Kolevski v Timber Creek Holdings Pty Ltd

1. [1]

   On 2 July 2015, Nikolce (Nick) and Lena Kolevski (the first and second plaintiffs) exchanged standard form contracts for the sale of two residential properties in New South Wales with Timber Creek Holdings Pty Ltd (Timber Creek, the defendant). Nick and Lena were the vendors. Timber Creek was the purchaser. One of the properties was the Kolevskis’ family home in Shell Cove. The other was a home in Port Kembla occupied by Lena’s elderly parents. Timber Creek was a company associated with the Kolevskis’ friend, Ken Stevens. I will adopt the naming convention used by the parties and refer to Mr Stevens and the members of the Kolevski family by their first names.

2. [2]

   Settlement occurred on 21 July 2015, whereupon Timber Creek became the registered proprietor of each property.

3. [3]

   To an outside observer, the distinctive feature of these otherwise unremarkable transactions was that the price paid by Timber Creek for each property was well below market value. As at 21 July 2015, the Shell Cove property had a market value of $1,025,000 but the purchase price was $400,000. The Port Kembla property had a market value of $320,000 but the purchase price was $222,000. The total purchase price for the two properties was almost exactly equal to the amount required to discharge mortgages held by the ANZ Bank over the properties.

4. [4]

   The Kolevskis have continued to live in the properties since the sale to Timber Creek. During the whole of the time that Timber Creek has owned the properties, the Kolevskis, including their son Cameron (the third plaintiff), have made monthly payments of $3,600 to Timber Creek, as well as some other payments to which I will refer in due course.

5. [5]

   The plaintiffs say that Nick and Lena, on the one hand, and Ken on behalf of Timber Creek, on the other, reached an oral agreement in May or June 2015 by which Timber Creek agreed to lend Nick and Lena $620,000 at 6.5% interest per annum in order to pay out the ANZ Bank mortgages and that the properties would be conveyed to Timber Creek in order to secure repayment. They say their regular monthly $3,600 payments have always been by way of loan repayment.

6. [6]

   The plaintiffs’ principal case is that the transaction considered as a whole (that is, the oral agreement plus the contracts for sale and the transfers) was akin to a loan and mortgage transaction. They say that they have performed all of their obligations under the arrangement save for repayment and that they are now ready, willing and able to repay what is owing in order to recover title to the properties.

7. [7]

   However, these claims are subject to two important and related qualifications. First, the plaintiffs do not say that the Court should order the properties to be conveyed to Nick and Lena as mortgagors. Rather, they say it was always an aspect of the oral loan agreement that Cameron could pay out the loan and have the properties conveyed to him. Secondly, although they plead that Nick and Lena are ‘ready, willing and able to repay the Loan Amount to Timber Creek’, Nick and Lena have never tendered an amount by way of repayment and there is no evidence that they are able to do so now. Rather, they say that Cameron is ready, willing and able to repay the loan. Thus, the orders they seek are, in substance, that ‘upon payment into Court’ of the sum of $322,943.17 (an amount I will say more about in due course) the properties should be conveyed to Cameron ‘or such other or others of the plaintiffs as they may elect’.

8. [8]

   The defendant’s principal case is that there was no agreement between the parties apart from the standard form contracts to convey the properties. Ken says that he (on behalf of Timber Creek) agreed to acquire the properties in order to assist the Kolevskis, who were old family friends and who were in financial difficulty at the time. I note that on any view of the evidence, Nick told Ken in about June 2015 that the ANZ Bank was threatening to take the properties. Ken says he agreed to purchase the properties outright to ensure that the Kolevskis did not lose their homes. Ken says he was willing to allow the Kolevskis to continue to live in the properties as lessees and that he was also prepared to reconvey the properties to them provided they were ‘back on their feet’ within a short amount of time. However, Timber Creek says that this never occurred. That is, Nick and Lena did not get ‘back on their feet’ within a short amount of time. Timber Creek says that none of these matters ever became the subject of a binding contractual commitment in any event.

9. [9]

   Timber Creek says in the alternative that even if there was an oral agreement and if Nick and Lena are in a position akin to equitable mortgagors, they have never tendered payment to exercise their equity of redemption and they are demonstrably unable to do so now. It also says that even if there was an oral agreement between the parties, it did not include a term that would allow Cameron to obtain title to the properties on repayment.

10. [10]

    This general description of the parties’ principal positions leaves out much relevant detail. It does however serve to identify the major factual issue in dispute, namely the content of the key discussions in June 2015 between Nick and Ken during which the alleged oral agreement is said to have been reached.

The facts

1. [11]

   Because so much turns on disputed accounts of discussions that took place almost 10 years ago, it is appropriate to bear in mind the inherent fallibility of human memory: Watson v Foxman (1995) 49 NSWLR 315 at 319 per McLelland CJ in Eq. This is especially so where the differences between the witnesses’ accounts, although contested and although they lead to very different legal outcomes for the parties, are in fact quite small and sometimes little more than matters of nuance. It is necessary to pay particular attention to the surrounding facts, most of which are objectively verifiable, and to the inherent commercial probabilities of how persons in the position of the witnesses would speak and act in those circumstances: Highfields Australia Pty Ltd v Advanced Motor Dealers Group Pty Ltd [2023] NSWSC 1458 at [113]-[115] per Richmond J, which was cited with approval in Touma v Highfields Australia Pty Ltd [2024] NSWCA 160 at [18] per Basten AJA with White and Adamson JJA agreeing.

2. [12]

   The following description of the background facts is derived largely from the considerable volume of documentary material tendered by the defendant and from aspects of Nick and Lena’s evidence that were not really in dispute. Where my findings have required me to deal with evidence that was in serious dispute, I will indicate why I have reached my conclusion.

3. [13]

   Lena and Nick were married in 1992. At the time of the hearing, Nick was 59 years old and Lena was 53 years old. Their first son, Cameron, was born in 1992. Their second son, Lachlan, was born in 1998.

4. [14]

   Lena and Nick acquired the Shell Cove property as a vacant block on 19 February 2001 for $162,000. To fund the purchase and subsequent construction of their home, they borrowed approximately $230,000 from the ANZ Bank, who took a mortgage over the property. Lena and Nick also contributed about $180,000 from their savings towards the costs of construction.

5. [15]

   The members of the Kolevski family have lived in the Shell Cove property since it was built. Since February 2021, Cameron’s wife Jessica has also resided at the property.

6. [16]

   Lena’s mother is Nadezda Laskovski. She is currently about 79 years old and lives at the Port Kembla property. She has lived at that property since September 1970 together with her late husband (Lena’s father), Simon Laskovski until his death.

7. [17]

   Lena and Nick bought the Port Kembla house from Lena’s brother George Laskovski in 2007 for the sum of $215,000. There was no evidence as to how or why George ever came to own it. To fund the purchase, they borrowed about $129,000 from the ANZ Bank and contributed about $86,000 of their own savings. The ANZ Bank registered a mortgage over this property as well to secure repayment of the borrowings.

8. [18]

   In about 2010, Lena and Nick redrew funds on the loan secured by the Shell Cove property to finance working capital for their businesses. They did not say how much they drew down for this purpose, but Nick said that, following the redraw, their repayments on the Shell Cove loan were about $2,215 per month. He also said that they redrew funds on the loan for the Port Kembla property from time to time.

9. [19]

   For many years prior to the 2015 transactions, Nick and Lena operated service stations in the Illawarra region south of Sydney. One was located at 256-260 Shellharbour Drive, Warilla. The other was located at 92 Lakeside Drive, Kanahooka.

10. [20]

    The Warilla station operated under the name ‘Advance Fuel Barrack Heights’ but it was mostly referred to in the evidence as the Shellharbour station. The property on which it was located was referred to as the Barrack Heights property.

11. [21]

    The Barrack Heights property was owned by Pinebai Pty Ltd (Pinebai). Nick and Lena were the shareholders of Pinebai. Another company, Ebacarb Pty Ltd (Ebacarb), carried on the service station business at that site (that is, at the Shellharbour station). Nick and Lena were also the shareholders of Ebacarb.

12. [22]

    The major supplier of fuel to the Kolevskis’ service stations was Park Pty Ltd (Park), a company controlled by the brothers Nick and Brett Fletcher. Fuel was supplied on a consignment basis and was subsequently paid for by the retailer (in the case of the Shellharbour station, Ebacarb) from the proceeds of sale of the fuel.

13. [23]

    The other service station operated under the name ‘Advance Fuel Kanahooka’ but it was generally referred to as the Kanahooka station. The land on which it was located was referred to as the Kanahooka property.

14. [24]

    Ebacarb Kanahooka Pty Ltd (Ebacarb Kanahooka) carried on the service station business at the Kanahooka station. Nick and Lena were the shareholders of Ebacarb Kanahooka. Ebacarb Kanahooka leased the Kanahooka property from an unrelated party. Park was also the major supplier of fuel to Ebacarb Kanahooka.

15. [25]

    By early 2014, the Kolevskis were experiencing financial difficulty in connection with, at the very least, the Shellharbour station. Ebacarb was placed into administration on 24 February 2014. The first meeting of creditors took place on 6 March 2014. The minutes of a subsequent meeting of creditors on 31 March 2014, identified the following creditors:

16. [26]

    A deed of company arrangement was entered into by the creditors other than Nick, Lena and Pinebai on 17 April 2014. The final report to creditors dated 3 September 2014 identified three unsecured creditors with debts totalling $1,477,302.18. These included the debts owed to Park and the ATO.

17. [27]

    Ebacarb ultimately went into liquidation on 9 February 2015. It was wound up on 30 June 2015.

18. [28]

    In circumstances that were not explained in the evidence, a new company associated with Nick and Lena began operating the Shellharbour station business in the period following the voluntary administration of Ebacarb. This company was called Dexter Global Pty Ltd (Dexter Global). Its shareholders and directors were also Nick and Lena.

19. [29]

    By some point in the first half of 2015, Pinebai was indebted to Park in a sum in excess of $850,000. Park had apparently obtained security interests in the Barrack Heights property, the Shell Cove property and the Port Kembla property to secure repayment of the amount owing. To protect its position, Park lodged caveats over each of these properties on 18 May 2015. The caveats described the caveatable interest asserted by Park as follows:

20. [30]

    By the first half of 2015, Pinebai also had a liability to Westpac in a sum of almost $750,000. Westpac had a registered first mortgage over the Barrack Heights property and had taken various other forms of security. Among these were personal guarantees granted by Nick and Lena.

21. [31]

    In the years immediately prior to the 2015 transactions, Nick and Lena had ownership interests in three residential apartments at 3400 Surfers Paradise Boulevard on the Gold Coast in Queensland. Some interests were held directly. Others were held through Calasy Pty Ltd (Calasy), a company of which, at least in the period immediately prior to 25 June 2015, Nick and Lena were directors and shareholders.

22. [32]

    The units were as follows:

    1. (1)

       Unit 2101. This unit had been acquired in 1999 or 2000 by Calasy, Jenny Saveski and Vidan Saveski (the Saveskis). Title was held in common between Calasy and the Saveskis, with Calasy as to 50%.

    2. (2)

       Unit 2406. This unit was acquired in 2005 or 2006 and was owned by Nick, Lena, the Saveskis, Massimo Gaetani and Terri-Anne Gaetani.

    3. (3)

       Unit 3304. This unit was acquired in 2010 and was owned directly by Nick and Lena.

