McNichol Pty Ltd v R.F Heritage Pty Ltd
[2010] VCC 1429
•21 October 2010
| IN THE COUNTY COURT OF VICTORIA | Revised |
Not Restricted
AT MELBOURNE
CIVIL DIVISION
COMMERCIAL LIST – EXPEDITED CASES DIVISION
Case No. CI-09-04913
| McNICHOL PTY LTD | Plaintiff |
| (ACN 077 871 919) | |
| v | |
| R. F. HERITAGE PTY LTD | First Defendant |
| (ACN 005 135 311) | |
| -and- | |
| ELAINE MAY HERITAGE | Second Defendant |
| -and- | |
| ROBERT FRANK HERITAGE | Third Defendant |
---
| JUDGE: | HER HONOUR JUDGE KENNEDY |
| WHERE HELD: | Melbourne |
| DATE OF HEARING: | 1, 2, 3, 7, 8 & 14 September & 4, 15 October, 2010 |
| DATE OF JUDGMENT: | 21 October 2010 |
| CASE MAY BE CITED AS: | McNichol Pty Ltd v R.F Heritage Pty Ltd & Ors |
| MEDIUM NEUTRAL CITATION: | [2010] VCC 1429 |
REASONS FOR JUDGMENT
---
Catchwords: claim under contract for sale of land and guarantee – whether variation of contract valid - whether guarantee discharged by variation- whether contract abandoned - whether plaintiff entitled to sue for damages for loss of bargain
| APPEARANCES: | Counsel | Solicitors |
| For the Plaintiff | Mr. M. J. Colbran QC & Mr. I. | Baker Jones |
| W. Upjohn | ||
| For the Defendant | Mr. P. G. Cawthorn SC & Mr. | Ken Smith & Associates |
| J. W. Kewley | ||
| HER HONOUR: |
1 McNichol Pty Ltd, as assignee, alleges that R. F. Heritage Pty Ltd (the purchaser) repudiated a contract of 1 March 2006 with Weeping Willow Pty Ltd (in liquidation) (the vendor) for the sale of a number of parcels of land in Axedale Victoria which contract was varied in about November 2006.
2 McNichol alleges that the vendor accepted the repudiation by correspondence of 21 August 2007 and seeks damages of $650,000 for loss in the value of the land together with statutory interest from the date of issue of the proceeding.[1] This amount is sought against the purchaser and Mr Robert Heritage (in his capacity as a guarantor). A former claim against Mrs Elaine Heritage, the second defendant, was abandoned by Senior Counsel for McNichol in closing submissions.
[1] Claims for loss of deposit plus interest as well as the costs of administration of Weeping Willow were abandoned by Senior Counsel for McNichol in closing submissions
Issues 3 The issues in dispute are:
• whether the variation of the contract was valid; • whether the guarantee was discharged by the variation; • whether the contract was abandoned; • whether the plaintiff is entitled to sue for damages for loss of bargain; • whether the quantum sought is sustainable; and • whether the assignment to McNichol was valid.
4 There is also a preliminary issue as to the admissibility of affidavits which had been filed in the Supreme Court of Victoria in relation to an application brought by the vendor to remove a caveat lodged by Northwater Investment Holdings Pty Ltd shortly prior to the date the (varied) contract was due to settle on 22 January, 2007. This issue will be dealt with shortly.
5 An earlier defence to the effect that the contract had been discharged for non- compliance with a special condition was not pursued by Senior Counsel for the defendants.
6 Finally, these reasons should be read together with a ruling delivered on 14 September.[2] As is apparent from that ruling, the case was initially run by McNichol on the basis that the contract remained on foot and it was only in closing submissions that Senior Counsel for Mc Nichol first alleged that the vendor had in fact terminated the contract in August, 2007. This has had some impact on the evidence received.
Preliminary Issue-admissibility of Supreme Court affidavits
background
[2] [2010] VCC 1226
7 In the current proceedings the affidavits filed and read in the Supreme Court proceeding were included in a Supplementary Court Book and were tendered by Senior Counsel for the defendants as part of his opening. They were sought to be tendered, not as truth of their contents, but to show what was occurring in the Supreme Court dispute. This was said to be necessary given the nature of the proceeding in the Supreme Court was a summary removal proceeding under s90(3) of the Transfer of Land Act 1958 (without pleadings) so that the affidavits really defined the ambit of the dispute.
8 McNichol initially objected to the receipt of the material on the basis of relevance, although this objection was subsequently withdrawn.
9 It appeared that Counsel had not appreciated the ambit of s60 of the Evidence Act 2008, which provides that the hearsay rule does not apply to evidence of a previous representation that is admitted because it is relevant for a purpose other than proof of an asserted fact.
10 Once I raised this matter with Counsel, Senior Counsel for the defendants requested that the court exercise its discretion under s136 so that the affidavits should only go in as evidence of assertions made by the parties in the caveat proceedings and not as the truth of asserted facts. In particular, he submitted that he had been unable to cross examine the deponents of the affidavits. Further, that, in the case of an affidavit of the vendor’s administrator, Mr White, that the affidavit contained an opinion.
resolution
11 I accept, consistent with the position of both parties, that the Supreme Court material could rationally affect the assessment of the probability of whether the vendor was able to provide good title during 2007.
12 I also accept that the effect of s60 of the Evidence Act is that the hearsay rule does not apply to the material so that, notwithstanding the understanding and intention of Counsel at the time, the matters contained in the material are able to be adduced as truth of the contents.
13 Section 136 permits the court to limit the use to be made of evidence if there is a danger that a particular use of the evidence might be unfairly prejudicial to a party or be misleading or confusing.
14 I accept that an inability to test the truth of a representation by cross examination may constitute grounds for the exercise of discretion under s136.[3] However, any inability to test the evidence was brought about by the defendants own actions in adducing the evidence. The case might have been different if the plaintiffs had sought to rely on the material without calling the relevant deponents.
[3] William Gary Quick v Stoland Pty Ltd (1998) 87 FCR 371; Roach v Page (No. 11) [2003] NSWSC 907
15 Further, although it is unfortunate that Counsel proceeded on an incorrect understanding of the law, this does not of itself amount to prejudice in the relevant sense.
16 Moreover, given that:
(a) I should not attempt to constrain the legislative policy underlying the statute by reference to common law rules which the legislature has discarded;[4]
(b) the relevant material is apparently on oath such as might make it
inherently more reliable;(c) the case does not concern a jury so that the potential for “misuse” should
be lessened;I am not generally satisfied that the admission of the affidavits is unfairly prejudicial to the defendants.
[4] Papakosmas v The Queen (1999) 196 CLR 297; 73 ALJR 1274 at [38-41] and [91-98]
17 The affidavit of Mr White of 17 August, 2007, however, warrants some special attention; the contents being potentially significant after McNichol altered the way it put its case.
