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  • Unreported Judgment

Nateau Investments Pty Ltd v Pitt St Properties

 

[2015] QSC 101

 

SUPREME COURT OF QUEENSLAND

 

CITATION:

Nateau Investments Pty Ltd v Pitt St Properties [2015] QSC 101 

PARTIES:

NATEAU INVESTMENTS PTY LTD ACN 140 018 855

(plaintiff)

v

PITT ST PROPERTIES PTY LTD ACN 101 927 502

(first defendant)
and
KARL CHRISTIAAN RAMEAU
(second defendant)

FILE NO/S:

No 7122 of 2012

DIVISION:

Trial

PROCEEDING:

Trial

ORIGINATING COURT:

Supreme Court at Brisbane

DELIVERED ON:

29 April 2015

DELIVERED AT:

Brisbane

HEARING DATE:

15, 16, 17 and 18 September 2014

JUDGE:

Dalton J

ORDER:

Judgment is given for the defendants on the claim and for the plaintiff on the counterclaim

CATCHWORDS:

CONTRACTS – GENERAL CONTRACTUAL PRINCIPLES – FORMATION OF CONTRACTUAL RELATIONS – AGREEMENTS CONTEMPLATING EXECUTION OF FORMAL DOCUMENT – WHETHER CONCLUDED CONTRACT – where the parties met to attempt to resolve a dispute – where detailed consensus on certain issues was reached – where evidence the parties intended to act upon obligations immediately – where opinions had been expressed by the parties that an agreement had been formed – where draft documents consistent with the conclusions reached at the meeting were circulated – whether a legally binding agreement had been made

CONTRACTS – GENERAL CONTRACTUAL PRINCIPLES – STATUTE OF FRAUDS – NONCOMPLIANCE WITH STATUTE – DEFENCE OR COUNTERCLAIM BASED ON CONTRACT – where s 59 of the Property Law Act 1974 applied – where counterclaim is an action brought for damages for breach of a contract of the sale of land; whether counterclaim an action brought on contract for sale of land within the meaning of s 59 Property Law Act 1974

DAMAGES – MEASURE AND REMOTENESS OF DAMAGES IN ACTIONS FOR BREACH OF CONTRACT – REMOTENESS AND CAUSATION – GENERAL PRINCIPLES – whether the loss alleged to be suffered by the defendants was caused by the plaintiffs – whether the defendants proved the loss alleged to be suffered

Property Law Act 1974 (Qld)

Australian Broadcasting Corporation v XIVth Commonwealth Games Ltd (1988) 18 NSWLR 540

Duff v Blinco (No. 2) [2007] 1 Qd R 407

Eastgate Properties Pty Ltd v J Hutchinson Pty Ltd [2005] QSC 196

Freedom v AHR Constructions Pty Ltd [1987] 1 Qd R 59

Marek v Australasian Conference Association Pty Ltd [1994] 2 Qd R 521

Masters v Cameron (1954) 91 CLR 353

Mermaids Café & Bar P/L v Elsafty Enterprises P/L [2010] QCA 271

Moffatt Property Development Group Pty Ltd v Hebron Park Pty Ltd [2009] QCA 60

Theodore v Mistford Pty Ltd & Ors (2005) 221 CLR 612

COUNSEL:

JA Sheean for the plaintiff

MD Martin QC for the defendants

SOLICITORS:

McKelvey & Hu Lawyers for the plaintiff

QBM Lawyers for the defendants

[1] Natasha and Brenden Rutherford lived next door to Karl and Dayna Rameau.  Natasha Rutherford was the sole director and shareholder of Nateau Investments Pty Ltd and Karl Rameau the sole director and shareholder of Pitt St Properties Pty Ltd.  Nateau and Pitt St entered into something described as a Joint Venture Agreement, dated 4 June 2010.  It concerned part of the subdivision and development of land which was owned by Pitt St and a company named Town Centre Development Pty Ltd.  The land was at Bannockburn.  Karl Rameau was a property developer and, I infer, was short of funds to develop the Bannockburn land.  The Joint Venture Agreement was drawn by Karl Rameau.  Under the heading “Recital” there was a summary of the commercial intent of the agreement.

“Pitt St will provide six (6) lots of land marked on Annexure A.  Nateau will provide sufficient funds for the construction of six (6) homes on the abovementioned lots.  Pitt St will provide all of the expertise required and Nateau will fund the construction to a limit of $1,000,000.  At settlement Pitt St will transfer the subject lots directly to the end users and will deduct from the settlement funds the land amount as stated in Annexure B and the marketing costs associated with the sale of each lot.  The balance is paid to Nateau at settlement.” (Underlining in the original.  Corresponding track changes marking in the margin not reproduced here).

[2] There was then a heading “Operative Part”, and eight typed and three handwritten clauses:

“1.Nateau will enter a land acquisition contract on the subject lots with settlement dates reflecting settlement in 120 days.  However this agreement is evidence to the fact that Nateau will be granted as many extensions as it requires so as to never have to settle the land and the land transfers directly to the end user.

2.Deposits already held on the initial two lots will be reallocated over the whole six (6) lots.

3.Pitt St is to provide all the marketing services and administer the construction on Nateau’s behalf.  The only fee payable will be $3,3500 per lot to the sales person.                                                              

4.Pitt St guarantees the return of Nateau’s investment.

5.Karl Rameau personally guarantees the return of Nateau’s investment.

6.Nateau agrees to enter into six (6) building contracts with B3 Constructions Pty Ltd as the licensed builder.

