Willis v Crosland (No 1)
[2020] VCC 1964
•11 December 2020
| IN THE COUNTY COURT OF VICTORIA AT MELBOURNE COMMERCIAL DIVISION | Revised Not Restricted Suitable for Publication |
GENERAL LIST
Case No. CI-20-01733
| ANNE WILLIS | Plaintiff |
| v | |
| VANESSA LOUISE CROSLAND | Defendant |
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JUDGE: | HIS HONOUR JUDGE MACNAMARA | |
WHERE HELD: | Melbourne | |
DATE OF HEARING: | 25, 26 November 2020 | |
DATE OF JUDGMENT: | 11 December 2020 | |
CASE MAY BE CITED AS: | Willis v Crosland (No 1) | |
MEDIUM NEUTRAL CITATION: | [2020] VCC 1964 | |
REASONS FOR JUDGMENT
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Subject:CONTRACT
Catchwords: Sale of land – Proceeding for recovery of deposit – Plaintiff purchaser obtaining report from building practitioner allegedly disclosing “major building defects” – GC 21 – Whether report identifying “major defects” disclosing and designating a “major building defect” – Report and notice of termination under GC 21 forwarded to vendor’s solicitors during business hours in the case of the report, and after close of business as to notice of termination, on final day for payment of deposit – Whether purchaser “in default” under contract and therefore not entitled to serve notice – GC 14 – Whether building practitioner’s report and notice must be served under the same cover – Where report of one building practitioner found no “major defects” relative to structure and the other found a number of “major defects”, whether defendant purchaser elected to rely on second report to the exclusion of the first
Legislation Cited: Interpretation of Legislation Act 1984 s53;
Cases Cited:Clarke v Mariotis [2009] VSC 279; Southern Cross Assurance Company Ltd v Australian Provincial Assurance Association Ltd (1935) 53 CLR 618; Aussie Invest v Pulcesia Pty Ltd [2005] VSC 362; Currie v Dempsey (1967) 69 SR (NSW) 116; Smith v Butler [1900] 1 QB 694; Sargent v ASL Developments Ltd (1974) 131 CLR 634; Tropical Traders Ltd v Goonan (1964) 111 CLR 41
Judgment:1. Proceeding dismissed.
2. Costs reserved.
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APPEARANCES: | Counsel | Solicitors |
| For the Plaintiff | Dr M Sharpe | DST Legal |
| For the Defendant | Ms G M Douglas | Ferdinand Zito & Associates |
HIS HONOUR:
Background
1 Ms Crosland is the owner of a house property at 959 Bacchus Marsh Road, Bullengarook. In August 2019 she placed her property on the market for sale, appointing Rhys Nuttall of RT Edgar Gisborne as exclusive agent. In November of that year, Mr Nuttall told Ms Crosland that a Mr and Mrs Willis had offered to purchase the property for $1,800,000. Ms Crosland rejected that offer, which was subsequently increased to $1,850,000. (Statement of Vanessa Crosland, paragraphs 3, 5 and 6, Court Book (“CB”) 373−4)
2 On 4 December 2019, Ms Crosland, the defendant in this proceeding, entered into a contract with the plaintiff, Ms Willis, for the sale of the property for $1,875,000. The contract noted that a $1,000 deposit had already been paid by the purchaser, leaving a balance of the 10 per cent deposit, namely $187,500, to be payable by 13 December. The balance of the purchase price, namely $1,687,500, was payable at settlement, which was scheduled for 31 January 2020 “or earlier by mutual agreement”. (CB 131, 134)
3 The contract was in the Law Institute of Victoria’s standard form, August 2019, and consisted of a set of particulars of the relevant transaction, special conditions, and a set of general conditions. Paragraph 21.1 of the general conditions provided that paragraph 21 applied if and only if “the applicable box in the particulars of sale is checked”. (CB 144) The relevant box contained a cross, and so general condition 21 applied. (CB 135) The balance of general condition 21 provided:
“21.2The purchaser may end this contract within 14 days from the day of sale if the purchaser:
(a) obtains a written report from a registered building practitioner or architect which discloses a current defect in a structure on the land and designates it as a major building defect;
(b) gives the vendor a copy of the report and a written notice ending this contract; and
(c) is not then in default.
21.3All money paid must be immediately refunded to the purchaser if the contract ends in accordance with this general condition.
21.4A notice under this general condition may be served on the vendor’s legal practitioner, conveyancer or estate agent even if the estate agent’s authority has formally expired at the time of service.
