Qin v Smith (No. 2)
[2013] VSC 476
•30 August 2013
| Send for Reporting | ||
| IN THE SUPREME COURT OF VICTORIA | Not Restricted | |
AT MELBOURNE
COMMON LAW DIVISION
S CI 2012 05748
BETWEEN:
| KATRINA QIN | Plaintiff |
| v | |
| SIMON SMITH and KAREN SMITH | Defendants |
AND BETWEEN:
| SIMON SMITH and KAREN SMITH | Plaintiffs by Counterclaim |
| v | |
| KATRINA QIN and THE REGISTRAR OF TITLES | Defendant by Counterclaim |
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JUDGE: | Derham AsJ | |
WHERE HELD: | Melbourne | |
DATE OF HEARING: | 4 June 2013 | |
DATE OF JUDGMENT: | 30 August 2013 | |
CASE MAY BE CITED AS: | Qin v Smith (No. 2) | |
MEDIUM NEUTRAL CITATION: | [2013] VSC 476 | |
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SALE OF LAND - Vendor and Purchaser – Whether contract requires vendors to give vacant possession at completion – Vendors intimate that they would not give vacant possession at completion - Whether purchaser must tender price on date for completion – Time of the essence – Intimation that vacant possession would not be given relieves purchaser from tendering the balance of the purchase price on the day for settlement - Vendors give notice of rescission – Whether notice valid – Notice not valid and contract remained on foot – Whether term requiring vacant possession a mistake - Whether rectification available – Basis for rectification not established.
PRACTICE AND PROCEDURE – Summary judgment – No real prospects of success – Lysaght Building Solutions Pty Ltd v Blanalko Pty Ltd [2013] VSCA 158 – S 63 Civil Procedure Act 2010.
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APPEARANCES: | Counsel | Solicitors |
| For the Plaintiff | Mr S. Hay & Mr R. Watters | Victor Tse & Associates |
| For the Defendants | Mr T. Sowden | Ken Smith & Associates |
HIS HONOUR:
Introduction
The plaintiff, who is the first defendant by Counterclaim (“Purchaser”), applies by summons filed 31 May 2013 for orders pursuant to Part 4.4 of the Civil Procedure Act 2010 that the Counterclaim of the defendants (“Vendors”) be summarily dismissed and that the defendants pay the costs of the proceeding on an indemnity basis.
When the Purchaser’s application came before me on 4 June 2013, I proposed, and the parties’ Counsel agreed, that it may be possible to deal with the application by the parties making written submissions and that I would give judgment based on those submissions, subject to their right to make further oral submissions if a matter outside those submissions arose. That proposal was agreed to by Counsel for the parties and directions were given for the filing and service of Outlines of Submission, which was done.
The dispute arises out of a contract of sale dated 25 July 2012 (“Contract”) under which the Purchaser agreed to purchase from the Vendors the property situate at and known as Unit 312, 86 Macaulay Road, North Melbourne, being the property described in Certificate of Title Volume 11227 Folio 345 (“the Property”). The purchase price was $417 000, with settlement due on 24 September 2012. The contract provided that vacant possession of the property be given on settlement. [1]
[1]The Vendors argued that this was not the proper construction of the Contract, but for reasons given below it is clear that vacant possession was required to be given.
The active parties are the Purchaser and the Vendors, as the Registrar of Titles, who is the second defendant by Counterclaim, has advised that, on the basis of present information, he does not intend to appear.
The disputes between the parties have already been aired once. The Vendors applied for the removal of a caveat. That application was heard on 18 February 2013 and the decision of the Court is to be found in the reasons of McMillan J in Qin v Smith [2013] VSC 158. The application to remove the caveat was dismissed.
Summary of Conclusions
I have concluded that on the present pleadings, affidavits and submissions, the Vendors’ Counterclaim is without substance, has no real prospect of success and should be dismissed.
Because, however, the Vendors filed a late affidavit in opposition to the Purchaser’s application for summary dismissal of the Counterclaim, in which they foreshadowed applying to amend the Counterclaim, and because of the conclusions I have reached as to those proposed amendments, and as to the appropriate construction of the Contract, I propose to hear the parties as to whether it is appropriate to allow any amendment to the Counterclaim, and any further evidence or submissions from the parties.
Background
Based on the affidavit material before McMillan J on 18 February, the following are the essential facts as found by her in Qin v Smith:
[3] Vacant possession of the property was a specific requirement on the part of the purchaser, as she intended to move into the property. Prior to signing the contract, the issue of vacant possession of the property was raised by the purchaser with the vendors’ agent. The agent informed the purchaser that he had mentioned to the vendors that she required vacant possession.[2] At that time, the agent informed the purchaser that he would insert a special condition that would ‘void’ the contract in the event that vacant possession was not provided. The contract ultimately provided that the sale was not subject to any lease, but the special condition was left out. The words ‘not applicable’ were inserted under general condition 1.1, which governed any lease, and the clause was initialed by both the vendors and the purchaser.[3]
[2]Affidavit of Katrina Chao Qin sworn 15 February 2013, [4]; Exhibit KQ-001 to the Affidavit of Katrina Chao Qin sworn 15 February 2013.
[3]The purchaser submitted that, because of cl 1.1, she considered it unnecessary to insert the special condition.
[4] Prior to signing the contract, the purchaser was provided with a statement required by s 32 of the Sale of Land Act 1962, signed by the vendors (‘the vendors’ statement’). The vendors’ statement dated 25 July 2012 disclosed a lease signed by the vendors more than six months earlier, with an expiry date of 4 January 2013. The vendors rely on this fact to show that the purchaser was aware that the property was subject to a lease before she signed the contract of sale.
[5] After the contract was signed, the vendors, through their agent and their solicitors, informed the purchaser that the tenants had refused to vacate the property by the settlement date and that the vendors would not be able to give vacant possession. The purchaser was told that she could either cancel the contract or purchase the property subject to the lease. The purchaser, through her solicitors, informed the vendors that she wanted vacant possession of the property on the settlement date. Negotiations continued between the parties but a compromise was not reached.
[6] On 20 September 2012 the purchaser lodged a caveat on the title to the property claiming an interest in the property by reason of the contract of sale. On 21 September 2012, the purchaser’s solicitors informed the vendors’ solicitors that the purchaser was willing and able to settle on 24 September 2012, provided that vacant possession of the property be given on settlement.
[7] Settlement did not occur on 24 September 2012. On the same day, the vendors served a notice of default on the purchaser alleging a failure to pay the residue of the purchase price on the due date and providing notice that, if the default was not remedied within 14 days, the contract would be terminated. The purchaser has not paid the balance of the purchase price. The vendors claim that the contract has been terminated.
[8] On 10 October 2012, the purchaser issued proceedings against the vendors seeking specific performance of the contract and an injunction restraining the vendors from terminating the contract on the basis of the rescission notice served by the vendors. It stated, inter alia:
a) the failure to settle arose from the vendors’ failure to provide vacant possession on the settlement date;
b) the vendors were entitled to serve a notice to vacate on the tenants under s 259(2A) of the Residential Tenancies Act 1997 and did not do so;
c) the failure to settle by the vendors was a breach of contract and a breach of their contractual duty of cooperation to do all things necessary to enable the purchaser to have the benefit of the contract;
d) the purported termination of the contract was unconscientious, as the vendors breached the contract by not providing vacant possession on the settlement date; and
e) at all times the purchaser was ready, willing and able to comply with her obligations under the contract.
[9] By a defence and counterclaim, the vendors maintain, inter alia:
a) at all times the purchaser knew the property was subject to a lease and that there were tenants in possession of the property;[4]
[4]The vendors rely on the vendors’ statement and oral statements made by the vendors’ agent to the purchaser prior to 25 July 2012.
b) they were not under any obligation to serve a notice under s 259(2A) of the Residential Tenancies Act 1997 and any failure to do so was not a breach of contract;
c) there was not any breach of contract or unconscionable conduct on their part;
d) a failure to deliver vacant possession does not constitute grounds to refuse to settle the contract or for specific performance where the purchaser has failed to pay the balance of the purchase price; and
e) to the extent that the contract purports to confer a right to vacant possession, the contract contains a mistake entitling the vendors to an order for rectification of the contract to include the lease in the special conditions of the contract.
[10] In response, the purchaser says that any mistake as alleged was unilateral and, in the absence of unconscionable conduct, the vendors are not entitled to rectification of the contract for unilateral mistake.
In addition to this summary of the facts, it is appropriate to set out
(a) the terms of the Contract a little more fully;
(b) in a little more detail, the evidence relating to the events leading up to the date for settlement under the Contract, including material not before McMillan J (even though this results in some repetition); and
(c) other material included in affidavits filed since the application to remove the caveat was heard and determined.
