Carydis v Merrag Pty Ltd

[2007] NSWSC 1220

CITATION:	Carydis v Merrag Pty Ltd [2007] NSWSC 1220
HEARING DATE(S):	19 - 20 September 2007
JURISDICTION:	Equity Division Expedition List
JUDGMENT OF:	Brereton J
EX TEMPORE JUDGMENT DATE:	20 September 2007
DECISION:	Decree of specific performance granted to purchaser subject to compensation to vendor.
CATCHWORDS:	CONTRACTS – Conditional contracts – accord and satisfaction – whether formation or performance of contract conditional – Repudiation – Abandonment – Remedies – Specific Performance. - EQUITY – Equitable remedies – specific performance – whether purchaser ready, willing and able to complete – when readiness must be established – specific performance with compensation to defendant - where plaintiff has been in default of non-essential time condition – compensation allowed to vendor.
LEGISLATION CITED:	(NSW) Conveyancing Act 1919, ss 52A, 66U (NSW) Conveyancing (Sale of Land) Regulation 2005
CASES CITED:	Commonwealth Refineries Ltd v Hollins [1956] VLR 169 Fitzgerald v Masters (1956) 95 CLR 420 Mehmet v Benson (1965) 113 CLR 295 Osborn v McDermott [1998] 3 VR 1 Perri v Coolangatta Investments Pty Ltd (1982) 149 CLR 537 Sommers v Pearse (NSWCA, 16 December 1993, unreported, BC 9302367)
PARTIES:	Spero Danis Carydis (first plaintiff) Helen Travassaros (second plaintiff) Merrag Pty Limited (defendant)
FILE NUMBER(S):	SC 3001/07
COUNSEL:	Mr F Kunc v Mr C Bova (plaintiffs) Mr G Moore (defendant)
SOLICITORS:	Gadens Lawyers (plaintiffs) DTA Lawyers (defendant)

IN THE SUPREME COURT
OF NEW SOUTH WALES
EQUITY DIVISION
EXPEDITION LIST

BRERETON J

Thursday, 20 September 2007

3001/07 Spero Danis Carydis v Merrag Pty Limited

JUDGMENT (ex tempore)

1 HIS HONOUR: Prior to 22 March 2004 the first plaintiff Spero Danis Carydis, the second plaintiff Helen Travassaros, and Ms Mary Lane were the registered owners of real property situate at and known as 11-13 Oaks Avenue, Dee Why. Prior to 4 November 2003, they had entered into negotiations with Mr Michael Khoury and Mr Rodney Khoury on behalf of the defendant Merrag Pty Limited, for the sale of the Dee Why property. On 4 November 2003, Mr Carydis, Ms Travassaros and Ms Lane as vendors and Merrag as purchaser exchanged contracts for sale of the Dee Why land; the contract contemplated that contemporaneously with exchange the parties would execute deeds of put and call option in respect of five of the proposed units, which would be dated upon completion of the contract.

2 The contract was duly completed on 17 March 2004, and the deeds of put and call option, in respect of the lots which ultimately became lots 2, 3, 21, 22 and 30 were dated that day. The deeds of put and call option granted to Mr Carydis (in respect of lots 3, 21, 22 and 30), and Ms Travassaros (in respect of lot 2), a call option to purchase the respective lots at any time during the call option exercise period (defined as the period commencing 43 days after the date of the option deed and ending at any time prior to 5pm 14 days following receipt by the purchaser of written notification from the vendor of the registration of the strata plan reflecting the approved building plans required under the contract). The option deed provided that upon exercise of the call options, the parties were deemed to have entered into a binding and enforceable agreement for sale of each unit, subject to the conditions of each annexed draft contract. Conversely, Merrag was granted a put option in relation to the same lots, exercisable during what the put option expiry period (defined as the period of seven days commencing on the day of the expiry of the call option exercise period).

3 Each draft contract included a Special Condition 3, in the following terms:

3. If completion of this Contract does not take place on the completion date as specified on Page 1 of the Contract otherwise than as a result of any default by the vendor the purchaser shall pay interest at the rate of ten per centum per annum (10%) on the balance of the purchase price and any other monies owing pursuant to this contract from the completion date until the date that completion actually takes place (but without prejudice to all or any other rights of the vendor pursuant to this Contract) and in addition the sum of $220.00 to cover legal costs and other expenses incurred as a consequence of the delay and it is agreed that the said interest and sum are a genuine pre-estimate of the vendor’s losses. It is an essential term hereof that such interest amount be paid on completion.

