Kaljo v Coady

[2009] NSWSC 480

CITATION:	Kaljo v Coady [2009] NSWSC 480
HEARING DATE(S):	08/05/09, 22/05/09
JUDGMENT DATE :	3 June 2009
JURISDICTION:	Equity Division
JUDGMENT OF:	Barrett J
DECISION:	Judgment for the plaintiff (purchaser) on the summons and for the cross-defendant (purchaser) on the cross-summons.
CATCHWORDS:	CONVEYANCING - from contract to completion - completion subject to happening of event - event did not happen - whether purchaser made reasonable efforts to cause event to happen - whether "lawful" to complete despite non-satisfaction of condition - whether vendor entitled to give notice to complete - whether purchaser's rescission for non-satisfaction of condition valid and effective - whether vendor's termination for non-compliance with notice to complete valid and effective - whether vendor's purported termination after purchaser's purported rescission was acceptance of repudiation - whether contract abandoned
LEGISLATION CITED:	Real Property Act 1900, s 56(2)
CATEGORY:	Principal judgment
CASES CITED:	DTR Nominees Pty Ltd v Mona Homes Pty Ltd [1978] HCA 12; (1978) 138 CLR 423 Jillinda Pty Ltd v McCourt [1983] NSW Conv R 55,145 Lantry v Tomule Pty Ltd [2007] NSWSC 81; (2007) 12 BPR 23,727 McNally v Waitzer [1981] 1 NSWLR 294 Re Barr’s Contract [1956] Ch 551 Wilde v Anstee [1999] NSWSC 612; (1999) 48 NSWLR 387
PARTIES:	Lilli Kaljo - Plaintiff Ellen Margaret Coady - Defendant
FILE NUMBER(S):	SC 4539/08
COUNSEL:	Mr M S Zammit - Plaintiff Mr J E Armfield - Defendant
SOLICITORS:	Haydon Fowler Corbett Jessop - Plaintiff Teece Hodgson & Ward - Defendant

- 19 -

IN THE SUPREME COURT
OF NEW SOUTH WALES
EQUITY DIVISION

BARRETT J

WEDNESDAY, 3 JUNE 2009

4539/08 LILLI KALJO v ELLEN MARGARET COADY

JUDGMENT

1 It is common ground in this case that a contract for the sale of land dated 27 June 2007 between Mrs Coady as vendor and Mrs Kaljo as purchaser is no longer on foot. The question is whether, as Mrs Kaljo contends, it was validly rescinded by her or whether, as Mrs Coady maintains, it was validly terminated by her. These are the issues arising on Mrs Kaljo’s summons and Mrs Coady’s cross-summons, each of which seeks declaratory relief.

2 I heard oral argument on 8 May 2009. Mr M Zammit of counsel appeared for Mrs Kaljo. Mr J Armfield of counsel appeared for Mrs Coady. At my direction, subsequent written submissions (dated 20 and 21 May 2009) were filed and there were further oral submissions on 22 May 2009.

3 In the final analysis, the parties’ dispute is about what should happen to the deposit. If Mrs Kaljo is correct in her contention that she validly rescinded the contract (the rescission being in accordance with an express provision of the contract), the position will be that the deposit must be refunded to Mrs Kaljo. If Mrs Coady is correct in her contention that she effectively terminated the contract on account of Mrs Kaljo’s breach, she claims to be entitled to keep or recover the deposit.

4 The contract related to a property at Warwick Farm held under the provisions of the Real Property Act 1900 of which Mrs Coady is the registered proprietor. The contract is in the form of the 2005 edition published by the Law Society of New South Wales and the Real Estate Institute of New South Wales plus certain special conditions including special condition 43 as follows:

“ Charge
The vendor discloses and the purchaser acknowledges being aware that the property is subject to a Charge to Liverpool City Council (‘the Council’). This contract and completion of it are conditional on the purchaser at its own expense entering into a deed of release and indemnity with and in favour of the council in such form as may be approved by the council and its solicitors, such deed to also include a further covenant with and in favour of the council to procure a future deed contains a covenant in like form. The vendor allows $850 towards cost of Deed at settlement.”