18 That affidavit contained the following statement (in paragraph 5):
“The purpose of the proceeding herein has been to effectuate the removal of caveats lodged on behalf of the First Defendant [Northwater] over rural properties of the Company [Weeping Willow Pty Ltd]. In addition, the First Defendant disputes the claims of McNichol Pty Ltd to a caveatable interest with respect to the said properties. I have reached agreement with both the First Defendant and McNichol Pty Ltd to provide withdrawal of caveats upon a sale of the relevant properties for market value” (emphasis added)
19 I accept the submissions of the defendants that the last sentence emphasised above contains a conclusory statement of opinion that an agreement was reached contrary to s76 of the Evidence Act. Such a conclusory opinion, without more, could also not rationally affect the assessment of the probability of any issue in the case under s55. In these circumstances the sentence is inadmissible.
20 However, even if the sentence is admissible, the statement does not annexe any document constituting the alleged agreement, nor are the material facts supporting the existence of any such agreement set out. It is also unclear what were the terms of any such agreement and/or whether any conditions of such an agreement were met.
21 It follows that, although the Supreme Court affidavits are generally admissible as truth of their contents I am not satisfied that the last sentence of paragraph 5 of Mr White’s affidavit is admissible. Even if that sentence is admissible it should be accorded little, if any, weight.
Factual Background
22 The plaintiff called three witnesses: Mr Graeme Colling, who negotiated the contract of sale; Mr Bruce Caldwell, the solicitor who acted in relation to the contract of sale and Mr Dean Jones, a director of McNichol and principal of the law firm DE Jones & Associates.
23 The defendants did not call any oral evidence.
24 The witnesses called had little independent memory of the transactions and added little to the evidence generally which largely turned on the construction of the correspondence at the time.
25 The chronology, below, is therefore largely based on undisputed evidence.
Preliminary
26 In February 2004 McNichol lent the vendor an amount of $350,000 and took a charge over the assets of the vendor. Subsequently, under a deed of assignment of 25 June 2008, McNichol paid the sum of $30,000 to the Liquidator of the vendor in return for an assignment of the vendor’s right title and interest in the alleged cause of action against the purchaser and the guarantors arising from the failure of the purchaser to complete the contract of sale the subject of this proceeding.
27 The director of the vendor was Ms Melitta Colling. However, the negotiations in relation to the purchase the subject of this proceeding were undertaken by Melitta Colling’s father, Mr Graham Colling, a property development consultant.
28 The directors of RF Heritage Pty Ltd are Mr Robert Heritage and Mrs Elaine Heritage.
29 Graham Colling and Robert Heritage had been known to each other for many years prior to the entry into the contract of sale.
30 In early 2006 Mr Colling and Mr Heritage met in order to discuss and develop a proposal for sale by the vendor of various lots of land at Eddington Street, Axedale. This led to the formation of the contract the subject of this proceeding which was prepared by Mr Bruce Caldwell, solicitor for the vendor.
Contracts
31 On 1 March 2006 the vendor (Weeping Willow Pty Ltd) and the purchaser (RF Heritage Pty Ltd) executed a contract for sale of lots 1,2,3,4,6 and 7. The purchase price was $1,000,000 with payment of the balance due on 1 September 2006 (“the relevant contract”). The deposit was $50,000 constituted by $2,500 on the signing and the balance within 30 days of signing. The contract was executed by Mr Heritage on behalf of the corporate purchaser as was the vendor’s statement.
32 The General Conditions provided that the general conditions in Table A of the Seventh Schedule of the Transfer of Land Act 1958 apply (clause 9.1).
33 Those General Conditions provided that time shall be of the essence of the relevant contract (condition 5).
34 The Special Conditions included special condition 5 which provided that “This contract is subject to and conditional upon the Vendor providing to the Purchaser confirmation within 30 days of the date hereof that the property is to be rezoned Residential 1 Zone under the Greater City of Bendigo Planning Scheme.” At that time the property was zoned Low Density Residential.
35 The contract also contained a guarantee given by Mr Robert Heritage and Mrs Elaine Heritage which is set out, below.
36 The contract contained an error since Lot 2 of the Axedale land was actually owned by separate parties, namely, Brett Major and Danielle Major. By a contract of sale of 10 August 2006 Baroke Developments Pty Ltd purchased lot 2 for a price of $145,000. Baroke Developments was an entity also associated with the Heritages.
37 Lot 5 was also separately owned by Melitta Colling in her own right. It was the subject of a contract of sale on 1 March 2006 to RF Heritage Pty Ltd for a purchase price of $200,000. That contract also contained a special condition 5 in the same terms as the relevant contract.
38 At the time of contract various lots were affected by encumbrances by way of mortgage to Westpac Banking Corporation, RMBL investments Limited and M & K Management Services Pty Ltd.
39 There were also caveats lodged by McNichol and Northwater as described earlier. The Northwater caveat was dated 28 September 2004 and claimed “as Beneficiary pursuant to a Constructive Trust between the Caveator and Weeping Willow Pty Ltd.”
Post contracts until 22 January
40 Notwithstanding that special condition 5 was not fulfilled by 30 April 2006, the evidence of Mr Colling was that it was “discussed” and Mr Heritage “didn’t seem to have a problem with it.”
41 No settlement occurred on 1 September, and, as will be seen below, Mr Colling’s evidence was vague about any communication between himself and Mr Heritage around this time.
42 However, although there was little contact between Mr Heritage and the vendor’s representatives, there was correspondence between DE Jones & Associates and Mr Caldwell around this time. In particular, by correspondence of 13 November, DE Jones stated that a decision had been made to appoint a voluntary administrator to Weeping Willow unless, inter alia, a firm settlement date was confirmed.
43 Mr Caldwell then appears to have had a conversation with Mr Heritage in which a new settlement date was agreed which will be referred to below.
44 By correspondence of 21 November marked “urgent” DE Jones suggested that if they did not receive adequate written confirmation from Mr Heritage of the matters he had agreed to (including the new settlement date) by 12.00 noon on 23 November then Mr White would be appointed administrator of Weeping Willow without further notice.
45 By correspondence of 22 November signed by Mr Heritage he then wrote to Mr Caldwell as follows:
“This is to confirm our phone call of Monday last, that the settlement of Axedale
will take place on January 22nd.
And to delete reference to Lot 2 from the particulars of Sale with Weeping Willow
and to waive rights in regard to Special Condition 5.”
46 Mr Caldwell accepted that the contents of the phone call referred to in this letter were embodied in this letter.
47 On 18 December 2006 a further telephone discussion took place between Mr Heritage and Mr Caldwell. The evidence of Mr Caldwell was that this discussion took place because the purchaser needed to submit a transfer and he was concerned that Mr Heritage did not have a solicitor acting for him and that he would need to do so quickly given the imminent vacation. The diary note of this conversation reads:
“ATT Rob Heritage. Told him he needs to get someone to act for him as settlement is due 22/1 and he will need to act quickly. He has misplaced the P/sub [plan of subdivision].”
