Fuller v Albert

1. [1]

   MACFARLAN JA: I agree with Emmett AJA.

2. [2]

   BRERETON JA: I agree with Emmett AJA.

3. [3]

   EMMETT AJA:

Introduction

1. [4]

   Mr Fuller commenced proceedings in the Corporations List of the Equity Division of the Supreme Court seeking relief in relation to both disputes (the Proceedings). On 14 July 2020, for reasons published on 25 May 20201 and 14 July 2020, [1] a judge of the Equity Division, sitting in the Corporations List (the primary judge), ordered that the proceedings be dismissed and that Mr Fuller pay the costs of Mr Albert, Mrs Albert and certain other defendants. No order as to costs was made against Matcove. Several other parties were joined as plaintiffs and defendants in the proceedings in the Equity Division. However, it is unnecessary to deal with the position of those other parties, since they are not parties to this appeal.

Background

1. [5]

   Mr Fuller and Mr Albert are the only directors of Matcove. They and members of their respective families originally held shares in Matcove, as to 60%, by Mr Fuller and his children and, as to 40%, by Mr Albert, Mrs Albert and their children. At the time of the hearing before the primary judge, by reason of the transfer of the Mortgaged Share, to which reference will be made below, the shares in the capital of Matcove were held as to one half by each of Mr Fuller and his family and Mr Albert and his family.

2. [6]

   The Property is in the area of Coffs Harbour City Council (the Council) and Matcove purchased the Property in 1993. At that time, the Property was undeveloped. The purchase of the Property by Matcove had been financed by a loan to Matcove, which was secured by a mortgage of the Property. That loan was subsequently refinanced from a loan of $400,000 by a different lender to Moonee Developments Pty Ltd (Moonee Developments), a company owned by the same shareholders and in the same proportions as Matcove. Moonee Developments was formed for the purpose of carrying out a proposed development of the Property. Guarantees were provided by each of Mr Albert and Mr Fuller for 50% of the amount borrowed by Moonee Developments. Matcove guaranteed to the new lender repayment of the loan by Moonee Developments. Matcove’s obligation under the guarantee was secured by a mortgage over the Property and a general security interest. The funds advanced to Moonee Developments were applied partly in repayment of the original loan to Matcove to purchase the Property and partly in the development of the Property by Moonee Developments.

3. [7]

   At the time of the purchase of the Property, Mr Fuller and Mr Albert discussed possible arrangements whereby each would acquire from Matcove a parcel of land forming part of the Property and the balance would be the subject of a development application. Their intentions at that stage were that each would acquire his parcel for a consideration other than the payment of a price in money. The discussions were to the effect that Mr Albert would acquire a parcel near a creek at the back of the Property and Mr Fuller would acquire a parcel at the front of the Property, with a frontage on the Pacific Highway, from which a service station could be operated.

4. [8]

   In 1998, Mr Albert arranged for Matcove to lodge a development application to have the Property subdivided to create a separate parcel, which was to be transferred to him. In February 2004, Matcove lodged a development application in respect of a subdivision to create a parcel for Mr Fuller on the western side of the creek running through the Property. However, Mr Fuller asked the Council to delay determination of that development application pending preparation of a submission. In May 2004, the Council informed Mr Fuller that the determination of his application would be suspended pending the determination of Matcove’s application for a subdivision of the Property, to create the parcel that was to be transferred to Mr Albert.

5. [9]

   In November 2005, the Council gave the necessary approvals for the subdivision of the Property into two lots, being one lot having an area of 12.922 ha (Lot 1) and a second lot having an area of 1.293 ha (Lot 2). On 8 December 2005, a special meeting of Matcove approved the transfer of Lot 2 to Mr Albert and Mrs Albert for the price of $175,000, on the basis that the costs associated with the transfer would be paid by them. Subsequently, a contract for sale of Lot 2 by Matcove to Mr Albert and Mrs Albert was signed (the Contract for Sale) and a transfer of Lot 2 from Matcove to Mr Albert and Mrs Albert as purchasers was executed. Each recorded that the consideration for the sale and transfer was $175,000. Mr Albert and Mrs Albert received legal advice in respect of the documentation just referred to, which appears to have been intended to record what was then understood to be the value of Lot 2 for stamp duty purposes. However, the price referred to in the documentation was not paid at that time. I shall return to the matter of the price below.

6. [10]

   In 2009, Matcove lodged an application for a major project consisting of the subdivision of Lot 1 into residential lots. That application was to be determined by the Minister for Planning. In January 2010, the Council invited Mr Fuller to withdraw his development application in respect of his proposed lot and indicated that it would refuse his application if it was not withdrawn. Mr Fuller did not apply for any further development approval for subdivision of the Property. However, he lodged a development application to build a house on the Property, which was rejected by the Council because of the approval that had been sought for the substantial subdivision of the Property, which was then before the Department of Planning.

Payment by the Alberts

1. [11]

   On 1 December 2016, a significant meeting took place in Mr Albert’s office. The meeting was attended by Mr Albert, Mr Fuller, Mr James King and Mr Matthew Bailey. Mr King introduced himself as a private investigator. Mr Bailey was an employee of Mr Albert’s accountancy practice. According to Mr Albert, whose evidence was accepted by the primary judge, conversation then ensued for about 40 minutes.

