De Amicis v Mattiuzzo
[2013] VSC 733
•20 December 2013
| IN THE SUPREME COURT OF VICTORIA | Not Restricted | |
AT MELBOURNE
PRACTICE COURT
No. 5739 of 2013
| GIOVANNI DE AMICIS | Plaintiff |
| v | |
| CARMELO MATTIUZZO | Defendant |
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JUDGE: | T FORREST J | |
WHERE HELD: | Melbourne | |
DATE OF HEARING: | 11 December 2013 | |
DATE OF JUDGMENT: | 20 December 2013 | |
CASE MAY BE CITED AS: | De Amicis v Mattiuzzo | |
MEDIUM NEUTRAL CITATION: | [2013] VSC 733 | |
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SALE OF LAND – Contract - Vendor and purchaser –Application under s 49(1) of the Property Law Act 1958 – Rescission where time of the essence of the contract – Notice of Default – Whether period of notice reasonable.
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APPEARANCES: | Counsel | Solicitors |
| For the Plaintiff | Mr David P Lloyd | Randles Cooper Lawyers |
| For the Defendant | Mr Garry Moffatt | John V Hayes & Co |
HIS HONOUR:
Background
The On 18 May 2010 a Contract for the sale of real estate was executed between the plaintiff as vendor and the defendant as purchaser. The subject property was a house in Brunswick, Victoria. The purchase price was $1 million payable by a deposit of $50,000 on 31 May 2010 with the balance of $950,000 due on 17 May 2011.
The parties agreed to amend the Contract of Sale. The sale price was increased to $1,100,000 with a deposit of $100,000, of which $50,000 had already been paid. The balance of the deposit became payable on 20 March 2011 and the remaining $1,000,000 with settlement on 17 May 2012.
The final $50,000 owing by way of deposit was finally paid on 26 August 2011. Thereafter a labyrinthine series of variations, missed deadlines and purported rescissions took place. It will be necessary later in this judgment to set these out in some detail.
By October 2013, three and a half years after the original Contract of Sale was executed, the purchaser served a Notice of Default on the vendor. It is common ground that the sale contract provided for vacant possession upon settlement. The defendant says that the vendor could not provide vacant possession on that date. It is against this broad background that the Notice of Default of 22 October 2013 was served by the purchaser.
These proceedings are brought under s 49(1) of the Property Law Act 1958 (Vic). A vendor or purchaser of any interest in land is entitled to apply to this Court in respect of ‘any question arising out of or connected with the contract’ provided the question posed does not affect the existence or validity of the contract.
At paragraph one of his originating motion the plaintiff asks the court to determine the following questions:
(a) When the defendant gave to the plaintiff the notice styled “Notice of Default” and dated 22 October 2013 (“the Notice”) pursuant to the Contract, was time still of the essence of the contract?
(b) If the answer to question one is “no”, is the period provided for in the Notice a reasonable period of time in all the circumstances for the plaintiff to be required to complete the Contract?
If the answer to the second question is “no” the plaintiff seeks, at paragraph two of his Originating Motion, declarations that the Notice of Default is invalid and of no effect and that the defendant is not entitled to rely or act upon it. The plaintiff also seeks an order that the defendant pay the plaintiff’s costs of the application.
Chronology
18 May 2010 – 29 August 2011
Under the amended contract for sale the sale price had increased to $1,100,000 with a deposit of $100,000, of which $50,000 had already been paid. The balance of the deposit was to be payable on 20 March 2011 and the remaining $1,000,000 with settlement on 17 May 2012.
Shortly after the formation of the contract the plaintiff agreed to lease the property to Adrian James Delaney for a period of 12 months on 1 June 2010.
By letter of 22 March 2011 the defendant sought to extend the date for payment of the balance of the deposit to 20 April 2011. The plaintiff acceded to the defendant’s request.
The defendant failed to pay this sum by the appointed date and by letter of 16 August 2011 the plaintiff served the defendant with a Rescission Notice. On 29 August 2011 the plaintiff finally received payment of the remaining $50,000. The default particularised in the Rescission Notice was remedied and the contract remained on foot.
At some point in May or June 2011 the plaintiff extended the lease agreement with Mr Delaney for a further 12 months, to 1 June 2012.
