Anastasia Kalathas v 89 Ebley Street Pty Limited

Issues for Determination

1. The issues which arise for determination are: 1. Was there a discrepancy between the subject matter of the Contract and what the Vendor was proposing to convey in satisfaction of the Vendor's obligation under the Contract? 2. Was the Purchaser entitled to rescind the Contract? 3. Was the Purchaser entitled to treat the Notice to Complete dated 24 April 2020 as repudiation of the Contract by the Vendor? 4. If the answer to (2) or (3) is yes, is the Purchaser entitled to a return of the deposit ($37,500)? 5. If the answer to (2) and (3) is no: 1. Is then Purchaser entitled to return of her deposit by virtue of s 55(2A) of the Conveyancing Act 1919 (NSW)? 2. Is the Vendor entitled to specific performance of the Contract? It should be noted that by way of Cross Claim filed 30 September 2020 the Vendor seeks either an order that the Purchaser completes the Contract or, in the alternative, that the Purchaser be required to pay damages arising from her repudiation of the Contract.
2. In respect of issue [3(1)], the Vendor accepts that it was required to convey a car space as well as the commercial space, and it also accepts that the car space was an essential part of the Contract which could not be met by compensation in lieu. At the hearing, the Vendor accepted that it was not in a position to complete the Contract as at the date of the Notice to Complete (24 April 2020) and that the Notice to Complete was invalid: see T14.8-20.
3. In respect of issue [3(2)], the Purchaser's case is that the Vendor, having registered the February Strata Plan with no car space and issuing the Notice to Complete, had taken steps that established that it was not willing or intending to convey a car space, and that she was entitled, in accordance with the principles enunciated in Flight v Booth (supra), to regard the Contract as at an end.
4. In respect of [3(3)] similar but not identical issues arise in respect of repudiation to those identified in [3(2)].
5. In respect of Issue [3(4)], there is no dispute that if the Purchaser was entitled to rescind or terminate the Contract she would be entitled to return of her deposit.