2. [12]

   The conversation on 1 December 2016 was in part to the following effect:

3. [13]

   Mr Albert said that Mr King continued to speak to Mr Bailey and that he, Mr Albert, had a conversation with Mr Fuller to the following effect:

4. [14]

   On 2 December 2016, Mr King sent an email to Mr Bailey setting out a version of the conversation that had taken place on 1 December 2016. Mr Bailey responded later in the day, saying that he had heard Mr Albert say to Mr Fuller:

5. [15]

   On 21 December 2016, a sum of $175,000 was transferred from an account named “KA&Co Business Loan” to Moonee Developments. The narrative on the payer’s account said, “Lot 2 Moonee” and the narrative on the payee’s account said “Land KASA”.

6. [16]

   On 21 December 2016, Messrs Fishburn Watson O’Brien, who were acting for Mr Albert and Matcove, wrote to Messrs Crowther Sim Lawyers, who were acting for Mr Fuller. The letter referred to a general meeting of Matcove convened by Mr Albert. On 9 January 2017, Crowther Sim wrote to Fishburn Watson O’Brien in response to the letter of 21 December 2016 asserting that there were defects in the notice convening the proposed general meeting of Matcove. Crowther Sim Lawyers wrote again to Fishburn Watson O’Brien expressing the view that the proposed meeting had not been properly called because of defects in the notice. Fishburn Watson O’Brien replied later on 10 January 2017, saying that the general meeting did not proceed and that Mr Fuller would shortly receive notice of a new meeting. The letter then said:

7. [17]

   There was no evidence as to the accounting treatment of the payment of $175,000 made to Moonee Developments. It appears to have been treated as a payment by the Alberts to Matcove.

The Proceedings

1. [18]

   On 25 September 2017, Mr Fuller filed a statement of claim in the Proceedings (the Original Statement of Claim). In the Original Statement of Claim, Mr Fuller sought, relevantly:

2. [19]

   Mr Fuller subsequently resiled completely from the allegations made in the Original Statement of Claim and filed an amended statement of claim on 15 May 2019 (the Amended Statement of Claim). In the Amended Statement of Claim, Mr Fuller sought, relevantly, the following relief:

Contract for the transfer of land

1. [20]

   In the Amended Statement of Claim, Mr Fuller made allegations that might fairly be restated as follows:

2. [21]

   Before the primary judge, Mr Albert disputed that there was a contract in the terms alleged by Mr Fuller. He also asserted that, if there was an arrangement along those lines, there was no intention to create legally binding obligations. The primary judge found that the formality of the Document indicated an intention to enter legal relations. There is no challenge by Mr Albert to that finding. Mr Albert also contended that any alleged contract was void for uncertainty. His Honour was satisfied that the Document was sufficiently certain, except possibly as to the consideration payable by Mr Fuller and Mr Albert for their respective parcels. There was no challenge to that conclusion in the appeal.

3. [22]

   The oral part of the Agreement, as alleged by Mr Fuller, was based on the evidence of Mr Albert, which the primary judge accepted as credible and reliable, or was common ground. In his affidavit of 9 February 2018, Mr Albert said that, in or around 1992, Mr Fuller telephoned him and told him that there was a property for sale near the creek on the highway at Moonee and asked whether Mr Albert would be interested in “coming in” with him. They subsequently met at the Property prior to Christmas 1992. At the time, they had a conversation as follows:

4. [23]

   In 1998, the Roads and Traffic Authority made an announcement that there would be a dual carriageway past the frontage of the Property. That negated any chance for Mr Fuller to build a service station at the front of the Property because the speed limit would not permit a turnoff. At that time, Mr Albert and Mr Fuller had a conversation, in which Mr Albert told Mr Fuller about the announcement, to which Mr Fuller responded with words to the effect:

5. [24]

   The primary judge accepted that the task of construction involved ascertaining the meaning that the Document would convey to a reasonable person having all the background knowledge that would be reasonably available to the contracting parties at the time the of the contract. That requires consideration of the language used in the Document, the surrounding circumstances known to the parties and the purposes or objects sought to be secured by the Agreement as alleged. [2]

6. [25]

   The primary judge accepted that pleaded terms (b), (c) and (e) of the alleged Agreement were made out. His Honour considered that pleaded term (a) of the Agreement was established but with the qualification that “would” should be read not as creating an obligation to acquire the relevant land but as recording that the parties intended that each of them could do so. His Honour observed that the part of pleaded term (a) of the Agreement that was oral was the reference to the consideration, for which Mr Fuller relied on the evidence of Mr Albert. His Honour concluded that it was the parties’ common understanding or expectation, within their informal arrangements, that the relevant lots were to be transferred for no further payment, at least until Mr King asserted to the contrary on Mr Fuller’s behalf and, after Mr Albert and Mrs Albert had paid the sum of $175,000 for Lot 2.

7. [26]

   Importantly, the primary judge concluded that alleged term (d) was not made out. His Honour considered that the question of whether pleaded term (d) arose depended upon whether or not it was necessary to give business efficacy to the arrangement and was not so obvious that it “goes without saying”. [3] His Honour did not consider that the requirement of necessity was satisfied given the availability of several alternative terms that would reflect a reasonable, but different, balancing of the interests of the parties in respect of the stated objective of the arrangement.

8. [27]

   The primary judge concluded that the preamble at the beginning of the Document did not have any promissory content and was no more than a record of the parties’ purpose, namely, that each would acquire one residential building site from Matcove and carve that parcel from the Property. His Honour held that there was no doubt that each had that purpose “at the relevant time”, being around when Matcove acquired the Property. It was also their intention at the time when the Document was dated and when it was signed, apparently in January 2004, notwithstanding that it is expressed to be signed on 18 February 2003. While his Honour did not consider that that statement of purpose had any promissory content, the use of the phrase “other terms” suggests that what precedes that statement was also regarded as a “term” of the arrangement recorded in the Document.

