Downing v Newsflash Nominees Pty Ltd [No 2]
[2012] WASCA 211
•22 OCTOBER 2012
JURISDICTION : SUPREME COURT OF WESTERN AUSTRALIA
TITLE OF COURT : THE COURT OF APPEAL (WA)
CITATION: DOWNING -v- NEWSFLASH NOMINEES PTY LTD [No 2] [2012] WASCA 211
CORAM: PULLIN JA
NEWNES JA
MURPHY JA
HEARD: 1 AUGUST 2012
DELIVERED : 22 OCTOBER 2012
FILE NO/S: CACV 9 of 2012
BETWEEN: VANESSA MARY DOWNING
Appellant
AND
NEWSFLASH NOMINEES PTY LTD
Respondent
ON APPEAL FROM:
Jurisdiction : DISTRICT COURT OF WESTERN AUSTRALIA
Coram :STEVENSON DCJ
Citation :DOWNING -v- NEWSFLASH NOMINEES PTY LTD [2012] WADC 26
File No :APP 69 of 2011
Catchwords:
Contract - Repudiation of a land sale agreement - Whether acceptance of repudiation - Whether respondent was entitled to judgment for loss of bargain damages - Accord and satisfaction
Legislation:
Nil
Result:
Appeal dismissed
Category: B
Representation:
Counsel:
Appellant: Mr C L Zelestis QC
Respondent: Mr S K Shepherd
Solicitors:
Appellant: Macdonald Rudder
Respondent: Tottle Partners
Case(s) referred to in judgment(s):
Blue Moon Grill Pty Ltd v Yorkey's Knob Boating Club Inc [2006] QCA 253
Holland v Wiltshire [1954] HCA 42; (1954) 90 CLR 409
McDermott v Black [1940] HCA 4; (1940) 63 CLR 161
Perri v Coolangatta Investments Pty Ltd [1982] HCA 29; (1982) 149 CLR 537
Sargent v ASL Developments Ltd [1974] HCA 40; (1974) 131 CLR 634
Wallace‑Smith v Thiess Infraco (Swanston) Pty Ltd [2005] FCAFC 49; (2005) 218 ALR 1
PULLIN JA: The appellant appeals against the judgment of Stevenson DCJ. By that judgment, his Honour dismissed an appeal by the appellant against the judgment of Magistrate Boon in the Magistrates Court of Western Australia. By that judgment, Magistrate Boon made orders that:
(a)the appellant pay the respondent the sum of $48,977.35 plus interest thereon at the rate of 6% per annum from 22 May 2009 until judgment; and
(b)the appellant pay the respondent's costs to be assessed if not agreed.
The background is as follows. On 14 January 2008, the appellant entered into a contract with the respondent whereby the appellant agreed to purchase land upon which a newly constructed house had been built at 47C Ewen Street, Scarborough (Contract). The purchase price was $765,000 and pursuant to the Contract, settlement was to occur on 28 February 2008. A deposit of $7,500 was payable. The Contract incorporated the Joint Form of General Conditions for the Sale of Land (2002 revision for use by non‑REIWA members) (General Conditions). The Contract was subject to various conditions including one relating to finance and another relating to Foreign Investment Review Board approval.
On or about 30 January 2008 the parties agreed to vary the Contract. Pursuant to this variation:
(a)the Contract became unconditional;
(b)the appellant was given possession prior to settlement; and
(c)the appellant agreed that another $10,000 would be paid by the appellant to increase the deposit to $17,500.
Once the appellant took possession, cl 14.9(b) of the General Conditions became applicable. By it the appellant promised to keep the property in good repair, having regard to the condition of the property as at the possession date.
The appellant had immigrated from South Africa. She had planned to pay for the purchase of the property partly with funds from South Africa and partly by taking out a loan in Australia. The appellant obtained the Australian loan. However, she decided to delay transferring her funds from South Africa because she hoped the rand would appreciate. Unfortunately the rand dropped in value to such a degree that the appellant was unable to pay the purchase price on the settlement date of 28 February 2008. The appellant later told the respondent's estate agent, Mr Mannino, that she had lost so much money because of the exchange rate that she could not settle.
