Tanwar Enterprises Pty Ltd & Ors v Cauchi & Ors
[2003] HCATrans 607
IN THE HIGH COURT OF AUSTRALIA
Office of the Registry
Sydney No S341 of 2002
B e t w e e n -
TANWAR ENTERPRISES PTY LIMITED
Appellant
and
JOSEPH CAUCHI
First Respondent
ANGELO CAUCHI
Second Respondent
MARY CAUCHI
Third Respondent
JULIAN DALLEY
Fourth Respondent
GLEESON CJ
McHUGH J
GUMMOW J
KIRBY J
HAYNE J
CALLINAN J
HEYDON J
TRANSCRIPT OF PROCEEDINGS
AT CANBERRA ON THURSDAY, 13 MARCH 2003, AT 11.05 AM
Copyright in the High Court of Australia
__________________
MR F.M. DOUGLAS, QC: May it please the Court, I appear with my learned friends, MR L.J.W. AITKEN and MR R.C. SCRUBY, for the appellant. (instructed by Alexander Lee & Associates)
MR I.M. WALES, SC: I appear with my learned friend, MR M.A. ASHHURST, for the respondents, may it please the Court. (instructed by Low Doherty & Stratford)
GLEESON CJ: When in due course we come to call and hear the second matter, it may be that counsel in that case will adopt or address their submissions by reference to some of the arguments in this case, but we will hear your appeal out first.
MR DOUGLAS: May it please the Court.
KIRBY J: Depending on how the case is put.
MR DOUGLAS: We have put our case in our written submissions but, as was said, I think, by the respondent in their submissions, the appeal concerns the nature and scope of the equitable doctrines of relief against forfeiture and unconscientious use of the power of termination of contractual rights where the subject matter of the contract is real property.
GUMMOW J: The written submissions seem models of what these things should be but is there any, in the end, disagreement between you on the principles of law?
MR DOUGLAS: As I read the respondents’ written submissions, there does not seem to be a great deal of disagreement but, of course, there is ‑ ‑ ‑
GUMMOW J: There is a dispute at paragraph 18 of the respondents’ submissions and that may be the crunch point. I do not know.
MR DOUGLAS: That is the paragraph mentioning that the “breach was ‘trivial’”.
GUMMOW J: Yes.
MR DOUGLAS: There is a reference there, of course, to the United Kingdom case of Union Eagle Ltd v Golden Achievement but, of course, as we would see it, that case really does not assist in Australia because it adheres to the earlier decision of Steedman v Drinkle and does not follow the decisions of this Court in Legione v Hateley and Stern v McArthur.
KIRBY J: Yes, but does it require us to reconsider the nuances of our own decisions?
MR DOUGLAS: We would not have thought so.
KIRBY J: I realise you would not have thought so but, I mean, behind the issues in this case are how this area of the law operates in conveyancers’ offices, in solicitors’ offices, and the English decision, at least on one view, gives an emphasis on the importance of clear rules.
MR DOUGLAS: But the English decision seems, in our respectful submission, to wish to focus for development in this area of the law in the area of restitution and to deny to equity the development of its own doctrines which have been found by this Court in Stern v McArthur particularly, but also in Legione v Hateley, to apply. That is, the unconscientious exercise or insistence upon your strict legal rights in relation to a contract for the sale of land.
KIRBY J: Stern was the one where there were strong dissenting opinions of Chief Justice Mason and Justice Brennan, was it?
MR DOUGLAS: In our respectful submission, the dissent in Stern v McArthur was a dissent upon the basis of fact, not law. Each of Justices Mason and Brennan in their own way embraced the principles which we would seek to have applied in a case such as this. It is probably convenient if I were to go to that directly. Firstly, in Justice Mason’s judgment – in the former Chief Justice’s judgment at page 501 in a paragraph commencing in the middle of the page, he says:
But, as Legione was to demonstrate, equity will relieve against an unconscionable exercise of legal right. If the vendor’s insistence on rescission and forfeiture of the purchaser’s interest under the contract is, in the circumstances of the case, unconscionable, there can be no unfairness in depriving the vendor of the benefit of rescission with the forfeiture of the purchaser’s interest entailed by that rescission. That was the message conveyed by Legione. It was a message which confirmed the long‑standing principle that, granted the existence of the preliminary condition for the exercise of the jurisdiction to relieve against forfeiture, the actual exercise of the jurisdiction depends upon the existence of circumstances which make it unconscionable for the vendor to insist on rescission and forfeiture of the purchaser’s interest –
Then he says, by reference to what he had said in Legione – he and Sir William Deane stated that:
“it is only in exceptional circumstances that specific performance will be granted at the instance of a purchaser who is in breach of an essential condition”. In this way we sought to balance the interest of the defendant in holding the plaintiff to the actual terms of a bargain freely made and the interest of the plaintiff in invoking an equitable jurisdiction to relieve against the consequences flowing from an over‑rigorous insistence on the enforcement of the terms of the bargain.
GLEESON CJ: Mr Douglas, I might have misunderstood or confused the facts of these cases, but is this the case in which there was a history of failure to observe the terms of the contract and before we arrived at this point?
MR DOUGLAS: Yes, it was. When you say it was “this case”, that is Stern v McArthur, yes, there was, your Honour.
GLEESON CJ: No, Tanwar?
MR DOUGLAS: In Tanwar, there had been, as our submissions point out, a previous appointment for settlement and the purchase price was not tendered upon that appointment for settlement, and there was a termination on 20 August 2000, but there was a deed subsequently between the parties where a new appointment was made for settlement, additional consideration was provided, and the terms of a contract were slightly varied so that they became more beneficial to the vendors.
GLEESON CJ: Now, what is the relevance to the unconscionability of insisting upon strict legal rights of a past history of that kind?
MR DOUGLAS: We would see this as being a case such as that which has been referred to in the House of Lords and also referred to in the judgment of the former Chief Justice Sir Harry Gibbs and Justice Murphy in Legione, an early decision of Vernon v Stephens which was commented upon in the New York courts, where there were prior defaults but they were waived.
This is not a unilateral waiver here, but what has happened is that by agreement, the parties have put behind them the defaults which have previously occurred, and then there has been a default arising on the day set for settlement after that deed for which an explanation can be provided, the explanation being, misadventure, accident, call it what you will.
KIRBY J: But do you go so far as to say that the court considering the case ignores the history of failures before the deed?
MR DOUGLAS: Your Honour, we would say ‑ ‑ ‑
KIRBY J: The primary judge did not, did he? He said you had to look at it all.
MR DOUGLAS: No, and in the Court of Appeal they did not either, but these parties have put it behind them, because they have entered into a deed whereby they have for a different ‑ ‑ ‑
KIRBY J: The deed was only necessary because of the defaults.
MR DOUGLAS: That is not necessarily so, your Honour. You would not need to have had another deed. They simply could have waived their earlier notice.
KIRBY J: Historically, it only came about because of the defaults.
MR DOUGLAS: This is the way the parties chose to express the terms on which they were prepared to go forward. It could have been done by waiver by the vendor of its entitlement, if it had one, which was not determined at trial, to terminate the earlier contracts.
McHUGH J: Does the evidence show why there was only the 20-day gap between the signing of the deeds and the date for completion?
MR DOUGLAS: The evidence shows that the parties negotiated it, and I think there is some evidence which my learned friend refers to, but our solicitor thought it was not long enough, but nonetheless, that is a period which the parties agreed upon, and that issue does not really arise as a matter of causation because there is simply no dispute but that. The parties were there prepared to settle on the last day stipulated by the deed, but that this misadventure arose on that last day, and they only found out about it on that day.
McHUGH J: Because of the second mortgage?
MR DOUGLAS: The second mortgagee was anticipating the transfer of moneys from Singapore. Their solicitor, that is, the solicitor for the second mortgagee, gave evidence and he said at settlement effectively, “Look, I’m sorry, we have arranged to have the money here but unfortunately there is a money laundering scandal in Singapore. We can’t get the money to you on time, but it will be here tomorrow”.
HAYNE J: There is an explanation?
MR DOUGLAS: There is an explanation.
HAYNE J: What is the character of the explanation that you say is relevant, that it is an explanation that says “What has happened was beyond my control”, or is it the bare fact of, “I can explain this”?
MR DOUGLAS: It shows that the breach was not wilful, your Honour. That is very important because, as Lord ‑ ‑ ‑
HAYNE J: So that it is unconscientious, is it, to rely on any breach other than a wilful breach? Is that the base proposition that we get to?
MR DOUGLAS: I am not putting it that way. I am just saying that from the time of Hill v Barclay Lord Eldon has said, and as Lord Wilberforce reaffirmed in Shiloh Spinners Ltd v Harding, wilful breaches do not often affect equity’s conscience, but what I am saying is this, that we have an explanation in the same way as we would have an explanation if our solicitor had been going to the settlement and had a heart attack and ended up in St Vincents rather than in a settlement room. That is the basis on which we put it.
If you look at cases like Ciavarella and if you look at Stern v McArthur, they are essentially circumstances in which it may not characterise a breach has been entirely wilful. Certainly in Ciavarella it was and probably one would say that about Stern v McArthur as well. So once you have that explanation and then you have a fact that the solicitor says, “But look, I will have the money here tomorrow” - and maybe let us take the heart attack example. Let us assume someone rings up from the operating room at St Vincents and says, “I’ve rung up my clerk and my clerk is going to bring the cheque”, and he comes an hour late. So an explanation is given, the money is tendered; termination has not taken place. Now, in those circumstances, at the time when they decide to exercise the contractual right of termination which they have under the contract, it is not a common law rescission.
They know that the money is there. That is, in our respectful submission, a very important circumstance, and it is a circumstance which distinguishes it from each of Ciavarella, Stern v McArthur and Legione v Hateley, because all of those considerations which are referred to by their Lordships in Union Eagle, for example, about the uncertainty that could otherwise be faced by vendors is overcome, certainly, in a situation where the money is available before they have decided whether to exercise their right to termination or not.
To answer the question which the Chief Justice put to me before as to the relevance of prior defaults, the only relevance we could perceive it may have in circumstances like this would be, for example, if they had chosen the night before to exercise their rights of termination not knowing whether the money was in or not, on the basis, for example, that they could not accept the explanation which had been proffered. That may in some way affect the unconscionability of their action, but, on the other hand, that of itself may not be enough, because the fact that we had been delayed by the misadventure which occurred is, in our respectful submission, even in those circumstances, if the party rights had not intervened, quite sufficient.
KIRBY J: Yes, but is there not a difference between the solicitor having a heart attack – that is the intervention of arteries – and your not having the money? Mr Wales says you knew this date, you also knew the background, you knew what had led to the deed, you knew the importance of time. You should have had it there the night before.
MR DOUGLAS: Or the week before, your Honour, or perhaps on a day they exchanged for deeds. Obviously, that is the counsel of the utmost prudence, but, as our written submissions make clear, equity has always been concerned about those who have made arrangements for settlement in circumstances like this and, by reason of a misadventure, have not been able to do it. I venture to say that a large number of conveyancing transactions in the city are settled on terms on the last day as fixed for settlement.
KIRBY J: You said that, and I do not know how much we can take notice of any development in practice in that respect. It is a fact that was not proved.
MR DOUGLAS: Well, that is a fact which is incapable of proof, I would have thought, your Honour.
KIRBY J: Well, I do not know.
GLEESON CJ: Could I ask a question about practice that is very minor, and I am embarrassed even to have to ask it, but it is 40 years since I have attended on a conveyancing settlement. Are people required to produce bank cheques on settlements now?
MR DOUGLAS: Your Honour, it is probably about as long since I have attended one, but I believe that is the situation, yes.
GLEESON CJ: Does not producing a bank cheque require making advance arrangements?
MR DOUGLAS: Yes, your Honour, but it does not take long.
GLEESON CJ: It may or may not.
MR DOUGLAS: No, but if you have the cash in the bank, you just simply write the bank cheque.
