Burke and Riversdale Road Pty Ltd v Gemini Investments Pty Ltd
[2003] VSC 33
•21 February 2003
| IN THE SUPREME COURT OF VICTORIA | Not Restricted | |
AT MELBOURNE
COMMON LAW DIVISION
PRACTICE COURT
No. 4476 of 2003
| BURKE AND RIVERSDALE ROAD PTY LTD | Plaintiff |
| v | |
| GEMINI INVESTMENTS PTY LTD | Defendant |
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JUDGE: | NETTLE, J | |
WHERE HELD: | Melbourne | |
DATE OF HEARING: | 18 February 2003 | |
DATE OF JUDGMENT: | 21 February 2003 | |
CASE MAY BE CITED AS: | Burke and Riversdale Road Pty Ltd v Gemini Investments Pty Ltd | |
MEDIUM NEUTRAL CITATION: | [2003] VSC 33 | First Revision 19/9/03 |
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Sale of Land – contract incorporating General Conditions from Table A of the Seventh Schedule to the Transfer of Land Act 1958 – time of the essence of the contract – default in payment of purchase price – waiver of essentiality of requirement as to time of performance – notice of rescission under General Condition 6 – whether effective – subsequent letter – whether letter discharged contract for purchaser’s repudiation - Transfer of Land Act 1958, Seventh Schedule, Table A, General Conditions 4, 5 and 6
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APPEARANCES: | Counsel | Solicitors |
| For the Plaintiff | Mr. G.D.Bloch with Mr.D.V.Aghion | Kalus Kenny |
| For the Defendant | Dr. Gavan Griffith QC with Mr. M.F.Wheelahan | Vadarlis & Assoc. |
HIS HONOUR:
By contract of sale of land dated 11 May 2001 Gemini Investments Pty Ltd (which I shall call “the vendor”) agreed to sell to Burke and Riversdale Road Pty Ltd (previously known as Radomi Pty Ltd) (which I shall call “the purchaser”) the land situate 472 – 480 Riversdale Road, East Hawthorn, for the sum of $11,330,000.00 plus GST. The contract provided for payment of a deposit of $1,699,500 by a first tranche of $520,150 on execution of the contract, and a second tranche of $1,179,350.00 on or before 8 June 2001, and for payment of the residue of the purchase price, being an amount of $9,630,500.00 plus GST, on or before 1 November 2002; at which time vacant possession would be provided. General condition 9.1 of the contract incorporated the general conditions in Table A in the Seventh Schedule of the Transfer of Land Act 1958.
The purchaser paid the first tranche of the deposit in accordance with the contract, but was late in the payment of the second, and on 25 June 2001 the vendor’s solicitor served a rescission notice on the purchaser in respect of that default. It was rectified when the purchaser paid the second tranche of the deposit on 6 July 2001 at 5.00 p.m.
The purchaser was, however, unable to obtain finance with which to complete the contract and thus failed to pay the residue which was due on 1 November 2002, and later in November 2002 (the evidence before me is no more precise than that) the vendor served on the purchaser a notice of rescission pursuant to General Condition 6 of Table A.
Proceedings[1] followed in which the purchaser alleged that the notice of rescission was defective. The contention was that the vendor had failed to calculate the amount of GST which was payable and hence that the notice did not specify with sufficient precision the amount which the purchaser was required to pay in order to rectify its default. A director of the purchaser also swore an affidavit to the effect that he expected that funds would be available to settle with the vendor by the end of January 2003, and in the result the vendor agreed to treat the contract as still on foot and the proceedings were dismissed by order of the Master made on 19 December 2002 without a determination on the merits.
[1]No 8665 of 2002
On 20 December 2002 the vendor provided to the purchaser a tax invoice in which the amount of GST was set out in the amount of $308,000.00 and on 20 December 2002 the purchaser’s solicitor faxed to the vendor’s solicitor suggesting a settlement date of 14 February 2003 or earlier by agreement. The purchaser’s solicitor alleged in the letter that, given what had occurred to that point, it would be unconscionable for the vendor to insist upon settlement before the end of January 2003 and that, if the vendor did insist upon a settlement before then, the purchaser would apply to the court for “equitable relief”.
