Saturday 11 May 2013
28Mr Snell arranged for the Property to be open for inspection by prospective purchasers on Saturday 11 May 2013. Prior to the open day, Mr Jeffrey Joseph, of Linton Pitt Lawyers prepared the Contract. Mr Snell or Ms Jiang left copies of the Contract on the kitchen bench at the Property inspection.
29There is a dispute between the parties as to what occurred on this occasion.
30It is however common ground that, ultimately:
(1)Mr Zhu and Mr Snell agreed that Mr Zhu would purchase the Property for $452,000;
(2)Mr Snell completed the Contract to show Mr Zhu as purchaser, the purchase price as $452,000, and the deposit payable as $45,200 (10 percent of the agreed purchase price);
(3)Mr Snell deleted and initialled the words "Vacant Possession" on the face of the Contract, and Mr Zhu placed his initials adjacent to the words "subject to existing tenancies";
(4)Mr Snell and Mr Zhu then executed and exchanged Contracts;
(5)the Contract called for completion in 42 days (that is by 24 June 2013) and contained the usual "cooling off" provision required by s 66X of the Conveyancing Act 1919 ("the Act");
(6)Mr Zhu paid Mr Snell a deposit of 0.25 per cent of the purchase price, being $1,130; and
(7)Mr Zhu and Mr Snell entered into a Residential Tenancy Agreement between Mr Zhu (as landlord) and Mr Snell (as tenant) for a period 22 June 2013 to 2 May 2014 at a rental of $450 per week ("the 2013 Lease");
31Mr Zhu asserted, but Mr Snell disputed, that he and Mr Snell executed the 2013 Lease first, and then the Contract. I find it unnecessary to resolve this dispute. Either way, both documents were executed as part of one transaction and must be read together (see the cases gathered at Lewison & Hughes, The Interpretation of Contracts in Australia, (2012) at [3.03]).
32In his affidavit Mr Snell said that prior to exchange of contracts, Ms Jiang said to Mr Zhu (in English):
"Paul and I are breaking up which is why we are selling the property. There are several options we are thinking of. Firstly, you can buy it for over $448,000, but that is conditional on my existing lease continuing until it expires in 2015. The second option is you can buy for market value, somewhere around the $500,000 mark and we will both move out giving you vacant possession. So please take all this into account when making your offer."
33Ms Jiang's account of her statement in her affidavit is as follows:
"I have broken up with my partner, Paul. That's the reason we have to sell the property as I do not have a job and cannot pay the mortgage. I do have a lease signed last year which entitled me to stay here until 2015. If you want to pay for the property around $450,000, I will stay here for a while and figure out where I will go. Paul can stay here if I move out before June 2015: otherwise you will have to pay market value of the property, around [$500 000], to let me move out before settlement."
34As I have mentioned, Mr Snell and Ms Jiang claim that Ms Jiang showed Mr Zhu a copy of the Alleged 2012 Lease.
35Ms Jiang also stated in cross-examination:
"I said I put money in this property...[Mr Zhu] asked who I am. I said, 'Paul Snell was my partner and this is our joint property and I put money in this property'...
I definitely mentioned the term 'money' somewhere."
36Mr Snell said that he did not tell Mr Zhu "directly" of Ms Jiang's alleged interest in the Property but that Mr Zhu "would have been aware in an implied sense" of such interest.
37Mr Zhu gave a very different account of events.
38First, he said that, apart from preliminary greetings, all of his discussions with Ms Jiang were in Mandarin.
39Second, he denied having a conversation with Ms Jiang to the effect referred to in [32] and [33] above and denied that Ms Jiang showed him, or referred to, the Alleged 2012 Lease.