KIRBY J: Well, you buy a bank cheque.
MR DOUGLAS: Or you buy a bank cheque.
HAYNE J: I think there is trouble if you write it, Mr Douglas.
MR DOUGLAS: Yes, I stand corrected.
HAYNE J: Does not your characterisation of what happened as misadventure or some such expression carry within it an assumption that the steps that were taken but were thwarted were themselves sufficient, reasonable, appropriate – some other characterisation?
MR DOUGLAS: Your Honour, I do not believe we have to go that far. The parties were planning on settlement on a particular day and, for a reason that is common ground between the parties and perfectly explicable, a difficulty occurred which prevented us from settling at that time. There are possibly, if I could put it that way, two levels at which we could approach this question because, firstly, the question may be whether it is an accident strictly so‑called within the ancient doctrines which we refer to in our written submissions.
GUMMOW J: Mr Wales says it is not.
MR DOUGLAS: He says it is not, and we say it is. If it is not, nonetheless, it is a circumstance which is relevant and which we say should affect the conscience of the vendors, having regard to the circumstances in which they terminated, because even if it is not an accident strictly so‑called, one can look at it and say, “Well, why wasn’t the money there on time?” That is one point of distinction between this case and Union Eagle, because your Honours have probably read the decision in Union Eagle [1997] AC 514. In that case, settlement was due at 5 o’clock in the afternoon. The facts, as they appear, are set out at the foot of page 517. Settlement was at 5 o’clock:
Under the usual Hong Kong practice, the vendor was to complete by giving a solicitor’s letter of undertaking to ‑ ‑ ‑
GUMMOW J: But had time been made of the essence?
MR DOUGLAS: It was of the essence yes, your Honour.
GUMMOW J: In the Hong Kong Case?
MR DOUGLAS: Yes, it was either of the essence in the contract itself or made of the essence, your Honour, but it was certainly of the essence.
HAYNE J: The sentence before the one you read us was a warning that the balance should be paid or else, prior to receiving any forfeit.
MR DOUGLAS: Yes, there had been a failure to attend ‑ ‑ ‑
HAYNE J: Now, where that is contractually rooted I am not quite sure.
MR DOUGLAS: Yes. There had been a failure to attend that morning, your Honour, at an inspection. So then what happened was that settlement did not take place by 5 pm:
and at 5.01 p.m. Miss Chow telephoned Miss Tin again. She said that the money had not arrived and that the vendor reserved the right to rescind and forfeit the deposit. Miss Tin replied that a messenger was on his way. The judge found that he arrived at 5.10 p.m. with an envelope containing the cheques for the purchase money and a letter of undertaking in a form previously agreed. Mr Tsui telephoned his client for instructions and was told to rescind the agreement. At 5.11 p.m. Miss Chow telephoned F. Zimmern & Co, told them that the contract would be rescinded and returned the envelope and contents to the messenger.
There are two points of distinction we would make about that case, one of which is that there was no explanation offered for the delay, no explanation at all. So even if we do not fall within the traditional doctrine of “accident”, we have proffered an explanation and a sufficient explanation for the delay.
The other point of distinction arises from the consideration by the House of Lords of the decisions of Steedman v Drinkle and Kilmer v British Columbia Orchard Lands, which you will find at pages 520 to 521. They refer to those decisions and essentially set their face against the view that equity will grant specific performance of a contract where an essential stipulation of time has been breached, and I think any other essential stipulation. They refer to Legione v Hateley and Stern v McArthur. At page 521B it says:
This principle has never since been questioned in any case in England or the Privy Council, although it has been criticised in academic writings and certain Australian cases as both historically inaccurate and unduly rigid.
They then go on to refer to re Dagenham and Kilmer, which are cases which have been analysed in our own High Court in Tropical Traders v Goonan and McDonald v Dennys Lascelles. Then coming back to Legione v Hateley they say:
Similar considerations informed the judgment of the High Court of Australia in Legione ‑ ‑ ‑
GUMMOW J: Now, Tropical Traders deals very particularly, does it not, with Kilmer?
MR DOUGLAS: It does, yes, because ‑ ‑ ‑
GUMMOW J: In a way perhaps not understood by the Privy Council.
MR DOUGLAS: Yes, your Honour.
GUMMOW J: Because they were not referred to it.
MR DOUGLAS: Yes, that is so, your Honour. And the facts appear, I think, more clearly in an unauthorised report of the decision ‑ ‑ ‑
GUMMOW J: Yes, which Sir Frank Kitto picked up.
MR DOUGLAS: Yes.
KIRBY J: Their Lordships do not at 523 refer to as significant in the final crucial decision that they make. Knowing of the line that this Court has taken they do not say that it is relevant that there was no explanation. They just say that the principle of law should be restated and “equity will not intervene”. Now, behind that seems to lie a view that, although it will lead to some semblance of injustice, that it is better to have a very clear ruling on such matters, and that is the rule that the law provides, Lord Hoffmann saying, “What is not very late?”, 521. He says then you get into an argument of whether it is 10 minutes or half an hour, or what is the default? So it does not seem as though their Lordships reached their view on paying a lot of attention to the fact that there was an explanation or was not an explanation.
MR DOUGLAS: Their Lordships seem bent, as we would read that last paragraph of their judgment, on trying to find some restitutionary remedy in these circumstances. We tend to feel that they may be ‑ ‑ ‑
KIRBY J: You are entitled to say that whatever they say and whatever is the law in England and in Hong Kong, the law in Australia for two decades has developed in a different way and that is the way it has developed throughout this nation and conveyancers everywhere know that that is the law they have to comply with.
MR DOUGLAS: And what is more, your Honour, there have been no great cri de coeur, as we would understand it, from vendors of real property ‑ ‑ ‑
KIRBY J: There probably have and we have not heard.
MR DOUGLAS: ‑ ‑ ‑ to the effect that the Australian law has developed in an inappropriate way and that in some way conveyancing transactions are not greatly affected.
GLEESON CJ: But you are not asking for your money back.
MR DOUGLAS: We were, your Honour.
GLEESON CJ: You are asking for specific performances, are you not?
MR DOUGLAS: We are asking for specific restitution.
GLEESON CJ: Right, so where does restitution come into your claim?
MR DOUGLAS: It does not, your Honour, except insofar as we sought the return of our deposit under section 55(2A) of the Conveyancing Act.
KIRBY J: Which you got.
MR DOUGLAS: No, we did not get that.
KIRBY J: I must be confusing ‑ ‑ ‑
GLEESON CJ: But the relief you are seeking in this Court is an order for specific performance of a contract.
MR DOUGLAS: It is relief against the unconscionable exercise by the vendors of their rights to enable us to get specific performance.
KIRBY J: Did the evidence reveal that the vendors had gone on to sell the property to anyone?
MR DOUGLAS: They have not, no.
KIRBY J: They have not.
MR DOUGLAS: We have made ‑ ‑ ‑
KIRBY J: You moved quickly.
MR DOUGLAS: We have moved quickly and the money was tendered, of course, the following morning at a time prior to termination. Your Honour, the reason I referred to restitution was because the House of Lords referred it, not because I am enamoured of the idea. If you read that paragraph, it says at the foot of page 522H:
Equity has always regarded the question of whether a transaction is a mortgage –
and that is perhaps unnecessary. That was a mortgage analogy. They say at the top of the page:
There is no question of any penalty, or of the vendor being unjustly enriched by improvements made at the purchaser’s expense –
et cetera, and then they go on to say:
It remains for consideration on some future occasion as to whether the way to deal with the problems which have arisen in such cases which have arisen in such cases is by relaxing the principle in Steedman v Drinkle –
That is what has happened in Australia since Legione v Hateley.
GLEESON CJ: Going back to the first sentence on that page, the reason there is no question of penalty here is because you are not asking for your money back, you are asking for specific performance.
MR DOUGLAS: We are asking for specific performance.
GLEESON CJ: There is a question akin to unjust enrichment here, is there not, and that is the increase in the value of the property as a result of a development application?
MR DOUGLAS: Yes, your Honour. I mean the court accepted that we expended money on obtaining a development consent for the land – it was a residential subdivision.
GLEESON CJ: Do you raise any question either of restitution or unjust enrichment?
MR DOUGLAS: It has not proceeded on that basis below. We have sought conventionally in terms of the Australian authorities to seek relief against the unconscionable exercise or insistence upon the strict legal rights of the vendors and specific performance flowing on from such relief, your Honour.
GUMMOW J: Is it relevant within that framework to have regard to the increase in value of the land? It is spoken about Stern v McArthur, is it not?
MR DOUGLAS: Yes, it is a matter which is considered in Stern v McArthur and is referred to in Legione v Hateley as a factor which goes to the unconscionability of the behaviour of the vendors.
KIRBY J: Is this the case where it has been argued that there was not actual proof of the increase in the value and that you omitted to prove this, it has just been left to an inference that the Court of Appeal was willing to draw? That is criticised I think by the respondent.
MR DOUGLAS: Yes, there was not proof of the actual amount of the increase in the value of the ‑ ‑ ‑
KIRBY J: That would not have been a difficult thing to prove, I would not have thought. If we are talking about whether you omit to explain your delay and omit to prove the unjust enrichment, why should it be left to speculation?
MR DOUGLAS: The court was prepared to accept, both at first instance and on appeal ‑ ‑ ‑
KIRBY J: Yes, I think Justice Windeyer did accept it, did he not?
MR DOUGLAS: Yes, that we had expended considerable moneys on ‑ ‑ ‑
KIRBY J: There seemed to be attention in his statement he was willing to accept it and then when he actually came to his findings he was not willing to take the inference from it that that would lead the respondent to be enriched to that extent.
McHUGH J: It is rather an irrelevancy, is it not, because it all took place before 5 June, that is, the increase in value took place before 5 June? The critical contract was the contract entered into on 5 June.
MR DOUGLAS: That is the analysis of Justice Handley in the Court of Appeal but on the other hand he then sought to take into account our conduct prior to 5 June. I would like to think that we can have our cake and eat it too and we would suggest that we can because we say that by the contract of 5 June ‑ ‑ ‑
McHUGH J: Maybe your opponent can have his cake and eat it.
MR DOUGLAS: There are many ways of looking at these sorts of problems, your Honour. Having said that, the parties put behind them the past history, that is prior to 5 June, and in any event it was not sought to prove at trial that they would have been entitled to rely upon their notices of termination on the earlier occasion, that is 20 August, but we would say that as part and parcel of the resolution of the issues which took place on 5 June ‑ ‑ ‑
KIRBY J: But you had got the development consent before the deed. It seems a little artificial to say you cannot take into account the whole history, at least when are applying equitable principles.
MR DOUGLAS: Obviously, being a developer, my client would have wished to, having got three substantial parcels of land in the western suburbs of Sydney and put them together and having excised two parts of that parcel for the benefit of some of the vendors and having undertaken certain subdivision work for one of the vendors and for himself, would like to have the benefit of that and that is ‑ ‑ ‑
McHUGH J: Naturally, but if the vendor had not entered into the deed of 5 June, you have already lost that.
MR DOUGLAS: That is not so, your Honour. That is not proven. That is not the situation at all. No attempt was made at trial to show that they could, in fact, have relied upon the notice of termination. It may be, for example, that if that issue had been litigated the facts would have shown that that notice of termination had been waived, or it may be that time had not properly been made of the essence. These are issues which were just not litigated and so it is not, in our respectful submission, appropriate for the Court to look at it in that way.
CALLINAN J: Mr Douglas, what about the fact that the titles had all been aggregated into one title? Is that a potential difficulty for the vendor, if the vendor remained the owner?
MR DOUGLAS: Your Honour, it is certainly a matter which takes it outside, if I could put it that way, your usual contract for the sale of land and it makes it very clear that the parties were a long way progressed towards doing things in relation to this land to ensure that a subdivisible parcel for the benefit of the purchaser was obtained and, not only that, your Honour, but part of the retained land was, pursuant to the terms of the contract, to be subdivided for the benefit of one of the vendors. There are a few additional references in relation to that aspect of the matter which I just wish to hand up to the Court, and perhaps if I could just do that now.
