Stewart v White
[2020] VSC 116
•17 March 2020
| IN THE SUPREME COURT OF VICTORIA | Not Restricted |
AT MELBOURNE
COMMON LAW DIVISION
PROPERTY LIST
S ECI 2019 02957
IN THE MATTER of s 31 of the Sale of Land Act (Vic) 1962 and pursuant to rule 4.06 of the Supreme Court General Civil Procedure Rules 2015
| RICHARD LAURENCE STEWART and EDWINA MARY STEWART | Plaintiffs |
| v | |
| VINCENT EDWARD WHITE and CLAIRE MICHELLE WHITE | Defendants |
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JUDGE: | Macaulay J |
WHERE HELD: | Melbourne |
DATE OF HEARING: | 3 February 2020 |
DATE OF JUDGMENT: | 17 March 2020 |
CASE MAY BE CITED AS: | Stewart v White |
MEDIUM NEUTRAL CITATION: | [2020] VSC 116 |
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LAND LAW ― Sale of Land Act 1962 (Vic) s 31 – Contract of Sale – Cooling off provisions – Whether contract of sale was terminated – Whether legal effect of giving a cooling off letter can be suspended by giving it as an escrow ― Monarch Petroleum v Citco Petroleum [1986] WAR 310 considered ― If terminated, whether contract was reinstated by conduct of the parties ― Lohar Corp Pty Ltd v Dibu Pty Ltd (1976) 1 BPR 9177 considered.
EQUITY ― Equitable Estoppel ― Whether deposit could be retained by purchaser if detrimental reliance upon assumption induced by vendor that contract remained on foot ― Difference between a contractual promise and an equity arising from an estoppel ― Waltons Stores (Interstate) Limited v Maher (1988) 164 CLR 387 ― Where finding that vendor induced purchaser to assume that contract of sale remained on foot ― Whether any detrimental reliance upon assumption that contract of sale remained on foot ― No detrimental reliance upon assumption.
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APPEARANCES: | Counsel | Solicitors |
| For the Plaintiffs | Mr B Carr | Advocatus Legal |
| For the Defendants | Mr P Barton | Mulcahy & Co Legal |
TABLE OF CONTENTS
Introduction........................................................................................................................................ 1
Was the contract terminated on 30 August 2018?......................................................................... 2
Was the contract reinstated?........................................................................................................... 13
Are the Stewarts estopped from denying the existence of a contract?.................................. 17
Conclusion......................................................................................................................................... 23
HIS HONOUR:
Introduction
Less than 24 hours after Mr and Mrs Stewart signed a contract on 28 August 2018 to buy a residential property at 143 Kilmore Road, New Gisborne (the property) from Mr and Mrs White, a water pipe burst in the ceiling of the house (then unattended) causing significant water inundation, collapsing part of the ceiling. Mr Stewart, a qualified legal practitioner, hand delivered to Mr and Mrs White’s real estate agent a letter dated 30 August 2018 stating –
In light of the significant damage to the property since purchase, we give notice of withdrawal from the contract under the cooling off provisions.
Reference in the letter to the ‘cooling off provisions’ was a reference to a right to terminate the contract given to purchasers under s 31 of the Sale of Land Act 1962 (the Act), exercisable within three clear business days of having signed the contract.
Early the very next day, Mr Stewart wrote an email, this time to Mr and Mrs White’s solicitors acting in the conveyance, in these terms –
I spoke to [the agent] this morning. I do not wish to cool off from the sale and will work with the owner on resolution of repairs etc.
I had given [the agent] a cooling off letter the other day to be held in escrow whilst we got over the shock and made a decision on the way forward, and due to a misunderstanding it appears to have been passed on. Please, however, disregard.
After that ‘please disregard’ email, Mr and Mrs Stewart appeared to behave (arguably, at least) as if they regarded the contract as being on foot, including by paying the balance of deposit and expressly waiving a contractual entitlement to pre-settlement possession. For their part, the Whites also conducted themselves on the basis that the contract remained on foot. The Whites made a claim on their insurers and set about organising repairs to the house to restore it to its condition at the date of sale to have it ready for settlement.
Before the scheduled settlement date the Stewarts again wrote to the Whites’ lawyers complaining about the extent of the damage and their lack of opportunity to inspect the interior. In that letter, dated 25 October 2018, Mr Stewart wrote –
In view of the extent of the damage which can be seen and that which cannot, the purchasers wish to cancel and withdraw from the sale at this time.
The scheduled settlement date was 25 January 2019. It came and went without settlement taking place, or even being attempted. Evidently, without prejudice negotiations continued between the parties to try and resolve the matter. These negotiations finally broke down on 12 March 2019 and the next day the Whites served a notice on the Stewarts giving them 14 days to settle the sale and warning that, if the sale was not settled in that time, the contract would be rescinded pursuant to its terms. Settlement never took place. The property was resold by the Whites about two months later for $25,000 less than the price for which they had sold it to the Stewarts.
The single question raised in this proceeding is who gets the deposit of $87,500: is it to be returned to the Stewarts (the purchasers) or retained by the Whites (the vendors)?[1]
[1]The proceeding was commenced by the Stewarts (the plaintiffs) by originating motion. No pleadings have been sought, and there is no counterclaim. The sole remedy sought is the return of the deposit with interest pursuant to the contract, less the statutory deduction, as prescribed in s 31(4) Sale of Land Act1962.
Numerous arguments have been put forward by the parties from which the following issues have emerged:
(a) Did Mr Stewart’s letter dated 30 August 2018 terminate the contract?
(b) If so, was the contract reinstated?
