Pintusen v Koutsopoulos

[2010] NSWSC 577

CITATION:	Pintusen v Koutsopoulos [2010] NSWSC 577
HEARING DATE(S):	25 May 2010
JUDGMENT DATE :	4 June 2010
JURISDICTION:	Equity Division
JUDGMENT OF:	Bryson AJ
DECISION:	1. A declaration that the contract for sale of land made between the plaintiff as purchaser and the defendants as vendors on 4 April 2008 in respect of the whole of the land comprised in Folio Identifier 1/553955 and being Lot 1 in Deposited Plan No 553955 has been validly terminated by the plaintiff. 2. Give judgment for the plaintiff against the defendants for $129,500.00. 3. Order that the defendants pay the plaintiff’s costs of the proceedings. 4. Dismiss the Cross-claim with costs.
CATCHWORDS:	VENDOR AND PURCHASER - contract for sale of real property contained non-standard Special Condition 43 which conferred right of rescission on each party if final approval of finance not obtained by 30 June - Special Condition 42 conferred right of rescission on Purchaser if development consent not obtained by 31 July - on 31 July when neither finance approval nor development consent had been obtained the parties agreed to alter Special Condition 42 by extending time - Development consent was given on 12 September, finance approval was refused on 29 October. Parties made several agreements extending time for completion and time was of the essence for 5 pm on 31 October - Purchaser rescinded at 2.26 pm, Vendors terminated at 5.20 pm. It was contended that right of rescission under Special Condition 43 had been lost by election, waiver, estoppel, etc - On consideration of facts in detail, there was no election. Discussion of construction of Special Conditions. Decision on own facts.
LEGISLATION CITED:	Conveyancing Act 1919
CATEGORY:	Principal judgment
CASES CITED:	Byers & Ors v Dorotea Pty Limited (1986) 69 ALR 715 Immer (No 145) Pty Limited v Uniting Church in Australia Property Trust (NSW) (1992) 182 CLR 26 Sargent v ASL Developments Limited (1974) 131 CLR 634 Secured Income Real Estate (Australia) Limited v St Martin’s Investments Pty Limited (1979) 144 CLR 596
PARTIES:	Tichagorn Pintusen (Plaintiff) Peter Koutsopoulos (First Defendant) Helen Daphne Koutsopoulos (Second Defendant)
FILE NUMBER(S):	SC 288167 of 2009
COUNSEL:	A Hill (Plaintiff/Cross-Defendant) L Young (Defendants/Cross-Claimants)
SOLICITORS:	Armstrongs Solicitors Pty Limited (Plaintiff/Cross-Defendant) Heidtman & Co (Defendants/Cross-Claimants)

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IN THE SUPREME COURT
OF NEW SOUTH WALES
EQUITY DIVISION

BRYSON AJ

FRIDAY 4 JUNE 2010

09/288167 TICHAGORN PINTUSEN V PETER KOUTSOPOULOS & ANOR

JUDGMENT

: The purchaser as plaintiff and the vendors as defendants and cross-claimants each make claims for remedies arising out of a contract for sale of land on the Law Society’s 2005 edition, which they entered into on 4 April 2008 for the sale of the property at New Line Road, Dural. The price was $1,300,000 and the purchaser paid a 10% deposit. The vendors conducted a licensed restaurant in the property for many years; they became its owners in about 1988 and conducted the restaurant until about the end of July 2007. The purchaser, who conducted a restaurant in Dubbo, NSW, became interested in purchasing the property in 2007 and engaged Geolyse Pty Limited, Surveyors and Town Planners, to prepare drawings for building work and make a development application to Hornsby Shire Council. She also applied to the Commonwealth Bank at Dubbo for funding for the purchase of the property and on 3 March 2008 received written in-principle approval for three loans, a Better Business Loan for $1,300,000 for the purchase of the land and premises, a Better Business Loan of $600,000 for removal and reconstruction of the premises and an Equipment loan of $150,000 for the purchase of restaurant plant and equipment. As is usual, the approval was stated to be non-binding on the bank and not a commitment to provide funds, and it was stated that a formal offer would be provided after verification to the bank’s satisfaction of a number of circumstances, relating to valuations, costings of the proposed building work and other matters. One of the matters which the bank said it was to be satisfied of, if a formal offer was to the provided, was as follows:

Complete break-up of costings to build proposed property to include Council approved plans and specifications, detailed fixed builder’s contract and other associated costs, such as demolition costs and road works, etc to be provided & funding by way of progress payment on authorisation by bank approved external property consultant’s/quality surveyor.

2 The deposit of $130,000 was paid at the time of exchange. The definitions in printed clause 1 show that the deposit holder was the vendor’s solicitors and printed clause 2.1 provides “The purchaser must pay the deposit to the depositholder as stakeholder.” Clause 9 deals with the purchaser’s default and establishes that if the purchaser does not comply with the contract or a notice under it in an essential respect the vendor can terminate and

“After the termination the vendor can:
9.1 keep or recover the deposit (to a maximum of 10% of the price)”

3 After many intervening events, on 31 October 2008 the purchaser purportedly rescinded the contract under Special Condition 43.4 and later on the same day the vendors purportedly terminated the contract and forfeited the deposit. The purchaser claims, in claim 1, a declaration that the contract has been validly terminated and in claim 2 an order for the return of the deposit and, in an alternative in claim 3, an order relieving the purchaser from forfeiture of the deposit pursuant to s 55(2A) of the Conveyancing Act 1919. The vendors cross-claim for orders establishing that their termination was effective and that the deposit had been forfeited.

