Rosa & Sons Investments Pty Limited (ACN 008 645 743) v Frances Stow and Harold Gordon Stow
[2001] ACTSC 97
•11 October 2001
ROSA & SONS INVESTMENTS PTY LIMITED (ACN 008 645 743) v FRANCES STOW AND HAROLD GORDON STOW [2001] ACTSC 97 (11 October 2001)
CATCHWORDS
REAL PROPERTY – contract for sale of land – whether plaintiff estopped from issuing notice to complete – whether plaintiff’s conduct in doing so unconscionable – whether contract validly terminated – whether plaintiff established loss in consequence of breach of contract.
Central London Property Trust Limited v High Trees House Limited [1947] KB 130
Combe v Combe [1951] 2 KB 215
Legione v Hateley (1983) 152 CLR 406
Waltons Stores (Interstate) Pty Ltd v Maher (1988) 164 CLR 387
The Commonwealth v Verwayen (1990) 170 CLR 394
Livingstone v The Rawyards Coal Co (1880) 5 App Cas 25
Robinson v Harman (1848) 1 EX 850
Koufosv Czarnikow Ltd [1969] 1 AC 350
The Albazero [1977] AC 774
Russell & Anor v Adwan & Ors [2000] ACT SC90 (18 October 2000)
No. SC 273 of 2000
Judge: Crispin J
Supreme Court of the ACT
Date: 11 October 2001
IN THE SUPREME COURT OF THE )
) No. SC 273 of 2000
AUSTRALIAN CAPITAL TERRITORY )
BETWEEN:ROSA & SONS INVESTMENTS PTY LIMITED
ACN 008 645 743
Plaintiff
AND:FRANCES STOW AND HAROLD GORDON STOW
Defendants
ORDER
Judge: Crispin J
Date: 11 October 2001
Place: Canberra
THE COURT DECLARES THAT:
The contract entered into by the parties on 7 May 1996 for the sale of a house and land at 14 Bungaree Crescent, Ngunnawal was validly terminated by the plaintiff on 25 February 2000.
This is an action for declaratory relief and damages for breach of contract based upon successive failures to complete the purchase of a residential property.
In April 1996 an agreement was negotiated for the plaintiff to sell the defendants a house and land at 14 Bungaree Crescent, Ngunnawal in the Australian Capital Territory. It was agreed that pending the preparation of exchange of contracts on the property the defendants would be allowed into occupation from 20 April 1996 at an occupation fee of $250 per week. The defendants duly occupied the property and have remained in occupation since that time.
The parties subsequently entered into a contract for sale dated 7 May 1996 pursuant to which the defendants agreed to buy the property from the plaintiff for the sum of $235,000. Item 12 of the agreement stipulated that the sale should be completed on or before 2 August 1996. Clause 22 provided that in the event of any delay in completion beyond the date specified in Item 12 due to default on the part of the defendants they would be liable to pay the plaintiff interest on the outstanding balance of the purchase price of 12 per cent per annum as liquidated damages. Clause 25 provided for continued payment of the occupation fee of $250 per week.
Regrettably, the defendants experienced financial difficulties, apparently due to problems associated with the sale of another property, and were unable to complete the purchase by that date.
After negotiations between the parties, the contract was varied by a deed executed on 29 August 1996. That deed provided for the date of completion to be extended to 20 September 1996 and for the defendants to pay to the plaintiff on completion the sum of $2,400 in full satisfaction of all interest and occupation fees due under the contract.
Unfortunately, the defendants’ financial difficulties persisted and they were unable to complete the purchase by 20 September 1996.
Negotiations resumed and the contract was again varied by a second deed executed on 11 October 1996. The date for completion was further extended to 5 December 1996 and the defendants agreed to authorise the stakeholder to account to the plaintiff for the deposit of $23,500 and to pay an occupation fee at the rate of $2,200 per month in full satisfaction of any liability to the plaintiff under clauses 22 and 25 of the contract.
Despite the additional time provided by the deeds of variation, the defendants again failed to complete the purchase by the agreed date.
On 24 December 1996 the plaintiff served a Notice to Complete requiring completion on 17 January 1997.
