Corado Pizzale & Anor v Gumina Enterprises Pty Ltd & Ors P23/1994 [1994] HCATrans 89 (25 October 1994)

IN THE HIGH COURT OF AUSTRALIA

Office of the Registry

Perth No P23 of 1994

B e t w e e n -

CORADO PIZZALE and MARIA PIZZALE

Applicants

and

GUMINA ENTERPRISES PTY LTD

First Respondent

CAMISA NOMINEES PTY LTD

Second Respondent

REGISTRAR OF TITLES

Third Respondent

Application for special leave to appeal

MASON CJ

DEANE J

GAUDRON J

TRANSCRIPT OF PROCEEDINGS

AT PERTH ON TUESDAY, 25 OCTOBER 1994, AT 12.26 PM

Copyright in the High Court of Australia

MR M.J. McCUSKER, QC: May it please Your Honours, I appear with my learned friend, MR P.G. LASKARIS for the applicants. (instructed by Frichot & Frichot)

MR C.L. ZELESTIS, QC: May it please Your Honours, with my learned friend, MISS J.H. AUERBACH I appear for the first respondent. (instructed by Talbot & Olivier)

MR D.R. WILLIAMS, QC: May it please the Court, I appear with my learned friend, MR P.A. MONACO for the second respondent. (instructed by Godfrey Virtue & Co)

MASON CJ: The Court has been informed that there will be no appearance for the third respondent, the Registrar of Titles, and that he will abide by the decision of the Court. Mr McCusker?

MR McCUSKER: May it please Your Honours, this action arises essentially out of a 1988 contract of co-purchase made between the applicants, as one set of co-purchasers, and the first respondent, Gumina Enterprises, as the other co-purchaser. The agreement between them was to purchase, as tenants in common in equal shares, that is to the applicant's one undivided half share and Gumina the other undivided half share, of a two-thirds interest in a property at Fremantle. The factual background, Your Honours, is set out in the applicant's summary, paragraph 2 starting at 2.1.

Pizzale, at the relevant time,as was Gumina, occupied portion of the subject properties, Your Honours, and it was common to both parties, as co-purchasers, that Gumina in entering into the contract of co-purchase wanted if possible to ultimately strata title this property at Fremantle so that the Gumina family could obtain a separate strata title to portion of the property which they were then occupying, and still do occupy, both as a residence for the family and as a business.

The two-thirds interest in the property, which they were proposing to purchase, was owned by two persons who appear to have been executors in an estate and the interest in question was called the "G/M Estate" throughout the proceedings, both at the trial and the appeal.

Now, before the trial judge the evidence was, and it was clear on the facts, that after the co-purchase contract had been entered into by the applicants together with Gumina, the first respondent, Gumina approached one of the vendors, a man called Maffina, and said that he did not any longer wish to complete and would not complete the co-purchase with Pizzale, the applicant. The reason that he gave for that, and maintained at trial, was that there had been, he said, an agreement that after completion of the purchase the Pizzales and Gumina would strata title the property so that Gumina would get his desired strata titled portion of the property. The trial judge found, and the Full Court agreed with him, that there was no such agreement.

The further reason, I should mention, that Gumina gave to the vendor for not proceeding, and gave at trial, was that Pizzale had said after entering into the co-purchase contract, "I don't wish to strata title." So against that background the question was, "Was Gumina entitled to act as he did?" which was first to in effect sabotage the co-purchase contract by telling Maffina that he would not complete with Pizzale - - -

GAUDRON J: But in the end it did not sabotage it, did it, because the contract stayed on foot? That is the finding in your favour in the Court of Appeal.

MR McCUSKER: That is so, Your Honour. He sabotaged it in this sense, as the trial judge found: by not paying his part of a purchase price and telling Maffina that he was not prepared to complete the purchase, the effect of that was, nevertheless, to frustrate completion of the co-purchase contract. But he went further than that, Your Honour. He not only said that, and failed to pay his share of the co-purchase price, but he also arranged to complete the purchase of the whole of the interest, that was to have been purchased with Pizzale as a co-purchaser, for himself alone. When I say "himself", that is for the first respondent, Gumina Enterprises.

