Cohen v Wilson Dowd
[2000] TASSC 174
•14 December 2000
[2000] TASSC 174
CITATION: Cohen & Anor v Wilson Dowd [2000] TASSC 174
PARTIES: COHEN, Barry Louis
COHEN, Robyn Jeanette
v
WILSON DOWD
TITLE OF COURT: SUPREME COURT OF TASMANIA (FULL COURT)
JURISDICTION: APPELLATE
FILE NO/S: FCA 127/1999
DELIVERED ON: 14 December 2000
DELIVERED AT: Hobart
HEARING DATE: 29, 30 August 2000
JUDGMENT OF: Cox CJ, Crawford and Slicer JJ
CATCHWORDS:
Contracts - General contractual principles - Discharge, breach and defences to action for breach - Repudiation and non-performance - Election and rescission - Loss or waiver of right to rescind - General principles of doctrine of election - Whether there were acts amounting to an unequivocal election to affirm the contract.
Sargent v ASL Developments Ltd (1974) 131 CLR 634, applied.
Perri v Coolangatta Investments Pty Ltd (1982) 149 CLR 537, referred to.
Aust Dig Contracts [136]
Conveyancing - Relationship of vendor and purchaser - Matters arising between contract and conveyance - Waiver of conditions - Contract conditional upon purchaser effecting a contemporaneous settlement of another contract - Whether election between inconsistent rights - Purchaser in possession and making efforts to complete.
Sargent v ASL Developments Ltd (1974) 131 CLR 634, applied.
Perri v Coolangatta Investments Pty Ltd (1982) 149 CLR 537, referred to.
Aust Dig Contracts [40]
REPRESENTATION:
Counsel:
Appellants: G L Sealy
Respondent: P L Jackson
Solicitors:
Appellants: Piggott Wood & Baker
Respondent: Griffits & Jackson
Judgment Number: [2000] TASSC 174
Number of paragraphs: 43
Serial No 174/2000
File No FCA 127/1999
COHEN & ANOTHER v WILSON DOWD
REASONS FOR JUDGMENT FULL COURT
COX CJ
CRAWFORD J
SLICER J
14 December 2000
Orders of the Court:
Appeal allowed.
Judgment for the respondent against the appellants set aside.
Judgment entered for the appellants against the respondent for damages to be assessed.
Case remitted to the trial judge for assessment of damages.
Serial No 174/2000
File No FCA 127/1999
COHEN & ANOTHER v WILSON DOWD
REASONS FOR JUDGMENT FULL COURT
COX CJ
14 December 2000
The appellants sought damages against the respondent firm of solicitors for negligence and/or breach of contract. Specifically they claimed that advice given by Mr Dowd of the respondent firm on 12 January 1995 was incorrect and was given negligently. The learned trial judge found that the advice given by Mr Dowd had been given by him without his having made any effort to research the relevant law, but that fortuitously the advice was correct. The appellants challenge that conclusion.
In 1994, the appellants owned a house property at Howrah which they contracted to sell to a Mr How in November 1994. It was an unconditional contract for the sale of the property for $145,000 and was due for completion on 4 December 1994. A few days after agreeing to this sale, the appellants found a house at Montrose which was being completed by the owner/builder, Mr Berry. They agreed to purchase the property for $120,000. Clause 3 of that contract also provided for completion on 4 December 1994. This day was a Sunday and for all material purposes the parties were prepared to accept the relevant date for completion of both contracts as Monday, 5 December 1994. The appellants showed the draft agreement with Mr Berry to the respondent solicitors and at the suggestion of the latter, the following clause was inserted:
"This agreement is specifically subject to and conditional upon the Purchaser effecting a contemporaneous settlement of their unconditional sale of 3 Vela Street Howrah in Tasmania to V S How by 4th December 1994."
