K & K Real Estate Pty Ltd v Adellos Pty Ltd

NEW SOUTH WALES COURT OF APPEAL

CITATION:
K & K Real Estate Pty Ltd v Adellos Pty Ltd [2010] NSWCA 302

FILE NUMBER(S):
2010/260515

HEARING DATE(S):
3 November 2010

JUDGMENT DATE:
11 November 2010

PARTIES:
K & K Real Estate Pty Ltd (Appellant)
Adellos Pty Ltd (First Respondent)
L A Concrete Pty Ltd (Second Respondent)

JUDGMENT OF:
Giles JA Young JA Handley AJA

LOWER COURT JURISDICTION:
Supreme Court - Equity Division

LOWER COURT FILE NUMBER(S):
SC 2010/260515

LOWER COURT JUDICIAL OFFICER:
Hamilton AJ

LOWER COURT DATE OF DECISION:
22 October 2010

LOWER COURT MEDIUM NEUTRAL CITATION:
K & K Real Estate Pty Ltd v Adellos Pty Ltd (in liquidation) [2010] NSWSC 1212

COUNSEL:
I M Jackman SC and R S Angyal SC (Appellant)
C R C Newlinds SC and P T Newton (Respondents)

SOLICITORS:
Colin Biggers & Paisley (Appellant)
ERA Legal (Respondents)

CATCHWORDS:
Vendor and purchaser- purchaser's suit for specific performance- vendors issue notice to complete- negotiations occur without agreement that time under notice will not run- neither party attends for completion on date specified in notice- whether essentiality of time waived- whether purchaser's solicitor intimated to vendors' solicitor that they were dispensed from attending on completion- significance of the word "intimation" in relevant authorities- how element of reliance on intimation needs to be established- mere fact that vendors resold at a profit insufficient to justify refund of deposit.

LEGISLATION CITED:
Conveyancing Act 1919, s 55(2A)

CATEGORY:
Principal judgment

CASES CITED:
Blacktown City Council v Fitzgerald (1990) 6 BPR 13,409
Foran v Wight [1989] HCA 51; 168 CLR 385
Haynes v Hirst (1927) 27 SR (NSW) 480
Hughes v Metropolitan Railway Co (1877) 2 App Cas 439
Jones v Barkley (1781) 2 Dougl 684; 99 ER 434
Jones v Dumbrell [1981] VR 199
Lacey v Hayden [2000] NSWCA 182; 10 BPR 18,199
Peter Turnbull & Co Pty Ltd v Mundus Trading Co (Australasia) Pty Ltd [1954] HCA 25; 90 CLR 235
Rawson v Hobbs [1961] HCA 72; 107 CLR 466
Wardley Australia Ltd v Western Australia [1992] HCA 55; 175 CLR 514
Zaccardi v Caunt [2008] NSWCA 202

TEXTS CITED:

DECISION:
The appeal is dismissed with costs.

JUDGMENT:

IN THE SUPREME COURT
OF NEW SOUTH WALES
COURT OF APPEAL

2010/260515
GILES JA
YOUNG JA
HANDLEY AJA
Thursday 11 November 2010

K & K REAL ESTATE PTY LTD v ADELLOS PTY LTD

Headnote

The plaintiff as purchaser and the defendants as vendors entered into a contract for sale in the usual form to buy and sell land at Oran Park for $5.6 million. The deposit of $560,000 was duly paid.

The contractual date for completion was 25 January 2010.

In accordance with the contract, the vendors gave a notice to complete for 3pm on 12 February 2010 making time of the essence.

On the day following the service of the notice the purchaser’s solicitors wrote the vendors’ solicitors two letters both marked “Without Prejudice”. One asserted that the notice was invalid, the other indicated that it was for the interest of both parties that there be negotiations.

Negotiations took place. There was, however, no request that these take place on the basis that time would not run under the notice to complete.

No-one attended on settlement at the expiry of the notice to complete.

The negotiations appeared to have continued in a desultory way until July 2010 when the vendors gave notice of termination based on the non-compliance with the notice to complete.

The purchaser maintained that the essentiality of time had been waived and that in any event the vendors were not themselves ready, willing and able to complete at the expiry of the notice to complete. The vendors acknowledged this last matter but said that in accordance with the authorities they had been dispensed from the requirement that they be ready, willing and able to complete. As a last alternative the purchaser sought recovery of its deposit under s 55(2A) of the Conveyancing Act 1919.

Hamilton AJ found against the purchaser who appealed. The Court of Appeal dismissed the appeal.

On the facts of the correspondence and the conduct of the parties there was no waiver of essentiality of time. The purchaser had intimated to the vendors that they need not prepare for completion and thus had dispensed the vendors.

The primary judge’s refusal to exercise his discretion to return the purchaser’s deposit was correct.

The principle in Peter Turnbull & Co Pty Ltd v Mundus Trading Co (Australasia) Pty Ltd (1954) 90 CLR 235, 246-7 applied; Foran v Wight (1989) 168 CLR 385 discussed.

