Starco Developments Pty Ltd v Ladd
[1998] QCA 344
•30/10/1998
IN THE COURT OF APPEAL [1998] QCA 344 SUPREME COURT OF QUEENSLAND Appeal No. 1804 of 1998
Brisbane
[Starco Developments P/L v. Ladd]
BETWEEN:
STARCO DEVELOPMENTS PTY LTD
A.C.N. 010 290 605
(Plaintiff) Appellant
AND:
CHRISTINE MacLAREN LADD and ROBERT HARLEY FULLER LADD
(Defendants) Respondents
de Jersey C.J.
McPherson J.A.Thomas J.A.
Judgment delivered 30 October 1998
Separate reasons for judgment of each member of the Court each concurring as to the orders made.
APPEAL DISMISSED WITH COSTS TO BE TAXED.
CATCHWORDS: CONTRACTS - construction - whether an instalment contract pursuant
to section 71 Property Law Act 1974 - whether default in making
payment amounts to repudiation.
Braidotti v. Queensland City Properties Ltd (1991) 172 C.L.R.293
Wacal Developments Pty Ltd v. Realty Developments Pty Ltd
(1978) 140 C.L.R. 503
Kaneko v. Crawford [1995] Q.Conv.R 54-468Sibbles v. Highfern Pty Ltd (1987) 164 C.L.R. 214
Counsel: Mr D.B. Fraser QC for the appellant.
Mr T.W. Quinn for the respondents.Solicitors: Clayton Utz for the appellant.
Horrocks Solicitors for the respondents.Hearing Date: 30 September 1998 IN THE COURT OF APPEAL
SUPREME COURT OF QUEENSLAND
Appeal No. 1804 of 1998
Brisbane
Before de Jersey C.J.
McPherson J.A.
Thomas J.A.[Starco Developments P/L v. Ladd]
BETWEEN:
STARCO DEVELOPMENTS PTY LTD
A.C.N. 010 290 605
(Plaintiff) Appellant
AND:
CHRISTINE MacLAREN LADD and ROBERT HARLEY FULLER LADD
(Defendants) Respondents
REASONS FOR JUDGMENT - de JERSEY CJ
Judgment delivered 30 October 1998
1 The appellant was the vendor under two contracts dated 16 January 1989, for the sale of
units to the respondents. The contracts required settlement on 27 November 1989. The contracts
were varied (it is indisputable that there was a variation) by an “addendum” dated 12 December
1989. That addendum authorised the trustee and stakeholder to pay deposits and interest thereon
to the appellant forthwith (clause 1); provided (clause 2) that in consideration of the respondents’
paying interest on the unpaid purchase price at 22 percent per annum from 27 November, the
payment to be made upon execution of the addendum, the completion dates were extended to 29 January 1990; and the respondents agreed (clause 6) to bear outgoings from 27 November. The
respondents were unable to settle on the due date. The male respondent then told the appellant’s
solicitor to the effect that the respondents wished to complete but were then financially unable to do
so. The appellant purported to rescind.
2 The learned District Court judge found that the contracts as varied were “instalment
contracts” under s.71 of the Property Law Act 1974, because they required the respondents to pay
over the interest earned on the deposits, and interest as the consideration for the extension -
payments without entitlement to conveyance in exchange. Because the thirty day notice under
s.72(1) was not given, the appellant’s purported rescission was of no effect, with the consequence
that the judge entered judgment for the respondents, in an amount substantially agreed. The judge
rejected a contention that the appellant terminated the contracts by way of acceptance of a
repudiation by the respondents: he found that the appellant purported to rescind, not in that fashion,
but “because of default on the part of the purchaser in payment” of the balance purchase moneys,
and he referred to what Deane J said in Braidotti v. Queensland City Properties Ltd (1991) 172
C.L.R. 293, 310.
3 The appellant challenges his Honour’s characterisation of the contracts as “instalment
contracts”, contending that the respondents did not become bound to make payments without
conveyance in terms of s.71.
4 Three points arise in relation to that. The first is whether, in authorising the trustee and
stakeholder “to forthwith pay” to the appellant the interest on the previously paid deposits, the
respondents were binding themselves to make payment of that interest to the appellant short of
settlement. I consider that they were. In authorising the payment over, they surrendered control
of this money, which would not necessarily otherwise end up with the appellant: payment became
inevitable, and it should be regarded as their payment through their agent. As suggested during the
oral argument, the variation to the agreement, secured through the addendum, removed a condition
regulating the respondents’ payment over of the interest on the deposit money, and in that sense
perfected the payment. It may also be compared with the payment by direction of a party: that party
is to be regarded as making the payment.
