Ryan v Urban Construct (SA) Pty Ltd
[2012] SASC 128
•31 July 2012
SUPREME COURT OF SOUTH AUSTRALIA
(Civil)
RYAN v URBAN CONSTRUCT (SA) PTY LTD
[2012] SASC 128
Judgment of The Honourable Justice Peek
31 July 2012
CONTRACTS - PARTICULAR PARTIES - VENDOR AND PURCHASER
CONTRACTS - GENERAL CONTRACTUAL PRINCIPLES - DISCHARGE, BREACH AND DEFENCES TO ACTION FOR BREACH
CONTRACTS - GENERAL CONTRACTUAL PRINCIPLES - DISCHARGE, BREACH AND DEFENCES TO ACTION FOR BREACH - CONDITIONS - INDEPENDENT AND CONCURRENT CONDITIONS
On 18 December 2007 the defendant contracted to buy the plaintiff’s house and land for $3 million with settlement on 31 December 2008. The defendant advised the plaintiff that it would not settle on that date by letter of 19 December 2008 and requested a deferment of settlement of one year. By letter of 8 January 2009 the defendant asserted that the circumstances leading up to the execution of the contract rendered it void or voidable and purported to rescind on that basis. The plaintiff served notices to complete and then a notice to terminate the contract on 11 February 2009.
Plaintiff sues for breach of contract – whether the defendant’s initial refusal to settle on the specified date amounts to anticipatory breach and repudiation – whether actual failure to settle amounted to fundamental breach – whether notices to complete and terminate the contract were valid – whether defendant’s letter of 8 January 2009 constituted repudiation.
Held: The letter of 19 December 2008 constituted an anticipatory breach of an important term of the contract and repudiation of the contract by the defendant. The defendant’s letter of 8 January 2009 constituted express repudiation and the defendant was in fundamental breach of the contract at common law.
CONTRACTS - GENERAL CONTRACTUAL PRINCIPLES - DISCHARGE, BREACH AND DEFENCES TO ACTION FOR BREACH - CONDITIONS - INDEPENDENT AND CONCURRENT CONDITIONS
Under the contract the plaintiff was obliged to supply the defendant at settlement with an invoice for any GST to be paid by the defendant. The defendant contended that the land sale transaction was a taxable supply and attracted GST.
Whether the term requiring the plaintiff to provide an invoice was a term the breach of which entitled the defendant to refuse to settle on the transfer of the property – dependent and independent terms and essential and non-essential terms considered.
Whether the plaintiff was in breach in failing to be ‘ready willing and able’ to perform the contract due to not being registered for GST at settlement and whether such failure prevented the defendant from being in breach of the contract.
Whether it was futile and unnecessary for the plaintiff to register for GST or to prepare GST related documents because the defendant had indicated by letter of 19 December 2008 that it would not settle on 31 December 2008 – whether the defendant was estopped from relying on an asserted failure of the plaintiff to produce or tender an invoice for GST due to his actions during together with the terms of the contract itself – Foran v Wight considered.
Held: The defendant’s letter of 19 December 2008 was an express and final statement that it would not settle on 31 December 2008. The plaintiff was willing to proceed to settlement at all relevant times. The plaintiff was entitled to rely on that letter and her decision not to further proceed to settlement was justified due to the defendant’s statements – any further efforts by the plaintiff to prepare for settlement were futile and unnecessary.
The terms of the contract requiring the defendant to pay the purchase price on the settlement is independent and separate to any obligation on the part of the plaintiff to deliver an invoice for GST – the defendant’s contention that the plaintiff was not ready, willing and able fails in limine. The clause requiring the plaintiff to supply a GST invoice is only engaged if the plaintiff decides that GST is payable on the transaction and decides to pass on a charge for an equivalent amount to the defendant under the contract – the occasion for the plaintiff to make such decisions never arrived due to the defendant’s repudiatory actions. Further, the plaintiff’s status of being unregistered for GST at the time of such repudiation did not demonstrate that she was incapacitated from continued performance of the contract.
CONVEYANCING - BREACH OF CONTRACT FOR SALE AND REMEDIES - VENDOR'S REMEDIES - DAMAGES
DAMAGES - MEASURE AND REMOTENESS OF DAMAGES IN ACTIONS FOR BREACH OF CONTRACT - REMOTENESS AND CAUSATION
CONTRACTS - GENERAL CONTRACTUAL PRINCIPLES - CONSTRUCTION AND INTERPRETATION OF CONTRACTS - PENALTIES AND LIQUIDATED DAMAGES
Whether the plaintiff is entitled to recover bargain damages under the contract – whether the plaintiff’s loss was caused by her own actions thus debarring her from claiming bargain damages – Shevill v Builders Licencing Board considered.
Held: The plaintiff is entitled to bargain damages on a correct construction of the contract. The defendant’s reliance on Shevill is premised on an acceptance of it’s contention for a construction of the contract which has been rejected above – in any event the defendant’s reliance on Shevill is misplaced – bargain damages may be recovered for fundamental breach, repudiation or breach of an essential term, all of which are established here.
DAMAGES - GENERAL PRINCIPLES - MITIGATION OF DAMAGES - PLAINTIFF'S DUTY TO MITIGATE
Whether the plaintiff failed to mitigate her loss.
Held: The defendant’s contention that the plaintiff failed to mitigate her loss to an extent reiterates its causation argument based on Shevill – in any event the plaintiff did not fail to mitigate her loss.
TRADE AND COMMERCE - TRADE PRACTICES AND RELATED MATTERS - CONSUMER PROTECTION - MISLEADING, DECEPTIVE OR UNCONSCIONABLE CONDUCT - PARTICULAR CLASSES OF CONDUCT - REAL ESTATE TRANSACTIONS
Defendant’s cross-action – whether the contract was procured by either unconscionable or misleading or deceptive conduct on the part of the plaintiff.
Held: The defendant’s claim of unconscionable or misleading or deceptive conduct is not established on the evidence – the defendant was not at a special disadvantage in the relevant sense required by the authorities.
Fair Trading Act 1987 (SA) ss 56, 57, referred to.
Greene v Sommerville (1979) 141 CLR 594; Van Reesema v Giameos (No 1) (1978) 17 SASR 353; Peter Turnbull & Co Pty Ltd v Mundus Trading Co (Australasia) Pty Ltd (Turnbull) (1954) 90 CLR 235; K & K Real Estate Pty Ltd v Adellos Pty Ltd [2010] NSWCA 302; Amaya v Everest Property Holdings Pty Ltd; Firmstone v Everest Property Holdings Pty Ltd; Sarkar and Islam v Everest Property Holdings Pty Ltd [2010] NSWCA 315; Australian Competition and Consumer Commission v CG Berbatis Holdings Pty Ltd & Ors (2003) 214 CLR 51, applied.
Shevill v Builders Licensing Board (1982) 149 CLR 620; Foran v Wight (1989) 168 CLR 385; Koompahtoo Local Aboriginal Land Council v Sanpine Pty Ltd [2007] 233 CLR 115, discussed.
Boone v Eyre (1779) 1 Hy Bl 273n; 126 ER 160; Kingston v Preston (1773) 2 Doug 690; 99 ER 437; Jones v Barkley (1773) 2 Doug 684; 99 ER 434; Turner v Goodwin (1714) 10 Mod 153; 88 ER 671; Luna Park (NSW) Ltd v Tramways Advertising Pty Ltd (1938) 61 CLR 286; Oscar Chess Ltd v Williams [1957] 1 All ER 325; Tramways Advertising Pty Ltd v Luna Park (NSW) Ltd (1938) 38 SR (NSW) 632, 641-642; Associated Newspapers v Bancks (1951) 83 CLR 322, 336; Hongkong Fir Shipping Co Ltd v Kawasaki Kisen Kaisha Ltd [1962] 2 QB 26; Psaltis v Schultz (1948) 76 CLR 547; Rawson v Hobbs (1961) 107 CLR 466; Firmstone v Estate Property Holdings Pty Ltd [2011] HCA Trans 216 (12 August 2011); Urban Construct Pty Ltd v City of Holdfast Bay [2005] SAERDC 55; Urban Construct Pty Ltd v City of Holdfast Bay [2006] SASC 201; Commercial Bank of Australia v Amadio (1983) 151 CLR 447; Blomley v Ryan (1956) 99 CLR 362; O'Brien v Smolonogov (1983) 53 ALR 107; Argy v Blunts (1990) 26 FCR 112; Gentry Bros Pty Ltd v Wilson Brown & Associates Pty Ltd [1992] ATPR 41; Franich v Swannell (1993) 10 WAR 459; ACCC v Gary Peer & Associates Pty Ltd (2005) 142 FCR 506; Taco Co of Australia Inc v Taco Bell Pty Ltd (1982) 42 ALR 177; Henjo Investments Pty Ltd & Ors v Collins Marrickville Pty Ltd (No 1) (1988) 39 FCR 546; McDonald v Dennys Lascelles (1933) 48 CLR 457; Holland v Wiltshire [1954] 90 CLR 409; Carpenter v McGrath (1996) 40 NSWLR 39; Robinson v Harman (1848) 1 Ex 850; 154 ER 363; Tabcorp Holdings Ltd v Bowen Investments Pty Ltd (2009) 236 CLR 272; Progressive Mailing House Pty Ltd v Tabali Pty Ltd (1985) 157 CLR 17; Gumland Property Holdings Pty Ltd v Duffy Bros Fruit Market (Campbelltown) Pty Limited (2008) 234 CLR 237, considered.
RYAN v URBAN CONSTRUCT (SA) PTY LTD
[2012] SASC 128Civil
PEEK J. Action for damages for breach of contract.
INTRODUCTION
The plaintiff is the owner of the land at 5 College Street, Glenelg, being the whole of the land in Certificate of Title Registered Book Volume 5231 Folio 349 (the subject property). The defendant is a property developer and had acquired land near and adjoining the subject property for the purpose of the demolition of the existing structures and the erection of a large apartment building.
On 18 December 2007, the plaintiff and defendant entered into a contract for the sale of the subject property (the contract) for $3,000,000. A deposit in the amount of $300,000.00 was paid by the defendant on 19 December 2007. Special Condition 2 specified the settlement date as “31 December 2008 or such earlier date being not before 1 June 2008”.
By letter of 19 December 2008 the defendant advised that it was not in a position to settle on that date and did not do so. By letter of 8 January 2009 the defendant asserted that the circumstances leading up to the execution of the contract rendered it void ab initio or at least voidable (and purported to exercise a right to avoid it). On 9 and 30 January 2009, the plaintiff served Notices to Complete with respective settlement dates of 27 January and 6 February 2009. Settlement did not occur on either of those dates. On 11 February 2009 the plaintiff served the defendant with a Notice of Termination of the contract.
