Sedrak v Starr - [2010] NSWCA 297

NEW SOUTH WALES COURT OF APPEAL

CITATION:
Sedrak v Starr [2010] NSWCA 297

FILE NUMBER(S):
2009/298578

HEARING DATE(S):
1 September 2010

JUDGMENT DATE:
10 November 2010

PARTIES:
Maged Sedrak (Appellant)
Gavin Mark Starr (Respondent)

JUDGMENT OF:
Beazley JA Campbell JA Sackville AJA

LOWER COURT JURISDICTION:
Supreme Court - Equity Division

LOWER COURT FILE NUMBER(S):
SC 5407/2008

LOWER COURT JUDICIAL OFFICER:
Gzell J

LOWER COURT DATE OF DECISION:
18 September 2009; 5 November 2009; 6 November 2009

LOWER COURT MEDIUM NEUTRAL CITATION:
Magred Sedrak v Gavin Mark Starr [2009] NSWSC 996; Magred Sedrak v Gavin Mark Starr [2009] NSWSC 1178; Magred Sedrak v Gavin Mark Starr [2009] NSWSC 1193

COUNSEL:
R Harper SC; F Santisi (Appellant)
J Gormly QC; D Shoebridge (Respondent)

SOLICITORS:
JN Legal Solicitors & Attorneys (Appellant)
Woods & Day Solicitors (Respondent)

CATCHWORDS:
VENDOR AND PURCHASER – purchaser rescinds contract for the sale of a pharmacy business – deposit forfeited – whether purchaser complied with warranty to do all things necessary to obtain the landlords’ consent to assignment of the lease – construction of warranty – whether landlords’ consent could not have been obtained in any event – no basis for ordering return of deposit.

LEGISLATION CITED:
Conveyancing Act 1919

CATEGORY:
Principal judgment

CASES CITED:
Hunyor v Tilelli (1997) 8 BPR 15, 629
Neeta (Epping) Pty Ltd v Phillips [1974] HCA 18; 131 CLR 286
Suttor v Gundowda Pty Ltd [1950] HCA 35; 81 CLR 418

TEXTS CITED:

DECISION:
The appeal is dismissed.
The appellant is to pay the respondent's costs of the appeal.

JUDGMENT:

- 27 -

IN THE SUPREME COURT
OF NEW SOUTH WALES
COURT OF APPEAL

CA 2009/298578
BEAZLEY JA
CAMPBELL JA
SACKVILLE AJA
10 November 2010

SEDRAK v STARR

Judgment

BEAZLEY JA: I agree with Sackville AJA.
CAMPBELL JA: I agree with Sackville AJA.
SACKVILLE AJA: This is an appeal from a decision of a Judge of this Court (Gzell J): Sedrak v Starr (No 2) [2009] NSWSC 1178. The decision related to a dispute arising out of a contract dated 11 August 2008 (“Contract”) for the sale of a pharmacy business conducted from leased premises in Lane Cove (“the Premises”). The appellant, the purchaser of the business, was the plaintiff in the proceedings determined by the primary Judge. The respondent, the vendor, of the business, was the defendant. I shall refer to the appellant as “the Purchaser” and to the respondent as “the Vendor”.
The Purchaser filed a summons seeking declarations that he had validly rescinded the Contract on 9 September 2008 and that the Vendor was not entitled to recover or claim forfeiture of the deposit payable under the Contract. The Purchaser also sought an order that the Vendor repay the sum of $201,250 he provided by way of bank guarantee as a part deposit in respect of the purchase.
The Vendor filed a cross-summons seeking declarations that the Purchaser’s purported rescission of the Contract was invalid and…

Grounds of appeal

[14] The appellant contends that the primary judge erred in finding that the respondent had discharged the onus of establishing the matters required under the relevant provision.

[15] It was submitted that his Honour failed to give adequate weight to the evidence of the second witness, and that the findings of fact were not reasonably open on the material before the Court.

[16] The respondent, for its part, submits that no error is disclosed, and that the conclusions reached were well within the range of outcomes available to the primary judge.

Consideration

[17] It is convenient to deal first with the question of construction, as the resolution of that issue informs the remaining grounds advanced by the appellant.

[18] For the reasons that follow, we are of the view that the appeal should be allowed in part and the matter remitted for further determination.

