Gogard Pty Ltd v Satnaq Pty Ltd
Case
•
[1999] NSWSC 1283
•23 December 1999
No judgment structure available for this case.
CITATION: Gogard Pty Limited v Satnaq Pty Limited [1999] NSWSC 1283 revised - 26/06/2000 CURRENT JURISDICTION: Equity FILE NUMBER(S): 2290/98 HEARING DATE(S): 31/08/1999, 01/09/1999, 02/09/1999, 24/09/1999 JUDGMENT DATE:
23 December 1999PARTIES :
Gogard Pty Limited (Plaintiff)
Satnaq Pty Limited (DefendantJUDGMENT OF: Santow J
COUNSEL : G P George (Plaintiff)
S T White (Defendant)SOLICITORS: L G Parker & Co (Plaintiff)
Davis O'Neill Sistrom (Defendant)CATCHWORDS: REAL PROPERTY — Contract of Sale — Making time of the essence — Failure to complete — Entitlement to issue notice to complete — Nature of a requisition — Requisitions as to minor encroachments such as awning, party wall and air-conditioning unit — Error or mis-description and contractual stipulations — Timing for and right to make requisitions under contract and by statute — Effect of Schedule 2 of Conveyancing (Sale of Land) Regulations 1995 — Recovery of deposit under s55 of Conveyancing Act 1919 (NSW) — Relevance of availability of specific performance against purchaser — Factors going to court’s discretion — Set-off against forfeited deposit of recoverable costs and expenses so injured party placed in same situation so far as money can do as if contract performed. ACTS CITED: Conveyancing Act 1919 (NSW) s13, s55, S88BB, s183
Encroachment of Buildings ActCASES CITED: A A Jones & Son Pty Limited v Weeden (1964) 82 WN(NSW) 326
Abraham v Mallon (1975) 1 BPR 9157
Australasian Performing Rights Association Limited v Austarama Television Pty Ltd [1972] 2 NSWLR 467
Bennett v Stuart (1927) 27 SR(NSW) 317
Blacktown City Council v Fitzgerald and Ors (1990) NSW ConvR 59,032
Braidotti v Queensland City Properties Limited (1991) 172 CLR 293
Carpenter v McGrath (1996) 40 NSWLR 39
Ciavarella v Balmer [1983] 2 NSWLR 439
Clarke v Dilberovic (1982) NSW ConvR 55-083
Clowes Developments (UK) Limited v Mulchinock [1998] 1 WLR 42
Clurstock Pty Limited v Timanu Pty Limited (1988) NSW Conv R 57,826
Florencio Delgado v Walker Developments Pty Limited (Bryson J, NSWSC, 18 July 1989, unreported)
Godfrey Constructions Pty Limited v Kanagra Park Pty Limited (1972) 128 CLR 529
Hooker Town Developments Pty Ltd v Director of War Service Homes (1973) 47 ALJR 320
Huber v Conroy (1982) 1 NSWLR 143
Jampco Pty Limited v Camerson (No 2) (1985) 3 NSWLR 391
Johns v Deacan (English CA, , 23 January 1985, unreported)
Jones v Dunkel (1958) 101 CLR 298
Joscelyne v Nissen [1970] 2 QB 86
Lucas & Tait (Investments) Pty Limited v Victoria Securities Limited [1973] 2 NSWLR 268
Mallet v Jones [1959] VR 122
Mayer v Vitale (1981) 2 BPR 9162
Mearns v Parras Holdings Pty Ltd (1994) NSW ConvR 60,025
McKenzie v Coulson (1869) LR 8 Eq 368
Neeta (Epping) Pty Limited v Phillips (1974) 131 CLR 286
Payne v Parker (1976) 1 NSWLR 191
Pratt v Hawkins (1991) 32 NSWLR 319
Re Barr’s Contract [1956] Ch 551
Re Ford and Hill (1879) 10 Ch D 365
Rossco Developments Pty Limited v O’Halloran and Anor (1980) 29 ACTR 1
Smilie Pty Limited v Bruce (1998) NSW ConvR 55-841
Socratous & Anor. v Koo & Anor (1993) NSW ConvR 59,914
Suburban Constructions Pty Limited v Mancan Pty Limited (1997) 8 BPR 15,529
Svanosio v McNamara (1956) 96 CLR 186
Terry v Permanent Trustee Australia Limited (1995) 6 BPR 14,091
Torr v Harpur (1940) 40 SR(NSW) 585
Travinto Nominees Pty Ltd v Vlattas (1973) 129 CLR 1
Westland Savings Bank v Hancock [1987] 2 NZLR 21
Wilson v Kingsgate Mining Industries [1973] 2 NSWLR 713DECISION: Defendant entitled to forfeiture of deposit and certain reasonable costs and expenses.
23 December1999
REVISED — 1 February, 2000
IN THE SUPREME COURT
OF NEW SOUTH WALES
IN EQUITYSANTOW J
No. 2290/98
Gogard Pty Limited
PlaintiffJUDGMENT
Satnaq Pty Limited
Defendant1 This dispute arises out of the Defendant’s termination of a contract for the sale to the Plaintiff of an industrial commercial property ("the Gogard Contract"). 2 The property is at 156 to 158 Parramatta Road, Camperdown ("the property). It consists of two parcels of land, namely, that land in Auto Consol 154549-22 and that in Folio Identifier 12/79120 being Lot 12 in Deposited Plan 79120. The vendor was Satnaq Pty Limited ("the Defendant"). 3 The vendor’s agent was an entity trading as Taylor Nicholas. The sale was handled by Mr Nick Spasevski. 4 The property was, at all material times and until 18 March 1998, owned by the Defendant. The Defendant is a trustee company, its principals and directors being Mr Donald Arthur Carruthers and Mr Allen Barry Wickham. 5 Gogard Pty Limited ("the Plaintiff") is also a trustee company. The principal on behalf of the Plaintiff is Mr Graeme Hayes. 6 Mr Graeme Hayes also provided consulting services to Carbest Pty Limited and Yengrin Pty Limited.
Table of ContentsPage
Introduction
INTRODUCTION
OVERVIEW OF MATTERS IN DISPUTE
FACTUAL BACKGROUND
THE LEGAL QUESTIONS
Credit and Opinion EvidenceThe Credit of Mr Carruthers
Question One: The Date of Completion
The Credit of Mr Wickham
The Evidence of Mr Williams
The Evidence of Mr Hayes
Question Two: The Notice to Complete
That the vendor was in default: failure to answer requisitionsConclusion
That the defendant vendor was not able, ready and willing to proceed to completion: defects in titleConclusion
Question Three: TerminationConclusion
Question Four: Damages
Question Five: Retention of the DepositConclusion
Question Six: The Cross-Claim for Damages, Reasonable Costs and Expenses
The contractual right to resell and to claim reasonable expensesConclusion
CONCLUSIONS
ORDERS
Overview of Matters in Dispute
7 The dispute in this case arises primarily over the deposit paid by the Plaintiff to the Defendant under the Gogard contract for the sale of the property and the damage said to arise to the Plaintiff from the loss of a discount on the market price which occurred when the contract to sell the property to the Plaintiff was terminated. 8 The Defendant terminated the Gogard contract because of an alleged failure on behalf of the Plaintiff to complete the contract according to its terms. 9 The property was sold to a third party while the deposit paid by the Plaintiff to the Defendant under the supposedly terminated first contract for sale has been retained by the agent of the Defendant. 10 The Plaintiff seeks return of the deposit and damages for wrongful termination of the contract of sale. The Defendant, in cross-claim, seeks reasonable costs and expenses arising out of the failed sale.
Factual Background
11 In 1997 Mr Spasevski listed the property for sale. The property was offered to the Plaintiff through October and November and until 4 December 1997. During that time there were some discussions between the parties about the terms of the Gogard contract. The topics discussed included the time for completion of the contract and the amount of the deposit to be paid. 12 The Plaintiff pursued the purchase of the property in order to provide for the goals of a joint venture agreement to which it was a party. The joint venture was between the Plaintiff company and another company, Lassgol Pty Limited. The Plaintiff, at all material times, had been the registered proprietor of a property at 180 Salisbury Road, Camperdown ("the Salisbury Road property"). The Plaintiff’s course of action was to be as follows. The Plaintiff would purchase the property from the Defendant. The lessor of the Salisbury Road property at that time would move its operations to the property. The Salisbury Road property would then be used for the purpose of a residential development undertaken by the joint venture between the Plaintiff and Lassgol Pty Limited. 13 The funds required for the Plaintiff company’s purchase of the property was to be raised from the sale of a property at 41-57 Mallet Street, Camperdown ("the Mallet Street property") by Carbest Pty Limited ("Carbest"). Carbest was, in 1997 the owner of the Mallet Street property. Carbest intended, at that time, to sell the Mallet Street property subject to a development application being approved by the South Sydney Council. It was the intention of Carbest to provide monies out of the proceeds of sale of the Mallet Street property to Gogard Pty Limited for the purposes of purchasing the property the subject of these proceedings. 14 On 2 October1997, Mr Spasevski, Mr Hayes and Mr Wickham met and inspected the property. At that meeting, they had a conversation, to the following effect about a lease over that property:
15 There is conflicting evidence as to the balance of the conversation. However, it is not necessary at this stage to adopt a view on the reliability of the various accounts (see Hayes affidavit 14 May 1998 para 6). 16 On 14 October1997 Mr Hayes of the Plaintiff met with Mr Spasevski, Mr Wickham and Mr Carruthers. At that meeting, a conversation to the following effect took place:
HAYES: "How long has the O’Briens lease to run?"
WICKHAM: "Four years"
HAYES: "What are O’Brien’s doing?"
WICKHAM: "I’m not sure, they may sub-let. We have the right to sub-let, they are doing a strategic plan. This is their most profitable outlet and they have about 120 all over the country. Don looks after that side and he is doing the negotiating with them".
HAYES: "I would like to retain the air conditioning and the office partitions. The condition of the building is not of concern, we intend to put a building envelope within the building for the factory. We will open the windows down the Mallett Street side so passers-by can see the chocolates in production and we intend to put a coffee shop in the front where the present office space is. You should be able to get a good pay out for the surrender of the O’Brien’s lease.(Wickham affidavit 29 May 1998 para 2)
17 At a date between 17 and 24 November1997, the Defendant’s solicitor, Mr Robert Minter, sent a draft contract to the Plaintiff’s solicitor, Mr Lindsay Parker of L.G Parker & Co. solicitors. 18 The purchase price of the property was agreed at $1,347,500. 19 A telephone conversation took place between Mr Hayes and Mr Carruthers on 6 November1997:
HAYES: "Would vacant possession be by the end of February?"
CARRUTHERS: "We are talking to O’Brien Glass the tenant on the terms of vacating the premises."
HAYES: "I have already sold a property and I require the premises to relocate my chocolate factory. I am concerned that you will not be able to get O’Brien Glass out by that time."
CARRUTHERS: "O’Briens have indicated that they will be out by January, no later than February."
HAYES: "What’s happening about the air conditioning plant and partitions?"
CARRUTHERS: "If O’Brien Glass leaves them there do you want them?"
HAYES: "Yes. I’m not worried about the condition of the building inside because I have to build a new thermal skin for the manufacture and storage of chocolates. I would like to have the settlement in April 1998 as I have a sale which will be completed at that time."
WICKHAM: "No way, I won’t accept a settlement in April."
CARRUTHERS: "I also agree that settlement cannot take place in April. The end of February is the latest."
HAYES: "I’ll have to think about that and come back to the agents". (Carruthers affidavit 12 May 1998 para 11 also see Wickham affidavit 12 May 1998 para 11)
20 The next day, Mr Carruthers confirmed a settlement date at the end of February with Mr Hayes. Mr Hayes represented that he wanted to proceed with the sale (Carruthers affidavit 12 May 1998 para 14). 21 On 28 November1997, Mr Parker, solicitor for the Plaintiffs telephoned Mr Minter, solicitor to the Plaintiffs and a conversation took place to the following effect:
CARRUTHERS: "What’s the problem?"
HAYES: "I am concerned that O’Briens will not be able to vacate the property in time."
CARRUTHERS: "I have a meeting with O’Briens tomorrow to negotiate the date for them to vacate and I will get back to you"
HAYES: "I would like to have an April settlement"
CARRUTHERS: "The settlement date is end of February. I have told you this before. If you’re having trouble with the settlement, Nick has another prospective buyer so you will need to let me know what you are doing."
HAYES: "No, its not necessary to talk to another party, I require the building for my chocolate manufacturing and will proceed subject to vacant possession."
CARRUTHERS: "I will ring you tomorrow after the meeting with O’Brien Glass with a definite date as to settlement" (Carruthers affidavit 12 May 1998 para 13)
22 The parties exchanged contracts on 4 December1997. On that date the Plaintiff paid the Defendant’s agent a deposit of $134,750 ("the deposit"). The agent continues to hold the deposit. 23 No survey was attached to the contract of sale. Clause 8 of the contract contained the vendor’s right to rescind the contract and read as follows:
PARKER: "I have received your contract. My client will require vacant possession in two to three months. Will that be possible?"
MINTER: "I believe it will be. My client has negotiated for the tenant to vacate and I will send you a copy of a further special condition for your approval."
PARKER: "My client understands that there is air-conditioning in the premises and wants it included in the sale."
MINTER: "I am not aware of any air-conditioning. I believe there is some owned by the tenant. I will check with my client."
PARKER: "Is there a survey?"
MINTER: "No.PARKER: "My client requires the penalty interest rate of 12% specified in Special Condition 35 to be reduced to 8%"
MINTER: "I believe that this will be OK; I will check with my client".
PARKER: "My client requires you to remove the Section 172 Building Certificate clause referred to in Special Condition 29.1"
MINTER: "My client will not agree to that. I will confirm what we have discussed by telephone once I have obtained instructions". (Minter affidavit 12 May 1998, para 7)
24 The deposit is agreed in clause 9 of the contract:
" Clause 8 Vendor’s right to rescind
The vendor can rescind if -
8.1 the vendor is, on reasonable grounds, unable or unwilling to comply with a requisition;
8.2 the vendor serves a notice of intention to rescind that specifies the requisition and those grounds; and
8.3 the purchaser does not serve a notice waiving the requisition within 14 days after that service." [PX5 5]
· the deficiency on resale (with credit for any of the deposit kept or recovered and after allowance for any capital gains tax payable on anything recovered under this clause); and · the reasonable costs and expenses arising out of the purchaser’s non-compliance with this contract or the notice and of resale and any attempted resale; or
" 9 Purchaser’s default
If the purchaser does not comply with this contract (or a notice under or relating to it) in an essential respect, the vendor can terminate by serving a notice and after the termination -
9.1 keep or recover the deposit (to a maximum of 10% of the price);
9.2 hold any other money paid by the purchaser under this contract as security for anything recoverable under the clause -
9.2.1 for 12 months after the termination; or
9.2.2. if the vendor commences proceedings under this clause within 12 months, until those proceedings are concluded; and
9.3 sue the purchaser either -
9.3.1 where the vendor has resold the property under a contract made within 12 months after the termination, to recover -
25 The completion date is mentioned in clause 15:
9.3.2 to recover damages for breach of the contract." [PX5 5]
26 Clause 30 of the contract read:
" 15 Completion date
The parties must complete by the completion date and, if they do not, a party can serve a notice to complete if that party is otherwise entitled to do so." [PX5 6]
27 Clause 33 of the contract for sale provided that the completion date was not later than 27 February 1998. Clause 33 reads:
" Clause 30 Purchaser’s acknowledgments
The purchaser agrees that:
30.1 no reliance has been made on any warranty or representation by the vendor or any person on its behalf except as expressly provided in this contract;
30.2 this contract constitutes the whole contract between the parties;
30.3 it has relied entirely on its own enquires relating to, and inspection of, the property, all improvements and any inclusions referred to in the contract and the use to which the property maybe put.
30.4 it is purchasing the property in its present state of repair and condition and must not make any objection, requisition or claim for compensation concerning the state of repair or condition of or any latent or patent defect in quality in the property." [PX5 11-2]
28 The contract was subject to a further special condition in clause 37:
" Clause 33 Completion
33. The completion date is not later than 27 February 1998. The property shall, on the completion date be delivered to the purchaser in a clean and tidy condition." [PX5 12]
29 As at 4 December1997 the premises were occupied by a firm trading as O’Brien’s Glass Industries Pty Limited ("O’Brien’s Glass"). 30 O’Brien’s Glass vacated the premises sometime in late December1997 or early January 1998. 31 On 18 December1997, the Defendant’s solicitor received a letter enclosing Requisitions on Title of the property from the Plaintiff’s solicitors. The Defendant’s solicitors replied to the Requisitions by letter dated 14 January 1998. Point 11 of the requisitions document reads:
" 37 Conditional contract
This contract is conditional on the purchaser obtaining vacant possession of the property under registered lease No. 3126056 to O’Brien Glass Industries Limited by the date herein prescribed for settlement. In the event of the vendor not obtaining vacant possession of the property by the said date the purchaser may give written notice of rescission to the vendor whereupon this contract shall be at an end and the provisions of Clause 19 of this contract shall apply AND in the event that this contract shall not have been rescinded and vacant possession as aforesaid shall not have been attained within a further two (2) months then either party may after that time rescind this contract by notice in writing to the other." [PX5 13]
32 The answer given to 11(a) was "No" and to 11(b) was "Noted" [PX5 48]. 33 Paragraph 28 of the requisitions reads:
"11.(a) Is the Vendor in possession of a Survey Report in respect of the subject property, and, if so, is he prepared to hand it over at settlement?
(b) Subject to Contract Survey should result satisfactorily and show that the whole of the land is available to the Purchaser and that there is no encroachment by or upon the subject property." [PX5 45]
34 The vendor responded "Such an alleged right is not admitted" and "Not applicable" [PX5 49]. 35 Further, requisition 32 reads:
"28. The Purchaser reserves the right to make such further requisitions and observations as may arise from examination of the relevant Certificate of Title or out of searches survey or your replies hereto." [PX5 46]
36 The answer given to this requisition was "No" [PX5 49]. 37 On 20 February the Defendant’s solicitor sent a letter to the Plaintiff’s solicitors, which relevantly stated:
"32. Is/are the vendor/s aware of any matters which may detrimentally affect the value or amenity of the property or the purchaser’s use or enjoyment thereof including but without restriction, any notices from any person or government body or any proposals to build upon or carry out any works or conduct any activities upon any surrounding properties (including any formal development or building applications relating to such surrounding properties) or any other physical defects in the subject property?" [PX5 47]
38 On 23 February 1998 at telephone conversation took place between the respective solicitors of the Defendant and the Plaintiff. The Plaintiff’s solicitors explained that the Plaintiff could not settle on the "prescribed date as its finance has fallen through". According to the Defendant’s solicitor the conversation included the words:
"The contract provides for settlement of this matter on 27 February next. Settlement will take place at the Commonwealth Bank of Australia at a time convenient both to yourself and the Bank. The Bank has requested a four days advance notice of a settlement time and your cooperation in this respect will be appreciated." [Minter affidavit 12 May 1998 annexure "L" p 30)
39 At that time the solicitor for the Defendant did not extend the time for settlement. In a letter of 24 February 1998, the Defendant’s solicitor confirmed that the Defendant was unwilling to provide for an extension of time within which to complete. The letter explained that if settlement did not occur on 27 February 1998 then the Defendant would issue a notice to complete under Special Condition 34 of the contract (Minter affidavit 12 May 1998 annexure "N" p. 32). 40 The Plaintiff’s solicitors telephoned the Defendant’s solicitors on 25 February 1998 to again request an extension of time within which to complete. 41 A letter of 25 February 1998 from the solicitors of the Plaintiff to the solicitors of the Defendant read, relevantly:
MR PARKER (Solicitor for the Plaintiff’s): "My client is selling a property in Camperdown which sale is subject to development approval and we expect to obtain approval in mid to late March. We seek your client’s agreement whether it would defer completion until that time and, if so, for what consideration." (Minter affidavit 12 May 1998 para 17)
42 The Survey report referred to was made by Souter & Associates, a firm of consulting surveyors and planners on 16 February 1998. The findings of the survey report were:
"We acknowledge your client’s refusal to consider our request for an extension of time to complete and in this regard are instructed to request that your client re-consider its position.