On 13 March 2008 the respondent's solicitors issued a default notice which required the appellant to remedy the default by settling within 10 business days from the date of service of the notice. This notice did not comply with the Sale of Land Act 1970 (WA). This lack of compliance became irrelevant because of the events which followed, and is not the subject of the appeal to this court.
The events of 20 March 2008
It is common ground that on 20 March 2008, a director of the respondent, Mr Lorton, and Mr Mannino went to the property and spoke to the appellant.
Mr Lorton gave evidence that he was told by the appellant (on some unspecified occasion) that the appellant could not settle. Cross‑examination did not reveal any evidence about a conversation on 20 March 2008. Mr Mannino also gave evidence that the appellant had told him that she did not have enough money to settle the purchase of the property. He gave no evidence about any other conversations which took place on 20 March 2008.
The appellant gave evidence that she told Mr Mannino that she 'couldn't proceed with the contract'. In her written statement forming her evidence‑in‑chief the appellant also said that Mr Lorton told her on 20 March 2008 that she 'was being evicted from the property and out of the kindness of his heart he was allowing [her] to stay until the Tuesday'.
A document prepared in Mr Mannino's handwriting and amended by Mr Lorton (the Termination Agreement) was then signed by the appellant and by Mr Lorton for the respondent.
It read:
To Wright Real Estate and Newsflash P/Ltd
Re: 47C Ewen Street, Scarborough
I am unable to effect settlement of 47C Ewen Street, and hereby agree to terminate the contract.
I agree to forfeit the deposit funds of $17,500 held in trust by Wright Real Estate, pay to Newsflash Nom. Pty Ltd immediately.
No further claim shall be made against the seller or Wright Real Estate.
Vacant possession shall be returned to the seller on 23/3/08.
No further claims will be made against the purchaser upon inspection of the home and it being in the same condition to purchaser gaining possession.
The appellant gave evidence in cross‑examination about the Termination Agreement. The transcript reveals the following:
That's your signature at the bottom?‑‑‑Yes.
You read that at the time that you signed it?‑‑‑Yes.
The first paragraph of that confirms what you've just been telling her Honour, that you were unable to effect the settlement?‑‑‑That's correct.
And that the basis for that was you simply didn't have enough money because of the exchange rate difficulty?‑‑‑That's right.
Mr Mannino and Mr Lorton, in response to that, said, 'We're going to have to terminate the contract.' That's right, isn't it? That's what they said to you?‑‑‑Correct.
The agreement provides for vacant possession on 23 March 2008. That's right?‑‑‑Yes.
...
And then Mr Lorton indicated to you that if you delivered the property back to him in the same condition that you had entered into possession of it that, other than the forfeit of the deposit, Newsflash wouldn't make any further claims against you. That's right?‑‑‑That's correct.
That's what he said, that, 'There'll be no further claims if you deliver the property up in the same condition'. That's right?‑‑‑Correct.
He didn't say, in any sense, that the further claims that might be made against you were otherwise limited?‑‑‑I think here it states that if it was returned in the condition they wouldn't have any other claims, that's right.
Events subsequent to 20 March 2008
On 25 March 2008, the appellant moved out. The appellant accepts that the property was not in the same condition as when the appellant moved in and that the cost of repairing the damage that had been done to the property was $6,306. Subsequently, the respondent resold the property for $705,000. The respondent sued in the Magistrates Court for damages for breach of the Contract. There were various components to the damages claim. There was a claim for:
(a)loss of bargain damages of $42,500 being the difference between the sale price under the Contract ($765,000) and the amount received on resale ($705,000), less the deposit of $17,500;
(b)utility charges from Synergy, Alinta Gas and the Water Corporation which the appellant had incurred and which the respondent had paid totalling $171.35;
(c)$6,306 being repair costs to bring the home back into the same condition as it was in when the appellant took possession; and
(d)interest totalling $46,351.68.