4 31 October 2008 was a significant date because, after various agreed extensions, a notice to complete, which the vendors’ solicitors had given to the purchaser required completion by 5.00 pm on 31 October 2008. Except for matters which I will discuss, the notice to complete should be taken to be effective. On 31 October 2008, the purchaser’s solicitors sent the vendors’ solicitors a notice of rescission, which according to its terms exercised the right of rescission pursuant to Special Condition 43.4. The notice required refund of the deposit with the reduction of $500 for which Special Condition 43.5 provides. The purchaser’s claimed entitlement to return of the deposit depends on showing that this notice of rescission was effective. A little after 5.00 pm the Vendors gave notice of termination, which can be taken to have been effective if the purchaser’s notice of rescission given earlier in the day was not effective.

5 The contract contained many special conditions, SC 30 to SC 51. Part J Completion included SC 42 and 43 in these terms:

PART J - COMPLETION


42 CONTRACT CONDITIONAL UPON DEVELOPMENT APPLICATION

42.1 This Contract is conditional upon the Purchaser at its expense obtaining from Council on or before 31 July 2008 consent pursuant to the Environmental Planning and Assessment Act, 1979 to a development application for use of the Property as a restaurant. (The Development Application)

42.2 The Purchaser must within 6 weeks of the date of this Contract lodge with the Council the Development Application and will use its best endeavours to secure tire consent. The Vendor will, when requested, sign all authorities which may be reasonably necessary to enable the Purchaser to lodge the Development Application.

42.3 Within 7 days of the Purchaser receiving written notification from the Council either that the Development Application has been refused or that it has been consented to, the Purchaser must give written notice advising the Vendor.

42.4 If the Council consents to the Development Application on or before the 31 July 2008, the Purchaser must complete this contract within 28 days after the date the Purchaser receives notification of the consent.

42.5 If the Council refuses consent to the Development Application the Purchaser has the right to rescind this contract by written notice to the Vendor given no later than 7 days after the date the Purchaser receives notification of the refusal (time being of the essence) and the provisions of clause 19 will apply.

42.6 If the Council fails to make a determination by the 30 May 2008, the Purchaser has the right to rescind this contract by written notice to the Vendor given no later than 7 days after the 31 July 2008 (time being of the essence) and the provisions of clause 19 will apply.

42.7 If the Purchaser fails to exercise the right to rescind in clause 42.5 or 42 6 then the Purchaser must complete this Contract no later than 28 days after the 31 July 2008.

42.8 The Vendor retains the copyright in the Development Application if this Contract is not completed for any reason.

42.9 The provisions of clause 19 will apply to a rescission under this clause.

43. CONTRACT CONDITIONAL UPON FINANCE

43.1 This Contract is conditional upon the Purchaser at its expense obtaining unconditional formal approval of finance to purchase the Property in writing on or before the 30 June 2008. ("Finance Approval").
43.2 The Purchaser will promptly, at the Purchaser's expense:


(i) apply for finance;

(ii) make and pursue the finance application, pay all fees, supply all particulars, certificates and valuations, and do all other things as may reasonably be required for the purpose of the application;

(iii) inform the Vendor regarding the progress of the finance application whenever reasonably requested to do so by or on behalf of the Vendor; and

(iv) notify the Vendor in writing after receipt of written approval or refusal from the Lender.


43.3 This Special Condition is for the benefit of the Purchaser who may, prior to rescission of this Contract, waive the benefit of it.

43.4 If without default on the part of the. purchaser, the finance approval in writing has not been obtained by the 30 June 2008; either party will be entitled by notice seized upon the other to rescind this Contract, provided that if the Purchaser has obtained the finance approval in writing prior to service of such notice of rescission by either party, neither party will thereafter be entitled to rescind this Contract for want of such approval.

43.5 Upon rescission pursuant to Special Condition 43.3, the provisions of clause 19 will apply except that the Vendor will be entitled to the sum of $ 500.00 (which may, at the option of the Vendor, be paid from the deposit) towards the Vendor's legal costs and disbursements.

6 The Special Conditions also included Special Condition 44 – Notice to Complete. Special Condition 44.1 established that 14 days notice to complete would be reasonable. Special Condition 44.2 was as follows:

Liquidated Damages
Without prejudice to the rights, powers and remedies otherwise available to the Vendor, and notwithstanding any other provision of this contract, if for any reason not attributable to the Vendor, the balance of the purchase price is not paid by the Purchaser to the Vendor by the completion date the Purchaser will, on completion of this contract, pay to the Vendor as liquidated damages and in addition to all other moneys payable hereunder, an amount calculated at the rate of ten percent (10%) per annum on a daily basis on the balance of the purchase price from the completion date until the date of actual completion. The Vendor will not be obliged to complete this contract unless payment of such liquidated damages is made on completion.

