O'Toole v Kent
[2015] VSC 470
•4 September 2015
| IN THE SUPREME COURT OF VICTORIA | Not Restricted |
AT MELBOURNE
COMMON LAW DIVISION
S CI 2015 02007
BETWEEN
| KERRI LOUISE O’TOOLE | Plaintiff |
| v | |
| MICHELLE ESTERHUYSE KENT and ASHLEY KENT | Defendants |
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JUDGE: | Mukhtar AsJ |
WHERE HELD: | Melbourne |
DATE OF HEARING: | 24 August 2015 |
DATE OF JUDGMENT: | 4 September 2015 |
CASE MAY BE CITED AS: | O’Toole v Kent |
MEDIUM NEUTRAL CITATION: | [2015] VSC 470 |
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SALE OF LAND ― Contract not expressed to be subject to finance ― Pre-contractual disclosure by purchaser of a dependence on funds overseas ― No negotiation or agreement of a protective condition ― Execution of contract by purchaser with knowledge of any such condition ― Default ― Assertion of implied term of being subject to finance ― Failure to file defence ― Default judgment ― No basis for an implied term or rectification or cognate defences ― Judgment not set aside
PRACTICE AND PROCEDURE ― Application to set aside default judgment ― Discretionary approach ― Requirement to show defence on merits ― No real factual controversy ― Demonstration of legal unsustainability ― No real question for trial
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APPEARANCES: | Counsel | Solicitors |
| For the Plaintiff | Dr C Button with Ms C Van Proctor of counsel | Arnold Bloch Liebler |
| For the Defendants | Mr R Watson-Jones, solicitor | Snowton Saje |
HIS HONOUR:
On 24 June 2015, the plaintiff obtained a judgment in default of defence against both defendants for $380,000 plus interest of $5,981. In addition there was another judgment against the second defendant for $39,959.25 plus interest of $628.95. He was his wife’s guarantor under a contract for the sale of land.
The judgment was based on a statement of claim which, avoiding all the details for present purposes, alleged that the first defendant Michelle Kent as purchaser defaulted under a contract for the sale of a luxury property at 1 Pembroke Place in Portsea in failing to complete or settle the purchase under the contract. The purchase price was $3,800,000. The contract was signed by her on 5 February 2015 and signed by the vendor on 9 February 2015. Completion of the contract was due on 19 February 2015. Thus, it was a 14 day contract. It was not expressed to be subject to finance. The contract states that Messrs Makin and Kinsey were acting as her solicitors. But correspondence for the Kents was coming from a conveyancing firm, First Choice Conveyancing.
She could not complete on the agreed date. The conveyancer sought an extension to 6 March 2015, saying that “funds should be cleared within the next few days”. The vendor agreed to extend the settlement date to 27 February 2015 in consideration for which the purchaser’s husband, the second defendant Ashley Kent, on 23 February 2013, gave the vendor a guarantee and indemnity for the performance of his wife’s obligations under the contract. Under that guarantee, he also agreed that if she did not complete the contract on the extended date, he would pay interest from the original completion date, the vendor’s costs of re-scheduling the date, and the legal costs of $825 associated with the guarantee. That is the basis of the additional judgment against him.
The first defendant failed to complete the sale as agreed. On 2 March 2015 the vendor served a notice of rescission giving her 14 days to remedy the default. E-mail correspondence shows that on 3 March 2015 the purchaser said funds were coming on 4 March and a settlement could occur on 6 March. That did not happen. On that date the conveyance said she could settle on 13 March 2015. That did not happen. On that date they said they could settle on 16 March 2015. On 16 March 2015 (the date on which the rescission notice expired) the purchaser asked for another week. The vendor refused, and re-asserted their reliance on the rescission notice. Their failure to remedy the default under that notice brought with it the result at law that the contract was terminated. At no time throughout the correspondence was there any assertion by or on behalf of the purchaser or the guarantor that the contract was impliedly subject to finance.
In a writ filed on 28 April 2015, the vendor sued the defendants for $380,000 under a special condition of the contract which obliged the purchaser (and therefore the guarantor) to pay or to forfeit an amount equal to ten per cent of the price ‘whether or not the deposit has been paid’. As I shall explain later, the contract stipulated a deposit of $300,000 (less than ten per cent of the price) but not the date by which the deposit was to be paid. In fact, no deposit was paid and as I shall expose in a little more detail later, the parties, on this 14 day contract, conducted the transaction by proceeding to completion as if the obligation to pay the deposit was carried forward to the ultimate obligation to pay the purchase price. The ten per cent default clause therefore created a liability for $380,000. The second defendant as guarantor was sued for an additional sum of $39,959.25 for interest, costs incurred in having to reschedule the settlement, and the legal costs of the guarantee.
