Charles Investments P/L v Karakis - [2002] NSWSC 1213

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CITATION: CHARLES INVESTMENTS P/L v KARAKIS [2002] NSWSC 1213

CURRENT JURISDICTION: EQUITY

FILE NUMBER(S): SC 1838 of 2002

HEARING DATE(S): 12/12/02

JUDGMENT DATE: 18 December 2002

PARTIES :

Charles Investments Pty Limited - Plaintiff
Ertan Karakis - Defendant

JUDGMENT OF: Bryson J at 1

COUNSEL : M. Hadley - Plaintiff
G. Foster - Defendant

SOLICITORS: Noyce Legal - Plaintiff
Phillip A Wilkins & Associates - Defendant

CATCHWORDS: VENDOR and PURCHASER - Notice to Complete time of the essence and Termination - V and P acting for selves wihtout solicitors - V sent home - made Notice to Complete after repeated failures by P to meet informally agreed completion dates - Notice held to be sufficiently clear in circumstances - issue of fact about alleged further oral agreement to extend time decided in favour of V - found there was no further oral agreement - Specific Performance claim by P refused.

CASES CITED: Balog v. Crestani (1975) 132 CLR 289
O'Brien v. Dawson (1941) 41 SR NSW 295
Laurinda Pty Ltd v. Capalaba Park Shopping Centre (1989) 166 CLR 623
Forslind v. Bechely-Crundall [1922] SC (HL) 173

DECISION: (1) Give judgment for the defendant with costs.; (2) Order pursuant to s.74MA of the Real Property Act 1900 that Caveat 6360332 be withdrawn on 20 December 2002.

IN THE SUPREME COURT
OF NEW SOUTH WALES
EQUITY DIVISION

BRYSON J.

WEDNESDAY 18 DECEMBER 2002

1838/02 Charles Investments Pty Ltd v. Ertan Karakis

JUDGMENT

1 HIS HONOUR: The Plaintiff (the purchaser) sues for specific performance of two contracts dated 7 November 1999 for sale of adjacent parcels of land in O’Brien Street, Mt Druitt. The parcels are Lots 126 and 127 DP 1218 and according to the plan each has a frontage of 100 feet and depth of 264 feet 3 inches. The contracts were on the 1996 edition of the Standard Form, but with modifications. The price of each lot was $150,000, and the deposit of $15,000 for each contract was paid to the Defendant (the Vendor). Neither party had a solicitor to conduct the sale. There was no agent. The affairs of the purchaser were conducted by Mr Richard Charles Mochalski, its director, who was an experienced land developer. Mr Mochalski made two affidavits which formed the plaintiff’s evidence; he died on 27 September 2002 and hence was not available to be cross-examined. His evidence about a number of facts was disputed. In assessing the weight of his evidence it is important to keep in view the circumstance that no opportunity to challenge it by cross-examination was available to the vendor.

2 At the hearing the plaintiff offered by its counsel to perform the contract within one week of the court’s order. Evidence showed that the plaintiff now has the resources to do this.

3 In each contract the Standard Form provided on the first page for a completion date and in that space was written “See Special Condition 14”.

4 Printed Condition 15 is as follows:

5 The Special Conditions include the following:

Special Condition 1:

6 Clause 15 is beside the point, and the intended reference obviously was to Special Condition 14, which is hand-written in these terms:

Notwithstanding any other term or condition settlement will take place on 31/3/2000.

7 The purchaser retained Mr Peter Zipkis, solicitor, to lodge a caveat and he did so; the caveat was verified on 19 November 1999 and lodged soon after and claimed an interest under contract for sale – “equitable interest as purchaser”. The Land Titles Office informed the vendor of the caveat by letter dated 23 November 1999.

8 On 23 June 2000 the purchaser entered into two contracts with sub-purchasers named Barbaro and Orlando; and agreed to sell each lot for $250,000.

9 The contracts were not completed on 31 March 2000 or 30 September 2000, the dates mentioned in Special Condition 14. Following discussions between Mr Mochalski and the vendor, completion of the contracts was extended several times. The last agreed extension is evidenced by a note written by Mr Mochalski in these terms:

12/12/2000. Agreement between Ertan Karakis in relation to Lot 126, & Lot 127 DP 1218 that settlement be deferred until 15th March 2001.

