Fekala Pty Ltd v Castle Constructions Pty Ltd

Case [2002] NSWCA 297

NEW SOUTH WALES COURT OF APPEAL

CITATION:     Fekala Pty. Ltd. v. Castle Constructions Pty. Ltd. [2002]  NSWCA 297

FILE NUMBER(S):
40222/02

HEARING DATE(S):    7 August 2002

JUDGMENT DATE:      07/08/2002

PARTIES:
Fekala Pty. Limited - appellant
Castle Constructions Pty. Limited - respondent

JUDGMENT OF:        Beazley JA Hodgson JA Santow JA   

LOWER COURT JURISDICTION:       Supreme Court - Equity Division

LOWER COURT FILE NUMBER(S):     ED 3812/01

LOWER COURT JUDICIAL OFFICER:   Windeyer J

COUNSEL:
Mr. B. Skinner for appellant
Mr. D. Officer QC with Mr. D.L. Warren for respondent

SOLICITORS:
Nugent Wallman & Carter, Edgecliff for appellant
Day Dockrill, Neutral Bay for respondent

CATCHWORDS:
CONTRACTS
CONVEYANCING - Vendor and purchaser - Notice to complete - Whether party giving a notice to complete can deny its validity - Whether party giving a notice to complete can unilaterally extend the time limited by the notice - Need for notice making time of the essence to be explicit - Whether vendor's notice to complete waived submission of transfer.

LEGISLATION CITED:

DECISION:
Appeal dismissed with costs.

JUDGMENT:

IN THE SUPREME COURT
OF NEW SOUTH WALES
COURT OF APPEAL

CA 40222/02
ED   3812/01

BEAZLEY JA
HODGSON JA
SANTOW JA

Friday 6 September 2002

FEKALA PTY. LIMITED V.
CASTLE CONSTRUCTIONS PTY. LIMITED

Judgment

  1. BEAZLEY JA:  I agree with the reasons of Hodgson JA as set out below.

  2. HODGSON JA:  Proceedings were commenced in the Equity Division on 1st August 2001 by the respondent Castle Constructions Pty. Limited (the Purchaser) against the appellant Fekala Pty. Limited and others (the Vendors) in relation to a contract for sale by the Vendors to the Purchaser of property at Eastwood.  The proceedings initially sought declarations as to what was included in the sale; but on 29 August 2001, the Purchaser gave notice that it terminated the contract, and by an Amended Summons (later further amended) the Purchaser claimed a declaration that the contract had been terminated, return of the deposit, and damages.  By a cross-claim in the proceedings, the Vendors sought specific performance and damages, and alternatively a declaration that they were entitled to the deposit.

  3. Windeyer J gave judgment in the proceedings on 26 February 2002, and on 1 March 2002 made orders granting the relief sought by the Purchaser (including an enquiry as to damages) and dismissed the Vendors’ cross-claim.  The Vendors appeal to this Court from those orders.

    FACTS

  4. The contract was entered into on 28 June 2001, in the form of the 2000 edition of the Standard Contract for the Sale of Land.  The Vendors were named as “Fekala Pty. Limited and others as mortgagees exercising power of sale pursuant to registered mortgage No.6152594”.  The contract was signed on behalf of the Vendors by their solicitor:  no issue is now raised by reason of that circumstance.  The completion date was specified as the 42nd day after the contract date, which was in fact 9 August 2001.  The price was $3 million, with a deposit of $300,000.00. 

  5. The names of the Vendors were set out in Annexure A to the contract.…

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Details
AGLC
Fekala Pty Ltd v Castle Constructions Pty Ltd [2002] NSWCA 297
Case
[2002] NSWCA 297
Decision Date

CaseChat Overview and Summary

This case involved an appeal by the Vendors, Fekala Pty Ltd and others, from orders made by Windeyer J in favour of the Purchaser. The dispute arose from a contract for the sale of land entered into on 28 June 2001. The Vendors were a group of mortgagees exercising their power of sale. A key issue was that one of the named mortgagees, Valerie Winifred Colburt, had died before the contract was signed, and her executors had been granted probate, a fact not disclosed by the Vendors to the Purchaser. The completion date was 9 August 2001.

The legal issues before the Court of Appeal concerned the validity and effect of a notice to complete served by the Vendors. Specifically, the court had to determine whether a party giving a notice to complete could unilaterally extend the time stipulated in that notice, whether the Purchaser was precluded from terminating the contract due to its own alleged failure to submit a transfer form, and whether the Vendors' failure to disclose the death of a mortgagee and the grant of probate to her executors impacted the validity of the notice to complete. The court also considered whether the Vendors had waived their right to rely on the Purchaser's alleged breach of the transfer submission clause by serving a notice to complete.

The Court of Appeal upheld the primary judge's reasoning. It was held that a notice to complete, once served, binds both parties and cannot be unilaterally extended by the party issuing it. The Vendors' failure to disclose the death of mortgagee Colburt and the grant of probate to her executors, which was information necessary for the form of transfer, constituted a breach of clause 4.2 of the standard contract. This breach meant the Vendors were not entitled to issue a valid notice to complete, as they had not complied with their own obligations under the contract. Furthermore, the court found that by issuing the notice to complete without having complied with clause 4.2, the Vendors had waived any breach by the Purchaser of clause 4.1 concerning the submission of the transfer form.

