Namrood v Ebedeh-Ahvazi

[2017] NSWCA 310

Court of Appeal

Supreme Court

New South Wales

• Amendment notes

Medium Neutral Citation:	Namrood v Ebedeh-Ahvazi [2017] NSWCA 310
Hearing dates:	28 November 2017
Decision date:	08 December 2017
Before:	Leeming JA at [1]; Payne JA at [77]; Sackville AJA at [78]
Decision:	Appeal dismissed, with costs
Catchwords:	CONVEYANCING – contract for sale of land – purported termination by both parties – vendor required to perform works “by completion” – whether performance required by date specified for completion under contract or time of settlement – contract distinguished between “completion” and “date of completion” – whether vendor complied with obligation to perform works – validity of notice to perform and notices to complete – whether vendor’s misleading and deceptive conduct causally connected with purchaser's successful bid at auction – whether deposit should be returned – Conveyancing Act 1919 (NSW), s 55(2A)
Legislation Cited:	Conveyancing Act 1919 (NSW), s 55(2A) Protection of the Environment Operations Act 1997 (NSW), ss 96, 97, 98 Uniform Civil Procedure Rules, r 51.36
Cases Cited:	DTR Nominees Pty Ltd v Mona Homes Pty Ltd (1978) 138 CLR 423; [1978] HCA 12 Jillinda Pty Ltd v McCourt (1983) 3 BPR 97,174 Lantry v Tomule Pty Ltd [2007] NSWSC 81; 12 BPR 23,727 Perri v Coolangatta Investments Pty Ltd (1982) 149 CLR 537; [1982] HCA 29 Romanos v Pentagold Investment Pty Ltd (2003) 217 CLR 367; [2003] HCA 58 Ross T Smyth & Co Ltd v T D Bailey Son & Co [1940] 3 All ER 60 Sweet & Maxwell Ltd v Universal News Services Ltd [1964] 2 QB 699
Category:	Principal judgment
Parties:	Sarjon Youssif Namrood (Appellant) Sam Ebadeh-Ahvazi (Respondent)
Representation:	Counsel: G M McGrath (Appellant) B Oliak, S Swami (Respondent)   Solicitors: Isho Lawyers (Appellant) Galluzzo Lawyers (Respondent)
File Number(s):	2017/139473
Publication restriction:	Nil
Decision under appeal	Court or tribunal: Supreme Court Jurisdiction: Equity Citation: [2017] NSWSC 399 Date of Decision: 12 April 2017 Before: Darke J File Number(s): 2015/311268

Judgment

1. LEEMING JA: Sarjon Youssif Namrood appeals as of right from a judgment holding that his vendor, Sam Ebedeh-Ahvazi, is entitled to retain a deposit of $146,000 paid by him pursuant to a contract for the sale of some 5.75 acres of vacant land in Cecil Park in south western Sydney. The primary judge (Darke J) heard and determined a claim and cross-claim over two days and delivered careful reasons addressing a large number of issues raised by the parties in a judgment delivered a fortnight later: Ebedeh-Ahvazi v Namrood [2017] NSWSC 399. The 12 grounds of appeal which were pressed give rise to six broad areas of dispute:

1. Questions of construction as to the time by which the vendor was required to undertake certain activities pursuant to orders made by the local council (grounds 1-3);

2. A challenge to the factual findings as to whether the vendor’s belated undertaking of works and provision of a survey satisfied his contractual obligations (grounds 4 and 6);

3. Whether the vendor had repudiated the contract (ground 7);

4. Whether the vendor’s termination of the contract by notice was valid (ground 8);

5. Whether the primary judge had erred in rejecting a claim based on the Australian Consumer Law derived from the advertisement of the property as a “mortgagee sale” (grounds 9-11), and

6. Whether the primary judge had erred in the exercise of discretion under s 55(2A) of the Conveyancing Act 1919 (NSW) as to the repayment of the deposit (grounds 12-13).

2. It is convenient first to give an overview of the undisputed factual background before turning to deal with each of those areas in turn.

The factual background

3. The primary judge summarised the factual background with considerable care at [6]-[58]. The only criticism of his Honour’s summary made by Mr Namrood was that a small number of details had not been included. For present purposes, the following considerably simplified summary will suffice.

4. Mr Ebedeh-Ahvazi had purchased the property in 2014, for $830,000, and shortly thereafter obtained development approval for a new residential dwelling and swimming pool. In early 2015, he caused loads of soil to be placed on the property prior to building the house. Apparently, this was not approved, and came to the attention of the local council, Fairfield City Council, which issued a prevention notice pursuant to s 96(2) of the Protection of the Environment Operations Act 1997 (NSW) on 6 February 2015. The order appears principally to have been directed to the earthworks altering the flow of water on the property and on adjoining properties. The order contained the following “Specified Action”:

“Immediately:

1. Cease excavation works and importing fill onto the premises.

Within seven (7) days from the date of this Notice:

2. Remove all foreign material (land fill) from the subject premises.

3. Submit to Council, copies of receipts for the disposal of land fill/waste associated with the above works.

Within fourteen (14) days from the date of this Notice:

4. Restore the premises to the condition in which they were before work was unlawfully carried out. Restoration work shall be conducted for the entire premises including but not limited to the overland flow path.

5. Submit to Council at the completion of the restoration work referred to above, evidence by way of updated surveyors report to substantiate that the levels of the land have been restored to the levels which existed prior to the unlawful work being carried out.”