Interest at 10% on daily rests

10 The vendor’s evidence, not challenged in this respect is that Mr Mochalski told him by telephone and letter on 2 October 2000 that land tax clearances were required and he paid outstanding land tax and obtained clear certificates on 6 October. Then in a telephone call from Mr Mochalski on 9 October 2000 the vendor agreed to an extension of settlement for 9 weeks. Mr Mochalski by a letter of 9 October 2000 confirmed that the vendor had agreed to extend the settlement date for a further 9 weeks and said “I confirm all interest etc will be paid & adjustment on settlement.” As the end of the 9 weeks approached Mr Mochalski made an arrangement to settle on 29 November 2000, and fixed the place at a branch of the ANZ Bank. About a week before 29 November the vendor sent to Mr Mochalski a fax message with settlement figures at 29 November and asked for submission of transfer and for settlement. Mr Mochalski then rang him, said that the purchaser would be settling on 15 December, and asked for adjusted figures. Then on or about 12 December Mr Mochalski asked for a meeting, met the vendor at his workplace at Five Dock on 12 December 2000 and asked for another 3 months. He said that it could settle before the 3 months. The vendor agreed, saying, “This is the final time, Rick. I can’t keep giving you extensions.” Mr Mochalski said “Look, this is the last extension I am going to require. If we don’t settle on this date we can forget the whole thing …” and continued on a note of assurance. This was recorded in writing.

11 Mr Mochalski sent stamped transfers with a letter of 21 January 2001.

12 Shortly before 2 February Mr Mochalski told the vendor that he was ready to settle on 2 February, and asked for settlement figures but did not make an appointment for an exact time. After some delay he spoke to the vendor again by telephone and told him “Look Ertan, good news. I’ve got your money” and offered to pay $255,000 within 7 days and to give a mortgage for the balance which would be $15,000 subject to adjustments. This position was spelled out in a letter of 20 February 2001 which the vendor considered but did not accept. He told Mr Mochalski by telephone “No I’m not interested. I’ve given you until 15 March 2001 to settle. That is the final settlement. You have got over 3 weeks to sort yourself out. 15 March still stands.” In my view these arrangements made completion by 15 March of the essence but Mr Karakis’ later behaviour including not distinctly relying on failure to settle by 15 March and his issuing Notice to Complete disentitles him from relying on the purchaser’s failure to complete by 15 March.

13 As 15 March approached the vendor tried to contact Mr Mochalski and received no reply. 15 March passed without any reply, settlement or arrangement to settle. He tried to contact Mr Mochalski many times over the following month. According to Mr Mochalski’s evidence Mr Karakis agreed, in a conversation in early March and before 15 March, to extend settlement beyond 15 March, with the purchaser to keep paying interest and the parties to work out a settlement date later on. Mr Karakis in evidence denied that there was any such conversation or arrangement, and I accept his denial.

14 Mr Karakis’ evidence would show that he believed that as a result of conversations fixing 15 March as the date for completion, the purchaser no longer had any right to complete after 15 March; however in May he read through the contract and decided that he had better send a Notice to Complete. On 10 May 2001 Mr Karakis sent the purchaser a Notice to Complete, which he prepared himself without legal advice, in these terms:

10 May, 2002-12-13

NOTICE TO COMPLETE

Re: Sale Lot 126 & 127 O’brien St Mt. Druitt

To: Charles Investments

As of today I, Ertan Karakis am issuing this notice to complete and that I am allowing Charles Investments 14 days to complete and settle the sale of Lot 126 & 127 O’brien St Mt. Druitt.

Could you please contact me on 0415339935 or on (02) 97168569 to give the settlement date and figure working of the list that you have if the settlement does not take place within the allocated time I will be issuing a notice of termination.

