Kuzamanovic v Elliminyt Pty Ltd
[2002] VSC 363
•22 August 2002
| IN THE SUPREME COURT OF VICTORIA | Not Restricted |
AT MELBOURNE
COMMERCIAL AND EQUITY DIVISION
No. 6521 of 2002
| MILENKO KUZAMANOVIC AND VERSATILE INDUSTRIES PTY LTD (ACN 078 472 198) | Plaintiffs |
| v | |
| ELLIMINYT PTY LTD (ACN 063 713 771) | Defendant |
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JUDGE: | HARPER J | |
WHERE HELD: | MELBOURNE | |
DATE OF HEARING: | 22 AUGUST 2002 | |
DATE OF JUDGMENT: | 22 AUGUST 2002 | |
CASE MAY BE CITED AS: | KUZAMANOVIC & ANOR v ELLIMINYT PTY LTD | |
MEDIUM NEUTRAL CITATION: | [2002] VSC 363 | |
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Interlocutory injunction – Property – Sale of land – Failure by purchaser to effect settlement on due date – Defective notice of rescission – Whether notice invalid – Extension of time for payment – Whether time of the essence – Continued failure to pay – Serious issue to be tried – Balance of convenience – Sale to innocent third party – Application for removal of caveat.
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APPEARANCES: | Counsel | Solicitors |
| For the Plaintiffs | Mr K. Hercules (Solicitor) | Keith Hercules Solicitors |
| For the Defendant | Mr M. Flynn | D.J. Thwaites Pty Ltd |
HIS HONOUR:
The second plaintiff in this matter (Versatile Industries Pty Ltd) alleges that it is the nominee of the first plaintiff (Mr Milenko Kuzmanovic) pursuant to a contract of sale made on 25 March 2002. The subject of the sale is the land known as Lot 83 Star Crescent, Hallam. The purchase price is $307,500, payable by a deposit of $30,750 on signing the relevant documentation, with the balance being payable on 28 June 2002. The transaction is evidenced by a "Contract Note" of that date. This, the parties agree, incorporates the provisions of Table A (in the seventh schedule) of the Transfer of Land Act 1958. Condition 5 of the table provides that "time shall be of the essence of this contract". By the contract note, the purchaser is described as "Milenko Kuzmanovic and/or his nominee". The vendor is the defendant, Elliminyt Pty Ltd. It admits the sale, but not the nomination - which, according to the statement of claim, was in writing and dated 7 June 2002. The plaintiffs allege that it was served upon the defendant on 11 June. This, too, is an allegation that the defendant does not admit in its pleading; but in an affidavit sworn on 16 August, Ms Juliann Skeparoski, the solicitor handling the file on behalf of the defendant, states that the nomination was received in the office of the defendant's solicitors on 13 June. This issue is not presently in dispute.
Settlement, according to the contract note, was (as I have already recorded) due on 28 June. It did not take place then, and has not occurred since. The plaintiffs were unable to raise the necessary finance. On 28 June, however, the plaintiffs' solicitor (Mr Keith Hercules) sought an extension until 31 July. This request was refused. Then, on 3 July, the defendant's solicitors, on instructions from their client, sent by post a notice of rescission to the plaintiffs, with a copy to Mr Hercules. In their statement of claim, the plaintiffs allege that the notice was received by them on 4 July. Not surprisingly, this allegation is admitted by the defendant.
The plaintiffs assert that the notice is ineffective, and that although the contract is still on foot, the defendant wishes to proceed as if it were not. By summons issued on 25 July, which was also the day on which the Writ itself was issued, the plaintiffs seek an interlocutory injunction restraining the defendant from forfeiting the deposit or dealing in any way with the land.
This raises a pleading point. The statement of claim does not allege that a deposit was ever paid. By paragraph 2 of an affidavit sworn on 6 August, however, the first plaintiff swears that the agreed deposit was in the sum of $31,750 (sic), and that that sum has been paid. Payment is not disputed by the defendant, although the amount specified in Mr Kuzmanovic's affidavit does not accord with that in the contract note. For present purposes, the difference is immaterial (which is not to suggest that the defendant acknowledges receipt of the amount identified in the affidavit of the first plaintiff).