Whilst the defendants have not disputed the fact that the plaintiff had then been ready, willing and able to complete the sale, the Defence alleges, somewhat cryptically, that by virtue of “the matters set out herein” the plaintiff was estopped from asserting the service of the Notice to Complete and that it was unconscionable for it to have served it. The defendants were unrepresented at the hearing of the action and, whilst obviously intelligent and articulate people, displayed little knowledge of relevant legal principles. The Defence had been drafted by the solicitor then acting for them but they seemed to have only a vague understanding of the issues apparently raised. It seems likely that the allegation was intended to refer to “negotiations for and the letter of the plaintiff’s solicitors dated 10 December 1996” followed by another reference to “the matters set out herein”.
It is true that a letter from the plaintiff’s solicitors dated 10 December 1996 had referred to an apparent agreement between the parties that the defendants would proceed to settlement prior to 20 December 1996 and had purported to enclose settlement figures. However, the sale was not then completed and the defendants neither pleaded nor sought to prove any facts or circumstances which might have given rise to any relevant estoppel or to have provided a basis for any contention that the plaintiff’s conduct in issuing the Notice to Complete four days after that date was unconscionable.
The defendants clearly failed to comply with that notice.
However, by letter dated 17 January 1997 the plaintiff’s solicitors advised the defendants that the time to complete could be extended until Friday 28 February 1997 upon written agreement that they would deliver a stamped transfer to the plaintiff’s solicitors by the close of business on 24 January 1997 and acknowledge that the outstanding occupation fees amounted to $8,607.27 as at 17 February 1997 and were then accruing at the rate of $72.33 per day. The defendants accepted these terms by signing a duplicate copy of the letter.
Despite this agreement they neither provided the stamped transfer nor completed the sale by the due date.
Perhaps surprisingly, the plaintiff did not take immediate steps to terminate the contract or even issue a further Notice to Complete, though some correspondence ensued concerning their failure to pay the agreed occupation fee since September 1996 and the plaintiff’s concern that their financial position might be such that they would be unable to complete the contract.
In March 1997 the defendants recommenced making payments to the plaintiff at the rate of $2,166.66 per month. These payments were said to reflect an occupation fee of $1,083.33 per month together with a further payment of that amount in respect of arrears. This figure appeared to reflect the original agreement for an occupation fee of $250 per week and to ignore the increased commitment which they had undertaken by entering into the deed of 11 October 1996.
In July 1997 there was a telephone conversation between the plaintiff and Mrs Stow. In her affidavit sworn 7 July 2000 Ms Stow described part of this conversation in the following terms:
He (Mr Rosa) said “Things can’t go on as they have been. My solicitors are charging me too much and I don’t want you to send your monthly rental payments to them any longer. In future, send the monthly cheques direct to me at my home address in O’Malley.”
I immediately replied “Yes, I will”.
At this point in the conversation Mr Rosa’s tone became more calm. The conversation proceeded as follows.
He said, “When do you think you will be able to complete the purchase of the house?” I said, “I still do not know. Can we continue as we are for the present time, that is continue to pay the occupation fee until we can realistically suggest a completion date?” He said, “Are you my daughter that I should do this for you?”
I said “Of course not, I’m not your daughter but I am grateful that you have treated us so very well. I hope you understand that the problems we’ve experienced and which have held us up from settling are not of our making.”
He said, “What I understand is that my solicitor keeps charging me a huge amount of money for fees and still the sale of the property is not finalised.”
I said, “I’m sorry we have caused you so many problems. We really want to buy the property but we will need longer to do so.”
He said, “I’ll give you more time. You can tell me when you’re ready to settle because I don’t want to waste any more time or money with solicitors until you are absolutely sure you are in a position to settle.
I said, “So our only fee through to settlement will be the occupation fee of $250 per week, payable monthly.”
He said, “That’s right.”
I said, “I know that amount is pretty high for a house such as this one in Ngunnawal. I will definitely send you the cheque on a monthly basis, not to your solicitors.”
