You've reached a verbal agreement to buy land – you then pay the money and move in. But now the vendor wants to back out of the deal?
- 06 Sep 2019
- Property & Conveyancing
Traditionally, there is no legal requirement that a contract be evidenced in writing. Unless a statute makes this a requirement. A classic example is that of contracts for the sale of land.
Problems, of course, arise when a contract has been partly or completely performed - but is not evidenced in writing – and the parties fall into a dispute. This usually occurs with agreements between family members, or between friends.
Section 54A of the Conveyancing Act 1919 (NSW) states that such agreements are voidable. But that subsection (2) goes on to state that the exception to this of 'part performance' still applies.
The Supreme Court of NSW in Phung v Phung (2019) NSW ConvR ¶56-409 has again examined this doctrine.
• Equitable Doctrine of Part Performance ,
The test for enlivening this doctrine is whether or not the plaintiff can demonstrate that they performed such acts which "unequivocally, and in their own nature, refer… to some such agreement as that alleged" (see Pipikos v Trayans (2018) 92 ALJR 880;  HCA 39).
In other words, if the plaintiff's actions unequivocally indicate the existence of an agreement such as the one alleged to have been reached through the part or whole performance, then the absence of writing will not make the contract a voidable contract.
• Phung v Phung (2019) NSW ConvR ¶56-409
The younger of two brothers, Cam Tai Phung, owned two properties in Lidcombe. One was a house in Dehli Street, and the other was a unit in Swete Street.
The younger brother lived in the Swete Street property, and the older brother, Cam Vinh Phung, lived in the Dehli Street property.
The older brother maintains that in January 2010 the parties reached an agreement whereby they would swap the living arrangements (i.e. the older brother would move to the Swete St Property and the younger to Dehli Street), and the older brother would purchase Swete Street from the younger brother for $180,000 paid in installments.
Various payments were made (initial advances to the sum of $50,000, plus various weekly installments from March 2010). Importantly, the older brother:
a. paid the younger brother to date the approximate sum of $180,000;
b. paid rates and strata levies on the property; and
c. carried out $6,000 - $7,000 of renovation work.
In 2013 the two brothers made a written note about how they'd reached the verbal agreement two years ago. But this hand written note made no reference to the purchase price.
The two brothers had a falling out, and in 2017 the younger brother maintained that their relationship was one of Landlord/Tenant, and the younger brother served a 90-day notice to vacate on the older brother.
Darke J in the NSWSC felt persuaded by the older brother and held that the parties had indeed reached an oral agreement in 2010 regarding the sale.
Whilst the parties did not expressly state a time for completion of the contract, Darke J held that there was an implied term that completion would occur in a reasonable time.
Darke J went on to find that the 2013 written note was not sufficient. It failed to mention the purchase price. Accordingly, the 2010 verbal contract was voidable, unless the doctrine of part performance applied.
Darke J was persuaded that this doctrine of part performance did apply.
The acts of the older brother were unequivocally referable to some such contract as alleged.
The payment of the purchase price alone has long been held to not be sufficient part performance of the contact (see Khoury v Khouri (2006) 66 NSWLR 241). But this was in conjunction with the taking of possession, the payment of outgoings, and the carrying out of renovations; all held to be clearly indicative that there was some such agreement for the sale of land to the older brother.
The older brother sought an order for 'specific performance' of the contract. This is an equitable remedy whereby the court actually orders the property be transferred; rather than say merely awarding damages (money).
The younger brother resisted this order on the basis of 'hardship'. Primary to this was the argument (along with other arguments) that the property was actually worth $330,000 at the time (the older brother believed it to be worth approximately $250,000) and was now worth approximately $600,000.
Darke J rejected the younger brother's submission, and held that specific performance of the contract (along with costs) was warranted as the suitable remedy.
For expert legal advice, contact Maclarens Lawyers on 96823777.
Note: For a previous related article on both part performance and equitable estoppel, see here