48 No transfer was provided and no further discussions took place between Mr Caldwell and Mr Heritage.
Supreme Court proceeding
49 As indicated already, on 13 December 2006 Weeping Willow Pty Ltd (and also Melita Colling) filed an Originating Motion and Summons in the Supreme Court seeking removal of caveats lodged by Northwater under s90(3) of the Transfer of Land Act.
50 In her affidavit of 14 December, Ms Melitta Colling stated (at para 22):
“Unless the caveats are removed, the purchaser will be entitled to refuse settlement, and, if I and Weeping Willow are not able to provide clear title to the purchaser on 22 January 2006 (sic), the sales will be in jeopardy.”
51 Mr Caldwell and Mr Jones also agreed in oral evidence that the settlement could not proceed if the caveat was there.
52 By order of 19 December 2006, the summons was adjourned to the Judge sitting in the Practice Court on 18 January 2007.
53 On 2 January, solicitors for the plaintiff wrote to solicitors for Northwater as follows:
“We confirm that, at the previous hearing, our clients’ Counsel handed up proposed orders that the net proceeds of sale be paid into Court pending resolution of the dispute. Alternatively, they might be paid into an interest bearing account. We maintain that this is the most sensible course of action given the serious threat posed to the Contracts of Sale (which are due to settle on 22 January 2007) by the maintenance of your client’s caveat.”
54 The letter suggested that the caveats were not only jeopardising sales but prejudicing creditors and claimed that there was “already a shortfall.” It proposed that orders be made that the net proceeds of sale be paid into court. (this letter is annexed to an affidavit of Mr Buordolone of 17 January 2007).
55 The response was that an affidavit of a Mr Skouras was filed on behalf of Northwater of 11 January 2007. It contained 22 pages and 25 exhibits and alleged that Northwater had paid over $300,000 for the purchase of the Axedale land (para 11A) and that Northwater and Mr Colling had entered a joint venture to develop the Axedale land (paragraph 8).
56 Although in this proceeding McNichol sought to lead evidence that the claims of Mr Skouras were without merit (for example, Mr Colling’s contention was that the arrangement with Mr Skouras was contingent on Mr Skouras’ interests purchasing the Bird and Bottle Hotel which did not eventuate) the evidence tendered suggests the dispute was substantive and complex with many issues raised. In any event, as will be seen below, the dispute was not able to be summarily resolved by the Supreme Court by the time of the settlement date of 22 January.
57 In submissions dated 18 January, the plaintiffs (in the Supreme Court) alleged that there would be a shortfall and that the caveats were jeopardising imminent sales. Further that, again, any interest of Northwater could be adequately protected by the payment into trust, or into court, of the net proceeds of sale after costs and payment of secured creditors.
58 However, no such arrangement was made. Rather, on 18 January 2007 Justice Bongiorno made the following order:
“The Originating Motion be immediately referred to the Listing Master to fix for Trial on an estimate of 2 days with such priority as is possible having regard to the Plaintiff’s obligation to third parties pursuant to a Contract of Sale which is due for imminent settlement and their obligations to third parties holding security interests in the subject properties.”
59 As conceded by Mr Jones it became apparent to him that the caveat could not be removed by 22 January.
60 On 6 February Master Kings (as Her Honour then was) referred the proceeding to mediation. However the mediation was concluded on 22 February without a settlement being reached.
22 January and after
61 On 22 January, the lots failed to settle.
62 On 2 March, 2007 Weeping Willow was then placed into administration with Mr White appointed administrator.
63 Subsequently on 22 March 2007, Piper Alderman, on behalf of the administrator wrote as follows:
“…We act for Mr Warren White, Administrator of the Company. Our client advises that you have indicated that you no longer intend to proceed with the Contract of Sale dated 1 March 2006, regarding the sale of the property situate at Lots 1, 2, 3, 4, 6 and 7 Eddington Street, Axedale, Victoria 3551 (the “Contract”).
We request confirmation in writing as to your intentions with respect to the
Contract by return…”
64 By way of letter of 23 March 2007 from Mr Heritage to Piper Alderman, Mr Heritage stated:
“We will not be proceeding with this development as there have been too many problems. I have been in discussions with Graham Colling and Boutique Homes and will be putting a proposal forward in the next few weeks.”
65 By way of correspondence of 26 March 2007 Piper Alderman then wrote:
“…We note your election not to proceed with the ‘development as there have been too many problems.’ Our client is considering his position and we will respond on his behalf in due course.
We reserve all right of our client in pursuance of the Contract of Sale dated 1
March 2006…”
66 A number of months followed with no evidence of contact between the purchaser and Piper Alderman. Then on 21 August 2007 Piper Alderman wrote to RF Heritage. Given McNichol suggests this effected a termination of the contract it will be set out in full, below.
67 On 4 February 2008 Weeping Willow discontinued its claim in the Supreme Court and the whole Supreme Court proceeding was ultimately dismissed on 30 July 2008 without an adjudication on the merits. However, the Northwater caveat has not been removed from the titles to the relevant lots.
68 On 16 October 2009 this proceeding was issued.
Variation and effect on guarantee
variation
69 It will be recalled that the letter of 22 November dealt with three matters:
• it confirmed a phone call “that the settlement of Axedale will take place on January 22nd”; • it deleted reference to Lot 2 from the particulars of Sale with Weeping Willow; and • it waived rights in regard to Special Condition 5. 70 It was submitted by the defendants that the letter of 22 November from Mr Heritage is of no binding effect because of various matters cited below. It followed that the variation was ineffective so that the failure to comply with special condition 5 subsisted until it was accepted by the purchaser on 23 March 2007.
71 The various matters relied upon were:[5]
[5] Outline of defendants’ submissions at paragraphs 32 and 33
(a) it is signed only by Mr Heritage in non-compliance with s126 of the Instruments Act 1958 insofar as the company was concerned as both directors should have signed;
(b) it is not addressed to the vendor;
(c) it does not distinctly indentify the contract;(d) its language is suggestive of a fresh bargain;
(e) there was no consideration; and
(f) the background to the letter is “unusual”, in particular, Mr Heritage had no
legal representation.S126 Instruments Act
72 Pursuant to s126 an action must not be brought upon a special promise to answer for the debt, default or miscarriage of another person or upon a contract for the sale or other disposition of an interest in land unless the agreement on which the action is brought, or a memorandum or note of the agreement, is in writing signed by the person to be charged or by a person lawfully authorised in writing by that person to sign such an agreement.
73 A corporate purchaser must necessarily act through an agent. It therefore appears that consideration should be given to the provisions in the Corporations Act 2001 (although Counsel did not specifically cite these provisions).
74 Pursuant to s126 of the Corporations Act 2001, a company’s power to make, vary, ratify or discharge a contract may be exercised by an individual acting with the company’s express or implied authority and on behalf of the company. The power may be exercised without using a common seal.