So we have, on those facts, a question whether a co-purchaser of realty who, behind his other co-purchaser's back, arranges to complete the purchase of the whole of the property himself will, at the end of that, hold portion of the property so purchased as a constructive trustee for the co-purchaser whose interest has been defeated by his actions.

DEANE J: But if that were the question, you won. Justice Ipp's judgment makes it quite clear that if that were the only question he would have been in your favour, but at page 118 he identifies the matters in which, so far as the majority of the Full Court were concerned, the case turned and that is (iv),(v) and (vi).

MR McCUSKER: Yes, Your Honour, but in reaching the conclusion that there was a fiduciary relationship, which was the way that he approached it, he found that that fiduciary relationship on which, as he saw it, the right to relief depended, arose out of something which was less than an agreement but an expectation or discussion that there would be negotiations for a strata title of the property.

DEANE J: He makes it quite clear it was a representation which formed the whole basis of the arrangement between the parties.

MR McCUSKER: Yes, Your Honour, but a representation as to what? Although it may be put in terms of "representation", it was no more than Gumina saying that is what he wanted to do and making it known to his co-purchaser that that was his desire, and the co-purchaser's response to it being, "Well, I don't reject that proposition that we should look at strata titling, but I want to look at that after we've completed the purchase."

DEANE J: But that misses the point of (iv), on page 118, where His Honour proceeds on the basis that your clients represented that there was no obstacle in principle to strata titling and that they would in good faith enter into negotiations, and they then repudiated that representation.

MR McCUSKER: Your Honour, that is Justice Ipps' categorisation of the evidence. He acknowledged that there was some difficulty because of some scant findings by the trial judge as to fact. But what was clear, and he observed that himself, was the trial judge accepted the evidence of Mr Pizzale's son, a man called Italo, and the trial judge's finding therefore must be taken as being an acceptance of the evidence that he gave, which appears at page 21, Your Honour, through to 22 point 20 when Mr Italo Pizzale was being questioned as to what had been discussed about strata titling.

As Your Honour can see what Italo said, and His Honour the trial judge accepted this and there was no finding to the contrary by the Court of Appeal, was that:

Nunzio brought up -

that is Gumina -

the possibility of strata titling.

.....he drew a rough sketch.....and said to my father that is the way he would like the possible strata titling to be done.

.....My father said he didn't want to discuss strata titling -

this is at line 35 and following -

without being given more information.

.....There was no agreement made.

At the top of page 22:

my father didn't really want to talk about it until he got more information.

.....it wasn't a flat rejection, `No, I'm not interested'?

His Honour said:

I accepted this witness as a witness of truth.

DEANE J: I do not want to take time, Mr McCusker, in view of your limitations, but all I was trying to convey to you was that reading the judgments it seems to me the difference between the majority judgments and Justice Rowland in the Full Court turn on that as a fact.

MR McCUSKER: We say no, Your Honour, for this reason - - -

DEANE J: Or turn on assessment of fact.

MR McCUSKER: Not essentially, Your Honour, because we say that the approach taken by the majority, as taken by the learned trial judge, was that unless it could be established that there was a fiduciary relationship then there could be no relief granted. The learned trial judge, dealing with that point, said at page 29 line 45:

Their relationship -

that is Pizzale and Gumina -

was not other than that of prospective co-owners of the Land -

and by saying it "was not other than that" he said there is nothing more to it than that and without more there could not be either a fiduciary relationship or, more importantly, relief of the type sought, that is a declaration as to a constructive trust.

Now, the majority in the Full Court took essentially the same approach, that is no relief, no declaration as to a constructive trust unless we can fit it in as a category of fiduciary relationship. His Honour Justice Ipp said, "I find a fiduciary relationship by reason of this background of a discussion about proposed strata title."

