Tanwar v Cauchi

[2001] NSWSC 674

Reported Decision: (2002) NSW ConvR 55-994

New South Wales

Supreme Court

CITATION:	Tanwar v Cauchi [2001] NSWSC 674
CURRENT JURISDICTION:	Equity Division
FILE NUMBER(S):	SC 3321 of 2001
HEARING DATE(S):	2 August 2001
JUDGMENT DATE:	9 August 2001
PARTIES :	Tanwar Enterprises Pty Limited (Plaintiff) Joseph Cauchi (First Defendant) Angelo Cauchi (Second Defendant) Mary Cauchi (Third Defendant) Julian Daley (Fourth Defendant)
JUDGMENT OF:	Windeyer J at 1

COUNSEL :	F.M. Douglas Q C with him Mr L.J. Aitken (Plaintiff) I.M. Wales S C (Defendants)
SOLICITORS:	Alexander Lee & Associates (Plaintiff) Low Doherty & Stratford (Defendants)
CATCHWORDS:	CONVEYANCING - vendor and purchaser - contracts for sale of land not completed on their terms - deed giving further time for completion clearly stating time of essence and failure to complete would result in forfeiture of deposits - second mortgage moneys required for settlement not available on last day as delay in transfer from Singapore - moneys available following day - contract terminated after notice moneys available - whether relief against forfeiture should be granted - whether return of deposit should be ordered - CONVEYANCING - vendor and purchaser - claim for return of deposit under s 55(2A) of Conveyancing Act 1919 - whether return should be ordered - EQUITY - relief against forfeiture - whether relief against forfeiture of interest in land should be granted after termination of contracts - whether failure to complete result of accident - whether unconscionable to terminate the contract
LEGISLATION CITED:	Conveyancing Act 1919 s55(2A)
CASES CITED:	Lucas & Tait Pty Ltd v Victoria Securities Ltd [1973] 2 NSW LR 269 Pentagold Investments Pty Ltd v Romanos 2001 NSWSC 269 Pratt v Hawkins (1991) 32 NSWLR 319 Story: Commentaries on Equity Jurisprudence Vol 1 Spence: Equitable Jurisdiction of the Court of Chancery Vol 1 p. 628
DECISION:	See paragraph 19

9

IN THE SUPREME COURT
OF NEW SOUTH WALES
EQUITY DIVISION

WINDEYER J

THURSDAY 9 AUGUST 2001

3321/01 Tanwar Enterprises Pty Limited v Cauchi & Ors

Facts:

1    Joseph Cauchi, the first defendant, owned 423 Sunnyholt Rd, Glenwood. He and Angelo Cauchi, the second defendant, and Mary Cauchi, the third defendant, owned 427 Sunnyholt Road, Glenwood as tenants in common in equal shares. Julian Dalley, the fourth defendant, owned 405 Sunnyholt Rd, Glenwood. These three properties are adjoining. The properties were originally on three titles, but for the purposes of a Development Application were consolidated into one lot under one title. The consolidated land is Lot 2 in Deposited Plan 1014616, the owners of the original three separate properties being shown as registered proprietors of the part of Lot 2 as was included in their earlier title. This added a complication, but nothing was claimed to turn on it.

2    The respective owners agreed to sell their properties to the plaintiff, Tanwar Enterprises Pty Limited (“Tanwar”), under three separate contracts for sale. All three contracts were dated 19 October 1999 and were to be completed on 28 February 2000. Each contract was amended by deed dated 5 November 1999. These deeds (referred to in the subsequent deed as “the Amending Deed[s]”) are not in evidence but it seems that they provided for the settlement date to be extended to August 2000. This did not take place and the vendors purported to terminate the contracts by issuing Notices of Termination for each contract on 20 August 2000.

3    In spite of the purported termination, the parties continued to negotiate. On 5 June 2001, separate but similar deeds were signed between vendors and purchasers in respect of each property. Each deed had the same effect; it recited the contract, the deed of 5 November 1999, the notice of termination and the agreement between vendor and purchaser to complete on the terms of the deed. Each deed contained the following operative terms:

1. The Notice of Termination dated 20th August, 2000 is withdrawn.

Monday, 25 June
2. Completion of the sale to take place by 4.00pm on Friday, 25th June , 2001, time of the essence.

(service of such notice to complete shall be validly served if served by facsimile on the Purchasers, Alexander Lee & Associates) [the bracketed words appear in the deed between Joseph Cauchi and Tanwar, but that does not effect it]

3. The Purchaser will pay to the Vendor on completion the moneys set out in the annexed settlement statement (after making adjustments for outgoings).

4. On completion the Vendor will transfer his [“their” in the deed between Tanwar and the three Cauchi’s] in Lot 2 Deposited Plan 1014616 to the Purchaser.