He said “I definitely need you to send the money direct to me because my solicitors are charging me too much over this property. I’ll consider the deposit already released to me as a good faith payment. It will definitely be deducted from the sale price of $235,000 when you are ready to settle.”
I said, “Are you sure that you’re happy to say what we’ve now agreed, that is –
1We’re not able to settle at the present time and we will contact you when we want proceed.
2We will continue to pay $250 per week, payable monthly as an occupation fee or rent until we can settle.
3We will begin to pay this fee direct to you each month not to your solicitors as you previously required.
4Our purchase price will be as per the original contract price of $235,000 less the deposit of $23,500 which has already been released to you at your request.”
He said, “yes, that’s right.”
At no time during the conversation did Mr Rosa suggest he required, nor did we agree to, any additional payments, penalty payments or interest for the delayed settlement.
Mr Rosa who was the principal of the plaintiff company gave evidence to the effect that he had rung Mrs Stow and had asked her to send further cheques directly to the plaintiff company rather than to its solicitors. He denied having agreed to waive any of the plaintiff’s rights under the contract.
I had the opportunity of observing both Mrs Stow and Mr Rosa cross-examined and I was left with the impression that both had honestly recounted their memories of the conversation but that neither version had been entirely accurate. Ms Stow conceded that she had not made any contemporaneous notes of the conversation and that she had not written to the plaintiff or its solicitors to confirm its terms. It seems likely that the passage of time and some continuing anxiety during the intervening years has affected the accuracy of her memory to some extent. In fact, she did not claim to remember the whole conversation but only the general tenor of what had been said about the issues of importance to her. Mr Rosa conceded that the plaintiff had had quite a number of residential properties which were tenanted but at the time of the conversation he seems to have been experiencing financial difficulties of his own. Furthermore, there is no reason to suppose that his memory was any less likely to have faded with the passage of time than that of Ms Stow.
The plaintiff clearly failed to pursue an early settlement for an extended period after this conversation and it seems reasonable to assume that the defendants continued occupation of the property must have been discussed. Furthermore, despite the financial difficulties which Mr Rosa might have been experiencing I think that Ms Stow, who was at that time in imminent danger of eviction, would have been likely to have attributed greater importance to the terms of the conversation and hence more likely to remember the broad thrust of the matters discussed. In all the circumstances I am satisfied that the terms of the conversation included an agreement that the defendants would be given some further latitude to complete the sale provided that they made monthly payments to the plaintiff calculated at the rate of $250 per week. On the other hand, I am unable to accept that Ms Stow’s claim that Mr Rosa had, in effect, offered to waive all of his rights under the contract save for the receipt of an occupation fee of $250 per week and his entitlement to receive the balance of the purchase price at some unspecified time in the future.
I have no doubt that Ms Stow now believes that that was the effect of the conversation. A number of factors may have contributed to that conviction. During their evidence before me both Ms Stow and Mr Rosa exhibited a tendency to speak discursively in response to questions and it was not difficult to imagine that some confusion might have emerged from a conversation between them. Ms Stow’s anxiety at the situation in which she and her husband found themselves may have coloured her impressions of crucial aspects of the conversation. It is also possible that her subsequent memories of the conversation were subtly influenced to some extent by the defendants’ continued financial difficulties and embarrassment at their inability to resolve the matter by completing the sale.
In any event, even Ms Stow’s account of the conversation provides little basis for the implication she apparently attributed to it. On the version contained in the passages from her affidavit which I have quoted, it would appear that Mr Rosa initially baulked even at the suggestion that the status quo be maintained until the defendants were able to complete the sale, asking, rhetorically, “Are you my daughter that I should do this for you?”. I accept that Ms Stow has correctly remembered this response and also accept that after some further discussion Mr Rosa agreed to give the defendants “more time” for settlement. I am less confident that he agreed that the sum of $250 per week was to be the “only fee through to settlement” but, even if he did, I would not construe that agreement as involving a waiver of the kind alleged. His acquiescence in the proposal could at most have involved an agreement to give the defendants some further latitude in relation to the completion of the sale upon the condition that they paid an occupancy fee at that rate during the intervening period. Similarly, any statement that the deposit could be deducted from the sale price at settlement might have provided some assurance that he did not intend to terminate the contract, forfeit the deposit and demand the full purchase price under a fresh contract for sale, but I would not have construed it as involving any agreement to waive other entitlements under the contract as alleged.