On 23 December 2002 the vendor’s solicitor responded with a letter in which he reminded the purchaser’s solicitor that the purchaser had had since 11 May 2001 to organise its finances, and he warned that if the sale did not settle by 4.00 p.m. on Monday 30 December 2002 the vendor would be exercising its rights under the contract. But the purchaser was unable to complete by 30 December 2002, because even then it had not obtained the finance that it needed, and on 31 December 2002 the vendor’s solicitor faxed to the purchaser’s solicitor a notice of rescission purporting to be served under General Condition 6 of Table A.
Doubts arose about the adequacy of service of the notice when it was later discovered that the offices of the purchaser’s solicitor had closed for the Christmas break between 25 December 2002 and 8 January 2003, and thus while maintaining that service of the notice had been effective, on 10 January 2003 the vendor’s solicitor withdrew the notice and that day delivered a further rescission notice also purporting to be given under General Condition 6 of Table A. I shall call it the Notice of Rescission of 10 January 2003.
The Notice of Rescission of 10 January 2003 began by reciting the making of the contract and a number of conditions of the contract, and the purchaser’s failure to pay the balance of the purchase price, which was described in Recital G as the “the default”, and then continued as follows:
“NOW THE VENDOR HEREBY GIVES THE PURCHASER NOTICE:
1.That the Vendor requires the Purchaser to remedy the default by paying to the Vendor:
(a)the Balance, being the sum of $9,630,500.00, plus GST of $308,000.00; and
(b)interest on the Balance of $9,630,500.00 at the rate prescribed in general condition 4 of Table A (“the applicable rate”) from the due date until the date on which the Balance of $9,630,500 is paid by the Purchaser to the Vendor (“the Interest”); and
(c)all reasonable expenses incurred by the Vendor (including but not limited to legal fees on an indemnity basis) as a result of the default, and the preparation and service of this Notice upon the Purchaser, which expenses and fees are fixed by the Vendor at $1,450.00 (“the Costs”).
2.That by the service of this Notice upon the Purchaser, the Vendor demands, pursuant to General Condition 7(b) of the Contract and general condition 4 of Table A, that the Purchaser pay the Interest to the Vendor.
3.That unless the default is remedied by the Purchaser within fourteen (14) days of the service of this Notice, by the Purchaser paying to the Vendor:
(a)the Balance of $9,630,500.00 plus GST of $308,000.00; and
(b)the Interest; and
(c)the Costs,
the Contract shall be rescinded pursuant to general condition 6(2) of Table A, and the Vendor shall… {exercise the rights said to be conferred on the Vendor by General Condition 6 of Table A}”.
On 22 January 2003 the vendor’s solicitor faxed to the purchaser’s solicitor noting that the Notice of Rescission of 10 January 2003 would expire on 23 January 2003 and asking to be advised as to the purchaser’s intentions. The purchaser’s solicitor replied on 23 January 2003 that, given the history and circumstances of the matter, the Notice of Rescission of 10 January 2003 did not make time of the essence of the contract and that he would communicate further and provide a statement of adjustments at some later time.
On 24 January 2003 the vendor’s solicitor faxed back noting that the Notice of Rescission of 10 January 2003 expired that day and inquiring whether the purchaser would be completing that day. The purchaser’s solicitor replied by fax later that day that the purchaser would not be completing that day as it was not required to do so.
On 28 January 2003 the vendor’s solicitor faxed to the purchaser’s solicitor that the purchaser had not complied with the Notice of Rescission of 10 January 2003 and therefore that the contract of sale had been rescinded. The letter went on to request that the purchaser’s caveat be removed from the register by 3.00 p.m. the next day and warned that, if it were not, an appropriate application would be made to the Court. The purchaser responded with this proceeding instituted by Writ filed on 11 February 2003.
By the Statement of Claim endorsed on the Writ the purchaser alleges that the Notice of Rescission of 10 January 2003 was defective:
(a)in that it required the purchaser to pay interest on the residue as from 1 November 2002, whereas interest did not begin to accrue under the contract until 31 December 2002; and
(b)in that it asserted that the rate of interest was 14% whereas interest was payable under the contract at the rate of only 13.5%.
It also alleges that it will soon have the finance with which to complete the contract and claims injunctions, including an interlocutory injunction, to restrain the vendor from dealing with the property otherwise than by sale to the purchaser until then.
