Wollondilly Retirement Village Pty Limited v Eid & Anor [2002] NSWSC 598

New South Wales Supreme Court

CITATION : Wollondilly Retirement Village Pty Limited v Eid & Anor [2002] NSWSC 598 CURRENT JURISDICTION: Equity Division FILE NUMBER(S) : SC 2903/01 HEARING DATE(S) : Monday, 24 June 2002 JUDGMENT DATE : 24 June 2002

Wollondilly Retirement Village Pty Limited (Pltf) PARTIES : Salim Eid (1D) Rose Eid (2D) JUDGMENT OF : McClellan J

COUNSEL : B McClintock SC/R Brender (Pltf) W Hodgkiss/T Tuckerman (Defs) SOLICITORS : Johnson & Sendall (Pltf) George Khoury & Co (Defs) CATCHWORDS : CONVEYANCING - rectification - omission in drafting and execution of contract of 5 metre strip - land to be conveyed misdescribed DECISION : Paras 67 & 72

IN THE SUPREME COURT EX TEMP OF NEW SOUTH WALES EQUITY DIVISION

McCLELLAN J

WEDNESDAY 26 JUNE 2002

2903/01 WOLLONDILLY RETIREMENT VILLAGE PTY LTD v EID & ANOR JUDGMENT 1 HIS HONOUR: The plaintiff brings a claim for rectification of a written contract dated 26 March 2001 by which the defendants agreed to convey to the plaintiff, for consideration, certain lands situated in the City of Goulburn. 2 The defendants were the owners of Lots 1 and 2 in DP 997846. Lot 2 had frontage to Hume Street and Finlay Road and had been developed some time ago with a motel and service station. By the time the relevant events occurred in the year 2000, the service station was disused, although the motel continued to trade. 3 Lot 1 in the deposited plan had a frontage to Finlay Road and to an unmade road, known as Robinson Street. The evidence indicates that before the plaintiff and the defendant entered negotiations, Goulburn City Council had formulated plans to make Robinson Street and provide a safe intersection with Finlay Road, but, for this purpose, was seeking to acquire part of Lot 1. This would enable the roadway intersection to be formed and would also provide some land which could be subdivided and sold by the Council. 4 I have annexed to these reasons a plan prepared by Mr Kell, surveyor, which reflects the boundaries of Lots 1 and 2 in DP 997846 and shows crosshatched the area of land which was identified by the council as appropriate for its purposes. It is marked annexure "A". 5 As I understand the situation, a plan has now been deposited with the Registrar-General which provides for the subdivision of Lot 1 and will enable the transfer of the relevant portion of land to the Council. 6 The plaintiff is the family company of Mr Stanley Geale. His sons, Rohan and Anthony, are active in the business which, amongst other interests, includes the development of land in the Goulburn area. 7 Before the negotiations which gave rise to the present problem, the Geales owned two parcels of land which adjoin the land owned by the defendants. Those parcels of land are identified on the plan which is annexed as Lots 23 and 24. By reason of the fact that Robinson Street had not been made, access to those parcels of land was difficult and they were vacant. 8 It appears that the Geale family were aware of the potential of land in this location and, as it happens, Wesfarmers Limited have been able to utilise the land which has so far been conveyed. No doubt aware of the potential, Mr Geale and his sons made an approach to Mr Salim Eid seeking to acquire his land with the intention of carrying out a redevelopment. 9 The present difficulties arise from the fact that the plaintiffs say that, at the conclusion of the negotiations, it was agreed that the defendants would convey to the plaintiff company substantial parts of both Lots 1 and 2 in DP 997846, together with a five-metre strip along a significant length of the boundary between those two Lots. 10 By mistake it is claimed that only part of Lot 2 was incorporated into the written contract and the error, having occurred, this Court should grant relief by way of rectification. 11 The evidence discloses that in about August 2000 Stanley Geale and his son Rohan approached Mr Eid whom they had known for many years. They had a discussion in which Mr Eid said he wanted $1,500,000 for all of his land, including the motel. Stanley Geale indicated he could not afford such an amount and said, "I can't afford that. How much do you want for the Robinson Street land and the service station land?" Mr Eid apparently replied, "I want $700,000 for that." Mr Stanley Geale then said, "We will let you know." 12 Mr Stanley Geale says the parties met again two weeks later when Mr Eid said, "I have sold some of it [the land] to the Council, but the rest of it is available for sale." At that point, Mr Eid handed Mr Geale a plan, which is the plan annexure "A" to this judgment. 