(d) More detail about the defence and Counterclaim.
The Contract terms and conditions
The Contract is in the form published by the Law Institute of Victoria and the Real Estate Institute of Victoria Ltd.[5] The following provisions are relevant to the disputes in this application.
[5]REIV Code 118, March 2012.
The opening clauses of the Contract provide:
The vendor agrees to sell and the purchaser agrees to buy the property, being the land and the goods, for the price and on the terms set out in this contract.
The terms of this contract are contained in the –
· particulars of sale; and
· special conditions, if any; and
· general conditions in Form 2 of the Estate Agents (Contracts) Regulations 2008; and
· the vendor’s statement required by Section 32(10 of the Sale of Land Act 1962, as attached
and in that order of priority.
In the ‘Particulars of Sale’ the following are relevant:
(a) Under the heading “payment (General Condition 11)” it provides:
Price $417,000
Deposit $41,500 (of which $41,150 has been paid)
Balance $375,000 payable at settlement.[6]
[6]The $500 discrepancy is not explained in the evidence. I infer that there was a preliminary deposit paid in the sum of $500 before the balance of the deposit was paid at the time of signing the Contract.
Each of these items is initialled by the Purchaser and the Vendors.
(b) under the heading “Settlement (General Condition 10)” it provides:
is due on 24/09/2012”.[7]
[7]In addition it provides a qualification where the property is a lot on an unregistered plan of subdivision, which is not applicable in this case.
This date for settlement is initialled by the Purchaser and the Vendors;
(c) under the heading “Lease (General Condition 1.1)” it provides:
At settlement the purchaser is entitled to vacant possession of the property unless the words ‘subject to lease’ appear in this box in which case refer to general condition 1.1”.
Beneath that provision is a box within which appears “not applicable”. This is also initialled by the Purchaser and the Vendors.
The ‘General Conditions’ include, so far as relevant:
(a) Condition 1.1 provides (in part and in so far as is relevant):
Encumbrances
1.1 The purchaser buys the property subject to:
(a) any encumbrances shown in the vendor’s Statement other than mortgages or caveats; and
(b) any reservation in the crown grant;
(c) any lease referred to in the particulars of sale.
[Emphasis added]
(b) Condition 10 provides that:
10.1 At settlement:
(a) The purchaser must pay the balance [of the purchase price]; and
(b) The vendor must:
(i) do all things necessary to enable the purchaser to become the registered proprietor of the land: and
(ii) give either vacant possession or receipt of the rents and profits in accordance with the particulars of sale.
10.2 The vendor’s obligations under this general condition continue after settlement.
(c) Condition 16.1 provides that:
Time is of the essence of this contract.
(d) Condition 25, headed “Breach” provides:
A party who breaches this contract must pay to the other party on demand:
(a) compensation for any reasonably foreseeable loss to the other party resulting from the breach; and
(b) any interest due under this contract as a result of the breach.
(e) Condition 27 headed “Default Notice” provides:
27.1 A party is not entitled to exercise any rights arising from the other party’s default, other than the right to receive interest and the right to sue for money owing, until the other party is served and fails to comply with a written default notice.
27.2 The default notice must:
(a) specify the particulars of the default; and
(b) state that it is the offended party’s intention to exercise the rights arising from the default unless, within 14 days of the notice being given –
(i) the default is remedied; and
(ii) the reasonable costs incurred as a result of the default and any interest are paid.
(f) Condition 28 headed “Default Not Remedied” provides:
28.1 All unpaid money under the contract becomes immediately payable to the vendor if the default has been made by the purchaser and is not remedied and the costs and interests are not paid.
28.2 The contract immediately ends if:
(a) the default notice also states that unless the default is remedied and the reasonable costs and interest are paid, the contract will be ended in accordance with this general condition; and
(b) the default is not remedied and the reasonable costs and interest are not paid by the end of the period of the default notice.
The Contract included a Vendor’s Statement pursuant to s 32 of the Sale of Land Act 1958, dated 3 May 2012. It is common ground that the Vendor’s Statement shows that the property was let for a term ending on 4 January 2013, but none of the several copies of the Statement in evidence discloses the fact. Nevertheless, the Vendors’ evidence clearly shows, and it was common ground, that there was a Residential Tenancy Agreement dated 20 December 2011 under which the Property was let for a term of 12 months commencing on 5 January 2012 and ending on 4 January 2013.[8]
[8]Affidavit of SP Smith Sworn 13 February 2013, Exhibit “SPS-3”.
The facts after the Contract was entered into
The evidence before me was by affidavits of the parties and their solicitors to which the written correspondence between them was exhibited. The affidavits included those that were in evidence before McMillan J. Neither party objected to the hearsay evidence given by the other. In any event, the hearsay evidence was given on information and belief and the sources were given. I can discern no controversy as to the facts so revealed. By piecing together the evidence from all the affidavits, the following are the facts after the Contract was entered into.
In early August 2012 the Vendors’ agent, James Burne, told the Purchaser (personally) that the tenants had refused to vacate the Property and that the Vendors would not be able to give vacant possession on the settlement day (24 September 2012). He told her that she could either cancel the Contract or accept the Property subject to the lease. She did not want to do either of these things, but thought she had no other choice.[9] This direct contact occurred notwithstanding that the Contract disclosed that the Purchaser’s solicitor was her solicitors in this proceeding.
[9]Affidavit Katrina Chao Qin sworn 15 February 2013, [12].
On 7 August 2012 the Purchaser sent a text to James Burne saying ‘ Hi James, can u let me know when does the lease expire? I will let u know my decision tomorrow. Thanks, Katrina”. To this message, James Burne responded, “Hi Katrina, the lease expires on the 4th of January. Just less than 120 days from today. No worries. James Burne”.[10]
[10]Affidavit of Kenneth Edwin Smith (the solicitor for the Vendors) sworn 12 June 2013, [3] and Exhibit KES-1.
On 11 August 2012 the Purchaser sent a text to James Burne saying “Hi James, I would still like to take the property at macaulay rd, have the settlement in Sept and take over the lease until January. Can you call to clarify? Thank you Katrina”.[11]
[11]Affidavit of Kenneth Edwin Smith (the solicitor for the Vendors) sworn 12 June 2013, paragraph 3 and Exhibit KES-1.
Further to the text messages referred to above, the Purchaser’s evidence is that on about 11 August 2012 Mr James Burne told her that she would need to get her solicitor to amend the Contract to make it subject to the lease if she wished to continue with the purchase.[12]
[12]Affidavit Katrina Chao Qin sworn 15 February 2013, [13].
On 13 August 2012 Mr Burne sent her a text message on that day saying” Hi Katrina, your solicitor needs to talk to you regarding the changes that are to be made to the contract. They will have to send the vendors’ solicitor a letter but need your advice first.” The Purchaser responded the same day “Hi James, I have emailed my solicitor. In regards to the vacate notice we spoke about, can you please send me a copy before you send it to the tenant? In addition are you waiting for any paper work from me or the bank? Thank you”.[13]
[13]Affidavit Katrina Chao Qin sworn 15 February 2013, [14] and Exhibit KQ-004.
On 14 August 2012 the Purchaser spoke to her solicitor who explained to her that the contract entitled her to vacant possession and that she was not required either to vary the Contract or cancel it. As a result of this advice the Purchaser instructed her solicitor to inform the agent and the Vendors that she wanted vacant possession as per the Contract.[14]
[14]Affidavit Katrina Chao Qin sworn 15 February 2013, [15].
It seems that James Burne had contacted the Purchaser’s solicitor on 13 August 2012 requesting an amendment of the Contract, because by email dated 14 August 2012 from the Purchaser’s solicitor to the Vendors’ agent, the agent was told that the Purchaser had not agreed to vary the Contract and intended to insist on her rights in relation to vacant possession.[15] One Georgina Mellick, of Melbourne Real Estate, the Vendors’ agent, responded stating:
Please be advised that the property is currently tenanted until 4th January 2013. We have requested the tenants to vacate the property by settlement date 24th September 2012 however they have declined our request. The buyer has been made aware of this situation and expressed to James that she was happy to continue with the transaction and settle as planned taking over the lease as a landlord.
The property cannot be delivered vacant possession at settlement so we are requesting the appropriate documentation from your firm and signed by your client as per her verbal agreement to be drawn up and executed at your earliest convenience as an amendment to the existing contract.
[15]Email of 14 August 2012 at end of email chain in Exhibit KES-2 to the Affidavit of Kenneth Edwin Smith (the solicitor for the Vendors) sworn 12 June 2013.