IN THE SUPREME COURT

OF NEW SOUTH WALES
COURT OF APPEAL

2010/260515
GILES JA
YOUNG JA
HANDLEY AJA
Thursday 11 November 2010

K & K REAL ESTATE PTY LTD v ADELLOS PTY LTD

Judgment

GILES JA: The nature of the appeal and the circumstances in which it arises are described in the reasons of Young JA. With the benefit of his Honour’s reasons, I can briefly explain why I joined in the orders that the appeal be dismissed with costs. There is no difference of substance from his Honour’s reasons.
The respondents’ ability to complete
The appellant’s principal submission was the respondents were not entitled to terminate the contract for failure of the appellant to complete on 12 February 2010, because the respondents themselves were not in a position to complete and did not attend on settlement. The prior question is the submission that the essentiality of the time for completion was waived, but it is convenient to consider the principal submission on the assumption that time remained essential.
The appellant accepted that the respondents could be excused from performance on their part if it had dispensed with their performance. But it submitted that this depended on principles of estoppel, and that there was neither a clear and unequivocal representation that the respondents need not perform on their part, nor evidence that the respondents relied on any such representation in failing to put themselves in a position to complete or to attend on settlement.
The governing concept, in the words of Dixon CJ in Peter Turnbull & Co Pty Ltd v Mundus Trading Co (Australasia) Pty Ltd (1954) 90 CLR 235 at 246-7, is that “a plaintiff may be dispensed from performing a condition by the defendant expressly or impliedly intimating that it is useless for him to perform it … ”. I do not think it necessary to go into variations in expression of the concept in Foran v Wight (1989) 168 CLR 385, or into whether the result in law is now to be seen as an estoppel against the dispensing party. Assuming the appellant’s approach, the appellant fails on the facts.
(a) Intimation by the appellant
The appellant submitted that the language of “intimation”, taken up in Foran v Wight, should be understood as requiring the clear and unequivocal representation ordinarily necessary for an estoppel. However, an implied intimation will suffice, and it is a question of fact whether by what it did and said (and did not do and did not say) the appellant sufficiently made known to the respondents that it would not be completing on 12 February 2010, so that there was no point in the respondents then being in a position to complete and attending on settlement.
In my view, the appellant made this clear.
On 19 January 2010, as the contractual date for completion of 25 January 2010 approached, the respondents noted that a transfer and settlement statement had not been received and requested them as a matter of urgency. On the next day, 20 January 2010, the appellant said that it would not be in a position to complete on 25 January 2010. The respondents asked when they “may be expected to be in a position to complete”.
Nothing more happened, and the appellant did not complete on 25 January 2010.
The respondents served the notice to complete on 27 January 2010, requiring completion on 12 February 2010.
On 28 January 2010 the notice to complete was rejected -
“ … as being defective as to content and as to form, not in accordance with the requirements of the common law and having been issued when the vendors are not in a position to issue the Notice to Complete in this matter. The time allowed under the Notice to Complete is, in all the circumstances, unreasonable.”
The respondents replied on the same day requesting explanation of the asserted deficiencies. They asserted the validity of the notice to complete and “reserve[d] all of their rights”.
The appellant’s response did not provide further information, but suggested that it was in the parties’ best interests to negotiate and “deal with the issue of the request for an extension of time for settlement as set out in” another letter of 28 January 2010. The appellant did not maintain in the proceedings that the notice to complete did not make time of the essence (as distinct from maintaining that the essentiality had been waived).
In the other letter of 28 January 2010, expressed to be “without prejudice”, the appellant sought an extension to the settlement date of nine months on certain bases, one being that the notice to complete be withdrawn. The letter included -
“The situation is, at this stage, our client is seeking an extension to the time for settlement for the following reasons:
1.The funding from our client’s bank has been delayed by virtue of the sale of certain properties in Queensland not having settled by their due date.
2.As you will appreciate, our client has paid a premium price for the property and the valuations of this property that our client is seeking are not coming up to a valuation figure anything like the price which our client is paying. Notwithstanding this, our client wishes to proceed with the purchase at the price shown on the contract for sale.
3.One of the directors of the associate of our client which will be involved in this transaction is seriously ill at the present time.
In view of these factors, our client is seeking an extension to the settlement date of 9 months on the following bases … ”.
There followed the respondents’ foreshadowing of a counter-proposal, as described by Young JA, and on 9 February 2010 a letter from the appellant saying that it was still waiting for the counter-proposal and asserting that it “intend[ed] to complete subject to the issues raised in our letter of 28 January 2010”.
The date and time for completion came and went without completion. Neither party took steps towards completion.
The trial judge said -
“30 There is no doubt that there was a telephone conversation on 20 January 2010 in which the plaintiff’s solicitor informed Andrea Marrone in the defendants’ solicitor’s office that the plaintiff would not be in a position to complete on 25 January 2010. That conversation was confirmed in an email from Andrea Marrone to Chris Rumore on that day. There was no suggestion afterwards that the plaintiff would be able to complete on 25 January or on 12 February 2010; indeed it was confirmed in the plaintiff’s solicitor’s letter of 28 January 2010 referred to in [6] above that the plaintiff continued and would continue to lack funds to complete.
31 In these circumstances it is my view that the defendants were absolved from removing caveats and preparing transfers, discharge of mortgage and settlement sheets for use on 12 February 2010. It cannot be said that they were not ready, willing and able to complete on 12 February 2010.”
The appellant submitted that there were three errors in his Honour’s reasoning: first, that the telephone conversation related to its ability to complete on 25 January 2010 and not later when, following the notice to complete, “the stakes were raised dramatically”; secondly, that it was not for the appellant to “establish” that it would be able to complete on 12 February 2010; and thirdly, that the second letter of 28 January 2010 was not to be construed as confirmation that the appellant continued and would continue to lack funds to complete. The second complaint was unsound: the judge did not impose a burden on the appellant, but correctly made the point that the appellant did not later say that it would be able to complete on one of the days.
