Their failure to give evidence as to the arrangements between them as to Mr Alessi's authority to manage the company means, in the circumstances, that little is required to draw an inference that Mr Alessi had actual authority, whether express or implied.

(c) Mr Alessi's apparent control of Rilac Pty Ltd. Mr Alessi in his oral evidence tended to identify Rilac Pty Ltd with himself. When speaking of actions that were performed by Rilac Pty Ltd, he would speak as if he and the company were one. He said that he decided to 'put [the property] under' Rilac Pty Ltd so 'I have control of title'. He agreed with a proposition that used the language that 'he' (not Rilac Pty Ltd) was to provide the services. He said for example, that 'Sam' took over the management and control of the property, and 'I, as the builder, was only interested in the maintenance element of the property'. He became frustrated because 'I wasn't receiving rental, I wasn't receiving expenses payments,' and that he said to Mr Chiodo that the only way things could be settled would be 'for me to pay you out'. This is all unsurprising in the context of a proprietary company owned by him and his wife, and is not improper. But it does tend to suggest that, in real life, the business was identified with him and, with the agreement of his wife, under his control.

(d) Consistently with this, for the most part Mr Alessi signed the documents by which Rilac Pty Ltd entered into legal commitments without his wife also signing them. As noted above, Ms Alessi did sign, along with Mr Alessi, in April 2002, the transfer of land and a mortgage relating to the property. That might have been a requirement of the registrar of titles or the mortgagee. Ms Alessi did not sign a memorandum of understanding made on 22 April 2002 that acknowledged that the property was held on trust, but the company seal was affixed to that document. There is no suggestion that she signed any other document after that time. On the other hand, Mr Alessi alone signed, on behalf of Rilac Pty Ltd and prior to the signing of the deed: an auction agreement in May 2005 authorising the auctioning of the property;[9] another auction or sale agreement with a second estate agent; a lease of the property to a tenant to commence on 13 October 2006; a surrender of that lease signed sometime later; a lease to another tenant to commence on 13 October 2008;[10] and a 'disclosure statement' required under the Retail Leases Act 2003.

(e) Equally, there was no suggestion that Ms Alessi played any role in the actual operations of the company. Save for the fact that she signed the 2002 documents referred to above, every action taken by Rilac Pty Ltd appears to have been taken by Mr Alessi. This is consistent with Ms Alessi not being present at the house in December 2002 when Mr Chiodo and Mr Alessi met, discussed and agreed on figures, and signed the deed.

(f) Mr Alessi conveyed that he had authority. Mr Alessi engaged in communications on behalf of Rilac Pty Ltd with Mr Chiodo about the moneys owed by Chiodo Investments Pty Ltd. Mr Alessi, in this way, held himself out as having the authority to enter into an agreement on behalf of Rilac Pty Ltd to resolve the issues between them including the disposition of Chiodo Investments Pty Ltd's beneficial interest in the property. He signed the deed and did so in circumstances that conveyed that the agreement was binding; that is, there is no suggestion that he said that his wife would need also to sign it before it was binding. Although Mr Alessi's own actions cannot create an ostensible authority, because ostensible authority must arise from representations made by the company or someone with actual authority,[11] they do create a situation where either he had actual authority, or he was wrongfully asserting that he had actual authority. If he didn't have authority from Ms Alessi (as the only other director) to do what he did, he was exposing himself to an action for breach of warranty of authority.

(g) The failure to assert that Mr Alessi did not have authority until much later. Following the execution of the deed, moneys were paid. There was then a family law proceeding that involved a property settlement between Mr Chiodo and Mr Alessi and Ms Alessi's daughter. Mr Alessi was aware that Mr Chiodo asserted an ongoing interest in the property in the family law property settlement, which can only have been an asserted interest under the deed. In the absence of any evidence to the contrary, I am prepared to infer, on the balance of probabilities, that Ms Alessi, too, was sufficiently involved in her daughter's family law proceeding to be aware that Mr Chiodo was asserting an ongoing interest in the property. There is no evidence that Mr Alessi or Ms Alessi or Rilac Pty Ltd asserted in the property settlement that Mr Chiodo did not have any interest in the property under the deed or otherwise. Care must be taken in using events after the fact, but subsequent events may be relied upon if it is remembered that the question is whether the agency relationship existed as at the earlier time.[12] If the arrangement between Mr and Ms Alessi was such that Mr Alessi did not have authority to commit Rilac Pty Ltd to the deed, I would have expected that to have been asserted in the family law property settlement and to have heard evidence to that effect. This factor alone would not have been sufficient to give rise to the inference of authority, and I would have drawn the inference even without this fact, but it does, in my view, provide some support for the inference.