23. [33]

    As already mentioned, Nick and Lena had granted mortgages over each of the Shell Cove and Port Kembla properties to ANZ Bank.

24. [34]

    For some period leading up to the middle of 2015, Lena operated a tanning salon known as ‘Body Brilliance’ from premises at Warilla. The business was owned and operated by LAWACCOUNT Pty Ltd, the shareholders of which were Cameron, Nick, Lena, Brent James Mathein and Kelly Hanna Mathein.

25. [35]

    Regulations introduced in about early 2015 had an impact on the profitability and viability of the business and so Lena decided to close it down. It ceased to trade on 30 June 2015.

26. [36]

    In June and July of 2015, Nick and Lena disposed of a number of assets.

27. [37]

    So far as the Queensland properties were concerned, the following occurred:

    1. (1)

       On 25 June 2015, Nick and Lena transferred their shares in Calasy to Cameron. This had the consequence that Cameron was now the indirect owner of a 50% share in Unit 2101.

    2. (2)

       Unit 2406 was sold on 15 July 2015 to unrelated purchasers for $552,000. The contract was not in evidence but it must have been executed about four to six weeks prior. Of the sale proceeds, a substantial amount (either $415,000 or $515,000) was applied to discharge the mortgage.

    3. (3)

       Unit 3304 was transferred to Nick’s cousin, Lillyan Batkov and her husband Tony Batkov, on about 6 July 2015. The price paid was $288,000, which was slightly less than Nick and Lena’s outgoing mortgage of $296,000 on the property.

28. [38]

    On 1 July 2015, Pinebai entered into a contract with Nicbrett Trading Pty Ltd (Nicbrett Trading), a company associated with the Fletcher family, to sell the Barrack Heights property for the sum of $1.63 million. Settlement occurred on or shortly after 7 July 2015. Payment of the purchase price was directed as follows. The slight discrepancy between the consideration noted on the transfer, and the total as directed at settlement, was not explained.

29. [39]

    The sale of the Barrack Heights property enabled Pinebai to repay its creditors. Dexter Global, which ran the business at Barrack Heights, sold the business to Nicbrett Trading for $1 on 1 July 2015. Dexter Global went into liquidation in the latter half of 2015. At that point, it had the following creditors: Ebacarb Kanahooka as to $97,545.91; Pinebai as to $136,000; Nick and Lena as to $223,000. In cross examination, the plaintiff could not recall that any of these creditors received anything from the winding up of Dexter Global.

30. [40]

    It is also relevant to note that by the first half of 2015, Nick was in poor physical health. He was suffering from a number of medical issues including diabetes, obesity, anxiety and sleep apnoea. He believed that these conditions were seriously impacting his ability to run the service station businesses.

31. [41]

    Ken Stevens was born in 1948 and was 76 years old at the time of the hearing. He is now retired. For many years, Ken had been involved in a marine and transport business which was conducted by Yallawadegra Investments Pty Ltd (Yallawadegra), a company controlled by him. Among other things, Yallewadegra supplied wholesale fuel to service stations, with a customer base largely in the Illawarra and Shoalhaven areas of New South Wales.

32. [42]

    Ken came to know Nick because for many years Nick acquired fuel from Yallawadegra for his service stations. They had a good working relationship and Ken came to know Nick’s family.

33. [43]

    As at June 2015, the Kolevskis’ service station businesses owed about $7,000 to Yallawadegra.

34. [44]

    Ken was an experienced businessperson. He had been involved in a number of businesses and ventures over the years, including a brickworks. He had caused Timber Creek to be incorporated for the benefit of his children. It had various investments and, from time to time, had engaged in mortgage lending.

35. [45]

    Ken and Nick had two discussions in June 2015 at Lena’s tanning salon, Body Brilliance. Their accounts of these conversations differ in some important respects, although there is much that is common in their recollections. Because so much turns on them, I will set out their competing accounts in full.

36. [46]

    Nick’s recollection is that the first discussion took place in early June 2015 and that only he and Ken were present. He says their conversation was to the following effect:

37. [47]

    He then says that there was a second discussion at Body Brilliance shortly thereafter, at which Lena was also present. On this occasion, according to Nick, they had the following discussion:

38. [48]

    On Nick’s account, the next thing that happened was that he received a letter from Ken’s solicitor, Pauline Betts of Pottenger & McGhee, Nowra, which attached transfers for the Shell Cove and Port Kembla properties, together with instructions for them to be completed. He says that he and Lena signed the transfers and returned them to Pottenger & McGhee.

39. [49]

    Ken recalls things rather differently. In his recollection there were two discussions in June 2015, both of which occurred at Body Brilliance. He says that his former wife, Elne, was present for at least some of the first discussion, as was Lena. He recalls that the first discussion was to the following effect:

40. [50]

    Ken specifically denies that there was any discussion at this stage about paying the ‘ANZ amounts’ or about any particular loan transaction.

41. [51]

    Ken was aware at the time that there was a risk involved in acquiring property from a person with unpaid creditors. He believed that there may be ‘potential issues’ with Nick’s and Lena’s creditors if Timber Creek were to acquire the properties in circumstances where they had creditors who had not been paid. He did not explain in detail what he believed these issues to be, but they will have been obvious to an experienced businessperson such as Ken.

42. [52]

    Ken also denies Nick’s account of the second discussion at Body Brilliance. He does however agree that there was such a discussion, and that Lena was also present on this occasion. Ken recalls that the second discussion at Body Brilliance was to this effect:

43. [53]

    Ken’s evidence was that he understood the expression ‘back on their feet’ to mean that they did not have creditors chasing them. He understood that the reference to the ‘Queensland properties’ was a reference to the three Gold Coast units. He says that he was well aware even at this early stage that Timber Creek could become liable for land tax if it were to acquire the Shell Cove and Port Kembla properties. I accept that he was aware of this at the time.

44. [54]

    The main differences between the accounts of what was said are as follows:

    1. (1)

       On Nick’s account, there were references to a ‘loan’ of $620,000 and to a resulting ‘debt’. There was a reference to the properties being transferred as ‘security’. There was also a clear reference to the prospect of the properties being transferred to Cameron once the ‘loan’ was repaid.

    2. (2)

       On Ken’s account, there was no reference to a ‘loan’ at all. Rather, the transaction would be a purchase of the properties which the Kolevskis would then rent back. There was discussion about the properties being ‘sold’ back to the Nick and Lena, but not to Cameron, within a relatively short period using the proceeds of sale of the Queensland properties. Ken also said that Timber Creek would not sell the properties back to Nick and Lena unless they were ‘back on their feet’.

45. [55]

    It is also relevant to notice the areas of general agreement between their accounts. Leaving aside the finer points of how these matters were expressed, it is clear that the substance of their discussions included at least the following:

    1. (1)

       Nick told Ken that he was in serious financial difficulty and that the ANZ Bank was threatening to foreclose on both their homes, being the Shell Cove property and the Port Kembla property.

    2. (2)

       Once the properties were transferred to Timber Creek, Nick and Lena would continue to live in them and to pay a base amount of $3,600 per month.

    3. (3)

       Nick and Lena would pay at least some outgoings, such as rates, water and insurance. There is dispute about whether they would pay land tax.

    4. (4)

       There was discussion about a rate of 6.5% per annum. On the plaintiffs’ case, this was an amount of ‘interest’ payable on the ‘loan’ of $620,000. On the defendant’s case, this was the ‘return’ that it required on any funds outlaid to acquire and hold the properties.

46. [56]

    Following their initial conversations, the parties then engaged lawyers who prepared and exchanged standard form contracts for the sale of land, asked and answered requisitions on title, and then arranged for the execution and registration of transfers for each property. Neither the amended statement of claim nor the evidence in chief of the plaintiffs made any mention of these events. As noted at paragraph [48] above, Nick’s evidence was that he and Lena simply received transfers from Timber Creek’s solicitor, which they duly executed and returned.

47. [57]

    Nick’s evidence was that after the second discussion at Body Brilliance and the execution of transfers, the mortgages were discharged (he did not say how) and that he then ‘set about seeking to sell the Kanahooka station and the [Shellharbour] station’ in order to ‘free up cash for [his and Lena’s] retirements and to repay the loan to Ken’.

48. [58]

    I cannot accept Nick’s evidence about these matters. It does not accord with facts that are otherwise quite clear from contemporaneous records. I find that the following things occurred in connection with the transfer of the properties.

49. [59]

    By no later than 9 June 2015, Nick and Lena instructed their solicitor, Mr Danny Lagopodis of Good Legal, to act for them in connection with the sale of the Shell Cove and Port Kembla properties to Timber Creek. Mr Lagopodis had acted for them in connection with other transactions, including the proposed sale of the Barrack Heights property which was already underway at the time he was instructed to act on the residential property sales.

50. [60]

    On 13 June 2015, Mr Lagopodis sent a letter to Timber Creek’s solicitors, Pottenger & McGhee, stating that he acted ‘for the vendors in this matter’ and enclosing a draft contract. The letter was Mr Lagopodis’ standard first letter to the purchaser of residential property. It stated that the vendors would require a certificate under s 66W of the Conveyancing Act 1919 (NSW). It contained usual statements about exchange and the payment of a deposit.

51. [61]

    I infer from other correspondence that he must also have sent an identical letter in relation to the sale of the Port Kembla property.

52. [62]

    Ms Pauline Betts of Pottenger & McGhee responded to both letters on 17 June 2015. She raised a series of matters, including about proposed special conditions, an acknowledgement that the deposits had already been paid, s 149 certificates and other routine matters in connection with the proposed transaction. Ken had arranged to pay the deposits, being 10% of the purchase price for each property, at about this time in cash.

53. [63]

    Mr Lagopodis replied on 26 June 2015. He enclosed s 149 certificates and otherwise replied to Ms Betts’ queries in the usual way.

54. [64]

    At around this same time, Nick arranged for valuations of the Shell Cove and Port Kembla properties to be done ‘for stamp duty purposes’. Those valuations came in at $630,000 and $300,000 respectively. The need to obtain these valuations would have been obvious to both Nick and Ken, because they both knew that the properties were not being sold at their market values.

55. [65]

    Contracts for the sale of the properties, including the negotiated special conditions, were exchanged on 2 July 2015. On that day, Mr Lagopodis acknowledged receipt of the purchaser’s signed contracts and forwarded duly signed counterparts to complete the exchange. He noted that settlement was required to occur by 23 July. However, on that same day, he wrote to ANZ Bank to inform them of the contracts and that settlement was expected to occur on 12 July. It is not entirely clear why he said settlement would occur on 12 July. It was not until several days after exchange that the idea of bringing the date of settlement forward was raised between the solicitors and, even then, it was only brought forward to 21 July. I don’t think anything turns on this. The reference to 12 July was probably a typographical error. Mr Lagopodis asked ANZ Bank to prepare discharges of mortgages and to advise him of the amount required for discharge at settlement.

56. [66]

    On 3 July 2015, Ms Betts wrote to Mr Lagopodis. She raised requisitions on title to both properties using the Standard Form Requisitions on Title published by the Law Society of New South Wales. Question 3(a) was ‘What are the nature and provisions of any tenancy or occupation?’ Ms Betts also enclosed transfers signed by the purchaser.

57. [67]

    On 7 July 2015, Mr Lagopodis wrote to Nick and Lena in relation to the proposed settlement. He enclosed the transfers and gave them instructions about how to execute the documents.