5 It is convenient to mention here that we were referred to clause 35 of the original contracts,
which provides for the payment on demand of interest as liquidated damages in the event of delay
in completion. The respondents relied on this as bringing the matter within s.71. The point appears
not to have been taken before the learned judge, and I need not deal with it separately anyway in
light of the reasons I have just expressed with relation to the payment over of interest on the deposit
moneys.
6 If the conversion of these contracts, through the variation, into instalment contracts simply
because of the requirement that the interest on the deposits be paid over short of settlement, is felt
to lead to a somewhat surprising limitation on the vendor’s rights, then that must be accepted as a
consequence of the legislation: compare Wacal Developments Pty Ltd v. Realty Developments Pty
Ltd (1978) 140 C.L.R. 503, 509 and 519.
7 Second, the respondents submitted that in agreeing to pay interest at 22 percent on the
outstanding purchase price calculated from 27 November 1989 to the new settlement date of 29
January 1990, but to be paid upon execution of the addendum of 12 December 1989, they became
bound to make such payment without entitlement to conveyance. The learned judge accepted that
submission. But consistently with Kaneko v. Crawford [1995] Q.ConvR 54-468, which binds this Court, I prefer the view that that should be regarded as a payment which brought the varied contract
into existence; it was not a payment under it, so that that payment did not convert this into an
instalment contract.
8 Clause 2 of the addendum is in these terms:
“In consideration of the Purchaser paying to the Vendor upon the execution hereof interest at the rate of twenty two (22%) per centum per annum for the period from 27th November 1989 to 29th January 1990 the Vendor agrees to extend the date for settlement referred to in the contract to 29th January 1990 and the parties hereto agree that the contract is hereby varied to the extent that the date of settlement or date for completion of the contract shall be deemed to be the 29th day of January 1990 in lieu of the date calculated by reference to Clause 7(a) of the contract.”
The word “paying” in the first line, rather than “agreeing to pay” is arguably significant. While the
latter parts of that provision may suggest an immediately operative variation - not, that is, dependent
on payment of the interest - clause 9 lends some support to the view that the variation was to arise
upon payment, even though clause 9 can apply comfortably as well to clause 7. Clause 9 says:
“The parties do hereby acknowledge and agree that time shall in all respects remain of the essence of the contract and of this Addendum and in respect of any extension granted pursuant hereto and the parties do in all other respects confirm the terms of the said contract.”
Note especially the reference to “any extension granted pursuant hereto”.
9 While this matter is difficult to resolve, and because of the view I have taken with relation
to the obligation to pay the interest on the deposit it is strictly not necessary for me to express a
concluded view, my preference is for the construction which puts this case into the Kaneko category,
so that on this basis, s.71 would not arise.
10 Because of my view expressed earlier, it is also not necessary to deal with the respondents’
separate contention that their becoming obliged to bear additional outgoings brought the case within
s.71, although I may say that I did not find that particularly meritorious. I would not be inclined to
interpret clause 6 of the addendum as requiring payment of outgoings prior to settlement as they fell
due. I would tend to prefer the construction adopted by the learned judge, which left the position
as established in the usual way by the original agreements, with the requisite apportionment being
made at settlement. But as I have said, it is not necessary for me to express a concluded view on
that matter.
11 The appellant also submitted that it terminated the contracts by accepting a repudiation by
the respondents, so that s.71 would be inapplicable. The learned judge related the purported
rescission to the respondents’ failure to pay on the due date, which would fall within s.71. The only
additional feature was the respondents’ oral concession that they could not pay. The judge
characterised it as a purported rescission “by reason of default” in payment, as referred to by Deane
J in Braidotti (supra) page 310. The majority referred to the same point at pages 302-3, confirming
that default in payment does not amount to repudiation excluding a need to comply with s.72. The
learned judge also referred specifically to what was said in Sibbles v. Highfern Pty Ltd (1987) 164
C.L.R. 214, 226-7, the foundation of this aspect of Braidotti, that s.72(1) applied “perhaps if the
repudiatory conduct alleged (were) no more than default in the payment of moneys due”.
12 This was a case where the respondents wished to settle, could not on the due date, but
hoped to be able to settle given more time and the hoped for sale of another property, albeit that
they had previously failed to settle on extended dates, that default having continued over a couple
of months. They certainly had defaulted after extensions, but they did not renounce or repudiate the
contracts. As the learned judge held, “this case is one in which the evidence of conduct is limited
to a statement of inability to pay and actual non-payment”. Where the judge in terms characterised
it elsewhere in his reasons for judgment as a case of “repudiation”, a degree of confusion apparently entered into his manner of expression. But as he also quite clearly said, “the (appellants) rescission
was one which could only be characterised as being dependent upon a default in payment of the
balance of the purchase money”. I regard it as clearly not amounting to a case of repudiation, and
I am satisfied that that was his Honour’s view.
