Schmidt v Fantinel
[2008] SADC 129
•9 October 2008
DISTRICT COURT OF SOUTH AUSTRALIA
(Civil)
SCHMIDT v FANTINEL
[2008] SADC 129
Judgment of Her Honour Judge McIntyre
9 October 2008
CONVEYANCING - RELATIONSHIP OF VENDOR AND PURCHASER - BREACH OF CONTRACT
Plaintiff seeks specific performance of an agreement for sale and purchase of a property entered into 9 September 2006. The contract specified 29 September 2006 as the date of settlement. The parties failed to settle on that date. The defendant says that the plaintiff repudiated the agreement first by failing to pay a deposit and second by failing to settle. The defendant contends that he accepted the repudiation by letter dated 28 February 2007 or in the alternative terminated the contract by notice of termination dated 31 August 2007. Held: the plaintiff's conduct evidenced a refusal to perform the contract according to its terms - the defendant validly terminated the contract by letter dated 28 February 2007. Accordingly the plaintiff's claim for specific performance, damages and consequential orders fails.
Land and Business (Sale and Conveyancing) Act 1984 s5, s15, s16(c), referred to.
Astill v South Esplanade Developments Pty Ltd (2007) 249 LSJS 334; Sibbles v Highfern Pty Ltd (1987) 164 CLR 214 at 225-226; Schmidt v Sturgeon Pty Ltd (2002) 84 SASR 443 at 449, applied.
Brien v Dwyer (1978) 141 CLR 378 at 393; Tanwar Enterprises Pty Ltd v Cauchi (2003) 217 CLR 315; Romanos v Pentagold Investments Pty Ltd (2003) 217 CLR 367; Zucker v Straightlace Pty Ltd (1986) 11 NSWLR 87 at 94-95; King v Poggioli (1923) 32 CLR 222 at 247 for 248, considered.
SCHMIDT v FANTINEL
[2008] SADC 129
This matter relates to a property owned by the defendant situated at 63 Maesbury Street, Kensington South Australia (“the property”).
The plaintiff and defendant entered into an agreement for sale and purchase of the property. It was signed by the plaintiff on 31 March 2003 and by the defendant on 24 June 2003 (“the first agreement”). The relevant terms of the first agreement were:
1. Consideration of $230,000;
2. Deposit $3,000; and
3.Special condition that the contract was subject to the purchaser obtaining Council building approval from the City of Norwood, Payneham and St Peters for the construction of a residential dwelling house on the property on or before 30 October 2003.
Settlement was to be within seven days after the day on which all special conditions were satisfied.
This contract was subsequently superseded by a second contract for sale and purchase signed by the plaintiff on 2 September 2006 and the defendant on 9 September 2006 (“the second agreement”). The relevant terms of that contract were:
1. Consideration of $249,000;
2. Deposit $3,000; and
3. Settlement date 29 September 2006.
There were no special conditions. The contract did not settle and the present proceedings arise out of the failure to settle on the second agreement.
The plaintiff brings this action seeking an order by way of specific performance of the second agreement or alternatively damages for breach of contract. The defendant denies that the plaintiff is entitled to the relief claimed or any relief. The defendant says that the plaintiff repudiated the agreement and that the defendant accepted the repudiation by letter dated 28 February 2007 or, in the alternative, the second agreement was formally terminated by notice of termination dated 31 August 2007. The defendant counterclaims for damages, costs and interest.
Witnesses
The plaintiff and her husband Anthony Schmidt gave evidence concerning the negotiations between the parties and the events surrounding the two agreements. Paul Edwards, a licensed conveyancer, gave evidence concerning various documents prepared by him.
The defendant gave evidence together with his son Michael Fantinel concerning the circumstances surrounding the two agreements.
I found the plaintiff and her husband to be unsatisfactory witnesses. Their evidence was vague and unhelpful on important matters. For example, neither gave any evidence whatsoever as to the reason that the plaintiff failed to settle on either of the two agreements, or, the steps that the plaintiff had taken to be in a position to settle such as arranging finance, instructing conveyancers or undertaking searches. Given the nature of the case this seems an extraordinary omission. The defendant and his son, on the other hand, impressed me as truthful witnesses who did their best to recall events that had taken place over a lengthy period of time. There was, in the event, little conflict between the evidence given by the witnesses. Where there was conflict I prefer the evidence of the defendant and his son.
A number of documents were tendered as follows:
P1 Plaintiff’s book of documents.
P2 Conveyancing File of Mr Paul Edwards.
D1... 2 Letters dated 24/9/2005 from Defendant to Dear Sir/Madam – cc Mrs L Schmidt & Brian Truran Real Estate.
D2... Letter signed by Mr A Schmidt dated 6/12/05.
D3... Notice of Default letter dated 20/5/07 from defendant to plaintiff.
P3... Copy of contract dated 2/9/06.
Background
The Schmidts engaged a real estate agent, Mr Brian Truran, to locate a property that they could purchase as their family home. They intended to renovate or build depending on what type of property was found.