4 In October 2005, Mr Carydis and Ms Travassaros lodged a caveat in respect of the Dee Why property. The strata plan was registered on 20 December 2005, and Merrag’s solicitors gave notice of its registration to Mr Carydis and Ms Travassaros on 21 December 2005. The next day, 22 December 2005, Mr Carydis exercised his call option in respect of lots 3, 22, and 30, but not in respect of lot 21, and Ms Travassaros exercised her call option with respect to lot 2. On 11 January 2006, Merrag exercised its put option with respect to lot 21. However, on 16 January 2006, Mr Carydis, in purported reliance on (NSW) Conveyancing Act 1919, s 66U, purported to rescind the resultant contract.

5 From that point, the parties were in dispute as to a range of matters in respect of their contractual relations, but at the heart of that dispute was whether Mr Carydis was indeed entitled to rescind the contract in respect of lot 21, and in connection with that, whether the true intention of the parties had always been that the put and call options were all interdependent, so that only all or none of them could be exercised. The dispute continued over some months. During that period, the caveat was withdrawn in respect of various of the lots in the development, as units were sold by Merrag. However, the caveat remained in force in respect of the five lots the subject of the put and call options.

6 On 3 July 2006, apparently following discussions between the parties prior to that day, Gadens, the solicitors for Mr Carydis and Ms Travassaros, sent a facsimile letter to DTA Lawyers, who by this time were acting for Merrag. which provided as follows:

We refer to your recent discussions between our respective clients.

Pursuant to those discussions, we are instructed that our respective clients have agreed to this matter being resolved on the following bases:

1. Mr Carydis will enter into a contract for sale in respect of Lot 21 on the same terms and conditions of the contract attached to the relevant deed of put and call options with the inclusion of the registered strata plan and by-laws.

To facilitate exchange and settlement, you will promptly provide us a copy of the contract for sale of Lots 21 duly executed by your client. After receipt of that contract we will attend to exchange of the contract and forward the counterpart signed by our client to you. The deposit under the rescinded contract, that is being held by your client's agents, will be the deposit under the new contract and the interest earned since the deposit was first paid will be dealt with under the new contract.

2. Settlement of the contracts of Lots 2, 3, 21, 22 and 30 will take place as soon as practicably possible. In this regard our clients are willing to target Monday, 10 July 2006 as the settlement date.

3. You will promptly provide us with copies of the contracts for sale of Lots 2, 3, 22 and 30 executed by your client. In this regard we note that receipt of these copies is essential to enable Mr Carydis to satisfy his mortgagee's requirements.

4. As a gesture of goodwill and so as to facilitate the resolution of all disputes between our respective clients, our clients will make an ex gratia ex gratia payment of $35,000 to your client. In order to assist your client in funding the works referred to in paragraph 5, $5,000 of these monies will be paid to your client immediately on confirmation of the contents of this letter. The balance of $30,000 will be paid at settlement and held in trust by your firm subject to and pending completion of the works referred to in paragraph 5.

5. Your client will as soon as practicable, which may be after settlement, complete the construction works at Lots 30, 21 and 20 in accordance with the contracts for sale in a Prosecutor and workmanlike manner by:

· for Lot 30, installing sliding doors between the bedroom and the balcony and installing the built in robe in the second bedroom and linen cupboard in the hall;

· for lots 20 and 21, installing the linen cupboards in the hall,


that are indicated on the plan accompanying each contract. In this regard, your client will use its reasonable endeavours to complete these works as soon as possible and in any event within 28 days of settlement.

6. At settlement our clients will return the National Australia Bank bank guarantee to your client.

7. As expeditiously as possible, which may be before or after settlement, your client will procure, and provide our client with copies of, the following special resolutions by the Owners Corporation of Strata Plan SP76171:


(a) That, by special resolution, the owners of retail Lots 2 and 3 are permitted to install within the common property a grease trap servicing Lots 2 and 3 in a location to be agreed by the developer and the owners of Lots 2 and 3 with the approval of the vendor and also strict maintenance of the grease trap as required and if this is not adhered to stringently, the Owners Corporation will proceed to service and maintain and will forward all costs for payment by the owners of Lots 2 and 3, and are permitted to penetrate the common property for the purposes of connecting the grease trap to Lots 2 and 3. Additionally, the owners of Lots 2 and 3 and their contractors are permitted to access the common property in any way reasonably necessary for the installation of the grease-trap;

(b) That, by special resolution, the Owners Corporation consents to the removal, realignment or alteration of the dividing wall between Lots 2 and 3 from time to time, by the owners of the Lots 2 and 3.