GLEESON CJ: Thank you.
MR DOUGLAS: What we seek to show in that document - and I know that there are time pressures on the Court and I do not wish to take up the time of the Court unduly - but what we are dealing with here are three adjoining blocks of land which are in the hands of three different vendors. The contracts, for example, if you go to the contract between the appellant and Joseph Cauchi at page 173, called for the conveyance of – if you look at about point 4 on the page – what was “Lot 2 in an unregistered plan” and if your Honours go to page 133 ‑ ‑ ‑
KIRBY J: What is the point you are making by these evidentiary references?
MR DOUGLAS: I am just following up what Justice Callinan put to me and also showing that this is just not what is sometimes referred to as an ordinary contract for the sale of land where ‑ ‑ ‑
KIRBY J: Do you say that in proof of the fact that you had invested, you got the development approval, you had a plan for the development, or that in pursuit of all this the vendors had aggregated the title?
MR DOUGLAS: Yes. It is similar, if I could put it that way, to the situation which applied in cases such as Legione v Hateley and Stern v McArthur where what had been erected on the land was a physical improvement, but what we are saying here is that the value of the land had been enhanced by obtaining approvals for its development which would benefit the purchaser.
KIRBY J: Yes, but one could say on the other side that you are big boys, you are an investor, you are well advised and you had been given chances. The thing had been delayed. You were then, as it were, given a last chance and you just had to conform to that chance and if you do not, that is just too bad. Goodnight, nurse.
MR DOUGLAS: Your Honour, I do not want to revisit the horse breaking its leg, the solicitor having a heart attack or ‑ ‑ ‑
KIRBY J: No, it is nothing to do with the solicitor. It is a completely different case.
MR DOUGLAS: No.
KIRBY J: This is not the intervention of God. This is the intervention of other factors.
MR DOUGLAS: Your Honour, just to get back to where I was going, if your Honours go to page 173 you will see that what was to be conveyed under Mr Cauchi’s contract was “Lot 2 in an unregistered plan” and if your Honours look at page 333 that is exhibit A to that contract and exhibit A is described in the special conditions to that contract which are to be found at page 186 and your Honours will see that the obligation which was upon the purchaser was:
before the completion date, use its best endeavours to procure registration of the Excision Plan, substantially in the form of the plan attached to this contract and marked “A”. The purchaser is responsible for all costs associated with procuring registration of the Excision Plan including:
a) subdivisional
b) legal
c) registration
d) any ancillary expenses
e) and the vendors reasonable legal costs –
and if your Honours then look at page 133, lot 2 in relation to Mr Cauchi’s land was what is described in handwriting on that document as “Lot 2” and what Mr Cauchi was to retain was “Lot 1” and your Honours will see that that is broken up into five subdivided lots in terms, and your Honours will then see that clause 9.2.1 of the contract provided that if it, that is:
The purchaser . . . is unable to procure registration of the Excision Plan by the completion date and provided the vendor is not otherwise in default under this contract, that it will immediately supply to the vendor the balance of the purchase price and the vendor will supply vacant possession of the property subject to the provisions of Special Condition 15. This is an essential term of the Contract –
because the linen plan was, in fact, forthcoming from the Blacktown City Council.
Then at page 187 it says:
Simultaneously with supply of the balance purchase price:
(a) The vendor will hold Lot 2 on trust for the purchaser –
So this is what would happen if in fact there had been no registration. It then goes on to deal with that situation. The obligations of the purchaser in relation to Mr Cauchi’s lot are to be found – if you go to page 187 at the foot it says:
After registration of the Excision Plan and during the purchaser’s work for the residential subdivision of the remainder of the property, the purchaser will:
a) Arrange for the provision of the following services to the Vendors five Lots -
and they are there set out. Then, your Honours, at least in my copy of the appeal book the next two pages actually are out of place and you should go through to page 190 and you will see at the top of page 190 the services also include:
Road construction
Survey
Services (power, phone, water, sewer, drainage etc)
Recycle water
RTA Contribution(b) The total fixed price to be charged by the purchaser which shall cover all the above services and any other incidental expenses associated with servicing the Lots in an amount of $200,000.00. This amount is to be deposited into the Trust Account of the vendor’s solicitors on completion, which is to be released to the Purchaser on completion of the provision of services in accordance with subclause (a).
So far as that is concerned, one matter which was altered by the deed and which was for the benefit of the purchasers was if you go through to page 59, point 36 of the bundle in clause 7 of the deed which amended that contract it says:
The vendor acknowledges that the Contract for Sale is amended in that in clause 9.7(b) the amount of $200,000.00 is deleted and the amount of $80,000.00 is inserted.
Read by itself, that would suggest that a concession of $120,000 was made by the purchaser in favour of Mr Cauchi concerning the amount which he could charge for the subdivision of the retained land of Mr Cauchi. However, there does seem to be, at page 61 of the appeal book, evidence which would suggest if the figure of $80,000 just reflects what the situation was going forward because you will see on page 61 that the settlement statement which would have applied to this land – that is Mr Cauchi’s land – in the event settlement had taken place, as organised, you will see that there is provision for Mr Cauchi to be paid $1.443m.
Low Doherty & Stratford –
who were the solicitors for the vendors:
$80,000,00
Ramesh Tanwar Pty Ltd $80,000
When you look at the terms of clause 9.7(b) it is reasonably clear that what was proposed at settlement was that $80,000 of the $200,000 amount would be paid to Mr Tanwar in respect of work done by him to date on subdividing the area of land which was retained by Mr Joseph Cauchi.
Another aspect of the matter which, in our respectful submission, takes it outside the context of what one might describe as an ordinary contract for a sale of land was that if you look at paragraph 7 of our written submissions there were substantial payments made by way of part‑payment of the purchase price to each of the respondents. There are amounts, I think, totalling $397,493.40. The situation in relation to that money at trial was that prior to trial no offer had been made to repay that money and it was only at trial that it was accepted by the purchasers that that money was not to be forfeited.
KIRBY J: What is the significance of that delay?
MR DOUGLAS: It is the sort of consideration, your Honour, that Justice Gaudron referred to in her judgment in Stern v McArthur and which I think probably goes back as far as what Lord Eldon said in Hill v Barclay to the effect that delayed receipt of money is, of itself, significant prejudice. I will just go to what Justice Gaudron said in Stern v McArthur at 541 in the second paragraph on that page because there it was argued that:
The unconscionability of the appellants’ action in asserting and insisting upon the legal rights conferred by cl 15 of the contract is not, in my view, alleviated by the concession allowing to the respondents the benefit of the increased value referable to the house erected on the land. First, it may be remarked, that unconscionability is a matter to be determined by reference to the circumstances obtaining at the time of the actions in question. No concession was made until some weeks after notice of termination had been given, and then it was expressed to be conditional upon the respondents’ introducing their purchasers to the appellants. But, more importantly, the concession very much leaves the time of receipt of the benefit of the increased value referable to the improvements on the land within the power and control of the appellants.
The benefit will accrue only if and when the property is sold. It is as unconscionable for the respondents to be shut out from that benefit pending sale as it is for them to be shut out from money which they have paid towards the purchase price pending ascertainment of the deficiency arising on resale when clearly no such deficiency will arise.
GUMMOW J: A lot of these matters are touched upon in Justice Heydon’s lengthy note in the Law Quarterly Review, to which Justice McHugh and I referred on the special leave, which is not in the papers. No one has provided it to us. Perhaps they had better.
MR DOUGLAS: I must say, I have been reading it assiduously ‑ ‑ ‑
GUMMOW J: Well, maybe you have.
MR DOUGLAS: ‑ ‑ ‑ for the last couple of weeks.
KIRBY J: You might have shared it with us.
GUMMOW J: Yes. It is 113 LQR 385.
MR DOUGLAS: We have copies of it, your Honour, and we will seek to hand that up during the course of the morning ‑ ‑ ‑
GUMMOW J: It might be a good idea.
MR DOUGLAS: ‑ ‑ ‑ and your Honour’s own discussion of the matter. Has a reference to that article been provided?
GUMMOW J: We have not got it.
KIRBY J: Justice McHugh referred to it. That is ‑ ‑ ‑
GUMMOW J: Justice McHugh and I referred to it on the special leave application. We were not beating the air.
MR DOUGLAS: No, but your Honour also wrote an article in Justice Finn’s collection of essays on equity ‑ ‑ ‑
GUMMOW J: Yes, but that is a long time before Union Eagle.
MR DOUGLAS: Yes, on reflection, your Honour, that essay should have been provided to the Court.
KIRBY J: In the old days, counsel would have opened the appeal with that ‑ ‑ ‑
MR DOUGLAS: It is perhaps an excess of timidity ‑ ‑ ‑
GLEESON CJ: No, they would not. In the old days, counsel would not have referred to anything by an author who was not dead.
MR DOUGLAS: That may have been what dictated my approach, your Honour. In any event, perhaps ‑ ‑ ‑
KIRBY J: Have you other notes? Have there been notes by practical conveyancing experts on the working of these rules and these cases that are before us now? Because if there are, I would like to see them.
GUMMOW J: It is my impression the Eagle Case gave rise to a bit of a flurry.
MR DOUGLAS: It did – that is my recollection too. There are other articles which I have in fact seen, but none which I thought would assist this Court greatly, but we are obviously prepared to find out if there are more and provide them to the Court.
KIRBY J: Because behind the talk of injustice and unconscionability are really very important practical considerations, and it may be that you cannot lay down any general rule, because each case ultimately comes down to its own peculiar facts and whether you are affronted by what is happening. But one gets a feeling that through Lord Hoffmann’s advice is an emphasis on clarity of simple rules, and through this Court’s majority views in Stern and in the Court’s majority view in Legione is a view that the justice of the particular case, the unconscionability of the case, is overwhelming.
MR DOUGLAS: Well, yes, but unconscionability as an equitable doctrine, not just in the air, as we make clear in our submissions. We do not seek to rely upon it as some principle in the air.
KIRBY J: Well, I know you say it is not in the air, but ultimately it comes down to some instances of particular cases that have come before courts that have dealt with it and given guidance in the particular case. The bottom line is it is still a departure from a very clear rule, which at least the Privy Council thought was one worth defending. Now, it may be the caravan has moved on in Australia and there is no challenge to the way it has moved on. This is, in a sense, simply the application of the principles in the facts of these two cases. But there are still lingering in the air these general issues of principle for the running of the legal system in a very important practical area.
MR DOUGLAS: It goes back to the question Justice Gummow asked me at the commencement of the argument, whether there is any difference in legal principles between the two parties. As I understand it, the respondent accepts that since Legione v Hately, the law in Australia has been that you can in fact get relief against breach of an essential time stipulation in a contract for the sale of land. So therefore, in those circumstances, you can get specific performance in Australia in circumstances where you cannot get it in England.
KIRBY J: You seem to contest the exceptional circumstances, but in the passage you read us from Justice Mason’s dissenting view in Stern I think he specifically referred to exceptional circumstances.
MR DOUGLAS: Yes, but that has to be understood in the light of what he explains “exceptional circumstances” to be. That explanation is to be found at the foot of page 502 and over on to the top of page 503.
KIRBY J: Well, at the bottom of 501, he quotes what he and Justice Deane said in Legione:
“it is only in exceptional circumstances that specific performance will be granted –
MR DOUGLAS: At the foot of page 502 and at the top of page 503 he makes it entirely clear, in our respectful submission, that exceptional circumstances is to be equated with unconscionability. So:
Ciavarella following hard on the heels of Legione, established (a) that only in exceptional circumstances will the court relieve against forfeiture of the purchaser’s interest in land under a contract for sale which has been validly rescinded by the vendor for breach of a term which is an essential condition and (b) that in order to make out exceptional circumstances the purchaser must show conduct amounting to unconscionable conduct on the part of the vendor.