An appearance was filed (late) on 22 May 2015 by the defendants’ solicitors, Messrs Maiken and Kinsey. A defence was due on 22 June 2015. A defence was not filed nor served. The plaintiff obtained the default judgment on 24 June 2015.
On 23 July 2015 the plaintiff, acting on evidence that before the defence was due the Kents had given an unregistered mortgage over their residential property (about which, more later), filed and served a summons for a freezing order. The following day, in correspondence from their lawyers (not marked without prejudice and to which no objection was taken on this application) the Kents made an offer to settle. The offer explained that the Kents were the victims of a financial scam which deprived them of funds on which they were dependant to complete the purchase. They said they could not pay for a defence.
The Kents then filed on 28 July 2015 their application to set aside that judgment by which time the defendants had changed their solicitors to Messrs Snowton Saje.
The plaintiff opposes judgment being set aside on the grounds that the explanation for failing to provide a defence is unsatisfactory or unmeritorious in the circumstances. But in any case, she says the defences as pleaded in a proposed defence or as asserted by the defendants in affidavit have no merit.
In my opinion, the defences as put are bound to fail. For myself, I have looked for some other possible reason for saying there is a case to be investigated at trial or for some other reason making it just to proceed to trial. I am afraid to say, I cannot see one. The purchasers here took an enormous risk in, acting by their own volition, agreeing to buy land for $3.8m to settle in 14 days under a contract which was not expressed to subject to finance and not sought by them to be subject to finance. They did not have or obtain the money to pay a deposit; they did not have the money to complete and it appears to me the defences that are now raised are a desperate attempt to extricate themselves from the financial consequences of their breach. Even if they were victims of a scam, I see nothing, and nothing is alleged to somehow implicate, as it were, the plaintiff in that misfortune and alter the terms of the contract or somehow make the contract, and by extension the guarantee, conditional. An elaboration of my reasons follows.
But first, it is convenient if I take leave to re-narrate the statement of the approach to be taken to these applications as I stated in JRC Enterprises.[1] Assuming the judgment was regularly entered (as this one was) the appellate authorities have endorsed the principle that if merits are shown it is undesirable to let a judgment pass on which there has been no proper adjudication: see Lubura.[2] The language of the test varies. If a “defence on the merits” or a “prima facie defence” or “some defence” or “adequate defence” is shown, the courts say the strength or weakness of the case does not matter, for it is not the function of the judge on the application to decide whether the defence would succeed. There will usually be matters of facts to be investigated, and it will be a miscarriage of discretion to make decisions about the credibility of factual assertions made by the defendant: see Lou v Citic Australia Commodity Trading Pty Ltd.[3]
[1] [2013] VSC 646 [6]-[8].
[2] [2013] VSCA 215 [4], quoting Kostakanellis v Allen [1974] VR 596.
[3] [1999] VSCA 34.
A contiguous principle informing the exercise of the discretionary judgment is whether the defendant has given an adequate explanation for the failure to file an appearance. The cogency of the explanation can reflect on the merits of the defence. But the absence of a sufficient reason for the procedural default does not necessarily mean that the application to set aside the judgment must fail.[4] What dominates, in the end, is whether the defendant is able to show a prima facie defence on the merits. If so, the law’s attitude is not to inflict the serious prejudice of preventing a defendant from defending the claim especially if there is no actual prejudice to the plaintiff that cannot be compensated by an indemnity costs order with security: see Lubura.[5]
[4] Kostokanellis v Allen [1974] VR 596 [605].
[5] [118]-[122].
I am very conscious of the restriction that it is not the function of the Court on such an application to decide whether the defence would succeed. If there is a defence on the merits shown, then ordinarily the default judgment is usually set aside. That is so particularly where there are questions of fact to be investigated under the processes and rigours of trial. But, in the confines of this case there are no controversies in the admissible objective facts; no issues of credibility; and nothing turning on the calibre of witnesses. The salient facts are documented and plain.
