Mulkearns v Chandos Developments Pty Ltd

[2003] NSWSC 1132

CITATION:	Mulkearns v Chandos Developments Pty Ltd [2003] NSWSC 1132
HEARING DATE(S):	18, 19 November 2003
JUDGMENT DATE:	3 December 2003
JURISDICTION:	Equity Division
JUDGMENT OF:	Young CJ in Eq
DECISION:	Plaintiffs' suit dismissed with costs.
CATCHWORDS:	CONVEYANCING [64]- Time- Vendor allegedly in breach of obligation to tenant when it issued notice to complete- Held not a disqualifying factor- Relevance of mutual requirement of readiness, willingness and ability.
LEGISLATION CITED:	Conveyancing Act 1919, s 54A
CASES CITED:	Alcatel Australia Ltd v Scarcella (1998) 44 NSWLR 349 Alexus Pty Ltd v Pont Holdings Pty Ltd (2000) 10 BPR 18,371 Anstruther-Gough-Calthorpe v McOscar [1924] 1 KB 716 Arnold v Mann (1957) 99 CLR 462 Benedict v Lynch (1815) 1 Johns Ch 370; 7 Am Dec 484 Ciavarella v Balmer (1983) 153 CLR 438 Golding v Vella (2001) 10 BPR 18,919 Hewett v Court (1983) 149 CLR 639 Legione vHateley (1983) 152 CLR 406 McDonald v Dennys Lascelles Ltd (1933) 48 CLR 457 McNally v Waitzer [1981] 1 NSWLR 294 Mehmet v Benson (1965) 113 CLR 295 Neeta (Epping) Pty Ltd v Phillips (1974) 131 CLR 286 Prosper Homes Ltd v Hambros Bank Executor & Trustee Co Ltd (1979) 39 P & CR 395 Re Dagenham (Thames) Dock Co; Ex parte Hulse (1873) LR 8 Ch App 1022 Rose v Watson (1864) 33 LJ Ch (NS) 385 Ryan v Costello [1915] VLR 370 Shiloh Spinners Ltd v Harding [1973] AC 691 Sterling Estates Development Corporation Pty Ltd v Malouf [2003] NSWCA 278 Stern v McArthur (1988) 165 CLR 489 Tanwar Enterprises Pty Ltd v Cauchi (2003) 77 ALJR 1853
PARTIES :	Anthony Michael Mulkearns and High Forest Estate Pty Ltd (P) Chandos Developments Pty Limited (D)
FILE NUMBER(S):	SC 4016/03
COUNSEL:	V R W Gray (P) C A Sweeney QC and W Hodgekiss (D)
SOLICITORS:	James H Field (P) Stephen Noss & Associates (D)

IN THE SUPREME COURT
OF NEW SOUTH WALES
EQUITY DIVISION

YOUNG CJ in EQ

Wednesday 3 December 2003

4016/03 – MULKEARNS v CHANDOS DEVELOPMENTS PTY LTD

JUDGMENT

1 HIS HONOUR: This is a purchaser's suit for specific performance.

2 On 6 November 2002 the second plaintiff entered into a contract in the 2000 edition of the standard form with the defendant for the purchaser to buy and the vendor to sell property at 925-937 Old Northern Road, Dural, for $2.5 million. The contact provided for a completion date in the events which have happened of 4 July 2003.

3 There is erected five buildings upon the land which is approximately one and a quarter acres. Two buildings are known as "the old church and chapel" which are subject to a lease to Dural Galleries. Behind the old church there is a building known as "the church hall" leased to Pamela's Craft & Fantasyland Pty Ltd. There is a residence upon the land occupied by tenants Philip and Helen Holley pursuant to a residential lease and upon the land fronting Old Northern Road, Dural there is a brick and tile building in Federation style.

4 The contract in special condition 43 provided that the purchaser was going into possession of the brick cottage subject to terms and subject to paying a licence fee.

5 The purchaser went into possession. The contract was not completed on 4 July 2003.

6 The vendor issued, but withdrew, notices to complete on 8 April 2003 and 9 July 2003. The latter notice was withdrawn because a mistake was made so that it unwittingly fixed completion for a Saturday.

7 A third and final notice to complete was given on 7 August 2003 purporting to make time of the essence for 1 September 2003. The purchaser did not attend at the time set out for settlement and on 2 September 2003 the defendant gave a notice of termination.