58. [68]

    Mr Lagopodis responded to the requisitions on title of both properties by letters dated 9 July. In each case, he answered question 3 as follows: ‘N/A – Vacant possession’. Ms Betts replied the following day. In relation to the Port Kembla property, she wrote:

59. [69]

    In relation to the Shell Cove property, she wrote:

60. [70]

    There seems to have been no reply to Ms Betts’ requests for confirmation about the rental arrangements.

61. [71]

    The parties brought settlement forward to 21 July. The parties corresponded with one another about settlement statements and cheque directions. Mr Lagopodis gave directions to pay the balance of settlement money for each property by bank cheque to Wollongong City Council, Sydney Water, Good Legal, and the ANZ Bank in amounts which he specified. Settlement took place at the venue arranged by the solicitors on 21 July.

62. [72]

    Transfer duty was paid on the contracts on the basis of the valuations obtained by Nick.

63. [73]

    At no stage in 2015 did Nick or Lena say to Mr Lagopodis that they had agreed with Timber Creek (or Ken) that the $620,000 paid at settlement, adjusted in accordance with the provisions of the contracts, was a loan or that the transfers of the Shell Cove property and the Port Kembla property were by way of security for a loan.

64. [74]

    In cross examination, Nick said that he did mention these things to Mr Lagopodis at the time, but even his own counsel said that I could not accept this evidence. I find that neither he nor Lena mentioned the alleged oral agreement to Mr Lagopodis in 2015, nor did they tell him that the properties were conveyed as security for a loan. I reach this conclusion for several reasons. The first is that in his final affidavit sworn 20 June 2023, Nick tacitly acknowledged that he had engaged Mr Lagopodis, having not otherwise mentioned this fact in his evidence, but said ‘[n]o instructions were given in relation to the loan agreement and no advice was received in respect of it.’ In fact, he said that he did not give instructions to or receive advice from ‘any’ solicitor in relation to those matters at the time.

65. [75]

    The second thing is that Lena says nothing at all about this matter. She said she left these kinds of things to Nick. I am confident she did not mention it to Mr Lagopodis.

66. [76]

    The third and most significant thing is that Mr Lagopodis said that he was not told about the purported loan agreement or the purported security arrangement in 2015. His evidence, which I accept entirely, is that he first learned about the purported loan agreement in 2021. There is no prospect that Mr Lagopodis would have allowed Nick and Lena to enter into and complete the 2015 contracts for sale of the Shell Cove and Port Kembla properties if he had been told that the parties had agreed that the transfers were intended only to be security for a loan and that this portion of the agreement was not in writing.

67. [77]

    It follows from all of this that Nick’s description of how the transfers occurred is not only incomplete but is entirely inaccurate. So too is his evidence that he ‘set about seeking to sell the Kanahooka Station and the [Shellharbour] Station’ only after the ANZ Bank debt had been paid. By the time of settlement of the two residential properties, Nick had already entirely divested himself of any interest in these businesses. He and Lena had transferred their shares in Ebacarb Kanahooka to Cameron on 25 June 2015. The contract to sell the Barrack Heights property had been entered into on 1 July 2015 and settlement occurred on 7 July 2015. The Shellharbour station business had also been sold on 1 July 2015 to Nicbrett Trading. Nick and Lena also no longer had any interest in the Queensland properties: see paragraph [37] above.

68. [78]

    The Kolevskis have paid the sum of $3,600 to Ken every month since settlement. Until early 2016, Nick says he paid in cash. From early 2016, he says that Cameron made these payments. Payments have occasionally been late, but Timber Creek does not dispute that all have been made eventually.

69. [79]

    Timber Creek has treated all such payments as rent for accounting and tax purposes.

70. [80]

    Since early 2016, payments have usually been made by Cameron by way of electronic funds transfer. On some occasions, he labelled the payments ‘rent’. He was asked about this in cross examination. His attempt to explain how and why the transfers came to be labelled ‘rent’ was dubious. He said that he had chosen the description of the payment from a drop-down menu in the banking app which he used to make the transfers and that ‘rent’ was the only vaguely relevant description available. This seems highly doubtful. Even so, Cameron struggled to explain why he chose to call the payments rent instead of using another descriptor or no descriptor at all. In the scheme of things, nothing much turns on whether Cameron sometimes labelled these payments as ‘rent’. It is a detail that sheds almost no light on the real issues in dispute. But Cameron’s blanket and almost comical refusal to make very obvious concessions about this issue in the witness box was not to his credit.

71. [81]

    At some point in 2016, Nick spoke with Ken’s son, James, about Cameron purchasing the Shell Cove and Port Kembla properties from Timber Creek. Nick told James that Cameron ‘had finance approved from the Suncorp Bank to pay out the loan and take the transfer of the properties’. James raised this prospect with his father, Ken, who was not prepared to entertain the idea. Ken and Nick spoke about the proposal. Ken was adamant that he wanted no part of a transaction whereby the properties he had acquired from Nick and Lena at an undervalue were, in turn, transferred to a third party for an undervalue. It was obvious to Ken that such a dealing would expose Timber Creek to having to meet a potential liability to Nick and Lena’s creditors. He was justified in reacting in that way. It is one thing to acquire an asset at an undervalue from a financially distressed vendor and to hold the asset; it is another thing entirely to dispose of the asset to a third party for other than an arm’s length price.

72. [82]

    Nick’s proposal in early 2016 was for Cameron to purchase the properties, not Nick and Lena. Even leaving aside the question of whether this was ever part of the agreement, the evidence does not demonstrate that Cameron had ‘finance approved’ to acquire the properties (as he claimed) in 2016. Nick’s evidence was that Cameron had obtained borrowing approval from Suncorp-Metway Bank Ltd (Suncorp) but a subpoena to Suncorp produced no written record of any such approval. Cameron’s evidence was that he believed had approval from RAMS Home Loans (RAMS) but documents from RAMS do not corroborate this. Nor did the plaintiffs tender any documents to suggest that finance had been approved in 2016.

73. [83]

    Cameron says that in early 2016 he was in a financial position to borrow to acquire the properties, but I cannot accept that he could have done so. At this stage, he was 23 years old and had recently completed university studies. He had just taken a job at Coles. His taxable income for the 2016 year was $66,957 and his taxable income for the 2017 year was $56,416. He was not in a position to borrow the amount necessary to acquire the two properties, neither of which would have been income producing.

74. [84]

    Timber Creek received assessments of land tax for the 2016 and subsequent land tax years which included amounts for the Shell Cove and Port Kembla properties. Bank records show that the Kolevskis paid amounts on account of land tax to Timber Creek starting in 2016. For example, Cameron made numerous payments by electronic funds transfer in the 2016 and 2017 calendar years which he labelled as ‘Cameron Kolevski land tax’ or some similar descriptor.

75. [85]

    The payments for land tax seem to have been fairly irregular. In early 2017, Ken spoke to Nick and told him that he would start to charge interest on arrears of land tax at the rate of 10% per annum. A ledger kept by Timber Creek shows that by 2023, the amount of land tax plus interest at 10% came to $127,903.07.

76. [86]

    The Kolevskis have not made any contribution to land tax since 3 April 2017.

77. [87]

    The Kolevskis made two offers to repurchase the properties from Timber Creek in late 2018.

78. [88]

    The first offer was made by Nick in a telephone discussion with Ken in October or November. He said that ‘Cameron is again able to get himself a loan for what you are owed.’ Cameron, for his part, says that on 18 October 2018 he obtained a ‘further finance approval’ from Suncorp to ‘take a transfer’ of the properties. He also says that he made two successful applications for finance from RAMS in 2018.

79. [89]

    Ken did not specifically respond to this evidence but there is no doubt he would at this point have refused to entertain any offer by Cameron to acquire the properties at other than a market price.

80. [90]

    Cameron’s offer does not really take matters very far in any event. Cameron did not have any binding ‘further finance approval’ from either Suncorp or RAMS in 2018.

81. [91]

    So far as RAMS was concerned, he only made a single application for finance, although the amount he proposed to borrow changed from $685,000 to $680,000. His application was highly misleading. It claimed that he had net business income from Ebacarb Kanahooka of $250,000 which was completely false. Cameron seems to have received ‘conditional approval’ for finance, but subject to documentation and a signed acknowledgement of the accuracy of the information provided. The application to RAMS was withdrawn on 4 July 2018.

82. [92]

    So far as Suncorp was concerned, Cameron made an application for finance on 10 September 2018 in which he claimed to live at his grandparents’ address (when he clearly did not – he lived at the Shell Cove property) and in which he claimed that the purpose of the loan was to purchase the Shell Cove property. He listed among his assets an item of ‘Residential Property’ with a current value of $600,000. In cross examination, he conceded that this was a reference to ‘something that’s not there’ and that it was a false statement.

83. [93]

    Cameron did receive a preliminary approval for a loan amount of $651,024.80 on 26 October 2018, but this was subject to further documentation.

84. [94]

    Timber Creek submitted that there was no prospect that Suncorp would have finalised this arrangement and actually advanced funds, because it would have become very obvious very quickly that Cameron did not own a property worth $600,000, as he falsely claimed in his application for finance. I agree. The loan was subject to further documentation, no official letter of offer had yet been sent and it is probable that Suncorp would have become aware of the deception fairly early on. However, even if they didn’t, the loan was only available to Cameron for the purpose of acquiring the Shell Cove property. There is no suggestion that the bank would have lent funds to Cameron to give to his parents to acquire property in their names.

85. [95]

    There was a further offer to acquire the properties in about December 2018. On that occasion, Nick told Ken that a relative was able to provide finance to the family to allow Cameron to repurchase the Shell Cove and Port Kembla properties. The relative in question was Mr Batkov, who is married to Nick’s cousin.

86. [96]

    I assume that Nick’s offer was for Cameron to pay around $650,000 for the properties. The evidence does not demonstrate that Mr Batkov was in a position to lend that sum, at least readily, at the end of 2018. He gave evidence that he would have sourced the funds from a longstanding line of credit with the Commonwealth Bank of Australia which, he said, had $800,000 ‘credit available’ at the end of 2018. However, documents produced by the bank show that his available credit was only $550,000 at that time, not $800,000. I do not doubt that Mr Batkov was willing to assist the Kolevskis to reacquire the Shell Cove and Port Kembla properties in late 2018 and that he was willing to use his line of credit to do so. He seems to have been genuinely concerned about the Kolevskis and willing to help them. But I am unable to conclude that his pledge of support was such as to put Nick and Lena in a position of being ready, willing and able to complete a purchase transaction, which is how they put their case. He certainly did not place Nick and Lena in funds such that they were able to tender the sum of $650,000 to discharge the ‘loan’.

87. [97]

    In any event, Ken was not willing to sell the properties to Cameron.

88. [98]

    At about this time, Ken obtained a credit report in relation to Nick and various entities associated with him. The report noted that Nick had an outstanding debt owed to ANZ Bank and that this debt had been assigned to a credit agency for collection. It concluded:

89. [99]

    Cameron says that he ‘obtained a further finance approval from Suncorp-Metway Bank’ on 27 June 2019 so that he could ‘take a transfer of the properties’. Soon thereafter, in late June or early July, Ken, Nick and Cameron met at the Coffee Club café in the Stockton Shellharbour Shopping Centre to discuss a further proposal by Nick and Cameron for Cameron to pay Timber Creek out and to ‘take a transfer’ of the Shell Cove and Port Kembla properties.