The appellant submitted that the statement that it could not complete on 25 January 2010 was limited to completion on that day, and said nothing of completion in the different circumstances obtaining after service of the notice to complete. It pointed out that its letter of 28 January 2010 referred to an extension of the time for settlement “at this stage”, which it suggested indicated that, if an extension was not granted, it might still complete as required. And it said that its letter of 9 February 2010 made apparent its intention to complete, and that “subject to the issues raised in our letter of 28 January 2010” in that letter did not detract from that intention.
In my opinion, the dealings between the parties do not bear the complexion suggested by the appellant. The express statement of inability to complete on 25 January 2010 did not stand alone, nor was it to be seen in isolation from subsequent events and non-events.
At no time did the appellant submit a transfer or a settlement statement. At no time did it say when it expected to be in a position to complete.
The plain import of the appellant’s letter of 28 January 2010 was that the appellant had been unable to complete on 25 January 2010, and would continue to be unable to complete for some time, because funding had been delayed and valuations were not coming up to the mark. A nine months extension was not inconsiderable, and even if it was an ambit claim the proposal for the extension, in the terms in which it was made, clearly conveyed that the inability affecting the appellant for 25 January 2010 would remain for 12 February 2010. The intention to complete expressed on 9 February 2010 was dependent on obtaining a sufficient extension of the time for settlement.
The appellant did nothing towards settlement. Instead, it sought to negotiate an extension of the time for settlement, for stated reasons including that its funding was delayed and valuations were not up to the mark. This was against the background of an express statement of inability to complete on 25 January 2010. In the circumstances, in my opinion, even without a further express statement it was clearly “intimated” to the respondents that it would be pointless for them to put themselves in a position to complete on 12 February 2010 or to attend on settlement.
(b) Reliance
There was direct evidence that the respondents had not put themselves in a position to complete on 25 January 2010 because the appellant said that it was unable to complete on that date, and that the respondents could have put themselves into a position to complete. The appellants submitted that there was no evidence of reliance on dispensation in relation to completion on 12 February 2010. It submitted that, on the contrary, from the foreshadowing of a counter-proposal and from the counter-proposal sent on 15 February 2010 (see the reasons of Young JA), the respondents were motivated to hold on to what they regarded as an advantageous sale. It said that it should be found that the respondents’ failure to put themselves into a position to complete and attend on settlement was not because they considered it was pointless to do so, but because their commercial interests lay in keeping the contract alive and negotiating with a view to a later settlement date.
There is not an inconsistency between those two positions. The circumstances spoke strongly of the respondents acting upon a belief that it would be pointless to prepare for settlement on 12 February 2010, as it had been pointless to prepare for settlement on 25 January 2010. The same inability of the appellant to complete was conveyed with respect to 12 February 2010, and the appellants had not submitted a transfer or a settlement statement and had done nothing towards completion on that day. That the respondents were prepared to negotiate towards a later completion date contributes to, rather than detracts from, the clear inference that they did not take steps towards settlement because there was no point in doing so. There was no point because, at the appellant’s instigation due to its inability to complete, there were to be negotiations towards another date (although the parties maintained positions outside the negotiations, see below). In my opinion, any necessary reliance should be inferred.
That the respondents could have put themselves in a position to complete on 12 February 2010 should also be inferred from the evidence concerning completion on 25 January 2010. I do not think it was disputed.
Waiver of essentiality of time
No submission was made that the notice to complete was ineffective to make time of the essence for 12 February 2010. The appellant submitted that the benefit of the essentiality had been waived, so that it did not have to complete on 12 February 2010.
The appellant submitted that, in response to its request for an extension of the settlement date, the respondents neither accepted nor rejected the request but indicated that that they were formulating a counter-proposal, and did nothing to insist nonetheless on completion on 12 February 2010. It submitted that this amounted to a waiver, because it was conveyed that rather than insisting on completion on 12 February 2010, the respondents were prepared to negotiate towards an extension of time for completion. The preparedness, it was said, was underlined by the indication in the respondents’ foreshadowing of a counter-proposal that it would be necessary that the appellant satisfy the respondents as to its likely ability to complete – in context, an ability to complete at some later date, not on 12 February 2010.
The appellant submitted in the alternative that the time for completion could be extended by agreement, and that there should be found in the request for an extension of the time for settlement and the response foreshadowing a counter-proposal an agreement that the time would be extended until a counter-proposal had been made and there had been a reasonable time to respond to it.
However, the letters of negotiation were not alone. The appellant’s proposal accompanied its letter rejecting the notice to complete. Although both bore the endorsement “without prejudice”, the request for an extension of the time for settlement alone could be of that character. Whatever may be said of the proper use of the endorsement on the requesting letter, it indicated that the negotiations were alongside the positions taken by the service of the notice to complete and its rejection, and recognised the maintenance of those positions. The respondents acted similarly - their response to the appellant’s letter, on 3 February 2010, was expressly “sent on a ‘without prejudice’ basis”.
Given the positions taken on the validity of the notice to complete, the respondents’ letter could not reasonably have conveyed to the appellant that the respondents no longer relied on the notice to complete for its effect if there was not completion on 12 February 2010. The respondents’ other letter of 28 January 2010, seeking explanation of the rejection of the notice to complete, made that plain. It said that the notice to complete was “valid in every respect, was validly served, and allows a reasonable time for settlement to occur”, asked for an urgent reply, and concluded, “In the meantime our clients reserve all of their rights”.
The appellant had initiated consideration of extension of the time for settlement, but its proposal had expressly been neither accepted nor rejected. There were two separate lines of communication, asserting entitlements or lack thereof. The respondents maintained their entitlement. If the foreshadowed counter-proposal did not come forth by 12 February 2010, the appellant was at risk because it could not complete. In my opinion, nothing in the respondents’ conduct waived their entitlement to terminate the contract in reliance on essentiality of time under the notice to complete, or gave rise to an agreement to extend the time for completion.
Return of the deposit