8 The plaintiffs had actually issued the present summons on 28 July 2003 after the issue of the second notice to complete, but before the issue of the third.

9 The proceedings were expedited and came on for hearing before me on 18 and 19 November 2003. Unfortunately, the submissions only finished at 3.25 pm and there was insufficient time to give reasons for judgment on that day.

10 Mr Ventry Gray of counsel appeared for the plaintiffs and Mr Charles Sweeney QC and Mr William Hodgekiss appeared for the defendant. I should note that while there are two plaintiffs, Mr Anthony Michael Mulkearns and High Forest Estate Pty Ltd, the corporate plaintiff is alone the purchaser, but the individual plaintiff appears to be its controller and, for almost all purposes, its alter ego. Mr Mulkearns says he joined in as plaintiff in order to show himself personally liable in costs.

11 In his opening, Mr Gray said that the plaintiffs relied on three reasons as to why the vendor's termination was ineffective. This was later expanded to four. In his expanded version, Mr Gray says:

(1) The notice to complete was a notice which the vendor was not in a position to give under the principle discussed in McNally v Waitzer [1981] 1 NSWLR 294. This is because the vendor was under an obligation to the purchaser to perform its obligations under the leases in particular its obligation to maintain the roof of the church building in good repair.

(2) As at the date of completion on 1 September 2003, the roof was not in fact in good condition and the vendor could not have completed.

(3) On 22 September 2003 the vendor was in a position where it could either rely on the termination or it could elect to enforce the contract or reinstate or vary it: the vendor did on that day elect to reinstate and vary the contract and the purchaser accepted this, thus there was an irrevocable election to keep the contract on foot.

(4) This is a case where equity would grant relief against forfeiture under the doctrine in Stern v McArthur (1988) 165 CLR 489. The submission is that under the contract the property was sold with development approval on the basis that the purchaser would be given immediate possession and on the basis that the purchaser would pay an occupation fee many times the rental value of the property. The purchaser paid all that was demanded up to 22 September and further tenders were refused thereafter. The plaintiffs have expended $600,000 improving the property and the property is worth, today, $4 million as against its $2.5 million value at the date of the contract. Thus if relief against forfeiture is granted, the vendor will get a fortuitous windfall. There are also disagreements as to adjustments to be made and the plaintiffs say this is to be borne in mind both on the matter of relief against forfeiture and on termination.

12 I will deal with these four points in due course, but first I should turn to some of the background facts. The contract included a set of special conditions:

"43. As and from the date of this contract the Vendor shall grant possession to the Purchaser of the brick cottage within Lot 2 being the cottage at the southern boundary of Lot 2 and fronting Old Northern Road and the Purchaser shall take possession of the said cottage and curtilige and the Purchaser shall pay to the Vendor a licence fee to occupy the said cottage and curtilige in the sum of $300,000.00 until the time provided herein for completion of this agreement. Such sum of $300,000.00 to be paid monthly in the sum of $37,500.00 the first payment to be made on the date of this contract and thereafter on or before the day of each of month for the period of 8 months and until completion. PROVIDED that should the Purchaser pay to the Vendor the said licence fee by the said monthly payment and by the due date each month then the Vendor shall accept the said sum without interest. In the event the said monthly installments are not paid by the due date then the Purchaser shall pay to the Vendor interest upon the said unpaid installment or installments at the rate of 12% per annum for each day the installment is not paid. FURTHER, in the event the Purchaser does not pay the said monthly installments and the installments are not paid on two occasions by the due date then notwithstanding anything else in this contract, the Vendor may give to the Purchaser a 21 days Notice to complete this contract in which respect time shall be of the essence of the said notice.
44. The Vendor shall accept on completion such licence fees as paid referred to in the previous clause (but not interest) in reduction of the sale price.

45. In the event this contract is terminated by the Vendor as authorised by this contract then the whole of the deposit monies together with the licence fees as paid and received by the Vendor shall vest upon the Vendor absolutely and such money the parties agree shall be forfeited to the Vendor as security for the Purchasers default under the contract.