DEANE J: Except how does that fit in with page 120, line 22, where His Honour says he finds a fiduciary relationship on which you would have succeeded, but for the unconscionable conduct of your client.

MR McCUSKER: Yes. Now, Your Honour, what His Honour has said there is the fiduciary relationship, which he saw as being essential to ground the relief, was itself based on a representation, I think Your Honour has put it that way, as to what would be done after completion of a purchase.

Now, when one looks to see what in fact the evidence was as to the representation, and it is clear His Honour admitted that there was difficulty in looking at the finding of fact, that the representation was no more, and none of the judges has found differently, than a statement that, "I don't reject the idea of strata titling, but I want to see more information and I'll look at this after."

DEANE J: I follow what you say, but that is simply inconsistent with (iv), (v) and (vi) on page 118, particularly (iv).

MR McCUSKER: Yes it is, in the way that it is phrased, Your Honour, yes, I accept that.

DEANE J: Reading Justice Ipps' judgment it seems to me the whole basis of what is ultimately a disqualifying factor of unconscionable conduct is hinged on (iv), (v) and (vi).

MR McCUSKER: Yes, but, Your Honour, two things to that: first, we would say that (iv), (v) and (vi) really is a categorisation of the evidence which goes beyond the evidence itself as found by the trial judge. It is elevating it to another level. Second, we would say that even if (iv), (v) and (vi) were a correct statement of that evidence, which I have identified at page 28, the evidence of Italo in particular, it still ought not to have been a bar to relief of the type that was sought; that is, the fact that there was, if it was the fact, a discussion or an understanding that there would be future negotiations after the completion of the purchase concerning strata titling and the further fact that after completion of the purchase, for reasons which were suggested to be a view of Pizzale that what Mr Gumina wanted was too valuable to agree to strata title, even if all of that were the case it should not, in our submission, justify one co-purchaser turning around and saying, "I'm going to, behind my co-purchaser's back, complete the whole of the purchase of this property myself."

We say that that is unconscionable conduct and is not excused by a statement, "Well, you were going to negotiate and after completion of the purchase", that is after completion of the contract and before completion of the purchase, "you turned around and said you decided you didn't like the idea of strata titling." That discussion about strata titling, the understanding, all of the judges said did not amount to a commitment, that is a contractual commitment to strata title. It is something - - -

GAUDRON J: But it did seem to proceed on the basis that that was actually the conventional basis on which the applicant and the first respondent conducted their negotiations between themselves.

MR McCUSKER: Yes, Your Honour, it can be analysed - - -

GAUDRON J: Justice Kennedy put it a bit higher than an understanding, particularly having regard to the trial judge's acceptance of the evidence of Mr Maffina.

MR McCUSKER: Your Honour, the evidence of Mr Maffina was not evidence as to the discussions or understanding as between Pizzale - - -

GAUDRON J: In the solicitor's office, discussions in the solicitor's office.

MR McCUSKER: Yes, certainly. This is where we are short of some findings of fact, but the discussions in the solicitor's office end on the basis that nothing was going to be signed, and it was still clear, and His Honour the trial judge found that there was no agreement that there would be strata titling. It was no more than an agreement that this would be further discussed after the contract to co-purchase was signed.

So if you have got an agreement to do no more than negotiate, negotiate perhaps in good faith on strata titling, and then after the purchase is entered into, the co-purchase, one of the parties to that agreement to negotiate having investigated the matter says, "I don't wish to strata title" does that justify the other co-purchaser in as I say going behind his back and buying the whole of the property for himself? Is there no relief that equity in those circumstances will give? Is the applicant precluded simply because after the contract was made he has decided that strata titling, because of inquiries made to his bank manager, would not be a good idea.

Now, we would say that is elevating the discussion about strata titling into a commitment to strata title and on no version of the evidence accepted by the trial judge was there such a commitment.

MASON CJ: Mr McCusker, we will adjourn now and we will resume at 2.15.

MR McCUSKER: May it please Your Honours.