13 Mr Geale responded by saying he was interested and asked whether Mr Eid would consider a boundary adjustment of Lot 1 to enable a service road to be provided for the land which the Geales were to acquire and develop with their own land. 14 Apparently, by this stage, Mr Geale had had discussions with the Council and having in mind that Wesfarmers may be a tenant for a substantial part of the site, he was concerned to ensure that semi-trailer access could be provided from Finlay Road. For this reason, Mr Geale was seeking the boundary adjustment which would enable the large vehicle access to be provided. 15 There was a further discussion between Mr Stanley Geale and Mr Eid late in September 2000 when Mr Geale gave evidence that he said, "We will offer you $500,000 for the land in your subdivision. I know the Council are buying the balance of the land at the back." On this occasion there was a further exchange of plans which indicated how it was proposed to subdivide Lot 2. 16 The intention was to provide three lots: one containing the motel, the second the service station, and the third, the residue being vacant land. The proposal was that Mr Eid would retain the motel, but sell the service station and vacant land. 17 During the course of this conversation and after the maps had been exchanged, Mr Geale says Mr Eid said to him, "There will have to be two subdivisions. The balance of the land at the rear Council is to buy about 4,500 square metres and this will leave about 10,000 square metres which we can sell you." Mr Geale then said to Mr Eid, "Can we have a road at the back of the motel to service the land and the motel?" He said, "I'll think about it." Mr Geale offered a sum of $500,000, to which Mr Eid responded, "No, but I'll sell it to you for $700,000." Mr Geale responded by saying, "It's not worth it. I won't pay that." 18 Mr Stanley Geale played no further direct part in the negotiations leaving the matter to his sons. Apparently his wife was unwell and he devoted himself to her well-being leaving further negotiations to his sons. 19 Mr Rohan Geale also gave evidence. In his affidavit he describes the conversations at which he was present in similar terms to the description given by his father. 20 On 19 September 2000 Mr Rohan Geale approached Mr Eid at the request of his father. His brother, Tony, was also present. Rohan Geale said to Mr Eid, "We want to talk to you about buying your land, but we need to verify if you would agree to give us a five-metre boundary adjustment (which dad spoke to you about) from your motel site for road access." He apparently indicated that the boundary from Finlay Road would not be wide enough to form an effective roadway. The additional land was required for an effective access. Mr Eid apparently replied saying, "My family want to sell. We will give you the five-metre boundary adjustment in the sale." 21 Mr Rohan Geale then left the meeting to speak with his father by telephone. On his return he said to Mr Eid, "We are prepared to give you $650,000 for the old service station site and the land at the rear [being approximately 10,000 square metres] of your motel if we can have a five-metre boundary adjustment to come from your motel. It is subject to DA conditions and an agreement to go 50/50 in putting the fence up on the new boundary." He said Mr Eid responded by saying, "I agree", they shook hands and Mr Eid said, "We agree. Congratulations to your family." 22 Mr Eid said, "I have spoken to my family. They agree to sell you the land." Mr Rohan Geale said that Mr Eid also said, "Families are very important and I look after mine like your father looks after yours." 23 Early in October Mr Eid apparently came to Mr Geale's office and indicated that he wished to put up a fence at the rear of his motel for security reasons. To facilitate that occurring, Mr Geale rang the surveyor, Mr Bayliss, from RJ Kell & Company, and according to Mr Eid, Mr Geale gave instructions to him to, "Move the boundary pegs for the five-metre boundary adjustment." 24 Mr Bayliss gave evidence in these proceedings by affidavit and was not requested to attend for cross-examination. I will come to his evidence later, but it is consistent with the evidence which Mr Rohan Geale gives in relation to the matter. 25 Mr Anthony Geale also gave evidence. He was present at the meeting towards the end of September and says that he went to the motel with his brother Rohan at about 10 or 11am in the morning. When he arrived he spoke with Mr Eid and his brother Rohan said, "We are interested in purchasing the service station site and the land at the rear". Mr Eid responded by saying, "The council have agreed to buy some of the land, but the rest is for sale." 26 Mr Rohan Geale then said, "We want to talk to you about a five-metre boundary adjustment to give us access to our other land that we own. We will also give you a rear entrance to your motel." Mr Eid responded by saying that he would sell and apparently appreciated the opportunity for a rear access to his motel. 