Mr Fantinel, the defendant, owns two adjoining properties in Maesbury Street, Kensington. He lives in one property at 65 Maesbury Street. The other 63 Maesbury Street, the subject property, has a heritage-listed cottage that is in a state of disrepair and is subject to notice under the Housing Improvement Act 1940. Mr Truran apparently established that Mr Fantinel might be willing to sell 63 Maesbury Street and advised the Schmidts.
After some negotiations the first agreement was entered into. This appears to be dated 24 June 2003. The essential terms of that contract are as set out above. It is common ground that this contract is no longer in force it having been either terminated by the defendant, repudiated by the plaintiff, or superseded in the second agreement dated November 2006.
The plaintiff attempted to obtain development approval in order to develop the property as the Schmidt family home. It took many months but finally development approval was granted in about November 2005[1]. The Schmidts were then required to obtain building approval within twelve months of the development approval.
[1] Transcript p38
The first agreement was varied on two occasions due to the difficulties in obtaining Council approval. The first variation was dated 14 November 2003 and varied the terms of the contract by substituting 31 December (presumably 2003) for the date specified as the latest date for obtaining Council approval for the construction of a residential dwelling house on the property.
The second addendum is dated 3 February 2004 and varies the first agreement by waiving the special condition that the contract was subject to the purchaser obtaining Council building approval and setting a date for settlement of 5 April 2004.
For reasons that are not apparent on the evidence the first agreement did not settle in April 2004. On 24 September 2005 the defendant wrote to the plaintiff and Mr Truran indicating that because the settlement date was well past and no deposit was made, he was withdrawing the property from sale.[2] This letter was sent to the plaintiff’s address as shown on the first agreement but by this stage the Schmidts had moved to another address.[3] Mr Schmidt denies that he received that letter or that Mr Truran had advised him of correspondence to that effect.[4] Mrs Schmidt on the other hand recalled seeing this letter albeit she was not 100% certain.[5] Whatever the status of this letter it is common ground that the first agreement came to an end at some stage. The time at which it came to an end is contentious but the second agreement contains an express term indicating that the second agreement supersedes the first.
[2] Exhibit D1
[3] Transcript p60
[4] Transcript p61
[5] Transcript p87
On 6 October 2005 Mr Edwards, a registered conveyancer engaged by the plaintiff, wrote to the defendant seeking approval to also act for him in relation to the sale. The defendant did not respond to this. It can be inferred from the evidence that this was because he considered the first agreement to have been terminated. It is not plain precisely when the plaintiff instructed Mr Edwards but there appears to have been no activity by him prior to October 2005. It therefore seems unlikely that the plaintiff instructed him to act on her behalf at a time that would have enabled him to settle the contract on 5 April 2004.
In December 2005 a transaction occurred between Mr and Mrs Schmidt and the defendant in which the sum of $5,000 was paid to the defendant. There is a document dated 6 December 2005 relating to that transaction. This is a contentious issue.
Subsequently, there were further discussions between the parties concerning the property. A new purchase price of $249,000 was agreed upon. On 1 February 2006 Mr Schmidt and the defendant entered into an agreement relating to interest on a proposed purchase price of $249,000. Mr Schmidt agreed to make monthly payments to the defendant. The precise nature of this agreement is contentious. It is however agreed that Mr Schmidt made the following payments under the terms of that agreement:
1 February 2006 - $1,500;
5 March 2006 - $1,400;
10 April 2006 - $1,400; and
9 May 2006 - $1,400.The second agreement was entered into in September 2006. Mr Edwards prepared the second agreement and the plaintiff signed it on 2 September 2006. Mr Schmidt delivered the second agreement, as signed by his wife, to the defendant who indicated that he wished his son to view the document before he signed it. Mr Michael Fantinel viewed the document and made two handwritten additions to the document, one on page 10 and one on page 11. The defendant signed the agreement on 9 September 2006 and returned it to Mr Schmidt.
The settlement date for the second agreement was stated to be 29 September 2006. Notwithstanding this nothing appears to have occurred to progress the transaction.
The next event appears to be a telephone conversation on 24 November 2006 between the defendant and Mr Edwards. Mr Edwards gave evidence about the content of that telephone call by reference to his notes as follows:
QRefreshing your memory from that notation, can you tell the court what that notation records.
AThat was a telephone ‘TT telephone to Ray Fantinel who advised that the sale was off, that settlement was two months too late, so it was off. Anthony needs to contact him, I presumed he wasn’t interested in proceeding’ and I think that there was a quote probably from Mr Fantinel that ‘it’s been dumped like a hot potato’. We immediately contacted in this case the Schmidts, spoke to Anthony Schmidt, advised him to see Mr Fantinel to sort things out, you know, where it was proceeding.[6]
[6] Transcript p28
Whilst he was unclear about dates, Mr Schmidt recalled being told about this conversation.[7] He did not say what, if any, action he or his wife took in consequence.
[7] Transcript pp 67-70
On 9 January 2007 Mr Edwards’ son, who also worked in the business, contacted the defendant to find if settlement was occurring “on Friday”. It is not clear on the evidence why this enquiry was made. Mr Edwards’ son was not called to give evidence. In any event, the defendant said that he knew nothing of a proposed settlement on that date.