21.5The registered building practitioner may inspect the property at any reasonable time for the purpose of preparing the report.”
4 Ms Crosland said that on 6 December 2019 she became aware, following discussions with Mr Nuttall, that Ms Willis had arranged for a building inspection. She said:
“I received an email from Rhys Nuttall, with a request from the purchasers for early access to the property to rectify some of the issues identified to “get piece [sic] of mind”. The items identified were termites, roof flashing, gutter cleaning, missing down pipes and hot water service repair. ... I emailed my consent to the early access to Rhys Nuttall on 7 December 2019.” (CB 374, paragraph 8)
5 The inspector was Mr Nigel Benn of ZYNC Inspections Pty Ltd. Mr Nuttall described Mr Benn as being “a local trusted person in the area that does a lot of building and pest inspections”. (Transcript (“T”) 114, Lines (“L”) 11−13) Mr Nuttall frequently recommends Mr Benn’s services to purchasers whom he deals with. He said he was an acquaintance rather than a friend. (Ibid, L3−7)
6 Including “boilerplate” general information, the report extended to 51 pages (CB 71−121). The summary page provided a list of what the report described as “major defects that need further evaluation or repair by appropriately Licensed Contractors” (CB 73−4) as follows:
“WET AREAS
TOILET:
Toilet Condition:A leak is present at the rear of the toilet pan and appears to be caused from either a leaking pan/waste seal or cistern leak. This needs to be repaired to prevent decay to surrounding components. A licensed plumber is required to provide a further assessment and to offer suitable rectification as required.
EXTERNAL AREAS
EXTERNAL WALLS:
Cracking To Masonry Or Concrete Elements:Cracks are evident to the garage and the front left corner of the house. These appear to have been caused by the twisting of the garage roof beam that has pushed the brick work out. Recommend a bricklayer re-install these bricks to secure them in place.
ROOF SYSTEM EXTERNAL
CHIMNEYS:
Condition:Chimney flashings are surface rusting and should be treated with an anti rust paint to prolong the life of the material. A licensed roof plumber is required to provide a further assessment and to offer suitable rectification as required. Also grass is growing behind the chimney and requires to be cleared away.
DECKS, PERGOLAS, BALCONIES, VERANDAHS, AWNINGS
VERANDAH:
Defects Or Maintenance Items:Minor-moderate wet rot decay is present to the middle post to the right side. Decayed timbers need repair or replacement to prevent additional deterioration. A qualified carpenter and/or builder is required to provide a further assessment and to offer suitable rectification as required.
Some downpipes appear to be missing to the rear. Recommend the missing downpipes be installed without delay, as the free water running off the roof may affect the foundations of the dwelling and cause potential structural issues and/or attract termites. A licensed roof plumber is required to provide a further assessment and to offer suitable rectification as required.
There are a number of flashings missing to the roof structure, which if not installed could lead to the decay of structural timbers. A licensed roof plumber is required to provide a further assessment and to offer suitable rectification as required.
The rear left end of the verandah is missing a beam and post to the roof structure and requires to be installed by a licensed builder or carpenter.”
7 The report said that it was prepared “in accordance with AS4349.1”, and stated that:
“Australian Standard AS4349.0-2007 Inspection of Buildings, Part 0: General Requirements recognises that a property report is not a warranty or an insurance policy against problems developing with the building in the future.” (CB 77)
8 AS4349.1-2007 at paragraph 1.4.6 defined the word “defect” as follows:
“Fault or deviation from the intended condition of a material, assembly or component.”
9 Paragraph 1.4.10 described the phrase “major defect” as follows:
“A defect of sufficient magnitude where rectification has to be carried out in order to avoid unsafe conditions, loss of utility or further deterioration of the property.”
10 By an email dated 10 December, Mr and Mrs Willis followed up a telephone conversation that they had had with selling agent Mr Nuttall. The email identified a series of salient features in the Benn report by page and opening words. The email continued:
“As discussed we are genuinely concerned about the building and pest report and the recommendations contained within it.” (CB 432−3)
11 The email expressed concern about water damage and “damp areas in the wall that could encourage termites into the frame”. The email continued:
“With our [sic, scil out) vacant access to the house we are unable to have an inspection this is HIGHLY RECOMMENDED nor will it be possible to adequately treat and rectify any possible problems.” (Ibid)
12 The email concluded:
“Unfortunately we are leaning towards terminating our contact of sale on the grounds of the building and pest report.