As Young JA records, the trial judge said -
“I realise that the defendants have resold the land (although not at any great profit), but I do not see that there is justification for an order for return in the present case. That conclusion is reinforced by the fact that the defendants have indicated that, if allowed to retain the deposit, they will not seek an order for the payment of any interest or damages to which they might otherwise be entitled.”
The appellant’s submissions were brief. It was submitted that the trial judge erred in failing to have regard to the facts that the appellant had not refused to complete the contract but had requested additional time to complete; that the respondents by their conduct suggested to the appellant that it was not required to complete by 12 February 2010; that there was a lengthy period of five months negotiation and then termination of the contract, and it was not suggested that the appellant acted otherwise than in good faith in the negotiations; that the appellant incurred expenses in the course of the negotiations; and that the respondents negotiated to sell the land to a third party simultaneously with the negotiations with the appellant, and sold it on more favourable terms.
The judge paid express regard to the sale on more favourable terms. I do not see that the appellant can rely on the failure of negotiations for a later settlement in order to regain the deposit when the negotiations were unsuccessful. The respondents made known to the appellant as early as 19 February 2010 that a new potential purchaser had made an offer; a submission of bad faith in the respondents was not expressly made but could not be accepted.
The matters to which the appellant referred do not in my opinion sway the exercise of the discretion in their favour. It is not clear that his Honour was asked to take them into account, but I would come to the same conclusion as he did.
YOUNG JA: This is an appeal from a decision of Hamilton AJ in the Equity Division of this Court in what may briefly be described as a conveyancing case. The primary judge dismissed a purchaser’s suit for specific performance with costs.
The Court heard the appeal on 3 November 2010 as an expedited matter.
On the appeal Mr I M Jackman SC and Mr R S Angyal SC appeared for the appellant and Mr C R C Newlinds SC and Mr P Newton appeared for the respondents.
At the end of the argument, the Court ordered that the appeal be dismissed with costs and that reasons would be given subsequently. These are my reasons for that decision.
By contract in the standard form the respondents agreed to sell to the appellant vacant land known as 1005 Cobbitty Road, Oran Park being the land in Folio Identifiers 293/708154A and 293/708154B for the price of $5,600,000.
The fee simple of the land was held by the vendors as tenants in common. Adellos Pty Ltd was the proprietor of the three-quarters share comprised in Folio Identifier 293/708154A and L A Concrete Pty Ltd was seised of the other one-quarter share comprised in Folio Identifier 293/798154B.
Adellos Pty Ltd has at all material times been in liquidation. The contract was signed by Mr Michael Gregory Jones its liquidator.
The contract provided for a deposit of $560,000 which was duly paid.
The date for completion provided for by the contract was the 42^nd day after the date of the contract which was clearly 25 January 2010. That time was not of the essence.
Clause 9.1 of the contract provided that “If the purchaser does not comply with this contract (or a notice under or relating to it) in any essential respect, the vendor can terminate by serving a notice.” The clause also authorised the vendors on termination to retain the deposit.
Clause 34.1 provided that should completion not occur by the completion date then either party should be entitled to serve a notice to complete requiring completion on a date not less than 14 days from the date of service. After service of such a notice the time allowed for completion shall be of the essence of the contract.
Clause 34.2 provided that should the purchaser not complete by the completion date without default by the vendors then the vendors are entitled to recover from the purchaser interest on the balance of purchase money at the rate of 10% per annum calculated from the original completion date to the actual date of completion.
At all material times, Folio Identifier 293/708154A was endorsed with two caveats, one by Robert Kusic, who is now deceased, and one by Michael Gregory Jones, the liquidator of the registered proprietor. Mr Kusic’s caveat claims an interest under an unregistered mortgage.
I will now set out the events in late January and February 2010 as found by the primary judge and about which there is no contention plus additional material of like nature.
On Wednesday 20 January 2010 the purchaser’s solicitor, Chris Rumore, informed the vendors’ solicitors that the purchaser would not be in a position to complete on Monday 25 January 2010. Settlement did not take place on that day and neither side attended at any appointment to settle.
On Wednesday 27 January 2010 the vendors served on the purchaser a notice to complete. The notice stated that the vendors are ready willing and able to complete; that the purchaser is required to complete by 3pm on 12 February 2010 and in this respect time is now of the essence of the contract; and that unless the purchaser completes within the time specified the deposit will be forfeited and the vendors will be entitled to terminate the contract.
On 28 January the purchaser’s solicitor by letter advised that the notice to complete was rejected as being defective and having been issued when the vendors were not in a position to issue a notice to complete. For some inexplicable reason, this letter was marked “Without Prejudice”.
On the same day the purchaser’s solicitors wrote seeking an extension of time for settlement. This letter was also marked “Without Prejudice”. The principal reason advanced was that the funding from the purchaser’s bank had been delayed by reason of the non settlement of sales of certain properties in Queensland. The extension sought was for 9 months. This was on the basis that the deposit be released forthwith; interest be paid on the balance of purchase monies quarterly in advance; the notice to complete should be withdrawn; and these matters if agreed should be incorporated in a deed of variation of contract.
This issuing of two separate letters clearly shows that the purchaser’s solicitors were dealing with the vendors’ solicitors on two different channels, one, a formal on the record channel where strong protests of a party’s rights would be made and the other, an informal one, in which it would be pleasantly suggested that a “commercial” settlement might be achieved for the benefit of both parties.
