Immer No 145 Pty Limited v The Uniting Church in Australia Property Trust (NSW)

[1992] HCATrans 113

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IN THE HIGH COURT OF AUSTRALIA

Office of the Registry

Sydney No Sl39 of 1991

B e t w e e n -

IMMER NO 145 PTY LIMITED

Applicant

and

THE UNITING CHURCH IN AUSTRALIA

PROPERTY TRUST (NSW)

Respondent

Application for special leave
to appeal

MASON CJ TOOHEY J GAUDRON J

Immer 10/4/92

TRANSCRIPT OF PROCEEDINGS

AT SYDNEY ON FRIDAY, 10 APRIL 1992, AT 11.42 AM

Copyright in the High Court of Australia

MR R.A. CONTI, QC:  I appear with MR D.P. ROBINSON, for the

applicant. (instructed by Baker & McKenzie)

MR B.W. RAYMENT, QC:  May it please Your Honours, I appear

with my learned friend, MR K.P. SMARK, for the

respondent. (instructed by Clayton Utz)

MR CONTI:  Your Honour, the issue that arises is a short one

in relation to the operation of a doctrine of

election arising out of a contract for the purchase

of so-called air rights in the city of Sydney

undertaken during the days when land development in

this city was very active.

Your Honours, the points we make are brief and

if I could indicate them to you at the outset of

the application. As indicated in the application

book, the matter of importance, we say, which

arises in the operation of the doctrine of election

is the meaning of the concept of adversity to which

Your Honour the Chief Justice made reference in

Sargent and Turner, two cases in 1974, to which I

will take you to very briefly shortly.

What we put is this: firstly, merely because

the conduct of the elector is such as to indicate
to the electee that so far as the elector is

concerned the contract remains on foot does not
mean per se that the conduct operates adversely to

the electee. That is because adversity depends

upon the nature of the contractual obligations of

the vendor and, contrary to the view, with respect,

of the Court of Appeal, is not a doctrine which can

be said to be "not hardly onerous".

Here, what was required of the electee, the

vendor, by way of contractual obligation

outstanding at the time of the alleged notice of

election was merely to continue restoration work on

its premises, undertaken already for a collateral

reason or enduring benefit, the air space being

merely a spin off from the undertaking of the

restoration work which was going to be undertaken

aliunde.

Secondly, in the case of a right to rescind

the subject of the election, there will be no
adversity where the right to rescind continues in

any event in substance in the purchaser, or the

elector, because or by reference to the vendor's

on-going radical obligation to bring into existence

the subject-matter of sale, namely the air rights.

They are the two points of principle. If we

obtain leave to appeal, we would seek to argue that

in the circumstances of the case there was no

Immer 2 10/4/92

insistent on performance of the contract on the

part of my client as a matter of inference and,

moreover, a fortiori because both parties were

under, as the Court of Appeal found, a

misapprehension on material fact relevant to the

giving of the notice of election.

MASON CJ:  Do your grounds of appeal sufficiently cover the

last way in which you put the point? When I say

the last way in which you put the point, namely
that there was a continuing obligation on the
vendor and that in failing to perform the
continuing obligation the vendor was failing to
bring into existence what was fundamental in terms

of the subject-matter of the contract.

MR CONTI:	I do not seek to put the matter quite that way. What I am saying is that there is no relevant
adversity - there was no adversity to the vendor
because - - -

MASON CJ:  You link it all to adversity. In every way you

put this submission it is linked to adversity.

MR CONTI:  The submission today, we put entirely to

adversity. If we got leave, on a final hearing we

would seek to have different inferences drawn in

relation to the matter of the misapprehension and

in the nature of the insistence which, it is said,

was inherent in our relevant letter. But it all

goes to adversity. So that adversity is twofold:

one, if a right of rescission for a radical breach

inherently continues because the vendor has got to

bring into existence the subject-matter of the

contract anyway, and there can be no relevant

adversity - - -

GAUDRON J: Does that say any more than that there is no

indication of a total abandonment of the right to

rescind, when it is a continuing right that - - -

MR CONTI: That is so. There can never be, because the

vendor has still got - - -

GAUDRON J:  The mere affirmation that the contract is on

foot does not amount to an abandonment of the

right, when it is a continuing obligation.