9. [28]

   Paragraph 1 of the Document is not expressly limited in time. Accordingly, the proposed excision by way of subdivision of the Property could be deferred into the indefinite future by either party, and indeed, until after the approvals for any other subdivision of the Property had been sought. While the primary judge accepted that paragraph 1 identified when the subdivision would occur, whereby the two building blocks would be excised from the Property, his Honour considered that paragraph 1 did not expressly impose any obligation on either party to bring about that result.

10. [29]

    The primary judge accepted that paragraph 2 of the Document recorded the intention of the parties concerning access but did not impose any obligation on either party to bring about the connection of public roads. Paragraph 3 refers to “the natural owners”, which his Honour appears to have assumed meant the parties. His Honour considered that neither “individual block costs” nor “joint utilities/costs” were within the scope of a potential sharing agreement. With respect to paragraph 4, his Honour accepted that the reference to the areas being “roughly depicted” on the plan on the Document should be regarded as having a similar content to “approximately”. His Honour considered that it would be possible for the Court to determine whether any particular block proposed by either party complied with the statement that it was “roughly depicted” on the plan, set out in the Document.

11. [30]

    Pleaded term (d) is very much linked to pleaded term (a) and it is convenient to deal with them together. Notwithstanding the view expressed by the primary judge as to the preamble of the Document, pleaded term (a) can be derived from the preamble. There may be some question about the propriety of the directors in appropriating to themselves assets of their company. On the other hand, pleaded term (a) alleges consideration in the form of Mr Fuller and Mr Albert taking steps to develop the Property and financing that development.

12. [31]

    Mr Albert accepted that there will ordinarily be an implied obligation on the parties to a contract, whereby each party has an obligation to co-operate with the others to achieve contractual objectives, particularly where the contract requires or envisages co-operation and involves an ongoing business arrangement. However, Mr Albert asserted that no such obligation was pleaded or alleged. His Honour concluded that, where several alternative terms were reasonable, the implication of one of them, to the exclusion of the others, is not necessary for the reasonable or effective operation of a contract of the particular nature in the circumstances of the particular case. [4]

13. [32]

    The primary judge considered that the parties, in balancing their respective interests, could reasonably have recognised that it would be imprudent for Matcove, still less its directors jointly or individually, to accept an unqualified obligation to deliver a subdivision that they could not achieve without third party approvals. His Honour accepted that neither Mr Fuller nor Mr Albert could himself “cause” excision of the relevant parcel from the Property by subdivision, since that depended upon approval by the Council or the Minister for Planning in relation to the relevant subdivision. While his Honour accepted that they could have chosen to accept such an absolute obligation, they did not do so. His Honour considered that that fact emphasised that it was neither obvious nor necessary that they should do so.

14. [33]

    The primary judge was not persuaded that pleaded term (d) could be implied in any agreement because the particular term contended for by Mr Fuller was neither necessary nor obvious. Further, his Honour held, the implication of pleaded term (d) was not necessary for the reasonable or effective operation of a contract of the particular nature in the circumstances of the particular case. His Honour considered that that resulted from the existence of several alternative terms that might have reflected an appropriate balancing of the interests of the parties in the circumstances. His Honour considered that, where there are multiple alternatives for such a clause, and several of them are reasonable, then no particular version of that clause is so obvious that it goes without saying or that it is necessary for the operation of the contract.

15. [34]

    On the other hand, the primary judge considered that that would not have prevented the parties reaching agreement, not only as to their common purpose, but also as to the obligations that they would assume in order to bring about that purpose. However, his Honour considered that it did have the consequence that, to do so, the parties had to determine for themselves which of several approaches would best achieve their contractual purpose, where several approaches were available and no single approach was either obvious or necessary to the exclusion of the alternative. His Honour therefore concluded that no term can be implied to make a choice between reasonable alternatives that the parties did not make for themselves. That is a curious conclusion. The result is that, notwithstanding that the parties intended to enter into legally binding relations, there was, in effect, no content in their contractual promises.

16. [35]

    It is not necessarily clear that Matcove was intended to be bound by any agreement. Thus, although the Document recited that Mr Fuller and Mr Albert were in fact directors of Matcove, they did not purport to sign as directors or on behalf of Matcove. Nevertheless, if the arrangement is to be given binding force, it should logically be understood as an agreement to which Matcove, as well as each of Mr Fuller and Mr Albert, is a party.

17. [36]

    Further, whether or not Matcove was intended to incur an obligation, it is fair to read the Document as a promise by each of Mr Fuller and Mr Albert that he will take whatever steps are reasonably within his power to effect the excision from the Property of the parcels chosen by each of them and the transfer of those parcels to Mr Fuller or Mr Albert as the case may be. That is the essence of pleaded term (d).

18. [37]

    Putting aside the question of consideration as between Matcove, on the one hand, and Mr Fuller and Mr Albert, on the other, I consider that it is clear enough that each of Mr Fuller and Mr Albert mutually promised that, when required by the other, he would co-operate in causing Matcove to take such steps as were reasonably open to it to achieve the stated purpose. That is the essence of pleaded terms (a) and (d). Whether there was a breach by Mr Albert of such a promise is, of course, a different question. Further, the question of whether such a promise could be the subject of an order for specific performance is also a different question. However, I consider that the primary judge erred in concluding that there was no binding obligation along the lines of pleaded terms (a) and (d) arising from the Document, in the context of the oral communications referred to above.