I am not satisfied that, during the course of the conversation, Ms Stow recapitulated her understanding of the gist of the of the agreement in the terms set out in the points numbered 1 to 4 in her affidavit. Those points may have reflected what she had understood to have been the effect of the conversation but I think it is unlikely that she actually put them to Mr Rosa in the manner suggested. I think it is more likely that she has subsequently come to attribute a later summary of her understanding to the conversation itself. In any event, even if statements had been made in the terms suggested they would not have provided any basis for imputing to Mr Rosa an agreement to waive other entitlements under the contract as varied.
The defendants argued, in essence, that any issue as to appropriate occupation fee would have been resolved by the statement contained in the second point of the alleged recapitulation and that any issue as to the purchase price would have been resolved by the statement contained in the fourth point. They seem to have assumed that in agreeing to accept monthly payments calculated at the rate of $250 per week Mr Rosa had agreed to waive the plaintiff’s entitlement to be reimbursed, on completion, for rates levied on the property during the period of any delay and for payment, again on completion, of an amount calculated at $2,200 per month which the defendants had agreed to pay under the second deed of variation. Even if I had been satisfied that the conversation had included the recapitulation suggested, I could not have accepted that it should be so construed.
As I have mentioned, it seems much more likely that Mr Rosa, at least, understood that what had been proposed was an interim arrangement pursuant to which the defendants would be given some additional time in which to obtain finance and during the intervening period would make monthly payments calculated at the rate of $250 per week, that being the rate agreed for that purpose more than a year earlier. I would not have been satisfied that Mr Rosa had been agreeing to waive any entitlement to receive any amounts payable under the contract at settlement. Indeed, I think that is highly unlikely. Ms Stow said that even at the time she “couldn’t believe he had made such a generous offer”. Whilst her recollection of that feeling provides some confirmation of the fact that her impression of this conversation was formed contemporaneously rather than by subsequently looking back on the incident through rose coloured glasses, it seems clear that even she would not have expected Mr Rosa to make the concession she now seeks to attribute to him. I do not accept that he did.
The defendants also submitted that an agreement to waive any such entitlement should be inferred from the fact that Mr Rosa failed to mention any additional payments or interest during the course of the conversation. I am again unable to accept this submission. In my view it is much more likely that any failure to have mentioned those entitlements reflected Mr Rosa’s understanding that what was being discussed was merely an interim arrangement and that there was no question of any entitlements arising on completion being waived.
Neither the offer to give them “more time” nor the suggestion that they could contact Mr Rosa when ready to settle could, in my view, have been construed as involving an undertaking by the plaintiff to abandon any right to issue a Notice to Complete and conferral of an unqualified right for the defendants to determine when settlement should occur.
The defendants did not plead any allegation of a further variation of contract based upon the terms of the conversation. Nor in my view, could they have done so. As I have mentioned, the defence was limited to allegations of estoppel and unconscionability. The principle of promissory estoppel upon which the defendants apparently rely may be broadly stated. A party who has induced another party to act on an assumption that contractual rights will not be enforced will not be permitted for enforce those rights where it would be inequitable to do so having regard to the dealings which had taken place between them. The doctrine was revealed or at least came to prominence in the judgment of Denning J (as he then was) in Central London Property Trust Limited v High Trees House Limited (the High Trees Case) [1947] KB 130 and in the subsequent case of Combe v Combe [1951] 2 KB 215. The principle has been accepted and discussed in a number of Australian cases including Legione v Hateley (1983) 152 CLR 406, Waltons Stores (Interstate) Pty Ltd v Maher (1988) 164 CLR 387 and The Commonwealth v Verwayen (1990) 170 CLR 394. However, an estoppel does not arise merely because one person assumes that another person will not enforce his or her legal rights. In the present case I am not satisfied that the assumption apparently made by the defendants had been induced by the plaintiff in any relevant sense or even that the plaintiff was aware of the assumption. There was certainly no evidence that it sought to take advantage of it or otherwise behaved in such a manner that it would be inequitable for it now to enforce its contractual rights. In my view no basis for an estoppel has been established and the conduct of the plaintiff could not be described as unconscionable. On the contrary, the plaintiff seems to have acted reasonably, if not generously, at all times.