We are not prepared to pay the full deposit on Friday 13th unless we are able to come to some form of suitable agreement.
We would also require that we can view the flat and that it is made available in the case of a more detailed inspection.
Kind Regards,
Anne and Jim” (Ibid)
13 Mr Nuttall had previously advised Mr Willis by email of 7 December 2019 that:
“The vendor has agreed to early access ... please get the licensed contractors to contact me for access.”
14 He was responding to an email seeking access relative to the items which were identified in the Benn report. (CB 426−7) Mr Nuttall attended the property on 13 December 2019 to enable a second inspector, Mr Colin Hibberd, to undertake a building and pest inspection. (CB 423, paragraph 14)
15 With the balance of the deposit payable on 13 December, Ms Burrows of Yarra Ranges Lawyers, acting for the purchaser Ms Willis, emailed Ms Meredith Williams of Cumberbatch & Williams Lawyers, who acted for the vendor Ms Crosland, seeking an extension of the date for payment of the deposit “until 18th December, 2019 to coincide with the due date of the building and pest inspection.” Ms Williams responded a few hours later, stating that she had instructions to agree to the extension. (CB 332−3)
16 Mr Hibberd of Hamley Home Inspections provided a 22‑page report upon his inspection, which was said to have been carried out between 12.40−3.15pm on Friday, 13 December 2019. Once again, the front page of the report describes it as being prepared “To comply with Australian Standard AS4349.1-2007”. The report contained a glossary of terms, ascribing the same meaning to the phrases “defect” and “major defect” as did the Australian Standard quoted above. Mr Hibberd said:
“No Major defects were found at the time of inspection.” (CB 253)
17 Ms Burrows of Yarra Ranges Lawyers sent an email late in the afternoon of 17 December 2019 (3.58pm) – that is, the day before the date for payment of the balance of the deposit – stating:
“Our clients have instructed they are willing to proceed with the purchase of the property on the basis that the purchase price is reduced by $25,000.00, which is a fair and reasonable amount to cover the repair costs.”
18 The email had forwarded a copy of “the reports”, presumably the Benn report and the Hibberd report, observing that the reports showed that there was “a lot of damage in the kitchen/dining area due to both water and termite damage. It is uncertain how much of the frame of the house will need replacing as a result.” (CB 298)
19 At 9.52am the following morning, Ms Williams of Cumberbatch & Williams, on behalf of Ms Crosland, denied that the requirements of general conditions 21 and 22 of the contract of sale in the circumstances entitled Ms Willis to rescind the contract [condition 22 was in generally the same terms as condition 21, but dealt with pest reports rather than building reports]. She continued:
“Neither report satisfies these definitions. There is no evidence of current pest infestation. Any past damage is not significant and does not constitute a major structural defect.
Accordingly, the contract will continue on its existing terms and conditions, including price, deposit payment and settlement date.” (CB 303)
20 Ms Burrows responded by email at 11.48am, stating:
“We re-iterate our clients offer to proceed with the purchase of the property on the basis that the purchase price is reduced by $25,000.00. In the event this is not acceptable to your client, we will seek instructions from our clients as to whether they propose to withdraw from the Contract of Sale pursuant to general condition 22.” (CB 305)
21 According to Mr Nuttall, a check of his company’s trust account showed:
“[A] cheque deposit for $184,000 was deposited by Mrs Willis into our trust account at 2:59pm on 18 December 2019. However, this money was not received into the R T Edgar trust account at this time and it was receipted on 23 December 2019, when the funds cleared into the RT Edgar Trust Account.” (CB 423, paragraph 18)
22 An extract from the trust account of RT Edgar held at Bendigo Bank showed this to have been a cheque deposit. (CB 431) At 7.51pm, Ms Burrows of Yarra Ranges Lawyers emailed Ms Williams, stating:
“I refer to the above matter and have been instructed to give notice that my client hereby ends the Contract pursuant to general conditions 21.2 and 22.2, on the basis that the reports obtained disclose a major building defect, termite activity and severe damage.
As the Contract is now at an end, please direct the agent to refund to our client all deposit monies currently held.” (CB 319)
23 Ms Williams, on behalf of Ms Crosland, served a document styled ‘Notice of Default and Rescission’ dated 19 December. The default alleged was “Failure to pay deposit due 18/12/2019”. It sought interest at the rate of 15 per cent, and legal fees of $385. (CB 338−9)
24 By an email sent 12.39pm, 20 December, Ms Burrows, on behalf of Ms Willis, acknowledged receipt of the Notice of Default and Rescission “served yesterday”, and continued:
“Our client in fact paid the full deposit on 18th December, 2019 and as such your Notice of Default and Rescission is invalid.
