Medium Neutral Citation: Fussell v Deigan [2018] NSWSC 1419
Hearing dates: 7, 8, 9 March 2018; 27 April 2018; further written submissions ending 15 May 2018
Date of orders: 19 September 2018
Decision date: 19 September 2018
Jurisdiction: Equity - Real Property List
Before: Parker J
Decision:
Specific performance granted.

Catchwords:
CONTRACTS – clause granting “either party” a right to rescind contract in the event of death or mental incapacity – construction

CONTRACTS – right of party to rescind contract on party’s death – whether right may be exercised by executor named in party’s will before grant of probate – implication

CONTRACTS – termination and rescission – rescission – limitations on rescission – party relying on own breach to rescind contract – whether reliance on delayed completion of contract disentitles vendor from exercising contractual right to rescind

EQUITY – equitable remedies – rectification – alleged mistake in including clause permitting rescission in the event of a party’s death

EQUITY – equitable remedies – relief against forfeiture – whether unconscientious to exercise right of rescission in the event of the vendor’s death

ESTOPPEL – contract for sale of land – lease to related party of purchaser – conventional basis of dealing – detriment

LAND LAW – conveyancing – contract for sale of land – obligations of vendor and purchaser – purchaser’s obligation to initiate settlement – vendor’s obligation to co-operate

LAND LAW – conveyancing – contract for sale of land – rescission – notice of rescission – notice issued by executrix of the deceased vendor – entitlement of executrix of deceased vendor to issue notice under the contract
WILLS PROBATE AND ADMINISTRATION – testate estates – executors and executrices – status of executor or executrix prior to grant of probate – Probate and Administration Act 1898 (NSW), ss 44 and 61 – validity of notice to rescind contract given by putative executor or executrix before grant of probate – relation back doctrine
Legislation Cited: Administration of Estates Act 1925 (UK), s 9
Conveyancing Act 1919 (NSW), s 66G
Increase of Rent and Mortgage Interest (Restrictions) Act 1920 (UK), s 12(1)(f)
Law Reform (Miscellaneous Provisions) Act 1944 (NSW)
Probate and Administration Act 1898 (NSW), ss 44, 61
Real Property Act 1900 (NSW), s 74J
Uniform Civil Procedure Rules 2005 (NSW), r 7.10
Cases Cited: AFC Holdings Pty Ltd v Shiprock Holdings Pty Ltd (2010) 15 BPR 28,199; [2010] NSWSC 985
Amaya v Estate Property Holdings Pty Ltd (2010) 14 BPR 27,243; [2010] NSWSC 32
Andrews v Hogan (1952) 86 CLR 223; [1952] HCA 37
Ballas v Theophilos (No 2) (1957) 98 CLR 193; [1957] HCA 90
Blacktown City Council v Fitzgerald (1990) 6 BPR 13,409
Bone v Commissioner of Stamp Duty (1974) 132 CLR 38; [1974] HCA 29
BP Refinery (Westernport) Pty Ltd v Shire of Hastings (1977) 180 CLR 266; [1977] UKPCHCA 1
Brennan v O'Meara (2009) 14 BPR 27,441; [2009] NSWSC 1374
Byers v Overton Investments Pty Ltd (2000) 106 FCR 268; [2000] FCA 1761
Byers v Overton Investments Pty Ltd (2001) 109 FCR 554; [2001] FCA 760
Carter v Hyde (1923) 33 CLR 115; [1923] HCA 36
Cherry v Steel-Parke (2017) 351 ALR 521; [2017] NSWCA 295
Commissioner of Stamp Duties (NSW) v Bone (1976) 135 CLR 223; [1976] UKPCHCA 1
Coppa v Barnett [2012] NSWSC 490
Crown Melbourne Ltd v Cosmopolitan Hotel (Vic) Pty Ltd (2016) 260 CLR 1; [2016] HCA 26
Darrington v Caldbeck (1990) 20 NSWLR 212
Dibbins v Dibbins [1896] 2 Ch 348
Doodeward v Spence (1908) 6 CLR 406; [1908] HCA 45
Douglas v Forrest (1828) 4 Bing 686; 130 ER 933
Eggins v Robinson [2000] NSWCA 61
Ell v Ell (2015) 14 ASTLR 32 [2015] NSWCA 38
Ex parte Callan; re Smith [1968] 1 NSWR 443
Ex parte Public Trustee; Re Birch (1951) 51 SR (NSW) 345
Foran v Wight (1989) 168 CLR 385; [1989] HCA 51
Foster v Bates (1843) 12 M & W 226; 152 ER 1180
Franklins Pty Ltd v Metcash Trading Ltd (2009) 76 NSWLR 603; [2009] NSWCA 407
Fred Long & Son Limited v Burgess [1950] 1 KB 115
GEL Custodians Pty Limited v The Estate of the late Geoffrey Francis Wells [2013] NSWSC 973
Harwood and Bincks v Hilliard (1677) 2 Mod 268; 86 ER 1065
Hewitt v Gardner (2009) 3 ASTLR 407; [2009] NSWSC 705
Holland v King (1848) 6 CB 727; 136 ER 1433
Hyde v Skinner (1723) 2 P Wms 196; 24 ER 697
Karfoal Pty Ltd v Lorence (2002) 11 BPR 20,129; [2002] NSWSC 284
Kelsey v Kelsey (1922) 127 LT 86; 91 LJ Ch 382
Kennewell v Dye [1949] 1 Ch 517
Laybutt v Amoco Australia Pty Ltd (1974) 132 CLR 57; [1974] HCA 49
Legione v Hateley (1983) 152 CLR 406; [1983] HCA 11
Linden Gardens Trust Ltd v Lenesta Sludge Disposals Ltd [1994] 1 AC 85
Marshall v DG Sundin & Co Ltd (1989) 16 NSWLR 463
Mehmet v Benson (1965) 113 CLR 295; [1965] HCA 18
Mills v Anderson [1984] QB 704
Newton v Metropolitan Railway Co (1861) 1 Dr & Sm 583; 62 ER 501
Nichol v Pettycrew (1969) 7 DLR (3d) 103
Pratt v Hawkins No 2 (1991) NSW Conv R 55-592
Progressive Mailing House Pty Ltd v Tabali Pty Ltd (1985) 157 CLR 17; [1985] HCA 14
Re Cousins; Alexander v Cross (1885) 30 Ch D 203
Re Stevens [1897] 1 Ch 422
Ryledar Pty Ltd v Euphoric Pty Ltd (2007) 69 NSWLR 603; [2007] NSWCA 65
Tanwar Enterprises Pty Ltd v Cauchi (2003) 217 CLR 315; [2003] HCA 57
Tarn v The Commercial Banking Company of Sydney (1884) 12 QBD 294
Tea Trade Properties Ltd v CIN Properties Ltd [1990] 1 EGLR 155
Teele v Federal Commissioner of Taxation (1940) 63 CLR 201; [1940] HCA 3
Tharpe v Stallwood (1843) 5 Man & G 760; 134 ER 766
The Daily Pty Ltd v White (1946) 63 WN (NSW) 262
Waterman v Gerling Australia Insurance Co Pty Ltd (2005) 194 FLR 419; [2005] NSWSC 1066
Webb v Adkins (1854) 14 CB 401; 139 ER 165
Western Export Services Inc v Jireh International Pty Ltd (2011) 86 ALJR 1; [2011] HCA 45
Willmott Growers Group Inc v Willmott Forests Ltd (Receivers and Managers appointed) (in liq) (2013) 251 CLR 592; [2013] HCA 51
Texts Cited: David Hughes Parry and John Cherry, Williams on Executors (Stevens & Sons, 12th ed, 1930)
G L Certoma, The Law of Succession (Lawbook Co, 4th ed, 2010)
Viscount Simonds (eds), Halsbury’s Laws of England (Butterworths, 3rd ed, 1964)
Category: Principal judgment
Parties: Bernard James Fussell (Plaintiff)
Carolyn Patricia Deigan (Defendant)
Representation:
Counsel:
N Cotman SC/J Kennedy (Plaintiff)
DL Cook SC/A Kauffman (Defendant)
Solicitors:
Etienne Lawyers (Plaintiff)
CLS Legal (Defendant)

File Number(s): 2017/313325
Publication restriction: Nil

Judgment

These proceedings concern a contract for the sale of land at Grand Avenue, Camellia, in Sydney, owned by the late James Boyd Lockrey. The plaintiff, Bernard James Fussell, is the purchaser under that contract.
The defendant, Carolyn Patricia Deigan, is executrix of Mr Lockrey’s last will, which was made in October 2013. Ms Deigan is a solicitor. She practises as a director of a solicitor corporation which trades under the name “CLS Legal”. CLS Legal acted for Mr Lockrey on the contract.
The sole beneficiary of Mr Lockrey’s estate is his widow, Mei (also known as “Lilly”) Lockrey. Mrs Lockrey is of Chinese extraction. She married Mr Lockrey in 2003.
Mr Lockrey and Mr Fussell entered into the contract in May 2012. The contract allowed a period of five years (that is, until May 2017) for completion. At the same time as the contract was entered into, Mr Lockrey granted a lease to Blue Star Trading Corporation Pty Limited (“BSTC”), a company belonging to Mr Fussell. The lease was for a period of six years, ending in May 2018, at a rent of $100,000 per annum.
The property is in an industrial area and a disused factory building stands on it. At the time the contract was entered into, both Mr Lockrey and Mrs Lockrey were living there, but in different places. Mr Lockrey was living in an upstairs part of the factory building, above a garage area. Mrs Lockrey was living in a free-standing demountable building located on the property.
The purchase price under the contract was $1.7 million. A deposit of $50,000 was paid in May 2012 and released to Mr Lockrey pursuant to the terms of the contract. The contract provided that on completion Mr Fussell would grant a life estate to Mr Lockrey over that part of the factory building where he was living. It also gave Mr Fussell the option of purchasing the demountable building for an additional $80,000. If Mr Fussell chose not to purchase the demountable building, he was required to grant a licence of one year’s duration for its continued occupation by one or other or both of Mr Lockrey and Mrs Lockrey.
The contract provided for completion to take place by 10 May 2017. That day passed without either party having taken any steps to arrange for settlement. Two days later, on 12 May, Mr Lockrey died.
The contract contained a special condition (cl 33.2) which, Ms Deigan contends, entitled Mr Lockrey’s legal personal representative to rescind the contract in the event of Mr Lockrey’s death. On 18 May Ms Deigan served a notice purporting to rescind under that special condition. At that time, probate had not been granted. On 16 October, after the grant of probate, Ms Deigan served a further purported notice of rescission.
The proceedings were commenced on 17 October 2017, the day after the second purported notice of rescission. Mr Fussell as plaintiff seeks an order for specific performance to compel Ms Deigan as executrix to complete the contract on behalf of Mr Lockrey’s estate.
The hearing took place in March 2018, followed by supplementary written submissions. The lease was due to expire in May. Shortly before the lease expired, the parties agreed to a regime for it to be extended up until the delivery of judgment, and I made consent orders reflecting this agreement. Some further written submissions were then made.

Issues for decision

Mr Fussell’s first contention is that cl 33.2, on its true construction, only permitted the purchaser to rescind in the event of the vendor’s death. Alternatively, Mr Fussell contends that if the clause did permit rescission by the vendor, that was a mistake and the contract should be rectified so as to deprive the vendor of any right to rescission in such circumstances.
Next, Mr Fussell contends that, even if the contract provided for a right of rescission, there was no entitlement to issue the purported notice of rescission of 18 May. This contention is put on four grounds. First, there was an estoppel against rescinding. Second, rescission would involve taking advantage of a wrong on Mr Lockrey’s own part. Third, by 18 May Mr Fussell already had a vested entitlement to obtain specific performance of the contract. And fourth, exercise of the right of rescission would involve a forfeiture against which Mr Fussell was entitled to relief. It was also contended that exercising the right of rescission would be unconscientious, but I do not understand this contention to add anything of substance to the four grounds to which I have referred.
Next, Mr Fussell contends that, even if there was a right to rescind, the May notice of rescission was not a valid exercise of that right. Mr Fussell argues that the notice issued by Ms Deigan was of no effect because she had not then obtained probate of Mr Fussell’s will, and did not have authority to act on behalf of his estate.
Mr Fussell accepts that Ms Deigan did have authority to act on behalf of the estate when she issued the second purported notice of rescission on 16 October. But he contends that, for the same reasons as he advances in connection with the May notice, any relevant entitlement had been lost by 16 October. He also seeks to contend that the 16 October notice was issued too late to be contractually effective in any event.
Apart from relying on the rescission of the contract, Ms Deigan’s defence also contends that specific performance should not be granted because Mr Fussell was not ready, willing and able to complete the contract. The contention was that Mr Fussell had failed to demonstrate that he had funds available to complete the contract.
This issue (including the question as to whether such inability had to be determined as at the original date for completion of the contract, or some later date or dates) was the subject of written submissions from the parties prior to the hearing, and evidence at the hearing. But in final submissions counsel for Ms Deigan accepted that the Court should take the pragmatic course, if otherwise satisfied that specific performance was available, of ordering specific performance and seeing whether Mr Fussell in fact proved able to complete (as Windeyer J did in Mehmet v Benson (1965) 113 CLR 295; [1965] HCA 18 at 314-315). It is therefore unnecessary for the Court to decide whether Mr Fussell was, or is, unable to complete.

