Lantry v Tomule Pty Ltd

[2007] NSWSC 81

Reported Decision: (2007) ANZ Conv R 187

New South Wales

Supreme Court

CITATION:	Hilary Ignatius Lantry & Anor v Tomule Pty Ltd & 2 Ors [2007] NSWSC 81
HEARING DATE(S):	29-30/01/07
JUDGMENT DATE :	31 January 2007
JURISDICTION:	Equity Division
JUDGMENT OF:	White J
EX TEMPORE JUDGMENT DATE:	31 January 2007
DECISION:	See paragraphs 91, 93 and 94 of judgment.
CATCHWORDS:	Contracts – Vendor and purchaser – rescission of contract of sale of land – Condition precedent to parties’ obligations to complete – S.C.23 authorised rescission by either party if vendor unwilling or unable to obtain a Building Certificate prior to completion – Vendors’ failure to satisfy condition precedent – No requirement that purchaser establish that vendors were “wholly and finally” unwilling or unable to carry out work required for issue of Building Certificate – No requirement that purchaser establish that he was ready, willing and able to complete before entitled to exercise right to rescind – Whether purchaser in breach of term requiring provision of documents for transfer of liquor licence – Whether timely compliance waived - Purchaser not precluded from exercising right of rescission where purchaser’s breach did not contribute to the vendors’ non-fulfilment of S.C.23 – Held that purchaser’s rescission valid.
LEGISLATION CITED:	Conveyancing Act 1919 (NSW) Environmental Planning Assessment Act 1979 (NSW) Building Code of Australia Civil Procedure Act 2005 (NSW)
CASES CITED:	Suttor v Gundowda Pty Limited (195) 81 CLR 418 Gange v Sullivan (1966) 116 CLR 418 at 442 Perri v Coolangatta Investments Pty Limited (1982) 149 CLR 537 Aberfoyle Plantations Ltd v Khaw Bian Cheng [1960] AC 115 Shimden Pty Limited v Rona [2006] NSWCA 256 Immer (No. 145) Pty Ltd v The Uniting Church in Australia Property Trust (NSW) (1993) 182 CLR 26 Foran v Wight (1989) 168 CLR 385 Jeppesons Road Ltd v Di Domenico [2005] QCA 391 Nina's Bistro Bar Ltd (formerly Mytcoona Pty Ltd) v MBE Corporation (Sydney) Pty Ltd [1984] 3 NSWLR 613 Road Show Entertainment Pty Ltd v (ACN 053 006 269) Pty Ltd (1997) 42 NSWLR 462
PARTIES:	Hilary Ignatius Lantry & Anor v Tomule Pty Ltd & 2 Ors
FILE NUMBER(S):	SC 2977/05
COUNSEL:	Plaintiffs: J Ghabrial Defendants: J Priestley, S Ipp (31/01/07)
SOLICITORS:	Plaintiffs: Parke Maher Solicitors 1st Defendant: Friedlieb Byrne Solicitors 2nd & 3rd Defendants: Carmody Crampton

IN THE SUPREME COURT
OF NEW SOUTH WALES
EQUITY DIVISION

WHITE J

Wednesday, 31 January 2007

2977/05 Hilary Ignatius Lantry & Anor v Tomule Pty Ltd & 2 Ors

JUDGMENT

1 HIS HONOUR: The principal issue in this case is whether the purchaser rescinded a contract for the purchase of the London Hotel in Mirrool Street, Ardlethan, before the vendors terminated the contract for non-compliance with a notice to complete.

2 The plaintiffs, Mr and Mrs Lantry, are the vendors. The first defendant is the agent who holds the deposit. It entered a submitting appearance. The second defendant, Mr McKay, is the purchaser. The contract described him as purchasing for and on behalf of Dondro Pty Limited, a company to be incorporated. The third defendant is Dondro Pty Limited. There is no evidence that it ratified the contract. The second and third defendants did not dispute that the purchaser was the second defendant. Nothing turns on this except possibly as to costs.

3 The second and third defendants have brought a cross-claim for a declaration that they rescinded the contract and an order for the return of the deposit. Although not specifically sought in the cross-claim, they submitted that if they had not validly rescinded the contract, an order for the return of the deposit should be made pursuant to s 55(2A) of Conveyancing Act 1919 (NSW).

Contractual Terms

4 Contracts were exchanged on 31 May 2004. The effect of special condition 16, in light of the events which happened, was that completion was to take place within nine weeks from the date of contract, that is, 2 August 2004. The time for completion was not made essential. Clause 15 of the general conditions provided that if the party did not complete by the completion date, the party could serve a notice to complete if the party was otherwise entitled to do so.

5 The case involves the interpretation and effect of special condition 23, which provided:

" The Purchaser will forthwith apply to obtain a Survey Report and then a Building Certificate in respect of the subject property. This Contract is conditional upon the Purchaser obtaining a Building Certificate from Council prior to completion. Should the Council require work to be carried out or monies to be expended prior to the issue of the Building Certificate then the Vendors will at their expense carry out such work or expend such money to enable the issue of the Building Certificate. If the Vendors are unwilling or unable to carry out such work or expend such money to enable a Building Certificate to issue then the Purchaser shall have the option of rescinding the Contract by notice in writing to the vendors’ solicitors in which case the provision of clause 19 hereof shall apply and in addition the Vendors shall pay to the Purchaser the sum of $1,000.00 by way of reimbursement of costs and expenses incurred by the Purchaser herein. "