In any event, our client maintains the position that the building report dated 5th December, 2019 (attached) notes a major building defect on page 3 under the list of ‘Major Defects’, namely the cracking of the external walls of the garage and front left corner of the house caused by the twisting of the garage roof beam.
On that basis, our client is withdrawing from the Contract of Sale and requires the deposit be immediately refunded by the Agent.” (CB 341)
25 Sarah Davies Legal Pty Ltd of Maleny, Queensland, sent an email to Ms Burrows of Yarra Ranges Lawyers dated 23 January 2020. It would seem that the Queensland firm was now acting on behalf of Ms Crosland. The email stated:
“[P]ursuant to clause 35.2 of the Contract, the effect of the non-compliance with the Notice of Default and Rescission served by Cumberbatch & Williams Lawyers on 19 December 2019 ... was that the Contract came to an end when the default was not remedied by 2 January 2020.” (CB 363)
This proceeding
26 By a writ filed 27 February 2020 in the Supreme Court by solicitors acting for Ms Willis she sought repayment of the sum of $185,000 together with consequential relief.
Plaintiff’s claim
27 The statement of claim filed with the writ alleged the agreement and variation extending the date for the payment of the balance of deposit money to 18 December 2019.
28 Next it was contended that the plaintiff, Ms Willis, had obtained “a report from a registered building practitioner” which disclosed four defects in the house located on the relevant property, and “designated the said defects as major building defects”. The report was the one provided by Mr Benn of ZYNC Inspections Pty Ltd.
29 Next it was said that on 18 December 2019 Ms Willis sought to pay the deposit and inadvertently paid $184,000, being $2,500 short of the required deposit. On the same day it was said the plaintiff served a copy of the Benn report and a notice terminating the contract and seeking repayment. The report was said to have been provided by an email in the morning at 11.47am, and the notice sent by email at 7.51pm. Accordingly, it was said that Ms Willis, the plaintiff, was not in default under the contract as varied, and had lawfully terminated the contract and was entitled to repayment of the deposit money.
Defence
30 In her defence, also filed in the Supreme Court, Ms Crosland generally admitted the formal transactions between the parties. The defence referred to Ms Willis’s obtaining two reports from Mr Hibberd, noting that they “did not identify any major defects at the property”. It was said that Ms Willis had “elected not to rely on the [Benn] Report, in favour of relying upon the different opinions set out in the Second [Hibberd] Reports”. It was said that it was an implied term “by fact” to give business efficacy to the contract that the balance of the deposit was required to be paid “by the close of business on the due date for the Deposit”. Accordingly, Ms Willis had failed to pay the total deposit due by 18 December 2019. The defence denied that the short payment was inadvertent. The $184,000, it was said, was not paid “in accordance with the methods provided by general condition 14.1 of the Contract”. The $184,000 was not received as cleared funds until 23 December 2019, and therefore the plaintiff had failed to pay $187,500 as the contract required her to do by 18 December 2019. Accordingly, the default notice required payment of the outstanding deposit by 2 January 2020, which had not been done.
31 Next it was said that the Benn report was served on 18 December 2019, but denied that this was “of any force or effect” because of the election previously referred to and the eventual failure to pay the outstanding deposit by close of business 18 December 2019. The $184,000 payment was said to have effect only on 23 December 2019.
32 Accordingly, it was said that the email purporting to terminate the contract, transmitted 7.51pm, 18 December, was ineffective, because at that time Ms Willis was in default, and was invalid, because it did not disclose a current pest infestation on the land that was a major infestation.
33 The contract, it was said, had been lawfully terminated and, by virtue of its terms, the defendant was entitled to retain the sums paid towards the deposit.