Trial of question under Rule 47.04
The purchaser’s application for interlocutory injunction came on for hearing in the Practice Court on 18 February 2001 as a matter of some urgency. Despite the degree of urgency, however, and despite the fact that for the purposes of obtaining an interlocutory injunction the purchaser needed to do no more than establish a serious question to be tried and that it was favoured by the balance of convenience, counsel on both sides made lengthy oral submissions and tendered substantial written submissions as to the question of whether the Notice of Rescission of 10 January 2003 was effective to bring the contract to an end.
Indeed as the hearing proceeded it became apparent that the only issue of substance at present between the parties is as to the efficacy of the Notice of Rescission of 10 January 2003 and, ultimately, as the hearing neared its end I was asked by both sides to treat the application as the trial of that issue pursuant to Rule 47.04 of the Rules of Court. On the basis of assurances from both sides that there was no other evidence or argument upon which they would wish to rely upon the issue at trial, I have acceded to their request.
The parties’ contentions
The purchaser contends that it is trite law that a notice of rescission given under General Condition 6 of Table A must identify with reasonable precision and accuracy[2] the default which is relied upon and it says that because the Notice of Rescission of 10 January 2003 contained two significant errors in its specification of the obligation to pay interest, which is to say an error as to the date from which interest accrued and an error as to the rate at which interest accrued, the Notice was invalid.
[2]Reliance was placed on Falconer v Wilson [1973] 2 NSWLR 131 at 145
The vendor accepts that the Notice of Rescission of 10 January 2003 was in error in the respects identified by the purchaser, but contends that because the Notice accurately and precisely specified the purchaser’s default in failing to pay the balance of the purchase price, the Notice was effective for the purposes of General Condition 6 (despite the inclusion in the Notice of the additional erroneous demand for interest). The purchaser submits that there is high authority in the decision of Gowans J in Gair vSmith[3] and in the decision of the High Court in Legione v Hateley[4] that a notice of rescission which requires rectification of two alleged defaults is not invalidated by reason only that the requirement to rectify one of the alleged defaults is not authorised by the contract[5].
[3][1964] VR 814
[4](1983) 152 CLR 406
[5]See Gair v Smith [1964] VR 814 at 817; Legione v Hateley (1983) 152 CLR 401 at 418-9
Alternatively, the vendor contends, if the errors relating to interest did operate to invalidate the notice for the purposes of General Condition 6, the purchaser nevertheless repudiated the contract by its persistent failure to pay in accordance with the terms of a contract, of which time was of the essence, and that the Notice of Rescission of 10 January 2003 or alternatively the vendor’s solicitor’s letter of 28 January 2003, constituted an acceptance of the repudiation which brought the contract to an end.
Notice under General Condition 6
I accept the vendor’s submission that a notice given under a contractual condition such as General Condition 6 can be effective, despite the inclusion in the notice of a requirement not authorised by the contract, if the notice sufficiently specifies at least one default of which rectification is required by the contract.
In Gair v Smith[6] the contract of sale of land provided that neither party could enforce certain rights and remedies thereunder “unless he gives to the other a written notice specifying the default and stating his intention to enforce his rights and remedies unless the default is made good”. The purchaser was 88 pounds in arrears with instalments and had failed to pay to the vendor an insurance premium of 16 pounds and 3 shillings due under the contract. The vendor served on the purchaser a notice purporting to specify both defaults but made an error in the notice in the amount of the instalments alleged to be due. Consequently, although the notice purported to state two defaults, it stated only one which could be established, namely, the failure to pay the insurance premium. Gowns J held nevertheless that the notice was sufficient to bring about a rescission. In his Honour’s view:
“…The notice does not confine itself to a generalization, nor is it lacking in precision, as might have been said to be the case if the schedule had been omitted… The trouble is it alleges a default, in respect of the payment of the instalments, which is admittedly too large in its statement… As stated, it describes, in this connexion, an alleged default which had not occurred, and which cannot be established.
But it seems to me that that does not nullify the notice. That situation is taken care of by the necessity to establish the other condition that ‘the other fails within that period to remedy the default’. If the default specified cannot be established, there is no compliance with the terms of the provision.