5 The contract specified the forty-second day after its date as the “completion date”. Standard condition 15 provided:

“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.”

6 Having regard to special condition 43, it is also relevant to quote standard condition 29:

“ Conditional contract
29.1 This clause applies only if a provision says this contract or completion is conditional on an event.
29.2 If the time for the event to happen is not stated, the time is 42 days after the contract date.
29.3 If this contract says the provision is for the benefit of a party, then it benefits only that party.
29.4 If anything is necessary to make the event happen, each party must do whatever is reasonably necessary to cause the event to happen.
29.5 A party can rescind under this clause only if the party has substantially complied with clause 29.4.
29.6 If the event involves an approval and the approval is given subject to a condition that will substantially disadvantage a party who has the benefit of the provision, the party can rescind within 7 days after either party serves notice of the condition.
29.7 If the parties can lawfully complete without the event happening -

29.7.1 if the event does not happen within the time for it to happen, a party who has the benefit of the provision can rescind within 7 days after the end of that time;

29.7.2 if the event involves an approval and an application or the approval is refused, a party who has the benefit of the provision can rescind within 7 days after either party serves notice of the refusal;

29.7.3 the completion date becomes the later of the completion date and 21 days after the earliest of -

· either party serving notice of the happening;

· every party who has the benefit of the provision serving notices waiving the provision;

· the end of the time for the event to happen.

29.8 If the parties cannot lawfully complete without the event happening:
29.8.1 if the event does not happen within the time for it to happen, either party can rescind;

29.8.2 if the event involves an approval and an application for the approval is refused, either party can rescind;

29.8.3 the completion date becomes the later of the completion date and 21 days after either party serves notice of the event happening.
29.9 A party cannot rescind under clauses 29.7 or 29.8 after the event happens.”

7 Reference should also be made to standard clause 16.3:

“Normally, on completion the vendor must cause the legal title to the property (being an estate in fee simple) to pass to the purchaser free of any mortgage or other interest, subject to any necessary registration.”

8 According to the interpretation clause in the contract, “Normally” at the start of clause 16.3 means “subject to any other provision of this contract”.

9 The only other provision of the contract that I need set out is standard condition 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. After the termination the vendor can:
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 this 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 -

· the deficiency on resale (with credit for any of the deposit kept or recovered and after allowance for any capital gains tax or goods and services 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

9.3.2 to recover damages for breach of contract.”

10 Special condition 43 and its inclusion in the contract are explained by the fact that, on 13 September 1983, Mrs Coady executed a form of charge under s 56(2) of the Real Property Act in favour of the Council of the City of Liverpool. The charge was in due course registered by the Registrar General and so came to encumber Mrs Coady’s title to the land that became the subject of the contract.

11 By the instrument of 13 September 1983, Mrs Coady (“Grantor”) charged the property for the benefit of the Council (“Chargee”) with

“the obligation to pay to the Chargee:
(a) an annuity in the sum of one dollar $1.00 per annum in perpetuity.
(b) on demand such sum of money being the amount of any expenditure incurred or loss suffered by the Chargee from time to time in relation to my claim demand or action made or taken by any person, persons, corporation or corporations in respect of damage or loss arising out of or caused by flooding of the charged land, of any improvements erected thereon or of any contents thereon or therein respectively suffered by that person, persons, corporation or corporations (including but without limiting the generality of the provisions hereof, the Grantor) as a result of any decision of the Chargee to permit the use of the charged land for any purpose or to permit the erection, alteration or extension of any building or buildings on the charged land.”

12 The instrument also said:

“The Chargee shall only be entitled to custody of the Certificate of Title relating to the charged land if there is no other mortgage or charge to which the charged land is subject but any other person or corporation having custody of the Certificate of Title shall have custody on behalf of himself and the Chargee according to their respective rights and interests.”

13 Leaving to one side as immaterial the annuity of one dollar, the effect of the document was to cause the property to be encumbered so as to stand as security for Mrs Coady’s obligation to pay to the Council on demand the amount of the Council’s expenditure or loss arising from a claim, demand or action for damage or loss suffered by any person because of flooding on the land. This is a somewhat abbreviated description but sufficient for present purposes. The essential message was that the land secured Mrs Coady’s obligation to protect the Council financially from claims against the Council arising from flooding.