…

47. Completion of this agreement shall take place on or before the expiration of 240 days from the date hereof. In the event completion does not take place within 240 days, either party shall be entitled to serve on the other party or its solicitor a Notice to Complete requiring completion to take place within 21 days from the date of the notice in which respect time shall be of the essence. It is expressly agreed between the parties hereto that the period of 21 days is a reasonable and sufficient period for such notice, notwithstanding any rule of law or equity to the contrary.
48. The Property is sold subject to the following tenancies which the purchaser shall accept on completion:
i) Commercial Lease between the vendor and Dural Galleries Pty Limited for the term of 6 years commencing 1 March 2002 a copy of which is annexed and marked 'C'.
ii) Commercial Lease made on 17 April 2000 between Pamela's Craft and Fantasy Land Pty Limited.
iii) Residential tenancy agreement made 28 November 2000 between the Vendor and Phillip and Helen Holly.


…

52. The purchaser acknowledges that the improvements upon Lot 1 DP 618271 namely, the Church, timber chapel and the cottage at the Southern boundary and fronting Old Northern Road, Dural on Lot 2 DP 618271 are subject to a Heritage Development Control Plan and classified as heritage controlled as determined by the Hornsby Shire Council in which respect, the Purchaser shall make no objection, requisition or claim for compensation with respect thereto and the Purchaser acknowledges having made all enquiries and inspections as the Purchaser may deem necessary prior to entering into this contract."

13 Special condition 31 as typed reads:

"Notwithstanding any other provision in this contract the Vendor and the Purchaser agree that the sum of $100,000.00 as paid by the Purchaser by way of part deposit (the balance paid by Security bond) shall be released to the Vendor forthwith."

There is then added in handwriting:

"The security bond shall be delivered to the Vendors Solicitors by Monday 11 November 2002."

14 The evidence is that these words were written in when contracts were exchanged between the representative of the vendor and the representative of the purchaser. The representative of the purchaser, who appears to be a very minor official in the plaintiffs' enterprise, would have had no authority to agree to a variation of the contract as signed by Mr Mulkearns, but no party takes the point that what is in handwriting was not a condition of the contract.

15 These proceedings came on before Windeyer J as duty judge on 15, 17 and 22 September 2003. The plaintiffs sought an interlocutory injunction to preserve the status quo. Upon it becoming apparent to his Honour as is common ground that the contract had not been stamped, that the deposit in excess of $100,000 had never been paid, and that the only parts of the licence fees that had been paid were two monthly instalments plus $10,000, his Honour made it clear that unless this default was made good, he was not interested in granting interlocutory relief. He granted relief on the basis that these matters would be attended to in the near future. The purchaser paid a further $440,000 on 22 September being $150,000, the balance of the deposit, and $290,000, the balance of the occupation fee. On 22 September his Honour then extended the injunction until the hearing.

16 The plaintiffs base the third of their propositions on part of the transcript taken before Windeyer J on 22 September 2003. On that occasion the defendant's solicitor said, "In relation to the continuance of the interim injunction, if your Honour is minded to grant that, then your Honour will recall that this sum of money merely pays out the occupation fees as of, effectively, now and not in the future … . We submit … in the circumstances the continuance of any order that you might make should be dependent entirely upon this plaintiff continuing to pay its occupation fees such that I ask the injunction be extended with liberty to apply." His Honour did not do that, but he did extend the injunction.

17 Mr Gray puts that the word "now" in the solicitor's initial statement to his Honour and the request for an occupation fee under the contract (not the tenanted value of the land which was merely $2,600 per month) showed an unequivocal election by the vendor to keep the contract on foot.

18 In attempted answer to this proposition Mr Sweeney and Mr Hodgekiss referred to subsequent correspondence between the solicitors for the parties which made it quite clear that the vendor was not seeking any occupation fee after termination.

19 However, when Mr Hill, the controller of the defendant was in the witness box he said the reason why he returned the money was that the occupation fee had been capped at $300,000 and all of that had been paid. On this evidence the refusal of the tender of additional occupation fee had nothing to do with anyone turning their mind to whether the contract was still on foot or not.

20 As I noted when setting out Mr Gray's fourth proposition, Mr Mulkearns says that he has expended $603,000 on improvements to the property. There is evidence from the defendant's side of the record that the cost of the work done by Mr Mulkearns was nearer $78,100. There is very little supporting material for the plaintiffs' claim for $603,000. Indeed, even the details of that claim show that it includes $102,650 management and administration fees which I believe I can merely delete. That reduces the claim to $500,727 which is the round figure that Mr Mulkearns pressed in the witness box.