13 In the absence of any evidence to the contrary, I infer from these matters that Ms Alessi was aware that Mr Alessi was operating and entering into contracts on behalf of Rilac Pty Ltd relating to the trust property, and that she either agreed to his doing so or acquiesced in his doing so. That agreement or acquiescence would extend, in my view, to agreements providing for the purchase or disposition of interests in the trust property of the types set out in the deed.[13]

14 Even if I were not prepared to infer that Mr Alessi had actual authority to enter into the agreement constituted by the deed, I would have concluded that Ms Alessi and thus Rilac Pty Ltd's board were probably aware that Mr Alessi was negotiating terms on behalf of Rilac Pty Ltd with Chiodo Investments Pty Ltd for the buy-out of the other half-share in the property and that Ms Alessi either agreed to his doing so or acquiesced in his doing so. The family connection, and the absence of any evidence to the contrary from Mr Alessi or Ms Alessi, makes that inference more likely than not. By allowing Mr Alessi to negotiate with Chiodo Investments Pty Ltd in this way, Rilac Pty Ltd held out Mr Alessi as having that authority, and thus clothed him with ostensible (or apparent) authority to enter into the deed.[14]

15 The deed provided (speaking loosely) that Rilac Pty Ltd would pay Chiodo Investments Pty Ltd the sum of $289,525.44, Rilac Pty Ltd would sell the property within three years, Chiodo Investments Pty Ltd would receive half of any amount over $1.5 million for which the property was sold, and Chiodo Investments Pty Ltd would receive 10% of the rental income in the meantime. It also provided that if Mr Alessi did not sell the property, then the deed would stand as Mr Alessi's consent for Mr Chiodo to sell it. It will be necessary to return to consider the wording of these clauses in some detail later. The property has not been sold.

16 The main issues between the parties, assuming that the deed is binding, are:

(a) Whether the deed effected the extinguishment of Chiodo Investments Pty Ltd's beneficial interest in the property;

(b) Whether the deed gave Chiodo Investments Pty Ltd the right to sell the property if Rilac Pty Ltd did not sell it within three years; and

(c) Whether it is now too late for Chiodo Investments Pty Ltd to seek to enforce a right to sell the property and to obtain a share of the proceeds.

C.1.1 Mr Alessi's assertion that he did not read, and was not given a proper opportunity to read, the deed before signing it.

17 Mr Alessi contended that Mr Chiodo did not provide a copy of the deed to him before the meeting on 10 December 2012 and only showed him at the meeting the one page that had the figures on it, that he did not read the deed before signing it, that he did not appreciate before signing it that the deed required him to sell the property and to pay half of any amount by which the sale price exceeded $1.5 million and to pay 10% of the rental income in the meantime, and that he only read through it properly that night after he had signed it. Mr Chiodo disputed these matters. Mr Chiodo pointed out, for example, that the payment obligation referred to on the page with the figures that were altered by hand and initialled by Mr Alessi at the meeting was described as an 'initial payout' and an 'initial payment' derived from an 'initial price' for the property, that the obligation to sell the property was on that same page, and that the cheque butt for the payment completed by Mr Alessi recorded the payment as '1st Part Payment on Partnership Settlement'. Mr Chiodo also pointed out that the same page was then altered and initialled again a day or so later, after, presumably, Mr Alessi had certainly read the deed, and that Rilac Pty Ltd did not complain at that time that the deed contained terms to which it had not agreed. Some time was spent in the trial exploring these matters. Rilac Pty Ltd, however, did not contend that if Mr Alessi had authority to sign the deed on its behalf then the deed was not binding on it according to its terms because Mr Alessi had not read it, and did not contend that Rilac Pty Ltd could escape the deed due to any misconduct on the part of Chiodo Investments Pty Ltd or Mr Chiodo. Accordingly, the issues between the parties on the effect of the deed must be resolved by interpreting its wording unaffected by the question as to whether or not Mr Alessi had read it before signing it.[15] The question is what reasonable business people, in the positions of the parties, would have taken the language of the deed to mean in the context of the known background circumstances.[16]

C.1.2 The objective background facts known to the parties and the signing of the deed

18 As noted above, the deed must be interpreted in light of the objective background circumstances known to both parties. Notwithstanding that credit attacks were made against both Mr Chiodo and Mr Alessi, the relevant matters were not in dispute. The objective background facts include the following:

(a) At all times until late 2012, the agreement between the parties was that Rilac Pty Ltd held the property on trust with it and Chiodo Investments Pty Ltd each owning a 50% share. The income and expenses of owning the property were to be shared equally between those two companies;

(b) Mr Chiodo (or Chiodo Investments Pty Ltd) managed the property. The rental income was paid by the tenants to Chiodo Investments Pty Ltd. Chiodo Investments Pty Ltd was obliged to forward half the rental income to Rilac Pty Ltd. That happened for some time. Mr Alessi (or Rilac Pty Ltd) paid the outgoings. Chiodo Investments Pty Ltd was obliged to reimburse Rilac Pty Ltd half of those outgoings;

(c) Rilac Pty Ltd sent invoices to Mr Chiodo for half of the expected rent and for half of the expenses. At first, Chiodo Investments Pty Ltd paid those invoices. In 2007 and 2008, Chiodo Investments Pty Ltd ceased reimbursing Rilac Pty Ltd half the expenses and ceased paying to it half the rent. Rilac Pty Ltd continued to send, and Chiodo Investments Pty Ltd continued to receive, invoices from time to time recording the rent and expenses owed. Over time, the indebtedness of Chiodo Investments Pty Ltd to Rilac Pty Ltd increased;