Conclusions
Validity of Ms Willis’ 18 December notice
34 In contending that that this notice was invalid, Ms Douglas, counsel for Ms Crosland, said that the enquiry as to its validity stood in contrast to the issue determined by the Supreme Court in Clarke v Mariotis [2009] VSC 279 where the Court considered the validity of a notice given under a corresponding but different provision under the then-current standard general conditions of contract of sale. There, according to Ms Douglas, the Court had to determine if the report “shows a major structural defect”. The Court had to determine in that instance whether what was shown in the report was indeed a major structural defect. The Court had to determine for itself if the alleged defect was both “major” and “structural”. She said this stood in contrast with the present GC 21 which bestowed a right of rescission where a report designated the alleged defect as being a “major building defect”. The enquiry therefore was not as to the nature and extent of the defect, but rather as to whether it was designated as being a major building defect. (Opening submissions, paragraphs 25−29). She continued:
“However, it is clear that nowhere in the Benn Report does he [viz Mr Benn] designate or describe any of the defects (in the structure of the land or anywhere else) to be a “major building defect”.” (Opening submissions, paragraph 31)
35 Ms Douglas continued:
“The language of GC 21 of the Contract of Sale is clear on its face. The purchaser is only entitled to end the contract under this provision if the building report itself discloses a current defect in a structure on the land and designates the defect in question to be a major building defect. The court should readily find that the Benn Report does not meet the necessary threshold to enliven the Purchaser’s right to terminate under GC 21.2.” (Opening submissions, paragraph 32; emphasis in the original)
36 Dr Sharpe, on behalf of the plaintiff, Ms Willis, referred to a passage in the joint judgment of Rich, Dixon, Evatt and McTiernan JJ in Southern Cross Assurance Company Ltd v Australian Provincial Assurance Association Ltd (1935) 53 CLR 618, 636, where their Honours said:
“The contract must be interpreted like any other contract, and the natural meaning of the language used must receive its effect unless, upon a proper application of the rules of interpretation, a contrary intention is found to be contained within the instrument.”
37 Dr Sharpe described this as the “golden rule” of interpretation. She continued:
“The natural or ordinary meaning of words is ‘as an ordinary person acquainted with the English language would read them’ [Webb v McCracken (1906) 3 CLR 1018 at 1023-24] or, put another way, ‘the ordinary usage of society.’ [Provincial Insurance Australia Pty Ltd v Consolidated Wood Products Pty Ltd (1991) 25 NSWLR 541 at 560 per Mahoney JA]” (Closing submissions, paragraphs 4−5)
38 Dr Sharpe said the Macquarie Dictionary defined the verb “designate” to mean “to mark or point out; indicate; show; specify” or “to name”. According to this meaning, it was sufficient, she said, that the registered building practitioner:
“... need only mark or point out those current defects that the practitioner considers to be a ‘major building defect.’ No special form of words or magical incantation is required. Just the naming, specification or showing of those defects that are major building defects.” (Closing submissions, paragraph 8)
39 According to this test, by identifying various matters the Benn report did “mark or point out”. Dr Sharpe noted that the report provided a list of major defects. (Closing submissions, paragraph 9) She noted that the Australian Standard governing pre‑purchase inspection reports distinguished between “major defects” and “minor defects”. She said, therefore, it could be inferred that matters identified as “major defects” should be regarded as being identified as “major building defects”, because the stated scope of the inspection was to report on:
“... any evidence of Structural Damage, Conditions Conductive to Structural Damage; Conditions Conducive to Structural Damage; any Major Defect in the condition of Secondary Elements and Finishing Elements; collective (but not individual) Minor Defects; and any Serious Safety Hazard discernible at the time of the inspection.” (Closing submissions, paragraph 12)
40 Dr Sharpe said the Benn report did not identify any separate class of major defects being “major building defects”. It merely distinguished between major and minor defects.
41 Ms Douglas said that the intention of those who drafted the current version of GC 21 was “to remove the scope for disputes between the parties, similar to the dispute that arose in Clarke v Mariotis.” (T128, L1−3) This approach, she said, was conducive to achieving certainty as between vendor and purchaser, which certainty can only be achieved if “the report itself must expressly state or identify the items to be major building defects”. (T128, L4−9)
42 As these arguments were being advanced, I reflected that the statement, “This is a matter of substance, not mere form”, whether made by a judge or by counsel, would almost never be rejected by an appeal court. Here, at least according to the defendant vendor’s counsel, the matter was a matter of “mere form” and not of substance. As a basis for rescission under GC 21, a building practitioner’s report would be effective if and only if it used a particular form of words, independently of the underlying substance of the alleged defect.
43 As to the question of “forms”, the Interpretation of Legislation Act 1984 provides in s53:
“53 Strict compliance with prescribed forms not necessary
Where a form is prescribed by an Act or subordinate instrument for any purpose, any form in or to the like effect of the prescribed form shall, unless the contrary intention appears, be sufficient in law.”