6 Clause 19, referred to in the last sentence, is contained in the general conditions of contract. It provided:

" 19 Rescission of Contract
19.1 If this contract expressly gives a party a right to rescind , the party can exercise the right -
19.1.1 only by serving a notice before completion; and
19.1.2 in spite of any making of a claim or requisition , any attempt to satisfy a claim or requisition , any arbitration, litigation, mediation or negotiation or any giving or taking of possession.
19.2 Normally , if a party exercises a right to rescind expressly given by this contract or any legislation -
19.2.1 the deposit and any other money paid by the purchaser under this contract must be refunded;
19.2.2 a party can claim for a reasonable adjustment if the purchaser has been in possession;
19.2.3 a party can claim for damages, costs or expenses arising out of a breach of this contract; and
19.2.4 a party will not otherwise be liable to pay the other party any damages, costs or expenses. ”

7 Clause 29 of the general conditions provided:

" 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.
…
29.6 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; and
29.7.2 if the event involves an approval and an application for 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 -

o either party serving notice of the event happening;

o every party who has the benefit of the provision serving notice waiving the provision; or

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

…
29.9 A party cannot rescind under clauses 29.7 or 29.8 after the event happens. "

8 The vendors also relied on special condition 13.2.1. Special condition 13 was headed "Completion Conditional upon Transfer of Liquor License)", Special condition 13.2.1 provided:

" The Purchasers shall within twenty (20) days after the date of this Agreement (and in this respect time shall be of the essence) deliver to the Vendor’s Solicitors, in triplicate, an Application and Affidavit of Transferee completed and executed in accordance with the provisions of the Liquor Act, the Regulations thereunder and the requirements of the Licensing Court for the transfer of the Hoteliers License (Serial Number 120435) “the License” from the present Licensee, Barry Jones to the nominee of the Purchasers and a cheque in favour of the Registrar of the Licensing Court for the prescribed fee. The Purchasers shall also provide all other documents required to facilitate the transfer including Direct Debit Authority for Gaming Fees and prerequisite Course Certificates for Holders of Hoteliers Licenses. ”

9 It was common ground that the building certificate referred to in special condition 23 was a certificate under 149D of the Environmental Planning and Assessment Act 1979 (NSW). Such a certificate has the effects prescribed by s 149E.

Outline of Principal Events

10 No building certificate was issued by 2 August 2004. The purchaser did not then seek to rescind the contract.

11 By 1 October 2004, a building certificate had still not been issued. The relevant council, the Coolamon Shire Council, advised that a certificate would not be issued until required rectification work had taken place on 1 October 2004. The purchasers' solicitor, Mr Lamond, of Lamond Howard & Associates, gave the first notice relied on by the purchaser as a notice of rescission. Another notice was given on 27 October 2004 when matters had not further progressed. The vendor did not accept the validity of the rescission.

12 The work required to obtain a building certificate was completed in November 2004. The building certificate was issued on 22 November 2004. The vendor sought to complete the contract. The purchaser maintained that the contract had been rescinded.

13 On 30 November 2004, the vendors' solicitor, Mr Maher of Parke Maher, solicitors, served a notice to complete. The purchaser refused to complete maintaining that the contract was already at an end.

14 On 24 January 2005, the vendors gave notice of termination following the purchaser's failure to complete.

Vendors’ Contentions

15 Counsel for the vendors argued that the purchaser was not entitled to rescind unless and until:

(a) the purchaser gave a notice to complete in accordance with clause 15 of the contract; and

(b) could prove that the vendors were unwilling or unable to carry out the work or to expend the money required by the council for the issue of the building certificate.

16 Counsel for the vendors submitted that the purchaser had to show that the vendors were "wholly and finally" unwilling or unable to carry out the required work. It was not enough, so it was submitted, that the building certificate had not been issued before the time which the contract provided for completion arose. Nor was it enough, so it was submitted, for the purchaser to demonstrate that the required work had not been carried out by that time, or within a reasonable time after the date for completion provided by the contract.

17 Counsel for the vendors also submitted that the purchaser could not rescind unless he demonstrated (the onus being on him to do so) that he was ready, willing and able to complete the contract if the building certificate were issued, and that he was not in breach of any of the provisions of the contract. It was submitted that the purchaser could not do this because he was in breach of clause 13.2.1.

18 The vendors accepted there was no causal relationship between the alleged breach of clause 13.2.1 and the fact that the required work was not completed until November 2004 and the building certificate was not issued until 22 November 2004.

Work Done to Obtain Building Certificate

19 Because of the vendors' submission as to what the purchaser had to establish in order to invoke clause 23, and because of the purchaser's alternative claim under s 55(2A) of the Conveyancing Act, it is necessary to consider in some detail what steps were taken to obtain the building certificate.

20 There was no dispute that the purchaser satisfied the requirements of the first sentence of special condition 23. He applied to the Coolamon Shire Council on June 2004 for a building certificate. Mr Lamond advised the Council that the purchaser was obtaining a survey report which would be sent to the council to enable the building certificate application to be finalised. The survey was obtained on 18 June 2004 and received by the Council on 21 June 2004.