90. [100]

    According to Nick, Ken said:

91. [101]

    Cameron’s recollection of this discussion in his own affidavit is in identical terms. In fact, many significant discussions to which both Cameron and Lena depose in their affidavits are in identical terms, or near identical terms, to the language in Nick’s affidavit. Given the frequency with which this phenomenon occurred in their affidavits, I am cautious about accepting either Cameron’s or Lena’s evidence about what was said in any discussion in relation to which the witness (or more likely their solicitor) has merely copied and pasted text from Nick’s affidavit about the same discussion. I will say more about this in due course.

92. [102]

    Ken does not deny that this discussion occurred. He seems to have been willing at this point to entertain an offer by Cameron at an arm’s length price or something close to it.

93. [103]

    The plaintiffs say that the making of this proposal for Cameron to purchase the properties in June or July 2019 demonstrates that the plaintiffs were again ready, willing and able to perform the oral loan agreement.

94. [104]

    However, Cameron did not obtain a ‘further finance approval’ in 2019. The evidence shows that on 11 June 2019, he and his de-facto partner made a joint application to Suncorp in which they claimed to be the equal owners of the Port Kembla property. This must have been false to their knowledge at the time. In cross examination, Cameron accepted that he did not believe he had ever received an official letter of offer from Suncorp in respect of this application in any event.

95. [105]

    Nick’s attempts to contact Ken after the 2019 Coffee Club meeting were unsuccessful. When they did finally speak in early May 2020, Ken asked him to put something to him for his consideration. Nick prepared a spreadsheet showing a ‘total debt’ as at 30 June 2020 of $626,849. This amount was made up of an opening balance as at 30 June 2019 of $595,805, plus interest at 6.5% per annum added for each of July, August and September 2019, plus interest at 5% per annum added for each subsequent month up to June 2020, less payments of $3,600 per month, plus an amount for land tax and interest on land tax. The change in the rate from 6.5% to 5% reflects that Timber Creek reduced its rate of required return because its own cost of funds had fallen. This seems to have occurred unilaterally. There is an unexplained discrepancy in the documents as to when this occurred. The spreadsheets produced by Ken to which I will shortly refer record that the rate fell to 5% in June 2018.

96. [106]

    Nick sent his spreadsheet under cover of a letter which was as follows:

97. [107]

    A further meeting between them followed in early July 2020, again at the Coffee Club. On this occasion, Ken handed Nick some spreadsheets. The first spreadsheet and a later iteration of it assumed enormous significance in the plaintiffs’ case. The document was entitled ‘Trading Acc plus costs not included yet Closing 30/6/2020’ and contained a table of transactions. Each row recorded a date, a description of a transaction (being a payment, receipt, debit or credit), an amount, and a running total. The entries for the first 12 transactions were as follows:

98. [108]

    As mentioned, the interest rate used in the table changed to 5% on 21 June 2018. There was occasionally an entry for interest on late payments. The running total as at 20 May 2020 was $595,317.01.

99. [109]

    Other documents provided by Ken at the July 2020 Coffee Club meeting showed workings for additional costs associated with Timber Creek’s ownership of the properties, such as land tax, interest on land tax, bank fees and so on.

100. [110]

     On 10 August 2020, Nick, after taking the spreadsheets home and reviewing them, sent Ken a letter by way of response. The substance of the letter was as follows:

101. [111]

     Ken did not respond to this letter.

102. [112]

     There was another meeting at the Coffee Club on 20 February 2021, this time attended by Nick, Lena, Ken and Ken’s daughter, Megan. Megan is and was a director of Timber Creek. The impetus for the meeting was that Ken wanted Nick and Lena to pay land tax, which by this point had been outstanding for some years. Ken handed Nick a copy of a rental ledger and a land tax ledger. I had some difficulty identifying which of the various land tax ledgers in evidence was actually handed to Nick at this meeting, but I do not think this matters.

103. [113]

     There was a further inconclusive discussion. None of it took the issue any further along the path to resolution. As Ken said:

104. [114]

     Nonetheless, Ken agreed by the end of the meeting that he would obtain some market appraisals for the properties. It appears that he did not do so until August 2021. I refer to these appraisals later in these reasons.

105. [115]

     Throughout the early part of 2021, Ken and Cameron were becoming more and more keen to find a way to reacquire the Shell Cove and Port Kembla properties. There was a telephone discussion between Ken and Nick on 25 March 2021. Cameron was also apparently ‘on the line’ listening in, but neither he nor Nick disclosed that he was doing so. I have not found any of the evidence about this meeting to be relevant to the outcome of this dispute.

106. [116]

     In May 2021, Nick wrote a letter to Ken imploring him to consider a sale of the properties at ‘market value’ to Cameron. He advised that he had located a valuer who was willing to say that the market value of the Shell Cove property was $800,000 and that the market value of the Port Kembla property was $400,000. He continued:

107. [117]

     As may be appreciated, and as Ken well knew, a sale of property on terms that part of the ‘price’ is to be funded by a ‘debt’ from the vendor that ‘only exists on paper’ is one that does not reflect an arm’s length dealing, regardless of whether the nominal ‘price’ is the market price. Ken did not respond directly to the proposal, nor to a follow up letter sent in June 2021.

108. [118]

     A further follow up letter sent on 19 July 2021 did finally elicit a response from Timber Creek’s solicitors. On 29 July 2021, Pottenger & McGhee wrote to Nick and Lena. It is appropriate to set the letter out in full. In doing so, I will add paragraph numbers, just as Cameron later did for the purpose of preparing instructions to Mr Lagopodis.

109. [119]

     Cameron forwarded this letter, together with a set of instructions setting out the Kolevskis’ reaction to the letter, to Mr Lagopodis of Good Legal on 2 August 2021. The instructions were as follows:

110. [120]

     Both Cameron and Nick accepted that these instructions represented their beliefs at the time they were sent to Mr Lagopodis.

111. [121]

     Mr Lagopodis received Cameron’s letter on 3 August 2021. This was the first he had heard about an oral agreement. Mr Lagopodis then had a telephone discussion with Nick, of which he prepared a careful note. He explained that he had not been instructed about an oral agreement at the time and that if there was to be a dispute about this, Nick would need to engage other lawyers. Nick asked if Mr Lagopodis could at least call Pottenger & McGhee to ‘enquire as to what the bottom line is regarding the sale to Cameron and why they don’t want to sell Port Kembla’.

112. [122]

     Mr Lagopodis then spoke with Ms Betts. She did not say anything to suggest that either she or her client considered there to have been either a loan agreement or a buy-back agreement at the time. As to the reason why Timber Creek was not willing to discuss the sale of the Port Kembla property, she said that Nick had indicated to Ken that he would ‘kick the mother out’, which was a reference to Lena’s mother who continued to live at the Port Kembla property.

113. [123]

     The only really noteworthy aspect of what Ms Betts said (as reflected in Mr Lagopodis’ note) is that the properties had been sold in 2015 at their market values, which they clearly had not been. I do not understand why Ms Betts would have held this view in 2021, but I do not find this to have any bearing on the issues in dispute. As to the proposal concerning the Shell Cove property, Ms Betts informed Mr Lagopodis that she would get a valuation and would revert to him in a day or so.

114. [124]

     Mr Lagopodis called Nick back and relayed to him what Ms Betts had said. Mr Lagopodis reiterated his position that he could not act for the Kolevskis in the matter and that they would need to find other representation.

115. [125]

     Following these interactions, Ken obtained various market appraisals for the Shell Cove property. After considering these, it appears Ken came to a value of $1,350,000. By letter dated 27 August 2021, Timber Creek made an offer to sell the property to Cameron at that price. The letter included the following:

116. [126]

     There followed some further inconclusive correspondence.

117. [127]

     It was at about this time that the plaintiffs engaged solicitors in connection with the dispute. Their solicitors, Kells, who are their solicitors in these proceedings, conducted various searches on behalf of the Kolevskis. Those searches revealed that Timber Creek had granted a mortgage over the Shell Cove property in July 2018 to secure a loan from Westpac.

118. [128]

     On 29 November 2021, Nick and Lena caused caveats to be lodged over each of the properties. The details supporting the claim were as follows:

119. [129]

     It was also during this period that Timber Creek retained a real estate agent to manage the Shell Cove and Port Kembla properties.

120. [130]

     On 12 January 2022, Pottenger & McGhee sent to Nick copies of lapsing notices it had lodged in respect of the caveats the Kolevskis had lodged against title to the Shell Cove and Port Kembla properties. This step prompted proceedings and on 1 February 2022, the caveats were extended until further order of the Court.

121. [131]

     The parties each filed and served expert valuation evidence in relation to the properties. The valuers prepared joint reports in which they reached agreement as to the market value of each property at particular points in time. Their joint position in relation to the Shell Cove property was as follows:

122. [132]

     Their joint position in relation to the Port Kembla property was as follows:

123. [133]

     The defendant relied on evidence from their own accountant, Anthony Pickham, in relation to their general practice of lending and the nature of their financial reports and how the relationship with the Kolevskis was reflected therein. There was no dispute about this evidence. It shows that Timber Creek has always treated the payments from the Kolevskis as rent. It also shows that Timber Creek’s usual lending practice was to advance loans that generally had a term on 12 months.

124. [134]

     Further evidence from Ken, Megan and Ms Betts indicated that these loans usually had interest rates of 10% or 11%, were interest only until the repayment of the principal sum and were secured by mortgages over the borrowers’ property.

The parties’ claims in more detail

1. [135]

   The plaintiffs’ central contention is that Nick, Lena and Ken had the discussions set out in Nick’s affidavits and that, as a result, the parties entered into an oral loan agreement on the following express terms:

2. [136]

   The plaintiffs further contend that, by necessary implication, it was a term of the loan agreement that the properties would be held as security for the loan amount as outstanding from time to time, free of any encumbrance.

3. [137]

   The plaintiffs contend that there have been numerous breaches of the loan agreement by Timber Creek. These were as follows:

   1. (1)

      Timber Creek breached the loan agreement by granting a mortgage over the Shell Cove property to Westpac on 2 July 2018.

   2. (2)

      Timber Creek breached the agreement when it ‘refused to accept funds for the Loan transfer’ from Nick or Cameron, presumably in 2018.

   3. (3)

      In June 2019, Timber Creek further agreed to accept payment from Cameron but breached this term by failing to ‘engage with’ the plaintiffs or to ‘accept payment of the Loan Agreement and to transfer the Properties to Cameron’.

   4. (4)

      On 25 March 2021, Timber Creek ‘again refused to accept payment of the Loan Amount and transfer the Properties to Cameron’ in breach of the agreement.

4. [138]

   The plaintiffs next contend that by reason of the principle in Lincoln v Wright (1859) 4 De G & J 16; 45 ER 6, Timber Creek holds the properties as constructive trustee. Its contention in this respect is as follows:

5. [139]

   They contend that they are ready, willing and able to repay the loan amount and that they have ‘completely performed their obligations’, save for repayment. They seek orders for the properties to be transferred to Cameron ‘or to such of the plaintiffs as they may elect’. They also seek the orders which I described at paragraph [7] above which include an order that the Kolevski’s pay $322,943.17 into Court.

6. [140]

   The figure of $322,943.17 was not really explained. If, as the plaintiffs say, Timber Creek was entitled to repayment of the purchase price of $622,000 plus stamp duty plus interest since 2015, then it is very difficult to see why the plaintiffs would now owe only $322,943.17, even taking into account ten years of monthly payments of $3,600. It may be that the figure of $322,943.17 represents the amount that would be repayable if interest were to stop running after some time in 2016, being a time at which the plaintiffs say they were first ready, willing and able to discharge the loan.