21 However, cross examination of Mr Mulkearns showed that this figure was very rubbery. The architects' and engineers' design fees of $56,000 seemed to be what the plaintiffs or one or other of them might have to pay in the future. The claim for furnishings and fittings should be rejected as these can just be removed. The house renovations figure appears to be inflated because it includes the commercial cost of painting when the painting was done cheaply by the first plaintiff's brother and the female tenant of the church.

22 However, doing the best I can on very skimpy evidence I find that the amount expended on the property is somewhere between $78,100 and $250,000.

23 There was no evidence of the increased value of the property. The figure mentioned by Mr Gray in his submissions was put forward in Mr Mulkearns' affidavit, but that was rejected. I might infer from what skimpy evidence there is, that there was some increase in value in the property, but whether that was caused by natural market forces beyond the control of either party or because of the expenditure by Mr Mulkearns and if both factors operated, in what proportion they operated, it is almost impossible to say.

24 The first and second points raised by Mr Gray involve determination of a question of fact. Printed clause 24 of the contract provides in 24.4.3 that:

"If the property is subject to a tenancy on completion – the vendor must comply with any obligation to the tenant under the lease, to the extent it is to be complied with by completion."

24.5 provides that:

"Rights under this clause continue after completion, whether or not other rights continue."

25 The lease of the church is in evidence. It is a lease for six years from 1 March 2002. Clause 7.1.1 provides that:

"The landlord must – maintain in a state of good condition and serviceable repair the roof, the ceiling, the external walls, and the floors of the property and must fix structural defects."

26 The evidence is that the church building was built in the 19th century. One piece of evidence is that it was built in 1801, another in the 1890s, but whatever it was, it is over a hundred years old. It is described as a "heritage building" though I am not completely sure what follows from this. The roof is of galvanised iron. There have been some leaks in the roof in the past and this is evident from some staining inside.

27 After the lease was entered into, in accordance with special condition 15, the lessee carried out a major fit-out and refurbishment of the interior of the subject premises and this included the installation of a mezzanine floor. The church is now used as an art gallery. I should note that the special conditions also included a condition that the lessor would extend to the lessee a first right of refusal to purchase the old church and timber chapel. However, neither party has made any reference to this in submissions.

28 Three people gave evidence as to the state of the roof. A Quantity Surveyor, Mr Rutledge, retained by the plaintiffs gave evidence as to the cost of replacing the roof. I was impressed with Mr Rutledge as a competent Quantity Surveyor and a person who was involved in the building trade for many years, but his expertise did not extend to what should be done with respect to the roof. However, he also gave evidence that Mr Dermot Lyons who, with others, trades as "Abseil Roofing" was well respected in the building industry as being a competent and efficient roofing contractor.

29 When Mr Dermot Lyons gave evidence his whole demeanour bore that out. Mr Lyons said that the roof suffered badly from rust, there were also other defects in it. The only solution to cure roofing problems was to renew the roof. Mr Sweeney put to him that it was possible to do a repair which would last for some years. Mr Lyons said that one could do a repair which would last four to five years, but it was just economically stupid to do so as the cost would be in excess of $10,000 and the result not particularly satisfactory.

30 The reason why the result would not be particularly satisfactory is that the repair would involve putting new sheets of galvanised iron under or over the existing sheets, but as the main problem was rust, the rust would before too long permeate into the new sheets and destroy them just as it had destroyed the old sheets.

31 The third witness, retained by the defendant, was Mr Paine, a builder. He was of the view that the roof was not in bad condition and could just be repaired. I did not have the same confidence in Mr Paine's evidence. It appeared that he had given too cursory an examination of the problem and was a general builder rather than a roofing expert such as Mr Lyons. Accordingly I accept Mr Lyons' evidence that the roof needed to be replaced. Mr Rutledge gave evidence that Abseil Roofing's quotation of $25,000 to $30,000 including the cost of scaffolding was reasonable.

32 It is in this factual background that I need to turn to the four issues raised by Mr Gray and I will deal with them in turn.