13 The case fell within the range of cases the draftsmen of these provisions had in mind. I consider
his Honour’s ultimate approach to the issue to have been correct.
14 I would dismiss the appeal with costs to be taxed.
IN THE COURT OF APPEAL
SUPREME COURT OF QUEENSLAND
Appeal No. 1804 of 1998
Brisbane
Before de Jersey C.J.
McPherson J.A.
Thomas J.A.[Starco Developments P/L v. Ladd]
BETWEEN:
STARCO DEVELOPMENT PTY. LTD.
ACN 010 290 605 (Plaintiff) Appellant
AND:
CHRISTINE MacLAREN LADD and ROBERT HARLEY FULLER LADD
(Defendants) Respondents
REASONS FOR JUDGMENT - McPHERSON J.A.
Judgment delivered 30 October 1998
1 I agree with the Chief Justice that this appeal should be dismissed with costs.
2 There were two contracts dated 16 January 1989; but they are in all material respects
identical and it is convenient to refer to them as one. The addendum dated 12 December 1989,
which was executed after the contract date for settlement of 27 November 1989 had passed,
made or at least contemplated various changes in the original contract. I am in no doubt that,
on its taking effect, the addendum brought about a variation in that contract. That was how the
parties themselves described it in the addendum. It fixed a new date for settlement and effected specific alterations in some of the terms of the original contract. It was therefore not a “mere”
voluntary waiver of the time for performance. Nor was it an outright rescission of that contract
accompanied by the substitution of a new one. Except to the extent of those alterations, the
original contract remained, even if some terms were varied. The fact that the variation was
effected, as variations always are, by a separate agreement or written instrument is irrelevant
to the result in this case.
3 Whether the contract then became an “instalment contract” as defined in s.71 of the
Property Law Act 1974 depended on whether as varied it was, under that section, an
executory contract for the sale of land in terms of which the respondent purchaser was bound
to make a payment or payments (other than a deposit) without becoming entitled to receive a
conveyance in exchange for the payment or payments. Clause 2 of the addendum provided that
in consideration of the purchasers, upon their executing the addendum, paying interest at 22%
from 27 November 1989 on the unpaid balance of the purchase price, the vendor agreed to
extend the date for settlement to 29 January 1990. To my mind, the form of that provision is
such that it was only if the specified interest sum was in fact paid on execution of the addendum
that the settlement date would be extended. It is an instance in which acceptance of an offer
(to extend the date for completion) was constituted by a single act (paying the interest), which
was at once both the acceptance and the performance of the resulting agreement. See
Australian Woollen Mills Pty. Ltd. v. Commonwealth (1954) 92 C.L.R. 424, 456-457. It
is true that cl.2 goes on to say that “the parties ... agree that the contract is hereby varied”. The
use of the present tense “is” and its conjunction with the preposition “hereby” may suggest a
different conclusion; but I prefer the view that the variation did not take effect until the interest was paid. It is most unlikely that the appellant vendor would have intended to extend the time
for settlement unless the interest was in fact paid upon execution of the memorandum. In the
light of earlier events, the promise of the purchasers to pay interest could hardly have counted
as the equivalent of actual payment of that interest.
The result is, as it seems to me, that the purchasers had an option, or right of election,
whether or not to pay the interest sum. If upon execution of the addendum they did not do so,
then the variation contemplated in cl.2 would not take effect. The offer to extend time would
then not have been accepted. On this footing, having regard to what was said in Kaneko v.
Crawford [1995] Q.Conv. R. 54-468, at 59, 540, the contract would not, by force of cl.2 of
the addendum, have become an “instalment contract” as defined. The purchasers were not, in
terms of that definition, “bound” to make the interest payment, but were free to do so or not,
as they chose. It may be that the word “bound” in the definition in s.71 is capable of being read
as meaning something less than legally bound; but that is not the view that was adopted by the
Court of Appeal in Kaneko v. Crawford , and this is an area of the law in which certainty is
at a premium. We should not depart from the meaning which the Court of Appeal so recently
placed upon that expression unless persuaded that it is plainly erroneous, which it is not.