7. [141]

   Next, the plaintiffs bring a case based on proprietary estoppel. This aspect of the case is factually closely aligned with the case based on contract and was poorly articulated. The plaintiffs say that Nick and Lena were induced by Ken to enter into the loan agreement or alternatively that they relied on his representations that he would hold the property as security. They say that when offering the loan agreement, Ken knew that it would be to Nick and Lena’s detriment. They say they entered into the loan agreement in reliance on the expectation that Timber Creek would adhere to the pleaded terms of the agreement. Specifically, they allege that:

8. [142]

   They say it is unconscionable for Timber Creek to refuse to transfer the properties back to them or to their nominee ‘in accordance with the principles of equitable proprietary estoppel by encouragement’.

9. [143]

   The last of the claims maintained by the plaintiffs is pleaded under the heading ‘Trust’. It is as follows:

10. [144]

    The plaintiffs said next to nothing about this claim in their submissions but it seems not to be materially different to their principal claim that Nick and Lena were, in effect, equitable mortgagors.

11. [145]

    The defendant’s principal contention is that there was no oral agreement among the parties. It contends that the transfer of each property was by way of absolute conveyance and that it thereby received indefeasible title to each property. It pleads and relies on ss 23C and 54A of the Conveyancing Act. It also pleads and relies on a defence under s 14(1) of the Limitation Act 1969 (NSW), either directly or by analogy, as well as laches although I note that both of these had seemingly fallen away by the time of the hearing, there being no reference to them in any submissions.

12. [146]

    Timber Creek pleads in the alternative and without admission that if the parties did enter into an oral agreement, it was to the following effect:

13. [147]

    Timber Creek alleges that since 3 April 2017, the plaintiffs have breached the agreement by failing to pay any monies for Timber Creek’s land tax liability in respect of the properties.

14. [148]

    By way of further alternative pleading, Timber Creek says that if, contrary to its primary case and the alternative just mentioned, the parties did have a loan agreement, it was on terms that included the following:

    1. (1)

       Nick and Lena would repay the principal amount plus interest, which they have failed to do.

    2. (2)

       Nick and Lena would pay amounts for land tax, which they have failed to do.

    3. (3)

       Nick and Lena would pay an occupation fee at a reasonable market rental, which they have failed to do.

15. [149]

    Timber Creek also brings a cross claim. It seeks judgment for all amounts owing in respect of land tax and a reasonable occupation fee for the properties. It also seeks orders for possession and for sale of the properties.

16. [150]

    The plaintiffs have filed a reply in which, relevantly, they reply to Timber Creek’s defence based on the statute of frauds. In relation to both s 23C and s 54A, they said that for Timber Creek to rely on these sections of the Conveyancing Act would be a fraud on the statute of the type considered in Ciaglia v Ciaglia [2010] NSWSC 341; 269 ALR 175 (Ciaglia). They also say that s 23C is inapplicable to their constructive trust claim by reason of subsection (2) and that s 54A is inapplicable to their claim, by reason of the doctrine of part performance.

17. [151]

    In the light of these various claims and counter claims, the principal factual and legal issues for determination are as follows.

    1. (1)

       What was actually said during the June 2015 discussions between Ken and Nick?

    2. (2)

       Did the June 2015 discussions give rise to an enforceable oral agreement and, if so, what were its terms?

    3. (3)

       Should the agreement be characterised as one under which Timber Creek took the properties as security for a loan?

    4. (4)

       Did any oral agreement reached by the parties survive the making and performance of the contracts for sale of the properties? That is, was any oral agreement overtaken by the written contracts?

    5. (5)

       If there was an oral agreement that survived the written contracts, does the statute of frauds apply? In particular, does the doctrine of part performance apply?

    6. (6)

       Have either of Timber Creek, or the plaintiffs, breached any such oral agreement as may have survived this far into the analysis?

    7. (7)

       Have the plaintiffs ever been ready willing and able to discharge the mortgage?

    8. (8)

       Have the plaintiffs made out their proprietary estoppel or trust claims?

    9. (9)

       Is Timber Creek entitled to judgment and orders on its cross claim, including for possession and sale?

18. [152]

    There is some overlap in these issues but, as far as possible, I will endeavour to deal with them in turn.

What was said in June 2015?

1. [153]

   I have set out the competing versions of the two critical discussions at paragraphs [45]-[55] above. I repeat the caution I expressed at paragraph [11] about the need to resolve this issue in the light of the inherent logic of events and the facts that are otherwise evident.

2. [154]

   It is useful at the outset to recall the setting in which the discussions took place. By the middle of May 2015, Nick and Lena’s circumstances were as follows:

   1. (1)

      They owed in excess of $850,000 to Park.

   2. (2)

      They owed almost $750,000 to Westpac in connection with the Shellharbour station business.

   3. (3)

      They owed $620,000 to ANZ Bank, secured by mortgages over the residential properties.

   4. (4)

      There was a risk that Park would discontinue selling petroleum to them, which would have caused both stations to close.

   5. (5)

      Unless the Shellharbour station business and the Barrack Heights property could be sold for a price that exceeded their liabilities, there was a risk that Park and, in turn, ANZ Bank, would force the sale of both the Shell Cove and Port Kembla properties.

   6. (6)

      As at the time of the key discussions with Ken, Nick and Lena had not yet entered into contracts for the sale of the Shellharbour station business and the Barrack Heights property, which did not occur until 1 July 2015.

3. [155]

   Timber Creek submitted that these background facts make it most unlikely that Nick and Ken would have had a discussion in the terms recalled by Nick. As it points out, a transaction whereby Nick and Lena would do no more than refinance the ANZ Bank debt would hardly have addressed their financial concerns because it would have done nothing to avoid the creditor action that was being threatened by Park and Westpac. Despite what Nick said to Ken about the ANZ Bank ‘breathing down [his] neck’, the actual threat to the Shell Cove and Port Kembla properties was coming from those other creditors.

4. [156]

   Timber Creek submitted that, in these circumstances, it is far more likely that the substance of their discussion would have been along the lines which Ken recalls, namely a discussion about getting the homes out of his and Lena’s names altogether.

5. [157]

   There is force in this submission. Nick and Lena were in compliance with their ANZ Bank mortgages and, despite what he said to Ken, the ANZ bank was not threatening to take recovery action. Park, on the other hand, was breathing down his neck, and it had lodged caveats over the Shell Cove and Port Kembla properties.

6. [158]

   One matter that assumes particular significance here is that at around the very same time as the discussions with Ken, Nick and Lena set about divesting themselves of assets generally: see paragraphs [36]-[39] above. Although the plaintiffs resisted the description of what occurred at this time as ‘divesting’ assets, it is difficult to see it any other way.

7. [159]

   There is much to be said for the proposition that the transfer of the residential properties was intended to be of the same character, namely a disposition of property and not merely a transaction whereby the property was given as security for a loan. Nick was perfectly familiar with the difference between a sale of property and the giving of a mortgage over property as security for a loan.

8. [160]

   The fact that Nick did not mention any oral loan agreement to Mr Lagopodis is also relevant here. This suggests that his discussion with Ken was about more than simply borrowing money. They (Nick and Lena) were clearly contemplating a transfer of the properties out of their own names.

9. [161]

   These circumstances are telling. They are more consistent with the version of the discussion as told by Ken than the version as told by Nick. If he had only ever intended to borrow against the properties, it is improbable that he would not have mentioned this fact to his lawyer.

10. [162]

    Timber Creek next submitted that I would not give any weight to the fact that Nick’s evidence was corroborated by Lena. As I have already noted, Lena entirely corroborates Nick’s account of what was said but she does so by giving a word-for-word account of the same discussions. It is perfectly natural that persons in the positions of Nick and Lena would speak about their recollections on a topic such as this and that they would do so on many occasions over the years. It is unsurprising that they would have very similar recollections when, many years later, they are asked to recall what was said.

11. [163]

    The difficulty here, however, is that their accounts are identical in significant respects. I do not accept that Nick and Lena have a word-for-word identical recollection of what was said in 2015. It is impossible to dismiss the theory that significant portions of one of the witness’s accounts of these critically important discussions has been copied and pasted from the other’s affidavit. It is clear that the person preparing the affidavits (or at least one of the affidavits – probably the later one) has not made a serious attempt to obtain the witness’s actual recollection of the key discussions.

12. [164]

    Lena was given an opportunity in the witness box to explain how her affidavit came to be in identical terms to Nick’s in important respects. It is fair to say that she was not willing to give an inch on this issue. She stood by every word of what she said in her affidavit. Again, this is not necessarily a criticism of her. She was very emotional in the witness box, which was understandable given the issues in dispute.

13. [165]

    However, in reaching a conclusion as to what was said in June 2015 I am not prepared to place significant (much less, decisive) weight on the fact that Nick’s version of the discussions was corroborated by Lena. I note that Nick’s principal affidavit was prepared prior to Lena’s. I also note that the critical discussions were between Nick and Ken.

14. [166]

    Timber Creek submitted that Nick’s version of the discussions was inherently unlikely for a number of additional reasons. For example, if what was being discussed was a ‘loan’ that also involved the conveyance of property and the payment of transfer duty as well as the incurrence of legal and other costs, it would not make sense that the amount of the ‘loan’ would only be the $620,000 purchase price. In fact, the plaintiffs have never disputed that the amount of their ‘loan’ includes the cost to Timber Creek of paying transfer duty. It was Nick and not Timber Creek who organised valuations for duty purposes at the time, perhaps for this very reason. I agree that the notion of a $620,000 loan does not sit well with any of these facts.

15. [167]

    It is also inherently unlikely that Ken said ‘you will pay me $3,600 per month…as well as interest at the rate of 6.5% capitalised per annum’. That is not something that any party later believed to be the arrangement. I cannot accept that Ken said it.

16. [168]

    Timber Creek also pointed out that Nick’s account of what occurred immediately after the discussions was seriously unreliable in important respects. His account, it may be remembered, was that he and Lena simply received blank transfer forms for both properties from Timber Creek’s lawyers, which they duly executed and returned, whereupon the ANZ Bank mortgages were discharged.

17. [169]

    One gains the strong impression from Nick’s account that he and Lena did nothing more than execute two transfers following a discussion with Ken about a loan. That impression is entirely false. It bears no relation whatsoever to what actually occurred, which is that the parties engaged lawyers, negotiated and then exchanged contracts for the sale of the properties, and then executed and delivered transfers of the properties at settlement. I note that the key factual allegations about the transfer of title in the amended statement of claim reflect Nick’s impossible-to-accept version of events. The fact that Nick’s recollection of these immediately subsequent events is so demonstrably unreliable causes me to be very cautious about relying too heavily on his recollection of what was said in the two conversations with Ken.

18. [170]

    Another matter that causes me to seriously doubt the reliability of Nick’s memory concerning the June 2015 discussions is his evidence that he told Mr Lagopodis about the oral agreement in July 2015: see paragraphs [73]-[74] above. As I have explained and as was accepted even by counsel for the plaintiff, Nick is entirely wrong about this matter. He did not mention the oral agreement to Mr Lagopodis in July 2015. The fact that Nick’s evidence about this matter, which is nearly contemporaneous with the disputed discussions, is so demonstrably wrong is a further reason to doubt the reliability of his evidence concerning what happened in June 2015.