On 19 February 2007 Mr Edwards wrote to the defendant again using his standard letter seeking authority to act as his agent in the contract of sale. The defendant did not respond directly to that letter. However, on 28 February 2007 he wrote to the Schmidts at 225 East Terrace, Adelaide informing them that the property was being withdrawn from sale and that the contract which expired on 29 September 2006 was not being renegotiated. The same day Mr Edwards had a discussion with Michael Fantinel to the same effect. The Schmidts had not lived at East Terrace for some years by this time however it was stated to be the plaintiff’s address on the second agreement and was therefore the appropriate address for service of notices upon the plaintiff. It appears clear that the plaintiff did receive this letter by some means and as a result instructions were given to Mr Edwards to lodge a caveat on the property.[8]
[8] Transcript p56
On 8 March 2007 the plaintiff lodged a caveat. The caveat refers to a contract dated 9 September 2005. This appears to be a typographical error and should be 2006.[9] On 26 March 2007 Mr Edwards wrote to the defendant referring to the caveat and enclosing a Memorandum of Transfer. He also indicated that he had been instructed to issue a notice to complete and suggested that the defendant seek legal representation.[10]
[9] Transcript p26
[10] Exhibit P1 tab 12
On 22 March 2007 the defendant lodged an application to remove the plaintiff’s caveat. The within proceedings were issued on 18 April 2007 by the plaintiff.
On 23 April 2007 Mr Edwards sent a notice to complete purchase to the defendant specifying 25 May 2007 as the date for settlement.[11] The matter did not settle on that date for reasons that are not apparent on the evidence. The defendant instructed solicitors at about this time.
[11] Exhibit P1 tab 16
The defendant’s solicitor issued a notice to complete dated 11 July 2007 specifying 31 July 2007 as the time and place for settlement.[12] There was some dispute about the adjustment statement. This notice was amended on 16 August 2007. On 31 August 2007 the defendant issued a notice of termination. [13]
[12] Exhibit P1 tab 17
[13] Exhibit P1 tab 24
Issues
The key issues to be determined in this matter are as follows:
·The status of the payment of $5,000 by the plaintiff or her husband to the defendant in December 2005.
·The nature and effect of the agreement dated 1 February 2006 between Mr Schmidt and the defendant.
·Did the plaintiff pay the deposit required under the second agreement?
·Did the defendant validly terminate the second agreement? If so when?
·The status and effect of the various notices to complete issued by the parties.
·Whether the plaintiff is entitled to specific performance and consequential orders as sought?
December 2005 Payment
In her statement of claim the plaintiff says that on 6 December 2005 she paid to the defendant the sum of $5,000 by way of a further deposit in respect of the first agreement. It is said that the defendant accepted this and signed a receipt on that day.[14]
[14] Statement of Claim para 2A
Mr Schmidt gave evidence about the payment of this amount of money.[15] He said that the defendant indicated that he was somewhat short of money and wished to purchase a vehicle. Mr Schmidt suggested he could help him by giving him $5,000 provided that it was taken into account at the time of settlement. Mr Schmidt prepared a document to evidence the agreement.
[15] Transcript pp 44 - 45
There are two copies of that document in evidence. The first is exhibit P1 document 5. This document is signed by the defendant. The second is a copy of the same document signed by Mr Schmidt and is exhibit D2. In that copy a portion of the text is highlighted being the words “as part payment of the purchase of”.
Mr Schmidt was cross-examined about these two documents. He was asked if there was a copy of the document P1 tab 5 signed by his wife. He stated that this was the only document.[16] He described meeting the defendant who he said signed the document at his kitchen table. Mr Schmidt then handed over the $5,000. The document that is exhibit D2 was put to Mr Schmidt. He agreed that it had his signature.[17] It was put to him that Mr Fantinel disagreed with him that the $5,000 was part payment of the purchase price.
[16] Transcript p63
[17] Transcript p71 line 28
He said:[18]
AI don’t believe so. I mean, he may have mentioned it, but certainly when Ray signed it my recollection, there wasn’t any problem with him writing it, so -
[18] Transcript p71 line 14
He did not recall Mr Fantinel marking the page to indicate his disagreement with the description of $5,000 as part payment of the purchase price.
Mr Schmidt agreed that the sum of $5,000 was a loan between him and Mr Fantinel. This is somewhat different to the position put in the pleadings that the amount was paid as a further deposit by the plaintiff. The key issue is however whether the amount was intended to be deducted from the purchase price of the property as is contended by the plaintiff or whether it was a stand alone agreement, which has since been discharged as is the defendant’s case.
