Toorak Home Developments Pty Ltd v VPJ Developments Pty Ltd
[2023] VCC 195
•23 February 2023
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| IN THE COUNTY COURT OF VICTORIA AT Melbourne COMMERCIAL DIVISION | Revised Not Restricted Suitable for Publication |
EXPEDITED CASES List
Case No. CI-20-05439
| Toorak Home Developments Pty Ltd | First plaintiff |
| and | |
| Baqir Rezaie | Second plaintiff |
| V | |
| VPJ Developments Pty Ltd (ACN 604 516 369) | Defendant |
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JUDGE: | HER HONOUR JUDGE A RYAN | |
WHERE HELD: | Melbourne | |
DATE OF HEARING: | 30 November and 1-3 December 2021, further submissions filed 22 December 2021, 7 and 17 February 2022 | |
DATE OF JUDGMENT: | 23 February 2023 | |
CASE MAY BE CITED AS: | Toorak Home Developments Pty Ltd v VPJ Developments Pty Ltd | |
MEDIUM NEUTRAL CITATION: | [2023] VCC 195 | |
REASONS FOR JUDGMENT
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Subject:REAL PROPERTY – CONTRACT
Catchwords: Plaintiffs seeking specific performance of a contract of sale of land - whether defendant was entitled to terminate the contract by notice of recission - alternatively, whether the plaintiffs repudiated the contract or breached a special condition by not applying for an identical planning permit expeditiously - whether defendant entitled to retain deposit
Legislation Cited: Evidence Act 2008; Sale of Land Act 1962
Cases Cited:Adaz Nominees Pty Ltd v Castleway Pty Ltd Aventus Cranbourne [2020] VSCA 201; Androvitsaneas v Members First Broker Network Pty Ltd [2013] VSCA 212; Associated Newspapers Ltd v Bancks (1951) 83 CLR 322; Bisognin v Hera Project Pty Ltd [2018] VSCA 93; BP Refinery (Westernport) Pty Ltd v Shire of Hastings (1977) 180 CLR 266; Donau Pty Ltd v ASC AWD Shipbuilder Pty Ltd [2019] NSWCA 185; IGA Distribution Pty Ltd v King & Taylor Pty Ltd [2002] VSC 440; Jones v Dunkel (1959) 101 CLR 298; K7 Developments Pty Ltd v Abbotsford Estates Pty Ltd [2021] VSC 422; Kennedy v Vercoe (1960) 105 CLR 521; Koompahtoo Local Aboriginal Land Council v Sanpine Pty Ltd (2007) 233 CLR 115; McGorlick v Palmer [2022] VCC 1229; Mount Bruce Mining Pty Ltd v Wright Prospecting Pty Ltd (2015) 256 CLR 104; Perri v Coolangatta Investments Pty Ltd (1982) 149 CLR 537; Shepherd v Felt Textiles of Australia Ltd (1931) 45 CLR 359; Thompsons Road Pty Ltd v Home Consortium Leasehold Pty Ltd [2020] VSCA 199; Walters v Cooper [1967] VR 583; Zhang v Shanghai Wool and Jute Textile Co Ltd (2006) 201 FLR 178
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APPEARANCES: | Counsel | Solicitors |
| For the Plaintiffs | Mr J McKay | Mills Oakley |
| For the Defendant | Mr D K Carlile | NOH Legal |
Contents
Factual background
Lay Evidence
Expert Evidence: Mr Thomas Saloumi
Jones v Dunkel inference – failure to call Al Sharbati
Issues for determination
(1) What is the proper construction of the special condition?
Relevant legal principles relating to construction of contracts
(2) Does the contract of sale include the terms pleaded by the defendant at paragraph 7.1 of its defence?
(3) Did the second plaintiff breach the contract of sale in the manner alleged by the defendant at paragraph 7.2 of the defence?
(4) Did the second plaintiff’s breach of the contract of sale amount to a repudiation of that agreement?
(5) Did the second plaintiff’s breach or repudiation of the contract of sale subsist when the defendant issued the default notice on 30 October 2020 or at any subsequent time?
(6) Did the plaintiffs waive any entitlement to rely upon the issue of endorsed plans as a condition of settlement, and if so, when?
(7) Did the defendant validly terminate the contract of sale?
(8) If the defendant did not validly terminate the contract of sale, then:
(i) did the defendant become obligated to complete the contract upon (or after) the issuance of the endorsed drawings under permit PlnA00042/20 by the City of Casey, and the second plaintiff thereafter calling for performance of the contract?
(ii) is the second plaintiff entitled to specific performance of the contract?
(iii) is the second plaintiff entitled to recover damages in addition to, or in lieu of, an award of specific performance, and if so in what amount?
(9) If the defendant did not validly terminate the contract of sale, then is the defendant entitled to retain the deposit paid by the second plaintiff under the contract?
(10) If the plaintiffs were in breach of the contract of sale but their conduct did not amount to repudiatory conduct, is the defendant entitled to any relief in accordance with paragraph 22.1 of the defence?
Conclusion
HER HONOUR:
1By a contract of sale formed on 22 October 2019 (“the contract of sale”), the second plaintiff, Mr Baqir Rezaie (“Rezaie”) agreed to purchase land at 73-75 Nettle Drive, Hallam, Victoria (“the land”) for the sum of $1,080,000. The defendant, VPJ Developments Pty Ltd (“VPJ”) is the vendor of the land. The land was sold with the benefit of a planning permit for eight dwellings. Settlement was due on 20 January 2020 but was later extended by agreement between the parties.
2Rezaie nominated the first plaintiff, Toorak Home Developments Pty Ltd (“Toorak”) as substitute purchaser on or about 20 November 2019.
3By this proceeding, the plaintiffs seek declaratory relief together with an order for specific performance of the contract of sale.
4VPJ denies the plaintiffs’ claim. It alleges the plaintiffs failed to comply with a special condition in the contract of sale concerning an application for a planning permit. VPJ argues the plaintiffs failed to apply for an “identical” permit as required under the special condition and did not act with reasonable expedition in applying for the permit. VPJ contends it validly terminated the contract of sale on 13 November 2020 after serving a notice of recission on 30 October 2020. Alternatively, VPJ argues the plaintiffs either repudiated the contract of sale or committed breaches which were of a sufficiently serious nature to justify termination.
5For the following reasons, I am satisfied the plaintiffs have made out their claim and are entitled to an order for specific performance.
Factual background
6VPJ acquired the land on or about 21 August 2015. The land was sold to VPJ along with planning permit PInA00756/14 (“the first permit”), issued by the City of Casey (“the Council”) on 22 April 2015. The first permit allowed for the development of eight dwellings on the land. The first permit was due to expire if the development was not started by the permit holder within two years of the date of the permit and was not completed within four years from the date of the permit.
7On 11 April 2017, the Council approved an extension of time for the first permit, with the deadlines for commencement and completion extended to 22 April 2018 and 22 April 2020 respectively. This extension approval was recorded in a letter dated 21 April 2017 from the Council to Mr Peter Polonski (“Polonski”), the then director of VPJ. Polonski arranged for the demolition of the existing dwelling on the land on or about 13 September 2017. Polonski was of the view that this demolition commenced the development under the terms of the first permit.
8Polonski had intended to carry out the development under the first permit himself, but he decided instead to retire and sell the land. The land was listed with RE/MAX real estate agency in Dandenong and marketed as a development site with endorsed plans and permits for eight townhouses. The internet advertisement for the land stated it was to be sold with “Fully endorsed Plans & Permits” and “All Working and Engineering plans” for “2 x 3 bedroom, 2 bathroom and single garage and 6x2 bedroom, bathroom, study and single garages townhouses with one boasting double garage”. The advertisement stated “[the] developer has commenced work on the project and its [sic] ready to go,” noting the current owner had already demolished the existing residence, removed all required trees, paid the South East Water contribution, installed temporary fencing and put a site office in place.
9Polonski provided a blank copy of the contract of sale to Mr Walter Kubiak (“Kubiak”), an estate agent with First National Real Estate. Kubiak was aware that Rezaie was looking for an appropriate site to develop in joint venture with his business partners. On 14 October 2019, Kubiak emailed Rezaie to tell him about the site. Kubiak stated he knew the owner well and that the owner had been unable “to get finance for construction”. He told Rezaie that the land was on the market for $1.2 million and had been on the market for some time.
10After a discussion with Rezaie about the land, Kubiak arranged a meeting between himself, Rezaie, Polonski, and Polonski’s friend, Mr Mirek John Wieczorek (“Wieczorek”) to discuss the potential sale of the land. This meeting took place on 18 October 2019 in Hallam.
11There is some disagreement about whether Rezaie’s brother, Mr Karim Khawari (“Khawari”) attended the meeting. Khawari is a builder and the director of Ghan Homes Pty Ltd (“Ghan”). Polonski and Wieczorek both claim that Khawari was at the meeting on 18 October 2019, which Rezaie expressly denies. Khawari affirms in his affidavit dated 22 November 2021, that he recalls:
“…being introduced to Polonski, Wieczorek on or about 18 October 2019 when they came to Ghan’s office. Baqir was not present when they arrived. My receptionist seated Polonski, Wieczorek and Walter Kubiak (Walter) in the board room….
I have known Walter since about 2015.
I went into the board room to say hello to Walter. Walter introduced me to Polonski and Wieczorek. One of them said that they were in the office to meet with Baqir. I do not recall what we spoke about, but I did not discuss the permit, the plans or the project. I spoke mainly to Walter. When Baqir arrived, I left the board room and did not participate in the meeting.”
12When cross-examined, Khawari said his brother was late and that he was at the meeting for about 5 to 8 minutes before Rezaie arrived.
13Human memory is fallible and recollections do vary but ultimately nothing turns on the issue of whether Khawari was an active participant in the meeting or was present for some but not all of the time. It is common ground that Rezaie was told at the meeting that the first permit was due to expire on 22 April 2020, unless extended. The parties subsequently decided to go ahead with the sale of the land with an agreed price of $1,080,000 and a 90-day settlement term.
14On 20 October 2019, Rezaie signed the contract of sale and paid $5,000 as part deposit. On 22 October 2019, Polonski signed the contract of sale on behalf of VPJ as vendor. The sale price recorded is $1,080,000. A deposit of $108,000 (minus the $5,000 already paid) was due by 28 October 2019 and settlement by 20 January 2020.
15Condition 17 in the contract of sale related to the first permit. Clause 17 provides:
“17.1The Purchaser acknowledges and accepts that the Land is sold with the benefit of the planning permit number PInA00756/14 issued by the City of Casey (“Planning Permit”). A copy of the Planning Permit and accompanying drawings are contained in Annexure A.
17.2The Purchaser accepts the conditions of the Planning Permit as well as the accompanying drawings as they appear in Annexure A.