44 This provision supposes that a form other than one precisely as prescribed could be regarded as “in or to the like effect” and therefore represent substantial compliance. What this indicates is that even in the case of compliance with “forms” there is some tolerance for less than exact compliance. To put it another way, ultimately this is not a matter of form over substance. Rather, the question is whether the form of the relevant parts of the report in substance identified defects in the relevant structure and designated them as “major building defects”.
45 It is perhaps regrettable that the General Conditions, which are published by the Law Institute of Victoria and would be regarded as representing the collective wisdom of the conveyancing solicitors of Victoria, identified as a key concept and the hinge upon which the purchaser’s right to rescind turned, a phrase which is not a defined term in the Australian Standard which governs the provision of pre‑purchase reports by building practitioners and which does not seem to be part of the “template” established by that Australian Standard.
46 In my view, for a report to identify a defect in a structure as a “major defect” in terms of the Australian Standard necessarily entails its designation as a “major building defect”, whereas here, the relevant report or part of the report pertains to a building. The Benn report is headed “Building and pest inspection report” (emphasis added).
Was the purchaser, Ms Willis, in default?
47 Clause 21.2(c) has the effect that no purported rescission or termination of the contract of sale based on GC 21 will be valid unless the purchaser giving the notice “is not then in default”.
48 In the events that had occurred, Dr Sharpe contended that her client, Ms Willis, was not in default when the notice was given by the solicitors on her behalf, but Ms Douglas said she was. At that time, Ms Willis had paid deposit moneys totalling $185,000. The 10 per cent deposit required under the contract totalled $187,250. Dr Sharpe said that, since her client had until the instant before midnight on 18 December to pay the entire 10 per cent, she could not have been in default. Ms Douglas, on behalf of the vendor Ms Crosland, did not in a general sense deny that the purchaser, Ms Willis’, obligation was to pay the entire deposit before midnight 18 December. She said, however, as a matter of practicality, by 7.51pm this had become impossible. It was a sort of repudiation by final disablement from performance. Dr Sharpe contended that an anticipatory breach by way of repudiation would not constitute a default for the purposes of GC 21.2(c).
49 According to Ms Douglas, the matter was resolved by a determination of Dodds-Streeton J (as her Honour then was) in Aussie Invest v Pulcesia Pty Ltd [2005] VSC 362. The issue there was whether, for the purposes of determining validity of termination, validity of notices, etc, allowance should be made for the possibility of a settlement after the vendor’s solicitor’s offices had closed at 6pm. Her Honour undertook a detailed consideration of the authorities on this difficult issue. Having considered those authorities, her Honour said at [314]:
“They do not establish that, (in a case where only a date is specified) a vendor’s solicitor is necessarily obliged to remain open after ordinary business hours. In particular, the vendor’s solicitor is not required to remain open on the mere “off chance” that the purchaser might seek to complete after business hours. The cases suggest that the extent of the vendor’s (or its solicitor’s) obligation will be governed by a determination of what is reasonable in all the circumstances of the case.”
50 According to Ms Douglas, the same principle applied here. By 7.51pm – that is, past ordinary office and banking hours – the vendor and her solicitor should not be regarded as obliged to provide a facility for payment of the balance of deposit “on the off chance” that such was to be made.
51 Ms Douglas took me to the provisions of GC 14 under the heading ‘Money’, and the subheading ‘Deposit’. She referred to GC 14.7 and 14.8, which provided:
“14.7 Payment of the deposit may be made or tendered:
(a)in cash up to $1,000 or 0.2% of the price, whichever is greater; or
(b)by cheque drawn on an authorised deposit-taking institution; or
(c)by electronic funds transfer to a recipient having the appropriate facilities for receipt.
However, unless otherwise agreed:
(d)payment may not be made by credit card, debit card or any other financial transfer system that allows for any chargeback or funds reversal other than for fraud or mistaken payment, and
(e)any financial transfer or similar fees or deductions from the funds transferred, other than any fees charged by the recipient’s authorised deposit-taking institution, must be paid by the remitter.
14.8 Payment by electronic funds transfer is made when cleared funds are received in the recipient’s bank account.” (CB 34)
52 According to Ms Douglas, with the vendor’s solicitor’s office closed, there could be no tender of cash or a cheque. She conceded it would have been possible between 7.51pm and 12 midnight for Ms Willis or those acting for her to launch an electronic funds transfer. Nevertheless, she said that by virtue of GC 14.8 that transfer would not be effective to “top up” the 10 per cent the deposit moneys because the proceeds of the transfer would only be available “when cleared funds are received” by the selling agent’s trust account. The phrase “cleared funds” as used in GC 14.8 is not a defined term. It would seem to mean the point at which the credit appears in the relevant account.
