Dunning v Callaghan; Dunning v Callaghan

[2008] NSWSC 553

CITATION:	Dunning v Callaghan; Dunning v Callaghan [2008] NSWSC 553
HEARING DATE(S):	3 June 2008
JUDGMENT DATE :	3 June 2008
JURISDICTION:	Equity Division
JUDGMENT OF:	Windeyer J at 1
EX TEMPORE JUDGMENT DATE:	3 June 2008
DECISION:	Contract was validly rescinded by purchasers. Orders for repayment of deposit.
CATCHWORDS:	CONVEYANCING - vendor and purchaser - matters arising between contract and completion - whether contract validly rescinded - sale of properties subject to special condition giving either party right of rescission if strata plan not registered within 12 months from contract date - power to extend time for registration for specific reasons subject to determination by vendors' architect - whether letter from architect was a determination
LEGISLATION CITED:	Conveyancing Act 1919
CATEGORY:	Principal judgment
PARTIES:	Thomas David Dunning (First Plaintiff 4986/06) Pauline Dunning (Second Plaintiff 4986/06) John Alban Dunning (Plaintiff 4987/06) Stephen Lloyd Callaghan (First Defendant in both matters) Kenneth Reginald Hardaker (Second Defendant in both matters)
FILE NUMBER(S):	SC 4986 of 2006; 4987 of 2006
COUNSEL:	Mr B Ralston (Plaintiffs in both matters) Mr M J Watts (Defendants in both matters)
SOLICITORS:	St Marys Legal Practice (Plaintiffs in both matters) Grogan & Webb (Defendants in both matters)

- 9 -

IN THE SUPREME COURT
OF NEW SOUTH WALES
EQUITY DIVISION

WINDEYER J

TUESDAY 3 JUNE 2008

4986/06 THOMAS DAVID DUNNING & ANOR v STEPHEN LLOYD CALLAGHAN & ANOR
4987/06 JOHN ALBAN DUNNING v STEPHEN LLOYD CALLAGHAN & ANOR

JUDGMENT

1 HIS HONOUR: These two actions were heard together and involve contracts for the sale by the defendants dated 2 March 2005, in one case to Mr John Alban Dunning of a property to be known as Lot 1/214 Railway Road North, Vineyard, and in the other case, to Thomas Dunning and Pauline Dunning of three lots in the same development, namely, Lots 2, 3, 4. It was envisaged under the contracts that a plan of strata subdivision would be registered. An order has been made that the evidence in one matter be evidence in the other so far as relevant to these actions. I should say the evidence is precisely the same in each, so that I will refer to a purchaser rather than refer to the purchasers under each contract.

2 Under special condition 42 it was provided that the sale was subject to consent to the vendor’s proposed plan of subdivision which was annexed and that if the plan was not registered as a strata plan within 12 months from contract date, namely, 2 March 2005, then either party could rescind by notice in writing to the other. In that event, the provisions of clause 19 of the contract would apply.

3 Clause 19 provides that in the event of rescission a right can only be exercised by serving a notice and that thereafter the deposit would be repaid by the vendor to the purchaser. In this case the evidence is that there was a five per cent deposit paid on each contract, namely, $30,000 on each contract, the sale price being $600,000, per unit and that the deposit was released to the vendor.

4 Special condition 43 provided as follows:-

Notwithstanding the time limit for registration of the Strata Plan referred to in special condition 43 (sic) above, the vendor shall be entitled to extend the date by which the Strata Plan must be registered, namely, 18 months, by each day that the vendor or its builders have been delayed by reason of:

43.1 Inclement weather or conditions resulting from inclement weather;

43.2 Any civil commotion, combination of workmen or strikes or lockout affecting the progress of the works or affecting the manufacture or supply of materials for the construction of the property;

43.3 By reason of any delay in any approval required for the construction of the property by the proper authority or authorities.
AND the parties agree that the vendor's architect shall be the sole determinator of the vendor’s entitlement to extensions of the time to the said 18 month period referred to above , and it is further agreed that the vendor’s architect shall act as an expert and not as an arbitrator and his decision shall be final and binding upon the parties thereto.

5 A part of the plaintiffs’ claim was that in Special Condition 43 the true agreement was that the period be 12 months and not 18 months: that has been accepted by the defendant vendors and an order has already been made that the contracts be rectified accordingly. Thus, the 18 months each time it appears in special condition 43 must be read as 12 months.

6 The strata plan was not registered within the 12 month period and in fact the purchasers gave a notice to complete and purported to exercise their rights under Special Condition 42. That, at the moment, does not matter for the purpose of this decision except that there was some correspondence entered into by the parties about the vendors saying that the notice to complete was invalid. That notice to complete was given on 3 March 2006.