Shortly before the date set for completion, the appellants arranged with Mr Berry that they should be allowed into possession of the Montrose premises over the weekend of 3/4 December 1994 in anticipation of a settlement on Monday, 5 December. They claimed they told a solicitor, Mr Bingham, employed by the respondent and who had the carriage of the conveyancing file, of this arrangement and that he had told them that this would not present any difficulties, but the learned trial judge found that the solicitor only learned of the appellant's entry into possession on 6 December 1994, some three days later. The purchaser, Mr How, failed to complete on 5 December and despite endeavours by the appellants and their solicitors to procure a settlement, none was forthcoming. By 12 December 1994, the appellants' solicitors had taken action to give Mr How a notice to complete his contract and to give notice to quit to persons occupying the premises at Howrah, who, it appears, had been admitted to them by Mr How. The appellants remained in possession of Mr Berry's property. Mr Berry's solicitor, Mr Henry, on 12 December 1994, advised the appellants' solicitor, Mr Bingham, that his client wanted $150 per week rent until completion and the same day issued a notice to complete the purchase of the Montrose house by 3 January 1995. Mr Bingham thereupon wrote to Mr Berry's solicitors as follows:
"I refer to the Notice to Complete dated 12 December 1994.
The entitlement of the Vendor to serve such a notice is denied. Despite the Purchasers using all reasonable endeavours to ensure that clause 16 of the contract herein was fulfilled, the settlement required to take place thereunder has not occurred."
The same day, Mr Henry telephoned Mr Bingham claiming that the appellants had waived cl 16 by taking possession and by giving verbal undertakings that the matter would settle "within the next couple of days". On 16 December, Mr Henry wrote:
"Your clients clearly waived the benefit of Clause 16 by taking possession of the property on an unqualified basis and by their advice to the vendor that the sale of their property would be completed within a few days."
All the solicitors involved in these transactions continued to make every effort to find the funds to enable Mr How to finalise his contract for the purchase of the Howrah property, but they were unsuccessful. Mr Bingham passed his file to Mr Dowd and the Christmas break intervened. Early in January 1995, Mr Berry's solicitor threatened to commence proceedings for an order that the appellants perform the contract for the purchase of the Montrose property. The appellants made an appointment to see Mr Dowd at 2pm on 12 January 1995. The purpose of the appointment was to obtain legal advice as to the appropriate course of action. Mr Berry's solicitor agreed not to serve the writ until after the appellants had seen Mr Dowd and taken his advice.
On 12 January 1995, the appellants saw Mr Dowd. The learned trial judge found that had the appellants learnt on that day that they could have rescinded the contract for the purchase of Mr Berry's house and return to their Howrah property, they would have done so. The learned trial judge also found that Mr Dowd took no instructions from the appellants to ascertain the facts relevant to any election, estoppel and/or waiver that may have occurred and did not undertake a scintilla of legal research with respect to the situation the appellants were in. He conveyed to his clients the clear impression that his advice was that they could not resist the threatened action to specifically enforce the contract. In the result, bridging finance was arranged, the purchase completed and the Howrah property ultimately sold to another purchaser, the whole exercise resulting in a significant financial loss to the appellants.
The learned trial judge found that the advice given was correct and that by 12 January 1995 when it was given, the appellants had elected to proceed with the contract for the purchase of the Montrose land from Mr Berry and were no longer entitled to rescind it.
Clause 16 was inserted for the benefit of the appellants. They had the right by virtue of cl 16 to avoid the contract through non-fulfilment of the condition. On the other hand, they could waive that right and could affirm the contract (Suttor v Gundowda Pty Ltd (1950) 81 CLR 418 at 441 - 442, Gange v Sullivan (1966) 116 CLR 418 at 441, Meehan v Jones (1982) 149 CLR 571 at 592 and Perri v Coolangatta Investments Pty Ltd (1982) 149 CLR 537).
