Re Cavill Estates Pty Ltd

[1997] QSC 199

IN THE SUPREME COURT

OF QUEENSLAND
  O.S. No. 7469 of 1997

[Re Cavill Estates Pty Ltd]

IN THE MATTER of the Land Title Act 1994

- and -

IN THE MATTER of an Application by CAVILL ESTATES PTY LTD ACN 071 694 114 for the removal of a Caveat by GLOBAL VISION NETWORK PTY LTD ACN 070 887 357 as Trustee

CATCHWORDS:                 REMOVAL OF CAVEAT - anticipatory breach of contract - ability of a party in breach of contract to rely on breach by the other party as a ground for recision.

Counsel:  P.J. Lyons Q.C. and P.G. Bickford for the applicant.

F.W. Redmond for the respondent.

Solicitors:Biggs and Biggs as town agents for Short Punch and Greatorix for the applicant.

Fleestone & Kumick for the respondent.

Hearing Date:  8 October 1997

REASONS FOR JUDGMENT - MUIR J.

Judgment delivered 17 October 1997

The applicant is the vendor of a building unit (“the property”) on the Gold Coast pursuant to a contract dated 17 March 1997 (“the contract”) entered into between it and the respondent.  The respondent lodged a caveat on the title on or about 2 July 1997 claiming an interest in the property “pursuant to a contract of sale dated 17 March, 1997 between Cavill Estates Pty Ltd as vendor and Global Vision Network Pty Ltd as trustee as purchaser”.  The application is for the removal of the caveat.

The contract was not expressed to be subject to finance.  The date for completion was twenty-eight days after 14 April 1997.  Settlement did not take place on that date and the applicant gave a notice to complete appointing 27 June 1997 as the settlement date.  The respondent does not contend that the notice to complete was defective in form.  The respondent did not complete on 27 June and, on 30 June 1997, the applicant gave notice of termination of the contract. 

The respondent asserts that the contract remains on foot and relies on the two matters discussed below to support its contention. 

The itex facility

The respondent asserts a collateral agreement between Mr Merton on behalf of the applicant and Mr Wilson on behalf of the respondent under which the respondent was to be permitted to pay $375,000 of the purchase moneys in what was described as “trade dollars”.  That agreement was allegedly entered into on 31 January 1997.  For the purposes of this application the applicant does not contend that there is no arguable case in relation to the alleged collateral contract. 

The alleged collateral agreement is relied on by the respondent to support its argument that the applicant was not ready, willing and able to settle on 27 June because, of the following–

·In a letter of 26 June 1997 the solicitors for the respondent informed the solicitors for the applicant that the respondent had available for settlement the sum of $375,000 in Itex trade dollars and sought advice as to the arrangements to be made to credit those trade dollars to the applicant’s account with the Itex Trade Exchange.

·The applicant’s solicitor’s response was to state in a letter of 26 July 1997–

“With respect to your comments regarding Itex trade dollars and the first and second mortgage, we refer and rely upon the terms of the contract of sale and our previous correspondence regarding same.”

In that correspondence, the applicant’s solicitors impliedly declined to accept the existence of any agreement in relation to trade dollars.

·At the place and time appointed for settlement the applicant’s solicitors did not take any steps to put in place arrangements for the transfer of the trade dollars from the respondent to the applicant. 

Partial release of unregistered mortgage

There was a mortgage over the subject land which had been lodged for registration but which was unregistered on 27 June 1997.  Although the release of that mortgage was produced by the applicant’s solicitors on 27 June 1997 it did not comply with the requirement of the contract that the purchase price be paid on completion in exchange for–

“(b)A properly executed transfer for the Land in favour of the Purchaser capable of immediate registration (after stamping) in the appropriate office free from encumbrances . .”.

The applicant’s responses to the respondent’s contentions

The applicant submits that there is strong evidence to support the conclusion that the respondent’s solicitor, who attended at the office of the plaintiff’s solicitor ostensibly for the purposes of effecting completion on behalf of his client, did not have the funds available to effect settlement.  The respondent’s solicitor did not effect any tender, disclose the existence of funds available for tender and was not accompanied by any representative of a lender.  It is submitted that the applicant’s argument is strengthened by the fact that the respondent does not swear to having funds available to effect settlement.  At the time and place appointed for completion the respondent’s solicitor did not produce or tender any documents purporting to effect transfer of the Itex funds or make any attempt in that regard.  The applicant also swears to having been in a position to sign all such documents as were necessary to accept payment of part of the purchase price in trade dollars had the respondent tendered performance in that manner.  The applicant submits that, having regard to those matters, it can hardly be said to have declined performance or not to have been ready to perform its obligations in relation to the trade dollars.  I acknowledge the force of submissions but there is, perhaps, a question of whether the respondent was entitled to infer from the applicant’s conduct that it would not tender performance in accordance with the contract, assuming the existence of the alleged collateral agreement.  Having regard to my conclusions on the second point raised by the respondent it is not necessary for me to pursue the matter further.