17.3The Purchaser may not:
(a) require the Vendor to may make any variations or alterations to the Planning Permit and/or to the accompanying drawings; or
(b) seek to vary the Planning Permit and/or the accompanying drawings in any way without permission of the Vendor, until ownership in all plans, drawings and documents relating to the Planning Permit have passed to the Purchaser under special condition 17.4.
17.4The Purchaser acknowledges and accepts that the ownership in all plans, drawings and documents relating to the Planning Permit remains with the Vendor and will not pass to the Purchaser until the Price is paid in full on or before the settlement date.”
A copy of the first permit and the Council’s letter dated 21 April 2017 approving the extension of the first permit were attached to the contract of sale as Annexure A.
16Around the time he signed the contract of sale, Rezaie contacted his intended business partners in this project, Ms Zita Lo (“Lo”) and her husband, Mr William Leung (“Leung”), to let them know of the impending sale and to formalise their joint venture. Toorak was incorporated on 19 November 2019 for this purpose. 50 of the 100 shares in Toorak are held by Leung and Lo on behalf of their family trust, and the other 50 by Rezaie and his wife Ms Kaneez Raza (“Raza”) on behalf of their family trust. Lo and Raza were both registered as the directors of Toorak.
17Rezaie gave evidence that when he signed the nomination form nominating Toorak as purchaser of the land, he did not date it, adding 20 November 2019 as the date on the document later. He says that it was signed at or around this date but prior to the execution of Toorak’s shareholders agreement, which he says was entered into on 2 December 2019. The nomination form was served on VPJ’s solicitors by email on 20 October 2020.
18On 26 November 2019, the contract of sale was amended to apply the GST margin scheme, increasing the price to $1,090,000.
19The next day, Rezaie was informed by Ghan, who had been preparing a quotation for his planned construction project on the land, that the first permit may be invalid. Rezaie contacted Kubiak and was informed that Polonski maintained the first permit remained valid. On 29 November 2019, the parties agreed that Rezaie would authorise a release of the deposit to VPJ by signing a statement under s 27 of the Sale of Land Act 1962, while Polonski would grant Rezaie an authority to liaise with the Council in relation to the first permit. The three men met later that day in Kubiak’s offices, where Polonski signed the authority prepared by Kubiak, and Rezaie signed the s 27 statement.
20On 10 December 2019, Lo (in her capacity as director of Toorak) signed a construction contract with Ghan to build eight townhouses on the land. Toorak paid a 5% deposit on the value of that contract to Ghan.
21On 16 December 2019, Rezaie, Khawari, Polonski and Wieczorek met with council planners at the Council’s offices. During this meeting, the Council’s representatives said that because VPJ had not submitted various plans required to be endorsed by the Council prior to the commencement of development under the first permit, the first permit had automatically expired and could not be extended. The defendant’s representatives disputed this, claiming that while failing to provide the outstanding plans may have been a breach of the conditions of the first permit, development had nevertheless commenced on 13 September 2017. This was well within the time limit required by the first permit and therefore, they argued it remained on foot. The planning representatives from the Council disagreed. They suggested that Polonski and Rezaie apply for a new permit in the same form as the first permit rather than attempting to extend the first permit, which they maintained had expired. Polonski remained of the view that the first permit was still in full effect and said if the Council maintained its position, he would make an application to VCAT to enforce it.
22Following the meeting, Rezaie emailed Kubiak advising that the plaintiffs could not settle on 20 January 2020. That email reads in part:
“As this property sold with the promise of a valid permit for 8 dwellings and now it's revealed that the permit is expired. we cant [sic] not settle on the 20th of Jan 2020.
The settlement will be postponed after obtaining the new permit.
As I promised to Peter, we're ready to help the vendor in any way we can to obtain their permit but the cost will be on them.”
23On 17 December 2019, Rezaie emailed Kubiak asking if he would be able to add these points in the special condition:
“Subjected to:
Provided a current endorsed plan and permit for 8 dwellings consist of 6 x 2 Bed +study and 2 x 3 Bed. All previous certificates and permits which were provided are now expired need to be renewed.
All the cost of the owner.”
24On 23 December 2019, Wieczorek forwarded an email to Rezaie that Wieczorek had received from his draftsman, Ranko Djurovic. Djurovic attached the plans he had used for the first permit in 2015. Djurovic noted the plans were very old and stated: “I am sure council will ask many more things as it has been long time and there were many changes like new BCA, regulations, garden area etc..”
25On 24 December 2019, Ms Helen Wittick (“Wittick”), a Council planning assistant emailed Rezaie advising him of the outstanding condition requirements that were yet to be satisfied before development could start. These included receipt of drainage plans, a site environmental management plan and landscape plans in accordance with conditions 1, 2 and 3 of the first permit. Rezaie, Polonski and Wieczorek briefly met with Ms Wittick in the foyer of the Council’s office later that day.
26Immediately after the meeting with Wittick in the Council foyer, Rezaie, Wieczorek and Polonski met for a coffee in the café at the Council building. They agreed to amend the contract of sale to reduce the purchase price to $1,080,000, and to add a special condition relating to obtaining a new permit. The price was reduced by $10,000 to compensate Rezaie for the costs of making the application for the new permit.
27Rezaie typed up the special condition before the parties met on 24 December 2019. It was signed by Rezaie and Polonski on that day. It provides as follows:
“Subjected to: A current endorsed plan and planning permit for 8 dwellings, consist of 6 x 2 Bed + study and 2 x 3 Bed provided, identical to Permit No.: PlnA00756/14”
(“the special condition”)
28At 2.12pm on 24 December 2019, Rezaie emailed Kubiak (formalities omitted):
“As I’ve mentioned over the phone, Peter and I agreed to reduce the purchase price to the original price of $1,080,000 with the marginal scheme and also agreed to add special condition Provided a current endorsed plan and planning permit for 8 dwellings, consist of 6 x 2 Bed + study and 2x 3 Bed.
Can you please amend the contract and send us a copy.”
29Rezaie’s oral evidence was that he prepared the special condition to protect himself as he considered it was clear that a new permit would be required. He said he had to add this special condition and get a new permit. He intended to settle after the new permit was obtained. He wanted it to be identical to the concept of having 8 dwellings with six of the 2 bedders and 2 x 3 bedders. He added that word to protect that configuration for himself. He said that this was in response to feedback he had received from his planner suggesting that he may not be able to get approval for 8 dwellings or the two three-bedders.
30The parties initialled the changes to the contract of sale, reducing the purchase price back to $1,080,000 and noting the margin scheme would be used to calculate GST on 20 January 2020.
31Also on 20 January 2020, VPJ’s solicitor emailed Rezaie’s solicitor (at the time, Mr Shaukat Akbari of BR Legal) seeking settlement of the contract of sale. The email stated that the vendor would charge penalty interest for each day that settlement takes place after 20 January 2020 and issue a recission notice should settlement not take place by 23 January 2020. Rezaie gave evidence that he informed Polonski the application for the new permit would take some time and that settlement could not yet be completed.
32On 27 January 2020, Rezaie lodged an application for a planning permit with the Council.
33On 24 February 2020, the Council replied to Mr Oday Al Sharbati (“Al Sharbati”), a building practitioner working on behalf of Rezaie setting out a detailed request for information (the “RFI letter”). The Council requested that the information sought be submitted by 6 April 2020.
34On 3 April 2020, Al Sharbati emailed the Council seeking an extension of time of no less than 60 days to meet the Council’s request for information on the planning permit application.
35On 8 April 2020, VPJ’s solicitors emailed Rezaie’s solicitor stating:
“Further to [the 20 January 2020 email], I am instructed that the vendor expects settlement to be effected by 20 April 2020 failing which a recission notice will be issued.
Please ensure that your clients make appropriate arrangements in that regard.”
36On 20 April 2020, Rezaie’s solicitor emailed VPJ’s solicitors stating:
“… our client and your client have agreed to extend the settlement date until 31 July 2020 or earlier. We have been instructed that by 30 June 2020, our client will confirm a settlement date for this purchase.
Please speak with your client to confirm the same.”
37On 22 April 2020, Al Sharbati sent a follow up email to the Council regarding his request for an extension of time.
38On 30 April 2020, the plaintiffs’ new solicitors, Mills Oakley emailed VPJ’s solicitors, asserting that VPJ was not able to call for settlement until the special condition was satisfied. That email concludes as follows:
“Our client has no wish to waste money on legal costs and is prepared to either:
· continue to pursue the grant of the replacement planning permit and endorsed plans and settle promptly after they are obtained as agreed by the parties and contemplated by the Contract, as varied; or
· end the Contract by agreement with a refund of the deposit of $108,000 in full and a reimbursement of the planning costs of $27,931.60 plus GST expended, being a total of $138,724.76.
Please let us know within the next 7 days how your client would like to proceed. Our client will hold off taking any further steps in the planning process until we receive your response.”
39On 4 May 2020, Wieczorek emailed Durga Viswanathan, the Council planner who had written to Al Sharbati on 24 February 2020. Wieczorek wrote that he represented the current owner of the property, VPJ. He noted that he had met Ms Viswanathan previously at the Council offices and discussed the current planning application for the land over the phone on two occasions. After setting out a short timeline of events relating to the planning permit applications, Wieczorek wrote:
”In December of last year, V P J P/L and Ghan Homes decided to amicably resolve this unfortunate turn of events with the Council by relodging Planning Application. Regrettably, what was intended as a quick solution unfortunately is stretching into eternity. Would you please therefore advise me of the following:-
· What are the usual requirements and procedures necessary to obtain Planning Permit?
· What is the usual time frame from lodgement of all requirements to the issue of Planning Permit?
· What items are still outstanding and when were they requested?
· Any other issues that are pertinent to the matter at hand.
Durga, it may be beyond your discretionary decision ability, but I would welcome the need for advertising to be waived. My reasons are as follows:-
· This fiasco has been created by the Council and the original applicants. Unfortunately we have to clean it up.
· Nothing to my knowledge has changed from the original submission that was advertised and decided upon. Hence, why readvertise and waste time? In a way it is not a new application and some commonsense approach to it would be welcome.
· Various delays have already inflicted their costs on this project and the sooner it is completed, the better. In that I am not just conscious of the costs to us but also of the fact that currently it is a residential eyesore and that the council is still not collecting potential rates and contributions.
40On 3 June 2020, Al Sharbati provided an arborist’s report and updated set of plans to the Council. The Council requested further information on 23 June 2020, which Al Sharbati provided on 29 June and 2 July 2020.
41On 24 September 2020, the Council sent a letter to Al Sharbati advising that Planning Permit No. PlnA00042/20 for eight dwellings was approved by the Council on 23 September 2020 (“the second permit”).
42On 8 October 2020, the plaintiffs lodged further amended plans with the Council for endorsement.