7.Nateau’s commitment to B3 Constructions Pty Ltd will commence as follows:

$50,000approximately will be due in deposits in approximately 30 days

$300,000approximately in progress draws will be due in about 90 days

$300,000approximately in progress draws will be due in about 120 days

$300,000approximately in progress draws will be due in about 150 days

$50,000approximately in final payments will be due in about 180 days

8.Should Nateau chose to settle all or some of the properties for any reason whatsoever and at Nateau’s discretion only this Joint Venture agreement provides for an additional discount of 10% per lot of the land component.

9.Nateau commits its fund for approximately 12 months.

10.Pitt St commits an additional 6 lots.  If the first six lots are successful.

11.Pitt St will provide a consent caveat over the subject lots which may be lodged by Nateau as they see fit.” (Underlining in the original.  Corresponding track changes marking in the margin not reproduced here).

[3] There was an annexure B to the agreement (although there was no annexure A).  Annexure B read as follows:

“The Pitt St will provide the following lots to the Joint Venture

Lot 4$230,000

Lot 5$230,000

Lot 6$230,000

Lot 20$215,000

Lot 18$220,000  $215,000 

Lot 17$330,000    315,000

Whilst these are the effective prices for the Joint Venture the actual Purchase Contracts for the Pitt St’s purposes may need to reflect a higher price.” (Underlining in the original.  Corresponding track changes marking in the margin not reproduced here).

[4] The execution page showed that Natasha Rutherford signed as director under the words “Signed by NATEAU INVESTMENTS PTY LTD” and that Karl Rameau signed as sole director of Pitt St Properties under the words “Executed by PITT STREET PROPERTIES PTY LTD”.  There was a track changes mark in the margin against these latter words.

[5] Apparently on the same day, there was another written agreement signed, named “Profit Share Agreement”.  This time the parties to the agreement were Brenden Rutherford and Natasha Rutherford of the one part, and Karl Rameau and Dayna Rameau of the other.  This time the recital read:

“The agreement is an extension of and directly relates to the arrangement set out in the corresponding Joint Venture Agreement between Pitt St Properties Pty Ltd and Nateau Investments Pty Ltd, signed on the same day of this document.”

[6] Under the heading “Operative Part” were five (four typed and one handwritten) clauses as follows:

“1.The Rutherfords will be responsible for the $1,000,000 to be provided by Nateau to the construction process.

2.All funds received by Nateau from the Nateau / Pitt St Joint Venture are to be held by Nateau with the exception of the $1,000,000 of the Rutherfords capital which is to be paid back first.  Ie. there is no profit until the Rutherfords money is repaid.

3.Natasha Rutherford controls Nateau exclusively on the Rutherfords and the Rameaus behalf.

4.Profit Share: the Rutherfords are guaranteed by way of this agreement to receive the first $200,000 of any profit made.  Once the profit is more than $400,000 all profit is to be shared equally.  Ie.  If only $200,000 is made on the venture then that is retained solely by the Rutherfords.  If $300,000 is made by the venture the Rutherfords would receive $200,000 and the Rameaus $100,000.  Ideally the profit anticipated for the venture should be $600,000 or greater.

5.The Rutherford’s can determine weather the first six deals warrant the re investment of funds in another 6 lots.”

[7] The execution page bore the signatures of Natasha and Brenden Rutherford under the words “Signed by BRENDEN RUTHERFORD & NATASHA RUTHERFORD”, and the signatures of Karl and Dayna Rameau under the words “Signed by KARL RAMEAU AND DAYNA RAMEAU”.

[8] The two written agreements above were presented in typewritten form, with track changes marked as shown, to the Rutherfords at dinner and the handwritten paragraphs were added during discussions over the course of the dinner.  It was Mrs Rutherford’s evidence that during the evening Karl Rameau assured the Rutherfords that he “would be personally guaranteeing all the money that [they] put into the investment” – t 1-31.  He said, “I guarantee everything that – you know, any money that you put in I guarantee that you’ll get back out”.  I accept this evidence.  I thought Mrs Rutherford was upset about the subject matter of this litigation, but that she gave honest evidence to the best of her ability.

[9] Surprisingly, the Rutherfords sought no legal advice before signing these agreements, or at all, until May 2012.  This is perhaps more surprising since the Rutherfords did not lack commercial sophistication.  Mrs Rutherford and her husband were both dentists.  They owned around nine real properties, valued at many millions of dollars – t 1-63.  Land contracts, as contemplated by cl 1 of the Joint Venture Agreement, were never signed because Karl Rameau never proffered them to Natasha Rutherford and she did not think to ask him to.  Likewise, there were no consent caveats as contemplated by cl 11, because although Mrs Rutherford did ask Mr Rameau about them, he told her they were not needed and it would not look good for his bank – t 1-37.

[10] It was admitted that on various dates between 15 June 2010 and 29 April 2011, Nateau paid B3 Constructions amounts of money totalling $1 million pursuant to the obligations in the Joint Venture Agreement.  B3 Constructions built homes on the lots referred to in the Joint Venture Agreement.

[11] After many anxious requests from the Rutherfords, on 9 February 2012 $100,000 was paid to Nateau in part discharge of obligations under the written agreements – t 1-40.  This was the first time money was paid to Nateau under the Joint Venture Agreement, despite the passage of time and many requests from Mrs Rutherford to Mr Rameau.  The amount was not referable to any amount due under the agreement.

[12] Despite many more requests, Mr Rameau did not pay any further monies to Nateau and did not meet with the Rutherfords when they requested it.  The Rutherfords became suspicious and drove out to Bannockburn in mid-May 2012.  They discovered that three of the six houses the subject of Nateau’s agreement with Pitt St properties appeared to have been sold.  The Rutherfords then consulted a lawyer.