On the same day, the vendors’ solicitor sent the purchaser’s solicitor an open email reserving all their rights, asking for further particulars as to the alleged defects in the notice to complete, but also enquiring as to what was a reasonable time for settlement.
On 29 January, the purchaser’s solicitor replied by email marked “Without Prejudice” strongly suggesting a commercial resolution and asking for a formal response to the request for an extension.
By email on Wednesday 3 February 2010 the vendors’ solicitor responded “This email is sent on a without prejudice” basis. It stated that “the Vendors neither accept nor reject” the plaintiff’s proposal, but would submit a counter proposal then under preparation. He noted a requirement that the plaintiff satisfy the vendors as to its ability to complete. It was stated that the proposal would follow not that day but most likely later that week.
On Tuesday 9 February 2010 the purchaser’s solicitor wrote that they were still awaiting the counter proposal.
It would have been possible at this stage for the purchaser’s solicitors to have taken the view that their ambit claim for a nine months’ extension was not favoured but that there had been a decision by the vendors to put up a counter proposal which was being formulated. Because the time for the expiry of the notice to complete was fast approaching, the lackadaisical approach being taken by the vendors and the time necessary to consider the counter proposal, the notice to complete must be treated as having at least been suspended.
However, there was no evidence of the purchaser’s solicitor even having taken that view. Indeed, he did not, as one would have thought he would have done had he taken that view, protected his client by expressly seeking an acknowledgment by the vendors’ solicitors that his view was shared. In contradistinction to other assumptions that solicitors may make in conveyancing transactions because of normal practice, there is no normal practice to cover this situation.
At 10:42am on 12 February (the date fixed by the notice to complete for settlement), the vendors’ solicitor emailed Suzanne Agius the solicitor at Blake Dawson, acting for the Kusic estate informing her that the purchaser appeared to be serious about ultimately completing the purchase of the land, annexing a copy of the purchaser’s solicitor’s letter of 28 January (set out at [53] above), and a draft response. .The email requested that the writer be told when probate had been granted and the name of the executor “to enable us, in due course, to ensure that any Withdrawal of Caveat or other such document has been executed correctly.”
Nobody attended to settle the contract at 3pm or any other time on 12 February 2010 nor was there any reference to settlement on that date contained in correspondence between the parties.
On 15 February 2010 the vendors’ solicitor wrote to the purchaser a letter which plays a central part in the argument of this case. Omitting formal parts it read as follows:
“WITHOUT PREJUDICE, SAVE AS TO COSTS
We refer to the above matter and in particular, to your “without prejudice” correspondence dated 28 January 2010.
We note that the aforesaid correspondence sought to explain your client’s failure to complete on 25 January 2010 and made a proposal to extend the completion date for nine months on certain terms and conditions.
Those providing instructions on behalf of our clients have now conferred and considered your client’s proposal. It has been resolved to reject the proposal, as it is not acceptable in its present form. However, our clients would be prepared to entertain a similar proposal (summarised below), provided certain preconditions are met namely:
*That the Purchaser is able to satisfy the Vendors as to its financial position and its ability to complete; and
*That the Vendors are given security over such assets as the Purchaser relies upon to demonstrate the viability of its financial position.
Provided those conditions are met to the Vendors’ complete satisfaction, the Vendors would be prepared to agree to extend the date for completion further, on the following terms and conditions”.
[The conditions were then set out]
The letter concluded:
“For the avoidance of any doubt, the Vendors shall not be legally bound, and the Contract shall not be varied, until the parties are in full agreement as to each term of the variation, and a Deed of the nature referred to in numbered paragraph 7 (and any collateral Deed or other instrument) is properly executed by those to be bound.
Would you kindly seek instructions as to the terms set out above. We look forward to hearing from you shortly and, in any event, by close of business on Thursday, 18 February 2010.
In the meantime the Vendors reserve all of their rights, including their rights, arising pursuant to the Contract, at law and in equity.”
As I have noted, a draft of this letter had been sent to Suzanne Agius. Ms Agius on 15 February 2010 sent to the defendants’ solicitor an email enquiring why the vendors were proposing to agree to surrender their contractual entitlements and “instead postpone settlement by a further six months”.
I should note at this point the inappropriate use of the endorsement “Without Prejudice”. That term only has proper significance in correspondence or discussions in which offers are made to settle a dispute. As Long Innes J noted in Haynes v Hirst (1927) 27 SR (NSW) 480, 489 no one can protect himself by making an offer to marry “without prejudice” and “A man, having eaten his cake, does not still have it, even though he professed to eat it without prejudice.”
However, the use of the term clearly indicates a mutual intention that the course of negotiations were not to affect a party’s rights at law or in equity.
On 16 February 2010 the purchaser’s solicitor sent an email to the vendors’ solicitors to the effect that his client was not available to give immediate instructions, but that there would be an answer by Thursday 18 February.
The vendors’ solicitors’ immediate riposte was that their clients regarded themselves as entitled to terminate the contract forthwith and reserved their rights to take this action without any further notice should the matter not proceed satisfactorily.
On Friday 26 February 2010 the purchaser responded to the defendants’ proposal set out in [63] above and rejected it, but put a counter proposal.