February 2006 Agreement
In the statement of claim the plaintiff claims that, in early November 2005, her husband Anthony Schmidt and the defendant reached an agreement that the plaintiff would pay the sum of $1,500 to the defendant in cash in each of the months of November 2005 to May 2006 on the basis and understanding that those moneys would be taken into account if and when the plaintiff purchased the land.[19] The defendant in his defence denied this. The defendant pleaded that Mr Schmidt approached him in late January 2006 requesting to extend the date by which the plaintiff might be able to purchase the property. Mr Schmidt was prepared to pay a monthly fee in order to retain an opportunity to purchase the land. On 1 February 2006 the defendant and Mr Schmidt executed a written agreement drawn by Mr Schmidt. This was admitted in the plaintiff’s reply, although the reason for the agreement was in dispute.
[19] Statement of Claim para 3
The agreement entered into on 1 February 2006 is exhibit P1 document 6. The monthly payment outlined was $1,488.40 with the first payment to be made on 1 February 2006 until 1 June 2006 payments being a month in advance. The reason for the payment is stated to be to cover “all outgoing costs of 63 Maesbury Street and interest on the purchase price of $249,000”.
Payments were made under that agreement as follows:
1 March 2006 $1,500
5 March 2006 $1,400
10 April 2006 $1,400
9 May 2006 $1,400Accordingly the total amount paid was $5,700 as against the amount due of $5,953.60.
The document dated 1 February 2006 refers to the sum of $5,000 as a loan. Mr Schmidt agreed that the sum of money referred to in that document was the same amount of money as that described in exhibit P1 tab 5.[20] This amount is deducted from the purchase price of $249,000 for the purpose of calculating the interest due on that sum.
[20] Transcript p46
The defendant alleges that he spoke to Mr Schmidt on or about 1 June 2006 to see if he was going to purchase the property. Mr Schmidt asked to continue the February arrangement modified so that the $5,000 loan entered into in December 2005 could be offset and treated as monthly payments under that deal. The defendant agreed to this. The defendant alleges that pursuant to the modified arrangement the loan money was, in effect, fully repaid by the defendant by September 2006.
Mr Schmidt denies that there was any subsequent agreement to extend the February arrangement. He says that he did not make any payment subsequent to 9 May 2006 because they were in the process of drawing up a contract at the price of $249,000.[21]
[21] Transcript p48 line 25
He denies the assertion in the defence that he was having cash flow problems in about June 2006 and that the plaintiff, his wife, remained unable or unwilling to proceed with the contract to buy the land. He specifically denied that there was an offer to make further payments after 9 May 2006 and also denied that the loan moneys of $5,000 could be offset and treated as monthly payments.[22] In examination in chief he says as follows:[23]
[22] Transcript p49
[23] Transcript p50
QSome time after you made the four payments that are referred to in P1 tab 8, did you have somebody prepare a new contract for the purchase of the land.
AYes, I did.
QThat was Mr Edwards.
AYes, it was.
QHe duly did prepare something for you.
AYes, he did.
QDid you and your wife go and see him and sign off that document.
AYes, we did.
QLooking at tab 7, and go to p.12 of 12, do you see there your wife’s signature.
AYes, I do.
QSigned the date 2 December 2006.
AThat’s correct.
This appears to be an error on the transcript. The date the plaintiff signed this contract appears to be 2 September 2006. Nothing turns on this issue – it is common ground. What is more important for present purposes is when Mr Edwards received instructions to prepare the second agreement. Mr Edwards was not asked when he received instructions to prepare the document or indeed when he prepared the document. His file was tendered as exhibit P2 but this provides no assistance as to the date on which instructions were provided to prepare the contract. In fact, there appears to be no activity on Mr Edwards’ file from October 2005 until the new contract.
I find that by February 2006 the first agreement had terminated. It is not entirely clear whether this was by repudiation, termination by the defendant or by mutual agreement. I do not need to make a specific finding on that point. The settlement date was long past and both parties were treating the agreement as if it was no longer in existence. The parties had entered into negotiations concerning a new purchase price. This is clear from the evidence of both Mr Schmidt and the defendant. There is further evidence of this in the file notes of Mr Edwards. These are relevantly:
14.10.05TF Fantinel $268,000 is price. LM for Anthony. Anthony to speak to him on Saturday.
17.10.05TT Anthony – been to see V offered extra 10K – sit tight.
24.10.05Extra 19K subject to building approval for construction of new dwelling.
The file note of 24 October 2005 also contains a reference to 31 January the significance of which is not entirely clear. The next file note on Mr Edwards file is 6 November 2006. There is no indication, as I have already stated, as to when instructions were received to draw up the new contract however both parties signed it in September 2006. It did not contain a special condition that it be subject to building approval.
The proposed purchase price in the February 2006 agreement is $249,000; $19,000 more than the purchase price in the June 2003 agreement.
The September 2006 contact was prepared on the basis of a purchase price of $249,000 the figure apparently agreed in about October 2005. There is no reduction in that purchase price to reflect an outstanding loan of $5,000, as was the case with the February arrangement. This is consistent with the defendant’s case and inconsistent in the plaintiff’s position. The plaintiff has offered no explanation for the absence of any reference to the sum of $5,000 in the second agreement. Further it seems unlikely that it would take a competent conveyancer from May, when the last payment was made, until September to prepare a simple standard form contract for the sale and purchase of land. It seems more likely that the conveyancer was not instructed to prepare the second agreement until much closer to the date it was signed by the parties. That being the case it seems probable that the plaintiff would take steps to preserve her position in relation to the property and the agreed purchase price. Accordingly, I find that Mr Schmidt and the defendant agreed to an extension of the February arrangement with continuation of the payment of interest to be offset against the December loan. I further find that the $5,000 loan was extinguished by September 2006.
