Aura S Kalra Pty Ltd v Zeine

[2022] VCC 680

IN THE COUNTY COURT OF VICTORIA

AT MELBOURNE

COMMERCIAL DIVISION

Revised
Not Restricted
Suitable for Publication

GENERAL LIST

Case No. CI-20-03518

AURA S KALRA PTY LTD	Plaintiff
v
ZEINE & Anor	Defendants

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JUDGE:	HIS HONOUR JUDGE MACNAMARA
WHERE HELD:	Melbourne
DATE OF HEARING:	23-25, 28-31 March, 1 April, 2 May 2022
DATE OF JUDGMENT:	23 May 2022
CASE MAY BE CITED AS:	Aura S Kalra Pty Ltd v Zeine & Anor
MEDIUM NEUTRAL CITATION:	[2022] VCC 680

REASONS FOR JUDGMENT
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Subject:SALE OF LAND

Catchwords:               Sale of land – interdependent contracts for sale of real estate on which general store and service station are conducted, and sale of business – contract for the sale of land unencumbered – tenants in possession at date of proposed settlement – whether vendors dispensed with obligation to provide vacant possession – claim for specific performance of contracts by purchaser company – whether purchaser ready, willing and able to perform its obligations at appropriate time – claim for damages for trading losses – alternative damages claim for loss of bargain – whether damages adequately proven – whether plaintiff failed to mitigate damages – counterclaim by purchasers based on rescission notice – rescission notice invalid because vendors in breach of fundamental obligation to offer unencumbered title – counterclaim dismissed

Legislation Cited:      Sale of Land Act 1962; Planning and Environment Act 1987; Retail Leases Act 2003; Residential Tenancies Act 1997; Evidence Act 2008; Supreme Court Act 1986

Cases Cited:STY (Afforestation) Pty Ltd v Atkinson [2006] VSCA 283; Zhang and Philip Jones Pty Ltd v Shanghai Wool and Jute Textile Co Limited [2006] VSCA 133; Badat v DTZ Australia (WA) Pty Ltd [2008] WASCA 83; Agricultural and Rural Finance Pty Ltd v Gardiner (2008) 238 CLR 570; Waltons Stores (Interstate) Ltd v Maher (1988) 164 CLR 387; Bishop v Taylor (1968) 118 CLR 518; King v Poggioli (1923) 32 CLR 222; Chatham v Coral Park Pre-Training & Breaking Pty Ltd [2020] VSC 814; Gurney v Gurney (No 2) [1967] NZLR 922; Price v Strange [1978] Ch 337; SDS Corporation Ltd v Pasdonnay Pty Ltd [2004] WASC 26; JC Williamson Ltd v Lukey and Mulholland (1931) 45 CLR 282; Mehmet v Benson (1965) HCA 295; Fox v Toll Property Pty Ltd [2007] VSC 138; Berrell v Combined Pastoral Pty Ltd [2015] NSWSC 1334; Green v Sommerville (1979) 141 CLR 594; European Bank Ltd v Evans (2010) 240 CLR 432; Hadley v Baxendale (1854) 9 Exch 341; 156 ER 145; Castle Constructions Pty Ltd v Fekala Pty Ltd (2006) 65 NSWLR 648; Payzu Ltd v Saunders [1919] 2 KB 581; Velik v Steingold [2012] NSWSC 860; All Phones Retail Pty Ltd v Hoy Mobile Pty Ltd [2009] FCAFC 85; Morris v Baron & Co [1918] AC 1; Idameneo  Pty Ltd v Ticco Pty Ltd [2004] NSWCA 329; Willis and Crosland [2021] VSCA 320.

Judgment:                   1.  Within 14 days of this day, the parties must bring in short minutes to give effect to these reasons.

2.Costs reserved.

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APPEARANCES:	Counsel	Solicitors
For the Plaintiff	Mr D. Gibson	Victoria Mercantile Lawyers
For the Defendants	Mr L. Wirth	R J Legal

HIS HONOUR:

Background

1Mr and Mrs Zeine, the defendants, have been married for 40 years. (Transcript (“T”) 901, Lines (“L”) 4‑7) Mr Ghassan Zeine and his wife, Nouhad, were registered as joint proprietors of the property at 1486‑1490 Diggers Rest-Coimadai Road, Toolern Vale, as from 13 January 2005. (Court Book (“CB”) 1255)  They conduct the Toolern Vale General Store at this address. (T900, L29‑30)  At the back of the premises, with a frontage to Coimadai Road, a Ms Simone Pannett conducts a business selling animal feed from a shed.  She has been a tenant of the Zeines since 2011 (T901, L19-20), currently paying rental of $150 per week.  The area of the site is said to be 33,000 square metres with Ms Pannett’s enterprise occupying approximately 40 per cent. (T828, L10‑13)  She operates from a shed, an office and a couple of extra sheds which she herself erected. (T810, L23‑28)

2In late 2017, Mr Vishal Sharma was driving to Gisborne from Tarneit and stopped at the service station which is part of the Toolern Vale General Store. (T69, L21‑30)  Inside the shop, he said he spoke to a lady whom he later knew to be Mrs Zeine’s daughter.  He inquired if the service station and store were for sale.  The inquiry therefore was “on spec”. (T70, L1-9)  As it turns out, the store and petrol station had been listed for sale with an estate agent. (T903, L10-12) According to Mr Sharma, his “intention was to buy and run the service station”. (T70, L21‑22)   There followed a series of negotiations during 2018.  Mr Sharma said, “those was [sic] just proposals, nothing was firm, … because their asking price was a bit high … I did my R&D and found out that this site was [for] sale for around 700,000, and then eventually time has gone and it was – the asking price was a little bit high.” (T70, L26‑31)

3According to Mr Sharma, he “proposed [to] them I think two year settlement and it was negotiated to one year later on in the negotiations.” (T70, L31‑T71, L2)  His proposal was:

“we’ll just lease out the property until the property is settled, and the vendor agreed to that.  Then in the meantime there was a concern regarding the tank reports and line reports.  That’s very important thing for any service station to have most recent tank report and line reports.  When the vendor been in a position where they don’t want to spend money on line and tank, … because the cost of this job was between 20 to 30 grand …” (T71, L3‑11)

4Mr Sharma said that he found himself confused and in need of guidance so he spoke to a Mr Kalra (a director and shareholder of the plaintiff company) T71, L12‑16).  By a text dated 3 July 2018, Mr Sharma asked Mrs Zeine for:

“a list of everything which comes in business and with property like number of fridges and if its a cold room how many doors or cold room … like solar panel and kitchen stove, counter other items.”  (CB 4175)

5He also asked for a vendor disclosure statement under s32 of the Sale of Land Act 1962. (CB 4176-7). A month later, Mrs Zeine supplied the “list of chattels” and stated as to price, that “Mr Zeine will not go below 950K”. (CB 4177-8)

6Negotiations continued with Mr Sharma visiting the store in July 2018. (CB 4179‑86)  Matters never reached the stage where Mr Sharma, or one of his companies, signed a contract or paid a deposit for purchase. (T75, L12‑16)  As at 6 August 2018, Mr Sharma said, “I was also eager to go ahead at that point, but still we were negotiating.  So that was regarding terms and conditions from my side.  It was still under negotiations [at] that time.”  (T75, L22-25)

7On 22 August 2018, by text Mr Sharma told Mrs Zeine that the company which would be purchasing the general store and petrol station was known as 1 Petroleum and Energy Pty Ltd “and/or nominee”.  He said this was a new company “so it may reflect on ASIC in a day or two”.  He said the purchaser’s solicitor would be Ms Heenatimulla of Victoria Mercantile Lawyers, the firm representing the plaintiff in this proceeding. (CB 4195)  By 20 September 2018, contracts had not been exchanged, however.  Mrs Zeine sent a text pressing Mr Sharma to “send the details to your solicitor so she can forward them to mine.  We want the soil test done ASAP and contract signed”  (CB 4198)

8The transaction or transactions then under discussion entailed an immediate purchase of the business by the nominated purchaser or an associated entity with a lease back pending an extended settlement on the real estate. (T77, L23-25)  Around this time, however, the Zeines sought a more straightforward transaction whereby both the business and the land were to be sold at the same time.  In Mr Sharma’s words, “Sold, settled and given to us same time, not as a tenant before.”  (T78, L5-7)  It was now 20 November 2018.

9By this time, however, Mr Sharma said he was having second thoughts about carrying out the purchase himself with one of his own companies.  He said:

“Well, my thought was the site has the potential and I want to go ahead, but with the type of work and I was - I had never developed a site where I have - I’ve never operated a site or bought a site where I have to get tanks changed and things like that because, though tanks were good, still the size of tanks need replacement because if the fuel deliveries are less, like 10,000 litres, 5,000 litres, 7,000-litre, then obviously it costs an operator more.”  (T78, L23-31)

10He said he consulted with Mr Kalra and Mr Deepinder Singh.  Mr Singh described himself as “in association” with Mr Kalra who, he said, “owns a group of companies” for which Mr Singh had worked since September 2015. (T237, L9-11)  Mr Kalra’s group was based in Sydney, New South Wales and Mr Sharma had worked for that group in New South Wales before moving to Melbourne in Victoria in January 2017 where he found the housing more affordable. (T237, L18-31)  The considerations which he had reflected upon and the advice that he obtained from Mr Kalra and Mr Singh led him ultimately to conclude that he should not proceed with the purchase himself.  Rather, Mr Kalra and his associate, Mr Singh, and their companies would be better placed to undertake a profitable venture with this site. (T81, L26 – T82, L7)

11On 18 October 2018, Mr Sharma sent an email to Mrs Zeine stating:

“After lots of efforts I have made my partners agreed to your condition of splitting the price.  I have to provided a new company name; ie AURA S KALRA PTY LTD (ACN: 620 347 220) ATF KKR KALRA FAMILY TRUST instead of 1 Petroleum and Energy Pty Ltd”. [sic]

12The email continued, advising that the real estate should be sold for $500,000 with $440,000 allocated for the sale of the business, making a total price of $940,000. He suggested a 10 percent deposit continuing, “and we will release section 27 [presumably the Sale of Land Act 1962] so that deposit amount can go into your bank account.” He suggested an 18 month settlement with the “lease back” option previously advised. The proposal he said was not “subject to finance”. (CB 4239-4241)

13Negotiations continued, this time with Mr Kalra’s company, the plaintiff in this proceeding as the proposed purchaser.  Mr Sharma sent an email to Mrs Zeine stating, “We received copy of contract from your solicitor and we find many of the things are not the way they were agreed before.”  Mr Sharma attached a lengthy email addressed to him from Mr Deepinder Singh dated 9 November 2018, providing a commentary and a number of objections and requests for amendment to the special conditions. (CB 896-898)  The solicitors acting for the Zeines and preparing the draft contracts were Buller McLeod.  That firm wrote a letter to Victoria Mercantile Lawyers dated 21 November 2018, dealing with a number of issues in the drafts and commenting:

“In relation to the produce area at the rear of the premises, the Purchasers will need to advise as to whether they require vacant possession of this area at settlement or for the Tenant to remain in possession of the premises.”  (CB 901)

14Victoria Mercantile responded in a letter dated 21 December 2018 (though mistakenly dated 21 November 2017) stating inter alia:

“We have been instructed that the Purchaser require vacant possession of the entire premises including the produce area at the settlement.”  (CB 903)

15A contract for the sale of the land was executed by the Zeines as vendor and by Mr Kalra and Mrs Raman Deep Kaur as directors of the purchaser, Aura S Kalra Pty Ltd (“Kalra”), and dated 22 December 2018 (CB 1111), though the Court Book materials would appear to indicate that the exchange of parts was not completed until 9 January 2019. (CB 973)  The particulars of sale referred to General Condition 1.1 and stated:

“At settlement the purchaser is entitled to vacant possession of the property unless the words ‘subject to lease’ appear in this box in which case refer to general condition 1.1”.

The box next to these words was blank. (CB 1113)

According to the particulars of sale “settlement (General Condition 10) was due on 20 December 2019”. (CB 1113)  General Condition 10 under the main heading “Money” and the sub-heading “Settlement” provided inter alia:

“10.1 At settlement:

(a) the purchaser must pay the balance; and

(b) the vendor must:

(i) do all things necessary to enable the purchaser to become the registered proprietor of the land; and

(ii) give either vacant possession or receipt of rents and profits in accordance with the particulars of sale.