The appellants were in a dilemma. On the one hand they had taken possession of the Montrose property on terms which were not the subject of any finding by the learned trial judge and indeed, as it appeared that neither Mr Berry nor Mr Henry gave evidence at the trial, on terms which were never even explored at the trial, and they were anxious to complete their purchase. On the other hand, as Mr How had not produced the purchase price for their property at Howrah, they did not have the funds to complete the purchase and had an interest in not abandoning their right to terminate the latter agreement in those circumstances. Mr Berry likewise had an interest in not seeing the sale of his property terminated by the appellants by reason of their inability to complete the sale to How. The fact that the appellants did not immediately exercise their right to avoid the Berry contract is completely understandable and in no way suggests an election to take any particular course.
In such circumstances, the law allows some leeway. As Mason J (as he then was) said in Sargent v ASL Developments Ltd (1974) 131 CLR 634 at 656:
"A person confronted with a choice between the exercise of alternative and inconsistent rights is not bound to elect at once. He may keep the question open, so long as he does not affirm the contract or continuance of the estate and so long as the delay does not cause prejudice to the other side. An election takes place when the conduct of the party is such that it would be justifiable only if an election had been made one way or the other (Tropical Traders Ltd v Goonan (1964) 111 CLR 41). So, words or conduct which do not constitute the exercise of a right conferred by or under a contract and merely involve a recognition of the contract may not amount to an election to affirm the contract."
See also Champtaloup v Thomas [1976] 2 NSWLR 264 at 268; Scarf v Jardine (1882) 7 AC 345 at 360.
The learned trial judge concluded that by at least 12 January 1995, the appellants had elected to proceed with the contract and acknowledged that the conduct from which such an inference could be drawn had to be unequivocal. The conduct to which he referred consisted of their possession of the Montrose premises since early December 1994, during most of which time they were aware that Mr Berry had determined to treat the contract as if it were in full force and effect and consisted also of their failure to communicate to Mr Berry that their continued possession was not to be taken as an unequivocal election to complete the contract. In addition, the appellants' solicitor indicated to Mr Henry that efforts were being made to complete the purchase, while it was said that payment of rent to Mr Berry was consistent with an election to complete the contract at the earliest possible date.
With respect, I am of the view that neither individually nor collectively could these acts or omissions amount to an unequivocal election to affirm the contract. The appellants had obtained possession prior to the date upon which non-settlement of the sale to How would have entitled the appellants to terminate the purchase from Berry. There is no evidence from which any finding was or could be made as to the significance of the taking or retaining of possession of the property as an indication of the exercise of any election. The appellants' inactivity in the knowledge that Mr Berry wished to hold them to the contract and had issued a notice to complete did not amount to conduct evidencing such an election, nor was their failure to disavow their continued residence at the Montrose property as an indication of such an election conduct evidencing the making of that election. The continued efforts of their solicitor to put them in a position in which they could achieve the desired result of completing the Berry purchase could not fairly be seen as evidencing an election to go on with the contract irrespective of How's failure to complete. In any event, the efforts referred to seem to have been directed towards financing Mr How into a position where he could complete the Howrah purchase. Finally, the reference to rent is equivocal. Mr Henry on 16 December had demanded payment of rent in the sum of $150 per week. Later, on 22 December, he wrote indicating his client's willingness to delay settlement until late January 1995 and he indicated that rent of $160 per week was now demanded. It seems that when, as the result of Mr Dowd's advice, the appellants accepted that they would have to complete the sale from Berry, the figures for settlement included rent for the period of possession prior to settlement, but there is no evidence of any on-going tender of rent prior thereto, nor indeed is it clear from the appeal books that the appellants agreed to anything prior to their consultation with Mr Dowd on 12 January 1995. The one positive action which they took was to get Mr Bingham to write to Mr Henry denying Berry's right to demand completion and pointing out that the condition referred to in cl 16 had not been fulfilled. By doing so they were, in my view, purporting to keep their options open and were not committing themselves to an affirmation of the contract. They were not entitled to keep the question open if the delay caused prejudice to the other side (Sargent v ASL Developments Ltd (supra) at 656), but there is nothing in the evidence which suggests that Mr Berry was occasioned any particular prejudice by the appellants' delay between 5 December and 12 January.