Deposit
The first agreement required the plaintiff to pay a deposit of $3,000. The plaintiff paid the sum of $3,000 into the Trust Account of the agent Mr Truran following execution of the first agreement. The defendant denies that this was a deposit. The defendant says that at no time did he appoint Mr Truran as his agent and that accordingly payment into his trust account could not constitute payment of a deposit to him.
Mr Truran was acting as an agent for the plaintiff. He had been engaged to locate a property for her. There is absolutely no evidence that Mr Truran ever represented the defendant. I have not been provided with a copy of any agency agreement and the evidence from the defendant is plain that he did not at any stage appoint Mr Truran to act as his agent.
Mr Schmidt in cross-examination supported the defendant’s position.[24]
[24] Transcript pp 60-61
QMr Truran was acting for you.
AYes.
QHe had assisted you in identifying and locating the property.
AYes, that’s correct.
QLooking at the first page of that contract for sale of land, up in the top left-hand corner there’s a section that says ‘Agents for the vendor Brian Truran Real Estate Pty Ltd’.
AThat’s correct.
QAre you aware of any basis on which Mr Truran was acting for the vendor Mr Fantinel.
ANo.
Accordingly while it is plain that a payment of $3,000 was made to Mr Truran it cannot be said that this payment was made to the defendant. I find that the defendant did not receive a deposit under the terms of the first agreement.
The second agreement also required a payment of a deposit of $3,000. The contract specified payment on the next business day following the expiration of the cooling off period. No vendor’s statement (“form 1”) was delivered to the plaintiff, as required by the Land and Business (Sale and Conveyancing) Act 1994 (“the Act”), until 2 August 2007.
The service of the vendor’s statement triggers the period in which the purchaser may exercise the right to rescind the contract, or “cool off”, under section 5. The purpose of the statement is to place purchasers in the position where they can make an informed decision whether to proceed with the contract. Section 16(c) of the Act provides a process whereby a purchaser can formally waive the requirement for a vendor’s statement.
There was no formal waiver of the requirement for a form 1 by the plaintiff under section 16(c) of the Act. The defendant says that the plaintiff waived the requirement for a vendor’s statement by her conduct. The conduct relied upon is, first, the position adopted by the plaintiff in asserting that a deposit had been paid and, second, the purported notice to complete dated 20 April 2007 from the plaintiff’s conveyancer. Further it is said that the plaintiff did not at any time prior to 20 April 2007 request a form 1 or put the defendant on notice that the contract could not settle until a form 1 was provided.
I was referred to the majority decision in Astill v. South Esplanade Developments Pty. Ltd.[25] in support of this submission. It is plain from that decision that the purchaser can by conduct waive the requirement for a vendor’s statement[26].
[25] (2007) 249 LSJS 334
[26] Note 25 above at pp 346-348
It is my view that the plaintiff did waive her right to receive a vendor’s statement by her conduct as outlined above. The peculiar circumstances of this matter including the prior contract, the lengthy negotiations and the persistence of the plaintiff in asserting rights under the contract also add to the force of these submissions. It may be that the plaintiff felt that she was fully informed of all the relevant information concerning the circumstances of this property and therefore did not require a vendor’s statement.
I therefore find that the plaintiff has waived entitlement to a form 1. Even had she not; the remedy that she seeks does not arise in consequence of any failure on the part of the defendant to deliver a form 1. The consequence of a failure to deliver a form 1 is to postpone the purchaser’s right to rescind or cool off but the plaintiff does not assert such a right here or seek to exercise it. To do so would be inconsistent with her claim for specific performance. Further, the plaintiff has not pleaded a cause of action for relief pursuant to s 15 of the Act.
The consequence of this finding is that the plaintiff was required, under the terms of the second agreement, to pay a deposit of $3,000.
The amount held by Mr Truran was transferred to Carrington Conveyancers on 10 May 2007.[27] Presumably this was intended to be the deposit under the second agreement as the plaintiff made no further payment[28]. It is however plain that at no stage did Carrington Conveyancers act as agents for the defendant. Indeed the evidence of Mr Edwards of Carrington Conveyancers was that on two occasions he sent letters to Mr Fantinel inviting him to provide instructions to Carrington Conveyancers to act on his behalf as well as on behalf of the plaintiff. It appears uncontroversial that he did not receive those instructions. Further, by the time the $3,000 was transferred, the parties were in dispute the contract having failed to settle on 29 September 2006. The sum remains in Carrington Conveyancers’ Trust Account[29].
[27] Transcript p20
[28] Transcript p50
[29] Transcript p20 line 12
I find that the transfer of $3,000 to Carrington Conveyancers did not constitute payment of the deposit, required under the second agreement, to the defendant.