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10.3 Settlement must be conducted between the hours of 10.00 a.m. and  4.00 p.m. unless the parties agree otherwise.”

(CB 1120)

16General Condition 1.1 provided:

“1.1The purchaser buys the property subject to:

(a)any encumbrances shown in the section 32 statement other than mortgages or caveats; and

(b)any reservations in the crown grant; and

(c)any lease referred to in the particulars of sale.”

(CB 1118)

17The first six special conditions were as follows:

1.Immediately upon the signing of this contract, the parties shall appoint a person to investigate the property and prepare an Environmental Protection Authority report in respect to the fuel tanks and surrounding soil. The cost of such report shall be paid in equal shares by the Purchaser and the Vendor.

2.If upon the issue of the report, the report contains advice that the soil or the tanks at the premises are subject to contamination, the Purchaser at its option may within seven (7) days from the issue of the report, end this contract by notice in writing to the Vendor and the deposit money shall be refunded to the Purchaser in full. If the Purchaser elects to proceed with the purchase, then the Purchaser shall be responsible for and be liable for all costs and expenses in corn plying with the EPA report and removing any contamination.

3.If upon the issue of the report, the report contains no advice that there is any contamination affecting either the soil or the tanks at the property then, upon the issue of the report, this Contract of Sale becomes unconditional and the Purchaser will proceed with the purchase.

4.The parties agree to keep the reports obtained in relation to the EPA absolutely confidential and shall not divulge or allow to be divulged any of the matters contained in those reports.

5.The Purchaser shall be entitled to submit plans to the municipal council for the development of the property and the Vendor agrees to assist the Purchaser in the submission of such plans but the cost and expense and all fees in relation thereto shall be paid by the Purchaser.

6.This contract is conditional upon and subject to a simultaneous settlement of a Contract of Sale of even date between the parties hereto for the sale of the business on the premises known as Toolern Vale General Store and it is agreed that both contracts be settled simultaneously. It is further agreed that a default under either contract shall be deemed to be a default under both contracts.

18There followed further special conditions dealing with matters such as electronic conveyancing, goods and services tax and so forth. (CB 1114-1116)

19With the sale contract entered into between the Zeines and a company controlled by Mr Kalra, and Mr Sharma having made a final determination not to purchase the site, Mr Sharma nevertheless continued in negotiations with the Zeines.  Mr Sharma said that he continued to be involved in the transaction as a “favour” to the Zeines and Mr Kalra and his companies. (T84, L27 – T85, L2)  He continued:

“… obviously I had somewhere hope that once Kevin [viz Mr Kalra] will renovate it, then myself and Deep [Singh] can operate the service station because Kevin is interstate.  So there are many opportunities we can expect from a guy like Kevin …”  (T85, L5-8)

20Mr Sharma said, “There was no assurance and I never expected because everything going to come when the site would be ready, renovated, ready to go.”  (ibid, L13-15)  Mr Sharma said that Mr Singh had been working with Mr Kalra and that Mr Kalra controlled service stations in a number of states, including Queensland. (ibid, L18‑22)  Mr Sharma had been a service station operator in New South Wales. (ibid, L27-28)

21Mr Sharma said he continued to play a role in negotiations with the Zeines at the request of Mr Singh.  He said Mr Singh lived in Clyde, which is to the south-east of Melbourne near Westernport Bay, whereas he lived in Tarneit on the western side of the metropolis and far closer to Toolern Vale. (T92, L19-22)  Mr Sharma said that from March to October 2019 he visited the Toolern Vale site “maybe two, three times”. (T95, 12-14)  He said he was generally accompanied by Mr Singh and discussions mostly did not extend beyond pleasantries. (ibid, L15-21)  The visits mostly dealt with council planning issues. (ibid, L22-23)  Mr Sharma said he also made contact with the tenant Simone having been given her telephone number by Mrs Zeine.  It was necessary to make contact with the tenant because Mr Sharma and Mr Singh, on behalf of the purchaser company, sought access to the whole of the site, including the feedstock area, in relation to a planning permit application. (T96, L1‑22)  He said, “We don’t want to walking into anybody’s place without letting them know.”  (ibid, L20-21)

22Mr Singh said that Mr Kalra instructed him to proceed with the soil test referred to in the special conditions of the contract.  A consultant, Neo Consulting, visited the site on 14 February 2019 together with Mr Singh. (T286, L24-29)  He said he did not speak to the Zeines or Ms Pannett (T287, L14-21)  A fortnight later, Mr Singh and Mr Kalra visited the site on 26 February 2019.  They spoke to Mrs Zeine.  The soil test was mentioned but the result was not available by that time.  They asked to carry out an inspection, in particular of the rear of the site.  Together with Mrs Zeine, they walked to the rear and according to Mr Singh:

“… while we were walking she mentioned that there is someone at the back, her name is Simone, and that is the first day I heard the word ‘Simone’, and she said, ‘She’s the one who’s running the - that animal, whatever, stock feed business, and we were a little bit like, you know, awkward as to should we go and - she said politely that, ‘Don’t worry, like, she knows’ - ‘she’s kind of aware that you guys are looking and all that. So it’s fine.’”  (T288, L6-14)

23Mr Singh said that Mrs Zeine:

“… is aware about two things. One is at that point the most important thing to us was the redevelopment and the council thing. So we already took permission in the contract to make visits and to apply to the council. So she said that, ‘She is aware about your’ - ‘why you are here, and you are taking over, and she will’ – like something to this impact, that, ‘She will leave before you start the work,’ or something like that.”  (T289, L2-9)

24The “she” to whom he referred was Ms Pannett.

25Mr Kalra said that he directed Mr Singh to investigate and modify the tanks and the linework, identifying contractors who would undertake that work. (T468, L6-8)  Mr Singh had advised that during his pre-contract inspection of the site he had noted that the bowsers were in a single line, which he said:

“… we call is one island station. So if you had, like, two lines, two rows, then we call it a two island station. So when it is a one line station it is a very - very limited scope because if there is one ute standing there filling up fuel you can’t go behind it and fill up fuel.”  (T251, L16-21)

26He also noted the tank size as being “quite small.  Ten thousand, 5,000 – exactly I don’t remember” (ibid, L30-31)  He continued:

“So basically they have to be taken apart, taken out, and upgraded to bigger tanks. Also, they are very old, as to our knowledge. They are steel tanks, old, and very prone to contamination, and the look of the site was such that we were very worried about, you know - as they say, every service station is contaminated …”  (T252, L3-9)

27After the February visit, Mr Singh said he texted his phone number to Ms Pannett. (T290, L28-30)

28On 1 March 2019, Mr Singh met a town planning consultant, Mr Daniel Bowden, at Mr Bowden’s offices in East Kew.  He had been referred to Mr Bowden by a friend. (T291, L4-6)  Mr Bowden advised that any planning process would require a survey report.  He referred Mr Singh to Mr Peter Farren. (ibid, L8-13)  On 11 or 12 March, Mr Singh met Mr Farren in his office, which he remembers as being in Footscray or Maribyrnong. (ibid, L15-17)  Mr Bowden visited the site on 13 March and advised Mr Singh to “go to the Melton Council [the responsible authority under the Planning and Environment Act 1987] to dig [up] more information.” (T293, L27-30) Mr Bowden said that another planning consultant, Mr Bill Jacobs, would be more appropriate to deal with these issues. Mr Jacobs had been mentioned by the surveyor, Mr Farren. (T293, L30 – T294, L5) Mr Singh apparently accompanied Mr Bowden on this visit. (T294, L7-11)

29Mr Singh said that 19 March 2019 was important because on:

“that day we had a big meeting with the Melton Council, with Mr Sean Tannery, and that was like our first proper meeting with the Council, and I attended, Kevin [that is Mr Kalra] attended it, Vishal [viz Mr Sharma] attended it and Bill Jacobs, the potential new town planner” attended.”  (T294, L18 – 22)

30The meeting was at the Melton Council Chambers.  He said the council officer:

“advised us that there had been a DA – like, a development approval application, earlier in 2016, by another party, like not related to Kevin or Vishal or anyone, totally another party back in 2016.”  (T295, L7-11)

31That application had been abandoned, but the officers advised Mr Singh and his party of the things that concerned them and which should be catered for in a planning permit application. (T295, L13-21)

32In particular, the council officers told them that a hut-shaped canopy should be included in the proposal, “to give it a village feeling rather than a modern city rectangular canopy.” (ibid, L23–24)  Mr Singh and his party were advised to seek copies of the earlier application under the Freedom of Information Act. (T295, L27 – T296, L3)  This information was provided “but only the actual designs were blackened out, that is the copyright issue because those we can only get directly from the said planner.”  (T296, L8-10)  The Freedom of Information material was provided on 25 March. (ibid, L19)

33Mr Singh said that he and Mr Sharma made a further visit to the site on 3 May 2019 by which time they had a survey report from Mr Farren.  He (Mr Singh) said they had observed that service station customers “when they fill up and when they go out, they’re using a little bit area from the neighbour’s or the council’s land.”  (T297, L10‑12)  They exchanged pleasantries with the Zeines but had no substantive discussions with them on 3 May. (T298, L9-13)  Mr Kalra was able to obtain the original drawings for the 2016-17 proposal from the author, Mr Dick Sinclair, who was based in Sydney. (T298, L21-27)  This application had been made apparently on behalf of a previous prospective buyer.  The application was abandoned in the face of objections from neighbouring property owners and occupiers, according to Mrs Zeine, “about one hundred.”  (T902, L12-29)

34Meanwhile, the contamination report became available showing no contamination on the site.  As a result and in accordance with the relevant special condition, the contract of sale became unconditional and the 10 percent deposit paid on behalf of the purchaser was released. (T469; CB 1129)  Mr Kalra decided that Mr Jacobs’ fees were too expensive and Mr Kalra, who had another planner doing work for him, requested that planner to draw up a plan for him. (T474, L1-11)

35Mr Kalra recalled a further visit to the site in September 2019, but could not recall any substantive discussions. (T475, L9-16)  As settlement was scheduled for December, Mr Kalra said he began investigations as to who would provide fuel supplies following settlement of the purchase. (T475, L24‑27)  Mr Singh had been involved in an accident on 5 July 2019 and his efforts on the town planning front were suspended for some months. (T351)  In the event, by the proposed settlement date in December 2019, no permit application had been lodged relative to the purchaser company’s contemplated redevelopment. (T348, L2-5)

36Around June 2019, a Mr Peter Cottingham approached Mrs Zeine, asking to be allowed to take up residence in a house on the site.  Mr Cottingham worked part time for Ms Pannett at the feedstore business. (T921-2)

37On 10 December 2019, Messrs Singh and Sharma attended the site for what was intended to be a final pre-settlement inspection (Agreed Chronology). (T97, L11‑17)  Mr Sharma said that prior to that inspection, he received a telephone call from Mr Sam Zeine, who is the vendors’ son.  According to Mr Sharma, Mr Zeine Jnr said, “This site is no good for you and you shouldn’t take it and we are happy to give you a little bit of your deposit back.” (T98, L3-9)  Mr Sharma said he replied that the Zeines should speak to their solicitor about this. (ibid, L12-13)

38Mr Sharma said on earlier visits to the site there was no fence around the stockfeed business, but by 10 December 2019 Ms Pannett had:

“put a fence at the back and made her boundary covering almost half of the back of the site and [the] scope of business was increased.  Before she was just operating little bit.  She might be – when I visited her first might not have that much stock.  But now on 10 December her business had enough stock, good stock.”  (T99, L3-10)

39Mr Sharma said he also noticed that “there is a guy living in the house.”  (ibid, L12)  He said Mr Zeine and his son, Sam, told him that the individual was a tenant. (ibid, L14-18)  Presumably this was Mr Cottingham.  Mr Sharma said that Mr Zeine continued, saying: “We asked you and you said, ‘Yes, you can keep a tenant.’”  Mr Sharma said he denied this. (ibid, L21-25)  Mr Sharma said that on his understanding, the house had no occupancy certificate, it was not liveable and contained asbestos. (ibid, L26-30)  Mr Sharma said he reported these things to Mr Kalra. (T100, L4)

40According to Mr Sharma, Mr Sam Zeine also asserted that those representing the purchaser had told his family that they could retain the tenant. (ibid, L16-20)  Mr Sharma said he was concerned as to whether settlement would proceed:

“The way Sam told me, Sam hasn’t mentioned me that they have given a notice to a tenant.  [presumably a notice to quit]  So if the settlement is on 20^th and tenants is there on 10^th and there has been no date of moving out decided, so obviously it’s a confusion …” (ibid, L26‑30)

41Mr Sharma said:

“I asked that it was supposed to be vacant, how come, like – it’s just something I never expected that someone would be living in that property even like that, an empty house.”  (T101, L8-11)

42Mr Sharma said that it was his job simply to inform Mr Kalra (ibid, L13-14) and the matter could be dealt with by the solicitors.  Mr Sharma said he was assured that the rubbish would be removed. (ibid, L29-31)  Mr Singh said that he was concerned because he saw no evidence that Ms Pannett was moving out. (T313, L7-13)  According to Mr Singh, Mr Zeine Snr said of Ms Pannett, “She will move out soon.  She’s looking for a place.  She will move out soon.”  (T313, L21-22)  Mr Singh was unsatisfied with this response because “the words didn’t meet the action at that time.”  (ibid, L22-24)  He then spoke to Ms Pannett. (ibid, L28)  She replied, “I’m exercising my rights as a tenant.”  He said she referred to “VCAT” and “Ombudsman”. (T314, L2-4)

43Mr Singh said he “called”, presumably telephoned, Mr Kalra reporting what had happened and Mr Kalra asked him to advise “our solicitor”. (ibid, L5-15)  According to Mr Sam Zeine, Mr Sharma or Mr Singh asked Ms Pannett “Look, if we want you out by settlement date is that a possibility because that’s what we’re after.”  (T971, L27-29)  Mr Sam Zeine said:

“We thought what’s going here?  For a whole year, year and a half, however long it had been, they wanted to keep Simone because it was in their benefit as they were always mentioning.” (T972, L7-10)

44Messrs Singh and Sharma, according to Mr Sam Zeine’s recollections, said to Ms Pannett, “If we want you out, is it possible for you to get out by then?” (viz settlement date).  He said that he and his father asked what had changed, saying the purchaser wanted to keep Ms Pannett.  He and his father asked Messrs Sharma and Singh, “Can you give them a couple of extra months after settlement just to sort themselves out?” and eventually the purchasers’ representatives “pretty much agreed to give Simone a month-by-month basis, to say, ‘If we want you out by the end of the month we can do that, or if we want to keep you on, we can keep you on’.”  (T972, L24  – T973, L19)  This would entail Ms Pannett agreeing to vacate on one month’s notice. (ibid, L20-23)  Mr Sam Zeine said he understood the same answer was given with respect to Mr Cottingham, (T974) though there was no suggestion that he was part of any conversation with Mr Sharma and Mr Singh.

45Ms Pannett had a slightly different recollection again.  She said on 10 December two individuals whom she had met before called.  One of them was polite, the other one less so, rather impatient and in a hurry.  She said they asked her, “We need to know how much you’re prepared to pay to stay here.”  She said she was “shell shocked”.  Her interlocutor continued, “Well, what are you going to pay to stay here?  What you pay is a pittance, we would prefer to bulldoze the place.”  (T822)

46On 4 October 2019 the plaintiff’s solicitor had sent an email to the defendants’ solicitor, Buller McLeod, stating:

“Please note that we have been instructed to seek your clients’ consent to settlement to be postponed to 31st of January 2020, due to the holiday season.  We have been instructed that our client will be will be overseas for his two nephews’ weddings as it is culturally the most auspicious wedding season in India, along with the family.  We seek an extension without any penalty interest and/ or other charges applicable.

Further we have been advised that they appreciate that the offices, bankers and solicitors might be on a break as well.  Therefore, our client suggests that end of January will be a more suitable and appropriate time for all parties.” (CB 1279)

47That request was repeated by an email of 19 November 2019 from the solicitors, stating:

“Please note that we have been instructed that our client is arranging finance for the settlement and have already ordered a valuation of the property.  However, the lender has advised that due to Christmas break there will be a delay in issuing of the formal approval of finance.

Therefore, our client seek your clients’ consent to settlement date to be extended until 31^st January 2020 without any penalty interest and/ or other charges applicable.” (CB 1275)

48Postponement of settlement was raised again in an email of 26 November 2019 from Mr Singh to the plaintiff’s solicitor. (CB 1282−3)

49Teetee Ades, a conveyancing clerk at Buller McLeod, responded by email of 20 November 2019 to the plaintiff’s solicitor, agreeing to a postponement of settlement but advising that the vendors required “penalty interest be paid in accordance with the terms of the contracts”. (CB 1293)

50The purchaser’s solicitor returned to this theme on 27 November 2019, advising:

“Please note that we have been instructed that our clients are attending to everything in their capacity in arranging finance for the settlement.  However, due to holiday, season is nearing there may be a delay in obtaining the formal approval of finance.  Please note that our client is genuine Purchaser who is willing to complete the settlement on the due date which is 20/12/2019.

However, if for any reason that the Purchaser has no control on, where there will be a delay in completing the settlement our clients seek again that your clients would consider granting an extension of the settlement date without any penalty interest.  If your client would like to grant a penalty free settlement date extension in January 2020 we all could arrange the settlement accordingly after the holiday season.” (CB 1302)

51During November this was therefore the third request by the plaintiff’s solicitors for an extension of settlement to the end of January. (T411, L25)

52Ultimately, however, no extension without penalty was agreed to, and settlement was scheduled for 19 December 2019.

53On 26 November 2019 a valuer instructed by National Australia Bank called to carry out a valuation. (CB 1282)  Mr Singh told the plaintiff’s solicitor that:

“The owner was very helpful in letting us through the site and was supportive to provide any available information.” (Ibid)

54The plaintiff’s solicitor had, by email dated 24 October 2019, requested provision of financial documentation for a period of two years for provision to the valuer. (CB 1277)

55By letter of offer dated 18 December 2019, National Australia Bank offered the plaintiff company, as trustee of the relevant trust, three facilities referred to as “business market loans”: respectively for $564,000 and $595,000, and a third for $1,036,000.  The letter of offer included detailed provisions and documentation for execution. (CB 1439−1546)

56Following the inspection on 10 December, and perhaps as a result of advices and instructions by Mr Singh, the plaintiff’s solicitors wrote to Buller McLeod by email of 11 December 2019 requesting a series of administrative or “systems” items, apparently necessary as part of the PEXA settlement scheme which has now been adopted by the banks and the Law Institute in lieu of the traditional manual settlements using bank cheques.  Most notably, the email requested a “PEXA invitation” and an “SRO DOL invitation”.  In addition, there were some eight items relative to the state of the site which were required.  The first of those stated:

“Purchaser require vacant possession of the property as per Contract of Sale of Real Estate dated 22/12/2018.  Please advise our office that the property is in vacant procession [sic] to complete the settlement.”

57There were references to the removal of rubbish, emptying of the septic tank, grass cutting and so forth.  There was also reference to a stocktake. (CB 1316−17)

58On 13 December the purchaser’s solicitors sent a follow-up, stating:

“WE await your urgent response to the email ... on the 11/12/2019 enabling us to arrange settlement for 19/12/2019.”

59The 13^th was a Friday.  The following Monday, 16 December, the conveyancing clerk previously managing the transaction for the vendor advised by email:

“Peter Buller is dealing with the file and I have forwarded all emails to him.” (CB 1330)

60Mr Buller responded, commenting first on various adjustment issues.  As to the staff of the business, Mr Buller stated that there were no employment agreements (scil no written agreements) relative to staff employed, “and they have finished their employment with the vendor at settlement.”  He said it was a matter for the purchaser as to whether those staff members should be re‑employed.  He said:

“We are also instructed that our clients have cleaned the property, which we understand is not to the satisfaction of the Purchasers.” (CB 1342)

61The plaintiff’s solicitor responded the same afternoon, seeking a response as to other matters in the email of 11 December 2019.  It was also stated that:

“We have accepted your PEXA invitation and await to receive the SRO DOL Form as well other requests ...” (CB 1354)

62Later again the same afternoon the plaintiff’s solicitors sent an email to Mr Buller enquiring:

“... could you please advise if the property is in vacant possession for our clients to take vacant possession of the property at settlement.”

63She also pressed for the “SRO DOL” invitation. (CB 1365)

64The following afternoon Mr Buller sent an email stating:

“We are waiting to hear back from our clients in relation to same.

Please forward Statement of Adjustments in readiness of settlement – in order for us to calculate GST.”

65This email was sent in response to an email a couple of days earlier, once again raising the issue of vacant possession.  Apparently, the solicitors had a telephone conversation later on Tuesday, 17 December.  The purchaser’s solicitor emailed Mr Buller the following afternoon, stating inter alia:

“We refer to the telephone conversation on the 17/12/2019 and confirm that you have advised that the above property will not be in vacant possession on the scheduled settlement date, ... therefore, you will seek further instructions and will be advising our office.” (CB 1435)

66At 10.42am the following day, 19 December, the scheduled settlement date, Mr Buller sent an email to the plaintiff’s solicitor saying:

“In relation to the Tenant’s [sic] at the property, we confirm that there are two (2) Tenants occupying both the dwelling and the produce store at the rear.

Neither has a Lease.

Our clients have advised that, there is an agreement reached between the parties on the 10 December 2019, that the Purchasers would allow the Tenants to remain at the premises following settlement.” (CB 1553)

67Mr Singh sent an email to the purchaser’s solicitor saying:

“We can’t settle unless we get vacant possession.” (CB 1555)

68On 15 December 2019, Mr Sharma paid a further visit to the Toolern Vale site.  He was in company with his friend, Mr Pravin Kumar Bhargav.  According to Mr Bhargav, he and Mr Sharma:

“went to Ballarat for personal things, personal business purpose, and when we were returning from Ballarat Vishal [Sharma] got a call and he said, ‘You know, can we go to the site which I need to inspect on behalf of Kalra Group’, I said, ‘I don’t mind’ because my car was parked at (indistinct) station at that time.” (T661, L9-15)

69The following day, Mr Sharma sent an email to Mr Singh and Mr Kalra recording that he had visited Toolern Vale “last Sunday” (viz 15 December 219) in company with his friend, Mr Bhargav, whom he described as a director of ICM College.  According to the email, “Owner of the property Gassan (Gary) and his son, Samuel (Sam) tried to convince me that this site is not good and we should not take this site.” (CB 97)  The email continued, reporting that Mr Sam Zeine had, on 16 December, that is the following day, “called me 2-3 times and advise [sic] that we should cancel this contract as he has been working on site from last year and this site is not good etc, etc.” (Ibid)  Mr Sharma said he told Mr Zeine Jnr that he explained that “we have spend lot of money [sic] and time on this site and we go the way contracts should be.  We have already recruited 2 full time employees.”  He said, “we should let our solicitors know about their intentions as Sam was not letting me go over the phone.” (Ibid)  He concluded by saying, “site is still same dirty and they have tenants in place”.

70Mr Bhargav remembered Mr Sharma:

“first … spoke with Sam because Gary was busy, and Sam and Gary both seated with us … Sam and Gary was [sic] insisting that … this property would not be good for you.” (T661, L19-25)

71Mr Bhargav also said:

“the next day I was again with Vishal (Sharma) and he received a call a few times, I exactly don’t remember, but two or three times.  He received a call from Sam, and again, he was insisting about not to go ahead with the purchase, you know.” (T664, L9-13)

72Mr Bhargav said, “And Sam said in three different phone calls, ‘This isn’t a good deal for you, you shouldn’t go ahead with it’.” (ibid, L29-31)  Mr Sam Zeine said that on 15 December, when Mr Bhargav accompanied Mr Sharma, Mr Bhargav was “a bit stand-offish, didn’t really want to chat with us”. (T977, L30-31).

73Mr Sam Zeine’s account of the meeting had his father, Ghassan, the first defendant, concerned that settlement would not proceed and seeking assurances that it would, with Mr Sharma providing those assurances.  The principal discussion related to the removal of rubbish from the site. (T978-9)  He said he had attempted, on 16 December, to speak to Mr Sharma on a number of occasions, leaving texts, but ultimately the messages/texts were not returned. (T981-2)

74The National Australia Bank security documents were signed on 27 December 2019. (CB 4245–4283)

75On 10 January 2020 the purchaser’s solicitor sent an email to Messrs Sharma and Singh stating:

“... we have not received any response from vendor’s solicitors as to if the property is now vacant in readiness for the settlement.” (CB 1564)

76Buller McLeod ceased acting for the Zeines.  As a result, the plaintiff’s solicitors, Victoria Mercantile Lawyers, wrote to the Zeines drawing attention to the lack of an offer of vacant possession of the sale premises and asserting, therefore, that the Zeines were in breach of the sale contract.  They sought an urgent indication as to when vacant possession would be available to enable settlement to take place.  The Zeines then appointed RJ Legal to act for them.