[13] Nateau’s solicitors wrote to solicitors for Pitt St, asking for the details of sales of the lots the subject of the Joint Venture Agreement.  On 23 May 2012 Pitt St’s solicitors replied that four of the lots had been sold and giving the dates and sale prices as follows:

  • Lot 18 sold 22.12.11 for $444,912
  • Lot 20 sold 23.12.11 for $444,857
  • Lot 5 sold 10.1.12 for $465,287
  • Lot 4 sold 21.5.12 for $438,608 – exhibit 1, tab 10.

[14] Nateau’s solicitors lodged caveats on the two remaining lots which were the subject of the Joint Venture Agreement.  Correspondence between the lawyers proposed that a commercial solution be found whereby Nateau purchased the two remaining lots the subject of the Joint Venture Agreement at a price reflecting the value of the land without the houses, and a second mortgage be taken over the balance of the entire development to secure repayment of an amount of around $700,000 over time.

Settlement Conference 12 June 2012

[15] On 12 June 2012 the Rutherfords, Mr Rameau, Mr Coman, Nateau’s solicitor and Mr  Delaney, Pitt St’s solicitor, met to try to resolve matters in dispute between the parties.  The defendants’ case was that an agreement was reached at that meeting; Nateau’s case was that the discussions did not go so far as to amount to a contract. 

[16] The defendants contended that the agreement reached that evening was within the first (or second) category referred to in Masters v Cameron:[1]

“… It may be one in which the parties have reached finality in arranging all the terms of their bargain and intend to be immediately bound to the performance of those terms, but at the same time propose to have the terms restated in a form which will be fuller or more precise but not different in effect.  Or, secondly, it may be a case in which the parties have completely agreed upon all of the terms of their bargain and intend no departure from or addition to that which their agreed terms express or imply, but nevertheless have made performance of one or more of the terms conditional upon the execution of a formal document.  Or, thirdly, the case may be one in which the intention of the parties is not to make a concluded bargain at all, unless and until they execute a formal contract.

In each of the first two cases there is a binding contract: in the first case a contract binding the parties at once to perform the agreed terms whether the contemplated formal document comes into existence or not …; and in the second case a contract binding the parties to join in bringing the formal contract into existence and then to carry it into execution. …

… Cases of the third class are fundamentally different.  They are cases in which the terms of agreement are not intended to have, and therefore do not have, any binding effect of their own. …”

[17] The evidence led as to this issue was not particularly satisfactory.  No witness was asked to give evidence of an oral contract in a disciplined or consistent way.  Nonetheless I am satisfied on the balance of probabilities that there was an agreement reached on 12 June 2012, within the first category of Masters v Cameron

[18] Mrs Rutherford agreed in crossexamination that the two remaining lots were to be transferred to Nateau for the price of $490,000.  When it was put to her that Nateau was to receive those lots for “whatever Bankwest required to release those properties” she answered, tellingly in my view, “No.  That wasn’t the figure.  There was a $490,000 figure.  It wasn’t what Bankwest – otherwise how could we come to an agreement.” – t 167. 

[19] The agreement to purchase the lots was subject to finance – t 1-67.  It was uncertain whether or not Nateau could obtain finance.  If Nateau could not get finance, the defendants’ case was that there was agreement that the properties would be sold and the plaintiff would receive the equity in the properties – t 2-46 per Mr Delaney.  Mrs Rutherford did not agree with that proposition – t 1-67.  It appeared she did not agree on the basis that there had been no agreement as to the price at which the lots would be sold.  It is correct that there was no such agreement – t 2-47 per Mr Delaney.  Mrs Rutherford certainly considered there was discussion about a possible sale – t 1-68 – and discussion that if Nateau could not get finance the lots “would have to be sold” – t 169.  There had been no discussion as to how the sale proceeds would be disbursed in that event – t 1-69. 

[20] Mr Coman agreed that the two remaining lots were to be transferred to his client for an amount of $490,000 – t 2-17 – and that obligation was to be subject to Nateau obtaining finance – tt 2-18-19.  He agreed that if finance was not obtained, the properties “were to be sold” but said there was no agreement at the meeting on how that was to be effected – t 219.  It was put to Mr Coman, “So the deal, wasn’t it, Mr Coman, that regardless of whether lots 6 and 17 were transferred to your clients or if they were sold, your clients were to get whatever equity was in those properties?--- Subject to the first mortgagee … yes, whatever – you would get the balance after whatever the first mortgagee decided it would take.  … That was what was said.” – t 2-33.

[21] Insofar as there was a difference as to the facts of the matter (rather than one of opinion as to whether those facts amounted to a contract) I prefer Mr Delaney’s evidence.  I thought he gave evidence in a straightforward way.  While he was the solicitor representing Rameau and Pitt St at the conference, I thought he displayed a professional diffidence and, of everybody at the meeting, had the most understanding of the commercial and contractual matters which were discussed.  I find that there was an agreement that if Nateau could not obtain finance to buy the two remaining lots, they would be sold and Nateau would receive the entire sale proceeds other than what was necessary to satisfy the mortgagee.  There was no agreement as to the timeframe for the sales and no agreement as to the price at which the lots would be sold.  These matters could not be agreed with any precision, because they were subject to the vagaries of the real estate market at the end of the global financial crisis.  In my view there was an implied term that the parties would act reasonably as to the timing and purchase price.  I think that these implied terms can be used in order to determine that the parties had reached a consensus which was “sufficiently comprehensive to be legally binding”.[2]

[22] Mrs Rutherford conceded that it was discussed that the amount of $704,000 was to be paid by Pitt St over time at a rate of $8,000 from each settlement as the whole development proceeded – t 1-71.  Mrs Rutherford conceded that parties did agree on $8,000 as being the only amount which Pitt St could afford to pay – t 1-73.  As well, she conceded it was discussed that Nateau would receive an unregistered second mortgage over the entire balance of the subdivision to secure that, and a personal guarantee from Mr Rameau – t 1-71. 