The applicant’s response to the assertion that it was not in a position to provide a title capable of immediate registration free from encumbrance was to submit that it was relieved of any obligation to tender because of the respondent’s inability to tender performance; cf. Shevill v. Builders Licencing Board (1982) 149 CLR 620 at 626. It relied, in particular, on the following passage in the judgment of Gibbs CJ in that case–

“However, if one party, although wishing to perform the contract, proves himself unable to do so, his default in performance will give the other party a right to rescind the contract, if the breach goes `so much to the root of the contract that it makes further commercial performance of the contract impossible’; Hong Kong Fir Shipping Co Ltd v. Kawaski Kisen Kaisha Ltd (1962) 2 Q.B. 26 at p.64. There is high authority for treating such cases as a form of repudiation of the contract.”

Whether the evidence disclosed a serious question to be tried or a “colourable title”

A difficulty with the applicant’s submission is that, if the respondent is correct in its allegations about the existence of a collateral contract under which the applicant was to advance the funds required to enable the respondent to effect settlement, the applicant’s own breach of contract will be a cause of the respondent’s breach of the contract.  There is a principle of contractual construction or of law that a party to a contract is not permitted to take advantage of its own breach of duty.  Cheall v. A.P.E.X. (1983) 2 A.C. 180 and TCN Channel 9 Pty Ltd v. Hayden Enterprises Pty Ltd (1989) 16 NSWLR 130 (C.A.). Although the applicant’s breach will have been of the collateral contract and not of the contract itself, there is a serious question to be tried as to whether in those circumstances the applicant was in a position to avail itself of its own wrongdoing and bring the contract to an end.

There is also, in my view, a serious question as to the ability of the applicant to rescind on the grounds of the respondent’s alleged repudiation in the circumstances outlined above.

The evidence may well establish that, prior to the date fixed for completion, there was an anticipatory breach of the contract by the respondent in that it was impossible for it to obtain sufficient finance to enable it to complete.  The applicant, however, did not elect to terminate on the grounds of such an anticipatory breach.  It acted as though the contract were on foot up until the time appointed for completion.  As Mason CJ observed in Foran v. Wight (1989) 168 CLR 305 at 395-6–

“Failure by the innocent party to treat an anticipatory breach of an essential term as a repudiation and to terminate the contract has the effect of leaving the contract on foot, in which event it remains in force for the benefit of both parties, just as it would if the anticipatory breach had never occurred, subject to a qualification to which I shall refer in a moment.  The parties then remain bound by the contract and the repudiating party must rely on any supervening circumstance which justifies his non-performance of the contract when the time for performance arrives . . . .  The qualification is that, if the repudiating party by his refusal to perform or other conduct intimates to the innocent party that he need not perform an obligation which is a condition precedent to the performance by the repudiating party of his obligation, and does not retract that intimation in time to give the innocent party an opportunity to perform this obligation, that party may be excused from actual performance of the condition precedent.”

At 396 Mason CJ pointed out that in contracts for the sale of land the vendor’s obligation to deliver good title and the purchaser’s obligation to pay the purchase moneys are “concurrent and mutually dependent obligations in the sense that they are `simultaneous acts to be performed interchangeably’.”.  He then observed–

“Generally speaking, a party in breach of such an obligation cannot terminate for the other party’s breach.”

Brennan J (as he then was) made a similar point at 417, observing–

“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 the time to perform his obligations.  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 nugatory tender of performance.”

See also per Deane J at 433 and per Dawson J at 441-2.  The following statement by Dawson J at 442 is pertinent–

“It is, I think, clear that 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 (1954) 90 CLR at p.251.”

The conduct of the respondent which may have amounted to an anticipatory breach, as I have said, was not acted on by the applicant.  It proceeded to go through the formalities of giving a notice to complete, and of appointing a time and place for completion and of attending at that place ostensibly for the purpose of completing the contract.  The respondent’s anticipatory breach then ceased to operate.      

