Romanous v Saleh

Potters (a firm) v Loppert [1973] Ch 399 CASES CITED : Hastingwood Property Ltd v Saunders Bearman Anselm (a firm) [1991] Ch 114 Manzanilla Ltd v Corton Property & Investments Ltd (Court of Appeal, Millett LJ, 13 November 1996 unreported at 11) Barclays Bank Ltd v Quistclose Investments Ltd [1970] AC 567

Harris Romanous & Anor PARTIES : v Michael Saleh & Anor

COUNSEL : Plaintiffs: F Kalyk Defendants: D Rayment

SOLICITORS : Plaintiffs: Thurlow Fisher Lawyers & Consultants Defendants: Woods & Day Solicitors

IN THE SUPREME COURT OF NEW SOUTH WALES EQUITY DIVISION DUTY LIST

4516/06 Harris Romanous & Anor v Michael Saleh & Anor JUDGMENT 1 HIS HONOUR: This application is partly for summary judgment and partly for interlocutory relief to preserve the plaintiffs' claimed entitlement to recover a deposit of $67,000 paid under a contract for the sale of land and a sum of $200,000. The plaintiffs claim that they lent $200,000 to the defendants pursuant to a short-term loan in July 2004 and seek repayment of the loan. The defendants contend that the moneys were paid under the contract for the sale of land. The plaintiffs, on this application, say that even if the defendants' contention is correct, they are entitled to recover that sum. 2 The relief sought is as follows: " 1. An order pursuant to UCPR r.13.1 that summary judgment be entered in favour of the Plaintiffs in the amount of $200,000 together with interest thereon at the rate of 6% from 27 July 2004 until 30 September 2004 and thereafter at the prescribed rate, pursuant to s. 100 of the Civil Procedure Act 2005. 2. An order that within 7 days the Defendants pay the deposit of $67,000 paid by the Plaintiffs under the contract for sale of land dated 13 May 2004 into a separate bank account in the names of the parties, and that such amount and interest therein be held in that account as stakeholder under the contract pending the determination of these proceedings or until further order or agreement between the parties. 3. That in the alternative to order 1 and in addition to order 2, an order that within 7 days the further amount of $200,000 be paid into the account referred to in order 2, and that such amount and interest thereon be held in that account as stakeholder under the contract pending the determination of these proceedings or until further order or agreement between the parties. 4. A direction that within 10 days the Defendants provide to the Plaintiffs a copy of such documents as are executed by the Defendants in the establishment of the bank account referred to in these orders and evidence from such bank as to payment of moneys as ordered. " 3 The relief was claimed in a notice of motion filed on 30 April 2008. These proceedings were commenced on 30 August 2006 and relate to events occurring in 2004. To say that the application for summary judgment and interlocutory relief is late is a considerable understatement. 4 The contracts for the sale of land were exchanged on 13 May 2004. The purchase price was $670,000. The contract was for the sale of land in Kissing Point Road, Dundas. Completion was due on 25 June 2004. The contract was not completed on that day. 5 The contract states that it was entered into without the intervention of an agent. Notwithstanding that, the front page of the contract stated that the depositholder would be the vendors' agent. It appears there was no such person. Special condition 52 is entitled "Release of Deposit" and provided: " Upon exchange of Agreements or thereafter and if required by the Vendor the Purchaser shall permit the release of the whole or part of the deposit moneys paid herein to the Vendor, such moneys to be applied solely for the deposit on a property being purchased by the Vendor or the payment of stamp duty in relation to same. "

6 Clause 2.1 required the purchaser to pay the deposit to "the depositholder as stakeholder". As I have said, the person named as depositholder did not exist and it is common ground that the deposit was paid to the vendors, that is, the defendants. 7 Clause 2.8 provided: "If any of the deposit or of the balance of the price is paid before completion to the vendor or as the vendor directs, it is a charge on the land in favour of the purchaser until termination by the vendor or completion, subject to any existing right. "