(c) If the contract remained on foot at settlement date, was it validly rescinded or simply abandoned?
(d) Alternatively, are the Stewarts estopped from denying the existence of the contract and, if so, what is the consequence for this proceeding?
Was the contract terminated on 30 August 2018?
In substance, Mr and Mrs Stewart argue that whatever may have been said around the time the cooling off letter was given, or however the parties may have conducted themselves thereafter, the legal consequence of Mr Stewart handing the 30 August letter to the vendor’s real estate agent was to terminate the contract there and then. It necessarily follows, they say, that they are entitled to the return of the deposit by virtue of s 31(4) of the Act (set out below).
Mr and Mrs White argue that Mr Stewart effectively suspended any operation the cooling off letter may have had by stipulating that it be held ‘in escrow’ while he and his wife considered their position and, having done so, cancelled its operation by asking that it be disregarded with the result that the contract was never in fact terminated.
Section 31 of the Act was introduced to protect purchasers from the consequence of an imprudent decision to buy residential land by permitting them to terminate the contract, without cause, within three business days of having signed the contract.[2] The process has come to be known as ‘cooling off’ and the three day period as the ‘cooling off period’.
[2]Victoria, Parliamentary Debates, Legislative Council, 24 November 1982, 986 (WA Landeryou, Minister for Economic Development).
Contracts that do not carry that right are contracts for the sale of industrial or commercial land,[3] land of more than 20 hectares used for farming,[4] land sold or to be sold at auction,[5] land previously sold by contract to the same purchasers,[6] and land sold to a real estate agent.[7] There is no dispute that the land sold to the Stewarts did carry the right to terminate under s 31.
[3]Sale of Land Act 1962 (Vic) s 31(1)(a) (‘the Act’).
[4]Ibid s 32(1)(b).
[5]Ibid ss 31(5)(a), (b).
[6]Ibid s 31(5)(c).
[7]Ibid s 31(5)(d).
Five conditions are required to be fulfilled before an eligible contract is terminated under this provision:[8]
[8]Ibid ss 31(2), (3).
(a) the purchaser must notify the vendor that he or she wishes to terminate the contract;
(b) the notice must be in writing;
(c) the notice must be signed;
(d) the signed notice must be ‘given’ to one or other specified person or left at a specified address; and
(e) the notice must be given within three clear business days after the purchaser signed the contract.
If these five conditions are satisfied, s 31(2) provides that ‘the contract shall be terminated’ and s 31(4) provides that the purchaser is entitled to the return of all moneys paid under the contract except for $100 or 0.2 per cent of the purchase price, whichever is the greater.[9]
[9]The Act s 32(4).
Additional provisions reinforce the right to cool off from the contract. They are that the contract must contain a conspicuous notice advising the purchaser of the right (which was complied with in this case);[10] if the contract does not provide such a notice then the purchaser can rescind the contract at any time before taking possession of the land;[11] and the parties cannot contract out of the right of termination.[12]
[10]Ibid s 32(6).
[11]Ibid s 32(7).
[12]Ibid s 32(8).
The full text of the provisions which are presently relevant are as follows:
Division 1—Cooling-off periods
31 Power of purchaser to terminate a contract for sale of land
…
(2)Where a purchaser under a contract for the sale of land signs that contract he may at any time before the expiration of three clear business days after he has signed the contract give notice to the vendor that he wishes to terminate the contract and where he has signed that notice and given it in accordance with the provisions of this section the contract shall be terminated.
(3)A notice under subsection (2) must, within 3 clear business days after the purchaser has signed the contract—
(a)be given to one of the following persons—
(i) the vendor;
(ii) an agent of the vendor;
(iii)an estate agent engaged or appointed by the vendor to sell the land; or
(b) be left at one of the following addresses—
(i)the address for service of the vendor specified in the contract;
(ii)the address of the vendor’s agent;
(iii)the address of the estate agent engaged or appointed by the vendor to sell the land.
(4)Where a contract for the sale of land has been terminated in accordance with the provisions of this section the purchaser shall be entitled to the return of all moneys paid by him under that contract except for the sum of $100 or 0·2 per centum of the purchase price (whichever is the greater) which may be retained by the vendor.
…
(8)Any provision in the contract or in any other document whereby any right conferred by this section on the purchaser is excluded, modified or restricted shall be void and of no effect.
To address the question whether the contract was terminated, it is useful to provide some further factual context.
The water damage to the property occurred overnight between Tuesday 28 August (the day the contract was signed) and Wednesday 29 August. The damage was discovered by Mr Rhys Nuttall, Mr and Mrs White’s real estate agent, when he attended the property to affix a sticker to the advertising board. Having noticed the damage, he immediately informed Mr White and also Mr Stewart. Mr and Mrs Stewart attended the property that same day but could not get inside to see it at close quarters. They were, however, able to see some internal damage by looking through the windows.
Next morning, Thursday 30 August, Mr Stewart attended the property and there met with Mr Nuttall. It was at that meeting that he handed Mr Nuttall the cooling off letter. It was addressed to Mr Nuttall and continued as follows:
Dear Rhys
143 Kilmore Road, New Gisborne
We refer to the contract of sale for purchase of the above property executed 28 August 2018.
In light of the significant damage to the property since purchase, we give notice of withdrawal from the contract under the cooling off provisions.
Notwithstanding that notice of withdrawal, we remain interested in the property subject to revised agreement on an extended settlement term and a satisfactory final building inspection of the property once repairs are completed.