The Purchaser’s solicitor responded (the same day) to Ms Mellick that it was not appropriate for “your firm” [the agent] to contact the Purchaser directly in circumstances where she was represented in order to attempt to induce her to give up her contractual rights without the benefit of legal advice, and that “We put you on notice that such behaviour may constitute misleading and deceptive conduct for the purposes of the Australian Consumer Law.”[16] Ms Mellick responded by email saying in substance that the Purchaser was not mislead, she was fully aware that the Property was tenanted, and that once it was confirmed that the tenants would not vacate she was contacted and offered the option to cancel the Contract, and that they have text messages and verbal agreements from the Purchaser agreeing to accept the Property subject to the lease.[17]
[16]Email of 14 August 2012 in the email chain in Exhibit KES-2 to the Affidavit of Kenneth Edwin Smith (the solicitor for the Vendors) sworn 12 June 2013.
[17]Email of 14 August 2012 in the email chain in Exhibit KES-2 to the Affidavit of Kenneth Edwin Smith (the solicitor for the Vendors) sworn 12 June 2013.
That led to the Purchaser’s solicitor responding on the same day as follows (so far as relevant):
The choice offered to our client between cancelling the contract altogether, or accepting the proposed variation, is misleading – even in the absence of any intention to mislead – because it ignores her option of insisting that the vendor give vacant possession as required under the contract, or pay compensation for breach if it cannot make good on its promise. …
In any case, our instructions are as stated: our client does not want to vary the contract nor sign a variation giving up her contractual rights without compensation. We are of the view that even if there was an oral variation (which we have not accepted), it is not open to the vendor to rely on it since it was induced by your firm via a misrepresentation of our client’s rights and obligations under the contract. If the vendor is unable to meet its obligation to provide vacant possession at settlement, we invite them to contact us to discuss the options to remedy that breach.
What happened between 14 August 2012 and the next communication in evidence is not the subject of detailed evidence, save that the Purchaser deposes that she spoke to her solicitor on 28 August 2012 and was told that the Vendors solicitor denied that they were required to give vacant possession at settlement.[18] Meanwhile, her solicitor undertook the usual steps in preparation for settlement on 24 September 2012, such as liaising with the Purchaser’s bank so as to be ready to settle the purchase.[19]
[18]Affidavit Katrina Chao Qin sworn 15 February 2013, [16].
[19]Affidavit Katrina Chao Qin sworn 15 February 2013, [17].
On 17 September 2012, the Vendors’ solicitors wrote to the Purchaser’s solicitor confirming their previous advice that “vacant possession will not be provided on the day of settlement” and gave notice that if the Purchaser fails to settle on the due date “it is intended to issue Notice of Default without delay”.[20]
[20]Exhibit DN-002 to the affidavit of David Ng sworn 31 May 2013.
On 19 September 2012 the Purchaser’s solicitor responded to the letter of 17 September 2012 in the following terms:[21]
[21]Affidavit Katrina Chao Qin sworn 15 February 2013, [18] and Exhibit KQ-005.
We refer to the above matter and your letter of 17 September 2012.
We understand from your communications with us so far that, while requiring our client to settle on the settlement date as per the contract, the vendor does not intend to deliver vacant possession per the contract and maintains that our client will suffer no damage as a result of their position (sic).
In order to clarify the issues in dispute, please advise as to whether or not you agree that:
· The vendor is in fundamental breach of the contract;
· The vendor has not made, and is unwilling to make, any attempt to remedy the breach.
Furthermore, please advise on what basis the vendor threatens to rescind the contract in view of their own breach.
As solicitors for the parties, we are required to help resolve dispute like this one. Without prejudice to our client’s rights, and subject to her approval, we therefore propose that the parties settle next week on the basis that the question of compensation from the vendor for their breach be resolved expeditiously after the settlement. Further, an amount of $20,000 from the vendor’s proceeds must be held in trust by the vendor’s solicitor on behalf of both parties, from which the damages are to be paid.
Please obtain instructions in relation to our proposal as a matter of urgency.
In the event that the vendor refuses to settle on the above basis and continues to deny their clear breach, this letter will be provided to the relevant Court in support of an application that the vendor pay costs on an indemnity basis.
The Vendors’ solicitor responded by facsimile the next day, in terse and uncompromising terms, that “there is no breach by the vendor” that “no monies are to be withheld at settlement”, and concluded by saying that “in the event that the purchaser fails to settle on the due date, it is intended to produce this facsimile as to any costs arising therefrom”.[22]
[22]Affidavit David Ng sworn 28 May 2013 Exhibit DN-002.
On 20 September 2012 the Purchaser lodged a caveat on title to the Property claiming a freehold interest as purchaser under a contract of sale.
On 21 September 2012, the Purchaser’s solicitor advised the Vendors’ solicitor that the Purchaser would only settle the transaction on the terms of the Contract, i.e. with vacant possession.[23] It may be that he also informed the Vendors’ solicitor that she was ready, willing and able to settle on 24 September 2012 if and only if the Vendors complied with the Contract by giving vacant possession.[24] The only reason she did not settle on 24 September 2012 was because the Vendors had made it abundantly clear that they were not going to give vacant possession.[25]
[23]Affidavit David Ng sworn 28 May 2013, [8].
[24]Affidavit Katrina Chao Qin sworn 15 February 2013, [20]
[25]Affidavit Katrina Chao Qin sworn 15 February 2013, [20-21].
The Purchaser did not attend settlement on the settlement day or tender the purchase price because of the ‘multiple intimations’ by the Vendors that they would not be giving vacant possession at settlement. On that day the Vendors served a Notice of Default pursuant to condition 27 of the Contract.[26]
[26]Affidavit David Ng sworn 28 May 2013, [9] and Exhibit NG-004.
On 9 October 2012 the Vendors’ solicitor wrote by facsimile to the Purchaser’s solicitor claiming that the Contract had been rescinded and the deposit forfeited due to the Purchaser not remedying the default specified in the Notice of Default and settling the purchase. The facsimile advised that the Property would be re-listed for sale and the Vendors reserved their right to take action to recover any loss arising on the re-sale.[27]
[27]Affidavit David Ng sworn 28 May 2013 , [10] and Exhibit NG-005.
This proceeding was commenced by Writ on 11 October 2012.
The Vendors commenced their application to remove the caveat by summons filed on 14 February 2013, which application was heard on 18 February 2013 and judgment delivered and orders made dismissing the application on 12 April 2013.
Following the failure of the application to remove the caveat, there were negotiations between the parties which led to the Vendors agreeing, by letter dated 20 May 2013, to perform the Contract according to its original terms (save for the settlement date) and “unequivocally agreeing to withdraw the Notice of Default and Rescission served on 24 September 2013 (sic) [2012]”. Settlement was set to take place on 17 June 2013. [28]
[28]Affidavit David Ng sworn 28 May 2013, [15-17] and Exhibit NG-007
On 31 May 2013 the Purchaser filed her summons seeking that the Vendors Counterclaim be summarily dismissed, supported by the affidavit of David Ng sworn 28 May 2013. The Vendors’ solicitor, Kenneth Edwin Smith, filed an affidavit sworn 12 June 2013 in response, referring to the text message of 11 August 2013 referred to above at paragraph 18 in which the Purchaser indicated her willingness to settle the purchase subject to the lease, contending that this constituted an election by her to proceed with the Contract, stating that the Property was vacated by the tenants on 4 January 2013 notwithstanding which the Purchaser “has still not tendered the purchase price”[29] and indicating that, in the circumstances, he is instructed to seek leave to amend the Counterclaim to seek damages from the Purchaser consequent upon either a failure to perform her contractual obligations on 24 September 2012 or alternatively by reason of the Purchaser’s failure to tender the purchase price when the Property became vacant on 4 January 2013.
[29]Affidavit of Kenneth Edwin Smith sworn 12 June 2013. This is said in the face of the agreement to settle the contract evidenced by the letter Mr Ng exhibited to his affidavit as Exhibit NG-007, referred to in paragraph 35 above.
The defence and Counterclaim
In the Vendors’ defence, so far as presently material:
(a) They admitted the basic terms of the Contract as pleaded by the Purchaser, save that they denied that at settlement, which they agreed was due on 24 September 2012, they would provide vacant possession of the Property;
(b) They pleaded, in further answer to that denial, that the Purchaser knew that the Property was leased and that terms of the Contract included the Vendor’s Statement, and that Statement contained a copy of the lease;
(c) They admitted that vacant possession was not given at settlement, but denied that this constituted a breach of the Contract, referring back to the knowledge of the Purchaser of the existence of the lease and the Vendor’s Statement being a part of the Contract;
(d) They further alleged that if there was a breach by them, the Purchaser elected not to rescind the Contract for the breach;
(e) They denied that the Purchaser was ready willing and able to comply with her obligations under the Contract and alleged that the Purchaser failed or refused to pay the balance of the purchase price at settlement or at all.
