Ek v Red Eagle International Pty Ltd (atf Chunan Bai Hybrid Unit Trust) [2022] VSCA 254, Niall and Kennedy JJA., (18 November 2022)
The facts were –
- The respondent (Red Eagle) was registered proprietor of three adjoining buildings at 7 – 13 Carrington Road, Box Hill (the Properties). Ms Cherry Pai was a director of Red Eagle. In 2021 and early 2022 she negotiated with the applicant (Jade) concerning their sale. Jade received a draft contract of sale and s. 32 Statement. She later paid $3,000 to Red Eagle.
- At a meeting between Cherry and Jade on 14 June 2022 a price of $12.15 m. was proposed and a ‘particulars of sale’ page was used to write down the discussion. Jade subsequently texted Cherry a photo of the completed particulars which included that price and a handwritten amendment by Jade of the address, from ‘7 – 13 Carrington Road Box Hill’ to ‘7 – 15 Carrington Road, Box Hill’ (the ‘first particulars’). However, Cherry subsequently explained that shop 15 was not on the title and so not for sale.
- On 9 July 2022 Jade and Cherry met at Jade’s dental clinic. Notwithstanding conflicting evidence of what occurred at this meeting it was undisputed that a revised ‘particulars of sale’ dated 9 July 2022 (the ‘9 July Particulars’) came into existence. This recorded the following, with two handwritten notes (denoted NB)–
Vendor: Red Eagle International Pty Ltd
Purchaser: Jade Ek & or Nominee
Street Address: 7 – 13 15 Carrington Road Box Hill 3128
Purchase price: $11,850,000.00
Deposit: $355,500.00 3 – 5% or ($592,500 @ 5%)
Balance: $11,494,500.00 (9 – 12 months)
N/B 3 – 5% Due 10/10/2022
N/B On Market Value 2 yrs after settlement if Property appreciate (Jade) will give 300k
The amounts recorded for price, deposit and the balance were in Jade’s handwriting over whiteout. Jade’s initials also appeared proximate to the entries of purchaser, street address, ‘3 – 5%’, and the notes. At its bottom Jade’s signature appeared next to the Chinese characters for ‘purchaser’ (next to a date of 9 July 2022) and Cherry’s signature appeared next to the Chinese characters for ‘vendor’.
- On 9 July Jade made a further payment of $12,500 to Cherry, and ultimately paid a total of $45,500 between June and 1 August (which she asserted was part payment of the deposit).
- On 24 July 2022 Red Eagle entered into a contract of sale of the Properties with a new purchaser, Jun Chen, with settlement on 24 October 2022. Cherry gave evidence that a 10% deposit was paid. That contract was not in evidence, nor did Jun Chen give evidence.
- On 2 August 2022 Jade caveated relying on an agreement with the registered proprietor dated 9 July 2022.
- In September the net deposit paid by Jun Chen was released to Red Eagle and it used $62,750 of it to pay consulting fees related to the sale to Jun Chen.
- Red Eagle applied to the County Court under the Transfer of Land Act s. 90(3) for removal of the caveat. Cherry deposed that: at the 9 July meeting she and her husband insisted on a price of $12.15 m.; ‘we signed’ at the bottom of the first particulars of sale next to the Chinese character meaning vendor (which showed her intention to sell at $12.15 m.) and Jade signed the bottom of the page next to the Chinese character for purchaser; Jade then took the signed document back to her office and amended it in handwriting including the price and the deposit, then initialled the changes, and added the handwritten notes; after this Jade presented the amended page to Cherry who refused the amendments.
- Jade deposed that while she was initially prepared to pay $12.15 m., this altered on realizing that Red Eagle could not sell 15 Carrington Road. She deposed that: on 9 July she met with Cherry and Cherry’s husband; Jade said to Cherry that she was initially prepared to offer $12.15 m. for “the Carrington Properties” but that after discussions with her son, who was investing with her, we would only pay $11.85 m.; Cherry asked if she would consider paying her $300,000 if the Carrington Properties increased in value of at least that amount, to which Jade agreed; Cherry wanted Jade to sign that day; she told Cherry they could meet again later to sign a clean copy as the copy Jade had contained her previous offer; Jade then remembered she had electronic access to the one page she had sent to Cherry previously by sms, and so they went to her office and arranged for her staff to print it out; Cherry whited out the details and asked Jade to complete the price and other details, which she did except for the Chinese writing appearing at the bottom, which was done by Cherry; she asked Cherry what that writing was and she said it was “buyer” and “seller”; Jade signed where the buyer appeared and wrote the date “9/7/2022”; Cherry signed where the seller appeared; Jade believed that they had reached a concluded agreement.
- Jade undertook to the court to pay 5% of $11.85 m. (in addition to amounts already paid).
