Mohabbat v Milo Projects Pty Ltd

Case •

[2020] NSWDC 943

•

30 October 2020

No judgment structure available for this case.

District Court


New South Wales

Medium Neutral Citation: Mohabbat v Milo Projects Pty Ltd [2020] NSWDC 943
Hearing dates: 29 October 2020
Date of orders: 30 October 2020
Decision date: 30 October 2020
Jurisdiction:Civil
Before: P Taylor SC DCJ
Decision:

(1)   Judgment for the plaintiffs in the sum of $150,523.72 inclusive of interest to date.

(2)   Defendant to pay the plaintiffs' costs.

(3)   Liberty to the parties to apply with respect to costs, including to apply for a variation of the existing cost order by email to my associate on or before Friday, 13 November 2020.

Catchwords:

CONTRACTS — termination — election — delay

CONTRACTS — misrepresentation — rescission — affirmation – certification – validity of certificate – construction of contractual entitlement

Legislation Cited:

CivilProcedure Act 2005, s 100

Conveyancing Act 1919, s 66ZS

Cases Cited:

Andrews v Australian and New Zealand Banking Group Limited (2012) 247 CLR 205

Australian Broadcasting Commission v Australasian Performing Right Association Ltd (1973) 129 CLR 99

Codelfa Construction Pty Ltd v State Rail Authority of New South Wales (1982) 149 CLR 337

Commissioner of Taxation v Reliance Carpet Co Pty Limited [2008] HCA 22

Ecosse Property Holdings Pty Ltd v Gee Dee Nominees Pty Ltd (2017) 261 CLR 544

Electricity Generation Corporation v Woodside Energy Ltd (2014) 251 CLR 640

Hillswick Investments Pty Ltd v Monash Mansions Pty Ltd [1998] VSC 167

Luong Dinh Luu v Sovereign Developments Pty Ltd & 2 Ors [2006] NSWCA 40

Mainteck Services Pty Ltd v Stein Heurtey SA (2014) 89 NSWLR 633

Play MR Pty Ltd v Heard Marketing Pty Ltd [2017] NSWDC 311

Rinehard v Hancock Prospecting Pty Limited (2019) HCA 13

Sargent v ASL Developments Ltd (1974) 131 CLR 634

Workers Trust and Merchant Bank Limited v Dojap Investments Limited [1993] AC 573

Category:Principal judgment
Parties: Mustafa Mohabbat (first plaintiff)
Khristine Mohabbat (second plaintiff)
Milo Projects Pty Ltd (defendant)
Representation:

Counsel:
Mr P Walsh (plaintiffs)
Ms R Kumar (defendant)

Solicitors:
Prichard Lawyers (plaintiffs)
Eden King Lawyers Pty Ltd (defendant)
File Number(s): 2020/00039510
Publication restriction: None

Judgment

A. Introduction

  1. Mustafa and Khristine Mohabbat contracted on 21 August 2015 to purchase a townhouse at Port Macquarie from Milo Projects Pty Ltd. The townhouse was not then built, and the contract stipulated that either party could terminate if the strata plan was not registered within 24 months, subject to conditions. As at 12 December 2019, the strata plan had not been registered, and Mr and Mrs Mohabbat purported to rescind. They claim a refund of their deposit with interest.

B. Issues

  1. The contract provided that Mr and Mrs Mohabbat were required to give 21 days' written notice of an intention to rescind. They purported to give that notice on 21 May 2019. Milo disputes the validity of that notice for two reasons:

  1. Mr and Mrs Mohabbat had previously affirmed the contract, so they were no longer entitled to elect to rescind; and

  2. Milo, on 10 July 2019, purported to extend the contract and date for registration of the strata plan, which operated to invalidate the notice issued on 21 May 2019.

  1. These are the primary issues in the proceedings. There is also a dispute about the extent of the entitlement of Mr and Mrs Mohabbat to interest, and depending upon other findings, an issue about whether the deposit was void as a penalty.

C. Events

  1. At the time of entering the contract to purchase the townhouse property, Mr and Mrs Mohabbat were aware that construction had not commenced, although construction was anticipated to commence in late 2015 or early 2016.

  2. The contract for the purchase of the property provided for payment of a deposit of $119,000, being 20% of the purchase price of $595,000. Special condition 37 provided for the release of the deposit to the vendor. Other relevant special conditions included cll 45 and 66, which provided as follows:

“45. Registration of Plans

(a) If the Strata Plan is not registered within Twenty four (24) months from the date of this Contract (or the extended date resulting from the exercise of rights under clause 45(b) and 45(i) then:

(i) the Vendor; and

(ii) subject to clause 45(i) the Purchaser may rescind this contract by notice.

