Lynda Marie Slarke v Ultima Constructions Pty Ltd
[2005] ACTCA 1
•15 February 2005
LYNDA MARIE SLARKE v ULTIMA CONSTRUCTIONS PTY LTD [2005] ACTCA 1 (15 February 2005)
CONTRACT – contract for sale of dwelling in course of construction – notice to complete - whether requirement for antecedent breach or unreasonable delay by other party – whether “Date for Completion” effective only if both parties under an obligation to complete on that date – whether party ready, willing and able to complete if some PC items not installed – relevance of industry practice.
Unit Titles Act 2001 (ACT), s 75(1)
Strata Titles Act 1973 (NSW), s 70(1)(c)
McNally v Waitzer [1981] 1 NSWLR 294
Golding v Vella [2001] NSWSC 567
Nelson v Bellamy [2000] NSWSC 182
Mulkearns v Chandos Developments Pty Ltd [2003] NSWSC 1132
Colbourne v Kaydot Pty Ltd [1995] ACTSC 74
Neeta (Epping) Pty Ltd v Phillips (1974) 131 CLR 286
Jillinda Pty Ltd v McCourt (1983) NSW Conv R 55-145
Doyle v Howey (1990) NSW Con R 55-545
P Butt, “Notices to Complete: Ready, Able and Willing”, (2004) 78 ALJ 162
P Butt, “The Standard Contract for Sale of Land in New South Wales”, 2nd Ed LBC 1998
ON APPEAL FROM A SINGLE JUDGE OF THE SUPREME COURT OF THE AUSTRALIAN CAPITAL TERRITORY
No. ACTCA 14 - 2004
No. SC 231 of 2004
Judges: Higgins CJ, Crispin P, Selway J
Court of Appeal of the Australian Capital Territory
Date: 15 February 2005
IN THE SUPREME COURT OF THE ) No. ACTCA 14 - 2004
) No. SC 231 of 2004
AUSTRALIAN CAPITAL TERRITORY )
)
COURT OF APPEAL )
ON APPEAL FROM A SINGLE JUDGE OF THE SUPREME COURT OF THE AUSTRALIAN CAPITAL TERRITORY
BETWEEN:LYNDA MARIE SLARKE
Appellant
AND:ULTIMA CONSTRUCTIONS PTY LTD
Respondent
ORDER
Judges: Higgins CJ, Crispin P, Selway J
Date: 15 February 2005
Place: Canberra
THE COURT ORDERS THAT:
the appeal be dismissed;
any interlocutory orders made pending the resolution of the appeal be discharged;
the appellant pay the respondent’s costs of the appeal.
IN THE SUPREME COURT OF THE ) No. ACTCA 14 - 2004
) No. SC 231 of 2004
AUSTRALIAN CAPITAL TERRITORY )
)
COURT OF APPEAL )
ON APPEAL FROM A SINGLE JUDGE OF THE SUPREME COURT OF THE AUSTRALIAN CAPITAL TERRITORY
BETWEEN:LYNDA MARIE SLARKE
Appellant
AND:ULTIMA CONSTRUCTIONS PTY LTD
Respondent
Judges: Higgins CJ, Crispin P, Selway J
Date: 15 February 2005
Place: Canberra
REASONS FOR JUDGMENT
THE COURT:
This is an appeal against the decision of Connolly J refusing to grant a declaration to the effect that the respondent had no right to terminate a contract dated 6 December 2002, (“the contract”), for the sale of land in Gungahlin in the Australian Capital Territory and the erection of a townhouse on the land in accordance with plans and a list of inclusions annexed to the contract.
Clause 2.8 of the contract provided that:
Completion must be effected on the Date for Completion or as otherwise determined by this Contract and if not so specified or determined, within a reasonable time.
Item 12 of the contract provided that the Date for Completion was “As per special condition 6”.
Special condition 6 was in the following terms:
Further to Item 12 of the Schedule, completion of this Agreement shall be effected within 14 days of the date of written notification to the Buyer’s solicitor of the issue of Certificate of Compliance.
Clause 17 of the contract included the following provisions:
17.1If Completion is not effected in accordance with Clause 2.8, either party may, at any time after the Date for Completion, serve the other party a notice requiring the party served to complete this Contract (“Notice to Complete”).
. . .
17.3At the time the Notice to Complete is served the party serving the Notice to Complete must:
17.3.1not be in default under this Contract; and
17.3.2be ready willing and able to complete but for some default or omission of the other party.