8. Within three month of settlement, your client will rectify the agreed defects in Lots 2, 3, 22 and 30 as notified in our faxes to Mary Khoury dated 16 February and 20 February 2006 and in any other notices from other clients. In relation to Lot 21, our client will be deemed to have notified the defects that are recorded in the Building Report prepared by the City Plans Services that accompanied our fax dated 16 February 2006 to Mary Khoury.

Mr Carydis will make himself available at all reasonable times to meet with your client or its contractors on site to facilitate the expeditious and satisfactory completion of works and rectification of defects. His contact telephone numbers are [phone] and 0425 224 879.

9. To the extent that the contracts for sale of Lots 2, 3, 21, 22 and 30 contain provisions requiring the purchaser to pay interest on the purchase price (or additional purchase price) for any reason, those provisions of each of the contracts for sale are waived and will not be relied on or enforced by the vendor.

We look forward to your urgent confirmation that this letter records the agreement between our respective clients, and to receipt of the lot 21 contract and copies of the other contracts.

7 On 5 July 2006, Mr Trodden of DTA replied by email in the following terms:

Client is happy with all of the matters referred toxin [sic] your letter - will fax signed front pages to you later today DTA.

8 On 6 July 2006, Mr Trodden forwarded to Gadens, by facsimile, front pages of the contracts in respect of lots 2, 3, 22, and 30, executed by Merrag as vendor.

9 On 10 July 2006, Gadens wrote to DTA requesting an occupation certificate for lots 2 and 3, which were retail shop premises. Pursuant to Conveyancing Act, s 52A, there are implied in a Contract for Sale of a lot in a strata plan, in the absence of a provision in the contract to the effect that an occupation certificate will not be issued before completion, the terms set out in clause 2 of Schedule 2 to the (NSW) Conveyancing (Sale of Land) Regulation 2005 - the effect of which is to require the vendor to serve, at least 14 days before completion, the original or a copy of an occupation certificate, and that the purchaser does not have to complete earlier than 14 days after such service. Conveyancing Act, s 52A, has the effect that, except insofar as the regulations otherwise provide, a provision in a Contract for Sale of land that would have the effect of excluding, modifying or restricting any provision so implied is void. Insofar as the term referred to in paragraph 2 of the 3 July 2006 letter would require completion earlier than 14 days after the issue of the relevant occupation certificates, it would have the effect of excluding, modifying or restricting the provision implied by regulation 6 in Schedule 2, clause 2.

10 On 11 July, Gadens again wrote to DTA Lawyers requesting an occupation certificate for lots 2 and 3 and stating:

Once we have that occupation certificate we will be willing to move to settlement without delay.

11 On 21 August 2006, DTA sent to Gadens occupation certificates stating:

We refer to the above matter and enclose the occupation certificates as requested. We look forward to the receipt of amended settlement figures for settlement on 23 August 2006.

12 As has been submitted on behalf of Mr Carydis, it appears (from the material tendered in the agreed bundle of documents), that the occupation certificates then submitted were incomplete, and no further evidence was tendered to show that complete certificates were in fact provided at that time. On 22 August, DTA asked Gadens to provide updated draft settlement figures at their earliest convenience, and in a subsequent facsimile anticipated receipt of updated settlement figures for 24 August 2006. On 6 September 2006, DTA provided complete occupation certificates and requested Gadens to make arrangements to settle the matter without further delay.

13 It appears that during October 2006 a proposal was advanced on behalf of the purchasers for some alternative means of completing the matter; however, this was abandoned by about 6 November 2006, when Gadens sent to DTA a letter confirming their clients’ readiness to proceed to completion under the terms of the contract "as varied by our letter dated 3 July 2006. Any suggestion as to an alternative way of proceeding is withdrawn", and nominating 15 November 2006 as the completion date.