15

Although the notice is more brief and less detailed in its specification of what is required than is usually seen in a Notice to Complete, when viewed in its factual context it says everything which it is necessary for a Notice to Complete to say. Its factual context includes the steps previously taken (several times) towards completing the contracts, and Mr Mochalski’s position as an experienced developer, with a grasp, evident from his behaviour throughout including his choosing to act without a solicitor and the terms of his communications, of what the contracts involved and what it was necessary to do to complete. What is required of a Notice to Complete appears from the judgment of Gibbs J in Balog v. Crestani (1975) 132 CLR 289 at 296 to 298. (Jacobs J concurred: 300). The notice fully meets the statement of Jordan CJ in O’Brien v. Dawson (1941) 41 SR NSW 295 at 304 which Gibbs J cited at 296. See too, in Laurinda Pty Ltd v. Capalaba Park Shopping Centre P/L (1989) 166 CLR 623, Mason CJ at 637-638; Brennan J at 646 Deane & Dawson JJ at 651-654 and Gaudron J at 664-665.

16 Mr Karakis posted the Notice to Complete by registered post and obtained a delivery confirmation receipt showing that it was delivered on 14 May 2001. In my opinion the Notice to Complete took effect as a notice when it was delivered on 14 May so that the last day available for completion was 28 May. Having regard to the terms of Special Condition 1 and of the Notice to Complete the Notice should reasonably have been understood to convey to the purchaser that 14 days from delivery of the Notice was available; that is its natural meaning. The Notice did not specify an exact time and an exact place for completion nor did it specify the adjustments to be made; instead it gave Mr Mochalski the opportunity to nominate those things. Working out the adjustments and interest was an exercise that had been gone through at least twice before and Mr Mochalski as an experienced developer could readily carry out that exercise himself. It was altogether easy for him to comply with the notice by specifying when and where he would settle; as neither party was represented by a solicitor but attended to their business personally the notice, and also the arrangements which had been made earlier indicated that Mr Karakis was prepared to go anywhere Mr Mochalski reasonably required to attend to settlement.

17 Mr Karakis’ evidence shows fully and firmly that he was in a position to settle at each of the appointed times, and was in a position to settle in May 2001 in accordance with the Notice to Complete. His obligation with respect to land tax was one which he had to comply with at the time of settlement; in fact he complied with it much earlier. There had been no requisitions except the requirement for paying land tax; the transfers had been stamped and were in Mr Karakis’ hands; Mr Karakis actually had the title documents. The Notice to Complete, although containing less detail than is usually seen in such documents, gave the purchaser a full, fair and readily understandable opportunity to complete within the 14 days which was contractually established to be sufficient time. In view of the previous history of dealings between the parties a notice of 14 days was a reasonably sufficient time for completion. As the two contractually appointed dates for completion had passed, and a series of further appointments, the latest of them recorded in writing had also passed, Mr Karakis acted reasonably in giving Notice to Complete.

18 Mr Mochalski’s evidence was that he posted to Mr Karakis a letter of 21 May 2001 rejecting the Notice to Complete, asserting that it was not in proper form, but was totally defective, null and void and recording “You are also aware settlement will take place in early July or at latest mid-July 01 & you agree to same as there is an on-sale to Barbaro and Orlando of this property. Your interest will be paid as promised.” It was his evidence that he sent the letter; and that it was his usual practice to place letters in the post at Terrigal himself. Mr Karakis flatly and completely denied ever receiving such a letter. His counsel contended that it was improbable that the letter was ever sent as its contents and the assertion that by 21 May Mr Karakis had agreed with the settlement date in July do not accord with facts which, counsel contended, should be found on Mr Karakis’ evidence.

19 I accept that Mr Karakis did not ever receive such a letter and, having regard to facts which I find elsewhere in this judgment, I regard it as very improbable that the letter was genuine. One reason for saying this is that the hospital records show that the only relevant hospitalisation during which the meeting at which there is said to have been reference to settling in July could have taken place began on 22 May. Another reason is that I accept Mr Karakis’ evidence about what took place in the hospital conversation. Whether or not the letter of 21 May was received or was sent is significant for credit, but that is less important than the question whether the arrangement which it purports to confirm actually was made.