The total claim exceeded the Magistrates Court's jurisdictional limit, so the respondent reduced its claim to $75,000 total in order to come within that limit.
The appellant disputed any obligation to pay the loss of bargain damages of $42,500 and disputed the basis on which interest was claimed. The claims in (b) and (c) were admitted. The appellant in her statement of defence pleaded the Termination Agreement as a bar to the loss of bargain damages. The appellant pleaded that 'acceptance of the $17,500 by the Claimant pursuant to the Termination Agreement amounted to a release of both parties from the effect of the Contract' (par 3.1).
After a trial, the magistrate found the appellant liable to pay the respondent:
(a)the loss of bargain damages (after taking into account the deposit) of $42,500;
(b)the repair costs of $6,306;
(c)the utility charges of $171.35;
(d)interest on the total of (a) ‑ (c) (that is, $48,977.35) at 6% per annum pursuant to s 12 of the Magistrates Court (Civil Proceedings) Act 2004 (WA); and
(e)costs.
Judgment was entered accordingly.
The issues before the magistrate
The parties were in issue about whether or not the appellant had repudiated the Contract and, if she had repudiated, whether or not the repudiation had been accepted. The magistrate held that the appellant had repudiated the Contract and that the repudiation had been accepted by the respondent. There was an issue was about the effect of s 6 of the Sale of Land Act but that issue has fallen away. The final issue concerned the proper construction of the Termination Agreement.
Magistrate Boon found that the Termination Agreement was 'plain and unambiguous'. Her Honour found that it provided that the respondent would make no further claims if the appellant gave vacant possession of the property in the same condition as when she gained possession of the property. Her Honour found that the appellant did not comply with that condition. Her Honour then said:
The law is well established that if an innocent party accepts a repudiation of a contract then the contract is discharged and the innocent party may sue for damages. That is what [the respondent] has done in this case. I do not consider that the conditional agreement showed any intention on the parties to limit Newsflash's claim for damages if Ms Downing did not comply with the condition. There is no basis on which to find [that the respondent] bound itself to limit its remedies at law. I find that [the respondent] is not limited to claiming the costs of rectification.
The appeal to the District Court
The appellant appealed to the District Court. The grounds of appeal alleged that the magistrate erred:
(a)in finding that the appellant repudiated the Contract;
(b)in finding that the respondent accepted the appellant's repudiation; and
(c)in construing the Termination Agreement.
There were other grounds of appeal but they are presently irrelevant. The respondent cross‑appealed. The cross‑appeal was dismissed and that part of the decision is not challenged in this court.
In relation to the three grounds listed above, Stevenson DCJ held that the magistrate did not err in finding that the appellant had repudiated the Contract [33], [36], [40]. The second of the grounds of appeal listed above challenged the magistrate's finding that the respondent accepted the appellant's repudiation. Stevenson DCJ held that it was open to the magistrate to find that the repudiation had been accepted and that as a result no error had been demonstrated [40], [42], [43].
As to the third of the grounds of appeal listed above, Stevenson DCJ said that subject to the exception contained within the 'proviso', (that is, the condition that the property be in the same condition as it was when the appellant gained possession), the intention of the parties was to discharge each other from any further liability to each other under the Contract. His Honour stated that it was the plain intention of the parties that if the appellant left the premises in the same condition as when she took possession, that there would be a resulting mutual release and discharge of both parties from any further claims under the Contract. His Honour said that the appellant did not maintain her side of the bargain and, as a result, she was not entitled to the benefit of the release provisionally given to her [75].
