Dotype v S and I Investments

[2000] NSWSC 342

CITATION:	Dotype v S & I Investments [2000] NSWSC 342
CURRENT JURISDICTION:	Equity
FILE NUMBER(S):	SC 1786 fo 2000
HEARING DATE(S):	6 and 7 April 2000
JUDGMENT DATE:	7 April 2000
PARTIES :	Dotype Pty Limited (First Plaintiff/First Cross-Defendant) Actdad Pty Limited (Second Plaintiff/Second Cross-Defendant) S & I Investments Development NSW Pty Limited (Defendant/Cross-Claimant)
JUDGMENT OF:	Windeyer J at 1

COUNSEL :	Mr D Ryan SC with him Mr J-J Loofs (Plaintiffs/Cross-Defendant) Mr B Coles QC with him Mr P Clay (Defendant/Cross-Claimant)
SOLICITORS:	Robert Wehbe & Partners (Plaintiffs/Cross-Defendants) Michie, Shehadie & Co (Defendant/Cross-Claimant)
DECISION:	See paragraphs 25 and 26

1

IN THE SUPREME COURT
OF NEW SOUTH WALES
EQUITY DIVISION

WINDEYER J

FRIDAY 7 APRIL 2000

1786/00 - DOTYPE PTY LTD & ANOR v S & I INVESTMENTS PTY LTD

JUDGMENT

1    The plaintiff companies own properties 14 and 16 Francis Street, Dee Why. On 4 February 1999 they entered into contracts to sell those properties to the defendant company, which I will call S & I, for one million dollars each. The contracts were interdependent. The contracts provided for completion on 22 February 1999.

2    The vendors were not registered as proprietors of those properties but were the purchasers of them under contracts for sale dated 6 July 1998. Those contracts provided for delayed completion dates of 20 January 1999, which date was extended by agreement to 22 February 1999. It was after this later date was agreed that agreement was reached with S & I, through Mr Mark Humphery, a director of that company, as to price and settlement date on the sale to S & I of 14 and 16 Francis Street.

3    There are two additional properties, namely 18 Francis Street and 47 Lewis Street, which S & I had also contracted to purchase from different vendors. The intention was to settle the purchase and the on-sale of 14 and 16 Francis Street on the same day, namely 22 February.

4    Mr Jassey, the solicitor acting for S & I, told Mr Robert Wehbe, the solicitor for the plaintiffs, on 18 February that he would not be ready to settle on 22 February. Notices to complete were served on 23 February requiring settlement on 23 March 1999. There is now no issue about the notices not having been in proper form or properly served.

5    Settlement did not take place as required by the notices and by notice dated 24 March 1999 the plaintiffs gave notice of termination of the contracts.

6    The plaintiffs had, upon entry into their contracts for purchase, lodged a development application with the Warringah Shire Council which had been rejected. On 10 March 1999 the plaintiffs completed their own contracts for the purchase of 14 and 16 Francis Street, funds being provided by the National Australia Bank. The arrangement with the bank was that it would not register the transfer or mortgage for a period of about one month but would hold the documents as security. I am satisfied that proper arrangements were made with the bank for the settlement proposed for 23 March 1999 in accordance with the notice to complete.

7    On 26 March there was a conversation between Mr Humphery and Mr Joe Wehbe, a director of Actdad Pty Ltd, the first plaintiff. Mr Ray Wehbe, a nephew, is a director of Dotype Pty Ltd, the second plaintiff. I do not think it was suggested that Mr Joe could not bind his nephew or that what he said did not bind both companies. By this time, namely prior to the termination, Mr Humphery had put into Council a development application for the four properties seeking approval for a development of 56 units. There is some dispute about the conversation but Mr Humphery says that the following statements were made during it. He said that he said:

Why don't I continue with the bloody DA. Let's face it, if we put the DA together 56 units and get an approval over the site you can buy me out or flick the full lot DA approved or we complete the sale. It suits you to sit at this time.

and Mr Wehbe said:

Well, you got the DA in there. You haven't put a stop to that have you, lets run.

He said that it was also said:

But we are not talking doing it now. I don't have to do anything either with mine and you don't have to do anything with yours and you know how long a DA is good for. You are happy to sit, you have got yourself negatively geared, I'm happy to sit with mine, why don't you keep the DA going.

and among other things finally Mr Joe said:

From our point of view keep the DA going and we will finalise our sale to you or buy yours. We've got one hundred grand.

to which Mr Humphery replied:

Alright, I will drop the one hundred grand for you, get the DA approved and complete the sale or you buy me out.

to which Mr Joe said, "Okay".