77In the course of February 2020 an exchange of emails, expressed to be without prejudice, or without prejudice save as to costs, took place.  On 5 March 2020 the plaintiff’s solicitors asserted that their client was “at all material times ready to settle and is still willing to fulfil its obligations ...”  They pressed for a settlement date. (CB 1632)

78By a letter dated 23 March 2020, RJ Legal set out a 17‑point history of the transaction as they saw it.  Most significantly, they stated:

“At about the time of execution of the Land Contract, the Vendors disclosed to the Purchaser that there was a commercial tenant operating a business at the rear of the Property, paying rent to the Vendors on a month-to-month basis, and that there was no formal lease documentation with respect to that arrangement.  At that time, the representatives of the Purchaser said that they would consider a variation to this provision at a later date, depending on the progress of the Purchaser’s plans relating to its proposed development of the Property.” (CB 1650−1652)

79The following day, RJ Legal wrote to Victoria Mercantile Lawyers enclosing a “Notice of Default and Rescission in relation to the Land Contract; and Notice of Default in relation to the Business Contract”.  They noted an earlier demand for $2,666.31 said to be payable under General Condition 24 of the contract.  They also claimed default interest at the rate of 12 percent per annum from 20 December 2019 until 5 March 2020 in the sum of $11,365.51. (CB 1656–1658)

80The following day, Victoria Mercantile Lawyers on behalf of the plaintiff/responded, denying their client was in default and asserting that the default lay with the vendors.

81The following day, Mr Jurdi of RJ Legal responded to the various points made by Victoria Mercantile Lawyers and called for steps to be taken to take the matter through to settlement. (CB 1673−4)

82Victoria Mercantile Lawyers wrote a letter dated 27 March 2020 enclosing, by way of service, the writ which commenced this proceeding, requesting RJ Legal to file and serve an appearance on behalf of the defendant. (CB 1682)

83RJ Legal responded by letter dated 31 March 2020 acknowledging receipt of the writ and stating:

“Our clients are ready, willing and able to settle on 3 April 2020, provided that your client remedies the breaches referred to in the Notices of Default in accordance with those notices, namely by paying the interest and compensation set out in those notices.  Could you please confirm that your clients will be paying those amounts at settlement.” (CB 1692)

84RJ Legal sent a further letter date 3 April 2020 repeating the proposal for settlement in the letter of 31 March, but limiting the penalty interest payable to interest accruing to 3 February 2020. (CB 1711)

85A response was transmitted the same day by Victoria Mercantile Lawyers stating that the purchaser was ready, willing and able to settle, but demanding the vendors pay the purchaser’s legal costs.  The letter recited what the purchaser saw as the history of the matter, asserting that the default had been made on the part of the vendors and not by the purchaser. (CB 1719–1721)

86The matter was listed for an interlocutory injunction hearing before Sifris J (as he then was).  His associate sent an email on 3 April urging the parties to resolve the matter because the amount in dispute was small, and the costs would be “out of all proportion” to the amount in dispute. (CB 1723)  According to the transcript of the hearing before his Honour (CB 192), his Honour urged the parties to settle on the basis of “parking” the issue of penalty interest and proceeding to settlement, leaving that matter to be resolved afterwards.

87On 6 April 2020 his Honour granted an interlocutory injunction upon the usual undertaking, restraining the Zeines from exercising contractual or other rights pursuant to the default notices served, selling or disposing of the business, or selling or disposing of the property, pending the hearing and determination of the proceeding or further order.

88The proceeding, commenced in the Supreme Court, has been transferred to this Court.

This proceeding

Plaintiff’s claim

89By its Amended Statement of Claim, the plaintiff referred to the two contracts for the sale of the business and the sale of the real estate at Toolern Vale dated 22 December 2018 said to contemplate settlement for both contracts on 20 December 2019, with the defendants, Mr and Mrs Zeine, giving vacant possession of the property and the business to the plaintiff purchaser.  It was said that the Zeines, in breach of the two agreements, failed to give possession of the business assets and vacant possession of the real estate.  It was said that the Zeines have wrongfully failed and refused to complete the contracts, as a result of which the plaintiff company has suffered loss and damage by way of loss of trade and loss of opportunity.

90The relief sought was primarily for specific performance of the two contracts; alternatively, damages by reason of the delay of performance for loss of trade in the sum of $141,347 per annum, or $11,779 monthly, exclusive of Goods and Services Tax, “and any future loss being the difference of vacant possession value and the value as impacted by either lease”.  Alternatively, if specific performance were not ordered, there was a claim for “lost opportunity damages at common law and or equity for an order of damages in lieu of specific performance”, the plaintiff’s loss being $1,269,293, being the vacant possession value plus profit with risk forgone by not being able to proceed with the redevelopment.  There were also claims for costs, interest, and “consequential special accounts, directions and enquiries”. (CB 486)

Defendants’ defence and counterclaim

91By their Further Amended Defence and Counterclaim, the defendants do not distinctly admit the contracts as alleged in the plaintiff’s claim, but alleged the existence of contracts of the same date with their terms more elaborately pleaded.  The defendants said that:

“In about 2018 and 2019, the [plaintiff] represented that it did not require Pannett to vacate the Property prior to settlement.”

92A similar representation was alleged relative to Mr Peter Cottingham.  It was said that the defendants relied upon these representations permitting the tenants to remain in possession.

93Then it was said the plaintiff insisted on performance of the vacant possession term which it was said had been waived.  In the circumstances, the defendants contended the requirement for vacant possession had been waived and the plaintiff was not entitled to vacant possession at settlement, it was unconscionable for the plaintiff to contend otherwise, and it was estopped from so doing.

94The defendants said that the purchaser had failed to mitigate any loss it might be found to have suffered because it did not take up opportunities to settle with the payment of a total sum of $2,665.84; nor did it take the opportunity of paying the amount claimed into trust to abide a subsequent determination.

95Even if that were not true, as a matter of discretion it was said specific performance should be declined.

96By way of Counterclaim it was said that in failing to settle the two contracts the plaintiff company was in default, as a result of which the defendants had suffered loss and damage, in particular in not having available the proceeds of the sale of the Toolern Vale property to meet liabilities under contracts to purchase two rural properties. (CB 4227–4234)

Reply

97By its Amended Reply, the plaintiff denied that it or its servants or agents made the representations relative to tenancies at the Toolern Vale property, and asserted in particular that they were not made aware of the residential tenancy with Mr Cottingham.  It was said the plaintiff company, its servants, agents or solicitor “made oral and written representations that the vacant possession was a term of the contract of the sale and vacant possession was required at settlement”.   The plaintiff denied any waiver, and said that in the circumstances it was not obliged to make any payment, as the defendants were unable to comply with an essential condition of the sale contract for the land by granting vacant possession on 19 December 2019 or thereafter.  Likewise with the sale of business agreement.

98As to the allegation of failure to mitigate, it was said that the plaintiff could not mitigate its damage by “settling with the tenant Pannett” because she was a:

“retail business tenant under the Retail Leases Act 2003 [and] section 21 requires a tenant with occupancy rights to a five-year written lease along with the section 26 renewal of lease disclosure.”

99As to Mr Cottingham, it was said that the Residential Tenancies Act 1997 prescribed “a procedure to terminate a residential tenant that was onerous.”

100It was said that the order for specific performance should be made because “the land and business cannot be replicated elsewhere, as the land and business is [sic] unique”.

101The plaintiff denied that it was in breach of the contract.  It said the default notices were “null and void”.  Finally, it was said:

“If the Defendants took the risk of making the purchase of the two Maryborough properties based upon the contracts of sale for which they had a contractual obligation to comply with the conditions of the sale agreements.  In breaching those conditions, the Defendants have no legal right of damages from the Plaintiff.  In the alternative the damages claimed are remote and the contracts were not known to the Plaintiff.” (CB 4235–4238)

Conclusions

Waiver and estoppel

102Whilst many issues divided the parties, and numerous complex issues of fact and law were ventilated, the crux of the dispute is the contention on the part of the defendants that, by reason of two representations referred to in the Defence as the “First Representation” and the “Second Representation”, the defendant vendors under the sale contract for the Toolern Vale property were dispensed from the obligation to provide “vacant possession” of the Toolern Vale property at the proposed settlement.  This was in the sense that the property could be transferred with the two tenants, Ms Pannett and Mr Cottingham, in occupation of their respective portions of the premises and in accordance with their leases. (CB 4230‑31)

103According to the Defence, Kalra’s attempted “resiling” from the representation meant that the Zeines “were unable to comply with the vacant possession term in time to settle the contracts by 19 December 2019”.  It is said that this constituted a waiver by Kalra of the “vacant possession” requirement, or estopped Kalra insisting on vacant possession, or both.

104In his work on the Law of Contract, Professor Carter says of “waiver” and “estoppel”:

“The precise interrelationship of these doctrines is uncertain … The law is extremely complex, and not characterised by a high degree of coherence or consistency, particularly in relation to the concept of ‘waiver’.  The looseness with which the term is used is notorious.” (Carter on Contract [07-180] 16,247, service 43)

105The professor distinguishes two main senses in which the word “waiver” is used, one in which it is effectively equivalent to the doctrine of election, viz a choice between two inconsistent rights in which the exercise of one right necessarily forever excludes the enjoyment of the other [07-190].  Second, a sense in which the word “waiver” is equivalent to estoppel [07-200].  According to the professor:

“…whereas it is not an essential element of waiver in the sense of election that a party should have changed his or her position in reliance on what the other party has said or done, it is essential for waiver in the sense of estoppel … Again, although there is no requirement of unconscionability in the context of election, no estoppel will arise in the absence of unconscionable conduct.” ([07-200], 16,272-3) (emphasis added)

106In essence, this means that a waiver in a context such as the present will be effective to modify the other party to the contract’s obligation if the representee has changed his, her or its position in a detrimental manner such that it would be unconscionable for the representor to maintain his, her or its original rights under the contract.  Consequently prior to the date set aside for closing submissions, my associate asked the parties to deal with certain specific questions, amongst which was “What detriment is relied upon to render it inequitable for the [purchaser] to go back on the waiver of the requirement of vacant possession said to have been made by the [purchaser]?”

107In supplementary written submissions, Mr Wirth on behalf of the Zeines, responded “the doctrine of waiver does not require proof of detriment”. (Paragraph 3)  The supplementary written submissions cited no authority for this proposition.  When I pressed him on the point, he said that the authority was to be found in the case of STY (Afforestation) Pty Ltd v Atkinson [2006] VSCA 283 [22] referred to at paragraph 99 of his principal closing submissions. This was a paragraph from the judgment of Maxwell P, who presided in the Court of Appeal consisting of himself, Nettle and Redlich JJA. The paragraph principally consisted of a quotation from the judgment of Chernov JA in Zhang and Philip Jones Pty Ltd v Shanghai Wool and Jute Textile Co Limited [2006] VSCA 133 [14], where his Honour described waiver as constituted “by the deliberate, intentional and unequivocal release or abandonment of the right that is later sought to be enforced”.

108This statement of principle is a general description of the doctrine of waiver.  It does not purport to be an exhaustive statement of the requirements for its establishment.  The STY case dealt with a contention on the part of the appellant that a statement to the effect that one party had no present intention of exercise in the future of a particular contractual right constituted either an irrevocable election between inconsistent rights or a waiver of that contractual right.

109Maxwell P rejected this contention, saying that a statement or representation along these lines necessarily carried with it:

“the possibility of a later change of mind.  All the maker of the statement can do is state truthfully what his or her present intention is.  No one can know with certainty what his or her future actions may be.” [2]

110It follows that I reject the contention that STY establishes or supports the proposition for which Mr Wirth cited it.

111In Zhang’s case, Chernov JA presiding in the Court of Appeal consisting of himself and Ashley JA and Bongiorno AJA, considered a contention that a party had waived its right to have the relevant dispute referred to arbitration.  According to his Honour:

“it was not open to [the primary judge] on the evidence to conclude that the appellants waived their right to arbitration in the sense of having intentionally and unequivocally abandoned it.” [16]

The other two judges concurred.