19. [171]

    I am also quite confident that Ken would under no circumstances have acquiesced in the suggestion that the properties would be reconveyed to anyone other than Nick and Lena. There is a significant body of evidence to show that Ken was flatly unwilling to entertain this idea, unless the transfer were for an arm’s length price, whenever it was raised with him in subsequent years. The spontaneity and strength of his opposition to the idea, which he expressed at every point subsequent to 2015, reflects his apparent concern about the propriety of such a transaction. The strong likelihood is that he would have had the very same instinctive response to this suggestion in 2015.

20. [172]

    For all of these reasons, I find that Ken’s evidence of what was said during the two key discussions in 2015 is generally more reliable than Nick’s (and Lena’s) evidence about those same matters.

21. [173]

    However, despite these conclusions, there are two respects in which Nick’s recollection about the key discussions seems inherently likely to be correct.

22. [174]

    The first concerns what was to happen if Nick and Lena could not provide the 6.5% per annum return to Timber Creek. According to Ken, he told Nick that he would sell the properties to a third party ‘at market price’.

23. [175]

    I accept that Ken said this and that Nick agreed to it.

24. [176]

    However, it is inherently unlikely that the parties would not have gone on to talk about what would happen with the proceeds of such a sale. Yet, on Ken’s account, nothing at all was said about this matter. This seems to me to be unlikely in the extreme. Nick and Lena were talking about selling their homes to Timber Creek at an undervalue. It was obvious to all that a subsequent sale at market value would almost certainly produce a sizeable surplus over and above the repayment of the purchase price plus the 6.5% return which Timber Creek was expecting to earn on the funds outlaid.

25. [177]

    According to Nick, they did address this eventuality albeit only obliquely. According to Nick, Ken said:

26. [178]

    I am not sure how the ‘properties’ could be transferred back if one had been sold. The evidence is in this respect a little incoherent. He probably meant that if the proceeds sale of one property were sufficient to recoup Timber Creek’s entire outlay plus its return, the other property would be returned. Also, I am unwilling to accept that Ken ever said he would transfer property ‘as directed’ for the reasons already indicated.

27. [179]

    Nevertheless, given the extreme unlikelihood that nothing was said about this matter (which is Ken’s evidence), I accept Nick’s evidence that Ken said that he would sell ‘to recover any lost monies first’. This would deal with the question of the proceeds of sale which, as I have said, the parties must surely have discussed. In other words, by saying that he would sell ‘to recover the lost monies first’, Ken was also saying that he would remit the balance to Nick and Lena after deducting his outgoings plus his required return.

28. [180]

    While I find that the substance of the key discussions was as set out in Ken’s affidavit, I am persuaded that Ken said ‘should anything ever happen Nick, I won’t sell the Port Kembla house. I’ll put the Shell Cove house on the market to recover any lost monies first. Once I’m paid back I will transfer the properties back’.

29. [181]

    The second respect in which I am inclined to accept Nick’s evidence concerns the price at which the properties might be reacquired by Nick and Lena. On Ken’s evidence, nothing at all was said about this matter. This is impossible to accept. It makes no commercial sense that Nick and Lena would have sold the two properties at a price that meant they were, effectively, giving up all their equity in the properties but without something being said about the price at which they could be reacquired. This is especially so given that I have otherwise accepted that the arrangement they discussed involved a potential repurchase.

30. [182]

    This leaves me in a position of some difficulty so far as the evidence is concerned, because Nick’s account of the discussions deals with this circumstance in terms that I am otherwise unable to accept. That is, his evidence is that he and Lena would be entitled to reacquire the properties on repayment of their ‘loan’, which is something I cannot accept was said, for reasons I have already explained.

31. [183]

    However that may be, I am in no doubt that something must have been said about the price at which Nick and Lena would be entitled to reacquire the properties.

32. [184]

    Even though I do not accept that the parties explicitly referred to their arrangement as involving a loan, and even though I am generally unwilling to place much weight on Nick’s recollection of these discussions, I do accept his evidence that Ken spoke about Nick and Lena ‘pay[ing] it back to me’. In so saying, Ken was referring to the funds advanced by Timber Creek on which it expected to earn a 6.5% return. This would be consistent with another aspect of Ken’s evidence, namely that he said ‘we have to get a 6.5% return’. This was said in the context of how Nick and Lena could repurchase the properties. He was saying, in effect, that Nick and Lena could repurchase at a price that ensured Timber Creek recovered its outgoings plus the return.

Was there an oral agreement?

1. [185]

   My conclusions as to what was said by Ken and Nick in 2015 mean that I am unable to find that Nick and Lena had an oral agreement with Timber Creek in the precise terms alleged in the amended statement of claim. However, it remains necessary to determine whether the parties entered into an agreement on some other terms.

2. [186]

   The principles governing the question of whether the parties entered into a binding oral agreement were not in dispute. In the case of oral agreements, it is often necessary to rely on contemporaneous corroboratory material in order to satisfy the Court that the words underlying the agreement were actually said. I note what was said by Hammerschlag J (as his Honour then was) in John Holland Pty Ltd v Kellogg Brown & Root Pty Ltd [2015] NSWSC 451 at [93]-[95]. See also Douglas v Mikhael & Ors [2023] NSWSC 979 at [19]-[21] (Richmond J) and the recent decision of Payne JA in Turner v Richards [2025] NSWCA 83 (with Leeming and Adamson JJA agreeing) at [58]-[61].

3. [187]

   In my view, these considerations lead to the conclusion that Nick, Lena and Timber Creek did reach an oral agreement and that they intended it to be binding. So far as the terms of that agreement are concerned, I find that they were largely but not entirely as pleaded by Timber Creek at paragraph 75 of its amended defence, as set out above at [146].

4. [188]

   As to the term in paragraph [146](c), my findings as to what was said do not support the conclusion that Timber Creek was only willing to sell the properties back to Nick and Lena at market value. On my findings, the parties agreed that Nick and Lena could repurchase the properties by paying an amount that represented a repayment of Timber Creek’s outgoings (including the initial purchase price plus duties and taxes) plus a return of 6.5% per annum on those outgoings. It was implicit in what Ken said about this matter that the $3,600 rental payments would count towards that return.

5. [189]

   A further term of the agreement was that Timber Creek would give any surplus on sale of the properties to Nick and Lena after recovering its outgoings plus a return of 6.5% per annum. This follows from Nick’s evidence, which I have accepted, that Ken said that if the properties were sold, Timber Creek would recover ‘any lost monies first’. It was implicit that, having recovered its own monies together with its 6.5% per annum return, Timber Creek would return any balance to Nick and Lena.

6. [190]

   I specifically reject the submission that the agreement included a term that Cameron was entitled to purchase the properties from Timber Creek. For reasons already explained, that is something to which Ken did not agree. Even if I had generally accepted Nick’s evidence as to what was said in the June 2015 discussions, I would still not have accepted his evidence that Ken agreed to this particular term.

7. [191]

   I also find that the required rate of return changed from 6.5% per annum to 5% per annum from June 2018.

8. [192]

   A reasonable person in the position of any of the parties would have expected to be able to rely on an agreement of the kind I have just described. The parties were not speaking in generalities about agreements they might reach in the future and the discussion was not simply as to the terms on which Timber Creek would acquire the two properties. It was, rather, as to a variety of matters that would govern the relationship of the parties into the future in important respects even after the transfer of the properties. The parties agreed that: the properties would be rented back to the vendors at $3,600 per month; the purchaser would be entitled to earn a 6.5% ‘return’; the vendors would be entitled to recover the properties in the future at an undervalue, albeit that the precise time at which this might occur was somewhat indistinct; and, on default, the properties would be sold at market value and the surplus would be repaid to Nick and Lena. I find that the parties intended their agreement about these matters to be legally binding.

What was the nature of the oral agreement?

1. [193]

   The plaintiffs’ basic case was that they had entered into a loan agreement and that they were mortgagors. Aside from its expression in the terms of the contract for which they contended, this basic case was articulated in only the broadest terms. The pleading referred to two decisions: Lincoln v Wright and Ciaglia. Neither written nor oral submissions took matters much further.

2. [194]

   However, it was quite clear even from the broad-brush approach adopted by the plaintiffs that they at least relied on the line of authorities discussed by White J in Ciaglia.

3. [195]

   Ciaglia concerned a transaction between two brothers, Robert and Pasquale Ciaglia. Between 1970 and 1991, Robert and Pasquale were the registered proprietors as joint tenants of a property in Chatswood. The property was used as a boarding house for a business conducted by a company of which Robert and Pasquale were the sole shareholders and directors.

4. [196]

   From about the late 1980s, Robert was involved in family law proceedings with his then wife. Robert alleged that in 1991, he and Pasquale reached an oral agreement concerning the property which White J summarised at [2] as follows:

5. [197]

   The existence of this oral agreement was admitted. Robert executed a transfer of his interest in the Chatswood property which recited consideration of $195,000. There was no dispute that Robert had repaid this amount, plus interest.

6. [198]

   One sees immediately the points of distinction between the facts of Ciaglia and the facts of this case. In Ciaglia, it was admitted that the parties reached an oral ‘loan’ agreement. The dealing in the land involved the delivery of a signed transfer and there was no intervening contract for sale. And, importantly, it was admitted that the loan had been repaid with interest.

7. [199]

   However, I take the plaintiffs’ submissions about Ciaglia to be directed to two particular observations made by White J (as his Honour then was) about the general principles to be applied in cases such as this. The first concerns what his Honour said at paragraphs [13] and [14] concerning mortgages generally:

8. [200]

   Although the facts are different here, I take the plaintiffs’ substantive case to be that the oral agreement reached in 2015 attracts these same principles.

9. [201]

   The further relevant observations made by White J are to be found in paragraphs [53] and [54]. At paragraph [53] his Honour said:

10. [202]

    The plaintiffs rely on this proposition. They say it would be a fraud on the statute for Timber Creek to insist on the absolute conveyance of the Shell Cove and Port Kembla properties.

11. [203]

    The line of authority to which White J referred in Ciaglia is long standing. Even by the time Abigail v Lapin [1934] AC 491; (1934) 51 CLR 58 was decided by the Privy Council, just a few decades after the introduction of the Torrens system, it could be said that a ‘practice has sprung up of affecting what amounts to a mortgage by registering an instrument of transfer of the legal title from the mortgagor, and at the same time executing a document certifying that it was by way of security only’: at 725. As that case demonstrated, the transferee of Torrens title land may be treated as a mortgagee in equity even where the related agreement as to the intended character of the transaction is not in writing.

12. [204]

    One explanation for the practice, at least in many cases, is that identified by the Privy Council at 725, namely to facilitate ‘dealings with the land by the transferee’. In some cases, however, it is clear that the practice is probably better explained as a means of concealing the transferor’s true asset position. That was the case in Ciaglia. It is probably also the case here, but the evidence does not allow me to reach a final conclusion as to precisely why Nick and Lena wanted to get all of their assets out of their own names.