In the Counterclaim the Vendors, as is the usual course, refer back to their defence and allege:
(a) That the terms of the contract included the Vendor’s Statement;
(b) That to the extent that the Contract purports to confer a right to possession on the Purchaser at settlement it contains a mistake entitling the Vendors to rectification;
(c) That the terms of the Contract entitled a party not in default to give a notice of default, that such a notice was given and not complied with, and that in consequence the Contract was rescinded and the deposit forfeited;
(d) That the caveat was wrongly lodged, that the Purchaser has refused to remove it, and that in consequence the Vendors are entitled under s 90(3) of the Transfer of Land Act 1958 to an order that the caveat be removed.
Purchaser’s Submissions
In written submissions,[30] the Purchaser contended that summary judgment dismissing the Counterclaim ought to be granted because, in summary:
[30]Plaintiff’s written submissions dated 5 June 2013.
(a) She did not breach the contract by not paying the purchase price on 24 September 2012, as –
(i) Her obligation to pay under condition 10.1(a) of the contract was mutually dependent and concurrent with the Vendors’ obligations under condition 10.1(b);
(ii) Further, the decision of the High Court in Foran v Wight[31] establishes a presumption of dependency in respect of the obligations on a vendor to deliver a conveyance and on the purchaser to pay the balance of the purchase price;
[31](1989) 168 CLR 385.
(iii) Nothing in the Contract is inconsistent with the application of the presumption. In fact, the language of the Contract supports the application of the presumption;
(iv) In addition, the nature of the Contract, as a standard form contract, supports treating the obligations under condition 10.1 as mutually dependent and concurrent;
(v) It follows that the Vendors’ claims based on her alleged breach cannot succeed (“the Breach Claim”);
(b) Where obligations are mutually dependant and concurrent, a statement by one party that they will not perform their obligations may excuse the other party from performing their obligation;
(c) Here, the undisputed facts show that, by letter dated 17 September 2012, the Vendors expressly stated that they would not provide vacant possession. It follows that the Purchaser was excused from tendering the balance of the purchase money on the settlement date;
(d) The question of whether or not condition 10.1(b)(ii) was an essential term is not relevant to the question of whether the Purchaser was excused from performance. Moreover, to the extent it is relevant, condition 10.1(b)(ii) plainly satisfies the test of essentiality;
(e) The Vendors’ claim for rectification cannot succeed, as the pleadings do not disclose a cause of action. Further, the rectification claim must fail because the Vendors have now acquiesced in the performance of the contract in its unaltered form;
(f) Whether or not the Purchaser was in breach of the contract, the Vendors’ claims for rescission and removal of the caveat cannot succeed, given the Vendors have:
(i) withdrawn the Notice of Rescission; and
(ii) agreed to perform the Contract.
Even if the Court is not satisfied that all the Vendors’ claims must fail, there is utility in deciding whether the Vendors’ Breach claim can succeed, given the Vendors’ stated intention to continue with this claim and the fact that two of the Vendors’ other claims are contingent on the determination of the Breach claim.
In support of this summary, the Purchaser made further reference to the authorities that support this statement of applicable principles. I refer to these authorities below.
Vendors’ Submissions
The vendors submitted –
(a) by seeking specific performance and damages the Purchaser is seeking an abatement of the purchase price. She is not entitled to one. Nor is she entitled to damages;
(b) the facts of this case are distinguishable from those in Foran v Wight;
(c) even if the Purchaser is right and the obligation to confer vacant possession is mutual with the obligation to pay the purchase price, the Purchaser is not relieved from paying the purchase price indefinitely. Brennan J in Foran rejected Lord Ackner’s principle of contract law[32] in which an innocent contracting party can either accept repudiatory conduct on the part of another party and rescind the contract or it can elect to affirm the contract (and sue for damages). Brennan J posited a third alternative. In addition to the affirm/rescind alternatives a party can defer performance until the offending party is “once again able and willing to perform”[33] its obligations under the contract. This does not confer on an innocent party a right to perform her obligations at any time she sees fit. The Purchaser knew of the terms of the lease. She knew that the tenants would be out of the premises on 4 January 2013 and yet she still has not tendered the settlement sum. Regard must be given to the Purchaser’s claim. It is based in equity. She seeks specific performance and is bound by a clean hands doctrine. She has provided no evidence of having tendered the settlement sum. Nor can she;
[32]Fercometal SARL v Mediterranean Shipping Co SA [1989] 1 AC 788 (see Foran at 421).
[33]Foran at 422.
(d) alternatively, assuming there are three alternatives open to an innocent contracting party for a ‘fundamental breach’, the Purchaser in unequivocal terms accepted the lease and committed to paying the purchase price in accordance with the contract by text message to the Vendors’ agent dated 13 August 2013[34] (a text message she omitted from her affidavit sworn on 15 February 2013). She had, therefore, elected to affirm the contract;
(e) the case law is clear and consistent that a failure to confer vacant possession does not constitute a breach of a fundamental term. It may give rise to a right to claim liquidated damages, but it does not relieve an innocent party from paying the purchase price as and when it falls due under the contract; King v Poggioli;[35] Eaglestar Nominees Ltd v Merrill,[36] Voumard, The Sale of Land (current edition at 9290);
(f) the Vendors assert a right to claim damages against the Purchaser. Summary judgment can only be given if there are no real prospects of success. Moreover, by this application the Purchaser seeks judgment on the Vendors’ Counterclaim whilst keeping her own claim for damages alive. This would deprive the Vendors of the right fully to articulate their claim at trial while leaving them to defend the claim for damages brought by the Purchaser. This will result in no net gain either to the parties or the Court in terms of time and expense. Under s 64(a) of the Civil Procedure Act the Court can dismiss a summary judgment application where it is just to do so.
[34]A mistaken reference to the text message of 11 August 2012.
[35](1923) 32 CLR 222.
[36][1982] VR 557.
Purchaser’s Submissions in Reply
Much of the Purchaser’s submissions in reply deal with the applicability of the principles to be derived from the decision of the High Court in Foran v Wight, and the authorities referred to in it. I will not reproduce those here as I deal with those principles in the reasoning leading to my conclusions.
In other respects the submission dealt with the reliance of the Vendors on the decisions in King v Poggioli[37] and Eagle Star Nominees v Merrill,[38] to which I refer below in the reasoning leading to my conclusions.
[37](1923) 32 CLR 222.
[38][1982] VR 557.
Summary Judgment Test
In the recent decision of the Court of Appeal in Lysaght Building Solutions Pty Ltd v Blanalko Pty Ltd[39] a question of law was referred to the Court pursuant to s 17B(1) of the Supreme Court Act 1986 as to the test to be applied when determining whether to give summary judgment in a civil proceeding under s 63 of the Civil Procedure Act 2010. After reviewing the authorities and extrinsic materials the Court concluded as follows:
[39][2013] VSCA 158.
Upon the present state of authority:
a) the test for summary judgment under s 63 of the Civil Procedure Act2010 is whether the respondent to the application for summary judgment has a ‘real’ as opposed to a ‘fanciful’ chance of success;
b) the test is to be applied by reference to its own language and without paraphrase or comparison with the ‘hopeless’ or ‘bound to fail test’ essayed in General Steel;
c) it should be understood, however, that the test is to some degree a more liberal test than the ‘hopeless’ or ‘bound to fail’ test essayed in General Steel and, therefore, permits of the possibility that there might be cases, yet to be identified, in which it appears that, although the respondent’s case is not hopeless or bound to fail, it does not have a real prospect of success;
d) at the same time, it must be borne in mind that the power to terminate proceedings summarily should be exercised with caution and thus should not be exercised unless it is clear that there is no real question to be tried; and that is so regardless of whether the application for summary judgment is made on the basis that the pleadings fail to disclose a reasonable cause of action (and the defect cannot be cured by amendment) or on the basis that the action is frivolous or vexatious or an abuse of process or where the application is supported by evidence.
I notice here the effect of s 64 of the Civil Procedure Act2010, as the Vendors say that it is relevant to whether the Counterclaim should be summarily dismissed. This section leaves to the Court a discretion to order that a civil proceeding go to trial if it is satisfied that, despite there being no real prospect of success, the civil proceeding should not be disposed of summarily because it is not in the interests of justice to do so, or the dispute is of such a nature that only a full hearing on the merits is appropriate.