14 Immediately after the contract was entered into, therefore, the position was that

(a) the charge of 1983 was recorded on the title and constituted an encumbrance;
(b) Mrs Coady, as vendor, had an obligation under clause 16.3 to give title unencumbered by that charge (which she could do, if she chose, by delivering on settlement a discharge in registrable form executed by the Council);
(c) the contract and completion under it were, by special condition 43, subject to the happening of a specified event;

(d) the “event” for clause 29 purposes, was Mrs Kaljo’s entering into a deed “with and in favour of” the Council – an event, therefore, that entailed action and acquiescence by both Mrs Kaljo and the Council and the consequence that a complete deed would come into existence as a result of the actions of the purchaser and the Council; and

(e) by virtue of clause 29.2, the time for the happening of the event in special condition 43 was 42 days after the date of contract (and, as it happened, that was also the specified completion date);

15 The fact that Mrs Kaljo had an active part to play in bringing about the clause 29 “event” (and that there are therefore promissory elements, so far as she is concerned) does not mean that the “event” is no “event” at all. To adopt language used by White J in Lantry v Tomule Pty Ltd [2007] NSWSC 81; (2007) 12 BPR 23,727 (at [58]), special condition 43 in this case “specifies the contingency which is a precondition to the parties’ obligation to complete” and “is not deprived of that character merely because it contains elements of a promise”

16 As things turned out, Mrs Kaljo and the Council never became parties to any deed. The Council made it clear that any incoming mortgagee would have to be a party to the deed. If mortgage finance was involved, the Council was simply unwilling to have Mrs Kaljo enter into a deed with and in favour of the Council unless the mortgagee also did so. That was not something of which neither Mrs Kaljo nor her solicitors were aware when contracts were exchanged. They had not, at that point, seen the like deed to which Mrs Coady became party in 1983.

17 In fact, the Council’s solicitors prepared (and later amended) a form of deed the proposed parties to which were Mrs Kaljo, the Council and an unnamed mortgagee. The Council actually executed the amended form of deed but it was never executed by Mrs Kaljo or by any mortgagee. Indeed, Mrs Kaljo never got to the stage of making any formal application for finance to any financial institution. A finance broker assisting her took the view that no lender would agree to execute the deed the Council required. Beyond making some general inquiries of one bank about the form of deed of priority that bank generally used when ceding first mortgage priority, the broker made no attempt to obtain concurrence from any prospective lender. He preferred to make efforts to negotiate some other position with the Council. These efforts (in which Mrs Kaljo’s solicitor and the Council’s solicitor were also involved) eventually produced no result.

18 On 30 August 2007, Mrs Coady’s solicitors served on Mrs Kaljo’s solicitors a notice to complete that purported to require completion on 17 September 2007 and to make time of the essence. By letter dated 3 September 2007, Mrs Kaljo’s solicitor disputed the right of the vendor to give a notice to complete and referred to special condition 43 saying:

“at this stage, the Deed cannot be executed and the condition therefore cannot be met”.

19 Mrs Kaljo’s solicitor said that the proper course for the vendor to take was to rescind. He concluded by saying that the purchaser “may be ready to settle the purchase next week”.

20 On 13 September 2007, the vendor’s solicitors extended the time for completion to 3pm on 24 September 2007. Completion did not take place on that day.

21 On 24 September 2007, Mrs Kaljo, as purchaser, purported to rescind the contract pursuant to standard clause 29.8. On 26 September 2007, Mrs Coady, as vendor, purported to terminate the contract and to forfeit the deposit.

22 The central issue is whether it was Mrs Kaljo’s purported rescission of 24 September 2007 or Mrs Coady’s purported termination of 26 September 2007 that was valid and effective. If neither was valid and effective, other questions will arise.