In this regard as advised by telephone our client has a reliable arrangement to fund this purchase which is dependant on the approval by Council of another property due to be given by Council on the 3 March 1998. Our client’s request in the spirit of commercial reality is based on our client accepting your client’s property with some significant defects: -
Firstly in relation to the condition the property has been left by the departing tenants; and
Secondly in relation to the several matters of non-compliance disclosed in the recent survey report obtained by our client (copy enclosed) [the survey of 16 February 1998]" [PX5 65]
43 The report said further that "Apart from fencing irregularities or as stated or shown on the sketch overleaf, there are no other visible encroachments by or upon the said land." [PX5 52] 44 The Plaintiff relies on the matters at points 3 and 4 of the surveyors report. 45 In response to the letter of 25 February 1998 and the attached survey report, the Defendant’s solicitors sent a letter on 27 February. That letter read, in part:
"1. Upon the land stands a two storey brick building with a corrugated metal roof known as 156-158 Parramatta Road, Camperdown.
2. Part of the eastern wall of the building stands over the eastern boundary of the land by up to 205 mm. An Easement for Support for this part of the wall has been created by Transfer No. J198678 and as shown on DP 217155.
3. Part of the eastern boundary of the land passes through a 355mm wide brick party wall and a 240 mm wide brick party wall. This party wall is common with the adjacent shop, No. 154 Parramatta Roads, is also shown on Lot 1 of Deposited Plan 538241.
4. A street awning overhangs Parramatta Road and Mallett Street. This awning is behind the 3.66 metre kerb line of both streets. An external air conditioning unit is situated on top of the Mallett Street awning.
5. Minor measurement discrepancies exist once all the title survey plans are compiled together. Prior to any redevelopment of the site we advise that the land, or at least lots 4, 13, 16 and 17 be consolidated by a plan of survey and registered at the Land Titles Office.
6. The land is partly fenced as shown on the sketch plan overleaf." [PX5 52]
46 The Defendant served a notice to complete dated 27 February 1998 [PX5 56]. The contract provided for the issuing of a notice to complete in Special Condition 34 in the following terms:
"You [the Plaintiff’s solicitor] also mentioned that there were certain matters relating to survey and the state in which the tenant left the property which require my client’s attention. Without admitting that you are still within time to make requisitions, please identify the specific survey and tenancy matters concerning your client so that those issues may be considered.
Notwithstanding the above, this matter was to be settled today. As it was not, I enclose a notice to complete."[PX5 55]
47 A letter was sent by the Defendant’s solicitors to the Plaintiff’s solicitors on 3 March 1998. That letter contained the following:
"34 Notice to complete
If this contract is not completed under clause 15 the party not in default may serve written notice (including a notice served after 3:30 PM on the completion date) requiring the other party:
34.1 if the notice is served on a Monday, to complete this contract within a period of time which expires at or after 1:00 PM on the second Friday after the notice is served; or
34.2 if the notice is served on any other day, to complete this contract within a period of at least 13 days after the service of the notice,
34.3 making time an essential condition of this contract in this respect both at law and in equity,
and any such notice may be withdrawn at any time." [PX5 12]
48 On 12 March Mr Parker telephoned Mr Minter and a conversation to the following effect took place:
"Notwithstanding prior correspondence and issue of my Notice to Complete, your client has approached my client through the agent to request further time within which to complete this matter. Your client also indicated to the agent that he did not expect to be in a position to complete within the two week period nominated in my Notice to Complete.
I informed you that my client has made certain financial commitments in reliance of completion taking place in accordance with the terms of the contract. Despite the fact that the settlement period prescribed in the contract was longer than the usual six weeks your client only indicated to my client that it might not be in a position to complete a few days before the prescribed completion date. One of the shareholders of the vendor company is relying on funds to continue a building project. If funds are not available it is possible that a breach of contract may occur with the builder. The other shareholder of the vendor company has entered into an option. If that option cannot be exercised shortly my client has estimated that a lost opportunity in the vicinity of $250,000.00 may occur.
I therefore wish to confirm that my client cannot grant a further extension of time and that your client should urgently make financing arrangements if indeed this is not presently occurring." (Minter 12 May 1998 affidavit annexure "T" p. 42)
49 On 13 March Mr Hayes, through Carbest Pty Ltd received a letter from Mercantile Mutual Funds Management Limited with respect to a loan application. The application was to request a loan of a further $1.2 million to Carbest in return for a mortgage over the Mallet Street property. It was acknowledged in the letter from Mercantile Mutual Funds Management Limited that:
PARKER: "My client has applied for finance and shortly expects to give us details."
MINTER: "We would need something concrete if we are to consider anything. You will need to move extremely fast as my instructions at this stage are that the matter must be settled in accordance with the notice. At the very least we will require something very specific indicating a clear possibility that the matter will be settled shortly."
PARKER: "I have told you that unless you are prepared to co-operate, we will be forced to bring the Council out to the property."
MINTER: "You still have not told me what is wrong with the property."
PARKER: "Well for starter there is the awning which encroaches."
MINTER: "If you telephone the South Sydney City Council they will tell you that the awning has been approved and as late as 1995 the Council approved signage of the awning."
PARKER: "There is also the air-conditioner which encroaches"
MINTER: "That is only a very small encroachment and you will remember that your client asked for it to be thrown in just before exchange as the tenant didn’t want to take it with it. In any event, the air-conditioner is easily moved without affecting its operability or damaging it." (Minter affidavit 12 May para 25)
50 In a further letter dated 16 March 1998, the Defendant’s solicitors warned the Plaintiffs that if they did not comply with the terms of the Notice to Complete that the Defendant would issue a Notice of Termination. 51 At no time before 16 March 1998 was the Plaintiff in a financial position in which it could settle the Gogard contract. At that time the final approval by Mercantile Mutual of the bridging finance arrangement had not yet been given. 52 On the afternoon of 16 March 1998 a telephone conversation took place between the respective solicitors of the Plaintiff and the Defendant. The conversation was, in part, to the following effect:
"The purpose of the loan is to provide bridging finance for the acquisition of the property at 156-168 Parramatta Road Camperdown [the property at the heart of these proceedings] until the present security property at Mallet Street is sold. A caveat is to be lodged over the property at 156-158 Parramatta Road Camperdown noting an interest as mortgagee for Terrace Guardians Limited. A mortgage will be taken over this property as well, in the unlikely event of the sale of the Mallet Street security not proceedings." (Hayes, affidavit 6 May 1998, annexure p 48)
53 The Defendant served a Notice of Termination dated 17 March 1998. 54 On that day, the Plaintiff’s solicitors, having received the Notice of Termination, telephoned the Defendant’s solicitor and a conversation took place, part of which was to the following effect:
PARKER (Plaintiff’s solicitor): "Was not the loan approval on Friday adequate?"
MINTER (Defendant’s solicitor): "No. My clients would think it was three weeks if not eight weeks late."
PARKER: "You know why it was late, we had been attempting to put to you another proposition regarding the other Camperdown development which was subject to Council approval."
MINTER: "We all know the vagaries of Council approvals and you should not have been relying solely on such an uncertain situation to solve your problems. I have told you on numerous occasions that if you have a proposition to put to us, it should have been specific as to details and certain as to time and reasonably should be in writing. We have constantly received general statements from you regarding the efforts your client is making and against that background my client would be circumspect about granting indulgences at this late state."
PARKER: "But what is wrong with the loan approval?"
MINTER: "I shouldn’t have to tell you these things. The loan approval was subject to a number of conditions and both of us know that there are a great many steps required before a full completion such as whether Land Tax has been paid"
PARKER: "No."
MINTER: "Have all necessary enquires been sent out and received, what is the Mercantile Mutual Credit Committee that needs to meet, did a valuation of the property have to be made, how long would it take? All these sorts of questions would need to be answered if there was to be any certainty." (Minter 12 May 1998 affidavit para 27)
55 54 Later in that conversation, the following exchange occurred:
PARKER (Plaintiff’s solicitor): "My client took a gamble in not having finance ready but when they struck problems and we were not prepared to extend the settlement time, my client immediately organized its finances. We now have a conditional approval."
MINTER (Defendant’s solicitor): "None of this is our concern."
56 The property was sold on or around 18 March 1998, for a price of $1,500,000 to a third party. The contract for that sale was completed on 15 June 1998. 57 Mercantile Mutual Funds Management Limited approved the bridging finance arrangement with Carbest Pty Ltd on 25 March 1998 [Hayes, affidavit, 6 May 1998 annexure p 52]. 58 On or around 27 March 1998 Mr Hayes had a conversation with Mr Wickham. Mr Hayes contends that, at that meeting, Mr Wickham represented to Mr Hayes that the deposit paid by the Plaintiff would be returned. Mr Wickham denies that any such representation was made (Wickham affidavit 29 May 1998 para 5). 59 The Plaintiff’s seek the return of the monies paid as deposit on the purchase of the property to the Defendant.
PARKER: "The finance approval represented certainty and settlement would take place at the worst at the end of next week and at best say, Monday"
MINTER: "This is not certainty. We have no reason to know this will be the case"
PARKER: "Please let us know what your client wants."
MINTER: "It is not for us to tell you what we want; at this stage the contract must be considered terminated."
The Legal Questions
60 The issues arising in this case can be stated as follows:
61 The Plaintiff argues that a completion date of 27 February 1997 was never a term of the Gogard contract. Rather, it is contended that the term concluded by the parties was to the effect that the contract was to be completed on a date that the parties agreed on, but that the contract was to include a nominal date for completion of 27 February 1997. 62 The Plaintiff seeks rectification of the Gogard contract in order to reflect the contended real agreement between the parties that completion would occur on a date agreed by them. 63 As to the Notice to Complete, the Plaintiff contends that the Defendant, according to clause 15 and clause 33 of the contract for sale of the property was never entitled to issue a Notice to Complete. Any Notice to Complete issued, therefore is said to be ineffective. 64 If as the Plaintiff contends, the Defendant was never entitled to issue a Notice to Complete, a Notice of Termination could never be effective. 65 In the circumstances, then, the Plaintiff says that it is entitled to relief under s55 of the Conveyancing Act 1919 and that the deposit paid under the contract should be returned to the Plaintiff. 66 Further, the Plaintiff asserts that the Defendant is not entitled to its "reasonable costs and expenses" because the Gogard contract does not entitle it to such relief. 67 In reply, the Defendant argues that the Gogard contract accurately reflected discussions between the parties in respect of the completion date, namely that the contract was to be completed 27 February 1998. This was a nominal date leaving completion for whatever date was later agreed. The Plaintiff failed to complete the contract on 27 February 1998 and the Defendant is thus entitled to issue a notice to complete on 27 February 1998. 68 The Defendant also asserts that, by reason of the Plaintiff’s failure to comply within the time specified in the notice to complete, the Defendant was entitled to serve a notice of termination on 17 March 1999. 69 Further in reply, the Defendant argues that, pursuant to clause 9 of the contract, the Defendant is entitled to retain the deposit paid under the contract together with its reasonable costs and expenses.
1. What was the completion date of the contract for sale of land executed by the Plaintiff and the Defendant on the 4 December 1997?2. Was the Defendant entitled to issue a notice to complete on 27 February 1998?
3. Was the Defendant entitled to terminate the contract?
4. Is the Plaintiff entitled to be paid damages by the Defendant for breach of the contract for the sale of the property?
5. Is the Plaintiff entitled to a return of the deposit paid under the contract of sale to the Defendant?
6. Is the Defendant entitled to reasonable costs and expenses incurred in the attempted sale?
Credit and Opinion Evidence
70 Before I deal with the issues of substantive argument, I must address the credit of Mr Carruthers, Mr Wickham and Mr Hayes and the relevance and admissibility of the evidence given by Mr Williams.
The Credit of Mr Carruthers
71 Counsel for the Plaintiff was given leave to make written submissions with respect to the evidence given by Mr Carruthers, Mr Wickham and Mr Williams (T, 150/151.40). The Plaintiff’s written submissions in reply outlines a number of reasons proffered to the court in support of the proposition that the evidence of those witnesses should not be accepted. 72 There were four reasons given by the Plaintiff as to why Mr Carruthers should not be believed.
73 The Plaintiff first asserts that Mr Carruthers falsely claimed to have relied on certain "telephone records" and "computer records" in the preparation of his affidavit of 12 May 1998. 74 The Plaintiff asserts that Mr Carruther’s reference to his practice of keeping file notes of telephone conversations "on most occasions" in paragraph 3 of his affidavit gives rise to only one possible inference, namely, that the file notes were the only relevant record he relied upon in giving evidence. But it is evident that Mr Carruthers did not solely rely on the file notes in giving his evidence and that he relied on his memory to a degree. That aside, the Plaintiff asserts that Mr Carruthers, in the course of his evidence, attempted to bolster his evidence by claiming to have relied on two other forms of documentation and that in so claiming was committing a "blatant lie" (Plaintiff’s written submissions in reply paras 4.1.4 & 4.1.6). 75 The first set of documents were "telephone records". During the Plaintiff’s cross-examination of Mr Carruthers, the following exchange took place:
Reason One
76 The STD records therein referred to by Mr Carruthers were not annexed or referred to in his affidavit. That those documents were not so annexed, however, does not give rise to the inference that they do not exist. Furthermore, that they were not referred to in paragraph 3 of Mr Carruther’s affidavit only suggests that it was not part of his practice so to log his STD telephone calls. 77 While it was asserted by the Plaintiff that the "telephone records" were not cited in discovery, nor produced at any time, the court has before it no evidence in relation to the discovery nor of any notice to produce. Furthermore, the Plaintiff’s assertion that the issue was raised earlier in the cross-examination and the existence of the "telephone records" was not, at that point, referred to is groundless (the Plaintiff refers to T, 92.5). The matter was not sufficiently raised earlier in the cross-examination. 78 The Plaintiff’s assertions cannot, therefore support the inference that Mr Carruthers was lying in this respect. This is especially so given that it was never put to Mr Carruthers that the telephone records did not exist or that he did not rely on such records. 79 The second set of documents were "computer records". During the cross-examination of Mr Carruthers, the following exchange took place:
Q. In your affidavit you say in paragraph 3 that you made file notes of conversations as a director of Satnaq?
A. That’s correct.Q. Do you have any independent recollection of the events that transpired with the Plaintiff and the Plaintiff’s representative in October, November, December and through until March 1998?
Q. So have you relied only on your file notes when you have reconstructed or given your evidence of conversations that occurred with Mr Spasevski, Mr Hayes and Mr Wickham?
A. Yes I do.
A. I had made diary notes. Also, all my telephone calls are logged, because I am leaving the country and they are STD and they have a time and also a date when those calls are made and also on fax documentation. [T, 94:30]
80 No reference was made to the computer records in Mr Carruthers’ affidavit of 12 May 1998. Mr Carruthers did rely on the computer records to assist his memory of events. The extent to which he did so is, however, unclear. 81 As previously mentioned, the court has no evidence before it of what documents were cited in discovery nor of any notice to produce. Again, questions posed by counsel for the Plaintiff earlier in the cross-examination (the Plaintiff relies on the question at t, 92.5) did not sufficiently raise the issue of computer records so as to make it relevant in the current determination. 82 The contentions on the Plaintiffs are far from sufficient to support the assertion that Mr Carruthers lied with regard to the existence of the "computer records".
Q. Can you recall meeting with Mr Hayes, Mr Wickham and Mr Spasevski on 14 October?
A. yes, I do.Q. That meeting is recorded in annexure D and also in your affidavit at paragraph 11?
A. Yes.Q. I suggest to you that on this day you said to Mr Hayes the time is not a problem with this sale, the contract will include a provision for completion to take place on 27 February 1998. We can accommodate you for whatever time you need to complete the purchase?
A. That’s not correct.Q. The only reference at annexure D, which is your diary note of 4 October, to this meeting is the entry, I think, starts at 1:30 pm; do you see that?
A. Yes, I see that.Q. You have recorded none of the event that you say transpired at that meeting?
A. No, I would have made notes when I went home.Q. Where are those notes?
A. They would be at home on my computer because if you see down below I was flying out at 3:05 on Qantas flight back to Armidale. I don’t carry the computer with me I take things home and put them straight on the computer.Q. When this affidavit was prepared and you swore it, you had been asked at the time or shortly before it, to produce whatever records you had of meetings you referred to in the affidavit?
A. Yes, that is correct.Q. Did you produce this record of the meeting from your computer?
A. I gave a transcript of all my conversations and meetings, including telephone bills which gave time, date and place to Robert C Minter.Q. Are you saying you gave a copy of the computer record of this meeting to Mr Minter?
A. I did.Q. I put to you that there is no such record?
A. I am sorry there is.…
HIS HONOUR: …"I think what counsel is asking you is when you put down that paragraph certain events, do you rely upon, for example, this computer record to assist your memory?
A. Yes, I do.Q. In paragraph 3 [of your affidavit of 12 May 1998] there is no reference there to reliance or a reliance upon computer records in the preparing of this affidavit or as a practice that you undertook as a director of Satnaq?
Q. Is there a lot of information, say, included on your computer or in files on your computer that hasn’t found its way to this affidavit?
A. I make all my references to my whole company on my computer.
A. No. (T, 101-2)
Reason Two
83 The second reason to disbelieve the evidence of Mr Carruthers proffered by the Plaintiff arises out of an inconsistency in the evidence given by Mr Carruthers and Mr Wickham:
84 While this inconsistency goes to the weight or Mr Carruthers’ evidence on this point, it is not sufficient to support the inference that Mr Carruthers deliberately lied about the matter. The inconsistency, then, does not effect the credit of Mr Carruthers.
"Mr Carruthers alleged during cross-examination that the Defendant had to "make good" the property after the tenant (O’Briens Glass) vacated on or around 24 December1997 and that this took a period of 20 to 40 days (t 101.10).
Mr Wickham refuted this and he gave evidence that making good required no great effort on the Defendant’s part and little or no money (T, 106.1)
Mr Carruthers acknowledge that Mr Wickham handled the finance (T, 89.55 & 93.10), so it is to be presumed that Mr Wickham was in a position to know what the correct position was." [Plaintiff’s written submissions in reply para 4.2]
Reason Three
85 The third reason proffered by the Plaintiff going to the credit of Mr Carruthers relates to the absence of Mr Spasevski during the hearing. The Plaintiff asserts that Mr Spasevski, being the agent responsible for selling the property to the Plaintiff on the Defendant’s behalf, could have corroborated Mr Carruthers’ evidence about:
86 The Plaintiff submits that since Mr Spasevski did not give evidence, "it must be presumed that his evidence would not have assisted the Defendant". 87 The principle in Jones v Dunkel (1958) 101 CLR 298 is that where a party does not call a particular witness, generally an inference may be drawn that the evidence, if called, would not have assisted the party’s case. Menzies J laid out the following principles with respect to a person that has not been called:
4.3.2.1. What offers he relayed to Mr Carruthers.
4.3.2.2. What Mr Carruthers’ instructions were and whether he (Spasevski) was informed that an April 1998 settlement was not acceptable (Carruthers affidavit of 12/5/98 para 10); and
4.3.2.3. Confirmed that the meeting held on 14 October1998 agreed that settlement would occur in February 1998 (Carruthers affidavit of 12/5/98 para 11)" [Plaintiff’s written submissions in reply para 4.3.2]
88 For the principles in Jones v Dunkel to apply in the present case, it must, then be shown that:
1. the absence of the person as a witness cannot be used to make up any deficiency in the evidence.