5. The notice stated that it was an offence pursuant to s 97 of the Act to fail to comply, and advised Mr Ebedeh-Ahvazi that non-compliance might lead to the commencement of civil enforcement proceedings in the Land and Environment Court, summary criminal proceedings, or the issuing of a penalty notice. The notice also advised that the Council might exercise its powers pursuant to s 98 of the Act to take action to cause compliance. It also stated:

“CONTINUING OBLIGATION

Under s 319A of the Act, your obligation to comply with the requirements of this Notice continues until the Notice is complied with, even if the time for compliance has passed.”

6. It appears that two other orders were issued later in February but it is the order reproduced above which is material to this litigation. It also appears that although Mr Ebedeh-Ahvazi ceased works, the other obligation in the 6 February order remained unsatisfied for some months.

7. In April 2015, Mr Ebedeh-Ahavazi placed the property on the market for sale. It was not a mortgagee sale but was advertised as such. The primary judge found that the reasons for this occurring were not adequately explained in the evidence.

8. The auction was to be held on 16 May 2015. The appellant purchaser, Mr Namrood, first noticed the property at around 11:30am on 16 May 2015, the day of the auction. An oral, pre-auction offer of $1.2 million was made by Mr Namrood’s son but was rejected. The primary judge found that the real estate agent told Mr Namrood that the owner was a manager of Vesta Homes, and that he did not want to take any offers.

9. Mr Namrood attended the auction. Prior to accepting bids, the auctioneer made a statement to the effect that before settlement the vendor would reinstate the land to its original levels and would pay for the costs of those works. Such a statement reflected new special conditions which had only recently been added to the draft contract and which were in the following terms:

“ADDITIONAL SPECIAL CONDITIONS

Prior to completion, the vendor agrees to carry out the following at the vendor’s expense:

1 Remove the load of soil currently lying on the property;

2 Carry out a Survey substantiating that the levels of the land have been restored.

3 Provide copies of receipts for the disposal of land fill/waste associated with the removal of the soil.”

10. In addition, cl 11.1 of the contract (which was in the standard form) provided:

“Normally, the vendor must by completion comply with a work order made on or before the contract date and if this contract is completed the purchaser must comply with any other work order.”

It was accepted that the 6 February order was a “work order” within the meaning of cl 11.1. Clause 1 of the contract defined “normally” to mean “subject to any other provisions of this contract”.

11. The Additional Special Conditions appear to have been prompted by an email from the local council to the real estate agent which was in the following terms:

“Re: Impending auction of xxx Ave, CECIL PARK

As discussed today over the phone, please find attached copies of outstanding Notices and Orders for the above mentioned premises. Council would like you to ensure that anyone wishing to purchase the premises is aware of the issues Council has with the site and remediation work which is required under the Protection of the Environment Operations Act 1997 & Environmental Planning and Assessment Act 1979.”

12. The email appears to have attached two orders made in February 2015 including that made on 6 February, as well as a further proposed order dated 13 May 2015 (the same day as the email). The latter indicated that Mr Ebedeh-Ahvazi had 14 days to make representations why an order in the following terms should not be made:

“That within a period of THIRTY (30) DAYS from the date of the order you are required to:

I. restore the premises to the condition in which they were before work (landfill) was unlawfully carried out, and

II. submit to Council that the completion of the restoration work referred to above, evidence by way of updated surveyors report that the levels of the land have been restored to the levels which existed prior to the unlawful work being carried out.

III. Submit to council copies of receipts for the disposal of land fill/waste associated with the above work.” Blue 92-93

13. There were four or five bidders at the auction. Mr Namrood said in his evidence that he was prepared to bid above his pre-auction offer of $1.2 million because other bidders made higher bids and he thought that the property was worth more than $1.2 million. Mr Namrood was the successful bidder at $1.46 million.

14. Mr Namrood duly executed the contract. On its front page, the contract provided that the completion date was “35 days after the date of this contract (clause 15)”. Special conditions 1(A) and (B) were as follows (with emphasis added to the words “completion” and “completion date”):

“1(A) Completion shall take place within thirty five (35) days after the date hereof and on and after the expiration of the said thirty five (35) days either party shall be entitled to give to the other Notice to Complete this Contract within fourteen (14) days after the date of the said Notice and in this regard time shall be of the essence hereto and the parties hereby expressly acknowledge that where the said fourteen day period has been granted in such notice then such period shall be sufficient and reasonable notice and no objection shall be raised by the recipient of the notice as to reasonableness of time or as to the form of the notice provided that the notice is served in accordance with printed Clause 20 of the printed form of Contract and provides for completion on or after Fourteen (14) days from service and there shall be no requirement for the sender of the Notice to state a time and venue for settlement in the contents of such notice.

1(B) If completion does not occur within the above period of time as a result of the purchaser’s breach or default then provided the Vendor is ready, willing and able to complete on the completion date then the Vendor shall be entitled to recover from the purchasers as liquidated damages payable on completion the following:

(a) Interest on the balance purchase price at the rate of twelve per cent (12%), calculated at a daily rate from the completion date to the actual date of completion, to compensate the vendor for the delay to be added to the balance of purchase monies payable upon completion;

(b) The sum of three hundred and thirty dollars including GST ($330.00) to cover legal costs and other expenses incurred as a consequence of the delay to be allowed by the purchaser party as an additional adjustment on completion.

It is expressly agreed and declared that such damages described in (a) & (b) above are a genuine pre-estimate of the damages incurred by the vendor due to the purchaser’s delay. In the event of a dispute as to payment of the above the vendor may elect to complete and recover such damages following completion. This provision shall not merge with the Transfer.”