(d) Mr Chiodo was married to Mr Alessi's daughter. Mr Chiodo was, at this time, building a family home (that he described as a 'dream home').[17] Presumably because of this familial relationship, nothing was said for many years by either party about the increasing debt; and

(e) Towards the end of 2012, things came to a head. By this time, Chiodo Investments Pty Ltd owed Rilac Pty Ltd more than $200,000. Mr Chiodo approached Mr Alessi with a view to obtaining some cash out of the property. It was acknowledged by both of them that something had to be done about the accrued debt for half the rent and expenses. The parties accepted that for the purpose of assessing what should be done, the property could be valued at $1.5 million, less $450,000 associated with a mortgage.

19 Mr Chiodo prepared the deed and took it to a meeting at Mr Alessi's home on 10 December 2012. The deed had typed figures on it that valued the property at $1.5 million, noted a 'mortgage' at $450,000, evaluated Chiodo Investments Pty Ltd's indebtedness to Rilac Pty Ltd for the rent and expenses at $210,000, included a deduction from that figure of $12,500, and provided for a payment by Rilac Pty Ltd to Chiodo Investments of $327,500. Mr Alessi produced records based on the invoices and receipts that put Chiodo Investments Pty Ltd's indebtedness at $241,724.56.[18] Ms Alessi was not present at the meeting. Mr Chiodo accepted that figure as accurate. The deed was amended by hand accordingly and then signed and initialled by Mr Alessi and Mr Chiodo. This amended deed provided for a payment by Rilac Pty Ltd to Chiodo Investments Pty Ltd of $295,775.44. A day or so afterwards, Mr Alessi indicate that the 'deduction' of $12,500 should be shared and thus halved rather than deducted in full. Mr Chiodo agreed. The deed was again amended in hand - probably, starting with another clean copy - and initialled and signed. This amended deed provided for Chiodo Investments Pty Ltd to be paid $289,525.44.

C.1.3 Events following the entry into of the deed

20 Following the entry into of that arrangement, Rilac Pty Ltd paid Chiodo Investments Pty Ltd $289,525.44 and Mr Alessi took over the management of the property. Thereafter, Rilac Pty Ltd received all the rental income and paid all the expenses. Rilac Pty Ltd did not sell the property and has not given Chiodo Investments Pty Ltd 10% of the rental income.

21 Mr Chiodo allowed this situation to continue, and nothing was said or done for some seven years. The cessation of any communication came about, no doubt, because Mr Chiodo separated from Mr Alessi's daughter after December 2012, and that process took a number of years. As noted above, Mr Chiodo asserted an interest in the property under the deed in part of the family law property settlement.

C.2 Did the deed extinguish Chiodo Investments Pty Ltd's beneficial interest in the property?

22 Chiodo Investments Pty Ltd is seeking a declaration that Rilac Pty Ltd holds on trust for it a 50% share of the property. It is, as noted above, common ground that it did so prior to the entry into of the deed. The issue is whether the entry into of the deed brought the trust relationship to an end.

23 There are aspects of the deed that indicate an intention that Chiodo Investments Pty Ltd's equitable interest in the property not be extinguished. The deed itself is called a 'Declaration of Trust'. Clause 1 provides that 'the Trustees [that is, Rilac Pty Ltd] hold their interest' in the property 'on trust for the Beneficiaries' [that is, Chiodo Investments Pty Ltd and Rilac Pty Ltd]. Clause 2 requires Rilac Pty Ltd to execute a transfer of land if requested by the beneficiaries. Clause 3 requires the beneficiaries to indemnify Rilac Pty Ltd against any liability incurred 'while acting as the Trustee'. Clause 4 contains an acknowledgment that 'at all times the legal and equitable ownership of the property rests with the Beneficiaries'. Clause 5 allows the beneficiaries to lodge a caveat 'to protect their interest pursuant to this Deed'. However, the deed then provides that:

(a) The property shall be valued at $1.5 million 'for resolution of matters pursuant to this Deed';

(b) Rilac Pty Ltd is to make an 'Initial Payout' of $289,525.44 to Chiodo Investments Pty Ltd which is a figure that has been calculated to reflect the net value of a 50% share of the property less moneys owed by Chiodo Investments Pty Ltd to Rilac Pty Ltd;

(c) Rilac Pty Ltd is to sell the property within three years and to pay to Chiodo Investments Pty Ltd 50% of the amount by which the sale price exceeds $1.5 million;

(d) Chiodo Investments Pty Ltd is entitled to lodge a caveat 'to secure its payment'; and

(e) Rilac Pty Ltd is to pay to Chiodo Investments Pty Ltd 10% of the rental income from the settlement date[19] until the property is sold 'in consideration of his interest in the Property'.