The Breach Claim of the Vendors
What is the effect of the Vendor’s Statement
Before turning to the aspect of the Vendors’ Counterclaim that purports to justify the claim that, by virtue of the Notice of Default, the Contract has been terminated, it is necessary to deal with an aspect of the defence that seems likely to amount to the proposition that it was a term of the Contract that at settlement the Purchaser would take the Property subject to the lease.
In the Vendors’ defence, they deny the term of the Contract that at settlement the Vendors were required to give vacant possession of the Property to the Purchaser, and deny that the failure to give vacant possession on the settlement date was a breach of the Contract. The defence alleges that the Purchaser knew that the Property was subject to a lease and was tenanted until 4 January 2013, and refers to the fact that the Vendor’s Statement was included in the Contract and contained a copy of the lease. These facts are undoubtedly correct. However, where do they lead?
It seems to me that they can only be an indirect means of contending that it was not a requirement of the Contract that the Vendors give vacant possession at settlement.
The facts disclosed by the Purchaser, and not contested by the Vendors, show quite clearly that the Purchaser bargained for and obtained, as a term of the Contract, that the Vendors would give vacant possession at settlement in exchange for the payment of the balance of the purchase price. It is not to the point to assert, in answer, that the Purchaser had knowledge of a possibly disabling fact, namely, that a lease existed that expired after the date for settlement. Nor does the reference to the disabling fact clearly and unequivocally reveal that the term requiring vacant possession at settlement was in some way modified or overridden by the presence of the Vendor’s Statement.
However, in the Counterclaim, the Vendors go a little further and allege that the terms of the Contract are contained, inter alia, in the Vendor’s Statement. That seems to be another attempt to allege that the clear and express provision for vacant possession to be given at settlement does not mean what it says.
It can be seen from the terms of the opening provisions of the Contract, referred to above at paragraph 11, that the Vendor’s Statement is incorporated into the terms of the Contract, but that the order of priority is that the Vendor’s Statement is last. This means that the Particulars of Sale and condition 10.1 have priority and take precedence over the Vendor’s Statement. To the extent that they are inconsistent, the general conditions and the Particulars of Sale prevail, or ‘trump’, the Vendor’s Statement.[40]
[40]Maile v Jennings [1956] VLR 45.
Thus, if the Vendors, by their defence or Counterclaim, seek to contend that the reference to the lease in the Vendor’s Statement in some way qualifies the express requirement for the giving of vacant possession at settlement, that contention must fail. There cannot, in my view, be any doubt about it. It has no prospect of success, ‘real’ or otherwise.
Mutually dependant and concurrent obligations
The next question is whether, properly construed, condition 10.1 of the Contract imposed mutually dependent and concurrent obligations on the Vendors and Purchaser. If so, then the Vendors’ refusal to provide vacant possession is an anticipatory breach and excuses the Purchaser from tendering the balance of the purchase price on the settlement day.
Whether an obligation is dependent and concurrent is a question of construction of the Contract[41] and, thus a question of law.[42] It is therefore open to this Court to determine that question.[43] In Southern Region Pty Ltd v Minister for Police and Emergency Services,[44] Phillips JA observed:
It may be accepted that, whenever summary judgment is sought, it is open to the judge (when circumstances warrant) to reach a conclusion on a question of law, even one involving argument, if at the end of the day he regards the matter as plain. That will be appropriate if and only if the conclusion is in aid of the grant of summary judgment. When summary judgment is sought by a plaintiff, the question is whether justice dictates that the proceeding lead forthwith to judgment as sought and if, even after argument, the judge is satisfied that the plaintiff’s claim must succeed, it will ordinarily be appropriate that summary judgment follow. But it is otherwise if the judge fails to reach that state of satisfaction. If, whether the argument is brief or long, the judge apprehends that there is, at least arguably, a weakness in the plaintiff’s case which may mean that the plaintiff will not in the end succeed, the appropriate course is to allow the matter to go to trial on the basis that there is a triable issue of law or (as here) of fact, or both. …
[41] Segboer v AJ Richardson Properties Pty Ltd [2012] NSWCA 253, [82].
[42] FAI Traders Insurance Company Ltd v Savoy Plaza Pty Ltd [1993] 2 VR 343, 351.
[43] Southern Region Pty Ltd v Minister for Police and Emergency Services [2003] VSCA 105, [14].
[44][2003] VSCA 105, [14].
I agree with the submissions of the Purchaser that as a matter of construction of the Contract, the obligation on the Purchaser to pay the balance of the purchase price and the obligation on the Vendors to give both good title and vacant possession are mutually dependant and concurrent obligations.
Reference to condition 10.1 in the General Conditions, when read with the Particulars of Sale, show that all the things there referred to had to be delivered at settlement if the Purchaser was to come under an obligation to pay the purchase price. It was a breach of that obligation which would entitle the Vendors to rescind. So long as the Vendors were not in a position to deliver vacant possession, the Purchaser’s failure to tender performance could not amount to a breach of the contract.[45]
[45]See, for example, the observations of Keane J in Jeppesons Road Pty Ltd v Di Domenico [2005] QCA 391, [22].
In a contract for the sale of land the vendor’s obligation to deliver good title and the purchaser’s to pay the purchase price are concurrent and mutually dependent obligations in the sense that they are simultaneous acts to be performed interchangeably.[46] Although the facts in Foran v Wight were different from those in this case, the principles explained and applied in all the reasons of the Judges in that case have application to the Contract and the facts in this case. In that case, Brennan J put the matter of ‘concurrent and mutually dependent obligations’ in this way:
The obligation of a vendor to deliver a conveyance and the obligation of a purchaser to pay the price on completion are mutually dependent and concurrent obligations in the absence of any contrary stipulation; each obligation is to be performed in exchange for the other … . Where the respective obligations of parties to a contract are mutually dependent and concurrent, the primary rule is that neither party who fails to perform his obligation when the time for performance arrives can rescind for the other party’s failure at that time to perform his obligation. Each party’s obligation is conditional on performance by the other; neither can complain of non‑performance by the other when the condition governing the other’s obligation goes unfulfilled. But if one party intimates to the other that it is useless for the other to fulfil his obligation and the other acts on the intimation, the party to whom the intimation is given is dispensed from a nugatory tender of performance.[47]
[46]Foran v Wight (1989) 168 CLR 385 per Mason CJ at 396, Brennan JA at 417, Dean J at 433, Dawson J at 442-450 and Gaudron J at 458.
[47]Ibid at 417. Similar views are expressed in Seachange Management Pty Ltd v Pital Business Pty Ltd (2009) 23 VR 396, [67].
In general, therefore, a party in breach of such a mutually dependent and concurrent obligation cannot terminate for the other party’s breach.
In this case, it is clear that the Purchaser did not accept the anticipatory breach by the Vendors intimating that they would not give vacant possession at settlement. It is also clear that the Purchaser maintains and has always maintained a readiness and willingness to complete the Contract in accordance with its terms, save that the tender of the purchase price on settlement day was futile and rendered nugatory by the anticipatory breach of the Vendors intimating that vacant possession would not be given. As Lord Mansfield put it in Jones v Barkley:[48]
Take it on the reason of the thing. The party must shew he was ready; but, if the other stops him on the ground of an intention not to perform his part, it is not necessary for the first to go farther, and do a nugatory act.
[48](1781) 2 Dougl. 684 at 694 (99 ER 434 at 440); Foran v Wight per Mason CJ at 397, Brennan J at 417, Dawson at 443
The basis of the ‘dispensation’ of the requirement that the innocent party tender the purchase price was variously attributed in Foran v Wight to be the result of an estoppel (Mason CJ, Dean, Dawson JJ), an equity raised against the party giving the intimation which is satisfied by treating him as though he had prevented the innocent party from tendering performance (Brennan J ), and waiver (Gaudron J).
In Foran v Wight Deane J expressed the dispensation this way:[49]
In the present case, the unequivocal and unqualified advice that the vendors would not complete the contract until after the stipulated date was in response to a request by the purchasers' solicitors to the vendors' solicitors to nominate a time for completion on that day. To adapt words used by Kitto J. in Peter Turnbull & Co,[50] that advice necessarily conveyed to the purchasers that it would be pointless for them to trouble to fulfil the condition of performance of their concurrent obligations within the time which the contract made of the essence: it was "a continuing intimation that the condition need not be observed, and it did not become any the less an intimation to that effect because (the purchasers) chose not to determine the contract before its time." The purchasers acted on the faith of that intimation that performance within the stipulated time would be futile and was unnecessary. They ceased their efforts to arrange finance with the consequence that they were neither ready nor able to complete the purchase within the time allowed by the contract.