14 DTA replied, on 15 November 2006:

We are unsure as to the exact basis upon which your client suggests that it is in a position to proceed to settlement. In particular, do your clients assert that they are entitled to unilaterally vary the terms of the contract? This appears to be the implication of your reference to your letter of 3 July 2006.

15 That comment appears to overlook the apparent acceptance by DTA's email of 5 July 2006 of the terms of the letter of 3 July 2006, by reason of which the variation was not unilateral. DTA’s letter proceeded to request the submission of draft settlement statements for review. On 22 November 2006, Gadens sent to DTA a cheque for $5,000, being one of the sums referred in paragraph 4 of the 3 July letter, a contract executed by Mr Carydis as purchaser in respect of lot 21 by way of exchange, draft transfers for execution by the vendor of lots 2, 3, 22 and 30, and various other documents in preparation for completion. On 5 December 2006, not having received a reply to the letter of 21 November, Gadens served notices to complete in respect of lots 2, 3, 22 and 30, and notice to perform including by way of exchange of contracts in respect of lot 21; the notices to complete were expressed to appoint 19 January 2007 for completion, and to make time the essence of each contract.

16 On 13 December 2006, DTA wrote to Gadens, asserting that the effect of Gadens' 3 July letter was to acknowledge the interdependency of the contracts and the requirement for simultaneous settlement, and that the contract in respect of lot 21 had not been effectively rescinded. DTA also remarked that the letter of 3 July had proposed settlement for Monday 10 July 2006 and that the purchasers had been unable to fulfil that commitment. The letter continued:

8. From the correspondence, it would appear that your clients are erroneously contending that they are entitled to complete the five contracts without complying with the provisions of the Contracts regarding payment of interest at 10% per annum from 17 February, 2006.

Please advise by no later than 12 midday on Monday 18 December, 2006, whether or not your clients are prepared to settle the purchases of each of the five contracts on the basis that they will pay interest of 10% per annum from 17 February, 2006.

If you fail to confirm, (by no later than 12 midday on Monday 18 December, 2006) that your clients are prepared to settle the purchases of each of the five contracts on the basis that they will pay interest at 10% per annum from 17 February, 2006, then our office will assume that your clients are only prepared to settle on the basis referred to in the paragraph numbered 8 above. In other words, we will assume that your clients are only prepared to settle on the basis that no interest is payable by reason of your clients' failure to settle on or before 17 February 2006.

17 Gadens did not respond to that letter, and on 20 December 2006 DTA wrote to Gadens as follows:

As was clearly stated in our letter, in the absence of a response to our letter, we presume that your clients are only prepared to settle the transactions upon the basis that no interest is payable to our clients. Your office has not seen fit to suggest that our presumption is incorrect.

Assuming that your clients are only prepared to settle the transactions upon the basis that no interest is payable to our clients, it follows that your clients have repudiated their obligations under the agreements.

We advise that our clients accept your clients' repudiation. Our clients hereby terminate each of the agreements.

18 Gadens responded, on 21 December 2006, rejecting the assertion that failure to respond to the letter of 13 December was a repudiation, maintaining that their client had, since 3 July, been willing to proceed to completion of the contracts according to their terms as amended by the 3 July letter, and seeking an explanation as to the basis upon which DTA's client asserted an entitlement to interest under the contract. On 9 January 2007, DTA responded, maintaining the vendor's position and purporting to reserve all rights. Gadens responded on 18 January, maintaining the purchasers' position, and asserting that the purchasers would commence proceeding for specific performance, damages and costs. On 9 March 2007, Gadens wrote to DTA confirming that they had been instructed to commence proceedings for specific performance. On 3 April 2007, Gadens again wrote, to the effect that their clients maintained the position that Merrag was required to complete the five contracts in accordance with their terms, but were prepared to have a meeting in an attempt to avoid the time and expense of legal proceedings; the letter concluded with a reservation of all rights. On 23 May 2007, Merrag served a lapsing notice in respect of the caveat, following which the present proceedings were instituted. Prior to the hearing, the proceedings between the second plaintiff Ms Travassaros and the defendant were settled, and it is only necessary to resolve the dispute as between the first plaintiff Mr Carydis and Merrag.

Was a binding and enforceable contract made on 5 July?

19 At the heart of these proceedings is the effect of the correspondence of 3 and 5 July 2006 and, in particular, whether that exchange of correspondence resulted in a binding and enforceable contract or variation.