24 In context of the prior arrangements whereby the income and expenses were shared equally, the express obligation on Rilac Pty Ltd to pay only 10% of the rental income to Chiodo Investments Pty Ltd and the failure on the part of the deed to impose any obligation on Chiodo Investments Pty Ltd to pay any part of the costs of holding the property, indicate an intention that, following the entry into of the deed and the making of the 'initial payout' derived from an assessment of half the property's value, Rilac Pty Ltd would bear 100% of the costs of holding the property.

25 If Chiodo Investments Pty Ltd's 50% ownership of the property survived the deed:

(a) it is surprising that Chiodo Investments Pty Ltd would be relieved of any of the costs of holding the property;

(b) it is surprising that Chiodo Investments Pty Ltd would not be required to disgorge some of the moneys received in the event that the property were sold for less than $1.5 million; and

(c) the obligation on Rilac Pty Ltd to pay to it 50% of the amount by which the sale price exceeded $1.5 million would be unnecessary, in the sense that those funds would be held on trust for it in any event.

26 The language set out in para 23(e) above possibly suggests that Chiodo Investments Pty Ltd is to retain an interest in the property until it is sold and that the 10% payment is to be made because Chiodo Investments Pty Ltd has this ongoing interest. On this interpretation 'in consideration of' takes the meaning of 'because of'. The language set out in para 23(d) above is consistent with this as a caveat may not be lodged unless there is an underlying interest in a property, although it is perhaps surprising that the caveat should be described as being available 'to secure' a payment obligation as if it were some form of charge. However, the obligation to pay 10% of the rent is also able to be seen as a part of the payment, or consideration in the legal sense of that term, for Chiodo Investments Pty Ltd giving up its equitable interest in the property.

27 The purpose of the obligation on Rilac Pty Ltd to pay 10% of the rental income pending the intended sale is not clarified in the balance of the deed. The deed states that the 10% figure is 'calculated as follows':

Expected Value: $1,850,000.00

Less Payout: $1,500,000.00

Balance: $ 350,000.00

Half to Sam:[20] $ 175,000.00

$175,000 of $1,850,000 equals to (estimated) at 10% being approximately $6,000 per annum.

28 This is not easy to understand. Probably, however, it is a figure intended to reflect the fact that the delay in the sale for up to three years would have the effect of delaying the expected receipt by Chiodo Investments Pty Ltd of an additional payout and prolong the period of time for which Rilac Pty Ltd would otherwise be entitled to all the net income from the property. In this respect, I note that three years of $6,000 per annum amounts to $18,000, which is approximately 10% of the anticipated additional payment to Chiodo Investments Pty Ltd of $175,000.

29 On balance, looking at the deed as a whole, in my view a reasonable businessperson in the position of the parties, with the knowledge they had of the prior arrangements, would interpret the deed as effecting a sale by Chiodo Investments Pty Ltd to Rilac Pty Ltd of its interest in the property on terms including a contractual obligation on Rilac Pty Ltd to sell the property and to pay a calculable additional sum to Chiodo Investments Pty Ltd in the event that the property were sold for an amount higher than the agreed figure for the purpose of the payout. The buy-out of Chiodo Investments Pty Ltd's interest in the property is the 'matter' that is 'resolved' by the entry into of the deed. The removal of any obligation on Chiodo Investments Pty Ltd to share in the costs of holding the property reflects the fact that it was thereafter to have no interest in the property itself. The language in the deed referred to above that is inconsistent with this conclusion is explicable on the basis that the deed is, it seems, a form of agreement designed to establish or to formalise a trust that has been 'repurposed'.

30 Accordingly, I conclude that, as from at least 10 December 2012, the trust relationship had come to an end. As from that date, Rilac Pty Ltd was the sole owner of the property, but was subject to the contractual obligations owed to Chiodo Investments Pty Ltd contained in the deed. The application for a declaration to the contrary should be dismissed.

C.3 Is Rilac Pty Ltd obliged to pay a share of rental income received after 30 October 2012 to Chiodo Investments Pty Ltd?

31 Chiodo Investments Pty Ltd is seeking a declaration that Rilac Pty Ltd holds on trust for it 50% of all rents and profits received by Rilac Pty Ltd since October 2012. It follows from the conclusion expressed in Part C.2 above that the application for a declaration in those terms should be dismissed.

32 Chiodo Investments Pty Ltd submitted in the alternative that it was entitled under the deed to 10% of the rental income received by Rilac Pty Ltd from 30 October 2012[21] to date. It accepts that it is statute barred from claiming for the period prior to six-years before the commencement of this proceeding on 20 August 2021 and therefore asserts an entitlement to 10% of the rental income from 21 August 2015 to date.

33 Chiodo Investments Pty Ltd does not in its further amended statement of claim seek a declaration that it is entitled to 10% of the rental income or damages for breach of the obligation to pay 10% of the rental income. Its pleaded position is that it is entitled to 50% of the rental income on the basis, rejected by me, that it retains a 50% interest in the property. However, Chiodo Investments Pty Ltd does seek in its further amended statement of claim an order that Rilac Pty Ltd account to it for the rents owing to the plaintiff under the deed, and both parties made submissions on the question as to whether Rilac Pty Ltd is obliged to pay to Chiodo Investments Pty Ltd 10% of the rent received by it. Rilac Pty Ltd did not contend that that claim to 10% of rental income was not raised by the pleadings. In those circumstances, I proceed on the basis that this alternative claim of Chiodo Investments Pty Ltd is validly before the Court.