I would add this. I do not think it is enough to say that a defence is arguable. Anything is arguable as a perfunctory exercise. The primary consideration is whether there is a defence on the merits to which the Court should pay heed, or put another way, whether a defence has been raised which carries some degree of conviction.[6] That gives meaning to the test of a prima facie defence. In Lubura[7] the Chief Justice regarded the test as not all that different from the test in summary judgment applications.That brings into consciousness the conventional test for such applications under the Rules of Court of no real question to be tried, or, the statutory test of no reasonable prospect of success.[8]Whether it is an application to set aside default judgment or an application for summary judgment, where facts are not in dispute or to be investigated, it sometimes requires extensive legal arguments and reasons to show the asserted defence is bound to fail. And that is what has happened here.
[6] See Civil Procedure Victoria, Vol 1 [21.07.20].
[7] [2013] VSCA 215 [3].
[8] That is, under s 63 of the Civil Procedure Act. See Lysaght [2013] VSCA 158.
The affidavit in support of the application was sworn by the second defendant. He swears that on 28 January 2015 he sent an email to a Liz Jensen of selling agents Kay & Burton at its Sorrento office, making an offer on his wife’s behalf to purchase the property for $3.8m on a deposit of $300,000 payable on 2 February 2015. He does not produce that e-mail. He says that he told Liz Jensen on that day ‘…that my wife and I did not presently have the money for the $300,000.00 deposit or the purchase price and would be sourcing funds from overseas’. He says that Liz Jensen sent him an SMS message the following day ‘…asking me if she could record $10,000.00 of the deposit as payable upon signing and for my wife’s middle name’. His affidavit does not say what response he gave. But it does not matter. The contract then arrived for signing by the purchaser, on this, a 14 day deal.
He then explains what happened when the contract arrived. Paragraph 16 of his affidavit says (with my underlining):
(b) I had a discussion with Ms Jensen on 28 January 2015 in which I told her that my wife and I did not presently have the money for the $300,000.00 deposit or the purchase price and would be sourcing funds from overseas;
…
(d) When my wife received the contract it did not record when the deposit was due and no issue was raised prior to the original settlement date of 19 February about the non-payment of the deposit whether $10,000.00 or any other amount;
(e) I told my wife to sign the contract in the knowledge that I had had the discussion in (b) above. I did not attach any significance at the time to the vacant particulars on page 3 in relation to General Condition 14.
(f) I believe the contract was always subject to finance as my wife and I were utterly dependent upon those funds to perform and complete the contract and we informed the Plaintiff’s selling agent of this prior to my wife signing the contract.
He then exhibits a proposed defence prepared by his lawyer. There is no need for me to make cross-reference to the statement of claim. They do not deny signing the contract. It says that in telling Ms Jensen that they ‘did not have that kind of money and would be sourcing funds from overseas’, they ‘intended that the contract would be conditional upon or termed (sic) as subject to finance in the usual way’. From there, the defence says there was an implied term of a contract that it was subject to finance and that the particulars of sale would be completed in such a way as General Condition 14 would apply to the contract. Alternatively, the defence says they are entitled to rectification of the contract to provide that it was expressly subject to finance.
As for the guarantee, the second defendant says it was void because –
(a) there was no consideration passing between him and the plaintiff;
(b) he made the guarantee on the faith of representations, assurances and promises from one George Said Eid as to the imminent receipt of an advance of $10,000,000 which he now knows to be false and/or fraudulent (I interpolate to say that there is no suggestion that this has anything to do with the purchaser or her agents);
(c) he signed the guarantee under economic duress, without an opportunity to obtain independent legal advice;
(d) the guarantee was unconscionable because the benefits to the plaintiff outweighed the benefits to him.
I can classify those as attempts at a vitiating element. A separate allegation is made that the notice of rescission was not valid because first, it specified a default in the payment of a deposit when the contract did not specify a due date for the deposit. Secondly, the defence says the notice was bad because it incorrectly referred to the completion date as 19 February 2015 when that date had been extended (in exchange for a guarantee, I add) until 27 February 2015 at the purchaser’s request.
Finally, and as an alternative, the defence seeks ‘relief against forfeiture, under s 49 of the Property Law Act or at common law’.
I shall deal first with the reasons given for default.