AT 12.43 PM LUNCHEON ADJOURNMENT

UPON RESUMING AT 2.24 PM:

MASON CJ: Mr McCusker.

MR McCUSKER: Your Honours, the judgments in the courts below demonstrate that this is an area which requires some clear direction from this Court. Justice Kennedy, referred to this morning, at page 60 line 20 of his reasons concluded that:

On the appellants' case, for reasons expressed by Ipp J, I am unable to conclude that any fiduciary relationship come into existence -

at any time. At page 61 at line 10 he said:

On this basis, once the form of offer and acceptance had been executed -

that is the co-purchase contract -

the first respondent owed to the appellants only such duties as may have been imposed upon it.

He clearly meant contractually. At page 64 line 35 His Honour said:

I have some difficulty, for myself, in concluding that, there being no fiduciary relationship between the parties in the manner contended for by the appellants, such a relationship arose out of an understanding that the parties would conclude an agreement for strata titling. However, on the basis that such a relationship did arise -

and I interpose His Honour clearly did not think that it did -

I agree with Ipp J that the appellants are precluded from obtaining equitable relief in this case -

that is for the reasons given by His Honour Justice Ipp that there was something which fell short of an agreement to strata title but nevertheless a breach of which amounted to a breach of a duty of good faith disentitling the applicants to relief.

This approach taken by His Honour Justice Kennedy was similar to the approach taken by the learned trial judge who said there was no fiduciary relationship as between co-purchasers and therefore no entitlement to relief. At the same time the trial judge found that there was no agreement to strata title and did not go on to consider the question as to whether the discussions about strata titling, which is all that they were, he found them vague and inconclusive; would have precluded a right to relief that otherwise existed.

His Honour Justice Ipp, and I think Your Honour Justice Deane referred this to me this morning, at page 118 line 20 did use the word "representation" but could I just add that it was never found, as against the applicants, that any so-called representation as to their approach to strata titling was a misrepresentation. There is no element of any falsity as to their state of mind or any deceit. It was simply, at the most, a statement by them to the effect that they saw nothing wrong in principle with the idea of strata titling at that point, and there was no agreement and all the judges below found that.

It is our submission, Your Honours, that if the applicants were granted special leave it would be an opportunity for the Court to resolve and give clear direction on this aspect. First, what is the duty owed between co-purchasers; there was confusion and difference between the judges in the court below as to whether any fiduciary relationship existed and, second, in the circumstances of this nature, where one co-purchaser goes behind the other's back, is that unconscionable conduct which irrespective of the relationship, whether it be fiduciary or otherwise, gives right to relief. There have been a number of dicta which we have referred to in our outline of submissions as to that of itself, the unconscionable conduct, or it has been put in the alternative by His Honour Justice Toohey as unjust enrichment, does that of itself give rise to a right to relief? In our submission it does and should on the authorities.

As matters stand in the court below we are left with a direction for Western Australia, and we would say at least with some persuasive value elsewhere, which leaves the matter in some considerable doubt. There is this fuzzy question of how far a purchaser may go before what is nevertheless not a contractual commitment but may be said to amount to something which will bar him from equitable relief. In our submission the approach which was taken by the court below is wrong. If this applicant were granted, Your Honours, the appeal could be disposed of, we would say, in a very short space of time and there would be no need to traverse any factual matters. May it please Your Honours.

MASON CJ: Thank you, Mr McCusker. The Court need not trouble you, Mr Zelestis, nor you, Mr Williams.

In the view of the Court, the outcome of the proposed appeal depends so much on findings of fact and the characterisation or complexion of the facts as to make the case an unsuitable vehicle for the determination of any question of general principle. The application for special leave is therefore refused.

MR ZELESTIS: We seek costs, may it please the Court.

MASON CJ: You do not oppose costs, Mr McCusker?

MR McCUSKER: I do not oppose it, Your Honour.

MASON CJ: The application is refused with costs.

AT 2.29 PM THE MATTER WAS ADJOURNED SINE DIE