112Again, this is not a case which sought exhaustively to state the requirements for a waiver in the nature of an estoppel.  Rather, it represented a rejection of the operation of the doctrine for failure to prove its primary feature.  Again, this authority does not support Mr Wirth’s contention.

113In the context of the present dispute, the difference between “waiver” and “estoppel” constitutes a distinction without a difference.

114Paragraph 100 of Mr Wirth’s principal submissions refers to a decision of the Western Australian Court of Appeal in Badat v DTZ Australia (WA) Pty Ltd [2008] WASCA 83 [141]-[148], where, he said, Le Miere AJA surveyed the authorities and said that waiver operates as a stand-alone doctrine, “if only in limited circumstances”.

115Without tracing the elaborate examination of authority which the learned judge undertook, the “limited sense” in which a separate doctrine of waiver existed seemed to pertain to a party’s entitlement not to insist on compliance with a requirement inserted solely for that party’s own benefit, which is not the present case.

116In footnote 131, subjoined to paragraph 100 of his principal submissions, Mr Wirth stated “See also Agricultural and Rural Finance Pty Ltd v Gardiner (2008) 238 CLR 570, 586-8 [50]-[55] (Gummow, Hayne and Kiefel JJ) for the difficulties of the supposed stand-alone doctrine”.

117In the present case, I reiterate there is no place for a “stand-alone” doctrine of waiver.

118At paragraph 102 of his principal submissions, Mr Wirth said, “The principles of equitable (or, more specifically, promissory) estoppel are well understood”.  He footnoted a reference to the well-known analysis of these matters by Brennan J (as he then was) in Waltons Stores (Interstate) Ltd v Maher (1988) 164 CLR 387, 428-9. In that well-known and oft cited passage, his Honour said:

“In my opinion, to establish an equitable estoppel, it is necessary for a plaintiff to prove that (1) the plaintiff assumed that a particular legal relationship then existed between the plaintiff and the defendant or expected that a particular legal relationship would exist between them and, in the latter case, that the defendant would not be free to withdraw from the expected legal relationship; (2) the defendant has induced the plaintiff to adopt that assumption or expectation; (3) the plaintiff acts or abstains from acting in reliance on the assumption or expectation; (4) the defendant knew or intended him to do so; (5) the plaintiff’s action or inaction will occasion detriment if the assumption or expectation is not fulfilled; and (6) the defendant has failed to act to avoid that detriment whether by fulfilling the assumption or expectation or otherwise. For the purposes of the second element, a defendant who has not actively induced the plaintiff to adopt an assumption or expectation will nevertheless be held to have done so if the assumption or expectation can be fulfilled only by a transfer of the defendant’s property, a diminution of his rights or an increase in his obligations and he, knowing that the plaintiff’s reliance on the assumption or expectation may cause detriment to the plaintiff if it is not fulfilled, fails to deny to the plaintiff the correctness of the assumption or expectation on which the plaintiff is conducting his affairs.”

119Mr Wirth said these principles applied to the present dispute in the following manner:

“…the Vendors were put in a position whereby they were prima facie in breach of contract at 19 December 2019, because they were unable to provide vacant possession.  The purchaser (wrongly) relied on this as sufficient to extend time for settlement to a time of its convenience.  Assuming that the purchaser was correct, this had the following consequences:

(a)   the Vendors were not entitled to receipt of the purchase price on 19 December 2019 and thus lost the benefit of having that money from that date or the right to recover interest from the Purchaser;

(b)   the Vendors lost the right to recover compensation from the Purchaser for other reasonably foreseeable losses in accordance with GC 24 [of the land sale contract]; and

(c)   the Vendors were unable to have the long-overdue holiday away from the Business.” (Supplementary Submissions paragraph 27)

120The analysis of the waiver/estoppel issue must begin with the question as to whether the “Representations” were in fact made.  The defendants say they were.  The plaintiff denies this.

121In an email of 18 August 2018, Mr Sharma was describing to Ms Zeine the proposal whereby Mr Kalra’s interests would initially rent the service station business from the Zeines before, at a later stage, purchasing the real estate.  He referred to a monthly rental of $3,000 “including GST”, referred to other terms, and described what he said was the “final offer in regards to the sale of freeholding business …”.  The email concluded:

“Rest of the terms will remain as per discussion.  You can rent the shed at the back and keep the rent from it but the house will remain part of shop.” (CB 2602)

122Mrs Zeine said this meant “we can keep Simone [Pannett] on that one and – yeah.” (T912, L25-26)

123She said in her evidence-in-chief that she recalled talking with Mr Sharma about Ms Pannett “multiple times”. (Ibid, L27-28)  She agreed, however, that the regime referred to in the email was intended to operate only until the sale of land was completed. (T913, L9-10)  Therefore, this email said nothing as to what would occur after completion of the sale of land. (Ibid, L1-12)

124Mrs Zeine, when taken to the Sale of Real Estate Contract which she had signed, and its provisions to vacant possession, said: “We didn’t pay attention to that, I actually don’t know what it meant”. (T919, L27-29)

125Mr Cottingham commenced occupying the house located on the property in June 2019, but his occupation was not perceived as causing any difficulty because, according to Mrs Zeine, Mr Cottingham told her “he could pick up and leave when he needed to”. (T922, L3-10).  Mrs Zeine said, “I mentioned it to Vishal [Sharma], he was at the shop one day and we had just given the house to rent to Peter [Cottingham], and I said to him that we’ve got a renter just until settlement.  He knows he needs to leave then.” (Ibid, L12-16)

126Mr Cottingham, she said, was no longer in occupation.  He was able to vacate within “probably … a week maybe”. (T923, L6-7)  In fact, he had just departed without notice. (Ibid, L11)  Presumably this was an example of the proverbial “midnight flit”, because the Zeines had been trying to contact him because he “owes us a bit of rent and he had a few things still left at the property”. (Ibid, L19-20)

127Mr Wirth took Mrs Zeine, in her evidence-in-chief, through a variety of texts and emails which seemed to be scattered throughout the 10-volume court book, in some cases thousands of pages apart, covering the months of 2018 and the negotiations which had been carried on between the Zeines, and Mr Sharma and Mr Singh on behalf of the plaintiff company.  The texts and emails referred to various meetings and visits which took place over the latter months of 2018 and thereafter. 

128Mr Wirth then asked, “talking about the sale and all the rest of it, do any particular topics of discussion stick [scil spring] to mind?”  Mrs Zeine replied:

“Look, whenever we had a meeting with them or they came to the shop we were always mentioning Simone [Pannett] and her stay there.  So – and they would always say to us, ‘it’s not a problem’.” (T926, L21-24)

129I asked her how many of those conversations dealing with Ms Pannett occurred.  Mrs Zeine said, “quite a few”, more than three or four but not as many as a dozen. (Ibid, L28-31)  I then asked follow-up questions:

“So you have told us already that those representing the purchaser were quite definite that they wanted her to stay?---Yes.

So if it was just as straightforward as that it wouldn’t have needed so many discussions, would it?---Look, we brought it up just to, you know, just to make sure that she’s - - -

You got the right answer before?---Yes.

But just to make sure they hadn’t changed their mind you asked them again, is that the way it was?---Yes.

All right. But nothing in writing?---Nothing in writing, no, unfortunately.” (T927, L6-17)

130The Zeines’ son, Mr Sam Zeine, was cross-examined by Mr Gibson about discussions said to have occurred relative to Ms Pannett’s situation over the same period.  He said, “They knew she was there and up until that date [viz 10 December 2019] they always confirmed they wanted to keep her”. (T992, L9-10)

131Mr Gibson sought to cross-examine Mr Zeine Jnr about these discussions where those representing the plaintiff were said to have repeatedly acknowledged that Ms Pannett would be entitled to remain in possession of her tenanted area up until settlement and, therefore, Mr Zeine Jnr was unable to give any specifics as to the discussion of this issue during the course of the many site visits and discussions that took place. (T992-994)  In effect, he was unable to give any “chapter and verse” aside from these generalisations.  None of the defendants’ witnesses was able to identify a particular occasion when the “Representations” were made before 10 December 2019.

132As to what transpired in the course of the visit by Messrs Singh and Sharma on behalf of the plaintiff, Kalra, on 10 December 2019 I surveyed the evidence at paragraphs [37]-[45] above.  It is necessary, however, to consider an extraordinary exchange which took place during the evidence-in-chief of Mr Kalra.  Mr Kalra was not present on-site on 10 December.  Mr Gibson asked Mr Kalra, “And at any time [and the narrative in his evidence-in-chief had by that stage reached late November 2019] was there any report back to you about vacant possession, can you tell us anything about that?”  Mr Kalra replied, “Deep [Singh] said to me, ‘We said to them we don’t need a vacant possession, we never said like that’.” (T490, L25-29).  I asked, “So what was it that Deep said to you again, I got a bit confused …”. (Ibid, L30-31)  He continued, “Deep said to me, ‘We said to them we don’t need a vacant possession’.” (T490, L31 – T491, L2)

133This seemed to me to be a very significant admission on Mr Kalra’s part.  It emerged not at the end of a dogged cross-examination, but in the course of examination-in-chief.  If one were to see civil litigation as analogous to a sporting competition, it could be regarded as an “unforced error”.

134Mr Kalra’s mode of speech indicated that English was not his mother tongue.  I found his evidence quite difficult to follow.  It seems that counsel laboured under even greater difficulties.  Neither Mr Gibson, who was leading the evidence-in-chief, nor Mr Wirth, on behalf of the defendants, appeared to appreciate the significance of what had just been said.  Far from embracing what seemed to be a valuable admission in favour of the defendants’ case, Mr Wirth said, “Your Honour, I’m just making the same objection as before, I object to the hearsay purpose but not the non hearsay purpose.” (T491, L3-5) I gave Mr Wirth the ruling which he sought. (Ibid, L6-8) 

135I then asked the witness a further question, “So he [Mr Deep Singh] told you that he had said to the defendants forget about vacant possession?”  The answer was “Yes”. (Ibid, L12-13)  I then asked Mr Kalra what he said to Mr Deep Singh, and he continued:

“my instruction to say like that to anyone, we need a vacant possession, I know what the (indistinct) vacant possession.  If the tenants are over there, it is no good for us.  It is a lot of hassle.” (Ibid, L14-18)

136I asked him if he told Mr Singh “that’s wrong?”, and Mr Kalra replied, “That’s wrong, a hundred percent wrong.  Why we signed that contract of inspection so we needed a (indistinct).” (Ibid, L19-21)  Mr Kalra said he thought this conversation occurred on 10 December. (Ibid, L22-26)

137This exchange took place just before the luncheon adjournment.  In the early afternoon, I took the opportunity to raise its significance with counsel.  I had encountered the same difficulty that counsel apparently had following Mr Kalra’s evidence, but I informed counsel that I had taken:

“the opportunity to discuss what I thought I heard with both my associate and my tipstaff over the luncheon adjournment because I thought it was pretty astonishing. And they heard it the same way as I heard it.” (T511, L20-24)

138Mr Wirth replied, “Yes, I don’t mean to be disrespectful to Your Honour, but I’m not always understanding the evidence.” (Ibid, L25-26)  At that stage, there was no transcript available to resolve precisely what had been said.

139I asked Mr Kalra:

“Now, before lunch did you tell me that after the inspection on 10 December, that you had a conversation with Deep, and that he told you that he had said to the vendors that the tenants could stay and vacant possession didn’t matter?” (T510, L28 – T511, L3)

140Mr Kalra’s response was: “No, he not saying anything like that. He not supposed to say and he not say anything like that.” (T511, L1-3)

141I reminded Mr Kalra that he had given evidence to this effect twice over, and he replied, “Nobody said the tenant can stay there, nobody, no-one have a right to say like that”.  He then continued, “We signed the contract …”, presumably making reference to the vacant possession terms required in the contract. (Ibid, L7-13)

142Mr Wirth appeared to be cognisant of the matters which I was seeking to clarify.  Mr Gibson, however, remarked, “I missed your point, Your Honour, could you…?” (T512, L3)  After further discussion Mr Gibson said, “It’s a confusion in understanding what was meant by those words of Deep, it was clear from Deep’s evidence.” (Ibid, L27-29)

143Mr Gibson took Mr Kalra to the issue again and he reaffirmed his denial that he had been informed by Mr Singh that the vacant possession requirement had been modified or dispensed with in any way. (T513)  During closing submissions I stated that I would modify my ruling on the hearsay objection by Mr Wirth, with the effect that the evidence of the pre-lunch exchange was admitted without restriction, viz of evidence of the truth of Mr Singh’s statement that he had agreed on behalf of the purchaser to Ms Pennett’s remaining on site after settlement.  Mr Wirth sought to rely on this evidence as an admission on behalf of the plaintiff.  (Defendant’s principle closing submissions, paragraph 34; T1009, LL15-19, T1010)

144Returning to the events of December 2019, the following day, 11 December 2019, Kalra’s solicitor sent an email to the vendors’ solicitors, Buller McLeod, stating a list of administrative requirements for settlement and a direct stipulation requiring vacant possession on settlement day. ([56] above)

145What am I to make of all this?