33 (1) Mr Gray puts that the condition in the lease 7.1.1 operates so that the vendor had an obligation to bring the roof up to a good state of repair and thereafter maintain it in that condition. He relied on Anstruther-Gough-Calthorpe v McOscar [1924] 1 KB 716, 734; Alcatel Australia Ltd v Scarcella (1998) 44 NSWLR 349, 356.

34 I am not completely sure whether one needs to read covenant 7.1.1 in this way with respect to an heritage building with a galvanised iron roof, but for the purposes of the argument I will accept it.

35 Mr Sweeney and Mr Hodgekiss put no submissions on the meaning of the covenant. They say that whatever its extent, any breach of it does not prevent the vendor from giving a notice to complete. They say that the authorities demonstrate that it is not breaches of all conditions in a contract which prevent a vendor from giving a notice to complete, but only those which go to the core elements of the contract, usually vacant possession and encumbrances on the title.

36 They point out that in Alexus Pty Ltd v Pont Holdings Pty Ltd (2000) 10 BPR 18,371 at 18,374, I said:

"One must distinguish between essential and non-essential obligations. Lack of readiness to perform an essential obligation ordinarily leads to inability to give a notice to complete or to force specific performance. However, this is not ordinarily the case where the obligations concerned are inessential … . There are some provisions in a contract which merely sound in damages and even a vendor in breach may still force completion."

37 I gave an example of the decision of Browne-Wilkinson J, as his Lordship was then, in Prosper Homes Ltd v Hambros Bank Executor & Trustee Co Ltd (1979) 39 P & CR 395.

38 At p 400, his Lordship said that it was completely uncommercial to require a vendor to be considered unable or unwilling or unready to complete merely because he may have failed in some respect to carry out his duty between contract and completion in looking after the property. That default would sound in damages. In Golding v Vella (2001) 10 BPR 18,919 Barrett J applied the same principle in a case where it was alleged that the vendor was in default in installing certain PC items in a house as agreed with the purchasers.

39 Mr Sweeny puts that the Court of Appeal in Sterling Estates Development Corporation Pty Ltd v Malouf [2003] NSWCA 278 endorsed this line of authority. I find it hard to accept this view. The Malouf case concerned the wording of a special condition.

40 Mr Gray's riposte to all this was that there was no distinction properly made between the various breaches of contract that a vendor might have committed when considering whether it was disqualified from issuing a notice to complete.

41 In McNally v Waitzer (supra) itself, Reynolds JA strongly suggested that what was required was that the vendor demonstrate at the material time that it was ready willing and able to proceed to completion. His judgment does not mention breaches. On the other hand, Hutley JA does appear to refer to breaches and his quotation from Neeta (Epping) Pty Ltd v Phillips (1974) 131 CLR 286, 299, confirms this. The writer of the headnote has picked up these words. The third Judge, Glass JA, agreed with both Reynolds JA and Hutley JA. He obviously could not have done so had there been a material difference between them. It seems to me that Hutley JA at p 304 makes it clear that he too is talking about readiness and willingness because he says, "Readiness and willingness is negatived by proof that the party seeking to enforce the contract has done something inconsistent with his obligations under the contract and which has not been or is incapable of rectification." He refers to Meagher Gummow and Lehane a paragraph that is now [20-115] of the fourth edition. This reference again seems to emphasise the readiness and willingness aspect, a matter which is not to be determined on whether or not there has been a breach of contract, at least unless the breach is substantial: Mehmet v Benson (1965) 113 CLR 295, 307-9.

42 Assuming that there was a breach and a continuing breach of covenant 7.1.1 of the lease, the vendor says that the tenant was quite content with the way things were and that in any event under clause 24.5 the obligation to pay damages remains notwithstanding completion. It of course also says that the roof was not in need of repair and was in good condition but on the facts, as I have said I prefer Mr Lyons' evidence and do not uphold that submission. The plaintiffs say that this was a substantial breach and it might be a very expensive substantial breach because if there were a heavy rainstorm and the roof failed to repel the rain, works of art inside the gallery might be irretrievably damaged. This point is taken, but there was no material to suggest that the rusted roof was in such a condition that there would be substantial ingress of water or that a tenant once he or she saw that water was coming in would leave material where it was to be ruined. In my view the breach, if it be a breach, of the lease, was not a substantial breach nor one which affected the vendor's readiness, willingness and ability to complete the contract. Accordingly it had no effect on the vendor's ability to give a notice to complete.