The plaintiff subsequently brought this action for damages (including bargain damages) for breach of contract. The defendant denied liability on various grounds. I find that the plaintiff has established her case and that the defendant is liable for damages including bargain damages. My reasons follow.
The contract
The form of the contract was the standard form “Residential Contract” of the Real Estate Institute of South Australia with various modifications and with a number of added “Special Conditions”. The relevant terms of the contract appear as an annexure to this judgment.
The contract does not proceed to settlement
By letter of 5 October, and by emails of 4 and 10 December 2008, the solicitors for the plaintiff attempted to communicate with the defendant as to procedural matters (such as the identity of the defendant’s conveyancer and the provision of a Memorandum of Transfer by the defendant) and particularly to ascertain whether the defendant would exercise its right pursuant to Special Condition 2 to bring forward settlement or if settlement would occur on the specified date of 31 December 2008. The defendant did not reply to any of these communications.
By letter of 16 December 2008, the defendant finally confirmed receipt of the above letters but did not advise if, or when, settlement would occur. By letter of 19 December 2008 the defendant advised in the following terms that it would not settle on 31 December 2008:
WITHOUT PREJUDICE
Dear Sir
Re: 5 College Street, Glenelg SA 5045 (“Property”)
We refer to your without prejudice telephone discussion with the writer on 18 December 2008 in relation to the Sale and Purchase Contract that we entered into with your client, Dr Pam Ryan on 18 December 2007 to purchase the above Property.
Due to unforeseen circumstances as a consequence of the global financial crisis, we confirm that we are not in a position to settle on the Contract on 31 December 2008 as the pre-sales for the development that is to take place on part of the Property have not been to the level we anticipated.
Accordingly, we seek your client’s consent to an extension of the settlement date under the Contract until 31 December 2009. We are prepared to negotiate on the terms of the extension of time.
….
Urban Construct (SA) Pty Ltd
Todd Brown Director
By letter of 24 December 2008, the plaintiff’s solicitors replied:
We refer to your ‘without prejudice’ letter of 19 December 2008.
We advise that our client holds your client to the contract and does not consent to any extension as requested by you. You would be aware that your client has no right to an extension absent our client’s consent.
Our client has always insisted on an unconditional contract in order to be certain that settlement will proceed. This is still her position. We therefore call for the Memorandum of Transfer which is due to be provided by you pursuant to the terms of the contract on or before 24 December 2008.
The defendant did not provide a Memorandum of Transfer. Settlement did not occur on 31 December 2008.
By letter of 8 January 2009, the solicitors for the defendant asserted that the circumstances leading up to the execution of the contract were such as to render it void ab initio, or at least voidable at the option of the defendant (and purported to exercise a right to avoid the contract). The letter is lengthy and made a number of allegations against the plaintiff some of which correspond to allegations now made by the defendant in support of its defence of unconscionable conduct to be considered below. In its letter of 30 January 2009 the plaintiff stated:
We refer to your letter of 8 January 2009 and the Notice to Complete served on your client on 9 January 2009.
While the legal basis on which your client purports to avoid the contract is unclear, the claims advanced in support are preposterous, yet predictable. Your client has no basis in law or in equity for rescinding the contract.
By letter of 9 January 2009 the plaintiff served a Notice to Complete dated 9 January 2009 in the following terms:
NOTICE TO COMPLETE
To:Urban Construct (SA) Pty Ltd, at Level 2, 60 Hindmarsh Square, Adelaide, South Australia
Contract date: 18 December 2007
Vendor: Pamela Margaret Ryan
The Purchaser: Urban Construct (SA) Pty Ltd
Level 2
60 Hindmarsh Square
ADELAIDE SA 5000
The Land: As comprised in Certificate of Title Register Book Volume 5231 Folio 349 and described as 5 College Street, Glenelg in the State of South Australia 5045
Purchase price: Three million dollars ($3,000,000.00)
Date of Settlement:31 December 2008
Conditions of sale: Unconditional
TAKE NOTICE that by Contract dated 18 December 2007 the Vendor agreed to sell to you the property situated at 5 College Street Glenelg in the State of South Australia being the land comprised in Certificate of Title Register Book Volume 5231 Folio 349 AND THAT the Contract provided that settlement take place on 31 December 2008 AND THAT by a series of letters the first of which was dated 15 October 2008 the Vendor’s solicitors enquired about your intentions for settlement including your right to settle on or before 31 December 2008 AND THAT you failed to respond AND THAT by letter dated 24 December 2008 the Vendor’s solicitors called upon you to proceed to settlement and demanded that you deliver to the Vendor a Memorandum of Transfer in accordance with paragraph 4.1 of the Contract AND THAT you failed to respond AND THAT you failed to settle on 31 December 2008 AND THAT by letter dated 8 January 2009 from Iles Selley, solicitors, to Sykes Bidstrup, solicitors and agent for the Vendor, you wrongfully purported to rescind the Contract.
NOW TAKE NOTICE that the Vendor requires you to settle on 27 January 2009 at the Lands Titles Office, 101 Grenfell Street, Adelaide in the said State at 11:30am. The amount payable by you at settlement is detailed in Annexure “A” hereto. This Notice to Complete is served on you pursuant to Clause 7.1.3.2 of the Contract. If you fail to settle on the day and at the time herein appointed the Vendor will exercise such right and remedies as are afforded to her at law in equity or under the Contract including termination of the Contract under Clause 7.1.3 and the exercise of the rights and remedies under Clause 7.1.4 of the Contract[1].
…
This Notice is given pursuant to the provision of paragraph 7.1.3.2 of the Contract.
[1] It is noted that “7.1.4” is a typographical error for “7.1.5” but no point as to this was taken.
The Notice appended the following adjustment statement:
“ANNEXURE A”
ADJUSTMENT STATEMENT
DR RYAN TO URBAN CONSTRUCT (SA) PTY LTD
5 College Street, Glenelg SA 5045
Date of Settlement: 27 January 2009
Purchase price $3,000,000.00
Deposit $300,000.00
Adjustments –
1. Council Rates for 2008/2009
$2,001.40 per annum paid to
30 June 2009
Purchaser to pay 155 days $849.91
2. SA Water for 2008/2009
$324.30 per quarter paid to
31 December 2009
Nil Adjustments $Nil
3. Land Tax for 2008/2009
$895.00 paid to
30 June 2009
Purchaser to pay 155 days $ 380.07
4. Emergency Services Levy for
2008/2009 $-142.55 per annum
paid to 30 June 2009
Purchaser to pay 155 days $Nil
5. Default interest calculated in
accordance with paragraph 7.1.1
of the Contract dated 18/12/2007
Purchaser to pay 28 days
8.89%pa on $2,700,000 $18,413.26
BALANCE due by Purchaser
at Settlement $2,719,643.10
Cheque details
1 Bank cheques totalling $2,719,643.10 in favour of Sykes Bidstrup Trust Account.
Having received no reply to the above letter and notice, the plaintiff’s solicitors sent the following letter dated 23 January 2009:
We refer to our letter dated 9 January 2009 enclosing our client’s Notice to Complete.
Can you please advise of your intentions to settle at the Lands Titles Office on the date and time therein appointed, being Tuesday 27 January 2009 at 11:30am.
The plaintiff’s solicitors never received a response to the Notice or to their letters of 9 and 23 January 2009 and settlement did not occur on 27 January 2009 as required by the Notice to Complete.
The plaintiff’s solicitors sent the following letter dated 30 January 2009:
We refer to your letter of 8 January 2009 and the Notice to Complete served on your client on 9 January 2009.
While the legal basis on which your client purports to avoid the contract is unclear, the claims advanced in support are preposterous, yet predictable. Your client has no basis in law or in equity for rescinding the contract.
Our client extends to your client a further opportunity to remedy its default and settle on the contract by giving to your client Notice to Complete the sale and purchase on 6 February 2009 in terms of the Notice served on your client today, a copy of which is enclosed*. If the purchase is not settled on 6 February 2009, our client will pursue her rights under the contract at law or in equity. In this regard, a conference has been arranged with senior Counsel for 9 February 2009 on the contingency that your client will continue its default with the inevitable consequences.
Enclosed with this letter was a further Notice to Complete in the same terms as the previous Notice and dated 30 January 2009 with the following additional paragraph:
…AND THAT by Notice to Complete served on you pursuant to clause 7.1.3.2 of the contract on 9 January 2009 the Vendor required you to settle on the Contract on 27 January 2009 at the Lands Titles Office, 101 Grenfell Street, Adelaide, in the said State at 11:30 am AND THAT you failed to settle required by the Notice to Complete nor did you make any endeavours to settle as required by the Notice to Complete.
And the same Notice then stated:
NOW TAKE NOTCE that the Vendor requires you to settle on 6 February 2009 at the Lands Titles Office, 101 Grenfell Street, Adelaide, in the said State at 11:30 am. The amount payable by you at settlement is detailed in Annexure “A” hereto. …
The plaintiff’s solicitors did not receive a response from the defendant. Settlement did not occur on 6 February 2009 as required by the Notice. By letter of 11 February 2009, the plaintiff’s solicitors stated:
The Purchaser did not attend settlement as required by the Notice to Complete on 6 February 2009 at 11.30 am at the Lands Titles Office.
In the circumstances, our client terminates the Contract with your client. A copy of Notice of Termination is enclosed* for your reference. By virtue of Clause 7.1.5.1 of the Contract the deposit is forfeited to the Vendor. Our client is now in a position to proceed to exercise rights accorded to her under Clause 7.1.5.2 of the Contract at law or in equity.
…
The plaintiff’s Notice to Terminate the contract
The solicitors for the plaintiff enclosed with that letter of 11 February 2009 a Notice to Terminate in the following terms:
TAKE NOTICE that by Contract dated 18 December 2007 the Vendor agreed to sell to you the property situated at 5 College Street Glenelg in the State of South Australia being the land comprised in Certificate of Title Register Book Volume 5231 Folio 349 AND THAT the Contract provided that settlement take place on 31 December 2008 AND THAT by a series of letters the first of which was dated 15 October 2008 the Vendor’s solicitors enquired about your intentions for settlement including your right to settle on or before 31 December 2008 AND THAT you failed to respond AND THAT by letter dated 24 December 2008 the Vendor’s solicitors called upon you to proceed to settlement and demanded that you deliver to the Vendor a Memorandum of Transfer in accordance with paragraph 4.1 of the Contract AND THAT you failed to respond AND THAT you failed to settle on 31 December 2008 AND THAT by letter dated 8 January 2009 from Iles Selley, solicitors, to Sykes Bidstrup, solicitors and agent for the Vendor, you wrongfully purported to rescind the Contract AND THAT by Notice to Complete served on you pursuant to clause 7.1.3.2 of the contract on 9 January 2009 the Vendor required you to settle on the Contract on 27 January 2009 at the Lands Titles Office, 101 Grenfell Street, Adelaide, in the said State at 11:30 am AND THAT you failed to settle required by the Notice to Complete nor did you make any endeavours to settle as required by the Notice to Complete AND THAT by a second Notice to Complete served on you pursuant to clause 7.1.3.2 of the Contract on 6 February 2009 at the Lands Titles Office, 101 Grenfell Street, Adelaide, in the said State at 11:30 am AND THAT you failed to settle required by the second Notice to Complete nor did you make any endeavours to settle as required by the Notice to Complete.