26 April 2012 – 27 May 2013
By letter of 26 April 2012 the defendant sought an extension of the settlement date from 17 May 2012 to 13 May 2013. In return, the defendant would pay an additional sum of $100,000. Again, the plaintiff consented to the extension. Together, the parties agreed the defendant would pay the additional sum by way of the following instalments:
a) $25,000 to be paid on 14 May 2012 (“the first instalment”);
b) $25,000 to be paid on 30 June 2012 (“the second instalment”);
c) $50,000 to be paid on 30 December 2012 (“the third instalment”).
The first instalment was paid by the appointed date. The second was paid, late, on 20 July 2012.
It was also during this period, in May or June of 2012, that the plaintiff agreed to allow Mr Delaney to remain in the property on a month to month basis. This arrangement commenced on 1 June 2012.
The defendant failed to pay the third instalment by 20 December 2012. The plaintiff informed the defendant that he would allow until 9 January 2013 for payment to be made.
On 17 January the defendant sought an extension of time for the payment of the third instalment. The plaintiff consented to the extension on the basis that the defendant would pay $10,000 on 18 January 2013 and the balance amounting to $40,000 on 31 January 2013. The sum of $10,000 – or the first instalment of third instalment – was paid on 18 January.
The defendant failed to pay the remaining $40,000 by 31 January 2013. By letter of 4 February the defendant advised that partial payment ($20,000) would be made the next day. The remaining $20,000 would be paid on or before 28 February. The first of these two instalments was paid on 5 February 2013. At the time of this application the remaining $20,000 was still outstanding.
On or about 25 March 2013 the plaintiff served a Rescission Notice on the defendant on the basis that it had failed to pay the third instalment of the money owing for extending the settlement date in full. The response was a letter of 6 April confirming that the defendant would be in a position to settle on 13 May and requesting that the remaining $20,000 be payable at that date.
Settlement did not occur on 13 May because the defendant was not in a position to settle. On 26 May the defendant requested a further extension of the date for settlement without penalty to 29 June 2013. On or about 27 May the plaintiff served a further Rescission Notice. It required settlement to occur by 11 June 2013.
By email of 27 May the plaintiff asked the defendant whether it intended to keep the property tenanted.
4 June 2013 – Present
By email of 4 June the defendant answered in the affirmative. The defendant sought confirmation that the property would be vacant at settlement in accordance with the Contract of Sale. By letter of 6 June the plaintiff withdrew the Rescission Notice and advised it would be in a position to proceed to settlement on 26 August 2013. It would provide vacant possession at that date. A Notice to Vacate, also dated 6 June, was served on Mr Delaney.
On 17 July 2013 the Victorian Civil and Administrative Tribunal declared the Notice to Vacate to be invalid. Two further Notices to Vacate dated 17 July 2013 were served on Mr Delaney (“the July notices”). At the hearing of this application counsel could not say why two Notices to Vacate were served on 17 July. The notices themselves may provide the answer.
The first of the July notices was purportedly served under s 259(2A) of the Residential Tenancies Act 1997 (Vic). As a result, it allowed Mr Delaney 60 days to vacate the premises . Notices to Vacate served under s 259(2A) must, however, be given within 14 days of the execution of the contract of sale. The notice period of 60 days was therefore inadequate. It is possible the plaintiff’s solicitors recognised this error and accordingly issued the second Notice under s 263(1). This Notice to Vacate correctly allowed a 120 day notice period and required Mr Delaney to vacate the premises on 17 November 2013.
By letter of 1 August the plaintiff advised it would be in a position to settle on 18 October 2013. At the hearing, counsel could not account for this date. It appears to split the difference between the dates provided for vacation in the two July notices. If I am correct and the plaintiff’s solicitors issued the second July notice having recognised the inadequacy of the first, then the plaintiff was advising it would be a position to settle by 18 October when it knew or ought to have known it very well might not be.
On 21 August VCAT ordered, by consent, that the plaintiff withdraw the first of the July Notices to Vacate. Mr Delaney was ordered to vacate the property by 16 December.