43 It must also be remembered that this was the third notice to complete, that the purchaser had been in default with even paying the deposit up until after the expiry of the third notice to complete, and did not appear at all concerned about any problem with the roof until after the original completion date had come and gone.

44 The Court must take a commercially realistic view of the completion of contracts for the sale of land particularly contracts with respect to commercial developments. It would be quite opposed to the presumed intention of parties to a contract if settlement could be indefinitely delayed because of some minor problem with respect to the state of the building or other possible breach of an obligation to a third party which the vendor under the contract had promised to look after. It may be that the category of breaches which go to readiness, willingness and ability extend beyond matters of title or vacant possession, but this is certainly the main subject matter of such breaches. It is noteworthy that Mr Mulkearns said that he would have settled had some sum been set aside to cover the replacement of the roof, but he did not appear to be putting forward that view in August.

45 In my view, there was no reason why the vendor could not on 7 August have issued a notice to complete as it did.

46 (2) This point is much the same as the previous point except that one is directed to the time of completion rather than the time of issuing the notice to complete. It seems to me for the same reason as I have given under (1), that the point fails.

47 (3) In my view this point fails for a number of reasons.

48 First, with respect, I think it is quite an artificial reading of what the vendor's solicitor said to Mr Justice Windeyer that the vendor had elected to keep the contract on foot. The discussion before the learned Judge was over whether an injunction should be continued to preserve the status quo until the final hearing. The parties and their legal representatives were thus discussing keeping the status quo and it would be quite extraordinary if they were intending in fact to make a new contract or to keep a contract which they were in deep dispute as to whether it existed or not on foot. The word "now" was used by the vendor's solicitor, but it seems to me very artificial to attribute that word as meaning 22 September rather than the date of termination.

49 Even if that were not so, I have tremendous difficulty with the concept that one can reinstate a contract which has been properly terminated. Dixon CJ directed his mind to the concept of waiving a notice to quit in Arnold v Mann (1957) 99 CLR 462, 474. Dixon CJ said that once a notice to quit expires the old tenancy is gone and it is too late to continue the old tenancy by common agreement that the notice to quit should be considered as withdrawn but that action may create a new tenancy. I consider the same applies to a notice of termination of a contract. Once the contract is gone, a new contract can be made. However, any new contract has to comply with s 54A of the Conveyancing Act 1919. That writing under that section is completely absent from the instant case. No principle of estoppel was brought into play in the argument.

50 Accordingly, I find that there is no election on the facts, but even if there were, it would not have the effect of continuing the contract in operation and there is insufficient material to show that there was any valid and enforceable new contract created.

51 (4) This is the most worrying of the various points raised by Mr Gray. It is trite law that when a contract is rescinded as a general rule a court of equity and perhaps nowadays even a court of common law, may relieve the purchaser against forfeiture of all payments of principal monies made except the deposit; see eg McDonald v Dennys Lascelles Ltd (1933) 48 CLR 457, 470, 478.

52 If an application were made under this principle, then the Court may well have considered that of the $625,000 paid by the plaintiffs, the plaintiffs may have been entitled to relief by ordering the return of $274,000 (less adjustments) being the $300,000 occupation fee paid less the amount of commercial rental of the property for 10 months at $2,600. The adjustments would be in respect of continued occupation after 1 September to date and possibly some adjustment for rates and taxes.

53 One could also see some restitutionary claim being made in respect of some unjust enrichment of the vendor in the increase in value of the property due to the plaintiffs' expenditure on it.

54 However, the plaintiffs make neither of these claims. Instead they claim that they should have relief against forfeiture of their estate by termination of the contract.

55 Mr Gray first relies on the decision of the English Court of Appeal in Chancery in Re Dagenham (Thames) Dock Co; Ex parte Hulse (1873) LR 8 Ch App 1022. That was an appeal from the Master of the Rolls in what appears to be the refusal of the Master of the Rolls to make a declaration in the winding up of the purchaser company. The purchaser had sought a direction that if the balance of the purchase monies were paid with interest it should be relieved from termination of the contract brought about by its not paying the purchase money by the due date. The Lord Justices held that the forfeiture was in the nature of penalty from which the court would relieve.