NOW TAKE NOTICE that the Vendor terminates the Contract, if on foot, by this Notice of Termination pursuant to clause 7.1.3 of the Contract AND THAT by virtue of clause 7.1.5.1 the Deposit is forfeited to the Vendor AND THAT the Vendor may pursue any of the rights afforded to her under or by virtue of clause 7.1.5 or otherwise at law or in equity.
The course of the proceedings
On 19 May 2009 the plaintiff issued the originating summons herein. On 21 December 2010 the parties signed a certificate of readiness for trial which provided some flexibility as to whether expert reports would be obtained by the parties. No further interlocutory activity was anticipated. At a listing conference on 11 January 2010 the parties signed a further certificate of readiness for trial and the trial was set to commence on Tuesday 13 September 2011.
On 2 September 2011 the defendant filed an interlocutory application supported by an affidavit of the defendant’s solicitor, Mr Agresta, seeking to make two substantial amendments to the defendant’s pleadings. I commenced to hear this application on Monday 5 September 2011 and adjourned further consideration of it to the trial which commenced on Tuesday 13 September 2011.
The first amendment – the defendant’s “Shevill” contention
The first of the two amendments raised what may be referred to as “the Shevill contention”, referring to the authority of Shevill v Builders Licensing Board.[2] In relation to this amendment, Mr Agresta deposed that:
On or about 22 August 2011, in the course of preparing this matter for trial, I formed the view that, as a result of having considered the decision of the High Court of Australia in the matter of Shevill v Builders Licensing Board (1982) 149 CLR 620, a question of causation of loss arose concerning the Plaintiff’s claim for damages.
[2] (1982) 149 CLR 620.
He went on to state that he had supplied the proposed amendment to the solicitors for the defendant on 22 August 2011 requesting to know their attitude to it and had been informed on 1 September that the amendment was opposed.
The second amendment – the defendant’s GST contention
The second of the amendments raised what may be referred to as “the GST contention”. Mr Agresta deposed that in the course of preparing the case for trial he had considered matters surrounding liability for GST and on 24 August 2011 he had ascertained by a computer search that the plaintiff had not been registered for GST at relevant times. He further deposed that following a conference with senior counsel on 29 August, he drew various amendments in this regard to the defendant’s pleadings which he sent to the plaintiff who indicated on 1 September that they were opposed.
The amendments by the defendant and consequential amendments by the plaintiff are allowed
The plaintiff vigorously opposed both amendments at substantial length (and the defendant sought to justify them at similar length) over Monday 5 and Tuesday 13 September 2009. I do not propose to attempt to summarise the submissions.
On balance I decided that both amendments would be permitted (as would be consequential amendments by the plaintiff) and I so ruled on Tuesday 13 September 2009.[3] As has transpired, the plaintiff has been successful in her claim and I do not intend to give further reasons for allowing the amendments. However, I do record that the plaintiff has comprehensively asserted and protected her position as to her opposition to those amendments as is recorded in the transcript.
[3] Ruling at T43. I grant permission to the defendant to raise the matter subsequent to the close of pleadings pursuant to Supreme Court Rule 54.
I further note that the defendant had the benefit of sufficient time (including the period from 5 September to 13 September 2011) to reflect on the facts and the law as applying to the proposed amendments and also of hearing detailed submissions by senior counsel for the plaintiff inter alia as to his views as to the inutility and ambit of the particular proposed amendments. Thus senior counsel for the plaintiff submitted as to the then proposed amendment Defence [23.10]:[4]
That appears to be, with goodwill, a plea that invokes the principle of readiness and willingness to perform concurrent and dependent obligations. But your Honour will note that there is no plea there of a lack of willingness or as the case is sometimes called disposition or resolve. It’s not pleaded against us that we lacked any disposition or resolve to provide a tax invoice; the plea against us is apparently that we lacked the capacity simply because we were not registered. Now the capacity cases sometimes come down to this: you did not have the capacity and you would not have had the capacity. There is no plea here that we would not have been able to achieve registration, the plea is a very narrow one, that simply we were not registered.
(Emphasis added)
[4] T174.
A little later counsel returned to the same topic of [23.10] and stated:[5]
… the other limb is 23.10, at no time did the plaintiff register for the purpose of GST law and as such the plaintiff was unable to provide a tax invoice and as I said this morning, and I repeat to emphasise, there is no plea there that we were unwilling to conform. No plea of a lack of disposition or resolve as the terms are used in Foran v Wright. There is no plea that when we were unable to gain registration.
(Emphasis added)
[5] T220.
In my view, the defendant had every opportunity to consider the final proposed wording of its amendments against the background of that very explicit submission but no further alteration to that proposed amendment was sought by the defendant.
In all the circumstances, including the substantial indulgence granted to the defendant, it is only fair to the plaintiff that the defendant be kept to the terms, and within the boundaries, of those very late amendments.
The plaintiff’s claim for damages (including bargain damages) in summary
The plaintiff’s position as to its claim for damages (including bargain damages) may be briefly summarised as follows.
First, the defendant’s failure to settle on 31 December 2008 was a breach of contract in that the defendant failed to comply with its obligations under the contract to buy the property and to settle on the date specified.[6] The plaintiff also contended that the nature of the breach in the particular circumstances here amounted to a repudiation of the contract and/or a fundamental breach of the contract which of itself led to the plaintiff having the right to sue for loss of bargain damages.
[6] Clauses 2 and 6; Special Condition 2.
Second, the above breach (putting aside contentions as to repudiation and fundamental breach[7]) directly engaged specific contractual clauses[8] the application of which led to the plaintiff having the right to sue for loss of bargain damages on the correct interpretation of the contract.
[7] Discussed below.
[8] Clauses 2, 6, 7.
Third, while the plaintiff in no way waived repudiation or a fundamental breach, she took the prudent course of following the procedure specified in the contract, namely to serve a Notice to Complete pursuant to clause 7.1.3. In fact, she served two Notices to Complete[9] thereby rendering time for completion to be “of the essence” (Clause 7.3 makes time of the essence in respect of any obligation under clause 7).
[9] No explanation was given as to why two Notices to Complete rather than one were served and nothing turned on this in the pleadings or at trial. The contract specifically stated that more than one such Notice may be served.
Fourth, the defendant subsequently failed to settle in accordance with the Notices to Complete, which failure constituted breach of a term made essential by virtue of clause 7.3.
Fifth, the plaintiff thereupon elected to terminate the contract by serving pursuant to clause 7.1.3 a Notice of Termination of 11 February 2011. This Notice purported to terminate the contract not just pursuant to the right to do so referred to in clause 7 but also pursuant to her rights at common law and equity.
Sixth, pursuant to clause 7.1.5.2a, the plaintiff elected to “retain the Property and sue the Purchaser for damages for breach of contract” (rather than to adopt the alternate liquidated damages option available under clause 7.1.5.2b) and to retain the deposit monies pursuant to clause 7.1.5.1.
The defendant’s contentions at trial in summary
Including the amendments to the pleadings, I understood the defendant’s contentions at trial to be in summary as follows:
·an analysis of the transaction and the GST law demonstrates that the sale under the contract would constitute a “taxable supply” and therefore the plaintiff was obliged by law to pay GST.
·the plaintiff was therefore obliged to claim an additional amount on account of that GST at settlement from the defendant.
·the plaintiff therefore had a positive obligation to supply an invoice to the defendant pursuant to Special Condition 5.3 which states: “… the Vendor shall deliver to the Purchaser at the time that the Purchaser pays the Price a tax invoice for the taxable supply made by the Vendor to the Purchaser under or pursuant to this Agreement”.
·the defendant pleaded that the plaintiff served documents on the defendant which specified amounts which did not include GST (third amended defence paragraphs 23.4, 23.5, 23.7, 23.8); and that the plaintiff did not at any time produce or tender to the defendant a tax invoice for the taxable supply setting out the GST payable on the taxable supply pursuant to Special Condition 5 of the contract (third amended defence paragraph 23.6 and repeated verbatim at 23.9).
·the Plaintiff “was at no time registered for the purposes of the GST Law as that term is defined in the Contract” (which fact is admitted by the plaintiff in her amended Reply).
·the plaintiff was not at relevant times “ready, willing and able” to perform the contract because she was in breach of Special Condition 5.3. The defendant pleads: “At no time was the Plaintiff registered for the purposes of the GST Law as that term is defined in the Contract and as such the Plaintiff was unable to provide a tax invoice setting out the GST payable pursuant to the Special Conditions of the Contract.”
·the failure of the plaintiff to be “ready willing and able” meant that the defendant was not in breach of the contract which in turn meant that the Notices to Complete and Notice of Termination were all invalid since such Notices could only be given to a party in breach of the contract.
·the asserted failure of the plaintiff to be “ready willing and able” in fact constituted a repudiation of the contract by the plaintiff.
·in the alternative, on the correct construction of the contract, a vendor who elects to proceed pursuant to clause 7.1.5.2a (to “retain the Property and sue the Purchaser for damages for breach of contract”) rather than adopt the alternate liquidated damages option available under clause 7.1.5.2b (and does not seek specific performance) is not entitled to recover bargain damages but rather is limited to a claim for the deposit paid, interest thereon, any other costs incurred and legal fees.
·in the further alternative, any loss that the plaintiff has suffered was brought about by her own actions and she is thereby debarred from claiming bargain damages. This contention may be broadly referred to as “the Shevill contention”.
·in the further alternative, the plaintiff failed to mitigate her loss.
·on a broader front, the contract was procured by unconscionable conduct by the plaintiff at law and/or in equity and/or contrary to s 57 Fair Trading Act 1987 (SA) as it then was and/or the plaintiff was guilty of misleading or deceptive conduct under s 56 Fair Trading Act 1987 (SA) as it then was.
Summary of the topics to be considered in this judgment
I will consider the above contentions of the parties in the following parts:
Part 1: The defendant’s GST contention
Part 2: Unconscionable conduct and/or misleading or deceptive conduct
Part 3: Conclusions as to the defendant’s liability
Part 4: Bargain damages
Part 5: The decision in Shevill v Builders Licensing Board
Part 6: The duty to mitigate loss
Part 7: Quantum of damages and interest
PART 1: THE DEFENDANT’S GST CONTENTION
Aspects of the parties’ pleadings
For reasons that will become apparent, it is necessary to have close regard to aspects of the parties’ pleadings in relation to the defendant’s contention that the plaintiff was not “ready willing and able” to perform concerning GST.
