Ladini v Hayward[2011] QDC 293

DISTRICT COURT OF QUEENSLAND

1. [1]
   The applicants (the first and second defendants) seek an order pursuant to Rule 194 of the Uniform Civil Procedure Rules 1999 (“the UCPR”) joining John Woulfe as a third party to the proceedings. There is also a cross-application by the plaintiff for an order that the signature of the first and second defendants on a Request for Trial Date be dispensed with.

2. [2]
   The plaintiff claims the sum of $519,000.00 against the first and second defendants pursuant to a contract for the sale of land from the defendants to the plaintiff dated 4 January 2008.^[1] In her statement of claim, the plaintiff alleges that by virtue of section 73 of the Property Law Act 1974 she was entitled to treat the contract dated 4 January 2008 (“the Contract”) as void as a result of the first and second defendants executing a mortgage over the property on 22 June 2009 in favour of Bank of Queensland Limited (“the Mortgage”).

3. [3]
   Section 73 of the Property Law Act 1974 provides as follows:

“73Land not to be mortgaged by vendor

1. (1)
   A vendor under an instalment contract shall not without the consent of the purchaser sell or mortgage the land the subject of the contract.

1. (2)
   Where land is mortgaged in contravention of this section –

1. (a)
   the instalment contract shall be voidable by the purchaser at any time before completion of the contract; and

1. (b)
   the vendor shall be guilty of an offence against this Act.

Maximum penalty – 9 penalty units.

1. (3)
   Nothing in this section affects –

1. (a)
   the rights of any bona fide purchaser from the vendor for value and without notice of the instalment contract; or

1. (b)
   the Land Title Act 1994.”

4. [4]
   It is not in dispute that the defendants executed the mortgage over the property in favour of Bank of Queensland Limited. The plaintiff’s claim is defended by the first and second defendants on the basis that:

1. (a)
   the plaintiff consented to the defendants mortgaging the property;

2. (b)
   the plaintiff waived the entitlement to avoid and/or is estopped from avoiding the Contract by virtue of the execution of the Mortgage over the property by the defendants;

3. (c)
   it would be unconscionable for the plaintiff to be allowed to avoid the Contract in reliance upon the execution of the Mortgage over the property by the defendants.

5. [5]
   The defendants did not accept that the plaintiff was entitled to avoid the Contract and required the plaintiff to complete the Contract. On 2 March 2011 the defendants terminated the Contract. They have subsequently attempted to resell the property and claim, inter alia, against the plaintiff any reduced price on a resale of the property. To date, those attempts have not proved successful.

6. [6]
   Mr John Woulfe acted as solicitor for the first and second defendants in the sale of the property to the plaintiff. The defendants now seek to join Mr Woulfe as a third party to the proceeding. The defendants’ claim against Mr Woulfe is that:

1. (a)
   the defendants retained him to act on their behalf in respect of the sale of the property to the plaintiff on 4 January 2008;

2. (b)
   that in breach of contract or in breach of the duty of care which Mr Woulfe owed to the defendants, he failed to advise them that if they mortgaged the property without the consent of the plaintiff, the Contract would be voidable by the plaintiff at any time before completion of the Contract;

3. (c)
   that had they been aware of the effect of mortgaging the property without the consent of the plaintiff, the defendants would not have mortgaged the property without the plaintiff’s written consent.

7. [7]
   The loss claimed by the defendants against Mr Woulfe is any liability found for the plaintiff against the defendants together with any further loss and damage as a result of Mr Woulfe’s negligence and/or breach of contract.

8. [8]
   Rule 192 of the UCPR provides:

“192A defendant may file a third party notice if the defendant wants to –

1. (a)
   claim against a person who is not already a party to the proceeding a contribution or indemnity; or

1. (b)
   claim against a person who is not already a party to the proceeding relief –

1. (i)
   relating to or connected with the original subject matter of the proceeding; and

1. (ii)
   substantially the same as some relief claimed by the plaintiff; or

1. (c)
   require a question or issue relating to or connected with the original subject matter of the proceeding to be decided not only as between the plaintiff and the defendant but also as between either of them and a person not already a party to the proceeding.”