2. evidence which might have been contradicted by the witness can be accepted more readily if the person fails to give evidence.
3. where an inference is open from facts proved by direct evidence and the question is whether it should be drawn, the circumstance that the Defendant disputing it might have proved the contrary had he chosen to give evidence is properly to be taken into account as a circumstance in favour of drawing the inference: see Jones v Dunkel at 312 per Menzies J.
89 The Defendant maintains that the conditions underlying the principle in Jones v Dunkel have not been satisfied. 90 It is correct to say that the "failure to call the evidence does not of itself give rise to the inference" (see Defendant’s written submissions in reply para 12). The Plaintiff does not elucidate the inference or inferences which it is said can be drawn from the established facts. While the Plaintiff’s counsel have provided a list of matters upon which Mr Sapveski could have, if called, given evidence they do clarify the inference sought. It seems that the inference could be either that Mr Carruthers was lacking in credibility or that the evidence given by Mr Carruthers was incorrect in respect of the matters to which Mr Spaveski could give evidence. 91 From the Plaintiff’s written submissions it can be assumed that the inference that the Plaintiff seeks to prove is that the evidence of Mr Carruthers should not be believed, especially in respect of three matters. In the alternative, the Plaintiff seeks to infer that:
1. If an inference is open from the facts proved;
2. a party disputes the inference being drawn; and
3. the party so disputing might have proved to the contrary by calling evidence;
4. the failure by that party to call the evidence can be taken into account in favour of drawing the inference.
92 The first inference is too vague to be ‘drawn’ from the evidence. The Plaintiff has, however, adduced evidence to the court with respect to the date of settlement and meetings in which that date was negotiated. 93 If, then, there is some inference to be drawn from the evidence it is clear that the Defendant wholeheartedly disputes the inference sought by the Plaintiffs. Moreover it is in contradiction to the wording of the contract. 94 The third condition precedent to the application of the principle in Jones v Dunkel is that Mr Spaveski would have, if called, been able to shed light on the disputed inferences. 95 While this may or may not have been the case, the Defendant correctly points out that if it were the case, there is no reason proffered by the Plaintiff why Mr Spaveski could not have been called as a witness by either party. He was not in either “camp”. I accept the Defendant’s submission that:
1. certain offers were relayed to Mr Carruthers.
2. That an April 1998 settlement was acceptable [see Carruthers affidavit 12 May 1998 para 10]
3. That it was agreed at a meeting of 14 October1998 that settlement would occur in February 1998 [see Carruthers affidavit 12 May 1998 para 11]
96 Mr Spaveski was acting as the agent for the vendor and could have been called by either party. The remaining question, then, is whether the ‘neutrality’ of Mr Spaveski negates the role of the principle in Jones v Dunkel in the present case. 97 In Payne v Parker (1976) 1 NSWLR 191, the NSW Court of Appeal was required to decide whether the trial judge in that case was in error for not giving a Jones v Dunkel direction to the jury. The case involved an action in tort for damages arising out of the negligence of a general practitioner said to have occurred during an operation on the Plaintiff’s husband who, it was argued, died as a result of its negligent execution. After the original operation and at the request of the general practitioner, a specialist surgeon carried out three further operations upon the deceased. Neither the general practitioner (being the Defendant) nor the widow of the deceased (being the Plaintiff) called the specialist surgeon as a witness. During the trial each counsel asked for a direction favourable to their client in terms of Jones v Dunkel. The trial judge declined to make any direction to the jury. 98 Hutley JA wrote:
"There is no evidence that Mr Spaveski was under the control of the Defendant at the time of the trial. He was not and is not an employee or consultant of the Defendant."
99 On the strength of this authority, the Defendant in the present case maintains that the Jones v Dunkel principle is "not applicable unless there is actual evidence that the witness whose absence is to be the subject of comment is not available to the party seeking the benefit of the inference" (Defendant’s written submissions in reply para 12). I agree the failure by the Defendant to call the evidence of Mr Spaveski cannot be taken into account in favour of drawing the inference sought by the Plaintiffs. 100 Nor does the failure to call Mr Spaveski affect the credit or reliability of the evidence given by Mr Carruthers.
"A Jones v Dunkel direction should not be given, unless there is actual evidence before the jury that the witness whose absence is to be the subject of comment is not available to the party seeking the benefit of inferences from his absence. Otherwise the opportunities for grave injustice will be open. There is a great difference in directing the jury, where a party, or a person clearly under the control of a party, is not called, and where the only basis for inferring that a witness is not equally available is a jury’s supposed judicial knowledge. This, in many cases involving professions, merely gives prejudice and suspicion full play".
Reason Four
101 The Plaintiff finally mentions that Mr Carruthers has a motive to lie:
102 With respect to this assertion, I accept the submission in reply made by counsel for the Defendant:
"he receives a $300,000 bonus from doing so (i.e. the deposit of $134,750 plus an enhanced purchase price of $152,500)" (Plaintiff’s written submissions in reply, para 4.4)
103 I find the submission by the Plaintiff, therefore, not to affect the weight of Mr Carruther’s evidence. I found him in fact to be a convincing witness and have no reason to doubt his evidence.
"The submission seems to be based on a premise that all parties have a motive to lie, namely, in order to succeed in litigation." (Defendant’s written submissions in reply para 13)
The Credit of Mr Wickham
104 The Plaintiff’s written submissions in reply suggested seven reasons to reject "Mr Wickham’s evidence". While the Plaintiff did not specify what part of Mr Wickham’s evidence should be rejected, it can be assumed that the Plaintiff firstly means to raise the issue of Mr Wickham’s credit generally and then the reliability of specific pieces of evidence that form the subject of the seven reasons proffered.
Reason 1
105 The Plaintiff, by written submission, asserts that Mr Wickham made a fraudulent claim with respect to money borrowed by the Defendant purportedly as a result of the Plaintiff’s delay. 106 In his affidavit of 12 May 1998, Mr Wickham stated the following:
107 Counsel for the Plaintiff’s asserts that Mr Wickham’s claim amounted to a "fraudulent claim" (Plaintiff’s written submissions in reply para 5.1.4). This assertion is made on flimsy grounds of alleged inconsistencies between Mr Wickham’s affidavit evidence and other evidence at trial. 108 During cross-examination, Mr Wickham said that the reason it was necessary to borrow the further $50,000 was that:
"As completion of the Gogard Contract did not take place on 27 February 1998 it has been necessary for Satnaq to extend and increase the commercial bill facility. … It was necessary for Satnaq to increase the commercial bill facility as it has no income with which to pay interest, land tax, water and Council rates and other outgoings." (Wickham affidavit 12 May 1998 para 16)
109 The Plaintiff asserts that this evidence was inconsistent with that given by Mr Carruthers during cross-examination. As to the further $50,000 borrowed by Satnaq, Mr Carruthers said:
"we had distributed – we were distributing the money that was in there and to be certain that we had the money there to cover outgoing expenses, it was prudent to do that because we weren’t getting any more income from the rent." (T, 105.20)
110 The inconsistency contended for by the Plaintiff does not arise to a sufficient degree to suggest any impropriety on the part of Mr Wickham in his deposition. While the documentary evidence does suggest that between March 1998 and May 1998 there was more than $50,000 dispersed from the accounts of Satnaq, that is not germane to the credit of Mr Carruthers since he at no time makes an assertion otherwise. 111 That the costs and expenses arising from the late sale of the property may now no longer sought by the Defendants in cross-claim does not affect the credit of Mr Wickham. That the Defendant no longer seeks those amounts as due to it as a matter of legal right cannot indicate that the facts asserted by the Defendant are false in the absence of evidence to the contrary. Furthermore, the allegation of fraud was never directly put to Mr Wickham during cross-examination. 112 In the circumstances, it is not appropriate to disbelieve Mr Wickham’s evidence on the strength of the first reason.
A. Mr Wickham asked me and it would be in my diary, requesting that he could go to the bank and request a further advance of $50,000 on the house that he was redeveloping, or remodelling.
Q. But that extra advance had nothing to do with the Plaintiff’s failure to settle on 16 March, is that right?
Q. Why is that?
A. Oh yes it did.
A. Because he didn’t have the money to pay off the loan he had and also to do the remodelling. (T, 94.8-20)
Reason 2
113 The Plaintiff asserts that Mr Wickham made two false claims with respect to the ‘reasonable costs and expenses’. The false claims alleged were:
114 The claims referred to by the Plaintiff are contained in the Defendant’s Further Amended Cross-Claim. Without here deciding that the Defendant is or is not entitled to the amounts claimed, that is not sufficient evidence to suggest that the Defendant and in particular Mr Wickham was dishonest or engaging in deliberate falsehoods so to claim.
"5.2.2.1. A claim for interest of $4,566.15 - interest that this was alleged to have been incurred from 17 March 1998 to on or about 16 May 1998. This interest was paid on 16 March 1998 (affidavit of Allan Wickham of 16/6/98. annexure "B"). The claim for interest was based upon a bill facility of $350,000 which was an inflated debt figure for the reasons set forward above.
5.2.2.2. A claim for legal costs of $2,092.63 that were allegedly incurred in selling the Parramatta Road property. The evidence supporting this claim was led by Mr Minter in an affidavit sworn on 16 July 1999 (annexure "B"). However, annexure "B" is titled "Sale to Isabella Street Investments Pty Limited" and it details Mr Minter’s costs for the period between 16 March 1998 and 29 May 1998. Clearly, this bill for legal fees had no connection whatsoever with the Plaintiff’s failure to complete the contract and would have been incurred in any event." (Plaintiff’s written submissions in reply para 5.2).
Reason 3
115 The third matter that the Plaintiff asks the court to consider is that :
116 With respect to the contents and effect of the contract for the sale of land, Mr Wickham did indicate that he retained a conveyancing solicitor (being Mr Minter) for the purpose of understanding the contract (T, 117.31). That Mr Wickham himself did or did not read the contract is of little weight. 117 Further, although the transcript reveals that Mr Wickham did misstate the price of the Gogard contract on one occasion (T, 119,.40), he earlier did reasonable accurately recall the price (t, 118.40). The discrepancy between the two occasions is not such as to raise doubts about Mr Wickham’s credit. Furthermore, while Mr Wickham could not name the exact price of the contract, in the circumstances (namely, whereby Mr Carruthers was the person primarily involved in negotiating the contract), the error is not such as to cast doubt upon the Mr Wickham’s evidence generally.
"Mr Wickham was allegedly an accountant and a lawyer (tp p 109.55). However, he was obviously not a person who bothered about detail because he did not read the contract for sale of land (tp p 117.15-35) and he could not remember what the building sold for (tp p 118.45)." (Plaintiff’s written submissions in reply para 5.3.1)
Reason 4
118 The fourth reason why it is submitted by the Plaintiff that the evidence of Mr Wickham not be accepted arises out of the cross-examination of Mr Wickham, during which the following exchange occurred:
119 The Plaintiff asserts that there were a number of contentious matters that were not the subject of written notes. It was never put to Mr Wickham that he kept no notes at all and the fact that Mr Wickham kept notes of some conversations and not others does not necessarily infer that no notes at all were kept. Furthermore, that the contentious nature of the conversations said by the Plaintiff to necessarily be the subject of notes is disputed by Mr Wickham (for example T, 110.48). 120 In these circumstances it cannot sensibly be inferred that Mr Wickham did not, in fact, keep any notes at all of any conversations nor that he did not refer to notes in the preparation of his affidavit.
“Q: Did you keep any diary notes of things that happened in your business?
A: Yes
Q. Did you provide those diary notes to your solicitor to assist him in the preparation of any of your affidavits?
A. In reference to the assisting and preparing that affidavit, that is the way I used them. I didn’t provide them to my solicitor.
Q. Would you agree with me that you haven’t referred to those notes or records in any of your affidavits?
A. These affidavits are mostly memory because I would in my diary strike a meeting with so and so at a certain time. I wouldn’t sit down and write a transcript of what occurred at that meeting only in the event that I thought it was contentious.
Q. If you used these notes in paragraph 11 of [your affidavit of] 12 May, you weren’t able to say with certainty when the meeting hat you referred to occurred?
A. Well, I don’t believe I even put a note down for that date. I had a note down for the 12th but I believe, I understand that the first day we were going to have a meeting, that was cancelled for some reason or it was postponed so I had to put an about date down.
Q. Do you have any of those notes now?
A. I do.
Q. Where are they?
A. They would be home.
Q. You didn’t think to bring them to Court?
…
Q. You have had no need to refer to those notes since this case commenced on Tuesday?
A. What notes?
Q. The notes you kept at meetings?
A. I didn’t keep notes of meeting unless it was a contentious issue and this was a very preliminary meeting with a prospective purchaser.
Q. What do you understand the word "contentious" to mean?
A. In effect a problem of one sort or another. (T, 110)
Reason 5
121 The fifth reason allegedly going to the credit of Mr Wickham is identical to the fourth reason put forward as against Mr Carruthers and warrants the same response.
122 The Plaintiff alleges that:
Reason 6
123 This proposition was never put to Mr Wickham in cross-examination. Furthermore, the evidence does not suggest that Mr Wickham did not agree to the price of $1.347 million. That he believed Mr Hayes was getting a "very good bargain" is no sufficient basis for inferring that Mr Wickham had a sufficient motive to be untruthful or that he did, in fact, give a less than candid account of what occurred.
"Mr Wickham has his "nose out of joint" when the building sold to the Defendant for $1.347 million, because he thought that the Plaintiff was getting "a very good bargain" (T, 122.18). However, his difficulty about the price was relieved when the building as sold for $1.5 million, as he regarded this as a better price (T, 122.50)."
Reason 7
124 The seventh reason proffered by the Plaintiff in support of the notion that Mr Wickham’s evidence should not be believed is the same in substance to the third reason proffered as against the evidence of Mr Carruthers and warrants the same response. It is not appropriate to infer that the evidence of Mr Spaveski would not have assisted the Defendant’s case. The absence of Mr Spaveski has no effect upon the credit of Mr Wickham or the reliability of his evidence. 125 I decline on any of these bases to discard the whole of Mr Wickham’s evidence. Again I found him a convincing witness.
The Evidence of Mr Williams
126 The comments made in the Plaintiff’s Written Submissions in Reply reveals the following alternative complaints:
127 The evidence in chief of Mr Williams was contained in his affidavit of 22 September 1999. Three paragraphs of that affidavit were objected to upon the Defendant seeking to adduce the evidence. The Defendant chose not to read one of the paragraphs subject to objection. The other paragraphs the subject of objections were allowed into evidence on the basis that the Defendant could deal with the objection (which went to the form of the paragraphs) in an oral examination in chief of Mr Williams. 128 Mr Williams expressed an opinion in his affidavit about the action that the Council would or would not (as he deposes) take with respect to the awning. Mr Williams based his opinion on the fact that a registered surveyor’s report of 19 July 1956 showed an awning of 3.66 metres wide was sent to the council as part of an application to "cut back" the awning and that the subsequent plan of 16 February 1998 showed an awning of 3.1 metres wide. He also asserted that there was an unwritten "awning standard" with which the awning, at around 3.1 metres wide, complied. The Court was not presented with any argument or evidence in support of an argument that Mr William’s evidence as to the existence of an informal ‘awning standard’ should be disbelieved. On the basis of the facts available to Mr Williams, then, and on the basis of his expertise as a District Building Assessor, evidence of Mr William’s opinion as to whether the awning would have needed to be altered or removed is not excluded by the opinion evidence rule. 129 As to relevance, Mr Williams does not represent the position of South Sydney Council and could not purport to do so. His opinion, based on his expertise, is capable, however of rationally affecting the assessment of the probability of the existence of facts in issue in the proceeding and is therefore relevant. The facts in issue are firstly, whether the awning constituted a matter that comes within paragraph 32 of the Plaintiff’s requisitions on title of 18 December1997. The evidence also goes to whether the awning constituted a defect in title so as to be capable of being the subject of a requisition on title. These issues are discussed below. 130 Mr William’s evidence is admissible.
1. Mr Williams’ evidence should not be admitted on the grounds that he had no expertise or experience upon which he could base his opinion evidence; or
2. The evidence of Mr Williams has no relevance to the proceedings.
The Evidence of Mr Hayes
131 Mr Hayes was called by the Plaintiff. The Defendant contends that two pieces of evidence given by Mr Hayes should not be accepted.
Conversation with Mr Carruthers and Mr Wickham
132 At page 6 of his affidavit of 6 May 1998, Mr Hayes attests that at a meeting of 10 October 1997 (this error was corrected later in the same affidavit), Mr Carruthers said:
133 Mr Carruthers and Mr Wickham, who were also at the meeting deny that any representation was made or conduct of the parties capable of grounding an inference that a settlement date later than 27 February 1998 was acceptable. Mr Hayes could not point to any documentary evidence to support his claim. 134 I find the evidence of Mr Hayes unconvincing on this point. In any case, as I decide below, the evidence is not enough to support the propositions of the Plaintiff that seek to rely on it.
Carruthers: "We don’t know what we have to do to the building once O’Brien’s are out. They may clean it. We will negotiate with them before we can commit. Time is not a problem with this sale. The contract will include a provision that completion is to take place on 27 February 1998. We can accommodate you for whatever time you need to complete the purchase."
Hayes: "Good, that will suit the purchaser. On that basis, the purchaser should be able to exchange soon". (Hayes affidavit 6 May 1998 para 6)
Conversation with Mr Parker
135 Mr Hayes maintains in his affidavit of 6 May that, in a conversation with Mr Parker his solicitor on or around 19 November 1997, words to the following effect were spoken:
136 This paragraph of Mr Hayes evidence was objected to by the Defendant on the grounds that it was hearsay and not otherwise relevant (T, 66.25). The evidence was admitted on the basis that it was relevant for a non-hearsay purpose, namely, that it went to the state of mind of Mr Hayes before the execution of the contract. 137 The Defendant further submitted, in closing, that the court should be cautious in accepting that the conversation ever took place. This contention is supported, the Defendant says, by two matters. First, it was conceded by the Plaintiff that Mr Parker, the solicitor, did not make a file note of the conversation. It is contended that such an omission on the part of a solicitor would have been a serious oversight. Secondly, Mr Parker, although available to the Plaintiff as a witness was not called to give evidence in support of Mr Hayes’ assertion. It is proper here to draw the Jones v Dunkel inference that Mr Parker’s evidence on this point would not have assisted the Plaintiff in seeking to convince the court that it was the intention of the parties to settle at some date other than 27 February 1998. 138 In these circumstances, it is appropriate for court to give little weight to the evidence of Mr Hayes in paragraph 8 of his affidavit of 6 May 1998 and certainly not such as to substantiate the inferences for which the Plaintiff contends as against the plain language of clauses 15 and 33 of the contract. It is to that I now turn.
Parker: "Graham, I have received a contract for sale of the property at Camperdown. the contract provides that the completion date is not to be later than 27 February 1998. Is this what you have negotiated."