MR CONTI:  We know the air rights were brought into

existence about a year later from the letter the subject of the notice of election. But assuming

that they had not been brought into existence,

during that yearly period, in our submission, the

purchase still could have rescinded because the

subject-matter had not been brought into existence,

albeit he may have had to give some reasonable

notice.

Irnrner 3 10/4/92

The other point is, on adversity, that to

bring the rights into existence the vendor had to

restore the building. That was the council's

requirement. But the vendor is already restoring

the building because that was part of what it was

doing for its own purpose and that therefore

nothing operated adversely upon it by continuing

its obligation under the contract, as it were, to

bring about the air rights which, in turn,

inherently involved bringing into existence a

totally restored building.

Your Honours, the facts are - - -

MASON CJ:  Just let me get this clear. When one looks at

your grounds of appeal the grounds of appeal travel

beyond adversity. For example, take ground 2(a),

that is not linked to adversity.

MR CONTI:  No, Your Honour, that is not linked to adversity.

That would be an inference we would seek to have

drawn on the construction. That is not a special

leave point, as we would see it, because it is only

a matter of construction of the conduct of the

parties.

If I can indicate why we have put that

particular ground. If you turn to page 30 of the

application book, line 16, the letter said to

constitute election is there set out:

I refer to our telephone conversation on finalisation of our respective clients'

transaction. You will note that it has been

altered from the previous form to take account

of certain changes required for stamp duty

purposes by my client.

I am awaiting instructions as to the final

date for completion.

Now, Your Honours, that was said by the Court

of Appeal to in effect constitute an insistence

upon completion of the kind that the Court

considered in Turner's case. That is stated in the

judgment at the top of page 35, a statement by

Mr Justice Mahoney that insistence upon continuance

to bring about the application of the doctrine.

What we were seeking to say there in that

particular ground is that one would not construe

that letter as an insistence.

MASON CJ:  I am not sure, Mr Conti, that it necessarily

follows that in a case like this the drawing of an

incorrect inference, ie that there was an

abandonment in circumstances of a conveyancing

Immer 10/4/92

transaction where there was a continuing obligation

to perform, is not a special leave point. By that

I mean that although normally the Court would not

consider the drawing of an incorrect inference to
give rise to a special leave point, if the drawing

of an inference in a conveyancing transaction is

one that is likely to have widespread consequences

in terms of too readily drawing an inference of

abandonment of a right of rescission, it is

conceivable that it could amount to a special leave

point.

MR CONTI:	Your Honour, I would embrace obviously that.
MASON CJ:	I am not saying that that is so, but I am just

demurring to your ready disavowal of the point as a

special leave point.

MR CONTI:  Your Honour, in turn I readily eschew any such disavowal. The contract does involve a lot of

money and inherent, of course, in the legal effect

of that letter are a number of the underlying

consequences, what I have just spoken about in

terms of adversity. I mean, one really cannot draw

a clinical - I suppose in a way I sort of do. I

draw a clinical division down the operation of the

doctrine of election and, as it were, say adversity

is solely to be seen in isolation. It is one

matter, as it were, put on top of the other.

Very briefly, if Your Honours have not had a

chance to look at the - - -

MASON CJ:  We have.

MR CONTI: Yes, Your Honours. In short - - -

MASON CJ: It seems a rather bizarre application of the

doctrine of estoppel. That is not to say that it

is necessarily wrong, in terms of principle.

MR CONTI:  Your Honours, what, as it were, has compelled the

concern of my client is the circumstances, first of

all, as has been found, clearly my client did what

it did, appears on page 30, under a

misapprehension, a misapprehension which had been

the subject previously of correspondence on the

part of the vendor, and yet we are said, as it

were, to cause something adverse to the vendor

arising out of a misapprehension that led to the

writing of that letter. It is not just only that,

Your Honours, it is the circumstances of what that

letter caused the vendor to do that it was not

otherwise going to do in its own interests,

independent of the contract; nothing. Because the

next thing that happened, a month later, was the

purchaser rescinded. A year later the vendor

Irnrner 10/4/92

having got in title then looked to enforce

completion of the contract, having completed the

restoration of the building collaterally for its

own benefit.