The defendant’s relevant pleadings
The defendant pleaded in the third amended defence:
[23.9]The Plaintiff did not at any time produce or tender to the Defendant a tax invoice for the taxable supply setting out the GST payable on the taxable supply pursuant to Special Condition 5 of the Contract.
[23.10]At no time was the Plaintiff registered for the purposes of the GST Law as that term is defined in the Contract and as such the Plaintiff was unable to provide a tax invoice setting out the GST payable pursuant to the Special Conditions of the Contract.
[24]The requirement for the Plaintiff to deliver a tax invoice to the Defendant was a fundamental term of the Contract and a requirement of the GST Law because it was a taxable supply.
[25]In the premises, the failure by the Plaintiff to deliver a tax invoice to the Defendant was a breach by the Plaintiff of a fundamental term of the Contract.
[26]As a consequence of the matters set out in paragraph 23-25 hereof, the Plaintiff repudiated the Contract.
[27]The Defendant accepted the Plaintiff’s repudiation of the Contract by not settling on the Contract. As a consequence of the Plaintiff’s repudiation, the Defendant is not liable for the amounts or relief claimed by the Plaintiff or any amount or relief.
(Emphasis added)
The plaintiff’s relevant pleadings
In response, the plaintiff relied upon a number of matters but her most important central argument was that it was both futile and unnecessary for the plaintiff to register for GST, or to prepare any GST related documents, because the defendant had already intimated by letter of 19 December 2008 that it would not settle. The plaintiff submitted that her reliance on the defendant’s intimation excused her from performing such a futile task, both as a matter of the application of contract law and by raising an estoppel against the defendant. The plaintiff’s third reply responded in the following way to the third amended defence:
[10(8)]In response to paragraph 23.10, the plaintiff admits that she was not registered under the GST Act during the period from December 2008 to February 2009 but says further:
(a) She was not required to be so registered;
(b)In the event that she had been required to be so registered, she could have been registered forthwith for the purpose of rendering a tax invoice to the defendant should the defendant have requested a tax invoice.
[11]In response to paragraph 24, the plaintiff denies paragraph 24 and says further:
(1)There was no requirement on the part of the plaintiff to deliver a tax invoice and the plaintiff repeats and refers to the matters in paragraph 10 above;
(2)The relevant fundamental term of the Contract imposing an obligation on the defendant to pay the balance of the Price on the due date for settlement is separate and independent of any obligation on the part of the plaintiff to deliver a tax invoice (which obligation is in any event denied);
(3)Any obligation to remit GST (in respect of the Price) under the GST Act or the Contract (which obligation is denied) is imposed on the plaintiff and not the defendant;
(4)The Contract expressly provided that any right of the plaintiff to claim, and any obligation of the defendant to pay, a further amount in addition to the Price on account of a liability of the plaintiff for GST under the GST Act was independent of the liability or obligation of the defendant to pay the Price and the former obligation did not merge in the payment of the Price.
[12]The plaintiff denies paragraph 25 and repeats paragraph 11 immediately above.
[13]The plaintiff denies paragraph 26 and says further:
(1)On the basis of the matters pleaded above, the plaintiff neither breached nor repudiated the Contract;
(2}The plaintiff says further that in view of the anticipatory breach and subsequent breach by the defendant of the Contract and its evinced intention not to settle on the purchase of the subject property, the plaintiff was not obliged to produce or tender a tax invoice to the defendant, even should one have been required at law;
(3)Even should the plaintiff have been required at law to render or produce a tax invoice (which is denied) and the plaintiff have been required to produce or tender a tax invoice to the defendant notwithstanding the defendant’s evinced and avowed intention not to settle on the purchase of the property, any such failure was inconsequential to the defendant and would not amount to a repudiation of the Contract.
[14]The plaintiff denies paragraph 27 and refers to the matters pleaded above.
The contractual terms relevant to the defendant’s GST contention
As noted above, a standard form SA Real Estate Institute “Residential contract” was used with modifications and with a number of added “Special Conditions”. GST is dealt with at clause 8.8 but it is also dealt with at Special Condition 5. I note that Special Condition 1.3 provides:
Should there be any inconsistency between these Special Conditions and the Standard Terms and Conditions, then these Special Conditions shall prevail.
I give full effect to that Special Condition 1.3 but I do not think that the contract, when considered as a whole, evinces an intention that Special Condition 5 should entirely cover the field in relation to the topic of GST. I note for example that Special Condition 7 deals with “Amendments” and that the parties have proceeded thereunder specifically to amend or delete various clauses in the main body of the contract.
No such deletions were made to clause 8.8. Further, there are a number of matters relating to GST provided for in clause 8.8 which are not addressed in Special Condition 7. In my view, such matters evince the intention that clause 8.8 is operative except in so far as it may be inconsistent with a Special Condition (including Special Condition 5).
The nature and effect of any obligation upon the plaintiff to provide a GST invoice under Special Condition 5
The submissions of the defendant focus primarily upon Special Condition 5. Although to be found within the annexure hereto, it is convenient to again reproduce Special Condition 5 (with emphasis added) thus:
5. GST
5.1 The Vendor and the Purchaser acknowledge and agree that:
5.1.1 the Price payable under this Agreement is exclusive of GST:
and
5.1.2the Vendor may, in addition to the price but subject to providing the Purchaser with a tax invoice (as required by the GST Legislation), recover from the Purchaser an additional amount on account of GST, such additional amount to be calculated in accordance with the GST Law and paid at the time of payment of the Price.
5.2 Without limiting the generality of Clause 5.1:
5.2.1the price does not include GST;
and
5.2.2the amount payable to the Vendor under this Agreement will be the sum of the Price and any GST payable or reimbursable by the Purchaser in respect of the Land.
5.3 Without limiting or negating any of the Vendor’s obligations under the GST Law, the Vendor shall deliver to the Purchaser at the time that the Purchaser pays the Price a tax invoice for the taxable supply made by the Vendor to the Purchaser under or pursuant to this Agreement;
The defendant in effect seeks to proceed directly to a contention that the plaintiff was not at relevant times “ready willing and able” to perform the contract because she was unable to issue an invoice to the defendant for payment of GST payable on the taxable supply.
However, in my view before one may consider contentions about being “ready, willing and able” to perform, one must first construe the contract to answer a critical anterior question: “What was the nature and effect of any obligation upon the plaintiff to provide a GST invoice?”
In Foran v Wight[10] it was contended that the purchaser was not “ready, willing and able” to raise the very purchase price itself. Such an inability is the closest and most directly related matter to the transfer of title by the vendor that can be imagined; the payment constituted the whole of the consideration for the transfer of title (and vice versa) and an inability of one party to perform such a central obligation obviously gave the other party the right to refuse to perform. Whatever the precise nomenclature chosen,[11] the obligations of transferring title and the payment for the same are clearly “interdependent” or “conditional”, the one upon the other.
The relevant question: is Special Condition 5.3 a term the breach of which would entitle the defendant to refuse to settle on the transfer of the property?
[10] (1989) 168 CLR 385.
[11] See discussion below.
In the present case the facts are very different to those in Foran and here the defendant does not suggest that the plaintiff was unable to transfer title. The defendant, of course, relies upon Special Condition 5.3 but the whole of Special Condition 5 must be read together in order to answer what becomes the relevant question: Is Special Condition 5.3 a term the breach of which would entitle the defendant to refuse to settle on the transfer of the property? If the answer to that question is in the negative, the argument for the defendant fails in limine.
The law governing the construction and operation of Special Condition 5
Professor Swanton in her learned article Discharge Of Contracts For Breach states: [12]
A term will, in the absence of an indication of a contrary intention, be a condition if it can be said that every breach of it must give rise to an event which will deprive the party not in default of substantially the whole benefit of the contract. In any event a term will be a condition if this was the intention of the parties express or implied. If their intention is not revealed expressly it is likely that the courts will continue to make use of the traditional tests and metaphors for discovering their intention. Thus it has been said repeatedly that a term is a condition if it goes to the root of the contract, if it affects the substance and foundation of the adventure which the contract is intended to carry out, if it goes so directly to the substance of the contract, or is so essential to its very nature that its non-performance may fairly be considered as a substantial failure to perform the contract at all or if failure to perform the term would render the performance of the rest of the contract a thing different in substance from that for which the innocent party stipulated. In Australia an authoritative test of essentiality is ‘whether it appears from the general nature of the contract considered as a whole, or from some particular term or terms, 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 a substantial performance of the promise, as the case may be, and that this ought to have been apparent to the promisor’.
[12] (1981) 13 MULR 69, 72.
Although writing before the decision of the High Court in Koompahtoo Local Aboriginal Land Council v Sanpine Pty Ltd,[13] she foreshadowed the refinement later to be introduced by the High Court in Koompahtoo thus:[14]
However, increasingly, it is being recognized that many contractual terms cannot be classified as conditions or warranties and that the effect of their breach on the rights of the parties depends on the gravity of the situation resulting from the breach. Such terms have been called ‘innominate’ or ‘intermediate’ terms to distinguish them from conditions and warranties. If the effect of breach of such a term is to deprive the party not in default of substantially the whole benefit which it was intended he should obtain from the contract, or, in other words, if it goes so much to the root of the contract that it makes further commercial performance of the contract impossible, then the injured party can rescind.
[13] (2007) 233 CLR 115. The learned author addresses the decision of the English Court of Appeal in Hong Kong Fir which was adopted by the High Court in Koompahtoo.
[14] (1981) 13 MULR 69, 73.
The learned author later makes an observation which is as insightful as anything I have read in the area:[15]
Unfortunately there are still available to the courts a multiplicity of different approaches, employing disparate terminology, for dealing with the self-same question. The main problem, it is suggested, which bedevils this branch of the law, is the fact that the same issue has been tackled by the courts, at different stages of history, from a variety of different angles. The very great difficulty of stating the law with respect to the effect of non-performance or defective performance by one party on the contractual obligations of the other is largely the result of the existence in the common law of overlapping categories, supported by case law which is still authoritative because of the doctrine of precedent, even though it may be obsolete. This has resulted in immense confusion both in terminology and in substance.
[15] (1981) 13 MULR 69, 74.
This is, of course, a general comment which might apply to a number of areas of the law but it does have resonance in the area presently under discussion.
As seen above, the plaintiff pleads the matter as follows:
[11]
(2) (T)he relevant fundamental term of the Contract imposing an obligation on the defendant to pay the balance of the Price on the due date for settlement is separate and independent of any obligation on the part of the plaintiff to deliver a tax invoice (which obligation is in any event denied)
(Emphasis added)
There is no doubt that this pleading addresses the correct question and is cogent and plain. But it is interesting to note that the terminology separate and independent makes use of learning dating back to the very beginning of contract law whereas the idea of a fundamental term belongs to a much later period commencing perhaps from about the time of the seminal decision of Boone v Eyre.[16] However, while the possibility of confusion is latent, my view is that a brief consideration of the old terms and concepts may indeed be useful here, and particularly so given that a sale of land is involved.