(b) The Vendor may (at any time and as often as necessary) extend the date specified in clause 45(a) by giving the Purchaser a certificate from the Vendor’s project manager, surveyor or builder stating that the construction of the Building was delayed because of:

(i) damage by fire, explosion, war, civil commotion or act of God; or

(ii) disputes with neighbours; or

(iii) by an Authority in giving any necessary approval; or

(iv) weather conditions that prevent work under normal construction practices; or

(v) industrial dispute; or

(vi) a combination of these or any other causes beyond the Vendor’s reasonable control; or

(vii) any variation pursuant to the contract for construction of the Building.

In that event the date in clause 45(a) is extended by the period of the delay stated in the certificates, provided that the extensions of time granted pursuant to this clause 45(b) shall not exceed, in total, six (6) months.

…

(i) If the Purchaser wants to terminate this Contract under clause 45(a) then the Purchaser must give the Vendor 21 days notice of its intention to do so. If within that time the Vendor gives the Purchaser a certificate under clause 45(b) then the Purchaser may not terminate this Contract under clause 45(a).

…

66. The Vendor shall pay the Purchaser interest on the deposit released to the Vendor pursuant to clause 37 calculated daily at the rate of 5.00% per annum from the date of the Contract to the date of completion, or such earlier date where the contract is terminated or rescinded by either party through no fault of the Purchaser. The interest payable pursuant to this clause shall be adjusted by the Vendor to the Purchaser at Completion and the Vendor agrees this is an essential term of the Contract”. [1]

1. Exhibit A; Court Book (CB) pp 160, 161, 171.

  1. Mr and Mrs Mohabbat paid the deposit in accordance with the contract. [2]

    2. Amended Statement of Claim at [3], Defence to Amended Statement of Claim at [3].

  2. The development did not proceed expeditiously. On 28 July 2017 "[Milo] sought an extension of the date [for the registration of the strata plan] in cl 45(a)". [3] The extension was for "six months to 21 February 2018". [4]

    3. Affidavit, Patrizia Hubbard, 27 July 2020, at [17].

    4. Affidavit, Patrizia Hubbard, 27 July 2020, at [18(d)].

  3. On 24 May 2019 the solicitors for Mr and Mrs Mohabbat sent a letter to Milo's solicitors by which they "give 21 days notice pursuant to clause 45(i) of our clients intention to rescind pursuant to 45(a)". [5] That letter also indicated that Mr and Mrs Mohabbat had made attempts to rescind by letters dated 10 November 2017 and 30 August 2018, although neither party relied on these letters as creating any rights or obligations.

    5. Exhibit A, CB p 87.

  4. In the period from 30 August 2018 until 24 May 2019, [6] the parties negotiated about amending terms, but no offer by either party was accepted by the other and negotiations failed. The conduct of Mr and Mrs Mohabbat in this period in letters sent by them or their solicitors comprise the counteroffer to proposed amended conditions on 4 and 12 December 2018, a response to different proposed amended conditions on 29 January 2019, and an acknowledgement or confirmation on 23 April 2019 that negotiations had failed. The documents constituting those negotiations were not in evidence, nor did the evidence reveal any more detail about the negotiations.

    6. Exhibit A, CB p 86.

  5. Milo asserts that the conduct of Mr and Mrs Mohabbat in these negotiations constituted an election to affirm the contract.

  6. Some 47 days after the 24 May 2019 letter from Mr and Mrs Mohabbat, on 10 July 2019, Milo, by its solicitor, responded by a letter stating relevantly:

“We note your 21 days notice pursuant to clause 45(1) of the Contract of Sale (Contract).

Pursuant to clause 45(b) of the Contract, the date in clause 45(a) is extended by the period of the delay stated in the certificate.

We hereby enclose our Client’s certificate pursuant to clause 45(b).

Consequently, the Purchaser is barred from terminating the contract under clause 45(1).

We reserve our Client’s rights and hold the Purchaser liable to complete the contract.” [7]

7. Exhibit A; CB p 90.

  1. Enclosed with the solicitor's letter was a document on plain paper, no letterhead and unsigned, which read as follows:

“RE: Mohabbat Purchase - 6/11 Kanangra Cove, Port Macquarie. NSW 2444.