On 22 August the defendant insisted that settlement occur on 26 August. The plaintiff replied by letter the next day. The plaintiff proposed the matter proceed to settlement on 19 December 2013 and enclosed, by way of explanation, the VCAT order of 21 August.
On 9 September the defendant demanded that settlement take place by 13 September.
On 11 September the plaintiff’s solicitor, Luke Peter Randles, spoke with Mr Delaney by telephone. During this conversation, Mr Randles deposes, Mr Delaney claimed to have been contacted on several occasions by the defendant. Mr Delaney swore to the contents of these conversations in his affidavit of 10 December. In short compass, it is Mr Delaney’s evidence that on three occasions between 3 June and 25 July 2013 the defendant indicated he wished Mr Delaney him to remain as his tenant after settlement occurred. The defendant allegedly advised Mr Delaney he “couldn’t provide a written assurance of his intention”.
On 12 September 2013 Mr Randles sent a letter to the defendant’s solicitors. He maintained that the plaintiff would be in a position to settle on 19 December and described his conversations with Mr Delaney. It is not necessary to set that letter out in any detail.
By letter of 22 October the defendant served a Notice of Default on the plaintiff. The default particularised in the notice was the failure to provide vacant possession by what was said to have been the further extended due date for settlement, 26 August 2013. The plaintiff had 14 days to remedy the default.
On 1 November the plaintiff wrote to the defendant and advised he would be in a position to proceed to settlement on 6 November 2013. The plaintiff noted the preceding day, 5 November, was Melbourne cup day. Evidently, the defendant did not consent to this extension. On 6 November the plaintiff filed, and shortly thereafter served, the Originating Motion and Summons in these proceedings.
Was time of the Essence of the contract at the date of issue of the Notice of Default?
By his Originating Motion dated 6 November the plaintiff asks the Court to determine the following question:
When the defendant gave to the plaintiff the notice styled “Notice of Default” and dated 22 October 2013 (“the Notice”) pursuant to the Contract, was time still of the essence of the contract?
The general principles concerning rescission for non-performance of a contractual promise by an agreed date or time were set out in Carr v J.A. Berriman Pty Ltd[1]. I summarise those principles:
[1](1953) 89 CLR 327; see also, Mehmet v Benson (1965) 113 CLR 295 at 303; Balog v Crestani (1975) 132 CLR 289 at 296.
1) Where a contract contains a promise to do a particular thing on or before a specified date, time may or may not be of the essence of the promise.
2) If time is of the essence and the promise is not performed on the appointed date the promisee is entitled to rescind the contract.
3) Equally, he may elect not to exercise that right. An election of this sort will be inferred from any conduct that is consistent with the continued existence of the contract.
4) If time is not originally of the essence – or time being originally of the essence the right to rescind for non-performance on the day is lost by election – time may be made of the essence of the contract.
5) In such circumstances the promisee can, generally speaking, rescind only after he has given a notice requiring performance within a specified reasonable time, and after non-compliance with that notice.
If the answer to the first question is “yes”, and time was of the essence of the contract when the defendant’s Notice of Default was issued on 22 October 2013, then this application will go no further. The defendant would have been entitled to rescind at that date and little, if anything, would turn on the length of the notice period. If, however, time was not of the essence of the contract at 22 October 2013 the question will properly become whether the Notice of Default made time of the essence. This will, of course, require the Court to assess the reasonableness of the notice period.
The Sale Contract contained a term that provided time was of the essence of the contract. I am satisfied that for a number of discrete periods of time between May 2010 and 6 June 2013 time was of the essence of the defendant’s promise under the contract. On 6 June the plaintiff withdrew the Rescission Notice of 17 May and advised, by letter, that he would be in a position to settle on 26 August. Plainly, this action was consistent with the continued existence of the contract and is evidence of an election not to rescind on the appointed date. The same may be said of the subsequent letter of 1 August, in which the plaintiff advised he would not be in a position to settle until 18 October. It also seems to me significant that neither of these letters was accompanied by a Rescission Notice fixing settlement for either of those postponed dates.