23 As I have said, the “event”, for the purposes of standard condition 29, was Mrs Kaljo’s entering into a deed “with and in favour” of the Council. As I have also said, that event entailed action by both Mrs Kaljo and the Council. Only through actions of both of them would a deed come into existence which was a deed entered into by Mrs Kaljo “with” the Council. Concurrence and execution by any third party was not necessary to the creation of a deed entered into by Mrs Kaljo “with and in favour of the Council”.

24 It is common ground that, at the expiration of 42 days after the contract date (being the deadline set by standard condition 29.2), the “event” just described had not happened. Several questions therefore arise in relation to standard condition 29.

25 The first question (posed by standard condition 29.3) is whether special condition 43 is said by the contract itself to be “for the benefit of a party”. As a matter of construction, the answer is “no”. It must follow that standard condition 29.3 does not cause special condition 43 to benefit either party to the exclusion of the other and that it accordingly exists for the benefit of each party. The obligation of each party to complete was accordingly subject to the happening of the event.

26 The second question arises under standard condition 29.4: did either party fail to do whatever was “reasonably necessary to cause the event to happen”?

27 Mrs Coady could not be regarded as having had capacity to do anything necessary to cause the special condition 43 “event” to happen. No action by her was contemplated. The focus must be upon Mrs Kaljo who obviously had some capacity to cause a deed to be entered into by herself “with and in favour of” the Council. I say “some capacity” because, while the special condition contained promissory elements on her part as already noted, action by her unaccompanied by action by the Council could not have caused a deed to which both were parties to come into existence.

28 It was submitted on behalf of Mrs Coady that, in the events that happened, Mrs Kaljo failed to comply with standard condition 29.4. Mrs Kaljo knew at an early stage, it is said, that the Council would find acceptable only a deed to which Mrs Kaljo’s incoming mortgagee was a party, in addition to the Council and Mrs Kaljo herself. Knowing, as she did, that she was dependent on the introduction of a mortgage lender to enable her to complete, Mrs Kaljo was bound, so it is submitted, to make reasonable efforts to obtain the concurrence of such a lender in the tripartite deed the Council required. Yet she did not even approach any lender with a request.

29 I am not persuaded that action by Mrs Kaljo of the kind just described was “reasonably necessary” to cause the special condition 43 event to happen. Special condition 43 contemplated the making of a deed between Mrs Kaljo and the Council – that she would enter into a deed “with and in favour of” it. The clause contemplated, according to its terms, a deed to which there were two parties. Nothing was said about a third or any other additional party.

30 It was pointed out on behalf of Mrs Coady that special condition 43 referred to a deed “in such form as may be approved by the council and its solicitors” and said that the deed was to include a covenant “with and in favour of the council” to obtain a future deed containing a like covenant (no doubt to cause a purchaser from Mrs Kaljo to become bound direct to the Council in like terms if Mrs Kaljo sells the property). The form and content of the deed to be entered into by Mrs Kaljo “with and in favour of” the Council were therefore required to be approved by the Council and its solicitors. But the fact that the clause contemplated a deed in relation to which the Council and its solicitors had the final say as to form and content does not mean that it contemplated a deed outside the basic description in special condition 43, even if the Council made it clear that a deed outside the basic description was the only deed it would accept.

31 Special condition 43 had in contemplation a deed to which Mrs Kaljo and the Council were the only parties. The deed the Council in fact produced and executed was not a deed of the kind with which special condition 43 was concerned. Mrs Kaljo, through her finance broker and solicitor, made reasonable efforts to have the Council moderate its requirement for a tripartite deed. They explored various ways of making the Council content with a deed to which Mrs Kaljo and the Council were the only parties, supplemented by other assurances and security. One possibility to which particular attention was given was an arrangement under which Mrs Kaljo would agree to demolish the structure on the land that was the source of the Council’s apprehension about liability for flood damage. None of the possibilities explored was such as to make the Council willing to approve any form of deed to which itself and Mrs Kaljo were the only parties. The Council was at no time willing to become a party to a deed within the special condition 43 description.

32 I am satisfied, therefore, that Mrs Kaljo complied with standard condition 29.4, thus preserving, through standard condition 29.5, any right of rescission accruing to her.