20 Mr Mochalski’s evidence was first to the effect that in April 2001 while Mr Mochalski was a patient in Westmead Hospital the vendor visited him, discussed completion of the contract and agreed to give him an extension to July. Mr Mochalski told him that he had on-sold the properties and said “… We would all like to settle in the first or second week of July so as to bring it into the new tax year.” The vendor agreed readily to a new settlement date and said “… July suits me as well and it is in the new tax year.” There was further conversation about Mr Mochalski’s health and about the vendor’s affairs. Their conversation confirmed an arrangement to settle in July 2001, not on a nominated date in July.

21 In a correcting affidavit Mr Mochalski attributed the hospital visit and this arrangement to a hospitalisation in May not April. Hospital records show that Mr Mochalski as a patient there on 5 April 2001, 22 to 24 May 2001 and on 13 June 2001.

22 In Mr Mochalski’s evidence it was discussed as a factor favouring Mr Karakis agreeing to postpone settlement to July that he would get some tax advantage. Mr Karakis denied the discussion. He went further and gave reasons, which were not altogether clear, why in his perception he would not have gained a tax advantage. Whether or not he would have gained a tax advantage, or thought he would not have, I accept his denial that he ever saw any tax advantage in delaying settlement to July, or discussed the subject.

23 The vendor’s evidence is that the conversation with Mr Mochalski at Westmead Hospital took place after the Notice to Complete had been sent; and the terms of the conversation as given by him are quite different in effect to the conversation given by Mr Mochalski. The vendor says that the conversation took place “just prior to the end of May 2001”. The hospital record shows that Mr Mochalski was in hospital from 22 to 24 May 2001, the only admission in May. In his evidence, although challenged, Mr Karakis adhered firmly to the position that he received no communication from Mr Mochalski from 15 March until after Mr Karakis had sent the Notice to Complete, and indeed until the arrangement to visit him in hospital.

24 Mr Karakis gives the time of the conversation as “just prior to the end of May 2001.” In my finding it probably took place during the hospitalisation from 22 May to 24 May. In Mr Karakis’ evidence Mr Mochalski telephoned him and asked him to come and see him in hospital. He did so on the evening of the request, about 7pm. There was a conversation about Mr Mochalski’s illness. Mr Mochalski then spoke about settling the purchases, said he could get the money, that he had on-sold the properties, and that the purchasers needed more time; he had a letter which he showed Mr Karakis in which Mr Zipkis, on 18 May 2001, stated that settlement of the sub-purchase was to occur on or before 6 July, time being of the essence. Mr Mochalski said he did not have the money, that he was waiting for the purchasers to pay; it would be a big favour to Mr Mochalski if Mr Karakis would give the sub-purchasers more time. Mr Karakis said his contract was with Mr Mochalski not with the sub-purchasers, and he pressed Mr Mochalski on whether he could raise the money himself; Mr Mochalski said “ I have to wait until 6 July if you accept that”. There was discussion about losing the deposit and Mr Mochalski said “Anyway, think about it and if you accept to help me out, to do me a favour.” Mr Karakis said “Rick I’ll think about it and I’ll let you know in one or two days”. After arranging for the letter from Mr Zipkis to be copied Mr Mochalski said “Please Ertan if you can help me out. That’s what friends are for and I know you are my friend.”

25 Mr Karakis’ evidence was correct, as I find, in placing the request for a meeting and the meeting at the hospital after he issued Notice to Complete. At the time of the conversation at the hospital the Notice to Complete was still running; 14 days from service on 14 May had not expired.

26 Mr Karakis’ evidence was that after a couple of days he decided not to accept the proposal and sent a Notice of Termination to Mr Mochalski by post on 30 May 2001. Sending the Notice of Termination was the way and only way in which he indicated that after thinking about it he had decided not to agree to a settlement in July.