Consequently, the Purchaser's termination of the contract was deemed effectual. The appeal by the Vendors was dismissed with costs.

Orders

Orders of the court

Appeal dismissed with costs.

Background

Background to the litigation

Windeyer J gave judgment in the proceedings on 26 February 2002, and on 1 March 2002 made orders granting the relief sought by the Purchaser (including an enquiry as to damages) and dismissed the Vendors’ cross-claim. The Vendors appeal to this Court from those orders.FACTS The contract was entered into on 28 June 2001, in the form of the 2000 edition of the Standard Contract for the Sale of Land. The Vendors were named as “Fekala Pty. Limited and others as mortgagees exercising power of sale pursuant to registered mortgage No.6152594”. The contract was signed on behalf of the Vendors by their solicitor: no issue is now raised by reason of that circumstance. The completion date was specified as the 42nd day after the contract date, which was in fact 9 August 2001. The price was $3 million, with a deposit of $300,000.00. The names of the Vendors were set out in Annexure A to the contract. There were 37 mortgagees holding as tenants in common in unequal shares. One of the mortgagees named in the mortgage and in the annexure was “Valerie Winifred Colburt”. She had in fact died on 20 April 2001, and probate of her will was granted to Jennifer Gai Davies and Ian Leslie Colburt on 22 June 2001. The solicitors for the Purchaser were not informed of this matter at any time by the solicitors for the Vendors, and did not become aware of it until they made a search of the title on 24 August 2001: a transmission application had been registered by then, apparently at some time after 30 July 2001. Clauses 4 and 15 of the standard form of the contract provided as follows:4. Transfer4.1Normally, the purchaser must serve the form of transfer at least 14 days before the completion date.4.2If any information needed for the form of transfer is not disclosed in this contract, the vendor must serve it.4.3If the purchaser serves a form of transfer and the transferee is not the purchaser, the purchaser must give the vendor a direction signed by the purchaser personally for this form of transfer.15. Completion dateThe parties must complete by the completion date and, if they do not, a party can serve a notice to complete if that party is otherwise entitled to do so. An additional cl.32 drafted for the particular contract provided as follows:32Despite any rule of law or equity to the contrary, the vendor and the purchaser agree that any notice to complete given by the vendor to the purchaser under this contract shall be reasonable as to time if a period of 14 days from the date of service of the notice is allowed for completion. On 19 July 2001, the solicitors for the Vendors wrote to the solicitors for the Purchaser concerning a dispute about what was included in the sale, and that letter concluded with the following two paragraphs:We look forward to your requisitions on title together with the memorandum of transfer in due course, bearing in mind that we have to obtain signatures of numerous mortgagees, some of whom is inter-state and some of whom live in the country.We note that settlement of this matter is due to take place on 9th August 2001.

Evidence

Evidence Before The Court

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Decision

Reasons for decision

A solicitor for the Purchaser attended for settlement at the office of the solicitors for the Vendors on 29 August 2001, but the Vendors were unable to settle because there was not yet a transfer signed by all the Vendors. The Purchaser then gave notice of termination of the contract.PRIMARY JUDGE’S DECISION The primary judge dealt with three issues: 1.Can a party giving a Notice to Complete unilaterally extend time for compliance?2.Whether the Purchaser was precluded from terminating the contract, because it had failed to submit a transfer as required by cl.4.1; and whether the Vendors’ failure to comply with cl.4.2 in relation to the mortgagee Colburt bore on this question.3.Whether by serving a Notice to Complete without reference to submitting a transfer, the Vendors had waived any breach of cl.4.1. The primary judge answered the first question no, on the ground that a Notice to Complete was binding on both parties. He answered the first part of the second question no, because of the Vendors’ breach of cl.4.2, in that information needed for the form of transfer, namely the fact of the death of the mortgagee Colburt and the grant of probate to her two executors prior to the contract, was not disclosed in the contract and was not supplied by the Vendors to the Purchaser. It was therefore not necessary to determine the third question, but in any event, the primary judge decided that the Vendors did waive the breach of cl.4.1 by serving the Notice to Complete. Accordingly, the primary judge found that the Purchaser’s termination of the contract was effectual. GROUNDS OF APPEAL In this appeal, the Vendors relied on the following grounds:1. His Honour erred in accepting that the Notice to Complete was valid in circumstances where he accepted that the vendor was in breach of clause 4.2. it being the case that the vendor's breach of 4.2 rendered the notice invalid for want of any right in the vendor to issue such a notice.2. His Honour ought to have placed reliance upon the facts that-a.the purchaser disputed the validity of the (invalid) noticeb.before the time indicated in the notice the vendor communicated to the purchaser that it did not require performance in accordance with the (invalid) notice.3. His Honour ought to have found that the purchaser was without any right to terminate for non-performance by the vendor in accordance with the notice to complete because of non-performance was brought about by the purchaser’s breach in failing to arm the vendors with the means to do its part (i.e. provide the vendor with a transfer).4. His Honour erred in finding that the vendor had waived the requirements of cl.4.15. His Honour ought to have found that the vendor’s act of issuing a notice to complete was made with the intention of obtaining performance from a reluctant obligor in breach of its obligation to provide a transfer and not with a view to any rescission. The Vendors have in fact re-sold the property, and do not seek specific performance, but forfeiture of the deposit and costs.SUBMISSIONS

Ratio Decidendi

Legal Principle Established

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