So our argument is that election must be given

some sort of commercial reality and if it does not

cause the vendor to do anything, why should we, as

it were, therefore have been found to have elected

and bound ourselves to complete. So we submit,

particularly as election is said to be cognate with

the doctrines of waiver and estoppel, as this Court

said in Verwayen, why would not aspects of

detriment and advantage and unconscionability

indeed be necessarily shut out of consideration in

the application of the doctrine of election in the

kind of case like this where the vendor has done,

as it were, nothing relevantly in consequence of

what we did. Indeed, we would argue on the facts

as they emerged here that the vendor really induced the kind of circumstance that came about here by us

writing that letter that we did because of their

assertions that, as it were, everything was now in

order.

Your Honours, moreover, when that letter was

received - that is the letter of 26 June - by the

time it was received, it was written on a Monday,

on the previous Wednesday the vendor had received

the council's letter saying, "You are going to have

to complete your building." So at the point of

time when the vendor gets our letter, it knows that

it has got to go ahead and do a lot more before the

deed which has been submitted with the letter and

the matters which are referred to in the letter

fall for consideration.

It knew by the time it got our letter that the council was saying, you have got no basis for

infringing this contract until you finish the

building, as the Court of Appeal said. Completion

of the building is far away.

MASON CJ:  You were going to take us to Sargent.

MR CONTI: Yes, Your Honours, if I may. Sargent is not as

extensively reported as the volume handed up might

indicate, Your Honours.

MASON CJ: For what reason, Mr Conti, were all these costs

incurred?

MR CONTI:  The discussion could move further afield, but the

main bulk here is Verwayen, because of the

discussion, albeit somewhat briefly, in all of the

judgments, of election and its relationship - - -

Immer 6 10/4/92

MASON CJ: There seems to be a grave misapprehension about

the nature of special leave applications if it is

thought that a large number of cases like this are

going to be discussed.

MR CONTI:  Your Honours, where reference to adversity

appears is on page 658 of Sargent. Sargent is at

tab 1. In the first indented paragraph:

For my part this proposition correctly states the law in its application to contracts

as well as interests in property. If a party

to a contract, aware of a breach going to the

root of the contract, or of other

circumstances entitling him to terminate the

contract, though unaware of the existence of

the right to terminate the contract, exercises

rights under the contract, he must be held to

have made a binding election to affirm. Such

conduct -

and this is the sentence -

is justifiable only on the footing that an

election has been made to affirm the contract;

the conduct is adverse to the other party and

may therefore be considered unequivocal in its

effect.

And the following sentence:

The justification for imputing to the affirming party a binding election in these circumstances, though he be unaware of his

alternative right, is that, having a knowledge

of the facts sufficient to alert him to the

possibility of the existence of his

alternative right, he has acted adversely to

the other party and that, by so doing, he has

induced the other party to believe that

performance of the contract is insisted upon.

Those elements, for the reason I have already

indicated, may be said not to have been satisfied
in the present case. In Turner, the other
reference to adversity is on page 670 of the report

at tab 2. Five lines from the foot of the page on

page 670 the sentence:

What he did was adverse to the respondent and

was justifiable only on the footing that the
contract was subsisting.

Turner is referred to in the Court of Appeal's judgment in support of the proposition, well, adversity involves something which is hardly

onerous. In that particular case

Immer 10/4/92

the purchaser was actively insisting upon the

vendor performing, quite the contrary to the

situation here. So that one can more readily

understand why it could be said that the vendor in that case, to then have to turn around and perform

his obligations, it might be said that the conduct

of the purchaser operated adversely to him.

MASON CJ:  But Justice Stevens judgment is directly against

you on the point of adversity, is it not?

MR CONTI: His Honour does not refer to - does not mention

adversity as a - - -

MASON CJ: But he denies that detriment needs to be shown in

a case of this kind, at page 647, does he not?