40Mr Zhu gave the following evidence in cross-examination in response to an open question from me ("[a]re there any conversations over and above those you have already told me about that you can remember?"):
"[A]t the beginning I asked [Ms Jiang], 'So why you want to sell this property?' This is quite normal questions and I was told [by Ms Jiang]...they were move to overseas next year and they want to sell this apartment, that's the one thing. And when we discussed the price and also we discussed the lease agreement. That is the advertisement they say 'lease back option' as $480 to $520 and because he want move to New Zealand in May of 2014 and he wanted lease agreement, that is around 55 weeks, that is from 22 June, because originally in the contract we should, you know, from the exchange to the settlement should be 42 days so from 22 June of year 2013 to 2 May of year 2014. That is for the lease, so we discussed that. At that the beginning I say that is $480 and [Ms] Jiang say 'oh you should make allow[ance]' and we got agreement to $460 per week and we write these things as agreement. Also we put four weeks deposit, that is about $1840.
But before we sign this contract of sales, after we discussed the price of the contract of sales and [Ms Jiang], when I say, 'We pay you what is the asking price', that's the [$448 000] and she take a call from the bedroom and after few minutes come back she told me she got a better price and ask me to match, to pay the same price. But we have some discussion and we say you just ask for [$448 000] and okay we agreed to pay that, but after few minutes [Ms Jiang] got another call and come back and she say, she got another better one so, 'you should increase your price to $450,000' and mean we have some discussing and we agree to pay [$450 000]. After a few minutes come to bedroom and [Ms Jiang] got another call and say, 'Some people can offer more, can you match it?' And we say, 'we match the [$452 000]' so that's the contract price but before we signed that, she want to reduce the rent from $460 to $450. At the beginning, we didn't agree. In this case I think Mr Snell come join that and they have some talk and Mr Snell used English and talked to us, 'Can you just make [Ms Jiang] happy: $10 only per week'. And in this case is very hard to refuse and then we agreed to change it from, that's the lease agreement which went from $460 to $450, that is you can see we have initialled that."
41The effect of Mr Zhu's evidence was that he and Ms Jiang negotiated the price at which Mr Snell would sell the Property by reference to offers that Ms Jiang said she was receiving from a third party. Thus, ultimately, Mr Zhu agreed to pay $452,000 rather than the asking price of $448,000 (in the Advertisements). Further, according to Mr Zhu, he negotiated with both Ms Jiang and Mr Snell as to the rent to be payable by Mr Snell to Mr Zhu under the "lease back option". Ultimately, Mr Zhu agreed that the rent under the 2013 Lease be $450 per week, rather than $480 per week as originally sought by Mr Zhu.
42The evidence of the parties as to these matters is irreconcilable. Each of Mr Zhu, Mr Snell and Ms Jiang presented as witnesses who were confident that their recollection was correct. But their recollections cannot all be correct. In those circumstances, I must look to any objectively established circumstances that might provide a guide as to whose recollection is, on the probabilities, correct.
43As Keane JA (as his Honour then was) said in Camden v McKenzie [2007] QCA 136; [2008] 1 Qd R 39, at [34]:
"Usually, the rational resolution of an issue involving the credibility of witnesses will require reference to, and analysis of, any evidence independent of the parties which is apt to cast light on the probabilities of the situation".
44There is some objective corroboration of Mr Zhu's account. The Advertisements suggested the possibility of a "lease back" of the Property at $480 per week; which Mr Zhu said was his starting point. The form of the 2013 Lease shows that the figure for "rent" has been changed from $460 to $450, consistently with Mr Zhu's evidence that the rent was agreed at $460 per week, and then changed to $450 per week. Further, in Ms Jiang's affidavit she agreed that while Mr Zhu and Ms Luo were present at the Property she "received a call from another potential buyer which I took in the bedroom".
45Further, Mr Zhu's evidence was to some extent corroborated by Ms Luo.
46However, the objective or "independent" evidence that I find to be most helpful is the form of the Advertisements.
47Ms Jiang composed the Advertisements. They nominated her as the contact person. The Advertisements specified an asking price of $448,000 (not "around the $500,000 mark) and stated that a feature of the Property was its potential as a source of rental income between $480 and $520 per week (not $1 per week, as stated in the Alleged 2012 Lease).