If the default which the vendor purported to specify were not a default in performing or observing any of the terms and conditions of the contract, but something not falling within that description, the notice would not specify ‘a default’ of the kind envisaged. …
But this notice specified another default, the failure to pay the annual fire insurance premium of 16 pounds and 3 shillings. It was contended that the notice can specify only one default. That would mean that for each default there would have to be a separate notice. This contention was rejected in Pannell’s Case,….In my opinion, the contention must be rejected in the case of this contract. It is obvious that in conditions 3 and 4 the word “default” operates to cover failures to pay purchase money or interest or other moneys or to perform or observe terms or conditions of the contract. In addition, by condition 9, the singular number is to include the plural. It is clear, in my view, the word must have as wide an operation in condition 5.
In my opinion, therefore, if there can be established the specified default in payment of the annual fire insurance premium due on 27 November 1962, then notwithstanding the inability to establish the specified default in relation to the weekly instalments, the notice will be sufficient to support it.”[7].
[6]ibid
[7]ibid at 816-7
Similarly, in Green v Sommerville[8], Mason J, with whom Murphy and Aickin JJ agreed, considered that a notice of rescission was not made ineffective by the inclusion of an unauthorised requirement to complete a contract in respects other than the payment of the balance of the price, although Barwick J and Wilson took a contrary view.
[8](1979) 141 CLR 594 at 607
Any doubts about the matter appear to have been eliminated in Legione v Hately[9], in which Gibbs CJ and Murphy J in a joint judgment and Brennan J in a separate judgment expressly approved what had been said by Mason in Green v Somerville in preference to the alternative view. Gibbs CJ and Murphy J dealt with the matter in their joint judgment as follows:
“First it was submitted that the notice of rescission erroneously claimed too much and was therefore ineffective. This argument had been rejected both by the learned trial judge and in the Full Court. It appears that the notice was in error in stating that the purchasers’ default included their failure to pay interest at the rate of 14 per cent for the quarter which ended on 1 July 1979. Under the provisions of the contract to which reference has been made, that interest was payable at the rate of 8 per cent only, and interest at the rate of 14 per cent would have become payable only in respect of a period subsequent to 1 July 1979 if the interest for the last quarter had not been paid within seven days of that date and the vendor had made a demand under cl.3 of the copyright conditions as amended by cl.5 of the special conditions. The notice therefore specified a non-existent default as well as a real default. However, in Green v Sommerville, Mason J., with whom Murphy and Aickin JJ agreed, held that a notice which required the party to whom it was given, under threat of rescission, to rectify two alleged defaults when under the contract only one of those defaults provided a foundation for rescission, was not invalidated by the presence of the additional unauthorized requirement. Barwick CJ and Wilson J took a different view. The decision in that case accords with that of Gowans J in Gair v Smith. We did not consider it appropriate to allow this question, so recently decided in this Court, to be reopened. This submission therefore fails.”[10]
[9](1983) 152 CLR 406
[10]ibid at 418-9
Brennan J in his Honour’s separate judgment stated that:
“The notice specified two defaults: the failure to pay the residue of the purchase price on 1 July 1979 and the failure to pay interest at the rate of 14 per cent per annum for the quarter ended 1 July 1979. The rate specified was higher than the rate to which the vendors were entitled, but the notice was not thereby invalidated: Green v Sommerville. The default in payment of the residue was truly stated. The notice accorded with the requirements of sub-cl.(1). A statement was indorsed on the notice, in accordance with sub-cl.(2)(a), that the contract would be rescinded unless the default therein specified was remedied and the costs thereby demanded were paid within fifteen days from the giving of the notice. It is common ground that the time for compliance with the notice expired at midnight on 10 August 1979, and that that time passed without the default in payment of the residue of the purchase price being remedied or the costs being paid. Unless the notice ceased to have the effect which sub-cl.(2)(a) accorded to it, the contract became rescinded at midnight on 10 August, and the purchasers’ tender of performance on 15 August was lawfully rejected.”[11]
[11]ibid at 451-2
It was submitted on behalf of the purchaser in this case that the decisions in Gair v Smith and Legione v Hateley are distinguishable on the basis that, whereas in those cases the defaults which were incorrectly alleged in the notices of rescission were defaults under covenants separate from the covenants in respect of which notice of default was properly given, in this case the alleged obligation to pay interest was an obligation which arose out of the covenant to pay the purchase price. Thus, according to the purchaser’s submission, while it may be that the reasoning in Gair v Smith and Legione v Hately could have applied in this case if there had been a special condition in the contract requiring payment of interest, in fact it does not apply in this case because there was no such obligation in the contract. Further, according to the purchaser, in Gair v Smith and Legione vHateley each of the notices referred to two separate defaults, only one of which was misstated, but in this case the Notice of Rescission of 10 January 2003 must be taken as alleging only one default (because the obligation to pay interest in this case arose out of default in the payment of purchase price), and the specification of that one default must be treated as rendered erroneous by the assertion in the notice that the obligation entailed interest as well as principal.