The primary judge accurately recorded that negotiations proceeded to and fro at a very leisurely pace. The status of the negotiations as at 8 July was that the purchaser’s solicitors had submitted a further proposal on 5 July. However on 8 July 2010, the vendors’ solicitors served a notice of termination of contract relying on the plaintiff’s failure to complete on 12 February 2010.
The plaintiff’s solicitor purported to reject the notice of termination as invalid.
On 9 July 2010 the vendors resold the land to Dandaloo Pty Limited at a slightly higher price. That contract was also advantageous to the defendants in that there was no agent and therefore no commission payable.
On 5 August 2010 the purchaser commenced the present proceedings for specific performance.
The appellant purchaser contended that there were six bases on which the contract was not validly terminated by the defendants and is therefore available to be specifically enforced in its favour. These were:
(1) The defendants were not in a position to say with certainty that they were ready willing and able to perform the contract on 27 January 2010 when they served the notice to complete.
(2) The notice to complete was ineffective because the defendants were in breach of the contract at the time it was given.
(3) The defendants intimated to the plaintiff that it need not complete on 12 February 2010 so that there was no breach on the plaintiff’s part by its failure to do so.
(4) The defendants were not on 12 February 2010 ready, willing and able to complete the contract on their part.
(5) Even if by reason of the plaintiff’s failure to settle on 12 February 2010 the defendants became entitled to terminate the contract the defendants affirmed the contract by their letter of 15 February 2010 (set out at [63]) above.
(6) If the contract were not affirmed as alleged in (5) above, the defendants affirmed the contract by engaging in protracted negotiations up to 5 July 2010 shortly before their notice of termination on 8 July 2010.
The primary judge’s view, on these points, for which he gave full reasons was as follows:
1.            The defendants were ready willing and able to complete the contract on 12 February;
2.            There was no relevant breach of contract;
3.            The judge was not prepared to hold that this was so;
4.            The defendants were absolved from removing caveats and preparing transfers, discharge of mortgage and settlement sheets for use on 12 February 2010. It cannot be said that they were not ready, willing and able to complete on 12 February 2010;
5.            The letter of 15 February does not constitute an affirmation by the defendants of the contract.
6.            There was no affirmation.
These rulings meant that the purchaser’s proceedings were dismissed with costs and the deposit ordered to be released to the vendors. However, the orders were stayed until and including 3 November 2010.
The purchaser appealed. The notice of appeal contains 9 grounds. However, as argued in writing and orally, three basal submissions were made, viz:
(1) On the true interpretation of the correspondence, essentiality of time had been waived.
(2)(i) the vendors were in relevant breach of contract at the material time; and
(ii) that they were not ready willing and able to complete at the time fixed by the notice to complete and were not absolved from preparing for completion.
(3) The judge should have ordered return of the deposit under s 55(2A) of the Conveyancing Act 1919.
I will deal with each of these submissions in turn and then under head “4” make some general comments.
(1) This submission was presented in the appellant’s written submissions and replied to in writing and there was no additional oral argument.
The appellant says that its solicitor’s letter of 28 January 2010 requesting a nine month extension (set out at [53] above) presented the vendors with four options: namely, (1) not respond to it; (2) reject it; (3) accept it; or (4) do none of the above but indicate that that they were formulating a counter proposal thus giving the message that they were prepared to negotiate an extension for completion.
The appellant says that the vendors chose this fourth option in their solicitors’ email of 3 February abstracted in [57] above. By doing so it indicated that the vendors were not so much interested in completion by 12 February, rather they wanted certainty that the contract would be completed. Impliedly they were saying, “We don’t expect you to attend our office on 12 February with the purchase monies, because if you have not heard from us by then, we will be formulating our counter-proposal and won’t be ready to settle ourselves.”
Thus, it is put, the situation is as noted by Gaudron J in Foran v Wight [1989] HCA 51; 168 CLR 385, 457 the vendors had led the purchaser to assume that essentiality of time was not being maintained and thus time had ceased to be essential.
The respondents say that this argument was never presented to the primary judge nor does it appear to relate to any ground of appeal. Further, the implication relied on is inconsistent with the express statement that the email was sent without prejudice.
The proposition in the first sentence of [83] appears to be incorrect (vide p 42 of the Appeal Book setting out p 25 of the transcript below). However, whether or not the submission in the first sentence of the previous paragraph is correct, that in the second sentence must be correct.
The correspondence was between two senior solicitors experienced in conveyancing matters (by themselves or their supervised clerk). They formatted their communications in two channels and the implication noted in [81] if it is to be made at all was in the “informal” channel. This view is reinforced by the fact that the purchaser’s solicitor never once sought any assurance that the notice to complete would be withdrawn or, if negotiations failed, the time for completion under it would be extended.
I consider that the respondents’ submission should be upheld.
(2) The appellant then says, in the alternative that, if its first submission fails, the notice to complete bound both parties to be ready willing and able to complete at 3pm on 12 February and the vendors were not in any position to do so.
This was because, there was at least one caveat on the title by a person claiming to be an unregistered equitable mortgagee and no withdrawal of caveat had been obtained.
In opening, Mr Jackman SC put three propositions:
1.At completion, the vendor’s and the purchaser’s obligations under the contract are concurrent;
2. A vendor can be excused performance if the purchaser dispenses with it;
3. To show a dispensation the vendor must establish an estoppel involving showing a clear representation by the purchaser and detrimental reliance on it.