Although the vendor Mr Berry, on 12 December 1994, gave a notice to complete the contract by 3 January 1995, he did not, unless and until the appellants waived the benefit of cl 16, have any right to enforce this contingent contract. In Perri v Coolangatta Investments Pty Ltd (supra) at 560, Wilson J, speaking of a notice to complete given by a vendor where there was a condition wholly for the benefit of the purchaser, said:
"The effect of a notice to complete is to give the purchasers, should they wish to waive the condition, the opportunity to finalize the transaction; alternatively, it serves to crystallize in the minds of both parties a common date on which the contract will come to an end for non-fulfilment of the condition. In the latter case, non-compliance with the notice to complete will not fix the purchasers with any default such as would deprive them of the right to the return of their deposit, although as I have said, a failure to make reasonable efforts to sell the property may expose them to an action for damages."
At 565 - 566, Brennan J (as he then was) said:
"The purpose of the stipulation is to ensure that the purchasers should have the proceeds of the sale of their Lilli Pilli property before their obligation to pay the balance of the purchase price for the Cronulla property becomes absolute. The substance of the stipulation is a condition for the benefit of the purchasers and they may waive it if they choose. But the limit of the time within which the stipulation is to be fulfilled enures for the benefit of the vendor as well as for the benefit of the purchasers, 'the vendor being interested to know for how long his liability was to remain unresolved' (per Windeyer J in Gange v Sullivan (supra) at p 443). When vendor and purchaser are each under a contingent obligation to complete a contract of sale, the fulfilment of the contingency or the entitlement to avoid the obligation is of equal interest to both parties.
Though the stipulation specifies the event upon the occurrence of which the obligations to complete cease to be contingent, the stipulation contains no promise that the event will occur. Until the event occurs or the purchasers waive the benefit of the stipulation (Gange v Sullivan (supra) at pp 430, 443) neither party is entitled to a decree of specific performance of their respective obligations to complete the sale (Brown v Heffer (1967) 116 CLR 344, at p 350 ) and the purchasers have no equitable interest in the property which is the subject of the contract (McWilliam v McWilliams Wines Pty Ltd (1964) 114 CLR 656)."
The giving of the notice to complete in this case paved the way for Mr Berry to say, if it were not completed on time, that he had waited long enough and to call off the sale which was still contingent (cf Brennan J's comment at 570). The expiry of the time stipulated in the notice, namely 3 January 1995, did not make the contract enforceable. As Brennan J said in Perri (supra) at 569:
"A notice to complete insists upon performance by a party in default to whom the notice is given of an obligation binding upon him. It can have no application to a situation where the party to whom it is given is under no obligation to perform. "
In my opinion, as at 12 January 1995, the appellants had not unequivocally elected to perform the contract and had not waived their right to terminate pursuant to cl 16. They were still in a position to terminate it by reason of Mr How's failure to complete the purchase of their home at Howrah, to vacate the premises Mr Berry had permitted them to enter and to pay him fair rent for the use of them in that period of five weeks or so. Had Mr Dowd advised them that they had the right to do so, the learned trial judge found they would have done that. Mr Dowd's advice was not sound and his conduct in giving it without any attempt at research amounted to a breach of the duty of care and of the contract of retainer pleaded in the statement of claim. It was causative of loss which the appellants have the right to have assessed. I would allow the appeal.
File No FCA 127/1999
BARRY LOUIS COHEN and ROBYN JEANETTE COHEN v WILSON DOWD
REASONS FOR JUDGMENT FULL COURT
CRAWFORD J
14 December 2000
The appellants unsuccessfully sued the respondent firm of solicitors for damages for negligence and breach of contract and they appealed to this Court. They claimed that the firm acted negligently in the provision of legal advice with respect to a contract into which they had entered for the purchase of a house at Jasanda Drive, Montrose. Findings of fact by the learned trial judge, which were not in contention before this Court, included the following.