33 The next question debated before me is that posed by the opening words of standard conditions 29.7 and 29.8, that is, whether vendor and purchase could “lawfully complete” without the special condition 43 event having happened. One point to be borne in mind here is a practical one that emerged from the evidence of the Council’s solicitor, Ms Tan. She made it clear that, unless a deed acceptable to it had been executed (including by the incoming mortgagee, if there was one), the Council would not have delivered on settlement a discharge of the charge given by Mrs Coady and registered on the title. As a result, Mrs Coady could not have satisfied standard condition 16.3 by giving an unencumbered title on completion and Mrs Kaljo would have been entitled to refuse to complete.

34 But this, in my view, does not go to the question raised by the opening words of standard conditions 29.7 and 29.8. Those words are concerned with what the parties themselves can “lawfully” do. It would have been perfectly “lawful” for Mrs Coady to convey to Mrs Kaljo and for Mrs Kaljo to take title from Mrs Coady notwithstanding the absence of a deed of the kind referred to by special condition 43, with Mrs Kaljo accepting the encumbered title that she was not, as a matter of contract, required to take.

35 It follows that the governing provision in this case was standard condition 29.7, not standard condition 29.8. Under that clause, the fact that the special condition 43 event had not happened by 8 August 2007 (which was the end of the period of 42 days specified in standard clause 29.2 and, coincidentally, the stipulated date for completion) caused a right of rescission to arise in each party. This is the effect of standard condition 29.7.1.

36 According to standard condition 29.7, however, the right of rescission conferred by standard condition 29.7.1 was limited as to time. It could only be exercised within seven days after the deadline for the happening of the special condition 43 event, that is, within seven days after 8 August 2007. Neither party took action to rescind within that period of seven days. That is a matter to which I shall return.

37 Things were in this state on 30 August 2007 when Mrs Coady’s solicitors served the purported notice to complete. The right to serve such a notice was conferred by standard condition 15 and was exercisable if the parties did not complete by the stipulated completion date, being 8 August 2007. That was the position as at 30 August 2007. Under standard condition 15, however, service of a notice to complete was a course available only to a party “otherwise entitled to do so”, that is, otherwise entitled to serve a notice to complete. This means, in the case of a vendor, that there is no contractual entitlement to give a notice to complete unless that vendor is, at the time, “able, ready and willing to proceed to completion”, to adopt language used by Danckwerts J in Re Barr’s Contract [1956] Ch 551 at 556 in a passage approved by Reynolds JA in McNally v Waitzer [1981] 1 NSWLR 294. Reynolds JA said at 296:

“The vendor must show that he is willing and able to provide the full consideration which is to pass from him at the due time.”

38 In other words, the vendor, in order to be permitted to give a notice to complete, must be in a position from which he or she will be able to convey the title that the contract requires be conveyed at the time the contract requires it to be conveyed. In this case, as in most others, the obligation is to convey on completion free from encumbrances (standard condition 16.3). While it is not necessary that an unencumbered title be held at the time the notice to complete is given, ability ultimately to give upon completion a title free from encumbrances must at that time be seen to be certain. As Hutley JA pointed out in McNally v Waitzer (above) at 303, the vendor’s obligation with respect to an existing mortgage or charge is to cause it to be discharged by completion at the latest; and “in many cases it will be discharged out of the purchase price”.

39 In the present case, the obligation of Mrs Coady as vendor to give an unencumbered title on completion came from standard condition 16.3. To perform that obligation she had to convey, on completion, free from the registered charge of 13 September 1983 given by her to the Council, although, consistently with the clause just mentioned, she might perform the obligation by delivering a registrable form of discharge instead of obtaining registration beforehand.

40 It is clear from the evidence that, at the time of service of the notice to complete on 30 August 2007, Mrs Coady had no means of ensuring that a registrable form of discharge, duly executed by the Council, would be available to her at the time of completion or at all. Both parties knew that the position was as described by Ms Tan in the witness box, that is, that the Council would release the charge held by it from Mrs Coady only if it received the deed it required Mrs Kaljo and any incoming mortgagee to execute. Mrs Coady knew that no such deed had come into existence as at 30 August 2007. She therefore also knew that the means of obtaining discharge of the charge given by her in 1983 were not to hand and that the discharge would not be available on completion, whatever the completion date might be. In Wilde v Anstee [1999] NSWSC 612; (1999) 48 NSWLR 387 at [55], Austin J said that the question of the availability of the means of obtaining removal of a charge at completion is to be approached according to the “practical circumstances” of the case. At 30 August 2007, the “practical circumstances” in which Mrs Coady found herself were that there was no apparent way of obtaining a discharge from the Council.