LETTER FOR DELAY IN PROJECT COMPLETION - this is a certificate pursuant to clause 45 (b) of the Contract for the Sale of land dated 21 August 2015

This letter is to inform you about the progress regarding project at 11 Kanangra Cove, Port Macqaurie [sic] NSW 2444.

Design changes in materials, engineering, architectural, storm water & sewer were required to improve practicability & viability of construction, means that 11 Kanangra Cove project has fallen behind schedule by approximately 48 mths.

The project was due to be completed on August 2018, but because of the delays in project completion, the amended date is May 2020.

The dates of the above phases are only estimates, as the progress of the work depends in part on weather permitting.

Milo Projects Pty Ltd will do everything possible to minimise the inconvenience caused by this work. However, you might experience some inconvenience during this period, and we ask for your understanding in this regard.

If you have any questions regarding this letter, please call the [solicitor acting for the company Eden King Lawyers.

I hope this provides you with sufficient information.

Best regards,

Management Milo Projects Pty Ltd”. [8]

8. CB p 91.

  1. On 12 December 2019 the solicitor for Mr and Mrs Mohabbat wrote to Milo's solicitor purporting to rescind the contract. The letter stated:

“We refer to previous correspondence and note the following;

1.   Clause 45(a) provides for the plan to be registered within 24 months of the date of the Contract -ie by 21 August 2017.

2.   Clause 45(b) entitles the Vendor to extend the time in clause 45(a) in certain circumstances ‘provided that the extensions of time granted pursuant to this clause 45(b) shall not exceed, in total, six (6) months’.

3.   The latest date to which the time for registration of the plan could be extended was 21 February 2018.

4.   By letter dated 24 May 2019 Hunter & Braddon gave notice pursuant to clause 45(i) of the Contract.

5.   The purported extension of time claimed in your letter of 10 July 2019 was not in accordance with Clause 45(b) of the Contract in that:

(i) There is no evidence that Management Milo Projects Pty Ltd is an entity acting as the Vendor's project manager, surveyor and/or builder;

(ii) The document is unsigned;

(iii) The document does not/and or does your letter specify a date to which the time for registration [of] the plan is purportedly extended; and/or

(iv) The time specified in the document is in excess of six (6) months.

In the circumstances our clients rescind the Contract for Sale dated 21 August 2015.

Please now have your client refund the deposit of $119,000.00 immediately. Please have your client's cheque for this amount payable to our clients forwarded to this firm.” [9]

9. CB pp 209-210.

  1. The evidence included an affidavit of Mr Rodney Smith, a licensed process server, who recently attended the property and took a number of photographs of the site. Mr Smith observed the property to be "a vacant block of land with incomplete construction work". [10] He said, "no tradespeople and/or construction trades on the property and, in my opinion, it appeared that there had not been any recent construction work undertaken". [11] He observed a number of exposed plumbing pipes and some excavation, and that the grass in place was "(4) feet high". He said the neighbours had advised that no work had been seen on the property for approximately 15 months. The photographs annexed to the affidavit indicate no construction work apart from plumbing pipes, with numerous vertical plumbing pipes visible, some capped, others with a stone to cover the open top and others open at the top.

    10. Affidavit, Rodney Smith, 5 June 2020, at [3]; CB p 45.

    11. Affidavit, Rodney Smith, 5 June 2020, at [3]; CB p 45.

  2. Ms Patrizia Hubbard, the director of Milo, swore an affidavit about the development. The affidavit recorded that Milo's builder had suspended and ceased construction work on 16 December 2014, some eight months before the contract date, that Milo had terminated the contract with its builder on 7 July 2016, that an application for modification of development consent was lodged on 19 January 2018, that on 13 December 2019, the day after the purported rescission, Milo sought to replace council with a private certifier as the principal certifying authority, and that on 17 July 2020 Milo filed a s 96 "modification of development consent" with the council.

  3. Ms Hubbard's affidavit also deposed, "The certificate dated 8 July 2019 was signed by ‘Management Milo Projects Pty Limited’, as the certificate for the first extension had been", and that "I confirm I authorised Mr Alex Hubbard to prepare and sign the certificate as from Management of Milo Projects Pty Limited". [12] From these paragraphs I infer that Ms Hubbard did not sign the certificate. The document in evidence purporting to be the certificate is unsigned.