[23] Mr Coman conceded that there was a total amount to be repaid agreed to in the meeting – t 2-13.  He agreed that there was going to be an unregistered second mortgage to secure this amount of $704,000 – t 2-15 – and that it was going to be repaid from settlements over the remaining four or five stages – t 2-15 – in amounts of $8,000 per lot – t 2-16.   Mr Coman conceded in cross-examination that the timeframe for the repayments (some four years) was agreed at the meeting – t 2-30.  Mr Coman agreed that there was an agreement as to a second mortgage and guarantee to secure the outstanding obligations – tt 2-19-20.  He said that the relevant parties agreed to give that security – t 2-20.  Nateau accepted that the mortgage in its favour would be an unregistered second mortgage.

[24] Mr Coman said that there was considerable discussion at the meeting about how the unregistered second mortgage would be kept in registrable form in circumstances where the remainder of the development would be gradually subdivided– t 2-36.  An arrangement was reached whereby Mr Delaney gave his personal undertaking that Mr Coman would be made aware of each of the sales and that he would contact Mr Coman to seek his consent to lodging plans of subdivision – tt 2-44-45.  As well, the parties got down to the detail of Mr Coman’s firm being paid $110 to attend at each of the settlements to take the $8,000 due to Nateau – t 2-31.  This level of detail on these issues convinces me that there was agreement as to these things at the meeting. 

[25] At the end of the meeting Mrs Rutherford said that she would go to her bank to see if she could obtain finance – t 1-75 – and that Mr Coman would write a letter for Mr Rameau to take to Pitt St’s financier and mortgagee, Bankwest, to seek that bank’s agreement to release its security over the two remaining lots for the amount of $490,000.  Mr Coman recalled Mrs Rutherford saying that she would go to her bank to apply for finance at the earliest possible opportunity – t 2-34.  The day after the meeting Mr Coman sent a letter to Mr Delaney to enable Mr Rameau to go to his bank – t 2-19. 

[26] Mr Delaney was of the view that there was an agreement reached at the meeting – t 2-44, t 2-45 and t 2-46.  He said that at the conclusion of the meeting Mr Rameau, Mr Coman and Mr Rutherford shook hands.  Mrs Rutherford was emotional and reluctant to agree, but he said she did agree.  Mr Coman said he would send the documents over to Mr Delaney’s office as soon as possible and Mrs Rutherford said she would contact her bank as soon as possible to see if she could arrange finance – t 2-46.  That the parties said they intended to act immediately in accordance with their obligations is strongly indicative that they regarded themselves as immediately bound.

[27] Overall, Mr Coman agreed that “an agreement in principle had been reached” – t 2-37.  The next day he wrote to Mr Delaney saying:

“Further to our the meeting on 12 June 2012 we have forwarded to you separate to this letter, a letter which will enable you to approach Bank West with respect to the proposed transfer of Lots 6 and 17.

With respect to the agreement which was reached during the meeting, we shall begin preparing the Deed of Settlement, Loan and Mortgage documents and hope to have them to you soon.” (my underlining).

[28] On the same day Mr Coman sent a separate letter which read:

“We refer to the meeting held on 12 June 2012 and confirm that as part of the agreement between the parties your client is to transfer Lots 6 and 17 to our clients in return for the payment of $490,000 which is to be paid to Bank West upon the transfer of the properties.  We note that with respect to Lot 17 the property is a duplex property and that the Survey Plan has now been sealed by the Gold Coast City Council.  We believe that it will be necessary for that Survey Plan to be registered and we would be pleased if you could immediately attend to the registration of the Survey Plan and the First CMS and provide us with a copy of the Registration Confirmation Statement once that occurs.” (my underlining).

[29] On 15 June 2012 Mr Coman sent a third letter which read:

“We refer to the meeting held on 12 June 2012 and in accordance with the agreement reached at that meeting we now enclose the following for your consideration:

1.Deed of Settlement;

2.Deed of Loan and Guarantee;

3.Mortgage (including Standard Terms No K613251P); and

4.Irrevocable Authority.

Could you please advise when the Survey Plan with respect to Lot 17 is to be lodged.

We confirm we have yet to provide a copy of the documents to our client and we reserve the right to make further amendments.” (my underlining).

[30] Both Mr Coman and Mr Delaney in their evidence (above), and Mr Coman in the underlined parts of his three letters of 13 June 2012 and 15 June 2012, expressed views that an agreement had been reached.  I think strictly speaking this evidence is opinion evidence which swears to the issue I must decide.  Nonetheless, it is clear from similar cases that Courts do have some regard to the parties’ own characterisation of what has occurred.[3]

[31] Mr Coman’s evidence was that the statement of agreement in the letter of 15 June 2012 was not so definite as it looks.  He said that the agreements sent to Mr Delaney were drafts, and indeed they are marked that way – they were not executed by Nateau and tendered for signature.  By the terms of the letter the drafts were provided for consideration and Mr Coman left himself some room, saying that he had not yet shown the documents to Nateau and “reserved the right to make further amendments”.  However, it is possible to read this reservation as going only to the fine details or drafting points as to the expression of the agreement in the written documents.  I prefer to read it that way because it is consistent with the preceding assertion in the letter, that an agreement was reached at the 12 June meeting.

[32] The documents tendered as drafts for consideration were remarkably consistent with the evidence of what was agreed at the 12 June 2012 meeting.  This consistency was at a level of detail.  An exception is that the draft documents contained a provision that Pitt St was to pay monies owing for rates and land tax in respect of the two remaining lots.  This was not discussed at the meeting.  It is not such a large matter.  Moreover, it is a matter which sits comfortably within the general agreement that Nateau was to receive the equity in the two remaining lots, except for what was owed to the mortgagee.  The inclusion of this matter does not dissuade me from the view that an agreement was reached at the meeting of 12 June.  As is recognised in Masters v Cameron itself, agreement can be reached on the understanding that the written form will be fuller or more precise.  I do not think the draft was different in effect.