27 There was then a discussion about price. The evidence of Mr Anthony Geale in relation to this discussion is consistent with that which I have related from Mr Rohan Geale. 28 The Geale family have used the services of Mr Cheetham, a partner in Johnson & Sendall Solicitors for their legal work over a number of years. They retained him to act in relation to this transaction. After receiving instructions, Mr Cheetham wrote to Mr George Khoury, the solicitor who acted for the defendants. 29 His initial letter was dated 17 October 2000 and was in the following terms: "We act for Wollondilly Retirement Village Pty Ltd who have completed negotiations to acquire Lots 1 and 2 of a Subdivision of Lot 2 DP997846 and also part Lot 1 DP997846 from your client Mr Sam Eid. We are instructed that the formal particulars are as follows: 1. Purchaser- Wollondilly Retirement Village Pty Ltd 2. Purchase price $650,000.00 3. Land to be conveyed is Lots 1 and 2 of a Subdivision of Lot 2 DP997846 and also part Lot 1 DP997846. 4. Settlement date: within 21 days of registration of Plan of Subdivision or within 12 months of the date of the Contract. If settlement does not take place within this time the Purchaser shall have the right to rescind but not the Vendor. 5. Deposit $300,000.00 which is to be released to your client to enable him to repay an existing debt of that amount to his Bank. At present the Bank holds a Mortgage over Lot 2 DP997846. Subject to verification of the terms of the Mortgage our client is to receive a Transfer of the Mortgage at the time of exchange of Contracts. 6. In consideration of our client agreeing to release $300,000.00, your client is to pay interest at the rate of 8% on that sum from the date of exchange until settlement. This interest is to be set off against amounts otherwise due at settlement. 7. No legal obligation shall arise between the parties until a formal exchange of Contracts. Each party is to acknowledge that until exchange of Contracts written or personal communications are an expression of the parties understanding between each other and are not to be binding under any circumstances. 8. Each party to pay its own costs. 9. The Vendor is to include a piece of land 5 metres wide within the proposed Lot 3 of a Subdivision of Lot 2 in the land to be conveyed ie a strip of land 5 metres wide at the rear of Lot 3 is to be included in the sale. Would you please confirm your client's general acceptance of these terms and forward a Contract to us as soon as possible." 30 Mr George Khoury responded with his letter dated 20 October 2000. That letter provides as follows: "We refer to your letter of 17 October, 2000 and are instructed to reply as follows: 1. Agreed 2. agreed 3. Agreed 4. Settlement Date: Within 21 days of registration of Plan of Subdivision. If after 6 months of the date of the Contract registration of both Plans of Subdivision has not been effected then either party shall have the right to rescind. (5) & (6)The Deposit is to be $350,000.00 which is to be released to the vendors on exchange. Interest of 8% will be payable after ten (10) weeks from the date of exchange. Such interest will be accounted for at settlement. The vendors will consent to a caveat being lodged against Lot 2 DO 997846 subject to allowing for the Plan of Subdivision being allowed to be processed by the Land Titles Office. The parties can also have a loan agreement if necessary. We understand that both Plans of Subdivision are ready or almost ready for finalisation. 7. Agreed 8. Agreed 9. The Vendors agree to give, after settlement, a piece of land 5 metres wide commencing at the rear boundary of proposed Lot 3 of Subdivision of Lot 2 right up to the boundary of Lot 2 of Subdivision of Lot 2 at no cost to them. The purchaser is to bear all surveyor, council, legal and other miscellaneous costs. The vendors will agree to grant consent for the Plan of Subdivision. We have ordered the s 149(2) Certificate to incorporate in the proposed Contract." 31 Mr Khoury gave evidence before me and indicated that he responded in accordance with the instructions which he had been given in relation to the matter. 32 Critical to these proceedings is the statement in paragraph 3 of the letter from Johnson & Sendall that the land "to be conveyed is Lots 1 and 2 of a subdivision of Lot 2 DP 997846 and also part of Lot 1 DP 997846." It is plain that the reference to Lots 1 and 2 of the subdivision of Lot 2 is the reference to two of the three allotments proposed to be created by the subdivision of Lot 2. 33 By this time negotiations between the parties had identified the proposed boundaries for that subdivision which is shown on the plan which I have also annexed to this judgment and marked "B". 