75 Further, although s127(1) provides that a company may execute a document without using a common seal if the document is signed by 2 directors, section 127 does not limit the ways in which a company may execute a document. (s127(4)).
76 The corporation RF Heritage Pty Ltd is a proprietary company with two directors, apparently husband and wife (they give the same address in the company search). Mr Robert Heritage is both the director and company secretary and the evidence suggested that it was he alone who was constituted as the person to have the carriage of negotiations on behalf of the company. Even more significantly, the purchaser company has accepted that the original contract bound it as purchaser notwithstanding that there appears to be only one signature on the original contract of sale and vendor’s statement on behalf of the company, namely that of Mr Heritage.
77 In such circumstances, the company has impliedly warranted that Mr Heritage, as a director, was authorised to execute any variation of the contract on behalf of the company.
78 It thereby follows that the company’s power has been exercised through Mr Heritage and the letter was “signed by the person [the company] to be charged” for the purposes of s126.
Other matters
79 In terms of the other matters raised:
•
it is true that the correspondence was not addressed directly to the vendor, but to a solicitor, Bruce Caldwell and Associates, acting on the vendor’s behalf. In my view this is sufficient;
•
the letter is clearly referring to the relevant contract given the reference to the then settlement date; the reference to Axedale and Lot 2 and the reference to the vendor, Weeping Willow. It was further not put to Mr Caldwell that he would have been discussing some other contract with Mr Heritage with these features;
•
there is no “fresh bargain”; rather the clear purport of the letter is to alter three matters but to otherwise allow the subsisting contract to continue to operate. To do otherwise would leave the other terms of the arrangement uncertain;
•
the consideration provided is that of the extension of time for the payment of the residue to 22 January; and
•
although it is clear that Mr Heritage did not have legal representation, the objective intention of the parties is clear.
80 In my view then the correspondence effects a variation of the contract in three ways. This is made clear by the cross referencing to the original contract by relevantly “deleting” reference to Lot 2 from the “particulars of sale” and by “waiving” rights in regard to special condition 5.
81 The natural reading of the letter was that the “untouched” part of the contract was otherwise to remain in force.
Effect of guarantee
82 The defendants submitted that the guarantee, on its proper construction, is not engaged for the claim for loss of bargain damages. Further, that a variation of the principal contract without the consent of the guarantors which increased the guarantor’s risk, will have the effect of discharging the guarantor from liability.[6]
Construction of guarantee
[6] See Outline of Defendants’ submissions at paras 61 and 62
83 The guarantee reads as follows:
“1. The ‘guarantor’, ‘vendor’, ‘purchaser’ and ‘contract’ are set out in the
schedule.
2. In consideration of the vendor at the request of the guarantor entering into the
contract the guarantor:
2.1 agrees to be jointly and severally liable with the purchaser to the vendor
for the performance of all the obligations of the purchaser.
2.2. guarantees to the vendor the payment of all money payable by the
purchaser and the performance of the purchaser’s obligations.3. If for any reason all or any part of the contract is unenforceable by the vendor against the purchaser the guarantor will indemnify the vendor against all loss including all money that would have been payable by or recoverable from the purchaser if the contract had been enforceable against the purchaser.”
84 In construing the guarantee there is a distinction between two forms of guarantee which distinction was first drawn by Lord Reid in Moschi v Lep Air Services Ltd[7] and subsequently adopted by the High Court in Sunbird Plaza Ltd v Maloney[8]. In that case Mason CJ stated:
“There are, however, two common classes of guarantee of the payment of instalments by the principal debtor. The first is an undertaking by the guarantor that if the debtor fails to pay an instalment he will pay. This is a conditional agreement. The guarantor’s obligation to pay arises on the debtor’s failure to pay. The second is an undertaking by the guarantor that the debtor will carry out his contract. Then a failure by the debtor to perform his contract puts the guarantor in breach of his.”[9]
[7] [1973] AC 331 at 344-345
[8] (1988) 166 CLR 245
[9] (1988) 166 CLR 245 at 256
85 If the guarantee is of type 1 the creditor’s cause of action is in debt or for a money sum. In respect of a guarantee of type 2 the cause of action will generally be in damages for breach of contract.
86 In my view the guarantee clearly includes a type 2 guarantee. Thus by clause 2.1 the guarantor is liable “for the performance of all the obligations of the purchaser” and by clause 2.2 guarantees the “performance of the purchaser’s obligations.”
87 In such circumstances, the vendor may sue the guarantor in damages.[10]
Whether consent of guarantors
[10] Moschi v Lep Air Services Ltd [1973] AC 331; Nangus Pty Ltd v Charles Donovan Pty Ltd (in liq) [1989] VR 184
88 It is not necessary for Mr Heritage to sign the letter twice, once on behalf of the company, and again in his own capacity if it is intended that the signature cover the two capacities.[11]
[11] Ontario Marble Co Ltd v Creative Memorials Ltd (1963) 39 DLR (2nd)149
89 Given the pivotal role of Mr Heritage, it was objectively intended that the entire contract arrangement, including the guarantee, would continue subject only to the three alterations, above. In those circumstances, although he only signed the letter of November once, there is nothing to indicate that Mr Heritage signed solely for and on behalf of the company.
90 I am further satisfied that Mr Heritage knew of and consented to the alteration in his liability as a guarantor such that his liability was not discharged by virtue of that variation.[12]
[12] See Winstone Ltd v Bourne & Anor [1978] 1 NZLR 94; Woodcock v Oxford & Worcester Railway Company (1853) 1 Drew 521; 61 ER 551
91 The position is quite different as regards Mrs Heritage who has not executed the variation at all. In these circumstances, the guarantee in respect of her is discharged. However, it is unnecessary to consider this matter further as McNichol did not pursue a claim against Mrs Heritage.
Abandonment
92 The defendants submitted that the contract was abandoned by the vendor on or about 22 January 2007, alternatively 5 February 2007.[13]
[13] Further further Amended Defence paragraph 9C
93 In terms of the suggestion of abandonment, the defendants rely on the following conduct of the vendor in particular:
(a) the failure to take any, or any reasonable steps to satisfy special condition 5 between 1 March 2006 and 31 March 2006; alternatively by 1 September 2006;
(b) the failure to settle or appoint settlement of the contract on 1 September
2006;(c) the failure to exercise on 1 September 2006 or within a reasonable time
thereafter any contractual right the vendor might have had;(d) the failure to take any, or any reasonable step to satisfy special condition 5
between 1 September and 17 November;
(e) the failure to settle or appoint settlement of the contract on 22 January,
2007;(f) its failure or refusal to remove caveats from the title at any time prior to 22
January;(g) its failure to have completed the necessary steps, required by
conveyancing practice, to complete a contract for the sale of land; and(h) its failure to exercise on 22 January or within a reasonable time, any contractual right it might have had (including by the administrator after 5 March).