13. [205]

    Cases have usually involved an express agreement for loan. However, that is not always so. In Hudson v Arap 1 (NSW) Pty Ltd [2015] NSWCA 126 (Hudson) the plaintiff, Hudson, sold land to the defendant, Arap, on terms that the parties also enter into a Tenancy Agreement and an Option Agreement. At the time of sale, the land was subject to a mortgage. The purchase price under the sale contract was subject to a ‘rebate’, which should be noted in some detail. It was as follows:

14. [206]

    The effect of the rebate was that the amount required to be paid by Arap on completion was the amount required to discharge Hudson’s mortgage, plus costs, plus the sum of $112,558.66. It was not in dispute that the sum of $112,558.66 was equivalent to the option fee (payable under the related option agreement) plus 12 months’ rent (payable under the related rental agreement).

15. [207]

    The overall arrangement was described in the following way in a letter setting out the proposal:

16. [208]

    There are remarkable similarities between the substance of the transaction in Hudson and the substance of the oral agreement in this case. In Hudson, as in this case, the plaintiff sold land and received, essentially, an amount sufficient to pay out an existing mortgagor. In both cases, the vendor was either required or permitted to remain in occupation and the rental payments would be taken into account in working out the amount to be paid to the purchaser (here, Timber Creek) at the time of repurchasing the property.

17. [209]

    At [38], Bathurst CJ pointed out that a mortgage may be ‘created by registering an instrument of transfer of the legal title from the mortgagor and, at the same time, entering into an agreement that the transfer was by way of security only’: Abigail v Lapin at 725; Currey (Registrar of Titles) v The Federal Building Society (1929) 42 CLR 421; [1929] HCA 28 at 434. His Honour explained that ‘the equitable interest in the mortgagor to redeem the property would be recognised at least inter parties…and can be protected by caveat’.

18. [210]

    His Honour said at [40]:

19. [211]

    In Hudson, the express agreement contained no reference to a ‘loan’ as such. Hudson was not required to exercise the option. Clause 7 of the Option Agreement provided that if Hudson did not exercise the option, he was required to vacate the property. Arap was then entitled to sell the property and account to Hudson for the surplus after recovering the amounts outlaid. Arap was explicitly required to use ‘reasonable endeavours’ to sell the property for a market price. It was also entitled to defer a sale if it could not achieve a price that exceeded its total outlay, which was described in the Option Agreement as the ‘Amount Owing’. There was of course a strong incentive for Hudson to exercise the option, but it was not obliged to do so, and it had no obligation to make up any difference to Arap if the property had fallen in value in the meantime.

20. [212]

    The Chief Justice nevertheless concluded that the arrangement was one that involved the transfer of property by way of security for repayment of a loan. His Honour held:

21. [213]

    As in Hudson, there are indications that the transaction in this case was one by which the land was transferred as security for repayment of funds outlaid: the price paid was equal to the funds required to discharge the existing indebtedness; Nick and Lena had an option to repurchase at least in the short term; the Kolevskis were entitled to remain in possession on payment of a rental of $3,600 plus outgoings; Timber Creek was entitled to a total return of 6.5% per annum; and if Timber Creek did not achieve its expected return it could sell to recoup its outlay (plus a return) and then remit the balance to the Kolevskis.

22. [214]

    The notion of a ‘return’ of 6.5% per annum is significant in this respect, because it suggests that Timber Creek’s entitlement to profit from the overall arrangement was on the basis of a return on the funds ventured into the arrangement, either at the outset or from time to time, and not on the basis of the value of the property actually acquired. Ken did not contemplate that Timber Creek would be entitled to either sell or earn a market rental for the properties themselves.

23. [215]

    In characterising the overall arrangement, the plaintiffs relied heavily on the spreadsheet described at paragraph [107] above. They submitted that the spreadsheet reveals a ‘loan’ arrangement in that it shows a calculation of interest of 6.5%, monthly payments of $3,600 that were sometimes described as ‘rent’ but which were in substance loan repayments, and a running balance. They say the running balance is the amount owing on the loan.

24. [216]

    I have not found the spreadsheet to be very probative of this issue. The information in the spreadsheet is consistent with both cases. On one view, the running balance is the amount that Nick and Lena would need to pay to Timber Creek at any point in time in order for Timber Creek to recoup the total funds outlaid plus 6.5% per annum, reducing to 5% per annum from 21 June 2018. It does not include land tax. The amount for land tax was shown on a separate spreadsheet.

25. [217]

    On another view, it shows the amount that would be owing on a loan at 6.5% per annum capitalised yearly, if the monthly $3,600 payments were treated as repayments of principal.

26. [218]

    One further piece of evidence should be mentioned on this point. Ken said that if the properties had been sold soon after 2015, he would have considered himself morally if not legally bound to return any surplus to the Kolevskis. He was far more circumspect as to what ought to happen with any surplus now that almost 10 years have elapsed, which was understandable. Nevertheless, the fact that he saw the arrangement in those terms at the time it was entered into is a further indication that Timber Creek acquired the properties as security and not as an outright conveyance.

27. [219]

    I do not consider that the characterisation of the oral agreement as giving rise to an equitable mortgage is affected by my conclusion that the parties discussed the repurchase of the properties in the ‘short term’. A mortgagee retains an equitable right to redeem after any contractual date for redemption: see B Edgeworth, Butt’s Land Law (7th ed, 2017, Thomson Reuters) at [11.30] and [11.510]; Gurfinkel v Bentley Pty Ltd (1966) 116 CLR 98; [1966] HCA 75 at 107 per Barwick CJ; Fuller v Albert [2021] NSWCA 88 at [73]-[75] per Emmett AJA with Macfarlan and Brereton JJA agreeing.

28. [220]

    Subject to my consideration of the next issue, the oral agreement between the parties was one that gave rise to a mortgage to secure the repayment of the moneys outlaid by Timber Creek to acquire and hold the properties. In this sense, as in Hudson, it is appropriate to characterise the arrangement as one in which security was given for repayment of a loan, being the funds outlaid by Timber Creek to acquire and hold the properties.

Was the oral agreement overtaken by the contracts for sale?

1. [221]

   Timber Creek submitted that any oral agreement could not have survived the entry into the contracts for sale of the properties. Those contracts, which were in the standard form, contained the usual promise to convey the whole of the vendors interest in the land in consideration of payment of the purchase price. Timber Creek referred me to the reasons of Dixon CJ, Fullagar and Taylor JJ in Maybury v Atlantic Union Oil Co Ltd (1953) 89 CLR 507; [1953] HCA 89 at 517 where their Honours said:

2. [222]

   I also note the reasons of Isaacs J in Hoyt’s Pty Ltd v Spencer (1919) 27 CLR 133; [1919] HCA 64 at 147.

3. [223]

   Timber Creek submitted that it would be impossible to reconcile an oral loan agreement with the contracts entered into on 2 July 2015. If the parties really had agreed that Timber Creek would provide $620,000 (or some other amount) only by way of loan and that the properties would be conveyed but only by way of security for a loan, those promises would have been completely overtaken by their later written agreement that Timber Creek was to receive title ‘free of any mortgage or other interest’ and that the payment of $620,000 was consideration for that transfer.

4. [224]

   However, the terms of the oral agreement which I have found to exist were somewhat different. They presupposed the entry into later contracts for sale of land and, in my view, were not inconsistent with them. The main inconsistency to which Timber Creek pointed was the promise to convey free and clear title to the properties which, they submitted, could not stand with the retention of interest as mortgagor. However, the fact that title to Torrens title land is transferred is not necessarily inconsistent with the proposition that the transferor may continue to have an equity of redemption, as was the case in Abigail v Lapin.

5. [225]

   In my view, the oral agreement supplemented the terms of the contracts for sale in the sense that it made provision for matters not otherwise dealt with in those contracts, namely the use of the properties after sale and their possible repurchase by the Nick and Lena: see McMahon v National Foods Milk Ltd (2009) 25 VR 251; [2009] VSCA 153 at [36]-[39] (Nettle JA).

Does the statute of frauds apply?

1. [226]

   Sections 23C, 23E and 54A of the Conveyancing Act are as follows:

2. [227]

   An interesting question arises as to which of s 23C and s 54A is engaged here: cf Ciaglia at paragraphs [50] and following. The parties did not address me on this issue. Rather, they proceeded on the footing that s 23C would apply to prevent Nick and Lena from asserting an interest in the property as equitable mortgagor, subject to whether the doctrine of part performance leads to a different result. I will approach the issues in that way.

3. [228]

   The doctrine of part performance was explained in Pipikos v Trayans (2016) 265 CLR 522; [2018] HCA 39. At paragraphs [51] and [53], Kiefel CJ, Bell, Gageler, and Keane JJ said (with emphasis in the original):

4. [229]

   As Kirk JA further explained in Li v Tao (2023) 113 NSWLR 131; [2023] NSWCA 310 at [56]:

5. [230]

   The plaintiffs relied on two matters in support of the proposition that there had been part performance of an oral agreement: (a) the transfer of the properties in 2015 and (b) the numerous ‘offers’ to repay the ‘debt’ and repurchase the properties.

6. [231]

   In relation to the second category, the offers to pay back the amount owing were not acts of part performance. They involved no change in position whatsoever in relation to the subject matter of the contract and in any event the plaintiffs were never and are not now in a position to pay the total amount that is owing, even on their case.

7. [232]

   The original transfers of the properties do however constitute sufficient acts of part performance. The distinctive feature of the transfers, as I noted at the very outset, was that they took place at an undervalue. One possible explanation for the sale on those terms is that Nick and Lena were desperate to sell the properties. But that is an altogether unsatisfactory explanation. They were not desperate to sell and they could easily have sold the properties for their market values otherwise. The far more likely explanation for the transfers is that, as Nick and Lena claim, they did so as part of an arrangement that would entitle them to recover the properties at some future date at essentially the same undervalue, plus Timber Creek’s return. This is exactly what the oral agreement provided for. In my view, there were sufficient acts of part performance of the oral agreement such that s 23C(1) does not apply.

Have Nick and Lena breached the oral agreement?

1. [233]

   A key term of the oral agreement was that Nick and Lena would pay rent of $3,600 per month together with outgoings, including land tax. Nick and Lena have paid rent and some outgoings, but they have not paid or even contributed to land tax since April 2017.

2. [234]

   Although not pleaded, the plaintiffs submitted in final submissions that the oral agreement was a residential tenancy agreement within the meaning of the Residential Tenancies Act 2010 (NSW) and that Timber Creek was not entitled to require Nick and Lena to pay land tax: s 40. In their submission, Timber Creek was therefore not entitled to rely on the non-payment of land tax as a breach of the agreement.

3. [235]

   Senior counsel for Timber Creek resisted this new case on the basis that the defendant would have conducted its case differently if this point had been taken. He submitted that the point was neither pleaded nor identified in written submissions and indicated that he would have cross examined differently had he known that this point would be taken. I accept this submission. I do not consider that it was open to the plaintiffs to raise this issue so late in the piece.

4. [236]

   But I would not have accepted the plaintiffs’ submission in any event. Section 8 of the Residential Tenancies Act is entitled ‘Agreements to which this Act does not apply’. It relevantly provides:

5. [237]

   In Hudson, Bathurst CJ held at [28] that for a residential tenancy agreement to be within the scope of s 8(1)(f), ‘the right to occupy must be conferred by the contract for the sale of land itself’. Emmett JA and Bergin CJ in Eq agreed at [54]-[56] and [57] respectively. In the light of that conclusion, I would not find that the oral agreement for the Kolevskis to rent the Shell Cove and Port Kembla properties was exempt from the operation of the Residential Tenancies Act by reason of s 8(1)(f).