43On 14 October 2020, VPJ’s solicitors, NOH Legal emailed Mills Oakley noting their instructions that a planning permit had been issued together with endorsed plans and seeking settlement within seven days as “all outstanding conditions are now satisfied”. NOH Legal advised that “[f]ailure to effect settlement within this time frame will result in a recission notice being issued.” Mills Oakley replied that afternoon, noting that the plaintiffs had not been aware that endorsed plans had been issued by the Council and seeking a copy. NOH Legal emailed back shortly after, noting their instructions that Rezaie already had a copy of the plans and had himself dealt solely with the Council in this regard.
44On 15 October 2020, Mills Oakley replied to NOH Legal, explaining that they were instructed that Rezaie had not been provided with endorsement of the plans as yet, but that he had been pressing the Council to do so. NOH Legal replied, advising that their client had “made enquiries with Casey Council in connection with the planning permit and the plans.” In this email, NOH Legal confirmed their client’s understanding that, inter alia:
“…procurement of endorsed plans is entirely up to your client and only your client the requirement for endorsed plans is a condition which is incapable of being enforced by your client and at the very least a condition which is not fundamental to the root of the Contract.”
NOH Legal reiterated their client’s position that the additional special condition had been satisfied insofar as it is capable of being satisfied by their client and that their position with respect of settlement taking place remained unchanged.
45On 19 October 2020, NOH Legal emailed Mills Oakley confirming that the postponed settlement was scheduled for 21 October 2020. On 20 October 2020, Mills Oakley replied. The lawyers noted the special condition added to the contract clearly refers to endorsed plans. They proposed a settlement date of 2 November 2020 because “plans are with Council, but have not yet been endorsed by Council, as previously advised”. NOH Legal replied, advising that VPJ and its lender had accepted the 21 October 2020 settlement date, were ready, willing and able to effect settlement at that time and reiterating that penalty interest would be payable under the contract of sale for any delay.
46On 20 October 2020, Mills Oakley emailed NOH Legal the sale of real estate nomination form and guarantee and indemnity relating to the sale of the land. NOH Legal responded that day, reiterating that VPJ was ready, willing, and able to effect settlement the next day. Mills Oakley replied (formalities omitted):
“The question is not whether you are ready to settle today, it is whether you have satisfied the condition in the contract. In the absence of ‘endorsed plans,’ which are specifically referred to, how do you claim the condition is satisfied?”
47NOH Legal replied that “given your client is the applicant under the permit and solely responsible for the obtaining of the endorsed permits, he cannot look to rely on that condition.” They said that the condition to obtain the endorsed plans was “not a fundamental one” which would allow Rezaie to refuse to complete the settlement.
48In reply, noting that the plans lodged with the Council two weeks prior had yet to be endorsed and that settlement was therefore not yet due under the contract, Mills Oakley offered a revised settlement date of 2 November 2020. NOH Legal did not respond.
49On 22 October 2020, a caveat was lodged on the land on behalf of Toorak claiming an interest as purchaser under the contract of sale.
50On 27 October 2020, Mills Oakley sent a statement of adjustments to NOH Legal with calculations made on the basis that settlement would occur on 2 November 2020. NOH Legal responded stating that Mills Oakley would “need to include penalty interest from 21/10/20”, and noting that they were “presently instructed [to issue] a rescission notice for your client’s failure to effect settlement on that day.” Mills Oakley replied on 28 October 2020 refusing to include penalty interest on the statement of adjustments, suggesting that “[in] the absence of endorsed plans the condition for settlement has not been satisfied and calling for settlement is premature.”
51On 30 October 2020, NOH Legal emailed Mills Oakley attaching a recission notice dated 30 October 2020 (“the recission notice”). In part, the recission notice provides the following:
“6. Due Date: 21 October 2020
7. Particulars of Default: Failure by the Purchaser to pay the balance of the Contract Price by the due date, namely $972,000.00 plus or minus adjustments following the effective satisfaction by the Vendor of the additional special condition of 24/12/19.
8. Interest Rate: 14% being the rate prescribed pursuant to Special Condition 3 and General Condition 32 of the Contract of Sale
9. Legal Costs: $600.00 plus GST
TAKE NOTICE that you are in default under the Contract referred to in the Schedule and that the particulars of default are specified in Item 7 of the Schedule.
TAKE FURTHER NOTICE that the Vendor intends to exercise its rights unless the default is remedied and interest on the amount due under the Contract at the rate specified in Item 8 of the Schedule are all paid within fourteen (14) days of the service of this notice upon you.
AND TAKE FURTHER NOTICE that the deposit will be forfeited by you.
AND TAKE FURTHER NOTICE that unless the said default is remedied within fourteen (14) days of the service of this notice upon you the Contract will be rescinded pursuant to General Condition 35 of the Contract.”
52On 2 November 2020, NOH Legal replied to Mills Oakley’s email of 28 October 2020, requesting an amended adjustment and settlement statement taking into account penalty interest, as well as legal costs of the rescission notice.
53On 11 November 2020, the plaintiffs lodged further amended plans with the Council (the “November plans”) correcting a minor issue raised by the Council planner relating to bins. The Council endorsed the plans as approved plans on 16 November 2020.
54On 16 November 2020, Mills Oakley emailed NOH Legal, attaching the endorsed plans and stating that they held funds in trust and could settle “as early as tomorrow”. NOH Legal replied that day, stating:
“With respect of settlement, I note that the Contract of Sale was ended pursuant to my client’s rescission notice of 30/10/20 with the 14 day period expiring on 13/11/20.”
55On 20 November 2020, Mills Oakley sent a letter to NOH Legal advising of their instructions to commence proceedings. The letter continues:
“If your client would like to avoid the cost of court proceedings and instead proceed with settlement of the Property, please let us know by 4:00pm on Monday 23 November 2020. Our clients stand ready, willing, and able to proceed with settlement.”
56On 10 December 2020, the plaintiffs commenced this proceeding seeking specific performance of the contract of sale and various declarations.
Lay Evidence
57The plaintiffs relied upon three lay witnesses, namely Rezaie, Khawari and Lo. VPJ relied on the lay evidence of Wieczorek and Polonski.
58VPJ submits that Rezaie had a propensity to reconstruct evidence to suit his own purposes and that the Court should make an adverse finding as to his credit. It relies on the following:
(a) Rezaie said that he had not dated the nomination document when he signed it, but that he had added the 20 November 2019 date “at or around this date and prior to the execution of the shareholders’ agreement for the First Plaintiff being entered into on 2 December 2019.” In cross-examination, he said that he did not date the nomination the day he signed it, but could not recall why not. The defendant submits this evinces that Rezaie “clearly backdated the nomination”.
(b) Rezaie’s evidence that there was “no point to gain” from the nomination date implies that he considers his gain when giving evidence;
(c) Rezaie’s evidence that he should have employed the words “substantially similar” in the special condition and that the use of “identical” was a mistake shows he was an inconsistent and unreliable witness;
(d) Rezaie conceded in cross examination that the special condition required him to obtain 6 x 2 bedroom dwellings and 2 x 3 bedroom dwellings;
(e) Rezaie failed to accept that the word “identical” was used because Kubiak told him that VPJ would not agree to any special condition unless that wording was used, despite that being “the very clear inference”;
(f) Rezaie reconstructed evidence, as shown by his refusal to admit an extension was required because he could not complete construction by 22 April 2020, and instead explaining he could not get a construction permit due to inadequate documentation; and
(g) Rezaie’s cross-examination was conducted in circumstances where Al Sharbati had not given evidence, but Rezaie’s evidence was “in the nature of ‘it’s all Al Sharbati’s fault’”.
59I am not persuaded that the attacks on Rezaie’s credit are made out. The mere fact that he disputed some matters did not make him an unreliable witness. I considered him to be an honest witness who was doing his best particularly given his language difficulties and his dyslexia. I do not consider he blamed Al Sharbati, for all issues, contrary to the defendant’s submission.
60VPJ similarly submits that adverse inferences should be drawn as to Khawari’s credit where he failed to put forward evidence (including discussions crucial to the case) when given the opportunity to do so. It is submitted that the evidence of Polonski and Wieczorek should be preferred to Rezaie and Khawari, as the latter two have shown themselves to be evasive. I am similarly unpersuaded that I should make any adverse findings about Khawari’s credit. I did not find him or his brother to be evasive.
61In any event, issues as to credit do not arise in this case in circumstances where the key issue is the construction of the special condition. This is a legal issue. The question of whether the permit was identical or not or whether there was an unreasonable delay turns on examination of the known objective facts. This involves a comparison of the relevant plans and an analysis of the steps taken to obtain the second permit, about which there was no real dispute on the evidence.
62VPJ submits that Lo’s evidence was deficient, in that she failed to give any evidence that Toorak was ready, willing, and able to settle at the relevant time, and failed to give any evidence as to the dispute between her and Rezaie. Ms Lo’s viva voce evidence was very brief. She confirmed that she had sworn an affidavit in this proceeding and that the contents of the affidavit remained true and correct. She was not cross-examined.
63Contrary to VPJ’s assertion, Lo confirmed in her affidavit that Toorak Homes was ready, willing and able to settle “at all times from 24 December 2019”, asserting that the only reason the loan was drawn down in February 2020 was to prevent it from lapsing. It is true that Lo did not give any evidence regarding any dispute she may have had with Rezaie, nor was she cross-examined on this issue. It is not readily apparent why there was any need to do so assuming there was such a dispute. In the absence of any cross-examination or other evidence to prove the contrary, I am not persuaded that the contents of Lo’s affidavit were not true and correct or that her evidence was deficient.
64The plaintiffs did not make any submissions as to the reliability or credibility of VPJ’s lay witnesses. I found Wieczorek and Polonski to be witnesses of truth. To the extent that they opined that a new permit should have taken three months, the plaintiffs objected to this opinion evidence which they say these witnesses were not qualified to give as it was a matter of expert evidence. I deal with this objection later in these reasons when dealing with the issue of breach by the plaintiffs for delay in prosecuting the second permit application.
Expert Evidence: Mr Thomas Saloumi
65VPJ also relies on the expert evidence of Mr Thomas Saloumi, a building regulations consultant employed by Ornina Design Pty Ltd. Two reports analysing the differences in the plans submitted to the Council for endorsement were submitted as annexures to the affidavits of Saloumi dated 9 April 2021 and 26 November 2021 (the “first report” and the “second report” respectively). Counsel for the defendant submitted at trial that the first report should be excluded as it was not made based on the code of conduct. The defendant relied solely upon the second report.
66During the hearing, Counsel for the plaintiffs objected to Saloumi’s evidence for lack of competency and expertise in the relevant field. I invited the parties to include in their written closing submissions their competing contentions about whether the Court should accept Saloumi’s evidence as an expert witness.
67The plaintiffs highlight the following:
(a) Saloumi obtained his bachelor’s degree in 2020 and has only lodged his application for a ‘limited’ building surveyor’s licence on 24 November 2021;
(b) Saloumi could not himself issue building permits because of his lack of qualifications; and
(c) Saloumi did not profess to be an expert as to whether the changes in the drawings accompanying a planning permit application relative to an existing approved plan would delay or impede an application.