The defendant’s right to rescind for non-performance must be considered in light of his conduct under the contract. He has on various occasions failed to settle on, or sought extensions to, the dates fixed for settlement. Those actions are plainly consistent with the continued existence of the contract and evidence of an election not to rescind. The question, then, is whether the defendant made time of the essence of the contract between 1 August and 22 October 2013. An executive chronology of that period is as follows:
1 August – The Plaintiff advises he will not be able to proceed to settlement on 26 August. He advises he will be in a position to settle on 18 October.
21 August – VCAT orders Delaney to vacate premises by 16 December.
22 August – The Defendant insists on 26 August settlement.
23 August – The Plaintiff proposes matter proceed to settlement on 19 December.
9 September – The Defendant insists on 13 September settlement.
12 September – The plaintiff advises he will be in a position to settle 19 December. The plaintiff sets out the contents of the conversations between Mr Randles and Mr Delaney regarding the defendant’s offer to retain him as tenant.
22 October – The Defendant serves the Notice of Default allowing 14 days to proceed to settlement and provide vacant possession.
By letters of 22 August and 9 September the defendant insisted that settlement occur on 26 August and 13 September, respectively. In isolation, each letter is clearly insufficient to make time of the essence. They provide notice periods of four days and are not accompanied by formal Notices of Default.
It may be that the two letters constitute a continuing course of conduct and ought be considered together. This consideration would include the periods of notice allowed in those letters. The defendant’s argument then is that the defendant revived time of the essence of the contract from 22 August onwards. If this were the case the answer to the first question would be yes. Whilst I am attracted to this analysis it is unnecessary to resolve it given my conclusion on question two.
Was the period provided for settlement in the Notice of Default reasonable?
The time given under the Notice of Default was 14 days. In considering whether this period was reasonable the Court must consider all the circumstances of the case.[2]
[2]Sindel v Georgiou (1984) 154 CLR 661 at 669; Laurina Pty Ltd v Capalaba Park Shopping Centre Pty Ltd (1989) 166 CLR 623 at 638 and 640 per Mason CJ, and 647 per Brennan J; Sunstar Fruit Pty Ltd v Cosmo [1995] 2 Qd R 214 at 222.
After amendment, the date for settlement was set for 17 May 2012. As I have said, the defendant successfully sought an extension of this date to 13 May 2013. The Defendant was not in a position to settle on that date and on 27 May a further extension was sought to 29 June 2013. The plaintiff did not consent to this extension and issued a Rescission Notice. This was withdrawn when it became clear the defendant required (and was entitled to) vacant possession at settlement.
The plaintiff submits that he has acted promptly in endeavouring to secure vacant possession of the property from the tenant. I do not accept this. True, it was only on 4 June that the defendant confirmed, in reply to the plaintiff’s query of 27 May, that he required vacant possession. The defendant was, however, entitled to vacant possession from the date the contract was entered into. The defendant never represented otherwise to the plaintiff.
In written submissions the plaintiff adverted to the importance of the notice-giver’s attitude towards the delay, communicated to the recipient before the notice was given. A shorter time would be reasonable where impatience is expressed towards the delay. I agree. The defendant’s letters of 22 August and 9 September are relevant in this regard.
Ultimately, it was the plaintiff who set the 26 August settlement date. The defendant advised an investor, Mr Steve Pellegrino, of that fact. When this date was abandoned by the plaintiff Mr Pellegrino notified the defendant that if settlement did not take place shortly he would not invest in the purchase. The money had been drawn from an overdraft facility and he would have to consider another venture. Given the size of this investment, $380,000, I accept the defendant’s evidence that he would have had difficulty proceeding to settlement without it. I accept that it was this difficulty that lay behind his insistence on timely settlement on 22 August and 9 September.
It may not be of great significance but it must also count in the defendant’s favour that on 4 November Mr Delaney vacated the property and the plaintiff was in a position to provide the defendant with vacant possession.
Finally, I note that under clause 27.2 of the Sale Contract the relevant period for default notices is 14 days.
I find that the 14 day period provided by the defendant’s Notice of Default was reasonable in all the circumstances.
Conclusion
I answer the questions set out at paragraph 1 of the plaintiff’s Originating Motion as follows:
(a) ‘It is not necessary to answer this question.’
(b) ‘Yes.’
Accordingly, I make none of the declarations sought at paragraph 2 of the plaintiff’s Originating Motion.
There shall be liberty to apply as to costs.
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