7 On 8 March 2006 Messrs Christopher M Edwards Solicitor having received that notice wrote to the solicitors for the purchasers stating that the notice to complete was invalid because the purchaser could not complete the purchase, as the strata plan had not yet been registered. That was an argument put to me by Mr Watts today but, in my view in the circumstances of this case, there is nothing in that argument. The purchaser could not complete the purchase and was not bound to complete the purchase or to be ready to complete the purchase because the strata plan had not been registered. If they were entitled to exercise their rights under Special Condition 42, then they were so entitled even if the document was perhaps an inappropriate one in view of the right of rescission, but that does not matter. The letter went on to say:

In addition we refer you to special condition 43 of the contract and advise that the delay has been occasioned by various issues as set out in the enclosed letter and attachment from G D Moore & Associates.
In particular, we draw your attention to the Construction Certificate wherein it stipulates when work was to commence, ie, 24 June 2005.
In short we advise that our clients will require a 90day extension in accordance with Special Condition 43 of the contract.

8 There was enclosed with that letter a copy of a letter dated 8 March 2006 from G D Moore & Associates to the vendors, which I will not set out in full, but which stated in part:

Please be advised of the following factors which all contributed to the delay in completion of the above property:

(1) Issue of construction certificate. Please find attached the construction certificate which was finally issued on 22 June 2005.

(2) Inclement weather. There was then a statement that from 22 June 2005 to 3 March 2006, 37 days were lost attributable to rain.

(3) Structural steel. Please note due to the illness of our structural steel manufacture and installation mid-stream of installation, a period of 21 days was lost.

(4) Water Board. This was not relied on and I do not set out what was said.

(5) From 3 March 2005, the total days lost, not including the water board delay, is 168 days.

9 It was that letter, as I will call it at the moment, which the vendor relied on in its statement that a 90-day extension was required.

10 On 13 March 2006 the solicitors for the purchasers replied stating that they did not agree the notice to complete was invalid as they had a right of rescission. They did not accept what they call the vendor's contention of one day in each two days of the period, and they maintained their right to rescind.

11 There was a further letter from the vendors solicitors of 13 March about some further work having been done to the property in 2006 which seems to be irrelevant, and then a letter dated 29 March 2006 from the solicitors for the purchaser referring to a claimed extension of 168 days and stating as follows:-

Our clients do not accept the validity of the "determination" by the architect and consider that the provisions of Clause 43 which provide for the method of determination would be likely to be set aside pursuant to the provisions of the Contracts Review Act.
However, we note that not notwithstanding the contents of the architect's report, the Vendors now seek an extension of the period of registration of the Strata Plan by 90 days. To assist in our obtaining our clients’ further instructions in relation to the issue we would ask that you conform that the vendors’ claim for any extension of time under clause 43 is limited to 90 days and that the vendors’ waive any claim for further extension arising from the contents of the architect’s report.

There was no reply to that particular request.

12 On 23 June 2006 the solicitors for the purchaser gave notice of rescission. There was some further correspondence from the solicitors for the vendor asking that this be reconsidered, as it seemed that the strata plan would shortly be lodged for registration, but the purchasers confirmed their decision to rescind and asked for return of the deposit. There was then some further correspondence between the parties, rather than between solicitors, which was an endeavour by the vendors to bring the matters back on track or perhaps to ask that the purchasers reconsider their decision, but nothing was achieved as a result of that. Subsequently the vendor gave a notice to complete and purported to terminate.

13 It is accepted that the matters for decision are as follows:-

1. Whether or not the letter from the architect was a determination under special condition 43 of the contract;

2. If it was, whether the letter from the vendors solicitors of 8 March 2006 was an election to require a 90-day extension in accordance with special condition 43 or whether a period of 168 days was the entitlement under that determination on the basis that there was no election.

14 There are two subsidiary issues. First, there was a suggestion that the letter of 8 March 2006 was an offer by the vendors to the purchasers of a 90 day extension, presumably in lieu of the 168 to which they were entitled, and that this offer was accepted. There is no evidence of that and that claim could not be sustained. The second subsidiary argument although not put forward as subsidiary was a claim based on estoppel by convention, namely, the parties conducted their affairs on the assumed basis that the letter of 8 March 2006 was a determination entitling the vendors to an extension of 168 days. In my view, the evidence is quite clear that the plaintiffs never conducted themselves upon that assumed state of affairs.

15 I turn to the question of the architect's letter. I should say at the outset it is accepted that G D Moore & Associates were the architects for the vendors so that they were the firm entitled to make a determination under special condition 43.