68The plaintiffs do not take issue that the changes identified by Saloumi in his report were made. The plaintiffs agreed that the plans exhibited to Saloumi’s report as Exhibits 5 to 11 were admissible under s50 of the Evidence Act 2008 and should be received into evidence.
69The plaintiffs object to Saloumi’s report insofar as he gives expert opinion as to the significance of various changes to the plans. In his report, Saloumi breaks up the changes made into the categories of major, medium and minor and gives a definition of how he makes that assessment.
70VPJ rebuts the plaintiffs’ claim that Saloumi was not an expert. It relies on the “overwhelming strength of the evidence that [Saloumi] gave and the fact that he clearly had evidence in dealing with planning permit applications as well as the plans that accompany same.”
71I accept that Saloumi has had sufficient experience dealing with planning permit applications to give an expert opinion in this proceeding. The matters he was asked to comment on were limited in scope and relevant to his previous professional experience. He was able to give evidence in relation to how changes to plans and permits would require response from Council and articulated his experience in determining difference in permits. The changes he noted between the various plans submitted were not objected to by the plaintiffs. I consider he was, given his experience, sufficiently qualified to give an opinion as to the classification of such changes as he identified, being major, medium and minor. I therefore reject the plaintiffs’ submissions that Saloumi was not qualified to give an expert opinion and find that his report is admissible.
Jones v Dunkel inference – failure to call Al Sharbati
72The defendant argues that the Court should draw an adverse inference in accordance with Jones v Dunkel[1] because Al Sharbati was not called to give evidence by the plaintiffs. The defendant says that there was no evidence led as to why changes were made and at whose request they were made.
[1] (1959) 101 CLR 298 (“Jones v Dunkel”)
73The defendant contends that the Court can draw an inference that the changes made were not due to any requirement by the Council but rather because of a decision by the purchaser. Further, the Court is entitled to draw an adverse inference as to delay to infer that the purchaser’s conduct amounted to inexcusable delay as alleged by the vendor.
74The plaintiffs argue that no adverse inference should be made because they did not call Al Sharbati. They say the rule in Jones v Dunkel only applies where the party accused of not calling the relevant witness was required to explain or contradict something. The question of who prompted the changes is beside the point. Al Sharbati was acting at all times as the plaintiffs’ agent.
75The evidence before the Court demonstrates the changes that were made. The critical issue then is whether those changes caused the approval process to be delayed unreasonably and breached the special condition. I am not persuaded that it can be inferred that the reason Al Sharbati was not called was because Rezaie feared to do so or that he was required to explain or contradict something. Further, the inferences which the defendant seeks to draw because Al Sharbati was not called to give evidence go far beyond the usual finding that such evidence would not have assisted the plaintiffs’ case. I am not persuaded that a Jones v Dunkel inference should be made, contrary to the defendant’s submission.
Issues for determination
76The parties agreed that the following key issues were necessary for determination:
(1) What is the proper construction of the additional special condition inserted into the contract of sale?
(2) Does the contract of sale include the terms pleaded by the defendant at paragraph 7.1 of its defence dated 23 June 2021?
(3) If so, did the second plaintiff breach the contract of sale in the manner alleged by the defendant at paragraph 7.2 of the defence?
(4) If so, did the second plaintiff’s breach of the contract of sale amount to a repudiation of that agreement?
(5) If so, whether the second plaintiff’s breach or repudiation of the contract of sale subsisted when the defendant issued the default notice on 30 October 2020 or at any subsequent time?
(6) Did the plaintiffs waive any entitlement to rely upon the issue of endorsed plans as a condition of settlement, and if so, when?
(7) Whether the defendant validly terminated the contract of sale?
(8) If not, then:
(i)whether the defendant was obliged to complete the contract upon (or after) the issuance of the endorsed drawings under permit PlnA00042/20 by the City of Casey, and the second plaintiff thereafter calling for performance of the contract?
(ii)whether the second plaintiff is entitled to specific performance of the contract?
(iii)whether the second plaintiff is entitled to recover damages in addition to, or in lieu of, an award of specific performance, and if so in what amount?
(9) If not, then is the defendant entitled to retain the deposit paid by the second plaintiff under the contract?
(10) If the plaintiffs were in breach of the contract of sale but their conduct did not amount to repudiatory conduct, is the defendant entitled to any relief in accordance with paragraph 22.1 of the defence?
(1) What is the proper construction of the special condition?
77The special condition reads:
“Subjected to: A current endorsed plan and planning permit for 8 dwellings, consist of 6 x 2 Bed + study and 2 x 3 Bed provided, identical to Permit No.: PlnA00756/14”.
78The focus of the debate under this heading concerned the meaning to be attributed to the word “identical” as set out in the special condition. The plaintiffs submit the parties intended there be a substantial rather than exact conformity between the existing and new plans. Accordingly, they argue “identical” should be construed as meaning “substantially similar” or “substantially identical,” with the result that minor changes that did not delay the application would not breach the special condition.
79The plaintiffs say their commercial objective was to obtain a permit that was substantially similar to the existing permit, and that VPJ’s objective was to ensure the new permit substantially accorded with the existing permit to avoid delays in progressing the application. They submit that the parties must be taken to have understood that at least some minor changes would likely be made to the permit documentation in the course of the application. This awareness was reflected in the email of 23 December 2019 which Wieczorek sent to Rezaie in which the draftsman of the original 2015 plans recognised changes would be required.
80VPJ submits the special condition inures for the benefit of both parties. Therefore, the obligations cannot be waived by either party and strict performance of the special condition must be adhered to. It submits the special condition confers a benefit on the plaintiffs, namely the benefit of the endorsed plans and planning permit (such that they can immediately begin the development), while VPJ receives the benefit of expedient approval of the new permit and consequently settlement. It emphasises that Kubiak and Wieczorek particularly relied on the wording of the special condition, including the word identical. They understood from their meeting with Rezaie and Kharwari on 16 December 2019 that a new, identical permit application based on identical plans to the first permit would enjoy an expedient approval process.
81VPJ argues that the express use of “identical” in the special condition means that the term should be given its ordinary meaning. VPJ contends the specific wording of the special condition was employed by the parties to expedite the approval process, noting that mere approval of a previously approved permit should involve “a far shorter approval process than a completely new permit.” Moreover, VPJ notes that the special condition was inserted:
“…in circumstances where the settlement date was only 27 days from the date of the amendment with the original settlement only being 3 months from the date of execution of the agreement/Contract of Sale. There being no change to the settlement date the reasonable inference is that it was not a fresh permit but effectively a rollover of the existing permit.”
82Further, VPJ submits that the plaintiffs’ construction of the special condition does not accord with the evidence in this matter, inter alia:
(a) Wieczorek providing endorsed plans under the first permit and other documentation to Rezaie;
(b) the provision of a ‘no objection certificate’ relating to copyright from the draftsman of the original plans;
(c) Rezaie instructing Al Sharbati that he wanted to “apply for the same proposed plan” [meaning the same proposed plan as the first permit] and instructing Al Sharbati “[w]e do not require any changes to PlnA00756/14. Please refer to all the proposed plans provided…”;
(d) Rezaie agreeing in cross-examination that he believed that submitting the current design would be the fastest way to obtain the new permit;
(e) The parties inclusion of the word “identical” in the special condition;
(f) Rezaie agreeing in cross-examination that it was agreed at the 24 December meeting that the original plans would be used in the new application;
(g) Rezaie representing to Wieczorek that “the new application is the old design without any changes”; and
(h) Rezaie’s evidence that he believed “that if you apply for the same permit [from the Council] will take it faster.”
83VPJ submits that, while the parties may have understood that the Council may require changes, this is not a basis to change the meaning of “identical” but rather at its highest a proposition that “identical” should mean subject to any changes made at the reasonable direction of the Council.
Relevant legal principles relating to construction of contracts
84The key principles applicable to the construction of commercial contracts as stated in Victorian Court of Appeal judgments Adaz Nominees Pty Ltd v Castleway Pty Ltd[2] and Aventus Cranbourne Thompsons Road Pty Ltd v Home Consortium Leasehold Pty Ltd[3] were helpfully summarised by the plaintiffs in their written closing submissions:[4]
“(a) The objective approach of interpretation requires reference to the text and its ordinary meaning, together with the context, being the entire text of the contract including matters referred to in the text, and the purpose.
(b) These matters will ordinarily be identified by reference to the contract alone, but evidence of mutually known objective background circumstances relevant to the purpose is admissible no matter how clear the ordinary meaning of the words.
(c)Identification of purpose may allow admission of evidence of the genesis of the transaction, the background, and the context in which the contract was formed.
(d) A court is entitled to approach the task of interpretation on the assumption that the parties intended to produce a commercial result.
(e)If, after completion of this process, the language used in the contract is ambiguous or susceptible of more than one meaning, then evidence of surrounding circumstances external to the contract is admissible to assist with interpretation of the language in question.
(f) A court must have regard to all of the words used in the agreement so as to render them harmonious one with another and to ensure the congruent operation of the various components as a whole.”
[2][2020] VSCA 201 at [70] per Whelan and McLeish JJA and Riordan AJA
[3][2020] VSCA 199 at [36]-[38] per Kyrou, Niall, and Hargrave JJA
[4]Plaintiffs’ closing submissions dated 7 February 2022 at paragraph [3]
85In Mount Bruce Mining Pty Ltd v Wright Prospecting Pty Ltd, French CJ, Nettle and Gordon JJ state:[5]
“The rights and liabilities of parties under a provision of a contract are determined objectively , by reference to its text, context (the entire text of the contract as well as any contract, document or statutory provision referred to in the text of the contract) and purpose .
In determining the meaning of the terms of a commercial contract, it is necessary to ask what a reasonable businessperson would have understood those terms to mean . That enquiry will require consideration of the language used by the parties in the contract, the circumstances addressed by the contract and the commercial purpose or objects to be secured by the contract .
Ordinarily, this process of construction is possible by reference to the contract alone. Indeed, if an expression in a contract is unambiguous or susceptible of only one meaning, evidence of surrounding circumstances (events, circumstances and things external to the contract) cannot be adduced to contradict its plain meaning .
However, sometimes, recourse to events, circumstances and things external to the contract is necessary. It may be necessary in identifying the commercial purpose or objects of the contract where that task is facilitated by an understanding "of the genesis of the transaction, the background, the context [and] the market in which the parties are operating" . It may be necessary in determining the proper construction where there is a constructional choice. The question whether events, circumstances and things external to the contract may be resorted to, in order to identify the existence of a constructional choice, does not arise in these appeals.
Each of the events, circumstances and things external to the contract to which recourse may be had is objective. What may be referred to are events, circumstances and things external to the contract which are known to the parties or which assist in identifying the purpose or object of the transaction, which may include its history, background and context and the market in which the parties were operating. What is inadmissible is evidence of the parties' statements and actions reflecting their actual intentions and expectations.