KIRBY J: Is this a play on words? Will it not be exceptional circumstances where the conscience is affronted?
MR DOUGLAS: It would be exceptional circumstances if, on the one hand, you have an explanation as to why you were not there on time. If, on the other hand, at the time when the vendor sought to exercise its rights, it knew that the money was in hand and nonetheless chose to exercise its rights and, in our respectful submission, in those circumstances, the only explanation they could offer for exercising their rights is because they wanted to get the windfall arising from the forfeiture of the deposit and the benefit of the consent which had been granted for the development of the land.
GLEESON CJ: We are not concerned with the conscience of the judge, are we?
MR DOUGLAS: Certainly not, your Honour.
GLEESON CJ: We are concerned with the conscience of the vendor?
MR DOUGLAS: Yes, we are.
GLEESON CJ: Now, why is it unconscientious of the vendor in these circumstances to insist on the terms of clause 6 of the deed of 5 June?
MR DOUGLAS: It is clause 6 of the deed, I think read in conjunction with the printed terms and conditions, which give them a right of termination, which is a contractual right of termination. If I can just go to - my learned friend will turn it up. I think it is clause 12. Yes, page 179 is an example of it. It is clause 9, I think, in the printed terms
If a purchaser does not comply with this contract (or a notice under or relating to it) in an essential respect, the vendor can terminate by serving a notice and after the termination –
keep or recover the deposit . . . hold any other money –
et cetera, a term your Honour would be well familiar with.
In terms of the authorities, the answer to your Honour the Chief Justice’s question is this. From the time of Hill v Barclay and in Shiloh Spinners Ltd v Harding this jurisdiction has not generally been used to relieve against wilful default, and certainly Lord Wilberforce said in Shiloh Spinners Ltd v Harding that you would really need a very good case to get relief in a case of wilful default.
GLEESON CJ: So it is the element of accident that bears on the conscience of the vendor?
MR DOUGLAS: That does, because there is an explanation which is offered. The next matter which is of great significance is, in our respectful submission, a provision such as that which your Honour referred to in the deed and clause 12. One of the functions of that clause is certainly to ensure for payment of the money on time, but if in fact you are assured of getting your money, then the exercise of those rights, in circumstances where you know you are going to get your money and immediately, is unconscionable. That is what happened in this case, because they did not terminate immediately. They terminated when they knew the money was in and when performance had been tendered.
In those circumstances, having regard to the fact that that clause is there to ensure that they get their money, and not the benefit of the developed land and the deposit, and for that matter the forfeiture of the sums of moneys which had been paid to them up until that point of time, then that is unconscionable. That is the sort of consideration, in our respectful submission, which underlies the reasoning in Stern v McArthur because whilst the majority, which consisted of Justice Gaudron and Justices Deane and Dawson, did refer to the mortgage analogy – if I can put it that way ‑ Justice Gaudron definitely placed her reasons strictly on the ground of unconscionability, notwithstanding what the House of Lords said in Union Eagle, and Justices Deane and Dawson expressed their views in relation to the exercise of a jurisdiction in terms wider than any reference to the mortgage analogy but relied upon the mortgage analogy principally in coming to the view which they did as to the unconscionability of the conduct of the vendors in those circumstances.
If I could just take the Court briefly to Justice Deane and Dawson’s decision. They refer firstly at page 521 to the difficult question as to what interest a purchaser under a contract for the sale of land has. It is 165 CLR.
GLEESON CJ: 165 CLR 521?
MR DOUGLAS: It is at page 521, your Honour. They refer firstly to a difficult question which does in some senses arise in this case as to what the interest of a purchaser under a contract for the sale of land is before they have paid the purchase price. In those passages from page 521 to 523 that question is discussed. In the decision of Justice Gaudron at page 537 she refers part, we suspect, based upon an earlier article of Justice Gummow, to the:
degree of circularity in the notion that it is necessary to grant relief against forfeiture of an interest in land as a preliminary to the grant of specific performance. The interest and land forfeited by a purchaser under a contract of sale is merely an equitable interest commensurate with the ability to protect the interest under the contract by obtaining specific performance.
Over at the top of page 538 she focuses upon:
the identification of some matter or circumstance bearing upon loss or forfeiture, which matter or circumstance equity will disregard.
So then there is a discussion, going back to the joint judgment of Justices Deane and Dawson, of the decisions of Legione v Hateley and the effect which that decision had for the purposes of Australian law concerning Kilmer and Steedman v Drinkle, and that is to be found at page 524 through to page 526. Then it is said at the top of page 526:
In Legione v Hateley it was said that it is only in exceptional circumstances that orders for relief against forfeiture and specific performance will be made at the instance of a purchaser who is in breach of an essential term . . . Gibbs CJ and Murphy J expressed the view that it was nevertheless open to a court to grant relief to prevent injustice. Mason and Deane JJ said that whether exceptional circumstances exist to justify granting relief will hinge upon the existence of unconscionable conduct.
GUMMOW J: Where are you reading from, Mr Douglas?
MR DOUGLAS: I am at the top of page 526, your Honour, at about point 3 on the page.
GUMMOW J: Yes, thank you.
MR DOUGLAS:
We do not understand there to be any significant difference between these two approaches. Moreover, in referring to unconscionable conduct, Mason and Deane JJ were not saying that there must be unconscionable conduct of an exceptional kind before a case for relief can be made out. Rather, what was being said was that a court will be reluctant to interfere with the contractual rights of parties who have chosen to make time of the essence of the contract. The circumstances must be such as to make it plain that it is necessary to intervene to avoid injustice or, what is the same thing, to relieve against unconscionable – or, more accurately, unconscientious – conduct.
In considering whether such intervention is justified, great weight will be given to the bargain which the parties have made for themselves.
Then reading down the page, he says:
It is in that sense that it is said that the circumstances must be exceptional to warrant relief in favour of a purchaser who is in breach of an essential term and that there must ordinarily be something such as fraud, mistake, accident or surprise before relief will be granted.
KIRBY J: What is the point of denying that it must be exceptional? The parties have legal rights which ordinarily they are entitled to insist upon, and equity intervenes to prevent them insisting on it, but it must be exceptional to their legal rights.
MR DOUGLAS: In a sense of unconscionable, your Honour. That is all I am saying, unconscionability ‑ ‑ ‑
KIRBY J: But why do we have all this debate about whether you have to prove exceptional circumstances and why this play on words in Stern – it just seems to me that the nature of the relief is exceptional. Normally parties in our system of law and our economy it is very important that parties stick to their bargains.
MR DOUGLAS: As long as by accepting what your Honour puts I am not accepting that it has to be unconscionable circumstances of an exceptional kind, as I think this judgment later refers to.
KIRBY J: I understand that. You do not want to have a double whammy.
MR DOUGLAS: Reading on:
These elements do not, however, exhaust the scope of unconscionable or unconscientious behaviour ‑ ‑ ‑
GUMMOW J: You did not read the sentence before which is pretty important.
MR DOUGLAS: Perhaps I will go back. It says:
Generally speaking equity expects men to carry out their bargains and ‘will not let them buy their way out of uncovenanted payment’ . . . Nor will it remake the parties’ contract simply because it transpires that as things have happened one party has made a bad bargain . . . It is in that sense that it is said that the circumstances must be exceptional to warrant relief in favour of a purchaser who is in breach of an essential term and that there must ordinarily be something such as fraud, mistake, accident or surprise before relief will be granted. These elements do not, however, exhaust the scope of unconscionable or unconscientious behaviour; they are referred to in this context to emphasize that a strong case must be made out to warrant departure from the general approach, which is to hold the parties to their bargain. The general underlying notion is that which has long been identified as underlying much of equity’s traditional jurisdiction to grant relief against unconscientious conduct, namely, that a person should not be permitted to use or insist upon his legal rights to take advantage of another’s special vulnerability or misadventure for the unjust enrichment of himself.
There is a reference to Holdsworth, where Holdsworth said that the equitable jurisdiction rests upon the idea that it is not fair that a person should use his legal rights to take advantage of another’s misfortune and still less that he should scheme to get legal rights with this object in view. Then they go on to refer to:
One situation in which equity has traditionally granted relief is where provision for forfeiture has been has been made to secure the payment of money –
And they then go on to discuss that. Then down at the foot of the page it says:
No doubt where the question is, not whether the jurisdiction exists, but whether it should be exercised, having regard to the breach of an essential stipulation with respect to time by the party seeking relief, exceptional circumstances in the form of fraud, accident, mistake or surprise may suffice to justify intervention. But those elements are not the basis of the jurisdiction and the circumstances which will suffice to support its exercise despite the breach of an essential term are not confined. In particular it is not necessary, in our view, for the party claiming relief to show unconscionable or unconscientious behaviour of an exceptional kind.
They then go on to refer to a number of articles and some English decisions, including the Sport International decision, which consider the application of a doctrine to an ordinary commercial contract unconnected with interests in land.
KIRBY J: Could I ask you just to pause at that point. You would be aware that there has been debate in the academic literature about the role of equity intervening in commercial dealings.
MR DOUGLAS: I am aware of that.
KIRBY J: If you look at Legione and if you look at Stern, they are claims by what one might call ordinary citizens in respect of their homes. This is a building development, a property development with a very large amount of money hanging on it, parties well resourced, well lawyered, and standing for profit. Why does one not have a different principle of conscience in those cases than one does for parties of the kind that are dealt with by the Court in Stern and in Legione?
MR DOUGLAS: It all becomes very difficult, your Honour, in our respectful submission ‑ ‑ ‑
KIRBY J: But line drawing is what courts do all the time. It is difficult but that is what we are paid for.
MR DOUGLAS: ‑ ‑ ‑ when one begins to divide contracts for the sale of land into subcategories, in our respectful submission.
KIRBY J: Yes, but if you were drawing a line, this is not in the class of Stern and Legione. This is not just ordinary citizens with their homes. This is property development.
MR DOUGLAS: I do not understand there to be any distinction in the cases between properties which are bought for residential purposes and properties which are bought for other purposes and it may be, for example ‑ ‑ ‑
KIRBY J: They might call on different urgency of what is fair to attribute to the conscience of the vendor.
MR DOUGLAS: Your Honour, there are a number of developers who make their money not by subdividing by broadacres but by buying existing homes and subdividing those. It is a difficult distinction to draw.
KIRBY J: There is quiet a lot of discussion about this in cases and in literature about the fact that – you see, a very important principle of our economy is that people stick to bargains. We are one of the countries of the world where the law upholds bargains. It is a very important sellable commodity of Australia in the world because we keep people to their bargains. I can understand helping out little old ladies like Kathleen McArthur in Stern v McArthur but helping out property developers who happen to slip up on a day is a different sort of issue, it seems to me.
MR DOUGLAS: Your Honour, unconscionable conduct is something which is applicable in any number of context and does not need to be subcategorised. One does not need to say, “We will apply to these sorts of contracts for sale of land and not others”. But obviously the circumstances of the parties are to be taken into consideration, but the fact that it is a commercial contract in the sense that it is a contract for the purchase of land which was to be subdivided by the vendor and that the vendor is a businessman and he is not a resident of the area, that is obviously something to be taken into account but, in our respectful submission, it is not something which looms large in the consideration of these issues.
Your Honour Justice Gummow pointed out the lamentable absence of the learned article by your brother Heydon in the Law Quarterly Review and we have had copies of that made and can I just circulate those to the Court.
GLEESON CJ: Thank you.
KIRBY J: We did not used to call ourselves brothers when Justice Gaudron came.
MR DOUGLAS: As long as you do not call each other sisters, your Honour, I will be quite happy.
KIRBY J: We call ourselves colleagues, as all other final courts do now.
CALLINAN J: Do not call me a sibling, if you do not mind.
