Savage v Bianchino & Associates Savage v Bianchino Don

Variation of the contract 12This was predicated on the contract and particularly that Mr Bianchino would "wait until the Manly project is completed or refinancing has come through from Brockstar, the financier". There is evidence that the first has not occurred and there is some evidence about satisfaction of the second. The evidence on the second is sufficient to shift near evidential onus and the defendant called no evidence. 13The defendant submits there is no scope for an oral agreement as alleged by the plaintiff for the following reasons: (a)The agreement is inconsistent with the 4 August 2009 letter, being contemporaneous documentary evidence confirming that defendants' rights under the loan deeds; (b)if the parties intended a fundamental abrogation of the defendants' rights (ie the ability to enforce the debt) then one would expect that to have been canvassed in the August letter; (c)To the extent that the August letter is binding on the parties, it is that document which recorded the agreement. The conversations which preceded its execution (if accepted as being true) were in the nature of negotiations, not offer and acceptance. Apart from being inadmissible to prove any agreement recorded by the August letter, those negotiations have culminated in the agreement itself; (d)The alleged verbal agreement is insufficiently clear to give rise to legal obligations and the parties did not intend to be contractually bound by what was said, only by what we signed; (e)The alleged verbal agreement seeks to vary the parties' obligations under the deeds of loan. The deeds of loan grant mortgages to the respective defendants and therefore such deeds, and any variation of them, are required to be in writing and signed by the parties: ss 23C and 54A of the Conveyancing Act. The alleged oral variation is unenforceable. (f)Finally, the August letter itself purports to create an interest in land, namely a mortgage over 92 Bower Street, Manly. To the extent that that interest was granted conditionally (ie on the basis that the deeds of loan could not be enforced until certain preconditions were met) then those requirements were part of an agreement to create an interest in land and were required to be in writing and signed by the parties. Again ss 23C and 54A of the Conveyancing Act apply. 14At first blush there is much force in the argument that the conversation is a preliminary to the written document which incorporated all the parties intended to be binding on that day. However, the 4 August memorandum initially only deals with the granting of additional security. That, of itself, is a provision of consideration for a variation of the contract price by the oral terms of the variation. 15The second part of the memorandum does arguably talk of the matters addressed in the conversation. The 5 March 2010 deed was a separate transaction from that which the present dispute concerns. The failure to include in the reference to the April 2009 deed a statement that the loan was "not repayable upon demand" is to be noticed. It may just simply accord with the fact that until demand the debts under the April deed did not become due or it might mean that, as agreed in the conversation, they would not be payable except in accordance with the terms of the conversation. 16The argument as to the need for writing has considerable force. In Powercell Pty Ltd v Cuzeno Pty Ltd [2004] NSWCA 51 the court addressed the question of the application of s 54A of the Conveyancing Act when dealing with matters both within and outside the purview of the statute. Giles JA, with the concurrence of Meagher and Santow JJA at para 43 to 48 dealt with the principles in these terms: 43. In Stonham, Vendor and Purchaser it is said - 46. If the contract relates to matters partly within and partly outside the provisions of the Statute, and the consideration for the promise is an entire one, the contract is unenforceable unless the Statute is complied with. But, where the consideration and promise relating to the part of the contract, which is within the section, can be severed from the consideration and promise relating to that part not within the section, so that the promises are severable, and really two separate contracts, one within the section and one outside the section, the latter can be enforced, though not evidenced in writing. [44] In Cheshire and Fifoot, The Law of Contract, 8th (Aust) ed at [16.47] it is said that if the promise is "implicated" in the whole agreement then it cannot be severed, and Carter and Harland, Contract Law in Australia, 4th ed says at [519] - Where a contract contains several promises, some but not all of which are required to be evidenced by writing, the absence of a written note or memorandum renders the whole contract unenforceable unless the promises are severable ... In other words, the plaintiff must show that the promise being enforced is not one required to be evidenced in writing, and that the form of the contract is such that the consideration for this promise is separate from the consideration supporting the unenforceable promises. [45] Severance does not assist the appellant, since it wishes to enforce the part of the contract within s 54A. The cases amply support that a contract partly within and partly outside s 54A is unenforceable in the absence of a written record. The Statute of Frauds or its various equivalents has been successfully pleaded, for example, as a defence to a claim under an agreement to pay arrears of rent and future rent when only the future rent was caught by the Statute (Thomas v Williams (1830) 10 B & C 664; 109 ER 597), to a claim under an agreement to sell bricks and plant in a brickyard and give up possession of the brickyard (Hodgson v Johnson (1858) EB & E 685; 120 ER 666) and to a claim under an agreement to sell the stock-in-trade, book debts and goodwill of a business and an interest in the premises in which it was carried on (Hawkesworth v Turner (1930) 46 TLR 389). In Horton v Jones (1935) 53 CLR 475 the deceased promised to make a will leaving his "fortune" to the plaintiff. The fortune was an interest under his father's will and an insurance policy. His father's estate included investments on mortgage of real estate. It was held that the contract was unenforceable, including as to the entire interest under the will and the insurance policy. Rich and Dixon JJ said (at 485) - In the present case the inclusion of the policies of insurance was no more than part of the reward that the deceased promised she should have under his will. It may be treated, perhaps, as an addition to the share in his father's estate, but his promise was to make a will containing dispositions of these two pieces of property in consideration of her promise to look after him. Further, we think the contention that the promise in reference to the insurance moneys might be considered separable must also fail. If a contract, which is not evidenced by writing, contains more than one promise and, although one of the promises is of a description to which the Statute of Frauds applies, another or others are not, the whole contract is unenforceable except when the promises are not only themselves severable but may be referred to and supported by independent or divisible considerations or divisible parts of a consideration capable of distribution (cf Hodgson v Johnson). There is nothing to support an interpretation of the contract sued upon which would bring it within the exception. [46] Horton v Jones was distinguished in Birmingham v Renfrew (1937) 57 CLR 666, in which s 54A was held not to apply because the deceased's agreement to leave his property to the plaintiffs was construed as an agreement to make a will to operate on whatever property the deceased had at his death. The deceased owned land at the time of the agreement, but not at the time of his death. No doubt was cast on the application of s 54A to a contract only partly dealing with the sale of land. [47] A line of cases in which a contract only partly dealing with the sale of land has been caught by the Statute was traced by Tadgell J in Collin v Holden (1989) VR 510 at 512-3. In the compromise of a dispute the defendant agreed to pay the plaintiff $10,000 and costs and the plaintiff agreed to transfer her interest in land to the defendant. Not surprisingly, it was held that the obligations to pay were "implicated" with the obligation to transfer the interest in land. [48] These cases show that a contract remains a contract for the sale of land notwithstanding that it is concerned with other matters, perhaps extensively concerned with other matters. The appellant referred to Kilpatrick v Mackay (1878) 4 VLR (E) 28 and De Nichols v Curlier (1900) 2 Ch 410 as cases supporting its submission. In Kilpatrick v Mackay the parties agreed to be partners in land speculation, and Molesworth J said (at 32) that "there are authorities that contracts for partnership in land speculation are not within the Act - amongst others: Dale v Hamilton". In Dale v Hamilton (1846) 5 Hare 369; 67 ER 955 the reasoning, taken from Forster v Hale (1800) 5 Ves 308; 31 ER 604, was that any partnership land was by operation of law held on behalf of the partners, and the Statute was not attracted. In De Nichols v Curlier this reasoning was reluctantly applied to the holding of real estate as community property under French Law. Neither case was an alternative characterisation of an agreement which was in part a contract for the sale of land." 17As the oral agreement in this case is a variation of a written term of the principal agreement it would seem the principles would mean that there could be no severance and the statute applied to the agreement as varied. 18However, there is another problem with the contract case and that is uncertainty. The condition in the conversation has two elements. A situation could arise where neither of these were satisfied and thus there would be a lacuna as to when the loan was to be payable. In effect, the variation did not fully deal with the repayment and therefore was too uncertain to be a term of the contract. In the result I am not satisfied that there is a genuine dispute in respect of the contractual argument.