The defendant most certainly does, however, dispute the allegation that the notice of rescission is invalid. At the same time, it concedes that the notice is inaccurate in two principal respects. First, the notice informs the plaintiffs "that unless the default [i.e. that committed by the failure to settle on 28 June] is remedied within the remedy time ... the contract shall be rescinded pursuant to Condition 2 of Table A ...".
But the relevant condition is not Condition 2. It is Condition 6. Moreover (and this is the second inaccuracy in the notice), the amount by which the plaintiffs are said to be in default is $307,500. This, of course, is to ignore the fact that a deposit has already been paid. The amount owing as at 28 June, assuming that settlement had then been affected, was the purchase price less the deposit plus or minus the appropriate adjustments. The latter may not have required calculation for the purpose of specifying the amount by which the purchasers were in default. Failure to take the deposit into account was, however, a most material error.
In my opinion, the notice of rescission is ineffective. While the reference to the incorrect Condition may not of itself be fatal (although the better view may be that it is), the insertion of the incorrect amount payment of which will remedy the default does, it seems to me, destroy the document's validity. A defaulting purchaser is entitled to be informed, accurately and in writing, of exactly how much must be paid if the default is to be remedied.
The plaintiffs submit that the defects in the notice of rescission are such as to render it invalid. I agree. They go on to submit that the contract is therefore still on foot, and that, accordingly, I should restrain the defendant from proceeding with the sale of the land to another purchaser. The second transaction is due for settlement in the very near future. In the meantime, the plaintiffs or one or other of them have (according to the defendant) not only moved machinery onto the land, but lodged a caveat, dated 29 July, in which they claim an estate in the land in fee simple. While it remains on title, the caveat will, of course, act to prevent the registration of the interest of any new proprietor.
The defendant resists the application of the plaintiffs. It submits that there is a question to be tried. Not only should I not grant the relief sought by the plaintiff, but (the defendant submits) I should order not only the removal of the caveat from the title, but also the machinery from the land.
These submissions are founded on the fact, which is not in dispute, that the purchaser or purchasers (and the second plaintiff is the party on whose behalf the caveat has been lodged) has or have neither paid nor tendered the balance of the purchase price. And this despite the fact that the defendant has been prepared to give them additional time.
It seems that the notice of rescission did not persuade the plaintiffs to give up. On 16 July, their solicitor contacted the solicitors for the defendant. The news was that finance had been approved. The proposal was that settlement proceed on 19 July, it being thought that the plaintiffs would then have the finance in place. Arrangements were made accordingly; indeed, the defendant's solicitors took the initiative in fixing the time and place: the National Australia Bank, 271 Collins Street, at 3.30 p.m.
It was not to be. At some time before the appointed hour, the plaintiffs' solicitor informed Ms Skeparoski that his clients could not settle that day, but should be able to do so early in the following week. Acting on her client's instructions, Ms Skeparoski told Mr Hercules that "no action should be taken pursuant to the notice of rescission until Wednesday 24 July 2002 to forfeit the deposit": see the affidavit of Ms Skeparoski sworn 16 August 2002 at paragraph 11.
Even this additional time was insufficient. In paragraph 12 of her affidavit, Ms Skeparoski sets out what happened next:
"By facsimile dated 23 July 2002 the plaintiffs' solicitor requested an extension of the settlement date and sent a copy of loan approval purportedly provided by 'BankWest' to the second plaintiff. This loan approval indicated on its face that it was conditional on a credit check, search and valuation."
The facsimile to which Ms Skeparoski referred is exhibited to her affidavit. It contains the handwritten notation:
"Purchasers request further two (2) weeks extension to contract of sale. Herewith are approvals per ... BankWest."
Accompanying the facsimile was a further document under the letterhead of "BankWest" which contained the following notation:
"Additional comments satisfactory. Valuation clear. Credit check and satisfactory company search."
Not surprisingly, the defendant's solicitors did not accept this material as indicating that the purchasers had by 23 July arranged the appropriate finance.
The following day, 24 July, the defendant's solicitors forwarded a facsimile to Mr Hercules advising him that the contract was rescinded. The facsimile contains the following paragraph:
"Pursuant to the note of rescission, the contract has been rescinded and my client intends to rely upon its rights pursuant to that notice."
