Kenning Investments Pty Ltd v Rusty Rees Pty Ltd

[1992] QCA 149

IN THE COURT OF APPEAL	[1992] QCA 149
SUPREME COURT OF QUEENSLAND

No. 1567 of 1991

BETWEEN:

KENNING INVESTMENTS PTY. LTD.

(Plaintiff) Respondent

AND:

RUSTY REES PTY. LTD.

(Defendant) Appellant

JUDGMENT - THE COURT

Delivered the Seventeenth day of June 1992

This is an appeal from an order of Thomas J. in a case concerning a sale of land. On 21 October 1991, Byrne J. declared that a contract dated 15 March 1991 for the sale by the respondent to the appellant of land at Cairns ought to be specifically performed and made consequential orders with a view to achieving that result. However, the sale was not completed and on 8 November 1991, the respondent applied to Thomas J. in chambers for orders that the contract be rescinded, the deposit of $100,000 paid under it be forfeited to the respondent and that the appellant pay to the respondent damages for breach of the contract to be assessed. That relief was granted and produced this appeal.

It appears from the evidence placed before Thomas J. that after the decree for specific performance was made, the respondent's solicitors wrote to the appellant's solicitors giving notice requiring settlement at a specified time and place on 31 October 1991. Subsequently, the respondent's solicitors provided certain further information about the proposed settlement. But on the day proposed for settlement, the appellant's solicitors purported to rescind the contract on two grounds, one relating to land tax and the other concerning "penalty interest". Further correspondence ensued and the appellant's solicitors adhered to the stance they had taken on behalf of their client.

Thomas J. described the two grounds raised before him by the appellant as being "pretexts ... in an attempt to justify the intention not to complete". His Honour explained in his reasons that it was submitted that the application to him was made under O.18A of the Rules of the Supreme Court. His Honour rejected a contention that there is not enough evidence to show the requisite readiness, willingness and ability to settle on the proposed date, namely 31 October 1991 and rejected the two other contentions which had been made - relating to land tax and to penalty interest.

All of these points were at first pursued before us, but the penalty interest point was ultimately abandoned.

Procedure

Mr. Mark Martin, for the appellant, contended that Thomas J. should have treated the application before him as having been made under O.18A r.1 of the Rules, which permits an application for summary judgment in actions for specific performance and the like. The advantage from the appellant's point of view of having the application so treated was thought to be that the requirements of that rule had not been complied with.

In our view, the application was not one for summary judgment in an action, but was brought in reliance upon the Court's inherent jurisdiction to grant relief consequential upon decrees for specific performance. The true character of the application appears from Fry on Specific Performance 6th Edition p.547-548:

"He [the party to a specific performance action, after judgment] may apply to the Court (by motion in the action) for an order rescinding the contract. On an application of this kind, if it appears that the party moved against has positively refused to complete the contract, its immediate rescission may be ordered ...".

At p.548-549, the author explains that on such an application, an order may be made determining the deposit to be forfeited to the vendor, permitting the vendor to resell and ordering the purchaser to pay the amount of any deficiency on resale.

Daniell's Chancery Practice, Volume 2 (1914) says at

p.1207:

"If after a judgment for specific performance, the defendant, the purchaser, makes default, the contract may also, on the application of the vendor, be ordered to be rescinded ...".

Examples of applications of this kind are to be found in the books; one is Singh v. Nazeer [1979] 1 Ch. 474 at 480-481, in which the Vice Chancellor said:

"... it also seems clear that once an order for specific performance has been made, there are adequate remedies available to either party if the other does not appear to be proceeding under the order with due dispatch. Thus an application may be made for a time and place for completion to be fixed, or for an order rescinding the contract, either forthwith, if the other party is refusing to complete, or else in default of completion within a limited time ... As the court has become seised of the matter, and has made an order, it seems to me that subject to anything that the parties may then agree, the working out, variation or cancellation of that order is essentially a matter for the court".

Australian examples are McKenna v. Richey [1950] V.L.R. 360 and Hughes v. Pellicciari [1982] 2 B.P.R. 9509.

Until Johnson v. Agnew [1980] A.C. 367 which was an appeal relating to an application of this kind, it was thought in England that on an application for a rescission order after a decree for specific performance, damages could not awarded for breach of contract, but following Australian authority, including McKenna v. Richey, the House of Lords there held the contrary. The case showed that to obtain an order for assessment of such damages, the respondent was not obliged to sue again. In Sunbird Plaza Proprietary Limited v. Maloney (1988) 166 C.L.R. 245, the High Court held or rather reaffirmed that after a decree of specific performance, a party cannot rescind without the leave of the court "or, more appropriately, the vacation of the order" (p.260); the Court at least implicitly upheld the practice which was followed in the present case.

We are of opinion that the application made to Thomas J. was of the character we have mentioned and was not to be treated as one under O.18A for summary judgment in the action. Submissions made on the assumption that O.18A governed the matter do not therefore require to be discussed.