Yours sincerely,
[signed by the purchasers]
Mr Nuttall recalled that, during their conversation, Mr Stewart said that he wanted Mr Nuttall to hold the letter ‘in escrow’ and that he, Mr Stewart, and his wife, were unsure what they were going to do. For his part, Mr Stewart denied using the expression ‘in escrow’. In his evidence, Mr Stewart explained that he would not have used such a word to a real estate agent because he would not expect an agent to understand its meaning.
Mr Nuttall said that he understood the word ‘escrow’ to mean, in effect, that he was to ‘keep it up his sleeve’. Despite that understanding, he agreed that he passed the letter on to Ms Wendy Cartledge, the conveyancing officer employed by the solicitors for Mr and Mrs White. Mr Nuttall explained that he felt uncomfortable not passing on to his vendor-client a letter from the purchasers saying that they withdrew from the contract. He passed it on that afternoon.
Earlier the next morning, Friday 31 August 2018, Mr Stewart spoke again to Mr Nuttall. In that conversation he learned that Mr Nuttall had passed the letter on to Ms Cartledge, and Mr Stewart expressed some dissatisfaction at him having done so because, as he explained, he and his wife now wanted to proceed with the purchase. In any event, at 8:48am Mr Stewart sent Ms Cartledge the ‘please disregard’ email set out earlier in these reasons.
Thereafter a number of things followed.
First, Mr and Mrs Stewart paid the deposit of $87,500 in several tranches by electronic funds transfer from their bank. These tranches were recorded as having been received by the real estate agency with whom Mr Nuttall was employed, Edgars, as follows:
·$19,800 on 28 August 2018
·$20,000 on 29 August 2018
·$19,000 on 31 August 2018
·$20,000 on 3 September 2018 and
·$8,700 on 3 September 2018.
Seemingly, a number of those payments were made after Mr Stewart had handed Mr Nuttall the cooling off letter. If so, it may be thought that those payments were inconsistent with Mr Stewart intending the contract to be terminated. However, Mr Stewart explained that he did not individually process each payment but, rather, scheduled all payments on the same day (presumably 28 August 2018) to be made electronically, staggering them to fit within his bank’s daily transaction limit of $20,000. I accept his evidence on this point. Either he did not turn his mind to cancelling the scheduled payments after he gave Mr Nuttall the cooling off letter on 30 August or he was content for those payments still to be processed.
Next, on Saturday 1 September 2018 Mr Stewart attended the property and there spoke to Mr White. He told Mr White that although he and his wife were initially shocked at learning of the water damage to the property they nevertheless wished or intended to proceed with the purchase.
By email dated 4 September 2018, Mr Stewart wrote to Ms Cartledge, this time on the email stationary of ‘Advocatus Legal’, a legal practice conducted by Mr Stewart, the subject heading being ‘White to Stewart Purchase of 143 Kilmore Road New Gisborne’. His email continued,
We act for the purchasers in the above matter and refer to the contract of sale dated 28 August 2018.
Given the damage which has occurred to the Property post contract, the purchasers will waive their rights and benefits accruing under special condition 11 to allow the vendor to conduct repairs.
Special condition 11 entitled the purchasers to enter possession of the property under a licence within 30 days of signing the contract upon payment of a weekly licence fee. The email continued with a request for the Stewarts to have ‘input’ into the selection of carpets and the floating floor to replace the damaged floor coverings, and an invitation to discuss the prospect that the Stewarts might undertake some of the repairs themselves for a suitable price reduction.
Mr Stewart’s explanation for his various statements, made in writing and orally, to the effect that he and his wife remained interested in the property or wished to continue with the purchase, was that they wanted to enter a new contract to buy the land at a suitably reduced price in light of the damage. That is, he denied believing that they were continuing under the 28 August contract as if it had not been terminated.
This explanation ran into some trouble, in my view. I bear in mind that Mr Stewart is a lawyer. His explanation does not sit comfortably with having written to Ms Cartledge on 31 August, saying ‘I do not wish to cool off from the sale’ and that she should ‘disregard’ the cooling off letter. He also had some difficulty, in my view, explaining why he wrote in his letter to Ms Cartledge that he had ‘given Rhys a cooling off letter the other day to be held in escrow’, and yet insisted that he did not in fact tell Mr Nuttall either that it should be held ‘in escrow’ or withheld from the vendor. His responses when questioned in cross-examination about that apparent incongruity were not persuasive.
In addition, he also found it difficult to explain why he wrote to Ms Cartledge stating that the letter had been passed on ‘due to a misunderstanding’. According to his evidence given in court, when handing the cooling off letter to Mr Nuttall his intention was that it would to take effect to terminate the contract, yet also convey to the vendor that he and Mrs Stewart remained interested in the property subject to a revised (that is, a new) agreement being made. Indeed, that was the very thing the letter said. Assuming he had intended to terminate the contract yet convey an interest in entering a new one on revised terms, it is not at all clear why passing on the cooling off letter would signify any ‘misunderstanding’ given that it contained the precise message he wanted to give to the vendors. Maintaining both propositions made no sense.
I prefer Mr Nuttall’s evidence on this point. I find it probable that Mr Stewart used the words ‘in escrow’, as Mr Nuttall recalled, when handing the letter to Mr Nuttall on 30 August 2018.
My finding is reinforced by inferences drawn from later conduct, through to 25 October 2018. Over that period, Mr and Mrs Stewart behaved in a way which was consistent with them believing that the contract was on foot. Not only did Mr Stewart tell Mr White (as already mentioned) that he and Mrs Stewart wished to proceed with the contract, he also purported to waive special condition 11. There is no logical explanation for Mr Stewart waiving a contractual entitlement if he thought the contract had been terminated.