34 Chiodo Investments Pty Ltd relies on cl 8 of the deed, which provides as follows:

1. RILAC PTY LTD agrees to pay to [Chiodo Investments Pty Ltd] upon receipt, 10% of all rental from the settlement date until the property is sold by RILAC PTY LTD pursuant to Clause 7(ii) herein in consideration of his interest in the Property until it is sold pursuant to clause 7(ii).

35 Rilac Pty Ltd contends that any obligation on it to pay 10% of the rent it received was only for a three-year period. It submits that this is the true effect of cl 8 when it is read with cl 7(ii), which provides as follows:

(ii) RILAC PTY LTD agrees to sell the property within three (3) years of the settlement date to a genuine Third Party purchaser at the then market value, and agrees that if the sale price of the Property exceeds $1,500,000.00, then [Chiodo Investments Pty Ltd] shall be entitled to 50% of any excess monies above $1,500,000.00 ("Potential Excess").

36 It is relevant to interpret cls 8 and 7(ii) also with cl 7(iv), which provides as follows:

(iv) RILAC PTY LTD agrees that if it does not sell the property within 3 years, then [Chiodo Investments Pty Ltd] has the rights to be included and involved in the sale of the property and RILAC's execution of this Deed is deemed consent and authority to [Chiodo Investments Pty Ltd] to arrange a sale.[22]

37 The deed anticipates that the property will be sold within three years and that Rilac Pty Ltd will pay 10% of the rental income to Chiodo Investments Pty Ltd until Rilac Pty Ltd effects a sale within that period. The deed provides that if Rilac Pty Ltd does not sell the property within three years, then Chiodo Investments Pty Ltd can itself take steps to ensure that the property is sold. It is not clear beyond argument, however, whether the obligation on Rilac Pty Ltd to pay 10% of the rental income continues beyond the three year period if Rilac Pty Ltd does not sell the property in that time. The deed does not, in clear terms, deal with that eventuality.

38 The contention that there would be no ongoing obligation on Rilac Pty Ltd comes from the wording of cl 8 where the obligation to pay is said (twice) to continue 'until the property is sold ... pursuant to Clause 7(ii)'. In my view, however, reasonable business people would not interpret those words as limiting the obligation to pay 10% of the rental to a maximum period of three years. The wording of cl 8 does not create an obligation that is limited by a time period, but rather creates an obligation that is limited by an event, that is, a sale of the property by Rilac Pty Ltd pursuant to cl 7(ii). That limiting event did not come to pass. In my view, the better interpretation is that the obligation to pay 10% of the rental income continues because Rilac Pty Ltd did not sell the property in accordance with cl 7(ii) and thus did not bring the obligation to an end. That interpretation is more in keeping with the language used, and also avoids a situation where Rilac Pty Ltd would potentially be in a better position were it to breach the contractual obligation on it to sell the property than it would be in if it complied with its contractual obligations.

39 I should add that in my view it would be implied, as a term so obvious that it did not need to be expressed, that the obligation to pay 10% of the rental income would also end on any subsequent sale of the property.[23]

40 There was no evidence led that quantified the rent that Rilac Pty Ltd has been receiving for the property. I will hear the parties on what orders, if any, should be made in light of my findings.

C.4 Is Rilac Pty Ltd liable for the fact that it failed to sell the property?

41 Rilac Pty Ltd was obliged by the terms of the deed to sell the property within three years of the 'settlement date'. The 'settlement date' was defined in the schedule to be 1 July 2012. Accordingly, Rilac Pty Ltd was obliged to sell the property by 1 July 2015. It did not do so. I accept Rilac Pty Ltd's submission that its failure to sell it thereafter was not a 'continuing breach' of this obligation. Where there is an identifiable date by which a contractual obligation has to be performed, then the obligation is breached when that date is reached without the obligation having been performed. The failure to perform afterwards is 'nothing but a failure to remedy [a] past breach and not the commission of any further breach'.[24] Accordingly, any claim that Chiodo Investments Pty Ltd wished to bring for breach of contract by Rilac Pty Ltd of its obligation to sell the property accrued on 1 July 2015. Section 5 of the Limitation of Actions Act 1958 provides that a proceeding founded on contract shall not be brought after the expiration of six years from the date on which the cause of action accrued. This proceeding was not commenced until 20 August 2021 and accordingly Chiodo Investments Pty Ltd is statute barred from bringing a claim against Rilac Pty Ltd for damages for breach of its contractual obligation to sell the property.