94 In terms of (a) and (d), Mr Colling suggested that the problem with special condition 5 was “discussed.” Although the evidence is vague, any ongoing discussion weighs against an abandonment.
95 In terms of (b), it was pointless to appoint a settlement date given the non- compliance with the special condition at that time. This does not show the parties have acted so as to mutually abandon the contract.
96 In terms of (c) and (h), the failure to exercise contractual rights, per se, does not show an abandonment, particularly when viewed in context with the other surrounding circumstances which, as will be seen below, were instead explicable by an inability to deliver title.
97 In terms of (e) to (g) above, it is true that Mr Caldwell did not take steps to contract Mr Heritage between 18 December and 22 January. However, in my view this was again explicable by an inability to deliver title.
98 More significantly, the correspondence of 22 November is totally inconsistent with abandonment as is the communication of 18 December 2006.
99 The issuing of the Supreme Court proceeding also suggested an intention to attempt to perform rather than an abandonment.
100 In these circumstances, I am not satisfied that the parties intended to abandon[14] nor should I infer abandonment.[15] The parties have also not conducted themselves so as to mutually abandon the contract.[16]
[14] DTR Nominees Pty Ltd v Mona Homes Pty Ltd (1978) 138 CLR 423
[15] See e.g. Fitzgerald v Masters (1956) 95 CLR 420
[16] see Summers v Commonwealth (1919) 26 CLR 180 at 151-2
101 The matters cited at (e) to (g), and particularly the ongoing existence of the caveat, are however, relevant to the question of repudiation and will be considered further, below.
Entitlement to damages
102 McNichol alleged that it was entitled to, and did, accept the repudiation by the defendant evinced in the correspondence of 23 March by reason of the letter of 21 August.[17] It allegedly followed that it was entitled to loss of bargain damages.
[17] Further Amended Statement of Claim paras 10 and 11
103 However, the defendants alleged that the letter of 23 March constituted an acceptance of a repudiation which had been committed by McNichol in failing to provide good title.[18] In these circumstances, it was too late for McNichol to accept a termination on 21 August as the contract was already terminated.
[18] Further Further Amended Defence para 9B
104 The defendants also denied that the effect of the letter of 21 August was to elect to terminate the contract.[19]
[19] Further Further Amended Defence para 11
105 The issues then became:
(a) what was the status of the letter of 23 March;
(b) if the letter of 23 March constituted a repudiation whether that repudiation
was accepted by the letter of 21 August; and(c) whether McNichol was entitled to loss of bargain damages.
Status of letter of 23 March
106 In considering whether McNichol had repudiated the contract, the applicable principles are as follows:
[20] Shevill & Anor v The Builders Licensing Board (1982) 149 CLR 620 at 625-626; Laurinda Pty Ltd & Ors v Capalaba Park Shopping Centre Pty Ltd (1989) 166 CLR 623
[21] Koompahtoo Local Aboriginal Land Council& Anor v Sanpine Pty Ltd & Anor (2007) 233 CLR 115 at [44]
[22] Laurinda Pty Ltd & Ors v Capalaba Park Shopping Centre Pty Ltd (1989) 166 CLR 623 at 658; DTR Nominees Pty Ltd v Mona Homes Pty Ltd (1978) 138 CLR 423 at 431
• a party will have repudiated a contract if, by words or conduct, it evinces an intention no longer to be bound by it, or if that party shows it intends to fulfil the contract only in a manner substantially inconsistent with its obligations and not in any other way;[20] • the test is whether the conduct of one party is such as to convey to a reasonable person, in the situation of the other party, renunciation either of the contract as a whole or of a fundamental obligation under it;[21] and • the party’s conduct is to be judged objectively by reference to the effect it would be reasonably calculated to have upon a reasonable person.[22] 107 It will be recalled that, as at 22 January, 2007, the Northwater caveat had not been removed. Instead, the matter had been referred to the Listing Master in the Supreme Court to fix for trial.
108 This position further continued right up until 23 March.
109 McNichol attempted to suggest that had “push come to shove” the court should conclude that title would have been provided.[23] Various matters were put in support of this proposition including:
[23] Outline of Closing Submissions of the Plaintiff at para 16
(a) the Northwater caveat could have been removed by various ways including by application for urgent injunctive relief under s90 and/or by agreement;
(b) that it was “particularly telling” that Northwater did not stand in the way of a
sale by Weeping Willow of a supermarket;(c) that the caveat itself was improperly based; and
(d) there was sufficient equity in Weeping Willow’s properties to satisfy all
encumbrances.110 In relation to the particular matters:
(a) the Supreme Court material summarised above makes it clear that, despite a range of attempts, the vendor had not been able to remove the caveat. I am unable to be satisfied that the caveat “would have been removed” as suggested;
(b) there was evidence that Weeping Willow had entered into a contract for the sale of supermarket on 16 June 2007 for $460,000. There was little evidence about this contract other than that because it was ultimately settled, Mr Jones “assumed” that Northwater provided a withdrawal of caveat. I do not find this evidence “particularly telling” insofar as the Northwater caveat over the Axedale land is concerned. This is particularly so given the direct evidence before this court to the effect that Northwater was vigorously opposing proceedings to remove the caveat over the relevant Axedale properties on 22 January;
(c) it is not for this court to determine whether the caveat was improperly based. The issue of whether the caveat should be removed was before the Supreme Court; the resolution of this question depending on the two stage test used by the Court when deciding applications for interlocutory injunctive relief.[24] In this context, it is sufficient to note that the claim of the caveator was sufficiently grounded so as to justify referral for trial in the Supreme Court of Victoria;
(d) even if the money worked out such that all encumbrances could be paid out (which is not established as is apparent, below) this is not to the point. A caveat effectively operates as an injunction to the Registrar by restraining the Registrar from registering any dealing except with the caveator’s consent (see s91(1) and 90(1)(b) TLA). The existence of a caveat is therefore an obstacle to a registered proprietor making title to a purchaser.
[24] Piroshenko v Grojsman & Ors [2010] VSC 240
111 The critical matter then, is that, despite the issuing of an application in the Supreme Court and the suggestion of various strategies (such as payment into court) so as to ensure a removal of the caveat, the caveat was not removed as at 22 January. Instead, the vendor was tied up in a complex dispute which warranted referral to the Listing master for a trial.
112 In these circumstances, the vendor was simply unable to deliver clear title as at 22 January. This constitutes a renunciation of a fundamental obligation under the contract and amounted in my view to a clear repudiation giving rise to a right to rescind.