    12. Affidavit, Patrizia Hubbard, 27 July 2020, at [25], [27].

  4. Mr Alex Hubbard gave no evidence. Documents in evidence reveal him to be the "General Manager, Better Mortgage & Financial Services Pty Ltd", not someone who is identified to be the project manager, surveyor or builder of the project. Ms Hubbard may have intended for the document to be signed. But I would prefer the unsigned original document annexed to Ms Hubbard's affidavit and also tendered by Mr and Mrs Mohabbat, over Ms Hubbard's statement of the document’s contents. Ms Hubbard gave no evidence of how she knew of its contents. Her statement of the authority of Alex Hubbard to sign it confirms that it was not signed by her.

  5. Accordingly, I am satisfied that the purported certificate was not signed.

  6. Ms Hubbard also gave evidence of further purported certificates extending the time for registration of the strata plan: one dated 6 January 2020 (purporting to extend the time to October 2020)[13] and another dated 5 June 2020 (likewise, to 1 December 2020). [14]

    13. Exhibit A, p 94; Annexure PH8 to Patrizia Hubbard affidavit, 27 July 2020, at [29].

    14. Exhibit A, pp 96-97; Patrizia Hubbard affidavit, 27 July 2020, at [32].

  7. Ms Hubbard's affidavit deposes to the need for "FBO" to be in place prior to recommencement, although the meaning of that acronym is not identified. She said she intends to enter a building contract within two weeks of her affidavit at 27 July 2020, [15] and that she anticipates "once funding has been secured and the contract has been entered into, construction of the Development will re-commence within 30 days”. [16]

    15. Affidavit, Patrizia Hubbard, 27 July 2020, at [37]-[39].

    16. Affidavit, Patrizia Hubbard, 27 July 2020, at [40].

  8. There was no evidence of any progress in respect to the building contract, funding or recommencement in the period 27 July 2020 to 29 October 2020, the day of the trial when her affidavit was read. The draft building contract confirms that the pouring of footings, stumps, piers, and slab, and the electrical and plumbing rough-in, the first steps in the building, still remain to be done. [17]

    17. See Exhibit A, p 140.

D. Affirming the contract

  1. Milo submitted that Mr and Mrs Mohabbat affirmed the contract and thus were not entitled to elect to rescind. The conduct constituting an affirmation of the contract was asserted to be twofold:

  1. failing to take any action with respect to the delay in the period 21 February 2018 (after expiry of the first extension by Milo) until 30 August 2018 (when, for the second time, Mr and Mrs Mohabbat sought to rescind); or

  2. engaging in settlement discussions in the period 13 September 2018 to 23 April (or 21 May) 2019,

and that Milo suffered prejudice as a result of this conduct in not being able to sell to another purchaser.

  1. A person has a right of election when events occur which enable him to exercise alternative and inconsistent rights such as to affirm or terminate a contract. [18] Once an election is made, it cannot be retracted, but "[e]ssential to the making of an election is communication to the party affected by words or conduct of the choice thereby made". [19] Significantly, "[a] person confronted with a choice between the exercise of alternative and inconsistent rights is not bound to elect at once", so long as the party does not affirm and so long as the delay does not prejudice the other party. [20] Words or conduct which merely involve recognition of a contract may not constitute an election to affirm. Nor will words or conduct which do not involve the exercise of a right conferred by the contract. [21]

    18. Sargent v ASL Developments Ltd (1974) 131 CLR 634 at 655.

    19. Sargent at 655-656.

    20. Sargent at 656.

    21. Sargent at 656.

  2. Thus, as a practical matter, a binding election to affirm the contract involves either delay causing prejudice,[22] or the exercise of a right under or pursuant to the contract. In the present case, neither has occurred. In the period from February to August 2018, Milo asserts that Mr and Mrs Mohabbat did nothing. That is not exercising a right under the contract. And in the period thereafter, Milo relies on settlement negotiations. But they cannot involve the exercise of a right under the contract. On the contrary, conduct of that sort is often described as "without prejudice" negotiations because that conduct is without prejudice to any right, such as a right of election under the contract.

    22. See also Play MR Pty Ltd v Heard Marketing Pty Ltd [2017] NSWDC 311 at [117].

  3. That leaves the question of whether Milo has suffered any prejudice by reason of the inaction of Mr and Mrs Mohabbat. Milo particularly referred to the six months after 21 February 2018. It submits it was denied the opportunity to sell the property to another. There is no evidence of any desire in Milo to sell or any attempt to sell. But there is another flaw to this argument. At all times, Milo, itself, had a right to terminate the contract under cl 45(a). Had the conduct or inaction of Mr and Mrs Mohabbat adversely affected or prejudiced Milo by postponing its right to sell, Milo could have terminated the contract and sold. That it did not do so confirms that it preferred for the contract to remain on foot, and that it was not prejudiced by any inaction by Mr and Mrs Mohabbat.