41 For this reason, Mrs Coady was, on 30 August 2007, not able to give title in accordance with the contract in due time. It follows that she was not entitled to give the notice to complete served by her solicitors on that day and that the notice was accordingly ineffective to require completion on 17 September 2007 and to make time of the essence in that respect.

42 I return to Mrs Kaljo’s purported rescission of 24 September 2007. As I have said, a right of rescission arose in each party when, by 8 August 2007, the special condition 43 event had not happened. For the reasons I have stated, the right arose under standard condition 29.7, not standard condition 29.8. Mrs Kaljo’s purported rescission was, in terms, pursuant to standard condition 29.8; but the fact that the wrong clause was relied on cannot, of itself, affect the validity of the rescission if a proper basis for it did in reality exist. A basis existed by reason of non-satisfaction of special condition 43 within the specified period but, because the operative provision was standard condition 29.7, the right of rescission subsisted for only seven days and ceased to be available after 15 August 2007; or, at least, that was the position under the terms of the contract.

43 In fact, however, both parties continued after 15 August 2007 to treat the contract as being subject to special condition 43 in such a way that completion remained conditional upon the event specified in that clause. Mrs Kaljo’s purported rescission itself proceeded on the footing that the condition was continuing and unsatisfied. Mrs Kaljo’s solicitor said expressly in his letter of 3 September 2007 that the condition “cannot be met”, thus confirming that it continued to be operative at that point.

44 Mrs Coady’s solicitors, in their letter of 24 September 2007 responding to Mrs Kaljo’s purported rescission of that day, referred to things done (or not done) in September 2007 as indicating that Mrs Kaljo had not complied with her obligation to do whatever was reasonably necessary to cause the special condition 43 event to happen. In the later part of August 2007, there was continuing email correspondence between the respective solicitors about progress in negotiations with the Council about “the deed”. Mrs Coady’s solicitors did not say at any time after 15 August 2007 – or at all – that the condition was no longer relevant. They did not say in their letter of 24 September 2007 disputing Mrs Kaljo’s right to rescind that any right to rescind had expired. They, like Mrs Kaljo’s solicitor, approached the matter throughout on the footing that it was for Mrs Kaljo to continue at all times to seek a resolution with the Council and that special condition 43 continued at all times to be operative.

45 Had the parties accepted that a right to rescind had arisen in each of them at the end of 8 August 2007 and then evaporated at the end of 15 August 2007, they would not have taken the stances they in fact took in late August and in September 2007. Rather, they would have approached matters on the basis that non-occurrence of the special condition 43 event by 15 August 2007 meant that the special condition was, as it were, spent; or, putting this another way, that the non-occurrence had produced a right for each to rescind within the relevant period of seven days and, since neither had done so, no right of rescission based on special condition 43 could ever be exercised, with the result that non-satisfaction of the condition was of no further force or relevance after 15 August 2007.

46 It is my opinion that, as in Lantry v Tomule Pty Ltd (above) at [63], both parties treated the completion of the contract as remaining conditional after the expiration of the period of seven days referred to in standard condition 29.7.1.

47 The case must therefore be regarded as one in which the right to rescind that arose when the special condition 43 event did not occur by 8 August 2007 continued to be available to each party even though the period of seven days had run without either having rescinded; so that it was open to either thereafter to rescind.

48 Two things follow from this. The first is that there was an added reason why it was not open to Mrs Coady to give the notice to complete she purported to give on 30 August 2007. Because special condition 43 remained operative and the event there specified had not occurred, Mrs Kaljo was not in default. Default by one party is a condition precedent to the right of the other party to give a notice to complete: standard condition 15 (and see Jillinda Pty Ltd v McCourt [1983] NSW Conv R 55,145).