[16] (1779) 1 Hy Bl 273n; 126 ER 160.
Independency and dependency of covenants or promises
As is well known, the common law originally adopted the position that a covenant of one party was enforceable independently of the performance of the other party’s covenant unless performance of the one was expressly made conditional upon the performance of the other. The performance of one covenant being expressly conditional upon the performance of another covenant is now sometimes referred to as “interdependent obligations”[17] or “interdependency of obligations”. Covenants the performance of which were thus made conditional were commonly referred to as “conditions precedent” or “conditions subsequent”.
[17] The term “interdependent” was used in this sense by Sir Anthony Mason in Greene v Sommerville (1979) 141 CLR 594, 608 to be considered below. “Interdependency” is a useful and precise shorthand descriptive term but it is a modern term and was not contemporaneously used.
The way in which the Courts originally determined whether the performance of one covenant was (or was not) dependent upon the performance of another was by reference to the particular words in the contract, it being established by precedent that some particular words and phrases were suitable to bring about that result whereas others were not.[18] However, as times and conditions changed, the law edged towards a more flexible system and a variety of considerations other than whether the words were traditional words connoting a condition came to be taken into account.[19]
[18] This approach in fact had originated in the much older real property law relating to grants of real estate, where the extent of the estate being conveyed could be limited by reference to “conditions” inserted in the grant by the grantor of the estate. Much learning evolved as to what words and phrases would, and would not, constitute such a condition. The words sub conditione were accepted as the most appropriate. Littleton (Coke on Littleton 23b) considered that proviso semper and ita quod were equally suitable and that view was adopted both in Viners Abridgement and Comyns Abridgement. It is difficult to say precisely how the status of particular forms of words was originally determined but by the time of Sir Edward Coke, judgment had been passed on a large number of words and phrases which were held not to be words of condition. Thus Viner tells us (5 Viners Abridgement 42ff) that ad effectum, ea intentione, ad solvendum, ut adveniat and periplendum were all denied such status in various decisions.
[19] Sergeant Saunders was later to attempt to rationalise and categorise the many seemingly inconsistent precedents in his famous “Rules in Pordage v Cole” attached to the report of the decision in Pordage v Cole (1669) Williams Saunders 318; 85 ER 449. Most think he was largely unsuccessful.
This evolving process finally led to the creation (or consolidation) of a different concept, the “concurrent condition”, particularly in the decisions of Lord Mansfield in Kingston v Preston[20] and Jones v Barkley[21] and thence to the modern law of contract.[22] Thus Dr Stoljar stated in his learned article “Dependent And Independent Promises”:[23]
The doctrine of the dependency and independency of promises has been a principal theme in the history of the law of contract. From the sixteenth century to the nineteenth, it moulded the basis structure of the parties’ performatory relations, as it was the main conceptual prop for the construction of conditions in a covenant or agreement.
[20] (1773) 2 Doug 690; 99 ER 437
[21] (1773) 2 Doug 684; 99 ER 434. While the decisions of Lord Mansfield in Kingston v Preston and Jones v Barkley are the best known, a number of commentators (including Dr Stoljar) insist that the creature had been born a little earlier. The case of Turner v Goodwin (1714) 10 Mod 153, 189, 222; 88ER 671, 687, 702 decided about fifty years before Kingston v Preston does appear to have a better claim to parentage.
[22] Obviously a gross over simplification.
[23] (1957) 2 Sydney Law Review 217, 217.
He later observed:[24]
There are then two principal motifs in the history of our doctrine. One was the struggle towards concurrent performance in executory exchanges, and the other the adjustment of broken, yet partly executed, contracts. But because these threads developed contrapuntally they also confusingly intermingled. To a great extent the many difficulties were due to a failure to understand that the problems of performance and breach of contract threw up situations of different functional type requiring different results and solutions. If we must not belittle the difficulties inherent in a system in which rules had to evolve in interstitial bursts and without a secure model, the fact remains that development was very slow and often painfully laborious.
[24] (1957) 2 Sydney Law Review 217, 219.
In Foran v Wight[25] Mason CJ referred to this matter of construction of the relevant terms as background against which the matter of the concept of “ready, willing and able” was to be considered:[26]
In the context of concurrent and mutually dependent obligations it was recognized as early as the eighteenth century that a party who was ready and offered to perform his part of the contract could maintain an action against the party who refused or neglected to perform his part.
[25] (1989) 168 CLR 385.
[26] (1989) 168 CLR 385, 396(.9).
The slow process referred to by Dr Stoljar also eventually led to another famous decision of Lord Mansfield, that of Boone v Eyre[27] which, despite its horrific subject matter of a sale of an estate together with a large number of slaves, also has a strong claim to being the progenitor of modern contract law. His lordship there stated:[28]
The distinction is very clear, where mutual covenants go to the whole of the consideration on both sides, they are mutual conditions, the one precedent to the other. But where they go only to a part, where a breach may be paid for in damages, there the defendant has a remedy on his covenant, and shall not plead it as a condition precedent. If this plea were to be allowed, any one negro not being the property of the plaintiff would bar the action.
[27] (1779) 1 Hy Bl 273n; 126 ER 160. The decision of Boone v Eyre is only shortly reported and is found in the form of a note to the later decision of The Duke of St Albans v Shore. This later case, being a dispute over an executory sale of land, is in fact rather closer to the factual situation in the present case. The plaintiff Duke had covenanted to convey land to Shore who repudiated the contract because the Duke had cut down timber on the land prior to settlement. It was decided that Shore was entitled to repudiate because the timber had been of very significant value and hence was “the chief inducement to a purchase of that estate”.
It is interesting to note that in AGC v Ross, Marks J (with whom Murray J concurred) referred to Van Reesema v Giameos (No 1) [which is to be considered below] and stated: “I think it possible to regard some cases as involving alternatively a breach of a fundamental condition giving rise to a discharge of the agreement or a total failure of consideration with the same consequences. In Van Reesema v Giameos (No 1) (1978) 17 SASR 353, at 374, Bray CJ observed: “Nowadays we speak of essential and inessential terms rather than of a breach going to the whole or part of the consideration but I think the principle is applicable to the altered terminology.” In Boone v Eyre (1779) 1 H B1 273n; 126 ER 160 Lord Mansfield spoke of “mutual covenants” which “go to the whole of the consideration on both sides, they are mutual conditions, the one precedent to the other”.
[28] (1779) 1 Hy Bl 273n; 126 ER 160.
The decisions in Greene v Sommerville and Van Reesema v Giameos (No 1)
Returning to the future, the rather more recent decision of the High Court in Greene v Sommerville[29] presents a good example of the continuing value of the old learning being applied to a factual situation not dissimilar to the present case. The contract there required the balance of the price to be paid on 10 November 1976 (a deposit having been paid) and by clause 11 interest was payable if the balance were not then paid. The purchaser was unable to settle on the due date but the vendors let her into possession at a weekly rent of $30 in the expectation that she would soon be able to complete. On 13th May 1977 they gave her a Notice under the contract stating that she had defaulted and requiring her to remedy the default and to fulfil her part of the contract within 14 days. The parties later agreed 30 May 1977 as the date for settlement but at settlement the parties were unable to agree upon the amount that should be paid. The vendors claimed interest from 10 November 1976 to 30 May 1977, but the purchaser asserted that so long as she had paid rent as agreed she was not obliged to pay interest. She tendered $23,938.30 in discharge of her obligations under the contract, comprising $23,400 as the balance of price and $538.30 as interest from 17 March to 30 May 1977. The vendors rejected the tender and later purported to rescind the contract. The purchaser’s suit for specific performance was dismissed by the trial Judge who found that the purchaser’s obligation was to pay interest for at least a portion of the time that she was paying rent and that her tender at settlement was of an inadequate amount.
[29] (1979) 141 CLR 594.
The High Court, while accepting the finding that the purchaser’s tender was inadequate, nevertheless found in her favour because the promise to pay an amount of money beyond the purchase price for interest was not an obligation interdependent with the promise by the vendor to convey title. Mason J (with whom Murphy and Aitken JJ concurred) propounded the central question thus:[30]
Was the respondent’s tender on 30th May 1977 of interest amounting to $538.00 instead of $1,156.32 (being $1,546.32 less $390.00 the rent actually paid) a breach of an essential term of the contract or, as it is sometimes put, of a term which was interdependent with the appellants’ obligation to convey?[31]
(Emphasis added)
[30] (1979) 141 CLR 594, 608.
[31] It is important to note that his Honour here uses the disjunctive in the sense of “that is to say” – his Honour is not postulating two contrary alternatives!
His Honour thus posits the question in the then current terminology of “essentiality” and then helpfully equates that concept to the much older test of “interdependency”. His Honour proceeded:[32]
Had the contract provided for the payment of interest together with the balance of purchase price on settlement or had it conditioned the performance of the vendor’s obligations on such payment, it would have been easy to reach the conclusion that payment of interest was interdependent with the vendor’s obligation to transfer. Yet the contract does neither of these things. Clause 3 merely provides that settlement will be effected by payment of the balance of the purchase money against the transfer and certificate of title. Clause 3 is therefore inconsistent with the notion that the payment of interest is interdependent with the appellants’ obligation to deliver a registrable transfer, for it proceeds upon the footing that the counterpart obligation to the purchaser’s right to a transfer of the interest in the land is the payment of the purchase price, the payment of interest being a compensation for late payment (see Mehmet v Benson).
Nevertheless the respondent was, in my opinion, in breach of contract by failing to pay on 30th May 1977 the interest which was then due. The implication to be gathered from the contract is that interest was payable either on the day fixed for settlement, if not upon earlier demand. But, as I have said, the failure to pay interest was not a breach of an obligation interdependent with the appellants’ obligation to transfer.
(Emphasis added)
[32] (1979) 141 CLR 594, 608.
His Honour then re-translated the matter back to terms of “essentiality”:[33]
The contrast between a term which is “essential” and one which is “trivial” is often employed. But it does not mean that a term which is not trivial is essential. The obligation to pay interest, though not a trivial term, is for reasons already explained, not an essential term.
[33] (1979) 141 CLR 594, 609.