8    Mr Joe Wehbe put forward a much shorter conversation and denies some parts of Mr Humphery's evidence, but as Mr Humphery produced a note of the conversation and this was not challenged I consider that I should accept his version.

9    The plaintiff companies or their agents lodged an appeal to the Land & Environment Court in respect of their rejected development approval for numbers 14 and 16 Francis Street. Mr Humphery says that he only became aware of this when he was negotiating with the Council for his development approval over the total site, consent to which application was given for 41 units on 19 January 2000. By this time Mr Humphery was well aware that the plaintiffs were pursuing their own development and presumably because of that the defendant company entered caveats dated 25 February 2000 against both properties. In those documents S & I claimed an equitable interest by virtue of the contracts for sale dated 4 February 1999 and "also pursuant to oral arrangements and agreements between the registered proprietors and the caveator subsequent to the date of the contract".

10    The claim of the plaintiffs is for declarations as to the valid termination of the contracts, for removal of the caveats and for an inquiry before a Master as to damages. The defendant by its cross-claim but really in defence of the plaintiffs' claim on the amended summons on termination, says that the plaintiffs were not ready, willing and able to complete at the time for compliance.

11    In the cross-claim proper the defendant claims that on 26 March 1999 an agreement was made with S & I to pursue the granting of the development application by Warringah Shire Council and that the plaintiffs/cross-defendants would not rely on the notice of termination and that the parties would regard the contracts as valid and subsisting. In the alternative to that claim S & I claims that the plaintiffs represented to them that if S & I took the steps to pursue the development approval then they, the plaintiffs, would not rely on the notice of termination and would regard the contracts as subsisting, and that in reliance upon that representation S & I took steps to pursue the granting of the development application thereby acting to its detriment and thus the plaintiffs should be estopped from relying on the notice of termination and from denying the contracts are valid and subsisting. There is an alternative claim that it would be unconscionable if the plaintiffs were entitled to rely on a notice of termination but nothing specific was argued about that. The final claim is a claim for relief against forfeiture by reason of the unconscionable actions of the cross-defendants, the triviality of the breach, the gain to them and the loss to S & I, and finally, in the conduct of the plaintiffs in making the representation alleged, and the conduct of the plaintiffs in encouraging S & I to assume an entitlement to complete the contracts. These latter matters I will come back to, but they really are not maintainable.

The validity of the termination:

12    Mr Jassey did not send forms of transfer to the vendor's solicitor for execution by the vendors. His secretary told Mr Robert Wehbe, the solicitor for the vendors, on 22 March that Mr Jassey or she was chasing up or organising for the transfers to be sent. Mr Jassey was told by Mr Wehbe that if settlement did not take place on 23 March then the contracts would be terminated.

13    On the morning of 23 March Mr Jassey said that the prospects for settlement did not look good. Later, either before or after 2pm - and I do not think it really matters which - Mr Jassey told Mr Robert Wehbe that the settlement will not be happening. He asked if the vendors would refrain from terminating but they would not agree.

14    On settlement the plaintiffs would have had to hand over transfers to themselves from the vendors, the contracts for sale to S & I provided for this; transfers of properties to S & I, withdrawals of caveats lodged by the plaintiffs as purchasers under the earlier contracts and some document in compliance with special condition 41 of the contracts for sale, which was as follows:

41. Prior to completion the vendors will assign to the purchaser whatever rights and title they may have or development plans submitted to Warringah Council together with survey plans for the property.

15    Vendors are not required to engage in useless activities. The expectation is the purchaser's solicitor will prepare the transfers; obviously Mr Jassey intended that. He indicated settlement was unlikely. I think it more likely than not that he did this before the time fixed for settlement when he said that it would not take place. If that were not so then in view of the first conversation the vendor's solicitor's proper expectation would have been to be told if settlement were to take place. Mr Robert Wehbe, as I have said, was not expected to engage in useless activity by attending on a settlement that was not to occur, and without further advice from the purchaser's solicitors I do not think it could be thought that there was any expectation of its occurring.

16    The evidence establishes that from the vendor's point of view settlement could have taken place. Even if it were thought that the vendors should prepare and have ready executed transfers which, as I have said, was never intended, the evidence was that that could have been done. Withdrawals of caveats could have been prepared in a few minutes if they had not been prepared; a simple letter would satisfy the requirements of special condition 41. The plaintiffs' solicitor said that could have been arranged. I accept that evidence. I accept the evidence that arrangements with the bank were in hand and were appropriate. There is no evidence whatsoever to the contrary. I find that the vendors were ready, willing and able to settle. I thus find that the termination was effective.

