Alexakis v Wan [2021] NSWCA 172 | Case summary

Court of Appeal (NSW)|2021-07-28|Before: Meagher JA, Payne JA, Darke J

[Note: The Uniform Civil Procedure Rules 2005 provide (Rule 36.11) that unless the Court otherwise orders, a judgment or order is taken to be entered when it is recorded in the Court's computerised court record system. Setting aside and variation of judgments or orders is dealt with by Rules 36.15, 36.16, 36.17 and 36.18. Parties should in particular note the time limit of fourteen days in Rule 36.16.]

HEADNOTE [This headnote is not to be read as part of the judgment] The respondent vendors entered into a contract with the appellant purchaser for the sale and purchase of a residential property in Sydney. "Additional" clause 38 provided for the payment of the deposit in two instalments, the first on exchange and the second "on the 4th month after the contract date". Clause 2.3 made payment of the second instalment by that time "essential". Contracts were exchanged on 4 April 2019. The appellant paid the first instalment on time. The second was paid on 7 August 2019. On 5 August 2019 the respondents purported to terminate the contract for breach by failing to pay the second instalment on or before 4 August 2019. The appellant brought a suit for specific performance. He argued that the respondents' termination had been ineffective because the notice was given before the time for payment had expired. That payment was relevantly said to be due on or before 5 August 2019. The primary judge dismissed the appellant's claim to specific performance. Clause 38 was construed as requiring the second instalment to be paid during the calendar month that started at the beginning of 5 July 2019 and finished at the end of 4 August 2019. He also found that clause 21.5 did not operate to extend the time for payment to the next business day in circumstances where 4 August 2019 was a Sunday. He did so on the basis that clause 21.5 did not operate to extend time "in the case of clauses 2 and 3.2", clause 2 making the time or times for payment of any of the deposit "essential". The sole issue in the appeal was whether the primary judge erred in concluding that clause 21.5 did not operate to extend the time for payment of the second instalment. The Court held (Meagher JA, Payne JA and Emmett AJA agreeing), dismissing the appeal: There was no error in the primary judge's construction. The exception to the application of clause 21.5 "in the case of clause 2" operated to exclude the time limit or limits for payment of any of the deposit that were made "essential" by that clause, irrespective of whether those time limits were specified by clause 2 or by another clause and incorporated by reference: at [24]-[32] (Meagher JA); [34] (Payne JA); [40] (Emmett AJA).

Judgment

MEAGHER JA: By a written notice given on 5 August 2019 the respondent vendors purported to terminate their contract with the appellant for his purchase of a residential property in Sydney. They did so on the ground that the appellant had breached his obligation to pay the second instalment of the deposit on or before 4 August 2019. Their position was that clause 2.3 of the contract for sale made payment by that time "essential", giving rise to an entitlement under clause 2.5 to terminate for breach.
Before the primary judge the principal issue was as to the construction of the clause fixing the time for payment of that second instalment. By "additional" clause 38, the first instalment of $150,000 was due on exchange and the second of $91,500 was payable "on the 4th month after the contract date". The primary judge held that the meaning of this provision was that the second instalment "was to be paid during the calendar month that starts at the beginning of 5 July 2019 and finishes at the end of 4 August 2019": Alexakis v Wan [2021] NSWSC 367 at [66]. That conclusion is not challenged on appeal.
There remained the question whether, because 4 August 2019 was a Sunday, clause 21.5 extended the time for payment to the "next business day", Monday 5 August 2019. The primary judge found that clause 21.5 did not have that consequence because it was expressed not to apply "in the case of clauses 2 and 3.2".
His reasons for doing so were stated briefly (at [68]): … The exception applies "in the case of clauses 2 and 3.2". So, where either of those clauses operates in relation to the time for the thing to be done or to happen, cl 21.5 does not operate so as to extend the time. In the present case, as Additional Condition 38 requires the purchaser to pay part of the deposit at a time after the making of the contract, cl 2.3 operates to make the time essential. I therefore think that cl 21.5 does not operate in relation to the time for the payment of the second instalment of the deposit. The time for payment, which is made essential under cl 2, cannot be extended through the operation of cl 21.5.
The sole issue in this appeal is whether the primary judge was correct in so holding. In addition to supporting the primary judge's conclusion that the exception in relation to clause 2 applied, the respondents contend that clause 21.5 only applies to extend the time for something to be done or to happen where the relevant provision requires that it be done or happen "on" a day, rather than within a period of time, and accordingly by the last day of that period.
For the reasons which follow, the primary judge's holding that the exception in clause 21.5 was enlivened should be upheld, making it unnecessary to address the respondents' contention.