McHUGH J: There are two other articles on this topic that you might have a look at, one is by Mr Stevens in 61 Mod LR 255 and the other by Thomson in (1997) 61 Conv 382.
MR DOUGLAS: If it please. I just want to go back to the judgment of Justices Deane and Dawson at 529 where, in that passage commencing about point 5 on the page:
If, however, further justification is required for the exercise of the jurisdiction to grant relief, it is to our minds provided by the circumstance that it is the respondents who had a reasonable expectation of benefiting from any increase in the value of the land with the passage of time. Under the contract the appellants could, in the absence of default, look for no more than the purchase price together with the interest provided. The land has in fact increased considerably in value so that it forms much more than adequate security for the balance of the purchase moneys owing. The forfeiture of the respondents’ interest in the land would truly result in a windfall to the appellants whereas relief against forfeiture would not result in a gain to the respondents properly describable as a windfall. The offer made by the appellants to allow the respondents the value of the improvements is but an attempt – and clearly an inadequate attempt – to make allowance for the unexpected advantage which would be enjoyed by them upon forfeiture.
Then Justice Gaudron, I think, expressed herself in somewhat similar terms where, from that passage commencing – I think probably about pages 540 to 542, which I will not read out to the Court but which sufficiently, in our respectful submission, explains the basis on which she made her decision. So far as Sir Gerard Brennan was concerned, he also recognised the existence of a doctrine:
to restrain the exercise of rights which equity and law recognize is . . . unconscionable.
That is a passage in his judgment commencing at page 513 at the foot of the page and over on to the top of page 514. One matter which seems to have carried great weight to Sir Gerard Brennan, if one has regard to the passage at page 515 at about line 5, is that what was being considered in that case was a general law right of rescission and not a contractual right of rescission and he analysed the authorities and came to the view that the mortgage analogy was not strictly referable to that case and that, in any event, looking at the top of page 520:
there is nothing in the vendors’ conduct which equity would regard as unconscionable in their rescission of the contract for the purchasers’ failure to pay the balance of the purchase price within the time limited by the notice to complete.
He recognises the jurisdiction, but on the facts decided that the jurisdiction did not apply in the circumstances of that case. We have elsewhere in our submissions dealt with more ancient authorities on the question of accident and they are collected at paragraphs 33 and following.
KIRBY J: Have there been other cases apart from Stern in this Court where Legione v Hateley have been applied?
MR DOUGLAS: There is Ciavarella, your Honour.
KIRBY J: Yes, it is 153.
MR DOUGLAS: That was a case which was referred to in the Court of Appeal. What happened in Ciavarella 153 CLR was that it was actually a case which came up on another point and then an application was made, if your Honours go to page 453 of the decision ‑ ‑ ‑
KIRBY J: This is a business. This is a rice farm.
MR DOUGLAS: Leave to amend was sought to raise relief against forfeiture and in the passage from 453 under the heading “Relief Against Forfeiture” over on to 454 that application for amendment was considered and refused on the basis, essentially, if one looks at it, that the conduct of the purchaser in that case was entirely wilful and so, therefore, it was just not a case to which the doctrine would apply.
KIRBY J: But the headnote No (4) says:
The case was outside the area of exceptional circumstances ‑ ‑ ‑
MR DOUGLAS: Yes, but that has to be read in the context of the passages which I have taken your Honour to in Stern v McArthur and also in Legione v Hateley itself.
GUMMOW J: On this general question of alleged reluctance to get involved in commercial transactions, United Dominions Corporation Ltd v Brian Pty Ltd 157 CLR 1 is a good example of two rather unpleasant groups of parties, I suppose.
MR DOUGLAS: Yes, a joint venture and a term in a contract which should have been drawn to the attention of one of those joint venturers. If pacta sunt observanda were to be given, as my learned friend’s submissions suggest, that “equity mends no man’s bargain” in reliance upon an authority Sir Gerard Brennan refers to – if that were given absolute authority, well, then, not only that authority but ‑ ‑ ‑
GUMMOW J: Well, you would have no doctrine in restraint of trade, to start with.
MR DOUGLAS: You would not, and also it is well established in this Court, as our written submissions have made clear, by authorities such as Amadio and Bridgewater v Leahy, that equity will intervene in the process of contract formation, if I could put it that way.
KIRBY J: The restraint of trade rests upon the public policy, does it not? The equitable doctrine you are invoking here is said to rest upon the conscience of the vendor. Conscience is a different consideration, it seems to me, and is much tied up in the relationship of the parties.
MR DOUGLAS: But United Dominions v Brian was not, your Honour. That was a case of a fiduciary relationship between joint venture parties, and it was ‑ ‑ ‑
GUMMOW J: And, anyway, lots of partners are commercial partners.
MR DOUGLAS: There are reams of authority where equity has intervened in contractual relations, and Bridgewater v Leahy and Amadio are just two.
GUMMOW J: A trading trust would be another example.
MR DOUGLAS: Exactly. We have no further submissions, may it please the Court.
GLEESON CJ: Yes, Mr Wales.
MR WALES: Thank you, your Honour. Your Honours, in a sense, on any view, the proposition expressed in Golden Achievement has to be read down to a degree. The question is not whether equity will intervene to relieve a purchaser in breach of a time‑essential condition, because we know that in some situations it does. We know that equity will intervene if the contract itself is in some way tainted – an Amadio‑type case – or, typically, one of the older cases of duress or expectant heirs or catching bargains, and so on.
We know that equity will intervene if there is some conduct in the course of the contract which gives rise to perhaps an estoppel, or something in the nature of an estoppel, and that was an important factor in Legione. In the view of some members of the Court, what the secretary of the vendor’s solicitor said amounted to an estoppel. In the view of other members of that Court, it was not an estoppel, but it contributed to the default by the purchaser. In some situations equity will intervene where the terms of the contract itself are such that it is simply impermissible that they be enforced in accordance with their terms. The law about penalties is an example of that situation.
The real question in this case is: will equity intervene in the case of a contract which bears none of those features and in respect of which there is no equitable cause of action asserted, and all that is raised by the purchaser is an appeal to idiosyncratic questions of hardship and the like? That is the real issue in this case. It may or may not ‑ ‑ ‑
GUMMOW J: It is a mistake, is it not, to talk about equitable causes of action?
MR WALES: Well, “equitable bases of relief” is perhaps a better way of putting it.
KIRBY J: I think, if I can say so, you have sort of understated the case of the appellant, which is natural enough – that is what, I suppose, you are paid to do – but the suggestion is that the very short time, the accidental circumstances and the fact that you waited until the money was in are the things that cause the argument that this is an affront to conscience and is an exceptional circumstance.
MR WALES: Indeed, but there is an assumption behind the proposition which is this. If I can say at the outset, there are perhaps two ways of approaching this case. We, in a sense, have taken the minimalist position, which is that even accepting that Legione and Stern are correctly decided, this case does not fall within the tests those cases have enunciated. We do go further and say that upon proper analysis the guidelines which those cases have laid down for the assistance of the profession are, to say the least, uncertain and merit clarification.
Can I begin by saying if one has a contract whose fairness is not challenged, as in this case – no Amadio-type claim – if there is no suggestion of any misconduct in the course of the contract, no one ever suggested that we said to the buyer, “Look, you really have more time than the 21 days the agreement allows”, can it ever, we say, be unconscionable to enforce that contract in accordance with its precise terms? This case revolves around a contract which bears no taint, no vitiating features. The parties acted in accordance with the precise terms of the contract, and what happened was the very outcome which the parties in precise terms contracted for.
KIRBY J: Can it be said that the fact that you had previously been so indulgent, so amenable, so agreeable to the delays that, without creating an estoppel, nonetheless your sudden insistence on time being of the essence, and in particular in these circumstances where there is the colour of an excuse, is an affront?
MR WALES: Well, your Honour, can I say this. Firstly, that proposition, the initial proposition, has never been put. It is a proposition which is inconsistent with the very terms of the deed itself. Your Honours will find the deed – there is more than one, but relevantly in the same terms – at page 45 of the appeal book. Now, nothing could be less calculated to lull a purchaser into a sense of false security.
If your Honours go to paragraph 6 of the deed at page 46 what it says is:
The Purchaser acknowledges that the contents of this Deed are a final arrangement to complete the sale of the Property.
Now, that provision, in a sense, harks back to the history and the earlier circumstance in which the purchaser could not complete, because on its own concession – and our submissions give the transcript references ‑ ‑ ‑
HAYNE J: I would have thought it harked back to the recitals.
GUMMOW J: Yes, recital (c) and (d).
HAYNE J: You do not need to go back to some more general statement of history.I would have thought to clause 1 as well.
MR WALES: Indeed. Now, the document went on to say ‑ ‑ ‑
GUMMOW J: And clause 2 stipulating time of the essence?
MR WALES: Quite.
KIRBY J: But can it be said that if you were reading this in the context of the history and the recitals that the recitals themselves show that you had, as it were, been saying this before. Had you made time of the essence before? I assume you had.
MR WALES: Your Honour, we had purported to terminate the contract the year before.
KIRBY J: Yes, that is ‑ ‑ ‑
GUMMOW J: But in the original set of contracts time was not of the essence, was it?
MR WALES: Quite. The evidence, I think, is not clear on the history of the earlier termination.
GUMMOW J: It may subsequently have been sought to make it of the essence?
MR WALES: Indeed, and one would infer that is what happened, but it must have in some way become essential in order to ground the right of termination but, your Honour, one really does not have to do more than read the words of the deed, namely, that this is a final arrangement:
If the Purchaser does not complete the sale in accordance with the provisions of this Deed the Purchaser will:
(a) forfeit all moneys –
there a reference to clause 9 which is the deposit forfeiture provision of the contract, never relied upon by the parties, but paragraph (c) provided that in the event of termination the purchaser would not commence court proceedings to dispute that termination. Now, no one suggested that ousted the court’s jurisdiction, but it was a fairly clear indication that the purchaser accepted that this was a final arrangement and that in the event of non‑completion, the inevitable outcome would be that the vendors would terminate. As well as that ‑ ‑ ‑
HAYNE J: Just apropos of that reference to clause 9, do you say that the right way of reading the deed is to read it as at least contemplating, perhaps requiring, a notice of termination of the kind contemplated by clause 9 to bring the contract to an end, or was the deed, in your submission, self‑executing? It would seem to me the reference to clause 9 meant that you had to give notice to bring it to an end.
MR WALES: I think that is probably correct, and that was the step that was taken. It has never been argued that the contract came to an end at the close of business on the 25th.
GUMMOW J: Before any notice?
MR WALES: Without notice, that is correct. The additional point is that ‑ ‑ ‑
KIRBY J: Where is clause 9, what page?
MR WALES: You will find an example – if your Honours go to page 179 of the appeal book.
KIRBY J: Yes, I see.
MR WALES: Paragraph 9.1 allows the vendor to keep the deposit in the event of termination.
HAYNE J: But it is the covering provision: the vendor can terminate by serving a notice?
MR WALES: Correct, yes, and on the point of the deposit – in answer to a question raised by Justice Kirby – if your Honours go to the judgment of Justice Windeyer, your Honours will find statements to the effect that before him, although there was a claim for the return of the deposit made in the summons, there were no submissions directed to that particular issue by counsel before him and he declined to make such an order. I think I am right in saying that there was no complaint about that in the Court of Appeal, but in any event, it was accepted at all relevant times that the purchaser was entitled to the part‑payments of purchase price which it had made and ‑ ‑ ‑
GLEESON CJ: Entitled on what basis?
MR WALES: On the basis that it would be a penalty to retain the payments made as part payments of the purchase price while the contract was on foot.
GLEESON CJ: I noticed that that was common ground, so that in effect if you are otherwise successful you keep 10 per cent of the purchase price and pay the rest back.