  4. I note that neither party relied on, nor referred to, any statutory restriction on the right of a vendor to rescind under a sunset clause of the type contained in cl 45(a), nor was there any indication of circumstances that Milo desired to rescind to obtain a higher price from another purchaser. [23]

    23. See Conveyancing Act 1919, s 66ZS.

  5. Accordingly, there has been no affirming of the contract by Mr and Mrs Mohabbat. The circumstance that they twice purported to rescind, in 2017 and August 2018, whilst relevantly ineffective, supports the inference, in the absence of other evidence, that Milo was not under a belief that Mr and Mrs Mohabbat were electing to affirm the contract. It follows that no election having been made, Mr and Mrs Mohabbat remained entitled to elect in May and December 2019 to terminate the contract. The circumstance that there was no time constraint on rescission on Mr and Mrs Mohabbat in cl 45 is indirectly supported by other clauses in the contract [24] that do specify a fixed period for rescission, unlike cl 45(a) which specifies no period.

    24. See cll 45(f), 46(d) and 51(b).

E. Invalidity of the intention to rescind notice

  1. The other submission made by Milo is that a notice of intention to rescind given by the purchasers on 24 May 2019 was invalid and not in accordance with the contract because of the further extension sought by Milo. This involves a construction of the terms of cll 45(a), 45(b) and 45(i).

  2. To derive the proper construction of cl 45, the words must be read in the context of the contract, its objective purpose, and the surrounding circumstances known to the parties at the time of the contract. [25] As Mr and Mrs Mohabbat submitted:

“The most relevant fact in context is that the subject matter of the Contract was a yet to be build town house in a yet to be registered strata plan. The evident purpose of Clause 45 is, on the one hand, to provide to the purchaser some certainty as to when the Contract will be completed. On the other hand, another purpose of the clause is to provide some flexibility for the vendor in the event genuine unexpected events delay completion for a not unreasonable time.”[26]

25. Rinehard v Hancock Prospecting Pty Limited (2019) HCA 13, Kiefel CJ, Gageler, Nettie and Gordon JJ at [26]; see also Edelman J at [83]; Electricity Generation Corporation v Woodside Energy Ltd (2014) 251 CLR 640 at [35]; Ecosse Property Holdings Pty Ltd v Gee Dee Nominees Pty Ltd (2017) 261 CLR 544 at [16]; Mainteck Services Pty Ltd v Stein Heurtey SA (2014) 89 NSWLR 633; Codelfa Construction Pty Ltd v State Rail Authority of New South Wales (1982) 149 CLR 337 at 352-3; Australian Broadcasting Commission v Australasian Performing Right Association Ltd (1973) 129 CLR 99 at 109.

26. Plaintiffs’ outline of submissions, 28/10/20, at [27].

  1. The contract should be read as a whole and preference should be given to a congruent operation of the various components of the whole contract. The argument of Milo that the notice of intention to rescind is invalid is accepted by both parties to depend upon the effectiveness and validity of the purported certificate dated 9 July 2019. Mr and Mrs Mohabbat say that the certificate is invalid for the following reasons.

  2. First, it was not provided within the 21-day period required by cl 45(i).

  3. Second, it did not state a period of delay as required by cl 45(a), or if it did, the period was excessive.

  4. Third, it was not given by Milo's project manager, surveyor or builder as required by cl 45(b).

  5. Fourth, the total extension permitted in cl 45(a) was six months, and that had already been exhausted by the extension certificate of 28 July 2017.

(a) The 21-day period

  1. The 21-day period is referred to in cl 45(i). The parties accepted that the reference to "within that time" in that clause referred to the 21-day notice period specified. That period commenced on 24 May 2019 and thus concluded on about 14 June 2019, and was well expired by 10 July 2019, when the purported certificate was issued.

  2. This argument appears unanswerable once the phrase "within that time" is confined to the 21-day notice period (and not to, say, the period ending with the rescission notice). But it operates only to render the concluding sentence of cl 45(i) inapplicable to the notice. The notice was therefore ineffective to prevent the purchaser from issuing a valid notice of intention to rescind. Milo, however, remained entitled to issue a notice under cl 45(b) "at any time". If the notice was effective to extend the date, then the rights of either party to rescind under cl 45(a) are affected for those rights depend upon the strata plan not being registered within 24 months of the contract date, "or the extended date resulting from the exercise of rights under cl 45(b) and 45(i)". Thus, Milo's right to extend the date under cl 45(b) remained, notwithstanding the lapsing after 21 days from 24 May 2019 of its rights under cl 45(i). An effective extension of the date under cl 45(b) would operate to preclude the purchaser from rescinding under cl 45(a) before expiration of the extended date.