The appellants owned and lived in 3 Vela Street, Howrah. After selling a business they owed $12,000. They decided to sell Vela Street, pay off their debts and purchase a smaller and cheaper house, more suitable for their needs and free of encumbrances. Their real estate agent found a purchaser, Mr How, for the Vela Street property at a price of $145,000. A contract for sale to Mr How, dated 4 November 1994, was entered into. Clause 3 provided that completion and change of possession was to take place on or before "30 days from this date", which meant 4 December. The first appellant, Mr Cohen, said that the real estate agent told him that Mr How was adamant that vacant possession be given to him on settlement day.
The appellants looked for a house to buy and determined that they had found what they wanted at Jasanda Drive, Montrose. It was a house under construction. The owner, Mr Berry, was also the builder. Mr Berry's father was a real estate agent and he drafted a contract for the sale of Jasanda Drive to the appellants for $120,000. Clause 3 provided for completion and possession on 4 December 1994, the same day as scheduled for the Vela Street sale.
The respondent firm was engaged by the appellants to act for them with respect to both their sale and purchase. A partner, Mr Dowd, referred the contract for the sale of Vela Street to be handled by an employed solicitor, Mr Peter Bingham. Mr Cohen attended on Mr Dowd concerning the draft contract for the purchase of Jasanda Drive. Two new clauses were added on Mr Dowd's advice. One required completion of the construction of the house by the vendor in accordance with plans and specifications. The other, cl 16, provided:
"This Agreement is specifically subject to and conditional upon the Purchaser effecting a contemporaneous settlement of their unconditional sale of 3 Vela Street Howrah in Tasmania to V S How by 4th December 1994."
Clause 16 was inserted by Mr Dowd for the purpose of protecting the appellants in the event that the contract for sale of Vela Street was not completed, because the appellants depended on the funds from that sale to pay for Jasanda Drive. The contract for the appellants' purchase of Jasanda Drive, containing cl 16, was signed by all parties and was dated 17 November 1994. The handling of the appellants' file concerning the purchase was also passed by Mr Dowd to Mr Bingham.
Doubts then arose concerning whether Mr Berry would be able to finish the construction of the Jasanda Drive house to the stage that it was ready for occupation by the scheduled date for completion. The first appellant requested the agent, who negotiated the Vela Street sale, to ask Mr How if the appellants could remain in occupation of Vela Street after the completion date, as their new house might not be ready by then. The agent reported that Mr How's response was that he was not agreeable to any delay in obtaining possession. It was the evidence of the first appellant that he then told Mr Berry that if Jasanda Drive was not finished by settlement day, they would have nowhere to live.
The agreed completion date for both contracts was 4 December, which was a Sunday, and no doubt that would have been inconvenient, at least to the solicitors involved in the completion of the contracts. By some point of time, all parties expected that settlement would instead take place on Monday, 5 December. Possibly the solicitors agreed to a variation of the contracts in that regard, but nothing turns on it.
It was Mr Bingham's evidence that the first appellant telephoned him on 29 November and told him that the Jasanda Drive house would be ready on time and he was, as Mr Bingham recorded, to "aim to settle on Monday 5/12".
As a result of an arrangement made directly between the appellants and Mr Berry, they entered into early possession of Jasanda Drive over the weekend of 3 and 4 December, prior to completion taking place. A major issue at the trial concerned whether the respondent firm was informed of the proposal for early possession and whether Mr Bingham negligently failed to advise them, prior to them taking possession, that the act of taking possession prior to settlement would be an act capable of constituting a waiver of the condition in cl 16 that the agreement was subject to and conditional upon a contemporaneous settlement of the sale of Vela Street to Mr How. The learned trial judge found that the firm was not informed of the proposal for early possession and therefore was not negligent in failing to give such advice before possession was taken. The grounds of the appeal do not attack those findings.
The morning of Monday, 5 December, dawned with the appellants and Mr Bingham expecting both contracts to be completed that day. Mr Bingham was instructed to act accordingly and was ready to effect the completion of the Jasanda Drive purchase so long as there was a contemporaneous completion of the Vela Street sale. The learned trial judge expressed himself as being unable to find that even by then, Mr Bingham was aware that the appellants had taken early possession of Jasanda Drive.