113 Further, although there was little evidence that the purchaser was actually aware of the defect in the title, it would be entitled to justify its purported termination on grounds other than the grounds on which it relied at the time, including upon grounds of which it was unaware at the time.[25]
[25] Civoken Pty Ltd v Madden Grove Developments Pty Ltd [2006] VSC 283 at [432] citing Shepherd v Felt and Textiles of Australia Ltd (1931) 45 CLR 359 at 378; Poort v Development Underwriting (Victoria) Pty Ltd (No. 2) [1977] VR 454 at 460; Nund v McWaters [1982] VR 575 at 585, Sunbird Plaza Pty Ltd v Maloney (1988) 166 CLR 245 at 262
114 It is also unnecessary for the purchaser to comply with condition 5 of Table A insofar as it relies on a repudiation.[26]
[26] Civoken Pty Ltd v Madden Grove Developments Pty Ltd [2006] VSC 283 at [447]
115 However, McNichol alleged that the original settlement date of 1 September 2006 “passed without incident and negotiations continued.”[27] It cited the cases of Thornton v Bassett[28] and Petrie v Dwyer & Anor29 and submitted that time was no longer of the essence so that the purchaser was entitled to rescind only after it had given a notice again making time of the essence.
[27] Plaintiff’s supplementary submissions at paragraph 1
[28] [1975] VR 407
116 Further, McNichol alleged that the purchaser had failed to prepare the Transfer of land document at least 10 days prior to the settlement date as required by general condition 13.1 of the Contract of Sale.30 It submitted that because of the purchaser’s conduct in failing to make any arrangement, including by provision of the transfer, there was no need for the vendor to attend at a “non-settlement” on 22 January because the purchaser had indicated that the settlement would not proceed on that date.31
Whether time of the essence
117 I accept that the initial settlement date of 1 September passed with little action. However, the evidence of Mr Colling was extremely vague as to what took place around this time as follows:
“…Was there a settlement appointed on or about 1 September?.....Look, I can’t clearly recall that. All I do know is that there was a request-because things looked like moving with the development, that Rob was happy to move things forward to later- early the next year.
If I could……Exact details I don’t know.”
118 In these circumstances, there was little evidence of anything more than an extension of time for payment and certainly nothing like the evidence of extensive negotiations present in the case of Thornton v Bassett.32
119 However, the granting of an extension of time, without more, does not amount to a waiver.33
120 The case of Petrie v Dwyer34 also does not assist McNichol given the High Court found that time of the essence had not been waived in the
(1954) 91 CLR 99
Reply at para 4(e)
Outline of Closing Submissions of Plaintiff at para 7
[1975] VR 407
Thornton v Bassett [1975] VR 407 at 422
(1954) 91 CLR 99
circumstances of that case where the vendors had merely indicated that they would consider extending the time on condition of receiving extra money over and above the contract price.
121 For reasons given already, the construction of the correspondence of 22 November was also that all of the terms of the original contract were intended to be applicable with the exception of the three matters “excised.” It will also be recalled that the surrounding correspondence suggested that there was considerable urgency surrounding the need to settle the transaction.
122 In these circumstances, in my view, time was intended to remain of the essence, though in relation to the revised settlement date.
Absence of transfer
123 The defendants submitted that a party in breach of a non-essential term was not prevented from rescinding for repudiation and that the purchaser’s failure to deliver the transfer was not an essential term of the contract.[35] They emphasized that Mr Caldwell accepted that the vendor’s solicitor could have prepared the transfer.
[35] Outline of Defendants’ submissions at para 36 citing, inter alia, Roadshow Entertainment Pty Ltd v CEL Home Video Pty Ltd (1997) 42 NSWLR 462
124 In Foran v Wight[36], Deane J suggested that actual breach or even repudiation should not prevent a party from rescinding in circumstances where that party does not seek damages. In His Honour’s words: “it is difficult to see why the law should insist that, even though both parties to a contract have repudiated it, the contract must hang like an albatross around their necks unless and until they can reach a new agreement about its termination.”
[36] Foran v Wight (1989) 168 CLR 385 at 437-8
125 Although this view has gained some support[37], this approach has not been universally adopted. [38]
[37] Sharjade Pty Ltd v Commonwealth [2009] NSWCA 373 in the judgment of Hodgson JA at [62]; Highmist Pty Ltd v Tricare Ltd [2005] QCA 357 at [61]–[62] per Keane JA (with whom Jerrard JA at [1] and Cullinane J at [66] agreed)
[38] See in particular Foran v Wight (1989) 168 CLR 385 at 406 per Mason CJ; Hoy Mobile Pty Ltd (No. 2) v Allphones Retail Pty Ltd [2008] FCA 810
126 Significantly, in the Victorian Court of Appeal decision of Emhill Pty Ltd v Bonsoc Pty Ltd, the Chief Justice, delivering the leading judgment, accepted the following principle:
“A party need only be ready and willing to perform the contract in substance. A party who is in breach may nevertheless have the right to terminate so long as the breach is not repudiatory or of an essential term or such as to deprive the other party of the substantial benefit of the contract. [39]
[39] Emhill Pty Ltd v Bonsoc Pty Ltd (No 2) [2007] VSCA 108 at [68] – [74]
127 In Emhill the court also found that (one of the) leases contained a clause rendering time of the essence with respect to the payment of rent, outgoings as well as costs and expenses. It thereby followed that Emhill was in breach of an essential term and was precluded from accepting a repudiation.[40]
[40] Ibid at [70]
128 The test of whether a term is essential so that a breach will give rise to an immediate right of rescission is that stated by Stephen J, Mason J and Jacobs J in DTR Nominees Pty Ltd v Mona Homes Pty Ltd:
“the quality of essentiality depends…on a judgment which is made of the general nature of the contract and its particular provisions, a judgment which takes close account of the importance which the parties have attached to the provision as evidenced by the contract itself as applied to the surrounding circumstances.”[41]
[41] DTR Nominees Pty Ltd v Mona Homes Pty Ltd (1978) 138 CLR 423 at 430-1 adopting a passage from the judgment of Jordan CJ in Tramways Advertising Pty Ltd v Luna Park (NSW) Ltd (1938) 38 SR (NSW) 632 at 641-2
129 General Condition 13 provides that “the purchaser must provide the instrument of transfer required by General Condition 12 of Table A,.... to the vendor or the vendor’s solicitor at least 10 days prior to the settlement date.” (emphasis added). General Condition 12 provides that the instrument of transfer shall be prepared by or on behalf of the purchaser.
130 Further, as enunciated above, the relevant contract provided that time shall be of the essence of the contract which provision was not waived.
131 The mandatory terms of General Condition 13 and the stipulation that time was of the essence suggest that the provision of the transfer was highly important for settlement. Notwithstanding the evidence of Mr Caldwell, the parties have evinced an intention that the purchaser must comply on time with General Condition 13 so as to indicate a readiness to complete.
132 In such circumstances I am satisfied that General Condition 13 was an essential condition.
133 It thereby follows, on the basis of Emhill, that the non-provision of the transfer deprived the purchaser of the ability to terminate for the vendor’s repudiation.