MR WALES: Correct. In fact, I think the position is that as a matter of fact there has been an arrangement between the parties about that and which I think need not concern the Court. There is no dispute about the entitlement of the purchaser to the part payments of purchase price. We say that we keep the 10 per cent deposit and we say that we keep those moneys that were paid from time to time as consideration for extensions of time because they got the extensions of time.
GLEESON CJ: I understand that. I would just like to understand the precise basis on which you agree that they are entitled to their money back in respect of the difference between the 10 per cent and what they paid.
MR WALES: Because we took the view that it was a penalty and that cases like Steedman v Drinkle, I think, dealt with that issue.
GLEESON CJ: So that the deposit is to secure payment of the balance of purchase price, if it becomes payable?
MR WALES: I am sorry, I did not follow that, your Honour.
GLEESON CJ: I am just interested in whether there is perfect consistency between the concession that they are entitled to that part of their money back and the contention that they are not entitled to relief against the forfeiture that they seek, that is, relief against forfeiture of whatever interest they claim to have in the land.
MR WALES: Certainly no point has ever been raised that there is such an inconsistency.
GLEESON CJ: I am not suggesting there is one but I just want to be satisfied in my own mind that there is none.
MR WALES: Indeed. In a number of the cases before this case – I think Legione and Stern, well, certainly, Stern is a case in point - the terms of the contract purported to entitle the vendor to keep, in effect, everything and there were proffers made of, for example, the increase in value of the land brought about by the purchaser’s improvements.
Now, the only issue before the Court was whether that proffer was sufficient to satisfy the requirements of equity. It was never suggested in those cases, for example, that, as it were, the whole of the provision entitling the vendor to terminate fell because in part it contained a provision that might be seen as penal and the further response might be this that where the paragraph 6 of the deed at page 46 operates to:
forfeit all moneys paid pursuant to the Contract of Sale –
the only moneys paid pursuant to the contract of sale were the deposit moneys. The part payments of purchase price were paid by way of private arrangement and the evidence – I will find the reference, but the evidence discloses, for example, that part of it was paid to assist one of the vendors to buy a property elsewhere, so that it was paid, not pursuant to any contractual obligation to pay it, but rather as a matter of private arrangement between the parties, so that it simply does not fall within the definition of moneys paid pursuant to the contract for sale.
CALLINAN J: Mr Wales, what about the money that was paid to secure the extensions? There was money paid, was there not?
MR WALES: There was, yes.
CALLINAN J: Almost $200,000 in total.
MR WALES: Indeed, but ‑ ‑ ‑
CALLINAN J: What happened to that? Was that money retained?
MR WALES: Yes. We contend that we are entitled to retain the moneys paid as the consideration for extensions of time.
CALLINAN J: Well, you would say you were suffering considerable opportunity costs.
MR WALES: Indeed.
CALLINAN J: Or would have been but for that.
MR WALES: Indeed. In any event, all of the sums were paid before the deed of 5 June.
CALLINAN J: Almost $200,000 was the purchase price. It affected the deed of the extension, was it not?
MR WALES: I am not sure that that is clear. We saw this morning for the first time these propositions about the variation. As I understand it, it may be that we need to send out the piece of paper that refers to the provisions. Your Honours were taken to the contract which showed that in respect of a part of the land which was to be retained by the vendors, they would pay $200,000 by way of payment for the services installed or provided by the purchaser at completion. As part of the dealing that went on to negotiate the deed of 5 June, that sum was reduced to $160,000, of which 80,000 was to be paid back to Mr Tanwar to assist with the costs of the project. But, by whatever means, there was to be a reduction in the cost which the vendors paid for the provision of services on land that they retained.
That sum was not a sum paid out in cash on 5 June. It was a sum that would have been part of the accounting if the matter had settled on the 25th or at some later stage. So that the matters which my friend raised this morning do not really go, we say, to any argument of an increase in the moneys paid out by the purchaser to get to 5 June. They simply would have been part of the adjustment which the parties made if they had settled on the 25th.
CALLINAN J: Well, do you accept the second half of paragraph 21 in the appellant’s written submissions - the factual statements?
MR WALES: Your Honour, I am not sure, on my feet, that that is correct.
CALLINAN J: You might think about it.
MR WALES: We will check that, but in any event, I note that it is an amount to be paid on settlement and the settlement, as we know, never took place.
CALLINAN J: It is contended that $80,000 was actually paid on 20 July, is not it, in consideration of an initial extension of time? It is only the second amount, I think, the 110, that was to be paid in the future. Anyway, you might look at it.
MR WALES: We will check that, your Honour. If I may do so, we go back to the original submission we made which was that even if one takes a minimalist view, this case does not come within any of the categories in which courts have granted relief before. Your Honours will recall that in Legione there had been some time elapsed after the exchange of contracts and, indeed, the purchasers had gone ahead and built a house on the property.
KIRBY J: Now, this is not like you, Mr Wales. You are arguing as though these are just factual categories. I mean, surely we have to have a concept.
MR WALES: Your Honour, we, with respect, agree entirely.
KIRBY J: Factual categories are simply illustrations of a concept.
MR WALES: They are illustrations but in Legione what one had was, as it were, the prospect of a windfall, and “windfall” seems to be an issue that looms large in the judgments. There was the prospect of a windfall to the vendor by retaining the house built by the purchaser and, secondly, there was the aspect of the conduct of the vendor’s solicitor’s secretary, in contributing to the breach by the purchaser.
CALLINAN J: Justice Handley thought the factual differences were significant. He distinguished Legione and the other case on the facts from this case.
MR WALES: Indeed. Now, if one takes the proposition that the relevant factors are an unjust enrichment or windfall situation or conduct of the vendor contributing to breach by the purchaser, this case has none of those attributes.
GUMMOW J: What about accident?
MR WALES: I will come to that, if I may. Stern was also a case where the purchaser had erected a house upon the property in question. Now, Stern was a case of a contract of very long duration, something like – and if one goes to the dates which appear in the judgment, it is apparent that it was going to take something like 10 years or more to complete the contract, and one would have thought it was entirely foreseeable that the purchasers would build a house on that land in that time and in fact they did.
So that what we submit motivated the court in that case very much was once again this question of windfall and, secondly and importantly, the analogy between the instalment contract in that case and a mortgage. Indeed, in the judgment of Justices Deane and Dawson there is a reference to the fact that if it had been a contract caught by the Lands Sales Act the purchaser would have been entitled to convert the contract into a mortgage, but it was the analogy with the mortgage that loomed large in the judgment of the majority judges.
It may even be that in, as it were, the development of a jurisprudence in relation to this question that instalment sales contracts are seen as special cases and, indeed, in Golden Achievement the Privy Council saw Stern really as turning upon this question of categorisation and itself left to one side the issue whether instalment sales contracts were special cases.
So it may be that in developing a jurisprudence one says that as well as mortgages and leases, which are well‑established cases of intervention, then instalment sales contracts fall into the same category. But as a matter of fact, this case bears none of those attributes. We say it is not an accident for these reasons. Firstly, the actual extent of equity’s jurisdiction in accident is uncertain. Justice Windeyer himself, quoting I think from Story, said so in his judgment.
GUMMOW J: It undoubtedly exists.
MR WALES: Indeed, but if one goes to modern books like Snell it is seen essentially as – and we have quote the relevant extract from Snell in the submissions – but it is suggested that it is a jurisdiction which certainly existed in older times to deal particularly with things such as lost documents where the common law would not allow a cause of action if a party had lost a document, equity would intervene to allow relief in such circumstances. But it is, we contend, surely not simply coincidental that no one can point to any decision in recent centuries dealing with accident as a separate and coherent doctrine. We say that accident has really become ‑ ‑ ‑
GUMMOW J: It is bound up with the attitude to time though, is it not, with equity’s attitude to time. Remember the evolution of the notion of time of the essence, simply because time stipulations may often misfire, if you like, through accidental unforeseen events. So, if you want to hold someone to that you have to say so specifically.
MR WALES: Your Honour, that is what happened in this very case.
GUMMOW J: No, I understand that.
MR WALES: Yes.
GLEESON CJ: But leaving aside clause 6 for the moment - and I know you say we cannot leave it aside - take Mr Douglas’ example of the second mortgagee’s solicitor being on the way to the settlement with a bank cheque in hand and suffers a heart attack and the solicitor and the bank cheque end up in the hospital and the settlement goes off for that reason. Is that an example of accident?
MR WALES Well, we say it is not. There really are two issues there. The first issue, we say, is this, that on any view of what accident may be, this case was not an accident. The evidence goes no further than this on that question. If one goes to page 66 of the appeal book – this is the affidavit of Mr Cormack who was the solicitor for the second mortgagee and although he does not recount the source of this information, he recounts at paragraph 5 at line 15 what he said to Mr Doherty, the solicitor for the vendors:
I act for the incoming second mortgagees. Some of the funds have already been received. Unfortunately there has been a delay in funds coming from Singapore. There is apparently some delay associated with a money laundering scandal in Singapore. As I understand it the Singapore Government is conducting additional checks on certain transactions and this has caused a delay in some of the funds coming to us. The funds should arrive tomorrow –
Now, that was the evidence.
GLEESON CJ: I am not sure what that means, that last sentence. Does it mean, “The funds should arrive tomorrow and, if they do, my clients will be in a position to settle then”?
MR WALES: That is how I would read it, your Honour, but the extent of the evidence is that, namely, the Singapore Government was conducting additional checks and that would cause a delay.
HAYNE J: Well, the case against you, as I would understand it, has several steps to it. There is an explanation for not completing. That explanation relates to conduct of persons other than the purchaser, namely, the second mortgagee. Third, the explanation is proffered and the funds, in fact, are available for completion before notice of termination is given.
MR WALES: Indeed.
HAYNE J: Now, it seems to me that it may drive you back to the proposition that accident cannot be an answer to time being of the essence.
MR WALES: That is the submission I make and that is the submission I put in answer to his Honour the Chief Justice’s question, namely, that if the contract – I am sorry, I will go back one step and say this. There either is or is not a principle that unforeseeable, inevitable events create a basis for relief. We say, firstly, that if there is such a principle, moneys being retained in Singapore at the eleventh hour, because of the government performing additional checks, are not such a category, but we say there is no principle that the court should grant relief in the unforeseeable, inevitable case of the solicitor who breaks his leg on the way to the settlement. The contract speaks in accordance with its terms. The obligation is on the party to settle by the relevant time.
If a party chooses to make the appointment for settlement at virtually the last possible moment, then they take the chance of the money not coming through, the solicitor breaking a leg, or in Golden Achievement the Hong Kong traffic being thicker than was expected. In any event, with great respect, the proposition which is put really assumes a step which is that in the absence of anything wrong with the contract itself, in the absence of any misconduct by the vendor, it can never be unconscionable simply to rely upon the very terms of the contract.
GLEESON CJ: Well, it seems to assume that time can never be absolutely ‑ ‑ ‑
MR WALES: Indeed. There can be, we submit – and we said this in our submissions – no substance in the point that the money was there after the notice was given. Had we terminated at 5 o’clock on the 25th, it would have been said, “Well, you were precipitate. You were told the money would be there the next day. In fact it was there. Nothing turns upon that question and we want the court to grant relief.”
GUMMOW J: Yes. Now, it seems to me perhaps the submissions on both sides need a little more refining because there is not much attention to just what is involved in the notion of time of the essence: what animates it, what ends it serves, how they are served here or not served here? I have a recollection – and people at the Bar table know more than I do - Chief Judge Young has considered this question of accident in unreported cases in the Equity Division. Someone should look at that, I think.
MR WALES: Yes. I am not aware of that, your Honour. We will certain check that and, if we can find the references, send them up. As has been observed, to say that equity will grant relief in situations such as the present involved the proposition that time can never be made essential and then involves the proposition that if money had come in on the second or the third or the fourth or the fifth day and the vendor had done nothing to its disadvantage in the meantime, that there would be no reason to compel the vendor to settle.