Mr Bingham arranged with Mr Berry's solicitor, Mr Henry, to settle the Jasanda Drive contract at 3pm on 5 December, but that afternoon Mr Henry telephoned to put off settlement until the next day. Later that day, Mr How's solicitor, Mr Badenach, telephoned Mr Bingham and said that there might be a week's delay in settling the Vela Street contract and he asked if the appellants would be prepared to rent Vela Street to Mr How for a week. Next day, 6 December, Mr Bingham contacted the first appellant to discuss the proposal with him and learned for the first time that the appellants had taken possession of Jasanda Drive over the weekend of 3 and 4 December.
Efforts to achieve settlement of the Vela Street contract were fruitless. By 11 December it was known that the purchaser, Mr How, had been admitted to hospital with a mental disease. On the appellants' instructions, Mr Bingham issued to Mr How on 12 December, a notice requiring completion on 9 January 1995.
In the meantime, the appellants remained in possession of Jasanda Drive. On 12 December Mr Berry's solicitor, Mr Henry, advised Mr Bingham that Mr Berry wanted $150 per week rent until completion occurred. On the same day Mr Henry, on Mr Berry's instructions, issued to the appellants a notice requiring completion of the Jasanda Drive purchase on 3 January 1995. On 15 December Mr Bingham responded on behalf of the appellants by a letter to Mr Henry. In it he denied the entitlement of Mr Berry to serve such a notice. He added that despite the appellants having used all reasonable endeavours to ensure that cl 16 of the contract was fulfilled, the settlement of the sale of Vela Street to Mr How had not occurred. On the same day, Mr Henry telephoned Mr Bingham, maintaining that the appellants had "waived cl 16 by taking possession and by giving verbal undertaking that matter would be settled within next couple of days" (Mr Bingham's note).
All solicitors involved in the transactions continued to make every effort to find funds to enable Mr How to settle his purchase of Vela Street, but they were unsuccessful. Before Christmas, Mr Bingham passed his file to Mr Dowd.
Early in January 1995, Mr Berry's solicitor threatened to commence proceedings for an order that the appellants perform their contract to purchase Jasanda Drive. The appellants made an appointment to see Mr Dowd on 12 January 1995, for the purpose of obtaining legal advice as to the appropriate course of action they should take. Mr Berry's solicitor agreed not to serve a writ until after they had obtained that advice.
The learned trial judge found that the appellants sought from Mr Dowd and were entitled to receive from him, competent legal advice. His Honour found that the advice he did give, and I will deal with it in due course, was given without taking appropriate instructions from the appellants to ascertain the facts relevant to any election, estoppel or waiver which may have occurred and without reference to relevant legal principles. Central Trust Co v Rafuse (1986) 31 DLR (4th) 481 and Vulic v Bilinsky [1983] 2 NSWLR 472 were referred to as authorities for the proposition that a reasonably competent solicitor is expected to have a sufficient knowledge of the fundamental issues and principles of law applicable to the work he has agreed to undertake, to enable him to perceive the need to ascertain the law on relevant points and to look at that law before giving advice. The learned trial judge found that in that respect, Mr Dowd failed to exercise the standard of care that the law required him to exercise at the consultation on 12 January 1995.
What then was Mr Dowd's advice? The learned trial judge found that he conveyed the clear impression that the appellants would lose the litigation which had been threatened by Mr Henry on Mr Berry's behalf. In other words, he gave them to understand that they could not rely on cl 16 and that they were contractually bound to complete the purchase of Jasanda Drive from Mr Berry, notwithstanding that they had been unable to settle the sale of Vela Street to Mr How.