Following Mr Stewart’s email of 4 September, in which he asked to have input into the replacement of floor coverings , numerous text messages were passed between Mr and Mrs Stewart and Mr and Mrs White about the type and quality of carpets and fittings to be used to replace the damaged items in the property. The Stewarts’ interest in the choice of replacement items for the property is best explained by a belief, shared by both parties, that the Stewarts were the purchasers of the property under a subsisting contract.
Finally, when Mr Stewart wrote his letter of 25 October (above [5]) he stated, at that point in time, that the ‘purchasers wish to cancel and withdraw from the sale …’. Such a letter would have been entirely otiose if Mr Stewart believed that the contract was already terminated. Only after that date, in later letters,[13] did Mr Stewart begin to assert that the contract was, and always had been, terminated as a result of the cooling off letter given on 30 August 2018.
[13]Letters dated 8 and 13 November 2018.
In short, I find that when Mr Stewart handed the cooling off letter to Mr Nuttall, he did so saying that it should be held ‘in escrow’. The following morning he informed the vendors, via their solicitors, that he withdrew the cooling off letter and that it should be disregarded. Thereafter the parties conducted themselves as if the contract was on foot. But was it?
Having found that Mr Stewart did stipulate that his cooling off letter was to be held by Mr Nuttall ‘in escrow’, it is necessary to consider what, if any, legal consequence followed from the utterance of those words.
An escrow has been defined as follows:
If an instrument be delivered to take effect on the happening of a specified event, or upon condition that it is not to be operative until some condition is performed, then pending the happening of the event or the performance of the condition the instrument is called an escrow.[14]
[14]Norton on Deeds, 2nd ed, (1928), 18.
Speaking of the delivery of a deed (which is the usual context in which the term ‘in escrow’) is used, the NSW Court of Appeal held that whether a deed has been delivered unconditionally, delivered in escrow or not delivered at all depends on the executing party’s intention. That question, the Court said, is to be determined on the basis of the words used by and the conduct of the promisor, taking into account the circumstances attending the execution of the deed.[15]
[15]Segboer & Anor v AJ Richardson Properties Pty Ltd & Anor [2012] NSWCA 253 (Sackville AJA, Allsop P and Campbell JA agreeing), [73] (‘Segboer’).
Applying that test to the current circumstances, and assuming (for one moment) that a cooling off notice under s 31 of the Act could be given in escrow, I would hold that the notice was given by Mr Stewart conditionally, that is, as an escrow, having regard to his words and conduct and the circumstances attending his execution of the notice. But, for the reasons that follow, I am of the opinion that a s 31 cooling off notice cannot be given in escrow. Or, to put it differently, the legal effect of a s 31 cooling off notice cannot be deferred or suspended, once given, pending the satisfaction of a condition. At the very least, in the particular circumstances of this case, stipulating that the notice was to be held in escrow did not prevent the giving of the notice having the immediate effect of terminating the 28 August contract.
I agree with the submission made on behalf of the Stewarts that the text of s 31(2) and (3) of the Act indicates a clear legislative intention that, upon the fulfilment of the five conditions which I set out previously, the contract is terminated. The expression ‘shall be terminated’ in s 31(2) should be construed as an pronouncement of the immediate legal effect. It does not allow for any qualification or condition, and none should readily be implied.
An escrow is essentially a private, quasi-contractual arrangement that is most commonly employed in connection with the enforcement of deeds. One of the essential elements for an effective deed is that it should be ‘delivered’ and the notion of an escrow largely developed in relation to that requirement.[16] Delivery of a deed may not be intended absolutely but, rather, be intended only to take effect upon the happening of an event. Whether delivery is to be regarded as absolute or conditional (that is, as an escrow) depends on the intention of the parties[17] or perhaps only that of the executing party.[18]
[16]See generally Nicholas Seddon, Seddon on Deeds (Federation Press, 2015) ch 3.
[17]Monarch Petroleum NL v Citco Petroleum Ltd [1986] WAR 310, 356 (Kennedy J) (‘Monarch’).
[18]Segboer [73].
Importantly, once a deed is delivered as an escrow, pending the occurrence of the condition, the party delivering it cannot resile from, withdraw or repudiate the deed.[19] The deliverer loses all ‘control and dominion over it’.[20]
[19]Monarch 357; Scook v Premier Building Solutions Pty Ltd & Ors (2003) 28 WAR 124, 134 [29] citing L Denning MR in Kingston v Ambrian Investment Co Limited [1975] 1 All ER 120, 125.
[20]Monarch (Kennedy J) at 357 citing Sir Denys Buckley, Alan Estates Ltd v WG Stores Ltd [1982] CH 511, 527.
In my view, none of these principles have any application to the delivery of a statutory notice under s 31 of the Act. Not only is the pronouncement of the legal effect of giving a notice in s 31(2) unqualified, s 31(8) makes it plain that there can be no contractual modification or restriction to the right of termination conferred by s 31(2). Subjecting that right to a qualification that the effect of giving the notice may, by agreement or unilateral stipulation, be made conditional upon the occurrence of an event would amount to an impermissible restriction or modification of the right.
In this case, once Mr Stewart handed Mr Nuttall a signed, written notice inside the cooling off period stating, in substance and effect, that he and Mrs Stewart wished to terminate the contract under the cooling off provision, all five conditions for the termination of the contract were satisfied. The statutory effect of the satisfaction of those conditions occurred without regard to the parties’ intentions, words, conduct or beliefs. Parliament deliberately made the legal consequence of termination dependent upon the existence of five objective facts. It would be inimical to that scheme to allow a qualifying mechanism that depended upon the intention of one of the parties.