That being so, the present matter falls directly within the ratio of the decision in Kaneko
v. Crawford, at 59, 540, col.2, where the Court of Appeal said:
“The right of election relied on is the purchaser’s right to bring the agreement for further extension into effect by paying $677.97. But on payment of that sum, there would not come into existence a contract ‘in terms of which the purchaser is bound to make a payment or payments (other than a deposit) without becoming entitled to receive a conveyance in exchange for the payment or payments’. That is so because the payment itself would effect the election and bring the varied contract into existence; under that varied contract the purchaser would not be obliged to pay $677.97, having already paid that sum.” Applying that statement here, it was only on payment of the interest required by cl.2 that the
provision in cl.2 for variation of the settlement date came into effect. Once that payment was
made (as in fact it was), the contract was varied; but, as regards the interest sum, the purchasers
were not “bound” to make that payment “in terms of the contract”. They had already paid it
as the price of accepting the vendor’s offer to vary the contract.
6 It is therefore not possible to regard cl.2 of the addendum as itself converting the
contract as varied into an “instalment contract” as defined. Clause 2 was, however, not the only
provision in the addendum that departed from the terms of the original contract. In dealing with
the deposit money ($19,000.00) payable and paid by the purchasers, cl.3(a) of the original
contract provided for it to be paid to a named solicitor to be held by him expressly as “trustee”
in the trust account of the firm of solicitors, of which he was a member, acting for the vendor
in the transaction. It is clear from cl.3(a) that the solicitor was no mere stakeholder but a trustee
for the parties. By cl.3(b) he was authorised to invest the deposit money in the firm’s name in
either of two specified forms of trust investment “with all interest accrued thereon to be paid on
settlement to the vendor”. An exception was provided for the case where settlement “does not
occur as a result of the vendor’s default or as a result of the rescission of this contract pursuant
to clause 4 hereof”. In either of those events, the interest was to belong to and be paid to the
purchasers.
7 Clause 1 of the addendum changed this state of affairs. By its terms, the vendor and
the purchasers jointly authorised the trustee “to forthwith pay the deposit of $19,000.00 plus
all interest earned by the investment thereof to the vendor”. Some question was raised as to
whether this provision had the effect of forfeiting the deposit, together with interest, to the vendor. I doubt that it had that effect. But, even if it did not, cl.1 of the addendum clearly
altered the prevailing legal regime under which the deposit and interest were being held.
Previously they were held by the solicitor as trustee for both parties. Upon execution of the
addendum, the parties authorised payment of that money to the vendor. The purchasers ceased
to be beneficiaries having even a contingent equitable interest in a trust fund and became entitled
only in certain events, such as the vendor’s default, to claim recovery from the vendor of the
amount of the deposit and interest as money had and received or by way of restitution, which
would give rise to no more than a claim in personam by the purchasers against the vendor.
The result was that, in relation to the deposit money and interest, cl.1 of the addendum
bound the purchasers to make or permit a payment or payments to the vendor without receiving
a conveyance in exchange for that payment or payments. As such, it was sufficient to constitute
the contract as varied an instalment contract within s.71. It is true that cl.1 of the addendum did
not in express terms require the purchasers to make the payment in question; but it constituted
an authority, by which they were bound, for that payment to be made and which, being given
for consideration, they were not entitled to withdraw unilaterally. In that sense, they were
“bound” to pay the money in question. It is also true that it was not the purchasers themselves
who paid it to the vendor; but, to the extent of their interest in it, it was their money, and,
without the express authority conferred by cl.1 of the addendum, the trustee would have had
no power to pay it over to the vendor. It was paid by the trustee pursuant to that authority
given by them, and so was a payment made by the purchasers. As it is, the definition of
“instalment contract” in s.71 does not require that the requisite payment be made by the
purchaser but rather that the purchaser be bound to make it.
9 The final submission on behalf of the appellant vendor to be considered here is whether,
independently of the purported rescission or termination by the vendor of the contract, there
was a repudiation by the purchasers that entitled the vendor to treat the contract as at an end
without giving the 30-day notice required by s.72(1) of the Act. The submission takes as its
starting point the fact that the purchasers did not complete the contract by paying the balance
of purchase moneys due on settlement. The evidence is that, not having that amount of money,
they were quite unable to settle the contract. However, s.72(1) inhibits termination of an
instalment contract for default on the part of the purchaser in payment of any instalment “or sum
of money” due and payable under the contract unless the statutory notice has been given. In
this context default in payment of a “sum of money” has been held to include non-payment of
the balance of the purchase price: see Braidotti v. Queensland City Properties Ltd. (1991)