Continue reading Sedrak v Starr

Details

AGLC: Sedrak v Starr [2010] NSWCA 297
Case: [2010] NSWCA 297
Decision Date: 10 November 2010

CaseChat Overview and Summary

In *Sedrak v Starr*, the purchaser (appellant) sought the return of a deposit paid under a contract for the sale of a pharmacy business, having rescinded the contract. The vendor (respondent) terminated the contract on the grounds that the purchaser's rescission constituted a breach of an essential term and subsequently called on a bank guarantee provided by the purchaser for part of the deposit. The dispute concerned whether the purchaser had complied with a warranty to do all things necessary to obtain the landlords’ consent to the assignment of the lease, and whether the landlords' consent could not have been obtained in any event. The matter was heard in the Court of Appeal of New South Wales.

The legal issues before the court were: (1) the construction of the warranty requiring the purchaser to do all things necessary to obtain the landlords’ consent to the assignment of the lease; (2) whether the purchaser had breached this warranty by failing to provide adequate information to the landlords; and (3) whether the landlords' consent could not have been obtained regardless of the purchaser's actions, thereby entitling the purchaser to rescind the contract.

The Court of Appeal, upholding the primary judge's decision, found that the purchaser had breached the warranty. The primary judge interpreted "references" in the contract to mean written appraisals of the purchaser and his business capacity, and that the landlords' request for information, including a statement of assets and liabilities, bank statements, and a valuation report, was not unreasonable. The purchaser's failure to provide sufficient detail regarding his assets, liabilities, and business experience, and his failure to identify his jointly owned residential property as security, constituted a breach of his obligation to provide all reasonable information. The court concluded that the purchaser was in breach of the warranty when he issued the notice of rescission, and therefore, his right to rescind under Special Condition 12 was conditional upon him not being in breach of that warranty.

The appeal was dismissed, and the appellant was ordered to pay the respondent's costs of the appeal.

Orders

Orders of the court

The appeal is dismissed.

The appellant is to pay the respondent's costs of the appeal.

Background

Background to the litigation

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Evidence

Evidence Before The Court

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Decision

Reasons for decision

On 11 September 2008, the Vendor’s solicitor terminated the Contract on the ground that the notice of rescission constituted a breach of an essential term of the Contract. The Vendor subsequently called on the bank guarantee previously provided by the Purchaser as payment of part of the deposit.PRIMARY JUDGMENT The primary Judge, after recounting the facts, expressed the view that the word “references” in cl 27.2.1 of the Contract meant written appraisals of the Purchaser and his business capacity. The word bore the same meaning in the Landlords’ solicitor’s letter of 14 August 2008. The Landlords did not merely ask for the identification of three referees. His Honour found that what the Landlords required from the Purchaser, not unreasonably, was not only a statement of assets and liabilities, but also copies of bank statements and a valuation report to corroborate the statement of assets and liabilities. In his Honour’s view (at [39]):“It was up to [the Purchaser] to provide all reasonable information including the identification of [his residential] property and his half interest in it”.Likewise the Purchaser’s statement of his experience had failed to make clear which pharmacies were no longer owned by him. The primary Judge rejected the Purchaser’s submission that the attitude adopted by the Landlords’ solicitor in his letter of 29 August 2008 (in which the Landlords required cl 5(h) of the Right of Entry agreement to be deleted) remained the Landlords’ position throughout. His Honour found (at [43]) that, to the extent that the Purchaser had formed the view that the Landlords’ Consent for the purposes of Special Condition 12 could not be obtained before the date of completion, that view was erroneous:“The [L]andlords had not refused to consent to the mortgage of lease and right of entry when [the Purchaser] issued the notice of rescission”. The primary Judge found (at [44]) that the Purchaser was in breach of cl 27.2.1 of the Contract when he issued the notice of rescission:“The scant material contained in the statement of assets and liabilities, the inaccuracy in including the entire interest in the residential property when it was jointly owned, the failure to provide written references and the failure to substantiate any of the values attributed to the assets discussed above constituted a failure to provide the requested information. The information that was requested was not, in my view, unreasonable. The landlord was entitled to assess the worth and ability of [the Purchaser] as the proposed lessee. [The Purchaser] was not entitled to rescind the contract for sale on general principles. It was he who was in breach.” His Honour then addressed the Purchaser’s argument that he was entitled to rescind pursuant to Special Condition 12. His Honour was prepared to assume that the “date of completion” for the purposes of Special Condition 12 was 8 September 2008. However (at [48]-[49]):“The right to rescind, limited to the purchaser only, was contained in a provision that required the purchaser to do all things necessary to obtain the landlords’ consent. That created an obligation on the part of the purchaser that affected the right to rescind. The right to rescind was conditional upon the purchaser not being in breach of the warranty.In this case [the Purchaser] was in breach of that warranty. For the reasons set out above, [the Purchaser] did not do all things necessary to obtain the landlords’ consent prior to 8 September 2008.”

Ratio Decidendi

Legal Principle Established

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