20 Prior to July 2006, the parties were in dispute as to whether there were on foot binding contracts for the sale by Merrag and the purchase by Mr Carydis of any or all of lots 3, 21, 22, and 30, arising out of the purported exercise of the put and call options and their subsequent purported rescission. The exchange of correspondence of 3 and 5 July documented a consensus between the parties as to the terms on which their commercial arrangements would move forward in the light of the dispute that had taken place. For present purposes, it is unnecessary to resolve whether or not in fact the put and call options were interdependent and whether or not Mr Carydis was truly entitled to rescind the lot 21 contract. What is clear is that there was substantial dispute between the parties as to those matters, and substantial dispute as to what were their true rights and obligations in the circumstances.

21 The letter of 3 July recorded consensus, first, that Mr Carydis would enter into a Contract for Sale in respect of lot 21; secondly, that settlement of the contracts for all five lots would take place as soon as practicably possible (implicitly accepting that there were binding contracts in respect of the other four lots); thirdly, that Mr Carydis and Ms Travassaros would make a payment of $35,000 to Merrag; and, fourthly, that the provisions in the contracts for sale of land requiring the purchaser to pay interest or additional purchase price were waived and would not be relied on or enforced.

22 That there was consensus on these matters is apparent from the email of 5 July 2006, which confirmed Merrag's concurrence with the letter of 3 July 2006. Merrag submits that the effect of this was to produce an accord executory (or, in more generic terms, a conditional contract in the sense that formation of any contract was conditional upon performance of certain acts); Mr Carydis contends that its effect was an accord and satisfaction proper (generically, an unconditional contract) or, at least, an accord and conditional satisfaction (or, generically, a conditional contract in the sense that obligation to perform, as distinct from formation of the contract, was subject to conditions).

23 The distinction between these types of contract, in the more generic terms, was elucidated by Mason J in the High Court of the Australia in Perri v Coolangatta Investments Pty Ltd (1982) 149 CLR 537 (at 551-552):

This divergence in approach calls for some discussion of the nature of conditions generally and of the characteristics of special condition 6 in particular. There is an obvious difference between the condition which is precedent to the formation or existence of a contract and the condition which is precedent to the obligation of a party to perform his part of the contract and is subsequent in the sense that it entitles the party to terminate the contract on non-fulfilment. In the first category the transaction creates no rights enforceable by the parties unless and until the condition is fulfilled. In the second category there is a binding contract which creates rights capable of enforcement, though the obligation of a party, or perhaps of both parties, to perform depends on fulfilment of the condition and non-fulfilment entitles him to terminate.

Conditions precedent within the first category may produce different consequences. In most cases, but perhaps not in all, a party may be able to withdraw from the transaction before fulfilment of the condition. But in each class of case, the transaction creates no enforceable rights in respect of the subject matter of the transaction unless the condition is fulfilled because, until the occurrence of that event, there can be no binding contract. There is also a problem in classifying a transaction which imposes an obligation on a party not to do anything which will prevent fulfilment of the condition. Even if it is to be placed in the first category, that consisting of conditional contracts - and I have some difficulty in placing it there - it yields no enforceable rights with respect to the subject matter of the transaction unless and until the contract is fulfilled, though the obligation not to prevent fulfilment of the condition will be enforceable in the event of its breach.
Generally speaking the court will tend to favour that construction which leads to the conclusion that a particular stipulation is a condition precedent to performance as against that which leads to the conclusion that the stipulation is a condition precedent to the formation or existence of a contract. In most cases it is artificial to say, in the face of the details settled upon by the parties, that there is no binding contract unless the event in question happens. Instead, it is appropriate in conformity with the mutual intention of the parties to say that there is a binding contract which makes the stipulated event a condition precedent to the duty of one party, or perhaps of both parties, to perform. Furthermore, it gives the courts greater scope in determining and adjusting the rights of the parties. For these reasons the condition will not be construed as a condition precedent to the formation of a contract unless the contract read as a whole plainly compels this conclusion.