Other principles are relevant in the construction of commercial contracts. Unless a contrary intention is indicated in the contract, a court is entitled to approach the task of giving a commercial contract an interpretation on the assumption "that the parties ... intended to produce a commercial result" . Put another way, a commercial contract should be construed so as to avoid it "making commercial nonsense or working commercial inconvenience" .
These observations are not intended to state any departure from the law as set out in Codelfa Construction Pty Ltd v State Rail Authority of New South Wales and Electricity Generation Corporation v Woodside Energy Ltd . We agree with the observations of Kiefel and Keane JJ with respect to Western Export Services Inc v Jireh International Pty Ltd.”
[5](2015) 256 CLR 104 at [46]-[52] (French CJ, Nettle and Gordon JJ), citations omitted
86The subjective intentions of the parties are not admissible when construing the special condition. Therefore, the views of the parties as to what they thought was meant by the term “identical” are irrelevant when construing the clause. The analysis to be undertaken by the Court is an objective one and involves an assessment of what a reasonable businessperson would have understood the clause to mean having regard to the commercial objectives of the parties.
87The commercial purpose the parties wished to achieve was to procure a new permit quickly so that settlement of the contract of sale could proceed once the new permit and plans were issued, in circumstances where the first permit annexed to the contract of sale had lapsed. In my view, a reasonable businessperson in the position of the parties would have understood the special condition to mean that the new permit be one which was not literally “identical,” because it could be accepted that the Council’s requirements may have changed since the first permit was issued in 2015 and other adjustments could be required. If VPJ’s case is accepted, then any alteration whatsoever to the first permit, however minor, would result in the new permit not being identical and therefore in breach of the clause. In my view, such a result would be commercially unworkable. Accordingly, I construe the word “identical” in the special condition to mean substantially similar which produces a commercial result.
(2) Does the contract of sale include the terms pleaded by the defendant at paragraph 7.1 of its defence?
88VPJ pleads at paragraph 7.1 of its defence that the contract of sale was varied expressly by way of the special condition and by the following terms said to be partly express and partly implied:
“(b) the second plaintiff was obliged to obtain a planning permit that was identical to permit No: PinA00756/14 …;
(c) the second plaintiff would make that application and prosecute it in an expeditious manner;
(d) the second plaintiff would obtain the permit within a reasonable time.”
89VPJ pleads that these terms are necessary to be implied into the contract in order:
“…to give business efficacy to the agreement, or by law, or by the conduct of the parties in circumstances where the purchase price was reduced by $10,000, the Defendant gave the Second Plaintiff all original application documents submitted to the Council in relation to the Planning Permit in electronic form and the Second Plaintiff made the application for a permit.”
90The test for implied terms is well established and set out in BP Refinery (Westernport) Pty Ltd v Shire of Hastings.[6]
[6] (1977) 180 CLR 266
91VPJ claims that it is a necessary inference of the implied terms that the permit be obtained in an expeditious manner and that all forms and applications would comply with reasonable council requirements and be complete, because a failure to do so would undoubtedly lead to delay.
92VPJ described the special condition as incorporating an “implied covenant that the application for a permit process be conducted in an expeditious manner and completed in a reasonable time” (the “implied covenant”).
93VPJ submits the implied covenant is necessary to give business efficacy to the contract of sale and to ensure that the process was conducted in an expeditious manner to comply with the VPJ’s wish for settlement to occur as soon as possible. VPJ also submits the terms can be implied by reason of the obligation upon a party to do all acts that are necessary to entitle the other contracting party to a benefit under a contract.[7]
[7]Citing Secured Income Real Estate (Australia Limited) v St Martins Investments Pty Ltd (1979) 144 CLR 596 at 607 (Mason J)
94VPJ submits the plaintiffs do not deny that Rezaie agreed to obtain the second permit. Further, it submits the Court can consider the extrinsic circumstances to determine whose obligation was to obtain the permit and points to the following as suggesting that the obligation fell squarely on Rezaie:
(a) Rezaie deposed that he agreed to obtain the second permit;
(b) the reduction in the purchase price of $10,000;
(c) the evidence that Rezaie was the maker and controller of the application for the second permit;
(d) Rezaie’s active discouragement of VPJ’s representatives engaging in the application process; and
(e) Polonski’s rejection of any obligation on the part of VPJ to obtain the second permit.
95The plaintiffs submit that the implied covenant is unwarranted as it does not reflect the evident intentions of the parties. Where the special condition was inserted into the contract of sale on 9 January 2020 (being 11 days before settlement), a reasonable timeframe for the procurement of the new permit was greatly in excess of 11 days. The plaintiffs emphasise that, contrary to the defendant’s pleading, the special condition imposes obligations on both parties. In accordance with Perri v Coolangatta Investments Pty Ltd,[8] they submit that the special condition should be construed as requiring procurement of the new permit and plans within a reasonable time, with settlement to occur shortly thereafter.
[8] (1982) 149 CLR 537
96The plaintiffs submit that the special condition is contingent, and that parties to a contingent condition are taken to have impliedly promised to do what is reasonably necessary to enable the condition to be fulfilled, or at least to refrain from action that would prevent its fulfillment.[9] They submit that both parties have an implied duty to do whatever may be reasonably required of them to satisfy the condition.[10]
[9]Citing Cheshire & Fifoot’s Law of Contract, Seddon, and Ellinghaus (10th ed) at [20.16]; see also Secured Income Real Estate (Aust) Ltd v St Martins Investments Pty Ltd (1979) 144 CLR 596 at 607
[10]Citing Kennedy v Vercoe (1960) 105 CLR 521 at 529 (Dixon CJ, Kiddo and Windeyer JJ)
97The plaintiffs accept that the special condition required Rezaie to obtain the permit within a reasonable time. To that extent then such a term can be implied but they disagree about what time period can be considered reasonable in this context.
98The special condition does not expressly identify who was to obtain the permit nor is any time frame stated. But there is no dispute on the evidence that the parties agreed that Rezaie would have the carriage of making the planning application in accordance with the terms of the special condition. Rezaie did in fact then lodge the planning application and dealt with the Council. Consequently, it can be accepted that there was an implied term that Rezaie would procure the permit in accordance with the special condition. The plaintiffs concede there was an implied obligation that he would do so within a reasonable time. In my view, a term can be also implied that he prosecute the application with expedition, which in effect is no different to saying that he should do so within a reasonable time.
(3) Did the second plaintiff breach the contract of sale in the manner alleged by the defendant at paragraph 7.2 of the defence?
99VPJ pleads in paragraph 7.2 of its defence that, in breach of his obligations, Rezaie:
(a)made an application for a planning permit that was not identical to the first but contained 265 changes;
(b) obtained the second permit that was not identical to the first permit but contained 297 changes;
(c) did not make the application until 27 January 2020;
(d)failed to properly include all necessary documents in the second permit application;
(d)failed to respond to requests from the Council in an expeditious manner taking approximately 11 months to obtain a permit that ought to have taken approximately 3 months
100It is then alleged in paragraph 7.3 of the defence that by reason of Rezaie’s repudiatory conduct, Rezaie evinced an intention to be no longer bound by the contract of sale or to fulfill it only in a manner substantially inconsistent with his obligations and thereby repudiated it.
101VPJ says the second permit was not identical to the first permit as:
(a) the application filed for the second permit was for 5 dwellings of 2 bedrooms and 3 dwellings of 3 bedrooms, whereas the special condition was for 6 dwellings of 2 bedrooms and 2 dwellings of 3 bedrooms: and
(b) there were 265 changes to the plans accompanying the application, of which 100 were major, 81 were moderate and 84 were minor.
102VPJ relies on the expert evidence of Saloumi on this issue. Saloumi was asked by VPJ to carry out a comparative analysis of the first plans which formed part of the first permit with the various plans submitted by the plaintiffs in their application for the second permit, and to prepare a report outlining any differences between the plans. In his second report, Mr Saloumi identifies 265 changes from the first plans to the January plans. Of these changes, he identifies 100 as “major”, 81 as “moderate” and 84 as “minor” changes. As a result, the January plans lodged with the Council were not identical to the first plans endorsed by the Council as a part of the first permit. Further, he notes that the plans eventually endorsed under the second permit included a total of 297 changes, 108 “major”, 90 “moderate” and 99 “minor”, with major changes in every planned dwelling. Therefore, Saloumi concludes the second permit is not identical to the first.
103Mr Saloumi describes the consistency matrix of minor, moderate or major changes employed in his reports as follows:
“(a) minor – such changes do not require secondary consent or an amended planning permit with such changes consisting of (but not limited to); minor reductions in floor areas; changes from sliding windows to awning windows; reduction in roof pitch; slight re arrangement in walls and minor increased setbacks from the boundary.
(b)moderate – such changes would require a secondary consent from the Council with such changes consisting of; changes to window from a single window to two windows; combined laundry/toilet separated into separate rooms; window sizes decrease; and internal wall re-arrangements.
(c) major – such changes would require a secondary consent from the Council and potentially an amendment to any planning permit, with such changes constituting of; setbacks of buildings closer to the front, side or rear boundaries; increased floor area; addition of windows not shown on the previously approved plans; external wall and roof re arrangements; re-arrangement of floor spaces; increase of building heights; deletion of water tanks; and changes of external façade such as changes of façade materials.”
104In the report, Saloumi goes into detail of each of the changes made between each iteration of the plans. He summarises some of the major changes identified as including:
“- Changes to floor area to all units throughout;
- Re-design of Dwelling 7 & 8 first floors with the addition of a habitable room and balcony
- Additional windows being added to the dwellings 1-7;
- External wall changes and re-configurations to units throughout;
- The general arrangement of the roof of each dwelling being significantly altered;
- Changes to the types of cladding materials being used on all first floors to all units and ground floor porches;
- Window size changes to all units throughout;
- Additional or deletion of windows to all dwellings throughout;
- Setback changes to all units throughout.”
105VPJ submits that Saloumi effectively summarised Rezaie’s failures in making the second permit application in the following excerpt of his viva voce evidence:
“So when you are … doing applications for multi-unit developments… it’s very typical that – all Councils will always require the most typical stuff. You’d require your [application] form, you’d require your drawings, you require – especially when there’s multi-units on there they will typically require..... [an] assessment … which you can get from an independent planning consultant. … that’s just a phone call, essentially, to the Council’s planning department to, essentially, determine whether or not they require it. It’s very simple for an arborist’s report. Every – basically, every single Council now will require an arborist’s report, whether you’ve got a – when you’ve a big tree on or near your property and the building.