Those basic propositions may be accepted, though not necessarily all the fleshing out that Mr Jackman provided when expounding them.
It was common ground that the vendors needed to show themselves ready willing and able to complete no later than 3pm on 12 February 2010 unless they had been dispensed from performance. As they did not attend on 12 February and did not hold the relevant documents on that day, they could only succeed in terminating the contract if they could show a dispensation.
The leading case on such dispensations is Peter Turnbull & Co Pty Ltd v Mundus Trading Co (Australasia) Pty Ltd [1954] HCA 25; 90 CLR 235, where Dixon CJ said at 246-247:
“... it was always the law that, if a contracting party prevented the fulfilment by the opposite party to the contract of a condition precedent therein expressed or implied, it was equal to performance thereof. But a plaintiff may be dispensed from performing a condition by the defendant expressly or impliedly intimating that it is useless for him to perform it and requesting him not to do so. If the plaintiff acts upon the intimation it is just as effectual as actual prevention.”
It is clear that the intimation need not be express. It may be conveyed by conduct.
Dixon CJ’s statement has been accepted as stating the law ever since. However, there is considerable difficulty in endeavouring to isolate the juristic basis of the principle.
This difficulty arises from the history of the principle.
It is of little benefit to the parties to trace that history in detail and, indeed, considerable research would have to be put into a project to do it comprehensively. However, it would appear that the principle originally surfaced in connection with conditions limiting estates at common law, then became significant in strict pleading of the performance of conditions precedent, but then was “modernised” as part of Lord Mansfield’s policy of remoulding the rules of common law and equity (see Jones v Barkley (1781) 2 Dougl 684, 694; 99 ER 434, 440).
Moving into the 19^th and 20^th centuries, the scope of the principle was affected first by the development of the law on anticipatory breach and then by the development of the principles of estoppel. It passed from a principle of prime significance in the common law of estates and principles of common law pleading into commercial contracts and then into conveyancing contracts.
The latest exposition of the principle is by the High Court in Foran v Wight [1989] HCA 51; 168 CLR 385. Unfortunately, the five judgments in that case do not appear entirely consistent with each other. The majority considered that the rule was part of the law of estoppel. However, Brennan J considered that there was an equitable principle at work.
Foran v Wight’s application to conveyancing cases was explained by Giles JA (with whom Fitzgerald and Heydon JJA agreed) in Lacey v Hayden [2000] NSWCA 182; 10 BPR 18,199, 18,203.
It is sufficient to say that, either because of estoppel or election, a purchaser who intimates that it would be a waste of time for the vendor to get ready for settlement is not allowed to say that the vendor was not ready willing and able to complete or else (on Brennan J’s view) equity would, despite time being of the essence, restrain the purchaser from terminating the contract for a reasonable time to permit the vendor to get ready for completion, its failure to do so in due time being the fault of the purchaser.
The Turnbull case shows that there are two preconditions before the purchaser could be said to have dispensed the vendor from taking all necessary steps to complete: (A) that the purchaser had intimated that they would not settle; and (B) that the vendor’s solicitor acted on that intimation.
As to (A), Mr Jackman made a number of submissions, principally that: (i) when one read the whole of the relevant correspondence (which is set out above) one could see that the focus of any statement of inability to complete was not on possible completion on 12 February at all, but on non-completion on the contractual date for completion, 25 January; (ii) that married in with the mutual understanding that completion would eventually take place and that time was unimportant; (iii) “intimation” in Turnbull and other statements of the principle meant a clear statement of refusal; and (iv) such an intimation could not be found in the evidence.
Mr Newlinds put that the first of these submissions was quite contrary to the manner in which the case was run below where it was common ground that the purchaser was in no position to settle until 5 August (the date when it commenced proceedings).
However, that submission does not really address the present submission.
More to the point is that the letter of 20 January must be read as meaning the purchaser could not complete on the contractual date for completion or within a reasonable time thereafter. The notice to complete thereafter, in accordance with the contract, specified what the limits of that reasonable period would be.
The surrounding circumstances up to 12 February show that the purchaser continued to be in a position where it did not have the funds to complete and was having difficulty raising finance. It at no stage indicated that it could complete by 12 February.
Further, each party was represented by experienced conveyancing solicitors who must be taken to know the usual procedure for settling conveyancing transactions. These include, provision of a duly marked transfer by the purchaser’s solicitor for execution by the vendor prior to settlement, agreement on the adjustments for land tax, rates etc.
Where these preliminaries, so far as they are needed to be done by the purchaser’s solicitor are substantially missing, the vendor is usually justified in assuming that there will be no settlement.
A good illustration is provided by Cohen J in Blacktown City Council v Fitzgerald (1990) 6 BPR 13,409 at 13,414-13,415 where he said:
“The solicitors for the [vendors] were entitled to consider not only positive statements of intention but a failure to carry out usual conveyancing procedures in order to gauge if there was an intimation by the [purchaser] that it would not be attending on settlement. The assessment was that in the absence of the usual practices having been carried out the [vendors’] solicitors would not be attending on settlement. That assessment proved to be true. The failure by the [purchaser’s] solicitors to give figures in the usual way was in fact as well as in theory an indication that they would not be in attendance. ... In my opinion the failure to carry out usual conveyancing steps was an indication that the [purchaser] would not be represented at the proposed settlement. The [vendors] did not attend that settlement, not because they were unwilling or not ready to complete but because the failure of the [purchaser’s] solicitors to carry out usual steps was a clear intimation that they would not be attending.
In my opinion the [vendors] by their solicitors were entitled to accept that intimation and to avoid the additional expense and trouble of travelling to Sydney for a settlement which they rightly anticipated would not take place. They were in my view ready, willing and able to complete on the day in question and, upon breach by the [purchaser] they were entitled to give a notice terminating the contract.”
Whatever the scope of the term “intimation”, authorities such as the Blacktown Council case show that the present case is within it.
As to (B), the cases demonstrate that not only must an intimation that the vendor need not turn up at settlement be found, but also that the vendor did not attend settlement because of the purchaser’s correspondence and conduct. The vendor must show that it was the purchaser’s intimation that it acted on to its detriment that was the reason for its non-performance of the condition precedent. The vendor must show that it acted on the purchaser’s intimation that it was useless to arrange for performance to its detriment.
The appellant submits that the vendors did not demonstrate that the purchaser’s intimation was one which they acted on in not getting ready for completion.
It is true that there was little direct evidence of reliance. However, in the present type of case the authorities show that reliance is normally inferred unless there is material to counter the inference. It is not realistic to expect people to make expensive preparatory steps to complete where the other party has clearly let it be known that it will not attend.
When a party shows that given a few days it could have been ready to complete, but does not get ready, one can readily infer that that party did not do so because of the other party’s intimation of the conventional procedure to complete conveyancing transactions and that the reason for the party not tendering performance was the other party’s intimation.