The property

The land which was the subject of the contract was registered as Lot F in deposited plan 33553. The Lot was created under a subdivision which appears to have taken place in 1949 (the year is difficult to read). There is no evidence as to when the land was purchased by Mr Lockrey.
The main building on the property was a large metal shed. Abutting one corner of the shed was a two storey brick building which had been used for offices. Adjoining this building was a two-storey structure within the shed. The ground floor consisted of six garages. The first floor consisted of a large room. The first floor of the structure connected with the first floor of the adjoining office building and together this constituted the area where Mr Lockrey lived. Mrs Lockrey’s son also lived in that area.
On the land surrounding the shed were the demountable home where Mrs Lockrey lived, some shipping containers, building products and other items which were identified in the contract (see [30] below). It appears that some of these items may have derived from a building business previously operated by Mr Lockrey which is referred to in the contract.

The contract and the lease

Sale of property

The contract between Mr Lockrey and Mr Fussell was a Law Society of NSW standard form “Contract for the Sale of Land – 2005 edition” containing twenty-nine clauses. The contract also contained twenty-two special conditions numbered from 30 to 51.
Clause 37 of the special conditions was headed ‘Completion’. It replaced clause 15 of the standard form. Clause 37.2 provided as follows:

37.2 The vendor and purchaser must complete this contract by 3:00pm on the date shown as the completion date (‘Completion Date’) shown on the front page of the contract.

The front page of the contract stipulated the completion date as ‘Five (5) years after the contract date’. The front page stated the contract date as 10 May 2012. This fixed the completion date at 10 May 2017.
Clauses 37.3 and 37.4 provided:

37.3   If completion does not occur on or before the Completion [sic] the vendor may serve the purchaser with a notice:
37.3.1   requiring the purchaser to complete the contract not less than 14 days after the date of service of the notice; and
37.3.2   making time of the essence.

37.4 The parties acknowledge that for the purposes of clause 37.3, the period of 14 days is sufficient time to complete this contract.

Clause 38 of the special conditions provided:

38.   If the purchaser fails to complete by the completion date (other than due to a default by the vendor), the purchaser shall pay to the vendor:
38.1   interest on the balance of the price outstanding at the rate of 10% from the completion date until completion is effected; and
38.2   The sum of two hundred and fifty dollars ($250.00) to cover legal costs and other expenses incurred as the consequence of the delay, as a genuine pre-estimate of those additional costs and expenses, this amount to be paid on completion.

This clause shall not affect any other right of the vendor.

Clause 19 of the standard form governed contractual rights to rescind the contract. It provided:

19   Rescission of contract
19.1   If this contract expressly gives a party a right to rescind, the party can exercise that right -
19.1.1   only by serving a notice before completion; and
19.1.2   in spite of any making of a claim or requisition, any attempt to satisfy a claim or requisition, any arbitration, litigation, mediation or negotiation or any giving or taking of possession.
…

Clause 1 of the standard form contained definitions for various defined terms appearing elsewhere in italics. Of the defined terms used in cl 19, “party” was defined as meaning “each of the vendor and the purchaser” and “serve” was defined as meaning “serve in writing on the other party”. Clause 20.6 relevantly provided:

20   Miscellaneous
…
20.6   A document under or relating to this contract is -
...
20.6.2   served if it is served by the party or the party’s solicitor;
20.6.3   served if it is served on the party’s solicitor, even if the party has died or any of them has died;

...

The term “solicitor” was defined as meaning “in relation to a party, the party’s solicitor or licensed conveyancer named in this contract or in a notice served by the party”.
Clause 21.1 of the standard form provided:

20 Time limits in these provisions
21.1 If the time for something to be done or to happen is not stated in these provisions, it is a reasonable time.
…

The critical provision, cl 33 of the special conditions, provided:

Death or insolvency etc.
33.   Without in any manner negating limiting or restricting the rights or remedies which would have been available to the parties at law or in equity had this special condition not been included, should either party prior to completion:
33.1   being a natural person be declared bankrupt, then
33.1.1   in the case of the vendor, the purchaser may rescind this contract by notice in writing forwarded to the solicitor for the vendor and this contract shall be at an end and the provisions of clause 19 shall apply; or
33.1.2   in the case of the purchaser, the purchaser shall be deemed not to have complied with this contract in an essential respect;

33.2   die or become mentally ill, then in the case of the vendor or the purchaser either party may rescind this contract by notice in writing forwarded to the solicitor for the other party and this contract shall be at an end and the provisions of clause 19 shall apply;
33.3 being a company, resolve to go into liquidation or have a petition for its winding up presented or entered into any scheme of arrangement with its creditors under the Corporations Act 2001 or should any provisional liquidator, liquidator, receiver and manager, receiver, controller, administrator or official manager be appointed in respect of either party or any asset of either party then:
33.3.1   in the case of the vendor, the purchaser may rescind this contract by notice in writing forwarded to the solicitor for the vendor and this contract shall be at an end and the provisions of clause 19 will apply; or
33.3.2   in the case of the purchaser, the purchaser shall be deemed not to have complied with this contract in an essential respect.

Clause 48 of the special conditions relevantly provided:

Inclusions and Exclusions
48.1 The purchaser acknowledges that the property contains a number of structures and a number of temporary structures, including but not limited to the following:
a separate demountable home, which is connected to all services (“Demountable Home”);
structural steel frameworks (“Structural Steel”);
roofing materials (“Roofing Materials”);
shipping containers including the contents of any of the shipping containers if any (“Shipping Containers”);
large quantities of miscellaneous cuts of timber (“Timber”);
an unspecified number of forklift pallets (“Pallets”);
concrete blocks (“Concrete Blocks”);
steel machinery (“Steel Machinery”); and
miscellaneous items relating to the previous building hoarding business operated by the vendor (“Miscellaneous Items”).
48.2 The purchaser acknowledges that the sale price does not include the Demountable Home, which the purchaser may purchase for an additional amount of eighty thousand dollars ($80,000.00) plus GST. If the purchaser decides to purchase the Demountable Home he shall advise the vendor’s solicitor in writing of this fact no later than five (5) business days before completion. In which case, the purchase price shall be increased by the amount of $80,000.00 plus GST on completion. In the event that the purchaser does not purchase the Demountable Home, he agrees that it grants to the vendor and/or his wife Mei Lockrey a licence to occupy the Demountable Home after completion for a period of not less than twelve (12) months. After the period of twelve (12) months the purchaser may give the vendor and/or Mei Lockrey a notice in writing providing not less than three (3) months notice for the vendor and/or Mei Lockrey to vacate the Demountable Home. At any time during the occupancy or an expiration of a notice to vacate that is issued in accordance with this clause the vendor shall have the right to remove the Demountable Home from the property. Should the Demountable Home not be removed within that time it will become the property of the purchaser.

48.3 Also excluded from the sale are the Shipping Containers. The purchaser agrees that this item may remain on the property for a period not exceeding twelve (12) months from the date of completion during which time the vendor shall have access to the Property and the right to have the items stored on the property to be sold or removed at will.
48.4 Included in the sale are the Concrete Blocks, Structural Steel, Steel Machinery, Roofing Materials, Timber, Pallets and Miscellaneous Items. Further, in the event that the vendor fails to remove any of the items referred to in clause 48.3 before the date, which is twelve (12) months after completion then the parties agree that these items become the property of the purchaser.
…

Life estate

Clause 49 of the special conditions provided:

Life Estate
49.1   The purchaser has agreed that in consideration of the vendor entering into this contract that he will on completion grant a life estate (“Life Estate”) to the vendor for the home built on top of the six garages on the property in the terms set out in the deed of life estate, a copy which is annexed and marked “A”.
49.2   After the date of this contract the vendor’s solicitor shall provide the purchaser’s solicitor with the deed creating the Life Estate completed as at the date of this contract in duplicate to be signed by the purchaser and returned to the vendor’s solicitor to be signed by the vendor and held in escrow pending stamping of that document and completion.
49.3   Prior to completion the vendor will if he deems necessary obtain at his expense a survey plan of the home built on the property.
49.4   The vendor prior to completion shall obtain a valuation of the Life Estate.
49.5   The purchaser’s solicitor shall prepare a transfer substantially in the form annexed and marked “B” and the vendor and purchaser shall ensure that a joint application is made to the Office of State Revenue for the purposes of stamping this contract and marking the transfer, which application will include the valuation referred to in clause 42.5 [scil 42.4]. The purchaser shall pay the stamp duty payable in respect of the purchase price and the vendor shall pay the stamp duty in relation to the life estate.

Clause 1 of the annexed Deed of Life Estate defined the “Property” as the whole of the Camellia land and the “House” as:

…the house constructed on top of the six garages on the Property as at the date of the Contract together with all the inclusions contained in the House.

Other relevant clauses of the annexed Deed of Life Estate were:

2.1   Fussell agrees that in consideration of Lockrey entering into the Contract and for no further consideration then [sic] the Purchase Price grants to Lockrey a life estate in the House.
…
2.5   Lockrey shall be responsible for maintaining the House during the life tenancy to the condition at the time of the transfer of the Property to Fussell pursuant to the Contract, fair wear and tear accepted.
…
4.1   Subject to clause 6, the life estate may only be terminated by Fussell on the death of Lockrey.
4.2   In the event of the death of Lockrey, Fussell agrees that if Mei Lockrey is the legal wife of Lockrey, as at the time of his death and has been residing in the House with Lockrey, she has twelve (12) months from the date of Lockrey’s death to vacate the House and remove any personal chattels located in the House that are the property of Lockrey.
…
6.1   Nothing in this deed shall prevent Fussell selling the Property subject to the life estate of Lockrey. However, in the event that Fussell was desires [sic] of selling the asset to a third party and determining the life estate on completion of that sale, Fussell agrees to negotiate in good faith with Lockrey to a value of Lockrey’s remaining interest in the life tenancy to be paid to Lockrey on the completion of any such sale, provided that a decision to do so is in Lockrey’s absolute discretion and can be withheld without any reason.

Clause 4.1 of the standard conditions dealt with the service of the transfer prior to completion. The special conditions modified the standard form so that it provided:

4.1 Normally, the purchaser must serve the form of transfer at least ~~14 days before the completion date~~ 3 business days after the date the vendor serves notice of registration of the plan.

The contract did not identify what “plan” this clause was referring to. Clause 49.3 referred to a survey plan for the “House” but this was only to be obtained at the vendor’s discretion and the contract contained no reference to registration of such plan. The evidence in the case did not touch on the question.

Lease to BSTC

The lease was executed on 10 May 2012, the same day as the contract for sale. The term of the lease was five years, commencing on 10 May 2012 and ending 9 May 2017. The leased area was specified as the whole of the Camellia land, excluding the upstairs area occupied by Mr Lockrey (that is, the “House”), the six garages under the “House”, and the demountable building.
The lease provided in the usual form for the payment of rent in monthly instalments (cl 1.1). The payment of rent was subject to review (cll 1.2 and 1.3). The lease could be terminated for the failure to pay rent or other default (cl 12.1). There was also provision for the payment of interest on overdue rent (cl 12.6).
Clause 4.1 set out the permitted uses of the premises:

4.1 The Lessee must not use the premises (including any part of the premises) or permit them to be used for any purposes other than as premises for carrying on the business or use set out in Item 4 of the Reference Schedule.