15. Vendor and purchaser were thereafter represented by solicitors. Although Mr Ebedeh-Ahvazi’s solicitors, Galuzzo Lawyers, advised, in answer to requisitions on title, that there were no outstanding notifications, claims or requirements by a statutory or local authority, searches undertaken on behalf of Mr Namrood revealed the council notices referred to above. Mr Namrood’s solicitors, Isho Lawyers, advised of the error by letter dated 17 June 2015. The letter noted that the completion date of the contract was 20 June 2015, and asked for confirmation that the work and supporting documentation had been carried out to the satisfaction of the Council on 19 June 2015.

16. On 19 June 2015, Galuzzo Lawyers, advised that “our client shall comply with the Additional Special Conditions referred to in the contract in respect to the Council’s order.”

17. Completion did not take place on 20 June 2015. The following week, some works seem to have taken place on the property, and on 25 June 2015, Galuzzo Lawyers advised that Mr Namrood had “complied with the conditions under the contract and requires the purchaser to settle on Monday 29 June 2015.”

18. On the same day, Isho Lawyers sent a letter to Mr Ebedeh-Ahvazi’s solicitors, stating the following:

“We refer to our letter of 17 June 2015 and note that to date we have not received a proper reply from you in relation to the matters raised in that letter.

We have conducted further enquiries with Fairfield City Council and note the following:

1. That Orders provided to you in our letter of 17 June 2015 and served by the Council on 6 and 18 February 2015 remain outstanding;

2. That a further Order was served by the Council on your client on 3 June 2015. Copy of the Order enclosed for your information;

3. The nature of the Orders are serious in particular Order number 3830.1/2015 served on your client on 6 February 2015.

Your client is required to comply with these Orders as well as with the Additional Special Condition contained in the Contract.

We note that the terms of clause 11 require compliance with an order. The proper evidence of compliance with that order is the satisfaction of Council that it has been complied with. As the failure to comply with an Order may result in the Council imposing a charge on the land. It is your client’s responsibility to supply evidence that the Order has been complied with.

The survey you emailed to us on 23 June 2015 does not appear to reveal whether or not the land has been restored to its former levels, as the Order requires.

We also refer to your letter of today enclosing a letter from ‘2Men & A Bobcat’ dated 23 June 2015. We confirm that the letter from 2Men & A Bobcat does not appear to comply with the terms of paragraph 3 of the Additional Special Conditions that states ‘Provide copies of receipts for the disposal of landfill/waste associated with the removal of the soil’.

We are instructed to confirm that our client denies your client’s allegation that our client inspected the property yesterday as you allege in your letter of today.

Your client is not in a position to complete until all works pursuant to the above Orders and the Additional Special Condition are completed and proper documentary evidence are provided to our client.

We enclose by way of service a Notice to [Perform].”

19. The letter attached a Notice to Perform, which relevantly provided:

“WHEREAS:

A. By Agreement for Sale dated 16 May 2015 (‘the Agreement’) you agreed to sell and Sarjon Yousif Namrood (‘the Purchaser’) agreed to buy xxx Ave Cecil Park NSW being property fully described in Certificate of Title Folio Identifier 117/31359 (‘the Property’) for the sum of $1,460,000.00.

B. By Clause 11 of the Agreement you agreed to comply before completion with any Order issued before the date of the Agreement.

C. There are two Orders made by Fairfield City Council namely order 3830/2015 served on 6 February 2015 and Order 3881.1/2015 served on 18 February 2015 1 (‘the Orders’).

D. Pursuant to the Agreement you agreed to carry out certain works to the Property at your expense before completion of the Agreement namely:

(i) Remove the load of soil currently lying on the property;

(II) Carry our Survey Substantiating that the levels of the and [sic – land] have been restored;

(iii) Provide copies of receipts for the disposal of the land/waste associated with the removal of the soil.

(‘the Works’)

E. The time for completion specified in the Agreement has expired and you have failed to provide evidence of compliance with the Orders.

F. The time for completion specified in the Agreement has expired and you have failed to carry out the Works.

As Solicitors for and on behalf of the Purchaser WE HEREBY GIVE YOU NOTICE:

1. You are required to provide evidence that the Orders have been complied with to Council's satisfaction by 5.00pm on Friday, 10 July 2015.

2. You are required to carry out the Works on or before 5.00 p.m. on Friday, 10 July 2015 in which respect time for completion shall be of the essence of the Agreement.

3. If you fail to comply with this notice the Purchaser shall be entitled by notice in writing to you terminate the Agreement and to recover damages for breach of the Agreement and loss of bargain damages.”

20. On 29 June 2015 Galuzzo Lawyers sent a facsimile to Isho Lawyers which included the following:

“We refer to the above matter and advise that our client has completed the vendor’s works pursuant to the ‘Additional Special Conditions’ in the contract. The vendor is now in the process of obtaining Council compliance.

In the meantime our client instructs that the matter be settled on Wednesday 01 July 2015, 3:00pm at NAB. The agent will hold back $13,000.00 in trust pending the issue of Council compliance.”

21. On 1 July 2015, Isho Lawyers replied, stating that they were instructed to inquire “on what basis your client is entitled to insist on completion when it does not appear to have complied with the terms of the contract or the notice to perform issued on 25 June 2015.” Isho lawyers also stated that the vendor was required to provide evidence of compliance with the Additional Special Condition and Clause 11 and that “it is not clear on what basis your client seeks to ‘hold back’ $13,000”.

22. Later that day, Galuzzo Lawyers responded as follows:

“Our client has complied with the additional special conditions, and we are able to provide the evidence referred to in those three points. Please note that our special conditions override the printed clauses.

Our client only wants to settle the matter now with $13k being held back until he gets the council compliance. (Council may take time to inspect and issue the compliance). Please note that we do not have to obtain the Council compliance under the contract for settlement to take place and the purchaser cannot delay us as long as the vendor’s works are complete and evidence provided.