D. Limitations and delay: Is Chiodo Investments Pty Ltd now able to sell the property?

42 Chiodo Investments Pty Ltd's prayer for relief claims 'an order that the property be sold in accordance with the terms of the deed of trust'. As noted above, cl 7(iv) provides as follows:

(iv) RILAC PTY LTD agrees that if it does not sell the property within 3 years, then [Chiodo Investments Pty Ltd] has the rights to be included and involved in the sale of the property and RILAC's execution of this Deed is deemed consent and authority to [Chiodo Investments Pty Ltd] to arrange a sale.[25]

43 Although expressed in somewhat awkward language, this term gives Chiodo Investments Pty Ltd the right to sell the property, and necessarily requires Rilac Pty Ltd to do what is reasonably required to permit Chiodo Investments Pty Ltd to do so.

44 Rilac Pty Ltd did not develop a submission against the proposition that this clause was designed to empower Chiodo Investments Pty Ltd to sell the property if Rilac Pty Ltd did not do so within the three-year period. It resisted the application for relief, however, on the grounds that it was now too late for Chiodo Investments Pty Ltd to seek to enforce its right to do so.

45 Section 5 of the Limitation of Actions Act 1958 provides that:

(1) The following actions shall not be brought after the expiration of six years from the date on which the cause of action accrued‑

(a) ... actions founded on simple contract ...

(8) This section shall not apply to any claim for specific performance of a contract or for an injunction or for other equitable relief, except in so far as any provision thereof may be applied by the Court by analogy in like manner as the enactment corresponding to that provision was applied before the repeal of that enactment by the Limitation of Actions Act 1955.

46 Rilac Pty Ltd contended that any right to sell the property was 'founded on' a breach of Rilac Pty Ltd's obligation to sell contained in cl 7(ii) (set out in para 35 above), and so any proceeding by which that right was to be enforced had to be commenced within six years of the accrual of that right, and that was not done. If necessary, it relied on laches as it applies by analogy. Rilac Pty Ltd did not cite any authority in which a limitations statute had been given effect in like circumstances.

47 In my view, Chiodo Investments Pty Ltd is not precluded from maintaining its claims directed at establishing its legal right to sell the property given by cl 7(iv) of the deed.

48 Chiodo Investments Pty Ltd is not seeking damages for breach of contract. It is seeking an order that the property 'be sold in accordance with the terms of the deed of trust'. If Rilac Pty Ltd were to accept (subject to the limitations arguments) that cl 7(iv) of the deed had the effect of empowering Chiodo Investments Pty Ltd to sell the property and for that purpose requiring Rilac Pty Ltd as the registered proprietor to co-operate with such a sale, then Chiodo Investments Pty Ltd would be seeking an order akin to an order for specific performance. If Rilac Pty Ltd were to dispute the meaning of cl 7(iv), then Chiodo Investments Pty Ltd would be seeking also an order akin to a declaration as to its meaning. Either way, Chiodo Investments Pty Ltd is bringing a claim for equitable relief that engages s 5(8) of the Limitation of Actions Act 1958, and so is only barred if it can be shown that the Court should impose a limitation period by analogy.

49 A claim for specific performance of the obligation contained in cl 7(iv) of the deed to do what is required to effect the sale of the property, or for a declaration that Chiodo Investments Pty Ltd has a contractual entitlement under cl 7(iv) of the deed to sell the property, is not analogous to the claim Chiodo Investments Pty Ltd might have been able to bring against Rilac Pty Ltd for damages for breach of cl 7(ii) of the deed, or any other like common law claim. Chiodo Investments Pty Ltd is here attempting to enforce the contract, not to seek damages for its breach. Not only are the claims conceptually different, but Chiodo Investments Pty Ltd is able to seek to establish a right under cl 7(iv) of the deed, standing alone, simply because the property was not sold within three years, without having additionally to plead or to prove that Rilac Pty Ltd was in breach of its obligations under cl 7(ii) of the deed. As Ball J observed in Alec Finlayson Pty Ltd v Royal Freemason Benevolent Institution of New South Wales Nominees Ltd:

In the case of a claim for specific performance of a simple contract, the facts giving rise to the claim for specific performance are not always the same as the facts giving rise to a claim for damages.... Plainly, an action for damages is not comparable to an order for specific performance.[26]

50 Accordingly, in my view the limitation period of six years does not apply by analogy.

51 Additionally, but relatedly, in my view it is wrong to say that Chiodo Investments Pty Ltd's relevant 'cause of action' accrued on 1 July 2015 just because Chiodo Investments Pty Ltd first obtained the right to sell the property at that time and the right to sue for damages for breach accrued at that time. The terms of the deed gave Chiodo Investments Pty Ltd a contractual right to sell the property that was unlimited in duration; there was nothing in the contract that would have precluded Chiodo Investments Pty Ltd from exercising its right under the contract at a time of its choosing. Until such time as a dispute arose between Chiodo Investments Pty Ltd and Rilac Pty Ltd as to the meaning of the deed, there was no dispute that could form the basis of a legal proceeding, and in that sense no relevant 'cause of action'. Where a contract creates a status relationship between two people, such as appointing one the agent for the other, the limitations legislation does not mean that that relationship only exists for six years or that a proceeding must be brought within six years of that appointment to validate it in some way. At the most, if a dispute arises as to the validity of the appointment, a party might be required to commence proceedings within six years of that dispute's arising. But that is not this case. As noted above, this proceeding was commenced within six years of the time at which Chiodo Investments Pty Ltd asserted, and Rilac Pty Ltd denied, Chiodo Investments Pty Ltd's right to sell the property.