48The effect of Ms Jiang's evidence is that she told Mr Zhu he had a choice: either buy the Property for $450,000 subject to her occupation at nominal rent until 24 June 2015 or buy the Property at $500,000 and obtain vacant possession, and thus be able to lease the property at market rent.
49That proposal would have contradicted the offer made in the Advertisements. It seems improbable that Ms Jiang would have made an offer at such odds with the Advertisements; or that Mr Zhu would have entertained such an offer.
50Further, I think it probable that, as Mr Zhu said, the critical conversations he had with Ms Jiang were in Mandarin. Although both Mr Zhu and Ms Jiang gave evidence before me in English, and without the aid of an interpreter, they both struggled in their adopted tongue. I think it likely that, once they realised the other was a Mandarin speaker, they communicated in that language about important matters. Mr Snell agreed he cannot speak or understand Mandarin.
51In those circumstances, I conclude that Mr Zhu and Ms Jiang did speak in Mandarin about all matters of substance and that, contrary to his evidence, Mr Snell did not hear Ms Jiang say the words set out at [32].
52On the other hand, Mr Zhu's account of what happened, set out at [40] above, was given spontaneously, after Mr Snell had cross-examined Mr Zhu closely as to his conversations with Ms Jiang, and in response to an open question from me as to what he could recall was said.
53For those reasons, I prefer Mr Zhu's evidence as to what was said. I accept his evidence that Ms Jiang did not show him the Alleged 2012 Lease on this occasion (assuming it then existed).
54However, even if Ms Jiang's account is be preferred, the fact is, as she well knew, that on 11 May 2013, Mr Snell (the legal owner of the Property) and Mr Zhu came to an agreement that reflected neither of the options that she claims to have put to Mr Zhu. Mr Snell agreed to sell the Property for $452,000 with a lease back to Mr Snell at $450 per week (which the parties agree is market rent). That agreement closely reflected the offer inherent in the Advertisements.
55Ms Jiang knew these matters because she composed the Advertisements and then witnessed Mr Snell's signature on the Contract and the 2013 Lease. In my opinion, the correct conclusion is that by so acting Ms Jiang consented to Mr Snell taking this course, notwithstanding the interest she claims to have in the Property.
56Assuming Ms Jiang has an equitable interest in the Property by reason of her payment of the deposit and contribution to its maintenance, the question is one of priority between that interest and the equitable interest that Mr Zhu undoubtedly obtained by reason of the Contract (see for example Butt, Land Law, (6th ed, 2010) at [7.33]).
57The relevant principle was summarised by Privy Council in Abigail v Lapin [1934] AC 491 at 502; 51 CLR 58 at 66:
"In the case of a contest between two equitable claimants the first in time, all other things being equal, is entitled to priority. But all other things must be equal, and the claimant who is first in time may lose his priority by any act or omission which had or might have had the effect of inducing a claimant later in time to act to his prejudice."
58In Heid v Reliance Finance Corporation Pty Ltd (1983) 154 CLR 326, Mason and Deane JJ said at 339 and 341:
"Where the merits are equal, the general principle applicable to competing equitable interests is summed up in the maxim qui prior est tempore potior est jure - priority in time of creation gives the better equity. But where the merits are unequal and favour the later interest, as for instance where the owner of the later equitable interest is led by conduct on the part of the owner of the earlier interest to acquire the later interest in the belief or on the supposition that the earlier interest did not then exist, priority will be accorded to the later interest...
...preference should be given to what is the better equity in an examination of the relevant circumstances. It will always be necessary to characterise the conduct of the holder of the earlier interest in order to determine whether, in all the circumstances, that conduct is such that, in fairness and in justice, the earlier interest should be postponed to the later interest."
59Ms Jiang knew of the basis on which the Property was marketed. She composed the Advertisements. She then consented to Mr Snell selling the Property to Mr Zhu on the basis of a lease back in the terms of the 2013 Lease; or at least acquiesced in such conduct. In those circumstances, in "fairness and in justice" to Mr Zhu, her interest in the property must be postponed to that of Mr Zhu; even if the Alleged 2012 Lease was created in 2012 and even if she told Mr Zhu of it.