56 In the Dennys Lascelles case at 478, Dixon J commented:

"The view adopted in Re Dagenham (Thames) Dock Co; Ex parte Hulse seems to have been that relief should be granted, not against the forfeiture of the instalments, but against the forfeiture of the estate under a contract which involved the retention of the purchase money: and this may have been the ground upon which Lord Moulton proceeded in Kilmer v British Columbia Orchard Lands Ltd [1913] AC 319, notwithstanding the explanation of that case given in Steedman v Drinkle [1916] 1 AC 275 and Brickles v Snell [1916] 2 AC 599."

57 Dixon J spoke in moderation because at that stage Australians were bound by the two Privy Council decisions last referred to in the passage I have quoted, though it is now clear that those two Privy Council cases do not represent Australian law and that what Dixon J said is 100% correct. Indeed, in addition to the cases he cited, one should also cite Ryan v Costello [1915] VLR 370.

58 The extensive jurisdiction of a court of equity to award relief against forfeiture was examined by the High Court in four recent cases to which I will refer shortly and was also the subject of a definitive article by Charles Harpum in [1984] Camb LJ 134.

59 The most recent of the High Court cases is Tanwar Enterprises Pty Ltd v Cauchi (2003) 77 ALJR 1853. That case reaffirms the jurisdiction of courts of equity to grant relief against forfeiture to persons who could be classed defaulting purchasers under contracts for the sale of land.

60 The case discusses the analytical problems that exist in finding such a right, not the least of which is the proposition that a purchaser only obtains an equitable fee simple at a time when he has a contract which will be specifically enforced and if the only route to specific performance is a prior decree for relief against forfeiture, how can it be said that there is any equitable interest held by the purchaser which has actually been forfeited. Although not quite apparent from the actual words used by the High Court, it would seem by implication that even before the time when the contract becomes specifically enforceable a purchaser who has paid money pursuant to the contract has some proprietary right in the land, possibly in the nature of a lien; see Tanwar at [52] p 1862; Hewett v Court (1983) 149 CLR 639; Rose v Watson (1864) 33 LJ Ch (NS) 385, 389-90 (a more abbreviated report appears as T & HLC 671, 683-4; 11 ER 1187, 1192) and see Harpum op cit at 137-8.

61 However the High Court made it clear that whilst the jurisdiction exists, the way of a defaulting purchaser seeking to get relief against forfeiture is hard and the Court will be reluctant to make such an order. A purchaser must show exceptional circumstances to attract the intervention of equity showing that it is necessary to relieve against unconscientious conduct by the vendors to terminate and to take advantage of the forfeiture. As a general rule, equity only intervenes where the forfeiture is in truth merely a security provided for the performance of some act or where there has been fraud, accident, mistake or surprise.

62 Mr Gray says that this is a strong exceptional case for the grant of relief against forfeiture. He points to the fact that with the deposit and occupation fees, the plaintiffs have paid $625,000 out of a total purchase price of $2.5 million, that is, 25% of the total purchase price. He then says that if the Court accepts that the purchaser has expended approximately $500,000 in improvements, then the purchaser has expended $1.125 million which is 45% of the total purchase price. He further says that the conduct of the vendor contributed to the breach, specifically the failure of the vendor to provide accurate figures for adjustment on completion and that the purchaser's breach was not wilful in the sense that he believed that he did not have to complete until the vendor's obligations with respect to the lease were met. Furthermore, the vendor has not suffered any adverse consequences as a result of the breaches. If nothing is done, then the vendor will receive a large windfall.

63 In Legione v Hateley (1983) 152 CLR 406, 449 Mason and Deane JJ said that:

"In the ultimate analysis the result of a given case will depend upon the resolution of subsidiary questions which invariably arise. The more important of these are:
(1) Did the conduct of the vendor contribute to the purchaser's breach?
(2) Was the purchaser's breach (a) trivial or slight, and (b) inadvertent and not wilful?
(3) What damage or other adverse consequences did the vendor suffer by reason of the purchaser's breach?
(4) What is the magnitude of the purchaser's loss and the vendor's gain if the forfeiture is to stand?
(5) Is specific performance with or without compensation an adequate safeguard for the vendor?"

64 In Tanwar at [44] at p 1860, five Justices of the Court said that what was there said about the five subsidiary questions "must be treated with care".