At all times, the Kents have had solicitors on the record. There is no suggestion they were unaware of the need to file a defence. Mr Kent swears that on 25 May 2015 (three days after the appearance), he provided to his solicitors an outline of the grounds on which he and his wife wished to defend the claim. He does not produce that document. He then says that his solicitors required funds in trust in time for them to brief counsel to prepare a defence. He says he did not have funds readily available but that during the time within which they had to file a defence, he attempted to secure sufficient funds to enable his solicitors to brief counsel. It is best if I quote from his affidavit as to what happened next.
8. On 17 June I advised Ty Brierley of Makin & Kinsey that the source I had hoped to secure funds from was unable to assist me. I nevertheless told him that I wanted to defence to be filed. He advised me that Makin & Kinsey were unable to continue acting if my wife and I wanted them to file a defence.
9. After 17 June I sought advice from Makin & Kinsey about the other options available to my wife and me. I continued to apply and seek third party funding and remained expectant of securing funds that would enable me to among other things pay Makin & Kinsey to file a defence.
10. On 9 July Makin & Kinsey advised me that default judgment had been obtained.
11. My wife and I always believed that we had a defence to the Plaintiff’s claim. Our immediate difficulty was funding that defence.
12. On 24 July 2015 my wife and I instructed Makin & Kinsey to write to the Plaintiff’s solicitors offering to make a payment in satisfaction of the judgment as a means of avoiding the costs of litigation, the stress and uncertainty. That offer was not an admission on my or my wife’s behalf of liability to the Plaintiff as alleged in the Statement of Claim. That letter is exhibited to the affidavit of Charles Gardiner dated 27 July 2015 as CGG‑19. The facts in the email are within my own knowledge and true.
13. On 24 July 2015 I was served with a freezing order application and in view of the course taken by the Plaintiff believe that my wife and I should seek to agitate our defence and take steps to have the judgment set aside.
I think this explanation lacks conviction. If the Kents had already prepared an outline of their defence, it would not have taken much for them to have filed, even if their solicitors refused to do so without funds, some sort of meaningful defence to truly reveal an intention to defend or to seek some extension of time from the plaintiff’s solicitors in the light of their asserted predicament. This was a large transaction and their failure to complete the sale was a confronting event which one would expect they would treat seriously. Moreover, it discredits their explanation to see documentary evidence that by 15 June 2015 (that is within the 30 day defence period), they were dealing with a solicitor for some lenders and had procured an offer of a loan for $400,000 over five months on the security of a third ranking mortgage over their home in order to buy a property at 42 Meek Street, Brighton. The establishment fee on the loan was $10,000. Moreover, they were moved to make this application to set aside judgment only when served with an application on 24 July 2015 for a freezing order.
It is hard to accept the explanation that the Kents did not have the ability to raise funds to pay lawyers to draft a defence. Something could have been done. But, I would not be willing on this ground alone to refuse to set aside the judgment. As was submitted correctly for the plaintiff, the deficiency of the defendants’ explanation for their default intensifies the Court’s scrutiny of the defences raised to see if there is truly a defence to which the Court should pay heed. That is how I prefer to proceed. I think the analysis depends on well-established legal principles not calling for dissertation or extensive citation of legal authority.
Implied term – subject to finance
Mr Kent acknowledges in his affidavit that he saw that the contract did not have any particulars concerning a loan, the approval of which was a condition of the contract. The question whether the contract was subject to a loan is a conspicuous part of the Particulars of Sale on the same page as the purchase price. General Condition 14.1 states that ‘If the particulars of sale specify that this contract is subject to a loan being approved, this contract is subject to the lender approving the loan on the security of the property by the approval date or any other later date allowed by the vendor.’ In the particulars of sale it is not as if the contract need only state ‘subject to finance’. It is plain that the parties must agree to the details of stating the lender, the loan amount and the approval date.
The insertion or presence of contractual terms is a matter of mutual assent and not a matter of subsequent unilateral belief. His subjective intentions are irrelevant. It is simply not productive of a contractual condition for Mr Kent to say ‘I believed the contract was always subject to finance as my wife and I were utterly dependent upon those funds to perform and complete the contract’. Even if they were, that does not mean the contract was subject to finance. Even if they told the selling agent that they were dependent on those funds does not therefore mean it was a condition of the contract. There has to be some evidence of an acceptance of that proffered condition or something under the well‑known preclusionary doctrines to make a case that by acquiescence or representation or something else, the purchaser agreed or was taken to have agreed to such a thing, albeit not in writing, or could not in all good conscience deny it. But here there is not a scintilla of evidence to sustain such a contention. Moreover, I think it ends any possible case for an implied term when Mr Kent could see the very thing he now asserts was a condition was manifestly absent from the contract in a conspicuous way.