GUMMOW J: And if there is any deficiency in the Hong Kong appeal and he is just saying the contract should be observed, the real point is the doctrine respecting time of the essence, or was of the essence, applied here. It was not an ordinary contract, it was a time of the essence contract. How that was to be connected to the particular circumstances seems to me to be what it is all about.
MR WALES: Indeed. If I can say this, too, then ‑ ‑ ‑
HAYNE J: Which flows on into the statement of the purpose of the clause. The argument against you is the purpose of the clause, presumably the clause permitting rescission of the contract, is to enforce payment. But is the purpose to enforce payment or to enforce payment on time?
MR WALES: If I may say so, the difficulty with that argument – and it is certainly one which has been raised and canvassed and dealt with in previous judgments of this Court like Legione – is that in a certain sense – and I put this proposition with great respect – it leads into a kind of forensic dead end and that will, I think, become more apparent in the case of Pentagold where the Court of Appeal held that the provision which entitled a party to terminate in the event of non‑payment of a deposit was there merely as a security for the payment of the deposit.
GLEESON CJ: It may be that one of the legitimate purposes of the clause making time of the essence is to put a party in the position where the party does not have to get into the question of examining the rights and wrongs of the money being held up in Singapore.
MR WALES: That is our submission in a nutshell, that once, as in Pentagold, you have a provision that says, “If you do not pay the deposit by the due date, time being of the essence, we can terminate”, the parties have themselves dealt with this question of the purpose of the provision. The purpose of the provision is to allow the vendor to terminate if the money does not come in by ‑ ‑ ‑
GLEESON CJ: One purpose of a provision like this, realistically, might be to allow the vendor or the vendor’s solicitors to say, “We have no idea what is going on in Singapore and we don’t care what is going on in Singapore and we shouldn’t have to wait to find out what is going in Singapore before we can assert our rights”.
MR WALES: Indeed, and it may go further than that. It may simply amount to this, that this was, as the deed says, a final arrangement. It was a simply a provision to say, “You have 21 days. This is your very last chance. If you don’t settle by that date” ‑ ‑ ‑
KIRBY J: “This is a very final arrangement”.
MR WALES: ‑ ‑ ‑ “this is what will happen.”
KIRBY J: I can understand these propositions, and in favour of them is the fact that we are here. The very fact that this is still being argued so long afterwards, which I assume is one of the purposes that clauses of this kind are designed to avoid. But, on the other hand, experience of the law and equity teaches that you cannot always anticipate all the events of life, accidents do happen, and that therefore you may need something that will relieve you in the truly exceptional case.
MR WALES: Your Honour, we say, no, firstly because the parties themselves anticipated every possible event. What they said was, if the purchaser does not complete, for whatever reason, by 4.00 pm, I think – or whatever time it was on the 25th – the vendors will terminate. They dealt with the possibility of any event which caused the purchaser to be unable to complete by the final time.
The difficulty is that once one leaves open the jurisdiction to intervene in a case which is exceptional, one then has a test which is impossible of any precise definition, so that one in real life then in practice has to grapple with the statement in Legione of Justices Gibbs and Murphy, that the purpose of the jurisdiction is to relieve against injustice. How does one apply that in the real world? Because all of the considerations which are then used to test the conscientiousness of the conduct of the vendor are, ultimately, idiosyncratic.
So, for example, it is commonly said in these cases that any appreciation in the value of the property because of inflation, generally, somehow goes to the account of the purchaser. One asks, why? Certainly in Stern, it was Justice Brennan, I think, who picked up the comment of Justice Mahony in the Court of Appeal below, that it was not a self‑evident proposition and, indeed, in a market in which vendors sell before they buy elsewhere, one would have thought it is the vendor who suffers since he cannot buy elsewhere until he gets his purchase price from his present sale.
If it is said that it is to the purchaser’s account that he spent money on development, the answers to that proposition are these, that firstly it is, to say the least, ironic that a doctrine which has been developed to assist individuals becomes a charter for the relief of distressed property developers.
In this particular case the developer did work in accordance with its contractual obligations. It understood, firstly, when the contract was made that if it could not complete, the benefit of that development would redound to the vendor. A fortiori in this case, where by 5 June all of the relevant development work had been done, nothing of consequence happened to change the position of the parties, on the ground if you like, between 5th and 25th, and the deed itself stated in express terms that if the purchaser did not complete by the due date then it would lose the contract and automatically ‑ ‑ ‑
GUMMOW J: Has any consideration been given to Justice Lindgren’s writing on this subject?
MR WALES: We have not, your Honour, no.
GUMMOW J: He wrote a monograph on time of the essence, you will remember.
MR WALES: I am aware of that book yes, your Honour.
GUMMOW J: While it might be out‑of‑date, I am sure it deals with the fundamentals; perceptive and useful ‑ ‑ ‑
MR WALES: Yes, I am not sure that it is with these very issues.
GUMMOW J: No, but the issues that animate equity staying its hand, if you like, where there is a contractual stipulation from the outset as to time being of the essence.
MR WALES: Once again, if we may, if we find those, we will send up a reference to those. Your Honours, I do not think there is any more I can add to our submissions.
GLEESON CJ: Thank you. Yes, Mr Douglas.
KIRBY J: Could I just ask you before you sit down, Mr Wales, are you aware of any commentary on this case or the other case in the professional literature?
MR WALES: We are aware only of those which have been referred to already: Justice Heydon’s note in the Law Quarterly Review and Justice Gummow’s essay in Finn. We are not aware of other writers on the topic.
KIRBY J: Do you have anything to add to the suggestion that I raised as to the relevance of the large debate about the role of equity in large scale commercial dealings as distinct from people like Mrs McArthur and Mr Legione?
MR WALES: We would simply say – I am not aware of more writers on that topic, your Honour.
GUMMOW J: There is an article by Lord Millett, is not there?
MR WALES: I am not aware.
KIRBY J: And there is a recent article or a speech which has been reproduced of Justice Hayne in the area of ‑ ‑ ‑
GLEESON CJ: Unfortunately, we do not know very much, do we, about what the Cauchis are like? I am not suggesting that we ought to but, for my part, it is not self‑evident that they are richer or poorer than the property developer.
MR WALES: No.
GLEESON CJ: There are plenty of people who sell land to property developers who have a great deal more money than the property developers have.
MR WALES: Indeed.
KIRBY J: But we do know that this is a multi‑million dollar transaction. It is not a case of equity intervening to help a small homeowner which are the only cases that have succeeded so far before this Court.
MR WALES: Indeed. But, perhaps more importantly, what this present debate throws up is that once one simply suggests that there is a jurisdiction not to enforce time essential provisions in cases such as this where there is nothing wrong with the contract, no misconduct by the vendor, et cetera, and the touchstone is merely that the circumstances are exceptional, then the test of exceptionality becomes completely subjective and idiosyncratic. So that, for example, there may be hardship to a purchaser if a contract is terminated.
There may be hardship to a vendor if they are forced into a situation of performing the contract. Do we end up in a situation where the outcome of a contractual dispute is a competition between, if you like, victim impact statements put on by the purchaser and the vendor? Does a contract, utterly clear in its terms, come down in point of enforcement to a question of who is the more harshly treated if effect is given to the terms of the contract?
GLEESON CJ: No, because that is why you have contracts.
MR WALES: Indeed.
GLEESON CJ: We will adjourn until 2 o’clock.
AT 12.59 PM LUNCHEON ADJOURNMENT
UPON RESUMING AT 2.01 PM:
GLEESON CJ: Yes, Mr Douglas.
MR DOUGLAS: Thank you, your Honour. In relation to time stipulations at common law and in equity, over the luncheon adjournment we have taken the opportunity to go back to Justice Lindgren’s book, “Time in the Performance of Contracts”, and extracted some parts of that work for the benefit of the Court, if I could hand that up.
GLEESON CJ: Thank you.
CALLINAN J: Mr Douglas, on the question of hardship, was there any exploration of the possibility that your client might have some remedy or recourse against the second mortgagee? Was there any exploration of that?
MR DOUGLAS: Evidence was called from the second mortgagee, your Honour, but obviously that is a matter which was not ventilated in this trial, and it would depend upon the contractual arrangements which existed between the second mortgagee and my client. But it would be obvious to your Honours that purchasers do not necessarily have very strong controls over their mortgagees.
CALLINAN J: No, but if there had been an agreement in principle – well, there must have been an agreement to lend the money – would depend upon the terms of that agreement.
MR DOUGLAS: Yes, and that is something to be looked at, but in reality it does not seem to us to be appropriate to necessarily take that consideration into account here when it has never been taken into account before.
CALLINAN J: No, I am really just suggesting it might be relevant to a question of hardship, but it was not explored anyway.
MR DOUGLAS: It was not explored and it seems to us that the matters of hardship are essentially those which have been raised, namely, the fact that we have done the work on getting the approval to the plan of subdivision, that we had done work on obtaining the subdivision of part of a retained land for Mr Cauchi, that we have paid $397,000 which was not agreed to be repaid before the hearing at first instance.
CALLINAN J: On one view it might have cost you 10 per cent of the price to buy an option to have the opportunity of buying the land and seeking approval in respect of it.
MR DOUGLAS: Yes, but it is a relatively complex transaction in which we have done much more than just agree to buy the land, if your Honour has regard to the stipulations which we drew to the attention of the Court this morning.
CALLINAN J: The excision.
KIRBY J: Insofar as you lost the appeal, if you did, and insofar as cases send signals to the profession, that would send the signal that if necessary if there is the slightest doubt you have to have the money in the kitty the day before and that time stipulations in our system of law are intended to be taken seriously. Is that such a bad thing in dealings of this kind?
MR DOUGLAS: Traditionally, equity has relieved against time stipulations. Before the Judicature Act in 1875 the common law always regarded time stipulations as essential even without the need for them to be described as essential. Equity, on the other hand, intervened, and since the Judicature Act obviously disparity between the position of equity and common law on this issue has not been so apparent and may explain in part the absence of more recent authority in some of the areas which were referred to by Lord Wilberforce in “fraud, accident, mistake or surprise”, in his decision of Shiloh Spinners v Harding.
What equity did do, that if in fact by your contract you made time of the essence or by notice subsequent to contract made time of the essence, well then it would not relieve against that time stipulation but that did not mean ‑ ‑ ‑
KIRBY J: But equity has not written that out of the common law. This is part of economic freedom that parties can make these bargains between themselves.
MR DOUGLAS: But, your Honour, the point I wish to make about that is that the common law has always been alleviated by the more generous jurisdiction of equity.
McHUGH J: Yes, but I am not sure that it is correct to say that equity treated time stipulations differently from the common law. It may be the true doctrine is that in the exercise of its equitable discretion a party in default of a time stipulation would not be refused equitable relief if no more appeared, but it is not to say that equity did not treat the time stipulation the same way that the common law did.
MR DOUGLAS: Your Honour, I would venture to submit that if, in fact, time was not made of the essence in equity, it would be regarded as not being essential, depending of course obviously upon a proper construction of the contract in its terms.
GUMMOW J: And the nature of the subject matter.
MR DOUGLAS: And the nature of the subject matter.
KIRBY J: And the parties.
MR DOUGLAS: Yes.
GLEESON CJ: But that is not what we are concerned with here, where time was made of the essence. At paragraph 230 Justice Lindgren says:
It was said earlier that “of the essence” means “having the character even in the eye of Equity of a condition precedent to further liability ‑ ‑ ‑
MR DOUGLAS: Your Honour, before Legione v Hateley and before Stern v McArthur it was generally thought that you could not get relief against a stipulation where time was made of the essence. Since those two authorities this Court has held that in fact you can get relief against such a stipulation. That is, as we understand it, accepted by the respondent.
KIRBY J: Rather grudgingly, I thought.
MR DOUGLAS: But nonetheless it is the law and no challenge has been made to that law. That is the law in Australia. That law in the United Kingdom is different because in the United Kingdom, because they take a different view about Steedman v Drinkle and British Columbia Orchards, you cannot get specific performance of a contract for the sale of land where in breach of an essential time stipulation under the contract.