Further, allowing a purchaser to suspend or defer the legal consequence of giving a notice within the three clear business day period has no logical policy merit. If the purchaser is unsure about giving the notice, the purchaser need only hold onto it until he or she is sure (within the permitted period). There is no warrant to imply any additional protection for the purchaser against a rash decision to give a cooling off notice.
Finally, the very condition of the supposed escrow in this case removes it from the situation where an escrow may be permitted. Whereas a true delivery of an instrument as an escrow removes the instrument and its legal effect from the control of the giver, here the suggestion is that Mr Stewart could control the legal consequence of the notice (that is, the termination of the contract) by electing whether or not to rely upon the notice.
So understood, it is clear that the utterance of the words ‘hold the letter in escrow’ could not bring about the suspension or deferral of its legal effect, nor render its effect dependent upon Mr Stewart’s election.
Putting aside the question whether the letter was delivered as an escrow and the legal consequence of those words being said, can a purchaser who has given a s 31 cooling off notice unconditionally simply withdraw the notice within the three-day period?
The Whites did not put their argument in those terms but had they done so in my view the answer to that question is, no. Once again, the plain statutory language indicates that the legal consequence of termination of the contract occurs upon the happening of the five factors I have identified. For much the same reasons as I have already given, there is no policy imperative to imply the existence of a right of withdrawal of the notice. It seems to me that the legislative intent lying behind the mechanism in s 31 is to promote certainty for parties in the sale of land, a very commonplace transaction. Finding by implication some right to withdraw the notice would give rise to all sorts of questions (such as, by whom, to whom, in what form, and so on) which would introduce the very uncertainty which it seems that Parliament was wishing to avoid.
It follows from my analysis that the 28 August contract was terminated by Mr Stewart’s letter of 30 August.
The Stewarts submit that, if that is the finding, that is the end of the matter: they are unconditionally entitled to the return of the deposit pursuant to s 31(4). The Whites contend that that finding is not the end of the matter. They argue that, despite its termination, the contract was reinstated, in effect, by the parties making a new contract upon the same terms as the 28 August contract and that the reinstated contract was ultimately rescinded consequent upon the Stewarts’ failure to settle.
I turn to that argument.
Was the contract reinstated?
In their written submissions, Mr and Mrs Stewart put their argument on this point as follows:
(a)In his email at 8:48am on 31 August 2018, or possibly in the conversation with Mr Nuttall referred to in that email, Mr Stewart on behalf of the purchasers offered to revive the contract, including impliedly offering that the $39,800 already paid not be returned to the purchasers;
(b)At that point the vendors had a choice. They could have not accepted this offer. If so they would have been bound to return the $39,800 already paid and if continuing not to accept the offer would have been bound to return further payments. Or they could have accepted this offer and this would have entailed that they did retain the amount already paid and not return further payments. They did this;
(c)The revived contract then remained on foot and was duly performed until the purchasers stated on 25 October that they did not intend to perform further and subsequently the vendors terminated it.
As seen, this argument proceeded upon the premise that the Stewarts, by the 8:48 email to Ms Cartledge, effectively offered to enter a new agreement, an offer that was subsequently accepted by the Whites. In support of the submission the Whites referred to a number of cases in which an analogous analysis had been undertaken. Those cases were Lohar Corp Pty Ltd v Dibu Pty Ltd (‘Lohar’);[21] Rona v Shimden Pty Ltd (‘Rona’);[22] Naval and Military Club v Southraw Pty Ltd & Anor (‘Naval and Military’);[23] and Portbury Development Co Pty Ltd v Ottedin Investments Pty Ltd (‘Portbury’).[24]
[21](1976) 1 BPR 9177 (Street CJ, Hutley and Glass JJA) (‘Lohar’).
[22][2005] NSWSC 818 (White J) (‘Rona’).
[23][2008] VSC 593 (Byrne J) (‘Naval and Military’).
[24][2014] VSC 57 (Garde J) (‘Portbury’).
I do not think that any of these cases assist the Whites’ position. Each of these cases concerned a question whether a contract for the sale of land had been effectively terminated, usually by the operation of a rescission notice for failure to perform an allegedly essential term. In each case the question arose because of the conduct of one or other of the parties that was allegedly inconsistent with the termination having occurred, that is, conduct after the time when the termination was said to have taken place.
In Lohar, only one of the three judges on appeal, Glass JA, sought to explain why a vendor’s notice to complete, served ‘without prejudice’ to its prior termination of the contract, did not operate to reinstate the contract. His Honour rejected the submission that the notice so served was inconsistent with termination, saying:
The present vendor was not hovering between two courses which were mutually inconsistent. To maintain that a former contract is over while being ready to consider another involves no contradiction.[25]
[25]Lohar 9187.
Without making any finding, because it was unnecessary to do so in that case, his Honour considered that the notice to complete was, at its highest, the vendor’s acceptance of the purchaser’s offer to maintain the agreement providing it settled within a narrow timeframe or, at the least, the vendor’s offer to ‘revive a defunct agreement’. His Honour did not find it necessary to choose between either of these analyses, nor was it necessary to determine whether the agreement had been reinstated.
In Rona,[26] White J referred to Glass JA’s obiter remarks in Lohar, again without needing to apply them to the case at hand. Byrne J did likewise in Naval and Military,[27] as did Garde J in Portbury.[28] In none of these cases did any judge find that an agreement to revive the terminated agreement had been effected. In each case the hypothetical possibility of such an agreement was only put forward as a means of explaining why, in that particular case, conduct that might at first blush appear to be inconsistent with a submission that a contract had been terminated may, upon closer analysis, be fairly understood as being consistent with termination. That explanation could be adopted if the subsequent communication could be fairly construed as an offer to create a new agreement while nonetheless accepting that the former agreement was no longer on foot.