172 C.L.R. 293, 300 (Mason C.J., Brennan, Dawson JJ.).
Once that is accepted, it becomes a matter of characterising the particular default on the
purchasers’ part that occasioned the rescission or termination of the contract by the vendor. In Sibbles
v. Highfern (1987) 164 C.L.R. 214, the conduct constituting the default went beyond mere failure by
the purchasers to complete the contract at due date, and included, as the trial judge found, persistence
on their part “in wrongfully contending that they had rescinded the contract in answer to the vendor’s
claim for specific performance”: Sibbles v. Highfern Pty. Ltd. (1987) 164 C.L.R. 214, 227 (Mason
C.J., Dawson, Toohey, Gaudron JJ.). The basis of the vendor’s rescission in that case was, as Deane
J. said in Braidotti v. Queensland City Properties Pty. Ltd. (1991) 172 C.L.R. 293, 310, “the
alleged repudiation of the contract as a whole by the purchaser”, and so was not capable of being
considered as arising simply “by reason of default ... in payment of” a sum of money represented by the
balance of the purchase price. By contrast in the present case, the default on which the vendor’s
rescission was based was nothing more nor less than the purchasers’ failure to pay the balance of
purchase moneys on the date fixed for settlement under the contract as varied. That is no doubt capable
in ordinary circumstances of being regarded as a repudiation of the contract; but it is a particular form
of repudiation which a vendor is prevented by the Act from relying on to rescind or terminate an
instalment contract without first having complied with the requirements of s.72(1) of the Act. No such
notice was given in this case.
In respect of the other matters raised on appeal, I agree with the reasons of de Jersey C.J.
IN THE COURT OF APPEAL
SUPREME COURT OF QUEENSLAND
Appeal No. 1804 of 1998
Brisbane
Before de Jersey C.J.
McPherson J.A.
Thomas J.A.[Starco Developments P/L v. Ladd]
BETWEEN:
STARCO DEVELOPMENTS PTY LTD
ACN 010 290 605
(Plaintiff) Appellant
AND:
CHRISTINE MacLAREN LADD and ROBERT HARLEY FULLER LADD
(Defendants) Respondents
REASONS FOR JUDGMENT - THOMAS J.A.
Judgment delivered 30 October 1998
1 On 16 January 1989, the appellant agreed to sell two units “off the plan” in the Noosa area to the respondents. The appellant registered the necessary plan within the time permitted in the contracts and the due date for completion became 27 November 1989. The respondents failed to complete on that date, and despite being given an extension on certain conditions, failed to complete. The appellant terminated the contracts and sued for damages, but its claim was dismissed because the learned trial judge found that the contracts had become “instalment contracts” under the Property Law Act 1974 and that the appellant had failed to give the notice required by s. 72 of that Act before termination.
2 The contracts are in material respects identical and the dealings between the parties were in material respects the same in relation to each contract. It will suffice for purposes of the appeal to discuss the position of the parties under the contract for the purchase of Lot 8.
The Contract
3 The contract provided for payment of a deposit of exactly 10% of the purchase price and provided that the deposit should be paid to Mr Sykes (a solicitor), such moneys to be held by him in the trust account of his firm and to be dealt with in accordance with the provisions of the Land Sales Act 1984-1985 and the law governing the operation of his trust account.
4 Clause 3(b) gave the trustee a limited discretion to invest the deposit moneys:
“with all interest accrued thereon to be paid on settlement to the vendor unless settlement does not occur as a result of the vendor’s default or as a result of the rescission of this contract pursuant to clause 4 hereof in either of which events the said interest shall belong to and be paid to the purchaser”.
5 Clause 4 imposed obligations upon the appellant to obtain necessary approvals, to effect construction of the units by given dates, and to achieve the necessary Shire Council approval by 30 June 1990. In the event that any of those conditions was not satisfied, the deposit (including any interest) was to be refunded to the purchaser.
6 Under cl. 7, settlement was to take place within 14 days of notification by the vendor’s solicitors that the plan had been registered.
7 Clause 8 provided that the vendor was responsible for outgoings and entitled to the profits up to the date of possession and provided for any necessary apportionment and adjustments
on settlement.
8 Clause 13 conferred upon the vendor certain remedies in the event of default by the purchaser, including termination, forfeiture of deposit and damages for breach.
9 Time was agreed to be of the essence. Clause 35 provided:
“INTEREST ON LATE PAYMENTS
35. Should there be any delay in payment of the balance of the purchase
money by virtue of default on the part of the Purchaser then without prejudice
to any other rights of the Vendor the Purchaser will pay to the Vendor a sum
for liquidated damages equivalent to interest at the rate of Twenty-two per
centum (22%) per annum on the moneys so owing from the date for payment
thereof until payment shall have been made. Any interest payable to the
Vendor pursuant to this clause shall be payable upon demand and if not
previously demanded, will be tendered to the Vendor upon settlement and the
Vendor may treat a failure to tender such moneys as a default entitling it torescind this contract.”