Item 4 in the Reference Schedule stated “Storage of Garden materials and filling”.
Clauses 8.1 and 8.2 provided:

8.1 The Lessee must not without the prior written consent of the Lessor (which consent shall not be unreasonably withheld) make any structural alterations or additions in or to the premises or any part of the premises.
8.2 The Lessee must not without the prior written consent of the Lessor (which consent shall not be unreasonably withheld) install any water, gas or electrical fixtures, equipment or appliances or any apparatus for illuminating, air-conditioning, heating, cooling or ventilating the premises nor shall the Lessee mark paint or drill or in any way deface or damage any walls ceilings partitions, floors or other parts of the premises.

Clause 33 provided:

The parties acknowledge that part of the property is occupied by Mr. John Lee (“Tenant”) on an informal basis. The Lessee agrees to enter this Lease subject to whatever basis the Tenant occupies the property and to make their own arrangements with the Tenant in respect of the outgoing tenancy or the vacation of the property by the Tenant on terms to be agreed between the Lessee and the Tenant. If the Tenant vacates and terminates the informal tenancy or the Lessee requests the Tenant to vacate and terminate the informal tenancy, the Lessee agrees to pay to the Lessor the sum of $2,000.00 each month in consideration for the Lessee occupying the part of the property previously occupied by the tenant.

A number of the special conditions in the contract referred to the lease. Clause 51 relevantly provided:

Lease
51.1   The property is sold subject to the lease (“lease”) between the vendor and Blue Star Trading Corporation Pty Limited ACN 156 585 376 (lessee) a copy of which is attached. The benefit of the lease will be given to the purchaser on completion.
…
51.7   If the lessee of licensee under the lease are as at the date of completion in arrears in payment of rental or other moneys payable udner the lease in respect of the calendar month current as at the date of completion (“current month’s rentals”) then the relevant adjustment (calculated in accordance with clause 14 of the conditions of sale) shall upon completion be made by the purchaser in favour of the vendor and right to recover any arrears in the current month’s rentals shall pass to the purchase [sic] upon completion.
…
51.9   The purchaser is an associated entity of the lessee and takes the obligations of the lease in the event that the lessee vacates the property or negates the lease.
51.10   The parties acknowledge that part of the property is occupied by Mr. John Lee (“Tenant”) on an informal basis. The purchaser agrees to complete the contract and take title to the property subject to whatever basis the Tenant occupies the property and to make their own arrangements with the Tenant in respect of the ongoing tenancy or the vacation of the property by the Tenant on terms to be agreed between the purchaser and the Tenant.

Clause 37.7 of the special conditions (other parts of the clause have been quoted at [21]-[23] above) provided:

37.7 The purchaser acknowledges that Blue Star Trading Corporation Pty Limited ACN 156 585 376, the lessee is an associated entity of the purchaser and the purchaser agrees and acknowledges that Completion is subject to and conditional upon all monies payable under the lease between the vendor and the lessee being paid up to and including the date of completion provided that if the moneys are not paid up to completion the outstanding moneys paid on settlement. In the event that there is any dispute as to whether any rent is outstanding under the lease on completion it will be the obligation of the lessee and/or purchaser to prove the amount of the rent outstanding and paid. The parties agree that in the event that the lease is terminated then this contract will also be terminated.

Summary and analysis of evidence

Mr Fussell was the principal witness in the plaintiff’s case. He swore three affidavits for the purposes of the proceedings (October 2017, December 2017 and February 2018), and was cross-examined.
Three of Mr Fussell’s sons, Clayton, Martin and William, also gave evidence. So did Steven John Viglione, a friend of Mr Fussell’s. The evidence of these four witnesses went to Mr Fussell’s ability to meet the purchase price. As that issue has dropped out of contention, it is not necessary to say anything more about their evidence.
Ms Deigan gave evidence in the defendant’s case concerning the drafting of the Sale Contract and lease, and on her subsequent dealings with Mr Lockrey. Evidence was also given by Mrs Lockrey and by Keith Hudson, a friend of Mr Lockrey. Both those witnesses gave evidence by affidavit and were not required for cross-examination.

Previous dealings by Mr Lockrey

In October 2009 Mr Lockrey entered into a contract to sell the Camellia property to a couple named Calleija. The contract price was $2.825 million with a ten per cent deposit and completion to take place within twelve months. Mr Lockrey was introduced to the buyer by a real estate agent, Phillip Mills of Mills Industrial Brokers, who had been retained by Mr Lockrey to sell the property. Mr Mills introduced Mr Lockrey to Ms Deigan, who prepared the contract. At the time, Ms Deigan was working as an employed solicitor for a firm known as Barends Black.
In January 2010, Barends Black was dissolved and Ms Deigan founded a new firm, CLS Legal, with another solicitor, John Tomko. CLS Legal was the business name of a company called Commercial Legal Solutions Pty Ltd of which Ms Deigan and Mr Tomko were directors. CLS Legal thereafter acted for Mr Lockrey. In 2015, the business name was transferred to another company also called Commercial Legal Solutions Pty Ltd (the former company was renamed).
In March 2010 the Calleijas decided not to proceed with the purchase. Mr Lockrey did not seek to enforce the contract.
In June 2010 Mr Lockrey instructed Ms Deigan that he had found another buyer for the property. Rita Boustani, an employed solicitor with CLS Legal, was asked by Ms Deigan to assist with drafting and issuing the contract. A draft contract for sale of the property to the proposed purchaser, Xinyu Wang, was issued in early July 2010 to Mr Wang’s solicitors. The price was $2.31 million with a ten per cent deposit. The date set for completion was specified as “the 42nd day after the contract date”.
At the end of July 2010 Ms Deigan received a telephone call from a solicitor acting for Mrs Lockrey. The solicitor said he had instructions to lodge a caveat on the property. According to Mrs Lockrey, she gave these instructions because she wished to ensure that any sale of the property which took place took account of her interests.
The contract with Mr Wang provided for a life estate to be granted back to Mr Lockrey. This became a sticking point in the negotiations. The life estate was said to be an obstacle to the grant of finance and the purchaser wished Mr Lockrey to take a lease instead. In August 2010 Mr Lockrey instructed Ms Boustani that he would hold on to the property and wait to see if he could get a better price. On Mr Lockrey’s instructions, Ms Boustani telephoned Mr Wang’s solicitor and told him that without a life estate Mr Lockrey was not interested in selling. Mr Lockrey also instructed Ms Deigan not to do anything about Mrs Lockrey’s caveat (which had by now been registered) for the moment.
In December 2010 Mr Lockrey was hospitalised. He gave urgent instructions to Ms Deigan to remake his will. Ms Deigan prepared a will for him, which provided for his estate to be distributed between his two daughters and Mrs Lockrey in three equal shares.
In February 2011, Mr Lockrey told Ms Deigan that Mrs Lockrey had left him and gone home to China. He gave instructions for the preparation of a new will which left his estate to his two daughters. Ms Deigan prepared a new will accordingly. On Mr Lockrey’s instructions, Ms Deigan also issued a lapsing notice against the caveat which had been lodged by Mrs Lockrey. The caveat subsequently lapsed pursuant to this notice.
Mrs Lockrey later returned to live at the Camellia property. The evidence does not identify exactly when this occurred. But Mr Fussell’s evidence was that Mrs Lockrey was living at the property from when he first got to know Mr Lockrey in 2011 onwards.
In March 2011 Mr Mills advised Ms Deigan and Ms Boustani that he had re-negotiated the sale of the land from Mr Lockrey to the Calleijas. The price was to be $2 million plus GST if applicable with a ten per cent deposit and up to twenty-four months for settlement. In the meantime, the purchaser was to go into occupation and pay rent at $90,000 per annum plus GST plus any State land tax if applicable. But in April 2011 Ms Boustani, on Mr Lockrey’s instructions, wrote to the Calleijas’ solicitor advising that Mr Lockrey would not be selling the property. The letter stated that CLS Legal would contact the Calleijas’ solicitor if this changed “within the next couple of months”.

Entry into the contract and lease

Mr Fussell first became acquainted with Mr Lockrey in mid-2011. Mr Fussell was conducting a horticultural supplies business at Wallacia, a suburb of Sydney, under the name “Blue Star” (at the time, the business was being conducted by a partnership; the company BSTC was not incorporated until later). The business involved converting organic waste materials into potting mixes, garden mixes, composts and fertilisers. On a few occasions, Mr Fussell picked up wood chip waste from the Camellia property at Mr Lockrey’s request. He was also picking up waste at the property next door and would drop in on Mr Lockrey.
At the time, there were four other people who were making use of the premises. Keith Hudson used the premises to park heavy machinery and to store tools in a container unit. Gary Wilding was operating an earthmoving business from the premises and was using the premises to store material and waste. John Lee (later referred to in cl 33 of the lease: see [41] above) was using part of the old factory as a workshop. There was another man named Alan (or “Al”) living in a caravan on the property.
According to Mr Fussell, when he first started visiting the property in the second half of 2011 there was a great deal of assorted junk lying around. There were also reclaimed building materials and items of equipment from the factory, some of which Mr Fussell bought from Mr Lockrey. People employed by Mr Lockrey were working on the site to clear it up.
Mr Fussell said that he became friendly with Mr Lockrey. Mr Lockrey would come downstairs and they would have morning tea together, often with Mr Hudson.
In evidence there are a number of file notes from CLS Legal made by Ms Boustani in 2012 about the transaction with Mr Fussell which is the subject of these proceedings. Ms Boustani’s note of 7 February, which is the earliest, records instructions from Mr Lockrey concerning a proposed sale to Mr Fussell. It refers to a price of $1.7 million with a settlement period of five years and also refers to payments of $50,000 on execution of the contract, further payments of $50,000 every six months and payments of $1,000 “rent” (also described as a “licence fee”) per month.
On 14 March Ms Boustani wrote to Mr Lockrey enclosing a costs agreement “for the new terms contract that you have requested”. The letter stated that CLS Legal would contact Mr Lockrey early the following week “to arrange a conference to review the draft contract”. A file note of Ms Boustani’s shows that Mr Lockrey discussed the proposed transaction with her again on 27 March.
Bruce Hanrahan, solicitor, acted for Mr Fussell on the transaction. On 2 April Mr Hanrahan wrote to Mr Fussell confirming his instructions to act on the purchase of the property and noting that there was to be a lengthy delayed settlement on the basis that Mr Fussell would be granted occupation of the property pending settlement.
On 3 April Mr Fussell sent an email to Ms Boustani under Mr Lockrey’s name. He explained that Mr Lockrey did not have a computer and asked him to send it on his behalf. The email stated:

I have attached a brief note to clear up how the agreement will be drawn. Please write back if there are any points which need clarification.

The attachment stated:

Contract for sale, requires 2 separate contracts.
1)   $500,000 payable in 10 instalments of $50,000, first payment made on exchange and following payments on the 6 month anniversary.
2)   Contract for sale at $1,700,000 with no deposit and settlement in 5 years.
Agreement to occupy the premises of 19 Grand Avenue
The purchaser, B.J.Fussell shall occupy the premises upon exchange, with the following exclusions.
1)   The residence which is built above the offices, the garage and rooms built above it, the transportable house and associated shipping containers , all areas necessary to gain uninterrupted access, which will be occupied by Mr Jim Lockrey
Mr John Lee is currently occupying the workshop, which he rents, payable to Jim Lockrey, if however Mr Lee moves out of the workshop it will be occupied by Mr Fussell with a further $1,000 per week payable.
Consideration paid by B.J.Fussell to Jim Lockrey shall be
$1,000 per week, plus rates payable to Parramatta Council (rate notice handed over or copied and payment to be made by Mr Fussell). Every rate notice after exchange.
As detailed above if Mr John Lee vacates the premises the weekly payment will increase to a total of $2,000 per week plus rates.
This shall be payable weekly with a receipt issued.

