- Unreported Judgment
SUPREME COURT OF QUEENSLAND
No BS8952 of 2004
JOHN LAWRENCE LAKE AND ANNE ELIZABETH LAKE
ANTHONY JAMES RATCLIFFE AND DEBRA LOUISE RATCLIFFE
HER HONOUR: The applicants, Mr and Mrs Lake, seek an order for the removal of a caveat lodged by the respondents, Mr and Mrs Ratcliffe, on 23 September 2004 over land of which the Lakes are the registered proproprietors. It is their home and it is located at number 85 Stanhill Drive, Chevron Island.
The grounds of claim set out in the caveat are equitable. In the first place the Ratcliffes contend that they entered into an oral joint venture agreement with the Lakes to purchase the property with an eye to future development; that the Lakes, having purchased the property in their sole names, hold the property on a constructive trust as to 50 per cent of its net value after all due allowances for the Ratcliffes.
The second ground is based on a repudiation of the joint venture agreement by the Lakes followed by an alternative arrangement whereby the Ratcliffes would have an option to purchase a 50 per cent unencumbered interest in the land exercisable after three years on certain terms and conditions.
The third alternative basis of claim is that the Lakes hold the land on resulting trust for the Ratcliffes since they paid $12,500 towards the deposit for the purchase price of $1 million.
There are quite fundamental disputed questions of fact between the parties as to what transpired between them from about December 2002 to approximately mid-July 2004. It was then that the Ratcliffes, who are now resident in Victoria, issued proceedings out of the Supreme Court of Victoria seeking declarations about the option agreement, alternatively the joint venture agreement, and in the further alternative, a resulting trust. They seek equitable compensation or the sale of the land.
The Lakes say that they need to have the caveat removed because they wish to refinance their borrowings secured against the land from the Commonwealth Bank to Westpac and Westpac will not be content with an unregistered mortgage. The Ratcliffes will not consent to the registration of the mortgage with Westpac in lieu of that with the Commonwealth Bank because they say it is an all moneys mortgage notwithstanding letters from Westpac to the Lakes, recently obtained, that the mortgage will specifically secure a housing loan of $750,000 in respect of the subject property and an overdraft limit of $400,000 in respect of Video and Audio (Australia) Pty Ltd, Mr Lake's business, virtually the same amounts secured by the Commonwealth Bank mortgage.
The Ratcliffes are concerned about a debt finance facility of $800,000 in the company name which is to be specifically secured by a fixed and floating charge over the company and personal guarantees from the Lakes.
Without a limit on the mortgage as to the amount secured the Ratcliffes are concerned that further borrowings may be secured against the land which has now been valued by the Westpac valuers at $1.65 million, a significant increase since its purchase at the end of 2002 for $1 million.
The Lakes and the Ratcliffes had been firm friends for many years. The Ratcliffes lived in the Gold Coast area as did the Lakes and the women worked together. Mrs Lake's widowed father lives at 83 Stanhill Drive. The Lakes and their children moved in to assist him after his wife's death in late 2002. The owner of the land next door at number 85, the subject land, died in December 2002. The Ratcliffes had said on previous occasions that they would be interested in buying the property should it become available. There was probably some conversation about the two couples doing something together with the land.
There were conversations between the women about the likely availability of the property and then the men discussed it. The Ratcliffes deposed that they reached agreement with the Lakes that the property would be purchased for the joint benefit of both couples. The Lakes maintain that although there were many conversations no concluded agreement was reached.
The Lakes signed a contract with the vendors of 85 Stanhill Drive on 20 December 2002. The Ratcliffes say the Lakes asked for one-half of the deposit of $25,000 - that is, $12,500 - which they paid into the Lakes' family company, Mandolo Pty Ltd's, account on 24 December 2002. The Lakes deny that they asked for the money. Mrs Lake deposes that she thought when Mrs Ratcliffe raised this with her it related to some as yet unspecified future plans that her husband and Mr Ratcliffe might be discussing. Three thousand dollars of that $12,500 was utilised by the Lakes as the deposit.
The parties conversed about the property in January 2003 and at the end of the month met at the Gold Coast where the Ratcliffes inspected the property and discussed improvements. Mr Ratcliffe produced a bundle of handwritten notes about their “agreement” prepared by his brother, a developer. It is clear that much that was essential to any agreement about the land and its further development had yet to be agreed. The further memo from Mr Nutbeam which was also produced - Mr Nutbeam is an account for the Ratcliffes - makes this imprecision about the terms of the agreement plain. He concluded with the words, “I recommend that the parties enter into a joint venture agreement prior to settlement.”
Mr G O'Sullivan for the Ratcliffes submits that the legal arrangements should be seen as a two-stage process. The first was the acquisition of the land in respect of which agreement was reached. The second concerned the development of the land in respect of which there was not yet agreement. The Lakes did not agree with the Ratcliffes' proposal set out in those notes. They were especially concerned at a timeframe of three to five years for development since Mrs Lake's father's welfare was their prime consideration.