24 In the more specific context of accord and satisfaction, the same distinction was discussed by Phillips JA in Osborn v McDermott [1998] 3 VR 1, as follows (at 10):

Thus, there are three possibilities, not two. First, there is the mere accord executory which, on the authorities, does not constitute a contract and which is altogether unenforceable, giving rise to no new rights and obligations pending performance and under which, when there is performance (but only when there is performance), the plaintiff's existing cause of action is discharged. Secondly, at the other end of the scale is the accord and satisfaction, under which there is an immediate and enforceable agreement once the compromise is agreed upon, the parties agreeing that the plaintiff takes in satisfaction of his existing claim against the defendant the new promise by the defendant in substitution for any existing obligation. Somewhere between the two, there is the accord and conditional satisfaction, which exists where the compromise amounts to an existing and enforceable agreement between the parties for performance according to its tenor but which does not operate to discharge any existing cause of action unless and until there has been performance.

Where there is a mere accord executory, no suit can be maintained upon the compromise unless and until there has been performance, and then suit is ordinarily unnecessary. Upon default in performance, the plaintiff's existing cause of action continues unaffected. With accord and satisfaction, either party may sue upon the compromise, but only on the compromise and for nothing else: the original cause of action has gone. Where there is accord and conditional satisfaction, the plaintiff is bound to await performance and accept it if tendered, but if there be no performance, then the plaintiff may proceed according to general principles called into play when any agreement is repudiated: the plaintiff may either treat the agreement (the accord) as at an end and proceed on his original cause of action; or he may, at his option, sue on the compromise agreement, in place of the original cause of action. Thus, the consequence should there be default in performance varies according to the case and, as indicated by Murphy J in Fraser at 401-2, it would be surely in the best interests of the parties if their legal advisers saw to it, when settling litigation, that the intended consequence upon default was clearly expressed and not left to implication.

25 In the letter of 3 July 2006, there is no suggestion that anything remains to be agreed, or that anything was subject to further documentation. There is nothing in the letter to suggest that formation of agreement was conditional upon any matter, other than confirmation that it accurately recorded the agreement, which was forthcoming on 5 July. None of its terms or provisions are expressed to be "subject to" or "conditional upon" anything, nor are any of the obligations expressed as provisos using terminology such as "provided that". (That the parties knew how to use such terminology, if required, is apparent from clause 5 which, in the last sentence, uses the terminology "subject to and pending completion”, in respect of the release of the $30,000 payment). In my view, there is simply nothing in the letter of 3 July to lend support to any view other than that it was an unconditional contract, or if it be regarded in terms of accord, an accord and satisfaction proper. Neither formation of the contract, nor performance of any of the obligations it imposed, was made conditional on anything.

26 It follows that, in my opinion, the effect of the exchange of correspondence on 3 and 5 July 2006 was to amend in part, and otherwise confirm, the obligations under the existing five contracts, and to introduce some additional obligations (for example, the payment of $35,000). One consequence is that, by clause 9, the provisions as to interest in the five contracts for sale (in particular, special condition 3), were waived and were not able to be relied on or enforced by the vendor. It follows also – from my conclusion that the agreement was not conditional upon any act, either as to formation of the agreement or as to performance of its terms, that default in performance of a term did not result in avoidance of the contract: any such default was a breach of a term, and if it were a breach of an essential term would have given rise to a right to terminate, but the default in performance of any of those terms did not of itself cause the contract to lapse for failure of a condition. Moreover, even if the contract had been one the performance of which was conditional on some act, it would have remained on foot after the condition had failed unless and until one or other party elected to rescind it.

27 Accordingly, I reject so much of the Defence as contends that no binding contract was made on 5 July, or that any such contract was conditional and lapsed for failure of a condition.

Did Carydis repudiate?

28 Merrag next submits, however, that the contract was terminated for repudiation, as a result of the correspondence which took place in late November and December of 2006, the alleged repudiation being the insistence by the purchasers on a view of the contract that interest was not payable under the contract.

29 It follows, from my conclusion that the July correspondence resulted in a binding contract, that the view asserted by the purchasers – that no interest was payable – was correct: that was the precise effect of clause 9 of the 3 July letter. As the purchasers were insisting on a correct view of the contractual position, there could not possibly have been a repudiation.

Were the contracts abandoned?

30 Merrag submitted that the contracts had been abandoned following January 2007 and before proceedings were instituted in May 2007. In Fitzgerald v Masters (1956) 95 CLR 420, Dixon and Fullagar JJ said (at 432):

There can be no doubt that, where what has been called an 'inordinate' length of time has been allowed to elapse, during which neither party has attempted to perform, or called upon the other to perform, a contract made between them, it may be inferred that the contract has been abandoned. ... What is really inferred in such a case is that the contract has been discharged by agreement, each party being entitled to assume from a long-continued ignoring of the contract on both sides that ... the matter is off altogether.