Initially Mr Fussell stated that the attachment was prepared by Mr Lockrey, but eventually he said that he could not recall who prepared it and that he might have prepared it.
A further file note of Ms Boustani’s dated 12 April refers to discussions with Mr Lockrey concerning the proposed sale, but it is not clear whether a draft contract was prepared at that point.
On 2 May (Wednesday) Mr Fussell sent an email to Mr Hanrahan which stated:

I have been waiting for the vendors solicitor to create the contract for sale. I have visited them today with the vendor and the contract is supposed to be ready this afternoon. It should arrive to you on Friday morning, hopefully.

I really want to make this deal happen as quickly as possible.
Just between you and I, the vendor is not in good health and he is due to leave the country next week.
If the contract arrives, and if you have the time to see me on Friday, I would like to come across and sign. The contract has a $50,000 deposit to be paid. Would you send a bank cheque or solicitor’s cheque?
I can organise either $50,000 in cash or a bank cheque, as need demands.
Sorry if I seem a bit impatient, but this deal has taken so long to put together and I can’t afford for it to fall over.

In evidence are file notes of both Ms Deigan and Ms Boustani dated 2 May. There are also some undated notes of Ms Boustani’s and typewritten drafts with handwritten alterations.
Ms Deigan accepted that it was on her advice that the transaction was ultimately documented as a contract for sale at a price of $1.7 million and a lease to Blue Star for rent of $100,000 per annum. The evidence does not identify precisely when Ms Deigan gave this advice to Mr Lockrey. The eventual lessee, BSTC, was not actually incorporated until 30 March, and its name first appears in the documentary evidence in Ms Boustani’s note of 2 May. Mr Fussell denied in cross-examination that he incorporated the company for the purposes of the lease, but he was not asked what other reason he might have had for incorporating it. What is clear is that Ms Boustani and Ms Deigan must have been told about the company, and that it would be the lessee, by Mr Lockrey. This cannot have happened any later than 2 May and Mr Lockrey must presumably have become aware of the company’s incorporation and have negotiated its becoming the lessee before he met Ms Deigan and Ms Boustani on that day.
On Friday 4 May Ms Boustani wrote to Mr Hanrahan enclosing a draft contract and lease. The letter stated:

We confirm that it is not intended to create contractual relations between the parties unless and until contracts are exchanged.
We look forward to hearing from you regarding an exchange.

The letter was sent by express post. The special conditions and the lease were also sent by email.

The evidence does not allow any detailed findings to be made about the process by which the initial draft of the contract and the lease were prepared or the extent (if at all) that the terms were the subject of advice to, or instructions from, Mr Lockrey. Ms Deigan referred in her evidence to template special conditions being purchased from an external supplier, but the evidence does not identify whether this is where cl 33 came from.
The drafts sent to Mr Hanrahan on 4 May were very similar to the contract and lease ultimately entered into. A file note of Ms Boustani’s shows that on 7 May (the following Monday) she spoke to Mr Lockrey about the draft and also to Mr Hanrahan. She then sent Mr Hanrahan fresh documents which inserted an additional clause in the lease concerning Mr Lee’s informal tenancy (cl 33) and made amendments to two special conditions in the contracts, namely those concerning rent outstanding at completion (cl 37.7) and the licence of the demountable building (cl 48.2). Early on the morning of Tuesday 8 May, Mr Hanrahan emailed Ms Boustani with suggestions for a further minor amendment to cl 48.2 and the provision in the contract concerning Mr Lee’s tenancy (cl 51.10). These were agreed by Ms Boustani. None of the amendments was of any consequence for the issues in this case and I have not attempted to summarise the changes. The final versions of each of the clauses have already been set out.
The tax invoice issued by Mr Hanrahan and Mr Fussell is in evidence. It records that on 7 May Mr Hanrahan had a conference with Mr Fussell to discuss the provisions of the contract and obtain further instructions from him. There is no other record of any discussion between Mr Fussell and Mr Hanrahan of the terms of the contract. It is not clear whether the amendments made by Ms Boustani on 7 May resulted from further discussion between Mr Lockrey and Ms Boustani, or from requests by Mr Hanrahan. But it is clear that the special condition in issue in this case, cl 33, was included with the draft sent on 4 May and was not the subject of any comment or change.
Later on 8 May Mr Hanrahan forwarded executed copies of the contract and the lease, together with a cheque for the deposit. On Thursday 10 May Mr Lockrey executed the contract and lease. By letter of the same date the contract as executed was sent to Mr Hanrahan by way of exchange (together, I assume, with the lease as executed, although that is not referred to in the letter).
Mr Fussell gave evidence by affidavit setting out his version of the negotiations with Mr Lockrey which resulted in the contract being entered into. According to Mr Fussell, from about January 2012 Mr Lockrey allowed him to use the property as another location for the Blue Star business. Initially the arrangement was informal, with Mr Fussell paying Mr Lockrey $1,000 per week. After a while, Mr Fussell decided that he wished to buy the property as a permanent base for his business. Mr Fussell said that he had a conversation with Mr Lockrey to the following effect:

Fussell:   I really want to buy this place and use it for my business. I want a delayed settlement, about five years, to give me plenty of time to get the funds together. But I’d like to be able to use the land in the meantime.
Lockrey:   That’s fine with me, so long as I can get some rent before we settle.
Fussell:   I am happy to pay rent to use the Property until I have the funds to buy the land off you. But only if I can buy this place. I rented places for the first 17 years of my business and I never want to do that again. I did all this work on those properties and then had to leave all my hard work behind. It takes a lot of time and resources to build good will and sales from a site. I reckon here it will take me at least 10 years to set up a landscape supply yard and renovate the old sheds to make them look new again.
Lockrey:   You can do what you like with this place so long as I can do what I like before I die.
Between you and me, I haven’t told Lilly that I’m selling the Property. Don’t worry, the Property is in my name so she doesn’t need to agree. But I am terrified of upsetting her because she goes crazy. When she is good she can be really nice, but when she gets angry, I worry that she will kill me! I once had to take an AVO out against her after she chased me around with a knife, trying to stab me. I want to put a clause in my will that if she kills me she is not entitled to inherit anything!
I tried to sell the Property before. Even found a buyer and had a contract drawn up and all. When Lilly found out, she literally chased the buyers off the Property, yelling at them in Chinese. They were Chinese buyers, and I don’t know what she told them, but they never came back! So don’t tell Lilly I’m planning on selling this Property to you. I don’t want her to find out, otherwise I may wake up with a knife in my back!
But when I sell the Property, Lilly won’t have anything to worry about. When I die she will have the rent until settlement. She doesn’t need to find someone to buy the Property and she won’t have to worry about tidying the place up. Lilly can just buy a block of land and move that little house onto it!

Mr Lockrey had a history of poor health. Sometime before 2005, Mr Lockrey was diagnosed and treated for bladder cancer. In around 2005 or 2006, he was diagnosed with prostate cancer which required an operation and subsequent radiation therapy. In around 2009 or 2010, he had another operation which involved placing four stents into his heart. He was also a smoker and prone to fits of coughing. According to Mr Fussell, he did not think, based on Mr Lockrey’s apparent ill health, that Mr Lockrey would survive for the five year settlement period specified in the contract. Mr Fussell said that he believed that Mr Lockrey had the same understanding.
Mr Fussell said that shortly before 2 May Mr Lockrey told him that he was going on a holiday to Bali. Mr Fussell was anxious to complete the transaction because he thought that Mr Lockrey might not survive the trip. Mr Fussell said that he went with Mr Lockrey on 2 May to visit Ms Deigan and Ms Boustani. His evidence continued:

In that meeting, I said words to the effect of: “I will buy the Property with a delayed settlement, and move in under a licence in the meantime”. Ms Deigan said to me words to the effect of: “We should handle that instead by way of a commercial lease. We will make the lease six years to cover any interim period after the settlement date, in case it doesn’t settle on that day.”

Ms Deigan denied that any such conversation took place between her and Mr Fussell. She said that Mr Fussell did visit her offices with Mr Lockrey on one occasion, but she told Mr Fussell that he could not be present as he had his own solicitor. Ms Deigan said Mr Fussell left the offices of CLS Legal when she told him this, although he might have waited around outside. In response, Mr Fussell accepted that Ms Deigan told him it was inappropriate for him to participate in the meeting because he had his own solicitor, but maintained that she allowed him to stay anyway.
Ms Deigan was pressed on this issue in cross-examination but I accept her evidence. Her note of 2 May is headed “JL” (a reference to Mr Lockrey) and underneath there are a series of dash points, the first of which reads “Fussell”. It was suggested to Ms Deigan that her note recorded that both Mr Lockrey and Mr Fussell had been present, but she denied this and in my view the note indicates to the contrary. The natural reading of the note is that the conference was with Mr Lockrey and that Mr Fussell was discussed. It follows that I must reject Mr Fussell’s evidence on this point as inaccurate.
Mr Fussell accepted that there was never any discussion with Mr Lockrey, Ms Deigan or Ms Boustani about what would happen if Mr Lockrey died before settlement. But he said in his affidavit that he raised the question in a telephone conversation with Mr Hanrahan “on or about 4 May”. Mr Fussell’s evidence was:

…I said words to the following effect: “If Jim dies before settlement, I want to make sure the contract can’t be cancelled – that there’s nothing in there that they can cancel it.” Mr Hanrahan said to me words to the effect of: “You don’t have to worry about that. There’s nothing in there.”

Mr Fussell’s evidence was that he signed the contract on this understanding. He said that he did not read the contract nor was he aware of cl 33 until after Mr Lockrey’s death in May 2017.

In cross-examination, Mr Fussell initially said the conversation with Mr Hanrahan took place on Friday 4 May, which he said was when the contract was signed. He said he did not believe the conversation took place in a telephone call, and when shown his affidavit he said the conversation took place across the desk with Mr Hanrahan but he might have already asked Mr Hanrahan about it on the telephone. He also said that he asked Mr Hanrahan whether if he died his sons could take over the contract and was told they could.
Mr Fussell said that he accompanied Mr Lockrey to the city when Mr Lockrey went to sign the contract on 10 May. His evidence continued:

I walked with Jim to his solicitors’ office. I did not want to be caught in a meeting, like on the first occasion, so I stayed on the ground floor. After less than 10 minutes, Jim returned. I said words to the effect of: “That was quick”. Jim replied: “Yeah, I just signed it and left. I couldn’t be bothered reading it”.
On the rivercat back to Parramatta, Jim and I had a conversation using words to the following effect:
Lockrey:   Ah well, I don’t own any property now.
Fussell:   Don’t worry, you can live in peace, I won’t give you any trouble.
Lockrey:   Well it feels good to sort out my affairs, and at least everything is set up so when I die Lilly doesn’t have to worry about what to do with the place.

Events following exchange

Following exchange on 10 May, Mr Lockrey travelled to Bali. Mrs Lockrey said that after he returned, Mr Lockrey was largely confined to his quarters upstairs in the factory building. A forklift was used to lift him down when he wanted to come downstairs. Mr Hudson said that Mr Lockrey stayed in his quarters for months at a time. Mr Fussell, on the other hand, said that Mr Lockrey continued to come downstairs and move around the property. As Mrs Lockrey and Mr Hudson were not cross-examined on this question it is not possible to make final findings. But it does seem that the regular morning teas continued in Mr Lockrey’s living quarters upstairs. Mr Hudson referred to this and Mr Fussell produced a number of photographs of Mr Lockrey at morning tea which post-dated May 2012.
Arrangements were made after 10 May for the Deed of Life Estate and the transfer to be executed. Ms Boustani prepared the Deed of Life Estate and Mr Hanrahan prepared the transfer. The two documents were executed by Mr Fussell and sent to Ms Boustani. In July, Ms Boustani returned them to Mr Hanrahan, executed by Mr Lockrey. Mr Hanrahan subsequently had the contract stamped.
The transfer form as prepared by Mr Hanrahan and then executed by Mr Fussell and Mr Lockrey was in the form specified in the contract (see cl 49.5 at [31] above). It provided for Mr Lockrey to transfer his interest in the property to himself and Mr Fussell, the transfer to himself being of “the Life Estate” and the transfer to Mr Fussell being of the “remainder”. The term “Life Estate” was no doubt intended to pick up the definition in the Deed of Life Estate (see [32] above) but it was not defined in the transfer itself. As a result there was nothing in the transfer to limit it to the upstairs residence as had been intended. On the face of it, the transfer would, on registration, vest a life estate over the whole of the property. This was, it seems, not noticed by the parties at the time and only came to attention later (see at [115]-[116] below).