[26]Rona [86].
[27]Naval and Military [23].
[28]Portbury [97].
Unlike the cases I have just mentioned, in this case the communication by Mr Stewart to Ms Cartledge cannot sensibly be construed as an acceptance that the 29 August agreement was at an end coupled with an offer to enter a new agreement upon the same terms. Despite Mr Stewart seeking to place that construction upon it himself (to refute the suggestion that, viewed subjectively, he was trying to disclaim the termination effected by his cooling off letter) his email cannot bear that interpretation. Rather, albeit mistakenly and misguidedly, his email to Ms Cartledge stated that his cooling off letter terminating the contract pursuant to s 31 of the Act should be disregarded. It conveyed his wish that the parties proceed with the existing contract as if it had not been terminated. Such an offer was the exact opposite of the offer contemplated in the four cases I have mentioned.
Although there may be some pragmatic appeal for doing so in this particular case, in my opinion it would stretch the sense of the email to breaking point to construe it as an offer to enter a new agreement on the accepted footing that the old agreement was at an end. Whereas, the cooling off letter itself contained the seed of a suggestion that, perhaps, a new contract might be entertained, the 8:48am email the next day purported to abandon that course and adopt a new proposal, namely that the 28 August contract be treated as if it was never terminated. But, as explained above, by that stage, at law, the contract was at an end.
Even if, contrary to my interpretation, the 8:48am email could be construed as an offer by the Stewarts to enter a new agreement with the Whites on the same terms and conditions as the 28 August contract, there is no evidence that the Whites accepted that offer. For example, there was no conduct on their part that is unambiguously referable to them accepting that a new agreement was on foot. Like the Stewarts, their subsequent conduct is equally or better explained as them proceeding on the mistaken belief that the 28 August contract remained on foot and that they were obliged by that contract to put the property into ‘the same condition it was in on the day of sale’.[29]
[29]General condition 24.2 of the contract of sale.
For these reasons I reject the submission that, by agreement, either the 28 August contract was revived or a new contract on the same terms was created. It is not necessary to consider the parties’ further submissions (made on the assumption that there was such an agreement) concerning the need for compliance with the requirements of s 126 of the Instruments Act 1958.[30]
[30]The submissions principally centred on the application of Stone v Nilsen [1951] VLR 389 as a potential answer to the need for writing to evidence any new contract for the sale of the land.
Further, having found that the 28 August contract was terminated and that no other contract was created, it must follow that no contract for the sale of the land was ever on foot beyond 30 August. That means that there could be no rescission of the contract due to the Stewarts not paying the balance of purchase money on 25 January 2019 or at any other time, and no contractual entitlement for the Whites to retain the deposit. Those conclusions effectively answer the third of the four issues identified at the outset of these reasons (above [8]).
I will deal shortly with the fourth and last of the Whites’ arguments, namely that the Stewarts should be estopped from denying the existence of a contract based upon the principles of equitable estoppel. But, before doing so, I should observe that the consequence of my findings that the contract was terminated pursuant to s 31(2) of the Act, and that the contract was not revived nor was any fresh contract created, is that the Stewarts are prima facie entitled to the return of the deposit pursuant to s 31(4) of the Act (less the statutory retention).
It now remains to be determined whether the outcome of the equitable estoppel argument affects that conclusion.
Are the Stewarts estopped from denying the existence of a contract?
In Waltons Stores (Interstate) Limited v Maher[31] Brennan J formulated the elements of equitable estoppel in this way –
In my opinion, to establish an equitable estoppel, it is necessary for a plaintiff to prove that (1) the plaintiff assumed that a particular legal relationship then existed between the plaintiff and the defendant or expected that a particular legal relationship would exist between them and, in the latter case, that the defendant would not be free to withdraw from the expected legal relationship; (2) the defendant has induced the plaintiff to adopt that assumption or expectation; (3) the plaintiff acts or abstains from acting in reliance on the assumption or expectation; (4) the defendant knew or intended him to do so; (5) the plaintiff's action or inaction will occasion detriment if the assumption or expectation is not fulfilled; and (6) the defendant has failed to act to avoid that detriment whether by fulfilling the assumption or expectation or otherwise.[32]
[31](1988) 164 CLR 387.
[32]Ibid 428-429.
Earlier, his Honour explained that the equity created by estoppel is different from an enforceable promise supported by consideration, even though the equity may sometimes ‘wear the appearance of contract’.[33] His Honour said (emphasis added):
The unconscionable conduct which it is the object of equity to prevent is the failure of a party, who has induced the adoption of the assumption or expectation and who knew or intended that it would be relied on, to fulfil the assumption or expectation or otherwise to avoid the detriment which that failure would occasion. The object of the equity is not to compel the party bound to fulfil the assumption or expectation; it is to avoid the detriment which, if the assumption or expectation goes unfulfilled, will be suffered by the party who has been induced to act or to abstain from acting thereon.[34]
[33]Waltons Stores (Interstate) Limited v Maher (1988) 164 CLR 387, 424.
[34]Ibid 423.