Estoppel 19In Sivoli Pty Ltd v Barbaro (1988) 13 NSWLR 466 and Austotel Pty Ltd v Franklins Self Serve Pty Ltd (1989) 16 NSWLR 582 at 610 Priestley JA conveniently distilled the reasoning of the majority judges in Walton Stores into these propositions (at 472): (a) Common law and equitable estoppel are separate categories, although they have many ideas in common; (b) Common law estoppel operates upon a representation of existing fact, and when certain conditions are fulfilled, establishes a state of affairs by reference to which the legal relation between the parties is to be decided. This estoppel does not itself create a right against the party estopped. The right flows from the court's decision on the state of affairs established by the estoppel; (c) Equitable estoppel operates upon representations or promises as to future conduct, including promises about legal relations. When certain conditions are fulfilled, this kind of estoppel is itself an equity, a source of legal obligation; (d) Cases described as estoppel by encouragement, estoppel by acquiescence, proprietary estoppel and promissory estoppel are all species of equitable estoppel; (e) For equitable estoppel to operate in circumstances such as those of the present case there must be the creation or encouragement by the defendant in the plaintiff of an assumption that a contract will come into existence or a promise be performed, and reliance on that by the plaintiff, in circumstances where departure from the assumption by the defendant would be unconscionable; (f) Equitable estoppel may lead to the plaintiff acquiring an estate or interest in land, that is, in the common metaphor, it may be a sword; and (g) The remedy granted to satisfy the equity (which either is the estoppel or created by it) will be what is necessary to prevent detriment resulting from the unconscionable conduct." 20The matters raised by the defendant in respect of this claim were as follows: "(a) The words or conduct relied upon by the defendant as giving rise to an estoppel must be clear and unambiguous; (b) The conduct of the plaintiff (in this case Savage Property Enterprises Pty Limited) in relying on those words or that conduct must be reasonable; and (c) The defendant (in this case Mr Bianchino and his company) must know or intend that the plaintiff will act or abstain from acting in reliance on those words or conduct. 10. Further, regard must be had to the relationship between the parties, their level of commercial sophistication and the inherent probabilities of their conduct. This is best summarised in the following statement by French CJ, Gummow, Heydon, Hayne and Kiefel JJ in John Alexander's Clubs Pty Limited v White City Tennis Club Limited [2010] HCA 19 at [101]: "Judge Learned Hand said: "in commercial transactions it does not in the end promote justice to seek strained interpretations in aid of those who do not protect themselves." And where interpretations, strained or otherwise, will not help, assistance to those persons by a strained application of equitable ideas does not promote justice either." 11. It is submitted that the estoppel argument put by the plaintiff in the present case requires a strained interpretation of equitable doctrines which does not reflect commercial reality." 21On the first aspect reference was made to the use of loose words such as "waiting" or "relaxing". The important consideration is the matters I have referred to when dealing with the variation claim and is the fact that there is no complete timeframe for repayment specified. That may not be an answer in the estoppel case because a court will, in such a case, be concerned with whether the detriment can be dealt with by reasonable notice of an intention to resile from the position taken. It is to be remembered that in Walton's case Brennan J said at p 426-7 and 540:1: "If the object of the principle of equitable estoppel in its application to promises were regarded as their enforcement rather than the prevention of detriment flowing from reliance on promises, the courts would be constrained to limit the application of the principles of equitable estoppel in order to avoid the investing of a non-contractual promise with the legal effect of a contractual promise. In Ajayi v R T Briscoe (Nigeria) Ltd [[1964] 3 All ER 556 at 559; [1964] 1 WLR 1326 at 1330], the Privy Council sought to qualify the enforceability of a non-contractual promise in this way: The principle, which has been described as quasi estoppel and perhaps more aptly as promissory estoppel, is that when one party to a contract in the absence of fresh consideration agrees not to enforce his rights an equity will be raised in favour of the other party. This equity is, however, subject to qualifications (1) that the other party has altered his position, (2) that the promisor can resile from his promise on giving reasonable notice, which need not be a formal notice, giving the promisee a reasonable opportunity of resuming his position, (3) the promise only becomes final and irrevocable if the promisee cannot resume his position. The qualifications proposed bring the principle closer to a principle the object of which is to avoid detriment occasioned by non-fulfilment of the promise. But the better solution of the problem is reached by identifying the unconscionable conduct which gives rise to the equity as the leaving of another to suffer detriment occasioned by the conduct of the party against whom the equity is raised. Then the object of the principle can be seen to be the avoidance of that detriment and the satisfaction of the equity calls for the enforcement of a promise only as a means of avoiding the detriment and only to the extent necessary to achieve that object. So regarded, equitable estoppel does not elevate non-contractual promises to the level of contractual promises and the doctrine of consideration is not blown away by a side-wind. Equitable estoppel complements the tortious remedies of damages for negligent misstatement or fraud and enhances the remedies available to a party who acts or abstains from acting in reliance of what another induces him to believe." 22It may well be argued in this case in circumstances where neither of the conditions as to repayment are likely to be met that repayment could be required on reasonable notice or indeed that the promise may be resiled from on giving reasonable notice. 23It was suggested that the commercial realities of this case may have involved a desire to avoid the top-up provisions in clause 3(e) of the deed from operating. However, there is nothing in the evidence to suggest that this element was part of the relevant discussions. 24I appreciate that in this case we are dealing with sophisticated commercial operators. In Summer Hill Business Estate v Equititrust [2010] NSWSC 776 Pembroke J at paras 31 to 40 set out the need for caution and careful scrutiny before using estoppel in cases involving sophisticated businessmen. This is a task which in this case I think is better done at a trial where the way the parties dealt with each other can be put under careful scrutiny. In my view in this area there is a genuine dispute.