It is established principle that pre-contractual negotiations are inadmissible for the purposes of determining whether a term is to be implied, not that there were negotiations here. Just because he told Jensen that they were sourcing funds from overseas is no basis for saying there were negotiations on the question of a condition of the one now sought to be implied, or that it was a fact commonly known to both parties from which may be inferred an intention to make the contract subject to finance. The source of the funds was the Kents’ problem.
Under the doctrine of implied terms, it simply cannot be said that the implied term sought to be inserted here was so obvious that it went without saying. Nor was the implied term necessary to give business efficacy to the contract. The contract was effective without a subject to finance term being implied. Furthermore, the implied term is inconsistent with the express terms of the contract which impose an absolute obligation on the purchaser to settle the contract on the completion date. This standard form contract enabled the parties to invoke General Condition 14, and they did not do so. Mr Kent saw that they did not do so. In my opinion a case to say that there was a mutual intention that, despite all that, the contract was subject to finance is hopeless.
Moreover, a term cannot be implied unless it is capable of clear expression and has some sort of commercial efficacy. How was it thought such an implied term as propounded by Mr Kent be capable of clear expression? It is not enough to say ‘I was dependent on money from an overseas source’. As the standard form contract shows, a commercially workable or business-like condition of this nature requires stipulation of the lender, the amount and the expected date.
For the same reasons, the case based on rectification is also hopeless. The very same facts denying an implied term preclude any possible credible contention that there was a mutual intention that it be subject to finance. There is nothing in any of the materials, nor is there a basis to suppose, that there was any intention on the vendor’s part that the contract be made subject to finance. Nor could it be said to be a case of unilateral mistake. There was no mistake, for Mr Kent could see the absence of any subject to finance clause. On the principles in Taylor v Johnson[9] it is not possible for Mr Kent on his own evidence to say that the purchaser knew of the omission of the intended term and that it was due to a mistake on Kent’s part, and that it was unconscientious for the vendor not to have to draw that to his attention, and the vendor is unconscientiously denying the basis upon which a contract was made.
[9](1983) 151 CLR 422. See also Leibler v Air New Zealand [1999] 1 VR 1 (Ct App).
The essential fact, according to the Kents, why they could not complete was because that they fell victim to a scam. They may have expected to receive money from an overseas scammer, and maybe they did enter into the contract in that expectation. But that does not found an implied term of the contract. For those reasons I do not think there is a defence available to the first defendant as purchaser to which the Court should pay heed. I turn now to the guarantee.
Following the plaintiff’s submissions, I think the elements of the proposed defence by Mr Kent can be articulated and disposed with as follows.
I think the contention that the guarantee is void for a lack of consideration is hopeless. Only a person who has given consideration may enforce a contract not under seal. In a contract of guarantee, the consideration for the guarantor’s promise is the lender’s promise of, or the actual making of the loan to a third party borrower. The consideration as expressed in the guarantee, which was present obviously as a matter of fact, was that the guarantee was provided by Mr Kent to the vendor in exchange for an extension of time to settle the agreement. The vendor has altered a significant term of the contract in reliance on the promise by Mr Kent to guarantee the purchaser’s obligations. The law is not concerned with the adequacy of the consideration, only with its reality. There was a nexus between his interests and that of Mrs Kent.
The misrepresentation case, is I think, misconceived. The proposed defence asserts that he made the guarantee on the faith of representations made by a third party regarding the imminent receipt of $10 million. It is not alleged this third party had any connection with the plaintiff, nor is it alleged that the plaintiff somehow played such a part in the making or adoption of the third party’s representation that she should somehow be held responsible for it.