Despite that appearance, his Honour explained the differences, in particular the differences in the measure of the contractual obligation and that of the equity created by estoppel, being only that which is necessary to prevent the detriment (emphasis added) –
But there are differences between a contract and an equity created by estoppel. A contractual obligation is created by the agreement of the parties; an equity created by estoppel may be imposed irrespective of any agreement by the party bound. A contractual obligation must be supported by consideration; an equity created by estoppel need not be supported by what is, strictly speaking, consideration. The measure of a contractual obligation depends on the terms of the contract and the circumstances to which it applies; the measure of an equity created by estoppel varies according to what is necessary to prevent detriment resulting from unconscionable conduct.[35]
[35]Ibid 425.
After further discussion, his Honour distinguished the object of the principle of equitable estoppel from the remedy for the adverse consequence of reliance on a promise. Referring to equitable estoppel and the detriment occasioned by the conduct of the party against whom the equity is raised, his Honour explained (emphasis added) –
Then the object of the principle can be seen to be the avoidance of that detriment and the satisfaction of the equity calls for the enforcement of a promise only as a means of avoiding the detriment and only to the extent necessary to achieve that object. So regarded, equitable estoppel does not elevate non-contractual promises to the level of contractual promises and the doctrine of consideration is not blown away by a side-wind. Equitable estoppel complements the tortious remedies of damages for negligent mis-statement or fraud and enhances the remedies available to a party who acts or abstains from acting in reliance on what another induces him to believe.[36]
[36]Ibid 427.
The importance of these passages to this case is to highlight that an equity created by an estoppel against denying the existence of a contract does not result in bringing the contract back into existence. Rather, it equips the court with the means of fashioning a remedy to avoid the detriment occasioned by the reliance on the assumption that has been unconscionably induced. The measure or extent of the remedy is only that which is necessary to prevent the detriment resulting from the unconscionable conduct. That detriment is not remedied by automatically granting the relief which the enforcement of the contractual promise would otherwise have delivered. Whilst doing so might, in proven circumstances, be the appropriate remedy, that would only be because that remedy equates to the minimum required, in all the circumstances, to prevent the detriment actually suffered by the reliance and to do equity.[37]
[37]The Commonwealth v Verwayen (1999) 170 CLR 394, 411 (Mason CJ), 428-9 (Brennan J); Giumelli v Giumelli (1999) 196 LR 101, 120-5; Cosmopolitan Hotel v Crown Melbourne Ltd (2014) 45 VR 771, [201] (Whelan JA), [206] (Santamaria JA).
In this case, the Whites submit that each of the six elements for equitable estoppel as formulated by Brennan J have been established. On that premise they contend that the Court should declare the deposit forfeited to the defendants. On the evidence, I find:
·From 31 August 2018 to 25 October 2018 the Whites assumed that the 28 August contract of sale remained on foot; and
·The Stewarts induced that assumption by representing that they wanted the Whites to disregard the cooling off letter and that they wanted the contract to proceed and, thereafter, by conducting themselves on the basis that they continued to have an entitlement to the property pursuant to the contract (until again disclaiming the contract by their letter of 25 October 2018).
Beyond those two elements I think that the Whites’ case on equitable estoppel encounters difficulty. Addressing the third element, they submit that they acted to their detriment, in reliance upon the assumption, by:
(a) not putting the property back onto the market until 6 April 2019 which may have led to them receiving $25,000 less in sale price than the price for which they had sold the property to the Stewarts;
(b) emptying their house of furniture in readiness for settlement and not having a furnished house during the second sale campaign, also contributing to a lower sale price; and
(c) devoting ‘much time’ to ensuring all repairs would be completed quickly.
I am not persuaded that reliance upon the assumption that the contract was on foot caused them to delay the resale, other than, perhaps, in relation to the period between 9 March 2019 and 6 April 2019. Between the date of the damage to the property on 29/30 August 2018 through to a date shortly prior to the scheduled settlement date, the Whites diligently attended to the repairs of the property on the assumption that they were required to deliver possession of it to the Stewarts at settlement in the same condition that it was in on the day of sale. That process required them to make a claim on their insurance, have the damage assessed and appoint builders, and those builders to carry out the repairs. The evidence established that the process had been completed by 25 January 2019, but not much before that date. I infer that, if anything, the Whites’ belief that the property had to be delivered to the Stewarts on 25 January hastened rather than slowed that process.
On 4 February 2019 the Whites again engaged Mr Nuttall to re-sell the property by auction. That was very soon after the settlement date had passed. The auction was scheduled for 9 March but was later postponed until 6 April to allow for the service and expiry of a rescission notice which the Whites served on 13 March 2019.
In my opinion, even if the Stewarts had not induced the Whites to believe that the 28 August contract remained on foot, in all probability the Whites would not have put their property on the market again much before 4 February 2019. In all probability they would have wanted the property to be prepared and presentable for sale by having it repaired first, thus necessitating a delay until late January 2019. My view about this is reinforced by the fact that the Whites claimed, as the second of the detriments said to have been suffered in reliance on the assumption, that they could not (conveniently) refurnish their house for inspection during the sale process and, by not doing so, they may have encountered greater difficulty in re-selling. That submission was made on the reasonable premise that the internal appearance of the home should be optimised for the sale campaign. It is almost unthinkable that they would have sought to re-sell the property with its ceiling collapsed or whilst it was a building site.
At most, the Whites’ belief that they remained obliged to sell the house to the Stewarts may have caused a delay of about one month in early 2019 in the resale of the property. Whether any part of the reduced purchase price can be attributed to that delay is not easy to determine.
Mr Nuttall, the selling agent, expressed the view that, in the relevant area, the real estate market conditions were generally ‘up and down’ in 2018 and 2019, and the only significant change had been since January 2020 when things began to pick up.[38] Otherwise, he made the point that saleability varies from property to property. That evidence did not establish any clear market disadvantage through any delay in selling the property throughout 2018 or 2019.