31 The correspondence, to which I have already referred, of January, March and April 2007 - in which Mr Carydis and Ms Travassaros were demanding specific performance and threatening proceedings - on the one hand, and the absence of any refund of the deposits which Merrag held on the other, are, in my view, fatal to any contention that the contract was abandoned during that period. So also is the circumstance that the caveat lodged by the purchasers remained pending. And it was an application for the lapsing of that caveat that ultimately provoked the institution of these proceedings. I would reject the contention that the contracts were abandoned during the first few months of 2007.

Was Carydis ready willing and able to complete?

32 Merrag next submits that the purchasers were not ready, willing and able to complete, either between July 2006 and late 2006, or at the time of commencement of proceedings, or at the date of hearing.

33 In Sommers v Pearse (NSWCA, 16 December 1993, unreported, BC 9302367), Mahoney AP said:

There is no doubt that a defendant in a proceeding for specific performance may succeed if the plaintiff's readiness, willingness and ability to perform does not appear. But I confess to the feeling that in the main, cases of which this is one, defences of this kind have about them an air of artificiality. The point is often taken rather to ambush than to enforce the substantial merits of the case. In the days when pleadings were precise and demurrers were taken if they were not, the omission to particularise such matters in the statement of claim or to prove them formally in evidence could be fatal. A plaintiff could fail notwithstanding that there was in substance no question but that he would and could complete the contract. The law must be observed and what is to be proved must be proved. But the view may now be adopted, I trust, that pleadings and proofs are to serve, not to govern, the determination of disputes according to their substantial merits and that, if there be defects in the pleading, particularisation and proof of such matters, such defects can, when pointed out, be adjusted.

34 I do not think that proof that a purchaser is ready, willing and able to complete for the purposes of a suit for specific performance necessarily requires that the purchaser be able to prove with certainty at the hearing that he has every cent that he needs to pay the purchase price, the costs of acquisition, and to service any borrowings which are required for that purpose. What is required is that the Court be persuaded on balance that the purchaser wishes, intends and in substance has the ability to complete.

35 For reasons which I have explained in the judgment I gave on the rejection of Mr Carydis' affidavit today and the subsequent application for an adjournment, I will proceed on the basis, without finding conclusively, that Mr Carydis was not ready, willing and able to complete between July 2006 and the end of that year; the circumstance that, despite demands to complete in August and early September 2006, he took no steps towards doing so until November, tends to support that view.

36 However, absence of readiness, willingness and ability to complete at some earlier time while the contract is on foot is not fatal to an application for specific performance. The judgments of Barwick CJ and Windeyer J in Mehmet v Benson (1965) 113 CLR 295, which enjoyed the concurrence of McTiernan J, make that clear: see also the judgment of the Court of Appeal in Sommers v Pearse. I accept that ultimately the time at which a purchaser must establish readiness, willingness and ability to perform is the date of hearing, although readiness, willingness and ability at earlier times may be a relevant discretionary consideration. In Commonwealth Refineries Ltd v Hollins [1956] VLR 169, Sholl J said (at 180):

It is then said that the plaintiff was not at the material times ready and willing to perform the contract; and again the evidence regarding the draft lease is pointed to. In order to obtain specific performance of a contract, a plaintiff must ordinarily show that he is ready and willing to perform his part of the bargain. But if in the past he has not been ready and willing to do so, and the other party has nevertheless elected to keep the contract on foot, the plaintiff may put himself right, even at the trial, and apparently at any time up to judgment, subject only to the risk of being ordered to pay costs: see Berners v Fleming [1925] Ch 264, at pp270, 273, 279; and cf Fuller’s Theatres Ltd v Musgrove (1923), 31 CLR 524 per Isaacs and Rich JJ, at pp 549-550.

37 In considering the question of readiness, willingness and ability, the observations of Barwick CJ in Mehmet v Benson are again relevant. His Honour said (at 307):

The question as to whether or not the plaintiff has been and is ready and willing to perform the contract is one of substance not to be resolved in any technical or narrow sense. It is important to bear in mind what is the substantial thing for which the parties contract and what on the part of the plaintiff in a suit for specific performance are his essential obligations. Here the substantial thing for which the defendant bargained was the payment of the price: and, unless time be and remain of the essence, he obtains what he bargained for if by the decree he obtains his price with such ancillary orders as recompense him for the delay in its receipt.