The appeal to this court
The appellant appealed on three grounds. Ground 1 challenged the construction of the Termination Agreement that had been found by both the trial judge and Stevenson DCJ. Ground 2 challenged Stevenson DCJ's conclusion that the appellant had repudiated the land contract. Ground 3 challenged Stevenson DCJ's conclusion that it was open to the magistrate to find that the repudiation had been accepted. Ground 2 was abandoned. The appellant now accepts the finding that she did repudiate the Contract.
It is convenient to deal with ground 3 first.
Ground 3 - did the respondent accept the admitted repudiation of the Contract?
The magistrate found that the respondent accepted the repudiation. The magistrate did not expressly state when this acceptance occurred, but it appears from the reasons that this occurred on 20 March 2008 before the Termination Agreement was signed. The appellant's written submissions (par 19) in this appeal accept that this was the effect of the finding. However, in oral submissions senior counsel submitted that it was 'not clear whether the magistrate found an antecedent acceptance'.
The issue alleging that the magistrate erred in concluding that there had been acceptance of repudiation was advanced in the District Court via ground 3 in that appeal.
The magistrate said:
Ms Downing signed the agreement on 20 March 2008 which stated that she was unable to effect settlement of the contract. Mr Lorton on behalf of [the respondent] had accepted the repudiation. The contract was at an end, and a conditional agreement was entered into.
Even if that be read as a summary of the appellant's submissions, rather than a finding, the magistrate clearly went on to say in a paragraph that unquestionably contained findings that 'Newsflash accepted the repudiation and chose to terminate the contract' (BAB 36 line 29 ‑ 30).
That passage makes it clear that the magistrate's finding was of an acceptance before the parties entered into the Termination Agreement. Therefore, the question is whether Stevenson DCJ erred in concluding that it was open to the magistrate to make the finding that the repudiation was accepted on 20 March 2008. If the respondent elected to accept the repudiation on 20 March 2008, it could only have been before the Termination Agreement was signed because no other time was suggested. To speak of repudiation being accepted after the Termination Agreement was signed would make no sense.
There were two pieces of evidence relevant to the point about acceptance of repudiation, both of which came from the appellant. The first was in cross‑examination, where, in answer to a question as to whether Mr Mannino and Mr Lorton said 'We are going to have to terminate the contract', the appellant said that this was 'correct'. The second was in evidence‑in‑chief where the appellant said that Mr Lorton told her she 'was being evicted from the property and out of the kindness of his heart he was allowing [her] to stay until the Tuesday'. Given the admission that there had been a repudiation, the statement by Mr Lorton could only have constituted an acceptance of the repudiation. The respondent could not have claimed the right to evict the appellant if it had not elected to accept the repudiation.
It is not necessary for a party to expressly state that they are accepting a defaulting party's repudiation. An election to terminate a contract does not require a consciously 'choosing' mind: Wallace‑Smith v Thiess Infraco (Swanston) Pty Ltd [2005] FCAFC 49; (2005) 218 ALR 1 [86] (French J). All that is necessary is conduct consistent with an election to accept the repudiation, thereby terminating the contract: Holland v Wiltshire [1954] HCA 42; (1954) 90 CLR 409, 416, 424 and Perri v Coolangatta Investments Pty Ltd [1982] HCA 29; (1982) 149 CLR 537, 570. More precisely, all that is needed is 'intentional and unequivocal conduct together with knowledge of the facts giving rise to the legal rights': Sargent v ASL Developments Ltd [1974] HCA 40; (1974) 131 CLR 634, 648 ‑ 649 (Stephen J).
The appellant referred in her written submissions to the fact that in cross‑examination she had said that on 20 March 2008, Mr Lorton had said 'we are going to have to terminate' (see appellant's written submissions par 20). However, the appellant omitted referring to her evidence that Mr Lorton said she was 'being evicted'. The written submission could be read as the appellant contending that the respondent might have intended to terminate but had not in fact done so. This submission suggests that it was necessary to choose whether the respondent only made the comment about having to terminate or only made the 'eviction' statement. However, the two statements are not inconsistent. It is the uncontested evidence that both statements were made. It hardly lay in the mouth of the appellant, who had proffered the evidence about the eviction statement, to contend otherwise.
