Bosca Land Pty Ltd, Re [1995] QSC 291

IN THE SUPREME COURT OF QUEENSLAND O/S No. 474 of 1995 Brisbane IN THE MATTER OF the Property Law Act 1974 AND IN THE MATTER OF an application by Bosca Land Pty Ltd REASONS FOR JUDGMENT - MOYNIHAN J. Judgment delivered: 8 November 1995 Counsel: J.W. Lee for the Applicant S. Blaxland for the Respondent Solicitors: H. Drakos & Co. for the Applicant Spranklin Solicitors for the Respondent Hearing date: 17 July 1995 -- 1 of 8 -- IN THE SUPREME COURT OF QUEENSLAND O/S No. 474 of 1995 IN THE MATTER OF the Property Law Act 1974 AND IN THE MATTER OF an application by Bosca Land Pty Ltd JUDGMENT - MOYNIHAN J Judgment delivered 8 November 1995 This is an unsatisfactory application in a singularly unedifying dispute. The applicant owns land at Bracken Ridge which it wants to sell. The respondent has a registered bill of encumbrance over the land. It is opposed to the sale of the land, claiming it requires its consent and to be entitled to improve conditions. The applicant rejects the respondent's contentions. The applicant has brought an originating summons seeking:- (1) A direction that it be at liberty to sell the land to one Springer and/or his nominee in terms of an exhibited draft contract; (2) An order that upon the equivalent of half the sale proceeds being paid to the respondent or into Court the Registrar be appointed to convey the land free of the bill of encumbrance held by the respondent. In seeking relief in terms of (2) the applicant invokes s.99(7) of the Property Law Act 1974. The power given by the subsection is ancillary to the powers given to the Court by the other provisions of s.99. Relevantly for present purposes it is thus applicable to judgments or orders in actions for redemption and/or sale and to actions brought by persons having a right of redemption. The originating summons does not have those qualifications and in my view -- 2 of 8 -- 2 the provision of s.99(7) cannot be availed of. The applicant also seeks to invoke Order 64 rule 1BB of the Rules of the Supreme Court. This provides for the determination of questions of entitlement to legal and equitable rights in circumstances where there is unlikely to be any substantial dispute of fact. The material reveals much disputation between the parties, but much of it is at best of dubious relevance to at least some of the questions of entitlement to legal and equitable rights arising from the bill of encumbrance and the applicant's intention to sell the land. I might at this stage remark that argument on the application failed to address a number of considerations which seem to me to be pertinent, and the material canvasses issues which are irrelevant in a way in which helps justify the description of unedifying, which I applied to the dispute at the outset. The deed of encumbrance at the heart of the dispute was executed on 6 November 1974. It reflects circumstances which arose out of a relationship between a property investor, William Keith Thompson (deceased), whose wife now controls the applicant, and Donald Keith Meiklejohn who was then a real estate agent and who is effectively the respondent. The land the subject of the bill of encumbrance is four lots of land at Bracken Ridge held on a single title. Its acquisition may for the moment be accepted as reflecting something in the nature of a joint venture between Thompson and Meiklejohn with the bill of encumbrance intended to protect the respondent's interest. It seems that the relationship between Thompson and Meiklejohn may have deteriorated during Thompson's lifetime. In any event relations between Meiklejohn and Thompson's widow can now be described as having broken down to an extent that it seems that judgements might well have become distorted on the part of one, or the other, or both. The respondent contends that the applicant has not complied with provisions of the deed of encumbrance notably cl.3. It contends that the applicant is under an obligation to -- 3 of 8 -- 3 consult with the respondent to arrive at a marketing approach, proposal or plan for the sale of the land and as to the sale price, and that failure to do so constitutes a failure to act in compliance with the applicant's obligations in respect of the sale which is thus not bona fide. It apparently claims the applicant is obliged to have its consent for the sale. As will emerge the respondent's position in these respects is, in my view, largely misconceived and the way in which the misconception was advanced and the misconception itself, together with the respondent's reaction, has led to the unedifying situation to which I previously referred. The issues which I have so far identified are essentially matters of construction of the deed of encumbrance. There are other areas of dispute, relating to whether the best price available has been obtained, which are essentially factual and it is convenient to postpone consideration of them for the present. The relevant provisions of the deed of encumbrance are part of the section and clauses 1 to 3. They are:- "........desiring to render the said land available for the purpose of securing to and for the benefit of D.K. & M.M. MEIKLEJOHN PTY LTD (hereinafter called "the Encumbrancee") the sum of money hereinafter mentioned, DO HEREBY ENCUMBER the said land for the benefit of the Encumbrancee with the sum of Twelve thousand five hundred dollars ($12,500.00) and with the payment of the sum of money by the Encumbrancer to the Encumbrancee to be raised and paid at the times and in the manner following and the performance by the Encumbrancer of the obligations, covenants and conditions set forth hereunder and the Encumbrancer covenants as follows:- FIRSTLY: that upon the sale howsoever of the freehold title to the said land there shall be immediately payable to the Encumbrancer to the Encumbrancee the sum of money which shall be equivalent to the sum of one half of the proceeds of such sale to which the Encumbrancer shall be entitled provided however the sum that shall be payable shall not in any case be less than the sum of Twelve thousand five hundred dollars ($12,500.00). SECONDLY: That in the event following upon any such sale the next available proceeds thereof to which the Encumbrancer shall be entitled shall be less than the sum of Twelve thousand five hundred dollars ($12,500.00) then in such case the Encumbrancer shall pay to the Encumbrancee the full amount of the net proceeds of such sale. THIRDLY: That the Encumbrancer shall notify the Encumbrancee of any forthcoming sale of their freehold title to the said land at least one calender -- 4 of 8 -- 4 month before any such sale and shall inform the Encumbrancee of the consideration to be sought on such sale and all other terms of such sale as the Encumbrancee shall be desirous of being informed and shall likewise inform the Encumbrancee of any offer made to the Encumbrancer by any prospective purchaser and in such case shall not accept