The Trade Practices Act claim 25This is a direct representation contravening s 52 of the Trade Practices Act and/or item 18 of schedule 1 of the Australian Consumer Law. Because the representation was as to a future fact, namely when the demand would be made on the loan or when the loan would become payable, the present defendant would have the onus of demonstrating that there is a reasonable basis for the making of the representation as to future fact. 26It was submitted that if the contravention was established it would be open for the court to give relief under s 87 of the Trade Practices Act as an alternative to damages. In this case the relief available would include an order setting aside the demand, a declaration that the loan was not due or payable, or an order restraining the defendant from calling on the loan. 27It was suggested by the defendant that any defence based on consumer protection legislation must fail because the conduct was not such as to mislead commercial parties communicating in an arm's length setting, particularly where the person alleged to have been misled was an experienced solicitor and businessman. Then there was no misrepresentation as to the contents or effect of the August letter. This also is something which I think should be determined at trial. 28Accordingly, in each matter I order:

1. The creditors statutory demand served by the plaintiff on the defendant of 12 October 2010 be set aside.
2. Defendant to pay the plaintiff's costs of the proceedings.
3. I vary the order I have made for costs to add the words "except in respect of the costs of the directions hearing held before me on 4 March 2011 in respect of which I order the plaintiff to pay the defendant's costs of the day."

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. Decision last updated: 11 March 2011