If your client does not agree to settle with the $13k to be retained, then we will issue a Notice to Complete tomorrow and interest shall apply from the due date, and if it is further delayed then we shall appoint a Law Society Arbitrator if the matter is in dispute.”

23. Later in July there was further correspondence including two Notices to Complete that were issued by Mr Ebedeh-Ahvazi. Both notices were later withdrawn by him. The most important document in this period was an email (sent on 17 July 2015) attaching a letter from a surveyor which included the following:

“I am writing in relation to surveys carried out at the above property.

An initial contour and detail survey was carried out at the above mentioned property on the 8th September 2014 as per your request. A second survey was then carried out on the 3rd July 2015 using the same methods (ie Global Navigational Satellite Systems).

Attached is a plan which overlays the more recent survey over the original survey with the current levels and contour lines shown in red.

It is my understanding that in between surveys an amount of soil was brought [to] and then removed from the site.

Generally, as can be seen from the contour lines, the site’s current topography is consistent with the original survey. There are a number of areas which have discrepancies of up to 200 millimetres but this needs to be considered in the light of the ground being uneven in nature and that the GNSS survey method is only accurate to +/- 30mm.

The areas of the greatest difference are in the western corners adjacent to Selkirk Avenue. In the northwest and southwest corners small gullies have been levelled out although this area was covered in spike rushes which created a significant unevenness to the ground.

Should you have any questions in relation to any of the above please do not hesitate in contacting me.”

24. On 29 July 2015, Isho Lawyers sent a Notice of Termination, which relied upon the failure to comply with the Notice to Perform, and the purported issuing of a Notice to Complete while the obligation specified in the Notice to Perform remained unperformed. In response, Galuzzo Lawyers stated that the Notice of Termination was a repudiation and an anticipatory breach of the contract, that Mr Ebedeh-Ahvazi was ready, willing and able to complete the contract, and was prepared to give Mr Namrood the opportunity to withdraw the termination and proceed to completion on 10 August 2015.

25. Finally, on 22 September 2015, the Council sent an email to Mr Ebedeh-Ahvazi, which stated:

“In lieu [sic] of recent documentation submitted to Council, the Order 12 & Order 19 issued upon yourself and Abdolreza Ebadeh-Ahvazi has been deemed complied. Councils Building Control & Compliance Department is taking no further action at this time.”

26. Also on 22 September, a letter was sent by Galuzzo Lawyers to Isho Lawyers which included the following:

“Dear Sirs,

RE: EBADEH-AHVAZI SALE TO NAMROOD

PROPERTY: XXXX AVENUE, CECIL PARK

1. We refer to previous correspondence and attach a further Notice to Complete (the “Notice”) which replaces the Notice to Complete issued in this matter on 24 July 2015 (which is withdrawn).

2. We confirm our earlier advice that we do not accept the validity of your purported Notice of Termination of the contract and that the contract remains on foot.

3. For the avoidance of any doubt, our client has obtained the attached letter from Fairfield City Council dated 21st September 2015 confirming that our client has complied with all of the outstanding work orders in relation to the property.

4. There can be no dispute that our client has also complied with the special conditions contained in the contract which relate to the works required by the work orders.

Our clients are ready, willing and able to complete at any time up until the expiry of the Notice.

If your client fails to complete in compliance with the Notice we are instructed to then proceed with any such legal action required by our client to enforce his rights.

Yours faithfully,

Galluzzo Lawyers”.

27. The letter attached a Notice to Complete, as follows:

“Sam Ebadeh-Ahvazi (vendor) gives you notice:

1. The vendor is ready, willing and able to complete the conveyance from you of the property known as xxx Avenue, Cecil Park in accordance with the contract for sale of land dated 16 May 2015 (the contract);

2. You are required to complete the sale on or before 09 October 2015 and in this respect time is of the essence for the completion of the contract;

3. The vendor appoints on or before 3.00pm, 09 October 2015 at the office of National Australia Bank, Cnr King & Elizabeth Streets Sydney as the time and place for completion or at such other place as the vendor may direct; and

4. Should you fail to complete the contract for sale of land within the period specified in this notice then you shall be in breach of the contract and the vendor shall exercise all other rights and remedies as are available to him by reason of your breach.

Dated: 22 September 2015”.

28. The letter and its enclosures were intended to be sent by facsimile. The transmission failed. It was accepted on appeal that the letter and the Notice to Complete were sent by post, and were received, and that email dated 22 September 2015 was also provided (it was the “letter from Fairfield City Council dated 21st September” to which reference was made in the third paragraph of the covering letter).

29. Completion did not take place on 9 October 2015, and on 19 October 2015, a Notice of Termination, based on the failure of Mr Namrood to complete within the time stipulated in the 22 September 2015 notice, was served. On the same day, it appears that Mr Ebedeh-Ahvazi sold the property to another purchaser for $1.5 million. He commenced these proceedings on 23 October 2015, inter alia, seeking declaratory relief that his termination was valid, and that he was entitled to forfeiture of the deposit. Mr Namrood cross-claimed.

30. The primary judge found in favour of Mr Ebedeh-Ahvazi, and dismissed the cross-claim. It will be sufficient to summarise the reasoning of the primary judge at the same time as addressing the grounds of appeal.