7 By an arrangement made on 31 July 2008, the parties agreed to alter Special Condition 42 and Special Condition 44.2. No alteration was agreed to the provisions of Special Condition 43; there was no discussion about an alteration to Special Condition 43. The altered Special Conditions 42 and 44.2 were:

42 CONTRACT CONDITIONAL UPON DEVELOPMENT APPLICATION

42.1 This Contract is conditional upon "the Purchaser at its expense obtaining from Council on or before 31 August 2008 consent pursuant to the Environmental Planning and Assessment Act, 1979 to a development application for use of the Property as a restaurant. (The Development Application)

42.2 The Purchaser must within 6 weeks of the date of this Contract lodge with the Council the Development Application and will use its best endeavours to secure the consent. The Vendor will, when requested, sign all authorities which may be reasonably necessary to enable the Purchaser to lodge the Development Application.

42.3 Within 7 days of the Purchaser receiving written notification from the Council either that the Development Application has been refused or that it has been consented to, the Purchaser must give 'written notice advising the Vendor.

42.4 If the Council consents to the Development Application on or before the 31 August 2008, the Purchaser must complete this contract within 2 8 days after the date the Purchaser receives notification of the consent.

42.5 If the Council refuses consent to the Development Application the Purchaser has the right to rescind this contract by written notice to the Vendor given no later than 7 days after the date the Purchaser receives notification of the refusal (time being of the essence) and the provisions of clause 19 will apply.

42.6 If the Council fails to make a determination by the 31 August 2008, the Purchaser has the right to rescind this contract by written notice to the Vendor given no later than 7 days after the 31 August 2008 (time being of the essence) and the provisions of clause 19 will apply.

42.7 If the Purchaser fails to exercise the right to rescind in clause 42,5 or 42,6 then the Purchaser must complete this Contract no later than 21 days after the 31 August 2008.

42.8 The Vendor retains the copyright in the Development Application if this Contract is not completed for any reason. The provisions of clause 19 will apply to a rescission under this clause.

44.2 Liquidated Damages


Notwithstanding the provisions of special conditions 42, without prejudice to the rights, powers and remedies otherwise available to the Vendor, and notwithstanding any other provision of this contract, if for any reason not attributable to the Vendor, the balance of the purchase price is not paid by the Purchaser to the Vendor by 31 August 2008 the Purchaser will, pay to the Vendor as liquidated damages and in addition to all other moneys payable hereunder, an amount calculated at the rate of ten percent (10%) per annum [on the balance of the purchase price payable monthly in advance from the said date until the date of actual completion.

Upon actual completion an adjustment will be made in favour of the Purchaser in the event that completion occurs during the period in which interest has been paid.]

8 I have shown provisions which were altered in bold type (which does not appear in the parties’ document). The passage I have shown in square brackets was largely recast, but the changes do not affect the outcome.

9 Events with respect to the development application with which Special Condition 42 deals were these. On 15 May 2008, Geolyse Pty Limited on behalf of the purchaser lodged her application for development consent with Hornsby Shire Council. On 12 September 2008, Hornsby Shire Council gave development consent; the purchaser’s solicitors received the development consent that day and informed the vendors’ solicitors of it on the same day. Attention by Geolyse continued. The plaintiff received quotations for building work on 25 September 2008. These documents were passed to the bank.

10 Events after 4 April 2008 with respect to the purchaser’s application to the Commonwealth Bank for finance were these. No significant step was taken in dealings with the Commonwealth Bank until after development consent was obtained. It was plainly not possible that the bank would agree to lend money unless development consent was obtained. With the granting of development consent further attention began. The Commonwealth Bank’s Business Banking Centre in Dubbo wrote to the purchaser’s solicitors on 16 October 2008 and referred to the in-principle approval and to the fact that the formal approvals had not been given. The bank said:

The proposal which is still being considered by the Bank has been delayed as a copy of the DA approval from Hornsby Shire Council, Council approved plans and specifications, builder’s quote and other requirements had not been available
We are now in a position where the application can be fully assessed which will be done as a matter of urgency. Any such approval would be subject to satisfactory valuations and other bank lending requirements.

11 The bank sent a message to the purchaser’s solicitors on 27 October indicating that a formal decision had not been given, that the bank was currently considering the application and would have a decision by 29 October 2008. The bank apologised for the bank’s delay. On 29 October 2008 the bank sent the purchaser’s solicitors a message which referred to earlier correspondence and said:

We … advise that after further consideration of the proposal the Bank is unable to assist with this purchase.
Should the abovenamed’s circumstances change we would be pleased to reconsider the proposal.

Of course, this brought the in-principle approval to a practical end.