Ready, willing and able

The next point taken was a complaint about a paragraph in the affidavit of Mr. G.S. Smith relied on before Thomas J. The affidavit said that at the time fixed for settlement on 31 October 1991, the respondent was "ready, willing and able to settle the contract of sale ...". It was suggested that this was too broad and that the respondent should have proved specifically that in relation to each of the important obligations under the contract, it was ready, willing and able - for example, that it had executed the memorandum of transfer, that the holders of mortgages on the land had prepared discharges ready for the settlement and so forth.

The appellant might perhaps have objected to the evidence we have mentioned, on the ground that it was a mere statement of opinion or of a conclusion, rather than of the facts on which the opinion or conclusion was based. It appears to us that it was incumbent upon the appellant to object to the paragraph we have mentioned; had the objection been upheld, no doubt the respondent could have given consideration to adducing evidence of a more specific kind. Without deciding whether the statement as to readiness, willingness and ability was too "bald", as counsel asserted, we hold that by failing to raise the objection, the appellant waived it. It should be added that the appellant did not, before Thomas J., cross-examine on this statement, nor seek to call evidence to contradict it.

In these circumstances, it was right for Thomas J. to act

upon it.

There is a further answer to the technical objection just mentioned. According to the evidence of Mr. Smith, on the date fixed for settlement, 31 October 1991, and before the time fixed for settlement (3 p.m.), the appellant's solicitors sent a fax purporting to rescind the contract.

Upon Mr. Smith inquiring of those solicitors, they reaffirmed that the contract had been terminated. It therefore became unnecessary for the respondent to so arrange matters as to be able to settle at the appointed time: Foran v. Wight (1989) 168 C.L.R. 385 at 434, 453, 454.

Land Tax

Mr. Martin took two points about land tax: first, that on the proper construction of the contract, the respondent was obliged to pay all land tax accrued, whether or not an assessment had issued and, secondly, that there was a land tax charge constituting a defect in the title.

Consideration of the first point requires that the relevant provisions of the contract be set out. It is in the form adopted in 1982 by the Real Estate Institute of Queensland Limited with a number of typed additions. Clause 13 of the printed form reads in part as follows:

"All rates and taxes (including land tax) and other outgoings (except insurance premiums on insurances effected by the Purchaser) with respect to the property hereby sold shall be paid and discharged by the Vendor up to and including the date of possession and thereafter by the Purchaser. Such rates taxes and outgoings shall if necessary be apportioned in the case of those paid by the Vendor on the amount actually paid and in the case of those unpaid on the amount payable disregarding (in the latter case) any discount for early payment.

...

Land tax shall be apportioned on the basis that as at midnight on the previous 30th June the Vendor owned no land other than his interest in the land and was a natural person resident in Queensland.

If at the date of possession there is not a separate unimproved value of the land in effect under the Valuation of Land Act 1944 then land tax shall be apportioned on a deemed unimproved value which shall equal (A x B) ÷ C where A is unimproved value in effect under Valuation of Land Act 1944 for the parcel of which the land forms part B is the area of the land and C is the area of the parcel".

It will be noted that the first of these paragraphs contemplates that the vendor may have an apportionment in its favour in relation to taxes it has paid, or an apportionment against it in respect of taxes unpaid.

The other clause dealing with the question - clause 36 - is a special condition which reads as follows:

"Notwithstanding Clause 13 hereof, land tax shall be adjusted on the basis that the vendor is a corporation not an individual and all outgoings shall be adjusted and paid for on the date of possession".

The first part of this sentence has to do with the mode of apportionment, not with the question whether the vendor is to pay any land tax. The second part - "all outgoings shall be adjusted and paid for on the date of possession" - is obscure in meaning, but does not appear to us to add anything relevant to the present problem. We can see nothing in the contract which imposes any obligation on the vendor to pay land tax; the assumption is that the liability to pay land tax, as opposed to the question of apportionment, is dealt with by the relevant statute.

Section 8 of the Land Tax Act 1915 ("the Act") imposes a land tax upon the unimproved value of lands. Section 10(2) reads in part as follows:

"Land tax shall be paid on such day or days, and either in one sum or by instalments ... as may be prescribed".

It should also be noted that the Act empowers, chiefly by s.18, the issue of assessments of land tax. Section 32 reads as follows:

"Land tax shall be due and payable upon such date as the Commissioner notifies the taxpayer in the notice of assessment served as prescribed".

Section 37(1) of the Act reads in part as follows:

"Land tax shall until payment ... be a first charge upon the land taxed ... Provided that no such charge shall be of effect as against a bona fide purchaser for the value who at the time of purchase made inquiry of the Commissioner as prescribed, and was informed that there was no liability".

Section 37(2) gives the Commissioner power to register the charge created by s.37(1).