His Honour proceeded to find that although the purchaser was in breach of her promise to pay interest (in the correct amount) she was nevertheless entitled to a decree of specific performance. This constitutes a strong authority for the present plaintiff. As Mason J put the matter in Greene:
In the present case, the respondent alleged her readiness and willingness to perform the contract but, by insisting that it was agreed that the payment of interest should be waived, she was insisting on a mode of performance of the contract to which she was not entitled. What is more, she did not in her statement of claim offer to perform the contract on its true construction. However, in the circumstances of this case I do not think that these considerations are inconsistent with a finding that the respondent was ready and willing to perform the contract at the commencement of the suit. First, the respondent was, on the view which I take of the contract, ready and willing to perform her essential obligation under the contract, that is, by paying the balance of the purchase price. …
(Emphasis added)
A South Australian decision involving the application of relevant principles to a factual situation not dissimilar to the present case is that of Van Reesema v Giameos(No 1)[34] (Van Reesema). Put shortly, the vendor contracted to sell a newly erected shopping complex at a price which was a very advantageous price for the purchaser. The contract contained a promise by the vendor to perform certain work to the car park prior to sale, relevantly the concrete edgings (the “edgings stipulation”). A dispute arose as to the performance of this work and the purchaser refused to settle on the ground that the work had not been completed. The vendor served a Notice to settle on the purchaser who declined to do so. The vendor then purported to terminate the contract on the basis of repudiation. The purchaser brought an action for specific performance which the vendor resisted on the basis that the contract had been validly terminated by himself.
[34] (1978) 17 SASR 353. The case was decided just before the High Court decision in Greene v Sommerville (1979) 141 CLR 594 but not cited therein.
It can be seen that there is a reasonable correlation to the present factual scenario in that in both cases the purchaser failed to settle and attempted to justify that failure on the basis that a particular promise or undertaking by the vendor had not, or could not, be fulfilled by settlement. In both cases, the vendor then purported to terminate the contract.[35]
[35] The ultimate remedies sought are different because of the different price situations. In Van Reesema, the price was below market value and the vendor wished to sell elsewhere while the purchaser wished to claim specific performance. In the present case, the price was above market value and the vendor claims bargain damages while the purchaser contests that claim.
In Van Reesema, Walters J gave judgment for the vendor and stated:[36]
Even if there were a breach by the defendant of the stipulation with respect to edging of the exits, in my opinion it was not such a breach as would amount to a bar going “to the whole consideration for the promise sued on”; nor was it such a breach as would disentitle the defendant to insist on the plaintiff’s performance of the contract (Oxford v Provan, per Sir William Erle, delivering the judgment of the Judicial Committee, at p 156).
[36] (1978) 17 SASR 353, 368.
On appeal, Bray CJ and Hogarth J expressly agreed with the view of Walters J that the “exit edgings stipulation” was not an essential term and while it may have given rise to a right to damages,[37] it did not give rise to a right to refuse to settle on the transfer of the property. Bray CJ stated:[38]
[37] (1978) 17 SASR 353 per Bray CJ at 376; per Walters J at 370. Thus Bray CJ: “(if) the purchaser had completed, then, subject to the question of waiver…, he may have had some claim against the vendor for the cost of doing this work.”
[38] (1978) 17 SASR 353, 373.
… I think that this term about the edgings was comparatively trivial and was certainly non-essential and that the vendor was none the less entitled to call on the purchaser to complete, even if he was in breach of it. I think the case falls within the principle referred to by Barwick CJ in Mehmet v Benson in the following words:
That the plaintiff was in default ... does not establish that he was not in the relevant sense ready and willing to perform the contract. If it were otherwise a purchaser in substantial default of inessential terms could never be granted specific performance. Indeed, the significance of the distinction between essential and inessential terms is derived from the fact that a person in breach of inessential terms may be granted specific performance. “ ... A plaintiff in equity may even have actually broken his contract in the letter and yet succeed, if the substance remains”: per Isaacs and Rich JJ in Fullers’ Theatres Limited v Musgrove.. The question as to whether or not the plaintiff has been and is ready and willing to perform the contract is one of substance not to be resolved in any technical or narrow sense. It is important to bear in mind what is the substantial thing for which the parties contract and what on the part of the plaintiff in a suit for specific performance are his essential obligations.
It is true that the learned Chief Justice was there speaking of the purchaser’s right to specific performance, not of the vendor’s right to rescind. But clearly, if a purchaser in default of an inessential term can get specific performance, so can a vendor in such default, possibly allowing compensation or being subject to a cross-action for damages for breach; cf Oxford v Provand, where their Lordships said:
The meaning of the maxim in Chancery that he who seeks equity must do equity, is not clear, because equity has not been clearly defined. The maxim, as their Lordships understand it, includes the rule at law which in all suits upon contracts, either for specific performance or for damages, guides to discriminate whether an alleged breach of the duty of the Plaintiff under the contract is a bar to the suit.
The rule has been expressed in various forms, the substance of it, as regards the present purpose, is, that such breach is a bar when it goes to the whole of the consideration for the promise sued on; but when it amounts only to partial failure of such consideration, it is no bar to the suit: the Defendant being entitled to recover in a cross-action compensation for such failure, if it should be proved to exist.
Nowadays we speak of essential and inessential terms rather than of a breach going to the whole or to part of the consideration, but I think the principle is applicable to the altered terminology.
But if the vendor in such circumstances is entitled to force the purchaser to complete, it seems to me that by parity of reasoning he must be entitled to exercise his option to rescind when he prefers rescission to performance.
(Emphasis added)
Hogarth J essentially took the same approach as Bray CJ and Walters J. Mitchell J came to the same result but did so on the basis of waiver.
The “essential”/“non-essential” dichotomy
In Van Reesema, Dr Bray equated the more modern “essential”/“non-essential” dichotomy with the earlier terminology of “a breach going to the whole or to part of the consideration” which, as observed above, is usually considered to have started at about the time of the decision of Boone v Eyre.[39]
[39] (1779) 1 Hy Bl 273n; 126 ER 160.
The “essential”/“non-essential” dichotomy distinguishes between an essential term which is so important that a breach of it gives rise to a right to terminate a contract[40] and a non-essential term the breach of which sounds in damages only[41] and largely equates to the “condition”/“warranty” dichotomy irrespective of whether the contract in question is or is not for the sale of goods. In Tramways Advertising Pty Ltd v Luna Park (NSW) Ltd Jordan CJ stated: [42]
The test of essentiality is whether it appears from the general nature of the contract considered as a whole, or from some particular term or terms, 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 a substantial performance of the promise, as the case may be, and that this ought to have been apparent to the promisor. If the innocent party would not have entered into the contract unless assured of a strict and literal performance of the promise, he may in general treat himself as discharged upon any breach of the promise, however slight. If he contracted in reliance upon a substantial performance of the promise, any substantial breach will ordinarily justify a discharge. In some cases it is expressly provided that a particular promise is essential to the contract, eg by a stipulation that it is the basis or of the essence of the contract; but in the absence of express provision the question is one of construction for the Court, when once the terms of contract have been ascertained. …
[40] See: Luna Park (NSW) Ltd v Tramways Advertising Pty Ltd (1938) 61 CLR 286.
[41] See: Oscar Chess Ltd v Williams [1957] 1 All ER 325.
[42] (1938) 38 SR (NSW) 632, 641-642. In Koompahtoo Local Aboriginal Land Council v Sanpine Pty Ltd the joint judgment of Gleeson CJ, Gummow, Heydon and Crennan JJ referred to and approved this statement.
Similarly, in Associated Newspapers v Bancks the High Court stated in a joint judgment:[43]
Various tests have been advanced by the courts from time to time to determine what is a condition as opposed to a warranty. In Bettini v Gye Blackburn J (as he then was) said that to determine this question the court must ascertain the intention of the parties to be collected from the instrument and the circumstances legally admissible with reference to which it is to be construed. Later in the same case his Lordship said that in the absence of any express declaration by the parties, as in the present case, “we think that we are to look at the whole contract and applying the rule stated by Parke B to be acknowledged in Graves v Legg, see whether the particular stipulation goes to the root of the matter, so that a failure to perform it would render the performance of the rest of the contract by the plaintiff a thing different in substance from what the defendant has stipulated for; or whether it merely partially affects it and may be compensated for in damages”. In Bentsen v Taylor, Sons & Co (No 2) Bowen LJ, discussing the distinction between a condition and a warranty, points out that in order to decide this question one of the first things you would look to is, to what extent the truth of what is promised would be likely to affect the substance and foundation of the adventure which the contract is intended to carry out. Perhaps the test is better formulated by C B Morison in his Principles of Rescission of Contracts (1916), at p 86. “You look at the stipulation broken from the point of view of its probable effect or importance as an inducement to enter into the contract.” …
(Emphasis added)
[43] (1951) 83 CLR 322, 336 (Dixon, Williams, Webb, Fullagar and Kitto JJ).
Koompahtoo Local Aboriginal Land Council v Sanpine Pty Ltd
For completeness, I note that the decision by the High Court in Koompahtoo Local Aboriginal Land Council v Sanpine Pty Ltd[44] confirms for Australia that there may be terms that are not to be classified in an a priori fashion as either “conditions” or “warranties” but may be considered as “intermediate” terms. The breach of an intermediate term gives rise to a right for damages but in some circumstances where the breach is particularly significant to the contract as a whole, it may also give rise to a right to terminate the contract. The joint judgment in Koompahtoo, adopted the formulation of the English Court of Appeal in Hongkong Fir Shipping Co Ltd v Kawasaki Kisen Kaisha Ltd[45] stating:[46]
[49]… In Hongkong Fir Shipping Co Ltd v Kawasaki Kisen Kaisha Ltd,[47] the English Court of Appeal was concerned with a stipulation as to seaworthiness in a charterparty. Breaches of such a stipulation could vary widely in importance. They could be trivial or serious. The Court of Appeal held that to the accepted distinction between “conditions” and “warranties”, that is, between stipulations that were in their nature essential and others, there must be added a distinction, operative within the class of non-essential obligations, between breaches that are significantly serious to justify termination and other breaches. This was a recognition that, although as a matter of construction of a contract it may not be the case that any breach of a given term will entitle the other party to terminate, some breaches of such a term may do so.
[44] Koompahtoo Local Aboriginal Land Council v Sanpine Pty Ltd (2007) 233 CLR 115.
[45] [1962] 2 QB 26.
[46] [2007] 233 CLR 115.
[47] [1962] 2 QB 26.
The defendant’s GST contention - discussion
As a matter of law, liability to pay GST on a “taxable supply” is imposed on the seller, not the purchaser, and this is so whether the sale is a multi-million dollar sale of land or a sale of goods of small value. Of course, it is lawful for a vendor to “pass on” to a purchaser an extra charge to compensate the vendor for its liability to pay GST in respect of the taxable supply but, importantly, a vendor is not obliged to pass on the whole or any part of the amount referable to GST.[48]
[48] I explain much later why I do not intend to explore a number of questions concerning GST law. In my view, the above brief remarks are sufficient background against which the construction of Special Condition 5 must be undertaken.
The defendant stresses, indeed founds upon, the words of Special Condition 5.3 (“the Vendor shall deliver to the Purchaser at the time that the Purchaser pays the Price a tax invoice for the taxable supply”).