146We commenced the consideration with the fact that the real estate contract was explicit on the issue of vacant possession.  This was not a mere matter of “boilerplate” to which the parties had not given specific attention.  It was specifically negotiated between the solicitors. [13]-[14]

147In the STY case relied on by Mr Wirth, Chernov JA was quoted as saying that a waiver has to be “deliberate, intentional and unequivocal”.  This does not mean that a waiver, as part of an equitable estoppel claim, needs to be proven according to some higher standard of proof than other matters in civil litigation.  Rather, that it must be distinct and clear, as distinct from vague or merely implicit.

148I found the evidence of Mr Zeine Jnr and Mrs Zeine, as to the multiple occasions on which the situation of Ms Pannett was discussed with the Zeines being assured that she could remain after settlement, unconvincing.  It was not only unspecific as to date and time, but the manner of the alleged assurance or assurances being given was unconvincing.  As I put to Mrs Zeine myself, is it plausible that a matter, once agreed, would be repeatedly returned to in discussion after discussion where, at least before 10 December, there was no attempt, according to the Zeines, by those acting for Kalra to go back on the earlier assurances?

149As to what transpired on 10 December, I cannot uncritically accept the evidence called on behalf of the plaintiff either.  The issue of vacant possession plainly was “up for discussion”.  Despite later denials, I believe that Mr Kalra, in his initial account of his discussion with Mr Deep Singh following the visit by Mr Singh and Mr Sharma to Toolern Vale on 10 December, was accurate, viz that Mr Singh, on behalf of the plaintiff, had told the Zeines and/or Ms Pannett that she could stay after settlement.  This was the point that I went over in some detail with Mr Kalra before the luncheon adjournment.  His evidence was clear.  His reversal after lunch was, in my opinion, an exercise in self-interest, realising that he had “let the cat out of the bag”.  I must necessarily reject the evidence of Messrs Sharma and Deep Singh on this point, who testified before Mr Kalra went into the box.  I also note that Mr Ghassan Zeine, the first defendant, was called as a witness on behalf of the defendants.  I was told that he had suffered a stroke about a month before trial.  This stroke was said to have affected his speech.  He gave his evidence with the assistance of an interpreter. (T841‑3)  Mr Wirth said that Mr Zeine Snr presented in the box as “frail”.  His evidence on some points was difficult to reconcile, even with the evidence of other members of his family.  It seemed that his memory had also been impaired by the stroke.  In the circumstances, with no suggestion that Mr Zeine Snr was doing other than giving truthful evidence as best he could, Mr Wirth was willing to concede that it would be appropriate to leave his evidence out of the equation in seeking to determine the truth of what transpired at the various interactions between the Zeines and representatives of the plaintiff. (T1117‑8)

150Mr Kalra’s admissions were made in the course of evidence-in-chief.  At that stage, there was no ethical prohibition on Mr Gibson having a conference with Mr Kalra to clarify these matters over the luncheon adjournment.  Mr Gibson, however, assured me that no such conference took place.  Mr Kalra’s earlier evidence is consistent with the evidence of Mr Zeine Jnr and Ms Pannett.  The email of the following day is entirely consistent with Mr Kalra having told Mr Deep Singh that he had given his assurances in excess of his authority.  The solicitor’s email was intended to correct Mr Singh’s faux pas.

151The effect, then, is that the “waiver” was purportedly operative for a period of 24 hours from the time of the on-site discussion until the transmission of the solicitor’s email the following day.

152Mr Wirth conceded that the communication to the Zeines’ solicitors on 11 December created imputed knowledge on their part but that actual knowledge was not gained by Mrs Zeine until 17 December. (T1113, L15 – T1114, L3)

153The solicitors were proper spokespeople for the plaintiff, Kalra.  It would have been a breach of protocol for them to have communicated directly with the Zeines.  If the solicitors failed to pass on an important communication to their client, this is a matter between the Zeines and their solicitors.  It cannot prejudice the situation of Kalra.

154According to Professor Carter:

“To conclude that a right has been ‘waived’ might be thought to suggest that the right has been lost. But that is not necessarily the case.  In order to determine what precisely is the effect of waiver it is necessary to examine the basis for the conclusion.

…

Second a waiver which is in truth an estoppel may involve no more than a temporary suspension of contractual rights.  Unless it would be inequitable so to allow, the right may be reasserted upon the giving of reasonable notice.

…” (Op cit [07-210] 16,295, service 43)

155The essence of waiver in the nature of equitable estoppel is that allowing the representor to go back on his representation is to be regarded as inequitable or unconscionable, having regard to the change of position by the representee in reliance upon the representation.  There is simply no evidence of any change of position in the period between the on-site meeting and the solicitors’ email the following day.  The tone of the evidence was that Ms Pannett was already settled in and was not expecting to move out.  Indeed, on her evidence, she was “shellshocked” when, as she recollected, Mr Sharma derided the rent she was paying as a pittance and expressed a preference for her tenancy to be immediately bulldozed.

156As to whether a representor being allowed to “go back” on his representation exhibits the necessary inequitable or unconscionable features, it is instructive to compare the present case with the Waltons Stores’ case.  In Waltons Stores, Waltons negotiated with Mr Maher with a view to leasing his building.  The proposal entailed his demolishing the existing structure and replacing it with a new one to Waltons’ specifications.  The parties then commenced negotiations of the proposed lease but was reluctant to commence demolition until it was clear that the negotiations were completed.  The final terms of the lease having apparently been agreed upon, the owner proceeded with demolition.  Waltons then repented prior to the execution of the lease and directed its solicitors to go slow.  The new building was about 40 percent complete before Waltons advised the owner that it would not proceed. 

157It is in the context of this extraordinary fact situation that the High Court reached its decision and determination that an equitable estoppel arose which would have the effect of providing the owner with what were, in substance, contractual rights against Waltons even although no final contract had been entered into.  The contrast between that situation and the 24-hour period during which Kalra had assured the Zeines that it did not require vacant possession is stark.

158In final submissions, the discussion was as to whether the period between 11 December and 19 December, or 17 December and 19 December (had I accepted that Mr Singh’s assurances should be regarded as remaining current until that date), was adequate to sort out the problems with Ms Pannett’s tenancy.  On the findings which I have made, this analysis is misconceived.  It would seem to assume, in effect, that the Zeines had, for months, been proceeding on the basis of the representation that they did not have to provide vacant possession at settlement.  My findings negate this.  Whatever difficulties associated with Ms Pannett’s tenancy would have encountered in rendering vacant possession as at 19 December arose because of her lengthy incumbency and lack of moveout preparation, they were not as a result of the period between the on-site meeting on 10 December and the email of 11 December.

159The defence based on waiver or estoppel therefore fails.

194It will be seen that the concept of mutuality depends upon the specific enforceability against a plaintiff of the plaintiff’s obligation under the arrangements which he, the plaintiff, seeks as against the defendant to have specifically enforced by the court.  It does not relate to the financial capacity of the plaintiff to perform, a matter dealt with under the separate issue of “readiness”.

195The decision of the English Court of Appeal in Price v Strange referred to by both Mr Wirth and Robert-Smith J also relates to mutuality, not “readiness”.  The opening catchwords in the Chancery division report are as follows “Specific Performance – mutuality …”.  Neither JC Williamson nor Price v Strange support the proposition that this plaintiff needs to demonstrate its financial capacity to perform under its contract as at the trial date.

196Roberts-Smith J also referred to the analysis of the concept of readiness and willingness to be found in Dr Spry’s work on Equitable Remedies.  He referred to what was presumably the most recent available addition, namely the 6^th edition, at pages 217-218.  These pages include the same passage to be found in the 9^th edition of the work and quoted at [187] above.

197One of the authorities referred to by Dr Spry is the decision of the High Court in Mehmet v Benson (1965) HCA 295. The plaintiff commenced an action for specific performance of a terms contract of sale. He had been repeatedly in arrears in paying instalments of the purchase price and interest, and had also committed acts of bankruptcy which had, by the time of the suit, ceased to be “available” as grounds for his being made bankrupt. The Court ordered specific performance in favour of the plaintiff. Windeyer J said:

“At the date when the suit is commenced the plaintiff must then be in a position to say that he is ready and willing to do at the proper time in the future whatever in the events that have happened the contract requires that he do ... And he must show too that he has performed or been ready and willing to perform the terms of the contract on his part … But if, notwithstanding earlier breaches, the contract remained on foot, then it seems to me a plaintiff is not necessarily barred from having a decree for specific performance if those breaches, not having resulted in a valid rescission, can be made good by the payment of interest. … But, generally speaking, it is I think sufficient that the plaintiff in a purchaser’s suit should allege that he is presently ready and willing and offers to pay the purchase money and that it is not strictly necessary in every case for him to go further ... But, as I am not convinced that the appellant is now ready and willing to complete the contract, I think there should be a proviso to meet the situation if he should prove to be unready promptly to complete the contract by payment in full. To that end the respondent should be expressly enabled to apply to the Supreme Court to fix a date for completion. If the appellant is not then ready to complete, the Supreme Court could make a decree for rescission.” (1965) 113 CLR 295

198Barwick CJ said:

“In my opinion, notwithstanding the defaults of the plaintiff in the payment of the instalments of price, he was not unready or unwilling to perform the contract in its essential terms: specific performance ought to have been granted. However, having regard to the time which has elapsed during this litigation, the decree should be passed and entered with a minimum of delay. Liberty should therefore be reserved to the respondent to apply to the Supreme Court so soon as the decree for specific performance is passed and entered for an order fixing the time and place for completion of the agreement, the plaintiff being placed on terms to pass and enter the decree with the utmost despatch.” (1965) 113 CLR 295, 309

199The effect seems to be that it is not essential to prove ability to complete as at the date of trial.  If there were any doubt about this, liberty could be reserved, as Windeyer J suggested, on application to be made to the court, to rescind the contract in the event that the plaintiff did not perform.  In Green v Sommerville (1979) 141 CLR 594, 611 Mason J (as he then was, with whom Murphy and Aickin JJ concurred) in dismissing an appeal against the grant of a decree of specific performance said, “…the respondent was, on the view I take of the contract, ready and willing to perform her essential obligations under the contract…”

200The “readiness” issue is determined in favour of the plaintiff.

The Zeines’ rescission notice

201Mr Wirth conceded at paragraph 137 of his principal closing submissions that “a party is ... unable to serve a default notice if it is in breach of an essential term.”  He footnoted a number of authorities to which it is unnecessary to refer.  The question then is whether, in the events that occurred, and in light of the communication prior to 19 December that the Zeines were not intending to deliver vacant possession at settlement, they were in breach of an essential term of the contract.  Mr Wirth contended that a failure to give vacant possession in breach of contract did not constitute a breach of an essential term.  He referred to a decision of Hansen J in Fox v Toll Property Pty Ltd [2007] VSC 138 [65]-[66], and Berrell v Combined Pastoral Pty Ltd [2015] NSWSC 1334 [19].

202These cases refer to failure to give vacant possession in the sense of leaving rubbish or personal property on site in a manner which would impede the enjoyment of the property by a purchaser or incoming tenant.  The term “vacant possession” was employed as describing the dispute relative to this contract by the parties.  For ease of reference I have adopted it too.  Nevertheless, it is plainly a misnomer if it is taken to refer to vacant possession in the sense in which the phrase is used in cases such as Fox v Toll Property Pty Ltd and Berrell v Combined Pastoral Pty Ltd.