6. [238]

   However, Bathurst CJ found that the arrangement did give rise to a mortgage within the meaning of s 8(1)(g) of the Residential Tenancies Act, as already explained. His Honour found that Hudson’s lease was therefore not within the scope of that Act. I would have reached the same conclusion here.

7. [239]

   In my view, the plaintiffs have been in longstanding breach of the oral agreement by reason of their failure to pay land tax.

8. [240]

   I consider the question of whether Timber Creek breached the oral agreement at [248]-[251].

Have the plaintiffs ever been ready willing and able to discharge the mortgage?

1. [241]

   My conclusion that the overall arrangement was in the nature of a mortgage means that it is necessary to consider the plaintiffs’ submission that they were ready, willing and able to perform their obligations under the arrangement at numerous points.

2. [242]

   The difficulty with this submission is that in order to redeem the mortgages, Nick and Lena were required not just to be ready, willing and able to repay; they were required to tender the amount owing. The position is stated in ELG Tyler, PW Young and C Croft, Fisher & Lightwood’s Law of Mortgage (3rd Australian edition, 2014, LexisNexis Butterworths) at [32.40]-[32.48]. In particular, at [32.41] the authors say:

3. [243]

   Where there is no fixed date of redemption and where the loan is repayable on demand, a mortgagor will be able to redeem at any time so long as they give the mortgagee enough notice to receive the money and bank it: G.A. Investments Pty Ltd v Standard Insurance Company Limited [1964] WAR 264 (Wolf CJ, Jackson and Hale JJ); Fisher & Lightwood’s Law of Mortgage at [32.6] and [32.36]. The tender must be unconditional and the money in question should be produced: Fisher & Lightwood’s Law of Mortgage at [32.46] and [32.47].

4. [244]

   Redemption of these mortgages would require the tender of an amount representing the total amount outlaid by Timber Creek to acquire the properties, plus outgoings and taxes (including transfer duty and land tax) plus a return of 6.5% per annum to Timber Creek reducing to 5% from 21 June 2018, less the monthly payments of $3,600.

5. [245]

   Payment of such an amount has never been tendered. Nor, for that matter, does the evidence demonstrate that Nick and Lena were ever or are now ready, willing and able to redeem the mortgages.

6. [246]

   At its highest, the evidence shows only that Cameron – not Nick or Lena – received conditional loan approvals, but those approvals were never actually accepted or acted upon. Furthermore, as I have found, no bank would actually have lent sufficient funds to Cameron at any point in an amount sufficient to redeem the mortgages. Every application for finance he made involved serious misrepresentations as to his financial circumstances. And in any event, even if he had found access to sufficient funds, he does not ever appear to have been willing to lend those funds to his parents so as to enable them to redeem the mortgages.

7. [247]

   There is no evidence that Cameron is currently ready, willing and able to redeem the mortgages. The evidence is that he believes he is able to do so, but he has not demonstrated a reasonable basis for that belief.

Has Timber Creek breached the agreement?

1. [248]

   I cannot accept the submission that Timber Creek breached the oral agreement in the ways described in (b), (c) and (d) of paragraph [137] above. I have found that Nick and Lena were not ever ready willing and able to perform the contract but, more to the point, neither they nor anyone else has ever tendered payment to discharge the mortgage. I have also found that the agreement did not contemplate that the property would be sold to Cameron.

2. [249]

   As to the submission that Timber Creek breached the agreement by mortgaging the property to Westpac, the plaintiffs have referred me to no clause of the agreement or to any statement of principle that would prevent Timber Creek from raising money against the security of the properties. One of the main reasons why parties enter into arrangements of the kind now in dispute is that the mortgagee is able to deal with the property as an owner, including by using the property as security for borrowings.

3. [250]

   A question could arise as between Nick and Lena, on the one hand, and Westpac, on the other, as to whose interest has priority. However, that is an issue I do not need to resolve.

4. [251]

   I find that Timber Creek has not breached the agreement.

Proprietary estoppel

1. [252]

   Before stating my conclusions on the issues addressed thus far, it is necessary to consider the plaintiffs’ alternative claim based on proprietary estoppel.

2. [253]

   Although pleaded, this claim was not developed in submissions in any kind of structured way. Even giving the plaintiffs the benefit of considerable doubt about what their case was in this respect, I cannot see a basis on which they are entitled to succeed by reference to the principles of proprietary estoppel.

3. [254]

   There is no doubt that Ken did make promises on Timber Creek’s behalf concerning the properties. But my findings as to what was said in the relevant discussions mean that I cannot accept that he made the promises on which this aspect of the plaintiffs’ pleaded case depends.

4. [255]

   I am also unable to find that Timber Creek has departed in any way from the promises that I found to have actually been made by Ken in 2015. So far as I can tell, Timber Creek has entirely kept its end of the bargain. In fact, at considerable cost to itself, it has refrained from exercising the right to sell even in the face of Nick and Lena’s continuing failure to contribute to the cost of land tax.

Conclusions

1. [256]

   I summarise my conclusions as follows:

   1. (1)

      I have all but rejected the plaintiffs’ account of Nick’s discussions with Ken in May and June 2015. However, even on Ken’s account, which I have almost entirely accepted, the parties did enter into a binding oral agreement.

   2. (2)

      The agreement, although not expressed as such, was in the nature of a loan and mortgage arrangement. It involved an assignment of the Shell Cove and Port Kembla properties as security for repayment of funds outlaid by Timber Creek to acquire, hold and sell the properties.

   3. (3)

      The oral agreement included a term that Nick and Lena would rent the properties for a total of $3,600 per month and that they would pay all outgoings and land tax.

   4. (4)

      Timber Creek was entitled to earn a return of 6.5% per annum on all funds advanced, including initial costs and transfer duty. From 21 June 2018, Timber Creek reduced this to 5% per annum.

   5. (5)

      The oral agreement was not evidenced in writing. However, I have found that the parties intended it to be binding, that it survived the entry into the written contracts for sale, and that the doctrine of part performance applies to it.

   6. (6)

      Redemption of the mortgages requires the tender of an amount representing the total amount outlaid by Timber Creek to acquire the properties including transfer duty, plus outgoings and land tax plus the return of 6.5% per annum (as modified to 5% per annum), less the monthly payments of $3,600 actually made to the date of redemption.

   7. (7)

      Nick and Lena have never tendered and do not now tender an amount sufficient to redeem the mortgages. If it matters, they have also never been ready, willing and able to discharge the mortgages because they have at all relevant times lacked the financial means to do so.

   8. (8)

      Nick and Lena are in longstanding and continuing breach of the oral agreement because they have not paid land tax, which they were required to do.

2. [257]

   It is appropriate in all of these circumstances for the Court to order possession of the Shell Cove and Port Kembla properties and for the properties to be sold. This conclusion is warranted by the fact that Nick and Lena are in breach of the agreement by reason of their ongoing failure to pay land tax. It would also be warranted if Timber Creek had not made its required return on the funds outlaid in any event. However, the parties did not specifically address me as to the calculation of the return which Timber Creek has actually made. My conclusion that Nick and Lena are in breach means it is not necessary for me to consider Timber Creek’s alternative argument that it is in any event entitled to give Nick and Lena notice to vacate the properties and for the properties to be sold. Had it been necessary to consider that question, I would have found that Timber Creek was entitled to do so. The oral agreement did not contemplate an open-ended arrangement under which Nick and Lena could remain in possession for 10 years without discharging the mortgage. It was explicitly intended to be a short-term arrangement. Whatever that expression may mean, it did not mean 10 years.

3. [258]

   Timber Creek submitted that both properties should be sold. The plaintiffs submitted that even if Timber Creek succeeds, it should not be entitled to sell the Port Kembla property because Lena’s elderly mother still lives there and because Ken promised that Timber Creek would not do so. The difficulty, however, is that I have found the Kolevskis to be in default of the agreement. Timber Creek’s only opportunity to recoup its outgoings is from a sale of the properties.

4. [259]

   The agreed valuations suggest that the price at which the Shell Cove property might sell will probably be sufficient to recoup all of Timber Creek’s outgoings in relation to both properties. If that is the case and if Nick and Lena are willing to pay the costs and transfer duty to recover the Port Kembla property, then they should have an opportunity to do so. However, if the proceeds of sale of the Shell Cove property are insufficient to discharge the total amount owing on the ‘mortgage’, or if Nick and Lena are unwilling to pay to have the Port Kembla property transferred back into their names, it will be necessary for that property also to be sold.

5. [260]

   I will therefore make an order for the sale of both properties but I will stay the order in relation to the Port Kembla property until such time as the Shell Cove property has been sold. If the funds produced by the sale of the Shell Cove property are sufficient also to discharge the mortgage over the Port Kembla property, then that is what should occur.

6. [261]

   Because I have found that Nick and Lena do have an equity of redemption, they will be entitled to exercise that right until immediately prior to the sale of the properties. Even though I have found that they were not ready, willing and able to redeem the mortgages on the basis of the evidence before me, it remains open to them to tender payment up until the point of sale.

7. [262]

   The Court may make an order for possession as an ancillary order to an order for judicial sale: Morris Finance Ltd v Free [2017] NSWSC 1417 at [124] (Ward CJ in Eq). It is appropriate to make such an order here, although I will also stay the order for possession of the Port Kembla property until such time as it becomes necessary to sell that property. To be clear, the order for possession will not take effect unless and until it is clear that the proceeds of sale of the Shell Cove property are insufficient to discharge the mortgage over the Port Kembla property and that the property therefore needs to be sold.

8. [263]

   I will also make an order setting aside the order made on 4 April 2022 which extended the caveat over the properties.

Orders

1. [264]

   Even though the plaintiffs have had a measure of success in the proceedings in that I have found that there was a binding oral agreement and that Timber Creek holds the properties as mortgagee, it is not appropriate for the Court to grant any of the relief sought in the amended statement of claim. The agreement I have found to exist is almost entirely as pleaded in the alternative in the defence and it is Nick and Lena, not Timber Creek, who are in breach of it. I have also found that Timber Creek is entitled to the relief sought in its cross claim, namely orders for possession and sale.

2. [265]

   I will therefore make orders as follows:

   1. (1)

      The amended statement of claim is dismissed.

   2. (2)

      An order for possession of the land comprised in Certificate of Title, Folio Identifier 3111/1006783, being the land situated at and known as 21 Dampier Crescent, Shell Cove NSW 2529 (the Shell Cove Property) be made in favour of the defendant/cross-claimant.

   3. (3)

      An order for possession of the land comprised in Certificate of Title, Folio Identifier 434/14939, being the land situated at and known as 7 Sixth Avenue, Port Kembla NSW 2505 (the Port Kembla Property) be made in favour of the defendant/cross-claimant.

   4. (4)

      An order for the sale by the defendant/cross-claimant of the Shell Cove Property.

   5. (5)

      An order for the sale by the defendant/cross-claimant of the Port Kembla Property.

   6. (6)

      Orders 3 and 5, being the orders for possession and sale of the Port Kembla Property, be stayed until 30 days after the completion of the sale of the Shell Cove Property (pursuant to Order 4 above).

   7. (7)

      The proceeds of sale of the properties are to be applied in the following way:

   8. (8)

      Grant liberty to apply to the defendant/cross-claimant in respect of any further orders or directions that may be appropriate to give effect to the orders for possession and sale.

   9. (9)

      Direct the parties to make submissions on costs as follows:

   10. (10)

       Set aside order 8 made by Ward CJ in Eq on 1 February 2022.