[38]Transcript of Proceedings, Richard Laurence Stewart & Ors v Vincent Edward White & Ors (Supreme Court of Victoria, Macaulay J, 3 February 2020) 88 (Mr Nuttall).
Nevertheless, Mr Nuttall expressed the somewhat equivocal opinion that the combination of the home being unfurnished during the second selling campaign and the resale having occurred in April 2019 rather than September 2018 ‘… may have led to the reduced price of $850,000’ (my emphasis).[39] The reference to the ‘unfurnished’ house is explained by the fact that the Whites claimed to have emptied the house of furniture ahead of the scheduled settlement on 25 January 2019 in order to provide vacant possession for the Stewarts. Thereafter, inferentially, it was either inconvenient or uneconomical to refurnish the property for the second sale campaign.
[39]Affidavit of Rhys Nuttall sworn 20 November 2019, [15].
It was not made clear in the evidence just when the furniture was removed. Mr and Mrs White had two houses, one in Redan and this property in New Gisborne. They lived between the two, staying at New Gisborne mainly on weekends. Presumably, at least some of the furniture at New Gisborne needed to be relocated or stored during the building repairs. And if the furniture was removed from the property after 25 October when the Stewarts signalled they would not proceed to buy the property, attributing the removal of the furniture for the purpose of giving vacant possession to them is even more muddied.
Nevertheless, in order to be in a position to perform the (assumed) contract and give vacant possession on 25 January 2019, the Whites did need to remove their furniture by that date. On balance, therefore, I accept that, due to their assumption that the sale remained on foot, the Whites did remove all of their furniture from the New Gisborne property. It follows that for the purpose of resale, they faced the choice of either marketing the property while unfurnished or incurring the expense of replacing their own furniture or installing hired furniture to make the property most attractive to prospective purchasers. No evidence was given about the expense that would have been associated with re-furnishing the property but the fact is that it remained unfurnished and the expense was not incurred.
So, have the Whites established on the balance of probabilities that the reduced sale price, or any part of it, can be attributed to them having assumed, up to 25 October 2018, that the contract of sale remained on foot? I am not so persuaded. While it is possible that some part of that reduction could be attributed to the month’s delay in putting the property on the market compared to what probably would have occurred without reliance on the assumption, or the fact that the property was unfurnished during the sale campaign, the state of the evidence leaves that conclusion only in the realm of possibility rather than probability.
As for the third category of claimed detriment, that the Whites devoted much time in getting the property repaired quickly, I fail to see how that was a detriment suffered in reliance upon the assumption. As I have observed, it is quite likely that the Whites did hasten the building works because they thought the contract remained on foot, and probably did devote much time in having those works performed quickly. But, if anything, that devotion of time presumably put them into a position to re-sell the property sooner than if they had taken more time to effect the repairs.
Claiming that devotion of time as a detriment runs counter to the premise of the first alleged detriment, namely that there was some disadvantage in not being able to sell the property sooner because of the belief they had to sell to the Stewarts. Because I have concluded the Whites would have waited until the building was repaired before re-marketing their property, irrespective of any belief about an ongoing contract with the Stewarts, the devotion of extra effort to ensure the repairs were effected quickly might possibly have been to their benefit, but it is not at all clear how it was to their detriment. If it was, its measure is too nebulous to warrant a remedy.
In the result, I am not satisfied that the Whites suffered any detriment in reliance upon the assumption which the Stewarts induced them to hold. Even if I had found there had been some detrimental reliance, it certainly would not have followed from such a finding that the Whites were thereby entitled to a declaration that the deposit be forfeited to them. As I have explained, the equity created by the estoppel against denying the existence of the contract would, at most, have enabled me to fashion a remedy to prevent such detriment as I had determined.[40]
[40]A procedural issue might then have arisen. As noted above (footnote 1), the proceeding only concerns a claim by the Stewarts for the statutory return of the deposit. There is no cross-claim for relief by the Whites. No argument was addressed as to what would or should have followed were I to have found that the Whites were otherwise entitled to a remedy pursuant to the equity created by an estoppel. Without having to decide the point, it may well be that the requirement in r 1.14 (1)(a) of the Supreme Court (General Civil Procedure) Rules2015 to endeavour to ensure all questions in a proceeding are completely, promptly and economically determined, coupled with the obligation to give effect to the overarching purpose in the Civil Procedure Act2010, would have enabled me to give relief that took into account both the Stewart’s entitlement to the return of the deposit under the Act and the White’s entitlement to an equitable remedy.
Accordingly, the answer to the question posed above (at [66]) is that the outcome of the equitable estoppel argument does not affect the prima facie conclusion that the Stewarts are entitled to the return of the deposit pursuant to s 31(4) of the Act.
Conclusion
To summarise, I have found that (a) the 28 August contract was terminated on 30 August by the giving of the cooling off letter; (b) neither that contract was revived nor was any further contract made; and (c) in those circumstances, no question of rescission or abandonment of the contract arose. Finally, while I found that the Whites were induced to assume, by the conduct of the Stewarts, that the 28 August contract remained on foot, at least until 25 October 2018, there was no detrimental reliance upon that assumption and thus no equity arose against the Whites, in favour of the Stewarts, warranting any relief.
Accordingly, there should be judgment for the Stewarts, namely an order pursuant to s 31(4) of the Act for the return of the deposit less $100 or 0.2% of the purchase price (whichever is the greater). On my calculation the amount to be returned is $85,750.
I will determine the precise terms of the final orders after the publication of these reasons.
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