The point under consideration was discussed at some length in judgments in Brixmond Pty Ltd v. Shaftsbury Nominees (Receivers and Managers Appointed) (in liquidation) (21 December 1994, Court of Appeal, unreported).  In that case the facts were not dissimilar from those now under consideration.  A purchaser under a contract for the sale and purchase of a hotel failed to attend on settlement and to tender performance.  The vendor purported to rescind and the purchaser contended that the vendor was not in a position to rely on any breach by the purchaser for order to terminate the contract as, on settlement, it could not show good title as there was an unregistered and unreleased charge over some of the property of the company.

Pincus JA at p.6 of his reasons stated–

“The conclusion which follows, then, is that the vendor was unable, on 27 June 1990, to produce evidence of the release of the charge in respect of the chattel property the subject of the contract.  The course taken to repudiate the contract and sue for damages for loss of the bargain, was therefore prima facie not one it was entitled to take; that was because it was not shown that the vendor was at the time of rescission itself ready and willing to perform its part of the contract; Carter, Breach of Contract, 2nd ed., pp.228-229.”

In Breach of contract at the above reference it is stated–

“When the courts speak of a requirement of readiness and willingness they mean that a party must be ready, willing and able to perform.  The concept of readiness and willingness therefore embraces ability to perform. . .

Moreover, evidence of the plaintiff’s readiness and willingness must be adduced if the defendant puts this in issue.  This is because a party who is not ready and willing to perform cannot enforce the contract.  Thus, a plaintiff who seeks to rely on a notice making time essential, claims damages, or equitable relief, will be required to adduce evidence of readiness and willingness, or a valid excuse for the absence of such.”

See also Suisse Atlantique Société d’armement Maritime SA v. NV Rotterdamsche Kolen Centrale (1967) 1 AC 361 and the discussion at paras.553 and 554 of 9 Halsbury 4th ed.

Balance of convenience

Having found the existence of a serious question to be tried and or a “colourable title” on the part of the respondent it is now necessary for me to decide the application on the balance of convenience.  Re Jorss’ Caveat (1982) Qd.R. 458 and Re Burman’s Caveat (1994) 1 Qd.R. 123. The applicant points to a hardship which might be occasioned if the caveat remains until determination of the action commenced by the respondent. Mr Tonge a director of the applicant deposes to the fact that the property is the subject of a mortgage under which “substantial holding charges” are accruing. He also swears that the applicant is a property trading company and that the inability on its part to sell the property is having a detrimental effect on its cashflow. The applicant also relies on the fact that there is no credible evidence that the undertaking as to damages, offered by the respondent and also by a director of the respondent, afford any worthwhile protection to the applicant. It submits that the fact that the respondent was unable to settle unless it obtained a loan sufficient to cover stamp duty and to meet future interest repayments on the loan are strong evidence of absence of net worth on the part of the respondent.

The respondent has a paid up capital of $100.  Ninety-nine of the one hundred issued shares in the capital of the respondent are held by a Kerry-Lee Wood.  Kerry-Lee Wood is the sole director and secretary of the respondent although its controller appears to be Mr Wilson.  It’s registered office is in South Australia.  The solicitors for the applicant have made attempts through correspondence to have the respondent provide evidence that it has sufficient assets to settle under the contract if required to do so.  The respondent has declined to provide any such evidence even though it must have been apparent to it that its ability to satisfy an undertaking as to damages would be an issue in these proceedings.  Mr Wilson, to whom I have referred above, swears that he is prepared to provide a personal undertaking as to damages should that be required.  I would certainly require that undertaking if I were to refuse this application but, in my view, it is not sufficient, at least as the evidence stands.

On the present state of the material I am satisfied that the balance of convenience favours the removal of the caveat.  I am a little reluctant though to order its removal as the material discloses the possibility that the applicant may not be a company of great substance.  I have decided to afford the respondent the opportunity of filing further affidavit material with a view to persuading me that undertakings by or on behalf of Mr Wilson and the respondent are sufficient to protect the applicant should the respondent fail in its writ action.  The respondent has not distinguished itself in pursuing its alleged rights under the contract.  Its specific performance action was not commenced until 24 September 1997.  If I am not to remove the caveat I would require an undertaking that the action commenced by the respondent be pursued with diligence.  If the respondent seeks to avail itself of the opportunity of filing the further material referred to above I propose to adjourn this matter to a date next week convenient to the parties.  I intimate now that I can see no reason why the respondent should not bear the costs of the further hearing.