In any case, even if it were necessary to choose between the statement in cross‑examination that the respondent was 'going to have to terminate' and the statement in evidence‑in‑chief that the appellant was 'being' evicted, it is not for this court to make its own choice. That was the task of the magistrate. The magistrate recited this evidence and by doing so, clearly accepted that Mr Lorton had said that the appellant was being evicted. That finding was not challenged.
Senior counsel for the appellant submitted that it was necessary to consider the 'whole course of events'. Giving consideration to the whole course of events still makes it clear that Mr Lorton unequivocally stated that the appellant was 'being evicted'. It was clearly open to the magistrate to make the finding that Mr Lorton had made the 'eviction' statement. As mentioned above, for the respondent to say that the appellant was 'being evicted' was consistent only with an election to accept the admitted repudiation. The finding of acceptance of repudiation was therefore open to the magistrate and there was no error by Stevenson DCJ in saying so.
Ground 3 should be dismissed.
Ground 1 - the construction of the Termination Agreement
On 20 March 2008, before the Termination Agreement was signed, the circumstances were that the appellant had repudiated the Contract and the respondent had accepted the repudiation. As a result, the respondent claimed an entitlement to terminate the Contract and an entitlement to evict the appellant. If the house was in disrepair as a result of the appellant's occupation of the premises, the respondent also had a claim for damages for breach of cl 14.9(b) of the General Conditions.
The parties then signed the Termination Agreement. The words 'I agree to terminate' in the first sentence can only be read, in context, as meaning that the appellant agreed to the termination of the Contract which occurred upon the respondent's election to terminate, as evidenced by Mr Lorton's statement that the appellant was being evicted.
The rest of the Termination Agreement contained the following mutual promises:
(a)the appellant promised:
(i)to forfeit the deposit and authorise the agent to pay it to the respondent immediately;
(ii)to make no claims against the respondent or the agent; and
(iii)to give vacant possession of the house to the respondent on 23 March 2008;
(b)in consideration for those promises and the appellant's agreement that the Contract had been terminated, the respondent agreed to make 'no further claims' against the appellant if, upon inspection of the house, it was in the same condition as when the appellant gained possession of it.
The promise by the respondent to make 'no further claims' meant no claims further to the claimed entitlement to terminate the Contract and to evict the appellant.
Another way of construing the Termination Agreement was that the proviso, ie the requirement that the home be in the same condition as when the appellant gained possession, was in fact a fourth promise by the appellant. On that construction, the Termination Agreement contained the promises by the appellant as set out in the previous paragraph at (a) and a promise that, upon inspection, the house would be in the same condition as when the appellant gained possession of it. On that construction, the respondent agreed to make 'no further claims against the appellant' in consideration for the four promises plus the appellant's agreement that the Contract had been terminated. The expression 'no further claims' was broad enough to release the appellant from all claims including all of the claims which were advanced by the respondent in the Magistrates Court.
Upon the first analysis, the respondent's release was a qualified release. The agreement by the respondent to make 'no further claims' was a conditional promise. The promise to make 'no further claims' would only be fulfilled if, when an inspection was carried out, the house was in the same condition as it was in when the appellant first gained possession. If the appellant satisfied that condition, then the respondent would release the appellant not only from any claim for loss of bargain damages, but also from the claim for utility payments and the claim for interest.
On the second analysis, the appellant had not performed all the promises that she had made and therefore there was no release of further claims by the respondent. In reality, despite the first analysis being expressed in terms of a qualified or conditional release, its effect was the same. That is, the appellant had to do all acts which she had agreed to perform before she was released from further claims. Therefore, whichever construction is adopted, the outcome is the same.