17.4The Completion of this Contract at the time date and place specified in the Notice to Complete is an essential condition of this Contract.
The respondent nominated 23 February 2004 as the Date for Completion. It was not suggested, either at trial or on appeal, that this date did not accord with the formula provided by special condition 6.
However, cl 10.2 of Annexure “C” to the contract of sale provided that the buyer did not have to complete earlier than seven days after service of a certificate pursuant to s 75(1) of the Unit Titles Act 2001 (ACT) (“the certificate”).
The certificate was not served until 23 February 2004 and the appellant was accordingly relieved of any obligation to settle until at least seven days after that date.
On 5 March 2004, the respondent issued the appellant with a notice to complete purporting to require completion on 22 March 2004. The appellant failed to settle the transaction on that date and on the following day the respondent advised the appellant that it had elected to terminate the contract.
The appellant maintained that the respondent was not entitled to do so since the oven, hot plates and hot water service which had been specified in the list of inclusions had not been installed in the townhouse. Furthermore, the respondent had been in default of the contract at the time the notice to complete had been issued.
The respondent had earlier advised the appellant that the oven, hot plates and hot water service would be installed on the day before the appointed settlement date. Mr Kambouris, who was a director of the respondent, subsequently filed an affidavit in which he deposed to a practice in the building industry of installing such items after settlement but immediately prior to occupation, due to insurance issues and the risk of possible damage to the items prior to occupancy. He also said that the appellant had purchased another townhouse in the same complex and that she had not made any objection to the delay in installing similar items in that townhouse. He expressed the opinion that the real reason for the sale not proceeding to completion had been the appellant’s inability to settle the transaction save in conjunction with a further sale of the property from her to a third party pursuant to a contract of sale dated 8 March 2004.
Connolly J held that the correct legal principle had been stated in the following passage from the judgment of Hutley JA in McNally v Waitzer [1981] 1 NSWLR 294 at 304:
The correct rule, in my opinion, is simply that a vendor who is in default in respect of things which up until then should have been done cannot give a notice to complete, but he can give notice to complete prior to performing all those other things which he has to perform in order to complete the contract.
See also P Butt, “Notices to Complete: Ready, Able and Willing”, (2004) 78 ALJ 162.
His Honour also noted that Barrett J had dealt with a similar issue in Golding v Vella [2001] NSWSC 567, holding, at [20], that the plaintiff had not failed to comply with the contractual requirement for the installation of PC items and adding at [27], that the requirement for their installation would not, in any event, have been an essential term of the contract. See also Nelson v Bellamy [2000] NSWSC 182 at [27] and Mulkearns v Chandos Developments Pty Ltd [2003] NSWSC 1132 at [38]. Connolly J took the view, in our opinion correctly, that this approach did not conflict with the observation of Higgins J (as he then was) in Colbourne v Kaydot Pty Ltd [1995] ACTSC 74 that a purchaser is entitled to insist on completion of substantial construction work before proceeding to purchase.
Connolly J found that the respondent had not been in default under the contract at the time it had issued the notice to complete. His Honour noted that the appellant had sought more time to complete the transaction. There had been evidence that she had been unable to obtain finance in time to enable her to settle on the date stipulated but that she would have been able to do so shortly thereafter. His Honour observed, however, that having issued a valid notice to complete, the respondent had been entitled to insist on settlement at the time stipulated. Accordingly, the appellant’s application was dismissed.
Mr McKeown, who appeared for the appellant, argued that his Honour had erred in finding that the notice to complete had complied with the requirements of the contract. The right to issue such a notice arose only once the Date for Completion had passed. Whilst 23 February 2004 had been nominated as the Date for Completion, settlement had not then occurred because the respondent had not complied with its obligations to provide the certificate at least seven days prior to that date. A completion date purportedly set by one of the parties could only be recognised as a valid Date for Completion for the purposes of cl 17.1 if it was a date upon which both parties were bound to complete the contract. Since, as his Honour had found, the late service of the notice had relieved the appellant of the obligation to settle on 23 February 2004, that date had not been a valid Date for Completion. Hence, it had been incumbent upon the respondent to set a further date at least seven days after the service of that notice and no right to issue a notice to complete could have arisen until after that date.