34 Before me the parties are at issue as to the land being referred to by Johnson & Sendall as "also part lot 1 DP 997846". 35 Mr Khoury responds to the intimation by Johnson & Sendall as to the land to be conveyed with the word "agreed". 36 The Johnson & Sendall letter in paragraph 9 also provided for the arrangements in relation to the conveyance of the five-metre strip within proposed Lot 3 of the subdivision of Lot 2. 37 In his letter Mr Khoury accepts, on behalf of his clients, that this forms part of the arrangement. When it came to the drafting and execution of the contract, it appears that everyone involved completely forgot about the necessity to provide for the conveyance of that five-metre strip and it is accepted by the defendants that, at least to that extent, rectification is required. However, the defendants oppose the rectification of the contract to provide for the conveyance of any part of Lot 1 in DP 997846. 38 After this exchange of letters, the matter took a somewhat unusual course. The defendant's solicitor did not draw the contract. Rather it was drawn by Mr Cheetham, or at least by someone under his supervision. A draft of the contract was sent to Mr Khoury in late November and a further copy was forwarded in December. 39 However, steps were not taken to exchange the contracts, although there were negotiations in relation to the prospect of a substantial deposit being paid in advance of settlement of the matter. Some of those negotiations are reflected in paragraph 5 of the original letter from Johnson & Sendall but it is unnecessary to explore the matter in any detail. 40 Ultimately, because of the fact that the defendants could not provide a mortgage, the plaintiff declined to advance a significant sum by way of deposit and the matter proceeded to exchange of contracts and settlement on the same day, being 26 March 2001. 41 As I have indicated, the parties were unaware that provision had not been made in the contract for the five-metre strip of land, but were also unaware that the contract had misdescribed the land to be conveyed. Apart from the claim that reference to part of the land in Lot 1 had been omitted, the contract provided that the land to be sold was Lot 1 and 2 in an unregistered plan, being part of Lot 1 in DP 997846. In fact, the reference to Lots 1 and 2 can only be a reference to land which was part of Lot 2 in DP 997846. This mistake was not identified by any of the parties. 42 The evidence of Mr Khoury is that when he received the draft contract from Mr Cheetham, he discussed the matter with Mr Eid and obtained instructions by reference to the plan attached to the contract; which were to the effect that the plan accurately provided for the land which had been agreed to be sold. That plan reflects the proposal for subdivision of Lot 2, but does not provide for the subdivision of Lot 1. 43 Mr Khoury says that, being satisfied that the contract referred to the appropriate land, having regard to the plan, he considered that the matter could proceed without difficulty. He gave evidence that he believed throughout the transaction that the contract reflected the agreement which was evidenced in the correspondence which he had with Mr Cheetham. It follows that throughout the transaction Mr Khoury laboured under a mistake that the contract reflected the true agreement of the parties when, on any view of the matter, this was not the case. 44 Mr Eid gave evidence which, in substance, denied there had been discussions about the prospective sale of any part of Lot 1, nor any discussion about the sale of the five-metre strip. His evidence was most unsatisfactory and where it conflicts with that of any of the members of the Geale family I prefer the evidence of the latter. 45 He asked to give his evidence with the assistance of an interpreter, but in the events which happened this did not occur. It was plain from the manner in which his evidence was given that he has a command of the English language more than sufficient for him to have understood and responded to the questions which he was asked. It must be remembered that he has, for some period, conducted the motel business in Goulburn in which he utilises the telephone and manages the operation, being assisted by some day help. 46 As I have earlier indicated, evidence was given by a surveyor, Mr Bayliss, who was employed by RJ Kell & Company, Consulting Surveyors. In his affidavit Mr Bayliss said that at the request of Mr Eid he went to mark half of the required fence line along the boundary of the proposed Lot 3 with Lot 1. He says that he met Mr Eid on site and that Mr Eid requested that the fence line be marked out five metres inside the boundary with the halfway point of that line also marked. 