12 Special Condition 43 calls for several observations.

13 One is that there seems to be some anomaly in the contrast between Special Condition 43.1 providing for the contract to be conditional upon obtaining formal approval of finance by 30 June 2008 while by Special Condition 42.1 the contract was conditional upon obtaining Council’s consent by 31 July 2008. It seems quite unlikely that there could be unconditional formal approval of finance in writing before there was Council development consent. The vendors’ counsel sought to show that this apparent anomaly had some profound effect adverse to the purchaser on the working of Special Condition 43.1, but in submissions did not make it clear what that adverse effect was. In my opinion there is no more than an apparent anomaly, not any real difficulty in the continued co-existence of rights conferred on the purchaser by Special Condition 42 and rights conferred on the purchaser and the vendors by Special Condition 43.

14 A second observation is that the requirements for action by the purchaser in Special Condition 43.2 are given effect by the provisions of Special Condition 43.4 referring to default; the right of rescission only arises if the purchaser has not obtained finance approval in writing and has not been in default under Special Condition 43.2.

15 A third observation is that Special Condition 43.4 confers a right of rescission on each party, but only in the circumstances stated, which include there having been no default on the part of the purchaser. This should be contrasted with Special Condition 42.5 and 42.6, which only confer rights of rescission on the purchaser. These two Special Conditions deal with different subjects, although there is some relation between the two different subjects, and they deal with those different subjects in different ways.

16 A fourth observation is that Special Condition 43.2(i) obliges the purchaser promptly to apply for finance. The purchaser could make applications to as many financiers as she wished, but what she is required to do by this provision is to make one application. The vendors’ counsel contended to the effect that the purchaser was in default in not making a number of applications to different institutions; but there is no reason why she was required to do so. Expressions in sub-clauses (ii), (iii) and (iv) show contemplation that there would be only one finance application. The vendors’ counsel also contended that the purchaser was in default in that she did not apply for finance after 4 April 2008 when contracts were exchanged. The purchaser had already applied for finance and obtained in-principle approval, and her application continued to be before the Commonwealth Bank, which still gave it attention much later in the year. Counsel’s contention was to the effect that there was a default in that the purchaser did not make another original application for finance, to the Commonwealth Bank or to some other financier, after 4 April 2008. In my finding, the purchaser complied with this requirement by continuing to apply and by keeping her application before the Commonwealth Bank; application was a continuous process, as is recognised by sub-clause 43.2 (ii), and the purchaser no less applied for finance because she maintained and pursued an application which had been made, and had to a limited degree obtained some success, before exchange of contracts.

17 The vendors’ counsel contended that the purchaser had been in default in compliance with sub-clause 43.2(ii) and pointed to the terms of the bank’s letter of 16 October 2008 in support of this contention. However, the bank’s letter does not indicate in any way that the purchaser had not pursued the finance application, or had not done something which was reasonably required for the purpose of the application; to the contrary the terms of letter of 16 October 2008 indicate that by 16 October 2008, in the view of the bank the bank had what was required fully to assess the application. There is no doubt that consideration by the bank had been delayed, because development approval did not exist until 12 September, well over six months after the in-principle approval; and some further requirements, such as builder’s quote, could not well be completed and supplied to the bank until the terms of the development consent were known.

18 Special Condition 43.4 confers an entitlement to rescission if finance approval has not been obtained by 30 June 2008; this limits the period during which default may be relevant to the period ending on that day, so that later default within the meaning of Special Condition 43.2 would not be relevant to the existence of the right of rescission. This reading appears clearly on the terms of Special Condition 43.4 and is assisted by the consideration that the right of rescission is conferred on both parties. It would be strange if the vendors’ right of rescission were liable to be defeated by a default by the purchaser after the vendors’ right of rescission had come into existence. However this may be, I am satisfied that there was no relevant default at any time.

19 Special Condition 43.3 expressly provides that the Special Condition, including of course the right of rescission, is for the benefit of the purchaser, and confers a power to waive the benefit; that power is to exist prior to rescission. There is of course another right of rescission conferred by Special Condition 42, and rights of rescission can arise in other ways.

20 Special Condition 43.5 refers to printed clause 19. The significant provisions in printed clause 19.2 are:

19.2 Normally, if a party exercises a right to rescind expressly given by this contract or any legislation -
19.2.1 the deposit and any other money paid by the purchaser under this contract must be refunded;
19.2.2 a party can claim for a reasonable adjustment if the purchaser has been in possession;
19.2.3 a party can claim for damages, costs or expenses arising out of a breach of this contract; and
19.2.4 a party will not otherwise be liable to pay the other party any damages, costs or expenses.

21 The alterations to Special Conditions 42 and 44.2 arose after correspondence between the parties’ solicitors which commenced with a letter of the purchaser’s solicitors of 30 June 2008. This confirmed that the purchaser was still awaiting approval of her development application, referred to the right of rescission by 31 July 2008 under Special Condition 42.6 and said that Geolyse apprehended that Council would not have made a determination by 31 July, and requested that the vendors consider whether they would extend the date in Special Condition 42.6 and 42.7, and for how long. The vendors’ solicitors replied on 25 July 2008 and proposed amending the completion date to 29 August, and also proposed amendments to Special Conditions 42 and 44.2. There was an exchange of correspondence on 28 July 2008. What emerged appears in detail from comparison of the two forms but shortly, if the development consent was available on or before 31 August, completion was to take place within 28 days of notification. If it was not completed by then, if it were refused by then or it was not determined by then the purchaser had rights of rescission within seven days of 31 August, in effect the contractual completion date became 28 days after notification of development consent, or 28 September 2008, and there was to be interest as liquidated damages if the balance of purchase price was not paid by 31 August 2008.