19. [38]

    In their defence, the defendants denied the allegations made in the Amended Statement of Claim, as set out above, and made counter-allegations that may be restated as follows:

20. [39]

    Mr Albert contended that, even if there was a binding contractual arrangement along the lines of pleaded terms (a), (b), (c), (d) and (e), that contract was repudiated by Mr Fuller and that repudiation was accepted by Mr Albert. Mr Albert also contended that Mr Fuller had waived or abandoned his rights under any contract, although his Honour considered that those defences added little to the allegation of repudiation. Mr Albert contended that Mr Fuller’s conduct in connection with the allegations made in December 2016 by Mr King and the Original Statement of Claim amounted to repudiation of any contract containing pleaded terms (a), (b), (c), (d) and (e). In particular, Mr Albert relies on the alleged insistence by Mr Fuller that Mr Albert pay for Lot 2 in accordance with the Contract for Sale.

21. [40]

    The primary judge accepted that repudiation of a contract is a serious matter, not to be found or inferred lightly and involves an expressed unwillingness or inability to render substantial performance of a contract. [5] His Honour considered that Mr Fuller’s conduct at the December 2016 meeting and in surrounding correspondence, in permitting Mr King to allege that the transfer of Lot 2 by Matcove to Mr Albert and Mrs Albert constituted fraud, amounted to a repudiation of the pleaded terms of the Agreement. His Honour considered that the fact that Mr Fuller may have acknowledged to Mr Bailey the existence of the Agreement, as alleged, or its terms, as pleaded, at the same time as permitting Mr King to allege that it amounted to fraud is not to the point. His Honour considered that the position that Mr Fuller permitted Mr King to take at the meeting in December 2016 manifested an intention no longer to be bound by a critical term of the Agreement, as pleaded, namely, that the transfer of the parcels to Mr Albert and Mr Fuller was to take place for the consideration stated in pleaded term (a) and, by necessary implication, would not require further payment of a price by Mr Albert or Mr Fuller.

22. [41]

    The primary judge considered that a reasonable person, in the position of Mr Albert, would plainly view Mr Fuller’s conduct as radically inconsistent with the pleaded terms and as a refusal by Mr Fuller to recognise or comply with those terms. His Honour considered that acceptance of the repudiation was obvious enough in that Mr Albert and Mrs Albert subsequently paid the consideration of $175,000 stated in the Contract for Sale and in the transfer of Lot 2. His Honour considered that the repudiation was accepted when Mr Albert took the understandable view that, if Mr Fuller would not recognise any right on Mr Albert’s part to a transfer of Lot 2 without payment, Mr Albert would not recognise any corresponding right of Mr Fuller.

23. [42]

    The involvement of Mr King and the role that he played is not entirely clear. Mr King did not give evidence. Nevertheless, it is clear enough that he was speaking on behalf of Mr Fuller at the meeting in December 2016.

24. [43]

    However, as Mr Fuller contends, it is important to have regard to precisely what Mr King said. He did not assert that the price referred to in the Contract for Sale and in the transfer of Lot 2 was owing by Mr Albert and Mrs Albert to Matcove. Mr King did not demand payment of the price of $175,000. Nor did Mr Fuller demand payment. Rather, Mr King’s assertion was that there was impropriety on the part of Mr Albert, and, for that matter, Mr Fuller, in being parties to what was tantamount to a sham. That is to say, the Contract for Sale and the transfer were brought into existence to reflect an obligation to pay a price of $175,000 in circumstances where the parties had no intention that that price would be paid. It appears that there was discussion between Mr Albert and his legal advisers to the effect that the transfer should reflect the value of Lot 2 for the purposes of assessing stamp duty. If the transfer were expressed to be for no consideration, or for the consideration pleaded in paragraph (a), the Stamp Duties office would have required independent evidence of the value of Lot 2 for the purposes of assessing ad valorem duty.

25. [44]

    The reason for Mr Albert making the payment of $175,000 is curious. Thus, on his version of events, he and Mr Fuller acknowledged at the December 2016 discussion that their intention was for the respective parcels to be transferred without payment of any price. Mr Albert gave evidence that, by reason of the conversations that had taken place at the meeting on 1 December 2016, he felt “intimidated and confused”. He said that that was the first time he had ever heard any suggestion of his having to pay for Lot 2 and decided that the best course of action, given that there appeared to be a dispute, was to pay the agreed consideration specified in the Contract for Sale. He said that he hoped, by doing so, to avoid any protracted dispute in relation to his “family home”. That is not an acceptance of a repudiation by Mr Fuller.

26. [45]

    On the other hand, the allegations made in the Original Statement of Claim appear to be quite inconsistent with the terms of the Agreement pleaded in the Amended Statement of Claim. Nevertheless, there was no acceptance of such a repudiation by Mr Albert. Rather, by his defence to the Original Statement of Claim, he denied the allegations made by Mr Fuller in the Original Statement of Claim.

27. [46]

    A repudiation is the evincing of the intention no longer to be bound by a contractual promise. In further answer to the allegation of repudiation, Mr Fuller asserts that, by December 2016, all obligations on his part had been performed. That is to say, there was no outstanding obligation for him to evince the intention not to perform. Mr Albert had received the benefit of all of the promises made by Mr Fuller to co-operate in causing Matcove to take steps reasonably open to it to effect the subdivision of the Property and transfer of the relevant parcel to Mr Albert and Mrs Albert. It may well be that steps were required to be taken by Mr Fuller to achieve the transfer of a relevant parcel to him. However, he had no obligation to do so. The evidence does not support a conclusion that he evinced an intention no longer to be bound by any unperformed obligation.