Did the Defendant terminate the Second Agreement and, if so, when?
The defendant submits that the plaintiff by her conduct repudiated the contract and that he accepted the repudiation by his letter dated 28 February 2007.
The basis of the repudiation is stated to be the plaintiff’s failure to:
·Pay the deposit,
·Provide a transfer as required; and
·Settle on the nominated date of 29 September 2006.
I have already found that the plaintiff did not pay the deposit of $3,000 to the defendant. The settlement date is set out at page 10 of the contract and is clause J which relevantly reads as follows:
The Settlement Date
[Clause 1.22]
(a) The 29th day of September 2006; or
(b) … …
(c) Such other date as is mutually agreed upon in writing, by the vendor and purchaser.
Paragraph (a) stipulating the 29th day of September as the settlement date is marked. The defendant through his son Michael Fantinel, marked clause (c) with the words “not applicable”. The precise rationale for this marking is unclear however it was presumably intended to convey to the plaintiff that the defendant would not be agreeing to any further extension of time. In any event, it is common ground that the contract did not settle on 29 September 2006.
Neither party took any steps to progress the settlement of the matter as far as can be demonstrated on the evidence before me. The defendant did not appoint a conveyancer nor did he arrange for a Form 1 to be served. The plaintiff did not arrange for a transfer document to be sent to the defendant until some months after the proposed settlement date. None of the usual council or rates searches appear to have been arranged by either party. There is no evidence of the plaintiff seeking finance for the purchase.
The defendant informed the plaintiff’s conveyancer in November 2006 that the property was withdrawn from sale because it had not settled on 29 September 2007. It is unclear what, if anything, occurred after this call. It appears from the file of Carrington Conveyancers that there was some effort to arrange a settlement in January 2007 but the precise circumstances of this are not clear. Mr Edwards’ son, who also works in the business, made the relevant file notes. He was not called to give evidence.
Notwithstanding the information received from the defendant in November 2006 the conveyancer wrote to him by letter 19 February 2007.[30] This was a standard letter indicating that the conveyancers had received a copy of the contract for sale and enclosing an authority for Carrington Conveyancers to act as the defendant’s conveyancer and an authority to disperse funds and a Memorandum of Transfer. Because this letter does not refer to the date of the contract it is not entirely clear whether it refers to the first agreement or the second agreement. The only contract that has been “received” by Carrington Conveyancers was the first agreement. They had prepared the second agreement and therefore cannot be said to have “received” it. It may be that this is just a function of the fact that this was a standard letter. However it appears at least possible that the Memorandum of Transfer enclosed with that letter relates to the first agreement rather than the second agreement because the conveyancer sent a further letter to the defendant on 26 March 2007 enclosing a Memorandum of Transfer reflecting the sale price of $249,000 and stating:
Our earlier transfer has been superseded as we have been advised that there is now a later contract of sale dated ninth September 2006.[31]
[30] Exhibit P1 tab 9
[31] Exhibit P1 tab 12
On any view however the Memorandum of Transfer was not delivered in a timely manner and certainly not within a time frame that would enable settlement to occur on the date stipulated in the contract.
The defendant, presumably in response to the letter from Carrington Conveyancers dated 19 February 2007, wrote to the plaintiff at the address nominated on the second agreement (225 East Terrace) by letter dated 28 February 2007[32] indicating that he considered the contract to be terminated. In response to this the plaintiff lodged a Caveat on 8 March 2007 and on 20 April 2007 the conveyancer prepared a Notice to complete. This notice to complete asserts that “[t]he purchaser has sought to effect settlement with you”.[33] The efforts to effect settlement are limited to the belated provision of a Memorandum of Transfer.
[32] Exhibit P1 tab 10
[33] Exhibit P1 tab 16 clause 2
Accordingly the matters upon which the defendant relies in asserting that the plaintiff has repudiated the contract are correct. Do they amount, in law, to a repudiation? What if any is the effect of the defendant’s failure to do anything to progress the settlement?
In considering these matters it is necessary to have regard to the parties and their experience of land transactions.
There is limited evidence about the plaintiff’s experience however she had the advantage of the assistance of her husband Mr Schmidt who appears to have been the prime mover in the negotiations with the defendant. Mr Schmidt has been involved in a number of property developments in the past.[34] It is clear that he has considerable experience in handling matters involving the sale and purchase of land.
[34] Transcript p32 line 11
The defendant on the other hand had limited schooling in Italy up to age 12 and only learned English upon coming to Australia at age 16. He has limited understanding of English. He has difficulty reading documents in English and is unable to write documents in English himself.[35] He has only ever purchased two properties. The house in which he lives, in 1961, and the subject property, in 1969. It is true to say therefore that there was a considerable imbalance between the respective experience levels of the parties. Accordingly whilst it may be tempting to be somewhat critical of the defendant in sitting back and waiting for settlement to occur this is far more explicable than the situation of the plaintiff.