At the trial, counsel for the respondent submitted that by entering into possession of Jasanda Drive on the weekend of 3 and 4 December 1994, the appellants elected to perform the contract for the purchase of the property and such election was irrevocable. Consequently, so it was submitted, Mr Dowd's advice on 12 January was correct. The learned trial judge ruled against the submission, holding that by simply taking possession of the property, prior to the scheduled date for completion, the appellants had made no election to perform the contract, regardless of whether the condition of cl 16 was satisfied.
The right of election conferred on the appellants depended on whether there was a contemporaneous settlement of the sale of Vela Street on 5 or 6 December (the date having been extended by mutual agreement from 4 December). If on the scheduled settlement day the sale of Vela Street did not take place, cl 16 gave to the appellants the right to elect whether to terminate the contract to purchase Jasanda Drive or to perform it.
At the time the appellants took possession of Jasanda Drive, a day or two before the expected completion date, it was believed by the appellants and Mr Berry that the completion of both contracts would take place as expected. At that time the appellants had no reason to think that they would need to make the election given to them by cl 16. Mr Berry had no reason to think that either. There was no basis upon which the trial judge could have concluded that the taking of possession constituted some form of election on the part of the appellants to be bound by the contract to purchase the property.
At the trial, issues included whether the appellants, by taking early possession, waived any rights that might have been conferred upon them by cl 16 and whether they might be held to be estopped from relying upon it. The learned trial judge found in the appellants' favour with respect to those issues, and they were not argued on the hearing of the appeal.
On 6 December the appellants were entitled to elect to terminate the contract and vacate possession, but they did not do so. The learned trial judge held that by 12 January they had made their election not to terminate the contract, but instead to proceed with it to completion. Such an election was held to have been made for the following reasons:
·During the majority of the time after the scheduled completion date, they knew that Mr Berry had determined to treat the contract as if it was in full force and effect.
·At all times after the scheduled completion date and after 3 January 1995, which was the date appointed by Mr Berry for completion in his notice to complete issued on 12 December, up until 12 January, the appellants remained in possession.
·Between 6 December and 12 January neither the appellants or their solicitor communicated to Mr Berry or his solicitor that notwithstanding that they were remaining in possession of Jasanda Drive, they had not made an unequivocal election to complete the contract.
·During the period 6 December and 12 January, the appellants' solicitor told Mr Berry's solicitor that every endeavour was being made to raise the finance necessary to enable the plaintiffs to complete the purchase.
·The appellants paid rent to Mr Berry.
Once the right to elect arises, the party entitled to make the election is not bound to do so as soon as possible. The party may wait and think which way he will exercise the option. Scarf v Jardine (1882) 7 App Cas 345 at 360. "He may keep the question open, so long as he does not affirm the contract … and so long as the delay does not cause prejudice to the other side." Sargent v ASL Developments Ltd (1974) 131 CLR 634 at 656.
The making of an election does not have to be expressly communicated before it is binding. If the party entitled to make the election has done an unequivocal act, that is one which would be justifiable if he had elected one way and would not be justifiable if he had elected the other way, so that the opposite party is led to believe that the choice has been made, the election has been completed and is final. Scarf v Jardine (supra) at 361. But words or conduct which do not constitute the exercise of the right of election and merely involve a recognition of the contract may not amount to an election to affirm the contract. Sargent v ASL Developments Ltd (supra) at 656. "The words or conduct ordinarily required to constitute an election must be unequivocal in the sense that it is consistent only with the exercise of one of the two sets of rights and inconsistent with the exercise of the other." Op cit at 646. However, for an election there need be no subjective intention to elect. The making of an election may be the effect which the law attributes to conduct justifiable only if such an election has been made. Tropical Traders Ltd v Goonan (1964) 111 CLR 41 at 55. Scarfe v Jardine (supra) at 361.