38 Windeyer J, harbouring some doubt as to whether the purchaser was ready and willing to complete, insisted on a proviso to meet that situation, so that lest the purchaser prove to be unready to complete the contract, an early date for completion could be fixed and, in the event of default, a decree made for rescission.

39 In this case there is evidence of a current albeit conditional loan approval from Suncorp for $500,000, a loan approval from ANZ for $1,522,000, and a willingness on the part of Ms Travassaros to make available to Mr Carydis a further $350,000 if required. This shows total funds available of some $2.3 million, against a total outstanding purchase price of some $1.85 million. In my opinion, Mr Carydis has established to the requisite standard that he is ready, willing and able to complete. I do not overlook that the Suncorp finance approval is conditional: there is, of course, a chance that the condition might not be satisfied and that the loan might not be approved, but on the other hand, there is a surplus of funds available over funds required of some $515,000 which, while it would be reduced to only $15,000 if the Suncorp loan were not finally approved, would still leave sufficient funds available to complete. Moreover, I do not think that the chance that a conditional approval will not become unconditional detracts from the conclusion that on balance the plaintiff is probably ready, willing and able to complete.

40 It follows that the four contracts for sale, as modified by the July 2006 correspondence, remain on foot and are binding and enforceable. Mr Carydis is ready, willing and able to complete them and is entitled to a decree for specific performance.

41 In addition to specific performance, Mr Carydis also claimed damages for delay in completion, after 19 January 2007, the damages being the lost rents that he would have derived from the properties had the transaction been completed in accordance with the notices to complete. I am prepared to accept that it was within the contemplation of the contracting parties that the purchasers would derive income by way of rent from the properties upon completion. The amount of rent that would have been generated from the four units, for the period from 19 January 2007 to date, has been agreed at a total of $60,937. However, had the contracts been completed on 19 January 2007, Mr Carydis would have had to complete his borrowings at that time, and would either have incurred an interest obligation, or would have lost the use of the purchase moneys which he otherwise retained for his own use and benefit for the time being, as from that date. Credit must be given for the savings he has made in that respect against the loss of income, and in those circumstances, I am unpersuaded on the available evidence that he has suffered any such damage. Accordingly, there will be no award of damages in addition to specific performance.

Compensation

42 As the passage to which I have referred in the judgment of Barwick CJ in Mehmet v Benson makes clear, specific performance may be granted to the purchaser in conjunction with an award of compensation to the vendor for breaches, including by way of delay, on the part of the purchaser.

43 Mr Carydis was in breach of his obligation under the July agreement to pay $5,000 from 5 July 2006 until it was paid on 21 November 2006. I accept that the effect of Conveyancing Act, s 52A, and the regulation to which I have referred is that completion should not have been regarded as practicably possible until 14 days after the occupation certificates had been provided. Those certificates were provided on 6 September, and 14 days elapsed on 20 September. Completion was practically possible, as was conceded, from 20 September, and in my view, Mr Carydis was also in breach of a non-essential time obligation (to complete as soon as practicably possible) from 20 September. Gadens’ letter of 6 November nominated 15 November 2006 as the completion date; however, various steps required to be taken on behalf of Mr Carydis were not completed until 21 November. Mr Carydis should be regarded as being in default until 5 December 2006, on which date the notices to complete were served on his behalf.

44 It should be a condition of relief that Mr Carydis pay Merrag, by way of compensation, interest on $5,000 from 5 July 2006 until 21 November 2006, and interest on the balance purchase price plus $30,000 (which was payable on completion) from 20 September 2006 until 5 December 2006. Having regard both to the interest rate referred in Special Condition 3 in the contracts, and more particularly to the prevailing court rates, I do not think any injustice is done by the adoption of 10 percent as the appropriate rate of interest.

Conclusion

45 Accordingly, there should be declarations that each of the four contracts in suit are binding and enforceable and ought to be specifically performed and carried into execution, and an order for specific performance of those contracts, but subject to the condition that Mr Carydis pay Merrag the compensation to which I have referred.

46 Given that some mathematical calculations will have to be made as to interest, I direct the plaintiff to bring in short minutes to give effect to this judgment. I will order that the defendant pay the first plaintiff's costs.

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