53 Ms Douglas noted that the $184,000 payment made by cheque deposit remotely was not credited to the RT Edgar trust account until 23 December. (CB 429) This was an example of the delay in crediting the proceeds of a deposited cheque rather than an electronic funds transfer. Ms Douglas told me of her experience of delays in electronic funds transfers. Dr Sharpe described her experience to the contrary: of electronic funds transfers, at least by way of debiting her account, taking effect instantaneously. Ms Douglas was ultimately willing to concede that this was a point upon which I could not take judicial notice, because the matter was not sufficiently notorious and generally known; nor was there proper evidence upon which I could make a finding. She also contended – I think but faintly, because of my scepticism on the point – that depositing a cheque into the relevant trust account did not amount to payment by cheque for the purposes of GC 14.7, though presumably handing the cheque across the counter in the agency office would constitute effective and immediate payment. In my opinion, this is a distinction without a difference.
54 The question then returns to whether it could be said that a default existed as at 7.51pm, 18 December, based upon the alleged impracticability of making payment. This is ultimately a question of burden of proof. I do not pretend to know myself whether it would have been possible to make payment between 7.51pm and midnight. I confess to not being “tech savvy”. Since I am not sure of the answer myself, there can be no question of the answer’s being so notorious that I can take judicial notice of it. There is no direct evidence as to the time which an electronic funds transfer initiated by Ms Willis after 7.51pm would take to arrive as “cleared funds” in the RT Edgar trust account. GC 14.8 assumes that the dispatch and arrival of an electronic funds transfer may not be instantaneous.
55 In my view, the Aussie Invest case provides no guidance here. Settlement of a transaction requires the performance of coordinate obligations. At least under the traditional pre-PEXA mode of conveyancing, settlement required not merely the attendance of the vendor’s solicitors to release the transfer document and, if applicable, duplicate certificate of title: it would also, in the case of mortgaged land, require the attendance of mortgagees to release discharges of their mortgages against payment of the mortgage debt. It is ultimately self-evident that one cannot expect these resources to be on hand “on the off chance” that a settlement might take place some time between the close of business and midnight. On the other hand, the payment of the balance of deposit moneys may be unilaterally performed by a purchaser in accordance, in the present case, with the provisions of GC 14. No one on behalf of the vendor is required to hang around until midnight “on the off chance”. In the present instance, the issue which arose in Aussie Invest is dealt with by GC 17.2, which provides:
“Settlement must be conducted between the hours of 10.00 am and 4.00 pm unless the parties agree otherwise.” (CB 35)
56 In the absence of evidence as to how long might be required to effect an electronic funds transfer, which party should suffer the adverse finding based on the lack of evidence?
57 According to the online edition of Cross on Evidence (Australian edition), edited by the Hon J D Heydon AC:
“[T]he legal burden of proving all facts essential to their claims normally rests upon the plaintiff in a civil suit or the prosecutor in criminal proceedings.” [7060]
58 The learned editor continues by citing, as “one of the clearest Australian expositions of the general rule,” a statement by Walsh JA, as he then was, in Currie v Dempsey (1967) 69 SR (NSW) 116, 125, where his Honour said:
“[T]he burden of proof in the sense of establishing a case, lies on a plaintiff if the fact alleged (whether affirmative or negative in form) is an essential element in his cause of action, eg, if its existence is a condition precedent to his right to maintain the action. The onus is on the defendant, if the allegation is not a denial of an essential ingredient in the cause of action, but is one which, if established, will constitute a good defence, that is, an “avoidance” of the claim which, prima facie, the plaintiff has.” [7065]
59 According to Cross, whilst generally a party does not bear the burden of proving a negative, the Latin maxim to this effect:
“must not be taken to mean that the onus of proof cannot lie upon a party who makes a negative allegation. If this were so, the application of the rule could be made to depend upon the language in which a case happened to be pleaded. For instance, a claim for damages for breach of covenant to keep a house in repair may be stated by saying that the defendant did not repair the house or allowed it to become dilapidated, but the legal burden is borne by the plaintiff, however the claim is expressed. There are numerous instances in which a plaintiff or prosecutor assumes the legal burden of proving a negative.” [7070]
60 The learned editor quoted with approval a dictum of Bowen LJ in which his Lordship said:
“If the assertion of a negative is an essential part of the plaintiff’s case, the proof of the assertion still rests upon the plaintiff.” [Abrath v North Eastern Railway Co (1883) 11 QBD 440]