They did not say this immediately to the Ratcliffes but deposed it was conveyed in February 2003. Mr Lake told Mr Ratcliffe that there was no way forward for them in the proposal and he would return the deposit. According to Mr Lake, Mr Ratcliffe said not to do so and something else might be worked out. According to Mr Ratcliffe, Mr Lake put an alternative proposal to him at the beginning of February 2003 that the Lakes buy the property outright and the Lakes would grant the Ratcliffes an option to purchase a house share at some future time and that the $12,500 could be an option fee.
The Lakes needed the property as security for the purchase price and in respect of business requirements. If that were to occur, the Ratcliffes wanted an option to purchase in three years at $500,000, half the actual purchase price.
The Lakes settled the purchase of the property on 29 April 2003. In May Mr Ratcliffe followed up with Mr Lake details of the option agreement. According to Mr Ratcliffe, Mr Lake was to have done this but did not and Mr Ratcliffe consulted with solicitors who produced an agreement which Mr Ratcliffe had sent to the Lakes in August 2003. There had otherwise been no communication since settlement between them.
The draft agreement signed by the Ratcliffes provided for an option to buy a 50 per cent interest in the land in three years from the date of settlement at 50 per cent of the purchase price. The Lakes were to provide the entire purchase price and all expenditure by the Lakes on the acquisition and improvement of the land was not to be included in the option cost. Upon the Ratcliffes exercising their option any future development would be considered by the parties.
Mr Lake sought advice and responded in August to the Ratcliffes that the proposal was not suitable. By letter of December 2003 the Lakes returned the $12,500. Mr Ratcliffe, however, according to Mr Lake telephoned and suggested that the Lakes might think things over over Christmas.
In early January the Ratcliffes returned the bank cheque representing the deposit moneys of $12,500. In August 2004 the Lakes were served with the Victorian proceedings and, as mentioned, on 23 September the caveat was lodged.
As Mr G Newton for the Lakes has set out in his detailed written and oral submissions, there are conflicts between the pleaded case advanced by the Ratcliffes and their affidavits. It is not suggested by Mr O'Sullivan that these differences do not exist. There are clearly flaws in the pleading but if the proceedings are cross-vested to Queensland, then that will be the occasion for this Court to deal with them.
As is readily acknowledged by Mr O'Sullivan, the Ratcliffes' claim can only proceed on the basis of a constructive trust not caught by the Statute of Frauds. There is a pleading of part performance in the reply relying on the payment and initial acceptance of $12,500 by the Ratcliffes. Nothing else pleaded evinces part performance in as much as being referrable to an alleged joint venture agreement.
Mr Newton contends that it is a weak constructive trust case. It is, in a sense, a fallback position for the Ratcliffes because they plead that they accepted the Lakes' repudiation of that agreement and then entered into the option agreement.
In respect of both issues whose account is believed will be paramount, but further, the common intention may be quite difficult to identify. It cannot be some vague idea of joint ownership. The facts not in contest do not immediately suggest the kind of informal arrangement between prospective partners or participants in a proposed joint venture such as is discussed by Justices Mason, Brennan and Deane in United Dominions Corporation Limited v. Bryan Pty Ltd  157 CLR 1 at 12. There are clearly serious questions to be determined. A claim based on a resulting trust will obtain for the Ratcliffes a 1.25 per cent interest in the net value of the property.
On the balance of convenience it is a serious impediment to the Lakes not to be able to refinance their borrowings in a manner more favourable to them than at present. Although the Ratcliffes say that they have the 50 per cent purchase price, they have neither advanced any funds nor exposed themselves to the risk of borrowings about this property. They are rightly concerned to secure their alleged interest. However, they delayed for at least nine months before doing so; perhaps, indeed, longer than that before commencing proceedings and then lodging the caveat. The Lakes have meanwhile conducted their business affairs assuming the land was available for security.
I have concluded that the caveat ought to be removed on the balance of convenience but on terms which will protect the status quo so far as it relates to the Ratcliffes' position. That can be accommodated by the Lakes undertaking until trial or further order not to encumber further the land or accept any increases to the present limits to their existing borrowing facilities with Westpac.
I would further require that the $12,500 plus an amount of $2,500 to represent some interest to date being the sum of $15,000 be paid into Court by the Lakes to secure the deposit moneys.
HER HONOUR: Well, as usual in many costs arguments there is something to be said for each side's position. It is tempting to suggest that at least one of the costs thrown away by the adjournment ought to be borne by the respondents to this application but apart from that I am of the view that what has finally eventuated has been a fairly slow process of negotiation in a sense by the lawyers which has allowed counsel to reach the positions that they have when the matter finally came to be dealt with yesterday.
I think in all of those circumstances there really isn't any benefit in identifying - shall we say - blame for the outcome that had to go to a hearing and for the outcome in terms of costs orders.
The order in respect of costs, all of them - that is, those reserved on a previous occasion - I am prepared to make either costs in the cause or reserved. Now, I know in reality if the matter goes to a final hearing it means the same thing but do either of you have any view about that?
HER HONOUR: I should then, if that is the case, reserve them so that if the proceedings are removed they can then be dealt with.
- Published Case Name:
John Lawrence Lake and Anne Elizabeth Lake v Anthony James Ratcliffe
- Shortened Case Name:
Lake v Ratcliffe
 QSC 405
02 Nov 2004
No Litigation History