52 In light of my findings, it is not necessary to determine whether the limitation period was 15 years because the deed was a 'bond or other specialty' and so within s 5(3) rather than s 5(1) of the Limitation of Actions Act 1958.

53 The Court may always, of course, decline to grant equitable relief where a party has 'slept' on its rights and thereby placed another party in a situation where it would be inequitable for the right now to be enforced.[27] I do not consider that this is the case here. The property is an investment property, not a family home. Although there was a period of delay, Chiodo Investments Pty Ltd asserted an interest in the property at all relevant times and in particular in the years of inaction during which Mr Chiodo and Mr Alessi's daughter were involved in family law proceedings. There was no suggestion that Rilac Pty Ltd would suffer any particular disadvantage from having the property sold and the proceeds divided in the way anticipated in the deed.[28]

E. The claim for an order for sale under the Property Law Act 1958

54 Chiodo Investments Pty Ltd sought an order pursuant to ss 228(2)(a) and 234D of the Property Law Act 1958 for the sale of the property and the division of the proceeds of the sale. Those provisions, where they apply, allow a 'co-owner' of land to apply for an order for the sale of land and the division of the proceeds among the 'co-owners'. The Property Law Act 1958, unless certain circumstances apply, gives jurisdiction to make such orders to the Victorian Civil and Administrative Tribunal and removes the jurisdiction to do so from this Court. Probably, the circumstances in this case are such as to give this Court the jurisdiction to entertain such an application. But it is not necessary for me to decide this, because only a 'co-owner of land' may make such an application.[29] In light of my finding that Chiodo Investments Pty Ltd did not have a beneficial interest in the property after signing the deed, Chiodo Investments Pty Ltd could not be said to be a 'co-owner' of the property.

(a) Rilac Pty Ltd is bound by the terms of the deed;

(b) Chiodo Investments Pty Ltd ceased to have an equitable interest in the property on the entry into of the deed;

(c) Chiodo Investments Pty Ltd is entitled to 10% of the rent received by Rilac Pty Ltd following the entry into of the deed but that claim is subject to the Limitation of Actions Act 1958 with the result that Chiodo Investments Pty Ltd is only entitled to this for the six-year period prior to the commencement of this proceeding; and

(d) Chiodo Investments Pty Ltd has a legal right to effect the sale of the property and to receive 50% of the proceeds to the extent that they exceed $1.5 million.

56 I will hear the parties on the form of order to be made, and on the question of costs.

[1] There was one payment half of which Chiodo Investments Pty Ltd said should go the other way, and Rilac Pty Ltd accepted this.

[2] Cf Corporations Act 2001 (Cth) s 127; Northside Developments Pty Ltd v Registrar General [1990] HCA 32; (1990) 170 CLR 146, 160 (Mason CJ).

[3] Cf Corporations Act 2001 (Cth) s 126(1). It is not necessary to determine whether the deed is in fact a deed, rather than an ordinary contract. See, also, Northside Developments Pty Ltd v Registrar-General [1990] HCA 32; (1990) 170 CLR 146; Junker v Hepburn [2010] NSWSC 88.

[4] Brick and Pipe Industries v Occidental Life [1992] VicRp 68; [1992] 2 VR 279, 361; Northside Developments Pty Ltd v Registrar-General [1990] HCA 32; (1990) 170 CLR 146, 205.

[5] See, eg, Junker v Hepburn [2010] VSC 88, [43] (Hammerschlag J); Motor Yacht Sales Australia Pty Ltd t/as The Boutique Boat Company v Cheng [2021] NSWSC 1141, [137].

[6] Cf Junker v Hepburn [2010] VSC 88, [63] (Hammerschlag J).

[7] Blatch v Archer [1774] EngR 2; (1774) 98 E.R. 969, 970 (Lord Mansfield).

[8] Jones v Dunkel [1959] HCA 8; (1959) 101 CLR 298. The inference is available if a witness is called but is not asked to give evidence on a particular topic: Commercial Union Assurance Company of Australia Ltd v Ferrcom Pty Ltd (1991) 22 NSWLR 389, 418F (Priestley JA). The evidentiary significance of a failure to call evidence from directors who might be expected to be able to give relevant evidence on the question of authority was noted by Hammerschlag J in Junker v Hepburn [2010] VSC 88 at [67]- [68] and Kennedy J in Cahill v Kiversun Pty Ltd [2017] VSC 641 at [133].

[10] A signed copy of this second lease was not tendered. A copy of the terms with some initialled handwritten amendments was tendered, along with the schedule to the lease. Mr Alessi accepted, when asked, that he did remember 'signing something' and that he had signed 'the earlier leases'.

[11] Northside Developments Pty Ltd v Registrar General [1990] HCA 32; (1990) 170 CLR 146, 205.

