Evans v Robcorp Pty Ltd[2014] QSC 26

SUPREME COURT OF QUEENSLAND

[1] PETER LYONS J:  This is an application for summary judgment under section 70 of the Property Law Act 1974 (Qld).  The summary nature of the application was recognised by Byrne SJA in Lindaning Pty Ltd (Receivers and Managers Appointed) v Dean Goodlock and Michael Gore as Trustees of the Gorelock Unit Trust and Dean Goodlock and Michael Gore [2011] QSC 266 at [21]-[22].

[2] The precise test to be applied in determining whether or not summary judgment should be granted under section 70 was not the subject of submissions in the present case.  The rules relating to applications for summary judgment under the Supreme Court Rules have changed since the section was first introduced.  Whether that has any consequence for the present application is unclear but, in my view, does not matter for the determination of the present application. 

[3] The applicant is the vendor under a contract for the sale of certain land.  The contract was dated 9 November 2012.  The purchase price is $1,253,720.  A small deposit was paid, under the contract, in an amount of $10,000.  The contractual date for settlement was 30 September 2013.  The first respondent is the purchaser under the contract.  The second respondent executed a guarantee of the first defendant’s contractual obligations. 

[4] It might be noted that the first respondent obtained a development approval for the land for the development of a 54 room motel on it.  The date of the approval is 27 September 2012. 

[5] The first respondent did not perform its obligations to complete the contract on the date for settlement, nor has it done so subsequently, hence this application.  The application is resisted, on grounds relating to the first respondent’s impecuniosity, though reference is made also to the financial position of the second respondent and to Robcorp Investments Pty Ltd. 

[6] Evidence about these matters was given by Mr Scott, the second respondent.  I shall attempt to summarise it.  His evidence was that funds, to enable the first respondent to complete the purchase of the land, were expected to materialise from other development projects.  One of those involved Robcorp Investments.  Those funds, however, have not become available.  Mr Scott also gave evidence that the first respondent is not “worth anything at all” nor, for that matter, is Robcorp Investments.  Mr Scott gave evidence of his own financial position.  His evidence was that he has no assets and that he has some debts.  In addition to that, he has financial obligations in respect of the support of five children.  He has attempted to enter into contracts for the resale of the land, but these attempts have been unsuccessful.  He has also attempted to raise funds by means of a prospectus.  However, the first respondent does not have the financial capacity at present to perform its obligation under the contract to settle.  Mr Scott was not the subject of cross-examination, nor was his evidence controverted.  It might be observed that the applicant seeks an order that the contract be performed in 14 days time. 

[7] The applicant took issue with the effect of Mr Scott’s evidence, which I mentioned previously.  Submissions were made about the fact that it is by no means comprehensive, particularly in relation to the financial position of the first respondent.  However, it seems to me that it is sufficient to provide evidence to demonstrate that, if the matter were being tried, the first respondent may well be in a position to satisfy the Court about the matters referred to in Mr Scott’s evidence. 

[8] It was also submitted by the applicant that the authorities demonstrated that specific performance should not be refused because of impecuniosity of a purchaser which has arisen subsequent to the contract.  In making this submission, the applicant relied on two cases. 

[9] The first case was Nicholas v Ingram [1958] NZLR 972.  That was a case where a woman had entered into a contract to purchase a property expecting financial support from other family members.  Subsequently, they decided not to provide that report.  Hutchison J said that the hardship that operates as a defence to an action for specific performance “must, in general, be such as existed at the time of the contract and not such as has arisen subsequently, from a change in circumstances”, citing authorities. 

[10] In Ready Construction Pty Ltd v Jenno [1984] 2 Qd R 78 at 82, Demack J applied Nicholas, as well as Spencer v Daniljchenko (1976) QLR 10 July 1976.  His Honour, however, stated the principle to be that mere financial inability on the part of a purchaser is not a reason for refusing to decree specific performance.  That may be, perhaps, a little wider than the basis on which orders were made in Nicholas.  It was a proposition advanced on behalf of the applicant. 

[11] I was also properly referred to Boyarsky v Taylor [2008] NSWSC 1415, a decision of Brereton J of the New South Wales Supreme Court.  I was particularly directed to paragraph 42, where his Honour said that he would refuse to make an order for specific performance against a purchaser if, to comply with it, the purchaser would have to resort to a lender of last resort, which involved raising funds at an exorbitant interest rate. 

[12] However, his Honour’s judgment goes considerably further.  In paragraph 43, his Honour made clear that, if there was no source from which it might be expected that the purchaser could reasonably obtain the funds necessary to settle, he would have refused specific performance.  It is apparent from paragraph 44 that his decision to order specific performance was based on his finding that it was likely that the purchaser would be able to raise the purchase moneys within a reasonable time, which would impose no hardship whatsoever upon the purchaser.  His Honour had, earlier, referred to matters which are not without some importance.  They include that notwithstanding the discretionary nature of the remedy, it is not to be refused unless some sound and recommended reason stands in the way of the court making the order:  see para 26.  His Honour also referred to Pasedina (Holdings) Pty Ltd v Khouri (1977) 1 BPR 9460.  There, Holland J doubted whether difficulty in obtaining the necessary funds to complete a purchase, however great, could establish a defence of impossibility to an application for an order for specific performance. 

[13] Brereton J also referred to earlier decisions referred to in Pasedina for the propositions that specific performance is not a remedy which should lightly be refused when the vendor has established the existence of a valid contract; that equity would not ordinarily decree to be specifically performed a contract which the purchaser has declined to complete:  see para 35.  Brereton J also cited with approval passages from Spry Equitable Remedies.  I have looked at the passages to similar effect in the eighth edition of that text.  I shall refer to some of them now.

[14] The author states that it is clearly established that the courts will not require that to be done which cannot be done:  page 132.  To similar effect is a passage at page 136 stating that if an act cannot be performed, the defendant will not be required to do what cannot be done, even though it is through his own acts or omissions that the obstacle in question has arisen.  At pages 137 to 138, the author expresses as the preferable view, that the courts of equity ordinarily concern themselves with the possibility of performance as at the date at which the proposed order is to operate

[15] The author dealt separately with the question of hardship.  At pages 202 to 203 he expressed the view that the decision in Nicholas is wrong.  He said that courts of equity must take account of all the circumstances known to exist at the time when an order is made, as well as of circumstances likely to occur subsequently, when called on to decide whether the effect of the order for specific performance will be to cause disproportionate hardship so as to give rise to injustice;  and that there is no reason in principle why a source of hardship should be ignored merely because it did not exist at the time when the contract was entered into:  pages 203-204.

[16] The views expressed in Spry appear to me, with respect, to be correct.  For the purposes of the present application, in my view, the respondents have done sufficient to demonstrate that summary judgment should be refused.  I would, however, do so on conditions that limit the issues which might be raised at trial.

[17] This is an unsuccessful application for summary judgment by a vendor.  The material put forward to resist the application was to the effect that the purchaser lacked the financial capacity to settle.  Neither the existence of the contract nor the failure of the purchaser to perform its obligations was put in issue; although, there was not an express admission of either of those matters.  It was obvious from the material put forward in opposition to the application, however, that they would not be controverted.