203In the present case, the fundamental obligation of the defendants under the real estate contract was to make over, in consideration of the agreed purchase price, the unencumbered fee simple of the Toolern Vale site. When they sought to settle with not one but two tenants in occupancy, the issue was not one of “vacant possession” but an issue of title, the provision of which is plainly, as Mr Wirth conceded, an essential term. He said the obligation was simply to provide the purchaser with a registrable transfer. Had settlement proceeded, and had Kalra or some mortgagee on its behalf lodged the transfer for registration, even after registration of the transfer Kalra’s title would be subject to “the interest (but excluding any option to purchase) of a tenant in possession of the land” – s42(2)(e) of the Transfer of Land Act 1958. The logic of Mr Wirth’s contention is that Kalra could have been compelled to settle, and the Zeines would not have been in default of their obligation to provide title if there were a tenant in possession under an oral 99‑year lease. To my astonishment, Mr Wirth was prepared to embrace this reductio ad absurdum. (T1022)

204It follows that in accordance with the principle conceded by Mr Wirth, namely that a party in default of a fundamental obligation is not entitled to serve a rescission notice, the Zeines’ notice was ineffective.

205It may, however, be that Mr Wirth conceded too much in framing the issue relative to his client’s notices of default and rescission.  In All Phones Retail Pty Ltd v Hoy Mobile Pty Ltd [2009] FCAFC 85, Perram J, in a judgment on this point concurred in by Goldberg and Jacobson JJ, rejected as a general principle a statement by Lord Finlay LC in Morris v Baron & Co [1918] AC 1, 9 namely, “A party to a contract which imposes certain obligations and confers certain rights upon him cannot claim to have exercised these rights while repudiating his obligations in material particulars.” ([53]-[76] of the judgment of Perram J)

206The New South Wales Court of Appeal in Idameneo  Pty Ltd v Ticco Pty Ltd [2004] NSWCA 329 considered the same issue. There, a medical practitioner who had sold a practice subject to certain restraint of trade obligations exercised a right bestowed on him by the sale contract to terminate the contract for non-payment of monies owing to him for services rendered. The purchaser contended that the doctor was disabled from relying on the right to terminate because of his own breaches of the restraint of trade provisions. Santow JA gave the principal judgment, which was concurred in by Mason P and Hodgson JA. His Honour at [103] held that even if the vendor doctors were:

“shown to be in breach of the restraint of trade obligation … and even if such breach constituted an unaccepted repudiation, Dr Rafter and Ticco were not precluded from exercising their respective right to terminate the relevant agreements in the manner they did and in particular were not precluded by the fact of there being an unaccepted repudiation on their part.  They were entitled to do so either by exercising their contractual right to terminate under cl 27, or by accepting Idameneo’s repudiation, and in fact did both.”

207What then of the present situation?  Following the issue of the writ commencing this proceeding there were further attempts to settle.  By letter dated 2 April 2020, R J Legal proposed a settlement with vacant possession, viz without Ms Pannett as a tenant (though nothing seems to have been said of the residential tenant) but subject to the purchaser’s paying default interest. (CB 1703-17-5)  By an email of 3 April 2020, Victoria Mercantile Lawyers, on behalf of Kalra, denied that their client was in breach of either the sale of land or sale of business contract and indicated a willingness to settle without payment of default interest or other charges not nominated in the default and rescission notices, together with payment by the Zeines of their client’s “legal costs”. (CB 1719-1721)  Neither party was prepared to settle on the other party’s terms.  The deadlock continued.

208The quoted decisions of the New South Wales Court of Appeal and the Full Federal Court have been adopted and applied by the Victorian Court of Appeal in Willis and Crosland [2021] VSCA 320. The finding that at the date of the notice the vendors were in breach is therefore insufficient to deprive them of the right to rely upon it. This case, however, is different from Willis v Crosland, where the Court of Appeal held that I had erred in treating as ineffective a notice of termination given by a purchaser.  At the time the notice in question was given, no actual default existed.  I found, however, that at the time the notice was given the purchaser in that case was not ready, willing and able to perform her obligations at the time when they fell due for performance.

209Here, the time for performance had arrived, the vendors defaulted by failing to make title.  The notice was a demand to the purchaser to settle paying the full purchase price at a time when unencumbered title had not and would not, as at the date of the proposed settlement, be made and subject to payment of costs and interest said to accrue solely on the basis of an alleged default on the part of the purchaser, Kalra, which, according to my findings, had not in fact occurred.  The intimated failure to make unencumbered title dispensed Kalra from making anything in the nature of a tender. The obligation to pay the price and the obligation to make unencumbered title were concurrent obligations, unlike the obligations in the Idameneo case, on the one hand to observe trading restrictions and, on the other hand, to pay for services rendered.  There was no obligation on the part of Kalra to settle and pay the purchase price in the absence of provision of unencumbered title by the Zeines, as they were obliged to do under the contract.  The preferable view is that the notice of default relative to the land contract was ineffective simply because an occasion to give that notice, viz the occurrence of a default on the part of the purchaser had not occurred.  Since the sale of business contract was dependent upon the sale of land contract, likewise there was no default on the part of the purchaser, Kalra, and therefore no basis for the service of the default notice.

210What then of the proposal to settle with Ms Pannett’s tenancy disposed of on 7 April?  Nothing was said as to the comings or goings of the tenant, Mr Peter Cottingham.  The letter of 2 April could not be an effective rescission notice or, indeed, notice to complete restoring time as being of the essence (assuming it had ceased to be) because the period of time between 2 April and 7 April could not be regarded as “reasonable”.  In any event, the proposal came with an unjustified demand to pay certain penalty interest which, on the findings I have made, had not become due and payable.  Accordingly, the sale contracts were not terminated by the formal notices of rescission and default served on behalf of the purchasers or the further correspondence of 2 April 2020, assuming that it is open to the vendors to rely upon it under their pleaded case.

Damages claims

211Section 38 of the Supreme Court Act 1986, which is the basis of Kalra’s damages claim, states as follows:

“Damages in addition to or in place of other remedies

If the Court has jurisdiction to entertain an application for an injunction or specific performance, it may award damages in addition to, or in substitution for, an injunction or specific performance.”

212This section represents a re‑enactment of the English Chancery Amendment Act 1858, popularly known as “Lord Cairns’ Act”.  The editors of Meagher, Gummow and Lehane’s Equity Doctrine & Remedies (5^th ed) observed:

“... the local form of Lord Cairns’ Act in the state of Victoria differs from the legislation elsewhere in containing no reference to `wrongs’.  The provision in Victoria has also been held to differ in applying to relief in aid of purely equitable rights.  In Giller v Procopets [(2008) 24 VR 1], the Victorian Court of Appeal had before it a claim for damages under the local Lord Cairns’ Act provision in lieu of an injunction to restrain a breach of a purely equitable obligation of confidence. The breach had occurred when the defendant showed videotapes recording sexual activity between the plaintiff and the defendant to others.” [24-080]

213This case therefore appears to say nothing as to the present dispute.  The claim for damages was, as to a significant portion, made on a strictly alternative basis: that is, with respect to losses which would be suffered if specific performance were not granted.  Another portion, namely loss of trading profit calculated at the rate of $141,347 per annum, or $11,779 monthly, as a matter of logic could be pressed in addition to the claim for specific performance as representing the plaintiff’s loss by reason of the performance of the sale contract being delayed.

214In the interests of completeness, and lest the matter go further, I will seek to deal with the entirety of the damages claims, at least briefly.

215The trading losses were said to have been verified by the evidence of Mr Raj Sandhu, chartered accountant.  Mr Sandhu sought to calculate “the profit that upon [his] analysis, [Kalra] would have made had the purchase of the property of Toolern Vale gone through as planned in December 2019”. (T755, L31 – T756, L4)  Mr Sandhu’s report was based on historic trading figures provided by the Zeines for the period before the scheduled settlement in December 2019.  His calculations were made assuming an interest cost of 4.096 percent per annum, which he said was “the borrowing rate of [Kalra] at that time.” (T756, L19‑20)  His calculations were made upon the assumption that the enterprise remained “static” in the sense that it continued to be conducted in the manner in which it had been by the Zeines and was not subject to any redevelopment. (T757, L13‑20)

216According to his calculations, settlement had been delayed for some 27 months and 12 days, and this calculated out to trading losses of some $322,592. (T758, L10‑14)  Mr Sandhu agreed that the COVID‑19 pandemic would have caused a major variation from the historic figure, yet the period of his calculation almost exactly corresponded with the onset of the COVID‑19 pandemic. (T762, L21‑23)  Mr Sandhu conceded, as he necessarily must have, that actual trading figures would be more reliable than a prediction based on past performance. (T764, L27‑30)  Despite an assertion to the contrary in final submissions by Mr Gibson, it appears that Mr Sandhu made no allowance whatsoever for the effect of the pandemic, which in the period 2020 to 2021 would have seen the business interrupted by lockdowns and various restrictions. (T765)

217I received no evidence about the pandemic, but its occurrence and major impact upon the economy and society generally, is so notorious that it can be the subject of judicial notice.  The details of the various restrictions on the economy and “lockdown” rules were embodied in a series of subordinate legislative instruments issued by the Victorian authorities.  None of these matters has been factored into the calculations made by Mr Sandhu.  Accordingly, I cannot be satisfied that the alleged trading losses have been adequately proven.

218In any event, the plaintiff’s case more generally was that it would have been pressing for a redevelopment of the site.  Town planners had been retained, etc.  No planning permit application had been lodged by the date of the proposed settlement, 19 December 2019, at least partly because Mr Deep Singh, who was heavily involved in this part of the plaintiff’s project, was “sidelined” by illness for a number of months.  Whatever the progress of this redevelopment might have been, whilst it would, if successful, have led to enhanced trading on the site, in the short run it would have entailed significant disruption to trading and represented a potential negative.

219The damage alleged to have been suffered as a result of a lost opportunity to redevelop the site, being $1,269,293, is also attended by significant legal difficulties.  As French CJ, Gummow, Hayne, Heydon and Kiefel JJ observed in European Bank Ltd v Evans (2010) 240 CLR 432, 437‑8 [11]:

“The principle with respect to damages at common law for breach of contract recently was confirmed by this Court in Tabcorp Holdings Ltd v Bowen Investments Pty Ltd [(2009) 236 CLR 272, 286 [13]] as that stated by Parke B in Robinson v Harman [(1848) 1 Exch 850, 855; 154 ER 363, 365]. The plaintiff is to be placed in the same situation with respect to damages, so far as money can do it, as if the contract had been performed.”

220At [12] their Honours referred to the rule in Hadley v Baxendale [(1854) 9 Exch 341; 156 ER 145], which they said was “concerned with the question of remoteness and marks out the limits of the heads of damage for which the plaintiff is entitled to receive compensation.” In Hadley v Baxendale, the plaintiffs’ mill shaft had broken down.  They gave it to the defendants to take to the manufacturers to use as a model for a new one.  Delivery was delayed.  Alderson B, delivering the judgment of the Court of Exchequer, said in such a case:

“the damages which the other party ought to receive in respect of such breach of contract should be such as may fairly and reasonably be considered either arising naturally, i.e., according to the usual course of things, from such breach of contract itself, or such as may reasonably be supposed to have been in the contemplation of both parties, at the time they made the contract, as the probable result of the breach of it.  Now, if the special circumstances under which the contract was actually made were communicated by the plaintiffs to the defendants, and thus known to both parties, the damages resulting from the breach of such a contract, which they would reasonably contemplate, would be the amount of injury which would ordinarily follow from a breach of contract under these special circumstances so known and communicated.”

221As to breach of a contract for the sale of land:

“The normal measure of damages is the market value of the property at the contractual time for completion less the contract price.” (McGregor on Damages (20^th ed) 861 [27-005]

222The possibility of recovering consequential losses such as losses on redevelopment would appear to depend upon their falling within the second limb of the Hadley v Baxendale formulation, which would require proof that a proposed redevelopment was within the joint contemplation of the parties when they made their contract.  In the present case there were special conditions in the contract of sale to facilitate investigations by and on behalf of Kalra in pursuance of its redevelopment plan.  Planners and other experts attended the site, to the knowledge of the Zeines, in relation to these matters.