21 On 5 July 2004, the Council wrote to the plaintiffs' solicitors in respect to the application. Council wrote:

" It should be noted that the issuing of a Building Certificate does not preclude Council from issuing an Order in relation to fire safety or fire safety awareness in accordance with Order No: 6 in Table 121B of the Environmental Planning and Assessment Act, however, Council would like to advise of issues raised in relation to fire safety awareness when inspecting the above mentioned property.
This inspection failed to locate smoke detectors, portable fire extinguishers, emergency lighting and exit signage. It was also noted that fire separation between the motel and hotel and between separate living quarters did not meet the fire separation requirements of the Building Code of Australia.
Council is unable to adequately determine the full requirements necessary for a fire safety upgrade until receipt of information including building plans in accordance with Clause 149C(1) of the Environmental Planning and Assessment Act have been submitted.
Further inspection revealed other areas of concern that in accordance with Section 14D(5) of the EP & A Act permits Council to defer its determination of any Building Certificate until such time as the above work had been completed. ”

22 There was then listed seven items of required repairs. These did not relate to fire safety issues but to the general condition of the building such as water damage to the western wall of the hotel accommodation, and damage to the septic tank and guttering. The letter continued:

" Coolamon Shire Council believes that the major issue at the London Hotel/Motel is fire safety. Whilst this does not preclude Council from issuing a certificate it is felt that public safety and fire awareness is an issue that must be dealt with now. For this reason Council will need a set of floor plans, to scale, in order to make an assessment of the required fire provisions.
The other issues raised in this report also require attention and Council will not issue a Building Certificate until work to rectify the problems has been completed. ”

23 On 9 July 2004, Lamond Howard & Associates sent a copy of this letter to Parke Maher. Mr Lantry received a copy of the letter from his solicitors on 13 July 2004. On 6 July 2004, a copy of the letter had been sent by the Council, addressed to Mr Lantry, to the facsimile number of his son. The letter was marked to his attention. It is likely that Mr Lantry saw the letter before 13 July, but nothing turns on the precise date of receipt by him.

24 Mr Lantry deposed that he contacted a Mr Jamieson, a plumber, to repair the plumbing and carry out repairs to the septic tank. However, it is clear that this work was not done until November 2004. Mr Jamieson's invoice is dated 13 November 2004 and Mr Lantry accepted that the plumbing work was not carried out until in or about November 2004.

25 Mr Lantry engaged the services of Wagga Fire Security ("WFS") to address the fire safety issues raised by council. He met with Mr Turner of that firm on or about 16 July 2006. WFS installed fire extinguishers, exit and emergency lights, a fire alarm and an occupant warning system. On 9 August 2004, WFS signed a form called a "Form 15A fire safety system" certifying that the fire safety measures referred to had been assessed by a properly qualified person and met the required standards. On the same day, WFS provided an invoice to Mr Lantry in the sum of $17,780.16. There was no issue that that invoice had not been paid.

26 On 10 August 2004, the hotel broker acting for the vendors, Mr Tinning of Chris Tinning & Co, wrote to the Council. He enclosed the form 15A provided by WFS. He advised that the issues of fire safety awareness had been addressed and that the westerly wall of the accommodation had been re-bricked. He asked for Council's approval of these measures. He also advised that the plumber had been engaged to review and repair the septic tank.

27 On 18 August 2004, Mr Maher advised the vendors that he had spoken with the purchaser's solicitor on that day who appeared not to be aware of what had recently taken place in relation to compliance with the Council's requirements. On 19 August, Lamond Howard & Associates wrote to Parke Maher as follows:

" We refer to recent attendances.
We have spoken to our client who advises that he is awaiting receipt of confirmation from the Council that the Building Certificate will be issued.
Apparently the agent has forwarded certain documentation to Council and the Council’s inspector has been asked to give the matter urgent attention.
We will advise you as soon as we receive notification of the issue of the Building Certificate which will then able this matter to proceed to settlement. ”

28 The purchaser had already secured the finance needed to complete the purchase.

29 The Council conducted a fire safety inspection on 24 August 2004. The officer making the inspection concluded that the fire safety measures did not strictly comply with the requirements of the Building Code of Australia and that either the building required a hose reel or the motel's door should be bricked up to achieve adequate fire separation between the motel and hotel.

30 On 27 August 2004, WFS wrote to the Council urging that there was no need for a hose reel because the alarm and exit lighting would permit safe egress in the event of a fire. The Council was not persuaded. It wrote to WFS on 3 September 2004 in response to WFS's letter of 27 August. Council said:

" Council is in receipt of your correspondence dated 27 August 2004 in regard to fire service installations at the above mentioned property.
Your statement that there is no need for a fire hose reel has not been supported by any evidence to indicate that Council should allow an exemption from this requirement.
The Building Code of Australia requires that any building in excess of 500 square metres must be provided with a hose reel.
Further to the requirement for a hose reel the following matters are also required for the motel/hotel:

§ All internal walls bounding units must be 60/60/60 fire rated.

§ All doors to the Manager’s residence and hotel accommodation must be solid core, tight fitting, self closing 35mm thick.

§ All exit doors should comply with the requirements of D2.19, D2.20 and D2.21 of the BCA.

§ Any openings within 6 metres of other buildings must be protected in accordance with C3.4 of the BCA.

Any wish to vary the requirements of the Building Code of Australia must be supported by an assessment of the building in relation to the performance standards set out in part C, D & E of the BCA.
Until such time as an appropriate assessment has been provided to Council indicating the reasons why a fire hose reel is not required, and supported by performance standards, then Council will require compliance with the BCA. "

31 This letter addressed WFS's contention that the fire safety measures were adequate. It did not address outstanding issues from the Council's letter of 5 July 2004, including the required plumbing work.

32 A copy of the Council's letter of 3 September 2004 to WFS was provided to Mr Tinning. On 15 September 2004, Mr Tinning sent a copy of the Council's correspondence to Mr Lantry. He advised Mr Lantry that Mr Turner of WFS was seeking advice as to the matters set out in the Council's letter of 3 September 2004.

33 On 22 September 2004, Lamond Howard & Associates wrote to the Council saying that the purchaser understood that the then present position was that the Council would not issue a building certificate. They asked for confirmation of such refusal. The Council replied on 27 September 2004. It stated:

" Council refers you to its letter of 5 July 2004 (attached) that outlines various issues that require attention prior to the issue of a Building Certificate. Until such time as the rectification works take place, Council will not be issuing a Building Certificate ".