27 Mr Karakis’ account of the conversation was challenged in detail; it was sought to establish that he had given Mr Mochalski an assurance that time would be extended, or that he would give him some opportunity to take action if Mr Karakis decided not to extend it. In my finding Mr Karakis’ evidence about the conversation at the hospital is substantially correct. He did not give Mr Mochalski any agreement or commitment that time would be extended, or that Mr Mochalski would have a further opportunity to settle in any event at all. In my finding there was no verbal arrangement made in May 2001 in which Mr Karakis agreed to extend the settlement to July. There is no basis in the evidence for concluding that the plaintiff’s position was changed, or that its course was affected at all by Mr Karakis’ indicating that he would think about the matter and let Mr Mochalski know in one or two days; Mr Karakis did not indicate that he would change his attitude, or that he was likely to, and his decision followed in a few days with the notice of termination. No events happened which created an estoppel, as plaintiff’s counsel contended for.

28 I was impressed by Mr Karakis as a witness; he seemed to be clear in his recollection and remained firm in his evidence under challenge. He tended to run on beyond the requirements of the question to put his whole position, with some repetition, and showed some signs of involvement and feeling, and resentment of the way he had been treated and the way in which settlement had been put off many times. Overall his resentment is justified. I regard him as a reliable witness. It is unfortunate that Mr Mochalski has died and his evidence cannot be tested. In his affidavits he made some corrections showing that his recollection of detail was not perfect. He referred to his initiating the caveat after he received the notice of termination whereas the caveat had been lodged long before. Mr Mochalski’s affidavits do not give a full account of the various arrangements about completion dates. His affidavit evidence does not present a picture of high accuracy. It is unfortunate that the opportunity to cross-examine him on contentious facts was defeated by circumstances. There is some sense that it is not altogether fair to a man who has died to test his evidence on paper against a witness who withstood cross-examination and had an opportunity to give a favourable impression; and did so. On any possible view of the facts the plaintiff and Mr Mochalski did not keep the original engagement, put off settlement a number of times, and in that way did not create the appearance of complete reliability in contractual engagements.

29 The overall picture presented by Mr Karakis, in which he agreed to several extensions, and then when 15 March 2001 went by and he did not hear from Mr Mochalski and could not contact him, behaved like a person whose patience was at an end and moved deliberately towards terminating the contracts, appears to me to accord well with the probabilities. The reliability of his evidence was challenged, in cross-examination and also in submissions, by reference to suggested improbabilities of his having turned aside completely from prospects of getting paid by Mr Mochalski and his company, and turned instead to projects for selling other properties (which he eventually sold) to meet his steadily increasing need to raise money to buy other land and build a house. Plaintiff’s counsel commented that the fact that Mr Karakis turned his attention to selling other properties, but not these lots, tended to support the claim that Mr Karakis had agreed to extend settlement to July. I do not think that this consideration has any real weight. Although he did not mention this factor, the caveat would have had to be removed before he could sell the land to someone else, and that was a factor favouring attempting to raise money he needed by selling other property. I do not regard his choice of which property he was to sell as an indication of his views about his obligations to the plaintiff. He was also attacked on what were said to be adverse considerations of probability about his tax position and references made to his tax position in a conversation with Mr Mochalski. I did not regard these critiques as furnishing any real reason to doubt his evidence. His overall position was consistent with his having been very forbearing with Mr Mochalski and his company, then deciding that enough was enough and not making any more concessions.

30 The document of 30 May 2001 was headed “Notice to Terminate”. Its contents contained some discussion, but overall it is entirely clearly and unequivocally an indication of an intention to terminate the contract.

31 Defendant’s counsel contended that, apart from operating as a Notice of Termination after the purchaser had failed to complete when time had been made of the essence, the Notice of Termination also operated as acceptance of a repudiation of the contracts and the repudiation was to be understood from the long series of events in which arrangements for settlement had been made and not carried through. It was contended to the effect that that series of events shows that the purchaser did not intend to complete the contracts according to their terms, and did not intend to complete them at all except on some basis which did not accord with the vendor’s entitlements.