[33] Further, the written draft settlement agreement contained a provision at cl 3, that it was only when the total consideration had been paid under the new arrangement, that the parties would release and discharge each other from claims under the Joint Venture Agreement.  Mr Coman said that clause was drafted in accordance with what was agreed at the meeting – t 2-21.  Mr Delaney accepted that the documents produced by Mr Coman were consistent with what was discussed at the meeting of 12 June 2012.  The defendants raised some dispute as to whether or not Mr Delaney had a different view as to whether there was an oral agreement about when release and discharge from obligations under the Joint Venture Agreement would occur.  In my view this does not matter.  If the provision in the written contract was new, that is, not discussed at the meeting, I regard it as something which was incidental to the documentation of the agreement, rather than something which was so fundamental that there could be no contract without an express agreement as to it.  Whether the oral agreement contained a term to the effect of cl 3 in the draft documentation does not affect the outcome of this litigation.

[34] Mr Coman said that, although it was agreed at the meeting that Nateau would have the right to register the second mortgage and charge interest on default, it was never discussed at the meeting what would amount to a default – t 2-32.  In the draft loan document, Nateau gained the right to register the mortgage on breach of the deed of loan or mortgage, which seems uncontroversial, and in accordance with what would normally be the case without specific provision.  While the written document contained a little more detail than the oral agreement in this regard, that does not mean that there was no binding agreement reached on the evening of 12 June 2012.

[35] Concern was expressed by Mr Coman about the reliability of Mr Rameau’s view that Bankwest would in fact accept $490,000 in exchange for releasing the two remaining lots from its security.  I understand his hesitation, but the agreement was that Pitt St Properties would sell the properties to Nateau for that amount; the agreement was clear enough.  If Pitt St could not fulfil its promise, it would be in breach of its agreement.  The matter goes to execution of the agreement, not its formation.

[36] I record for completeness that Mr Rutherford had little understanding of what occurred at the meeting of 12 June 2012 and I do not find his evidence about it useful in trying to determine whether or not an agreement was reached – see t 2-81ff.  Further, because I did not regard Mr Rameau as an honest witness, I have disregarded his evidence in coming to my conclusions about this matter.

Events Subsequent to 12 June 2012

[37] After the meeting of 12 June 2012 Mr Delaney found that his client, Mr Rameau, was hard to contact.  This was apparently because Mr Rameau had gone shooting.  After that it was school holidays and Mr Delaney was away.  In any event, there was no attempt by Mr Rameau, or anyone associated with him, to either reply to Mr Coman’s letter of 15 June 2012 or to carry out any terms of the settlement agreement.  Mr Coman wrote another letter dated 5 July 2012.  It said:

“We refer to previous correspondence and confirm that we have now been instructed that our client is not agreeable to compromising or settling the matter on any basis other than the immediate and full repayment of the amount owing by your client to our client.  Our client is not interested in taking an unregistered second mortgage in relation to the monies owing by your client to it and is also not interested in taking a transfer of Lots 6 and 17.

We confirm we are now briefing Counsel to draft proceedings in relation to the Caveat (Lots 6 and 17) as well as the recovery of the amount owing by your client ($677,806) and unless the full amount owing is paid within seven (7) days proceedings will be filed and served immediately thereafter.

Could you please advise whether you hold instructions to accept service on behalf of Pitt St Properties Pty Ltd and/or Karl Rameau.”

[38] Mr Delaney replied the same day:

“We refer to your facsimile of 5 July, 2012 which comes as an absolute surprise to ourselves and our client.

It is our client’s position that a binding Agreement to settle the dispute between Nateau Investments Pty Ltd and Pitt St Properties Pty Ltd had been reached at a meeting held in our offices on 12 June, 2012 (the ‘Agreement’).

The documents prepared by your firm on behalf of your client and delivered to our offices under cover of your letter of 15 June, 2012 are consistent with the terms of the Agreement reached at the meeting between our respective clients.

It is our client’s position, that your client cannot unilaterally rescind or otherwise attempt to terminate the Agreement as it has purported to do so in your facsimile of 5 July, 2012.

In the circumstances, the contents of your facsimile of 5 July, 2012 amount to an unlawful rescission of the Agreement and in this respect we reserve all of our client’s rights.

…”

[39] The next day Mr Coman wrote a letter saying that there was no concluded agreement on 12 June 2012:

“With respect, we deny that there was as at the conclusion of the meeting on 12 June 2012 any agreement which could said to have been a binding contract between our respective clients.  In particular, but without limitation, we deny that there was any consideration given by your client to our client for any alleged agreement and further we note that the alleged agreement involved, amongst other things, the granting of a mortgage by your client to our client.  As you are aware a mortgage cannot be granted orally and can only be created in writing signed by the person creating that interest (Section 11 Property Law Act 1974).  There does not exist any such writing signed by your client.

Any agreement that was reached on 12 June 2012 was at all times subject to the parties entering into the formal legal documents including a Deed of Settlement, the Mortgage and other related documents the terms of which were still subject to agreement and until such time as those terms had been agreed and the agreements had been entered into there was no concluded binding contract.  The documents forwarded to you under cover of our letter dated 15 June 2012 were draft documents (the Deed of Settlement and Deed of Loan and Guarantee being marked ‘Draft’), were ‘for your consideration’ and we reserved the right to amend them.”

[40] Nothing was said on 12 June 2012 that any agreement was subject to being reduced to writing, or that until the parties had signed a document there would be no agreement.  Perhaps this is surprising given that there were lawyers present. 