34 On 1 October 2004, Lamond Howard & Associates sent the first notice of rescission to Parke Maher. They said:

" We refer to recent attendances, and enclose copy letter from the Council dated the 27 September 2004 together with attachment.
As the Council is still refusing to issue a Building Certificate, our client wishes to rescind the Contract pursuant to the relevant provision of the Contract.
We would be pleased if you would authorise the agent to return the deposit as soon as possible. "

35 The vendors disputed this was a notice of rescission. I understood counsel to submit it was merely an expression of the purchaser's desire to rescind, not a notice of rescission. In my view, the letter should not be read in that way. The request for the return of the deposit is only consistent with the purchaser intending to exercise his asserted right to rescind the contract. The second paragraph was expressed in polite terms, but read as a whole, the letter was a purported rescission.

36 On 26 October 2004, Mr Maher sent a copy of Lamond Howard & Associates' letter of 1 October 2004 to Mr Lantry. Mr Maher said, amongst other things:

" Although the Council notified of its requirements by letter dated 5 July 2004 it was not until earlier this month that we were notified. You are to be allowed a reasonable time in which to obtain the Building Certificate but we suspect the purchaser’s solicitor will take steps to bring the Contract to an end just as soon as he is able to. We urge you to keep in touch with the Council and do all that you can to ensure the issue of the Certificate as quickly as possible. "

37 Mr Maher must have overlooked the fact that the Council's letter of 5 July 2004 had been forwarded by the purchaser's solicitors to him on 9 July 2004, and that he had sent it to Mr Lantry.

38 At about this time, Mr Lantry spoke with WFS to find out what was happening. He was told that the contractor who did the work for the fire rating would not be able "to certify satisfactorily to Council's requirements". He then instructed another company, Approved Fire Gear Pty Limited, to certify the property for the purpose of fire safety.

39 Meanwhile, on 25 October 2004, the Council again wrote to Mr Lamond advising that it was still in negotiation with the owner to undertake work necessary for compliance with matters raised under the application for the building certificate. The Council stated that, "Presently, Council is unable to grant a Building Certificate on the above mentioned property until such time as this work has been carried out." On 27 October 2004, Mr Lamond wrote to Mr Maher as follows:

" We refer to our letter of 1 October 2004 (copy enclosed).
We enclose copy of a further letter received from the Council dated 25 October 2004.
Clearly, Special Condition 23 of the Contract has not been complied with and the purchaser hereby rescinds the Contract.
Please authorise the agent to release the deposit to the purchaser. "

40 There was no dispute that this was a purported rescission. On 28 October 2004, Mr Maher wrote denying that the purported rescission was of any effect. No reasons were given for that contention.

41 On 1 November 2004, the Council wrote to Mr Lantry. It is clear from that letter that the required work identified in the Council's letter of 3 September 2004 was still outstanding. Mr Lantry accepted that this was the position.

42 It follows that, as at the dates of both letters of rescission, the work required by the Council in its letter of 3 September 2004 had not been carried out and nor had the plumbing work required by the Council's letter of 5 July 2004 been carried out.

43 Approved Fire Gear Pty Limited installed additional or replacement fire systems on 10 November 2004. They certified that these complied with the Building Code of Australia or other relevant standards. This work was done at an additional cost to the vendors of $5,046.80. As indicated previously, on 13 November 2004, the plumber, Mr Jamieson, rendered an invoice for his work. His work was invoiced in the sum of $1,327.35. Again there was no issue that these invoices were not paid.

44 As previously indicated, the building certificate was issued by the Council on 22 November 2004. On that day, Mr Maher wrote to Mr Lamond and said:

" We have received a copy of the Building Certificate which issued from Council today. The original Certificate should be in your hands within a few days.
Will you please submit the Transfer for approval and at the same time give us an indication as to when you expect the purchasers to be in a position to settle.
We are of the view that the purported rescission is of no effect. Although it is a long while since contracts were exchanged it is only since receipt of your letter 1 October 2004 that our clients have been in a position to deal with the issues raised by Council and have done so promptly, leading to the issue of the Building Certificate, we suggest, in circumstances completely consistent with special condition 23. ”

45 I reject the assertion in that letter that it was only since the receipt of Lamond Howard & Associates' letter of 1 October 2004 that the vendors were in a position to deal with the issues raised by the Council. The vendors had had the Council's letter of 5 July 2004 since at least 9 July 2004. The vendors' contractors, Mr Tinning and Mr Turner of WFS, had dealt with the Council in relation to its requirements. Prior to receipt of both letters of rescission, the vendors had simply not carried out the work which the Council required be carried out.

Special Condition 23

46 I set out earlier in these reasons the grounds on which the vendors submitted that the purchaser was not entitled to rescind under special condition 23. Counsel for the vendors disavowed any submission that the purchaser could not rescind pursuant to special condition 23 without first serving a notice requiring the vendors to carry out works and to expend such money as required to enable a building certificate to be issued within a nominated period and making time for performance of the vendors' obligation under special condition 23 essential.

47 It was common ground that, notwithstanding the third sentence of special condition 23 (that the vendors would carry out required work at their expense to enable a building certificate to be issued), the purchaser's only remedy in respect of the vendors not carrying out such required work was the right of rescission, together with payment of $1,000 as provided for by the fourth sentence of the condition.