I reject the purchaser’s submissions. To begin with, it appears to me that the obligation to pay interest in this case is imposed by a covenant which is separate and distinct from the covenant to pay the purchase price. The contract imports the provisions of Table A and thus makes them conditions of the contract. Hence the obligation to pay interest that is provided for in General Condition 5 of Table A is imposed by a provision of the contract. Doubtless, the covenant to pay interest is only engaged upon default under the covenant to pay the purchase price. But that does not make it any the less an obligation distinct from the obligation to pay the purchase price.
In the second place, it does not seem to me that the reasoning in Gair v Smith and Legione v Hateley turned on whether or not there were two separate and distinct obligations mentioned in the notices of rescission with which they were concerned. Rather, as I comprehend it, it was concerned with a more general conception that an excessive demand and a failure to comply with so much of it as is not excessive is capable of initiating the consequences for which General Condition 6 provides. So much appears as plain in the reasoning of Gowans J in Gair v Smith (on which all of the subsequent decisions have been based), for his Honour there described the effect of referring to interest in the notice, not as the specification of a separate default, but rather as alleging a default in respect of the payment of the instalments which was “admittedly too large in its statement”.
In the third place, in case it matters, I consider that the structure of the Notice of Rescission of 10 January 2003 was such as to require not one but two things of the vendor, namely, payment of the principal as specified in paragraph (a), and payment of interest as specified in paragraph (b). Hence, if it were necessary that there be two obligations specified in a notice of rescission in order to attract the operation of the reasoning in Gair v Smith and Legione v Hateley, I consider that the requirement was met.
All that having been said, however, I do not consider that the Notice of Rescission of 10 January 2003 had the effect of bringing the contract to an end in accordance with General Condition 6 of Table A.
Originally time was of the essence of the contract, because it was so provided in General Condition 5. But once the due date for completion had come and gone without the vendor treating the contract as grounds for rescission, I regard the stipulation as to time as having been waived, and thus time as having ceased to be of the essence[12]. At that point General Condition 6 ceased to apply, and while it was open to the vendor upon proper notice once again to make time of the essence (and for reasons to which I shall come, I consider that that is the effect of what the vendor later did), it was not open to the purchaser or the vendor to revive the operation of General Condition 6 once it had been spent. The point is made by Pape J in Thornton v Bassett[13] as follows:
“The provision requiring notice to be given is in cl.6 of Table A expressed in the form of a proviso to a provision that time shall be of the essence of the contract in all respects. It restricts the right of rescission to cases where, because time is of the essence, an immediate right of rescission would be available to the vendor but requires that before that right is exercised, notice must be given. But once the provision that time is to be of the essence is waived, as it undoubtedly was in this case, in my view cl.6 of Table A has no further operation. Clause 6 was in my view intended to apply to cases where time is of the essence substantially the same principle which would apply if it were not of the essence, namely, that before rescinding, the purchaser must be given an opportunity of remedying his default, Once cl.6 ceases to be effective because it has been waived, the common law position obtains, namely, that after default and unreasonable delay, the vendor may fix a reasonable time for performance and so make time again of the essence. Any default occurring by a failure to comply with a notice so given is not then in my view default ‘in the observance of any of the terms and conditions of the contract’ within the meaning of those words in cl.6 of Table A nor does the vendor then purport to exercise his rights and remedies ‘arising out of such default’.” (Emphasis added).[14]
[12]See Mehmet v Benson (1965) 113 CLR 295 at 303; Foran v Wight (19889) 168 CLR 385 at 457 – 8; cf. Tropical Traders v Goonan (1964) 111 CLR 52 - 4
[13][1975]VR 407 at 429
[14]See also Poort v Development Underwriting (Victoria) Pty Ltd (No 2) [1977] VR 454(FC) at 461
Repudiation
I turn therefore to the vendor’s alternative contention that even if the Notice of Rescission of 10 January 2003 were not effective to bring the contract to an end in accordance with General Condition 6 of Table A, the purchaser nevertheless repudiated the contract, by its persistent failure to pay in accordance with the terms of a contract of which time was of the essence, and that the Notice of Rescission of 10 January 2003 or alternatively the vendor’s solicitor’s letter of 28 January 2003 constituted an acceptance of the repudiation which brought the contract to an end.
