Tohme v Q & A

[2009] NSWSC 176

CITATION:	Tohme v Q & A [2009] NSWSC 176
HEARING DATE(S):	12/02/2009
JUDGMENT DATE :	19 March 2009
JURISDICTION:	Equity Division
JUDGMENT OF:	Macready AsJ at 1
DECISION:	Paragraph 24
CATCHWORDS:	Equity - Specific performance of contract for sale of unit. - Vendor and purchaser. Whether it would be necessary for time to be of the essence to ground specific performance. - Held not necessary.
PARTIES:	Tony Tohme and Belinda Mary Tohme v Q & A Properties Pty and Kele Property Group Pty Ltd
FILE NUMBER(S):	SC 4103/08
COUNSEL:	Mr DG Pullinger and Mr N Allan for plaintiffs Mr D Arraj for defendants
SOLICITORS:	Blunden & Montgomery for plaintiffs Blackstone Waterhouse Lawyers for defendant

- 1 -

IN THE SUPREME COURT
OF NEW SOUTH WALES
EQUITY DIVISION

ASSOCIATE JUSTICE MACREADY

Thursday 19 March 2009

4103/2008 Tony Tohme and Belinda Mary Tohme v Q&A Properties Pty Ltd and Kele Property Group Pty Ltd

JUDGMENT

1 HIS HONOUR: This is the hearing of the proceedings in which the plaintiffs’ summons seeks orders for specific performance of a contract for sale of Unit 8/157-161 Kissing Point Road, Dundas and orders facilitating the sale in default of the defendants complying with the order to perform the contract.

Background to the proceedings

2 The plaintiffs are the purchasers described in the contract for sale of land dated 1 September 2006. The defendants are the two vendors. The contract for sale provided for the sale price of $500,000 with a deposit of $300,000. Clause 55.1 of the contract deals with the deposit and provides “the purchaser, hereby releases the deposit to the vendor as at the date of this contract for the vendor to do as it wishes”.

3 It is clear that the deposit of $300,000 was paid on exchange and immediately released to the vendors. The contract contained the following clause 60:

“60 Rebate on purchase price on settlement

It is expressly agreed between the vendors and purchasers and it is a condition of this contract that if the purchasers pay to the vendors at the time of exchange the sum of $300,000 rather than the usual 10% deposit of $50,000, on settlement the purchasers are to receive a rebate of $150,000 requiring an amount of only $50,000 to be paid on settlement.”

4 The sale was subject to the relevant strata plan being registered. The completion date was dealt with at clause 34.1 of the contract which is in these terms:

“34.1 Completion
The vendor will notify the purchaser when:
(a) the strata plan is lodged for registration, and
(b) the strata plan is registered (at which time the purchaser will also be provided with a section 109 certificate).
And the completion date occurs 21 days after the purchaser is notified of registration”
34.2 Issue of notice to complete
(a) If completion does not occur on or before 4.00pm on the completion date, at any time thereafter either party (not then being in default under this contract) may serve on the other a notice (“notice to complete”) requiring completion of this contract on a specified date being not less than 14 days (“notice period”) after the date of service of the notice to complete.
(b) The parties agree that:
(1) the notice period is sufficient; and
(2) time will be essential for compliance with the notice to complete.
(c) The vendor can, at any time, withdraw its notice to complete without prejudice to the right to give a further notice.”

5 As it was referred to in submissions I also note the terms of special condition 15 which is as follows:

“15 Completion date
The parties must complete by the completion date and, if they do not, a party can serve a notice to complete if that party is otherwise entitled to do so.”

6 In February 2008 the strata plan was registered and on 5 March 2008 the solicitors for the vendors wrote to the solicitors for the purchasers advising that the strata plan had been registered and they required settlement to take place on Tuesday 26 April 2008 which was said to be 21 days from the date of the letter. In fact the correct date was 26 March 2008. The letter also referred to special condition 60, to which I have referred, and required payment of $50,000 pursuant to special condition 60 and rent of some $12,000 being rent collected for renting the property from September 2007. In a letter of 6 March 2008 the purchasers’ solicitors replied and pointed out the correct settlement date should have been 26 March 2008. They also raised the fact that in August and November 2006 the purchasers had paid two cheques totalling $50,000 to the vendors for payment of the purchase price balance. The letter also queried the obligation to pay the rent claimed by the vendors.

7 On 11 March 2008 the plaintiffs submitted a transfer for execution by the vendors such transfer having expressed consideration for $500,000. On 26 March 2008, the day on which settlement was due, the vendors’ solicitors wrote disputing the payments of the balance of the purchase price saying that it related to other matters concerning the parties. They also disputed the purchasers’ right to receive the rent from the property.

8 On 1 April 2008 there was a response to that letter and in particular the detailed allegations made in the letter of 11 March 2008. On 11 June 2008 the purchasers’ solicitor sent the following letter:

“Re: TOHME Purchase from KELE PROPERTY GROUP PTY LIMITED and Q & A PROPERTIES PTY LIMITED
PROPERTY: Unit 8/ 157-161 Kissing Point Road, Dundas

We refer to the above and advise we require settlement late Friday afternoon or Monday.

In your letter dated 5 March 2008 you advised you would be forwarding the S109 certificate and in our letter of reply dated 6 March 2008 we asked for the S109 certificate to be forwarded to us. We note that we have not received same to date.

We require you to forward the S109 certificate to us by facsimile forthwith.

Our clients will pay the $50,000.00 allegedly for the balance of the purchase price plus the rent received by our clients for the abovementioned property to your client to settle this matter however we stand by our previous correspondence to you and confirm the full purchase price was paid in full and in advance in 2006.

We put you on notice that our clients are settling and paying the additional sums under objection and intend to recover same from your client.”