28. [47]

    Having regard to the conclusion reached in relation to repudiation, the primary judge did not consider that it was necessary to deal with the other defences outlined above. However, his Honour addressed the defences briefly. His Honour observed that the defendants relied on the same facts in support of legal propositions formulated in the various alternative defences.

29. [48]

    The primary judge considered that the Agreement, if it was otherwise enforceable, was not completed as at 6 January 2010 as alleged by the defendants, in circumstances where Mr Fuller had not received the benefit of the Agreement at that date. His Honour considered there was substantial force in the submission made on behalf of Mr Fuller that the matters alleged by the defendants did not identify any particular variation of the Agreement, as evidenced by the Document, and raised the same issues as the allegation that Mr Fuller had abandoned the Agreement or his rights. His Honour inclined to the view that the Agreement did not specify whether any payment was required by Mr Fuller or Mr Albert in respect of their respective lots. His Honour inclined to the view that the matters alleged by the defendants did not give rise to any variation of the Agreement, as evidenced by the Document. However, his Honour considered the position taken by Mr King, on Mr Fuller’s behalf, at the December 2016 meeting, was fundamentally inconsistent with the position being advanced by Mr Fuller in the proceedings that no payment was required in respect of either of the lots.

30. [49]

    The primary judge was also inclined to conclude that the defences of waiver or abandonment added little to the defendant’s allegation of repudiation. His Honour also inclined to the view that the defence of release did not raise any matter that was not raised in respect of the questions of waiver and abandonment. Further his Honour observed that no consideration was given or promised by Mr Albert for any alleged release. His Honour also considered that the defence of estoppel would not be established because the evidence did not establish the alleged representation by Mr Fuller that he was not entitled to and did not wish to receive a subdivided part of the Property or that Matcove was under no obligation to cause that subdivision.

31. [50]

    By notice of contention filed on 17 November 2020, Mr Albert contended that the decision of the primary judge should be affirmed on the following alternate bases:

32. [51]

    In their written submissions in support of the notice of contention, the respondents relied upon the same facts and conduct to support the defences of waiver, abandonment, unilateral release and that the alleged Agreement had been superseded or varied. The facts and conduct relied on were described in their submissions as follows:

33. [52]

    In support of those contentions, the respondents relied on their submissions to the primary judge. In response, Mr Fuller also relied upon his submissions to the primary judge.

34. [53]

    In their written submissions to the primary judge, the respondents asserted that, depending upon the construction of the Document, any contract said to arise out of it had been completed. They said that the attempt in 2004, ultimately unsuccessful in January 2010, by Mr Fuller to obtain his own block of land or dwelling constituted a completion of any obligations said to arise under the Document for the parties to cause a “subdivision” of a block to Mr Fuller to take place. Equally, the respondents said, the Document had been varied by the subsequent conduct of the parties and Mr Fuller’s unsuccessful attempt to obtain a development application. It was said that the variations were supported by consideration, most prominently being the increase in value of Lot 1 by reason of a development application maximising more land available for residential development. The submission asserted that no such varied agreement was sued upon by Mr Fuller.

35. [54]

    It is somewhat difficult to understand the respondents’ contentions in relation to completion and variation. It may be that, on the construction of the Document adopted above, the obligations of Mr Fuller were complete. However, it could not be said that the obligations of Mr Albert were complete, in so far as Mr Fuller had not obtained a parcel as contemplated by the terms of the Document.

36. [55]

    It is difficult to discern precisely what allegation is made by the respondents as to a variation of the contractual arrangements between the parties. There is no formulation of a varied contract or of a contract that superseded the existing arrangements. The defence does not indicate the nature of the variation alleged or attempt to particularise in any way the terms of the varied agreement. For example, it is not pleaded by the respondents that the agreement between the parties was varied to provide that Mr Fuller and Mr Albert would pay a sum of money to Matcove as consideration for the transfer by Matcove of a parcel to each of them. The contention does not appear to add anything to the contention that any contractual arrangement still in force was abandoned by Mr Fuller.

37. [56]

    The respondents’ written submissions to the primary judge also contended that the conduct of Mr Fuller could be characterised as a waiver or abandonment by him of any entitlement to his own block of land. The submissions contended that it was plain from the conduct of the parties that neither intended that their agreement would be further performed, based on an objective assessment of the conduct of the parties, having regard to the length of time that had elapsed during which neither Mr Fuller nor Mr Albert attempted to perform or called upon the other to perform a subdivision.

38. [57]

    Of course, there is no reason for Mr Albert to call upon anyone to perform. The balance of the Agreement that required performance was for the benefit of Mr Fuller. Mr Albert had obtained the benefit of the Agreement from his point of view, subject to the question of the payment made by him. The contention that Mr Albert’s conduct in paying the sum of $175,000 is consistent only with abandonment says nothing about the conduct of Mr Fuller. It may be that the respondents were asserting that the Agreement was varied in some fashion whereby the parties agreed that a consideration was to be paid for the parcel of land. However, no such allegation is contained in the defence or elsewhere. I do not consider that Mr Fuller’s conduct, as described above, constituted an abandonment by him of any entitlement to receive a transfer of his own block of land.