22 This chain of communications ended with the purchaser’s solicitors’ letter of 31 July 2008 which, omitting formal parts was as follows:

We refer to your fax of even date and confirm that our client has elected not to exercise her right to rescind the Contract herein in consideration of the amendments to special condition 42 as set out in the fax. Our client also agrees to the terms of the (revised) special condition 44.2 in relation to liquidated damages. For the purposes of certainty, we return herewith copies of the agreed special condition 42 and 44.2 signed by the writer.

23 On any rational understanding of this letter, in the context of the terms of the contract unaltered and as proposed to be altered, and in particular of the terms of Special Condition 42, the reference to an election not to exercise a right to rescind could mean and could mean only the right to rescind with which Special Condition 42 deals, which was the right that was to arise, and was to be exercised in seven days, if Council failed to make a determination by 31 July 2008. The relevant correspondence opened by the purchaser’s solicitors on 30 June 2008 dealt only with Special Conditions 42 and 44.2, did not refer to Special Condition 43, and did not refer to the subjects with which Special Condition 43 dealt. The letter could not rationally have been understood by the person to whom it was directed to refer to anything other than the exercise of the right to rescind in Special Condition 42. A strongly confirming circumstance is the fact that no alteration to Special Condition 43 was discussed or considered, there was no reference in the correspondence to Special Condition 43 at all, although the right of rescission in it had already existed since 30 June and was a right of each party. If anyone thought that Special Condition 43 was involved, it is difficult to suppose that there would not have been some expression reserving or foregoing rights under it. Until late developments in October there were no expressions in communications between the parties’ solicitors of the concept that Special Condition 43 and its right of rescission might have been involved in the arrangements made in July. I am satisfied that it was nobody’s thought that they were, but if anybody did think that, they did not have a rational basis for so thinking.

24 Late in August 2008 there were letters and telephone conversations between the parties’ solicitors which led to agreement on 29 August again to alter Special Conditions 42 and 44.2. The alterations included extending the time in Special Condition 42.6 for Council’s determination (or failure to make a determination) to 30 September 2008 and providing for completion within 21 days after notification of consent if Council did consent on or before 30 September 2008. There were other alterations. The time for commencement of liquidated damages in Special Condition 44.2 was extended to 30 September 2008 and there were several other alterations that do not require particular notice now.

25 On 12 September 2008 the purchaser’s solicitors received notification of approval of the development application, and informed the vendors’ solicitors of this. They responded noting that settlement was due to occur on 3 October 2008.

26 On 29 September 2008, the vendors’ solicitors, by letter requested that part of the deposit moneys be released to the vendors so that they could fulfil their obligations under a contract to purchase a house at Castle Hill which they had made. The purchaser’s solicitors replied on 30 September 2008 and said that they were:

… instructed to consent to the release of part of the deposit, namely $110,000.00, on the strict proviso that it is paid to Louis Carr Real Estate to be held by that firm pursuant to the terms of the contract in respect of your clients purchase …

The vendors’ solicitors, who were the stakeholder, acted accordingly and released $110,000, leaving $20,000 of the deposit in their own hands.

27 The purchaser’s solicitors also sought a concession with respect to interest. The vendors’ solicitors by letter of 2 October 2008 stated a concession relating to interest, reducing interest which would be accepted in respect of the period 30 September to 14 October 2008, after which interest was to run at 10% on the balance of purchase price as earlier agreed.

28 Time was again extended by agreement, to 3 October 2008, which went by without completion. The vendors’ solicitors served notice to complete on 7 October 2008 and appointed a time for completion at 3.00 pm on 23 October 2008, that is they allowed more than the 14 days required by contract. This notice to complete was effective to make time for completion of the essence.

29 While time of the essence for completion was running, the purchaser received the letter of the Commonwealth Bank of 16 October 2008 to which I earlier referred; there was still no finance approval. This led to correspondence commencing on 16 October 2008 in which the purchaser’s solicitors proposed extension of the settlement date to 13 November 2008. In this connection they referred to the purchaser being at liberty to rescind the contract because finance was not approved by 30 June 2008. The vendors’ solicitors made a detailed proposal in their letter of 21 October 2008, the purchaser’s solicitors replied and the solicitors made arrangements to extend notice to complete, which were recorded in a number of exchanges of messages. The notice to complete was extended to 5.00 pm on Friday 31 October 2008. During this extension the Commonwealth Bank made its striking contribution of refusing the finance application. There were some further messages between the solicitors about varying terms which led to no agreement.