Hayes: "Don’t worry about that. The vendor has agreed that the time to complete the contract will not be a problem." (Hayes affidavit 6 May 1998 para 8)
Question One: The Date of Completion
139 The first question to be dealt with is whether the contract for sale should be rectified in order to reflect a completion date now contended for by the Plaintiffs. The basis of the Plaintiff’s claim for rectification is that the contract executed on 4 December1997 does not accurately reflect the agreement of the parties at that time. No unilateral mistake induced by unconscionable behaviour on the part of the Defendant, nor any other recognised ground for rectification has been argued. The clause sought to be rectified is Special Condition 33 of the contract. 140 Clause 15 and Special Condition 33 of the contract deal with the completion date. Clause 15 states:
141 Special Condition 33 of the contract for sale provided that the completion date was not later than 27 February 1998. Special Condition 33 reads:
"15 Completion date
The parties must complete by the completion date and, if they do not, a party can serve a notice to complete if that party is otherwise entitled to do so." [PX5 6]
142 The rectification contended for by the Plaintiff was set out in the first prayer of the summons. 143 The clause contended for initially by the Plaintiff was to the effect that the completion date would be 27 February 1998 or, in the alternative, a date that was agreed by the parties. However, since it was evident that no agreement had been reached between the parties as to an alternative completion date, the rectification contended for did not help the Plaintiff. 144 After being given leave to amend its summons, the Plaintiff reformulated the rectification sought. The rectification now contended for is contained in the first prayer of the Further Amended Summons. It is argued that Special Consideration 33 should read:
"Clause 33 Completion
33. The completion date is not later than 27 February 1998. The property shall, on the completion date be delivered to the purchaser in a clean and tidy condition." [PX5 12]
145 The Defendant contends, in opposition to the rectification that the rectification sought by the Plaintiff is uncertain in its terms and should therefore not be allowed. 146 The factual matters going to the matter of rectification are as follows. 147 Mr Hayes, a consultant and principal to the Plaintiff took part in discussions with Mr Wickham and Mr Carruthers of the Defendant in late 1997 with respect to the prospective sale of the property. 148 By 30 September 1997 Mr Carruthers of the Defendant had turned his mind to the completion date. A diary note of that date notes that a suggestion for settlement in April as "too long". [Carruthers affidavit 12 May 1998 annexure C, p 15] 149 On 14 October1997, Mr Hayes met with Mr Carruthers and Mr Wickham to discuss the contract of sale. Mr Hayes maintains that, at that meeting, it was agreed that the date of completion was "able to be later than 27 February 1998" (T, 74.25). He deposes that the content of that discussion included a conversation to the following effect:
"The contract is to be completed on a date agreed by the parties. A nominal date for completion is 27 February 1998 but if the contract is not completed by this date, it is to be completed within a reasonable time of this date, which date is to be convenient and suitable to both parties."
150 Mr Hayes could not point to any documentary evidence to support his claim (T, 74.55). Mr Carruthers and Mr Wickham deny that there was any agreement to complete on a date other than 27 February 1998. 151 Mr Hayes also recalls a conversation with his solicitor, Mr Parker on or around 19 November1997 to the following effect:
"Hayes: "The Plaintiff will not be able to settle the sale until at least the end of April 1998."
Carruthers: "We need to settle earlier than that. O’Brien’s Glass will be out at the end of January, maybe February. Can you pay rent until settlement?"
Hayes: "I don’t think that is appropriate?"
Carruthers: "What about the end of February?"
Hayes: "May be. It depends on other settlements. Gogard probably needs until the end of March, at least?"
Carruthers: "We don’t know what we have to do to the building once O’Brien’s are out. They may clean it. We will negotiate with them before we can commit. Time is not a problem with this sale. The contract will include a provision that completion is to take place on 27 February 1998. We can accommodate you for whatever time you need to complete the purchase."
Hayes: "Good, that will suit the purchaser. On that basis, the purchaser should be able to exchange soon"." (Hayes, affidavit 6 May 1998, para 6)
152 While as I have said this statement was subject to an objection on the basis of hearsay, it was admitted into evidence on the grounds that it could be used for a non-hearsay purpose. That purpose, in this instance, is to demonstrate that it was the belief on behalf of Mr Hayes that the completion date was somewhat flexible. The solicitor, Mr Parker did not make a file note of this conversation and he was not called to give that evidence himself. It should be given no weight in the circumstances. 153 Evidence from Mr Minter, the Defendant’s solicitor suggests rather that there was no agreement as contended for by Mr Hayes and the Plaintiff. A letter of 14 November1997 from Mr Carruthers to Mr Minter outlining the salient points of the draft contract for sale of the property names the settlement date as 27 February 1998 [Minter affidavit 12 May 1999 annexure A, p12A]. Further, a file note of a conversation between Mr Minter and Mr Parker of 14 November1997 does not mention any agreement to the effect that the date of settlement could be some other date convenient to the parties as asserted by the Plaintiff [Minter affidavit 12 May 1998 annexure A1, p12B]. A conversation of 28 November1997 between the Plaintiff’s solicitor and the Defendant’s solicitor similarly contained no discussion as to a variation of the settlement date earlier canvassed (Minter affidavit 12 May 1998 para 7). 154 Mr Hayes admitted that the solicitor to the vendor had nominated 27 February 1998 as the date of completion and that there was a real need to complete the contract before that date (T, 76.30-40). For example, the letter of 25 February 1998 from the Plaintiff’s solicitor to the Defendant’s solicitor contains the words:
PARKER: "Graham, I have received a contract for sale of the property at Camperdown. The contract provides that the completion date is not to be later than 27 February 1998. Is this what you have negotiated?"
HAYES: "Don’t worry about that. The vendor has agreed that the time to complete the contract will not be a problem".[Hayes affidavit, 6 May 1999 para 8]
155 Nowhere in that letter is asserted a contractual right on the part of the Plaintiff or even an informal mutual understanding to complete after 27 February 1998. While it may be true to say that the Plaintiff never expressly represented that it would be in a position to complete as at 27 February 1998 (see Plaintiff’s written submissions in reply para 11.1.1 p. 9), the absence of such a representation does not speak to the intention of the parties being anything other than what is recorded in the express words of the contract. 156 A final matter going to rectification is the content of Special Condition 35. That clause reads:
"We acknowledge your client’s refusal to consider our request for an extension of time to complete and in this regard are instructed to request that your client re-consider its position". (Minter affidavit 12 May 1998 annexure "O" p.34)
157 Special Condition 35 does contemplate completion after the Completion date. This is not, however, relevant to deciding that there was a date prescribed for completion or that the Defendant (the vendor) was entitled (assuming it had otherwise complied with the contract) to complete on or after 27 February 1998. Of particular importance in reaching this conclusion are the words "without limiting any right of the vendor". 158 Rectification is the process by which the Court reforms an instrument in which the parties have ‘mistakenly’ recorded their agreement. Courts "rectify instruments purporting to have been made in pursuance of the terms of contracts.": McKenzie v Coulson (1869) LR 8 Eq 368 at 375 per James V-C. Courts do not rectify underlying agreements that are expressed in documentary form save as set out below: 159 In the present case it is necessary for the Plaintiff to prove that the underlying agreement between the parties was not accurately recorded in the contract instrument on the date that it was executed, namely, on 4 December1997. The question before the court, then, is whether, at the time the contract document was executed, the intention of the parties was accurately recorded in that contract or alternatively whether their intentions conformed with the words of the rectification contended for. 160 In an attempt to delineate the various categories of case, Dr Spry puts the position thus (Spry, I.C.F., “The Principles of Equitable Remedies”, 5th edition, (LBC Information Services, 1997), 611-2:
35 Interest for late completion
Without limiting any other right of the vendor, if completion of this contract takes place after the Completion date it is an essential term of this contract that, on completion, the purchaser must pay interest to the vendor calculated on the unpaid balance of the price at the rate of 8% per annum on a daily basis from but not including the Completion date and including the date on which this contract is completed. The purchaser need not pay interest for any period where the delay in completing is caused by the vendor. [PX5 13]
"The simplest cases in which a mistake arises are found where a provision that is intended to be included is inadvertently omitted or where there is an inadvertent inclusion of an unintended provision or where a provision is inadvertently mis-expressed. In all of these cases rectification may, where appropriate, be ordered.
…..
A more difficult case arises where the parties are aware of the precise terms of the relevant part of the document but misapprehend their effect. Here it appears to be necessary to distinguish between two positions. The first position occurs where the concurrent intention, that is, the intention that the document is desired to effectuate remains the dominant and governing intention. In this event it should not matter that the precise terms of the document have been seen by the parties, and rectification, where otherwise appropriate, should be ordered. So it has been said by Brightman J., "Furthermore, rectification is available not only in a case where particular words have been added, omitted or wrongly written as a result of careless copying or the like. It is also available where the words of the document were purposely used but it was mistakenly considered that they bore a different meaning from their correct meaning as a matter of true construction" : In re Butlin’s Settlement Trusts [1976] Ch.251 at 260 per Brightman J. The second position arises where the parties, whatever their previous intention may have been, have ceased to retain that intention as their governing intention and have formed instead an intention to be bound by the precise terms of the document in question, regardless of possible discrepancies between its provisions and prior or other intentions on their part. In this event rectification is not appropriate": Spry, Equitable Remedies 1997, p. 611-2
161 Were the Plaintiff’s contention correct, this case would only fall within Spry’s ‘more difficult’ category of cases. The conversations of 14 October1997, 14 November and 19 November 1997 and the admissions of Mr Hayes (T, 76.30-40), without more and in the absence of assertion otherwise, lead to the conclusion that the principals of the Plaintiff were aware that a term in the contract of 4 December nominated 27 February 1998 as the completion date. Furthermore, the letter of 14 November 1997 from Mr Carruthers to Mr Minter reveals the Defendant’s knowledge of that contract would state that it be completed on 27 February 1998. The Plaintiff’s case in rectification, then, rests at its highest on the argument that at the time the written contract was executed, the parties shared a common intention that the agreement would operate in a manner at odds with the express terms of the instrument purporting to express that agreement. 162 In Westland Savings Bank v Hancock [1987] 2 NZLR 21, Tipping J followed accepted authority to decide that, for a Court to rectify a written instrument, it must be established that the parties held a single corresponding intention on the point in question right up to the moment of execution of the instrument: at 26. His Honour, after considering the Australian position, considered that outward expression of that common intention is not necessary before rectification can be contemplated. Tipping J (at 30) decided that: 163 Tipping J quotes Street J in Australasian Performing Rights Association Limited v Austarama Television Pty Ltd [1972] 2 NSWLR 467 (approved by Menzies J in Hooker Town Developments Pty Ltd v Director of War Service Homes (1973) 47 ALJR 320, 323-324):
"… before rectification can be ordered the Court must be satisfied that the following points are established: [30]
(1) That, whether there is an antecedent agreement or not, the parties formed and continued to hold a single corresponding intention on the point in question.
(2) That such intention continued to exist in the minds of both or all parties right up to the moment of execution of the formal instrument of which rectification is sought.
(3) That while there need be no formal communication of the common intention by each party to the other or outward expression of accord, it must be objectively apparent from the words or actions of each party that each party held and continued to hold an intention on the point in question corresponding with the same intention held by each other party.
(4) That the document sought to be rectified does not reflect that matching intention but would do so if rectified in the manner requested": Westland Savings Bank v Hancock at.29-30 per Tipping J
164 The Plaintiff, on the strength of this authority, argues that since the doctrine of rectification requires no outward expression of the accord antecedent to the written agreement, rectification is appropriate in this case. The Plaintiff has, however failed to establish on the balance of probabilities nor to the level of "convincing proof" (see Joscelyne v Nissen [1970] 2 QB 86 at 98) that the common intention of the parties as at 4 December1997 was anything other than that recorded in the written contract executed on that date. In Westland Savings Bank v Hancock (supra), the evidence suggested that the parties shared a common intention even in the absence of outward expression:
"It seems rather that the true principle involves finding an identical corresponding contractual intention on each side, manifested by some act or conduct from which one can see that the contractual intention of each party met and satisfied that of the other. On such facts there may be seen to exist objectively a consensual relationship between the parties" : [1972] 2 NSWLR 467 at 473.
165 No similar factual scenario exists in the current case. To the contrary, it can be firmly stated that the vendor at no time "acted as if the document stood in the form into which it is sought to be rectified": compare Westland Savings Bank v Hancock at 31. 166 The Plaintiff’s case for rectification is not made out; issues of uncertainty do not arise.
"While there may not have been any formal communication by each to the other of such intention, the [Plaintiff] clearly demonstrated such intention by the terms of the loan offer and its actions subsequent to the signing of the mortgage. The [Defendants] demonstrated their identical intention by taking the loan offer to their solicitor and instructing him to proceed in terms of it": Westland Savings Bank v Hancock at.30
Question Two: The Notice to Complete
167 The Plaintiff seeks a declaration that the notice to complete issued on 27 February 1998 is not valid. The notice was issued in purported pursuance of Clause 15 and Special Condition 34 the contract of sale which I have earlier quoted. 168 Having decided that date for completion of the contract was 27 February 1998, it is not in dispute that the contract was not completed in accordance with clause 15. While it is disputed by the Plaintiff that the Defendant was free of relevant default when giving the notice and that the Defendant was able, ready and willing to proceed to completion, no argument is made as to the reasonableness of the time fixed by the notice. In the absence of any argument on behalf of the Plaintiff to that effect, I find that the date nominated by the notice to complete, being 16 March 1998 did provide the Plaintiff with reasonable time in which to complete the contract. Furthermore, the valid form of the notice is not in dispute. 169 The notice to complete is not, therefore, challenged except on the following grounds:
170 It is the Plaintiff’s case that there were, existing at the time that the contract was to be settled, encroachments onto adjoining lands. The encroachments alleged are a party wall, an external air conditioning unit and an awning extending over a public footpath. The encroachments were not, it is alleged, disclosed in the express terms of the contract. 171 The Plaintiff argues that the "non-disclosed encroachments" amounted to breaches of contract and disentitled the Defendant to issue a notice to complete under clause 15 of the contract. 172 It is the Defendant’s position that the mere fact there may be a possible defect in title does not mean there is a breach of contract disabling the Defendant from completion (T, 163.30). The Plaintiff’s case can only succeed, it is argued, if there is established a failure on the part of the vendor to answer requisitions properly issued by the purchaser. 173 The questions to be answered with respect to the notice to complete, then, are:
1. that the Defendant vendor was not free of relevant default when giving the notice;
2. that the Defendant vendor was not able ready and willing to proceed to completion at the time the notice was issued.
174 If the questions are both answered in the negative, the conclusion must be that the notice to complete was validly issued by the Defendant.
1. Was there any failure on the part of the Defendant to answer properly issued requisitions?
2. If the answer to the first question is "No", is there any other matter, such as a defect in title or non-compliance with the Local Government Act as would disqualify the Defendant from issuing a notice to complete?
That the vendor was in default: failure to answer requisitions
175 Regardless of whether failure to properly answer requisitions on the part of the vendor constitutes a breach of the contract for the sale of land, it is generally the case that a vendor cannot issue a notice to complete unless it has fulfilled its obligations with regard to any properly-issued requisitions: Neeta (Epping) Pty Limited v Phillips (1974) 131 CLR 286. 176 There were two sets of ‘requisitions’ issued by the purchaser. The first set was issued on 18 December1997. These requisitions were answered by the vendor on 14 January 1998. The second set of ‘requisitions’ was issued on 25 February 1998. The 25 February ‘requisitions’ were never answered by the vendor. The vendor Defendant, however, argues, firstly, that the 25 February ‘requisitions’ were made out of time according to the terms of the contract; and secondly, that they did not otherwise constitute valid requisitions according to the terms of the contract. I start with the first test.
Requisitions of 18 December1997
177 On 18 December1997 the Plaintiff’s solicitors sent a list of requisitions to the Defendant’s solicitors. The 18 December1997 requisitions were answered on 14 January 1998. The Plaintiff contends that the answers to the 18 December requisitions were not sufficient so as to discharge the vendor’s duty arising from the contract of sale. It is thus contended that the 18 December requisitions were not properly answered and that, therefore the Defendant was not entitled to issue the notice to complete. 178 The vendor’s duty to answer requisitions is summarised thus:
179 The limits mentioned by Stonham are as follows. Questions are "relevant" when they concern
"… the vendor, by settled conveyancing practice, is bound, within [some] limits…, to answer not only requisitions and objections to title but also all relevant questions put to him by the purchaser in respect of the subject property or the title thereto": Stonham, The Law of Vendor and Purchaser para 1009, at 507
180 Then there is the use to which the vendor’s representations in answer to requisitions may be put:
(a) the ability of the vendor to carry out its obligations under the contract;(b) matters which, having regard to the terms of the contract, must be dealt with on completion of the transaction;
(c) information as to the rights apart from matters of title, which the purchase may or will acquire and as to the obligations to which it may or will become subject, on becoming the owner of the property sold (including rights in respect of party walls);
(d) matters affecting the nature, quality, use or value of the property; or
(e) any other matters which might be a ground for equitable relief (for example, as a defence to a suit for specific performance): at para 110, p.507.
As to the nature of the answer that must be given by the vendor:
"… the vendor is only bound to answer such general inquiries as to his own knowledge or as to matters within his knowledge or from documents or records within his possession, or that of his servants or agents; and he is not bound to inquire elsewhere for the purposes of furnishing the purchaser with information. Where the vendor has no such knowledge, the proper answer to such an inquiry is that the vendor is not aware, and it may be appropriate, in some circumstances, to add that the purchaser ought to make further inquiries on his own behalf; but it is not appropriate to answer that the purchaser must rely upon his own inquiries where the vendor has some knowledge because the purchaser is entitled to an answer, within the limits already mentioned.": Stonham, The Law of Vendor and Purchaser Sydney: LBC 1964 ¶1011, p. 508
181 It is clear that a vendor has an obligation to answer requisitions properly issued to the extent of the vendor’s knowledge. With respect to the requisitions of 18 December1997, there is no dispute that they were properly to be called requisitions and were otherwise validly issued by the Plaintiff. I will deal with each of the contentious requisitions in turn in determining whether the Defendant vendor has discharged such duty. 182 Paragraph 11 of the 18 December1997 requisitions states:
"The vendor must answer even though the answer confers no rights under the contract upon the purchaser; but it must not be supposed, because an answer discloses something, which is or may be detrimental to the purchaser, by reason of exposing him to some obligation or claim, that the purchaser is necessarily entitled to compel the vendor to remove the detriment or to some other relief… He has no remedy unless the matter is something which relates to title , or some other matter for which the vendor is liable by the terms of the contract , or confers some right or remedy upon the purchaser in accordance with equitable principles relating to the enforcement of contracts for the sale of land and the adjustment of rights between the parties.": Stonham, “The Law of Vendor and Purchaser”, para 1011, p. 508-9 [my emphasis]
183 The Plaintiff contends that the "Survey" referred to in requisition 11(b) refers to any survey carried out over the subject land. It is not restricted, the Plaintiff says, to the survey referred to in 11(a). The Plaintiff argues, then that the answer given to requisition 11(b), being "noted", opens the door to any future survey revealing an encroachment upon the property to be considered part of the original requisition. It was put to the Plaintiff that the capital "S" in "Survey" as written in requisition 11(b) suggested that it referred to the same survey as was mentioned in requisition 11(a). The Plaintiff submitted that while the use of a capital "C" in "Contract" used in the requisition was employed in order to refer to the contract for the sale of the subject property, the use of a capital "S" in "Survey" was not employed to refer to any specific survey. That submission is internally inconsistent. 184 The use of capital letters in the phrase "Contract Survey" suggests to the reader that the requisition is referring to a specific survey, namely, the survey referred to in paragraph (a) of that requisition. Having answered "No" to paragraph (a), the Defendant need not answer paragraph (b) in a definitive manner. 185 The answer given to the requisition at clause 11 is, therefore, sufficient and does not constitute a breach of contract on the part of the Defendant. 186 Requisition 12(b) of the requisitions of 16 December1997 reads:
"11.(a) Is the Vendor in possession of a Survey Report in respect of the subject property, and, if so, is he prepared to hand it over at settlement?