48 It was common ground that the purchaser could not unilaterally waive the requirement for the issue of the building certificate, complete the contract and sue for damages for the vendors' failure to carry out such required work and to make such expenditure. It was common ground that if the vendors thought it too expensive or difficult to do what was required to obtain a building certificate, they could not be compelled to complete.

49 Special condition 23 combined promissory conditions with a statement of the contingency on which the parties' obligation to complete the contract depended. The first sentence contained a promise by the purchaser. If the purchaser defaulted in doing what the first sentence required, and if his default contributed to the failure of the contingency, he could not rely on the precondition to his obligation to complete expressed in the second sentence (Suttor v Gundowda Pty Limited (1950) 81 CLR 418; Gange v Sullivan (1966) 116 CLR 418 at 442; Perri v Coolangatta Investments Pty Limited (1982) 149 CLR 537 at 546, 566-567).

50 The second sentence did not make the existence of the contract conditional upon the obtaining of a building certificate. Neither party submitted there was no binding contract. Rather, the obligation of either party to complete the contract was conditional on the obtaining of the building certificate (Perri v Coolangatta Investments at 552).

51 Where completion of the contract depends not on the performance by a party of his contractual obligations, but on the occurrence or non-occurrence of the specified event by a certain time, a party entitled to rescind on the occurrence or non-occurrence of that event may exercise that right when the time arrives without prior notice. In Aberfoyle Plantations Ltd v Khaw Bian Cheng [1960] AC 115, the Privy Council said (125) that:

"Where a conditional contract of sale fixes (whether specifically or by reference to the date fixed for completion) the date by which the condition is to be fulfilled, then the date so fixed must be strictly adhered to, and the time allowed is not to be extended by reference to equitable principles.”

52 The position is settled by the judgments of the majority of the High Court in Perri v Coolangatta Investments Pty Limited. In that case, the contract did not fix a time for completion. Completion was therefore due within a reasonable time. The contract included a condition that it was entered into subject to the purchasers completing a sale of their own property. The vendor gave a notice to complete and purported to terminate the contract on the basis of the purchasers' non-compliance with that notice. Wilson J held that the vendor brought the contract to an end in this way. Six weeks after serving a purported notice of termination, the vendor commenced proceedings for a declaration that the contract had terminated. By then, a reasonable time for completion had passed. The majority of the High Court held that by instituting the proceedings when the condition for completion (namely, the sale of the purchasers' own property) was neither waived nor fulfilled, the vendor elected to avoid the contract (at 547 and 570).

53 Gibbs CJ said (at 545):

" Suttor v Gundowda Pty Ltd and Gange v Sullivan are consistent with Aberfoyle Plantations Ltd v Cheng and support the view that where a conditional contract fixes the date by which the condition is to be fulfilled the contract may be terminated if the condition has not been fulfilled when that date arrives, and that it is unnecessary to give any prior notice to the other party. "

54 His Honour concluded (at 546) that:

“ ... I consider that when the time has elapsed for performance of a condition which is not a promissory condition, but a condition precedent to the obligation to complete a contract of sale, either party, if not in default, can elect to treat the contract as at an end if the condition has not been fulfilled or waived, and that it is not necessary first to give a notice calling on the party in default to complete the contract or fulfill the condition. What I have said is, of course, subject to any sufficient indication of a contrary intention in the words of the contract itself. "

55 Brennan J, with whom Stephen J agreed, said (at 569-570):

"Then it was submitted that the vendor could not avoid the contract unless it had given a notice to complete and the notice had not been complied with. The notice of 17 July 1978 was given before the expiration of the time limited for fulfilment of the stipulation and called for performance of the contract before the expiration of that time. Further, it was submitted, the vendor seeking to avoid the contract was bound to give a notice to complete after that time expires, affording the purchasers a further reasonable time for compliance with the demand in the notice. These submissions suggest a confusion between the consequence of non-fulfilment of a contingent condition and the consequence of breach of a promissory term. A notice to complete insists upon performance by a party in default to whom the notice is given of an obligation binding upon him. It can have no application to a situation where the party to whom it is given is under no obligation to perform. And here, of course, the vendor was not seeking performance by the purchaser after 10 August 1978.
In the present case, when the time limited for fulfilment of the stipulation passed, the purchasers did not come under an obligation to complete. That obligation remained contingent on their completion of a sale of the Lilli Pilli property. The vendor was then entitled to say: ‘As you have not completed the sale of your Lilli Pilli property, our contract is still contingent. I have waited long enough. Our sale is off.’ Thereafter, the vendor was not seeking to rescind the contract for breach by the purchasers of their obligations; it was seeking to rescind the contract because the event upon which the obligations of both parties were conditioned had not occurred. The ground on which it sought to rescind the contract affected the formation of obligations to complete, not their performance. No notice to complete was called for."

56 By contrast, if a party wishes to terminate for breach of the other party's obligation to do something within the required time, time for performance of the obligation must have been made essential either by the terms of the contract or the giving of notice.

57 Hence the vendors submitted that special condition 23 was a promissory condition and that the purported rescission was rescission for the vendors' alleged breach.

58 However, in my view, the better construction of special condition 23 is that it specifies the contingency which is a precondition to the parties' obligation to complete. A clause is not deprived of that character merely because it contains elements of a promise. For example, in Perri v Coolangatta Investments, the relevant condition imported an implied obligation on the part of the purchasers to use reasonable endeavours to sell their property. They were in breach of that implied promise (per Gibbs CJ at 541, 545, and per Brennan J at 566). That did not affect the proper characterisation of the clause.

59 The vendors' concession, which in my view was rightly made, that the clause was for the protection of both parties, and that the purchasers' only remedy for the vendors not carrying out work or meeting expenses required by the third sentence was the remedy of rescission and possibly recovery of $1,000, but not unliquidated damages, demonstrates that that is so.