Accepting that by merely taking possession, with the agreement of Mr Berry, over the weekend of 3 and 4 December, the appellants were not exercising the relevant right of election, I am of the respectful opinion that the learned trial judge was in error when he concluded that the appellants, at some unspecified time thereafter but before 12 January, by their conduct caused their exercise of the election to affirm the contract to be communicated to Mr Berry. He was well aware that the condition of cl 16 had not been fulfilled because the appellants had not been able to settle their sale to Mr How. He was also aware that without that settlement, they did not have the funds to enable them to settle their purchase from him. It was in the interests of Mr Berry as well as the appellants, that reasonable efforts be made to achieve a settlement of the sale by the appellants to Mr How. As found by the learned trial judge, all solicitors involved in the transactions continued to make every effort to find funds to enable Mr How to settle. By participating in that course, by their solicitors, the appellants were not in any sense affirming that they were bound to complete their contact to purchase from Mr Berry. They were merely letting it be known to Mr Berry that they were doing what they reasonably could to enable it to be completed, notwithstanding the non-fulfilment of cl 16. The same conclusion should be reached concerning any efforts which may have been made by the appellants to raise finance for themselves, to enable them to settle with Mr Berry. The simple communication of their desire to do what they could to achieve settlement did not alone amount to the exercise of the right to elect to be bound by the contract.
One of the factors relied upon by the learned trial judge was that neither the appellants nor their solicitors communicated to Mr Berry or his solicitor that he had not made an unequivocal election. With respect, such a factor would have a negative effect, but in any event, it was not altogether true. Following the issuing of the notice to complete on 12 December, the respondents asserted to Mr Berry's solicitor on 15 December, on behalf of the appellants, a denial of the entitlement to issue such a notice and maintained that cl 16 had not been fulfilled. Those assertions amounted to a clear communication, it may be inferred, that the appellants' right to make the election had not been, and was not at that time being exercised by them.
The fact that the appellants remained in possession of Jasanda Drive and that they may have agreed to pay rent, was equivocal. They had not taken possession and did not continue in possession under any clause in the contract. Any agreement to pay rent was only made when Mr Berry demanded rent if they wished to remain in possession and they agreed to pay it. Such an agreement amounted to recognition that the appellants had no right to possession until they completed the purchase and until then, they were Mr Berry's tenants. It would not have been proper if the appellants had remained in possession and refused to pay rent.
That the appellants remained in possession after Mr Berry issued his notice to complete the contract, did not amount to the exercise of the election by them. The issue of the notice to complete, in the circumstances as they then existed, amounted to notice by Mr Berry that if the sale was not completed by the date nominated by him in the notice, he would be entitled to terminate the contract. Perri v Coolangatta Investments Pty Ltd (1982) 149 CLR 537.
It is therefore my opinion that the learned trial judge was in error when he concluded that the appellants had unequivocally elected to perform the contract by 12 January 1995. They were entitled to terminate the contract on that date and to refuse to be bound by it. It follows that Mr Dowd's advice to the appellants that they were bound to complete the contract, was wrong. That advice was given consequent upon a failure by Mr Dowd to exercise the standard of care that the law required him to exercise. The Court is not concerned to inquire into the question whether, if Mr Dowd had taken appropriate instructions from the appellants to ascertain the facts relevant to the exercise of the election and then ascertained and considered relevant legal principles, he would have given the same advice. I respectfully concur with the learned Chief Justice that as the advice was not sound and it was given as a consequence of a breach of the duty of care owed by the respondents to the appellants and of the contract of retainer, it was causative of the loss which the appellants suffered as a consequence of the advice. I would therefore allow the appeal. There should be judgment for the appellants against the respondent for damages. The case should be remitted to the learned trial judge for assessment of those damages.
It is unnecessary to consider the grounds of appeal by which the appellants maintained that the learned trial judge was also in error, by refusing to allow an amendment to their statement of claim long after the conclusion of the trial but before the learned trial judge published his reasons for judgment.
File No FCA 127/1999
COHEN & ANOTHER v WILSON DOWD
REASONS FOR JUDGMENT FULL COURT
SLICER J
14 December 2000
I have had the advantage of reading in draft form the Reasons for Judgment of the learned Chief Justice and agree with both his reasoning and conclusion. I would allow the appeal.
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