(b) Subject to Contract Survey should result satisfactorily and show that the whole of the land is available to the Purchaser and that there is no encroachment by or upon the subject property." [PX5 45]
187 The answer given to this requisition was "No" [PX5 48]. While it is not made clear by the Plaintiff, it appears that the Plaintiff contends that an easement for support existed and was not disclosed "by the particulars of sale, the abstract of particulars of title or the replies to the above requisitions". The easement was not disclosed in the Environmental Planning and Assessment Act 1979 s149(2) certificate attached to the contract of sale. However, the existence of a registered easement for support was disclosed by the Defendant in the 14 January answers to the requisitions in the answer to clause 21 of the requisitions. The use of the word "above" in paragraph 12(b) does not dissuade me from the view that the easement was disclosed to the purchaser. 188 The requisition at clause 12(b) was, therefore, sufficiently answered. 189 Requisition 32 reads:
"Are there any building or other restrictions or any easement or other similar rights (including rights-of-way, drainage, light, air etc.) affecting or appurtenant to the property sold not disclosed by the particulars of sale, the abstract of particulars of title or the replies to the above requisitions ? If so, please give particulars. [PX5 45] [emphasis is mine]
190 The answer given to this requisition was "No" [PX5 49]. 191 The Plaintiff maintains that the party wall, the air conditioning unit and the awning were all physical defects of the subject property. It is argued, however, that the ‘defects’ complained of do not have any detrimental effect on the value or amenity of the property. 192 The question to ask, according to the terms of the requisition is not whether the contested encroachments constitute defects in title. Rather, it is whether they "detrimentally affect the value or amenity of the property". Physical defects in title, or other matters referred to in paragraph 32 are not the subject of the requisition unless they detrimentally affect the value or amenity of the property. 193 With respect to the party wall, it is clear from the survey documents that there are encroachments by the wall on either side of the boundary line. Any latent claim attaching to the subject property on the part of the adjoining land holder could be offset by a corresponding claim against the holder of that adjoining land balancing each other out. There thus can be no relevant affectation of the value or amenity of the property. 194 It is also clear that even were the party wall encroachment a ‘defect’ potentially within paragraph 32, it would have been readily curable after sale by means which refute any detrimental affectation to value or amenity. That is, in fact, what appears to have occurred. The third party purchasers of the property have since registered a plan showing the encroachment complained of and have, by virtue of s88BB of the Conveyancing Act 1919 (NSW), thus created an easement, curing any defect caused by the encroachment (Souter, affidavit 16 September 1999 para 20). The plan was registered on 22 April 1999. 195 The party wall, therefore, does not come within the words of requisition 32. 196 Similarly, the encroachment by the air conditioning unit could have been cured without detrimental affectation to value or amenity by removing the unit from the wall and placing it inside the building. As of 27 February this had not occurred. However, while the air conditioning unit may be capable of being described as an encroachment according to the Encroachment of Buildings Act, it cannot reasonably be said to detrimentally affect the value or amenity of the property. 197 With regard to the awning, it is necessary to have reference to the evidence of Mr Williams. I have dealt with the admissibility of Mr William’s evidence above. 198 It was given in evidence by Mr Williams that the council, at the time of completion would not have required the owner of the property to remove or otherwise alter the awning [Williams affidavit 22 September 1999 para 6]. The evidence of Mr Williams suggests that even though, at the time of sale, there may not have been any infringement of council policy arising from the awning, the policy that determined infringement could be changed by the council at any time [T, 161.30]. 199 Further to Mr William’s evidence, a certificate issued pursuant to s172 of the Local Government Act 1993 was issued on 4 May 1998. The document certifies that the Council will not take proceedings in relation to any encroachment by the building or part onto land vested in or under the control of the Council (such as the awning). 200 The point raised by the Plaintiff is that, while the Defendant has proved that after 4 May 1998 the awning could not properly be said to come within paragraph 32, nonetheless at any time until the issue of the s172 certificate, the awning remained a matter "which may detrimentally affect the value or amenity of the property". 201 The situation that we are faced with, then, is the following. The Defendant has answered "No" to a requisition while not having the requisite knowledge so to answer. That is, there has been no evidence to suggest that the Defendant inquired of the council their attitude to the awning before issuing the notice to complete. As it turns out, however, on the evidence, the Defendant’s answer has been vindicated by subsequent events. Without the evidence of Mr Williams, then, it is unlikely that "No" would have constituted a proper answer to the requisition. The evidence of Mr Williams, however, changes the matter. On the basis of Mr Williams’ opinion evidence, it can be said that it was, at all material times, the case that the awning did not constitute a matter "which may detrimentally affect the value or amenity of the property". Does the fact that it was possible that the situation could change, due to Council minute or ordinance, any time until 4 May 1998 make the answer "No" an insufficient one? 202 It was at least true to say that no notice pursuant to s124 of the Local Government Act 1993 had been issued by South Sydney Council requiring that the awning be altered or removed. Was it the duty of the vendor to alert the purchaser, then, that such a notice may be issued in the future? The use of the word "may" in paragraph 32 of the requisitions does make the requisition one of some breadth. But it is not rendered of such scope as to bring with its ambit speculative consequences of no demonstrated likelihood. The requisition could not validly require of the vendor in answer, to speculate as to what may, in the future affect the value of the property. It is conceivable that all manner of things could then come within the scope of the requisition at paragraph 32. I therefore find that the answer "no" to the requisition at paragraph 32 was sufficient and proper with respect to the awning. 203 Requisition 32 was, then, properly answered.
"32. Is/are the vendor/s aware of any matters which may detrimentally affect the value or amenity of the property or the purchaser’s use or enjoyment thereof including but without restriction, any notices from any person or government body or any proposals to build upon or carry out any works or conduct any activities upon any surrounding properties (including any formal development or building applications relating to such surrounding properties) or any other physical defects in the subject property? [my emphasis] [PX5 47]
The Submission Ruled Inadmissible
204 During final oral submissions, the court was referred to paragraph 21 of the requisitions of 18 December1997. The submission was objected to on the grounds that it was not revealed as a ground for complaint by the Summons, the opening submissions or subsequently in the trial until that point. This court ruled at that time that the final submission with respect to paragraph 21 was inadmissible. 205 In the Plaintiff’s Written Submissions in Reply, counsel for the Plaintiff seeks to re-agitate the issue. The Plaintiff cites in support of this application, “Halsbury’s Laws Of England” 3rd ed Vol 3 at 69:
206 The Plaintiff maintains that this supports the assertion that there is no legal basis to prevent evidence that was not specifically identified in an opening from being led and then raised in submissions. Further, the contention is made by the Plaintiff, that what cannot be referred to in submissions is a matter that has not been properly introduced into evidence. 207 The paragraph of Halsbury’s Laws cited by the Plaintiff does not help its case at this point. It is not material that the evidence necessary for the Plaintiff to prove its submission had been admitted as relevant to other points raised in the summons and the opening. It is in the interests of fairness and the orderly conduct of trials that the ruling made by the court during final submissions not be altered. The submission with regard to paragraph 21 of the requisitions of 18 December1997 is not admissible. 208 But were that ruling incorrect or otherwise, I am satisfied that paragraph 21 of the requisition of 18 December1997 provides no grounds for the Plaintiff to launch a successful argument. The requisition was answered correctly by the Defendant. Paragraph 21 reads (in part):
"The object of the opening address is to give the jury a general notion of what will be given in evidence. Counsel in opening states the facts of the case, the substance of the evidence he has to adduce and its effect on proving his case and remarks upon any point of law involved".
209 The answer provided by the Defendant was:
(b) Are there any party walls?
(c) If the answer to (b) is "Yes" specify what rights are held in respect of each party wall. [PX5 46]
210 The Defendant does not represent that the easement J198678 ran the entire length of the party wall. Even if admissible, then, the Plaintiffs’ submission based on paragraph 21 of the requisitions of 18 December1997 fails. 211 The answer provided for paragraph 21 was sufficient to discharge any obligation on the vendor with regard to that requisition. 212 The requisitions of 18 December1997 were, therefore, properly answered. They form no basis for disqualifying the Defendant from being able to issue a Notice to Complete on 27 February 1998.
"(b) Yes. See easement for support J198678." [PX5 48]
The Further Requisitions
213 The Plaintiff maintains that further requisitions were sent in February of 1998. The Plaintiff’s solicitors, in a fax dated 25 February 1998 made known to the Defendants their position; being that the property was subject to certain defects. That fax read (in part):
214 The Plaintiff asserts that the letter of 25 February 1998 constituted a requisition and that the Defendant had an obligation to answer or comply with it accordingly. No answer was ever issued by the Defendant. 215 The Defendant contends that the letter placed no obligation upon it to reply or to carry out any remedial action. The letter is said not to fall within the definition of a requisition for the purpose of the contract of sale and in any case that it is out of time. 216 Nature of requisitions 217 The first matter to deal with then, is whether the correspondence of 25 February constituted a requisition. 218 The Plaintiffs say that the letter of 25 February 1998 was a formal requisition according to the terms of clause 6 of the Conveyancing Regulations. The Defendant contends that the letter of 25 February 1998 was not a proper requisition and that it was under no obligation to respond to it. 219 While Clause 5 of the contract provides for certain time limits to be applied to different types of requisitions, it does not otherwise confine the right of the purchaser to make requisitions. I will, then, look to the general law of requisitions. Clause 6 of the Conveyancing (Sale of Land) Regulation 1995 requires the following term to be implied into contracts for the sale of land:
"We acknowledge your client’s refusal to consider our request for an extension of time to complete and in this regard are instructed to request that your client re-consider its position.
In this regard as advised by telephone our client has a reliable arrangement to fund this purchase which is dependent on the approval by Council of another property due to be given by Council on the 3 March 1998. Our client’s request in the spirit of commercial reality is based on our client accepting your client’s property with some significant defects :-
Firstly in relation to the condition the property has been left by the departing tenants; and
Secondly in relation to the several matters of non-compliance disclosed in the recent survey report obtained by our client "
220 A definition of "requisition" is provided in the contract of sale at clause 1 as:
"Objections and requisitions
Nothing in this contract or any other agreement prevents the purchaser, expressly or by implication, from making any objection requisition or claim that the purchaser would otherwise be entitled to make in respect of:
(a) any encroachment onto any adjoining land by any building or structure on the land , other than a dividing fence as defined in the Dividing Fences Act 1991; or
(b) any encroachment onto the land by any building or structure on any adjoining land , other than a dividing fence as defined in the Dividing Fences Act 1991; or
(c) any non-compliance with the Local Government Act 1993, or any regulation under that Act , in respect of any building or structure on the land,
unless the encroachment or non-compliance is disclosed and clearly described in this contract and the contract contains an express term precluding the purchaser from making such an objection, requisition or claim.": Schedule 2, Conveyancing (Sale of Land) Regulations 1995 (NSW) [my emphasis]
221 The contractual definition means that the term "requisition" should be understood to be wide in scope, encompassing pure ‘requisitions’ as well as "objections" and "questions". Helpfully, a claim is excluded from the definition. The broad contractual definition reflects standard conveyancing practice:
"an objection, question or requisition (but the term does not include a claim)"
222 A requisition on title is helpfully defined by Stonham as:
"The expression "requisitions on title" is often used rather loosely in conveyancing practice and, frequently, is intended to cover not only requisitions on title, strictly so called, but also matters of objection to title or conveyance and inquiries for information in relation to the property of the vendor": Stonham, “The Law of Vendor and Purchaser” para 1005.
223 An objection on title is defined as:
"… a demand by the purchaser, on the vendor, for something to be done in respect of some matter shown on the abstract of title, and arising out of some defect appearing therefrom or from the evidence of title shown in the abstract.": Stonham “The Law of Vendor and Purchaser” para 1006 p.505
224 The contractual definition of "requisition" encompasses both a "requisition" on title and an "objection" to title. 225 As already mentioned above (see paragraph 180), requisitions, properly called, can cover a wide range of subjects. Further requirements of a valid requisition are as follows (see Stonham para 1014ff): 226 Requisitions firstly should be specific: A requisition should not constitute a general interrogatory or "catch-all": Re Ford and Hill (1879) 10 Ch D 365 per James LJ at 369 and see Butt, “The Standard Contract for Sale of Land in New South Wales” para 5.15 at 266. 227 Requisitions secondly should not insinuate a failure on the part of the vendor to include a matter in the particulars of title which the vendor knows to be material to the title: Re Ford and Hill. While this requirement might, for example, go against a ‘requisition’ alleging an omission or misdescription capable of fulfilling the requirements of s183 of the Conveyancing Act 1919 (NSW), it does not prevent a purchaser from inquiring as to matters that do not appear in the particulars of title or from asserting that the title as particularised is deficient nor does it prevent requisitions concerning matters affecting the title discovered outside the particulars provided by the vendor with the contract of sale: Butt (supra) para 5.15 at 266 228 Requisitions thirdly should be clearly framed. A requisition ought to be framed so as to explain its materiality if otherwise the materiality of the requisition is not obvious. 229 Finally, requisitions must be made in time. Subject to the terms of the particular contract for sale of land, requisitions may be made at any reasonable time up until the time for completion. In the present case, the contract nominates the point from which time is to run as the execution of the contract for sale. 230 Requisitions (which are included in the salient definition of "requisition": see clause 1 of the contract) are of four broad types, as identified by Barwick CJ in Godfrey Constructions Pty Limited v Kanagra Park Pty Limited (1972) 128 CLR 529 at 536 (omitting footnotes):
"an objection to the title, as shown on the abstract or particulars of title, as compared with the title promised by the contract, as being defective in some particular; and objection to title ought to be accompanied by a demand, or requisition, for the remedying of the effect where it is remediable, or may point out what is required to complete the abstract or perfect the title.": Stonham “The Law of Vendor and Purchaser” para 1007 p.505-6
231 The distinction between different types of requisition becomes material when determining whether the requisitions or objection has been made in time according to the contract. I deal with that aspect below. 232 The requisition in dispute can be restated in the following terms:
"… it is possible to maintain the distinction between an objection to title and an objection to conveyancing in respect of land held under the Real Property Act . An objection to title involves and assertion that there is a defect in the vendor’s title to the estate in the land which he has sold. An objection or requisition as to conveyance is an objection or requirement as to the form of the memorandum of transfer as, for example, the absence of or the need for parties to join in the transfer. But solicitors are accustomed, it seems to me, to make both demands and inquiries which cannot be fitted into either of these categories. Some of these requisitions may relate to structures on the land or to physical features connected with it which may not accord with the contractual terms as, for example, the connexion of water or sewerage services through common facilities. These are, in my opinion, truly requisitions demanding something of or some action on the part of the vendor. Other "requisitions" are merely inquiries for information. Some of this information the purchaser might have been able to ascertain by his own endeavours: perhaps he really seeks the vendor’s admission of the facts. Then, it seems to me, that there are other so-called "requisitions" which are not more than reminders to the vendor of his obligations under the contract. Paragraphs 2 and 33 of the appellant’s requisition in this case, in my opinion, form a good example of this class of so-called "requisitions". The are not objections to title nor demands as to the form of conveyance, nor do they related to the physical condition of the land or the structure thereon. They do no more than remind the vendor of what is expected of him according to the terms of the contract as a performance of his obligations. The respondent’s answers to requisitions so treated them."
233 The requisition was contained in a letter of 25 February 1998. The overall effect of that letter was in terms of a compromise. The Plaintiff purchaser was offering to take the property with the alleged defects if the Defendant vendor would extend the time for completion of the contract. 234 I will deal with each point of the requisition separately. The question to be asked in each case is whether the purported requisition is such as to create in the vendor an obligation to answer the requisition or rectify the problem therein objected to. 235 The “objection” as to the state of the property cannot be said to be an objection going to title nor an objection going to conveyance. If it is truly a requisition, it is one in the nature of a reminder to the vendor of the vendor’s obligations under the contract. It certainly does not ask for an answer — save as to the compromise sought. 236 But in any event, there is evidence to show that the state of the property was generally agreed as between the parties in the sense they were aware of a vacating tenant (see paras 14 and 16 above). 237 Furthermore, Clause 10.1 of the contract reads:
The property has "some significant defects":
1. "the condition the property has been left by the departing tenants"; and
2. "several matters of non-compliance disclosed in the recent survey report obtained by our client"
238 Furthermore, Special Condition 30 reads:
10 Restrictions on the rights of purchaser
10.1 The purchase cannot make a claim or requisition … in respect of —
10.1.4 any change in the property due to fair wear and tear before completion;
239 These contractual provisions point to consequential agreement that the Plaintiff purchaser would take the property in the state in which it was left by the departing tenants of whose existence they were well aware from the outset. That allows the conclusion to be drawn that the first objection made is more in the nature of a reminder of what is claimed to be the vendor’s obligations under the contract than a valid requisition. But the vendor either had no obligation in this respect or had sufficiently discharged that obligation. 240 The first objection cannot be said to fall within the class of requisitions that can be said to be general inquiries. The objection seeks to oblige the vendor to improve the quality of the property where there was no such obligation arising otherwise under the contract or in the general law (for example, the vendor was not required to clean the property in order to allow for the transfer of the title described in the contract for sale). 241 The first objection, therefore, is not a valid requisition when regard is had to the terms of the contract. The Defendant was not under any obligation to reply or to engage in any positive action in respect of the first objection. 242 As to the second objection, there a reference is made to the accompanying survey report. That survey report, dated 16 February 1998 contained what purport to be two significant points relied upon by the Plaintiff as evidencing "non-compliance". I assume here that the ‘non-compliance’ referred to is in reference to some non-compliance with the contract. The Plaintiff maintains that the survey report discloses three otherwise undisclosed encroachments. The Plaintiff further contends that the undisclosed encroachments constituted defects in title that required to be corrected before the Defendant could issue a notice to complete. I will deal with each of the ‘encroachments’ in turn. 243 First, there is the matter of the party wall. Paragraph 3 survey report read:
30 Purchaser’s Acknowledgments
The purchaser agrees that:
30.4 it is purchasing the property in its present state of repair and condition and must not make any objection, requisition or claim for compensation concerning the state of repair or condition of or any latent or patent defect in quality in the property.
244 Part of the eastern wall, being a part approximately 12.3 metres in length was subject to an easement for support created by Transfer No. J198678 [Souter, affidavit 16 September 1999 para 3.1]. The remainder of the wall of approximately 18.3 metres in length was between 240mm wide and 355mm wide and stood over the eastern boundary of the land [Souter affidavit 6 September 1999 para 3.2]. 245 The Defendant argues that a proper reading of paragraph 3 reveals no encroachment and, therefore, no non-compliance with the contract is identified. 246 The first point is that the encroachment of the party wall was subject to an easement for a portion of its length. It was only the original wall, making up some 60% of the length of the party wall that encroached upon the property in question. That does not negate the validity of any requisition relating thereto. 247 The second matter relates to the way in which the boundary and the alleged encroachment are measured. The party wall in question was constructed some time before September 1898. The surveyor gave evidence to the following effect:
3. Part of the eastern boundary of the land passes through a 355mm wide brick party wall and a 240 mm wide brick party wall. This party wall is common with the adjacent shop, No. 154 Parramatta Road, is also shown on Lot 1 of Deposited Plan 538241.
248 Later, however, Mr Souter said the following:
Q. Indeed, can I suggest to you that it is a notorious fact that party walls constructed in the last century are invariably not precisely on the boundary line?
A Quite often the boundary passes through the centre of the party walls. The walls are - actually become the monument. We have in surveying - it is the monument over the measurement because measurements have got more accurate in recent times. It does not make any difference if it is twenty feet between two party walls or ten feet, the party walls are still the boundary as shown on the original plan. [T, 130:50]
249 While this evidence does suggest that it may have been in the knowledge of the Plaintiff before the signing of the contract that the party wall was an encroachment , it does not suggest that the contract disclosed the encroachment or that it was the subject of an agreement between the parties. 250 Thirdly, the Defendant maintains that there is nothing in the survey that identifies an encroachment of any kind by the party wall. The survey report, including the attached sketch, the Defendant contends, merely identifies the characteristics of the party wall and does not expressly mention encroachment. It says, therefore, that the survey does not indicate any defect in the title of the property in relation to the party wall. 251 The survey report refers to the party wall in paragraphs two and three of that report:
Q. Is the upshot of this, Mr Souter, is that part of the wall which is not the subject of the easement had been constructed not precisely along the boundary, that is, the eastern boundary?
