Feitelson Holdings Pty. Limited v. Franks Centre Lofts Pty. Limited [2000] NSWSC 903

New South Wales Supreme Court

CITATION : Feitelson Holdings Pty. Limited v. Franks Centre Lofts Pty. Limited [2000] NSWSC 903 CURRENT JURISDICTION: Equity Division FILE NUMBER(S) : SC 1766/00 HEARING DATE(S) : 6 & 7 September 2000` JUDGMENT DATE : 7 September 2000

PARTIES : Feitelson Holdings Pty. Limited for plaintiff Franks Centre Lofts Pty. Limited for defendant JUDGMENT OF : Hodgson CJinEq at 1

COUNSEL : Mr. F. Gleeson for plaintiff Mr. B. Coles QC with Mr. V. Kerr for defendant SOLICITORS : Holding Redlich for plaintiff Harris & Company for defendant CATCHWORDS : CONTRACT - Specific performance - Option for purchase of unit in development at undervalue - Benefit of contract on account of venturer's share of profit in development - Deed referring to contract for purchase of unit - Whether such contract existed - Probability of loss from development - Even if contract existed, specific performance not granted. DECISION : See end of judgment

IN THE SUPREME COURT OF NEW SOUTH WALES EQUITY DIVISION

CORAM: HODGSON, CJ in Eq.

Thursday 7th September 2000

NO. 1766 OF 2000 FEITELSON HOLDINGS PTY. LTD. V. FRANKS CENTRE LOFTS PTY. LIMITED

JUDGMENT

1 HIS HONOUR: In these proceedings, the plaintiff seeks specific performance of a contract to purchase from the defendant unit 13 in building 1 of what has been called the Franks Centre Project, for a price of $205,000; and in the alternative, the plaintiff seeks damages or remedies based on estoppel. outline of facts 2 I will commence with an outline of facts, which are not really in dispute. 3 Between April 1997 and February 1999, the directors of the defendant were Tony Feitelson and Curtis Mann. Mr Mann is still a director of the defendant. The plaintiff is a company associated with Mr Feitelson. 4 During the period from April 1997 to February 1999, the defendant was undertaking a development on land which it owned at Camperdown which, as I have said, has been called the Franks Centre Project. This was one of a number of projects undertaken by what has been called the Whitehall Property Group, in which Mr Feitelson, Mr Mann and others were involved. 5 In May 1997, an agreement was made between various co-venturers in the Franks Centre project providing, amongst other things, for the distribution of the profits of that project. One of the venturers was Arquilateral Pty Limited, a family company of Mr Feitelson. However, the plaintiff was not a party to that agreement. 6 At around the time of this agreement, there was discussion amongst the venturers to the effect that they could take some of their profit in the venture by purchasing units in the development at a discount. 7 In about July 1997, the plaintiff by deed granted a put option to the defendant to sell unit 13 to the plaintiff for $205,000, which was to be exercised, if at all, before the expiry of one month after registration of the relevant strata plan. 8 Clause 5.1 of the put option provided that it "may be exercised by delivery of a written note of exercise" by the defendant, upon which the parties would be bound by a contract in the terms of a form of contract annexed to the option. Under the terms of that contract, completion was to take place 14 days after the vendor served a notice on the purchaser of registration of the strata plan. The option and the form of contract were executed by the plaintiff, but not by the defendant. 9 At around the same time, similar put options were granted by some of the other venturers. 10 It is common ground that the list price of unit 13 was $410,000. Although there was some question about this during the course of the hearing, it became common ground at the end of the hearing that, if the purchase of unit 13 went ahead at that price, the advantage of this to the plaintiff would be offset against Arquilateral's share of the profit from the project, that profit being calculated as if the sale had been for full price. 11 In late 1997, there was an oral agreement amongst the venturers varying the profit shares, pursuant to which Arquilateral's share became 10 per cent. 12 During 1998, Mr Feitelson informed other persons involved in the Whitehall Property Group that he wished to withdraw. There followed negotiations which ultimately led to the execution, in mid December 1998, of what has been described as the Share Buyback Deed, this deed being executed by Mr Feitelson, Mr Mann, the plaintiff, the defendant, Arquilateral and others. Negotiations for this deed between Mr Feitelson and Mr Mann were conducted by an intermediary, Graham Hurwitz. 13 On 10 November 1998, Mr Feitelson sent a facsimile to Mr Hurwitz setting out terms on which he was prepared to withdraw from the Whitehall Property Group. Paragraph 14.3 of this document stated: The contract by Feitelson to purchase a unit (13 in building 1) is to be rescinded or cancelled. 14 On 11 November 1998, there was a meeting between Mr Hurwitz and Mr Mann, in which Mr Mann rejected the proposal in paragraph 14.3 of the document to which I have just referred. There is some dispute about the details of this conversation, but I will not need to resolve that dispute. 15 On 12 November 1998, there was a telephone conversation between Mr Hurwitz and Mr Feitelson, in which Mr Feitelson accepted Mr Mann's rejection of his proposal on that matter. 16 There were further negotiations during November 1998, and on 30 November 1998 a letter was sent from solicitors who were preparing the deed noting, amongst other things: The Chancellery contract and the Franks Centre contract, annexures A and B, must be attached to the deed. I understand that Curtis will arrange for those contracts to be prepared and attached to the deed. 17 On 1 December 1998, Mr Hurwitz wrote to Mr Mann passing on a request from Mr Feitelson for a copy of the document he had signed in relation to the purchase of unit 13. On the next day, Mr Mann wrote to Mr Hurwitz confirming "that a copy of the contract in respect of unit 13 has been delivered to Tony Feitelson." Mr Feitelson in fact received that document in the mail shortly afterwards. 18 On 9 December 1998, the solicitors again wrote to various persons, including Mr Mann and Mr Feitelson, noting, amongst other things "The Chancellery and the Frank Centre contracts must be attached to the deed." That instruction was repeated again in a letter from the solicitors to the same persons the following day. 19 On 14 December 1998, Mr Mann sent a letter to Mr Hurwitz enclosing the Share Buyback Deed, signed by parties other than Mr Feitelson and his associated companies. The letter also enclosed a copy of the contract for sale for The Chancellery unit, a copy of the deed of option in relation to unit 13, a resolution of directors dated 11 December, which is referred to in the Share Buyback Deed, and finally two cheques payable to the plaintiff representing moneys payable to the plaintiff under the deed. 20 Thereafter the deed was executed by Mr Feitelson and his associated companies. However, the contract for sale for The Chancellery unit and the deed of option in relation to unit 13 were not annexed to the deed, and were not returned to the other parties when the executed deed was returned. 21 Some of the provisions of the deed are of importance in this dispute. Clause 1.1 contains certain definitions, including definitions of The Chancellery Contract and the Franks Centre Contract, which are in the following terms: "Chancellory Contract" means the contract for the sale of unit 29 of the building known as the Chancellory to be entered into between Whitehall Development No.11 Pty. Limited CAN 072 081 657 as vendor and a purchaser to be nominated by Tony. A copy of the contract is attached as Annexure "A"