8 On or about 27 July 2004 the plaintiffs paid the defendants $200,000. The plaintiffs claim that the defendants requested a short-term loan and agreed to pay a substantial rate of interest on the loan. The defendants say that the settlement was then overdue; that the first defendant told the first plaintiff that the defendants needed to settle because they needed the money, and the first plaintiff said that the plaintiffs could make a part payment of $200,000 to come off the cost of the property. 9 It is accepted that the question of whether the moneys were paid as a loan or on the basis contended for by the defendants is a triable issue. The plaintiffs do not seek summary judgment on the basis that there is no arguable defence to their claim for money lent. An application for summary judgment is inappropriate where there is any serious conflict on a question of fact. It is incumbent on the plaintiffs, on an application such as the present, not to show that they have a strong case, but that the defendants' position is so obviously untenable that it is clearly demonstrated that the defendants must fail. 10 As I have said, the claim for summary judgment in the sum of $200,000 has therefore been argued on the basis that even on the defendants' evidence the plaintiffs must succeed. 11 The claim in relation to the deposit of $67,000 is put on a different basis. The plaintiffs do not claim, on a summary judgment application, that they are entitled to the return of the deposit. In other words, they accept that there is an arguable question as to whether they are entitled to the return of the deposit or not. Rather, they contend that under the contract, properly construed, the defendants were required to hold the deposit on trust for whomever might become entitled to the deposit, and were required to keep the moneys separate from their own moneys and not to use the deposit for their own purposes. 12 The plaintiffs contend that the defendants have not complied with that obligation. They have sought the production of bank account statements showing how the deposit of $67,000 was applied. No documents have been produced in response to that call. This may partly be due to the time at which the notice to produce was served. On the other hand, if the defendants had kept the $67,000 in a separate account, I would expect evidence of that to have been led by them on the present application. There is no such evidence. There is a strong prima facie case that the defendants have used the $67,000, as indeed they contend they are entitled to do under the terms of the contract. 13 The plaintiffs say that they are entitled to the relief sought in para 2 of the notice of motion so as to preserve or restore their claim to the deposit if, at a final hearing, the court holds that the deposit should be returned to them. Hence the claim is in the nature of an interlocutory injunction. 14 I will deal first with the claim in relation to the deposit. As I understand it, the plaintiffs' argument is that the contract required the deposit to be held by a named person as stakeholder, and that if it were to be released to the vendor it could only be applied by the vendor as a deposit on a property to be purchased by the vendors or in payment of stamp duty. 15 It is not suggested that the moneys were to be applied, or have been applied by, the defendants in either of those ways. As I understand it, the plaintiffs argue that the defendants are required to hold the deposit as a stakeholder pending the determination of the parties' rights to the deposit and they also contend that holding the moneys as stakeholder precludes the vendors from using the moneys for their own purposes or getting the benefit of the deposit unless and until it is determined that they are so entitled. 16 There are difficulties with this argument. The first is that subject to the express terms of a contract, a stakeholder is not customarily required to hold a deposit received under a contract for the sale of land on trust for the parties, in other words, to hold the moneys separate from his or her own moneys. The obligation of a stakeholder is usually to pay the deposit to whoever is entitled to it, but the obligation to make that payment is a personal obligation rather than an obligation to account for trust moneys (Potters (a firm) v Loppert [1973] Ch 399 at 409; Hastingwood Property Ltd v Saunders Bearman Anselm (a firm) [1991] Ch 114 at 123; Manzanilla Ltd v Corton Property & Investments Ltd (Court of Appeal, Millett LJ, 13 November 1996 unreported at 11)). 17 A further difficulty is that it is by no means clear that special condition 52 was activated. Mr D Rayment, who appears for the defendants, submitted that the deposit was paid to the vendor pursuant to clause 2.8 rather than being released as a result of a requirement made by the vendor and permission given by the purchaser under special condition 52. He submits that the relevant clause is clause 2.8 and that special condition 52 has no relevant application. 18 That is certainly an arguable position. If special condition 52 applies I think it is arguable that a trust might arise on principles analogous to Barclays Bank Ltd v Quistclose Investments Ltd [1970] AC 567 that the moneys are to be held on trust for whomever might be found to be entitled to them, unless applied in the ways contemplated by that condition. 19 Although this is arguable, I do not consider that it is so strongly arguable that the plaintiffs can now be seen to be likely to succeed on that question. But accepting that the plaintiffs have shown a serious question to be tried as to their right to require the deposit to be held on trust for them, nonetheless I do not accept that the balance of convenience favours the grant of a mandatory interlocutory injunction to require the defendants to pay the amount of the deposit into a joint account. Of course, that is not the obligation of the vendor under the contract. 