A. It was not constructed along it, no.
Q. Again, I suggest that it was quite common for party walls constructed in the 1800’s not to have been constructed precisely along the boundary, in your experience?
A. I don’t know if it is that common. Quite often the system of land title back then was old system and when a primary building was done the land was brought under Torrens title. The boundaries were moved to be along the centre of the walls with easements for support on either side.
Q. In your own experience, it is not uncommon for party walls constructed in the 1800’s not to have been done so precisely along the subject boundary?
A. Yes, that did happen, yeah.[T, 131.45]
252 The question is, then, whether the ‘requisition’ was clear enough in its terms so as to be valid. 253 The report was accompanied by a survey sketch. The survey sketch had marked upon it "party wall" and "easement" for the appropriate parts of the property. The survey sketch does not have marked upon the word "encroachment" to indicate the defect complained of. On its own, the survey sketch cannot be said to reveal the alleged encroachment. 254 An important matter going to this question is that the requisition is in the form of a demand (as opposed to a requisition at common law or a general inquiry). It is not that the Plaintiff purchaser is asking the Defendant vendor to disclose information, such as the existence of encroachments by the party wall or otherwise. Rather, the Plaintiff seeks to have the survey and report construed as a demand on title. The demand must be clear enough to have enabled the Defendant vendor to identify the matter complained of to an extent that the vendor could take steps to rectify the contended defect. 255 The survey report does not indicate the extent of the alleged encroachment and, as stated above, the survey sketch was not sufficient to disclose the extent or nature of the encroachment. The encroachment is not sufficiently disclosed by the letter of 25 February, the survey report or the accompanying survey sketch to amount to a valid demand on title. 256 I conclude there is no valid requisition with respect to the party wall. 257 The survey report then referred to the awning and the air-conditioning unit. 258 The awnings were referred to in the surveyors report of 16 February 1998 at point 4 in the following terms:
"2. Part of the eastern wall of the building stands over the eastern boundary of the land by up to 205mm. An Easement for Support for this part of the wall has been created by Transfer No. J198678 and as shown on DP217155.
3. Part of the eastern boundary of the land passes though a 355 mm wide brick party wall and a 240mm wide brick party wall. The party wall is common with the adjacent shop, No. 154 Parramatta Road, is also shown on Lot 1 of Deposited Plan 538241.
…
Apart from fencing irregularities or as stated or shown on the sketch overleaf, there are no other visible encroachments by or upon the said land". [PX5 52]
259 The Defendant claims never to have had a requisition in relation to awnings on the building. In the alternative the Defendant contends that approval was given by the Council in respect of the building, including the awnings on 4 May 1998 and that, in any case, at any time before the notice to complete, the awnings did not constitute a defect in title. 260 The questions before me, then, are firstly whether, in its terms, the letter and survey report amounted to a requisition with respect to the awning and secondly whether the encroachment, in the case of the awning, amounted to a defect in title to which the Defendant vendor could attend. 261 Dealing with the first question, the words of the survey report are clear enough to amount to a demand on title in respect of the awning. The awning was not "disclosed and clearly described" in the contract nor did the contract contain "an express term precluding the purchaser from making" the objection: Conveyancing (Sale of Land) Regulation 1995, Schedule 2 (see cl. 6). 262 As to the second question, a Building Certificate was issued by the Council pursuant to the Local Government Act 1993 dated 4 May 1998. Relevantly, the certificate reads:
"4. A street awning overhangs Parramatta Road and Mallett Street. This awning is behind the 3.66 metre kerb line of both streets."
263 The Plaintiff’s response is that the relevant date is not 4 May 1998 but 27 February 1998. The survey prepared on behalf of the Plaintiff and served upon the Defendant’s solicitors before 27 February 1998 clearly showed the encroachments the subject of the requisition. 264 It is evident that many, if not, the majority of properties along Parramatta Road in the vicinity of the property in question have awnings of the type present on the building. It would be highly unlikely, therefore, that Council approval would not have been either in de facto existence at the time of settlement or that the Council would not have approved the awning upon application being made for it so to do. The Defendants rely on evidence of Garry Raymond Williams, an employee of South Sydney City Council to assert that the awning was, even before 4 May 1998, in compliance with the general policy of the Council and that it would not need to be altered or removed to comply with the Council regulations (see Williams affidavit 22 September 1999 paras 4-7). 265 While, as discussed above (see paragraph 196), the awning did not constitute a matter detrimental to the value of the property, it cannot be similarly said that the awning did not constitute an encroachment not disclosed in the contract. As an encroachment not disclosed in the contract, the awning amounted to a defect in title and could be the subject of a valid demand on title. In Svanosio v McNamara (1956) 96 CLR 186, the High Court stated that:
The Council certifies that in relation to the building or part identified below the Council:-
a) by virtue of anything existing or occurring before the date of issue in this certificate; or
…
must not -
…
d) take proceedings for an order or injunction requiring the demolition, alteration, addition or rebuilding of or to the building or part; or
e) take proceedings in relation to any encroachment by the building or part onto land vested in or under the control of the Council.
266 This proposition is supported by Hamilton J in Suburban Constructions Pty Limited v Mancan Pty Limited (1997) 8 BPR 15,529 (NSWSC, 18 April 1997). In that case he found that if the description of the property in the contract extends to a building on the premises, then it should be taken to be intended that the purchaser should get the whole of the building. The principle emerging from that case is that if what is described in the contract for the sale of the property encroaches onto adjoining lands then there is a defect in title. In the present case the contract discloses the improvements to the property as "Commercial premises". Applying the principle, then, if any part of the Commercial premises, including, for present purposes, the awning, encroaches on neighbouring lands, there is a defect in title. 267 With respect to the air-conditioning unit, the air-conditioning unit is disclosed in the contract as an inclusion [PX5 2]. The evidence also suggests that there was an agreement to leave the air-conditioning unit in place. Since the survey report and letter is not in the nature of a request and no demand can validly be made to ‘rectify’ something that has already been disclosed in the contract and does not otherwise constitute a defect in title, the ‘requisition’ with regard to the air-conditioning unit is not a valid one. 268 The "requisitions" of 25 February 1998 are, save as with respect to the awning, not proper requisitions and have no bearing on the Defendant’s ability to issue a notice to complete. With regard to the awning, it is necessary to determine whether the requisitions were made in time according to the contract. Made outside the time limits prescribed by the contract, a requisition cannot have any effect.
"If the contract states that certain premises are erected on the land sold, that is a representation that the vendor will make title to land on which those premises are erected… If the premises are not erected wholly on the land sold the vendor will fail to fulfil the promise or in other words will fail to make a good title to the whole of the land described in the contract. … When the purchaser discovers that part of the building is not on the land he should object to the title. Such a misdescription is an objection to the title": at 205 per McTiernan, Williams & Webb JJ.
Time of requisition
269 Clause 5 of the contract states:
270 The first matter, then, is to determine the nature of valid requisitions. The requisition, being a demand that the Defendant rectify the unauthorised encroachment amounted to by the awning, is a demand on title (see paragraph 263). The requisition then arises out of the contract and is in relation to title. The relevant time limit to apply is the limit in clause 5.1 of 21 days. 271 The 21 day time limit expired on 25 December1997. This was raised by the Defendant’s solicitors in a letter to the Plaintiff’s solicitors of 17 March 1998, which contained the following:
5 Requisitions
If the purchaser is or become entitled to make a requisition, the purchaser can make it only by serving it -
5.1 if it arises out of this contract (apart from clause 13) or it is a general question about the property or the title - within 21 days after the date of this contract;
5.2 if it arises out of anything served by the vendor - within 21 days after the later of the date of this contract and that service ; and
5.3 in any other case - within a reasonable time [PX5 5]
272 The rules governing the time for making of requisitions, including clause 5 of the Standard Contract for Sale of Land (the terms of which are employed in this case), are subject to a judicial "gloss": see Butt, The Standard Contract for Sale of Land para 5.2 at 257. Where the gloss applies, the purchase may raise objections or requisitions at any time up until completion. Butt identifies four types of objections or requisitions to which the gloss may be applied (see Butt, “The Standard Contract for the Sale of Land in New South Wales” at para 5.26 at 272):
1. Survey matters - The time for raising requisitions has long since expired. In any event, enquires with South Sydney City Council will reveal that consent to the awning over the footpath has been granted and that as late as 1995 the Council’s consent to signage on the awning was also granted. Any encroachment by the air conditioning unit is not a matter which would entitle your client to withhold completion. The air conditioner is in any event removable without affecting its operability or otherwise.
273 The requisition here does not fall within the first three categories. With respect to the fourth, that is, objections or requisitions arising aliunde, it is unlikely that the Defendant can enjoy the benefit of the gloss. 274 It is settled law that, in the case of an assignment of Old System title, requisitions or objections arising out of matters aliunde, that is matters arising from inquiries elsewhere and not shown on the abstract of title, are not subject to contractual time limits of the type in clause 5.1 and 5.2: see Stonham, “The Law of Vendor and Purchaser” para 1025 at 515; Butt, “The Standard Contract for the Sale of Land in New South Wales” para 5.36 at 280-1. With regard to Old System title then:
(1) objections or requisitions as to conveyance;
(2) reminders to the vendor of the vendor’s obligations under the contract;
(3) objections going to the root of the title; and
(4) objections or requisitions arising "aliunde" (from elsewhere).
275 The position with respect to Torrens title, as is relevant in the present case, is different. There is no settled position in Australian law with respect to the gloss in these circumstances: Butt (supra). I do not, however, need to decide the issue here. 276 Where the gloss applies, the rule is that the requisition or demand must be made within a reasonable time of the purchaser becoming aware of the alleged defect. 277 The reasonableness of the time for requisition depends, in part, upon the conclusion reached as to the agreed completion date. It seems unavoidable that if one concludes that the completion date was agreed as 27 February 1998 then the issuing of a requisition some two days prior to that date could not be said to have occurred within a ‘reasonable time’ from the exchange of contracts. 278 As I have decided above, the completion date of the contract was 27 February 1998. The demand in respect of the awning was not, therefore served within a reasonable time of the exchange of contracts. 279 If I am incorrect in saying that the requisition can only fall within the terms of clause 5.1, then the only other appropriate time limit is that provided for in clause 5.3. Since I have concluded that the requisition would not have been made within a reasonable time if the Plaintiff had been relying on the aliunde rule, I must also conclude that the requisition was not made within a reasonable time according to clause 5.3. 280 The terms of Schedule 2 of the Conveyancing (Sale of Land) Regulations 1995 has no effect on the time in which requisitions can be made.
"… notwithstanding the expiration of the time fixed by such a clause (such as the common clause) for making requisitions, it is still open to the purchaser to show, if he can, from searches or inquiries or by obtaining information from any other quarters, that there are defects in the title, not disclosed in the abstract or particulars of title, whether arising before, during or subsequent to the period in which the vendor is bound to prove his title; and a defect so discovered, at any time before completion, may be relied on: see Re Lemon & Davies Contract (1919) VLR 481": Stonham, para 1025 at 515
Conclusion
281 There are no validly issued requisitions that have not been sufficiently and properly answered by the Defendant vendor. The Defendant is not in default of the contract and is not, on that basis, disqualified from issuing a notice to complete.
That the defendant vendor was not able, ready and willing to proceed to completion: defects in title
282 While there were no valid requisitions issued that remained unanswered by the Defendant, that is not to say that there were no defects in title at the time the notice to complete was issued. For example, the awning, which as I have already concluded, amounted to a defect in title and remained so as at 27 February 1998. Similarly, although it cannot be said that a valid requisition was issued with respect to the encroaching party wall, that encroachment did still amount to a defect in title (although an extremely minor one). The air-conditioning unit, on the other hand, could not be said to amount to a defect in title (see above). 283 The argument is put by the Plaintiff that the non-disclosed encroachments constitute defects in title and that the defects in title constitute breaches of the contract for the sale of the subject property. The Plaintiff claims that the vendor was not "willing and ready to complete the contract" [PX5 56] for sale as the Defendant so claimed in the notice to complete dated 27 February 1998. It is well established that a notice to complete can only be valid if the party issuing the notice is ready, willing and able to proceed to completion at the time he give notice to the other party to complete: Abraham v Mallon (1975) 1 BPR 9157 at 9160 per Holland J; see Re Barr’s Contract [1956] Ch 551 at 556. 284 In the English case of Johns v Deacan (English CA, , 23 January 1985, unreported) discussed in Clowes Developments (UK) Limited v Mulchinock [1998] 1 WLR 42 at 49-50), the vendor had issued a notice to complete in circumstances where there was a misdescription contained in the contract for sale. The particulars included reference to a stable block. After exchange of contracts the parties discovered that the stable block had been removed and could not be replaced. The contract for sale contained a clause similar in terms to clause 6 of the present contract that a misdescription should not annul the sale but should entitle the purchaser to compensation. Browne-Wilkinson LJ said in that case:
285 The decision of Browne-Wilkinson LJ was interpreted by Carnwath J as follows:
"A valid notice to complete could not be served… since the vendor at that stage was not able and willing to complete. He could not complete on the terms that he was to receive the full £100,000, because, by reason of the misdescription provisions, that no longer was the full purchase price payable. The purchase price payable was £100,000 less the compensation. Unless and until that reduction in the purchase price had been agreed, he could neither make title to the whole of the property contract to be sold not make title to the lesser amount, being the property less the stable block. Accordingly, he was in no position to say at that stage that he was able and willing to complete … the contract": cited in Clowes Development Limited v Mulchinock at 50
286 The Australian authorities point out that for the principles in the paragraphs quoted to apply, the claim for compensation must have been made before the notice to complete was issued. In Abraham v Mallon (1975) 1 BPR 9157 the purchasers claimed that the vendors were not entitled to issue a notice to complete since, inter alia, at the time of the notice, the vendors were not "able" to complete in that they did not have title to all subject matter of the sale as two outbuildings described in the contract did not stand wholly upon the land to which the vendors did have title. The minor encroachments were identified by a survey report made through the purchaser’s efforts. In circumstances similar, though not identical, to the present case, Holland J applied the principles summarised in the judgment of Menzies J in Travinto Nominees Pty Ltd v Vlattas (1973) 129 CLR 1 at 27-28:
"The language of that judgment could perhaps be taken as implying that, whenever there is a potential compensation claim, there cannot be a valid notice to complete until that compensation has been settled. I doubt, however, if it was intended to express the matter so widely. On the facts of that case, it was not simply a matter of misdescription of the subject matter of the sale. The vendor was unable to convey that which he had contracted to sell, which included the stable block. Thus, if one asks the question… "Could the vendors carry out their contract?" the answer was "No, they could not.": Clowes Development Limited v Mulchinock at 50
287 In Abraham v Mallon, Holland J concluded that so long as the purchaser had not made a claim for compensation, the vendor was entitled to give a notice to complete. This conclusion was reached by first reasoning that, on the basis of the equitable rule, the vendor would have been entitled to compel completion if he offered compensation for the insubstantial defect in title. Secondly, a clause in the following terms (similar to the terms of clause 6 in the present contract) was included in the contract:
"At common law, any difference, however trivial, between the land described in the contract and the land produced constituted a defect which entitled the purchaser to rescind.
"Where there was only a slight difference, the Courts of Equity began to interfere and introduced the principle of compensation for deficiency: see Erskin L.C. in Halsey v Grant (1806) 13 Ves. Jun. 73 at pp. 76-79. Unless the [28] deficiency was so substantial as to give the purchaser something entirely different from what he had contracted, equity would order specific performance on giving compensation for the deficiency.
"Also to avoid the harsh effect of the common law, it became the practice to insert in contracts a clause stating that a difference from the description of the subject matter would not annul the sale. These clauses were of two types: those which allowed compensation to the purchaser for a deficiency, and those which did not. The right to compensation under a clause in the contract was independent of the right to compensation in a claim for specific performance.
"However, where there was a clause in the contract preventing the sale from being annulled even if the purchaser had the right to compensation for a misdescription, equity would still permit the purchaser to rescind if the misdescription was a substantial one: see Flight v Booth (1834) 1 Bing NC 370 at 377; 131 ER 1160 at 1162-3; Jacobs v Revell [1900] 2 Ch 858; Lee v Rayson [1917] 1 Ch 613."
288 The operation of this clause allowed the notice to complete to be issued without offering compensation where such compensation had not already been claimed. Holland J wrote at 9167:
"No error or misdescription of the property shall annul the sale but compensation if demanded in writing before completion but not otherwise shall be made or given as the case may require,…"
289 Similarly, I find in the present case, that the encroachments amounted to by the party wall and the awning were not substantial defects. They were only those insubstantial defects of the type where the equitable rule would still allow specific performance upon the proffering of compensation. 290 As to the party wall, a document that does identify an encroachment is DP 1001633 [PX7 last page]. DP 1001633 shows that the relevant portion of the wall is 18.3 meters in length. (The balance of the wall is subject to cross-easements for support as discussed above). Of the 18.3m, a length of 6.13 m has a width of 240mm. Of the 240mm, 130mm is located on the subject property and 110mm is located on the adjoining property. This amounts to an encroachment by this part of the wall on the subject property of 10mm. 291 DP 1001633 discloses that the remaining 12.17m of the party wall is 355mm in width. According to the plan, 135mm is located on the subject property and 220mm is located on the adjoining property. Consequently, this equates to an encroachment on the adjoining property of 43mm. The encroachment of the party wall is, then, on any view an insubstantial defect in title. This is supported by the fact that the creation of cross-easements for the wall could be achieved at very little cost in relation to the value of the property (see Abraham v Mallon at 9163). 292 With regards to the awning, the encroachment is an insubstantial defect in title. The size of the awning here is not conclusive. The prevalence of such awnings on buildings in the vicinity of the subject property, the evidence of Mr Williams and the subsequent s.174 certificate obtained by the Defendant vendor indicate that the defect constituted by the awning was insubstantial. 293 In the words of Kearney J in Mayer v Vitale (1981) 2 BPR 9162 at 9168 it "could not be said that the Plaintiffs are not getting substantially what they bargained for and it could not be said that the property with this minor encroachment [by] it is different from the property the subject of the contract so as to justify rescission of the contract on the basis of a substantial defect in title". There is no substantial defect in title arising from or constituting an error or misdescription or otherwise that would invalidate the notice to complete. 294 By adopting reasoning similar to that of Holland J, I also find that the terms of the contract made the proffering of compensation by the vendor without demand so to do unnecessary. Clause 6 in the present contract for sale is in the following terms:
"In my opinion, the vendors are entitled to rely upon the fact that cl 5 says that the error or misdescription is not to annul the sale and upon the words" but compensation if demanded in writing before completion but not otherwise shall be made or given", to say that until compensation is demanded by the purchasers, the purchasers remain bound to complete without it and to accept on completion a conveyance of such title as the vendor has. Full force, must, I think, be given to the words which I have just quoted. And this is given by saying that the purchasers remain bound to complete notwithstanding an error or misdescription for which compensation is payable under cl 5 without such compensation so long as they fail to demand it. If this were not the case, a vendor in a case to which cl 5 applied would be blocked from requiring completion in accordance with the terms of the contract as long as a purchaser, aware of a defect for which compensation could be demanded, chose to remain silent. In my opinion, as the purchasers remained silent throughout the relevant period in the present case, the vendors were entitled at the time of giving their notice to complete and up to the date of rescission to require the purchasers to complete the contract by accepting a conveyance of the title which the vendors had and paying for it the full amount of the purchase money without deduction by way of compensation because to do so was fully in accordance with the requirements of the contract and, accordingly, it could not validly be said that because at the relevant times they were not able to complete in accordance with those requirements the vendors were disabled from giving a notice to complete and rescinding for non-compliance with it."