Some consideration was given to the effect of these provisions in a case where land tax is due but unpaid, in Davisbourne Pty Ltd v. Kis (Australia) Pty. Limited [1985] 2 Qd.R. 341. There, the contract provided for an apportionment of land tax as at the date of settlement, as does the contract before us. There was unpaid land tax at the date of settlement and the vendor proposed that settlement be effected by applying part of the purchase price in full discharge of that liability. It was argued that land tax was a charge on the land and that while tax remained due and unpaid, the title was not free from encumbrances as the contract required. Shepherdson J. held that the expression "free from encumbrances" used in the relevant part of the contract had to be read down, in view of the contractual provision contemplating apportionment of land tax liabilities and that, in the circumstances, the purchaser was obliged to settle.

In the present case, the facts were somewhat different.
When settlement was first contemplated in July 1991, the
appellant's solicitors suggested that a sum of $26,500 be
held in their trust account pending issue of a land tax
clearance. That suggestion was taken up by the vendor's
solicitors in preparing for the proposed settlement of 31
October 1991, although the vendor's solicitors proposed to
hold a lesser amount, namely $19,396.85. On the day of
settlement, but before the time fixed for settlement, the
appellant's solicitors sent a fax to the respondent's
solicitors complaining that the sum of $26,500 previously

mentioned had not been paid; the fax also, as has been

mentioned previously, purported to rescind the contract.
The vendor's solicitors then proposed that settlement could
take place on the basis originally suggested by the
purchaser's solicitors, but that was not agreed to. The
figure of $26,500 had been put forward by the Commissioner
of Land Tax, apparently in anticipation of an assessment
which was to issue between November 1991 and January 1992.

It appears to us unnecessary, for present purposes, to discuss the correctness of the decision in Davisbourne's case where, as we understand the facts, there was land tax presently due but unpaid. Here, tax had accrued but not yet become immediately payable, since no assessment had issued.

Since the contract plainly contemplated that settlement might occur in those circumstances, with an apportionment as to land tax, we interpret it as obliging the parties to settle where land tax has accrued but not become immediately payable.

Mr. Martin relied upon the decision of the Full Court

in Holland v. Goldtrans Pty Ltd [1984] Q.Conv.R. 54-149.
There, no land tax was payable, but the purchaser insisted
on a land tax clearance. The case does not appear to us
relevant to the present problem since, as the Court
distinctly found, there was no charge upon the land
(p.56,956 and 56,959). We confess to some uncertainty as to
precisely what was held by the majority in that case, with
respect to the question of land tax. It may be implicit in
the reasons that there is a general obligation lying upon a
vendor of land in Queensland to produce a document under
s.37(1B) of the Act certifying whether or not land tax
remains unpaid and that in default of production of that
certificate, the purchaser may decline to settle. Since the
point was not argued, we prefer not to comment upon it.
Holland's case is no authority for the view that the
purchaser may decline to settle, merely because there is, as
there was here, an accrued liability for land tax which is
not immediately payable because an assessment has not yet
issued.

As has been mentioned, the remaining point was a submission that a provision of the contract required the payment of interest constituted a penalty. That was not pressed and we think it unnecessary to say anything about it.

The appeal should be dismissed, with costs.

IN THE COURT OF APPEAL

SUPREME COURT OF QUEENSLAND

No. 1567 of 1991

Before the Court of Appeal
Mr. Justice Pincus
Mr. Justice Davies

Mr. Justice Derrington

BETWEEN:

KENNING INVESTMENTS PTY. LTD.

(Plaintiff) Respondent

AND:

RUSTY REES PTY. LTD.

(Defendant) Appellant

JUDGMENT - THE COURT

Delivered the Seventeenth day of June 1992

MINUTE OF ORDER:	The appeal is dismissed, with costs.
CATCHWORDS:	EQUITY - SPECIFIC PERFORMANCE - Plaintiff sought order rescinding contract after defendant in breach of order to specifically perform contract - whether plaintiff could obtain an order for damages on return of summons without fresh action.
CONVEYANCING - MORTGAGES CHARGES AND ENCUMBRANCES - Appellant claimed that unpaid land tax at date for completion was a charge on the land - whether vendor under REIQ contract bound to pay land tax prior to settlement - whether unpaid land tax an encumbrance or charge on the land. Land Tax Act 1915, ss.10, 37.
Counsel:	M. Martin for the Appellant C. Brabazon Q.C., with him K. McGhee, for the Respondent
Solicitors:	MIller & Harris for the Appellant Bells Solicitors for the Respondent
Hearing Date(s):	29 May 1992

IN THE COURT OF APPEAL

SUPREME COURT OF QUEENSLAND

No. 1567 of 1991

BETWEEN:

KENNING INVESTMENTS PTY. LTD.

(Plaintiff) Respondent

AND:

RUSTY REES PTY. LTD.

(Defendant) Appellant

_______________________________________________

Mr. Justice Pincus Mr. Justice Davies Mr. Justice Derrington

_______________________________________________

Judgment of the Court delivered on 17th June,

1992.

_______________________________________________

APPEAL DISMISSED, WITH COSTS.

_______________________________________________