The meaning of “completion” in cl 11.1 and the Additional Special Conditions (grounds 1-3)

31. This issue was framed by the primary judge as turning upon whether “completion” in both of cl 11.1 and the Additional Special Conditions referred to 20 June 2015 (the date 35 days after the date of the contract), or alternatively, the date on which title to the property was conveyed from vendor to purchaser. The primary judge observed at [66] that “the language of the contract draws a distinction between ‘the completion date’ and ‘completion’”, with the former referring to 20 June 2015 and the latter to the date on which title was conveyed. That distinction is most clearly seen in special conditions 1(A) and (B), which carefully and precisely employ both terms as reproduced above.

32. The primary judge went on to observe that the different expressions were used elsewhere in the contract. The expression “the completion date” was used in cl 4.1 to fix the time for service by the purchaser of the form of transfer, in cl 13.4.3 in relation to obligations arising if the purchaser is not registered for GST, and in cl 27.9. On the other hand, the term “completion” was used frequently in the contract, including in cll 6, 7, 14.2, 16 and 17. His Honour observed that it was clear from those clauses that the term “completion” meant the date of actual settlement of the sale rather than the date initially contemplated by the contract at which settlement would occur. His Honour said at [68]:

“The expression ‘completion’ is employed frequently throughout the contract (including in cl 13.4.3 itself). It is apt to describe the event of completion which occurs when the parties perform their respective obligations whereby the title to the property may be conveyed from the vendor to the purchaser (see Peter Butt, The Standard Contract for Sale of Land in New South Wales, Second Edition, 1998 at p 635). This is reinforced by the nature of the various circumstances in which the expression is used. For example, cll 6 and 7 provide that the purchaser can only make certain claims if the claim is made ‘before completion’. Clause 14.2 provides for the parties to make any necessary adjustment ‘on completion’. Clause 16 provides, inter alia, that ‘on completion’ the vendor must give the documents of title to the purchaser, and the purchaser must pay the price to the vendor. Clause 17 provides that, normally, the vendor must give the purchaser vacant possession of the property ‘on completion’. It would make no sense to read those references to ‘completion’ as meaning ‘the completion date’.”

33. On appeal, counsel for Mr Namrood accepted that no distinction should, for this purpose, be drawn between cl 11.1 and the Additional Special Conditions, both of which used the word “completion”. He acknowledged, properly, that the textual distinction drawn between those two terms, and in particular, in the special conditions 1(A) and (B), tended against the construction for which he contended, which was for a meaning to be given to the word “completion” in cl 11.1 and the Additional Special Conditions different from that given to the same word elsewhere in the special conditions and throughout the contract.

34. Against this, he pointed to context and purpose:

“Text is against me. But in [a] context where there is a binding obligation to settle with everything done on the 20th, the context is with me and as to purpose it’s obviously the purpose of the contract to provide for the settlement to happen on the 20th with pre-completion obligations done. So I do have context and purpose with me, even if the usage is slightly different.”

35. Both the standard terms of the contract of sale and the Special Conditions clearly distinguish between “completion” and the “completion date”. The consistent use of these terms throughout the contract strongly supports the primary Judge’s construction of cl 11.1 and the Additional Special Conditions.

36. I do not accept that this construction should be rejected on the ground that the purpose of the contract was to ensure that everything required for settlement would be done by the completion date. In particular, I do not accept the submission that the purpose of the Additional Special Conditions, and cl 11.1, was to ensure that by the date specified in the contract for completion, namely, 20 June 2015, that the purchaser would have no exposure to the cost and inconvenience of any orders issued by the Council. What mattered from the purchaser’s point of view, in a contract which, as a matter of practicality, could not give rise to an enforceable entitlement to a registrable transfer on 20 June 2015, was that when title was in fact transferred, the obligations under the orders issued by Council had been performed. It did not matter from the purchaser’s point of view, whether the various works and provision of documents required by Council took place on 20 June 2015 or some time later, so long as it took place before settlement.

37. Against this it was said that the conditions should not be construed in such a way as to give a vendor (who might be selling into a rising market) the facility of unilaterally delaying completion by failing to comply with the contractual obligation. But there is nothing in this submission either. For one thing, the vendor was exposed to civil and criminal enforcement proceedings in the way threatened by the notices which had been issued. For another, the purchaser was entitled to sue for specific performance, so long as he was ready, willing and able to complete. For a third, the contract provided (in cl 20.8) that rights under cl 11 continued after completion.

38. Mr Namrood invoked authority to support his argument. He submitted that the contract was required to be construed so as to avoid a circularity such as that pointed to by White J in Lantry v Tomule Pty Ltd [2007] NSWSC 81; 12 BPR 23,727, and he relied on the reasoning of McLelland J in Jillinda Pty Ltd v McCourt (1983) 3 BPR 97,174. But both were very different contracts.

39. The relevant clause in the contract in Lantry v Tomule Pty Ltd provided that the contract was conditional upon the purchaser obtaining a building certificate from Council prior to completion (this was the second sentence in special condition 23). At [65] White J rejected a submission advanced by the vendors:

“Counsel for the vendors submitted that the second sentence of special condition 23 referred to the event of completing, not the date for completion fixed by the contract. From this, counsel argued that the condition in special condition 23 was not unfulfilled because the date for completion provided by the contract had passed. She argued that the clause only required that the condition be fulfilled by the time the event of completion arrived. However, if a building certificate was not issued, the event of completion could never arise unless both parties waived special condition 23. How, then, could the purchaser or the vendors rescind?”

40. That led his Honour to conclude that “completion” in a contract which was conditional upon something happening by “completion” meant the date specified by the contract, rather than the conveyance of title. The force of his Honour’s reasoning is self-evident. But it is not authority for the construction of the same word in the contract signed by Mr Namrood, in conditions and special conditions which consistently contrast “completion” with “the completion date”.