295 Since there was no demand for compensation by the Plaintiff purchasers during the time of the notice to complete or before that time and as it cannot be said that the demands on title purported to be made by the letter of 25 February 1998 constituted demands for compensation for the encroachments therein allegedly described, I find, in a way similar to Holland J in Abraham v Mallon (also see Mayer v Vitale (1981) 2 BPR 9162 at 9169), that the vendor was ready, willing and able to complete the contract at the time the notice to complete was issued.
"6 Error or misdescription
The purchaser can (but only before completion) claim compensation for an error or misdescription in this contract (as to the property, the title or anything else and whether substantial or not".
Conclusion
296 The notice to complete issued by the Defendant vendor on 27 February 1998 is, therefore, valid.
Question Three: Termination
297 Having concluded that the notice to complete was validly issued by the Defendant, the matter remaining for resolution is whether the contract was validly terminated by the Defendant vendor. 298 The notice to complete issued by the Defendant on 27 February 1998 nominated 16 March 1998 as the date for settlement. Settlement did not take place on that day. On 17 March 1998, the Defendant’s solicitors sent a letter to the Plaintiff’s solicitors attaching a notice of termination. 299 The Plaintiff makes its argument in the following terms:
300 In Neeta (Epping) Pty Limited v Phillips (supra), the leading judges decided that:
1. A "completion date is not the date that a contract must be concluded by, unless time is an essential term of the contract" [Plaintiff’s written submissions in reply para 11.1.2 at 9]
2. Time was not an essential term of the contract since Clause 35 of the contract allowed for interest to accrue on the amount payable under the contract if settlement did not occur at 27 February 1998 [Plaintiff’s written submissions in reply para 11.1.3 at 9]
301 As discussed above, those conditions for the issuing of a notice to complete have been met. Paragraph 5 and 6 of the notice to complete issued by the Defendant read:
"In cases where the contract contains a stipulation as to time but that stipulation is not an essential term then before a notice can be given fixing a time of performance, not only must one party be in breach or guilty of unreasonable delay, but also the party giving the notice must himself be free of default by way of breach or antecedent relevant delay. Only then may a notice be given fixing a day a reasonable time ahead of performance and making that time of the essence of the contract": at p 299 per Barwick CJ and Jacobs J.
302 The effect of the notice to complete is then to make the time nominated in the notice "of the essence of the contract". In reply to the Plaintiff’s first submission, it is sufficient to point out that the breach of the time stipulation in the contract, which occurred when the contract was not completed by 27 February 1998, does not itself need to be construed as a breach of an essential term of the contract. Breach of the Completion Date as contained in the contract will not, alone, give rise to a right in the vendor to rescind the contract. Breach of the time for completion in the contract is enough, however, to enable the vendor, while the vendor is not in default and is ready, willing and able to proceed towards completion, to issue a notice to complete. Once the notice to complete is issued, time does become an essential aspect of the contract. 303 This accords with the position in equity as described by Glass JA in Ciavarella v Balmer [1983] 2 NSWLR 439 at 450, in the New South Wales Court of Appeal:
5. The vendor requires the purchaser to complete the contract by Monday, 16 March 1998 and in this respect the vendor makes time of the essence of the contract both at law and in equity.
6. If the purchaser does not comply strictly with this notice the vendor will be entitled to exercise all of the vendor’s rights under the contract and the general law in respect of a breach of an essential condition of the contract. [PX5 56]
304 Note also that pursuant to s13 of the Conveyancing Act 1919, stipulations as to time which would not have been of the essence in equity are not of the essence at common law. At the High Court, Ciavarella v Balmer (1983) 153 CLR 438, the Court affirmed the findings of Glass JA:
"…the promise to complete is essential and that which equity treats as not of the essence is the failure to perform it strictly in time. A non-performance before any notice is given amounts to no more than a slight breach sounding only in damages. Non-compliance with a valid notice to complete, however, is a serious breach and liable to be treated as fundamental. I would prefer to describe the ground of rescission in this manner rather than as a renunciation since the recipient who unsuccessfully disputes the reasonableness of the time limited by the notice will be exposed to rescission no matter how anxious he may be to maintain the contract."
305 Deane J in Braidotti v Queensland City Properties Limited (1991) 172 CLR 293 at 307 described the default giving rise to a right in the vendor to rescind as a failure to participate, on behalf of the purchaser, in the completion process:
"We agree with the view expressed by Glass JA in the Court of Appeal that the effect of a valid notice to complete, once the purchaser fails to comply, is to establish the existence of an essential breach, the breach which preceded the giving of the notice being non-essential. The function of the notice is to fix a reasonable time for completion so that non-compliance with its requirements evidences a fundamental breach or renunciation. The effect of the notice is not to convert a non-essential term into an essential term. In this respect what is important for present purposes is that the notice requires completion of the contract, notwithstanding that the object of the party issuing the notice is to place himself in a position in which he can terminate the contract in the event of non-compliance with the requirements of the notice, should he choose so to do… The point is that it is the failure of the party in breach to complete in accordance with the innocent party’s insistence on completion as expressed in his valid notice to complete that brings into existence the innocent party’s right to terminate the contract.": at 448
306 The time stipulation that must be complied with is that nominated in the notice to complete. No argument was put to this Court that the time stipulation in the notice to complete was unreasonable. 307 In respect of the second point of argument raised by the Plaintiff, Special Condition 35 of the contract states:
"A general notice to complete a contract for sale of land requires the participation of the recipient of the notice in the process of completion to the extent necessary on the part of the recipient to complete or execute the contract. In a case such as the present where the recipient of the notice to complete simply refuses or fails to participate in the essential steps of the completion process, rescission consequent upon that refusal or failure is not based upon default in the performance of a particular term of the contract. Its basis is that the refusal or failure of the other party to participate in the essential steps of the completion process constitutes a repudiation or renunciation by that party of the contract as a whole."
308 This paragraph is not to be construed as an agreement by the parties not to be bound to complete on the date of settlement nominated in any notice to complete. Rather, Special Condition 35 operates in any situation where the completion occurred after the Completion date of 27 February 1998. The clause cannot have any effect on the vendor’s competence to issue a notice of termination arising out of a breach of an essential term of the contract or notices validly issued under the contract by the purchaser. 309 Given that the notice to complete was validly issued by the Defendant and was operative to make time the essence of the contract, the validity of the termination by the Defendant for non-compliance with the notice to complete on behalf of the Plaintiff cannot be resisted.
"35 Interest for late completion
Without limiting any other right of the vendor, if completion of this contract takes place after the Completion date it is in an essential term of this contract, on completion, the purchaser must pay interest to the vendor calculated on the unpaid balance of the price at the rate of 8% per annum on a daily basis from but not including the Completion date and including the date on which this contract is completed. The purchaser need not pay interest for any period where the delay in completing is caused by the vendor." [PX5 13]
Conclusion
310 The contract was validly terminated by the Defendant.
Question Four: Damages
311 As I have concluded that the contract was validly terminated by the Defendant, it follows that the Plaintiff cannot be entitled to any damages or compensation arising from that termination where is was not unconscionable of the Defendant so to terminate the contract.
Question Five: Retention of the Deposit
312 While the Plaintiff is not entitled to any damages arising out of any act or omission of the Defendant in relation to the termination of the contract, there remains the question of whether the Plaintiff is entitled to the return of deposit monies paid to the Defendant’s agent. 313 A deposit of $134,750 was paid to the Defendant’s agent by the Plaintiff on 4 December 1997. 314 The Plaintiff bases its claim on sub-sections (1), (2) and (2a) of s55 of the Conveyancing Act 1919 (NSW). 315 Section 55 of the Conveyancing Act 1919 reads, relevantly:
316 The rationale of s55(1) was explained by Long Innes J in Bennett v Stuart (1927) 27 SR(NSW) 317 at 327:
"Right of purchaser to recover deposit etc
55 (1) In every case where specific performance of a contract would not be enforced against the purchaser by the court by reason of a defect in the vendor’s title, but the purchaser is not entitled to rescind the contract, the purchaser shall nevertheless be entitled to recover his deposit and any instalments of purchase money he has paid, and to be relieved from all liability under the contract whether at law or in equity, unless the contract discloses such defect and contains a stipulation precluding the purchaser from objecting thereto.
(2) If such undisclosed defect is one which is known or ought to have been known to the vendor at the date of the contract the purchaser shall in addition be entitled to recover his expense of investigating the title.
(2A) In every case where the court refuses to grant specific performance of a contract, or in any proceeding for the return of a deposit, the court may, if it thinks fit, order the repayment of any deposit with or without interest thereon.
(3) On the application of the purchaser the court may order payment under this section and declare and enforce a lien in respect thereof on the property the subject of the contract"
I will deal with each subsection in turn. I will then deal with the effect of clause 9 of the contract.
Section 55(1)
317 Thus, for s55(1) to operate so as to require the vendor to return the deposit paid by the purchaser, the Court must be satisfied that:
"As I understand it, the object of the section was to enable a purchaser to recover his deposit in a case in which, though he had contracted to accept such title as the vendor had, or had otherwise precluded himself from relying upon a defect in the vendor’s title, the Court of Equity would not "by reason of a defect in the vendor’s title" have enforced specific performance of the contract against the purchaser. It consequently has no application to a case where the Court finds in fact that there is no defect in the vendor’s title; nor, as it seems to me, to a case in which the Court of Equity would refuse to decree specific performance because the title was too doubtful".
318 If the fourth condition is not met, then although s55(1) has no operation, the purchaser will normally be able to recover the deposit monies in an action against the vendor for breach of contract.
1. There is a defect in title; and2. the contract does not disclose the defect or [inclusive "or"] the contract does not contain a stipulation precluding the purchaser from objecting to the defect in title; and
3. the Court would not enforce specific performance of the contract; and
4. the purchaser is not entitled to rescind the contract (e.g. through fundamental breach on the part of the vendor)
Defects in Title
319 The Plaintiff alleges three defects in title, namely, the air conditioning unit, the awning and the party wall as identified in the surveyors report of 16 February 1998. 320 As discussed above (see paragraph 280), the awning and the encroaching party wall did constitute defects in title.
Disclosure of Defect
321 The Defendant claims that the Plaintiff purchaser was aware of the presence of the air conditioning unit at all material times and that, therefore, the contract did not need to disclose its existence. As discussed above, the presence of the air-conditioning unit cannot be said to have given rise to a defect in title. 322 With respect to the awning and the party wall, neither encroachment (which in this case also constituted a defect in title) was disclosed in the contract for sale. The inclusion of clause 10 in the contract [PX5 6] is, then, of no relevance at this point.
Specific Performance
323 Having concluded, therefore, that there were in existence at the time of termination of the contract, defects in title that were not disclosed in the contract, the Plaintiff must establish that the court would not, on the basis of those defects, have awarded specific performance of the contract as against the purchaser. 324 The Defendant argues that, on the evidence, the Court could not refuse an order that the purchaser specifically perform the contract if that had been prosecuted at the appropriate time. The Defendant puts it in their outline of submissions thus:
325 The encroachment of the party wall and the awning onto adjoining lands in this case reveals a misdescription of the property by the contract. These encroachments do not constitute defects in title so as to make the title too doubtful to be the subject of a specifically enforceable contract. Mere defects in title do not prohibit an order for specific performance. Spry writes:
The matters relied upon by the Plaintiff in respect of s55(1) are not defects that would prevent an order for an order for specific performance and therefore s55(1) does not apply. At most they amount to claims for compensation which are not the subject of these proceedings. Consequently a court would in the circumstances, make an order for specific performance.
326 With respect to the party wall the encroachments identified by DP 1001633 are so small as not to form any basis upon which a court would refuse an order for specific performance of the contract for sale if petitioned by the vendor. The misdescription with respect to the party wall is an insubstantial one. 327 With respect to the awning, as I have found above (see paragraph 290), the nature and circumstances of the awning make the misdescription insubstantial and insufficient thereby to convince the Court that an order of specific performance could not be made. 328 With respect to the air-conditioning unit, if in any case the unit could be described as a defect in title, this Court would still have ordered specific performance of the contract notwithstanding. It would be unconscionable for the Plaintiff to represent that the air-conditioning unit should be retained (see above, paragraphs 13 and 15) and, subsequently, to rescind the contract on the basis that the unit constituted a breach on the part of the vendor. The air-conditioning unit cannot, therefore, in any event, form the basis for refusing to grant specific performance. 329 In this case, then, specific performance would not be refused on the grounds that there existed defects in the title of the property so as to mean that the contract contained a misdescription of the property for sale. It is not the case here that the property for sale "by reason of a departure from the terms of the contract, is so materially altered in character as to be in substance a different thing from that contracted for": Torr v Harpur (1940) 40 SR(NSW) 585 at 594 per Williams J. Even if specific performance were granted it is clear by the words of s55(1) that the grant of specific performance and the alleged defect in title have to be causally connected. No such causal connection can be found in the present circumstances.
"A further situation where specific performance is sometimes granted, although the contract in question cannot be enforced at law by the Plaintiff, arises where there is a contract for the sale of an interest in land and there is an error in description or a deficiency in title.": Equitable Remedies at 289
Conclusion
330 The Plaintiffs, therefore fail in their petition for return of the deposit on the basis of s55(1).
Purchaser not entitled to rescind the contract
331 In accordance to that which I have already decided (see above, paragraphs 166 to 309), namely, that the notice of termination issued by the Defendant was validly issued and did not constitute a repudiation of the contract on the part of the Defendant, the Plaintiff is not entitled to rescind the contract. 332 As I have concluded that it would not have been inappropriate for the court at the suit of the Defendant vendor to order specific performance of the contract for the sale of the property, my finding as to this final point on s55(1) may not greatly matter.
Section 55(2)
333 Since no relief is available to the Plaintiff under subsection 1 of s55 of the Conveyancing Act 1919, it follows that no relief is due under subsection 2. The inclusion of the word "such" in subsection 2 gives rise to the requirement that not only must there be defects in title not disclosed by the contract of sale, those defects must also be capable of forming the basis of a defence to an order for specific performance of the contract for the sale of land. I have earlier reached the conclusion that the defects in title were not such as to persuade this court that it would not have ordered specific performance of the contract, at the suit of the vendor if that had been sought.
Section 55(2A)
334 Subsection 2A of s55 of the Conveyancing Act 1919 is in much wider terms. According to the terms of the subsection the court may, if it thinks fit, order the repayment of any deposit with or without interest in every case where specific performance is not granted or in any proceeding for the return of a deposit. This Court may order return of the deposit notwithstanding the conclusion made above that this would have been a case in which a court could have ordered specific performance of the contract as against the purchaser. In the present case, the Plaintiff seeks return of the deposit in the further amended summons filed in court on 1 September 1999: see Huber v Conroy (1982) 1 NSWLR 143 per Holland J at 149,151. 335 The subsection gives this Court a wide discretion to grant the order sought if it is so minded. The subsection can operate even where the contract for sale provides for the retention of a deposit where the purchaser is in breach of an essential term of the contract or any notice issued under it, as does the contract in the present case (see clause 9 of the contract [PX5 6]). As I wrote in Terry v Permanent Trustee Australia Limited (1995) 6 BPR 14,091 at 14,105:
336 The onus lies on the purchaser to show that it is unjust and inequitable for the vendor to retain the deposit: Clarke v Dilberovic (1982) NSW ConvR 55-083, at 56, 491. 337 In A A Jones & Son Pty Limited v Weeden (1964) 82 WN(NSW) 326 Hardie J made an order for the return of a deposit under s55(2A) in circumstances where, although the Plaintiff had not established that a material and irremediable defect in title existed, the court was still unwilling to force the title on an unwilling purchaser. His Honour said of s55(2A):
"This provision has been liberally interpreted. It is not necessary that the court find inequitable conduct on the part of the vendor. Rather, in the exercise of its broad discretion, the court should look at whether in all the circumstances it could be said that it is unjust an inequitable to permit the vendor to retain the deposit forfeited on termination".
338 His Honour in that case reached the conclusion that return of the deposit was appropriate on the basis that that the defects in title could only be proved or rectified in a "lengthy equity suit, and accordingly that specific performance would not have been ordered against the purchaser": at 336. 339 A similar approach was taken in Wilson v Kingsgate Mining Industries [1973] 2 NSWLR 713, in which Wootten J decided that an order should be made for the return of the deposit on the basis that it was inequitable, in all the circumstances of the case, that the vendor should retain the deposit as against a willing and able purchaser. In that case the Plaintiff purchaser had failed in its application for specific performance of the contract for sale of the property. Wootten J referred to the need to take into account the reason for a deposit to be paid at all under the contract:
"The language of the subsection,…., is appropriate to confer a wide discretion in the court to order a refund of the deposit. It is clearly available in cases in which the vendor’s contractual right to forfeit the deposit is otherwise completely unassailable": at 335
340 The effect of subsection 2A on the vendors right to forfeiture of the deposit was further explained by Street CJ in Lucas & Tait (Investments) Pty Limited v Victoria Securities Limited [1973] 2 NSWLR 268 at 272-3:
"The purpose of a deposit is that, in addition to being a part payment, it is also an earnest to bind the bargain so entered into, and creates by the fear of its forfeiture, a motive in the payer to perform the rest of the contract…
It is no doubt important that the court should not adopt an attitude in ordering the return of deposits under s55(2A) which would weaken the proper function of a deposit in providing a sanction for purchasers treating the making and completion of a contract with due seriousness and good faith. On the other hand there seems every reason to exercise the discretion in favour of a purchaser who was willing and anxious to complete, but lost his opportunity through the temporary inadvertence of those he had properly employed to act for him.": p.735
341 The question to ask, then, in relation to s55(2A) is whether the court is satisfied that there are special or exceptional circumstances where it would be unjust or inequitable for the vendor to retain the deposit: Terry v Permanent Trustee Australia Limited (1995) 6 BPR 14,091; Mearns v Parras Holdings Pty Ltd (1994) NSW ConvR 60,025 per Santow J at 60,033; also see Lucas & Tait (Investments) Pty Limited v Victoria Securities Limited [1973] 2 NSWLR 268, Clurstock Pty Limited v Timanu Pty Limited (1988) NSW Conv R 57,826, Pratt v Hawkins (1991) 32 NSWLR 319 (Young J). 342 From the authorities one is able to ascertain that the court looks to matters such as "the conduct of the parties, especially the applicant, the circumstances which brought about the termination and forfeiture, and the amounts at stake": Terry v Permanent Trustee Australia Limited at 14,105. The court considers matters connected with the contract as well as the conscionability of the conduct of the parties after contracts are exchanged: see Pratt v Hawkins (1991) 32 NSWLR 319 at 324. 343 For example, in Mayer v Vitale, a case in similar circumstances to the present litigation, Kearney J wrote:
"The section was designed to provide relief to a purchaser against an unjust and inequitable consequence of forfeiture of a deposit. It is clear enough that at law a vendor’s right to forfeit a deposit to himself in the event of a purchaser’s default bears no necessary relation to the damages actually suffered by a vendor. At law a forfeited deposit could result in a vendor making a profit which in justice and equity he ought not to be permitted to enjoy at the purchaser’s expense. In a complementary sense, an order for the return of the deposit does not necessarily affect the vendor’s right to sue a defaulting purchaser at law and recover against him such damages as the vendor can prove. The jurisdiction under s55(2A) does not give to a court an overall discretionary supervision of monetary adjustments between parties to a contract under which a deposit was paid but which had been terminated. A vendor who forfeits a deposit in strict enforcement of his legal rights is not to be deprived of it under s55(2A) unless it is unjust and inequitable to permit him to retain it".