30 Explicit reference to Special Condition 43 and rescission began when on 16 October 2008 the purchaser’s solicitors asserted that the purchaser remained at liberty to rescind prior to completion or termination. They made a somewhat similar reference in their letter of 23 October 2008, and on 30 October 2008 the vendors’ solicitors asserted that the right of waiver in Special Condition 43 had been waived and that “… the purchaser was granted numerous concessions on the basis of this waiver and understanding.” This is a remarkable statement to make after there had been no explicit reference to any such basis. The vendors’ solicitors also contended that there was “obvious breach of the terms of Special Condition 43.2” and that this “along with the conduct” created an estoppel because of “the Purchaser’s obvious breach of terms of Special Condition 43.2 along with their conduct” and to say that if there was a purported rescission the vendors would terminate the contract. No agreement emerged and nothing happened to change the agreed position that the time for completion was 5.00 pm on 31 October 2008 and time was of the essence.

31 This first reference, not made until the hour of crisis, after three months had passed during which there was much discussion of the parties’ rights, is an illustration of how improbable it is that the vendors’ solicitors understood the letter of 31 July 2008 to refer to Special Condition 43 at the time when it was received. However that may be, it was not correct and it was not reasonable so to understand it.

32 On 31 October 2008, at 2.26 pm the purchaser’s solicitors sent notice of rescission. The vendors’ solicitors disputed the validity of the notice of rescission at 2.41 pm indicated continued readiness to proceed as earlier arranged by 5.00 pm. Then at 5.22 pm they served notice of termination of the contract. Hence this litigation.

33 The purchaser’s position is essentially simply: she contends that she had a right of rescission under Special Condition 43, which accrued on 30 June 2008 and was open for exercise thereafter.

34 I will seek to address the bases upon which the vendors’ counsel asserted that that right no longer existed.

35 The primary position put was to the effect that the purchaser’s solicitors’ letter of 31 July 2008 with its reference to election constituted an election, clear, unequivocal and communicated by the purchaser, not to exercise her right to rescind the contract; and that right to rescind was identified as a right referred to in Special Condition 43 by the reasoning that, as of 31 July no other right to rescind, in particular no right to rescind under Special Condition 42 had accrued to the purchaser.

36 I was referred to a number of decisions in which the doctrine of election has been addressed but it is sufficient to refer to the observations of Stephen J in Sargent v ASL Developments Limited (1974) 131 CLR 634 at 641 where his Honour said of the doctrine of election:

The doctrine only applies if the rights are inconsistent the one with the other and it is this concurrent existence of inconsistent sets of rights which explains the doctrine; because they are inconsistent neither one may be enjoyed without the extinction of the other and that extinction confers the elector the benefit of enjoying the other, a benefit denied to him so long as both remain in existence.

There is a further and perhaps fuller statement by Mason J at 655-656 and there are extensive observations in Immer (No 145) Pty Limited v Uniting Church in Australia Property Trust (NSW) (1992) 182 CLR 26 at 30 (Brennan J) and at 41-42 (Deane, Toohey, Gaudron and McHugh JJ). The present case involves no more than the simple core of the doctrine, whether there is an inconsistency and a need for choice.

37 In my opinion the doctrine of election does not apply to the situation of the purchaser before and after 31 July because the purchaser did not have rights which were inconsistent the one with the other and could not concurrently exist. This was so both before the alteration of Special Condition 42 and 44.2 was agreed, and after the alteration was agreed. Before the alteration there was no inconsistency between the purchaser potentially having a right to rescind under Special Condition 42.5, which was to exist for no later than seven days after refusal of development consent, whenever that was given, and the purchaser also having the right of rescission conferred on both parties by Special Condition 43.4 if finance approval had not been obtained, as it had not been, by 30 June 2008. There would have been no such inconsistency if 31 July 2008 had passed without alteration of the dates referred to in Special Condition 42; both rights to rescind would have continued to exist until the seven days available under Special Condition 42.6 had passed. The purchaser’s being a party to the alterations agreed on 31 July 2008, and the rights arising under the altered term were in similar ways not inconsistent with the continued existence of the right of rescission in Special Condition 43.

38 Although the purchaser’s counsel gave very extended attention to her contentions on election, she did not ever demonstrate what inconsistency there was. The co-existence, if times and circumstances allowed, of two rights of rescission was clearly a contemplated possibility on the terms of the contract from the beginning. There is, in my opinion, no inconsistency, and no anomaly at all in the purchaser’s having had two different rights of rescission, differing from each other in significant details but both capable of existing concurrently; and also, in the case of the right under Special Condition 43, capable of continuing to exist after the time available under Special Condition 42 in any of its forms had run out.

39 The vendors’ counsel did not explain and did not embark on explaining why making the arrangements of 31 July 2008 and the alteration to Special Condition 42 and 44.2 involved the exercise of a right which was in any way inconsistent with the continuing existence of an unexercised right of rescission created by Special Condition 43. The inconsistency is the foundation of any discussion of election; but the foundation was not laid. In my opinion to affirm the altered and otherwise continued operation of the contract was to affirm the continued operation of the whole of the contract, including whatever rights of rescission it conferred.