47 Mr Bayliss said he performed his survey as required and placed pegs on the appropriate boundary. All of this occurred in October 2000 and, since that time, Mr Bayliss has observed that a fence was constructed along the line which he pegged. Mr Eid gave evidence of constructing the fence, but denied that he had placed it five metres from the boundary in the manner indicated by Mr Bayliss. I have already indicated that Mr Bayliss was not required to attend for cross-examination and I have no hesitation in accepting his evidence. The evidence from Mr Eid in relation to this aspect of the matter must be rejected. Accordingly, it is plain as the defendant, through his counsel, now accepts that the agreement included the sale of this five metre strip of land. 48 I am satisfied that Mr Eid's evidence denying that there was discussion about the sale of any part of Lot 1 of DP 997846 or the five-metre strip should also be rejected. That evidence is both inconsistent with the evidence of the members of the Geale family, and is at odds with the exchange of correspondence between the solicitors. 49 There is no explanation for the inclusion by Mr Cheetham of reference to Lot 1 and the five-metre strip in his letter unless this had formed part of the negotiations. But, more importantly, there would be no explanation for Mr Khoury's response accepting these elements of Mr Cheetham's letter, which he said he did having received instructions, unless the position was as the Geale family stated. 50 Furthermore, my observations of all the members of the Geale family convinced me that in giving their evidence they were both truthful and clear in their recollections of the events which occurred. 51 After the transaction was settled, the Geale family received a letter from Mr Cheetham indicating the transaction had been finalised. On perusing that letter they immediately realised that no part of Lot 1 had been conveyed and the five-metre strip had not been dealt with. They contacted Mr Cheethan and each of them spoke with Mr Eid. Mr Rohan Geale said he spoke to Mr Eid in April 2000 about the matter and said, "Sam, we need this fixed up. You know what the arrangement was." He said that Mr Eid responded by saying, "Yes, I know what the agreement was. I know you purchased the land and it was always my intention to sell you the land, but my solicitor won't let me sign the transfer, my solicitor will not give me any money that you paid for the land." 52 Mr Anthony Geale says that he went by himself to see Mr Eid at the motel and said to him, "What the bloody hell is going on?" Mr Eid said, "My wife's solicitor will not let her sign the paperwork. I've been trying to get her to do it, but her solicitor will not let her do it. I am going to Sydney to take the paperwork to her and get her to sign it." He also said, "My wife is not the full quid and I haven't been with her for about 14 years. I promise to sort the matter out." Mr Geale pressed him and said, "This is a major problem. I want it sorted out" to which he replied, "I'm going to Sydney to get her to sign it even if it takes me a week. I do not want to do the wrong thing by your family. I understand that an error has been made and I want to help you." 53 I have no hesitation in accepting this evidence. It is confirmation of the fact, of which I am satisfied, that the parties agreed that, apart from the land which has been conveyed, there would also be a conveyance of part of Lot 1 and the five-metre strip. 54 Mrs Eid also gave evidence. Although she has a command of the English language which I am satisfied was adequate for her to give evidence in these proceedings, it emerged that she could not read. Accordingly, she has relied upon her husband and Mr Khoury in relation to business dealings. Mr Khoury confirmed that he had the instructions of both Mr and Mrs Eid when he acted in the matter and this is confirmed by correspondence in Mr Khoury's own hand. I am satisfied that throughout this transaction Mr Khoury was instructed to act on behalf of both Mr and Mrs Eid. 55 There being no issue that the contract must be rectified to provide for the conveyance of the five-metre strip, the only issue is whether it should also be rectified to provide for the conveyance of part of Lot 1. 56 In this respect the submission of the defendants is that because no plan was attached with Mr Cheetham's letter of 17 October, it is not possible to identify the land being part of Lot 1 which was referred to in that letter. Accordingly, it is submitted that it is not possible to conclude that there was an agreement in relation to the conveyance of any part of Lot 1 and, accordingly, I do not accept this submission. 57 I am satisfied that the parties conducted their negotiations on the basis and ultimately agreed, that proposed Lots 1 and 2 of the subdivision of Lot 2 would be conveyed as would that part of Lot 1 which would form the residue following the sale of part of that lot to the Council and in addition the five metre strip would be conveyed. 