- On 21 October a County Court judge ordered Jade to remove the caveat by 4 November. The judge reasoned inter alia: she reached her conclusion on a consideration of the particulars of sale, and so was not required to resolve disputed facts or matters of credit; the indicia of objective intention available from a consideration of the face of the particulars of sale did not support the argument that the parties intended the document to be a binding contract; these indicia included the absence of Cherry’s initials, including against changes to the price and deposit; at trial the caveator would have to establish that the amendments were agreed to by Red Eagle and in view of this lack of initialling Jade’s prima facie case in this regard was weak; the submission that it was left to the purchaser to decide whether to pay a deposit of 3%, 4%, 5% or something in between was not supported on the face of the document – there was nothing to indicate at whose election the amount of the deposit within that range can be decided – so the prima facie case on certainty in this regard was weak; as to the time for payment of the balance of price, a range was provided but without indication of who decided when; she rejected the contention that the terms were agreed but it was simply that the mechanism was not; it was objectively apparent from the existence of unresolved matters on the face of the document that the argument that the document was a final enforceable agreement was weak.
- Jade filed an application for leave to appeal. Her proposed grounds included first that the judge erred in finding that her prima facie case of an interest in land arising from an enforceable contract of sale was weak. The particulars of this ground included that the judge erred by considering that the strength of the prima facie case was diminished by: (a) the term specifying the deposit as 3–5% of the price; (b) the term fixing settlement as 9 – 12 months after entry into the contract; (e) the fact that handwritten notations on the agreement had only been initialled by the purchaser and not on behalf of the vendor.
- The Court of Appeal stayed the County Court order.
The Court of Appeal gave leave to appeal, allowed the appeal and dismissed the application under s. 90(3), holding –
- Because the court’s power under s. 90(3) was discretionary an applicant for leave to appeal against an exercise of that discretion must establish an error of the kind identified in House v The King (1936) 55 CLR 499. [22]
- The critical issue was whether the parties signed the 9 July Particulars (which include a revised price of $11.85 m.) or the (earlier) first particulars. This could only be resolved at trial. [16]
- The judge hearing the caveat removal application was not required to consider that a trial judge might consider the absence of Cherry’s initials in determining whether Cherry had really executed the 9 July Particulars. Not only was this not required, it was ordinarily inappropriate for a judge to enter into resolution of the underlying factual dispute on this sort of application, particularly where this turned on findings on credit of witnesses. Accordingly, the judge was not in a position to assess the key issue of whether the parties signed the 9 July Particulars or the first particulars. The judge had endeavoured to reach a finding about the strength of the key issue in the case and in so doing had considered the absence of Cherry’s initials without regard to the other evidence. [25]-[26]
- Even if the judge was in a position to assess the merits of the key issue, there could be no assessment on a prima facie basis, or otherwise, by only having regard to one isolated piece of evidence. The judge thereby erred in her treatment of the evidence that the 9 July Particulars had only been initialled by the purchaser. [27]
- The judge’s reasoning that the ranges for the deposit (3% – 5%) and settlement date (9 – 12 months) meant that the prima facie case on certainty was ‘weak’, because there were ‘unresolved matters’, was also flawed. A contract was only uncertain if the court could not put any definite meaning on it. The objection that one party was left to choose whether to perform a contract was distinguishable from the situation where the contract gave one party choice of or discretion in the manner of performance. The identification of the person given the choice to determine the figure within the range specified for the deposit or time of settlement was capable of resolution, consistent with the general approach of upholding contracts: there was authority, for example, that it is the promisor who usually had the right to elect which of the methods of performance to choose (although this may need modification as regards time for settlement, given this depended on mutual obligations). Issues of contractual construction of the 9 July Particulars were ultimately to be determined by the trial judge, but this said nothing about whether the 9 July Particulars gave rise to a binding contract in the first place. [28], [29], [33], [34]
- Each of the absence of Cherry’s initials and the specification of the deposit and time of settlement ranges played a significant, if not determinative, role in the judge’s assessment of the prima facie case. They also affected the judge’s assessment of the balance of convenience. Accordingly grounds 1(a), (b) and (e) were sustained. [36]-[37]
- Given the urgency of the case and the Court of Appeal having before it the evidence and submissions that were before the judge, it was appropriate for the Court to exercise afresh the discretion under s. 90(3). [39]
- For the reasons given in holding number 5 Red Eagle’s submissions concerning failure to agree on the deposit and settlement date were unmeritorious. Also unmeritorious was its submission that there was a failure to agree on the mechanism for determining market value to ascertain whether the additional $300,000 was payable. Courts were routinely called upon to determine the market value of properties and would readily supply machinery when parties failed to state the basis for determining value. [40]-[41]
- As to any argument about reliance on material which post-dated the contract, post-contractual conduct could in limited circumstances be admissible on whether the parties intended a contract to be binding. There was conflicting material which could only be tested at trial. [42]
- In summation, the 9 July Particulars raised a serious question to be tried of whether Jade had the interest claimed. [43]
- The balance of convenience favoured maintenance of the caveat having regard to: evidence that available properties of this nature in this location were very rare; evidence of Jade’s business needs; an assessment of the interests of the other purchaser; the vendor dissipating part of the released deposit to third parties (to which Jade’s undertaking as to damages was relevant); Jade’s undertaking to pay an amount equal to 5% of $11.85 m. and to prosecute a proceeding for specific performance. [44], [45], [47], [48]
- Accordingly, although the matter was finely balanced, the lower risk of injustice was to maintain the caveat. [49]
Philip H. Barton
Owen Dixon Chambers West
Tuesday, March 14, 2023