Activities at the property from May 2012

Mr Fussell’s evidence was that the “Blue Star” partnership business continued to operate from the Camellia property after the incorporation of BSTC in March 2012. There appeared to be little, if any, distinction between the Blue Star partnership business and the business conducted by BSTC, but Mr Fussell suggested that some of the equipment used had been purchased by the partnership and also that the EFTPOS terminal used for sales was in the name of the partnership. There was no evidence in the form of financial statements which would clarify this. In any event, Mr Fussell accepted that BSTC was operating its own business from the premises.
In June 2012 Mr Fussell asked Mr Wilding to leave the property. He gave Mr Wilding a written notice to vacate. A copy of the notice is in evidence. It required Mr Wilding to vacate the premises and remove his belongings by 29 June and not to enter the property after then without the “express written permission of the principle [sic] authorised tenant”.
In June 2012 Mr Fussell also gave Mr Lockrey a document in the form of a letter concerning “site insurances”. A copy of the letter is in evidence. It referred to liability insurance having been obtained in accordance with “contractual obligations between the parties” (this was presumably a reference to cl 9.5 of the lease). The letter stated that “our” insurance cover was $20 million “as per contract” and that “our company” covered all workers “employed directly by us”. The letter was addressed to Mr Lockrey from “Bernie Blue Star”.
At around the same time, Mr Fussell engineered the departure of Al from the property. According to Mr Fussell, Mr Lockrey complained to him that Al was a hanger-on and Mr Fussell suggested that Mr Lockrey stop paying him. In cross-examination, Mr Fussell said that he created the “site insurances” letter for Mr Lockrey so that it could be shown to Al, presumably as some sort of justification for not paying him. According to Mr Lockrey, Al left shortly afterwards. Mr Fussell said that Mr Lockrey had also asked him to make Mr Wilding leave. But it seems clear enough that Mr Fussell also wanted to make full use of the lease which BSTC had taken over the property. For the moment, Mr Lee, whose departure would result in BSTC having to pay additional rent (see [41], [58] above), remained.
In August 2012, Mr Fussell prepared a form of agreement between himself and Mr Lockrey concerning “site clean up” at the property. The letter stated:

This agreement shall take effect from 20th August 2012.
The purpose of this agreement is to work out who will take responsibility for cleaning up the site and who will pay the costs associated with the work, including labour and tip fees.
The Aim of this agreement is to simplify the responsibilities and clear up any confusion.
Basically it is agreed that Bernie Fussell will assume the task of cleaning up the entire property. This will include removing unwanted materials, rubbish, leftover building materials etc. Bernie will pay the labour costs, the costs of any machinery involved and all transport and tip fees associated with the disposal of waste.
Jim Lockrey will identify any belongings that he wishes to keep and they will be put aside or moved into storage on his behalf. When the shipping containers are emptied they will be advertised for sale and the proceeds of the sale will belong to Jim Lockrey. Other Items that Jim may wish to sell will be advertised on his behalf and all monies from their sale will be paid to Jim.
The value of any resources recovered will be used to subsidise the costs associated. This will include scrap metal. Any tyres that are to be kept should be identified and the rest will be sent for disposal. If any belongings in the containers that need to be moved we will help out and put these things where they are wanted. We will need to use the old 8 ton forklift and the mobile crane to continue with the cleanup. Some containers need to be moved around and we can help with this job.

Space was provided for signature by Mr Lockrey and Mr Fussell. But it was not in fact signed. Mr Fussell’s evidence was that he told Mr Lockrey that the property needed to be tidied up and that Mr Lockrey agreed. But Mr Fussell said that after the document had been prepared Mr Lockrey asked him to leave his junk until he died. Mr Fussell was not asked about this in cross-examination.
In July 2013 Mr Fussell moved into the ground floor of the office building, converted the office into living quarters and started to live there. He said that he told Mr Lockrey he would like to live at the property so as to keep an eye on the machinery which was there as part of the operations of the Blue Star/BSTC business and that Mr Lockrey agreed. In her affidavit, Mrs Lockrey described a conversation with Mr Lockrey after seeing “a person she now knows” to have been Mr Fussell at the office. She said Mr Lockrey told her that the person in question was going to live in the office and this would improve the security situation. The form of conversation suggests that Mrs Lockrey had not yet met Mr Fussell. On the other hand, Mrs Lockrey gave evidence that she was aware that Mr Fussell had done work in the workshop in May 2012. She also said he and she were involved in an incident in August 2012 which resulted in her car being damaged. Because Mrs Lockrey did not give evidence the issue was not resolved. It is however clear that by April 2016 Mrs Lockrey was aware who Mr Fussell was and that he was renting the property.
According to Mr Fussell, between 2012 and May 2017 he made a number of what were described as “improvements” to the property. According to Mr Fussell, such work included cleaning the property and removing old building material, painting the walls and ceilings of the offices, putting in new doors and replacing some of the gutters on the factory. Mr Fussell and his sons did much of this work themselves.

On Mr Fussell’s evidence, Mr Lockrey never objected to this work; indeed he approved of it. Mr Fussell said that around the time of the execution of the contract:

…I had a conversation with Jim where he said to me words to the effect of: “Oh well, I don’t own anything anymore.” He looked relieved when he said this. He also said to me words to the effect of: “I’ve spent so much time and money trying to clean this Property up. I don’t have to bother with that anymore. I don’t have to pay those people to clean up anymore.”

Mr Fussell appears to have interpreted this conversation and the absence of Mr Lockrey’s objection to mean he could make such alterations to the premises. Mr Fussell otherwise never asked for permission from Mr Lockrey to undertake the improvements.
In his affidavit evidence, Mr Fussell claimed that he paid for the improvements. But in cross-examination he acknowledged that in fact BSTC paid for all necessary materials.

Changes to Mr Lockrey’s will

In July 2012, Mr Lockrey instructed Ms Deigan to draft a new will. The draft will, which is in evidence, appointed Ms Deigan as sole executrix and trustee of the will. It bequeathed Mr Hudson the sum of $400,000; his two daughters $150,000 each; and the residue of the estate to Mrs Lockrey. But Mr Lockrey never proceeded to sign it.
In October 2013, Mr Lockrey instructed Ms Deigan to draft another will. The will, dated 3 October 2013, nominated Ms Deigan as sole executrix and trustee of the will, and was duly signed by Mr Lockrey. Relevantly it bequeathed Mr Lockrey’s entire estate to Mrs Lockrey.
Mr Fussell gave evidence that he was aware of Mr Lockrey having changed his will so as to make Mrs Lockrey the sole beneficiary. He said he found out because he used to collect Mr Lockrey’s mail and one day Mr Lockrey opened a letter from CLS Legal in his presence and told him that it contained a new will to that effect. According to Mr Fussell, Mr Lockrey told him that Mrs Lockrey had forced him to make the change.
Mr Fussell said that the conversation took place in 2014 or 2015, but as the will was prepared in October 2013 that cannot be correct, and Mr Fussell must have become aware of the making of the will around that time. It is not necessary to decide whether Mr Lockrey did actually tell Mr Fussell that he changed the will because of pressure from Mrs Lockrey.

Proposed agreement concerning occupation of the “House”

At the hearing, Mr Fussell gave evidence that he and Mrs Lockrey disliked each other. In his affidavit he gave evidence of an altercation with Mrs Lockrey in 2014, but it appears that the relationship between them was always poor.
In February 2014, Mr Fussell prepared an agreement between Mr Lockrey as lessor and BSTC as lessee. It stated:

This agreement should form part of the Lease agreement Contract signed on the 10th May 2012.
The principles agreed to in this contract were originally negotiated prior to signing the Lease agreement, they were not however put into the original Lease. It is the purpose of this addition to the lease to clear up any areas of uncertainty and make the Lease more workable.
It is hereby agreed that: in the event that Jim Lockrey lives for a term which is shorter than the completion of the lease term, that the managers residence could be used by Bernie Fussell (Blue Star). The managers residence shall be deemed to be the first floor house directly above the offices and also above the 5 car garages. It does not include the use of those garages. All costs related to the maintenance and repair of the premises shall be paid by Mr Fussell. Any services connected to the property shall be terminated prior to occupation, these shall include L.P.G bottles, phone and internet connections and cable television. The occupation of the managers residence would be effective from a date 28 days after the passing of Mr Lockrey. Upon this date the areas occupied by the lessee will be the yard space, the workshop area, and the upstairs residence as outlined in the survey attached to the lease. The garages and 3 bedroom home (re-locatable) would continue to be occupied by Mei Lockrey as per the original lease agreement.

The document contained space for signature by Mr Lockrey and Mr Fussell to be witnessed by Mr Hudson and Mr Fussell’s son Martin. But it was never signed.
According to Mr Fussell, at some point during the negotiation of the contract in 2012, Mr Lockrey said to him words to the effect:

“When I die, you may as well move into the upstairs house because Lilly lives in the demountable.”

Mr Fussell said that in February 2014 he read over the lease and noticed that it did not contain anything about what Mr Lockrey had said. According to Mr Fussell, they had a conversation to the following effect:

Fussell: “You know how we discussed my using the space upstairs? It’s not in the Lease.”
Lockrey: “Well it’s yours. I feel like I’m dying, so we should probably tidy things up. Why don’t you type up an agreement to deal with this? I still haven’t told Lilly about having sold this property, and I don’t want her to find out. But if we sign this agreement you can just present it to her after I die.”

But Mr Fussell said that when he prepared the document and handed it to Mr Lockrey he appeared offended and said:

“This looks like you just want me to die!”

Mr Fussell said he then dropped the subject.

I am sceptical about Mr Fussell’s account of how this proposed agreement came to be prepared. Had a conversation about the subject taken place in 2012, there seems no reason why it would not have been incorporated into the lease. And it seems implausible that Mr Lockrey would have been offended by being asked to sign the document if he had himself asked Mr Fussell to prepare it a few days beforehand, as Mr Fussell claimed. The bare sequence of events would suggest that Mr Fussell prepared the document on his own initiative out of a concern to shore up his position against Mrs Lockrey in the event of Mr Lockrey’s death. That would fit comfortably with Mr Lockrey’s offended reaction. But it is not necessary to make any findings on the question.

Rent issues and early settlement

Rent receipts prepared by Mr Fussell are in evidence. Each receipt was signed by Mr Fussell (on behalf of BSTC) and Mr Lockrey. Mr Fussell’s son Martin and Mr Hudson also signed as witnesses. The receipts show that during the first few months, the rent was often paid after the first day of the month, which was the due date under the lease. But for the period from December 2012 until July 2014, rent was paid well in advance, apart from the rent for May 2013 which was not paid at all. Mr Fussell explained this as an oversight on his part which he did not discover until Mr Lockrey died in 2017.
In June 2013 Mr Fussell asked Mr Lee to leave the property. Mr Lee’s departure triggered BSTC’s obligation to pay an additional $2,000 rent each month under cl 33 of the lease (see [41] above). Rent certificates show BSTC paid this additional amount from 1 July 2013 until 30 June 2014.
BSTC maintained the practice of paying rent in advance for the period up to July 2014. But from August 2014, rent fell into arrears. From July 2014 BSTC also ceased paying the extra $2,000 rent for the workshop formerly occupied by Mr Lee. Mr Fussell’s evidence did not explain why these payments ceased.
In early-to-mid 2016, Mr Lockrey’s health deteriorated further. He moved into the demountable building with Mrs Lockrey so he could receive her support and assistance. Mr Fussell said he hardly saw or spoke with Mr Lockrey after this.
Mrs Lockrey gave evidence that she found out about the sale contract in April 2016. Mrs Lockrey said that she was told by the neighbours that Mr Fussell was describing himself as the owner of the property. Mrs Lockrey then obtained a copy of the contract.
In June 2016, Steven Brown, solicitor, wrote to Ms Deigan to inform her that he now had carriage of the matter in place of Mr Hanrahan. Mr Fussell’s evidence was that he was willing to settle early in August 2016 and engaged Mr Brown as his solicitor for this purpose.
Mr Fussell said that in July 2016 he approached St George Bank for a loan to finance the purchase, but was told:

“There’s a problem with us settling the mortgage, because Mr. Lockrey has a life estate over the entire property, and his name will be on the title deeds.”