134 The purchaser’s correspondence of 23 March made it clear that it was unwilling to perform the contract. Although the terms of the previous correspondence of Piper Alderman of 22 March appears designed to make the purchaser “show its hand” in circumstances where the vendor was also unable to settle, the purchaser’s response is clearly repudiatory. It therefore constituted a wrongful renunciation of the purchaser’s obligations and gave rise to a right to rescind to the vendor.
135 The issue then becomes whether the vendor accepted this repudiation by reason of the correspondence of 21 August as alleged.
Status of the letter of 21 August
136 The full terms of the letter of 21 August were as follows:
“We refer to our previous letters dated 22 March 2007 and 26 March 2007 in relation to the above matter, and, more particularly, to your letter of 23 March 2007. We enclose copies of each of these letters.
As you are aware, your election not to proceed with the Contract, as confirmed in your letter of 23 March 2007, constitutes a breach of the Contract. The consequences that flow from such a breach include a liability for damages incurred by the aggrieved party, in this case, the Company.
Damages in this regard will include losses incurred, if any, from the inability of the Company to achieve a sale price as high as that contemplated in the Contract, losses incurred in relation to additional selling costs, together with any other quantifiable loss caused by the breach.
You should also be aware that the Company may have a separate claim against R. F. Heritage Pty Ltd in respect of any unpaid deposit in relation to the Contract.
The Company reserves all rights in pursuance of the Contract.
Should you have any questions regarding the above, please do not hesitate to
contact Mr William Nerlich of this office.” (emphasis added)
137 In terms of the correspondence referred to in this letter, it will be recalled that the earlier letter of 22 March requested confirmation of the purchaser’s “intentions.” After receipt of the letter of 23 March, the letter of 26 March then stated that “our client is considering his position and we will respond on his behalf in due course.” Further: “We reserve all rights of our client in pursuance of the Contract of Sale dated 1 March 2006.”
138 It may be that the correspondence of 26 March, particularly when taken with the failure to correspond until 21 August, constitutes an election not to terminate so that the correspondence of 21 August can be of no consequence. Nevertheless, I have considered the case on the basis of whether the correspondence of 21 August, in context, constitutes an election to terminate as now pressed by McNichol.
139 In terms of the letter of 21 August, Senior Counsel for McNichol submitted:
(a) that the reference to “damages in this regard” specified loss of bargain damages which was consistent with the vendor regarding itself as at liberty to resell the property; and
(b) that the reader should stop at the word “breach” and find that the reference to reservation of rights relates to the “ill-considered” claim for a deposit because that would be a claim that would be advanced under the contract.
140 In written submissions McNichol again emphasized that the vendor intended to resell and that a claim was made for loss of bargain damages. It also cited a passage from a judgment of Dixon CJ in Holland & Anor v Wiltshire[42] and Poort v Development Underwriting (No.2)[43] as authority for the proposition that as long as the vendor makes it clear to the purchaser that the vendor considers itself at liberty to resell “that is sufficient”; no “magic words” are required.[44]
[42] (1954) 90 CLR 409 at 416
[43] [1977] VR 454 at 459
[44] Further Submissions of the Plaintiff dated 14 October at [3]
141 Although I accept that no “magic words” are required, in order to accept a repudiation, the innocent party must demonstrate that she/he treats the contract at an end[45] which response should be unequivocal.[46]
[45] Civoken Pty Ltd v Madden Grove Developments Pty Ltd [2006] VSC 283 at [446]
[46] Cheshire & Fifoot , Law of contract 9th edition at page 1032 and cases therein cited
142 The cases of Holland and Poort also do not assist McNichol.
143 Holland’s case concerned a defaulting purchaser on a sale of land contract. After being informed that the purchaser would not proceed with the contract, the vendor on 17 March 1952 gave notice which required the purchaser to settle by 28 March and informed the purchaser that, if settlement was not made by that date, the vendor would take proceedings against the purchaser for breach of contract. The purchaser failed to complete and the vendor resold the land at a lower price and sought loss of bargain damages. However, the only issue on appeal, was whether a special clause in the contract provided the only compensation the vendor might have (which did not include loss of bargain damages).
144 The court found that the vendor was not restricted, and had not acted, under the special rescission clause.
145 Dixon CJ, in a passage cited by McNichol, found that the “election to treat the contract as discharged by the purchasers’ breach was sufficiently manifested by his proceeding to advertise the property for sale, and by his selling it.” This enabled the vendor to treat the whole contract as no longer binding on him so that both would be discharged from further performance and the whole contract was involved (including the special clause).
146 The case is distinguishable since there was more than a reference to the possibility of a resale; the property was actually sold. The approach of Kitto J was also that the notice of 17 March (on its own) was a mere warning and not an expression of final election. [47]
[47] Holland & Anor v Wiltshire (1954) 90 CLR 409 at 420 & 421; although Taylor J appears to have taken a contrary view
147 In Poort, the full court of the Victorian Supreme Court cite Holland and state:
“The innocent party rescinds if he treats the contract as at an end, declining to perform his part and declining to accept performance from the other party… What he cannot do is to blow hot and cold. If in some respects he treats the contract as still subsisting after repudiation he cannot later rescind.”[48]
[48] (1977) VR 453 at 459
148 In Poort the vendor clearly notified that the contract had been rescinded by correspondence of 30 September 1974. The full court in that case determined that this should in context be read as a statement that the contract stood cancelled.[49] This again is to be distinguished from the present case where no such clear statement is made in the correspondence of 21 August.
[49] Ibid at 460
149 Contrary to the submissions of McNichol, I am unable to find any general statement in either Holland or Poort that as long as the vendor makes it clear to the purchaser that the vendor considers itself at liberty to resell “that is sufficient.” Certainly, an unequivocal statement that the property was to be resold might suggest that the contract was being treated as terminated. However, the letter of 21 August does not clearly indicate any such thing. Instead, it blows “hot and cold” as to whether the contract is subsisting.
150 In examining the entire contents of the letter (I do not accept that I should stop at the end of the third paragraph) the second paragraph suggests that the consequences “include” a liability for damages. Such damages are then said to only “include” loss of bargain damages (on a resale) in the third paragraph. An “inclusive” position is then continued in the fourth paragraph which refers to a separate claim that the company “may have” for an unpaid deposit. As properly conceded by Senior Counsel, the deposit would only be recoverable under the contract if the contract was still subsisting.
151 The ultimate statement that the company “reserves all rights” “ in pursuance” of the contract is also totally inconsistent with treating the contract at an end. Rather, the reference to rights “in pursuance of” the contract treats the contract as ongoing.
152 The letter then reads more like a textbook in setting out a range of possible legal consequences that may flow from the purchaser’s correspondence without ever electing between those possibilities. Consistent with the opening of Senior Counsel and the way the case was originally run, it my view the letter of 21 August was merely a letter that indicated “that proceedings may be issued” and which sets out a range of possible legal consequences.