60 In my view, in the third sentence, the draftsman was addressing the question as to who, as between the vendors and purchaser, would be responsible for doing the work which might be required. That did not displace the conditionality of the parties' obligation to complete expressed in the second sentence.

61 The fourth sentence addressed what the position would be if, having learned what was required to be done, the vendors decided they did not wish, or were unable, to do it. In the event of such an expressed or proved inability or unwillingness, the purchaser did not have to wait until the time for completion to arrive. He could rescind immediately. That is not to say, however, that the purchaser could not rescind for failure of the condition expressed in the second sentence when the time for completion arose, whether or not he could prove that the vendor was unwilling or unable to do the work.

62 Such a right to rescind for non-satisfaction of the condition in the second sentence would be implied. In any event, clause 29 provided the mechanism for such rescission. Clause 29.1 was satisfied by the second sentence of special condition 23. Clause 29.4 supplemented special condition 23, although it was qualified by the third sentence of special condition 23, which provided that it was the vendors and not the purchaser who were required to do whatever work was necessary for the building certificate to be issued.

63 Clause 29.7.1 provided for the right to rescind to be exercised within seven days. For the reasons I will give shortly, I consider that the right to rescind arose on 2 August 2004. The purchaser did not rescind within seven days. However, both parties treated the contract as remaining conditional. The vendors said they had no submission to make with respect to clause 29. They did not submit that the right to rescind was lost because it was not exercised within seven days. That was consistent with the parties continuing to treat the completion of the contract as conditional on the issue of the building certificate.

When the Right to Rescind Arose

64 As I have said, time for completion was fixed by special condition 16 as nine weeks from the date of the contract, or 2 August 2004, in the events which happened. At that date, no building certificate had been obtained. In my view, the purchaser was then entitled to rescind. Counsel for the vendors submitted that there was a distinction between the completion date which the contract provided, and the event of completion. That there is such a distinction is unquestionably correct (Shimden Pty Limited v Rona [2006] NSWCA 256 at [29]).

65 Counsel for the vendors submitted that the second sentence of special condition 23 referred to the event of completing, not the date for completion fixed by the contract. From this, counsel argued that the condition in special condition 23 was not unfulfilled because the date for completion provided by the contract had passed. She argued that the clause only required that the condition be fulfilled by the time the event of completion arrived. However, if a building certificate was not issued, the event of completion could never arise unless both parties waived special condition 23. How, then, could the purchaser or the vendors rescind?

66 Counsel submitted that such a right to rescind would arise if a notice to complete were issued fixing a date for completion. However, a notice to complete would not bring about the event of completion. It would fix a date for completion. But that was something the contract itself did.

67 In my view, once the date provided by the contract for completion arrived and the condition of completion was unsatisfied, the right to rescind arose. In my view, that conclusion is required by Suttor v Gundowda Pty Ltd, Gange v Sullivan and Perri v Coolangatta Investments Pty Limited. The purchaser did not rescind immediately. However, that does not mean that it waived its right to rescind (Immer (No. 145) Pty Ltd v The Uniting Church in Australia Property Trust (NSW) (1993) 182 CLR 26 at [39], [41]).

68 At first, counsel for the purchaser argued that after the time for completion fixed by the contract had passed with completion not occurring, the time for completion became a reasonable time, and the time for satisfaction of the condition also became a reasonable time. That time had passed by 3 October 2004 and 27 October 2004. No doubt if the condition had been satisfied before rescission, or if the condition had been waived, the time to complete would have been a reasonable time once the date for completion fixed by the contract passed. However, I do not consider that the effect of neither party seeking to rescind immediately was that the time for satisfaction of the condition was extended until a reasonable time had passed.

69 In any event, even if that is wrong, a reasonable time had passed for satisfaction of the condition before the purchaser exercised his right to rescind. He did not rescind until more than four months had passed after exchange. By their contract the parties showed that they considered nine weeks a sufficient period in which to satisfy condition 23. It took less than two and a half weeks for the vendors to have the remaining work carried out which was required for the issue of the building certificate after Mr Maher told Mr Lantry on 28 October 1984 that he should hurry up. The certificate was issued less than four weeks after Mr Maher's letter of 26 October 2004.

70 Moreover, the Council's requirements were made known to the vendors by 9 July 2004, and its specific requirements in relation to fire safety measures were made known on 2 September 2004. It also should have been known to the vendors prior to 2 September 2004 that the Council had such requirements.

71 I can also infer from the subsequent events that the Council's requirements, as expressed in its letter of 2 September 2004, were necessary for compliance with the Building Code of Australia and applicable standards. The vendors knew from the Council's letter of 5 July 2004 that it required such compliance.

72 For the reasons I have already given in relation to the right to rescind on non-satisfaction of the condition in the second sentence of special condition 23, I do not accept the vendors’ submission that to be entitled to rescind the purchaser had to establish not only that no building certificate had been issued before the time for completion, but also that the vendors were not willing or able to carry out the required work.

73 If I am wrong in that, and if on the proper construction of the contract, the purchaser must establish the requirements of the fourth sentence of special condition 23 before being entitled to rescind, nonetheless, on the proper construction of that sentence, the purchaser was so entitled. I accept that the vendors did not lack the capacity to carry out the required work. I accept that the vendors were not completely unwilling, come what might, to do the required work. So much is clear from the fact that the required work was ultimately done and paid for. However, in my view it was not necessary for the purchaser to establish that the vendors were "wholly and finally" unable or unwilling ever to carry out the required work. It was sufficient that the vendors were unwilling to carry out the required work when it was required to be done to enable a building certificate to be issued prior to the time of completion. In my view that was established.