GLEESON CJ: But does not clause 6 of the deed in this case mean, amongst other things, “Don’t bother turning up and telling me on the last day that the cheque’s in the mail”?
MR DOUGLAS: No, it does not mean that, your Honour. Your Honour, looking at the deed, which is at page 46, clause 5 of the deed provides – and I must say, your Honour, that no argument has ever been submitted, either at first instance or on appeal, that the provisions of clause 6(a) are in effect self‑executing and do not need a notice of termination. I do not understand that to be submitted here today. But the way in which it works is that clause 5 says:
The provisions of the Contract for Sale and the Amending Deed are to continue to operate and bind the Vendor and the Purchaser unless those provisions are inconsistent with the provisions of this deed.
Then clause 6 says:
The Purchaser acknowledges that the contents of this Deed are a final arrangement to complete the sale of the Property. If the Purchaser does not complete the sale in accordance with the provisions of this Deed the purchaser will:
(a) forfeit all moneys paid pursuant to the Contract for Sale and acknowledges the Vendor’s rights under clause 9 of the Contract for Sale.
GLEESON CJ: What about paragraph (b)? What is the point of a stipulation to “withdraw any caveat”?
MR DOUGLAS: Let me just deal with (a) to start off with, because it is an acknowledgement of the vendor’s rights under clause 9. The vendor’s rights under clause 9 are to issue a notice of termination. Such notices of termination issued, and they are to be found in the bundle at page 104, 105 and 106. So this is not a case where by its terms the contract was self‑executing, so that it came to an end as a result of the default.
There are examples of such cases, and in the time available I have not been able to get a copy of it, but an example of such a case, if you look at paragraph 311 of the extract from Justice Lindgren, is a decision of Sir Nigel Bowen when he was Chief Judge in Equity, in FAI Insurance Ltd v Furness which was decided on 19 November 1975, which is a case which I have a particular reason to remember because I seem to recall it was virtually my first contested action in equity, and where FAI, being a relatively well‑run company at that time, had a very strict provision in its contract which effectively said, “This is self‑executing”. Now, that is not what 6(a) says.
GLEESON CJ: What could 6(b) mean except that the purchaser promises not to assert any equitable interest in the property?
MR DOUGLAS: It means, your Honour, that you will withdraw any caveat against the property. So that, in other words, they have a contractual provision which enables them to insist upon the withdrawal of a caveat if they choose to exercise their rights of termination.
GLEESON CJ: But in that event, the import of the withdrawal of a caveat is an abandonment of any claim of a caveatable interest, is not it?
MR DOUGLAS: But only once they had exercised their rights, your Honour.
GLEESON CJ: Quite.
MR DOUGLAS: So, until they exercise their rights, there is in fact – we have a right to maintain that caveat. What they are doing, your Honour, when they are reserving their rights – if I can put it that way – is described quite well in the decision of Sir Frank Kitto in Tropical Traders v Goonan (1963) 111 CLR 41 which we gave the Court a reference to over the luncheon adjournment, where he says at about point 2 on the page:
Time being of the essence the appellant became entitled, as soon as 6th January 1963 had passed, to elect for or against rescinding the contract. Any act done by it and consistent only with the continuance of the contract on foot the law would hold to constitute an election against rescinding; and an election once made could not be retracted. But the appellant was not bound to elect at once. It might keep the question open, so long as it did nothing to affirm the contract and so long as the respondents’ position was not prejudiced in consequence of the delay.
So what they did here is they kept the question open.
GLEESON CJ: What page were you reading from, Mr Douglas?
MR DOUGLAS: Page 55, your Honour. Did I not give you the reference?
GLEESON CJ: You may have but I just did not take a note of it.
MR DOUGLAS: So what they did here, your Honour, was keep the question open. Then I want to turn to the consideration which your Honour the Chief Justice advanced an argument, namely, that the purpose of this clause may be to ensure that the vendor does not have to worry about what actually happened in Hong Kong and so on.
Now, if at the moment failure to complete took place the vendor had turned around to its solicitors and said, “I want you to immediately issue a notice of termination. I’m sick of this chap, and I can’t accept that explanation”, that may be a relevant consideration, leaving to one side for one moment our argument about accident, but once you decide to keep the issue open, as Sir Frank Kitto explains in this passage, you are bound by all circumstances which occur in the intervening period when you come to exercise your election. So you cannot, at the time when you exercise your election, in full knowledge of the fact that the money is there and ready to be paid, turn around and say, “I didn’t know what on earth was going to happen here.”
KIRBY J: We are not talking about a lot of time or a lot of action here. It all happened within a day.
MR DOUGLAS: No. That is why, whilst in some circumstances, the vendor at the time of the contract or at the time when breach has occurred may be able to say, “I didn’t know what was going to happen”. Once the situation has crystallised, the unconscionability of his conduct has to be regarded, having regard to the facts and circumstances at the time of its exercise.
Now, your Honours, one submission which was made by my learned friend in answer to a question put by Justice Hayne was that this doctrine of relief against the unconscionable exercise or insistence upon your legal rights does not apply to accident. That would seem, in our respectful submission, to be contrary to what Lord Wilberforce said in Shiloh Spinners Ltd v Harding which was accepted by this Court in a number of cases where the doctrine of relief against forfeiture has arisen, not only in Legione v Hateley and Stern v McArthur but also in – because it is the well‑known passage in that case. It is the passage which refers to fraud, accident, mistake or surprise. It is really the passage commencing at the top of page 722 ‑ ‑ ‑
HAYNE J: At 722 between letters D and E, is not it?
MR DOUGLAS: Thank you very much, your Honour. So, it is clearly a basis on which intervention can be obtained pursuant to these principles. Justice Gummow asked concerning a decision of Justice Young, at first instance, the Chief Judge in Equity in New South Wales. We believe that decision to be Baird v BCE Holdings Pty Ltd (1996) 40 NSWLR 374. There are some relevant and useful references to the doctrine of accident really at about 358 through to 386.
GUMMOW J: Yes, that is what I had in mind.
MR DOUGLAS: Is that what your Honour had in mind?
GUMMOW J: Yes, thank you.
MR DOUGLAS: Also, your Honour, whilst not relevant for the purposes of these proceedings, except to recognise that the doctrine of surprise still has some life, there is a useful decision of the Victorian Full Court in the case of Aquamax v MT Associates Pty Ltd (2001) 3 VR 473 at 489 to ‑ ‑ ‑
KIRBY J: What does this fall under?
MR DOUGLAS: It is a recent consideration of the doctrine of surprise.
KIRBY J: Yes, but where does this fit into your theory of the case?
MR DOUGLAS: Shiloh Spinners Ltd v Harding is the most recent modern indication of the authorities on relief against forfeiture in the House of Lords. There have been decisions since but Lord Wilberforce’s judgment in that refers to the well‑known cases in which equity would intervene of mistake, accident, fraud or surprise. I only refer to it because it is a modern Australian authority which explains what the doctrine of surprise is which is part of and just helps to explain the ambit of the principles which Lord Wilberforce was discussing in Shiloh Spinners.
Lastly, your Honour Justice Kirby made some observations about property developers and it is worthwhile bearing in mind, in our respectful submission, in that context, that Mr Brian in the decision of United Dominions v Brian was a property developer and there was a contract between him and his financier which effectively was ‑ ‑ ‑
KIRBY J: The point was not property developers. The point was the role of equity in protecting well‑lawyered, well‑heeled commercial parties. The invasion of judges’ consciences into the bargains of parties is a matter of legitimate concern in the law. I am just saying we have to solve these two cases in that context, it seems to me.
MR DOUGLAS: Your Honour, equity’s conscience is affected by a very prompt and rapid destruction of the fortunes of a property developer as much as anyone else, I would have thought, if it is unconscionable.
KIRBY J: That is true and we attribute the conscience to the vendor, but in fact it is a judge, a lawyer, who determines where the obligations of conscience lie and they may not always be in tune with the marketplace.
MR DOUGLAS: It is not the judge’s conscience which is affected, though, your Honour, but it is the conscience of equity ‑ ‑ ‑
KIRBY J: I know that is the theory of it, but somebody has to say what conscience requires and that happens to be a lawyer and a judge, whereas the parties make their bargain.
GUMMOW J: The parties might be anyone, I suppose.
MR DOUGLAS: They could be anyone.
GUMMOW J: Yes.
KIRBY J: Could I ask you this, given that you and Mr Wales did not at the trial disagree about the principles to be applied, what weight are we to give that it has gone through three layers of the courts – we are in the third – and an experienced trial judge in Equity Division has come to one conclusion applying what might be said to be open‑textured principles and then the Court of Appeal unanimously has affirmed that. I mean, we are now being asked to see error, but when one is talking about what the conscience of a vendor requires, what the justice of the case requires, to use what was said by Chief Justice Gibbs and Justice Murphy, these are very open‑textured principles and these judges said they did not require relief in this case.
MR DOUGLAS: Well, your Honour, we have sought to approach this argument on a principled basis and not to dwell too much upon the reasons which exist below but, in our respectful submission, there are a number of errors in the decisions below. One, that this is not an accident, and two, that the circumstances did not amount to unconscionable conduct, particularly because the courts below did not give enough emphasis to the fact that, by keeping its options open, the vendor’s conscience was affected by the fact that the money came in, there having been a prior explanation for the absence of the money on the appointed day which was consistent with the time when the money came in.
Moreover, I think as we sought to make clear in our application for special leave, there seemed to be undue emphasis in the Court of Appeal upon the earlier decision of this Court in Ciavarella. There seemed to us to be an approach in the Court of Appeal which emphasised the concept of “exceptional circumstances” and, in our respectful submission, seemed to put it into that area which Justices Deane and Dawson described as being unconscionable conduct of an exceptional kind.
GLEESON CJ: Neither party suggests in this appeal, do they, that principles of House v The King have anything to do with the matter?
MR DOUGLAS: No one suggests that, your Honour.
GLEESON CJ: This is not a discretionary decision by the courts below.
MR DOUGLAS: No, it is not, your Honour.
KIRBY J: I did not say “discretionary”, but the principles are expressed in evaluative terms which are extremely widely expressed and effectively, as you have argued the case until the last minute when you began to point to error, you have been seeking to get us to respond to the demands of the vendor’s conscience, whereas the whole point of an appellate system, and especially at the level of this Court, is that we do not intervene except for error.
MR DOUGLAS: Your Honour, could I answer that in this way. If your Honours go to paragraph 14 of our submissions – also, on the application ‑ ‑ ‑
KIRBY J: I am not taking a formal point here, Mr Douglas. I am simply saying that a factor, at least it seems to me, in the reasoning which this Court has to address is that the judges below, looking at all the facts and probably with more time to look at all the details, came to a conclusion that the justice of the case and the demands of conscience ‑ ‑ ‑
MR DOUGLAS: Could I respond to your Honour’s question this way. In our submission seeking special leave to appeal we criticised at some length on a principle basis the decision of Justice Handley in the Court of Appeal and of Justice Windeyer at first instance, and also compared the treatment of the relevant principles in that decision to the treatment of the relevant principles in Ciavarella and Bateman.
The most expeditious way, I feel, of responding to your Honour’s question may be if I were to be given leave to provide to the members of the Court a copy of our detailed written submissions on the application for
special leave, and to rely upon them as the principal basis on which we say that there was error in the decisions below – in addition to the reasons which have been expressed in our written submissions.
KIRBY J: I did read the special leave application, so I know how you put it there.
MR DOUGLAS: So could we do it in that way, your Honour?
GLEESON CJ: Yes.
MR DOUGLAS: Those are the submissions we would wish to make in reply.
GLEESON CJ: Thank you, Mr Douglas. We will reserve our decision in this matter. Call the next case, please.
AT 2.27 PM THE MATTER WAS ADJOURNED
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