Following this conversation there was sporadic correspondence but the defendants continued to occupy the property for an extended period, apparently without further threats to terminate the contract. Indeed, on 23 November 1999 the plaintiff’s solicitors wrote to the defendants indicating that their client would be willing to consider “keeping the contract on foot” provided they fully complied with its terms. The letter pointed out that they had been paying an occupation fee at the rate of $250 per week but not the sum of $2,200 per month agreed to in the deed of variation executed on 11 October 1996 and asserted that an amount of $43,550.13 was outstanding. The letter purported to offer two options: the defendants could proceed to settlement, in which case they would need to allow for payment of the outstanding amount due under the deed of variation; or the plaintiff would release them of their contractual obligations, in which case they would be obliged to vacate the property and the plaintiff would retain all monies already paid. The defendants referred the matter to their solicitors and there were subsequent discussions between them and the plaintiff’s solicitors but no settlement was achieved.
A further Notice to Complete was served on 18 January 2000 requiring completion by 21 February 2000.
The defendants again failed to complete the purchase by the due date. By letter dated 21 February 2000 the defendants’ solicitors advised the plaintiff’s solicitors that they had been instructed to deny the validity of the Notice to Complete “based on, inter alia, variations to the original contract as provided in correspondence and in verbal discussions between the parties directly and between their solicitors over a number of months”.
In a reply sent by facsimile on the same day the plaintiff’s solicitors asserted that the only variations to the contract had been specified in the Notice to Complete and protested that, whilst other variations seemed to have been suggested, the defendants’ solicitors had never indicated either formally or informally what those variations had been. The letter expressed particular disappointment at the reference to discussions between the parties’ solicitors and stated that there had never been any discussion concerning variations. It warned that if settlement did not occur that day then the plaintiff’s solicitors expected to receive instructions to terminate the contract and recover possession of the property.
The rejoinder was neither spirited nor enlightening. It stated that in alluding to discussions between solicitors the defendants’ solicitors had been intending to refer to “matters that arose in conversations” between Mr Dodd and Mr Del Rio and cited as examples letters from Mr Dodd dated 29 August 1996 and 11 October 1996. Those letters had related to the deeds of variation which, as the plaintiff’s solicitors pointed out, had been referred to in the Notice to Complete. The letter from the defendants’ solicitors concluded “the contents of those conversations may or may not ultimately prove of relevance to the issue at hand. Our letter was merely indicating that there have been discussions in the past in relation to the matter.”
The defendants did not attend the settlement conference to tender the amount they claimed was due under the contract or otherwise attempt to comply with the notice.
The defendants, who impressed me as decent and generally responsible people, explained the difficulties which they had been experiencing and the understanding which they had had of their rights and obligations. I am not unsympathetic to the matters which they raised. However, the evidence did not reveal any facts or circumstances which could have relieved them of their obligation to complete the transaction as required by the Notice to Complete and the contract for sale plainly gave the plaintiff the right to terminate the contract on their failure to do so. Consequently, I am obliged to declare that the contract has been validly terminated.
As a consequence of this declaration the plaintiff will be entitled to retain the deposit which must be taken to have been forfeited pursuant to cl 19 of the contract.
The plaintiff sought also damages but in all of the circumstances I am not satisfied that any further net loss has been proven.
The general principle is that damages should be “that sum of money which will put the party who has been injured, or who has suffered, in the same position as he would have been in if he had not sustained the wrong for which he is now getting his compensation or reparation”: Livingstone v The Rawyards Coal Co (1880) 5 App Cas 25 per Lord Blackburn at 39. When the wrong consists of a breach of contract the plaintiff is generally entitled to be placed in the same position as he or she would have been in had the contract been performed: Robinson v Harman (1848) 1 EX 850: see also Koufosv Czarnikow Ltd [1969] 1 AC 350; The Albazero [1977] AC 774. Hence, any assessment of damages involves a comparison between the position that the plaintiff would have enjoyed but for the breach of contract and that in which it finds itself as a consequence of that breach. Whilst there are some qualifications to the general rule none appear to be relevant to the present situation.