The defence of economic duress is also I think hopeless. It is not necessary to go through the elements of economic duress in its statutory form or at common law: see Crescendo Management.[10] Economic duress involves the exertion of illegitimate pressure, usually by unlawful threats, or maybe by pressure which, if not unlawful, nevertheless goes beyond that which the law is prepared to countenance as legitimate. Judicial pronouncements view it as involving similar considerations to unconscionability in equity. That can involve considerations of a person’s special disability as it is known in the law under well‑known authorities such as Blomley v Ryan[11] and Amadio.[12] Mr Kent claims no such special disability the presence of which might lead a court to conclude that he needed independent advice to conserve his own interests before entering into what has to be shown to be an improvident transaction. The plain fact is he gave this guarantee to enable his wife to gain more time to make the purchase. Moreover, he does not say he did not understand the nature or significance of a guarantee. He does not say that had he understood the burdens of a guarantee that he would not have signed it. Mr Kent does not say he was subjected to duress. The pressure he and his wife were under was the result of being unable to complete the 14 day contract that they made voluntarily.
[10](1988) 19 NSWLR 40.
[11](1956) 99 CLR 362.
[12](1983) 151 CLR 447.
Paragraph 6(d) of the defence alleges another species of unconscionability. It says ‘It is unconscionable for the Plaintiff to enforce the Guarantee and Indemnity when the benefits to Plaintiff of the Guarantee and Indemnity far outweigh the benefits to the Second Defendant thereunder.’ It is hard to know what to make of that allegation. Unequal bargaining power of itself does not make for an unconscionable bargain. Under statutory unconscionability, it may be one out of a litany of factors which a court may take into account in the aggregate for the presence of unconscionable conduct. To assert that the guarantee is unenforceable because it is more beneficial to the vendor than to Mr Kent is manifestly without substance. A guarantee by its nature (which was known to Mr Kent) is for the benefit of a creditor or an obligee. He gave it voluntarily to gain the benefit, presumably shared in common with his wife, to obtain an extension of time. I see nothing improvident or unconscientious or exploitative in this or any other part of the transaction.
I turn now to the validity of the Notice of Rescission. As I have said, the contract of sale stipulates a deposit of $300,000 (which Mr Kent had offered beforehand), but does not fix a time for the payment of the deposit. A deposit is usually paid on the signing of the contract and is usually 10 per cent, but it does not have to be. A deposit is an initial payment under the contract as a guarantee that the contract will be performed. Default and subsequent termination therefore leads to the legal entitlement of the vendor to keep the deposit or to sue for the deposit if it was not paid.
It is a feature of the statement of claim (see paragraph 8) that the plaintiff alleges that Mrs Kent failed to pay the $300,000 (which is less than 10 per cent) due on 9 February 2015. The Notice of Rescission also recites in clause 7 that the first default in performance was the failure to pay the deposit due on 9 February 2015. The fact is the deposit was payable but no date was stipulated. To that extent the Notice of Rescission is incorrect. But is that a fatal flaw?
The plaintiff is correct to submit that a rescission notice is effective if it is sufficiently clear and unambiguous to leave a reasonable recipient in the position of the purchaser in no reasonable doubt on how and when the notice is intended to operate. This principle was affirmed in Androvitaneas v Members First Broker Network Pty Ltd[13] in which the Court of Appeal adopted the following statement of principles as given by Hargrave J in U108 Pty Ltd v Sing Fan:[14]
[13][2013] VSCA 212 [40].
[14][2010] VSC 12.
The relevant legal principles to be applied in determining whether or not a rescission notice is valid are not in doubt. The relevant authorities were reviewed by Campbell J in Robinson v Becata Pty Ltd. I respectfully adopt his Honour’s analysis. In summary, a rescission notice served under general conditions 5 and 6(2) of Table A must, in relation to its essential features as required by those conditions, be clear and unambiguous. In determining whether or not a rescission notice is relevantly clear and unambiguous, the court applies an objective approach. In Catley v Watson, Brooking J (as he then was) expressed the applicable standard of objective reasonableness in the following terms:
A notice is not unequivocal, in the sense in which such notices are required to be unequivocal in relation to their essential contents, if a reasonable person, having considered the notice as a whole, fairly and properly, might entertain a doubt as to its meaning in relation to some essential matter, even though he would form in his mind a preference for one view, rather than the other of what the notice was intended to convey. It must be possible to say that, after the appropriate consideration, any doubts that may have arisen would be quieted and the purchaser would not be left in any uncertainty as to the meaning of the notice.