58 The area of land to be sold to the Council was identified on the plan which is annexure A to these reasons which was the plan proffered by Mr Eid at an early stage of the negotiations. I have related the evidence in relation to those negotiations which I am satisfied proceeded upon the assumption that the area of land beyond that required by the Council would be sold to the plaintiff. 59 Accordingly, I am satisfied that the contract which was executed between the parties did not reflect their true agreement which included so much of Lot 1 as was not purchased by Council, as well as the five-metre strip. 60 The plaintiff submits that a mutual mistake has occurred and that the intention of the parties remained throughout that the additional lands would be conveyed. There is no question in my mind that this was the position of the members of the Geale family. 61 It was also Mr Khoury's evidence that throughout the transaction he always believed that the contract reflected the agreement which he understood was reflected in the exchange of letters between solicitors. 62 It would follow, if the evidence was confined in that manner, that the proceedings would lead to the conclusion that a mutual mistake has occurred. However, I am not comfortable about the position of Mr Eid. If it be true that he gave instructions to Mr Khoury that the contract, including the plan within it, reflected the agreement between the parties, he was either mistaken or sought an advantage from the error of Mr Cheetham. Having regard to his denial that there were negotiations in relation to the sale of part of Lot 1 and the five-metre strip, I am inclined to the view that he was aware that the contract had been prepared in error, but remained silent and sought to take advantage of that situation. 63 However, whatever be the position, the outcome, in my view, is the same. Whether the correct conclusion is that a mutual mistake has occurred or whether that mistake is confined to the plaintiff, I am satisfied this Court should intervene and make orders which rectify the contract. 64 There is one further matter which I should address. Senior Counsel for the plaintiffs submitted that in a number of respects Mr Khoury and Mr Eid had deliberately lied to the court. I have indicated that I do not accept the evidence of Mr Eid where it conflicts with that of the members of the Geale family and I need say no more about that. 65 With respect to Mr Khoury's evidence, it is only necessary for me to consider it in so far as he relates the fact that he laboured throughout under the mistaken belief that the contract reflected the agreement of the parties. Accordingly, it is not necessary for me to otherwise resolve the issues raised by the submissions of counsel for the plaintiff. 66 For those reasons I am satisfied that I should make the orders contemplated in paragraphs 1, 2, 3 and 4 in the amended statement of claim. It is necessary to amend the fourth paragraph to provide for the plural in relation to subdivisions. 67 The orders will be as provided in paragraphs 1, 2, 3 and 4 in the amended statement of claim with the amendment of paragraph 4 which I have indicated. 68 The plaintiff seeks costs on an indemnity basis. It is submitted that although the initial error was made by the plaintiff's solicitor, Mr Eid, upon being apprised of that mistake, immediately acknowledged the position and said that he would make arrangements to have the situation rectified. 69 On the evidence, it was after the intervention of Mr Khoury that the position changed. As Mr Eid did not honour his agreement to rectify the situation, it was necessary for the plaintiff to bring these proceedings. It is submitted that if Mr Eid had honoured his promise, these proceedings would have been unnecessary. 70 The court has an inherent jurisdiction to order the payment of costs on an indemnity basis. Where it is satisfied that a defence is deliberately false or the proceedings were unnecessary, indemnity costs may be appropriate. 71 In the present matter I am satisfied that the defendants sought to resist the plaintiff's application in circumstances which Mr Eid must have known did not entitle him to bring a defence. I am satisfied that when the matter was raised with him he knew that an error had been made, but sought to take advantage of that error by resisting the plaintiff's application. 72 He took that resistance to the point of giving evidence which I am satisfied was not true. In those circumstances I am satisfied this is a matter in which an order for indemnity costs is appropriate and, accordingly, I order the defendants to pay the plaintiff's costs on an indemnity basis. **********