…
Yes. You know, and then, so you’ve got your – you could always contact an arborist’s report, you’d always submit your plans, you’d always submit your application forms and your relevant titles. So in my opinion, a lot of the stuff that are on this preliminary assessment report should have been done… as part of the original application… most of the stuff here is quite typical that for the original planning permit application to be provided – because you, essentially, would know what the Council was going to request. So if – if you have – so the fact that they only submitted, essentially, the – the planning – the planning permit application form, some incomplete drawings – in my opinion, they’re not developed drawings, so they’re just preliminary drawings – and the relevant certificate of title, this is what my assumption is of what they’ve assessed.
They, essentially, then, had to create this RFI rather than going straightaway and internally – internally reviewing the – the entire permit itself. So this – this entire RFI letter, in my opinion, is what you were saying as the delay..”
106The plaintiffs accept the plans submitted to the Council differed from those endorsed under the first permit in the respects identified in the Saloumi report. However, they contend the changes were not of sufficient significance to constitute a breach of the contract of sale because the changes did not delay the permit application.
107The plaintiffs note the Council itself directed material changes to the plans, and accordingly, any amendments prompted by the Council ought not amount to a breach of contract. They rely on the RFI letter sent by the Council to the plaintiffs dated 24 February 2020, suggesting that changes were being made to the submitted plans on the request of the Council that were equally applicable to the design contained in the first permit.
108VPJ contends it was inevitable that the plaintiffs would not obtain an “identical” permit where the application lodged by the plaintiffs did not contain plans which were identical to the first plans, and that any requests by the Council are therefore irrelevant.
109VPJ submits that while Rezaie believed that the second permit would only take two to three months to obtain, almost 11 months passed between the insertion of the special condition into the contract and the grant of the permit. It submits this is not a reasonable timeframe in the circumstances. VPJ notes that none of the changes incorporated in the subsequent permit applications were made at the request of the Council and therefore constitute a breach of the special condition.
110VPJ argues that the plaintiffs’ failure to adhere to this implied condition caused inexcusable delay in obtaining the second permit, including by:
(a) failing to include relevant documents in the application which ought to have been submitted by any competent applicant;
(b) changing the configuration of the dwellings from the first permit in a manner which required it to be reassessed by Council and hence caused delay;
(c) failing to file the documents in a timely manner and requiring two extensions to the filing deadline; and
(d) taking over three months to obtain the arborist’s report required by the Council.
111The plaintiffs point to the fact that the application was a significant enterprise that took place over several months and required the submission of a substantial volume of complex documents and the input of several Council officers and consultants. The significant milestones in the progress of the application were summarised by the plaintiffs as follows:
(a) On 21 January 2020, Al Sharbati supplied his draft of the application drawings to the plaintiff by email;
(b) On 23 January 2020, Rezaie requested a copyright letter confirming that the design contained in the 2015 plans could be used for the new application. On 23 January 2020, the draftsman that had prepared the 2015 plans provided the requested copyright approval. The copyright letter was forwarded to Al Sharbati by Rezaie on the same day.
(c) The application was lodged with Council on 27 January 2020. The Council sent a letter confirming receipt of the application on 31 January 2020.
(d) On 31 January 2020, Council issued its internal strategic maintenance report with respect to the application. The report stated that two nature strip trees would have to be provided in connection with the report, and that Telstra would have to be contacted regarding the relocation of a services pit (or the incorporation of the pit into the crossing). The report also stated that a crossing permit would need to be obtained and the existing crossing removed.
(e) On 6 February 2020, Council provided its internal traffic management report in connection with the development. The report stated that the proposed cross-over would have to be amended, together with the height of the garages, the access driveways, the lighting, the signage, the rubbish bin collection points, and the visitor car spaces.
(f) On 24 February 2020, the Council provided a letter requesting further information and documents to Al Sharbati, which sought the following:
(i)a written submission pertaining to clause 55 of the Casey Planning Scheme;
(ii)a neighbourhood description specifying the surrounding development, built form, and architectural styles;
(iii)a site description describing the shape, size, orientation, levels, buildings, open spaces and habitable windows, solar access, views, street frontage features, and other notable site characteristics;
(iv)a design response describing how the development proposal responded to various planning requirements;
(v)further details on the plans to show certain setbacks and dimensions;
(vi)amendments to the elevations to show finished floor levels and building height; and
(vii)an arborist’s report.
(g) The letter also noted that:
‘The development would benefit for the proposed plans to address the reserve in a complimentary manner such as balconies facing the reserve, habitable room windows (living room, bedroom windows) to face the reserve.’ It was also stated that: ‘the first floor of all proposed buildings with (sic) benefit with further articulation with variation of window sizing to help break up the overall built form along the eastern and western boundaries.’
(h) On 27 February 2020, the Council provided its urban forest renewal report, which indicated support for the application, but recommended the imposition of various conditions requiring the erection of tree protection barriers and fences, and the removal and replacement of certain trees and bushes.
(i) On 9 March 2020, a surveyor was engaged and instructed for the purposes of preparing the survey documents sought by Council. Al Sharbati instructed the surveyor to follow the levels in the existing 2015 plans: ‘I have attached the approved previous application we need to follow the same FFL [finished floor level]…the client instructed to follow the same FFL’. The surveyor produced the surveys on 8 April 2020 and 26 April 2020.
(j) On 26 March 2020, Council provided its internal waste management report, which required an amendment to the site plans to show bin storage areas within the private lots and kerbside collection locations.
(k) On 7 and 20 April 2020 the purchaser sought a quote for the preparation of an arborist report from DB Horticulture. On 20 April 2020, DB Horticulture provided a quote. On 22 May 2020, the arborist produced the report.
(l) On 27 April 2020, a detailed town planning report comprising some forty-six pages was produced by Innovative Planning for submission to Council.
(m) On 3 June 2020, the arborist’s report and an updated set of plans and associated documentation was provided to Council by Al Sharbati.
(n) On 23 June 2020, the Council issued a further request for information which was answered by Al Sharbati in responsive emails sent on 29 June 2020 and 2 July 2020.
(o) On 29 July 2020, the Council decided that adjoining landowners should be notified of the application. On 5 August 2020, Council sent letters to sixteen adjoining owners in order to provide such notice.
(p) The second permit was issued by Council on 23 September 2020 and provided to Al Sharbati on 24 September 2020.
(q) Plans were submitted for endorsement on 8 October 2020 and receipt was acknowledged on 9 October 2020.
(r) Updated plans were submitted to Council on 11 November 2020 to address a small issue concerning bin collection that had been raised by Council that day. The endorsed plans were issued on 16 November 2020.
112The plaintiffs contend that no evidence was given as to the time that competent consultants would have taken to prepare the application documents and liaise with Council to progress the application. The plaintiffs ask rhetorically how long should it have taken to prepare a title re-establishment plan, or a feature survey plan, or a level and contour survey? What time would be required to procure an easement plan, or a street plan, or a plan of survey, or to amend the cross-over design, or the garage heights, or the driveways, or the lighting, signage, rubbish collection points, and car spaces? How long does a planning report running to nearly fifty pages normally take to prepare? What about an arborists report, or the amendments to the plans that were prompted by Council? Further, how do these steps interrelate? Can one proceed with the preparation of the planning report and site plans whilst significant amendments to the development plans that were directed by Council are outstanding? To what extent can the required steps be conducted contemporaneously rather than consecutively? The plaintiffs submit that none of these matters were addressed by Saloumi and it is not possible to compare the time taken to obtain the second permit and endorsed plans with the time it should reasonably have taken. The Court cannot therefore determine whether any undue delay has occurred and if so, the magnitude of the delay.
113The plaintiffs note the highpoint of VPJ’s case respecting these matters was not addressed by Saloumi in his expert reports, but during cross examination. The evidence is extracted at paragraph 44 of VPJ’s written submissions in closing. Saloumi’s view was that some of the documents submitted in response to the letter of 24 February 2020 should have been prepared prior to lodgement of the application:
“[I]n my opinion, a lot of the stuff that are on this preliminary assessment report (ie, the 24 February 2020 letter) should have been done, essentially, a – before, like, should have been done as part of the original application’.
114Assuming this was correct, no evidence was given by Saloumi as to the extent by which the lodgement of the application would have been delayed in order to procure the relevant documents before the application was lodged. All of the documents would still have needed to be procured even if they were prepared before the application was first lodged. Put simply, the nature, extent, and detail of the evidence led in support of the delay claim fell substantially short of what was required for the Court to make any rational assessment as to the existence and extent of any undue delay.
115What constitutes a reasonable time is assessed at the date of the contract,[11] being 24 December 2019; the date of the inclusion of the special condition.
[11]Donau Pty Ltd v ASC AWD Shipbuilder Pty Ltd [2019] NSWCA 185 at [109], applying Agricultural and Rural Finance Pty Ltd v Gardiner (2008) 238 CLR 570 at [35]
116The plaintiffs submit that courts have applied the concept of a reasonable timeframe generously and amply, citing Dixon CJ, Kitto and Windeyer JJ’s finding in Kennedy v Vercoe that the delay necessary to exhaust the relevant contingent condition would have to be “so unreasonable in its length as to involve a complete failure of performance in an essential provision of the contract.”[12] The plaintiffs contend it follows that the special condition was to expire when, and only when, the delay in its satisfaction had become so unreasonable as to be inequitable and to indicate a complete failure of performance.
[12] (1960) 105 CLR 521 at 527 (Dixon CJ, Kitto and Windeyer JJ)
117I accept the plaintiffs’ submissions on this point. Having regard to the steps that they identified and the timeline set out above, I am not persuaded that the plaintiffs failed to act with reasonable expedition or delayed unreasonably. On the contrary, the plaintiffs in my view were actively pursuing the permit application following the agreement to add the special condition on 24 December 2019. The contract of sale was formally amended on 20 January 2020 to include the special condition. The application was lodged on 27 January 2020. The Council sent a request for information on 24 February 2020 allowing for a response by 6 April 2020. Even if the plaintiffs had not sought an extension from 6 April 2020, it would still have taken some further time before the Council’s approval was forthcoming. The permit was approved in September 2020. Whilst there may have been some gaps along the way until the final plans were endorsed in November 2020, I am not persuaded that any delays were caused by a lack of reasonable expedition on the part of the plaintiffs.
118The other insurmountable difficulty with the defendant’s case is that there is insufficient evidence from which the Court could draw an inference there was unreasonable delay by the plaintiffs. This is because there is no yardstick before the Court to enable it to measure how long the process should have taken had it been done more expeditiously when compared with the plaintiffs’ actions. In the absence of evidence as to what would have been a more reasonable timeframe, the allegation that the plaintiffs delayed unreasonably has not been proved.
119In addition, as Saloumi seemed to suggest in his oral evidence that various steps could have been taken before the application was lodged which would have speeded up the permit process, it would obviously still have taken some time for these steps to take place. There is no evidence before the Court about how long these steps would have taken and if so, when an application could have been lodged and when approval would have been given by the Council assuming its requirements were met. There being an absence of evidence about these matters, I am not satisfied that the defendant proved the plaintiffs delayed unreasonably by lodging their application in January 2020 as opposed to obtaining further documentation and lodging their application at some later uncertain date.