It was a highly advantageous agreement from the appellant's point of view. The respondent was willing to give up loss of bargain damages but it required the appellant to satisfy the condition or to perform the promise to put the house back into condition.
The appellant via senior counsel referred to the Termination Agreement as a 'consensual termination agreement' and in ground of appeal 1 the appellant described the Termination Agreement as one of accord and satisfaction. The mere use of that latter expression does not give the Termination Agreement some special quality. I agree with Keane JA in Blue Moon Grill Pty Ltd v Yorkey's Knob Boating Club Inc [2006] QCA 253 [20] that it is important to focus on what was agreed, rather than categorising the agreement as an accord and satisfaction. However, even if categorisation is necessary, then there was an 'accord executory' between the parties which never extinguished the respondent's right to pursue a claim for loss of bargain damages: see McDermott v Black [1940] HCA 4; (1940) 63 CLR 161, 183 ‑ 184 where Dixon J said:
An agreement not to sue upon particular allegations might give a defendant a good equitable plea, but at common law it would be necessary for him to show that it amounted to an accord and satisfaction discharging the cause of action or else that it gave rise to an estoppel.
The essence of accord and satisfaction is the acceptance by the plaintiff of something in place of his cause of action. What he takes is a matter depending on his own consent or agreement. It may be a promise or contract or it may be the act or thing promised. But, whatever it is, until it is provided and accepted the cause of action remains alive and unimpaired. The accord is the agreement or consent to accept the satisfaction. Until the satisfaction is given the accord remains executory and cannot bar the claim.
The appellant in this case made an offer of a 'satisfaction', namely the promise to release the deposit, to give up possession, to agree to make no claims against the respondent or the agent, to deliver up the premises in the same condition as when the appellant took possession and to agree that the Contract was terminated. In return, once the promises were performed, the respondent's accord was that it would accept the satisfaction in place of its cause of action for breach of contract, ie it would make no 'further claims'. Because of the appellant's failure to perform the promise to deliver up the house in the condition it was in when possession was taken, there was no accord and satisfaction. As Dixon J said in McDermott:
Until the satisfaction is given the accord remains executory and cannot bar the claim ... An accord executory neither extinguishes the old cause of action nor affords a new one (184).
Dixon J acknowledged that an accord executory may in some cases be accepted as satisfaction of a cause of action 'so amounting to an accord and satisfaction' (184) but that was not so in this case in relation to the promises to release the deposit, deliver the house in its former condition and to give vacant possession.
Finally, it is necessary to refer to a submission made on behalf of the appellant about the proper construction of the Termination Agreement. Senior counsel submitted that the last sentence should be read as revealing 'an implicit intention to allow a claim for the repair condition' (ts 32). If I understand this submission correctly, it is that the last sentence should be
read as allowing the respondent only to claim damages for non‑repair of the house, but to make no other claim. That submission must be rejected. It involves either reading in words which are not in the Termination Agreement or reformulating the last sentence in a way which cannot be justified.
Conclusion
On the evidence, it was open to Magistrate Boon to find that the respondent had accepted the appellant's repudiation. Stevenson DCJ did not err in making a finding to this effect.
Further, the Termination Agreement, properly construed, only released the appellant from further claims if she delivered up the house in the same condition as it was in when she took possession. The appellant failed to do so. Stevenson DCJ's finding in this regard was correct. The appeal should be dismissed.
NEWNES JA: I agree with Pullin JA.
MURPHY JA: I am in general agreement with the reasons given by Pullin JA. There was sufficient evidence, as Pullin JA indicates, for Stevenson DCJ to conclude that there was no error in the magistrate finding that the respondent had accepted the repudiation. In this court it was not contended that the appellant had not repudiated the contract. Accordingly, the contract had been terminated and it is impossible to read the agreement in writing between the appellant and the respondent made on 20 March 2008 as constituting a consensual termination of the contract. By the time that agreement was made, the respondent had an accrued right to loss of bargain damages. I would dismiss the appeal.
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