16 I have been referred to what I think is the Macquarie Dictionary definition of "determination" which gives various meanings such as the act of coming to a decision, the fixing or settling of a purpose, a settlement of a dispute by authoritative decision, and the decision arrived at or pronounced. The word in any event is an ordinary word, here meaning a decision for the purposes of special condition 43. This is a case where the architect was required to act as an expert and where his decision would be final and binding upon the parties. On its face, the document does not appear to be a determination, but rather a letter addressed to the vendors. It does not appear to be a determination taking into account relevant matters in accordance with special condition 43. For instance, it gives a period of 21 days lost because the structural steel manufacturer was ill, which is quite irrelevant to special condition 43. The extension of time which is said to be related to the delay in obtaining the construction certificate was not such as it could come within 43.3 of the special conditions. It was never expected by the parties to this contract that construction would commence on the date of entry into the contracts. The evidence on that is quite clear. The final statement as to the days lost being 168 days, which I accept does not take into account anything about the Water Board, does not on its face appear to be a determination in accordance with special condition 43. Thus, I conclude that the letter is not a determination. On that basis the plaintiff must succeed.

17 However, it is I think important to deal with the question of election. Under special condition 43 the vendors were entitled to extend the time for registration from 12 months by the extension time given by the determination of the vendors' architect. They were not required to do so but they could if they wished. The vendors could have exercised rights to rescind had they wished to do so which they did not, presumably because the contract price was satisfactory to them. In other words, they wished to proceed. They elected to do so. The question is whether or not the last paragraph of the letter of 8 March 2006 stating, “In short, we advise that our clients will require a 90 day extension in accordance with special condition 43 of the contract", is an election to extend the completion date by that period or whether in some way a right to an extension of 168 days is maintained.

18 I conclude that the vendors are bound by an election for a 90 day extension. There was no correspondence which suggested otherwise. Even after the rescission, there was no correspondence to suggest that the reliance on a 90 day extension was incorrect. I consider that there was an election to rely on special condition 43 for an extension of 90 days.

19 It is accepted that if I held that the architect's letter was not a determination within special condition 43 or if I determined that any election was limited to a period of 90 days, then the plaintiffs must succeed. If I held against that contention, then the defendants would succeed. It follows from this that the plaintiffs are entitled to succeed and I will make the necessary orders.

20 In matter number 4986/06 I make the declarations sought in paragraphs 1, 2 and 3 of the summons but deleting the word "terminated" and inserting in lieu the word "rescinded". I make the order sought in paragraph 4 deleting the word "deposit" and inserting the words "total deposits". Order the defendants pay interest on the said sum of $90,000 in the sum of $17,085.20.

21 In matter number 4987/06 I make the declaration in paragraph 1 of the summons but deleting the word "terminated" and inserting in lieu the word "rescinded". I make the order sought in paragraph 2 of the summons. Order the defendants to pay to the plaintiff interest on the said sum of $30,000 in the sum of $5,695.06.

22 So far as costs are concerned, there are two matters to be considered. The first is that offers of settlement letters were sent by the plaintiffs’ solicitors to the defendants’ solicitor on 4 October 2006 and 16 April 2007. The first letter was an offer of settlement on the basis that the vendors repay the deposit there and no order as to costs and no order as to interest. The second letter was an offer to settle on the basis that for the claim relating to three contracts that the plaintiffs pay to the defendants $15,000, the defendants repay to the plaintiffs $90,000, each party to pay its own costs, with no claim for interest. In matter 4987/06 the offer was that the plaintiff pay the defendants $5,000, that the deposit of $30,000 be repaid, each party to pay its own costs, with no claim for interest.

23 The letter of 4 October 2006 while it would have given some small benefit to the vendor in the nature of interest as at that date was really a very minimal offer, and in my view would not justify an order for indemnity costs. The offer of 16 April 2007 was an offer which in the light of my decision was an offer which would have been of considerable benefit to the defendants and might therefore justify an order for indemnity costs as from 16 April 2007. However, counsel for the defendants has reminded me quite correctly that there was in each action an alternative claim under s 55(2A) of the Conveyancing Act 1919 for return of the deposit, which was abandoned at the commencement or shortly after the commencement of the hearing. Counsel said that there was some work which was not insignificant in the response to that claim. I accept that to be the position. That might have justified some small reduction in the costs recoverable by the plaintiffs against the defendant but in the circumstances in my view that would be balanced out by any claim for indemnity costs. It is therefore appropriate not to complicate the matters but in each case to order that the defendants pay the plaintiffs’ costs. I make that order in each case. Order the defendants to pay the plaintiffs costs. The exhibits can be returned.

**********