120The opinions expressed by Wieczorek and Polonski that the permit should have been obtained within three months is lay opinion and not admissible under s76 of the Evidence Act 2008. But even assuming it was admissible, I am not satisfied that any weight should be placed on this evidence. Their views were expressed very generally and did not descend into the particular facts of this application. Accordingly, such evidence is not probative in my view of establishing that the plaintiffs in this case delayed unreasonably.
121Whilst the plaintiffs do not dispute that the changes identified by Saloumi were made, I am not persuaded that this factor alone provides a basis for finding that Rezaie repudiated the contract of sale. Implicit in this argument is that the changes made caused delay in the approval process such that the delay became inequitable. The difficulty for the defendant is that it has not been proved to my satisfaction that these changes to the plans resulted in an unreasonable delay which would not have occurred had no changes been made. There is simply no evidence before the Court upon which such a finding could safely be made.
122Overall, I am not persuaded on the evidence that the defendant proved the plaintiffs breached the special condition by failing to act expeditiously or caused such a delay that was sufficiently inequitable to give rise to a finding that Rezaie repudiated the contract of sale.
(4) Did the second plaintiff’s breach of the contract of sale amount to a repudiation of that agreement?
123VPJ says that, as the special condition was a negotiated term between parties, the plaintiffs’ application for the second permit showed a contumelious disregard for the bargain struck between the parties. VPJ argues this conduct evinced an intention not to be bound by the contract of sale, thus amounting to repudiation, which was accepted by VPJ and relied upon when it served the recission notice.
124The plaintiffs point to the fact that Rezaie wrote to Al Sharbati on 30 December 2019 asking him to submit the same proposed plans as had been lodged previously with the first permit. The plaintiffs argue that this evidence is relevant to rebut any suggestion that the plaintiffs wished to repudiate the contract.
125I am not satisfied that the defendant has proved that Rezaie repudiated the contract of sale by lodging the amended plans for the second permit. Rezaie was desirous of the contract of sale proceeding and was taking active steps to secure a new permit. I do not consider he evinced an intention to be no longer bound, quite the contrary – he wanted the deal to go ahead.
126Further, as the plaintiffs note the defendant did not communicate any acceptance of the alleged repudiation by the plaintiff. Termination for repudiation only happens when the promisee decides to terminate performance by accepting the repudiation.[13] There was no evidence of any acceptance by the vendor of the alleged repudiation. In that case, the obligations under the contract of sale were not terminated. The notice of recission was ineffective for this purpose.
[13] Heydon, Heydon on Contract, (Thomson Reuters, 2019) at [24.410]
127For these reasons and given my finding under the preceding issue that Rezaie did not engage in the repudiatory conduct alleged in the defence, it follows then that Rezaie did not repudiate the contract of sale. Even if he had, the vendor did not accept the repudiation. Consequently, the answer to this question is no.
(5) Did the second plaintiff’s breach or repudiation of the contract of sale subsist when the defendant issued the default notice on 30 October 2020 or at any subsequent time?
128I have already determined that Rezaie did not repudiate the contract of sale. The question of whether he was in breach as at 30 October 2020 or thereafter falls for consideration under issue (7) below.
(6) Did the plaintiffs waive any entitlement to rely upon the issue of endorsed plans as a condition of settlement, and if so, when?
129In the alternative, VPJ pleads at paragraph 13.1 of its defence that the plaintiffs waived the requirement to obtain endorsed plans from the Council and were obliged to settle without endorsed plans. It relies on two emails sent by Mills Oakley to NOH Legal. The first was sent at 2.13pm on 20 October 2020, which said (formalities omitted):[14]
“I have now reviewed the background and obtained instructions. The special condition added to the contract clearly refers to endorsed plans, see attached. We are instructed that the plans are with Council, but have not yet been endorsed by Council, as previously advised.
However, while reserving his rights, our client would like to work with your client to settle as soon as possible. To that end we have been instructed to accept your DOL and PEXA invitations.
We will shortly forward a nomination form for a company and guarantees from its directors. We propose a settlement date of 2 November 2020, in less than 2 weeks’ time. We hope that your client can accept that this is an appropriate compromise.
If you confirm this date we will forward adjustments for your review.”
[14]CB 200
130The second email from Mills Oakley to NOH Legal, sent at 10.08am on 21 October 2020, relevantly provides:[15]
“Our client’s offer to settle on 2 November 2020 is not subject to the plans being issued by that time and therefore provides your client with certainty in case Council raises further issues.
If your client rejects this proposal, our client reserves its right under the contract.”
[15]CB209
131VPJ submits that the plaintiffs waived their right to rely on the special condition, as evidenced by their preparedness to accept the PEXA invitations and settle forthwith. It notes that after it had issued its notice of rescission, the plaintiffs sought to rely upon the special condition as not being fulfilled as precluding their obligation to settle. However, given the plaintiffs had previously waived the special condition, VPJ contends they could no longer rely upon it and they were obliged to settle. The refusal constitutes repudiation. For this reason, VPJ was entitled to regard the agreement as at an end once the plaintiffs failed to pay the monies due on 13 November 2020.
132The plaintiffs submit that none of the emails relied on constitute a waiver of the benefit of the special condition. Rather, they say the emails merely assert that the condition remained unsatisfied and their solicitors were evidently trying to resolve the impasse in order to avoid a costly battle regarding completion of the contract of sale. Moreover, they note that their solicitors had relied steadfastly on the special condition, and agreed to settle only when the permit and endorsed drawings had issued. There was no intimation, express or implied, that Rezaie would agree to complete whilst these matters remained outstanding (save for the offers of early completion that were not accepted by NOH Legal).
133The doctrine of waiver is underpinned by the notion that equity precludes relief in cases where the enforcement of rights would be unconscionable.[16] In general, waiver is constituted by the deliberate, intentional, and unequivocal release or abandonment of the right that is later sought to be enforced.[17]
[16] P W Young, C Croft, and M L Smith, On Equity (Lawbook Co, 2009), [17.160]
[17]McGorlick v Palmer [2022] VCC 1229 at [84]. See, also, Zhang v Shanghai Wool and Jute Textile Co Ltd (2006) 201 FLR 178 at [14] (Chernov JA, with whom Ashley JA and Bongiorno AJA agreed), citing Commonwealth v Verwayen (1990) 170 CLR 394, 423–424 (Brennan J), 473 (Toohey J), 482 (Gaudron J) and 497 (McHugh J).
134I agree with the plaintiffs that the emails identified above do not amount to a waiver of their right to rely on the special condition. Their solicitor explicitly reserves their rights under the contract in their communications, and far from proffering a “deliberate, intentional an unequivocal release” of that right, merely offers a practical solution in the circumstances. Consequently, the pleaded defence of waiver is not made out.
(7) Did the defendant validly terminate the contract of sale?
135The defendant relies upon the recession notice as entitling it to terminate the contract of sale. But if that was invalid, the defendant claims it was entitled to terminate on other grounds.
136VPJ pleads it validly terminated the contract of sale on 14 November 2020, after serving the recission notice on 30 October 2020, and the plaintiffs failing to pay the balance of the purchase price within 14 days in compliance with the notice of recission.
137VPJ submits the recission notice relies upon the plaintiffs’ breach in failing to pay the balance of the contract price by the due date on 21 October 2020 following the effective satisfaction of the special condition by VPJ. It says it made time of the essence in its email of 14 October 2020, when it required settlement within seven days. It is agreed that the plaintiffs did not pay the balance of the monies due on 21 October 2020.
138VPJ submits there is no defect in the rescission notice, as all remaining obligations under the special condition lay upon the plaintiffs. By providing the original permit documents, and the no objection certificate on 23 January 2020, VPJ had done all it needed to do to satisfy the special condition.
139VPJ relies upon Shepherd v Felt Textiles of Australia Ltd[18] as authority for the proposition that termination for breach based on an invalid ground is not necessarily ineffective, if termination is in fact justified on another ground. This is so even though the promisee is unaware at the time of a valid ground for termination, but only becomes aware of it later.[19] The plaintiffs accept this as a proposition of law, but submit that this principle does not extend to cases such as this one where there is a specific contractual requirement to issue a notice, under clause 34 and 35, specifying the default as a pre-condition of termination. Citing the judgment of the Full Court of the Victorian Supreme Court in Walters v Cooper,[20] the plaintiffs submit the only relevant circumstance in which the service of a default notice is not required as a precondition to termination of a contract, and where Shepherd would consequently apply, is where the defaulting party has repudiated the agreement. I have already found that the plaintiffs did not repudiate the contract of sale.
[18](1931) 45 CLR 359, 370 (“Shepherd”); Castaway Avenue v CSC1957 Investments [2022] VSC 547at [54].
[19] Heydon, Heydon on Contract, (Thomson Reuters, 2019) at [24.420]
[20] [1967] VR 583 (Winneke CJ, Smith and Pape JJ).
140VPJ submits the special condition is an essential term such that any breach would justify termination. Settlement could not be effected until the Council granted a new permit and that adherence to the special condition therefore goes to the root of the contract. As the special condition was an essential term, VPJ submits it was entitled to terminate the contract of sale upon even a minor breach.[21]
[21]D closing submissions filed 22 December 2021 at [149], citing Koompahtoo Local Aboriginal Land Council v Sanpine Pty Ltd (2007) 233 CLR 115
141In the alternative, VPJ submits that the plaintiffs’ breach of the special condition constituted a material breach of the contract of sale. It submits that the special condition was not strictly complied with as the plaintiffs’ permit application contained 265 changes from the first permit, such that the application was not identical, nor substantially the same.
142Applying Androvitsaneas v Members First Broker Network Pty Ltd,[22] VPJ submits that the plaintiffs’ breach had a serious effect on the benefit it was to enjoy (namely the benefit of the purchase price of the land on the settlement date). The breach is significant in that it severely delayed the permit application process and consequently settlement.
[22] [2013] VSCA 212 (Redlich JA, Priest JA, Macaulay AJA)
143The plaintiffs notified VPJ on 19 October 2020 that the plans had been lodged with the Council for endorsement and that settlement would occur once the endorsed plans were issued. They submit that VPJ took no action to terminate the contract at any time proximate to the alleged repudiation, only issuing the rescission notice once the new permit was issued and the plans had been submitted for endorsement. The plaintiffs claim that at this point they were ready, willing and able to settle once the plans were endorsed and that this would occur imminently. Rezaie offered to tender on the same day the plans were endorsed, which was only three days after the default notice expired. Neither the default notice nor any of the surrounding communications from NOH Legal alleged that Rezaie was in repudiation by virtue of him failing to apply for an identical permit but rather alleged that the special condition had been satisfied.