[41] Given the executory nature of the agreement reached on 12 June 2012, it is s 59, not s 11 of the Property Law Act 1974 which is relevant.[4]  Section 59 of the Property Law Act does not prevent an executory contract being made orally, even though it concerns promises to convey land and to grant a mortgage.  Nor does s 56, which is also relevant, given that Mr Rameau was providing a guarantee pursuant to the agreement. 

[42] There is authority to the effect that a binding contract for the sale of land will normally not be made until the execution of a formal contract.[5]  I quite accept that authority and the reasoning behind it.  However, I do not think that there is any strong rule in relation to a compromise agreement which involves the parties making various promises to each other, the execution of some of which will involve written documentation concerning the creation, or transfer, of interest in land.  The case of Mermaids Café & Bar Pty Ltd v Elsafty Enterprises Pty Ltd[6] is a case in point.  That case concerned a compromise of litigation concerning the terms of a sublease.  The compromise was documented informally, although it expressly contemplated that formal documents would be drawn up and executed.

[43] The parties agreed on all the matters essential to their bargain on the evening of 12 June 2012.  There was nothing in the documents proffered three days later which amounted to a substantial addition.  The level of detail in the agreement reached on the evening of 12 June 2012 was considerable.  There was great consistency as to the terms which were agreed having regard to Mr Coman’s handwritten diary notes; the written documents proffered by him on 15 June, and the evidence of Mrs Rutherford and the two solicitors at the meeting.  That Mrs Rutherford would say at the end of the meeting that she would check with her bank as to finance as soon as possible is an indication that an agreement had been reached.  So is Mr Coman’s preparing a letter for Mr Rameau to take to his banker.  My conclusion is that there was an agreement intended to be immediately binding made on the evening of 12 June 2012.  The effect of it was to supersede and replace the parties’ obligations under the Joint Venture Agreement and the Profit Share Agreement.  The plaintiff made no claim except pursuant to those two agreements and thus its claim must fail.

Counterclaim

[44] On 21 November 2013 Mr Delaney sent a letter to the plaintiff’s solicitors, electing to terminate the settlement agreement as a result of its anticipatory breach of contract by the letter of 5 July 2012, [37] above.  It seems to me that the defendants were entitled to do that.  For completeness I add that whether or not there was agreement between the parties in terms equivalent to cl 3 of the draft written settlement agreement, it could not avail the plaintiff.  The plaintiff could not, by breaching the agreement made on 12 June 2012, re-enliven its rights under the Joint Venture Agreement and Profit Share Agreement.  Indeed, this was not an argument advanced by the plaintiff.

[45] The counterclaim was for loss of opportunity to profit from the Bannockburn subdivision.  The first defendant alleged that Pitt St could no longer proceed with the subdivision because the plaintiff did not honour the settlement agreement; commenced this proceeding; maintained caveats on the two remaining lots, and because as a result of these things, its banker refused to provide further finance to it – see paragraph 6 of the amended defence and counterclaim.  The counterclaim continued:

“8.As a result of the First Defendant being unable to proceed with its subdivision and Development of the Development Lot which has an expected profit of approximately $3,828.000.00

9.The First Defendant’s damages of $3,828,000.00 have been calculates as follows:-

Average Sale Price per Lot

$220,000.00

Estimate Development Cost per Lot

$70,000.00

Estimated Interest and Finance Costs per Lot

$16,000.00

Debt per Lot

$17,000.00

Estimated Marketing and Commissions per Lot

$30,000.00

Estimated Profit per Lot

$87,000.00

Estimated Total Profit for the Development 88 Lots

$7,656,000.00

The First Defendant’s share of the estimated profit 50%

$3,828,000.00

…” (original grammar and punctuation).

[46] A question arises as to whether or not the counterclaim is an action brought upon a contract for the sale of land.  If it is, it fails because of the provisions of ss 56 and 59 of the Property Law Act.  The settlement agreement did contain executory promises to sell lots 6 and 17 of the development; provide a second mortgage, and provide a guarantee.  The counterclaim seeks damages for its breach.  Freedom v AHR Constructions Pty Ltd is authority for the proposition that an action cannot be brought for damages for breach of an oral contract which was required to be in writing by s 59 of the Property Law Act.[7]  Even if this were not an insuperable obstacle to the counterclaim, I would otherwise give judgment for the plaintiff on the counterclaim, because the first defendant led no evidence in support of its counterclaim which actually persuades me that it lost anything of value by reason of the actions of the plaintiff.

[47] The counterclaim depended almost entirely on Mr Rameau’s evidence, so it is appropriate to record that I formed a poor impression of Mr Rameau’s credit.  Mr Rameau received considerable amounts of money on settlement of the lots the subject of the Joint Venture Agreement, which he paid away in breach of the Joint Venture Agreement.  He ought to have paid that money to Nateau; the Rutherfords were his good friends and neighbours.  Mrs Rutherford’s evidence was that she constantly asked him for information about recovering those payments and told him constantly that she needed repayments to be made under the Joint Venture Agreement.  I accept her evidence.  Mr Rameau did not tell her that three lots settled in December 2011 and January 2012 until May 2012.  Then he only told her of two settlements – t 3-46, t 3-47 and t 3-48.   He told her he was doing everything he could to protect Nateau’s interests (exhibit 8).  That was plainly untrue.  He did not tell her that Pitt St had dreadful financial difficulties.  Mr Rameau fobbed off her enquiries and did so dishonestly.