This statement by Brooking J has been applied in a number of Victorian cases, and further consideration has been given to the attributes of the ‘reasonable person’ for these purposes. In Central Pacific (Campus) Pty Ltd v Staged Developments Australia Pty Ltd, Ormiston JA said that the relevant reasonable person was ‘a reasonable reader in the position of the purchaser’. This approach was endorsed by Winneke P (with whom Charles and Eames JJA agreed) in Greydale Pty Ltd v Malilane Pty Ltd. A reasonable reader in the position of the purchaser must be taken as one who knows the terms of the contract of sale, including general conditions 5 and 6 of Table A, and who is aware of the surrounding circumstances relating to the default.
Whatever may be said about the reference to the payment of the deposit under the rescission notice, as was submitted for the plaintiff, the essential obligation was the payment of the purchase price of which the deposit was a part. A reasonable person considering the notice as a whole might question the reference to the deposit but that fades into insignificance when, reasonably understood, the reasonable reader knowing that the purchaser was bound to complete by paying the purchase price by a certain date can see that the notice seizes on the fact that the purchaser could not complete settlement by 27 February 2015. The rescission notice clearly and unambiguously put Mrs Kent on notice of the obvious fact that she had not completed the purchase of the property on 27 February 2015 as she was required to do and that she had 14 days to remedy that default. The notice is not saying she is in default only because she did not pay the deposit.
The plain purport of the notice was to give the purchaser an opportunity to remedy her default in failing to complete the contract by the extended date. The notice made clear what she had to do to avoid rescission. Therefore, I agree with the plaintiff’s submission that there is no merit in this proposed line of defence. The legal effect of the remedy was then to attract special condition 9 and the obligation to pay 10 per cent of the price.
Finally, I think the reference in the defence to a claim for relief against forfeiture under s 49(2) of the Property Law Act is misconceived. Section 49 is the well‑known provision which enables a vendor or purchaser under a contract to, amongst other things, apply to the Court to resolve any question arising out of the contract. Commonly known in practice as a vendor-purchaser summons, it was a means to obtain a quick resolution for rights under a contract, as long as there was no question concerning the existence or validity of the contract. Section 49(2) states:
Where the Court refuses to grant specific performance of a contract, or in any action for the return of a deposit, the Court may, if it thinks fit, order the repayment of any deposit.
The plaintiff submitted that this gives the Court a discretion where it refuses to grant specific performance the power to order the repayment of a deposit. I do not think that is quite right. That is, the power to order the return of the deposit is not necessarily attached to a refusal to grant specific performance: see Poort v Development Underwriting (Victoria) Pty Ltd.[15] It is a provision which gives the Court a power to enable a defaulting purchaser to obtain relief from forfeiture of a deposit when a deposit was paid. But it requires exceptional circumstances. In Poort it was said that as a prime consideration in the exercise of discretion, a Court would not readily assist a wrongdoer ‘…and certainly would make no order in favour of a defaulting purchaser which would have the effect of working an injustice on the victim of the wrongdoer’.[16]
[15][1976] VR 779 [783-4]; affd on appeal [1977] VR 454.
[16][784].
I cannot see in this case how such a provision is available. The purchaser has defaulted, and did not remedy. Any hope to be relieved of an obligation to pay a deposit or to be relieved of the consequences of Special Condition 9 would have to depend on a court upholding the grounds for non‑performance which by this judgment I regard as being bound to fail. Accordingly, I can see no prospect of a meritorious argument based upon s 49.
In conclusion therefore, I do not think it is enough for the defendants to postulate this array of defences and then urge the Court to the view the matter as requiring a trial. If this case involved the rigours of trial to require findings of fact or to assess the credibility or calibre of witnesses, or to look into competing versions of conversations, then it might be a different matter. The keynote defence put forward by the Kents is based upon the fact that they could not complete this contract because an expected source of funds did not come good. My firm view is that the attempts to say that the contract was subject to finance are legally unsustainable on the facts. The other defences seem to me to be a variation on that theme in an attempt to say that the law should not enforce the contracts because, in the events that occurred, they could not obtain the finance they expected.
In modern litigation, even where the Court has to deal extensively and analytically with legal arguments on an application to set aside default judgment, or an application for summary judgment, there is no injustice in bringing to an early end a case which has does not have a defence to which the Court should give heed (that is, a respectable defence) or no real prospects of success. And that is how I view this case.
For those reasons, I shall order that the defendants’ application to set aside the default judgment be refused. In that event, I shall make the usual order for the defendants to pay the plaintiff’s costs of the application.
2
9
0