The Addendum
10 On 12 December 1989, the parties signed an “addendum to contract of sale”. Following a recital “whereas parties have agreed to vary and extend the contract on the terms hereinafter set out”, the agreement proceeded:
“NOW THIS AGREEMENT WITNESSETH AND THE PARTIES
HERETO AGREE as follows:-1. The Vendor and Purchaser do hereby authorise the Trustee and Stakeholder referred to in the Contract to forthwith pay the deposit of NINETEEN THOUSAND ($19,000.00) plus all interest earned by the investment thereof to the Vendor.
2. In consideration of the Purchaser paying to the Vendor upon the execution hereof interest at the rate of twenty two (22%) per centum per annum on the balance of purchase price for the period from 27th November 1989 to 29th January 1990 the Vendor agrees to extend the date for settlement referred to in the contract to 29th February 1989 and the parties hereto agree that the contract is hereby varied to the extent that the date of settlement or date for completion of the contract shall be deemed to be the 29th day of January 1990 in lieu of the date calculated by reference to Clause 9(a) of the contract.
3. The Vendor agrees to complete the contract at any date prior to the 29th day of January 1989 after receiving seven (7) days prior written notice from the Purchaser that earlier completion is required and in the event of such earlier completion the interest referred to in Clause 2 hereof will be payable from the 27th day of November 1989 until the completion of the contract and any interest overpaid will be credited to or paid to the Purchaser on completion.
4. The Vendor does hereby consent to the Purchaser furnishing and fitting out the unit at his own risk and provided that any damage to the unit or fittings whatsoever may be repaired by the Vendor at the Purchaser’s cost and expense.
5. The Vendor agrees to allow the Purchaser reasonable access to the unit for the purpose of allowing the same to be inspected by prospective purchasers but nothing herein grants to the purchaser any right to possession of the unit or any right to occupy the same.
6. The Vendor and Purchaser agree that all outgoings (as defined in the contract) in respect to the unit will be borne and paid for by the Purchaser from the 27th day of November 1989.
7. In the event that the Purchaser has entered into a contract to sell the said unit on or before the 29th day of January 1990, the Vendor will at the request of the Purchaser and upon production of a photostat copy of the said signed contract of sale to the Vendor and upon payment by the Purchaser to the Vendor of interest calculated at the rate of twenty two (22%) per centum per annum on the balance of the purchase price due and owing under the contract (as herein defined) from the 29th day of January 1990 until the extended date of completion extend the date for completion of the said contract (as herein defined) to such date (the extended date of completion) as the Purchaser may require not later than the 28th day of February 1990.
... 9.
The parties do hereby acknowledge and agree that time shall in all respects remain of the essence of the contract and of this Addendum and in respect of any extension granted pursuant hereto and the parties do in all other respects confirm the terms of the said contract.”
Statutory provisions
11 The following are relevant provisions in the Property Law Act 1974:
“71. In this Division - ‘deposit’ means a sum -
(a) not exceeding 10% of the purchase price payable under an instalment contract; and
(b) paid or payable in 1 or more amounts; and
(c) liable to be forfeited and retained by the vendor in the event of a breach of contract by the purchaser;
‘instalment contract’ means an executory contract for the sale of land in
terms of which the purchaser is bound to make a payment or payments (other than a deposit) without becoming entitled to receive a conveyance in exchange for the contract;
...
Restriction on vendor’s right to rescind
72. (1) An instalment contract shall not be determinable or determined because of default on the part of the purchaser in payment of any instalment or sum of money (other than a deposit or any part of a deposit) due and payable under the contract until the expiration of a period of 30 days after service upon the purchaser of a notice in the approved form.
...”
12 I shall now discuss the questions relevant to the disposition of this appeal upon which the parties are at issue.
What is the combined effect of the two agreements?
13 In my view, the second agreement effects a variation to the original contract. The contract binding the parties thereupon became the contract as varied. The variation was a strict legal arrangement given for consideration. It touched the parties’ rights under the original contract in several respects, and by no stretch of the imagination could it be regarded as a mere waiver or extension of time for performance of the contract.
Did the agreement to release the deposit “plus all interest” convert the contract into an “instalment contract” under s. 71 of the Property Law Act 1974?
14 Upon the making of the variation agreement, as at 12 December 1989 there was in force between the parties a varied contract which remained to be completed and which was therefore an executory contract. The deposit plus interest by that time reached a sum exceeding 10% of the purchase price. If this provision amounted to a payment, it would therefore be one for the payment of something other than a deposit (see s. 71).