[48] If more examples be needed, Mr Delaney was quite certain in his evidence that his instructions from Mr Rameau were that Pitt St was charged default interest by Bankwest from 1 May 2012 in a very specific figure – $57,522.33 – tt 2-53-54.  Mr Rameau denied that default interest was ever charged – t 3-32 – and was most unimpressive when challenged with what his solicitor had written on his behalf.  I thought Mr Rameau gave plainly dishonest evidence as to his offering Nateau a personal guarantee – t 3-35, t 3-36.  My view was that the documents had been changed, and changed at his instructions, so that they might falsely indicate that he was giving a personal guarantee, when he was not – tt 339-41 and tt 3-43-44.  Mr Rameau resorted many times in his evidence to saying that he did not know, or did not recall, when asked questions about matters which were to his discredit, for example, t 3-30, t 3-31, t 336, t 3-37, and t 3-46.  I believe he made these responses dishonestly to avoid making true answers which were against his interests.

[49] In addition to these credit problems, the evidence led by the first defendant to support its counterclaim was vanishingly thin.  The development at Bannockburn was undertaken, I gather (there was no condescension to provision of documents), by a joint venture or partnership between Pitt St Properties and Town Centre Development Pty Ltd.  Mr Rameau was a director of Town Centre Development Pty Ltd.

[50] As to causation Mr Rameau gave this evidence:

“All right.  Now, as a consequence of the proceedings that were ultimately commenced and the caveats that remained over lots 6 and 17, what did you do about the subdivision or the balance of it?  How did it proceed?--- Sorry, could I get you to ask that again?

So – well, after that letter of the 5th of July that your solicitor sent, were proceedings commenced by Nateau against you and Pitt St?--- Yes, they were.

All right.  And what did you then do with respect to the subdivision?  How did you progress it after that?--- The only way for Town Centre to survive was to – for Pitt St to sell its share.

And why did – why did Pitt St have to sell its share?--- Because being embroiled in litigation it was unable to get finance and detracted from its partner in the project.

All right.  Now, I don’t want you to tell me what he said, but did you have a conversation with Mr Clarke about the existence of caveats and potential litigation in relation to Pitt St?--- Yes, I did.

And when was that conversation?--- Late June, early August 2012.

What then did you do about Pitt St’s interest in this – the balance of the subdivision – the balance 88 lots?--- It had to sell its share.

And to whom did it sell its share?--- Immobiliere Capital.

All right.  And what does that company do?--- Venture capitalists.

And what was the arrangement that you made with that entity with respect to Pitt St?--- It assumed Pitt St’s debt and provided working capital to the subdivision.

And what did it get in exchange?--- 50 per cent of the profits.

And what was Pitt St’s debt at that stage when Immobiliere acquired its interest.

I can’t recall Pitt St’s overall debt, but Bankwest excised that portion for – with debt of $3 million attached.

Okay.  Now, have you then through Town Centre and Immobiliere continued with the subdivision of the balance 88 lots?--- Yes.

Okay.  And how many of those lots have been sold?--- 28 …” – tt 3-16-17.

[51] Nothing in that exchange gave any persuasive evidence of any of the matters canvassed.  There were no documents tendered to support that version, and nowhere was there any more detail as to it.  Notwithstanding that Mr Clarke gave evidence, he did not support this version of events from Mr Rameau.  He said that he was told that caveats had been lodged over the two remaining lots in July or August 2012 and that proceedings might be commenced.  He was then asked:

“Mr Clarke, in those circumstances, namely that caveats had been lodged over properties in the subdivision and proceedings – legal proceedings – may be commenced, in those circumstances, would Bankwest have provided any further finance for that subdivision to Mr Rameau or to his company, Pitt St Properties Pty Ltd?--- No.” – t 3-3.

[52] In cross-examination Mr Clarke said that when he was informed about the caveats he suggested to Mr Rameau that he would need to get the caveats removed if he wanted the bank to give him further funding – t 3-68.  A caveat would not necessarily mean the bank would not provide further funding – t 3-70.  The bank would consider what the legal proceedings associated with a caveat involved – t 3-70.  Mr Clarke was not in a position within Bankwest to make the decision whether or not finance or additional finance would be approved by the bank – t 3-72. 

[53] Mr Rameau gave evidence that, at least by the time of the meeting of 12 June 2012, Pitt St Properties could not pay its debts as they fell due.  It could not pay land tax.  That was causing difficulties because notices of garnishee were being issued to purchasers of the lots in the development for land tax referable to the lot they had purchased – t 3-30.  Pitt St could not pay its rates and was being threatened with legal action by Logan City Council – t 3-30.  Mr Rameau himself was getting a divorce; selling his home, and being chased by the Australian Taxation Office for monies owing – t 3-31.  He personally owed money for rates.  He owed his sister for wages (she worked as his personal assistant in the land development business).  He had difficulty repaying money at the insistence of his parents – t 3-32.  Mr Rameau’s position at the settlement conference on 12 June 2012 was that, if he could not make an agreement, he would put Pitt St into liquidation.  His position was that there was no more money available than was offered pursuant to the agreement which was reached, and that Pitt St had “nowhere near enough money” to pay what was owing under the Joint Venture Agreement – t 2-63 per Mr Delaney.

[54] In those circumstances, I am not prepared to find that the real cause of Pitt St Properties’ sale of its interest to Immobiliere was the plaintiff’s commencing this proceeding and maintaining caveats.  Given the parlous nature of Pitt St Properties’ finances, I cannot safely conclude that there would have been any different or better outcome for it had the plaintiff adhered to the settlement agreement made on 12 June 2012.