39. [58]

    The respondents also contended to the primary judge that Mr Fuller’s conduct constituted a unilateral release by him of any obligation that Mr Albert still had under the agreement evidenced by the Document. The contention was based on Mr Fuller’s insistence in the Original Statement of Claim that Mr Albert had no entitlement to Lot 2 of the Property. The respondents also asserted that Mr Fuller should have insisted upon his rights at the meeting on 1 December 2016 when, as they say, he asserted that Mr Albert had no entitlement to Lot 2 for no consideration. They asserted that Mr Albert raised the entitlement of Mr Fuller to his own block of land and that Mr Fuller’s failure to insist on his own block and maintaining that Mr Albert had no basis or entitlement to Lot 2 of the Property constituted a unilateral release of any obligation that Mr Albert may have had to cause Mr Fuller’s subdivision of a block from the Property. However, while here is clearly considerable tension between there being an agreement in the terms alleged by Mr Fuller in the Amended Statement of Claim and the allegations made in the Original Statement of Claim, I do not consider that that amounts to a release any more than it amounts to abandonment.

40. [59]

    Once it is accepted that there was no repudiation, abandonment, release or variation of the Agreement, as was alleged by Mr Albert in his defence to the Amended Statement of Claim, the operation of the Limitation Act 1969 (NSW) depends upon when there was a breach of the Agreement. There was no breach until Matcove or Mr Albert failed to perform the obligations imposed upon them by the Agreement. There is no evidence of any request or demand on the part of Mr Fuller for Matcove or Mr Albert to perform their obligations until shortly prior to the commencement of the proceedings. Whenever any such request or demand was first made, it is clear that it was made within the limitation period prior to the filing of the Amended Statement of Claim. I do not consider that a limitation defence has been established.

41. [60]

    Further, I do not consider that the circumstances alleged by Matcove and Mr Albert in their defences amount to laches. Laches may well be based upon lack of diligence and activity in making a claim. However, mere delay is insufficient to constitute laches. Rather, any delay must be characterised as being unreasonable so as to prejudice the other party. Further, it is a defence to a claim in equity and not a defence to a claim for damages for breach of contract. Neither Matcove nor Mr Albert has pointed to any specific prejudice suffered by either of them as a consequence of any delay on the part of Mr Fuller in bringing his claim. For the reasons indicated below, there may well be difficulties with specific performance. However, laches would not be an answer to a claim for damages for breach of contract.

42. [61]

    The net effect of the conclusion reached by the primary judge is an imbalance in the respective rights and entitlements of Mr Albert and Mr Fuller. That is to say, Mr Fuller had received nothing. That, of course, may partly be because of his failure to take steps earlier at the time when Mr Albert took steps for the transfer of his parcel. On the other hand, Mr Albert acquired a parcel in accordance with the pleaded agreement. While, some 10 years after the acquisition, he paid a sum of $175,000, there was no suggestion of a promise by Mr Albert to pay that sum and there was no demand for the payment to be made.

43. [62]

    It may be that Mr Albert has a remedy against Matcove for recovery of the sum of $175,000, on the basis that it was a payment made under a mistake or under duress in some way. That was not in issue in the proceedings and that question is not presently before this Court. Further, it has not been argued that an obligation to do equity, on Mr Fuller’s part, would involve procuring repayment of the sum, or giving credit for it, possibly because the payment appears to have been voluntary, albeit mistaken, and not in response to a demand.

44. [63]

    While Mr Fuller did not repudiate the pleaded agreement, it is clear enough that Mr Albert has now repudiated it by purporting to accept Mr Fuller’s alleged repudiation. Mr Albert has evinced a clear intention not to be bound by the pleaded contract. On the other hand, Mr Fuller certainly has not accepted that repudiation. Mr Albert’s conduct, however, may justify Mr Fuller’s application for specific performance of any unperformed term of the pleaded contract. That raises the question of whether an order for specific performance is appropriate or whether the appropriate relief is damages for breach of contract either by Mr Albert alone or by Mr Albert and Matcove together.

45. [64]

    There are difficulties in granting the relief of specific performance sought by Mr Fuller. Apart from the difficulty in identifying the parcel of land that should be excised from the Property and transferred to Mr Fuller, questions may arise as to the steps that need to be taken in order to achieve the further subdivision of the Property. For example, it might be found that planning or regulatory constraints mean that the Agreement was incapable of performance or was frustrated. Those matters have not been the subject of evidence.

46. [65]

    In the circumstances, the appropriate course would be to remit the Proceedings to the primary judge for inquiry as to whether orders for specific performance are practicable. If his Honour concludes that they are not, it would be necessary to embark on an inquiry as to the damages suffered by Mr Fuller by reason of the failure by Mr Albert and Matcove to take such steps as are reasonably open to effect a further subdivision of the Property in order to excise a parcel that would satisfy Mr Fuller’s entitlement under the Agreement as pleaded.

47. [66]

    If, in the course of that inquiry, it became apparent that the Agreement was incapable of performance or was frustrated, it might be found that Mr Albert’s breach caused no damage since, by the time he was called on to perform his obligations, subdivision was no longer able to be achieved in any event. On the other hand, if specific performance is not practicable, Mr Fuller may well have an equitable charge on the Property, for an amount equivalent to 150% of the value of Mr Albert’s lot, having regard to the 60:40 relationship in the Agreement. On the basis that Mr Albert’s parcel was worth $175,000 in 2005, Mr Fuller would have a charge for an amount equivalent to $262,500 plus interest. Those considerations would be for the primary judge to take into account after hearing from the parties.

The Mortgaged Share

1. [67]

   In late May and early June 2013, Mr Fuller sought the assistance of Mr Albert in obtaining a loan of the sum of $100,000. A payment of $170,000 was subsequently made to Mr Fuller, part of which was applied in part payment of accounting fees owed to Mr Albert’s accounting firm by Mr Fuller and entities associated with Mr Fuller. Mr Fuller subsequently signed a deed of loan, a transfer of a share in Matcove and a general security deed in respect of the transaction. The deed of loan relevantly provided as follows:

2. [68]

   The deed of loan also provided for the giving of security over the Mortgaged Share. The deed of loan provided that, if the principal amounts, totalling $170,000, were not repaid by 1 December 2013, the Mortgaged Share was to be transferred from Mr Fuller to Mrs Albert on that date. A transfer of the Mortgaged Share from Mr Fuller to Mrs Albert was executed by Mr Fuller and dated 4 June 2013.