9. [9]
   The first and second defendants contend that the proposed third party proceedings fall within the ambit of Rule 192(b) and/or Rule 192(c). For present purposes, nothing turns on the identification of the particular subrule that applies in this case.

10. [10]
    In an affidavit filed 17 November 2011,^[2] the first defendant confirms that at about the time the Contract was signed, he and his wife engaged Mr Woulfe as the solicitor to act on their behalf in respect of the conveyance of the Property. A letter dated 7 January 2008 from Mr Woulfe referred to a document called an “IMPORTANT INFORMATION” sheet which was attached to the letter. That sheet contains information about instalment contracts but does not make any mention of the consequences of mortgaging a property where the contract for the sale of that property is an instalment contract.

11. [11]
    Mr and Mrs Hayward entered into a contract with builders to construct a house for them to live in at Ormeau (“the Building Contract”). It was not expected that they would move into the house at the time of the settlement of the Property, and in fact they moved into the house at Ormeau on 18 December 2009. The defendants (Mr and Mrs Hayward) had used the $300,000.00 instalment paid by the plaintiff pursuant to the Contract largely for the purpose of purchasing land at Ormeau on which to build and they were, to some extent, reliant upon the settlement monies from the sale of the Property to make payments under the Building Contract.^[3]

12. [12]
    Mr Hayward states that in March and April 2009, he was approached by Mr Ladini, the father of the plaintiff. Negotiations on behalf of the plaintiff in respect of the purchase of the Property were conducted by Mr Ladini. Mr Ladini requested an extension of time for completion of the Contract. An agreement was reached to extend time for completion of the Contract to 8 January 2009. Mr Hayward states that he informed Mr Ladini that he and his wife had entered into the Building Contract and that if they were to agree to an extension of time for completion of the Contract, it would be necessary for them to obtain bridging finance in order to meet their obligations under the Building Contract. In late June, Mr and Mrs Hayward took out a bridging loan with Bank of Queensland for an approved limit of $260,000.00. They signed a mortgage over the Property in favour of Bank of Queensland on 22 June 2009.^[4]

13. [13]
    Further extensions of time for completion of the Contract were requested on behalf of the plaintiff and agreed to. The final request for an extension of time was made in December 2010 and shortly thereafter Mr Woulfe received a letter from the plaintiff’s solicitor advising that the plaintiff elected to void the Contract and demanded repayment of $519,000.00. Mr Hayward states that at no time prior to 15 December 2010 was he aware of any implications should the Property be mortgaged without the consent of the plaintiff after execution of the Contract. The implications of mortgaging the Property as a result of the Contract being an instalment contract were not explained to the Haywards by Mr Woulfe. Had Mr Hayward been aware of the implications of mortgaging the Property, he would have ensured that the plaintiff’s written consent was first obtained before agreeing to any extension for completion of the Contract which may have resulted in the need to obtain bridging finance and a consequent mortgage over the Property.^[5]

14. [14]
    Mr Hayward states that ultimately the Contract did not settle and proceedings have been commenced by the plaintiff. Mr Hayward has instructed his present solicitors to defend these proceedings. However, if the plaintiff succeeds against Mr and Mrs Hayward, he wishes to seek to recover any loss that they sustain from their former solicitor, Mr Wolfe. The Hayward’s are presently attempting to sell the Property but have been experiencing difficulty in doing so.

15. [15]
    In an affidavit filed 14 November 2011,^[6] the plaintiff states that she is alarmed about the possibility of delay in the hearing of her action against the defendants whilst another party is joined to the action. The plaintiff contends that any matter by the defendants in relation to a third party has no relationship to her claim in this matter against Mr and Mrs Hayward.^[7]

16. [16]
    The plaintiff states that she borrowed a substantial amount from Westpac Banking Corporation (“Westpac”) and that loan is secured against other properties which the plaintiff owns and had contracted to sell. The purchaser under the contract for the sale of her property defaulted and Westpac is pressing her for repayment of its loan. The plaintiff has been issued with a Default Notice from Westpac and she states that there is a very high risk that Westpac will move to take possession of the property for a mortgagee sale. The plaintiff states that she has been paying high default interest rates under her loan and that she will suffer very considerable hardship if her claim in this proceeding is delayed.^[8]