As has already been explained, the effect of allowing the due date for completion to pass was that time ceased to be of essence of the contract, and it could not again be made to be of the essence without reasonable notice first being given. In point of fact such a notice was not given before the service of the Notice of Rescission on 10 January 2003. A purported notice of rescission had been served on 30 December 2002, but it had been withdrawn. In the result, time was not of the essence of the contract as at 10 January 2003, and as at that date there was no repudiation of the contract by the purchaser which would have entitled the vendor to rescind the contract. Accordingly, I reject the vendor’s contention that the Notice of Rescission of 10 January 2003 amounted to an acceptance of a repudiation of the contract which brought the contract to an end.
But that is not to say that the Notice of Rescission of 10 January 2003 is immaterial to the outcome. On the contrary, although it did not have the effect of bringing the contract to an end, I think that it did have the effect of once more making time of the essence of the contract. It specified a period of 14 days for the payment of the purchase price, and in terms it made plain that if the price were not paid within that time the contract would come to an end and, in all the circumstances, I consider that 14 days was a reasonable period of time. Thus, in my opinion, the Notice of Rescission of 10 January 2003 comprised a demand for payment of the purchase price, within a reasonable period of time, coupled with a warning that, failing compliance, the vendor would treat the contract as at an end.
It does not matter I think that the notice may have been given in the mistaken belief that General Condition 6 still applied, or that the notice expressed the consequences which would have followed from failure to comply if General Condition 6 did still apply. As Pape J explained in Thornton v Bassett:
“But even if the notice were given in the mistaken belief that time was still of the essence of the contract, that does not in my opinion deprive the notice of the essential characteristics of a notice fixing a time for completion within the meaning of the authorities. The question then arises whether the time of fourteen days fixed thereby was a reasonable time. In considering what was a reasonable time the whole of the circumstances of the case must be considered, including the nature of the property sold, the importance of time to the parties, the previous conduct of the parties, what remains to be done at the time of the notice, the previous delay of the party to whom the notice is given and the attitude of the innocent party in relation thereto - taking into account not only conveyancing matters but also that the innocent party has been continually pressing for completion.” [15]
Similarly, in Nund v McWaters[16] Brooking , in whose judgment Starke and Murphy JJ agreed, took the view that such a notice given in the mistaken belief that a provision similar to General Condition 6 continued to apply was enough once more to make time of the essence of the contract.
[15]supra at 427
[16][1982]VR 575 at 583
It may perhaps be said that there is a difference between the Notice of Rescission of 10 January 2003 and the notices which were the subject of consideration in Thornton vBassett and Nund v McWaters. For whereas Gowans J and Brooking J said of the notices in those cases that they were concerned with only one simple default[17], namely, the failure to pay the purchase price, it could be said of the Notice of Rescission of 10 January 2003 that it was concerned with two alleged defaults, namely, failure to pay purchase price and failure to pay interest or, if one adopts the purchaser’s preferred characterisation of the notice, that it was concerned with one obligation but the amount of the obligation was erroneously inflated.
[17]In Thornton v Bassett, supra at 427, Pape J noted that “the notice required only one thing to be done, namely, the payment of $21,000”; and in Nund v McWaters , supra at 583, Brooking J noted that the notice was “concerned only with the simple default, the failure to pay $9817.36”
But I do not consider that that difference between the contents of the notices makes any difference in result. Read in context it can be seen that the only purpose of Gowans J’s and Brooking J’s references to the simple nature of the defaults, was to explain that a period of 14 days was a reasonable period of time in which to cure a default as simple as failure in payment. Implicitly, 14 days might not be thought a reasonable period of time in which to cure some other more complex default. In this case, regardless of whether the Notice of Rescission of 10 January 2003 is to be taken as specifying one default or two defaults, it remains that all that the Notice required be done within 14 days was that a sum of money be paid. Therefore, in this case, as in Gair v Smith and Nund v McWaters, 14 days may be regarded as a reasonable period of notice.