However, I consider that there are two major problems with the defendant’s contention. The first problem is that while any obligation of the plaintiff to deliver a tax invoice may be said to be interdependent with a payment of GST by the defendant, that in no way establishes that payment of GST by the defendant is interdependent with the plaintiff’s obligation to transfer the land. It is only the latter interdependency that might lay the foundation for a submission that the plaintiff was not “ready, willing and able” to settle.
The second problem goes back one step. I consider that under Special Condition 5 any obligation of the defendant to pay GST will only be engaged after the vendor decides, first, that there is a “taxable supply” and second, to recover an additional amount on account of GST from the purchaser. The word “may” in Special Condition 5.1.2 (“the Vendor may recover from the Purchaser an additional amount on account of GST”) governs all that follows. That the vendor “may”, rather than “must”, pass on an amount equivalent to the GST payable follows from the legal position that payment of GST is the responsibility of the vendor; it is the vendor who decides both whether the contract constitutes a “taxable supply” (and hence that GST is payable) and, if so, whether or not it will seek to recover an equivalent amount from the purchaser. So it is that Special Condition 5.2.2 refers to “any GST payable…” (meaning if there is any GST payable) and Special Condition 5.3 refers to “the taxable supply” (meaning if there is any taxable supply).
Thus I consider that the meaning of Special Condition 5 is that if the vendor considers that GST is payable and decides to pass on a charge for an equivalent amount to the defendant, then the defendant must pay that amount at settlement, but only if the plaintiff supplied a GST tax invoice.[49] Such a term as this should not be construed as interdependent with the vendor’s obligation to transfer the land which obligation is, however, interdependent with the purchaser’s obligation to pay for the land.
[49] The plaintiff points out that clause 8.8 strongly supports this interpretation but I bear in mind that the matter of GST is expressly addressed in the Special Conditions and that Special Condition 3.1 provides: “Should there be any inconsistency between these Special Conditions and the Standard Terms and Conditions, then these Special Conditions shall prevail.”
The correctness of that construction is confirmed by reference to modern decisions as Greene v Sommerville[50] and Van Reesema v Giameos (No 1)[51] referred to above, as well as many of the older decisions.
[50] (1979) 141 CLR 594.
[51] (1978) 17 SASR 353. The case was decided just before the High Court decision in Greene v Sommerville (1979) 141 CLR 594 but not cited therein.
One may also look at the matter in a slightly different way, namely that suggested by the High Court in the last passage in the extract from Associated Newspapers v Bancks[52] reproduced above. In my view, it is quite plain on this approach that the “probable effect or importance as an inducement to enter into the contract” of the provisions as to the vendor supplying an invoice (in Special Condition 5) was simply that the purchaser was thereby assured that if GST were to be charged, then (but only then), there would be a compensating effect to the purchaser of the receipt of a tax invoice which might enable a full or partial corresponding credit or offset to be later claimed by the purchaser. In other words, the purchaser would clearly realise that the compensating benefit would only arise if the vendor determined both that there is a “taxable supply” and to recover an additional amount on account of GST from the purchaser.
[52] (1951) 83 CLR 322.
I conclude for the above reasons that the plaintiff is correct in her contention that the term of the contract imposing an obligation on the defendant to pay the balance of the price on the due date for settlement is separate and independent of any obligation on the part of the plaintiff to deliver a tax invoice in relation to GST.
The plaintiff claims the forfeiture of the $300,000 deposit and all interest accrued thereon and an award of damages in the amount of $1,750,000 (being the contract price of $3,000,000 less the market value of the property of $950,000 less the deposit monies of $300,000).
The deposit
The contract provides for the forfeiture of the $300,000 deposit at clause 7.1.5.1 if the contract is terminated under the provision of clause 7.1 and I have found that to have occurred. Accordingly, I will order that the $300,000 deposit be forfeited to the plaintiff. The plaintiff rightly concedes that she must give credit for that amount when calculating the quantum of her damages.
The quantum of damages
The report of the expert valuer Mr Gil Piccinato dated 28 April 2009 was received as exhibit P8. Mr Piccinato considered that the fair market value of the property as at 31 December 2008 was $950,000 and that the fair market value remained at the same figure as at the date of the report in April 2009.
The defendant adduced no expert evidence and in fact pleaded at third defence [15.9] and at third cross-action [35.1] that at all material times the property had a market value of $950,000.
I note that senior counsel for the defendant cross-examined Mr Piccinato and suggested that a different methodology would or might produce a higher valuation but Mr Piccinato maintained his opinion that the correct valuation was as stated in his report.
I accept the evidence of Mr Piccinato and find that at all material times the property had the value of $950,000.
Interest
The plaintiff also seeks orders in respect of interest as follows:
·a sum reflecting interest at the contractual default rate on the sum of $2,700,000 between 31 December 2008 (the Settlement Date) and 11 February 2009 (the date of termination), pursuant to clause 7.1.1.2 of the Contract (the “default interest sum”); and
·an order for pre-judgment interest on the sum of [(x) $1.75 million and (y) the default interest sum] from 11 February 2009 to the date of judgment.
I will hear submissions from the parties on interest.
PART 8: DISPOSITION OF THE PROCEEDINGS
I find in favour of the plaintiff’s claim on all issues including on the issue of bargain damages.
I find against the defendant’s cross-action on all issues. I specifically find that the defendant has not made out any of the pleas at paragraphs 28 to 35 of the third cross-action and that the defendant is not entitled to any of the remedies or orders sought. I will dismiss the defendant’s cross-action in its entirety.
I will hear the parties on:
·Costs
·Interest
·The form of the orders
·Any consequential matters
SCHEDULE – KEY TERMS OF THE CONTRACT
1 INTERPRETATION
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1.10“GST” means any goods and services or similar or comparable tax imposed by and defined in the GST Law.
1.11“GST Law” means the A New Tax System (Goods and Services Tax) Act 1999 and any other Act or Regulation pursuant to, associated with, amending or replacing the Act. Any expression used in this Agreement that is defined in the GST Law has that defined meaning.
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1.17 “the Price” means the sum identified as the Price in the Schedule;
1.18“the Property” means the Land together with the included Chattels and the Consumer Credit Chattels as detailed in the Schedule;
1.19 “the Purchaser” is the party named and described in the Schedule:
1.20“rates and taxes” includes any tax, levy, charge, impost or other charge made by any Governmental, semi-Governmental or local Governmental authority payable by the Vendor, on or in respect of the Land.
1.21“Settlement” means completion of this Agreement for Sale and Purchase by Transfer of the property from the Vendor to the Purchaser;
1.22“the Settlement Date” means the date shown in the Schedule and fixed by this Agreement as the date for settlement;
1.23 “Special Condition” means a special condition set out in the Schedule;
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1.26 “the Vendor” is the party named and described in the Schedule:
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2 AGREEMENT FOR SALE AND PURCHASE
Subject to clause 8.8 and the Special Conditions, the Vendor agrees to sell the Property to the Purchaser who agrees to buy the Property from the Vendor for the price together with any GST applicable.
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3 THE PRICE
3.1 The Price is comprised as set out in the Schedule and is payable as follows:
3.1.1 the Deposit as set out in the Schedule to the trust account of the Agent;[130] …
[130] Cl. 3.1.2 deleted pursuant to Special Condition 7 “Amendments”
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AND
3.1.3 the balance at Settlement.
4 SETTLEMENT
4.1Purchaser to Deliver Signed Documents
The Purchaser must deliver the following documents, properly executed by the Purchaser, to the Vendor not less than seven (7) days before Settlement Date: -
4.1.1 a transfer (or other appropriate conveyance) of the Land (“the transfer”)
4.1.2 any documents supplied by the Vendor to the Purchaser necessary to transfer to the Purchaser title to the Property (other than the Land) (“the assignments”).
If the Purchaser fails to deliver the transfer, then the Vendor may prepare the transfer at the Purchaser’s expense. If the Purchaser fails to so deliver the assignments, the Purchaser shall indemnify and does indemnify the Vendor against any liability, accruing after the Settlement Date in respect of the Property (other than the land) until the Vendor’s interest is assigned to the Purchaser.
4.2 Vendor Must Advise Cheque Details
The Vendor must notify the Purchaser not less than two (2) days before the Settlement Date the number of, the payee for, and the amount of each bank cheque required to effect Settlement. If the Vendor fails to do so, the Purchaser may tender the total amount due at Settlement and payable to the Vendor.
4.3 Place and Time for Settlement
Settlement must occur at the Lands Titles Registration Office in Adelaide (or other place nominated by the Vendor and agreed by the Purchaser not later than two business days prior to the Settlement Date) on the Settlement Date.
4.4 Vendor Must Deliver at Settlement
At Settlement, provided the Purchaser pays to the Vendor all monies payable under this Agreement and otherwise complies with this Agreement, the Vendor must hand to the Purchaser:-
4.4.1 the transfer signed by the Vendor;
4.4.2 such documents in stamped and registrable form as may be necessary to give (subject to this Agreement) the Purchaser clear title to the Land;
4.4.3 the duplicate Certificate of Title;
4.4.4 the assignments;
4.4.5 any other document in stamped and registrable form that may be required for the purpose of stamping and registering the transfer.
4.5 Application of the Deposit
The Deposit shall be applied towards any commission and expenses due by the Vendor to the Agent in accordance with any Agency Agreement entered into between the Vendor and Agent and in part payment of the Price, unless the Purchaser has defaulted (in which case clause 7 applies) or given notice of intention not to be bound by this Agreement (in which case the Vendor may retain the statutory amount). In any other case, the Deposit must be refunded to the Purchaser.[131]
[131] Clause 4.5 is amended by Special Condition 7 “Amendments to the REISA Contract”. Clause 7 of the Special Conditions provides: “the following amendments shall be made to the REISA Contract 7.3 Clause 4.5 of REISA Contract Clause 4.5 shall be amended by deleting the following words starting in the first line: “… any commission and expenses due by the Vendor to the Agent in accordance with any Agency Agreement entered into between the Vendor and the Agent and …””.
6 SPECIAL CONDITIONS
The party required to comply with a Special Condition must make every reasonable endeavour to do so. If the Special Condition is not complied with before the date specified in the Special Condition (or if no date is specified, within twenty one (21) days of the date of this Agreement) then,
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6.2if the failure to comply with the condition is due to the neglect or default of the Vendor or the Purchaser, the party not in default may terminate this Agreement. If the Vendor is in default, the Purchaser may, upon giving seven days’ written notice to the Vendor, terminate the Agreement and all monies paid by or on behalf of the purchaser must be repaid to the Purchaser upon the termination or otherwise clause 7.2 will apply. If the Purchaser is in default, clause 7.1 will apply.
7 DEFAULT
7.1 Purchaser’s Default
7.1.1 If the Purchaser breaches this Agreement and as a result, the purchase of the property is not completed on the Settlement Date, or the Price or any part of the Price is not paid on its due date, the Purchaser must pay interest on the full Price (less the amount of any deposit monies paid) from the Settlement Date until either:-
7.1.1.1 the date full payment is made; or
7.1.1.2the date of termination (whichever first occurs) at the default rate. Any payment of interest at the default rate is without prejudice to any other legal remedy the Vendor may have by reason of the Purchaser’s default.