65 However, my summary of what Mr Gray has put throws up the factual matters underlying the subsidiary questions.

66 I was surprised during the argument that there was very little emphasis placed on the concept of readiness, willingness and ability. I have already mentioned that concept in another connection with these reasons.

67 It must be remembered that traditionally equity only assisted a party in specific performance if that party had shown himself or herself at all material times ready, willing and able to complete the contract. In early days, this requirement was very strict as can be seen from the case discussed during argument of Benedict v Lynch (1815) 1 Johns Ch 370; 7 Am Dec 484, a decision of Chancellor Kent. In more modern times, equity has been more merciful and even though a party seeking specific performance may have been in breach of contract at some time during the contract period of the contractual regime, if at present time it has cleared all breaches and is demonstrably ready, willing and able to complete, then relief is given.

68 The whole history, however, of this purchaser does not show a person ready willing and able to complete. It did not pay the deposit in full. It did not pay the occupation fee until after the proceedings were commenced and it was virtually forced on it as a term of obtaining an interlocutory injunction. Moreover, the plaintiffs are, on the evidence which I have in the light of Mr Sweeney's cross examination of Mr Mulkearns, willing to take any technicality believed open to him in order to postpone the time of settlement.

69 I note, for completeness, the other two recent decisions of the High Court which bear on the question of relief against forfeiture, namely Ciavarella v Balmer (1983) 153 CLR 438 and Stern v McArthur (1988) 165 CLR 489. See also the decision of the House of Lords in Shiloh Spinners Ltd v Harding [1973] AC 691. In view of the discussion by the High Court in Tanwar it is not necessary to discuss these cases in any detail or indeed at all.

70 I should, with respect to the failure to pay the deposit and failure to pay the occupation fee, refer to some more matters of fact.

71 Mr Mulkearns swore that there was some variation as to the payment of deposit on a discussion with the vendor prior to exchange. This is inconsistent with the words that were written into special condition 31 on exchange, and although Mr Mulkearns was not there on that occasion it would seem quite clear that he read them shortly afterwards and did not object. I do not accept Mr Mulkearns' evidence concerning postponement of the deposit.

72 It is also clear at least one cheque for the $37,500 occupation fee was dishonoured. It was not replaced and no occupation fee was paid until the case came before Justice Windeyer in September. This is hardly the actions of a person who, as at the commencement of the suit was ready, willing and able to complete.

73 There was quite considerable cross examination about the availability of funds to Mr Mulkearns to complete. It seems to me from the evidence that the probabilities are that given a couple of weeks to organise things he would have been able to raise the money. However, the evidence also suggests that he was not particularly interested in doing that if it could be avoided or postponed.

74 Although the questions of readiness, willingness and ability which have to be established to get specific performance and the prior question as to whether relief should be given against forfeiture are separate to a degree, to a great extent the evidentiary material on the two questions interlock.

75 I do not consider that this case is an exceptional case for which I should give relief against forfeiture.

76 I bear in mind the points that Mr Gray has raised, but I also bear in mind that had the purchaser asked for relief against penalty rather than for relief against forfeiture, the probabilities may well be that it would have got relief as to say $274,000. [The reasons for this figure are noted in [52] above]. Moreover, I do not accept the plaintiffs spent $500,000 in improvements on the property, though I do accept they spent somewhere between $78,100 and $250,000. Here again it may be that there was some restitutionary remedy available to the plaintiffs, and indeed, that may possibly still be open.

77 It follows that the proceedings should be dismissed with costs. However, it may be that the plaintiffs have some application which I should consider before becoming functus. Accordingly I will direct that this order not be taken out for 14 days after the date on which these reasons are delivered and that either party may have liberty to file a notice of motion returnable before me on at least three days' notice to the other side, the return day to be at 9.30 am on a Tuesday or a Thursday to be arranged with my Associate.

78 Accordingly the Court orders:

(1) The proceedings are dismissed.

(2) The plaintiffs are to pay the defendant's costs of the proceedings.

(3) The exhibits may be returned on the usual undertakings.

(4) These orders not to be taken out until after the expiry of 14 days from the date of delivery of these reasons.

(5) Liberty to the parties within the period mentioned in order (4) to file a notice of motion returnable before Young CJ in Eq at a time to be arranged with his Honour's Associate.

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Last Modified: 12/04/2003