344 In the present case I am minded not to order that the deposit be returned to the Plaintiff. I have reached that conclusion for the following reasons. 345 First, there has been no evidence before this court that the Defendant vendor acted unconscionably in the circumstances of the case. The Defendant was willing and able to complete the contract at the time due for performance. In this regard, the present case is not dissimilar to Socratous & Anor. v Koo & Anor (1993) NSW ConvR 59,914, a case in which McLelland CJ in Eq. wrote:
"This was a case of a purchaser refusing to complete by deliberate reliance on grounds which I have held to be invalid. In all the circumstances it does not seem to me that it is unconscionable on the part of the Defendants to exercise heir right of forfeiture of the deposit having regard to the circumstances referred to in McLaren v Lucas & Tait Pty Limited [1973] 2 NSWLR 268 and other relevant authorities. In my opinion the Plaintiffs’ claim for return of the deposit should not be granted": at 9172
346 I find the absence of unconscionable behaviour on the part of the Defendant to be a factor strongly against granting the Plaintiff relief under s55(2A). 347 Second, the "risk" that the Plaintiff took was to structure their financial dealings in such a way that at the point in time when completion was to occur, the Plaintiff was unable to finance the purchase. 348 As mentioned above (see paragraph 12), the funds necessary for the purchase of the Parramatta road property were to be raised out of the sale of a property at Mallet Street Camperdown by Carbest Pty Limited. It is evident that the sale of the Mallet Street property did not occur in time to provide finance to Gogard Pty Limited. The sale of the Camperdown property was subject to building approval which, as of 23 February 1998 was not expected to be finalised until March 1998 [Minter affidavit 12 May 1998 para 17; PX5 65] (see paragraph 37). 349 Carbest Pty Limited did attempt to arrange for bridging finance after the notice to complete was issued. Mercantile Mutual informed Mr Hayes that it had provisionally accepted the application for further loan monies on 13 March 1998 [Hayes’ affidavit 6 May 1998 annexure C page 45]. 350 However, at no time before 16 March 1998 did the Plaintiff have the necessary finance arrangements in place to purchase the Parramatta Road property. 351 On 17 March 1998 Mr Parker and Mr Minter had a telephone conversation. In the course of that conversation, Mr Parker said words to the following effect:
"There is no evidence or suggestion of any default, misconduct or unfair dealing on the part of the Plaintiffs. There is no evidence that they acted otherwise than in perfect good faith in their dealings with the Defendants. The position is that the Defendants, for their own reasons, deliberately took a substantial risk, which on any objective view was a foolish one and against the consequences of which, at least so far as the Plaintiffs are concerned, there is no basis for affording them discretionary relief.": at 59,918
352 The approval was, however, subject to approval by the credit committee of the Mercantile Mutual AJ Mortgage Trust. The mortgage proposal was not approved by that that committee until 25 March 1998 [PX5 52]. By that time the contract for the sale of the Parramatta property had been validly terminated by the Defendant. 353 Even though the result in Pratt v Hawkins (supra), in which Young J cited the fact that the contract failed "because the purchaser did not have enough money to complete it"(at 327) can be distinguished because of other conduct of the purchaser arising in that case, it does stand as authority for the proposition that the financial readiness of the purchaser to complete the contract on the date so agreed is a matter going to the discretion of the court. The present case is one in which "forfeiture of the deposit was a contractual outcome the possibility of which the purchaser incurred open-eyed and as a matter of business in an arrangement in which each party incurred risks": per Bryson J in Smilie Pty Limited v Bruce (1998) NSW ConvR 55-841 at 56,598. 354 Third, whether the risk assumed by the Plaintiff was or was not in the nature of a "gamble", it is at least clear from the facts of this case that it is not of a type similar to that of Blacktown City Council v Fitzgerald and Ors (1990) NSW ConvR 59,032. In that case Cohen J ordered the return of a deposit in circumstances where "the Plaintiff had done all that it could to ensure that completion took place". The Plaintiff in that case had "forwarded the balance of the purchase price to its solicitors upon being advised that completion was to take place… The Plaintiff failed to complete not because of any decision to that effect, nor for any inability, but only because of an omission on the part of its solicitors which turned out to have a most drastic result": at 59,038. 355 In the present case, it cannot be said that the Plaintiff’s default was due to a mere administrative error. While the purchaser may have been mistaken about the effect of the date of completion contained in the contract, that cannot be a mistake that could be said to have lead to the failure of the Plaintiff to comply with the contract and especially could not have said to have effected the Plaintiff’s failure to comply with the notice to complete. 356 In Clurstock Pty Ltd v Timanu Pty Ltd at 57,831, Young J wrote:
PARKER: "My client took a gamble in not having finance ready but when they struck problems and we were not prepared to extend the settlement time, my client immediately organised its finances. We now have a conditional approval". (Minter affidavit 12 May 1998 para 30)
357 In the present case, then, the failure of the contract was due to the Plaintiff’s default and could not be said to have resulted from its unilateral mistake as to the effect of the inclusion of a date of completion in the contract. 358 Fourth, as has been found above, the Plaintiff purchaser would not have had a defence to specific performance if an order requiring such were sought by the Defendant vendor. In Lucas & Tait (Investments), Street CJ decided that:
"…where the purchaser has been caught up in a situation through little fault of his own or perhaps because of the fault of his solicitor and has endeavoured to do the decent thing, the Court will very often exercise its discretion in his favour, notwithstanding that this will have the effect of depriving the vendor of the right to forfeit the deposit and notwithstanding that the making of such an order will lessen the importance of a deposit as an earnest that the contract will be fulfilled. However, merely because a large amount of money is involved and situations have arisen which were not contemplated by the purchaser and make it inexpedient for the purchaser to pursue the contract will not usually be thought to be a sufficient reason why the parties’ respective rights at law should not continue to apply"
359 While the proposition does not automatically hold that since specific performance of the contract would have been granted therefore the vendor is entitled to forfeiture of the deposit (that would be to ignore the second limb of subsection 2A), it certainly is a matter in favour of this court declining to exercise its discretion to order that the deposit be returned. 360 Fifth, the deposit in this case is not in the nature of a penalty: see Lucas & Tait at 273; Terry v Permanent Trustee Australia Limited at 14,107. In Smilie Pty Limited v Bruce (supra) at 55-842, Bryson J wrote:
"If the court would not, in its discretion, specifically enforce the contract [273] against the purchaser, then it may follow that it would be unjust and inequitable to allow the vendor to retain the deposit": at 272-273
361 Sixth, it is evident that the Defendant has, subsequent to issuing the notice of termination, resold the property for a higher price than that agreed under the then validly terminated contract with the Plaintiff. This is a factor that weighs in favour of granting the Plaintiff relief in respect of s55(2A): Florencio Delgado v Walker Developments Pty Limited (Bryson J, NSWSC, 18 July 1989, unreported); also see Terry v Permanent Trustee Australia Limited at 14,107. However, in the words of Young J in Clurstock Pty Limited v Timanu Pty Limited at 57,826, "the cases indicate that that mere fact is not enough because of the twofold nature of the deposit, one purpose of it being to make sure the contract is binding": at 57,831. It cannot be said, in the present circumstances, that the Defendant sought, by the resale, to make a windfall profit at the expense of an innocent purchaser. In that case, the profit made by the Defendant from the resale of the property is not enough to offset the considerations I have earlier noted; see Terry v Permanent Trustee Australia Ltd at 14,107-8 for a discussion of the principles applicable in such cases. 362 In all the circumstances of this case, I am satisfied that this is not a situation where considerations of justice and fairness render it appropriate to order a return of the deposit under s55(2A). I reason here as I did in Terry v Permanent Trustee Australia Limited: "In the circumstance it was not unjust and inequitable for the Defendant to insist upon the due performance of the contract and, on the default of the Plaintiff, to forfeit the deposit. As the vendor was not seeking to make a windfall profit at the expense of an innocent purchaser, the financial benefit to the vendor was not in the circumstances sufficient to justify an order for the return of the deposit". I therefore decline to make the orders sought by the Plaintiff in respect of s55(2A).
"Forfeiture of a deposit of a reasonable amount is not a penalty, and the deposit of 10% was at the reasonable and customary rate from which parties to real estate contracts in New South Wales rarely depart".
Conclusion
363 The Defendant is entitle to forfeiture of the deposit.
Question Six: The Cross-Claim for Damages, Reasonable Costs and Expenses
364 By cross-claim contained in the Further Amended Cross-Claim filed 9 July 1999, the Defendant claims to be due reasonable costs and expenses as provided for in clause 9.3.1 of the contract and otherwise arising out of the Plaintiff’s (Cross-Defendant’s) failure to complete the contract. The cross-claim also seeks damages against the Plaintiff. 365 Clause 9 of the contract allows only one of the forms of relief sought by the Defendant (Cross-Claimant). Clause 9.3 allows either relief by way of recovery of deficiency on resale and reasonable costs and expenses or damages for breach of contract. It seems clear that the Defendant must elect to pursue one or the other form of relief: Butt at 482-3. Furthermore, Butt observes that "having elected to pursue one right, the vendor cannot resile from the election and choose the other if it eventuates that the course chosen is the less advantageous one"; at 482. No submissions were made on behalf of the Defendant Cross-Claimant in respect of a claim for unliquidated damages. Although not expressly made, it appears that the Defendant Cross-Claimant has elected to pursue relief under clause 9.3.1: see Jampco Pty Limited v Camerson (No 2) (1985) 3 NSWLR 391 (a case where the opposite conclusion was made). In those circumstances I can dismiss the claim for unliquidated damages by virtue of the doctrine of election. In any event, since the Defendant obtained a higher price on resale of the property, and since the basic principle is that the measure of damages is the difference between the contract price and the value of the property at the date of the breach (see Rossco Developments at 6), the Defendant would not be entitled to such damages. Furthermore, no evidence was proffered as to any consequential damage suffered by the Defendant. 366 The decision of this court to allow the Defendant to retain the deposit cannot affect the Defendant’s rights to sue under the contract:
367 Furthermore, there was no evidence before me to suggest that the Defendant would not have been entitled to resell the property at general law. Since the notice of termination was validly issued and there are not other circumstances that would offend the conscience of this court, the decision to resell was within the rights of the Defendant.
"… it will still remain open to the vendor to sue the defaulting purchaser and recover against him whatever damages may be due to the vendor at law in the event of the contract having gone off through the purchaser’s breach. The ordinary principles of contract law and of damages stand untouched by this section except in so far as it operates to qualify the ordinary right of a vendor to forfeit and retain a deposit": Lucas & Tait at 273 per Street CJ.
The contractual right to resell and to claim reasonable expenses
368 Clause 9.3 of the contract reads:
· the deficiency on resale (with credit for any of the deposit kept or recovered and after allowance for any capital gains tax payable on anything recovered under this clause); and · the reasonable costs and expenses arising out of the purchaser’s non-compliance with this contract or the notice and of resale and any attempted resale; or
"9 Purchaser’s default
If the purchaser does not comply with this contract (or a notice under or relating to it) in an essential respect, the vendor can terminate by serving a notice and after the termination -
…
9.3 sue the purchaser either -
9.3.1 where the vendor has resold the property under a contract made within 12 months after the termination, to recover -
369 The Defendant in the present case has "resold the property under a contract within twelve months after the termination" of the Gogard Contract. The only claim made by the Defendant is in respect of the second limb of clause 9.3.1, namely, the "reasonable costs and expenses arising out of the purchaser’s non-compliance with this contract or the notice and of resale and any attempted resale". 370 The "purchaser’s non-compliance with this contract or the notice" refers to the opening words of clause 9 being a non-compliance with "this contract (or a notice under or relating to it) in an essential respect". I have earlier decided that the Plaintiff did not comply with the notice to complete in an essential respect and that the Defendant validly terminated the contract. 371 The sub-clause, then, provides for the recovery of costs incurred arising out of:
9.3.2 to recover damages for breach of the contract."
372 The amounts claimed in the Further Amended Cross-Claim pursuant to clause 9.3.1 of the contract included sums expended on legal costs, financial costs, council rates, water rates, land tax and risk insurance [Further Amended Cross-Claim, 9 July 1999]. The Defendant subsequently accepted that all expenses other than legal expenses incurred by the Defendant cannot be claimed as reasonable costs and expenses. The Defendant thus admits that the expenses claim amounts only to $4,886.63 being:
1. the purchaser’s non-compliance with the contract; and
2. the purchaser’s non-compliance with the notice; and
3. the resale; and
4. any attempted resale.
373 As to the other claims, while formally pressed by the Defendant Cross-Claimant, the Defendant acknowledges that the principles in Rossco Developments Pty Limited v O’Halloran and Anor (1980) 29 ACTR 1 allow only the legal expenses in this case to be claimed under clause 9.3.1. 374 In that case, Blackburn CJ, obiter, considered a clause that provided for the recovery of "all expenses on of and incidental to any" resale of the property as liquidated damages. Out of a raft of claims made by the vendor in that case, only those costs arising out of the retainer of a land agent in connection with the advertisement and exhibition of the property for resale and the legal costs associated with the resale were said to be “of and incidental to the resale”. 375 Following the principles in Rossco Developments, only the amount of $2,092.63, being legal costs arising from the resale can be claimed by the Cross-Claimant as costs arising from the resale of the property. 376 Clause 9.3.1 is wider than the clause under consideration in Rossco Developments. The second paragraph of clause 9.3.1 allows the vendor to claim costs arising out of the non-compliance with the original contract for sale or notices issued under it. It is clear, then that the amount of $2,794, being legal costs arising out of the Cross-Defendant’s non-compliance with the contract is also validly claimed by the Cross-Claimant. As to the other expenses claimed, it cannot be said that these arise out of the Cross-Defendant’s non-compliance and cannot be said to be payable to the Cross-Claimant in this case. 377 As to costs arising out of any attempted resale, since there was in this case no attempted and subsequently aborted resale, no issue in the present case.
(a) $2,794 for legal costs incurred under the failed sale to the Plaintiff;
(b) $2,092.63 for legal costs incurred by the Defendant in reselling the property.
Conclusion
378 The costs and expenses then due to the Cross-Claimant amount to $4886.63 .
Set-off as against the forfeited deposit
379 Since I have decided that the vendor is entitled to forfeiture of the deposit, a question arises as to whether the purchaser should further be required to settle the vendor’s costs and expenses recoverable under clause 9 of the contract and recover those in addition. If that were the case, the vendor would be able to retain the deposit monies and in addition would be able to recover an amount for reasonable costs and expenses. The alternative is that the reasonable costs and expenses of the vendor be satisfied out of the deposit monies. In that case, the purchaser would be required to compensate the vendor only to the extent that the reasonable costs and expenses outweighed any forfeited deposit monies. 380 In Carpenter v McGrath (1996) 40 NSWLR 39, Clarke JA wrote at 44-45 (also see Sheller JA at 63):
381 In cases such as the present, where the claim for damages under clause 9.3.1 is directly connected with the purchaser's failure to complete, the damages must be set off as against the forfeited deposit monies. To the extent that the amount of the deposit exceeds the amount of the damages, the purchaser is not required to pay more than the forfeited deposit: see also “The Standard Contract for the Sale of Land in New South Wales”, para 9.177 at 499.
"The general principle which applies to the awarding of damages for the breach by a purchaser of a contract of sale of real estate is that the injured party is to be place in the same situation, so far as money can do, as if the contract had been performed… For this reason it has long been accepted that if the deposit is forfeited it must be set-off against any damages claimed. That rule does not simply apply to a deficiency on re-sale of the property but applies to all general damages allowed pursuant to the principle in Hadley v Baxendale "
Set-off against profit on the resale
382 The Plaintiffs argue that, since the property has been resold (that is, on 18 March 1998) and that since there was no deficiency on resale (rather that it was resold for a price some $152,500 more than the original asking price), the Defendants are not entitled to costs and expenses. 383 The Defendant admits that there is some divergence on the authorities as to whether the vendor is entitled to reasonable expenses in circumstances such as the present. The issue is whether, where there has been a surplus on resale, the profit gained from the resale should be taken into account in ascertaining whether there has been any expense incurred by the vendor. The question raised is whether the court should set off the profit made under the resale as against the expenses incurred by the vendor in the first unsuccessful sale. 384 There is conflicting authority on this point. In Mallet v Jones [1959] VR 122 the Full Court of the Victorian Court of Appeal found that the profit was to be set off as against the expenses of the failed sale. On the other hand, in Rossco Developments, Blackburn CJ of the A.C.T. Supreme Court allowed the vendor to recover reasonable expenses in addition to the profit from any resale. 385 It is unnecessary here for me to choose between the divergent authorities. Since I have decided that the costs and expenses are to be set off against the forfeited deposit, it is unnecessary for me to decide whether, in any case, the costs and expenses should be set off as against the profit on resale.
Conclusions
386 The issues in this case have been resolved as follows:
387 Subject to hearing the parties on costs, if they wish, but otherwise on the basis that costs should follow the event, I propose to make the following orders and declarations:
(1) The completion date was that date contained in the express terms of the contract. There are no grounds for rectification in this case.(2) The Defendant’s entitlement to issue a notice to complete making time of the essence arose out of the breach on behalf of the Plaintiff of a non-essential term of the contract as to time, namely, the date of completion. The Defendant was otherwise entitled to issue a notice to complete since it was not in breach of the contract at the time that the notice was so issued and was not otherwise disqualified from so issuing the notice.
(3) Non-compliance with the notice to complete on the part of the Plaintiff entitled the Defendant to issue a notice of termination. The contract was validly terminated by the Defendant.
(4) The Plaintiff was not, therefore, entitled to any damages for wrongful termination or breach on the part of the Defendant.
(5) The Defendant is entitled to forfeiture of the deposit according to clause 9 of the contract. Section 55(1),(2) and (2a) of the Conveyancing Act 1919 do not avail the Plaintiff.
(6) The Defendant is entitled to reasonable costs and expenses pursuant to clause 9.3.1 of the contract. Those damages are, however, to be satisfied out of the deposit monies.
Orders
1. I declare that on 17 March 1998 the Defendant (Cross-Claimant) validly terminated the Contract for Sale of Land dated 4 December1997 between the Defendant (Cross-Claimant) as vendor and the Plaintiff (Cross-Defendant) as purchaser in respect of the land under the provisions of the Real Property Act 1900 (NSW) known as 156-158 Parramatta Road, Camperdown.2. I declare that the Defendant (Cross-Claimant) is entitled to the forfeiture of the deposit of $134,750 together with interest thereon paid under the Gogard Contract.
3. I declare that the Defendant (Cross-Claimant) is entitled to the sum of $4,886.63 being reasonable costs and expenses recoverable under clause 9.3.1 of the contract.
4. I order that the sum of $4,886.63 plus interest thereon be paid from the deposit monies held by the Defendant’s agent to the Defendant.
5. I order that the Cross-Claim be otherwise dismissed
6. I order that the summons be dismissed
7. The Plaintiff pay the Defendant’s costs.
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Last Modified: 06/26/2000
Cases Citing This Decision
186
Leros Pty Ltd v Terara Pty Ltd
[1992] HCA 22
Bunning v Cross
[1978] HCA 22
Rands Developments Pty Ltd v Davis
[1975] HCA 36
Cases Cited
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Statutory Material Cited
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Braidotti v Queensland City Properties Ltd
[1991] HCA 19
Braidotti v Queensland City Properties Ltd
[1991] HCA 19
HTW Valuers (Central QLD) Pty Ltd v Astonland Pty Ltd
[2004] HCA 54