During the course of the hearing the plaintiff’s counsel, Mr Meagher, handed up a copy of the amended Statement of Claim with updated figures for the particulars of damages based upon the defendants’ failure to complete the purchase of the property on or before 2 August 1996, that being the date for completion specified in Item 12 of the Contract. However, the claim as formulated seemed to overlook the fact that cl 22 of the Contract specifically provided for the computation of damages in the event of any failure to complete by the date specified in Item 12 and that both the first and second variations of that Contract not only extended that date but provided certain rights in lieu of those provided by cl 22. The entitlement to fees at the rate of $2,200 per month pursuant to the terms of the second Deed of Variation fee was to be in full satisfaction of all amounts due under cl 22 and cl 25 in relation to the period from 20 September 1996 “to completion”. Accordingly, whilst I accept that the defendants committed a further breach of contract by failing to complete the purchase by the extended date of 5 December 1996 referred to in that deed of variation, the plaintiff’s entitlement to damages would appear to have been confined to those specified in the deed of variation.
Clause 19 provided an alternative right to damages in the event of a failure to comply with a Notice to Complete in which case the plaintiff was entitled to terminate the contract, retain the deposit and either sue the defendants for breach of contract or resell the property and recover any deficiency arising on the resale providing, in the latter case, that it entered into a contract for the resale of the property within 12 months of the date of the notice of termination. However, it was not suggested that this clause applied whilst the contract remained on foot.
The settlement statement prepared by the plaintiff’s solicitors indicates that if completion had occurred on 21 February 2000 the plaintiff would have been entitled to receive the sum of $259,791.83 including outstanding occupancy fees at the rate of $2,200 per month and arrears of rates. Interest at the rate claimed, that is 8.25 per cent per annum, from that date would amount to approximately $37,000 but this amount would have been offset by occupancy fees of $250 per week since that date and that would have amounted to approximately $21,000. Hence the amount allowable for loss of the use of the capital sum could have been no more than $16,000. The plaintiff claimed the sum of $9,472.53 for arrears of rates and that sum less the amounts of $267.81 and $73.41 already taken into account in the settlement statement as at 21 February 2000 would also have been allowable. In addition, the plaintiff claimed the sum of $3,251.74 which represented the irrefundable portion of the stamp duty on the contract for sale which was paid by the plaintiff following the decision of the Chief Justice in Russell & Anor v Adwan & Ors [2000] ACT SC90 (18 October 2000) in order to ensure that the contract would be admissible in evidence during the current proceedings. For present purposes I am prepared to assume that that amount should also be taken into account in assessing the plaintiff’s claim to damages.
However, even on that basis the plaintiff would be unable to demonstrate a gross financial loss of less than $290,000 and, on the other hand, it has retained the property which the evidence establishes now has a value of between $300,000 and $310,000.
In effect, the rising property values have created a situation in which the value of the property which the plaintiff retains is now worth more than the amount which he would have received upon the completion of the sale together with further amounts to compensate him for the loss of the use of the money and the other matters to which I have referred.
In these circumstances I am unable to find that the plaintiff has suffered any net loss. Accordingly, the claim for damages must fail.
Nonetheless the plaintiff is plainly entitled to immediate possession of the property.
I will hear the parties as to costs.
I certify that the preceding forty-six (46) numbered paragraphs are a true copy of the Reasons for Judgment herein of his Honour, Justice Crispin.
Associate:
Date: 11 October 2001
Counsel for the plaintiff: Mr B Meagher
Solicitor for the plaintiff: Clayton Utz
Counsel for the defendants: Self
Date of hearing: 17-18 September 2001
Date judgment reserved: 3 October 2001
Date of judgment: 11 October 2001
0
3
0