49 The second and important point is that Mrs Kaljo, by her notice of 24 September 2007, validly and regularly exercised the right of rescission that the parties, by their conduct, accepted as being then available to each party.

50 The situation was thus one in which (a) the condition concerned with Mrs Kaljo’s entering into a deed “with and in favour of” the Council remained at all times operative and unsatisfied; (b) Mrs Kaljo did not fail to do what was reasonably necessary on her part to bring about satisfaction of that condition; (c) Mrs Coady was never in a position from which she would be able to deliver an unencumbered title on completion (a circumstance which, together with lack of default on Mrs Kaljo’s part, meant that Mrs Coady never had any entitlement to serve a notice to complete); (d) it was open to either party, after 8 August 2007, to rely on the non-occurrence of the special condition 43 event as a basis for rescission; and (e) Mrs Kaljo validly did so by her notice of 24 September 2007.

51 In the result, therefore, Mrs Kaljo is entitled to recover the deposit and there will be judgment for her as plaintiff on the summons and as cross-defendant on the cross-summons. There will also be a costs order in her favour.

52 Although I have reached the conclusions just stated, it is appropriate that I make some observations about the position that would have pertained if, contrary to what I have said in that respect, it was not open to Mrs Kaljo to rescind on 24 September 2007 because the right to rescind was, by operation of standard condition 29.7.1, not available to be exercised after 15 August 2007.

53 Mr Armfield submitted that, in those assumed circumstances, Mrs Kaljo’s purported rescission on 24 September 2007 and Mrs Coady’s purported termination on 26 September 2007 were, respectively, repudiation of the contract by Mrs Kaljo and acceptance of that repudiation by Mrs Coady so that the contract was discharged by breach on Mrs Kaljo’s part and thereby came to an end. The problem with that analysis is that Mrs Coady’s action of 26 September 2007 was not consistent with her treating the contract as at an end. On the contrary, she purported to exercise the express right of termination conferred by standard condition 9 as a consequence of Mrs Kaljo’s failure to complete within the time Mrs Coady considered herself to have made of the essence by her notice to complete. In that way, Mrs Coady showed very clearly that she considered the contract to remain on foot as the source of her right to terminate. The possibility that the correct characterisation of events would have been repudiation and acceptance thereof must therefore be rejected.

54 In the assumed circumstances, the true position, it seems to me, is that for which Mr Zammit contended, that is, that the contract would have continued in operation in its conditional state despite both Mrs Kaljo’s purported but ineffective rescission on 24 September 2007 and Mrs Coady’s purported but ineffective termination on 26 September 2007, with neither party being in default under the contract but both acting on the basis that it was no longer in force. The correct characterisation of that situation is, in my view, that described in the joint judgment of Stephen J, Mason J and Jacobs J in DTR Nominees Pty Ltd v Mona Homes Pty Ltd [1978] HCA 12; (1978) 138 CLR 423 (at CLR 434):

“Thus the contract in the present case was still on foot on and after 25th July 1974. Neither party had effectively rescinded. But there can be no doubt that by 5th December 1974, when these proceedings were commenced, neither party, whatever may have been their reasons, regarded the contract as being still on foot. Neither party intended that the contract should be further performed. In these circumstances the parties must be regarded as having so conducted themselves as to abandon or abrogate the contract. The position is similar to that with which Isaacs J dealt in Summers v The Commonwealth (1918) 25 CLR 144. The plaintiff did not succeed in his action for damages for breach of contract, but on the other hand the defendant had not rescinded. Time passed during which neither party took any steps to perform the contract. It was held that the parties had so conducted themselves as mutually to abandon or abrogate the contract.

A consequence of this abandonment and abrogation was held by Isaacs J (1918) 25 CLR at p.153 to be that the deposit was returnable. Likewise the deposit is returnable by the appellant to the respondents in the present case.”

55 Had the right of rescission purportedly exercised by Mrs Kaljo been unavailable because of the time limit in standard condition 29.7.1, the outcome with respect to the destination of the deposit would therefore still have been as stated at paragraph [51] above.

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