MR CONTI: Yes, I appreciate that, Your Honour. If one was

to, as it were, put the doctrines of estoppel

involving detriment and election together, the

question of whether there was detriment would be

more a matter to be viewed from the point of view
of the elector rather than the electee. What we are putting here in terms of adversity is not so much detriment as a coin, one side of which is

advantage to the elector because he is pursuing

election - the pursuing that his conduct is said to

pursue, the on-going performance of the contract;

and on the other hand the conduct of the vendor who

has obligations he must turn around now and perform

in virtue of the conduct of the elector.	And the
point we put here is that where are those

obligations and what was performed? Why can it be

said in the present case that there was adversity?

It is not a kind of per se operation that if one

exercises one inconsistent right, it follows that

the remaining right imposes conversely on the

electee some kind of adversity.

Your Honours, essentially the principle is this, that where conduct is said to have

constituted election but it does not involve the

vendor in doing anything more than it was going to

do anyway, and when the subject-matter of the

election is a rescission but in substance the right

to rescind continues anyway because of the nature
of the vendor's radical obligation, it is not a

scenario where the doctrine of election fits. If

Your Honours please.

MASON CJ: Thank you, Mr Conti. Yes, Mr Rayment.

MR RAYMENT:  Your Honours, my learned friend's first

submission is, we would respectfully submit, well

covered by authority in this Court. To take

Sargent for example, at page 656 in Your Honour the

Chief Justice's judgment, the test as to when an

Immer 10/4/92

election takes place is put on the basis of this

Court's decision in Tropical Traders Ltd v Goonan

as depending upon whether -

the conduct of the party is such that it would

be justifiable only if an election had been

made one way or the other -

Similarly, Your Honours, we would put that what was

said in this Court in Khoury's case, Khoury v

Government Insurance Office (NSW), 58 ALJR 502 at

page 506, in the joint judgment of Your Honour the

Chief Justice and Justices Brennan, Deane and

Dawson, puts the matter perfectly clearly:

prejudice is not necessary to be shown for the

purposes of election. Can I just read a paragraph,

if Your Honours please, that we would submit shows

that clearly:

A person confronted by two truly

alternative rights or sets of rights, such as

the right to avoid or terminate a contract and
the right to affirm it and insist on
performance, may lose one of them by acting
"in a manner which is consistent only with his

having chosen to rely on [the other] of them":

and reference is made to authority, including

Tropical Traders Ltd v Goonan and Your Honour's

judgment in Sargent's case.

Where an insurer is confronted with such

alternative rights and elects to affirm the

contract of insurance, he is commonly said to

have "waived" the right to avoid or

terminate it: cf. Craine v Colonial Mutual

Fire Insurance Co Ltd. While actual

"prejudice to the other side'' may be relevant,

particularly in determining whether an

election should be imputed to a person who is

not shown to have made a conscious decision to

elect (see, e.g., Sargent; Tropical Traders;

Champtaloup v Thomas; and Scarf v Jardine, it

is not necessary that such prejudice be

demonstrated to establish a completed election

between the right to affirm and the right to

avoid a contract. An election, unlike

estoppel, is concerned with what a party does

and not what he causes the other party to do -

and reference is made to Craine again. So

prejudice may take away a continuing right to

rescind but will not be necessary in order, we

would submit on the authority of that case, to

establish that the contract has been affirmed. We

would respectfully submit that the first matter put

by our learned friends is precluded on the

Immer 9 10/4/92

authority of those decisions. And there is no

suggestion in the judgments below which would throw

up any such question

The second matter put by our learned friends

does not arise, in our respectful submission, in

point of a consideration of what adverse conduct

is. The point the other side make is this: they

say the rights did not exist at the time of the

so-called affirmation, therefore there could be no

relevantly adverse conduct.

The right of rescission was a right which

arose on a particular date, that is if by April

1989 something had not occurred, there was a right

of rescission. The facts were well known to the

other party, that by the date nominated in the

contract, those events had not occurred and those

findings, at page 33 of the application book, are

not put in contest by the applicant. What follows,

in our respectful submission, is that the right of rescission, given that there was an affirmation of

the contract as the court rightly found, we would
say, the right of rescission after that date was

lost. It left on foot the right of the other

party, if it wished, to serve a notice to complete

making time of the essence for completion of the

contract and to rescind if that notice be not

complied with.	But that is, of course, what they
did not do.	They simply rescinded without making

time of the essence for the completion of the

contract.