[35] Transcript p93
The plaintiff, on her version, was keen to purchase the property as a family home. She said they “fell in love with the property”.[36] That being the case it is difficult to understand the leisurely approach taken by the plaintiff to the settlement of the first and second agreements. The plaintiff well knew what was required to effect settlement and yet apparently took none of the usual steps to ensure that this occurred. She did not press the defendant to appoint a conveyancer or to provide a form 1. She did not seek an adjustment statement. She did not have her conveyancer provide a Memorandum of Transfer to the defendant in a timely manner. There is limited evidence of efforts to obtain finance to purchase the properties. All of this appears inconsistent with a person who has fallen in love with a property and wishes to purchase it.
[36] Transcript p81
The second agreement contains default clauses. The vendor’s rights in the event of a default by the purchaser are contained in clause 7.1. Clauses 7.1.2 and 7.1.3 are of particular relevance and are as follows:
7.1.2If the Purchaser fails to pay the Deposit in accordance with this Agreement, or otherwise breaches a term of this Agreement prior to the Settlement Date, the Vendor may, without prejudice to any other legal rights or remedies the Vendor may have, give to the Purchaser notice in writing requiring such default to be remedied within a period of three business days from the service of the notice and stating that, unless the default is remedied within that period, this Agreement will automatically terminate. If the default is not remedied within the period specified, this Agreement will automatically terminate at the expiration of that period unless, in the meantime, the Vendor withdraws the notice by written notice to the Purchaser.
7.1.3If:-
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.
The defendant did not give notice in writing until July 2007 following his engagement of a solicitor to act on his behalf. The defendant however does not rely upon this notice as his primary argument. Rather he says that the plaintiff’s repudiation of the second agreement was accepted and the contract was terminated by him in November 2006 by communication with her agent Mr Edwards and by the letter dated 28 February 2007.
Clause 7.1.2 provides that a vendor “may” give a notice and that the notice procedure is “without prejudice” to any other legal rights or remedies the vendor may have. Clause 7.1.3 is couched in similar terms. The right to terminate a contract at common law for fundamental breach in addition to any right conferred by the contract is recognised in Astill[37] and Sibbles v Highfern Pty Ltd.[38]
[37] Note 25 above, para 88
[38] (1987) 164 CLR 214 at 225-226
The plaintiff and her husband Mr Schmidt did not give evidence as to the reason that they failed to settle on the second agreement. They took absolutely no steps, as far as can be discerned from the evidence before me, to settle on the appointed date.
I also have regard to the history of this transaction. First, there was the extraordinary delay and failure to settle on the first agreement. That agreement was entered into on 24 June 2003. The initial delay in settlement was occasioned by difficulties in obtaining development approval, however that agreement was varied on 3 February 2004 to waive the special condition requiring council building approval and setting a date for settlement of 5 April 2004. The plaintiff and her husband have not given any explanation as to the reason that first agreement did not settle on that date or at all.
Further, negotiations took place between the parties in or about October 2005 and, as I have found, a new purchase price of $249,000 was agreed in or about October 2005. Again, the plaintiff and her husband have not proffered any explanation as to why this agreement was not made the subject of a contract until September 2006.
The defendant gave evidence that Mr Schmidt informed him that he wished to purchase a Woolshed at Port Adelaide and that he wished to delay the purchase of the subject property. In the interim he said that he would pay interest rather than go to the bank and take out another loan to purchase the subject property and pay the bank interest.[39] That discussion, he says, led to the February 2006 arrangement. The defendant says that this was extended because Mr Schmidt told him in June 2006 that he didn’t have the money to purchase the property because some of his dealings with the Woolshed had gone wrong and he wished to extend the February arrangement.[40]
[39] Transcript p98 line 5
[40] Transcript p99 line 1
Mr Schmidt denies this evidence[41] but does not proffer any reasons for the delay in submitting the second agreement to the defendant. He agreed that the arrangement for payments in February to May of 2006 was a “stepping stone” towards obtaining a new contract with the defendant. No reason was proffered as to why a stepping-stone was necessary. He denied that there was a similar arrangement in June, July and August 2006 however I have already made a finding that this arrangement did continue.
[41] Transcript p70 line 6
Having finally entered into a contract with a settlement date one would have thought that the plaintiff would proceed expeditiously towards settlement. Nothing however appears to have occurred to progress towards settlement following execution of the second agreement. There is absolutely no explanation why this is the case. Further, the settlement date provisions were annotated on behalf of the defendant in admittedly cryptic fashion but arguably suggesting that the settlement date was of some importance to the defendant. There was no contact with the defendant to clarify this note. Finally, there was no attempt to negotiate another settlement date under the terms of the second agreement. Again, the plaintiff has not offered any explanation for what seems a significant omission when viewed in the light of her avowed desire to purchase the property.
It is my view that there is evidence of unreasonable delay in the completion of the purchase of the subject property on the part of the plaintiff. This combined with the plaintiff’s conduct in failing to pay the deposit is evidence of a refusal to perform the contract according to its terms. In my view the defendant was justified in treating that conduct as a repudiation of the contract.[42] It was not necessary for the defendant, before he terminated the contract, to give notice requiring payment of the deposit within a reasonable specified time.[43] It was further not necessary that the defendant utilise the default provisions of the contract[44]. He was entitled to exercise his common law rights to terminate the contract. The right of a vendor to terminate a contract for sale of land for the purchaser’s failure to complete on a nominated date and non-payment of the deposit will be effective, and equity will not interfere in the absence of unconscientious conduct by the vendor.[45] The defendant’s conduct in this matter cannot be described as unconscientious.