74 The vendors’ willingness to carry out the required work in a timely way is to be determined by their actions and inactions. The vendors used the services of contractors to seek to satisfy the Council's requirements. However, rather than merely carrying out the required work, the vendors, through their consultant, sought to negotiate with the Council as to what minimum work would be acceptable. There was no explanation why the plumbing requirements set out in the letter of 5 July 2004 were not carried out. WFS sought to negotiate a satisfactory position with the Council rather than comply strictly with the Building Code of Australia and other applicable standards. Accordingly, I consider that the purchaser established the ground for rescission and the payment of the $1,000 for expenses under the fourth sentence of special condition 23.

Relevance of Purchaser’s Readiness and Willingness to Complete

75 Counsel for the vendors then submitted that the purchaser could not rescind unless he proved he was ready, willing and able, himself, to complete the contract. The purchaser did establish that he was ready, willing and able to complete the contract if the building certificate was issued. He had the finance to complete. His willingness was conveyed by Mr Lamond's letter of 19 August 2004, which I have set out earlier. It was also conveyed by his oral evidence which I accept.

76 Although it is not strictly necessary to deal with it, I should say that I nonetheless do not accept that it was necessary for the purchaser to establish that he was willing and able to complete before he could exercise his contractual right to rescind for failure of the condition precedent to the parties’ obligations to complete.

77 Foran v Wight (1989) 168 CLR 385, upon which counsel for the vendors relied, was concerned with a different question. It was concerned with rescission for actual or anticipatory breach. A party seeking to rescind a contract for actual or anticipatory breach must be ready and willing to complete in the sense described in that case. So also, a party serving a notice to complete must be willing and able to complete when the time for completion under the notice arrives. However, no authority was cited to show that a party must prove an ability and willingness to complete before he or she can exercise a contractual right to rescind for failure of a condition precedent to the parties’ obligations to complete. I do not consider that Jeppesons Road Ltd v Di Domenico [2005] QCA 391, is authority for such a proposition.

78 The reason for the requirement of readiness and willingness to complete in the event of rescission for anticipatory or actual breach was explained by Mason CJ in Foran v Wight (at [404]-[405]). It is based on the injustice of a party who is not willing or able to perform his own obligations being able to take advantage of a breach or anticipatory breach of the other party. That rationale has no role to play in the case of rescission for failure of a non-promissory condition precedent to completion, where the relevant obligation has not arisen.

79 No such requirement was suggested in Perri v Coolangatta Investments. There, the vendors purported to terminate on the basis of a notice to complete which only Wilson J held to be valid. If the notice to complete were invalid, then the vendor, by asserting that the contract had been determined before proceedings were commenced, would not itself have been ready and willing to complete when it commenced the proceedings. However, it was not suggested that this precluded the vendor from exercising its contractual right of rescission for failure of a condition precedent, which it was held it did by commencing proceedings.

Breach of Special Condition 13.2.1

80 For the same reasons, it is not an objection to the purchaser exercising his right of rescission for non-fulfilment of the condition to completion that he was, or might have been, in breach of special condition 13.2.1, where that breach did not contribute to the non-fulfilment of the condition (Gange v Sullivan at 442).

81 Indeed, even in the case of termination for breach, a party seeking to terminate for the opposite party's breach is not precluded from doing so by reason of his own breach of contract if he has not repudiated the contract, if his breach is of a non-essential term, and if there is no causal relationship between his breach and that of the opposite party (see Nina's Bistro Bar Ltd (formerly Mytcoona Pty Ltd) v MBE Corporation (Sydney) Pty Ltd [1984] 3 NSWLR 613 at 620 and 632; Road Show Entertainment Pty Ltd v (ACN 053 006 269) Pty Ltd (1997) 42 NSWLR 462 at 479-480. That must be so is a fortiori in the case of non-fulfilment of a non-promissory condition to completion. The alleged breach of clause 13.2.1 was that the purchaser did not supply documents within the time specified in that clause and did not supply all the required documents. Subclause 13.2.1 required delivery of the documents within twenty days. The purchaser delivered documents required by that clause in twenty-two days. If this were a breach, the breach was waived. No complaint was made of late delivery. Nor could it have been, as the vendors’ solicitors had advised on 1 June 2004 that work in relation to the transfer of licence would be deferred until the position with respect to the purchaser's finance and other issues was clarified.

82 The vendors submitted that two documents required by clause 3.2.1 were not provided. No such complaint was made during the course of the conveyance. On 29 June 2004, Mr Maher wrote to Mr Lamond saying:

“ Thank you for your letter dated 22 June 2004. Before we proceed further with the transfer of the licence we would like to hear from you in relation to those aspects of the agreement which leave the Contract conditional ie
1. Can you confirm approval of finance
2. What is the present position with respect to application for the building Certificate.
Subject to what you tell us in relation to the above we suggest that, unless you have any objection, that the transfer application be lodged with the Sydney Registry as it will be dealt with much more quickly at that venue. We have received one copy only of forms D and C together with the Direct Debit Request Customer Service Agreement and Authority. We think we will need as well the completed form E and Responsible Gaming Affidavit. ”

83 The letter of 22 June 2004 referred to was a letter in which Lamond Howard & Associates enclosed “documents completed by our client in relation to his licence application together with a cheque in favour of the Liquor Administration Board”.