In any event it seems to me that just as a notice given under General Condition 6 may be effective for the purposes of that condition notwithstanding that it specifies an excessive amount as payable, so too may a notice be effective to make time of the essence of an obligation to pay an amount, notwithstanding that the notice specifies an excessive amount as payable. If the matter is approached on the basis that the Notice of Rescission of 10 January 2003 specified two defaults, the position appears to me to be covered by the reasoning of Mason J in Green v Sommerville, that a notice which required the party to whom it was given, under threat of rescission, to rectify two alleged defaults when under the contract only one of those defaults provided a foundation for rescission, was not invalidated by the presence of the additional unauthorised requirement. If on the other hand, the matter is approached on the basis of the purchaser’s preferred characterisation, which is to say that the Notice of Rescission of 10 January 2003 expressed one inflated default, the position appears to be covered by the reasoning of Gowans J in Gair v Smith which was approved in Legione, that:
“A notice which specifies a default in the payment of money, which while falling within the description names a sum greater than that due, is not bad, but creates the situation that the party giving the notice cannot establish the default” [18]
That is to say the party giving the notice cannot establish default in an any amount greater than the sum which is due but can establish default in respect of so much of the amount specified in the notice as is due.
[18]supra at 817
Once it appears that the Notice of Rescission of 10 January 2003 was effective to again make time of the essence of the obligation to pay the purchase price, it follows that the purchaser’s failure to pay the purchase price within the 14 days set in the notice constituted a repudiation of the contract entitling the vendor to rescind. Of course, the vendor could only rescind by accepting the repudiation, for as has already been explained, General Condition 6 had ceased to apply when the time for completion specified in the contract was first allowed to pass. But I think it clear that the vendor did accept the repudiation, by delivery of the vendor’s solicitor’s letter of 28 January 2003. The letter noted that the purchaser had not complied with the vendor’s rescission notice and stated that the contract had been rescinded as a result.
As with the Notice of Rescission of 10 January 2003, it may be observed that the author of the letter of 28 January 2003 was proceeding upon the misconception that General Condition 6 remained applicable, and that the rescission to which reference was made was a rescission pursuant to that condition. But I regard that as immaterial, just as Brooking J regarded a similar mistake as immaterial in Nund v McWaters. Brooking J dealt with the problem in Nund v McWaters as follows:
“In the present case, the notice of 16 December 1976, speaks of rescission pursuant to the Transfer of Land Act and pursuant to “any other Provision “ of the contract of sale. The notice of 23 February 1977 refers back to the earlier notice of 16 December . That earlier notice in fact states the consequences of rescission in a way that is not accurate, having regard to the reference to forfeiture of instalments, with respect to rescission for repudiation (or, for that matter, rescission pursuant to condition 6(2) of Table A or copyright condition 5(2). Moreover, the right conferred by condition 6(2) of Table A and copyright condition 5(2) on a vendor who retains the land to retain instalments pending the determination of damages is a right which he evidently does not enjoy if he discharges the contract in consequence of the purchaser’s repudiation… So it may be said that the consequences of discharge for repudiation differ from those of rescission under either of the two conditions. Having regard to this, if, for example, a vendor purports to rescind under condition 5(2), can he then say that he has discharged the contract for repudiation?...[19]
… Shepherd v Felt and Textiles of Australia Ltd (1931) 45 CLR 359… is itself sufficient to warrant and indeed require the conclusion in the present case that the notice dated 23 February 1977 was effective to rescind the contract of sale on the ground of the purchaser’ repudiation, notwithstanding that the notice of 23 February referred back to the notice of 16 December, a notice which itself spoke of rescission pursuant to the Transfer of Land Act and “any other provision of the said contract and stated consequences of rescission for repudiation inaccurately, and notwithstanding that discharge for repudiation has results that are not the same in all respects as rescission founder copyright condition 5(2)…”[20].
[19]supra at 585
[20]supra at 589
In the result, I consider that the contract of sale came to an end upon the service on the purchaser’s solicitor of the letter of 28 January 2003.
Conclusion
For the reasons given, I am prepared to make a declaration that the contract of sale came to an end on 28 January 2003 upon service on the purchaser’s solicitor of the vendor’s solicitor’s letter of that date.
I will hear counsel on the form of orders
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CERTIFICATE
I certify that this and the 15 preceding pages are a true copy of the reasons for judgment of Nettle J of the Supreme Court of Victoria delivered on 21 February 2003.
DATED this day of 2003
__________________________
K.M. Wriedt
Associate to Justice Nettle
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