Early in August 2016, Mr Brown contacted CLS Legal with a view to organising an early settlement. He spoke to Liesel Pierce, an employed solicitor who was assisting Ms Deigan with the transaction. Correspondence ensued. Mr Brown made the point that the form of the transfer did not reflect the parties’ intention that the life estate was to be limited to the “House”. It would entitle Mr Lockrey to receive the whole of the rent and oblige him to pay the rates and outgoings. Mr Brown also said that, to be registrable, the life estate had to cover the whole property. A life estate over part of the property could only be an equitable interest, protected by a caveat. Mr Brown suggested that instead of the life estate Mr Fussell should purchase the fee simple and grant Mr Lockrey a lease for life of the “House”. This would enable Mr Fussell, on completion, to deal with the lease to BSTC in his own way and would mean that Mr Fussell, not Mr Lockrey, would have to pay the rates and other outgoings.
In response, Ms Pierce indicated that an early settlement was acceptable. But she pointed out that the rent was in arrears. She also said that Mr Fussell had failed to pay the sum of $500,000 for the purchase of “certain items” at the property. Mr Brown then wrote seeking an explanation.
On 25 August, Ms Deigan wrote back to Mr Brown:

I have been able to make contact with my client. The $500,000 was a payment your client was to make to our client in connection with various items he was acquiring in addition to the property and was to have been paid prior to exchange. We were only recently made aware of the arrangement and the fact that the moneys were not paid. Your client is currently at least 4 months behind in his lease payments to our client and he owes a significant amount of rent in respect of the part of the premises that were formerly occupied by a tenant which your client required to vacate and was paying the rent in lieu.
In discussing the matter with our client our instructions are that our client wants the outstanding moneys resolved before we will consider any amendments to the documents. However, he has instructed that if your client would like to acquire the property now not subject to the life tenancy he would consider relinquishing it on the following basis:
1.   The contract is settled within 8 weeks;
2.   The purchase price is increased by $1.5m being the $500,000 and a further $1m for the life estate;
3.   The rent is paid in full by completion;
…
5.   The contract is varied by deletion of the reference to the life estate but settled otherwise on its terms (subject to the agreed variation contained in this email).

On 29 August, Mr Brown sent an email response to Ms Deigan. Relevantly he noted:

…our client denies any collateral agreement concerning the unspecified “various items he was acquiring in addition to the property”. Mr Fussell is not aware of any alleged arrangement. Is the alleged arrangement documented? If so please provide us with a copy so we can discuss with Mr Fussell.
We are instructed that the arrears in rent will be paid. Please provide details of the issues concerning the former tenant [Mr Lee] which our client required to vacate, as he is again not aware of what that alleged arrangement is about. Is the alleged arrangement documented? If so please provide us wth a copy so we can discuss it with Mr Fussell.
Mr Fussell is not willing to pay more for the interest he is acquiring than that which has been negotiated.
Mr Fussell does need to deal with the following issues concerning the documentation that was drafted, including:
1 – if there is a life estate, then how will the issue of rent be addressed. The special conditions in the contract are to the effect that once there is a completion of the sale, the rent under the subsisting lease is to be paid to the purchaser not the life tenant? How does the Life Tenant propose to have this transfer of rights recorded?
2 – We note that as Life Tenant all rates and taxes on the land will be paid by the Life Tenant during their life time.
…
Mr Fussell opines that the vendor has no interest in resolving the drafting ambiguities now and as such will look to raise the matters again prior to the scheduled settlement in May 2017.

On 2 September, Ms Deigan responded, stating she was “instructed not to consider any drafting issues until the other matters are resolved”. Mr Brown responded:

Matter for your client about when the issues are to be addressed and tied up.
Unless your client wishes to do so sooner, as advised our client will revisit the matter closer to the proposed settlement date next year.

Ms Deigan did not take the issues further and the correspondence ceased.
Mr Fussell’s evidence was that Mr Lockrey adopted a carefree attitude to the payment of rent. Mr Fussell said that, at some unspecified point, Mr Lockrey told him:

“Don’t worry about it Bernie. If you’re not travelling well don’t worry about paying rent, you can catch up later.”

Ms Deigan gave evidence of discussions with, and instructions from, Mr Lockrey which painted a different picture. According to Ms Deigan, from about March 2016 onwards, Mr Lockrey complained that Mr Fussell was well behind on his rent (including the additional rent following Mr Lee’s vacation of the premises). According to Ms Deigan, Mr Lockrey wished to terminate the arrangements with Mr Fussell; she said that he told her that on the current state of the market that he would inevitably get a better deal. Ms Deigan also said that Mr Lockrey told her that Mr Fussell had agreed to pay $500,000 for materials on the site, but had not honoured the agreement.
Ms Deigan said that she advised Mr Lockrey that a default under the lease was not a default under the contract and that, while Mr Lockrey could sue Mr Fussell (and, in Ms Deigan’s opinion, should do so), he would have to wait until the time for settlement arose, give a notice to complete, and then terminate the contract if Mr Fussell failed to pay. She said that Mr Lockrey could not be bothered to sue and instructed her to await default after completion, and then terminate the contract. Ms Deigan’s advice to Mr Lockrey made no mention using the failure to pay rent as a ground to terminate the lease which would in turn result in termination of the contract (see [43] above). But she was not asked about this in cross-examination and I proceed on the basis that Mr Lockrey thought he had no choice but to wait until after 10 May to terminate.
Ms Deigan in her affidavit stated that in the course of these discussions with Mr Lockrey she reminded him that she had advised him against selling to Mr Fussell in the first place and that Mr Lockrey ruefully acknowledged this. Her affidavit did not set out the advice she had given back in 2012. In cross-examination, she said:

I kept saying, “This man’s only got $50,000, and you shouldn’t agree to it.”

The context, however, left it unclear whether this related to the amount of the deposit, or the whole transaction.

Ms Deigan was not challenged on any of this evidence. In evidence there is written acknowledgement from Mr Lockrey for advice given before entry into the contract in May 2012 of risks associated with the lease to BSTC and the contract for sale to Mr Fussell “including but not limited to those relating to the low purchase price and the length of the completion period”. Ms Deigan’s file notes and emails to Mr Lockrey and Mrs Lockrey amply support her evidence of Mr Lockrey’s complaints about Mr Fussell’s failure to pay rent and Mr Lockrey’s desire to get out of the contract. To the extent that Mr Fussell’s evidence that Mr Lockrey was relaxed about failure to pay rent relates to the period after 2014, I must therefore reject it.
The rights and wrongs of Mr Lockrey’s complaint about the $500,000 payment for materials are less clear. There is no contemporaneous evidence of any such agreement, although the document prepared by Mr Fussell in August 2012 which was never signed (see [91]-[92] above) appears to have touched on a similar subject matter. In an email sent to Mr Lockrey on 2 September 2016, Ms Deigan said that the $500,000 payment had been “something that we advised you to either document or ensure was paid before you exchanged contracts, now you really do not have a leg to stand on regarding that payment”. This suggests that the issue was discussed in 2012, but in her affidavit Ms Deigan said that the first she heard about the issue was on 2 August 2016. Because Ms Deigan was not cross-examined on this subject, the inconsistency was not addressed in the evidence.
But there is no doubt that, by mid-2016, Mr Lockrey wanted to obtain an additional $500,000 payment from Mr Fussell, and was seeking to make that a condition of any further negotiations. He was also seeking to use the negotiations as a way of extracting a further $1 million by way of payment for the life estate, which seems likely to have been much more than it was worth. It is equally clear that Mr Fussell was unwilling to pay the extra amounts Mr Lockrey wanted and was only prepared to complete the transaction at the price specified in the contract.
From August 2016 onwards Mr Fussell made efforts to reduce the rent arrears. Three monthly rental payments were made between 3 August and 9 September. A further monthly payment was made in December. Three monthly payments were made in March 2017, a further two in April and then on 4 May a payment was made for three months’ rent which covered arrears up to the end of February 2017 (apart from the May 2013 payment which had not yet been identified). In April an additional payment was made for the workshop rental for the four months from September to December 2015. The workshop rental from July 2014 to August 2015 and from January 2016 onwards remained unpaid. The evidence did not explain why the payment was made for this particular four month period.
It appears that from 2016 onwards, Mr Lockrey’s affairs were increasingly in the hands of Mrs Lockrey who was communicating with CLS Legal. The rental receipts from 13 August onwards are signed by Mrs Lockrey on Mr Lockrey’s behalf with the exception of the receipt dated 21 March 2017 which is signed by Mr Lockrey.
According to Mr Fussell, he last saw Mr Lockrey when he visited him at the demountable home in March 2017. Mr Fussell said they did not discuss the contract or the property.
Mr Fussell’s evidence was that in April 2017 he had approximately $1.2 million in bank accounts available to complete the contract. In addition he said he could have drawn on monies from his son and Mr Viglione. He also took steps to secure some additional external finance. In evidence are an email dated 15 April from JCB Construction Equipment Australia offering to purchase from Mr Fussell some machinery for $145,000 and a letter dated 24 April from Ozwide Asset Management (apparently a finance broker) recording that approval was held for a loan of $234,000 which was to be secured against two other items of machinery. Mr Fussell said he did not accept these offers because he was hoping to obtain more favour terms (he said he did ultimately accept a more favourable offer from Ozwide in June).

Events from May 2017

Settlement of the contract of sale did not occur on 10 May 2017. The date passed without any communication between the parties’ solicitors. According to Mr Fussell, he did not himself proceed to completion on 10 May because he was hoping to obtain more favourable finance terms, although he said he would have been able to complete, if necessary.

Gibbs J ultimately decided that Amoco could not have exercised the option because it was not possible to interpret the clause providing for the nomination of an agent in any way to determine who such agent might be. The clause was therefore void for uncertainty and could not be severed from the agreement. Unlike Menzies and Mason JJ, however, Gibbs J did address whether the executrix was the proper party to receive the notice. His Honour noted (at 77-78):

There is no doubt that at the time when the notice was given the estate of the deceased had by virtue of the operation of s. 61 become formally vested in the Public Trustee, although it is not altogether clear what capacity and powers the Public Trustee had as a result: cf. Holloway v. Public Trustee (1959) SR (NSW) 308, at p311. At the date of the hearing, however, probate had been granted and s. 44 had taken effect; the estate of the deceased was then vested in the appellant whose title had related back to the time of death. Moreover, although s. 61 provides for the vesting of the deceased's property pending probate, it does not alter the rule that an executor derives his title from the will and that the probate merely authenticates his title and is not the source of it. At the time when the notice was given the appellant was therefore the executrix of the deceased's estate and in that capacity was competent to receive the notice exercising the option; the fact that the property of the deceased was not then vested in her provides no reason why she could not do so.

His Honour explained Holland v King as a decision that the exercise of the option could not be ratified by the administratrix after the time allowed for the exercise of the option had expired. His Honour distinguished the case before him on two grounds. First, the appellant was the exectutrix at the time she received the notice (a view clearly based on the passage I have set out above) and, second, she did not perform any act which required ratification and merely received the notice. His Honour pointed out that in fact in Carter v Hyde probate had not been granted until after the notice exercising the option had been given, but acknowledged that the point had not been discussed in that case.