223A claim such as the present was considered by the New South Wales Court of Appeal, Mason P, Beazley and Bryson JJA, in Castle Constructions Pty Ltd v Fekala Pty Ltd (2006) 65 NSWLR 648. The claim for this head of damages failed. Mason P, with whom Beazley JA concurred, advanced a number of reasons as to why that result should follow. He observed:

“The purchaser was entitled to loss of bargain damages based upon the difference between market value and the contract price, market value being determined at the date when completion should have occurred (Diamond v Campbell-Jones [1961] Ch 22; Hoffman v Cali [1985] 1 Qd R 253). However, the purchaser led no evidence to suggest that the market value at that date was greater than the contract price. Nor were outgoings such as architect’s costs sought to be recovered. Rather, the purchaser claimed as damages the loss of profit on a hypothetical re-sale with development approval that would have taken place in about April 2002 had the contract not been breached. This invoked the “second limb” of the rule in Hadley v Baxendale (1854) 9 Exch 341; 156 ER 145.” ((2006) 65 NSWLR 648, 651 [11])

224His Honour also observed:

“An additional reason for caution stems from the fear of double compensation.  The market for land that is generally known to be capable of (re)development builds into the present value the possibilities of future gain stemming from such development (see generally Spencer v Commonwealth (1907) 5 CLR 418 at 441, Yates Property Corporation Pty Ltd (in liq) v Darling Harbour Authority (1991) 24 NSWLR 156 at 175-6). A fully informed market will make due allowances for the likelihood of favourable town planning decisions, the cost of development, and the time which may elapse before the property is available for sale, either with development approval or fully developed.” ((2006) 65 NSWLR 648, 656 [40])

For the reasons given by Mason P, Kalra would be over-compensated if the damages for redevelopment were awarded.  The potential is already allowed for in the value of the property fixed at $940,000.

225Kalra relied on valuations prepared by expert valuer, Mr Dudakov.  He assessed the “vacant possession” of the property at $940,000. (CB 625)  He said this unencumbered value was reached after “taking into account its future potential as a redevelopment site”. (T679, L30‑31)  He also valued the property as if it had been completed in accordance with a redevelopment proposal formulated by Kalra at $4,260,000.  He also valued the property on a “fully leased basis” at $815,000. (CB 625)  He reached this valuation on the assumption:

“that because part of the property was leased, that the whole of the property couldn’t be redeveloped over that period [assumed to be five years].  So therefore I applied rentals to all of the component parts of the premises, that is, the dwelling, the yard and the service station and the store, and assessed the value by taking its unencumbered value in five years time, but also factoring in that for that interim five years period you would receive a rental for that property.” (T680)

226These valuations were made as at the date of the contract, namely 22 December 2018. (T682)  Mr Dudakov, however, said that in the period 2018 to 2019 the market remained “relatively steady”. (T683, L8‑16)

227The choice of dates in Dudakov’s report is problematic.  Damages for breach of contract by   a vendor of land are fixed by reference to the value at the date for completion of the contract – not the date the contract was made.  (McGregor on Damages (20^th ed) 861 [27-005]

228Kalra’s case, should it be forced to the “fallback” damages claim in lieu of specific performance, would calculate the damages by reference to the alleged value of the “fully developed service station minus the costs of building it”.  According to Mr Gibson, that would be the value of the bargain which his client had lost. (T684, L22‑25)

229For the purposes of this calculation, Mr Dudakov assumed construction costs of $2,225,000 exclusive of goods and services tax, a construction period of 20 months, and a development period of 32 months.  He allowed for interest at the rate of 6 per cent, “assumed nil equity”. (CB 667)  Mr Dudakov’s valuation report included the following note:

“I reiterate that I am not an expert in the construction, nor operation, of Service Stations and I have relied entirely on the Financial Information Construction costings provided.  Should the information provided be incorrect, I reserve the right to review my valuation.

I recommend that these costs be verified by an independent Quantity Surveyors costing report to confirm that the expected construction costs are adequate to complete the project to the expected high standard.” (CB 669)

230The source of the assessment of construction costs was a report from Mr Dhirend Kumar Singh, who described himself as a building consultant and project manager. (T767, L22‑24)  He said that he had “32 years experience in the Australian building industry”. (T769, L10‑11)  He said that he worked from drawings which depicted a building “approximately 350 metres square.  The shop area and canopy would have been 25 metres by 7 metres canopy.” (T770, L11‑12)  His cost estimate was $2,941,000, which he said was “basically based on a brand new petrol station under construction in Tamworth and this petrol station is the same size that we have proposed in Toolern Vale.” (T772, L4‑10)  Mr Singh had done an earlier estimate for 2019, but he said in the period 2019 to 2022 building costs had “increased by more than 30 per cent”. (T772‑3)

231As this summary indicates, Mr Singh was offered to the court as a skilled and experienced operator in the building industry in good standing.  His credit was gravely impaired in cross-examination.  Mr Singh gave an address in New South Wales.  His report, at CB 4284, included in its heading “Builders Licence No. 1163082”.  He listed as part of his experience a multiplicity of projects in New South Wales and a few in Queensland.  It appeared that he had done extensive work for the Kalra group of companies, including some five projects. (CB 4284)  One would have supposed from this context that the “Builders Licence” referred to was issued in New South Wales.

232Documents produced in cross-examination by Mr Wirth, however, showed that Mr Singh’s New South Wales builder’s licence, having a different number, was cancelled with effect from 16 December 2020. (CB 4306)  The documents showed that as from that date he was “permanently disqualified from holding an authority under the Act” (presumably the statute regulating home building in New South Wales).  As at the same date, Mr Singh was “permanently disqualified from being a member of a partnership, or an officer of a corporation that is a member of a partnership, that is the holder of an authority under the Act”.  He was also permanently disqualified “from being an officer of a corporation that is the holder of any authority under the Act”.  He was fined $8,000. (CB 4307)  According to the same document, “insurance claims paid” numbered eighteen.  A list of infringement notices showed:

·        a penalty of $1,500 having been imposed upon him on 6 August 2018 for “Demand/receive payment for residential building work without insurance as prescribed”

·        a further infringement notice on 20 June 2018, “Demand/receive payment for residential building work without insurance as prescribed”, penalty $1,500

·        a further infringement notice on 20 June 2018, “Unlicensed person seek residential building work”, penalty $250

·        “Contract to do unlicensed residential building work”, 20 June 2018, penalty $750.

233As to one of the penalties, being a $750 fine, Mr Singh said:

“No, that was nothing to build a house, that was just a misunderstanding, it’s all been sorted out.  That was just to help someone and I (indistinct) I was just an advisor.” (T800, L20‑24)

234The registration number which Mr Singh quoted on his report was a Queensland registration. (T798, L6‑11)  The “ABN” on his report belonged to a different and unconnected organisation, according to a search conducted on a Commonwealth Government website. (T796)

235Mr Wirth conducted a highly effective cross-examination, the upshot of which was that Mr Singh’s estimates, aside from any other misgiving that one might have about them, represented a broad-brush approach without any engineering detail, and little detail about materials and so forth.

236The result of all this is that I could not accept Mr Singh’s estimates as being reliable.  The alleged “profit” to be derived by a redevelopment could easily disappear with building overruns, without reliable evidence on which to base the profitability of the redevelopment.  I doubt, for that reason alone, that I could confidently have assessed damages relative to this matter.  The assumption as to building costs underlying Mr Dudakov’s evidence is not made out.

237For all of these reasons, Kalra’s damages claim would have failed had its case for specific performance not succeeded.

238There is a further problematic issue relative to the damages claim – failure to mitigate.

239As the narrative indicates, the Zeines proposed settlement on a number of bases, all of which required the payment by Kalra of penalty interest and some compensation.  The sums involved, compared to the transaction as a whole and, one may say, the costs of conducting this proceeding, were “chickenfeed”.  Mr Wirth contended that in its duty to mitigate its damages, Kalra should have settled with the Zeines according to one of these proposals.

240Had there been an opportunity for Kalra to have settled without additional outlay, failure to do so would have been fatal to a damages claim.  In Payzu Ltd v Saunders [1919] 2 KB 581, Bankes LJ said:

“It is plain that the question what is reasonable for a person to do in mitigation of his damages cannot be a question of law but must be one of fact in the circumstances of each particular case. There may be cases where as matter of fact it would be unreasonable to expect a plaintiff to consider any offer made in view of the treatment he has received from the defendant. If he had been rendering personal services and had been dismissed after being accused in the presence of others of being a thief, and if after that his employer had offered to take him back into his service, most persons would think he was justified in refusing the offer, and that it would be unreasonable to ask him in this way to mitigate the damages in an action of wrongful dismissal.” ([1919] 2 KB 581, 588‑9)

241Payzu’s case was one of sale of goods, and the court found that no exception, such as the hypothetical considered by Bankes LJ, existed in that context.  The same issue arose in the case Castle Constructions Pty Ltd v Fekala Pty Ltd (2006) 65 NSWLR 648. Mason P said:

“In my view, the damages claim should also be rejected because, even if remoteness is assumed in the purchaser’s favour, the purchaser unreasonably failed to avoid the loss of profit it sought to prove. In brief, it failed because it chose not to accept the vendors’ offer to complete the original contract according to its terms and under the supervision of the Court, such offer being propounded in the cross-claim for specific performance filed on 28 September 2001.” ((2006) 65 NSWLR 648, 658)

242Neither Payzu nor Castle Constructions is on all fours with the present dispute.  In both those cases, the offer to settle was on the original terms.  Where an opportunity to mitigate presents itself and requires the aggrieved party, if it is to be availed of, to enter into a transaction with a third party, any deficiency as between the original contract arrangements and those which can be made with a third party are recoverable as damages from the party in breach of contract.  The situation is more complex where the opportunity to mitigate requires “doing a deal” with the original contracting party and leaving a deficiency or over-expenditure.  Accepting any of the offers made by the Zeines would have entailed Kalra paying more than it had contracted to pay for the Toolern Valley site, which Kalra refused to do.

243If the additional expenditure or the allowance of the discount goes in favour of the party in breach of contract, can that amount be recovered after the event, either as damages or under the principles of restitution?  Mr Gibson said that they could not be: the payments would be regarded as voluntary and payments made to close a transaction, and as such would not be recoverable under the principles of restitution.

244Mr Wirth relied on a decision of Slattery J in the Supreme Court of New South Wales, Velik v Steingold [2012] NSWSC 860. This case, as vendor/purchaser disputes characteristically do, arose out of a series of failed settlements and “cut and thrust” between vendor and purchaser. His Honour found that the vendor had validly terminated the contract and was entitled to retain the deposit. His Honour declined to order refund of the deposit to the purchasers under the New South Wales equivalent of s49 of the Property Law Act 1958. It is not evident from that outcome that the issue of mitigation of damages arose at all. Indeed, a keyword search of his Honour’s lengthy judgment does not show that he used the word “mitigate” or “mitigation” at all. The issue arose only relative to the plaintiff purchasers’ application for the refund of the deposit. The purchasers asked that the deposit be repaid. His Honour said the plaintiffs could have paid over the funds demanded by the defendants at settlement under protest and sought later to recover them in restitution. He considered this a reason why the discretion as to the refund of the deposit ought to be exercised against the purchasers. The issue did not apparently arise on appeal to the Court of Appeal. The authorities referred to by his Honour at [156] were in a very different context: in one instance, a claim to recover money paid under an unconstitutional statute where the demand for payment was backed by the power of government, and another in the context of landlord and tenant. In the circumstances, I think it is unnecessary to express a concluded view on this point.

245Mr Wirth also pressed a variation  on this theme.  He said Kalra should have settled the contracts on the basis suggested by Sifris J, viz paying the disputed amounts into court or some sort of suspense account.  This contention fails for lack of any evidence the Zeines would have settled the contracts on this basis.

246An alternate issue as to mitigation of damages relates to the possibility of Kalra’s having acquired an alternative development site.  Mr Dudakov agreed that the Toolern Vale site was not a “unique” development opportunity. (T705, L14‑23)  It may be, therefore, that the failure of Kalra to pursue other development opportunities represented a failure on its part to mitigate its damages, in the same way as, for instance, a buyer, the victim of a breach of contract by a seller’s failure to deliver goods which it had agreed to sell, would be expected to go out into the market and obtain like goods to mitigate its loss.  Whilst I raised this issue, it was not really embraced by Mr Wirth on behalf of the Zeines.  Accordingly, I say no more about it.

Counterclaim

247The defendants’ counterclaim depended for its success upon a finding that the Zeines had validly terminated the contract by their notice of rescission in early 2020.  Since I have found against them on this point, their counterclaim necessarily fails.

Disposition

248I will direct the parties within 14 days to bring in short minutes to give effect to these reasons.  I have heard no argument on the question of costs, so I will reserve this issue.