17. [17]
    In MGM Containers Pty Limited v Wockner [2006] QCA 502, the respondent issued proceedings against the appellant, its former solicitor, for damages for breach of contract and negligence arising out of the respondent’s purchase of a shopping centre. The appellant sought leave to file and serve third party proceedings against additional advisors retained by the respondent to advise it in the transaction. Chesterman J (as he then was), stated that:

“Even with the similarities between the respondent’s complaints against the appellant, and its complaints against SPG, there is bound to be an expansion of the issues in dispute at the trial and the evidence relevant to them if the third parties are joined. There will be an increase in complexity, length of trial and, consequently, cost. I do not know that one can be too critical of the qualification that those increases will be ‘considerable’. The adverb is more pejorative than descriptive.

The applications called into question two conflicting principles. The first is that there are good reasons why a third party should be joined in an action where a defendant has an arguable case for contribution or indemnity from the third party against a plaintiff’s claim. Such a joinder ensures finality in litigation, avoids multiple proceedings with associated extra cost, and obviates the possibility that there might be different decisions given on the same issues if tried by different courts. The second principle is that a plaintiff should be allowed to prosecute its action and obtain judgment without being delayed or inconvenienced by the defendant’s endeavours to offset its liability. See Phonesivorabouth v Tops Services Pty Ltd (1992) 106 FLR 471.”^[9]

18. [18]
    In Phonesivorabouth v Tops Services Pty Ltd the rationale for joining third parties was expressed in the following passage:

“The public policy sought to be advanced by allowing a third party to be joined in an action is the need to ensure finality in litigation and to avoid multiple proceedings with their associated extra costs. Further, by preventing the same questions being tried twice, the possibility of different decisions on the same issues being given by different constituted courts is avoided, that possibility being a matter calculated to bring the administration of justice into disrepute.

The grant of leave… to file a third party notice out of time is discretionary. In general, there is a strong argument against granting such leave where the effect of doing so would be to embarrass or delay the plaintiff. Nevertheless, it is a matter of balancing the inconvenience to the plaintiffs of the inevitable delay which will be caused by a late joinder in this case, against the inconvenience to the defendant of not having the claims of the plaintiffs and its claim against the Northern Territory of Australia heard at the same time.”^[10]

19. [19]
    The applicants submit that the claim against them by the respondent plaintiff is likely to be somewhat more complicated than their claim against Mr Woulfe. By contrast, it is submitted, the claim by the applicants against the third party is a straightforward one which is unlikely to add significantly to the length of the trial. It is suggested that the only additional witness is likely to be the proposed third party. If it becomes relevant to explore what the position would have been had Mr Woulfe advised the applicants of the effect of mortgaging the Property without the plaintiff’s consent, evidence may be required from the plaintiff and/or Mr Ladini. It would be more convenient, the applicants contend, for that evidence to be given at the trial of the claim between Ms Ladini and Mr and Mrs Hayward.^[11]

20. [20]
    The submissions of the applicants concede that there is likely to be some delay as a result of the joinder of the proposed third party. However, that delay is not likely to be significant. The Third Party Notice and Statement of Claim have been prepared and can be filed and served immediately. Mr Woulfe has been served with the application under consideration together with the supporting affidavit material, and as such, is aware of the nature of the claim against him. It is said that solicitors have already been retained to act on his behalf should he be joined as a third party. Mr Woulfe has previously provided his file to the applicants’ solicitors and it is suggested that it would be unlikely that there would be any significant number of additional documents of which disclosure would be required beyond those contained in the conveyancing file of Mr Woulfe.^[12]

21. [21]
    It may be assumed that, as the Third Party Notice is a claim against a solicitor in his professional capacity, it is likely that Mr Woulfe’s professional indemnity insurer will be notified of the claim and will seek to conduct the defence of the claim on behalf of the third party. In these circumstances, it will be necessary to file a defence to the third party claim and there may be interlocutory applications in order to strike out or dismiss claims to limit the insurer’s liability under the policy of insurance. Furthermore, Mr Woulfe himself may wish to defend the third party claim as the outcome of a successful claim may result in an increase in his premiums with his professional indemnity insurer.