In support of this contention Mr McKeown relied upon what he submitted was an established principle that a notice to complete may not be issued unless the other party has been guilty of breach of contract or unreasonable delay. This principle was recognised in the following passage from the judgment of Barwick CJ and Jacobs J in Neeta (Epping) Pty Ltd v Phillips (1974) 131 CLR 286 at 299:
In cases where the contract contains a stipulation as to time but that stipulation is not an essential term then before a notice can be given fixing a time for performance, not only must one party be in breach or guilty of unreasonable delay, but also the party giving the notice must himself be free of default by way of breach or antecedent relevant delay. Only then may a notice be given fixing a day a reasonable time ahead for performance and making that time of the essence of the contract.
In reliance upon this principle, McLelland J held, in Jillinda Pty Ltd v McCourt (1983) NSW Conv R 55-145, that a notice to complete issued within seven days of the service of a certificate under s 70(1)(c) of the Strata Titles Act 1973 (NSW) had not effectively made time of the essence. In the subsequent case of Doyle v Howey (1990) NSW Con R 55-545, Cohen J appeared to accept that the vendor would have been entitled to issue a notice to complete so long as he had provided the certificate no later than seven days before the time for completion specified in the notice and would have been in a position to complete on the date specified. It has been suggested that the decision in Jillinda should be preferred because a purchaser would not be in breach of the obligation to complete until at least seven days after being supplied with a certificate of the relevant kind: see P Butt, “The Standard Contract for Sale of Land in New South Wales”, 2nd Ed LBC 1998.
However, it must not be forgotten that the rights of a vendor and a purchaser depend upon the terms of the particular contract into which they have entered. In the present case, the right to issue a notice to complete was governed by cl 17 of the contract and that clause did not make the right to issue of a notice to complete contingent upon any antecedent breach of contract or unreasonable delay by the recipient of the notice. It did provide that the party serving the notice must not, at the time of giving it, be in default under the contract and must be ready, willing and able to complete “but for some default or omission of the other party”. Subject to those requirements either party was at liberty to issue a notice to complete at any time after the Date for Completion. That date had to be ascertained by reference to special condition 6, but there was nothing in the contract to suggest that the date so ascertained would not be a valid Date for Completion if one or other of the parties was not obliged to complete the contract on that date. Furthermore, the contract contained no provision for any subsequent Date for Completion to be fixed in such an event.
The Date for Completion (ascertained by reference to special condition 6) having passed, the respondent was entitled to issue a notice to complete provided that it was not then in default under the contract and that it was ready, willing and able to complete, save to the extent to which it may have been prevented from doing so by some default or omission of the appellant.
Mr McKeown maintained that the respondent had been in breach of the contract because the oven, hot plates and hot water system had not been installed. However, as we have mentioned, Mr Kambouris had deposed to an industry practice to the effect that items of that kind would be installed after settlement but immediately prior to occupation. That evidence was neither challenged in cross-examination nor rebutted. Furthermore, the respondent had earlier offered to have the PC items installed on the day before the appointed settlement date of 23 February 2004. In any event, the contract did not require the construction of the works to be completed prior to the completion of the contract. There was no requirement for the items in question to be installed prior to the issue of a notice to complete. Hence, his Honour’s finding that the respondent had not been in breach of the contract at that time was plainly correct.
Mr McKeown also submitted that the respondent could not have been ready, willing and able to complete the transaction. This requirement does not mean that a party giving a notice to complete must be ready, willing and able to proceed to completion by the time the notice is given. The requirement is derived from the comparable requirement in suits for specific performance and has a similar meaning: McNally v Waitzer at 303. Subject to any consideration relating to the trade or custom of the relevant industry, it may have been open to the appellant to have insisted upon the provision of the PC items prior to completion rather than merely prior to occupancy. However, as we have mentioned, the respondent had earlier offered to install them prior to settlement and there was no evidence to suggest that it would not have been willing to do so prior to the proposed completion on 22 March 2004. The notice to complete stated that the respondent was ready, willing and able to complete the contract and, in our opinion, there was nothing in the evidence to cast doubt on the truth of this assertion.
In our view, the respondent was clearly entitled to issue the notice to complete and, upon the appellant’s failure to comply with the notice, to terminate the contract pursuant to cl 18.1. For these reasons the appellant was rightly refused the declaratory relief she had sought.
The appeal must be dismissed.
The appellant should pay the respondent’s costs.
I certify that the preceding twenty-four (24) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Court.
Associate:
Date: 15 February 2005
Counsel for the Appellant: Mr C McKeown
Solicitor for the Appellant: Gungahlin law
Counsel for the Respondent: Mr BA Meagher SC
Solicitor for the Respondent: Nicholl & Co
Date of hearing: 12 November 2004
Date of judgment: 15 February 2005
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