McMahon v Shadbolt
[2009] VCC 746
•3 July 2009
| IN THE COUNTY COURT OF VICTORIA | Revised |
Not Restricted
AT MELBOURNE
CIVIL DIVISION
COMMERCIAL LIST
EXPEDITED CASES DIVISION
Case No. CI-09-00956
| MICHELLE DIANE MCMAHON | Plaintiff |
| v | |
| ERNEST JOHN SHADBOLT | Defendant |
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| JUDGE: | HER HONOUR JUDGE KENNEDY |
| WHERE HELD: | Melbourne |
| DATE OF HEARING: | 1 July 2009 |
| DATE OF JUDGMENT: | 3 July 2009 |
| CASE MAY BE CITED AS: | McMahon v Shadbolt |
| MEDIUM NEUTRAL | [2009] VCC 0746 |
| CITATION: |
REASONS FOR JUDGMENT
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Catchwords: contract for sale of land – rescission notice served for failure to pay balance of deposit – whether plaintiff had waived time of the essence stipulation – whether time was made of the essence by service of the notice of rescission even if there was a waiver
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| APPEARANCES: | Counsel | Solicitors | ||||
| For the Plaintiff | Mr. K. J. Naish | Moores Legal | ||||
| For the Defendant | Mr. N. P. Jones |
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| Solicitors | ||||||
| HER HONOUR: |
1 On 27 September 2008, the plaintiff sold 3 Catherine Street, McRae (the property) to the defendant for $575,000. The property was sold on the basis of the part payment of a deposit. The deposit was $57,500, but only $5,000 of the deposit was paid; the remainder was to be paid on 27 October 2008.
2 The defendant defaulted in paying the balance of the deposit and the plaintiff served a rescission notice on 28 November 2008. The plaintiff now seeks damages of $128,479.12 consequent on the service of this notice.
ISSUES
3 The parties are to be congratulated for the expeditious way the case was conducted.
4 One witness only was called: Mrs McMahon, the plaintiff, and the evidence was generally undisputed.
5 The quantum of the damages[1] was also accepted by Mr Jones, who appeared as Counsel for the defendant. The case was conducted on the basis that only one issue was in dispute.
[1] The calculations for the amount sought are provided in the plaintiff’s written submissions as to quantum, particularly at paragraphs 1 - 5
6 Mr Jones submitted that the plaintiff had waived the stipulation that time was of the essence of the contract:
(a) by failing to take steps on or about 27 October to exercise her right of
rescission; and/or(b) by her correspondence of 17 November;
such that she was required to make time of the essence again prior to service
of the notice of rescission.7 Mr Naish, who appeared as Counsel for the plaintiff submitted:
(a) there was no waiver of time being of the essence;
(b) even if there had been a waiver; time was again made of the essence by the service of the notice of rescission. In those circumstances, there was no need to serve another notice of rescission so that the plaintiff’s rescission was effective in any event.
8 The court must therefore resolve whether there was a waiver and also whether, even if there was a waiver, time was again made of the essence by the service of the notice of rescission in any event. For reasons that will become apparent, I will consider the latter point first.
BACKGROUND FACTS
9 The contract of sale of 27 September 2008 contained terms and conditions, inter alia, that the general conditions of sale contained in the seventh schedule to the Transfer of Land Act 1958 applied. By general condition 5 of the seventh schedule, time was of the essence of the contract.
10 On the due date for the payment of the remainder of the deposit of 27 October 2008, the conveyancers for the defendant, Professional Conveyancing Services (“PCS”) wrote to Mason Sier Turnbull (the solicitors for the plaintiff), requesting a 30-day extension for the payment of the deposit .
11 On 2 November 2008, the plaintiff wrote to David Short, the selling agent, stating that she was not prepared to grant an extension of time. On 6 November 2008, David Short wrote to the plaintiff advising that he had spoken to the defendant and advised him that full payment of the deposit was requested to be made immediately. The defendant indicated that “he is hopeful that he will be able to respond to your request and advise what he can do on Monday 10th November.”
12 On 17 November 2008, and with no further correspondence between the parties, the plaintiff’s solicitors wrote to PCS, granting the defendant until 27 November 2008 to make the payment of the full deposit amount.
13 The letter said, relevantly:
“My client has agreed, albeit reluctantly, to extend the date for your client to pay
the full 10% deposit to Thursday the 27th November, 2008.
If the full deposit is not paid by the above date a Rescission Notice will be issued on Friday the 28th November, 2008. If the full deposit is not then paid within the 14 day period legal action will be taken against your client seeking compensation for any financial loss that may be incurred by the estate[2].”
[2] The plaintiff’s interest in the property was as the executor of the will of her late father
14 No response was received from this correspondence until 26 November 2008, when a letter was sent by PCS on behalf of the defendant. It requested more time and expressed a conditional desire to complete the contract, but stated that the defendant would be unable to pay either the deposit or the balance of the purchase price until after Easter 2009. The letter suggested the plaintiff consider putting the property on the short term rental market to realize good income and “to compensate for the delay in payment of deposit and settlement until after Easter next year.”
15 The extended day for performance came on 27 November 2008, one month after the original deadline. No payment was made.
16 On 28 November 2008, the plaintiff served a rescission notice on the defendant, requiring the deposit to be paid within 14 days, after which the contract would be rescinded.
17 No further payment was made and on 16 December 2008, the plaintiff’s lawyers wrote to PCS stating that the contract was at an end.