41. Mr Namrood also invoked Jillinda Pty Ltd v McCourt (1983) 3 BPR 97,174. The condition in the contract in Jillinda required provision of a certificate by the vendor “not less than seven days prior to completion”. Completion was fixed for 19 February 1983. Only on 18 February 1983 did the vendor furnish the requisite certificate. On that basis McLelland J stated that:

“[O]n the true construction of the contract the plaintiff’s obligation to complete on 19 February, 1983 was conditional on the defendant's having not less than seven days prior thereto furnished to the plaintiff a certificate.”

42. Although submissions at first instance and on appeal were directed to what were said to be questions of principle derived from the authorities, the present case turns upon a question of construction which is particular to the contract of sale. There was nothing like the distinction between the terms “completion” and “the completion date” in the contract considered by McLelland J. The primary judge was, with respect, correct to consider that Jillinda did not shed much light on the question of construction raised here: at [71].

43. What seems to have been lost sight of in some of the submissions advanced in the present appeal is the fact that the issue posed by grounds 1 and 2 is one of construction of a particular contract. Decisions on the construction of the same words in different contracts are apt to be of little assistance.

44. Alternatively, Mr Namrood contended by ground three that:

“His Honour should have held that clause 11.1 and the Additional Special Conditions operated as conditions precedent to the obligation to settle the contract, that the respondent was obliged to but did not fulfil the conditions precedent within a reasonable time and that the appellant then became entitled to terminate the contract and validly did so.”

45. That submission turns upon the proposition that cl 11.1 and the Additional Special Conditions required things to be done but did not set any time for the doing of those things. In such circumstances, the law requires performance within a reasonable time: Perri v Coolangatta Investments Pty Ltd (1982) 149 CLR 537; [1982] HCA 29. However, for the reasons already given, both cl 11.1 and the Additional Special Conditions did specify a time: it was the time on which completion (namely, transfer of title) occurred. There is no sound basis by which the principle in Perri v Coolangatta Investments can convert an obligation to do something prior to or by completion into an obligation to do the thing within a reasonable time after 20 June 2015, being the time at which the contract made provision for completion. Perri v Coolangatta Investments concerns the proposition that where no time is stated for performance, the law will imply a term that performance occur within a reasonable time. But there is no scope for any such implication where provision is expressly made for the time for performance.

46. (For completeness, it may be noted that at all times, argument at first instance and appeal proceeded on the basis that the Council’s original 2015 order remained extant, notwithstanding the proposed order, in substantially identical terms, which had issued on 13 May 2015, and which stated that there was a right to make representations as well as a right of appeal. This assumption was wholly favourable to Mr Namrood, and accordingly, its correctness need not be analysed further.)

47. The construction upheld by the primary judge was correct. These grounds are not made out.

Factual error in finding that property was restored to former condition (grounds 4 and 6)

48. Mr Namrood’s submissions in support of these grounds focussed upon the surveyor’s letter, which disclosed that there were discrepancies of up to 200 millimetres in a number of areas on the land. It also disclosed that the GNSS survey method was only accurate to +/- 30 millimetres. It was said that this did not amount to compliance with the 6 February 2015 notice.

49. There is nothing in these grounds. The evident purport of the surveyor’s letter was that the levels had been restored to those in the original survey. There was nothing in the evidence to suggest that on this particular parcel of land, of more than five acres, a discrepancy of up to 200 millimetres was significant. If, as seems likely, the survey included Australian Height Datum measurements over the land, they are illegible in the versions reproduced in the appeal books. However, the contour lines on the survey suggest that the land fell away some 3-4 metres from one end to the other. In the absence of evidence to the contrary, there is no reason to think that a 200 millimetre divergence between the original and current levels would be significant, given the twenty-fold greater general slope of the land.

Repudiation (ground 7)

50. This ground challenged the finding by the primary judge that Mr Ebedeh-Ahvazi did not repudiate the contract. Mr Namrood’s oral submissions were directed to Galluzzo Lawyers’ email of 1 July 2015 which is reproduced above. That communication does not evince an intention no longer to be bound by the contract.

51. It is true that the July 2015 email expressed the view that special conditions override the printed clauses and expressed a wish that $13,000 be held back prior to Council compliance. The email also states that “we do not have to obtain the Council compliance under the contract for settlement to take place”, a proposition which Mr Namrood accepted was accurate during the hearing of the appeal. The conclusion of the email threatened the issue of a Notice to Complete. Far from amounting to a repudiation of the contract, the email is premised upon the Vendor’s insisting upon its rights under the contract.

52. It is clear that if a party is willing to perform the contract on its proper construction, then the fact that it proceeded on a mistaken interpretation of the contract will not evince an intention no longer to be bound: DTR Nominees Pty Ltd v Mona Homes Pty Ltd (1978) 138 CLR 423; [1978] HCA 12. “A party should not too readily be found to have refused to perform the agreement by contentious observations in the course of discussions or arguments”: Sweet & Maxwell Ltd v Universal News Services Ltd [1964] 2 QB 699 at 734, cited with approval in DTR Nominees at 432. Further, as McDougall J observed in Wesiak v D&R Constructions (Aust) Pty Ltd [2016] NSWCA 353 at [91], reference is often made to Lord Wright’s speech in Ross T Smyth & Co Ltd v T D Bailey Son & Co [1940] 3 All ER 60 at 71 to the effect that “repudiation of a contract is a serious matter, not to be lightly found or inferred.”