153 I am thereby not satisfied that the letter of 21 August constituted an acceptance of any repudiation as belatedly suggested by McNichol.
154 Such a conclusion is further fortified from the surrounding conduct as follows:
• the letter of 26 March, 2007 wherein Piper Alderman stated that they “reserve all rights of our client in pursuance of the Contract of Sale”; and • letters of 29 August 2007 and 5 September 2007 sent to the guarantors which repeat the contents of the letter of 21 August and “reserve all rights in pursuance of the Contract.”
155 The defendants also made reference to correspondence from DE Jones (lawyers on behalf of McNichol) to lawyers for Mr Heritage and RF Heritage Pty Ltd of 10 April 2008 wherein reference is made to the purchaser’s failure to “complete the purchase of the Axedale properties” and “the possible completion of the Contract.” However, although this correspondence tends to confirm that the contract had remained on foot to be completed, it does not take the matter a great deal further given it is not directly sourced from the vendor (the assignment not taking place until 25 June 2008).
156 It follows that the vendor did not accept the purchaser’s repudiation by terminating on 21 August as now alleged.
157 The issue then becomes whether McNichol is entitled to the loss of bargain damages it seeks in the absence of a termination of the contract.
Availability of loss of bargain damages
158 Senior Counsel for the plaintiff made reference to two authorities in support of a proposition that loss of bargain damages may be available absent a termination, namely Ogle v Comboyuro Investments Pty Ltd[50] and Tropicus
Orchids Flowers and Foliage Pty Ltd v Territory Insurance Office[51]
[50] (1976) 136 CLR 444
[51] [1997] NTSC 46, 1 May 1997
159 However, the case of Tropicus Orchids was an insurance case wherein the court awarded damages for loss of use of money against an insurer who failed to pay an indemnity within a reasonable time. This case was hence concerned with damages for loss of use of money rather than for loss of bargain and is not authority for the principle that loss of bargain damages are generally sustainable absent a termination.
160 Importantly, the principle that termination of a contract is a necessary condition for recovery of loss of bargain damages was restated and accepted by the High Court in Sunbird Plaza Pty Ltd v Maloney[52]. The contrary view suggested by Barwick CJ in Ogle was also explicitly disapproved.[53]
[52] (1988) 166 CLR 245 at 260-1 per Mason CJ, Deane, Dawson and Toohey JJ agreeing
[53] Ibid: see also Wallace-Smith v Thiess Infraco [2005] FCAFC 49 at [58], [138],[288]
161 It follows that, absent a termination, the vendor is not entitled to loss of bargain damages.
162 Given then my finding that McNichol had not terminated the contract, its case for loss of bargain damages must fail.
Other Defences
163 Given my findings above it is unnecessary to consider further the defences based on quantum and the assignment.
164 It is also unnecessary to consider the defendants’ defence to the effect that the vendor was not ready able and willing to perform the contract. However, given a large amount of time was spent on the topic I will briefly record my findings.
165 Regardless of any mathematical calculation, I repeat and refer to my earlier findings to the effect that the vendor had repudiated the contract by reason of its inability to deliver clear title on 22 January (given the intractable dispute with the caveator). Pursuant to the principles in Emhill Pty Ltd v Bonsoc Pty Ltd,[54] then, the vendor had no right to terminate the contract and sue for loss of bargain damages.
[54] [2007] VSCA 108
166 If the revised case is considered as at the date of the alleged termination in August, the affidavit of the administrator, Mr White, becomes relevant.
167 However, as previously set out, the conclusory statement of an alleged agreement contained in that affidavit is inadmissible in form. Moreover, even if it is to be treated as admissible, it should be given little weight given it fails to annexe any relevant agreement and/or set out the facts said to support the existence of any such agreement. It also fails to enunciate what were the terms of any such agreement, in particular, whether any conditions were to be met if the caveat was to be removed.
168 I am therefore not satisfied that the vendor would have been ready and able to perform the contract by the provision of clear title even if the situation is considered as at the date of the alleged termination in August 2007.
169 The actual amounts of any encumbrances becomes irrelevant unless the caveat could be removed. However, given both Counsel addressed this question I will also set out my findings on this question.
170 Critically, the evidence provided to the Court was directed to the date of 22 January given the way the case was originally conducted. In such circumstances I am unable to be satisfied that the encumbrances could have been removed on the critical date in August.
171 However, even if consideration is given to the evidence available as at 22 January, this was that the sum of $1,157,143 was due to pay out secured creditors other than Northwater as follows:
Westpac $600,000 RMBL $170,000
McNichol $387,143.00 (though this amount appeared to be significantly understated given an informal proof of debt had been lodged at $637,143.61 including costs) 172 The evidence of Mr Skouras was a little unclear but it appeared that Northwater was allegedly owed at least $499,738.58 (affidavit of Mr Skouras of 11 January 2007 at para 10)
173 Taking these encumbrances into account then there would be a substantial shortfall consistent with what had been said in affidavit material in the Supreme Court (some $656,881 being $1,157,143 + $499,738.58 less $1Mill plus costs).
174 Further, although it was suggested that various other transactions could make up for any shortfall, such an exercise was highly speculative. Thus:
•
in terms of alleged proceeds of sale by Weeping Willow of the contract for the sale of the supermarket, the evidence of Mr Jones was that the proceeds “went to pay the higher ranking secured creditors”;
•
I am not prepared to infer, in the absence of any evidence from Ms Colling, that she would be prepared to use her personal funds on a sale of Lot 5 for the benefit of the company. In any event that sale was rescinded;
•
the evidence of Mr Jones to the effect that he would “not have allowed his caveat to stand in the way of a settlement” is rejected. It was highly self-serving given McNichol’s current status as an assignee. It is also at odds with the objective evidence of his behaviour prior to the assignment wherein he was vigorously pursuing his entitlements including by the threat of appointment of an administrator;
•
the evidence of Mr Colling to the effect that RMBL was prepared to “float” its security was vague and based on hearsay and I give it no weight.
175 The evidence about the ability of the vendor to settle was therefore speculative and unsatisfactory.
176 More significantly, McNichol did not lead any cogent evidence that Northwater would have actually removed its caveat by August particularly given the strong opposition that is evidenced in the Supreme Court.
177 Even if (contrary to my findings above) the letter of 21 August constituted a termination of the contract, I am therefore not satisfied that the vendor was entitled to terminate the contract
Conclusion
178 McNichol has not demonstrated that the vendor is entitled to loss of bargain damages by reason of having terminated the contract on 21 August, 2007 for the repudiation by the purchaser on 23 March, 2007.
179 Even if the letter of 21 August constituted a termination of the contract, I am also not satisfied that the vendor was entitled to terminate the contract.
180 McNichol, as assignee, is thereby not entitled to the damages sought and the proceeding should be dismissed.
181 I will hear from the parties on the question of costs.
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