[42] Schmidt v Sturgeon Pty Ltd (2002) 84 SASR 443 at 449
[43] Brien v Dwyer (1978) 141 CLR 378 at 393
[44] Above note 25
[45] Tanwar Enterprises Pty Ltd v Cauchi (2003) 217 CLR 315 and Romanos v Pentagold Investments Pty Ltd (2003) 217 CLR 367
The defendant communicated his acceptance of the repudiation and his intention to terminate the contract in the telephone discussion with Mr Edwards on 24 November 2006 and in the letter dated 28 February 2007. It is necessary that an election to terminate or rescind a contract is communicated to the other contracting party.[46]
[46] Zucker v Straightlace Pty Ltd (1986) 11 NSWLR 87 at pp 94-95
The defendant does not rely, in his defence, upon the conversation with Mr Edwards. He relies upon the letter dated 28 February 2007. That letter was properly served under the terms of the contract at the address stated in the contract. In any event it is plain on the evidence that the plaintiff was aware of the letter and, on that basis, subsequently instructed her conveyancer to lodge a caveat.
Accordingly I find that the defendant lawfully terminated the September 2006 agreement by his letter dated 28 February 2007 as a result of the repudiation of the contract by the plaintiff.
Notices to Complete
In view of the finding that the contract was validly terminated by the defendant on or about 28 February 2007 the plaintiff’s notice to complete dated 23 April 2007 was misconceived and of no effect.
The defendant also served a notice to complete dated 11 July 2007. This notice was amended on 16 August 2007. A notice of termination was issued based on the amended notice to complete on 31 August 2007. Whilst it was prudent of the defendant to issue these notices under the default provisions of the second agreement in the event that it was found the common law termination was ineffective, they were of no effect in view of my finding that the contract was terminated on our about 28 February 2007. If however I was wrong in that finding, I consider that the notice to terminate dated 31 August 2007 effectively terminated the contract.
Specific Performance
The plaintiff seeks an order for specific performance of the second agreement. In view of my finding that the agreement has been lawfully terminated by the defendant as a result of the repudiation of the contract by the plaintiff this claim fails. In any event specific performance is not available to a purchaser who is not willing to perform the contract according to its terms. In addition to the failure to pay the deposit and to take steps to settle in accordance with the terms of the contract I also note the correspondence from the plaintiff’s solicitor dated 15 August 2007 (or 22 August 2007)[47] that indicates that the plaintiff maintained a payment of less than the purchase price of $249,000 should be made. The plaintiff was seeking credit for:
“the deposits paid, one of which went directly to your client, and one of which is in Carrington Conveyancers Trust Account”.[48]
[47] Exhibit P1 tab 23
[48] Ibid
The first amount is presumably the sum of $5,000 the subject of the loan agreement in December 2005. I have found that this loan has been repaid by the defendant. I have further found that the amount of $3,000 in the Carrington Conveyancer’s Trust Account is not a deposit paid to the defendant. The plaintiff by this letter indicated that she was willing to pay the purchase price of $249,000 only after making deductions to which I have found she is not entitled. In those circumstances she could not obtain specific performance.[49]
[49] King v Poggioli (1923) 32 CLR 222 at 247 for 248
Further there is no evidence that the plaintiff was, as at 29 September 2006 or subsequently, ready and willing to settle. There is no evidence that funds were available in 2006 or are now available. The plaintiff’s only evidence on the subject of finance was that in January 2007 the Adelaide Bank wrote to her indicating that they declined to finance the proposed purchase of the property because of the heritage listing.[50] Mr Schmidt gave no evidence on the issue of finance.
[50] Transcript p88 line 2
The only other material available is a letter dated 3 June 2008 from API Home loans addressed “To whom it may concern” indicating approval “in principle” for a loan to purchase the property.[51] No one was called from API Home loans to explain the terms of that approval nor did the plaintiff call any other evidence concerning the circumstances of that approval. This falls short of acceptable evidence of an ability to fund the purchase of the property and in any event post-dates the original settlement date by some considerable margin.
[51] Exhibit P1 tab 25.
In the absence of evidence that funds are available the plaintiff could not be granted specific performance.
Conclusion
In conclusion I find that the defendant validly terminated the contract by letter dated 28 February 2007 and accordingly the plaintiff’s claim for specific performance, damages and consequential orders fails. There is in consequence no basis for the Caveat no. 10658525 to continue. I order that the Caveat no. 10658525 be removed.
The defendant seeks damages for breach of contract by the plaintiff. The defendant has not called evidence of loss but seeks a direction for the assessment of damages if the Court finds in favour of the defendant on questions of liability. I will hear counsel on this issue and any other consequential matters.
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