32 In expressions drawn from judgments in Forslind v. Bechely-Crundall [1922] SC (HL) 173 and cited in Laurinda at 658, Mr Mochalski’s treatment of the obligation to complete showed “procrastination … persistently practised” and “a shilly-shallying attitude in regard to the contract”. The terms of the pleadings preclude disposition of the proceedings on the basis of accepted repudiation. However the long course of events in which there was recurring non-compliance with arrangements for completion influence my decision in other ways. They show that it was reasonable of the vendor to give Notice to Complete when the vendor did. They show circumstances in which the purchaser cannot possibly have misunderstood the meaning and effect of the Notice to Complete when it came. They also appear to me to have significance as circumstances assisting acceptance of Mr Karakis’ evidence, and his claims that after granting a series of concessions he became implacable.

33 Some matters raised in the pleadings were not relied on or developed at the hearing. It was said in Statement of Claim para 8(c) that the Notice to Complete was of no effect because it made completion of each contract dependent upon completion of the other. I do not think that this ground has any substance. The notice by its terms uniformly applied to both contracts; there were obligations to complete both contracts; there is no basis for thinking that the purchaser might have wished to complete one but not the other, and if it had so wished it could have done so.

34 In the Statement of Claim para 5 it is alleged that an agreement was made to the effect that completion would not occur prior to July 2001. In my finding there was no such agreement.

35 In para 10 it is alleged that the Notice of Termination was of no effect because it purported to terminate the contracts earlier than the date of the Notice of Termination. This relates to a reference in the Notice of Termination to terminating “… this contract as of the 25th of May 2001”. Of course it could not operate before its own date, but on a whole view of what it said, it unmistakably operated when it was given. The clear statement of an intention to terminate is not defeated by the internal reference to an earlier date; the overall intention is unmistakable. This part of the Statement of Claim was not developed in submissions. In my view the Notice of Termination was effectual.

36 Some further allegations in the Statement of Claim contending that the vendor’s conduct was unconscionable by reason of Mr Mochalski’s disability were not developed at the hearing, and in the circumstances of fact before me there was no basis on which they could have been.

37 The litigation was precipitated by a notice of lapse of caveat initiated by the vendor. This caveat has been extended from time to time and on 11 April 2002 it was extended until further order of the court. On giving judgment I will order that it be removed.

38 My Orders are:

(1) Give judgment for the defendant with costs.
(2) Order pursuant to s.74MA of the Real Property Act 1900 that Caveat 6360332 be withdrawn on 20 December 2002.

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Last Modified: 02/07/2003

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Citations

Charles Investments P/L v Karakis [2002] NSWSC 1213

Cases Citing This Decision

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Cases Cited

2

Statutory Material Cited

0

Balog v Crestani [1975] HCA 16

Laurinda Pty Ltd v Capalaba Park Shopping Centre Pty Ltd [1989] HCA 23

CITATION:	CHARLES INVESTMENTS P/L v KARAKIS [2002] NSWSC 1213
CURRENT JURISDICTION:	EQUITY
FILE NUMBER(S):	SC 1838 of 2002
HEARING DATE(S):	12/12/02
JUDGMENT DATE:	18 December 2002
PARTIES :	Charles Investments Pty Limited - Plaintiff Ertan Karakis - Defendant
JUDGMENT OF:	Bryson J at 1

COUNSEL :	M. Hadley - Plaintiff G. Foster - Defendant
SOLICITORS:	Noyce Legal - Plaintiff Phillip A Wilkins & Associates - Defendant
CATCHWORDS:	VENDOR and PURCHASER - Notice to Complete time of the essence and Termination - V and P acting for selves wihtout solicitors - V sent home - made Notice to Complete after repeated failures by P to meet informally agreed completion dates - Notice held to be sufficiently clear in circumstances - issue of fact about alleged further oral agreement to extend time decided in favour of V - found there was no further oral agreement - Specific Performance claim by P refused.
CASES CITED:	Balog v. Crestani (1975) 132 CLR 289 O'Brien v. Dawson (1941) 41 SR NSW 295 Laurinda Pty Ltd v. Capalaba Park Shopping Centre (1989) 166 CLR 623 Forslind v. Bechely-Crundall [1922] SC (HL) 173
DECISION:	(1) Give judgment for the defendant with costs.; (2) Order pursuant to s.74MA of the Real Property Act 1900 that Caveat 6360332 be withdrawn on 20 December 2002.