22. [22]
    Should the third party be joined and file a defence to the third party claim, a duty of disclosure will arise as between the third party and the applicants: Rule 202(1) UCPR. Should the third party deny the allegations made by the respondent (plaintiff) against the applicants (defendants) in its amended statement of claim, a further duty of disclosure will arise as between the third party and the respondent (plaintiff) which may further delay the proceedings and may involve the respondent in further costs: Rule 202(2) UCPR.

23. [23]
    In the written submissions of the plaintiff, the allegation is made that the defendants’ application has been brought at the last moment, solely in an attempt to further delay the plaintiff’s strong case. It is pointed out in the submissions that the applicants have had a year within which to advance their case. There is no explanation whatsoever as to:

1. (a)
   why the foreshadowed proceedings have not been commenced against the solicitor;

2. (b)
   why the third party proceedings were not brought within the period when leave of the Court was not required;

3. (c)
   why the defendants have taken a year and are still to formulate a case; and

4. (d)
   delay generally.^[13]

24. [24]
    The plaintiff estimates that the trial of the proceedings between herself and Mr and Mrs Hayward is likely to take one day, or possibly two if oral submissions are required. The sole issue is whether or not the plaintiff consented to the defendants encumbering the property in June 2009. The plaintiff submits that the third party proceedings will delay the plaintiff by at least the same time as has elapsed in the proceedings to date. If both proceedings are heard as one, the trial will take four days or possibly more and will inevitably serve to complicate a very simple case. The costs of the plaintiff will inevitably increase and joinder of the third party will also exacerbate the lengthy delays experienced so far. Furthermore, it is submitted, the proposed third party proceedings are of a distinct nature from the issue raised in the defence. ^[14]

25. [25]
    This application involves a balancing exercise between two conflicting principles, both of which are important:

1. (a)
   that there are good reasons why a third party should be joined in an action where a defendant has an arguable case for contribution or indemnity from the third party against a plaintiff’s claim; and

2. (b)
   a plaintiff should be allowed to prosecute its action and obtain judgment without being delayed or inconvenienced by the defendant’s endeavours to offset it’s liability.

26. [26]
    I accept that if the proceedings between the applicants and the proposed third party are heard separately, there will be a real possibility that some of the issues in dispute in the proceedings as presently constituted would need to be re-litigated, there being no res judicata or issue estoppel due to the difference in the parties. It is important to avoid wasting court resources and also to avoid the possibility of different decisions on the same issue. On the other hand, I think it clear that the duration of the trial will significantly increase should the joinder of the third party be permitted. There will inevitably be additional costs to the respondent as well as further delay in having the matter listed for hearing should the third party be added to the action. I also accept that there would be some increase in the complexity of the issues to be dealt with at the hearing if joinder is permitted. The unexplained delay in seeking to join Mr Woulfe is also a factor to be considered.

27. [27]
    The precarious financial position of the respondent (plaintiff) in this case tips the balance, in my view, against granting leave to issue third party proceedings. It should be remembered that Ms Ladini perceives a very high risk that the Westpac Bank will move to take possession of her property for a mortgagee in possession sale. The plaintiff is also faced with meeting high default interest rates under her loan and I accept her evidence that she will suffer very considerable hardship if her claim is further delayed. It remains an option available to the applicants to bring separate proceedings against the proposed third party, Mr Woulfe.

28. [28]
    The application is refused.

29. [29]
    With respect to the cross-application by the plaintiff for an order that the signature of the defendants on a Request for Trial Date be dispensed with (pursuant to Rule 469 UCPR), I note the submission of the first and second defendants that the Property has not as yet been resold. It does, however, appear that a sale may be imminent.^[15] In the circumstances, I order that the signature of the defendants on a Request for Trial Date be dispensed with and that the matter be listed in the callover to be held in the District Court at Southport on 13 December 2011 at which time trial dates will be allocated.

30. [30]
    In relation to costs, I order that the applicants are to pay the respondent’s costs of and incidental to the application for leave to join Mr Woulfe as third party to be agreed or, failing agreement, assessed on a standard basis. I further order that the respondents (defendants) are to pay the costs of and incidental to the application to dispense with the signature of the defendants on a Request for Trial Date to be agreed or, failing agreement, assessed on a standard basis.