In these circumstances, the law will not allow the vendors to depart from the state of affairs upon the basis of which they had, by their conduct, induced the purchasers to act. The doctrine of estoppel by conduct explained by Dixon J. in Thompson v. Palmer[51] and Grundt v. Great Boulder Pty. Gold Mines Ltd[52] is applicable to preclude the vendors from asserting that the purchasers' failure to tender performance or to have the purchase price ready and available on the stipulated day either constituted a failure to discharge a contractual obligation upon the performance of which the vendors' own obligations remained conditioned or placed the purchasers themselves in breach of contract. In that regard, it is unnecessary to decide whether the vendors' representation related to a present or future state of affairs or whether the purchasers are seeking to use estoppel as a sword rather than a shield. In Waltons Stores (Interstate) Ltd. v. Maher,[53] I explained in detail the reasons which led me to conclude that the assumed state of affairs under an estoppel by conduct can provide the factual foundation of a cause of action and that estoppel by conduct (in its emanation commonly described as "promissory estoppel") may preclude departure from a represented or assumed future "state of affairs" in at least certain categories of case. A case such as the present which involves a representation between parties in a pre-existing contractual relationship that one party is dispensed from strict performance of the contract clearly falls within one such category of case (see Legione v. Hateley). [54]
[49]At 434-5.
[50]Peter Turnbull & Co. Pty Ltd. v Mundus Trading Co. (Australasia) Pty Ltd (1954) 90 CLR 235, 251.
[51](1933) 49 CLR 507, 547.
[52](1937) 59 CLR 641, 679.
[53](1988) 164 CLR 387, 444–52.
[54](1983) 152 CLR 406, 434–5.
In this case there were several and repeated intimations by the Vendors’ solicitors that vacant possession would not be given and that if settlement did not occur on the Vendors’ terms, namely that the Purchaser pay the balance of the purchase price in return for a title subject to the lease, then the Vendors would treat that as a breach of the Contract and give a Notice of Default under general condition 27. Prime among those many intimations is the letter dated 17 September 2012 from the Vendors’ solicitor expressly stating that they would not provide vacant possession. However, the account of the facts I have given above demonstrates that the letter of 17 September was neither the last nor the first intimation. It follows that the Purchaser was excused from tendering the purchase price settlement day, as it would have been a futile act.
I agree with the Purchaser’s submission that the reliance by the Vendors on the decision of the High Court in King v Poggioli[55] is misplaced. That case is concerned with the question of whether a person who is not entitled to specific performance may be awarded equitable damages or compensation.[56] The Court decided, by majority, that such an award could not be made. Further, the reasoning in that case turned in part upon the fact that in New South Wales at the time equity and common law were not concurrently administered. In order to be able to make a claim for equitable damages, pursuant to Lord Cairns’ Act it was necessary for the person to bring proceedings for specific performance. The Court decided that the plaintiff was not entitled to a decree for specific performance and, accordingly, was not entitled to equitable damages or compensation.[57]
[55](1923) 32 CLR 222.
[56]See also the decision of McMillan J in Qin v Smith [2013] VSC 158, [27].
[57]See the decision of Starke J at 246–7.
It is clear in this case that the Purchaser is ready, willing and able to perform the contract and pay the full purchase price without abatement. This is the subject of unchallenged evidence from the Purchaser and her solicitor and is evident from the fact that she has agreed to complete the Contract and to do so on 17 June 2013.
The decision in Eagle Star Nominees v Merrill was concerned with the availability of an equitable set-off as a defence to a claim at law. In this case there was no set‑off claimed and the Purchaser is prepared to pay the full purchase price (and apparently has already done so).
Was condition 10.1 an essential term of the Contract?
The question whether or not a term requiring the delivery of vacant possession is an essential term is a question of construction and the courts have on occasion determined that such a term is essential.[58]
[58]McKendrick and Co Pty Ltd v Fush [2001] VSC 95; Austral Standard Cables Pty Ltd v Walker Nominees Pty Ltd (1992) 26 NSWLR 524.
It is tolerably clear that condition 10.1 of the Contract is essential. The Purchaser referred me to the analysis undertaken by Keane JA (as he then was) in Jeppesons Road Pty Ltd v Di Domenico.[59] It is enough in these reasons, having regard to my earlier conclusion as to the mutual and concurrent nature of the obligations under condition 10.1, to refer briefly to the proposition that the date fixed for settlement was made essential by the express provision in condition 16.1 making time of the essence and the terms of condition 10.1, read with the particulars of sale, make it clear that “the promise is of such importance to the promisee that he would not have entered into the contract unless he had been assured of a strict or substantial performance of the promise.”: Tramways Advertising Pty Ltd v Luna Park (NSW) Ltd.[60] The only substantial performance available was literal performance by giving vacant possession. The concurrent nature of the Vendors’ obligations and the express provision making time of the essence, have the result that the requirement is essential. As Dawson J said in Foran v Wight:[61]
Under the contract, the obligation of the purchasers to pay the purchase price … was simultaneous with the obligation of the vendors to deliver a conveyance. That is to say, they were mutual or concurrent obligations, the performance of each being conditional upon the performance of the other … Not only were there concurrent obligations to settle but, an essential time having been fixed for settlement, there was an obligation on each side to settle within that time.
[59][2005] QCA 391, [20]-[32].
[60](1938) 38 SR (NSW) 632, 641–2; Jeppesons Road Pty Ltd v Di Domenico [2005] QCA 391, [24].
[61](1989) 168 CLR 385, 450–1.
But the essentiality of the obligation is a distraction for the reasons expressed by Keane JA in Jeppesons Road Pty Ltd v Di Domenico,:
To enquire whether cl 5.3(1)(d)(ii) of the contract is to be characterised as an "essential term" of the contract is to be distracted from the real issue. As was emphasised by the majority of the court in Beard v Wratislaw, the provisions of the contract in relation to what is required to be provided at settlement "in exchange for payment of the Balance Purchase Price" are of critical importance because "the obligations of a purchaser and vendor under a clause in that form are dependent, concurrent and reciprocal". Absent compliance by the vendor with those provisions or proof of the vendor's readiness, willingness and ability to comply, the purchaser cannot be charged with breach of contract by reason of its failure to perform its dependent, concurrent and reciprocal obligation to tender the purchase price.[62]
[62][2005] QCA 391, [21]. See also Highfield Property Investments Pty Ltd v Commercial and Residential Developments(SA) Pty Ltd [2012] SASC 165, [376]. It is conceded that no Victorian court has expressly applied Jeppeson. Nonetheless, comity suggests that, unless this Court is satisfied Jeppeson is plainly wrong, it ought to follow it, given that there is only one common law in Australia. See generally ASIC v Ingleby [2013] VSCA 49, [26].
What is the effect on the Contract of the above conclusions?
In the several judgments in Foran v Wight, the law relating to the rights of parties to a contract where there has been an anticipatory breach followed by an actual breach, and the consequences which follow in the general circumstances of a contract of this kind, are set out. To take the reasoning of Dawson J as an example,[63] he described the sequence as follows:
[63](1989) 168 CLR 385, 441–2; See also Brennan J at 416–22.
(a) Repudiation by way of anticipatory breach by a party to a contract does not put an end to the contract unless the other party accepts the repudiation and rescinds the contract.
(b) Although he may do so, the other party does not have to accept the repudiation. He may continue to treat the contract as on foot and hold the party guilty of repudiation to the performance of his obligations. If those obligations remain unperformed when the time for performance arrives, the anticipatory breach will be converted into an actual breach. Thus, the anticipatory breach of a contract amounting to repudiation cannot, if the repudiation is not accepted, continue beyond the time for performance. At that point, the failure to perform becomes an actual and not an anticipatory breach and the remedies available are for actual, rather than anticipatory, breach. See Peter Turnbull& Co. Pty. Ltd. v. Mundus Trading Co. (Australasia) Pty. Ltd.[64]
[64][1954] HCA 25; (1954) 90 CLR 235, 251.
(c) If the other party keeps the contract alive, he does so not only for his own benefit but also for the benefit of the party guilty of repudiation. The latter may, upon giving reasonable notice, withdraw his repudiation and complete the contract and, subject to a qualification, the other party remains bound by the contract, enabling the repudiating party to take advantage of any breach by the other party or any supervening event which would discharge him from liability.
(d) The qualification is that if the repudiation by one party makes it futile or pointless for the other party to attempt to perform an obligation, the law does not require him to do so. The obligation remains - it does not disappear from the contract - but the other party is treated as if he had performed it in the limited sense that he is absolved from the consequences which would otherwise flow from his non-performance. This principle, which emerged before the doctrine of anticipatory breach, was formulated in 1853 in Hochster v. De la Tour, [65] and was originally justified as being common sense, although it has latterly been seen as the early recognition of the now developed notions of estoppel.