9 It can be seen from the fourth paragraph that there was a concession by the purchasers that they would pay the additional $50,000 as well as the rent which had been demanded by the vendors. Also to note is the requirement for a settlement shortly thereafter.

10 On 12 June 2008 the purchasers served a notice to complete appointing a time for completion on 30 June 2008 at the Law Society. On 27 June 2008 the purchasers’ solicitor sent a letter withdrawing the notice to complete.

11 These proceedings were commenced summons filed on 7 July 2008.

12 The purchasers have sworn affidavits saying they are ready and willing to complete the purchase. The property is subject to a registered mortgage to Macquarie Bank Limited. The title is also subject to a number of caveats. The earliest are by the purchasers followed by three other caveats. One caveator appeared at the hearing of the proceedings to indicate that it maintained its interest, whatever that might be.

The defendants’ claims

13 The defendants raised three matters in answer to the plaintiffs’ claims for specific performance which they resisted. They were as follows:

1. Futility as the defendants did not have the funds to discharge the mortgage over the property they could not settle the matters.

2. That the plaintiffs had not established an entitlement to proceed with specific performance as they had not given notice making time of the essence in respect of completion of the contract.

3. That the plaintiffs had not demonstrated that they were ready, willing and able to complete the purchase.

14 I will deal with these in turn.

Futility as the defendants did not have the funds to discharge the mortgage over the property they could not settle the matters.

15 Annexed to the affidavit of a solicitor for the defendants is a letter from the mortgagee Macquarie Banking in which the bank indicated that they would require the full net proceeds from the sale of the security lots in the development until such time as the bank’s facility was repaid in full. The solicitor followed that letter up with a telephone call in which he discussed what the term “full net proceeds” meant and whether the requirement applied to Unit 8, the subject of these proceedings. The bank confirmed that it did apply and that the proceeds were the net proceeds less commission and reasonable solicitor’s costs and adjustments.

16 In argument I pointed out that the defendants had not proved by this evidence that they were in fact unable to discharge the mortgage particularly given they had received the vendors’ deposit of $300,000. I allowed an adjournment so that the solicitor appearing for the defendants could obtain instructions as to whether he wished to seek an adjournment in order to bring forward that evidence. After a half hour’s adjournment the court reconvened and I was informed that in the circumstances no adjournment would be sought in order to bring forward such evidence. Prior to the adjournment I had clearly indicated that I would not act on any assertions made from the bar table on the matter.

17 There is no doubt that if performance is impossible even if entirely due to the default on the part of the defendants and if for whatever reason the defendants cannot possibly perform their obligations, specific performance will not be decreed against them; see Meagher, Heydon and Leeming, Meagher Gummow and Lehane’s Equity Doctrines & Remedies 4th Edition (2002) at par 20-140. One of the important matters commented upon was that a court would be reluctant to make such an order since disobedience is contempt of court and is punishable by imprisonment or sequestration of a company’s assets.

18 In my view the onus is clearly upon the defendants to establish the defence. They have been given every opportunity to do so and they have declined that opportunity. Accordingly, I find that this defence is not made out.

That the plaintiffs had not established an entitlement to proceed with specific performance as they had not given notice making time of the essence in respect of completion of the contract

19 It is correct that there was no notice to complete given it was withdrawn and, accordingly, time was not made of the essence under clause 34.2 of the contract. If, for example, the purchasers had wished to rescind and sue for damages that would have been an appropriate procedure. This is put quite neatly in Stonham “Vendor and Purchaser” (1964) paragraph 1460 in these terms:

“Notice Not Necessary for Specific Performance-Operation of Notice.
1460. Having regard to the foregoing object, notice to complete is not necessary where the prospective giver does not intend to rescind, but intends to sue for specific performance or for an injunction or other equitable relief. The right to sue for specific performance in equity is not to be equated with a cause of action at law, and all that is required, in equity, is to show circumstances which will justify the intervention of the Court of Equity; and, where the time for performance has not yet arrived, the Court will mould its decree accordingly, and will not compel a party to perform the contract before the contract date arrives, and furthermore, will give relief against any order for specific performance in the event of any intervening circumstances subsequently frustrating the contract.21 When the aggrieved party wants completion, and not rescission, of the contract, the giving of a notice making time of the essence of the contract is inadvisable; because once a valid notice is given, its effect is to make time of the essence of the contract, not only as to the party in default, but also for the innocent party.”

20 It is plain from its defence in these proceedings that the defendants resist performance of the contract. Accordingly I am satisfied that as the time for completion has passed that the defendants do not wish to complete.

That the plaintiffs had not demonstrated that they were ready, willing and able to complete the purchase

21 One of the matters suggested by the defendants was that the contract showed a transfer price of $500,000. No objection seems to have been taken to this by the vendors’ solicitors and no doubt they simply followed the stamping of the contract at the purchase price of $500,000. The stamp duty paid on the contract was $17,990 which is the duty payable on a contract for $500,000.

22 The question is whether the purchasers were, and are ready, willing and able to complete.

23 Both plaintiffs have given sworn evidence that they are ready, willing and able to complete. There was no cross-examination to estoppel and no evidence tendered which would suggest that they did not have the funds to complete. It is unlikely as they have already paid the sum of $300,000 in cash and they only need to obtain finance of about $60,000 to complete. There is no reason not to accept the sworn evidence of the plaintiffs.

24 In my view the plaintiffs have established their entitlement and I make the following orders:

1 . I order that the defendants specifically perform the contract for sale of land known as Unit 8/157-161 Kissing Point Road, Dundas contained in Certificate of Title folio 8/SP80091 made between the defendants as vendor and the plaintiffs as purchasers and dated 1 September 2006.

2. I order the defendants to pay the plaintiffs’ costs.

3. I reserve liberty to apply.

**********