53. This ground is not made out.

Invalid termination? (Ground 8)

54. In the alternative to grounds 1-7, Mr Namrood submitted that the Notice of Termination given on 19 October 2015 was not valid, because the Notice to Complete had been served at the same time as the email from the Council, and did not allow him reasonable notice of the Council’s position. It was submitted that the Notice to Complete could only be issued if the purchaser was in breach, and the purchase could not be in breach when, simultaneously, he received notification that the vendor had complied with the vendor’s obligations. This in substance amounted to a challenge to what was said by the primary judge at [91]:

“In my opinion, the Notice to Complete was validly served by the plaintiff. It was not necessary for the plaintiff to have complied with cl 11.1 and the additional special condition at the time the notice was served. Those obligations were not then due for performance. Rather, it was incumbent upon the plaintiff to be ready, willing and able to perform his obligations as and when they were required to be performed up to and including completion (see McNally v Waitzer [1981] 1 NSWLR 294 at 296-7 and 304).”

55. It was accepted during argument that this ground turned upon demonstrating error in [91] (transcript, 28 November 2017, p 27). The construction of the contract referred to in [91] is correct, for the reasons given in relation to grounds 1-3 above. This ground is not made out.

Australian Consumer Law (grounds 9, 10 and 11)

56. The primary judge addressed Mr Namrood’s case based on the Australian Consumer Law at [96]-[112]. Mr Namrood’s cross-claim alleged that the advertisement of the auction by “mortgagee sale” was calculated to and did in fact induce him to bid at the auction. The primary judge accepted that the statements about the sale being a mortgagee sale were misleading or deceptive, and also that when Mr Namrood saw the advertisement he believed that the sale would be a mortgagee sale. However, the primary judge also accepted Mr Namrood’s answers in cross-examination that he had been told that the owner of the property was the manager of a project housing builder, Vesta Homes (this occurred when his offer of $1.2 million was rejected). It was on that basis that the primary judge found that Mr Namrood did not thereafter hold any belief that the sale was a mortgagee sale: at [102]. Accordingly, the primary judge said that he was “unable to conclude that any statement about a mortgagee sale was a cause of the defendant’s purchase of the property”: at [103]. Mr Namrood also gave evidence that, at the time, “really I didn’t even think about these things”. The primary judge appears to have accepted that evidence.

57. On appeal, it was submitted that the fact that Mr Namrood did not turn his mind to the incongruity of an auction advertised as a mortgagee sale and the fact that the real estate agent was taking instructions from someone who was not an officer of a bank, did not imply that Mr Namrood no longer believed that it was a mortgagee sale.

58. Whether or not that be so, the real difficulty in these grounds is that all that was alleged, and all that the evidence established, was that Mr Namrood was attracted to the auction, in part, by the representation that it was a mortgagee sale. It was not alleged, and there was no evidence, that Mr Namrood made any particular bid at the auction because he believed it was a mortgagee sale. It is plain that the bids he made were a consequence of the sequence of bidding by other participants. Indeed, as has been noted, the primary judge found (and there was no challenge made to the finding) that:

“The defendant was prepared to bid above his offer of $1.2 million ‘because other bidders made bids above that price so I thought it was worth more than $1.2 million’”: at [20].

59. Accordingly, there could be no error in the primary judge finding that the misleading and deceptive conduct did not cause his entry into the contract.

60. The primary judge gave a further reason for rejecting the claim under the Australian Consumer Law, namely, that the conduct did not take place in trade or commerce: at [107]-[111]. The primary judge accepted Mr Ebedeh-Ahvazi’s evidence that he had financed and purchased the property in his own name with the intention of building a home for his parents, his brothers and himself, and that he had decided to sell the property for financial reasons (namely, a need to reduce debt and provide funds to support another development). Consistently with this, the sale was not a taxable supply and the margin scheme was not used. The primary judge considered that although there were some links with Mr Ebedeh-Ahvazi’s property development business, the conduct “ought not be regarded as an aspect or element of an activity or transaction that of its nature bears a trading or commercial character: Williams v Pisano (2015) 90 NSWLR 342; [2015] NSWCA 177 at [37].”

61. The challenge to this finding was not developed orally at all. The written submissions in support of it were brief (they occupied three paragraphs). The submissions did not in anything like the detail expected of a challenge to findings of primary fact identify the way in which the challenge was sought to be made out, or give the evidentiary references required. There was no compliance with UCPR r 51.36(2). Indeed, the written submission concluded with an unparticularised assertion that the primary judge’s acceptance of Mr Ebadeh-Ahvazi’s evidence did not consider “the falsehoods in his written evidence”. What they were was not identified (nor was there any engagement with this aspect of the submission in Mr Ebadeh-Ahvazi’s submissions in response). Although I have read the entirety of the transcript of Mr Ebadeh-Ahvazi’s cross-examination, I cannot see that it was ever put to him that any aspect of his evidence was false.

62. There is no utility in dwelling on the unsatisfactory aspects of the way this appeal has been propounded. Nothing was put in writing sufficient to establish this ground, which was entirely ignored in oral submissions.

Section 55(2A), Conveyancing Act 1919 (NSW) (Grounds 12 and 13)

63. Section 55(2A) provides:

“In every case where the court refuses to grant specific performance of a contract, or in any proceeding for the return of a deposit, the court may, if it thinks fit, order the repayment of any deposit with or without interest thereon.”

64. The primary judge stated, by reference to authority, that the discretion conferred by s 55(2A) was a broad one, that it was not necessary to show special circumstances or something similar, but nevertheless, the discretion should not be exercised lightly and it was necessary to show that it would be unjust or inequitable for the vendor to retain the deposit. No issue was taken on appeal with his Honour’s formulation of principle. It was accepted that these grounds involved appellate review of the exercise of a discretionary power, and that it was necessary to identify error.