(e) If the other party elects to rescind, the rescission is not ab initio. He is entitled to maintain an action for damages for the anticipatory breach, the damages being calculated by reference to the loss which he would suffer by the breach becoming actual, subject to any opportunity to mitigate his loss in the meantime. See Hochster v. De la Tour;[66] Frost v. Knight;[67] Avery v. Bowden;[68]; Peter Turnbull & Co. Pty. Ltd. v. Mundus Trading Co. (Australasia) Pty. Ltd.[69]
[65](1853) 2 El & Bl 678 (118 ER 922).
[66](1853) 2 El & Bl 678 (118 ER 922).
[67](1872) LR 7 Ex 111, 112.
[68][1856] Eng R 889; (1856) 6 El & Bl 953 (119 ER 1119).
[69][1954] HCA 25; (1954) 90 CLR 235.
Where the other party does not elect to rescind, and time is of the essence of the Contract, or as it is sometimes put, an essential time was fixed for settlement,[70] the Vendors’ intimation that they would not abide by the terms of the Contract and give vacant possession on settlement day, and the implied intimation that it would be useless for the Purchaser to attempt to do so, leads to the time ceasing to be of the essence until it is made essential again by one party or the other giving reasonable notice of intention to complete the contract.[71] This is conventionally done by one party giving to the other a notice to complete.
[70]Foran v Wight per Dawson J at 450–1.
[71]Carr v. J.A. Berriman Pty.Ltd. [1953] HCA 31; (1953) 89 CLR 327, 348–9; Foran v Wight per Brennan J at 420–1;
The concurrent nature of the obligations of the Vendors and Purchaser, under the Contract in this case, has the consequence that the right of rescission is only available to a party who is ready, willing and able to perform its contractual obligations and is therefore in a position to charge the other with a breach of its concurrent obligations. Thus, the Vendors could only charge the Purchaser with actual breach of contract in failing to pay the purchase price on the due date, and therefore be entitled to rescind, if they themselves were ready, willing and able to perform all of their obligations on that date.[72]
[72]Jeppesons Road Pty Ltd v Di Domenicao [2005] QCA 391 per Keane JA at [29] and [34].
Thus the notice of default, and the rescission claimed by the Vendors in consequence of that notice, is ineffective to terminate the Contract and the deposit has not been forfeited. It remained on foot, but time has ceased to be of the essence.
The Purchaser, in her submissions in reply to the Vendors’ submissions, maintained that the Contract was still on foot (before completion in consequence of the Vendors’ letter of 20 May 2013 agreeing to complete the Contract according to its terms, and withdrawing the notice of default and rescission). That is undoubtedly the case. As I have said, the Vendors’ notice of default was ineffective. There was no rescission in consequence of that notice. Time ceased to be of the essence of the Contract. It is then up to one or other of the parties to make time of the essence again. There is no evidence apart from the letter of 20 May 2013 of time again being of the essence. It is not incumbent on the Purchaser to monitor the situation and tender when the tenants vacate, as the Vendors appear effectively to submit.[73]
[73]Paragraph 5 of Vendors submission, referred to at paragraph 42(c).
The Vendors also maintained that it is a breach for the Purchaser not to have tendered on 4 January 2013 when the tenants apparently vacated. The addition of a claim in this respect is referred to below at paragraph 76. But it is unsound for the reasons I have already given and because at that time the Vendors contended the Contract was at an end. They seem to be contending that they, the Vendors, were then ready willing and able to complete the Contract had the Purchaser, out of the blue, tendered the balance of the purchase price, notwithstanding that on 15 February 2013 they filed their application to remove the caveat on the basis that the Purchaser had no interest in the Property because the Contract was at an end and the deposit had been forfeited. A startling submission!
Application to amend Counterclaim
After I made directions for the filing and service of submissions in support of, and in opposition to, the Purchasers application for summary dismissal of the Counterclaim the Vendors filed the affidavit of Kenneth Edwin Smith, the Vendors’ solicitor, sworn on 12 June 2013. In the affidavit, Mr Smith refered to the Purchaser having elected to continue with the Contract and settle on 24 September 2012, subject to the lease, and (perhaps) that she agreed to a variation of the Contract so that settlement was subject to the lease, based on the text message of 11 August 2012 (referred to above at paragraph 18) and the emails that followed between solicitors. He then foreshadowed an application to amend the Counterclaim –
(a) to claim damages for the Purchaser’s failure to perform her contractual obligations on the settlement day, 24 September 2013;
(b) alternatively to paragraph (b), to claim damages by reason of the Purchaser’s failure to tender the purchase price when the Property became vacant on 4 January 2013.
For the reasons I give below, the so-called election by the Purchaser was, in my view, not an unequivocal election between inconsistent rights. Moreover, a reading of the text message makes it clear that the Purchaser was not fully informed of her right to insist upon the delivery of vacant possession under the Contract.
For the reasons I give above, the Vendors could only charge the Purchaser with actual breach of contract in failing to pay the purchase price on the due date, and therefore be entitled to rescind, if they themselves were ready, willing and able to perform all of their obligations on that date (at paragraph 70 to 73).
In order to claim that the Vendors are entitled to damages for failure to complete when the tenants vacated the premises on 4 January 2013, assuming that they did so, the Vendors must have given a notice to complete, so making time of the essence of the Contract for the purposes of completion or settlement of the sale (see above at paragraph 71). In other respects, I refer to my observations above at paragraph 75.
Therefore, on the present affidavit material, there is no room for those amendments to be made as they are bound to fail.
The election argument
The argument advanced by the Vendors that the Purchaser either elected to take the Property subject to the lease (expressed in the defence as “elected not to rescind” the Contract) or agreed to vary the contract, by reason of a text message to the agent is in my view without foundation.
The text message of 11 August 2012 (see paragraph 18) is equivocal. It refers to a “desire” (“I would still like to take the property”), and it is clear that the desire is a response to the two limited options given to the Purchaser by the Vendors’ agent – that is either cancel the Contract or take the Property subject to the lease. It is in my view not an unequivocal election between inconsistent rights. Election consists in a choice between rights which the person making the election knows he or she possesses and which are alternative and inconsistent rights.[74] The text message makes it clear that the Purchaser was not fully informed of her right to insist upon the delivery of vacant possession under the Contract. Even assuming that it is the law that a person in the position of the Purchaser should be taken to know her contractual rights (Sargent v ASL Developments Ltd)[75] this is not a case where the contract clearly lays out the rights, as was the situation addressed by Stephen J in Sargent. What is required in this case is knowledge of the kind only available with the advice of the Purchaser’s solicitor.
[74]Per Brennan J in Commonwealth v Verwayen (1990) 170 CLR 394, 421.
[75]Per Stephen J, (1974) 131 CLR 634, 645.
In the circumstance that it appears that the Purchaser was mislead by the options presented to her by the agent (I assume unwittingly), she proceeded without the requisite knowledge of her inconsistent rights until after the agent asked her to contact her solicitor (see paragraph 20 above) .
The rights presented to the Purchaser by the agent were clearly not all the rights available to her. In Foran v Wight, Brennan J rejected Lord Ackner’s formulation of principle in Fercometal SARL v Meditarranean Shipping Co SA, where Lord Ackner had posited two alternates, and no ‘third choice’, in the following passage:[76]
When A wrongfully repudiates his contractual obligations in anticipation of the time for their performance, he presents the innocent party B with two choices. He may either affirm the contract by treating it as still in force or he may treat it as finally and conclusively discharged. There is no third choice, as a sort of via media, to affirm the contract and yet to be absolved from tendering further performance unless and until A gives reasonable notice that he is once again able and willing to perform. Such a choice would negate the contract being kept alive for the benefit of both parties and would deny the party who unsuccessfully sought to rescind, the right to take advantage of any supervening circumstance which would justify him in declining to complete.[77]
[76][1989] 1 AC 788; (1988) 3 WLR 200; (1988) 2 All ER 742, discussed in Foran v Wight at 422.
[77][1989] 1 AC 788, 805; (1988) 3 WLR 200, 212; (1988) 2 All ER 742, 751–2
Brennan J was unable to agree with Lord Ackner’s rejection of the third choice. He held, in accordance with Peter Turnbull and Mahoney v Lindsay,[78] that an intimation of non-performance of an essential term of a contract amounts to repudiation and dispenses a party who acts upon it from performance of his dependent obligation though he does not rescind the contract.
[78](1980) 55 ALJR 118; 33 ALR 601.
In light of the agent giving her only two of her three options to choose between, and her apparent intimation of her desire, but not her clear and unequivocal determination, it is my view that she has not made a binding election.