5. The provisions of the Contract of Sale and the Amending Deed are to continue to operate and bind the Vendor and the Purchaser unless these provisions are inconsistent with the provisions of this Deed. [Both the deed between Joseph Cauchi and Tanwar and the deed between Julian Dalley and Tanwar then contain reference to specific special conditions in their respective contracts]

6. 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;

(b) withdraw any caveat against the property.

(c) not commence any Court proceedings to dispute the Vendor’s termination of the Contract of Sale.
Clause 9 of the contract for sale referred to is as follows:

9. Purchaser's default
If the 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 -
9.1 keep or recover the deposit (to a maximum of 10% of the price);
9.2 hold any other money paid by the purchaser under this contract as security for anything recoverable under this clause -
9.2.1 for 12 months after the termination; or
9.2.2 if the vendor commences proceedings under this clause within 12 months, until those proceedings have conclude; and
9.3 sue the purchaser either -
9.3.1 where the vendor has resold the property under a contract made within 12 months after the termination, to recover -
the deficiency on resale (with credit for any of the deposit kept or recovered under this clause); and
the reasonable costs and expenses arising out of the purchaser's non-compliance with this contract or the notice and of resale and any attempted resale; or
9.3.2 to recover damages for breach of contract.

4    Both the deed between Joseph Cauchi and Tanwar and the deed between Julian Dalley and Tanwar contained several additional clauses which do not bear on this dispute. Each deed had a settlement statement annexed, as provided for by clause 3. The figures in each statement vary, but they are not the subject of any dispute.

5    The parties arranged to settle the purchase on the last day available to them, namely Monday, 25 June 2001, at the Office of State Revenue at 12.30 pm. The settlement time was later postponed until 3.30pm The finance that Tanwar had arranged included funds to be secured by a second mortgage. These funds were to come from an undisclosed source in Singapore. Mr Cormack, of Corrs Chambers Westgarth solicitors, acted for the incoming second mortgages. The money from the second mortgagee did not arrive from Singapore on 25 June 2001. The explanation for the delay was that it was said some money laundering scandal in Singapore had resulted in Singaporean officials requiring additional checks before allowing transfer of the funds overseas.

6    Mr Tanwar, who controls the plaintiff, informed Julian Dalley that the plaintiff would not be able to pay the full amount due to him on settlement, although it would be able to pay the full amount due to the Cauchis. He said that he would be able to pay Mr Dalley half the amount due to him on settlement, and the balance the next day.

7    Mr Dalley initially indicated that he was prepared to accept this arrangement, but he said that he would like to speak to his solicitor, Mr Gary Doherty. Mr Doherty advised him not to settle as he would have no security for payment of the balance of the purchase moneys. He accepted this advice and refused to settle. The result was that none of the contracts was settled on the last day available for settlement under the deeds of 5 June 2001. Separate contracts could not be settled because the incoming first mortgagee was taking security over the whole of the land.

8    The moneys from Singapore were received into a trust account operated by Corrs on 26 June 2001. Mr Doherty was informed of this some time after 11 am. Settlement could have taken place that afternoon assuming all other parties could have been organised to attend. Notices of Termination for each contract, signed by Mr Doherty on instructions from each of the vendors, were served on 26 June 2001, after notification was received the funds were available. The vendors had given instructions to terminate before that notice and apparently confirmed these after notice.

Plaintiff's claim

9 By amended summons filed 2 August 2001 the plaintiffs sought declarations that the contracts remained on foot and that the notices of termination were ineffective and an order for specific performance. In the alternative, the plaintiffs sought relief against forfeiture and specific performance. Finally they sought an order under s55(2A) of the Conveyancing Act 1919 for return of the deposit.

10    At the commencement of the hearing Mr Douglas QC, senior counsel for the plaintiff, put the plaintiffs claim for relief on a number of grounds. At the conclusion of the evidence he correctly abandoned all grounds other than the claims for relief against forfeiture and specific performance if relief were granted and alternatively for return of the deposit.

Relief against forfeiture

11    In deciding whether relief should be granted I consider that there are two issues: first, whether the failure to have the moneys available for settlement arose as a result of “fraud, accident, mistake or surprise” which in the circumstances of this case would justify the intervention of equity and second whether termination would amount to unconscionable conduct.