It is a case relevantly like, we would say, a

case where the vendor of land needs to get in title

to relevant property conveyed before completion.

It is known at the time of contract, as it was in

this case, that he does not yet have title to the

land. In that situation, a notice to complete can

be served on the vendor. If he cannot, within a

reasonable time, obtain title to the land or, in

the present case, take such steps as are necessary

to make it tranferable in his hands, then the other

party can rescind.

Your Honours, what is indicated, in our

respectful submission, by the applicant's

submissions, is that the real case they desire to

put to this Court if special leave were granted is

the one which was dealt with in the judgments and

in our respectful submission to raise questions of

misapprehension in relation to affirmations of

contract. An inappropriate vehicle is a case in

which no oral evidence was given of the state of

mind of the person serving the notices, and that is

this case. The best that the applicant has, with

respect to a misapprehension, is a recital in the

Immer 10 10/4/92

conveyance which it submitted to the vendor, but no
evidence as to why that recital was inserted or as

to whether it was given in a state of doubt and the

like, and we would respectfully submit that the way

in which the case was put in the Court of Appeal

was rightly dealt with by Their Honours in the

Court of Appeal on those issues, there being no

primary evidence as to the state of mind of the

applicant for special leave or what motivated it.

If Your Honours please, those are our

submissions.

MASON CJ:  Thank you, Mr Rayment. Now, Mr Conti, assume

that the Court is against you on the question of

adversity. What then do you have to urge as a

reason for the grant of special leave?

MR CONTI:  What we would have to urge is that the correct

inference to be drawn on the true construction of
the letter of supposed election, and in the context

in which that letter was written, it did not

involve an election for one supposed inconsistent

right at the expense of the other. It did not

involve any relevant insistence. At the time the

letter was received it would be known to the other

party that the base upon which the letter is

written had no foundation, it was nugatory, it had

no operation.

MASON CJ: But how do you build this up into a special leave

point? Let us assume for the moment that the

correctness of the inference drawn by the Court of

Appeal is debatable, let us assume that. How do

you manage to erect that into a special leave

point? Normally the fact of the matter is that the

Court would not contemplate granting special leave

if it transpired that that was the critical point

that the applicant wished to argue on the hearing

of the appeal.

MR CONTI: It erects into a special leave point because the

doctrine of election has not been looked at closely

since 1974 - - -

MASON CJ: That is about the weakest ground the Court hears

in support of a special leave application.

MR CONTI: Yes, I know. I think I tried that some months

ago without singular success, Your Honour.

MASON CJ:  Is this an indication of how hopeful you are on

this occasion?

MR CONTI: No, Your Honour. It was purely put as a

prefatory observation. The critical - - -

Immer 11 10/4/92

GAUDRON J:  But it is an issue, is it not, the question of

election and the inferences to be drawn is one

which arises in a number of cases importantly

affecting the rights of persons to conveyancing

transactions and similar transactions and if the

inferences are going to be drawn in circumstances

relating to a continuing right to rescind, what was

otherwise a continuing right to rescind, where

title has not even been got in, then conveyancing

is going to be put into chaos, is it not?

MR CONTI:  The difficulty arises because of the notion of

inconsistent right, and this is what need

exploration. Merely because one has inconsistent

rights - and we deny they were inconsistent, in

this case, for the reason I have already
elaborated, there was a right of rescission

survived albeit that you had to give a notice

first - but assuming that they were inconsistent

rights and one of them is exercised, it still

leaves open for consideration, albeit partly
pervading the area of adversity which you are
against me on, but in any event still leaving open
for substantial consideration necessarily "What is

the nature conversely of the obligation which then

accrues to the electee by virtue of the
extinguishment or sterilization of one of the

rights in reliance on the other?" That is the

critical area which we submit entitles on, as a

matter principle, investigation. What is the

nature of the obligation which is, as it were,

consequential upon the right that remains and has

not been sterilized.

MASON CJ:  You sound as if you have become quite

enthusiastic.

There will be a grant of special leave in this

case. We will hand back to you this volume of

authorities. There is no reason why they should

continue to clutter up the Court records.

AT 12.16 PM THE MATTER WAS ADJOURNED SINE DIE.

Immer 12 10/4/92