144The plaintiffs contend that the recission notice is invalid and ineffective, and that they were not obliged to complete the contract of sale until both a planning permit and a current endorsed plan for the development was issued, which it had not been by 30 October 2020.
145The plaintiffs argue it is clear from the wording of the special condition that neither party was assuming any obligation to ensure that the condition was fulfilled but rather simply agreeing that the completion of the contract of sale was “subject to” the procurement of the relevant permit and endorsed drawings. The special condition was in effect a contingent condition or “condition precedent” to settlement. Such conditions do not impose a binding duty on either party to fulfill the condition. As Brennan J said of the condition in Perri v Coolangatta Investments Pty Ltd:[23]
“This is not a case where the purchasers promise that a condition precedent to the obligation to complete will be fulfilled ... where the occurrence of an event upon which the obligations to complete are contingent is not promised, the mere non-occurrence of the event is no breach of contract.”
[23](1982) 149 CLR 537 at 566 (Brennan J)
146VPJ submits that the plaintiffs’ position is a classic “bootstrap” argument that says they were not obliged to settle as they had not fulfilled their obligations. It submits the plaintiffs’ construction of the rescission notice is invalid, where the obligation to obtain the second permit lies with the plaintiffs and not VPJ.
147In my view, the recission notice was defective and therefore invalid, with the consequence that the contract of sale remained on foot when the notice expired.[24] The defendant is stuck with the notice it served. It did not, for example, seek to terminate on the grounds of any alleged breach by the plaintiffs of the special condition. At the time it was served, the condition precedent to settlement had not yet occurred, namely the issue of a new permit together with endorsed plans. The second permit had been granted but the purchasers were still waiting on approval from the Council on the November plans. This was a matter known to the defendant. The defendant attempted to make time of the essence but in circumstances where the call for settlement was premature as the special condition was not fulfilled. It was not a case of the vendor having met its obligations, if any, but whether the special condition had been satisfied. Once the special condition was satisfied, settlement could then be called for.
[24]K7 Developments Pty Ltd v Abbotsford Estates Pty Ltd [2021] VSC 422 at [121] (Forbes J), citing Catley v Watson (1981) V Conv R 54-003
148The plaintiffs do not dispute the proposition that a fundamental term of a contract is one of such importance that any breach will entitle the innocent party to terminate the agreement, even of the breach is minor in its extent and consequences.[25] But they say that the special condition is not such a fundamental terms for two reasons. The first is that the parties did not include in the special condition the implied obligation to use reasonable endeavours to procure the second permit and did not expressly agree that any breach of the implied obligation would justify immediate termination. If the parties had intended this outcome, they would have said so in the agreement. The second reason is that the if term was of such a nature, then any insignificant breach such as a minor delay could have resulted in immediate forfeiture. The plaintiffs contend that the parties were unlikely to have intended such drastic consequences for minor breaches of the implied duty, particularly as the contract of sale contained terms that entitled the innocent party to terminate on giving 14 days written notice of any default.
[25] c.f. Associated Newspapers Ltd v Bancks (1951) 83 CLR 322 at 336.
149The plaintiffs rely on Koompahtoo Local Aboriginal Land Council v Sanpine Pty Ltd[26] to submit that termination of an agreement for a breach of an intermediate term is only open where the breach is of such a magnitude as to substantially deprive the innocent party of the benefit of the contract. They submit that the sole benefit conferred on VPJ under the contract of sale was the right to receive the sale price. Any detriment that the vendor suffered in consequence of a breach of the implied obligation consists merely of a delay in receipt of this money which could have been ameliorated by an award of interest under general condition 33 of the contract of sale or damages. The plaintiffs go on to say that is the defendant’s own conduct in refusing to complete the contract of sale that is depriving the vendor the benefit of the bargain.
[26](2007) 233 CLR 115 at [50]
150In my view, if the vendor wished to terminate the contract of sale, it had to act under the terms of the contract and serve a valid default notice under condition 34 requiring the purchaser to remedy the breach within 14 days. It did not do this. As I have already found the plaintiffs did not repudiate the contract, the result is the requirement to serve a valid default notice remained before termination could be effected by the vendor. But even if I am wrong in this, I am not satisfied that the special condition was a fundamental term for the reasons articulated by the plaintiffs. It cannot have been intended that any breach, however minor, would have resulted in immediate termination. Such a construction would be commercially untenable.
151I am not satisfied that the changes to the plans lodged by Rezaie amounted to a breach of an intermediate term of such magnitude so as to deprive VPJ the benefit of the contract of Sale. VPJ was still going to receive the purchase price upon settlement, albeit accepting that settlement was not going to occur as quickly as it had hoped. I also agree with the plaintiffs’ submission that if the clause is an intermediate term, then breach of it could have given rise to any claim for damages or interest under the contract for the delay in settlement. But this is not the defendant’s case – it has at all time maintained it was entitled to terminate the contract and did so on 13 November 2020.
152Accordingly for all these reasons, I find that the defendant did not validly terminate the contract of sale.
(8) If the defendant did not validly terminate the contract of sale, then:
(i) did the defendant become obligated to complete the contract upon (or after) the issuance of the endorsed drawings under permit PlnA00042/20 by the City of Casey, and the second plaintiff thereafter calling for performance of the contract?
(ii) is the second plaintiff entitled to specific performance of the contract?
153In my view, once the special condition was satisfied following the issue of the endorsed plans by the Council on 16 November 2020, the plaintiffs were then entitled to call for settlement which they did. The defendant refused to settle saying the contract of sale had expired on 13 November 2020.
154VPJ pleads at paragraph [20] of its defence that the plaintiffs were not ready, willing, and able to complete. VPJ submits that Toorak had no money in its loan account available to settle the contract of sale as at 10 September 2021, where it had drawn all of its loan and utilised $1,682,285.18. Applying the equitable maxim that those who seek equity must do equity, VPJ says that the plaintiffs’ claim for specific performance must fail.
155VPJ further submits that the plaintiffs cannot seek equitable relief where they do not have clean hands (as they were in breach of the special condition and contract of sale). This was not pleaded in its defence.
156Where a party seeks specific performance, the maxims of equity apply that ‘he who comes into equity must come with clean hands’ and that ‘he who seeks equity must do equity.’ Nettle J provided the following helpful analysis in IGA Distribution Pty Ltd v King & Taylor Pty Ltd:[27]
“Apart from cases of fraud or misrepresentation or illegality or a breach of contract leading to a lack of readiness or willingness on the part of the plaintiff to perform his obligations, there are broadly speaking two main categories of cases in which plaintiffs are denied specific performance on the basis of a lack of clean hands: first, where the plaintiff is shown materially to have misled the court or to have abused its process, or to have attempted to do so; and, secondly, where the grant of relief would enable the plaintiff to achieve a dishonest purpose and where in all the circumstances it appears to the court to be inequitable to grant the particular relief in question. …
The gist of that second category of case is that equity will not assist unconscionable conduct on the part of the plaintiff, either by enforcing a right already improperly obtained or by otherwise furthering unconscionable purposes. But the undesirable behaviour in question must involve more than mere "general depravity". It must have an immediate and necessary relation to the equity sued for; it must be a depravity in a legal as well as in a moral sense; and, in order to have an immediate and necessary relation to the equity sued for, the plaintiff must seek to derive advantage from his dishonest conduct in so direct a manner that it is considered to be unjust to grant him relief.”
[27][2002] VSC 440 at [246]-[247], citations omitted
157I have found that the plaintiffs were not in breach of the contract of sale. The unpleaded allegation made by the defendant that the plaintiffs do not have clean hands simply because they breached the contract of sale fails. It was not argued that the plaintiffs had otherwise engaged in any dishonest or unconscionable conduct so as to deprive them of equitable relief. This ground is not made out.
158As the plaintiffs seek specific performance, their readiness and willingness to perform the contract is relevant to the Court’s decision whether to exercise its discretion to grant the relief.[28]
[28]Bisognin v Hera Project Pty Ltd [2018] VSCA 93 at [156] citing Bahr v Nicolay (No 2) [1988] 164 CLR 604 at 640-641, 659
159The plaintiffs rely on Lo’s evidence that Toorak stood ready, willing, and able to settle from 24 December 2019, pointing to Toorak’s home loan statements of account from 16 February 2020 to 11 November 2021. Her evidence was not challenged at trial.
160Rezaie deposed that Toorak deposited funds into the plaintiffs’ solicitor’s trust account for settlement on 16 November 2020. Counsel for the plaintiffs confirmed in opening submissions that the funds remained in that account ready to settle. This was not disputed by VPJ. I am satisfied on the evidence that the plaintiffs were ready, willing, and able to settle at the relevant time and have remained so up to and including trial. A caveat lodged on the land by Rezaie on 20 October 2020 remains on title. In answer to my query at the start of the trial, the plaintiffs’ Counsel stated there was no impediment which would prevent the Court from ordering specific performance if the Court was minded doing so. There was no evidence led by VPJ to prove hardship causing it any injustice which outweigh the hardship to the plaintiff if specific performance were denied.
161Accordingly, I am satisfied that the plaintiffs are entitled to an order for specific performance of the contract of sale and will make an order to that effect.
(iii) is the second plaintiff entitled to recover damages in addition to, or in lieu of, an award of specific performance, and if so in what amount?
162The plaintiffs no longer seek damages in addition to an award of specific performance.
(9) If the defendant did not validly terminate the contract of sale, then is the defendant entitled to retain the deposit paid by the second plaintiff under the contract?
163This issue falls away given I have found that the plaintiffs are entitled to an order for specific performance of the contract of sale. The defendant can retain the deposit paid as part of the purchase price, the balance of which will be payable upon settlement.
(10) If the plaintiffs were in breach of the contract of sale but their conduct did not amount to repudiatory conduct, is the defendant entitled to any relief in accordance with paragraph 22.1 of the defence?
164Similarly, this issue falls away as I have found that the plaintiffs did not breach the contract of sale. But if I were wrong on this, I would not have been satisfied that the defendant was entitled to the penalty interest claimed in paragraph 22.1 of its defence. Interest was sought from either 27 January 2020 when the second permit application was lodged or 31 March 2020, being approximately 3 months after the date of the special condition. Such dates are arbitrary and it could not reasonably be found, on the evidence led, that settlement could have taken place on either of those dates. Nor would I have found that some other date was applicable.
Conclusion
165For the foregoing reasons, I am satisfied that the plaintiffs are entitled to an order for specific performance of the contract of sale. I will hear from the parties regarding the form of the orders to be made consequent upon these reasons, including any declaratory relief and costs.
166Subject to hearing from the parties, I propose ordering that the defendant pay the plaintiffs’ costs of and incidental to the proceeding, to be taxed on the standard basis in default of agreement.
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Certificate
I certify that these 51 pages are a true copy of the Reasons for Judgment of Her Honour Judge A Ryan delivered on 23 February 2023.
Dated: 23 February 2023
Associate to Her Honour Judge A Ryan
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