  3. It was not in issue that the notice of intention to rescind was a separate notice from the notice of rescission. [27]

    27. See Hillswick Investments Pty Ltd v Monash Mansions Pty Ltd [1998] VSC 167 at [13], [15].

  4. Accordingly, whilst the purported certificate was not issued in the 21-day notice period prescribed by cl 45(i), and thus ineffective under that clause, that lateness does not preclude it from effecting an extension under cl 45(b) (assuming the contract has not already been rescinded) so as to limit the purchaser's right to rescission under cl 45(a).

(b) Failure to state a period of delay or stating an excessive period

  1. The purported certificate dated 9 July 2019 claims to be a certificate pursuant to cl 45(b). [28] The only relevant reference to dates is in the third paragraph, which read, "The project was due to be completed on August 2018, but because of the delays in project completion, the amended date is May 2020".

    28. Exhibit A, p 91.

  2. The reference to May 2020, coupled with the reference to cl 45(b) is, I think, sufficient to constitute a claim for an extended date of May 2020. I would read the reference to May 2020 as 31 May 2020, a date Milo submitted.

  3. But on Milo's construction of the final sentence of cl 45(b), the certificate can only extend the time by six months. On its face, the certificate appears to seek to extend the period by about 21 months from August 2018 to May 2020. In fact, the extended time pursuant to cl 45(b) as at 9 July 2019 was 21 February 2018, pursuant to the extension to the date claimed on 28 July 2017. This would mean an extension under the purported certificate of 27 months.

  4. Even ignoring the period of time prior to the date of the certificate (though for reasons which follow, I am not persuaded that period should be ignored), the extension from 9 July 2019 until 31 May 2020 is near 11 months, and well over the six-month limit asserted by Milo.

  5. Milo submits that the certificate should be read down to extend the period to the maximum allowed, namely six months. In order to invalidate the notice of intention to rescind, it would seem necessary that the extended period cover the date of that notice. If the certificate were to date from 21 May 2019, the date of the notice of intention to rescind, as I understood the submission, the certificate of extension would be read down to 21 November 2019.

  6. I think there is some force in this submission by Milo. Clause 45(b) purports to extend the day "by the period of the delay stated in the certificates", which would be, in this case, until May 2020. But the extension under cl 45(b) should not exceed six months, so the extension period, although claimed to be longer, is only granted for six months maximum. In that event, the period claimed would be shortened. Clause 45(b) does not provide that a period greater than six months cannot be "stated in the certificates", only that the period of extension granted under the clause shall not exceed six months.

  7. Accordingly, I do not regard the period claimed in the certificate, a period that exceeds six months and does not specify a particular date, as fatal to the validity of the certificate. It might be different if the extension claimed was less than six months, with no clear date specified, so that cl 45(b) did not operate to determine the date according to the maximum period, but that question does not arise.

(c) Certificate given by project manager, surveyor or builder

  1. The certificate purports to be given by "Management Milo Projects Pty Ltd". This is a company name unknown to the proceedings. Milo orally argued that it was intended to be, and should be read as, “The Management, Milo Projects Pty Ltd". That construction finds some support in the terms of the purported certificate where within the text it refers to "Milo Projects Pty Ltd". In addition, the covering letter from the solicitor purports to enclose "our Client's certificate". In its submissions, Milo asserted that "Milo's solicitor issued a delay certificate". In any event, the difference between “The Management, Milo Projects Pty Ltd” and what is effectively "Milo Projects Pty Ltd", the vendor, is not crucial in this case.

  2. Clause 45(b) requires that the certificate be given by the project manager, surveyor or builder of the project. There is no indication on the certificate that it was given by any one or more of those persons, as neither Milo, any management of the Milo company, or Milo's solicitors satisfy this requirement. Milo refers to the evidence that, "Milo has been the project manager for the Property",[29] and therefore a certificate by Milo is sufficient. I do not think this is so.

    29. Affidavit, Patrizia Hubbard, 27 July 2020 at [15].

  3. First, whether Milo "has been" the project manager is immaterial since the certificate, so far as it can be given by the project manager, must be given by the "Vendor's project manager", which I think must be the project manager at the time of the certificate, not at some other time.