15 It was submitted however that the payment that the purchaser directed to be made in this respect would be made by Mr Sykes and would not be made by the purchaser. At the relevant time, 12 December 1989, both vendor and purchaser retained an interest in the deposit and either of them could become entitled to its payment in due course, according to future events that might happen. The purchaser having originally placed those moneys in the hands of the trustee, and now abandoning any future claim to the deposit and interest thereon and directing the trustee to make final payment of those moneys to the vendor, the purchaser was by direction causing that payment to be made. By agreeing to cl. 1 of the addendum, I consider that the purchaser bound himself to make that payment by direction.
16 The final question that arises on this point is whether that payment was a payment of something other than a deposit. As to this, even if the accrued interest might somehow be regarded as taking on the same identity as the deposit, the fact that the amount then exceeded 10% of the contract price means that under the statute it was a payment other than a deposit (see definition in s. 71).
17 Although there is some awkwardness in treating the premature release to a vendor of a deposit as an actual payment, with some hesitation I think that that is a correct description of the transaction. If the matter had proceeded to settlement and the amount had then been received by the vendor by direction, it would naturally be regarded as completing a payment by the purchaser. In my view, its premature payment may similarly be regarded as a payment by the purchaser, and it had the effect of converting the contract into an “instalment contract” as defined.
Did the arrangement for payment of money in consideration of the extension
(cl. 2) convert the contract into an “instalment contract”?18 Mr D. Fraser Q.C. for the appellant submitted that the payment of the money required under cl. 2 of the addendum should be treated as a separate consideration forming no part of any executory contract. In my view, the payment of these moneys was the price paid for the grant of the necessary extension of time, and was part of the consideration provided in a contract in which the parties agreed to forego various rights and confer various benefits. One of the additional benefits obtained by the respondents from the contract was the right of access to the units and to do certain things that would facilitate their resale of the units. The evidence is that the purchasers provided the cheque to the vendor along with the addendum duly signed by them.
19 The addendum itself expresses the arrangement in terms of payment “upon the execution hereof”. It would be a mistake to look solely at the addendum and say that as the money was paid on execution the purchaser never become bound to make a payment. The contract that needs to be examined in order to determine whether it is an “instalment contract” under s. 71 is the original contract as varied. When the addendum varied that contract on 12 December 1989, the contract as varied remained very much an executory contract. There was still the balance purchase moneys to be paid and the effecting of transfer by the vendor. The question is whether the purchaser paid substantial sums, including interest at 22% on $400,000 for approximately 7 weeks, without being bound to do so under the contract as varied, or under any contract.
20 Reference was made to Kaneko v. Crawford[1] in which this Court decided that a payment made to obtain a 5 day extension was not made pursuant to an agreement that bound the
purchaser to pay that sum. The Court found it unnecessary to determine whether the arrangement for extension effected any variation to the principal contract, concluding that the purchaser did not ever become bound to pay the additional moneys. With respect to that arrangement, the Court observed:
“The choice is between interpreting the arrangement as one under which the vendor agreed to an extension in exchange for the mere promise to pay the money, and interpreting it as one in which the vendor was not bound at all until the money was paid.”
[1] [1995] Q.Conv.R., para. 54-468.
The Court concluded, having observed that it did not understand counsel for the purchaser to resist the conclusion, that the extension agreement did not bind the purchaser to pay any sum. It was the choice of the purchaser to make the payment; if he did not make it he would not get the extension; if he did make it he would get the extension. There was therefore no point, the Court concluded, at which the purchaser was “obliged to pay” the extra money, “having already paid that sum”.[2] I confess to a difficulty with this decision. It focuses entirely upon the arrangement for variation rather than upon the contract as varied. I acknowledge however that I am bound to follow that decision to the extent that it is applicable. The ratio seems to be that where a payment is interpreted as a condition precedent to an agreement rather than a condition of the agreement, it cannot be said that the payer ever became bound to make the payment. It is rare these days to adopt the former interpretation, and courts lean against such an approach.[3] Having construed the arrangement as a condition precedent to agreement, the court held that the extension did not take effect until the money was paid, and that in such event the purchaser was never bound to make a payment under any executory contract. I think that Kaneko should be strictly confined to its own facts, if not reconsidered.
[2] Ibid, p. 59-540.
[3] Perri v. Coolangatta Investments Pty Ltd (1981-1982) 149 C.L.R. 537, 552.