12    In Pentagold Investments Pty Ltd v Romanos 2001 NSWSC 269, a case concerned with relief against forfeiture I said at paragraph 10:

Relief against forfeiture
This claim is made upon the basis of the law laid down in Legione v Hateley (1983) 152 CLR 406; Ciavarella v Balmer (1984) 153 CLR 438; Stern v McArthur (1988) 165 CLR 489 and PC Developments Pty Ltd v Ravel (1991) 22 NSWLR 615. It is extraordinarily difficult to obtain from these decisions some common basis upon which this question must be decided. However, I proceed on the basis that the Australian Courts accept the statement in Shiloh Spinners Limited v Harding [1973] AC 691 at 722 that equity would grant relief on the traditional grounds of "fraud, accident, mistake or surprise, always a ground for equity's interference, the inclusion of which entailed the exclusion of mere inadvertence and a fortiori of wilful defaults". It also seems clear that a party having a legal right to terminate will be prevented in equity from exercising it if this would amount to unconscionable conduct. Whether or not in a case such as the present, where termination was based on failure to comply with an essential term, it is necessary that there be "exceptional circumstances" to justify relief, as seems to have been accepted in Ciavarella v Balmer at p 454, is not altogether clear, but probably it is exceptional circumstances which give rise to unconscionability.

13    On the question of accident, some argument was directed to the fact the money to settle was available the next day. This misconceives the issue because attention must be focused on why the money was not available on the day, not when it would have been available. If there were an accident or mistake then equity can intervene, although whether it will do so or not may, of course, be affected by the length of the delay. However, the argument went to unconscionability as well.

14    It was said the second mortgage moneys were not available on settlement because there was a delay in their transfer from Singapore for the reason given by Mr Cormack, who said that he was told that because of some money laundering scandal the Singapore authorities demanded additional and unforseen checks which delayed the transfer of funds. It is I think doubtful whether the inability to settle was caused by accident. It was caused because the funds were not available. That was always a risk if funds were to be transferred from overseas on the final day.

15    The day for settlement in August 2000 was not adhered to because funds were not available. The solicitor for the plaintiff said he did not think that time allowed by the 5 June deed was sufficient. He wanted four weeks, the defendant wanted two weeks and the three weeks was a compromise. Clearly it was a risk with little margin for unforeseen problems.

16    According to Spence: Equitable Jurisdiction of the Court of Chancery Vol 1 p. 628:

Every attempt to define Accident in its judicial acceptation, even in modern times, [1846], has failed.

But if accident is an extremity, for the failure to obtain funds in this case to qualify as an accident there would need to be evidence as to its being unusual for transfers of funds from overseas to be delayed so as to be really unexpected or unusual. The most detailed discussion in the old books appears to be in Story: Commentaries on Equity Jurisprudence Vol 1. At s89 of the 7th edition the learned author says, after discussing specific cases of accident:

And it may now be stated generally, that, where an inequitable loss or injury will otherwise fall upon a party from circumstances beyond his own control … Courts of Equity will grant him relief.

This requires an inequitable loss from circumstances beyond control. Story goes on at s101 to say that no relief will granted in the case of accident in matters of positive contract and obligation, but the law has moved on since then as Legione shows. I do not consider the breach giving rise to termination resulted from an accident. But if I were wrong in that the consideration I am about to give to the question of unconscionable conduct would be relevant to the question of whether it would be inequitable to refuse relief.

17    Attention must be focussed on clause 6 of the deed. Clause 2 makes time of the essence, but clause 6 is even more explicit. While no argument was based on clause 6(c) its effect is to make the result of failure to complete even clearer than it might otherwise be. On one interpretation the rights under clause 6(a) are self-executing without any notice of termination. But leaving that to one side it seems to me that the statement that on failure to complete the vendor will forfeit all moneys paid makes the position of the vendor almost unassailable. With that provision and having regard to the date of the contract, the original completion date of 28 February 2000 provided by the contract, the failure to complete, probably in August 2000, because funds were not available, and the bargaining which took place to fix the time for completion at three weeks, I do not think it could be said it was unconscionable to exercise clear contractual rights of termination and forfeiture or in the terms of relief in the case of accident, that it would be inequitable to allow the loss to fall on the plaintiff. I add that while it is likely the value of the land has increased as a result of the development consent, there is no evidence of this, and there is no evidence of the cost to the plaintiff of obtaining the consent. If there were such evidence on would need to balance it against the long delay between contract and termination and the fact that the defendants are locked together in one title so that they could not sell separately without re-subdivision.

Return of Deposit

18 There remains the claim under s55(2A) of the Conveyancing Act 1919 for the return of the deposit. No real argument was addressed to this issue. For the claim to succeed it must be shown that it would be unjust and inequitable to allow the vendors to retain the deposits: Lucas & Tait Pty Ltd v Victoria Securities Ltd [1973] 2 NSW LR 269. It is established by Pratt v Hawkins (1991) 32 NSWLR 319 that in dealing with the application for return of the deposit the court can take into account the conduct of the parties if this might be unconscionable and I have already dealt with that. No additional evidence was adduced to support the claim. It has not been shown that the vendors have obtained some windfall as a result of the termination. A feeling that others with more sympathy might have proceeded to settle is not sufficient to justify an order.

19    It follows the amended summons must be dismissed with costs.

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Last Modified: 09/10/2001