Harrison, Stephen v Lidoform Pty Ltd & Ors [1998] FCA 1487

IN THE FEDERAL COURT OF AUSTRALIA

NEW SOUTH WALES DISTRICT REGISTRY NG 649 of 1998

BETWEEN: STEPHEN HARRISON

Applicant

AND: LIDOFORM PTY LIMITED

(ACN 009 870 008) (RECEIVER & MANAGER APPOINTED)

First Respondent

JUTTA BRINKMEYER, ALEXANDER WILLIAM BRINKMEYER

Second Respondent

IAN JOHN NICOL, GRAEME CHARLES NETTLE, PAUL RICHARD O'CONNOR (T/AS BARRADS)

Third Respondent

WODEN CONTRACTORS PTY LIMITED (ACN 008 581 342)

Fourth Respondent

WODEN CONSTRUCTIONS PTY LTD (acn 008 403 763)

Fifth Respondent

ANTHONY GREGORY MCGRATH

SEVENTH Respondent

JUDGE: HELY J

DATE: 24 NOVEMBER 1998

PLACE: SYDNEY

REASONS FOR JUDGMENT HELY J: Lidoform is the registered proprietor of various parcels of land situate at Jerrabomberra Hill, Queanbeyan, generally known as the "Jerrabomberra Heights Estate" ("the Estate"). In 1986 the Estate comprised some 2,000 acres. It was zoned "non-urban". As a result, owners of lots within the Estate did not have any entitlement to erect a structure upon their property, nor could structures be erected on any part of the Estate. Lidoform embarked upon the development of the Estate in the expectation that it would be rezoned so as to enable its use for residential purposes. On 13 June 1986 Lidoform entered into a contract for sale of land with the applicant for the sale and purchase of Lot 666 DP17205 being the whole of the land comprised in Certificate of Title Volume 15316 Folio 166 ("the Property") for the sum of $10,000. The contract is a complex document, and it is not easy to summarise its effect. It was drawn so as to contemplate three possible alternatives in relation to the acquisition of property in the estate: · The sale of a lot in its raw condition without any rezoning to allow for erection of buildings on the land taking place. Cl 31 enables the Vendor to discontinue its endeavours to secure rezoning, and to require the purchaser to complete the contract for the sale and purchase of the Lot comprising the Property in accordance with its terms. · The Vendor is successful in its rezoning application, but without the Council requiring a resubdivision of the Estate. In that case, the sale of the Lot comprising the Property proceeds, but with the purchaser being obliged to bear, in addition to the price, its proportion of any service costs incurred in relation to the rezoning (Cl 23). · The Vendor is successful in its rezoning application, but as a condition of the rezoning, a resubdivision of a particular area or areas is required. Cl 26 reserves to the Vendor the right to resubdivide the whole or part of the Estate, including the property, by means of a "New Plan". If the New Plan alters the dimensions, size, survey or siting of the lot comprising the property, the Vendor is required to offer the purchaser an alternative lot in the New Plan which is as proximate as possible (having regard to Council requirements, the Vendor's obligations to other purchasers of land in the Estate, and other considerations which might reasonably apply) to the location of the Lot comprising the property (Cl 25). The purchaser may elect (Cl 29) to affirm the contract and accept the Substituted Land in lieu of the Property, or it may exercise its right to rescind the agreement and require the Vendor to refund the purchase price less certain deductions specified in Cl 29. If the Lot offered to the purchaser has an area of 80% (or less) of the area of the property, then if the purchaser so requests, the Vendor is required to offer the purchaser a lot in another location within the Estate (Cl 24(c)). Other relevant provisions of the contract are: · The deposit and payments of, or on account of, the purchase price "shall be charged on the property" in favour of the purchaser pending completion subject to any subsisting mortgage or charge. (Cl 6(e)) · Until "completion" any title passing is equitable only, and subject to Part III (which is concerned with resubdivision and substitution of Lots). The Vendor is to cause legal title to pass on completion (Cl 7), but the Vendor is entitled to hold the certificate of title and transfer until formal completion (Cl 5). · The Vendor "shall not further mortgage the Property" pending Formal Completion. It is not necessary, for the purposes of the applications currently before me, to engage in further analysis of the concepts of "Completion" or "Formal Completion". On 14 July 1986 the applicant paid the balance of purchase price. He received at least copies of the Certificate of Title and a transfer from Lidoform to the applicant. He may have received the originals, but if he did, they were probably returned to Lidoform to be held "in escrow … pending rezoning and/or a resubdivision of the property" (Ex VE 15 p12, 15). On 11 January 1991 Queanbeyan Local Environmental Plan No 100 was gazetted. This provided for the rezoning of the land to permit of the erection of dwellings on Lots within the Estate. Apparently this was conditional upon a resubdivision of part or parts of the Estate taking place. The fourth respondent ("Woden Contractors" or "Woden") is a civil engineering contractor. The fifth respondent ("Woden Constructions" or "Woden") is the ultimate holding company of Woden Contractors, and is a company whose business is that of investment and plant hire. Woden Contractors carried out development work in relation to Stage 3 of the Estate for Lidoform, as a result of which, it was owed a little more than $2 million at 30 November 1994. It had agreed to do further work subject to it receiving security for monies owing to it. On 30 November 1994 an agreement was entered into between Lidoform and Woden Contractors in relation to what