Relevant circumstances and provisions of the contract

The printed form of contract is the Law Society of New South Wales "Contract for the Sale and Purchase of Land 2018 Edition". Contracts were exchanged on 4 April 2019.
Although in the box on the front page of the contract the deposit was written as "$483,000", clause 38 provides: The parties agree that the purchaser shall pay the amount of $241,500.00 as the deposit payable in 2 instalments. The first instalment shall be $150,000.00 on the exchange of contracts and the second instalment shall be $91,500.00 on the 4th month after the contract date.
The appellant paid the first instalment on 4 April 2019 when contracts were exchanged. The second of $91,500 was not paid into the real estate agent's trust account until 7 August 2019.
Clause 2 relevantly provides: 2 Deposit and other payments before completion 2.1 The purchaser must pay the deposit to the depositholder as stakeholder. 2.2 Normally, the purchaser must pay the deposit on the making of this contract, and this time is essential. 2.3 If this contract requires the purchaser to pay any of the deposit by a later time, that time is also essential. … 2.5 If any of the deposit is not paid on time or a cheque for any of the deposit is not honoured on presentation, the vendor can terminate. This right to terminate is lost as soon as the deposit is paid in full. … [Italics in original to denote defined terms]
Clause 9 provides that if the purchaser did not comply with the contract "in an essential respect, the vendor can terminate by serving a notice".
In the early evening of 5 August 2019 the respondents' solicitor served a notice of termination on the appellant's solicitor. The stated ground for termination was the purchaser's failure "to pay the balance of the deposit of $91,500 in accordance with clauses 2 and 38 of the contract".
The appellant contested the respondents' right to terminate, bringing a suit for specific performance. In those proceedings the respondents maintained that the contract had been validly terminated and that they were entitled to forfeit the deposit. In that event the appellant sought an order under Conveyancing Act 1919 (NSW), s 55(2A) for the return of the deposit.
In addition to contesting the construction of clause 38, the appellant contended that "if the last day for payment of the instalment was on 4 August 2019 then as that day [was] a Sunday clause 21.5" operated to extend the time for payment to 5 August 2019. In that event the respondents' purported termination, prior to the end of 5 August 2019, would have been ineffective.
Clause 21 provides: 21 Time limits in these provisions 21.1 If the time for something to be done or to happen Is not stated in these provisions, it is a reasonable time. 21.2 If there are conflicting times for something to be done or to happen, the latest of those times applies. 21.3 The time for one thing to be done or to happen does not extend the time for another thing to be done or to happen. 21.4 If the time for something to be done or to happen is the 29th, 30th or 31st day of a month, and the day does not exist, the time is instead the last day of the month. 21.5 If the time for something to be done or to happen is a day that is not a business day, the time is extended to the next business day, except in the case of clauses 2 and 3.2. 21.6 Normally, the time by which something must be done is fixed but not essential.
Clause 1 defines "normally" (which appears in clauses 2.2 and 21.6) to mean "subject to any other provision of this contract".
Finally, clause 3 only applies if "the vendor has agreed to accept a deposit-bond for the deposit (or part of it)". Although there was no such agreement in this case it remains necessary to consider clauses 3.2 and 3.3, the first of which is the other provision in relation to which clause 21.5 is expressed not to operate. Clause 3.2 provides: 3.2 The purchaser must provide the original deposit-bond to the vendor's solicitor (or depositholder) at or before the making of this contract and this time is essential.
Clause 3.3 fixes the time limit for the service of a "replacement deposit-bond" in the event that completion "does not occur by the date which is 14 days before the expiry date" of the original deposit-bond. That time limit is "at least 7 days before the expiry date" and is made "essential".

Did clause 21.5 extend the time for payment of the second instalment of the deposit?