[55] Additionally, there was very real uncertainty about the likelihood of the settlement agreement ever being performed according to its terms.  It required Pitt St Properties to transfer the remaining two lots to the plaintiff for the consideration of $490,000.  There is no evidence that Bankwest would have released those two lots from its security for that consideration.  The amount was an estimate of the unimproved value of the lots.  In fact they had houses built on them, and were worth roughly twice that amount.  The fact that the bank had been prepared to release other lots of land in the subdivision to arm’s-length third party purchasers for the land value of the lot, rather than the value of the house and land (see for example exhibit 1, tab 10), does not mean that the bank would have made that concession in relation to lots which were not being transferred to third party purchasers, but were being transferred in settlement of potential litigation.  Where a third party purchaser was involved, the purchase price over and above the land value was applied to the benefit of the land development generally.  Had the transfer of the two remaining lots to the plaintiff been proposed, the bank may well have been concerned that the purchase price received over and above the land value would be lost to the development.  The bank would have been interested to enquire as to the dispute being settled and may, if it persisted with its enquiries, have been told about the terms of the settlement agreement including the second mortgage, and the agreement to pay $8,000 to the plaintiff from each settlement.  There was no direct evidence that the bank would have agreed to releasing the two remaining lots for $490,000.  I would not be prepared to draw that inference.

[56] In any event, the attempt by the first defendant to prove the loss set out in paragraph 9 of the counterclaim (above) was farcical.  Mr Rameau simply sat in the witness box and responded in extremely economical terms to questions, which were often leading questions, in an attempt to prove the figures in the table to paragraph 9, or something like them.  He said that he calculated the average sale price of $220,000 on “a combination of what was selling in the area, what had sold on the estate, and valuations that had been done on the estate to date” – t 3-19.  None of the contracts and none of the valuations were disclosed or put in evidence, so that his evidence was secondary evidence of documents and there was no opportunity to properly question whether or not there was a sound basis for his averaging exercise, or indeed whether his evidence was true.  As his evidence moved on, it appeared that the average selling price was in fact only based on the 26 lots which had sold in stage 2, and that those had all sold in 2014 – t 3-21.  In those circumstances I raised with him the curiosity that the counterclaim had been pleaded in 2013.  I was told that “there were some pre-sales, your Honour” – t 3-57.  It was never explained what a pre-sale was.  No writing or detail was ever produced.  I am not prepared to act on this evidence.

[57] Evidence as to the expenses associated with each lot was similarly cursory and in response to leading questions, for example:

“How is that – and it’s said in the pleading it’s $70,000.  How is that figure calculated?--- Civil works, water pipes, road works, electricity is provided to the estate, council charges, headworks charges, all of those combined with, you know, application fees, all those things thrown in to be about $70,000.” – t 3-22.

[58] This estimate was apparently based on work done by an engineer.  A Mr Homes was called to prove a one page document entitled “Preliminary Estimated Development Cost Stage 2”, dated 16 August 2012.  Altogether Mr Homes was in the witness box for three minutes.  The one page document which he produced (exhibit 14) contained absolutely no explanation.  It is simply a list of figures.  It showed that the cost of producing a lot in stage 2 of this development was estimated at $84,791.  Mr Rameau said that the figure was higher than his own estimate of $70,000 because “engineers traditionally pad their estimates” – t 3-24.  Similarly, superficial and imprecise evidence was given by Mr Rameau as to finance costs – t 3-25 – and marketing costs – tt 3-26-27.

[59] Although Mr Rameau was a director of Town Centre Development Pty Ltd, and although he swore that company filed tax returns and had financial statements drawn upon a regular basis, including accounts and profit and loss statements, none of these documents were produced showing that in fact Town Centre Development Pty Ltd had ever made any profit from this development – t 3-58. 

[60] I am not persuaded that the plaintiff’s actions caused the sale of Pitt St’s interest in the subdivision.  I am not persuaded that, had Pitt St Properties continued in whatever partnership or joint venture arrangement it had with Town Centre Development Pty Ltd, it would ever have made any profit.  I give judgment for the plaintiff on the counterclaim.

[61] I will hear the parties as to costs.

Footnotes

[1] (1954) 91 CLR 353, 360-361.

[2] Mermaids Café & Bar P/L v Elsafty Enterprises P/L [2010] QCA 271, [47] and the authorities cited there.

[3] See for example Australian Broadcasting Corporation v XIVth Commonwealth Games Ltd (1988) 18 NSWLR 540, 547 per Gleeson CJ, “It is submitted on behalf of the respondents, correctly in my view, that even an assertion that ‘an agreement has been concluded’ is equivocal when one bears in mind the nature of the issue in the case.” See also Eastgate Properties Pty Ltd v J Hutchinson Pty Ltd [2005] QSC 196, [119], per Muir J. This has been justified in the cases as a determination of the intention of the parties “disclosed by the language the parties have employed” – Eastgate (above), [135].

[4] Theodore v Mistford Pty Ltd & Ors (2005) 221 CLR 612, [29]; Duff v Blinco (No. 2) [2007] 1 Qd R 407, [30], [37] and [45].

[5] Marek v Australasian Conference Association Pty Ltd [1994] 2 Qd R 521, 527-528 cited in Moffatt Property Development Group Pty Ltd v Hebron Park Pty Ltd [2009] QCA 60, [15]: “The usual expectation of parties in negotiation for the sale of land is that they will not to be taken to have made a concluded bargain unless and until a formal contract is executed.” However, even in the case of a contract for the sale of land there can be a binding oral agreement made: Freedom v AHR Constructions Pty Ltd [1987] 1 Qd R 59, 68-69.

[6] [2010] QCA 271.

[7] [1987] 1 Qd R 59, 70-71, per McPherson J.

Close

Editorial Notes

  • Published Case Name:

    Nateau Investments Pty Ltd v Pitt St Properties

  • Shortened Case Name:

    Nateau Investments Pty Ltd v Pitt St Properties

  • MNC:

    [2015] QSC 101

  • Court:

    QSC

  • Judge(s):

    Dalton J

  • Date:

    29 Apr 2015

Litigation History

No Litigation History

Appeal Status

No Status