[12] See, eg, Cox v Goldcrest Developments (NSW) Pty Ltd [2000] NSWSC 763; (2000) 50 NSWLR 76, 78 [12] (Young J).

[13] I doubt that there is any further legal requirement for the existence of actual authority that Mr and Ms Alessi communicate their respective consents to Chiodo Investments Pty Ltd: cf Freeman & Lockyer v Buckhurst Park Properties (Mangal) Ltd [1964] 2 QB 480, 501 (Diplock LJ); Junker v Hepburn [2010] NSWSC 88, [45] (Hammerschlag J); Molonglo Group (Australia) Pty Ltd v Cahill [2018] VSCA 147; Cahill v Kiversun Pty Ltd [2017] VSC 641, [126]-[136] (Kennedy J); Motor Yacht Sales Australia Pty Ltd v Cheng [2021] NSWSC 1141, [141]-[145] (Payne JA). If there were such a requirement, in my view it was in the circumstances communicated by their conduct.

[14] See, eg, Freeman & Lockyer v Buckhurst Park Properties (Mangal) Ltd [1964] 2 QB 480, 497 (Wilmer LJ), 498 (Pearson LJ), 503-505 (Diplock LJ); Northside Developments Pty Ltd v Registrar-General [1990] HCA 32; (1990) 170 CLR 146, 159 (Mason J), 172 (Brennan J), 198-199 (Dawson J).

[15] Toll (FGCT) Pty Ltd v Alphapharm Pty Ltd (2004) 219 CLR 165, 180-182 [42]-[46] (Gleeson CJ, Gummow, Hayne, Callinan and Heydon JJ).

[16] Codelfa Construction Pty Ltd v State Rail Authority (NSW) (1982) 149 CLR 337, 353 (Mason J); Pacific Carriers Ltd v BNP Paribas (2004) 218 CLR 451, 462 [22] (Gleeson CJ, Gummow, Hayne, Callinan and Heydon JJ); Toll (FGCT) Pty Ltd v Alphapharm Pty Ltd (2004) 219 CLR 165, 179 [40] (Gleeson CJ, Gummow, Hayne, Callinan and Heydon JJ); Electricity Generation Corporation v Woodside Energy Ltd [2014] HCA 7; (2014) 251 CLR 640, 656-657 [35] (French CJ, Hayne, Crennan and Kiefel JJ).

[17] Mr Chiodo said that he was under financial stress and that Mr Alessi was aware of this. Mr Alessi knew that Mr Chiodo was building a family home but says that he was not aware that Mr Chiodo was under any particular financial stress. It is not necessary to resolve this dispute in order to determine this proceeding.

[18] No account was taken of any interest on this indebtedness.

[19] The settlement date was, somewhat surprisingly, defined to be 1 July 2012.

[20] 'Sam' was defined to mean Chiodo Investments Pty Ltd.

[21] The obligation on Rilac Pty Ltd to pay 10% of rent is expressed to apply 'from the settlement date', which is stated in the schedule to be 1 July 2012. But there is also a clause in the deed that states that each party is entitled to half the net rental up to and including 30 October 2012. These clauses clearly conflict. The calculations used by the parties to reach the 'initial payout' figure were in evidence and reveal that the rental income and expenses used in that calculation went beyond 1 July 2012 but not beyond 30 October 2012. In these circumstances, I am satisfied that any entitlement of Chiodo Investments Pty Ltd's to 10% of the rental income commenced after 30 October 2012, and not after 1 July 2012, or 10 December 2012 when the deed was signed.

[22] A minor typographical error has been corrected.

[23] See, eg: Shirlaw v Southern Foundries (1926) Ltd [1939] 2 KB 206, 227 (MacKinnon LJ); BP Refinery (Westernport) Pty Ltd v President, Councillors and Ratepayers of the Shire of Hastings (1977) 180 CLR 266, 283 (Lord Simon of Glaisdale, Viscount Dilhorne, Lord Keith of Kinkel); Codelfa Construction Pty Ltd v State Rail Authority of NSW (1982) 149 CLR 337, 347 (Mason J).

[24] Larking v Great Western (Nepean) Gravel Ltd [1940] HCA 37; (1940) 64 CLR 221, 236 (Dixon J).

[25] A minor typographical error has been corrected.

[26] [2013] NSWSC 1167, [35]. See also [48].

[27] Fysh v Page [1956] HCA 13; (1956) 96 CLR 233, 243 (Dixon CJ, Webb and Kitto JJ); Orr v Ford [1989] HCA 4; (1989) 167 CLR 316, 341 (Deane J); CSR Ltd v Amaca Pty Ltd (under NSW Administered Winding Up) [2016] VSCA 320; (2016) 62 VR 359, 433 [246] (Maxwell P, Beach and Kaye JJA).

[28] See, eg, No 68 Ltd v Eastern Services Ltd [2005] NZCA 495; [2006] 2 NZLR 43 [54], [70].

[29] Property Law Act 1958 (Vic) s 225(1).