WHETHER RESCISSION NOTICE EFFECTIVE EVEN IF WAIVER
18 Even if there was some kind of waiver, so that time was at large, the plaintiff submitted that the effect of the service of the notice of rescission was that time was again made “of the essence”, and the failure to make the payment within 14 days as required under the notice was grounds for the rescission of the contract.
19 Mr Naish highlighted that the “old view” that a further notice was required was overruled by the Full Court in Poort v Development Underwriting (Victoria) Pty
Ltd (No 2).[3]
[3] [1977] VR 454.
20 Mr Jones was unable to put submissions in response to this proposition.
21 I accept that this is the effect of the Poort authority. It makes clear that a rescission notice can operate both to fix a new time for performance provided the time is reasonable and to rescind for non-payment. Further that there is no reason why, when the right to rescind for non-compliance with a time so fixed is exercised, its exercise should be subject to the further notice provision (in clause 6 of Table A).
22 The time fixed in this case was reasonable and the defendant did not suggest otherwise.
23 The failure to comply with the requirement to pay the balance of the deposit within the reasonable time specified in the rescission notice gave the plaintiff a right to rescind the contract. By the correspondence of 16 December 2008 the plaintiff stated that the contract was at an end and thereby confirmed that the contract was rescinded.
24 In the light of the decision of the Full Court in Poort, it follows that the plaintiff is entitled to judgment in this proceeding.
25 I also accept the submissions of Mr Naish that the correspondence of 26 November made it plain that the defendant did not consider himself bound by the terms of the agreement and thereby repudiated the agreement. As such, the plaintiff may also rely on this separate repudiation as a basis for rescinding the contract and accepting such repudiation even though it was not referred to as a ground in the rescission notice.[4]
[4] Poort v Development Underwriting (Victoria) Pty Ltd (No 2) (1977) VR 454
26 However, it is unnecessary to consider this further given my findings above.
WHETHER WAIVER IN ANY EVENT
Whether Waiver on or about 28 October 2008
27 Although it is unnecessary to resolve the question of waiver in these circumstances, the issue will be considered out of deference to the submissions of Counsel.
28 Mr Jones submitted that an election was made by the plaintiff on 27 October 2008 or “thereabouts” given the plaintiff failed to exercise her right to serve a rescission notice at that time. He also suggested that the refusal to grant an extension on 2 November was in fact “worse” than doing nothing since the plaintiff, whilst insisting on strict compliance, chose to do nothing about it.
29 He placed reliance on the cases of Thornton v Bassett[5] and Mahred Nominees Pty Ltd[6] in support of his submissions.
[5] [1975] VR 407
[6] Unreported decision of the Supreme Court of Victoria, Byrne J, 11 September 1991
30 In my view there was no conduct of the plaintiff which could constitute a clear and unequivocal election. [7]
[7] As per Immer Pty Ltd v Uniting Church in Australia Property Trust (1993) 182 CLR 26
31 A person confronted with a choice between the exercise of alternative and inconsistent rights is not bound to elect at once. She may instead keep the question open so long as she does not affirm the contract and so long as the delay does not cause prejudice to the other side.[8]
[8] Sargent v ASL Developments (1974) 131 CLR 634 at 656
32 In this case, the alleged “failure” to immediately move to rescission is not enough to constitute a waiver of the plaintiff’s rights as she was not bound to elect “at once” and any delay did not cause prejudice to the defendant. Moreover, and contrary to the defendant’s submissions, the consequent refusal of an extension made it clear that the plaintiff did not affirm the contract.
33 I can also find nothing in the two authorities cited by the defendant which would support a contrary position.
34 The facts of Mahrad included circumstances wherein the parties undertook negotiations in an attempt to salvage the transaction which facts are not present here.
35 The passage relied upon in Thornton simply suggests that a vendor is entitled to give a notice “immediately” but does not suggest that a failure to do so will necessarily constitute a waiver.
36 There is therefore no waiver by reason of the plaintiff’s conduct in failing to issue the rescission notice on or shortly after 27 October 2008.
Whether Waiver by correspondence of 17 November 2008
37 In relation to the letter of 17 November 2008 I accept the submission of Mr Naish that it expressly preserves the rights of the plaintiff to sue upon a continued failure to pay the deposit on time.
38 In such circumstances I do not accept the defendant’s submissions that the correspondence constitutes an election to affirm the contract rather than to serve a rescission notice.
39 A vendor who does no more than give the purchaser the opportunity to pay within a limited time thereafter is not electing not to rescind for non- payment on the original date. Rather time continues to be of the essence though in respect of the later date.[9]
[9] Tropical Traders Ltd v Goonan (1963) 111 CLR 41
40 In this case, I do not find in the letter of 17 November 2008 a determination not to rescind for the defendant’s failure to pay the deposit.[10] Moreover, the defendant could not have reasonable grounds for supposing that if he failed to make the payment on 27 November 2008, he could still count on being allowed further time.[11] The consequences of the failure were clearly set out in the letter and there was also a clear fixed date for payment of the balance of the deposit.
[10] Nund v McWaters [1982] VR 575 at 580
[11] cf Tropical Traders Ltd v Goonan (1963) 111 CLR 41at 53.
41 In these circumstances, if it was necessary to determine, I would find that there was no waiver by the plaintiff.
CONCLUSION
42 The plaintiff is entitled to judgment in the amount of $128, 479.12.
43 I will hear from the parties as to the precise form of final orders including the question of interest and costs.
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