3. [69]

   Mr Fuller did not repay the amount due under the deed of loan on 1 December 2013. The minutes of a meeting of the directors of Matcove attended by Mr Albert and Mr Fuller on 1 August 2014 records a resolution to approve the transfer of one share in Matcove from Mr Fuller to Mrs Albert with effect from 1 August 2014 and that notification of the transfer be lodged with the Australian Securities and Investments Commission (the Commission). On 18 August 2014, notice of the transfer of the Mortgaged Share from Mr Fuller to Mrs Albert was lodged with the Commission. Thereafter, the parties treated Mr Albert and his family, on the one hand, and Mr Fuller and his family, on the other, as having a half interest each in Matcove.

4. [70]

   It was common ground that the sum of $170,000 was advanced to Mr Fuller, of which $70,000 was applied as part payment for accounting fees owing to Mr Albert’s firm by Mr Fuller and entities with which he was associated or which he controlled. However, before the primary judge, Mr Albert and Mrs Albert did not accept that the transfer of the Mortgaged Share by Mr Fuller to Mrs Albert was by way of mortgage as security for a loan. The primary judge accepted the contentions advanced on behalf of Mr Fuller that the arrangements were in the nature of a mortgage and that the provision for the transfer of the Mortgaged Share to Mrs Albert was “a remedy for default”, in effect perfecting the security. There is no challenge to the conclusion reached by the primary judge that the arrangements between Mr Fuller, on the one hand, and Mr Albert and Mrs Albert, on the other, in relation to the Mortgaged Share constituted a creation of a security interest.

5. [71]

   The primary judge then considered Mr Fuller’s claim for redemption. His Honour concluded that Mr Fuller was not entitled to an order for redemption of the Mortgaged Share and that it was neither unfair nor unconscionable in all the circumstances for Mrs Albert to retain the Mortgaged Share. His Honour advanced three reasons for reaching that conclusion. The first was the delay over a long period in repayment of the loan secured by the mortgage, although his Honour acknowledged that the payment of interest at Court rates would compensate Mrs Albert for that delay so long as interest payable by Mr Fuller at those rates is no less than the interest paid by Mr Albert and Mrs Albert on their home loan over that period. The second reason was that Mr Fuller had not offered any adjustment to compensate Mrs Albert for additional monies contributed to loan repayments by Matcove proportionate to the increase in shareholding that arose from the transfer of the Mortgaged Share to Mrs Albert. His Honour could see no reason why the Court should formulate or impose an additional condition that Mr Fuller takes steps that he had not previously offered to take “in order to establish an equity of redemption”. His Honour considered that the fact that Mr Fuller had not himself addressed that matter tended against any unconscionability or unfairness in Mrs Albert’s retaining the Mortgaged Share.

6. [72]

   The third reason was that Mr Fuller had made no offer to pay Mrs Albert’s costs attributable to the Proceedings in such amount as may properly be payable. His Honour considered that such costs would properly be payable, both because the Proceedings arose from Mr Fuller’s default in repayment of the loan over a very long period of time and because Mrs Albert reasonably defended the Proceedings. His Honour said that, had he been otherwise persuaded that an order for redemption should be made, he would have deferred making such an order until Mr Fuller had paid, and not merely promised to pay, the amounts referable to the principal of the loan, the interest and an estimate of costs of the Proceedings.

7. [73]

   The arrangement described above constituted agreement to give a legal mortgage, which was perfected by the registration of the transfer to Mrs Albert, giving her legal title to the Mortgaged Share. There was a proviso for redemption whereby, if Mr Fuller repaid the advance on 1 December 2013, he would be entitled to a re-transfer of legal ownership of the Mortgaged Share and discharge of the security. However, his default brought the contractual right to redeem to an end. Nevertheless, in equity, his proprietary interest in the Mortgaged Share, namely, his equity of redemption, continued to be recognised.

8. [74]

   The equity of redemption, recognised by the Lord Chancellor in English law, was derived from the doctrine introduced into Roman law by the Praetor, who recognised that a mortgagor’s right to redeem was more than a mere contractual right. Thus, in the case of a transfer of ownership of property in Roman law subject to a fiducia cum creditore, the transferee could not derive any benefit from the mortgaged property beyond the secured debt and interest and expenses. The mortgagee could not become owner, free from the fiducia, even through an intermediary. An agreement that the mortgagee would have no right to sell was void although, under Roman law, the mortgagee’s power of sale was hedged around with increasing statutory restrictions and the mortgagee’s right of absolute foreclosure of the equity of redemption was in later law legislated almost out of existence. [6]

9. [75]

   Under Roman law, as under the common law, the equity of redemption continues until such time as there is either foreclosure of the equity of redemption, by order of the Court, or the valid exercise of a power of sale by the mortgagee. Neither has occurred in the present case. It must follow, therefore, that Mr Fuller’s equity of redemption continues on foot. The question is whether Mr Fuller has yet proffered sufficiently appropriate undertakings or assurances to obtain an order for redemption of the Mortgaged Share.