17    That part of the cross-claim which asserts an agreement not to rely on the notice of termination but to regard the contract valid has some difficulties. If contracts had been validly terminated as I have found they were then, on one basis, this agreement must have been a new agreement relating to land. If it was, it required writing. This was pleaded by amendment. No reply of part performance was made. In fact counsel for S & I made it clear that he was not relying on a new agreement although I had difficulty in thinking that he was not doing so. If he was, however, then that claim must fail through lack of writing.

18    I do not consider that the agreement which has been pleaded has been made out. Even if the agreement was to continue with the DA and "get an approval over the site you can buy me out or flick the lot DA approved or we complete the sale", that could not amount to a right to complete at the option of S & I. Three alternative courses were proposed without any right of unilateral decision. I do not think the conversation relied upon could in any way amount to a binding agreement, nor could the words, "Alright, I will drop the $100,000 for you, get the DA approved and then complete the sale or you buy me out", to which Mr Joe is alleged to have said "Okay", give rise to some right in S & I to buy at a fixed price or put its own price on its own properties. Apart from anything else it would indicate a new agreement at a new price not in writing. Such an agreement is contrary to the actions of Mr Joe Wehbe in sending a fax to Mr Humphery on 23 April 1999, stating that any arrangement for the joint sale was to come to an end in four weeks, after which each vendor would go it alone. In spite of the evidence of Mr Humphery as to a conversation about possible purchasers it seems to me it would have been impossible to think after that date that the vendors thought there was any agreement and for that matter after that date for S & I to think it was possible that there was any representation which continued to exist. The letter from Mr Humphery, which is annexure E to his affidavit of 23 March 2000, dated 14 October 1999 is inconsistent with the claimed agreement. I find that the claim for continuation of the agreement and non-reliance on the notice of termination is not made out.

19    So far as the estoppel claim is concerned unless S & I can establish the representation upon which its claim that there was an agreement to retain the contracts on foot was based then that claim must fail. It has not done so. I accept that S & I did expend moneys on obtaining the development approval after 23 March but that is a risk it took.

20    The evidence establishes that little was spent between 23 March 1999 and the date on which it was perfectly clear to S & I that the plaintiffs were pursuing their own development application. In fact the sum expended appears to have been about $3,300. In addition Mr Humphery put time and effort into obtaining the consent.

21    I do not think that it would be possible to find that there was some clear representation as to the actions which the plaintiffs would take in the future or the actions which they would refrain from taking despite the notices of termination. For any representation to give rise to an estoppel it must be perfectly clear. As I have said the agreement, if it was an agreement, to increase the price by $100,000 was contrary to the representation which has been claimed.

22    Be that as it may, when considering the detriment to S & I which has been claimed to arise in para 14 of the cross-claim, namely, "S & I taking all necessary steps to pursue the granting of the development application", the loss, if any, to it in acting on that representation during the time and the only time when it might have thought that representation stood, would not justify an order that the contracts remain on foot.

23    In any event I do not think that the words which were set out earlier in this judgment could possibly give rise to a representation that at whatever time and in whatever form the development approval was obtained and however long it took to gain such approval the plaintiffs would be bound to sell to S & I at the originally agreed price for which settlement was expected at the latest on 23 March 1999.

24    Finally, I deal quickly with the question of relief against forfeiture. In my view there is no basis for relief if the termination was effective. There is nothing unconscionable in the termination. The parties understood perfectly well their position under the contract, the risk of termination had been discussed between them. The right of termination was not there to secure to the purchasers instalments of the purchase money but it was a right to bring the contract to an end upon breach. This is the only matter to which forfeiture goes because if there were an agreement to keep the contract on foot then it has not been terminated.

25    It follows from this the plaintiffs' claim succeeds. The plaintiffs may have a reference to a Master for an inquiry as to damages if they wish but at their own risk as to costs.

26    The orders are as follows:

1. Make declarations sought in paragraphs 1 and 2 of the amended summons but deleting "24 March 2000" and inserting in lieu "24 March 1999".

2. Order that the defendant withdraw caveat 6597269 and 6597270 by 12 April 2000.

3. Order that it be referred to a Master to determine the damages, if any, suffered by the plaintiff as a result of registration of the caveats and that the Master enter judgment for the amount of such damages.

4. Order that the costs of any inquiry be determined by the Master.

5. Order that if the claim for damages is pursued the plaintiffs file a notice of motion to proceed on the inquiry returnable before a Master not later than 28 April 2000, and if no such motion is so filed order that the claim for damages be dismissed.

6. Order the cross-claim be dismissed.

7. Order the defendant/cross-claimant pay the plaintiffs/cross-defendants' costs of the proceedings up to and including the taking out of this order.

8. The exhibits other than Exhibit B can be returned.

Last Modified: 09/25/2000