It is no longer controversial that clause 38 provided that the second instalment of the deposit was to be paid by no later than 4 August 2019.
On the appellant's case, 4 August 2019 was a day "for something to be done or to happen" that was not a business day. That was sufficient to engage the condition for the automatic application of clause 21.5. It followed that the time for payment of the second instalment was to be extended to the "next business day". The exception to the operation of clause 21.5 did not in terms apply to clause 38. Nor did it apply to clause 2 because the relevant subclause 2.3 did not appoint or fix the time for payment of the second instalment of the deposit. That was done by clause 38. It was not sufficient to engage the exception that it made "essential" that time as fixed by clause 38.
The immediate question is what are the rights and obligations of the parties with respect to the payment of the deposit. The starting point is the language of the contract. The objective theory of contract requires that the task of construction of that language be approached from the perspective of a reasonable person in the position of the parties.
The box on the first page of the contract describes the deposit as $483,000. That is contradicted by the more specific agreement recorded in clause 38 that the deposit was $241,500, and to be paid in two instalments.
Clause 2 is headed "Deposit and other payments before completion". Clauses 2.1 to 2.5 are concerned with the payment of the deposit - to whom it is to be paid, when it is to be paid, the manner of payment (i.e. cash or cheque) and the consequences of not paying "any of the deposit on time". Clause 2.6 disapplies these earlier provisions in the event that the vendor accepts a bond or guarantee for the deposit; and where the vendor only accepts a bond or guarantee for part, clause 2.7 provides for their continued application to the balance. Clause 2.8 provides for a charge in favour of the purchaser if any of the deposit or balance of the purchase price is paid to the vendor or as the vendor directs and before completion. Clause 2.9 governs the investment of the deposit and the payment of any interest received.
In addressing the time limits for payment of so much of the deposit as is not the subject of a bond or guarantee, clause 2 expressly contemplates that other provisions of the contract may provide for the payment of all or any of the deposit by a later time, or later times, than "on the making of the contract".
Clause 2.2 establishes the 'normal' position as being that the deposit is payable on exchange, and that the time for doing so is "essential". If some other provision of the contract requires the payment of any of the deposit by a time later than on exchange, clause 2.3 makes that time or those times "also essential". The use of "also" in that expression emphasises the continuing application of clause 2.2 to any of the deposit which remains payable on exchange.
Clause 2.5 provides that if any of the deposit is not paid on the or a time that is made essential by clauses 2.2 or 2.3, the vendor is entitled to terminate.
Where the condition for its operation is satisfied, clause 21.5 extends the time limits otherwise imposed by the contract for doing something. However, it does not apply to the instances of time limits dealt with by clauses 2 or 3.2.
The appellant's argument (as summarised in [20] above) focuses on clause 2.3. It is contended that the inquiry as to what the contract "requires" in relation to the payment of any of the deposit by a time later than exchange is to be answered by reference to the time specified by clause 38, as extended by clause 21.5. So construed, clause 2.3 would make that extended time, as distinct from the time provided by clause 38, "also essential".
There are two difficulties with the appellant's proposed construction. First, it does not give effect to the language of clause 2.3, which makes essential the "later time" by which payment is "require[d]" by another provision of the contract, here clause 38. Secondly, to construe clause 2.3 as making "essential" a time limit which has been extended by the operation of clause 21.5 ignores the effect of the exception in clause 21.5.
Properly construed, what is excepted from the operation of clause 21.5 "in the case of [clause] 2" is the time limit which is the subject of that clause, namely that for the payment of the deposit. In "the case of [clause] 3.2", that time limit is for the service of the replacement deposit-bond. Furthermore, the position is the same if the time limit in relation to which clause 21.5 does not operate is described by reference to the more specific subject matter of clause 2.3, namely the time or times for payment of any instalment of the deposit after exchange.
The exception applies to the time limits dealt with by clauses 2 and 3.2 and irrespective of whether those time limits are set out in the clause or incorporated by reference or some other mechanism. The exception implicitly assumes that each of these clauses deals with a time limit or time limits and the only sensible characterisation of those time limits is in the case of clause 2, those for payment of any of the deposit.
For these reasons, the construction contended for by the appellant must be rejected. It does not give a congruent operation to these relevant provisions, which have the consequence that the times for payment of the deposit and provision of the deposit-bond are not extended by clause 21.5. The fact that clause 3.3 (which deals with the time for service of a replacement deposit-bond) is not included within the excepted instances of time limits in the contract does not call into question the correctness of the interpretation adopted by the primary judge.
In the result, the appeal should be dismissed with costs.
PAYNE JA: I agree with Meagher JA.
EMMETT AJA: The question in this appeal is whether the respondents, Mr Chi Hing Wan and Ms Kwan Yee Chan (the Vendors), were entitled to terminate a contract for the sale and purchase of land in Vaucluse made with the appellant, Mr Theo Alexakis (the Purchaser) on 4 April 2019 (the Contract). The Contract was in the form of the 2018 edition approved by the Law Society of New South Wales and the Real Estate Institute of New South Wales.
Clause 2 of the approved form relevantly provided that, subject to any other provision of the Contract, the Purchaser was to pay the deposit on the making of the Contract and that that time was essential. Clause 2 also provided that, if the Contract requires the Purchaser to pay any of the deposit by a later time, that time was also essential. However, cl 21.5 of the form relevantly provided that, if the time for something to be done or to happen was a day that was not a business day, the time was extended to the next business day "except in the case of cl 2 …".
Under special condition 38 of the Contract, the parties agreed that the Purchaser would pay a deposit of $241,500 in two instalments. The first instalment of $150,000 was paid on the exchange of contracts. The second instalment of $91,500 was to be paid "on the 4th month after the contract date". The appeal proceeded on the basis that special condition 38 should be understood as referring to 4 August 2019, which was a Sunday. Since 4 August 2019 was a Sunday, the next business day was Monday 5 August 2019.
The second instalment was in fact paid on 7 August 2019. However, late in the afternoon of 5 August 2019, the Vendors gave notice purporting to terminate the Contract on the basis that the Purchaser had failed to comply with an essential term, namely that the balance of the deposit be paid no later than 4 August 2019. The question is whether that notice was effective.
The Purchaser commenced proceedings for specific performance of the Contract, notwithstanding the purported termination. A judge of the Equity Division concluded that the exception in cl 21.5 operated to exclude the extension to the next business day that would otherwise have been available under that provision. Accordingly, specific performance was refused on the basis that the Contract had been validly terminated.
The Purchaser now appeals to this Court from that refusal. The question in the appeal turns on the construction of cl 21.5 of the Contract. I have had the advantage of reading in draft form the reasons of Meagher JA for concluding that the primary judge did not err in the construction of the provisions of the Contract. I agree that the appeal should be dismissed with costs.

DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. The onus remains on any person using material in the judgment or decision to ensure that the intended use of that material does not breach any such order or provision. Further enquiries may be directed to the Registry of the Court or Tribunal in which it was generated. Decision last updated: 11 August 2021

Alexakis v Wan

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