21 The operative words in cl. 2 of the addendum are:
“the parties hereto agree:
... in consideration of the purchaser paying to the vendor upon the execution hereof
interest ... the vendor agrees to extend the date for settlement ... and the parties
hereto agree that the contract is hereby varied to the extent that the date of
settlement ... shall be deemed to be the 29th day of January 1990 ...”.
Moreover, the addendum was not limited to cl. 2. The respondents promised to cause the deposit to be paid to the vendor and to pay certain outgoings while the appellant permitted special arrangements that would give the respondents the maximum opportunity of on-selling the units. It could not be said, as it could in Kaneko, that the purchasers had a right of election whether or not to pay the interest sum. Clause 2 is not a severable promise. It was part of an overall agreement that bound both parties from the same instant. The variation was agreed to in consideration of several promises, one of which was performed, as the agreement required, upon execution. I do not think that any different conclusion is demanded by the reference in cl. 9 to “any extension granted pursuant hereto”, as cl. 7 contemplates the possibility of shifting periods of extension.
22 Was this payment a condition precedent to an agreement, or was it the consideration for it? In my view, only one answer is possible. On the face of the addendum this and other consideration moving from the purchasers (including other payments) was given in exchange for the promise of the vendor to extend the time for completion and for other benefits therein set out. I would therefore distinguish the present variation agreement from that in Kaneko. In my view both the addendum and the principal agreement as varied bound the purchaser to pay interest which comprised a sum over and above a 10% deposit at a time before the purchaser was entitled to receive a conveyance.
23 It follows that the agreement as varied thereby became an “instalment contract” under s. 71.
24 The respondent also referred to cl. 35 of the contract as a basis for concluding that the contract was an instalment contract. I would reject that submission. Clause 35 did not bind the purchaser to pay any money unless a demand were made. The vendor at no stage made a demand under that clause. In the absence of such a demand, in the event that the vendor kept the contract alive beyond the initial settlement date, money would be payable thereunder only upon settlement. In the event, the parties proceeded not under cl. 35 but by means of the addendum agreement.
Was the obligation to pay outgoings one that converted the contract into an instalment contract?
25 It was submitted that the promise in cl. 6 of the addendum to pay outgoings for a limited period also bound the purchaser to make payments over and above the 10% deposit. Such payments cover matters such as rates, insurance, body corporate levies, all of which involve obligations to third parties. It is clear from the reasoning in Wacal Developments Pty Ltd v.
Realty Developments Pty Ltd[4] that “the payments to which the definition refers are confined to those which a contract obliges a purchaser to pay to the vendor” and that “they do not include those required by the contract to be paid to third parties”[5]. Gibbs J.[6] took a similar view. The position in the present matter is clouded by the admission of the respondents in their defence that such payments were received by the appellant, but the fuller statement in the admitted facts suggests that the character of the payments as outgoings was not lost even if paid through the vendor who received such payments in trust for the discharge of such obligations. I do not think that the position can be satisfactorily distinguished from that in Wacal and conclude that the purchaser’s payments for outgoings do not have the effect of converting the contract into an instalment contract.
Did the respondents repudiate the contract with the result that the appellant is relieved from the obligation to comply with s. 72?
[4] (1978) 140 C.L.R. 503.
[5] per Stephen J. at 515, with which Aickin J. agreed at p. 532.
[6] at p. 507.
26 The facts as found by the learned trial judge suggest that at material times up to and including 29 January 1990, when it is alleged that they repudiated the contract, the respondents were ready and willing to complete but not able to do so. By not completing on that date, they undoubtedly committed a breach which entitled the vendor to rescind, as time remained of the essence of the contract. However, their conduct up to and including that time was that of parties who were trying to keep the contract alive. It was not conduct of the kind regarded as necessary to amount to repudiation in Sibbles v. Highfern Pty Ltd.[7] However, it is not necessary to pursue the distinction between a fundamental breach and repudiation. In a case where the default is that of a purchaser in paying moneys due under
the contract the protection given by s. 72(1) remains and the vendor is obliged to give the necessary 30 days notice.[8] The appellant’s purported determination of the contract was “because of default on the part of the purchaser in payment of [a] ... sum of money ... due and payable under the contract”. Under s.72, a contract is not determinable on such a basis until the expiration of 30 days after service of a notice in the approved form. The appellant has failed to demonstrate that the facts in this case amount to repudiation or renunciation of the whole contract such as to enable the vendor to treat it as at an end without giving a notice under s. 72(1).
[7] (1987) 164 C.L.R. 214.
[8] Braidotti v. Queensland City Properties Limited (1990-1991) 172 C.L.R. 293, 302,. 305, 310.
27 The appeal should be dismissed with costs.
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