Owen v Costigan [2005] NSWSC 820

New South Wales Supreme Court

CITATION : Owen v Costigan [2005] NSWSC 820

HEARING DATE(S) : 8, 9, 10 & 11 August 2005

JUDGMENT DATE : 17 August 2005

JURISDICTION : Common Law Division

JUDGMENT OF : Associate Justice Malpass at 1

DECISION : Reasons published.

CATCHWORDS : Oral arrangement to pay money and acquire equity in land - written option agreement - option not exercised - rectification, estoppel and equitable charge.

Masters v Cameron (1954) 91 CLR 353 CASES CITED : Plunkett v Bell (1915) 19 CLR 544

Bronwyn Patricia Owen (Plaintiff) PARTIES : Anthony Costigan (Defendant)

FILE NUMBER(S) : SC 11783/04

Mr S A Benson (Plaintiff) COUNSEL : Mr N Manousaridis (Defendant)

Michael Croke & Co (Plaintiff) SOLICITORS : Muggletons (Defendant)

LOWER COURT JURISDICTION :

- 18 - IN THE SUPREME COURT OF NEW SOUTH WALES COMMON LAW DIVISION POSSESSION LIST

Associate Justice Malpass

17 August 2005

11783 of 2004 Bronwyn Patricia Owen v Anthony Costigan

JUDGMENT 1 His Honour: The plaintiff was married to the late Michael David Hughes (the deceased). They separated after a short marriage (in about August 2000) and reached property arrangements by consent. The deceased became the sole registered proprietor of land known as 79 Lowanna Avenue, Forresters Beach (the land). He came to that position under the property arrangements. 2 The deceased committed suicide on or about 18 October 2001. Since 2 April 2004, the plaintiff has been the registered proprietor of the land (following the obtaining of letters of administration and a transmission application). 3 The defendant remains in occupation of the land (he has been in possession since about May or June 2001). He has refused to give up vacant possession. 4 The plaintiff has commenced these proceedings to obtain possession. The defendant has filed both a defence and a cross-claim. 5 At the commencement of the hearing, the case for the defendant was put on a number of bases. I shall briefly refer to how it is presented in the pleadings (see amended defence and cross-claim filed pursuant to leave granted on 19 April 2005). He relies on an oral agreement said to have been made with the deceased in about May 2001 (the oral agreement). He relies also on a subsequent written option agreement (the written agreement). It was prepared by a solicitor (Mr Hodges). It was executed on 28 May 2001. In the alternative, the defendant seeks rectification of the written agreement (whereby alleged erroneous terms are deleted and it is otherwise reformed so that it reflects what was said to be contemplated by the oral agreement) and alleges estoppel. There is a further alternative claim for an equitable charge over the land. 6 The defendant paid the sum of $30,000 to the deceased (it was paid upon execution of the written agreement). He has made payments in respect of a mortgage (held by Perpetual Trustees Australia Limited) over the land. It was taken out by the deceased. 7 The plaintiff does not dispute that the defendant is entitled to an equitable charge over the land (there may well be dispute, inter alia, as to quantum). The wider area of dispute is whether or not he is entitled to any of the other relief sought in the pleadings. 8 What is before the court does engender some aura of mystery. It is apparent that it is merely a part of a much bigger picture. I shall now turn to matters that were revealed in evidence. 9 The defendant had known the deceased for in excess of 20 years. The deceased was the son of family friends. He had, for a time, worked for the defendant when the latter was carrying on business as a building sub-contractor. 10 I shall now refer to the defendant's version as to what he says happened (as it appears, inter alia, in an affidavit sworn on 1 February 2005). 11 He says that conversation concerning the land commenced in about March 2001. The deceased had told him that he was having financial difficulties and was concerned that he might lose the land. The defendant offered to provide financial assistance. 12 Thereafter, on a number of occasions, the defendant gave the deceased amounts (totalling about $2,500) to assist in the meeting of mortgage repayments. 13 The defendant has deposed that in or about early May 2001, there was a conversation that brought about the oral agreement for the purchase of the land for the sum of $30,000 clear. In oral evidence he has conceded that he did not regard this agreement as being legally binding. 14 At the time, there was a perceived problem which brought the deceased to the position where he did not want to transfer title immediately. The deceased had entered into a sole agency agreement with a real estate agent for the sale of the land. He did not want to have to pay commission. The defendant contends that it was proposed that the property be transferred when the agreement expired. 15 The deceased said that he would get the agreement drawn up by a solicitor. This was acceptable to the defendant. The deceased then gave instructions to Mr Hodges. 16 A letter dated 25 May 2001 was sent by Mr Hodges to the deceased. It enclosed a draft of the proposed written agreement that had been prepared by him (it was described in the letter as an option agreement). The letter contained, inter alia, the following:- We refer to previous correspondence and note that we were instructed to advise as to the transfer of the property to a friend on the basis that he would pay you the sum of $30,000 and take over the mortgage payments. It would not normally be possible for the friend to become registered as the owner of the property without paying out the mortgage to Perpetual Trustee. If the property is sold now, you have the expense of paying commission to the estate agent pursuant to an exclusive agency agreement you signed with Steele's First National. Normally, estate agents become aware of the sale of property by reading the records of land transfers. So, if a change of title was to be effected in the next few months, suspicion would be aroused. We note that we have not seen all of the provisions of your exclusive agency agreement, but in most of them, the commission is due to the agent if the property is sold to a person introduced to the property during the agency period. We have drafted an option agreement and it is enclosed. We cannot guarantee that it will protect you from claims by the agent for commission. However, the risk will be reduced because the transfer of the title is not due for about 12 months. By that time, it would be difficult for the agent to prove his case if the property is then transferred to a person with whom he has had no contact. 17 An arrangement was made to see Mr Hodges. Both the deceased and the defendant attended his offices at 225 Macquarie Street, Sydney, on 28 May 2001. They met a clerk (Les Connolly) and came to attend upon Mr Hodges. The defendant has deposed that Mr Hodges said, "This is the option agreement. I've made it for 12 months". Both of them signed the written agreement and their respective signatures were witnessed. After the signing of the agreement, the defendant handed over his cheque for $30,000. 18 The written agreement is headed "Option agreement". It commences with certain recitals. The recitals include the following:- 2. The owner has attempted to sell the property. The attempt has not been successful and the owner now wishes to make arrangements for the property which will be definite for the next 12 months; 3. The purchaser wishes to occupy the property and perhaps purchase it at a later stage … … … 19 The operative words include the following:- 5. Upon the signing of this agreement the purchaser shall pay to the owners the sum of $30,000 (the "option fee"). The payment of the option fee is an essential term of this agreement and in the event that it is not paid within 24 hours of the date of this agreement, or if any cheque in purported payment of it is not paid on presentation, this agreement shall be void and of no effect. 6. The owner grants to the purchaser an option to purchase the property. 7. The option shall be exercised as follows: a. At any time after the expiration of three months and prior to the expiration of the period of 12 months from the date of this agreement, the purchaser may forward to Stephen Hodges, solicitor, of 2/225 Macquarie Street, Sydney, the solicitor for the owner, the attached Contract for the Sale of the property duly signed and executed together with a Certificate pursuant to Section 66W of the Conveyancing Act signed by a solicitor, whereupon the owner's said solicitor shall deliver to the purchaser or his agent the original contract duly signed by the owner so as to complete the exchange of contracts. b. The purchase price of the property shall be $30,000, plus whatever amount is due by the owner to Perpetual Trustees Australia Limited in respect of the mortgage.