65. The primary judge identified at [116] six matters which, so it was submitted, meant that it would be unjust and inequitable for Mr Ebedeh-Ahvazi to retain the deposit:

“(1) the plaintiff misled the defendant about the sale being a ‘mortgagee sale’;

(2) the plaintiff misled the defendant concerning the existence of the Council notices and orders;

(3) the plaintiff gave an incorrect answer to requisition 8 concerning work orders;

(4) the defendant acted reasonably in seeking to protect his own interests and in giving the plaintiff time to comply with his obligations to undertake works;

(5) the Council notices and orders were arguably never complied with; and

(6) the plaintiff was able to quickly re-sell the property for an additional $40,000.”

66. Once again, no issue was taken on appeal that those matters did not represent the principal considerations urged upon the primary judge.

67. The primary judge addressed all six of those matters, at [117]-[122]. His Honour regarded the first and second as “carrying little weight”, because the “advertisement of a mortgagee sale” was not a cause of Mr Namrood’s entering into the contract, and because there was no reasonable expectation that the Council’s notices would be disclosed prior to contract and in any event Mr Namrood learnt of the notices and orders shortly thereafter. Similarly, although the answer to the requisition was incorrect the true position was quickly discovered. In answer to the fourth matter, the primary judge referred to his conclusions that it was not open to Mr Namrood to issue the Notice to Perform, nor to terminate the contract for the failure to comply with it.

68. In relation to the fifth, which was contrary to his Honour’s findings, his Honour observed that by 24 September 2015, Mr Ebedeh-Ahvazi had provided evidence which strongly suggested that there had been compliance, in the face of which Mr Namrood declined to complete the contract. Finally in relation to the last point, the additional price of $40,000 did not, in his Honour’s view, “amount to much of a profit”.

69. His Honour concluded at [123]-[124] as follows:

“Having considered the various matters raised by the defendant, and the circumstances of the case overall, I do not think that it would be unjust or inequitable to allow the plaintiff to forfeit the deposit. I have of course paid regard to the well-established nature of a deposit as an earnest of performance. In this case, the defendant, despite having evidence that strongly suggested that the plaintiff had complied with his contractual obligations, declined to complete, preferring instead to erroneously maintain that he had already terminated the contract. I note that insofar as there was any doubt about the plaintiff’s compliance with the order of 6 February 2015, the plaintiff’s obligations in that regard would continue after completion, pursuant to cl 20.8 of the contract.

The forfeiture of the deposit in the circumstances of this case would not in my opinion involve injustice to the defendant. I decline to order that the deposit be returned to him.”

70. Ground 12 of the Notice of Appeal identified three relevant factors which, so it was said, the primary judge had failed to take into account. Two of those were “the terms of the survey certificate and the surveyor’s letter” and “the terms of the Fairfield City Council email dated 22 September 2015”. Those matters were not elaborated in any way in either written or oral submissions. Further, it is plain that his Honour’s express reference to the provision of evidence “which strongly suggested that there had been compliance” was a reference to the survey certificate, the surveyor’s letter and the terms of Council’s email of 22 September 2015.

71. The remaining matter said not to have been taken into account was:

“The conduct of the respondent:

i. in failing to direct his real estate agent to cease the misleading and deceptive conduct of advertising the sale as a mortgagee sale when that conduct came to the respondent’s attention;

ii. the cumulative impact on the appellant of the respondent’s conduct as found by His Honour;

iii. the effect of the respondent’s repeated insistence that printed clause 11.1 and the additional special condition of the contract had been complied with when they had not.”

72. Once again, it is difficult to conclude that any of those aspects of the conduct were matters to which the primary judge failed to have regard. Nothing in his Honour’s reasons suggests this. The first point is tied up with the six matters expressly dealt with by the primary judge. It is not clear what the “cumulative impact” is or how it was something to which his Honour had failed to have regard. The primary judge addressed the submission of repudiation in terms; there is no reason to conclude that his Honour failed to have regard to this when he came to s 55(2A).

73. Finally, ground 13 asserted that the exercise of discretion under s 55(2A) miscarried

“in that his Honour evaluated a number of factors by reference to whether the factors pointed to constituted legal defences to the respondent’s claims rather than how they affected whether it would be unjust and inequitable to allow the respondent to retain the deposit.”

74. But this is simply not what the primary judge said that he did. His Honour in terms stated, by reference to authorities including Romanos v Pentagold Investment Pty Ltd (2003) 217 CLR 367; [2003] HCA 58 at [27], that the evidence must establish that it would be unjust or inequitable to allow the vendors to retain the deposit: at [115]. And his Honour in terms applied the test of whether it was unjust or inequitable to allow the deposit to be forfeited at [123] and [124].

75. The contract was originally due to complete on 20 June 2015. On any view, by 24 September 2015, Mr Ebedeh-Ahvazi had demonstrated that there had been compliance with cl 11.1 and the Additional Special Conditions. There was no evidence to suggest that in the 13 intervening weeks there had been any material change in circumstance on the part of Mr Namrood. Mr Namrood at that time declined to complete the purchase. It was amply open to the primary judge to refuse Mr Namrood’s application for repayment of the deposit.

Orders

76. For those reasons none of the grounds of appeal is made out. I propose that the appeal be dismissed with costs.

77. PAYNE JA: I agree with Leeming JA.

78. SACKVILLE AJA: I agree with Leeming JA.

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Amendments

08 December 2017 - [41] In the quote "defendants" replaced by "defendant's", and "plaintiffs" replaced by "plaintiff"

[75] "nine intervening weeks" replaced by "13 intervening weeks"

Decision last updated: 08 December 2017