Analysis and conclusion

It is clear that, in general, a contract entered into by a natural person may be enforced against that person’s legal personal representative if he or she dies before completion. But I do not think that this general “rule” should be seen as a fixed rule of positive law. The language of Lord Macclesfield LC in Hyde v Skinner that the executor of every person is “implied in himself and bound without naming” is, expressly, the language of implication. As with other implications, it must ultimately be a matter of discerning the intentions of the parties and the general “rule” must therefore give way to an express, or sufficiently clearly implicit, statement of intention to the contrary.
In the present case, there is no dispute that the general “rule” applies, in the sense that the contract was enforceable notwithstanding the death of one or other of the parties. As has been seen, cl 1 of the contract did not define a “party” as including that party’s legal personal representative. But, as has been accepted since Hyde v Skinner, it was not necessary to do so. There was nothing in the contract to exclude the usual implication to that effect. Indeed, the provision in cl 20.6, referring to service of documents on a party’s solicitor if that party has died, implicitly contemplated that in such a situation the contract continued to be enforceable. The present debate concerns a separate issue, namely the way in which the power of rescission could be exercised in the period after the deceased’s death.
In the case of service on the party who had died or become mentally ill, the contract in fact did make express provision. It provided for service on that party’s “solicitor”. In my view this means, in accordance with the definition of “solicitor” in cl 1 of the standard form, the person named as the vendor’s solicitor in the contract (it is not necessary to consider whether it would also include a solicitor who subsequently assumed carriage of the matter without notice having formally been given pursuant to the cl 1 definition: cf Pratt v Hawkins No 2 (1991) NSW Conv R 55-592). In my view this did not depend upon whether the solicitor had any authority on the deceased’s behalf outside the contract, and it would be immaterial whether the party’s death had resulted in the termination of the solicitor’s retainer. Had the contract provided that notice could be given by publication in a newspaper or on a bulletin board, I have no doubt that would have been treated as effective irrespective of whether such a notice came to the attention of those responsible for the affairs of the deceased or mentally ill party.
But the contract made no express provision for service of notices on behalf of someone who had died, by that person’s solicitor or anyone else. Of course, the usual implication, flowing from Hyde v Skinner, would be that the party’s duly appointed legal personal representative could do so. But at the time Ms Deigan had not obtained probate.
The argument for Ms Deigan is that, having later obtained probate, she had a right to issue the notices which related back under s 44. But I think it is important to note that s 44 is concerned, in its terms, only with the title to property. It does not expressly deal with the exercise of contractual rights at all.
Of course personal property, including any chose in action vested in the deceased, passes to the deceased’s executor just as real property does. But an executory contract under the type of consideration in this case is an unusual type of chose in action. It carries with it obligations as well as benefits. And, like an option, its assignability may be limited. If the obligations under such a contract are purely personal it is not assignable at all; and, even if they are not personal in this sense, the contract may provide that they are not assignable: see generally Linden Gardens Trust Ltd v Lenesta Sludge Disposals Ltd [1994] 1 AC 85.
Higgins J in Carter v Hyde said that the question whether the option in that case survived the death of the option holder could be analysed either in terms of property or contract. But both Knox CJ and Isaacs J treated it as a question of interpretation of the contract creating the option. Similarly, in Re Cousins, all members of the Court of Appeal treated the question as one of interpretation of the instrument creating the option, in that case, a will. It is also significant that Mason J in Bone analysed the rule concerning a release of a debt by appointment of the debtor as executor as a rule depending on the intention of the testator, presumably to be determined as a matter of construction from the will.
I think the question of whether the rights of a party to an executory contract such as this one pass to the party’s estate on the party’s death must be determined in the same way. And the same approach must equally apply to the question of how, if they pass, such rights are to be exercised on the estate’s behalf after the party’s death.
It follows, I think, that the question before me is not whether s 44 in some way conferred on Ms Deigan, retrospectively, authority to exercise rights of rescission which Mr Lockrey had under the contract. The question is whether the contract, having provided (implicitly) for the right of rescission arising on Mr Lockrey’s death to be exercised by his duly appointed legal personal representative, also went on to provide that upon the grant of probate actions taken by the nominated executor before the grant were retrospectively to be treated as valid. Ultimately this is a question of interpretation of the contract and specifically it is a question of implication.
In BP Refinery (Westernport) Pty Ltd v Shire of Hastings (1977) 180 CLR 266; [1977] UKPCHCA 1 at 283, five conditions were identified as having to be satisfied for a term to be implied into a contract. In my view two of those conditions stand out.
First, there is the question of whether the implication was “necessary to give business efficacy to the contract”. In my opinion, it was not. It would have been open to the putative executor under the deceased party’s will or any other responsible person acting in the interests of the deceased party, to obtain an urgent grant of probate or administration or a grant of representation for the limited purpose of exercising the right to rescind. It therefore cannot be said that relation back was the only practical answer to the hiatus created by the party’s death.
The second relevant condition is that the putative implied term must be “reasonable and equitable”. I do not think this requirement is satisfied either. Parties contemplating the operation of the contract would have recognised that, in the event that one party died and the possibility arose of the contract being rescinded on that basis, the other party would need to know where he stood. The practical difficulties which would arise with relation back, which are referred to by Isaacs J in Callan (see [243] above), are important considerations in this regard. Faced with a notice issued by a party claiming to be executor of the deceased party’s estate, the other party would have no means of knowing what might eventuate. The will in question might or might not actually prove to be the deceased’s last will. Even if it proved to be the deceased’s last will it might or might not prove to be valid. The putative executor might not even ultimately apply for probate. If the other party had to wait for the application to proceed in the ordinary course (as happened in this case) it might be months before the position was clarified. And the other party would have no control over the process of applying for probate. These factors are of particular importance in a commercial contract such as this one. In my view, the implication of a term providing for relation back of authority would be neither reasonable nor equitable.
I think the decisions in Holland v King and Dibbins v Dibbins support the conclusion that the contract in this case does not contemplate a right to issue the notice operating retrospectively. Holland v King shows that even if the contract in this case had specifically referred to the service of a notice by Mr Lockrey’s “personal representative” or “legal personal representative”, that would not have included the putative administrator under the law pre-dating s 44, and accordingly would not now include the executor nominated in Mr Lockrey’s will before the grant of probate. Dibbins v Dibbins shows that the same would have been so if Mr Lockrey had become mentally incapable and the notice had been issued on his behalf by somebody who was later appointed to manage his affairs. This is I think of particular significance, given that cl 33.2 applies equally to a situation where a party to the contract becomes mentally incapable as to the situation where he dies.
It might be objected that my conclusion creates a lack of mutuality in the contract. Mr Fussell as purchaser can proceed to enforce the contract against Ms Deigan, but she cannot exercise the right of termination under cl 33.2 back against him. But on analysis there is no contradiction. In notifying Ms Deigan that Mr Fussell wished to proceed, and then issuing a notice to complete, Mr Brown on Mr Fussell’s behalf was exercising an express contractual right to serve documents on Ms Deigan (properly, CLS Legal) as the vendor’s solicitor. If Mr Fussell succeeds in these proceedings, he will obtain an order for specific performance against Ms Deigan, but that only reflects the fortuitous circumstance that Ms Deigan, after the contract was made, was nominated as Mr Lockrey’s executrix in what turned out to be his last will.
For these reasons, I conclude that the May notice of rescission was ineffective to exercise the right of rescission arising from Mr Lockrey’s death.
In case I am wrong in characterising the question as one of contractual interpretation rather than statutory construction, I will now consider the interpretation of ss 44 and 61.
Out of the two sections it is s 44 on which attention must focus. The question is whether the subsequent grant of probate had some retrospective effect. This is the subject matter of s 44, not s 61. To conclude that, between the date of Mr Lockrey’s death and the grant of probate, the NSW Trustee was the legal repository of the title to the property would not necessarily mean that, once probate was granted, it could not have some retrospective effect.
I think the course of authority since the decision of the English Court of Appeal in Fred Long amply bears out Emmett J’s statement (quoted at [253] above) that s 44 only operates in a restricted way, consistently with the former general law doctrine of relation back. It is designed to protect the deceased’s estate from “wrongful injury” during the interval between the deceased’s death and the grant of probate. The suggestion by Herron J in The Daily (see [234] above) that an action taken by a prospective executor is not a nullity but is merely “inoperative” until the grant is made, which was obiter and was not fully considered, cannot, in my view, survive this later stream of authority.
I think this conclusion accords with principle. Relation back first developed to allow an action to be brought against a person trespassing on the deceased’s property between the date of death and the date of grant. The fact that at the time the trespass takes place the identity of the person with title to the property is unknown is no disadvantage to the trespasser. The trespasser knows that the property belongs to someone else. There is nothing unfair with allowing the trespasser to be sued for the trespass by the person who ultimately obtains a grant of probate or administration. But it is otherwise where the exercise of contractual rights is concerned. As the authorities have recognised, in contractual situations such as a tenancy it would be intolerable if a party dealing with the estate were faced with actions of a putative executor which might or might not be effective depending upon whether that putative executor ultimately obtained probate.
Counsel for Ms Deigan argued that relation back was based on benefit to the estate, so that if the exercise of the option was in the estate’s interest, it was given effect by s 44. It was agreed that the property was now worth considerably more than the purchase price and counsel argued it was therefore in the interests of the estate for contract to be rescinded. But the requirement of benefit to the estate derives from cases where a contract has been made by a person who later becomes administrator or where a subsequently appointed administrator seeks to enforce a contract made on the estate’s behalf. Benefit to the estate has not been considered relevant for the purposes of determining the legal effect of a purported exercise of the pre-existing rights between the deceased and a third party. Isaacs J in Callan did not ask whether sustaining the assignment would be in the estate’s interest; nor did Yeldham J in Marshall ask whether it would be in the estate’s interest for the proceedings to be maintained.
This is consistent with principle. Where the exercise of rights depends upon the receipt of a notice, the effect of serving a notice on the deceased’s executor or administrator could not depend upon whether the Court later thought it was in the estate’s interest to receive the notice. So it should likewise be where the exercise of rights depends upon the issue of a notice on behalf of the deceased. The third party should not be in the position of receiving a purported notice the validity of which might or might not later relate back upon the grant of administration, depending on the Court’s view about the estate’s interest.
For these reasons, I think that even if s 44 applied it would not have the effect of retrospectively authorising Ms Deigan’s notice of rescission.
The final argument for Ms Deigan was based on the statement by Gibbs J in Laybutt which I have set out at [279] above. Counsel for Ms Deigan argued that, just as (in Gibbs J’s view) notice of exercise of the option could be given to the nominated executrix in Laybutt even though the property of the deceased was not then vested in her, so, in this case, Ms Deigan as the nominated executrix could validly give notice under cl 33.2 before the grant of probate even though Mr Lockrey’s property had not vested in her.
The passage which I have quoted and upon which counsel relied contains four sentences. The first states that as from the date of death the deceased’s property vests in the Public Trustee. That is uncontroversial. The second sentence states that this is subject to relation back in s 44. That also is uncontroversial, although Gibbs J made no reference to the authorities which showed that relation back is a narrow doctrine which does not alter retrospectively the legal effect of steps taken during the interval.
The third sentence is critical. For convenience, I set it out again:

…although s 61 provides for the vesting of the deceased’s property pending probate, it does not alter the rule that an executor derives his title from the will and that the probate merely authenticates his title and is not the source of it.

The fourth sentence expresses Gibbs J’s conclusion that the appellant could validly receive the notice even though the deceased’s property was not vested in her. That way of expressing the conclusion tends to suggest that it was based on the point made in the third sentence, but Gibbs J did not expressly say so and on that view it is not clear why he mentioned s 44 at all.
The third sentence is problematical. The scope and application of the common law rule that an executor’s title flowed from the will does not appear to have been argued in any depth. As I have pointed out at [217] above, the rule was not as absolute as Gibbs J stated it. In particular, the rule did not entitle an executor to require payment of an amount due under a contract with the deceased before the grant of probate.
In context the reference in Gibbs J’s third sentence to “title” would appear to be a reference to title to the deceased’s property. But read this way, the sentence seems impossible to reconcile with the authorities which state that the effect of s 61 and s 44 operating together is to assimilate the position of an executor under the general law rule to that of an administrator. It also seems impossible to reconcile with what Stephen J said in Bone.
In my view it is artificial to consider the part of the rule concerning the vesting of title in isolation from the qualification (ostensibly one of evidence, but in fact amounting to a rule of substance) requiring subsequent proof of the grant of probate. When one considers the effect of the rule and the qualification operating together, the simple fact is that ss 61 and 44 did change the law. The outcome in Marshall illustrates this. Under the previous law, an action commenced by an executor before the grant of probate was valid if probate were subsequently obtained. Following the enactment of ss 61 and 44, such an action was a nullity even if probate were subsequently obtained.
Subsequent authority in this State has cast doubt on the third sentence. Yeldham J in Marshall quoted from the judgment of Gibbs J including the third sentence but did not in terms question it. In Byers, Emmett J referred to the statement by Mason J in Bone and said that this seemed to be directly inconsistent with the third sentence. His Honour also cited the statement of Stephen J that the executor does not become a competent plaintiff to sue for the debts of the deceased (at [50]). In GEL Davies J said that the third sentence “has been doubted” (at [35]). His Honour referred to the decisions in Bone, Marshall, Darrington and Byers. Of those decisions, only Byers expressly cast any doubt on the third sentence. Indeed the decision in Bone actually preceded the decision in Laybutt by several months. But I take his Honour to have meant that the decisions in question are such as to render the accuracy of the third sentence doubtful, and I respectfully agree.