20 It is of particular significance that the rights the plaintiffs now seek to enforce arose more than four years ago, and it is more than 18 months after the commencement of the proceedings that the present claim has been made. Where a party seeks interlocutory relief in equity pending the final determination of the proceedings, he or she must move promptly for that relief. Equity assists the diligent, not the tardy. The plaintiffs' delay in bringing this application, coupled with the protection they have under clause 2.8 of the contract for the sale of land by which, if they are correct, their right to the deposit will in any event be secured by a charge on the land, indicates that the balance of convenience does not favour the grant of the relief sought in para 2 of the notice of motion. 21 I turn then to the claim for summary judgment for $200,000 with interest. I do not accept that there is no triable issue that the defendants are not entitled to retain the $200,000 paid. If the $200,000 was paid in the circumstances described in the affidavit of the first defendant of 2 July 2007, it was paid and accepted as part payment towards the purchase price, at a time when the defendants would say they were entitled to insist on completion of the contract, but did not. 22 It was submitted for the plaintiffs that that sum of $200,000 was not paid under the contract because it was not a payment required by or authorised under the contract. Certainly the contract does not require the making of a part payment. It provided for the balance of the purchase price to be payable on completion. However, the contract does authorise the parties to pay parts of the purchase price prior to completion. Such a possibility is expressly contemplated by clause 2.8. The purchaser is entitled to a charge on the land until the contract is terminated by the vendor to secure inter alia "the balance of the price … paid before completion." Likewise, clause 9.2 contemplates the payment of moneys other than the deposit "under this contract". 23 I do not accept that the vendors are only entitled to retain such a part payment if the vendors have terminated the contract and seek to retain the payment as security for moneys payable by the purchaser under clause 9.3. The fact that the moneys are paid in reduction of the purchase price itself indicates that the payment is not revocable. Put in terms of consideration, the vendors accept the payment in consideration of their not being able to sue for what would be otherwise the balance of the purchase price, or to insist on that balance being paid on completion. Moreover, the defendants' affidavit suggests that there could be other grounds on which the defendants could maintain that there was consideration for the payment. Although any such grounds have not yet been pleaded, that is not a decisive consideration on an application for summary judgment. In that respect I have in mind that the defendants might contend, for example, that there was consideration for the payment of $200,000 in the defendants' not seeking the immediate enforcement or termination of the contract for the sale of land. 24 The circumstances relating to the payment of $200,000 give rise to triable issues which make this an inappropriate case for summary judgment. For these reasons order 1 sought in the notice of motion should be refused. 25 In effect, order 3 of the notice of motion seeks Mareva relief to secure the entitlement of the plaintiffs to the sum of $200,000. If, as the defendants contend, the $200,000 was paid under the contract, the plaintiffs have security for the repayment in the form of the charge under clause 2.8. If, as the plaintiffs contend, the moneys were not paid under the contract but were a loan, then they might not have such an entitlement. However, there is nothing in the evidence which would justify the grant of Mareva relief. There is no evidence that the defendants have dealt or propose to deal with their assets with the intention of frustrating any judgment the plaintiff might obtain. For these reasons, I also dismiss that claim. 26 Accordingly, I order that the notice of motion filed on 30 April 2008 be dismissed with costs. 27 In my view, it is appropriate to order that costs be assessed forthwith and be payable forthwith after agreement or assessment. It is not an efficient way to conduct litigation to make an application for summary judgment more than 18 months after the proceedings have started and when the proceedings are ready, or almost ready, to obtain a hearing date. I order that the costs payable by the plaintiffs to the defendants may be assessed forthwith and to be payable forthwith after an assessment or agreement. 28 That leaves the question of how the proceedings should now be brought on for hearing. The defendants have foreshadowed instituting a cross-claim. Their position is that they have not accepted the plaintiffs' rescission or purported rescission of the contract as being effective to bring the contract to an end. Nor have they treated it as a repudiation and terminated the contract themselves. They say the contract is still on foot, but they have made no claim for specific performance, nor for any other relief in respect of the contract. That also is not an efficient way of conducting litigation. All of the matters in issue between the parties arising out of this contract and the payment of $200,000 should be brought forward for resolution. But for any further evidence which might arise from such a cross-claim, the proceedings are ready to be set down for hearing. 29 I direct that within 14 days the defendants file and serve any cross-claim, together with any affidavits upon which the defendants propose to rely, whether on that claim or in the proceedings generally. I direct that the plaintiffs file and serve their defence to cross-claim and any affidavits upon which they propose to rely, whether on that cross-claim or in the proceedings generally, by 28 July 2008. 30 I relist the proceedings before the Registrar on 1 August 2008. I note that on compliance with the above orders the proceedings should be ready to be allocated a hearing date. The parties should be in a position to provide the registrar with whatever information is necessary to allocate such a date. 31 I direct that the defendants pay the plaintiffs any costs thrown away by reason of the late filing of the cross-claim.

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