In these circumstances, I accept that there is a serious issue to be tried. In my opinion, should the evidence at trial remain as it is now, the conclusion would be that the plaintiffs have repudiated the contract and that such repudiation has been accepted by the defendant thus bringing the contract to an end as at 24 July 2002. This conclusion is based, at least in part, upon an authority which seems to me to be almost directly in point. That authority is Nund v. McWaters, a decision of the Full Court of the Supreme Court of Victoria, (1983) Victorian Conveyancing Reports at page 62,354.
The leading decision in that case was given by Brooking, J. In it he considered the question of repudiation where the real ground of repudiation subsequently appears to be different from that first put forward by the party alleging that the contract has come to an end. His Honour also considered the position where a purchaser was in default in payment of the purchase price, where an ineffective notice of rescission had been served, but where - by its persistent failure to place itself in a position from which it could settle - the purchaser had evidenced such an inability to meet its contractual obligations as to amount to a repudiation. In such circumstances, His Honour held the fact that the notice of rescission was ineffective or invalid did not deprive the innocent party of the right to accept a repudiation as such and to terminate the contract accordingly.
As I have indicated, it seems to me on the authority to which I have just referred that there is here a serious issue to be tried. It also seems to me that the balance of convenience lies with the defendant. If it be true, as I accept for present purposes, that the defendant has resold the land to a new purchaser, that third party may well have an interest in the land which would take priority over that of the plaintiffs should there be occasion to adjudicate upon the several claims to priority.
The caveat to which I have referred was lodged by the plaintiffs, as its date indicates, on or after 29 July. That was at least four days after the new contract of sale was, on the evidence before me, entered into. Accordingly, were I to accede to the relief sought by the plaintiffs, I would raise the possibility of orders being made by this court in this proceeding which would or might come into direct conflict with orders that might be sought by the new purchaser in any proceedings against the present plaintiffs.
There is another consideration which it seems to me leads to the conclusion that the balance of convenience lies with the defendant. If the plaintiffs are correct in their contentions, and if in any contest over priorities they were to prevail over the interest of the new purchaser, their entitlement to damages would remain.
Accordingly, in deciding the present interlocutory application in favour of the defendant, I am not depriving the plaintiffs of such relief as they may be entitled to obtain by way of damages. On the other hand, accession to the plaintiffs's submissions would result in the defendant in effect being required to specifically perform the contract of sale. It would be required to do so in circumstances where the plaintiffs are not even yet in a position to specifically perform their part of the bargain.
An open offer was made yesterday by or on behalf of the plaintiffs to settle the purchase within 14 days. Such an open offer does not amount to a present tender. Not only that, but there is reason to have some scepticism about the prospects of the plaintiffs being able, even with a further 14 days, to come good with the purchase money. Be that as it may, the uncontested evidence before me is that the plaintiffs are not now in a position to settle. Accordingly, it seems to me, they are not now in a position to seek specific performance.
For these reasons, it seems to me that the plaintiffs' application for an interlocutory injunction restraining the defendant from parting with possession, transferring, leasing or dealing in any way with the land should be dismissed.
On the other hand, the relief sought by the defendant should in part be allowed. By its summons, the defendant seeks an injunction requiring the plaintiffs to forthwith remove the machinery and the caveat. In the circumstances, I think I should grant that relief and orders will be made accordingly. I will not, however, make an order which would have the effect of forfeiting the deposit. It may be that if this matter does go to trial and the plaintiffs succeed, they will be entitled to damages. They should not be placed in a position where any such entitlement would be rendered nugatory in part or in whole because the deposit had in the meantime been dissipated. Accordingly, as a condition of granting the relief sought by the defendant, I will order that the deposit be dealt with in a way which ensures that should the plaintiffs ultimately succeed, that deposit will be available to them as meeting in whole or in part such damages as they may be awarded.
I will hear the parties on what orders would be appropriate to secure the deposit pending the ultimate outcome of this litigation.
(Discussion ensued.)
The undertaking I have in mind is in these terms: under the heading "Other Matters", there will appear the following:
"Upon the undertaking of the solicitors for the defendant to pay into an interest bearing account and thereafter retain in that account an amount equal to the deposit of $30,750 paid to their client by the plaintiffs or one or other of them on 25 March 2002, the court orders as follows -"
and then the orders will be set out thereafter.
(Discussion ensued re costs.)
Costs to be costs in the cause.
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