was called "the security land" which forms part of Stage 3. Lot 666 DP 17205 was part of the security land. In essence the agreement created an equitable mortgage over the security land to secure repayment of monies due and to become due to Woden Contractors for development work. The agreement refers to a "standard Jerrabomberra Heights Estate Contract for sale". I am prepared to proceed for present purposes upon the basis that Woden knew that there was a standard form contract, and knew of its terms. An unregistered mortgage was executed pursuant to that agreement. That mortgage included Lot 666 in DP 17205. On 29 August 1995 Woden Contractors lodged a caveat No 0506746 claiming an estate or interest as mortgagee under an unregistered mortgage of 30 November 1994. On 29 July 1996 an agreement was entered into between Lidoform and Woden Contractors which provided for Woden Contractors to be granted a first ranking mortgage over "all Lidoform" land, including "all unsold land zoned residential (known as stages 3, 4 and 5)" to secure about $4.5 million and monies to become due in the future. On 30 July 1996 mortgage registered No 2422309 was granted pursuant to this agreement. Whilst Folio Identifier 666/17205 was included on p 44 of the schedule of lands, the reference has been crossed out. On 28 July 1997 the seventh respondent was appointed receiver of the lands comprised in this mortgage. On 11 December 1996 an unregistered mortgage was granted by Lidoform in favour of Woden Contractors. It included folio identifier 666/17205. On 16 January 1997 a plan of resubdivision was registered as DP 864750. It effected a resubdivision of certain of the Lots previously comprised in DP's 17204, 17205 and 862277. Lot 666 in DP 17205 is now part of lots 387 and 386 in DP 864750. The balance of Lot 666 is not included in this Plan, and is apparently now part of a roadway comprised in some other plan. On 7 July 1997 mortgage No 3242144 was entered into between Lidoform and Woden Contractors. It does not include the subject land (by which I mean Lot 666 in DP 17205 and/or Lots 387 and 386 in DP 864750). The seventh respondent was appointed receiver of the lands comprised in this mortgage on 24 July 1997. On 14 August 1997 a further, but unregistered mortgage was entered into between Lidoform and Woden Contractors. This includes the subject land. On 18 September the seventh respondent was appointed Receiver pursuant to this mortgage. On 26 May 1998 Lidoform, by the seventh respondent its Receiver executed further mortgages in favour of Woden Contractors including mortgage 5019479J which affected the subject land. On 18 September 1998 the seventh respondent was appointed receiver of the lands comprised in this mortgage. The mortgages executed on 30 November 1994 and 12 December 1996, involved a breach of Cl 5 of the contract insofar as they included the Property. The New Plan (DP 864750) affected the Property in a manner which enlivened the Vendor's obligation to offer to the applicant a substituted lot in the New Plan, and if the area of the substituted lot offered was 80% or less than that comprised in the property, and the applicant so requested, a lot in another location within the Estate. No such offer has been made. The proceedings The amended statement of claim pleads the contract including the express term that payments of or an account of the purchase price would be charged on the property or the substituted land, and that the Vendor would not further mortgage the property or the substituted land pending completion. It also pleads an implied term as follows (ASC 23): "It was each an implied term of the standard Contract that: (a) the Vendor would do all things necessary on its part to enable the Purchaser to have the benefit of the standard Contract; (b) (i) If the Vendor exercised its discretion to resubdivide the Development, or any part or parts thereof, including the purchased land, and thereafter failed, neglected or was unable, to offer the Purchaser, an equal number of alternative lots in the new subdivision, in accordance with Clause 24 of the standard Contract, then the Vendor would offer the Purchaser another unencumbered lot, or lots of land, in another location within the Development then remaining, until completion of the standard Contract; and (ii) The Purchaser, or any person or corporation claiming through him, had the right to lodge a Caveat on the lot or lots of land, within the Development then remaining pending formal completion, which Caveat would exclude from its operation:- i. registration by the Vendor of the Transfer to the Purchaser; and ii. registration by the Vendor of any Plan of Subdivision." This implied term was not alleged in the statement of claim as originally drafted. It is claimed that, by virtue of the contract, the applicant acquired an equitable estate or interest in the property, and in the substituted land, and in the "lot or lots of land in another location within the Development" (ASC paras 32 and 33). This last interest is alleged to arise from payment of the purchase price for the property, if a New Plan is registered including the property and if there is a failure to offer the applicant a substitute lot in accordance with Clause 24 (ASC 33). It is claimed (to put it in very general terms) that the fourth, fifth and seventh respondents took whatever interest they acquired in the property or in the substituted land or in the lots within the development then remaining, with knowledge, actual or imputed, of the applicant's estate or interest therein, and that the taking of the mortgages earlier referred to involved Woden Contractors knowingly participating in various breaches of duty on the part of Lidoform.