40 At one point the vendors’ counsel contended to the effect that to seek the alteration of Special Condition 42 and 44.2 (or perhaps it was to seek and also to obtain the alteration) was to elect against the continued existence of the right of rescission in Special Condition 43. Counsel sought to support this contention by referring to Byers & Ors v Dorotea Pty Limited (1986) 69 ALR 715 at 722 (Pincus J). In that case the applicants had agreed to purchase a home unit and among other claims, claimed a right to rescind the agreement for misrepresentations about the size of the units made before the building was constructed. There were several grounds upon which Pincus J held that the claim for rescission for innocent misrepresentation could not succeed, and they included that the applicants had affirmed the contract by requesting an extension of time for completion at a time when they knew that there had been misrepresentation. In my opinion there is no relevant analogy; the purchaser does not rely on the general law relating to rescission for innocent misrepresentation, but relies on an expressly conferred contractual right of rescission which was one of the terms of the contract which was to be continued in effect by the agreed alterations. What was to be continued in effect with the alterations was the whole of the existing contract, including Special Condition 43 and its rights of rescission.

41 The high point of the vendors’ contention is the reference to election in the purchaser’s solicitors’ letter of 31 July 2008. On the correct view, indeed on any rational view of the meaning of that letter, what is spoken of as an election refers to a decision not to rescind under the first form of Special Condition 42.6 within seven days after 31 July 2008. The word “elect” as used in that letter does not refer to a decision to take one and not another of inconsistent rights, but to a decision not to rescind by 7 August 2008 under the first form of Special Condition 42.6: nothing inconsistent with the continued existence of the right of rescission in Special Condition 43 about that.

42 The contention was to the effect that because the right to rescind under Special Condition 43 had accrued by 31 July 2008, but the right to rescind under Special Condition 42 had not, the reference to election in the letter of 31 July must be understood to refer to the right to rescind in Special Condition 43. In development of this submission it was contended to the effect that the statement about election applied to whatever right to rescind then existed, whether or not the letter of 31 July 2008 was intended to refer to a different right to rescind.

43 I reject this contention because to treat the reference to election in the letter of 31 July 2008 as applying to anything but the prospective right to rescind which would come into existence on the following day would be to disregard the context both within the letter of 31 July 2008 itself and also in the correspondence of which it was part; there can be no doubt which election was intended, and which election the recipient of the letter could reasonably regard the letter as referring to. In the letter and in this correspondence the right of election in Special Condition 43 was not mentioned, and not alluded to in even the most distant way.

44 It was further contended that the purchaser had, by the letter of 31 July 2008, waived the right to rescind under Special Condition 43.4, or had waived Special Condition 43. The basis of this included a submission “the clear and unequivocal expression in the 31 July letter leaves the receiver in no doubt that the purchaser intends not to rely on her right to rescind.” This contention is based on a wrong view of the meaning of that letter. It was further contended that there was an estoppel and that “the 31 July letter communicated to the vendors a representation by the purchaser, which was relied upon by the vendors and caused the vendors to alter their position, to their detriment.” The basis of this is a contention that the letter communicated a clear and unambiguous representation that the purchaser would not exercise her right to rescind the contract if the vendors agreed to vary the contract in the specified manner. In my interpretation of the letter, and of the events, there was no such representation. It was also contended that the alteration agreed on 31 July 2008 had the effect of writing any right of rescission out of the contract. However, the arrangements of 31 July 2008 had no such meaning or effect.

45 The reference in Special Condition 43 to a right of waiver which was to exist until rescission is or includes reference to rescission under the other provision of the contract expressly referring a power of rescission, that is, Special Condition 42. The effect of Special Condition 43.3 is that the purchaser may waive the benefit of Special Condition 43; after the purchaser had done so neither party could take the benefit of it, and if the purchaser had not done so then Special Condition 43.4 applied, and either party could take the benefit of it, until there was a rescission or a waiver by the purchaser. Until 1 July 2008, it was not possible that either party should be entitled to rescind under Special Condition 43, but the purchaser would waive the benefit of Special Condition 43 before or after that date.

46 The vendors’ counsel contended that the purchaser had elected not to exercise a right of rescission in Special Condition 43.4 by a number of steps later than 31 July 2008. Counsel referred to an extensive array of facts including the negotiations for further alterations, and steps taken after receipt of development consent including notifying development consent, seeking execution of an application for a liquor licence transferral, obtaining quotations for restaurant construction, communicating with the Commonwealth Bank, agreeing to partial release of the deposit, negotiating for a concession on interest and other negotiations directed to extending the dates for completion and contract alterations. Counsel referred to the whole array of facts and in particular to the two later negotiated alterations of Special Condition 42 as unequivocal conduct, communicated to the vendors, affirming the continued existence of the contract.

47 There were many acts by the purchaser consistent with the continuing existence of the contract and impliedly affirming it, but the conduct and affirmation can only have related to the whole contract and all the purchaser’s rights in it, in the absence of any expression of an intention to forego some part of it. To keep the contract on foot was not inconsistent with continuing to have the right of rescission which the contract conferred. It is correct that the purchaser continued to act as if the contract was still on foot until her notice of rescission was delivered; and so she should have, as it undoubtedly was still on foot until that event. None of her conduct was inconsistent with the continued existence of her entitlement to rescind which had accrued with the expiry of 30 June 2008.