The view that relatively little is required to show reliance in this type of case is reinforced not only by the way in which numerous judges at first instance have dealt with these cases, but also by analogy with the way reliance has been treated in cases under the Trade Practices legislation.
It is significant that there are so few conveyancing cases which actually refer to the “innocent party” having established reliance to the court’s satisfaction.
Again in Zaccardi v Caunt [2008] NSWCA 202 [109] Campbell JA said (with the agreement of Allsop P and Barr J) that he was able to infer readiness, willingness and ability where the tasks required to get ready for completion were rudimentary (even though they included obtaining a discharge of mortgage) and that that party had shown its desire for completion by giving a notice to complete. There an inference was drawn of readiness to perform from the ordinary course of a conveyancing transaction.
In considering reliance in Trade Practices cases one applies a “common law practical or common-sense concept” (Wardley Australia Ltd v Western Australia [1992] HCA 55; 175 CLR 514, 525) and courts often have little difficulty in inferring reliance from the facts and circumstances.
Thus, in my view the primary judge was correct on this issue.
(3) As to the claim for return of the deposit under s 55(2A) of the Conveyancing Act, the primary judge simply said at [39] that the only possible justification for such an order was that the vendors had resold at a profit. He did not see that that was a sufficient justification for such an order especially as the vendors had forgone interest on the balance of purchase money.
I can see no error in that discretionary judgment.
(4) Before closing, I would like to make two general comments.
The first is that at the commencement of the proceedings, the then counsel for the appellant said that he would be addressing the judge via the “Court Book”. There was no “Court Book”. The appellant had produced a book, the respondents had not joined in its production although invited to do so and did not have a copy.
The production of a “Court Book” is very costly both in the professional time required for its production and the cost to the client of extra photocopying. The modern rules turn their face against unnecessary costs.
Thus, unless the judge has given a direction at a pre-trial (usually by consent) or it is clear that the documents and affidavits can not be submitted to the court in an orderly manner, a solicitor who has such a book prepared is unlikely to be able to claim the costs of it from the other party if his or her client is successful and, indeed, may not even be able to claim the cost from his or her own client.
Secondly, I should note a submission made below by Mr Newlinds that as the appellant was seeking an equitable remedy of specific performance, it would be quite inequitable to grant that relief to a purchaser who had contracted to complete by 25 January; could not do so despite a notice to complete until 5 August; and then sought to rely on some technical fault of the vendor. It was not necessary for the primary judge to rule on this submission and it was not part of the appeal, but it is intellectually interesting and I wait to see what academic commentators or judges in subsequent cases make of it.
For the above reasons, I joined in the order the appeal be dismissed with costs.
HANDLEY AJA: The history of this litigation, and the relevant facts have been summarised by Young JA and there is no need for me to repeat all of this material. In view of the urgency these reasons are briefer than otherwise would have been the case, and consideration of the authorities has been curtailed.
On 20 January 2010 the purchaser’s solicitor informed the vendors’ solicitor that the purchaser could not complete on 25 January, the date fixed by the contract. The purchaser’s solicitor gave no indication of when the purchaser would be able to complete. The inability of the purchaser’s solicitor to do this was, in my opinion, of considerable significance.
On 27 January the vendors’ solicitor served a notice to complete. This prompted the purchaser’s solicitor to initiate negotiations for a variation of the contract which would extend the time for completion by 9 months. The negotiations which followed were expressed to be subject to contract in the form of a deed of variation. The negotiations dragged on over many months but agreement was never reached and a deed of variation was never executed.
On 28 January, the day after they served their notice to complete, the vendors’ solicitors sent the purchaser’s solicitor an email which reserved all their rights. On 3 February the vendors’ solicitor said that a counter proposal would be submitted within a few days.
The settlement date fixed by the notice to complete, 12 February 2010, came and went without either solicitor making any attempt to progress the contract towards completion. The purchaser’s solicitor did not, as the contract required, submit a transfer for execution by the vendors, and he did not submit a settlement sheet. Both solicitors acted, to all appearances, as if they knew that settlement would not take place on the date fixed by the notice.
On 15 February the vendors’ solicitor sent their counter offer to the purchaser’s solicitor, subject to contract in the form of a deed, adding at the end of the letter:
“In the meantime the vendors reserve all of their rights, including their rights, arising pursuant to the contract, at law and in equity.”
The statement by the purchaser’s solicitor on 20 January that the purchaser could not complete on 25 January in context, coupled with what followed, was an intimation that the purchaser would be unable to complete within any reasonable time thereafter. It was evidence of “a substantial incapacity [from] doing in the future what the contract requires”: Rawson v Hobbs [1961] HCA 72, 107 CLR 466, 481. It was an anticipatory breach but the vendors kept the contract alive and issued their notice to complete.
The statement was not just a prediction, it was also a statement of existing fact. It was a statement that the purchaser’s then financial position was such that it could not complete within a reasonable time. It was a continuing representation unless and until it was withdrawn or modified: Jones v Dumbrell [1981] VR 199, 203.
The continuing representation was confirmed by the failure of the purchaser’s solicitor to take any steps towards completion while time was running under the notice to complete, and by his request for a 9 months’ extension of time.
The vendors’ solicitors did not terminate the contract for breach until 8 July, and then did so peremptorily relying on the purchaser’s failure to complete on 12 February. There was a long delay but Mr Jackman SC did not submit that during this period the vendors made an unequivocal election to affirm or any representation that could support an estoppel by representation.
The negotiations between the solicitors which continued until the vendors terminated the contract on 8 July were capable of supporting a promissory estoppel of the traditional kind enforced in Hughes v Metropolitan Railway Co (1877) 2 App Cas 439 but no such submission was made.
No doubt this was because it was common ground that the purchaser could not have completed before a date early in August. It could not establish therefore that it had acted to its detriment in reliance on any promise by the vendors, express or implied, conveyed in the negotiations between February and July that they would not rely on their notice to complete.
Election does not depend on estoppel, and proof of detrimental reliance is not required. The vendors’ solicitors reserved their clients’ rights in emails and letters to the purchaser’s solicitor on 28 January, 3 February and 15 February. In my judgment this prevented the negotiations operating as an unequivocal election to affirm the contract in the face of the purchaser’s continuing repudiation.
On 8 July the purchaser was “finally disabled from … performance” within a period of 14 days that might have been fixed by a new notice to complete, and it still suffered from “a substantial incapacity [from] doing in the future what the contract require[d]”: Rawson v Hobbs above at 480, 481.
In my judgment, therefore, the vendors’ solicitors kept their election open and did not affirm the contract before they elected to terminate it for breach. Subject to the above I agree with Young JA. For these reasons I joined in the orders of the Court pronounced orally on Wednesday 3 November that the appeal be dismissed with costs.
**********

LAST UPDATED:
11 November 2010

[2010] NSWCA 302

11 November 2010

Key Legal Topics

Areas of Law

Contract Law

Property Law

Civil Procedure

Legal Concepts

Appeal

Reliance

Remedies

Costs

Estoppel