The purchase of a property is usually one of the biggest purchases that most Australians make in their lifetime and this is why contracts for the sale and purchase of property are governed by strict statutory requirements. In particular, sections 23C and 54A of the Conveyancing Act 1919 require contracts for the sale and purchase of property to be in writing, however the recent case of Phung v Phung [2019] NSWSC 117demonstrates how an oral contract for the sale of property can also be enforced in certain circumstances.
Facts
This case involves a dispute between two brothers for the sale of a Lidcombe unit which was registered in the name of the younger brother, Cam Tai Phung. The older brother, Cam Vinh Phung, alleged that in a conversation with his younger brother in January 2010 an agreement was reached whereby the older brother would move into the unit and the younger brother would transfer the title of the unit to the older brother in consideration of $180,000, paid by installments.
The older brother paid the agreed amount of consideration for the unit in various lump sum payments between 2010 and 2013 totaling $90,000 and also paid the younger brother a fortnightly amount of $400 between 2010 and 2019, which meant that the total amount paid by the older brother was actually more than $180,000. The older brother also paid the council rates and strata levies for the property and carried out renovation work to the property valued at approximately $7,000.
In 2017 the brothers had a falling out and the younger brother maintained that the payment of the consideration by the older brother was for a life interest in the property and not for the sale of the property.
The older brother then commenced proceedings against the younger brother seeking an order for 'specific performance' of the oral contract that had been formed between the brothers. ‘Specific performance’ is an equitable remedy where the Court can order that a property be transferred rather than awarding a monetary amount as damages.
Decision
In order to determine whether the oral contract between the brothers was enforceable, Justice Darke applied the doctrine of part performance from the case of Maddison v Alderson (1883). This test provides that an oral agreement may still be enforceable notwithstanding the statutory requirement to document an agreement in relation to real property in writing under sections 23C and 54A of the Conveyancing Act 1919 if ‘the acts relied upon as part performance [are] unequivocally, and in their own nature, referable to some such agreement as that alleged’ and the oral agreement is partly performed.
Justice Darke considered the evidence brought forward by the brothers, the applicable provisions of the Real Property Act 1900 and Conveyancing Act 1919, together with the doctrine of part performance in relation to oral contracts for the sale of property and granted the remedy of specific performance in favour of the older brother. In particular, the Court held that the actions of the older brother were ‘unequivocally referable’ to the oral contract that had been formed between the brothers by the fact that:
1. the older brother had taken possession of the property;
2. the older brother had paid for all outgoings in relation to the property (including council rates and strata levies);
3. the older brother undertook renovations to the property; and
4. the older brother had paid the consideration for the property to the younger brother.
Conclusion
Whilst the case of Phung v Phung shows that oral contracts for the sale of real property can be enforced in certain scenarios it is highly advisable to prepare and sign a written contract drafted by a solicitor for the sale of property
If you are thinking of buying or selling a property, contact Peter Crittenden or Ben Wong on (02) 4626 5077 to ensure that your rights and obligations are correctly documented in any transactions involving real estate.
The contents of this publication are for reference purposes only. This publication does not constitute legal advice and should not be relied upon as legal advice. Specific legal advice should always be sought separately before taking any action based on this publication.