Moreover, the text message was a direct communication with the agent in circumstances where the agent knew that the Purchaser had engaged a solicitor and the name of that solicitor was specified in the Contract. It is an extraordinary submission, in my view, to contend that she has elected between inconsistent rights when only two of the three rights are presented to her, and they concern a contract in relation to which she has a solicitor engaged who is effectively by-passed by the agent until the so-called election is made.
If it is a variation of the Contract that the Vendors seek to raise as defence and as a basis for the Breach Claim, and that is not clearly alleged, then for there to be an effective variation of the Contract, the variation must be in writing and signed as required by s 126 of the Instruments Act 1958. The text message does not satisfy that requirement.
Removal of the caveat
It follows from the conclusions I have reached on the Breach Claim that the contract has remained on foot and that the Vendors attempt to rescind it failed. In those circumstances, absent –
(a) a notice to complete being given by the Vendors specifying a reasonable period for the Purchaser to complete the Contract by paying the balance of the purchase price in return for vacant possession and title; and
(b) a failure on the part of the Purchaser to complete the Contract on the date specified in the notice,
there is no basis for the Vendors to contend that they have terminated the Contract for breach by the Purchaser.
The Purchaser therefore at all material times was entitled to an interest in the Property arising under the uncompleted Contract and that is sufficient to support the caveat.
Further, in light of the parties’ agreement to proceed with the original Contract, and the unequivocal withdrawal of the notice of default and rescission, it cannot be contended that the Purchaser did not have an interest in the Property sufficient to support the caveat.
Rectification
The Vendors claim that the term of the Contract requiring them to give vacant possession at settlement was a mistake and that the Contract should be rectified so that in the Particulars of Sale the term “subject to lease” should be inserted.
The Purchaser denies that there is any mistake and alleges (in her defence to Counterclaim):
(a) that there is no inconsistency between the disclosure of the lease in the Vendor’s Statement and the requirement to give vacant possession on the settlement date as the lease could be terminated by the Vendors; and
(b) in any event, by the terms of the Contract the Particulars of Sale take precedence over the Vendor’s Statement; and
(c) if there was a mistake it was a unilateral mistake and absent unconscionable conduct on the part of the Purchaser, the Vendors are not entitled to rectification.
The Purchaser contends that the Counterclaim does not plead the necessary facts to establish a unilateral mistake entitling the Vendors to rectification nor is there any evidence in the record that could substantiate such a claim.
The pleading of the mistake is brief and lacks facts. It simply asserts a conclusion from facts that are unstated.
The evidence that there was a mistake is equally limited. In his affidavit sworn on 13 February 2013, in support of the application to remove the caveat, the first defendant, Simon Patrick Smith, deposes that the Contract “mistakenly states that there was no lease”, and that “while the contract of sale mistakenly provides that the property was unencumbered by a lease, I am advised by my solicitors that the lease was disclosed in the section 32 statement…”.[79]
[79]Paragraph 3.
There is no other evidence submitted on the factual question of whether or not the absence of the words “subject to lease” in the relevant part of the Particulars of Sale was a result of a mistake. As it stands, it is an unsatisfactory basis for the allegation that a mistake occurred. It does not set out how the mistake occurred, and who made it. In fact, it does not directly assert a mistake in the terms or conditions of the Contract at all. It advances the proposition that the mistake was that the Contract stated that there was no lease. Even if it were true, which it is not in light of the Vendor’s Statement, it does not mean the Contract terms and conditions were mistaken. It is quite open for the Vendors to sell the Property with vacant possession whilst it is subject to a lease. It is for the Vendors in that situation to deal with the lease and remove the tenants prior to settlement.
Moreover, in the light of the extensive evidence given by the Purchaser, summarised in the extract from the reasons of McMillan J above (at paragraph 8), it is clear that, whatever the position of the Vendors, the Purchaser was not labouring under any mistake at all. Therefore, in the result, any mistake was clearly unilateral.
The Purchaser submitted that in order to succeed in a claim for unilateral mistake, the claimant must demonstrate four things:
[F]irst, that one party A erroneously believed that the document sought to be rectified contained a particular term or provision, or possibly did not contain a particular term of provision which, mistakenly, it did contain; secondly, that the other party B was aware of the omission or the inclusion and that it was due to a mistake on the part of A; thirdly, that B has omitted to draw the mistake to the notice of A... there must be a fourth element involved, namely, that the mistake must be one calculated to benefit B.[80]
[80] Thomas Bates and Sons Ltd v Wyndham’s (Lingerie) Ltd [1981] 1 All ER 1077, 1086. This analysis was referred to with apparent approval by the High Court in Harrington v Lowe (1996) 190 CLR 311, 318, and by a majority of the High Court (Mason ACJ, Murphy and Deane JJ) in Taylor v Johnson (1983) 151 CLR 422, 431. See also Leibler v Air New Zealand [1999] 1 VR 1, [36] per Kenny JA, with whom Winneke P and Buchanan JA expressed ‘substantial agreement’.
In Leibler v Air New Zealand Ltd (No 2)[81] Kenny JA summarised the law as requiring the following elements:
[81](1999) 1 VR 1, [36].
(a) If one party, A, makes an agreement under a misapprehension that the agreement contains a particular provision which the agreement does not in fact contain; and
(b) the other party, B, knows of the omission and that it is due to a mistake on A's part; and
(c) party B lets A remain under the misapprehension and conclude the agreement on the mistaken basis in circumstances where equity would require B to take some step or steps, depending on those circumstances, to bring the mistake to A's attention; then
(d) B will be precluded from relying upon A's execution of the agreement to resist A's claim for rectification to give effect to A's intention.
Moreover, to establish mistake, whether it be common mistake or unilateral mistake, the party seeking rectification must advance ‘convincing proof’ that it not only made a mistake but that the mistake made was precisely the one identified by it for the purposes of its claim for rectification: Leibler v Air New Zealand Ltd (No 2)[82] Slee v Warke;[83] Maralinga Pty Ltd v Major Enterprises Pty Ltd [84]; Pukallusv Cameron;[85] Joscelyne v Nissan.[86]
[82](1999) 1 VR 1, [38].
[83](1949) 86 CLR 271, 281.
[84](1973) 128 CLR 336, 350.
[85](1982) 56 ALJR 907, 909.
[86][1970] 2 QB 86, 98.
In this case, there is no convincing proof of the mistake alleged. The extent to which there is any evidence in answer to the Purchaser’s summons for summary dismissal of the Counterclaim, it does not establish on any basis that there was a mistake in the terms or conditions of the Contract. There is no evidence or basis for asserting that the Purchaser was aware of the purported mistake. Indeed the Purchaser’s evidence is quite to the contrary, and having regard to the fact that all her dealings were with the agent in the lead up to the signing of the Contract, that is hardly surprising. If the evidence was that the Vendors mistakenly omitted from the Contract “subject to lease” in the Particulars of Sale (and the evidence does not rise that high), there is no evidence, and on the current evidence from the Purchaser, there could be no evidence, that she was aware of a mistake having been made by the Vendors and stood by, silent, knowing of the mistake without correcting it, and taking advantage of it to the detriment of the Vendors.
In addition to these matters, I am at a loss to see how the Vendors can maintain the claim for rectification in the face of the open agreement to complete the Contract and their unequivocal withdrawal, by open letter of 20 May 2013, of the notice of default and rescission served on 24 September 2012. This is, as the Purchasers submitted, an unequivocal waiver by election of any right to rescind the Contract. Election is an informed choice between two inconsistent rights.[87] Here, to argue that the Contract has been rescinded is inconsistent with the continued performance of that Contract to which the Vendors have now agreed. As the Full Court of the Federal Court said in Comandante Marine Corp v Pan Australia Shipping Ltd, ‘when a contract is repudiated the innocent party either accepts the repudiation and ends the contract or chooses not to end the contract. Both cannot be done – the contract is either ended or on foot.’[88]
[87]See, generally, Zhang v Shanghai Wool and Jute Textile Co Ltd [2006] VSCA 133, [15], citing the judgment of Brennan J in Verwayen v Commonwealth (1990) 170 CLR 394, 421, and Sargent v ASL Developments Ltd (1974) 131 CLR 634 per Stephen J at 641.
[88][2006] FCAFC 192, [62].
For these reasons, in my view it is impossible for the Vendors to establish the claimed mistake as a basis for rectification of the Contract.
Because, however, the Vendors filed a late affidavit in opposition to the Purchaser’s application for summary dismissal of the Counterclaim, in which they foreshadowed applying to amend the Counterclaim, and because of the conclusions I have reached as to those proposed amendments, and as to the appropriate construction of the Contract, I propose to hear the parties as to whether it is appropriate to allow any amendment to the Counterclaim, and any further evidence or submissions from the parties.
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