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7.1.3 If: -
7.1.3.1the Purchaser breaches this Agreement prior to or on the Settlement Date; and
7.1.3.2any such default continues unremedied for a period of not less than three (3) business days the Vendor may at any time after those three (3) business days give notice to complete to the Purchaser. The notice must: -
7.1.3.3appoint a time for Settlement (between 10:00am and 3:00pm on a business day); and
7.1.3.4require the Purchaser to settle at the time appointed in the notice.
If the Purchaser fails to comply with the terms of the notice, the Vendor may, without prejudice to any other legal rights or remedies the Vendor may have, terminate this Agreement by notice in writing to the Purchaser. A notice of completion may be given more than once.
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7.1.5 If this Agreement is terminated under the provisions of this clause 7.1:-
7.1.5.1the Deposit is forfeited to the Vendor except so much as exceeds 10% of the purchase price (which excess, if any, shall be deemed for the purposes of this Clause to be an instalment of the purchase price);
and
7.1.5.2 the Vendor may, at the Vendor’s option, either:-
7.1.5.2aretain the Property and sue the Purchaser for damages for breach of contract; or
7.1.5.2bresell the Property either by public auction or private contract and if the Vendor re-sells the Property and the re-sale is settled within 12 months following the date of termination the deficiency in price (if any) upon such re-sale together with all charges and expenses of and incidental to the re-sale or attempted re-sale and the Purchaser’s default must immediately after such re-sale be paid by the Purchaser to the Vendor as and by way of liquidated damages (the Purchaser receiving credit for any deposit paid).
If the Property realises a higher price than was payable under this Agreements the Vendor is entitled to retain that higher price, free of any claim by the Purchaser. In exercising any rights of resale, it is not necessary for the Vendor first to tender a transfer to the Purchaser.
7.1.5.3the Vendor shall be entitled to retain for 12 months from the date of termination of the contract and pending re-sale of the property all instalments of purchase price paid.
7.1.5.4 if the Vendor resells the property the Vendor may:-
a.if settlement of such resale is within 12 months after the date of termination of the contract, apply any instalments of purchase price paid in or towards satisfaction of any damages mentioned in clause 7.1.5.2b; and
b. retain absolutely:-
(i)any surplus arising from such resale in excess of the original purchase price and expenses arising from the re-sale and all losses and expenses incurred by the Vendor resulting from the Purchaser’s default; and
(ii)any interest paid by the Purchaser;
7.1.5.5if the Vendor does not commence proceedings for the recovery of damages or fails to re-sell the property within the 12 month period referred to in Condition 7.1.5.2b, then after the said period of 12 months has expired, the Vendor shall account to the Purchaser for all instalments of purchase price received by the Vendor (other than for any deposit forfeited to the Vendor in the terms of the contract) without interest.
7.2 Vendor’s Default
7.2.1 If the Vendor breaches this Agreement prior to or on the Settlement Date, the Purchaser may without prejudice to any other legal rights or remedies the Purchaser may have, at any time after the occurrence of such breach, give to the Vendor notice in writing requiring such breach to be remedied within the period specified in the notice being not less than three (3) business days after serving of the notice.
7.2.2 Unless the breach is remedied within that period, the Purchaser may:-
7.2.2.1treat this agreement as being terminated at the end of that period; or
7.2.2.2postpone the Settlement Date until after the breach is rectified and notified to the Purchaser and claim from the Vendor (in which case the Vendor must pay to the purchaser);
7.2.2.2ainterest at the default rate on the full Price from and after the Settlement Date to and including the date when such breach ceases and is notified to the Purchaser; or
7.2.2.2bthe amount of the actual damage suffered by the Purchaser (whichever is the greater amount, at the Purchaser’s discretion)
7.2.3 If this Agreement is terminated under the provisions of this clause 7.2 all monies paid by the Purchaser must be refunded to the Purchaser.
7.2.4 If the Settlement Date is postponed pursuant to the terms of this clause, all rates and taxes (but not income) shall be re-adjusted to midnight on the day before settlement takes place.
7.3 Time of the Essence
Time is of the essence in respect of any obligation under clause 7.
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8 MISCELLANEOUS
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8.2 No Merger
The provisions of this Agreement shall not merge on completion of this Agreement and shall survive Settlement and any termination of this Agreement by either the Vendor or the Purchaser.
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8.8 Goods and Services Tax
The Vendor and the Purchaser acknowledge and agree that:
8.8.1if GST applies to any supply made under or in connection with this Agreement by the Vendor:
8.8.1.1the amount payable in respect of the supply is exclusive of GST; and
8.8.1.2the Vendor may, in addition to any amount or consideration expressed as payable in respect of the supply, recover from the Purchaser an additional amount on account of GST; and
8.8.1.3the Purchaser shall pay to or reimburse to the Vendor or to a third party (as the case may be), any additional amount on account of any GST that is or was incurred, paid or payable by the Vendor in respect of that supply; and
8.8.1.4the amount payable by the Purchaser to the Vendor or to a third party in respect of that supply shall be increased by the product of:
(a)the rate at which GST is imposed at that time; and
(b)the amount or consideration payable for the relevant supply; and
8.8.1.5the Purchaser shall pay any additional amount on account of GST at the same time as the payment for the relevant supply is payable or at such other time as the Vendor directs.
8.8.2 The Purchaser acknowledges and agrees that if GST applies to any supply made under or in connection with this Agreement by the Purchaser, that the Purchaser shall be responsible for the payment of any additional amount on account of any GST in respect of that supply.
8.8.3 The Purchaser warrants that the Property shall be used by the Purchaser predominantly for residential accommodation within the meaning of the GST Law. Delete for vacant land and see “GST Annexure”.
8.8.4 This clause 8.8 shall not merge on completion of this Agreement and shall survive settlement and any termination of this Agreement by either the Vendor or the Purchaser.
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8.10 Other Conditions
The other terms and conditions set out in the Schedule Other Conditions form part of this Agreement.
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RESIDENTIAL CONTRACT
Schedule
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H The Price (Clause 1.17)
Three Million Dollars $3,000,000.00
GST (if applicable) $ 300,000.00
Total $3,300,000.00
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J Settlement Date (Clause 1.22)
Refer Annexure A Special Conditions attached
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S Other Conditions (clause 8.10)
Annexure A – Special Conditions
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ANNEXURE A
SPECIAL CONDITIONS
1 Interpretation
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1.3Should there be any inconsistency between these Special Conditions and the Standard Terms and Conditions, then these Special Conditions shall prevail.
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2 Settlement
Settlement of this Agreement shall take place on 31 day of December 2008, provided however the Purchaser may bring settlement forward to an earlier date by giving the Vendor at least 28 days prior written notice of the earlier date so nominated by the Purchaser … not before 1 June 2008[132]
[132] The italicised part of this clause comprises a handwritten addition initialled by both parties.
3 Deposit
3.1The Purchaser shall pay the Deposit as set out in the Schedule preceding these Special Conditions by way of cash or Bank Cheque into the trust account of the Vendor’s Solicitor.
3.2The Deposit shall be invested in the name of the Vendor’s Solicitor in an interest bearing deposit account at a Bank nominated by the Vendor’s Solicitor.
3.3All interest which accrues on the investment of the Deposit less any taxes, bank charges and other expenses (“net interest”) accrues for the Vendor’s benefit and is payable to the Vendor at Settlement or on default by the Purchaser in accordance with Clause 7.1, except if this Agreement is terminated by reason of the Vendor’s breach in which case the net interest will be paid to the Purchaser solely.
3.4The Vendor’s Solicitor may withdraw the Deposit (with accrued net interest) at any time during the period of 3 Business Days immediately preceding the Settlement Date and forthwith pay such money into their trust account in readiness for Settlement.
3.5The Vendor’s Solicitor shall hold and deal with the Deposit in accordance with the terms of this Agreement provided that each party authorises and directs the Vendor’s Solicitor to invest and deal with the Deposit and net interest in the manner specified above and will do all other things necessary to give full effect to the provisions of this Special Condition.
4 Undertakings
4.1 Until settlement has occurred under this Agreement, the Purchaser undertakes:
4.1.1 not to take any steps to physically demolish the building located at 3 College Street, Glenelg (“3 College Street”);
4.1.2 not to do anything that interferes with the Vendor’s use of the Land; and
4.1.3 to maintain 3 College Street in good repair and condition.
4.2 The Vendor:
4.2.1 acknowledges that as part of the Purchaser’s future development intentions for the Land and 3 College Street, it will be necessary for the Purchaser (or a related entity) to seek and obtain provisional development plan consent to demolish the building on the Land and the building on 3 College Street; and
4.2.2 agrees that the Purchaser shall not be in breach of the provisions of Special Condition clause 4.1 above by virtue of seeking and obtaining such provisional development plan consent.
4.3The Purchaser agrees that should it, its contractors, consultants or related entities breach any of the provisions of clause 4.1 above, the Vendor may in addition to any other right or remedy apply to the Supreme Court for an injunction to restrain the Purchaser its contractors consultants and/or related entities from any such demolition works or to prevent any such interference or to enforce its obligation to undertake such maintenance and repair.
5 GST
5.1 The Vendor and the Purchaser acknowledge and agree that:
5.1.1 the Price payable under this Agreement is exclusive of GST; and
5.1.2 the Vendor may, in addition to the price but subject to providing the Purchaser with a tax invoice (as required by the GST Legislation), recover from the Purchaser an additional amount on account of GST, such additional amount to be calculated in accordance with the GST Law and paid at the time of payment of the Price.
5.2 Without limiting the generality of Clause 5.1:
5.2.1 the price does not include GST; and
5.2.2 the amount payable to the Vendor under this Agreement will be the sum of the Price and any GST payable or reimbursable by the Purchaser in respect of the Land.
5.3Without limiting or negating any of the Vendor’s obligations under the GST Law, the Vendor shall deliver to the Purchaser at the time that the Purchaser pays the Price a tax invoice for the taxable supply made by the Vendor to the Purchaser under or pursuant to this Agreement;
5.4 In this clause 5:
5.4.1 any expression used that is also used in the GST Law shall have, for the purposes of this Agreement, the meaning used in or attributed to that expression by the GST Law from time to time;
5.4.2 ‘recipient’ means a person who acquires or receives or is entitled to acquire or receive a taxable supply under this Agreement; and
5.4.3 ‘supplier’ means a person who supplies or is required to supply a taxable supply under this Agreement.
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7 Amendments to the REISA Contract
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[A number of amendments are listed but are not here reproduced. Amendments relating to the terms reproduced above have been incorporated]
2
7
1