In the course of the appeal in Byers, counsel for the appellant argued that s 61 did not alter the common law rule that an executor’s title derived from the deceased’s will. Counsel relied for that submission on Gibbs J’s statement in Laybutt. The Full Court described the submission as misconceived and responded (at [21]):

… Gibbs J is not referring to the vesting of the deceased’s property but to the source of the executor’s appointment as executor which undoubtedly is the will. His Honour’s position is quite consistent with the proposition that the vesting of the property is effected by statute. At common law a grant of probate was purely evidentiary albeit the only acceptable evidence of an executor’s appointment. As explained above, title to the property of a testate estate vested in the executor at the death of the testator. Section 61 alters that position in relation to the vesting of property only. It does not alter the fact that the title to the position of executor stems from the will. As such it makes a distinction between the powers of the executor before and after probate that does not exist at the common law. As Mr McInerney, counsel for the respondent, pointed out in his written submissions:
“After death and before a grant of probate, an executor has a title derived from the will which grants the executor a status in respect to the estate. The executor’s authority in respect to the estate is limited, however, to situations where the vesting of the property in the executor is not a necessary pre-condition to the exercise of that authority.”

In this analysis, the common law rule concerning succession by an executor is seen as consisting of a sub-rule concerning title to the deceased’s property, which is affected by s 61, and a wider sub-rule concerning “title to the position of executor”, which is not. The result is that an executor is, from the deceased’s death, entitled to exercise “authority” in respect to the estate which does not depend upon the property having vested in the executor. Counsel for Ms Deigan submitted that such “authority” extended to the issue of a rescission notice on behalf of Mr Lockrey’s estate in this case.
In my respectful view this analysis has its difficulties. In the first place, there is no sign of it in previous authorities which expounded and developed the common law rule. Those authorities speak in terms of the title to the deceased’s property, not “title to the position of executor”, vesting in the executor. All, or virtually all, of the powers and duties which an executor has are powers and duties which are to be exercised with respect to the deceased’s property and by virtue of the executor’s ownership of that property. The executor’s powers with respect to the deceased’s funeral arrangements and the disposal of the deceased’s body may be an exception to this, but the exception rests on the unique status in the law of the human body which, at least when dealing with the body for burial and funeral purposes, cannot be the subject of rights of ownership: Doodeward v Spence (1908) 6 CLR 406; [1908] HCA 45. It is, with respect, hard to see what real content “title to the position of executor” has, divorced from title to the deceased’s property.
There is also a conceptual difficulty with drawing the distinction between proprietary and non-proprietary authority. The analysis is founded on what Gibbs J said in Laybutt but as his Honour noted, there is a standing controversy about whether rights under an option should be analysed in proprietary, or contractual, terms. Ironically, Gibbs J himself came down on the “proprietary” side of the debate (Laybutt at 76). It might also be thought strange that, on the argument for Ms Deigan, she could exercise a right to rescind the contract under cl 33.2 before the grant of probate, but would have lacked the ability to bring proceedings for specific performance of it.
A similar problem would arise in trying to apply the analysis in tenancy cases. As the High Court has repeatedly emphasised, leasehold interests may be treated as being proprietary for some purposes but a lease remains a type of contract (Progressive Mailing House Pty Ltd v Tabali Pty Ltd (1985) 157 CLR 17; [1985] HCA 14 at 29, 40-41, 51-52; Willmott Growers Group Inc v Willmott Forests Ltd (Receivers and Managers appointed) (in liq) (2013) 251 CLR 592; [2013] HCA 51 at [39]-[40]). The tenancy cases make it clear that the executor nominated in a will has no authority to issue a notice to quit and terminate a tenancy of the deceased before the executor has obtained probate.
Counsel’s submission in the Byers appeal in effect denied that s 61 had any effect at all. That was contrary to the way s 61 had always been understood, including by the High Court in Andrews. It is easy to see why the Full Court described the submission as “misconceived”. It could readily have been disposed of without considering whether an executor has powers which go beyond title to the deceased’s property, or the effect of s 61 on such powers.
The question for determination is who was authorised to exercise the right of rescission on behalf of Mr Lockrey’s estate following his death. I have already explained why I consider that the weight of authority, including High Court authority, treats the answer to this question as depending upon the construction of the contract, not upon concepts of succession to “property”. I think if I were to accept the argument put forward on behalf of Ms Deigan, I would also be adopting an analysis which is inconsistent with settled lines of authority in this State represented by the decisions in Isaacs J in Callan and of Yeldham J in Marshall. Those decisions in turn derive from decisions of the English Court of Appeal in the 1940s and the 1950s, which at the time were regarded as authoritative in this country. I would also be adopting a distinction between an executor’s title to the deceased’s property and “title to the position of executor” which I respectfully consider is questionable.
For these reasons, I reject the contention that Ms Deigan had authority, before the grant of probate, to issue a notice of rescission under cl 33.2. The notice which she issued on 18 May was invalid and ineffective to rescind the contract.

October notice of rescission

I have earlier concluded that when the May notice of rescission was issued, there had been no breach of the contract on Mr Lockrey’s part and Mr Fussell had no accrued right to specific performance. But by October events had moved on.
Mr Brown issued a notice to complete on behalf of Mr Fussell on 1 June. The contract did not expressly provide for the purchaser to issue a notice to complete, but there was no dispute on behalf of Ms Deigan that Mr Fussell was entitled to make time of the essence in accordance with ordinary contractual principles. In my view the fourteen day period allowed was reasonable in the circumstances. It corresponded with the fourteen day period allowed for the vendor to issue a notice to complete, which could equally have occurred after the purchaser’s death. It allowed sufficient time to obtain an urgent grant of representation. In my view the notice validly required Mr Lockrey’s estate to complete the purchase by 16 June. Thereafter, the estate was in breach of the contract.
It may be that the breach occurred earlier. On 16 May Mr Brown, on Mr Fussell’s behalf, sought to book in a settlement. The obligation then passed to Mr Lockrey’s estate to co-operate towards the effectuation of settlement, in the first instance, by nominating a date for settlement within a reasonable time. I have found that this did not require the nomination of a date before the notice issued on 18 May; but clearly it did require the nomination of a date relatively soon after that. Again I doubt whether a reasonable date for settlement would have extended beyond the fourteen day period which was provided for the giving of a vendor’s notice to complete. On that view, the estate was in breach in failing to settle from 30 May.
As I have mentioned, there was a debate whether, on the evidence, it was established that Mr Fussell had sufficient funds to complete the purchase, either at 10 May or thereafter. Mr Fussell never tendered the outstanding monies but the response from Mr Lockrey’s side of the transaction clearly dispensed with the need for him to do so or to prove that he could have paid the necessary funds on the settlement date: Foran v Wight (1989) 168 CLR 385; [1989] HCA 51 at 427, 437, 442.
In my opinion, in issuing a fresh notice of rescission after the date on which the estate was obliged to complete, Ms Deigan was indeed taking advantage of the estate’s own wrong. The October notice of rescission is invalid for this reason.
In the course of final submissions, counsel for Mr Fussell sought to raise a further point. Clause 33.2 did not expressly provide a time period within which the notice of rescission had to be issued. In such circumstances, as Ballas v Theophilos (see [269]-[270] above) shows, the law will imply a condition that the notice be issued within a reasonable time. Counsel argued that a reasonable time had expired before the October notice of rescission was issued, and it was invalid for that reason also.
Counsel for Mr Fussell acknowledged that this point had not been raised in Mr Fussell’s pleadings. Counsel argued that that was unnecessary, pointing out that the onus lay on Ms Deigan to justify the notice of rescission. Alternatively, leave was sought to amend the Statement of Claim so as to raise the point.
I agree that it was unnecessary for this point to be pleaded in Mr Fussell’s Statement of Claim; it was a point which arose in response to the notices of rescission and it was up to Ms Deigan’s Defence to rely on those notices. But in my view the point had to be raised by way of Reply in order to avoid surprise.
In fact, no Reply was filed on behalf of Mr Fussell. This meant that Mr Fussell would have needed leave to file a Reply out of time raising the point. But counsel for Ms Deigan objected that, in that event, a Rejoinder would be necessary to raise an argument that the communications between the parties in the period after the service of the first notice of rescission gave rise to an estoppel which prevented the point now from being taken. There was no response to this from Mr Fussell. The basis for the foreshadowed estoppel argument was not explained. The position is not satisfactory but in view of my conclusions on other issues I do not need to deal with the argument now anyway. I will leave it to those representing Mr Fussell to decide whether to apply to file a Reply raising the point and deal with any further evidence and argument which may arise in due course. For obvious reasons, however, any such application would need to be made very promptly after the delivery of my judgment.

Conclusions and orders

For these reasons, I have concluded that:

(1) on its true construction, cl 33.2 permitted rescission of the contract on behalf of Mr Lockrey’s estate following his death;

(2) Mr Fussell’s claim to rectify the contract so as to avoid this result fails;

(3) so too do Mr Fussell’s contentions that there was no entitlement to issue the May notice of rescission because of estoppel, prior breach of contract on the part of Mr Lockrey or his estate, an accrued right to specific performance and relief against forfeiture;

(4) but Ms Deigan, not having obtained probate, had no authority to issue the May notice of rescission on behalf of Mr Lockrey’s estate and the subsequent grant of probate did not retrospectively confer such authority on her;

(5) and Mr Fussell is entitled to specific performance of the contract despite the issue of the second notice of rescission because in issuing the notice Ms Deigan was taking advantage of a breach of the contract on the part of Mr Lockrey’s estate.

I will hear the parties on costs, and on any consequential directions that should be made following the making of the order for specific performance, if these matters cannot be agreed.
The orders of the Court are:

1. Declare that the contract for the sale of land between the late James Boyd Lockrey and the plaintiff dated 10 May 2012, relating to Lot F in deposited plan 33553, has not been rescinded and remains on foot.

2. Order that the contract be specifically performed.

3. Direct that within 21 days of today’s date the plaintiff bring in a minute of any proposed further directions for the carrying of Order 2 into effect, and dealing with the costs of the proceedings, which if not agreed are to be the subject of further argument before me at a date, and in accordance with directions, to be determined by arrangement with my Associate.

Amendments

20 September 2018 - Para [142] - Changed "purchaser's solicitor" and "vendor's solicitor" to "Solicitor for the Purchaser" and "Solicitor for the Vendor" respectively.

20 September 2018 - Minor typographical amendments.

Details

AGLC: Fussell v Deigan [2018] NSWSC 1419
Case: [2018] NSWSC 1419
Decision Date: 19 September 2018

CaseChat Overview and Summary

In Fussell v Deigan, the dispute arose from a contract for the sale of land where the vendor, Deigan, sought to rescind the contract following the death of his wife, the other vendor. The purchaser, Fussell, contested the right of the vendor’s executrix to rescind the contract before the grant of probate and argued that the rescission clause was unenforceable. The case was heard in the Supreme Court of New South Wales.

The primary legal issues addressed by the court involved the interpretation of the rescission clause, the validity of an executor’s actions before the grant of probate, the implications of a party’s own breach on the right to rescind, and the availability of equitable relief in light of the vendor’s death. The court was required to determine whether the executrix could validly exercise the rescission right before probate and if the purchaser’s delay in completing the settlement could prevent the vendor from exercising the contractual right to rescind.

The court held that the rescission clause was clear and unambiguous, allowing either party to terminate the contract upon the death or mental incapacity of the other. The court further found that an executrix could validly exercise the right of rescission before the grant of probate, applying the relation back doctrine to uphold the executrix’s notice of rescission. Additionally, the court ruled that the purchaser’s delay in completing the contract did not preclude the vendor from exercising the right to rescind. Finally, the court declined to grant equitable relief, finding no unconscionable conduct in exercising the rescission right.

The court ordered that the contract for the sale of land be rescinded, and both parties be released from their respective obligations under the contract.

Orders