84 No further request for documents was made because the issue with respect to the application for a building certificate was never resolved. The vendors did not suggest there had been a failure to comply with clause 13.2.1 at any time before the first day of the hearing. The vendor did not demand extra copies of the document sent on 22 June 2004. Nor did they ask for a completed form E or the “responsible gaming affidavit” which Mr Maher had advised he thought would be needed.

85 The question did not arise as Mr Maher was waiting to see whether the building certificate would be issued. His view, as communicated both to the purchaser's solicitors and his own clients, was there was not much point proceeding with work in relation to the transfer of the licence until the conditions to completion were clarified. That was a perfectly reasonable position to take. But timely compliance by the purchaser with clause 13.2.1 was waived. The vendors’ solicitor was satisfied for the time being with the documents which he received. He considered more documents would be needed if the matter were to proceed to completion, but until it was clear that it would do so, he did not ask for anything more to be provided.

86 Even if there was a breach of clause 13.2.1, it was not essential. It was unrelated to the issue of the building certificate.

87 For these reasons, I reject all of the grounds advanced by the vendors for disputing the validity of the purchaser's rescission.

88 For the reasons I have given, I consider that the purchaser is also entitled to the sum of $1,000 payable under the fourth sentence of special condition 23.

89 The claim for an order pursuant to s 55(2A) of the Conveyancing Act does not arise. However, I should add that, had I upheld the vendors’ contentions as to the validity of the purchaser’s rescission, I would have upheld the purchaser’s claim for a refund of the deposit under that provision. I fully recognise the importance of preserving the integrity of the system or practice of taking a reasonable deposit as an earnest performance in conveyancing considerations. Here, however, if the purchaser had failed, it would have been because his solicitors had taken an incorrect view as to what notices the law required be given before the purchaser could exercise his right of rescission. In fact, I consider the view taken by his solicitor was correct. But, even if it were not, the fact remained that it was the vendors who failed to carry out the required work for an extended period. The purchaser showed forbearance during that period. He was in no way at fault, although the vendors were. The vendors sold the property in 2006 for the same price. Presumably they enjoyed the benefit of ownership of the hotel until the 2006 sale was completed. They would therefore receive a windfall if they were entitled to retain the deposit. In the circumstances, justice would have required its return. However, for reasons I have given, the claim under s 55(2A) of the Conveyancing Act does not arise.

90 The purchaser is entitled to a declaration that the contract was validly rescinded pursuant to special condition 23. He is entitled to an order that the agent refund the deposit to him. He would be entitled to his share of the interest earned from the investment of the deposit pursuant to clause 3, but I am advised that the deposit was not invested. Accordingly, it is unnecessary to qualify the order to be made pursuant to s 100 of the Civil Procedure Act 2005 (NSW) for interest on the amount for which judgment for the recovery of the deposit is to be given.

91 For these reasons, I make the following orders:

1. Order that the summons be dismissed;

2. Declare that the contract for sale of freehold business between the first cross-claimant as purchaser and the cross-defendants as vendors dated 31 May 2004, (“the Contract”) for the business known as the London Hotel/Motel, Ardlethan, and for the land known as 12 Mirool Street, Ardlethan, Folio Identifiers 1/367864, 1/5822, 2/5822, and part 3/5822, was validly rescinded by the first cross-claimant pursuant to Special Condition 23 thereof;

3. Order that the third cross-defendant refund to the first cross-claimant the deposit of $54,000 paid by the first cross-claimant and held by the third cross-defendant as stakeholder;

4. Order that the first and second cross-defendants pay to the first cross-claimant interest on the deposit of $54,000 at the rates prescribed pursuant to s 100 of the Civil Procedure Act 2005 (NSW) from 1 December 2004 to date of repayment of the deposit;

5. Order that the first and second cross-defendants pay to the first cross-claimant the sum of $1,000, together with interest at the prescribed rates from 1 December 2004 to the date of payment; and

6. Order that the plaintiffs pay the third defendant's costs of the proceedings as a submitting defendant.

92 The defendants are entitled to their costs. Although it is unlikely to arise, to the extent, if at all, that the defendants’ costs have been increased by the joinder of the third defendant as a cross-claimant, then the plaintiff should not be required to pay any such additional costs. The length of the hearing was extended unduly by the vendors’ reliance on the claim that the purchaser was in breach of clause 13.2.1 of the contract. That particular claim was wholly without merit, and was raised very late. But for that claim having been raised, I think there was every prospect that the matter could have concluded within one day. In my view, the costs of the second day’s hearing on 30 January should be paid by the plaintiffs on an indemnity basis.

93 Accordingly, I order that the plaintiffs pay the defendants costs of the proceedings, provided that:

(a) that order shall not extend to any additional costs incurred by the defendants by reason of the joinder of the third defendant/second cross-claimant as a second cross-claimant; and

(b) that the costs of the hearing on 30 January 2007 be paid on an indemnity basis.

94 The exhibits may be returned after 28 days.

BOTH COUNSEL ADDRESSED RE CALDERBANK LETTER AND WHETHER INDEMNITY COSTS ORDER SHOULD BE EXTENDED OR SET ASIDE. HIS HONOUR INDICATED HE WOULD NOT EXTEND THE ORDER FOR INDEMNITY COSTS.

95 I will add that I do not consider that the fact that the parties had taken steps before the hearing to bring about an expeditious hearing is a reason for setting aside the indemnity costs order I have made in relation to the second day of hearing. It was my distinct impression during the first day of hearing that the matter should conclude on that day. The reason that did not happen was because of the evidence called from Mr McKay and Mr Maher orally, and the associated tender of documents through those witnesses. That arose from the raising of the issue of the alleged breach of clause 13.2.1 and the fact that that issue was only flagged at the commencement of the hearing. I decline to vary or set aside that order.

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