  4. Secondly, I read the reference in cl 45(b) to the certificate from the "Vendor's project manager, surveyor or builder" as being from a person, if not wholly independent from the vendor, at least separate from the vendor, a person who is prepared to certify the fact of a delay for a specified reason. The vendor or the vendor's solicitor is not qualified by cl 45(b) to do that.

  5. It may be that a valid cl 45(b) certificate is conclusive evidence of the fact of the delay for the purpose of an extension of time. The clause indicates no basis to challenge the facts stated in the certificate. Yet it seems uncommercial to allow the vendor simply to procure a delay by stating it, at least in circumstances where the text of the clause indicates otherwise. In my view, the clause required a professional or semi‑professional person who fulfilled a particular role - project manager, surveyor or builder - to assert, in that professional or semi‑professional capacity, that a delay was occasioned and why. Any misleading assertion contained within the certificate would then not be without consequences, both professionally and legally, for the certifier.

  6. I come to this conclusion informed by the evidence of the project - that no builder has been retained on the project since 2016, more than four years ago, that no surveyor is mentioned in the evidence, and that no current project manager, either now or as at 9 July 2019, is evidenced to exist. The evidence displays with clarity that the construction component of the project has remained inactive for more than four years.

  7. In the result, the assertion in the purported certificate that:

“[d]esign changes in materials, engineering, architectural, storm water & sewer were required to improve practicability & viability of construction, means that 11 Kanangra Cove project has fallen behind schedule by approximately 48 mths”,

is difficult to view as genuine. This same terminology is repeated in the subsequent certificates of 6 January 2020 [30] and 1 June 2020, [31] verbatim save that in the final purported certificate, the period is changed from 48 months to 54 months. There was no evidence to indicate even the possibility of any of the claimed matters being the cause of delay. The only cause indicated is perhaps that in 2014, the builder ceased work, and in 2016, that builder was terminated. Whether any of the quoted matters had any real causative impact on delays in 2019 or 2020 might be doubted.

30. Exhibit A, p 94.

31. Exhibit A, p 97.

  1. I am also of the view that the form of the certificate is insufficient to satisfy cl 45(b). As indicated, it has no letterhead and is unsigned. There is nothing on the face of the certificate to indicate by whom it was created or issued other than, as the defendant's submissions assert, by reason of the covering letter that it was issued by Milo's solicitor. Clause 45(b) requires a certificate from the "Vendor's project manager, surveyor or builder", not merely a document that claims to be such.

  2. The term "certificate" is not a defined term in the contract, but the ordinary meaning of the word - an official document attesting to a fact - is not established by an unsigned printed document with no verifying connection with the person in the position qualified to attest to the relevant fact (being the cause of the delay).

  3. For these reasons, I am not satisfied that the purported certificate is a certificate satisfying cl 45(b).

(d) Total period of extension

  1. The final reason as to why the purported certificate does not satisfy cl 45(b) is said to be that "the extensions of time granted pursuant to this clause 45(b) shall not exceed, in total, six (6) months".

  2. The term "six (6)" was handwritten, replacing the period "fifteen (15)" months. A similar change was made to cl 45(b), where the period for registration of the strata plan was originally "eighteen (18)" months, but changed in handwriting to "twenty four (24)" months.

  3. These changes indicate that the parties agreed for a more specific period before termination could occur, not one that could vary from 18 months to 33 months (18 months plus a potential 15-month extension), but one that was confined to between 24 to 30 months (24 months with a potential 6-month extension).

  4. Clause 45(b) allowed for multiple extensions, but it limited all extensions to a maximum of six months in total. This meaning is apparent in the proviso from the plural form of both the words "extensions" and "certificates", and the words "in total" in the proviso imposing the six-month limit.

  5. Milo argued that this extension limit applied to each certificate, so that there would be no upper limit to the permissible extension so long as only six months was claimed in any one certificate. Milo relied on the single term "event" in the opening phrase to the proviso "in that event".

  6. This construction gives no weight to and is inconsistent with the two plural terms identified, "extensions" and "certificates". Nor does it give weight to the term "in total". Also it would involve reading "event" as one certificate. Literally, the "event" refers back to the opening words of the clause: "The Vendor may (at any time and as often as necessary) extend the date specified". It is thus not a singular event. Once the event refers to the vendor as often as necessary extending the date, the singular form loses force as a reference to only one certificate. Properly read, the “event” is the vendor having extended the term once, or more than once.