10. [76]

    Ultimately, the dispute concerning redemption appears to turn on deficiencies in the prayers for relief in the Amended Statement of Claim and the failure of Mr Fuller to offer to pay and compensate Mrs Albert for all losses and outgoings she had suffered and incurred by reason of the default in repayment of the secured indebtedness on 1 December 2013. In that regard, it is necessary to have regard to the communications between the parties on the question of redemption.

11. [77]

    On 28 February 2020, Crowther Sim Lawyers wrote to Pure Legal, who were acting for Mr Albert and Mrs Albert. By that letter, Crowther Sim Lawyers said, relevantly, as follows:

12. [78]

    Pure Legal responded on 12 March 2020 saying that they would respond to the substance of the letter of 28 February 2020 as quickly as possible but in the meantime asked “what interest component” Crowther Sim Lawyers held in trust and how that figure had been calculated. Crowther Sim Lawyers replied on 20 March 2020 saying, relevantly, as follows:

13. [79]

    On 24 March 2020, Pure Legal replied as follows:

14. [80]

    On 26 March 2020, Crowther Sim Lawyers responded to the letter from Pure Legal of 24 March 2020 saying, relevantly, as follows:

15. [81]

    Pure Legal wrote again to Crowther Sim Lawyers on 27 March 2020 in response to the letter of 26 March 2020. Pure Legal said, relevantly, as follows:

16. [82]

    In the course of final address, the primary judge asked counsel for Mr Fuller whether the position was that there would be no offer to pay Mrs Albert’s costs of the Proceedings in so far as they were concerned with redemption, whatever they might properly be. Counsel for Mr Fuller responded that that was not the position and said that Mr Fuller would ask that his Honour make it a condition of redemption that costs be paid and accepted that that would be a proper condition of any redemption. His Honour repeated the question as to whether there was an offer to pay the costs of the redemption in connection with the request for redemption. Counsel for Mr Fuller responded that he would obtain instructions to that effect and asked that his Honour proceed on the basis that that was an offer that would be made. Later, counsel for Mr Fuller confirmed that he had instructions to offer, as part of the offer to redeem, that Mr Fuller pay the costs of the Proceedings. Counsel said, however, that, in so far as costs are discretionary, the primary judge should disallow Mrs Albert her costs, for the reason that she continued to deny the equity of redemption.

17. [83]

    Mr Fuller’s written submissions to the primary judge included the following:

18. [84]

    The primary judge refused an order for redemption, principally, on the basis of the delay on Mr Fuller’s part in repayment of the amount secured by the mortgage of the Mortgaged Share. However, that delay is compensated for by the offer to pay interest at UCPR rates. Delay alone would not be sufficient to extinguish the equity of redemption prior to the valid exercise of a power of sale of the mortgaged property or an order for foreclosure by the Court. It follows that his Honour erred in refusing an order of redemption on the basis of delay. The other matters upon which his Honour relied in refusing relief were dealt with in the offers made in the course of the hearing before the primary judge.

19. [85]

    In addition, in the course of the hearing before this Court, Mr Fuller proffered an offer in the following terms:

20. [86]

    One of the difficulties with Mr Fuller’s claim for relief is that it was not formulated as a claim for redemption. However, in the interests of ensuring finality as to the dispute concerning redemption, it would be appropriate to order the taking of accounts as between Mr Fuller, as mortgagor, and Mrs Albert, as mortgagee and to order that, upon payment by Mr Fuller within 21 days of the amount found to be owing, Mrs Albert re-transfer the Mortgaged Share to Mr Fuller.

21. [87]

    Questions may arise on the taking of accounts as to the costs of these proceedings appropriately attributable to Mr Fuller’s default. It is relevant that, in the proceedings before the primary judge, Mrs Albert and Mr Albert denied that the arrangement described above constituted a security. It would follow that the inquiry as to the account would need to address the costs properly attributable to the redemption of the Mortgaged Share.

Conclusion

1. [88]

   In relation to the first dispute, I have concluded that there was a binding contractual arrangement involving Mr Fuller, Mr Albert and Matcove substantially in the terms of the Agreement as pleaded in the Amended Statement of Claim. However, I have concluded that the appropriate course is for the Proceedings to be remitted to the primary judge for consideration of the practicability of specific performance or, alternatively, for assessment of damages.

2. [89]

   On 11 November 2020, Mr Albert and Mrs Albert filed a notice of motion seeking, inter alia, leave to rely on an affidavit of Mr Albert that was sworn on the same date. The purpose of the evidence was to provide potentially relevant material for the Court should it determine to order specific performance. On 16 November 2020, the Registrar of the Court of Appeal made the following orders:

3. [90]

   On 20 November 2020, Mr Fuller filed an affidavit of Mr Jason Wasiak that was sworn on the same date. In the course of the hearing, Macfarlan JA admitted each of the affidavits subject to the objections of the parties and noted that they were read as arguably relevant to any re-exercise by the Court of a discretion to order specific performance. In the light of the foregoing, the notice of motion should be dismissed.

4. [91]

   In relation to the dispute concerning redemption of the Mortgaged Share, I have concluded that Mr Fuller is entitled to redemption and that an inquiry should be directed for the purposes of determining the just amount that should be paid by Mr Fuller in order to effect redemption of the Mortgaged Share.

5. [92]

   The orders that I would propose are therefore as follows:

   1. (1)

      The appeal be allowed.

   2. (2)

      The orders made by the primary judge on 14 July 2020 be set aside.

   3. (3)

      The Proceedings be remitted to the Equity Division for further determination in accordance with these reasons.

   4. (4)

      The first and second respondents should pay the appellant’s costs of the appeal.

   5. (5)

      The notice of motion filed on 11 November 2020 be dismissed, with costs to be the costs of the parties at first instance.