48 The vendors’ counsel also contended that the purchaser had been in default in respect of what she was required to do by Special Condition 43.2, and referred to the obligation to do all things reasonably necessary to secure performance, stated in Secured Income Real Estate (Australia) Limited v St Martin’s Investments Pty Limited (1979) 144 CLR 596 by Mason J at 607.

49 It may well be the correct reading of Special Condition 43 that Special Condition 43.2 is not a contractual promise to perform acts, but states acts default in performance of which produces results indicated later in Special Condition 43. In support of this reading, Special Condition 43 is for the benefit of the purchaser, and Special Condition 43.2 lists circumstances in which if they are fulfilled the purchaser has advantages including the advantage in Special Condition 43.4. The time at which those acts were to be performed and default in which was to defeat the right of rescission expired on 30 June 2008; after that, each party had the right of rescission so conferred.

50 It was contended that it appears from the bank’s letter of 16 October 2008 that there had been default in that a copy of the development approval and other documents had not been available. First I observe that there had been no default in not making the development consent available by 30 June 2008 as it did not then exist and the other documents to which the bank referred could not reach a completed form without it. Secondly, the bank’s letter makes no statement about when the delay referred to began and ended, or about when the documents had become available; if there were a contractual requirement for the purchaser to provide them promptly after the development consent was available there is no evidence that there was a failure in that respect and in particular the bank’s letter does not state that there was a failure in that respect.

51 There were also complaints that the purchaser had only made one application for finance; the terms of Special Condition 43 show plainly that it was contemplated that there would be only one application. No doubt the purchaser could make as many others as she wished, but none of the contractual machinery turned upon her making more than one.

52 In my opinion, maintaining an existing application which has already reached the stage of a highly tentative letter of approval was a compliance with the requirement to apply for finance; maintaining an existing application was just as much applying for finance as making a fresh original application.

53 For the reasons stated I am of the opinion that the notice of rescission was effective. Accordingly, it is not necessary to address arguments about the effectiveness of the termination, or about whether the vendors were ready willing and able to complete at 5.00 pm on 31 October 2008. Nor is it necessary to address arguments which were put to me, in considerable detail, in support of the vendors’ claim for damages. In my opinion the claim for damages was excessive in some respects, but it is not necessary to examine the claim in detail.

54 Nor is it necessary to examine the purchaser’s claim for relief under s 55(2A) of the Conveyancing Act. I would not have upheld that claim, as the vendors did not contribute to the purchaser’s difficulties in obtaining finance; nor to any difficulty. On the whole they were quite accommodating. So too was the purchaser, who agreed to the release by the stakeholder of a large part of the deposit. The contract for sale and the events relating to it, and the expenses and losses involved for both parties, have constituted an all-round economic disaster. The purchaser put a great deal of effort and expense into the proposal, including her legal costs relating to the purchase, her trouble and expense relating to the application to the bank and large expenses for the work done by Geolyse Pty Limited; the development consent which she was successful in obtaining is of no value. The vendors incurred much expense and lost the advantages which completion of the contract would have brought to them, including entitlement to balance of purchase money and to interest relating to extension of the time for completion. They had great difficulty in selling the property and sold it by auction only after many months at a price very significantly less than the amount the purchaser had agreed to pay. There have been large losses all round. It cannot be said that the vendors in any way contributed to the purchaser’s difficulties and inability to obtain bank finance and inability to complete the purchase. If the purchaser’s notice to complete and notice of termination were found to be effective, I would not regard this as a case where there was any significant ground of relief against forfeiture of the deposit under s 55(2A); such relief is not granted as a matter of indulgence. The unavailability of bank finance was quite foreseeable and forfeiture of the deposit was the ordinary contractual outcome, and would not in any way be unjust.

55 The purchaser has a clear right to return of the deposit, confirmed by express language in the contract with a deduction of $500. The vendors’ counsel suggested that the release of part of the deposit, with the concurrence of the purchaser, by the stakeholder to the vendors themselves, in some way adversely affected her rights to its return. In my opinion there is no reason why this should be so; the deposit remains the deposit and her entitlement to recover it exists no matter who has received it. By permitting the vendors to receive part of the deposit the purchaser gave up security which protected her potential right to receive it back, but her right to receive it back was not affected. $20,000 of the deposit remained with the stakeholder, the vendors’ solicitors. I was surprised to be told by counsel that the vendors’ solicitors had accounted for the remaining $20,000 to the vendors, and no longer held any part of the deposit. This was a perilous thing to do, in the absence of its being clearly established that the rescission was not effective. The vendors’ solicitor has placed himself at risk of personal liability for that $20,000 in the event that it is not recovered from the vendors.

56 For these reasons I propose to give judgment for the plaintiff and to make orders giving effect to the plaintiff’s substantial claims and entitlement to the deposit.

1. A declaration that the contract for sale of land made between the plaintiff as purchaser and the defendants as vendors on 4 April 2008 in respect of the whole of the land comprised in Folio Identifier 1/553955 and being Lot 1 in Deposited Plan No 553955 has been validly terminated by the plaintiff.

2. Give judgment for the plaintiff against the defendants for $129,500.00.

3. Order that the defendants pay the plaintiff’s costs of the proceedings.

4. Dismiss the Cross-claim with costs.

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