  7. Further, the six-month limit is not specified to be a limit on a particular extension or a particular certificate, but a limit on "the extensions of time granted pursuant to this clause 45(b)". This confirms that no greater extension than six months in total is available under cl 45(b), no matter how many certificates or extensions are involved.

  8. It follows that as at 9 July 2020, no further extensions were available under cl 45(b) since the six-month limit of extensions had already been exhausted by the extension on 28 July 2017, extending the time to 21 February 2018. That date in February was two years and six months after the contract date, and constituted the maximum period for which the time for registration could be extended under cl 45(b).

  9. It follows that for this reason also, the purported certificate was ineffective under cl 45(b) to extend the time. No further valid certificates under cl 45(b) could be issued as at July 2019, at least not so far as to further extend time once the 30-month maximum period from the date of the contract to registration of the strata plan had elapsed.

  10. It follows that the notice of intention to rescind of 24 May 2019 is valid, and the notice of rescission on 12 December 2019 is effective to terminate the contract.

  11. Milo raised no issue against the return of the deposit if the Court found that the contract was validly rescinded. Milo also raised no issue about the period from the notice of intention to rescind on 24 May 2019, and the notice of rescission on 12 December 2019, but rather expressly eschewed any argument based on that period of delay.

F. Penalty

  1. Although there are reasons to conclude that a deposit of 20% is void as a penalty,[32] in view of my other findings, this question need not be resolved.

    32. Workers Trust and Merchant Bank Limited v Dojap Investments Limited [1993] AC 573, Luong Dinh Luu v Sovereign Developments Pty Ltd & 2 Ors [2006] NSWCA 40 at [24]-[25], Commissioner of Taxation v Reliance Carpet Co Pty Limited [2008] HCA 22, Andrews v Australian and New Zealand Banking Group Limited (2012) 247 CLR 205 at [10].

G. Interest

  1. Clause 66 entitles Mr and Mrs Mohabbat to interest up until the date of rescission. Milo faintly argued that the final sentence of this clause precluded recovery of interest other than as a set-off on completion. That was not a pleaded point, but in any event, it ignored the clause's express contemplation of interest to the date of rescission. Accordingly, 5% interest from 21 August 2015 until 12 December 2019 is payable on the deposit in accordance with the terms of cl 66.

  2. Milo sought to resist any further claim for interest under s 100 of the Civil Procedure Act 2005 on the basis that it was not pleaded. The amended statement of claim sought as part of the relief claimed "interest…continuing until payment or judgment". I regard this as sufficient to entitle this Court to award interest even if the interest claimed appeared to be based on cl 66 and not on s 100, and even if no express mention of s 100 was made. Mr and Mrs Mohabbat's submissions the day before the trial made apparent that the interest claim sought contractual interest for a period and statutory interest thereafter. [33]

    33. Plaintiffs’ outline of submissions, 28/10/20, at [35].

  3. In any event, no prejudice being claimed, Mr and Mrs Mohabbat sought, and I allowed an amendment during the hearing to amend the amended statement of claim to include an express claim for interest under s 100 of the Civil Procedure Act.

  4. Section 100 precludes interest on interest under s 100 being allowed, and precludes s 100 interest being allowed for a period where interest is already allowed on another basis. [34] It does not preclude s 100 interest on a contractual entitlement to interest. In the result, the correct assessment of s 100 interest should be from the period from 12 December 2019 until today, the day of judgment, 30 October 2020.

    34. Civil Procedure Act 2005, s 100(3)(a) and (b).

  5. Further, s 100 interest should be on the total sum payable as at the date of rescission, being the $119,000 deposit plus the amount of cl 66 interest on that sum from 21 August 2015 until 12 December 2019. That calculation is set out in the following table:

($)

Deposit

119,000.00

Plus: Interest on deposit at 5% under cl 66 from 21 August 2015 to 12 December 2019

25,642.05

Subtotal

144,642.05

Plus: Section 100 interest on $144,642.05 from 12 December 2019 to 30 October 2020

5,881.61

Total

150,523.72

  1. Judgment should be given for $150,523.72.

H. Costs

  1. The parties agree that costs should follow the event but allowing the parties 14 days by email to my associate to apply for a different costs order.

I. Orders

  1. The orders of the Court are:

  1. Judgment for the plaintiffs in the sum of $150,523.72 inclusive of interest to date.

  2. Defendant to pay the plaintiffs' costs.

  3. Liberty to the parties to apply with respect to costs, including to apply for a variation of the existing cost order by email to my associate on or before Friday, 13 November 2020.

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Endnotes

Decision last updated: 21 October 2022

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