61 In Smith v Butler [1900] 1 QB 694, 698 – a claim, as is the present proceeding, for the recovery of a deposit – the purchaser of a leasehold interest claimed to be entitled to terminate the contract for non-proof of consent to the sale or transfer by a mortgagee of the freehold. Collins LJ, a member of the Court of Appeal consisting of himself, A L Smith LJ (as he then was) and Romer LJ, said:
“If he [the plaintiff] was right in treating that which happened on October 4 as a final refusal by the defendant to carry out the contract, he is right in this case. If he had legal grounds for so treating the matter he was within his rights; otherwise he was in the wrong.” [1900] 1 QB 694, 698
62 Here, it was an essential element of the plaintiff Ms Willis’s case that she was not in default at the time of service of the notice, as was the requirement under GC 21; or, to put it in more traditional language, that she was at that time ready, willing and able to perform. That depended on proof that it was possible, in accordance with the terms of the contract, for her to have paid the outstanding amount of the deposit between 7.51pm, 18 December, and midnight on that night. It was therefore incumbent upon her either to raise some matter of which judicial notice could be taken by reason of its notoriety or else to put on evidence to prove that fact. The plaintiff has done neither, and therefore the incidence of burden of proof precludes me from making the necessary finding in her favour.
63 The plaintiff’s claim fails for this reason.
64 Lest the matter go further, I should nevertheless consider the other matters which were argued.
65 I did not understand the pleaded contention that Ms Willis’s short payment of the deposit by $2,500 was “inadvertent” to be persisted with. She relied solely on documentary evidence, and neither gave evidence herself nor called any witnesses. If the issue continued to be alive, the contention of “inadvertence” would have to be rejected on the basis of lack of evidence.
66 Another matter argued on behalf of Ms Crosland by her counsel, Ms Douglas, was that the process of contract termination under GC 21 required that both the notice of termination and the relevant report should have been forwarded under one cover. It suffices to say that GC 21 requires a number of steps to be taken by a purchaser to effect a termination. GC 21.2(b) requires that the vendor be given a copy of the report “and” a written notice ending the contract. The word “and” is by its nature conjunctive: that is, both steps must be taken to enliven the power of termination. As a matter of language, however, there is nothing that requires them to be taken simultaneously as distinct from in series. In any event, in so far as the notice refers to the Benn report, it could be regarded as incorporating it by reference if, contrary to my inclination, there were a requirement that the two be dispatched under the same cover. This attack upon the exercise of power under GC 21 must be rejected.
67 Ms Douglas contended that in deciding, as she did, to call for a second building report, the Hibberd report, Ms Willis elected to rely on that report to the exclusion of the Benn report. Since it found no major defects, it could not on any view be regarded as forming a proper basis to exercise a power to terminate the contract under GC 21.
68 Referring to the doctrine of election, Stephen J in Sargent v ASL Developments Ltd (1974) 131 CLR 634, 641, said:
“The doctrine only applies if the rights are inconsistent the one with the other and it is this concurrent existence of inconsistent sets of rights which explains the doctrine; because they are inconsistent neither one may be enjoyed without the extinction of the other and that extinction confers upon the elector the benefit of enjoying the other, a benefit denied to him so long as both remained in existence.”
69 I see nothing in the general conditions of contract or elsewhere in the arrangements between the parties which would restrict the defendant purchaser from obtaining whatever reports she wished and relying upon the report which suited her purpose. Indeed, one could imagine a situation where building practitioners of different specialties might provide reports on a subject building from different perspectives. In the same way as a personal injury plaintiff is entitled to select as his or her leading witness the medical expert who provides a view of his or her injuries most advantageous to the plaintiff’s case, so a purchaser in this regime is entitled to rely upon the building practitioner whose report is most advantageous to the line which a purchaser wishes to take.
70 Dr Sharpe correctly contended that in obtaining more than one report and seeking an extension of time to obtain the second report, the purchaser was refraining from making an election whether to terminate or not terminate, and keeping her options open. She referred to the High Court’s decision in Tropical Traders Ltd v Goonan (1964) 111 CLR 41.
Disposition
71 The plaintiff’s claim must be dismissed.
Costs
72 I have heard no submissions on the question of costs, and so I will reserve them.
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