any such offer until after such offer shall have been notified to the Encumbrancee in the like manner as aforesaid and in the event that the Encumbrancer shall conclude a contract for any such sale without notifying the Encumbrancee in the manner stipulated herein then the Encumbrancer acknowledges that such a contract for sale shall be voidable at the instance of the Encumbrancee. FOURTHLY: That in the event of the sale or conveyance by the Encumbrancer of its interest in the said land to any person then such person shall be bound by the provisions hereof as if such person were the Encumbrancer at the execution of these presents and for the effectual performance of this condition any such sale or conveyance shall be deemed to include this condition notwithstanding any provision in any contract or agreement to the contrary........" Clause 6 is to the effect that if the encumbrancer defaults in payment of any of the monies secured or fails to observe or perform any of the covenants "all monies as shall then be due or owing" by the applicant to the respondent become immediately payable. The deed of encumbrance is not without its curiosities both in what it provides and in what it does not provide. Clearly enough it charges the land to secure payment to the respondent of $12,500.00 or half the proceeds of its sale, whichever is the greater; or all the proceeds if they are under $12,500. The instrument appears to contemplate the payment out of the proceeds of sale as distinct, for example, from an obligation arising upon conclusion of a contract for sale. This has implications for cl.6 because in effect there are no monies due and owing until the proceeds of a sale are available. Cl.3 is expressed to require notification of intention to sell, and of the proposed sale price and then "such term or terms of the proposed sale as the respondent is desirous of being informed" (i.e. asks for). There is a similar obligation in respect of an offer and, amount of the offer, and presumably "such terms" of the offer as the respondent requests should also be supplied. The only consequence which the clause is expressed to provide for in the event of -- 5 of 8 -- 5 failure to comply with its requirements is that the respondent may avoid (or perhaps compel the applicant to avoid) a contract to which the respondent is not a party. This would of course effect the rights of the other party to that contract. Clause 4 purports to bind a purchaser from the applicant by the provisions of the deed but is not expressed to impose any obligation on the applicant to advise the third party. It seems to me ineffectual to impose any obligation on a third party and seemingly is in no consequence for a bona fide purchaser for value without notice. The notion that the respondent is entitled to avoid a contract to which it is not a party (or to compel the applicant to do so) seems to me to be fairly startling. Put shortly none of the applicants obligations arising under the bill of encumbrance, however characterised, seem to me likely to be specifically enforceable and a breach of either cl.3 or cl.4 by the applicant, assuming all else in the respondent's favour, would sound only in damages. I have already referred to the difficulties in respect of cl.6. Moreover, whatever its curiosities in my view the deed of encumbrance does not impose an obligation on the applicant to consult or collaborate with the respondent in respect of the sale or the sale price or give the respondent a right to veto a sale or to impose terms. I do not regard it open to imply terms to deal with the difficulties identified above. The requirements for the implication of a term are far from satisfied; see Codelfa Construction Pty Ltd v. State Rail Authority (1981-82) 149 C.L.R. 337. The consequences set out above may not be what the respondent contemplated when the deed of encumbrance was executed, or not have the effect which it now wishes to have given to the deed. Neither consideration is however to the point in the present circumstances. It may be accepted, at least for the purpose of the immediate argument, that the applicant is obliged to act in good faith and take reasonable steps to obtain a fair price in selling the land; eg. Latec Investments Ltd v. Hotel Terrigal Pty Ltd (In Liquidation) (1965) 113 CLR 265, at 273. That does not impose on the applicant obligations of the kind for which the -- 6 of 8 -- 6 respondent contends. Steps taken in arranging sale for example are not in breach of the applicant's duty simply because the respondent favours a different approach. Returning to cl.3 as I construe it; from earlier than 14 December 1994 the respondent knew the applicant wanted to sell the land and the purchase price of $255,000 was mentioned. There was then an exchange of correspondence in which the respondent by its solicitors insisted that the applicant was obliged by the terms of the deed of encumbrance to discuss and arrive at a marketing plan and procure the respondent's agreement to the sale price before the land could be sold. The respondent has not deviated from that position. As I have indicated in my view the deed of encumbrance has no such consequence. The evidence does not establish that the applicant has failed to inform the respondent of any terms of which the respondent "is desirous of being informed" particularly given the respondent's adamant maintenance of what I have concluded is an untenable construction of the bill of encumbrance. There is sworn material by D. K. Meiklejohn criticising the marketing of the property as reflected in the contract which the applicant has apparently entered into and conflicting valuation evidence. There are factual issues which are inappropriate to resolve on this application, although I should mention that the material is far from rendolent of a breach by the applicant of its obligation to act in good faith and take reasonable steps to obtain a fair price. There is evidence capable of founding a conclusion that D.K. Meiklejohn has sought to use what I have concluded is an untenable construction of the deed to bring pressures to bear on the applicant. I was invited to make findings to that effect but I regard it as inappropriate to do so on this application. The considerations being those I have indicated, the applicant seems to me entitled to the following declarations:- 1. The applicant has notified the respondent, so as to satisfy clause 3 of the bill of -- 7 of 8 -- 7 encumbrance, of the sale of the land the subject of the bill. 2. The bill of encumbrance does not require the respondent's consent to the sale. 3. The bill of encumbrance does not empower the respondent to impose on the applicant obligations to consult or agree on marketing proposals on the purchase price as a condition of the sale of the land. Since the declarations differ from those sought in the summons I will give an opportunity for submission on their final form and as to costs. -- 8 of 8 --