Flight v Booth

1. The principle in Flight v Booth (supra) can be stated as "that purchasers cannot be forced to accept (even with compensation) a property that is substantially or materially different from that which they contracted to buy" per Barrett J (as his Honour then was) in Higgins v Statewide Developments Pty Ltd [2010] NSWSC 183 at [51].
2. His Honour then said at [52]: "The focus is upon what the purchaser contracted for, that is, the subject matter of the sale as described in the contract. Determination of what the purchaser did or did not "mean to have" (Fletcher v Manton) or whether the subject matter available to be conveyed makes the purchase "altogether useless for the purposes for which it was made" (Dykes v Blake) directs an inquiry into what is involved in due performance of the contract. It is a matter not of what the purchaser thinks in his own mind he is buying or what he would like to be buying but of what the contract requires him to take. It is that that must be compared with what the vendor proposes to convey by way of completion of the contract." (Emphasis added).
3. The reference to "mean to have" came from a passage in the judgment of Rich ACJ in Fletcher v Manton [1940] HCA 32; (1940) 64 CLR 37 in which in the context of Flight v Booth his Honour described as "wholesome" the doctrine that "a purchaser shall have that which he contracted for, or not be compelled to take that which he did not mean to have".
4. I have already noted that the Vendor does not dispute that it was contractually required to convey not only the 50m2 commercial space, but a car space as well and that it could not force the Purchaser to accept the commercial lot with no car space. The Vendor certainly has, after the commencement of these proceedings, put itself in the position in the position that it could by 31 July 2020 convey both the commercial space and the car space because at some unspecified time after 8 May 2020 it commenced taking steps to register a fresh plan of subdivision (i.e. the July Strata Plan) which following the requisite certificates and agreement of its financier it was able to achieve by 31 July 2020.
5. The Purchaser does not dispute that the Vendor can now convey what it was required to convey under the Contract, but her position is that she was entitled to rescind on 28 April 2020 because the Vendor could only be taken at that point in time as having adopted a different position to that which it now advances (because it had registered a plan with no car space and it was insisting that the Purchaser complete the Contract without having conveyed to her a parking space).
6. Mr El-Hage, Counsel for the Purchaser, placed emphasis on the last sentence of [52] from Higgins, i.e. the comparison is between what was promised and what the vendor "proposes to convey". He contends that one must determine objectively what the Vendor was proposing to convey and given that, as at the date of the Completion Notice of 2 April 2020 and the Notice to Complete of 24 April 2020, the February Strata Plan which had been registered by the Vendor and which showed the Purchaser's lot as Lot 3 did not contain a car space for Lot 3, the Vendor must be taken to be insisting that the Purchaser settle the transaction on the basis that she would not receive all that she had bargained for.
7. Ms Williams, Counsel for the Vendor, sought to resist the reliance on Flight v Booth by relying on the following matters: 1. There could be no doubt, she submitted, that it was at all times within the power of the Vendor to provide a car space. The Vendor owned all of the lots in the strata plan at the time and could allocate a car space from another lot if it was required. 2. That this was not a case in which a vendor was unable to meet its contractual obligations. Rather, all that had happened was that the February Strata Plan, by error, had not included a car space allocated to Lot 3 and steps had to be taken to rectify the error. In this connection it should be noted that by its Cross Claim the Vendor contended that the Completion Notice and the Notice to Complete were issued with the Vendor not appreciating that the February Strata Plan did not include a car space for Lot 3: see paragraphs 17, 23 and 24 of the Cross Claim. Paragraph 17 of the Cross Claim, for example, is in the following terms: "At the time of issuing the Completion Notice, the Cross-Claimant did not appreciate that the condition precedent to completion of the Contract required by clause 5(a)(ii) of the special conditions of the Contract had not been satisfied." (Emphasis added). 1. That the Vendor had demonstrated its ability to provide a car space for Lot 3 by registering on 31 July 2020 the July Strata Plan and creating a new lot (Lot 5) which incorporated a car space for the Purchaser's commercial space. 2. That the Flight v Booth principle applies where the Vendor is unable to convey what was promised, not where it had the power and ability to convey, and the omission is capable of rectification. Ms Williams relied on Victorsen v Easy Living Holdings Pty Ltd [2019] NSWSC 1721 and in particular [82]. In that case Darke J held that the location of an on-site stormwater detention tank chosen by the Vendor precluded provision of an outdoor recreational area and that the outdoor area was a matter of substance entitling termination. His Honour noted, obiter, at [82], that a problem relating to a bathtub which had not been installed in accordance with the contract could have been rectified and that its incorrect installation would not have justified rescission. 3. The Vendor revoked the Notice to Complete (on 8 May 2020). 4. A purchaser must rescind immediately if he/she is entitled to rescind because of a material discrepancy. Ms Williams cited Forrer v Nash (1865) 35 Beav 167; (1865) 55 ER 858, and see T70-71 in support of that proposition. 5. The Vendor contended that because the February Strata Plan was defective (because it did not contain a car space for Lot 3) this meant that cl 5(a)(ii) of the Special Conditions of the Contract had not been satisfied and the February Strata Plan and the Completion Notice of 9 April 2020 were a nullity: see T80.50. 6. A late attempt to claim that the Purchaser could not rely on a Flight v Booth discrepancy by reason of the terms of the Contract was advanced, but then expressly abandoned: see T94.23.
8. In relation to [14(1)] and [14(3)], whilst it is certainly established that the Vendor was able by 31 July 2020 to put itself in the position that it could convey what it had promised to convey, the Vendor has failed to establish that as at 28 April 2020 it was proposing to convey the car space. Indeed objectively the Vendor must be taken to have been proposing not to convey a car space because it was insisting on settlement on the basis of a registered plan which did not contain a car space. The Vendor was not asserting in April that it could rectify the contract and nothing said in Victorsen (supra) about the bathtub at [82] has any relevance to the present case.
9. In relation to [14(2)], the argument is premised on an assertion that the Vendor thought that the February Strata Plan included a car space for Lot 3 which is simply not supported by evidence and must fail. Ms Williams accepted that there is no evidence to support the assertion that the February Strata Plan was not the plan which the Vendor (by its human representatives and agents) intended to lodge or that it had given instructions for inclusion of a car space for Lot 3 which somehow was accidentally omitted.
10. I observe too that the first response from the Vendor (through its solicitor) to the Purchaser's letter of 28 April 2020 terminating the Contract is dated 7 May 2020 (at CB 320) and was sent just over an hour after the Purchaser's solicitors had indicated that these proceedings were to be filed that day (at CB 320), and was inter alia: "The position that your client has now adopted is that the absence of a car space within lot 3 justifies termination. This is not agreed. If the position is that contracts were exchanged on the basis that the subject lot would include a car space then our client is in a position to deliver a car space to your client, and remedy any error which has resulted in no car space forming part of lot 3 on registration, however would only do so if your client confirms that she will complete the contract within a reasonable time."
11. The email asserts that "If the position is that contracts were exchanged on the basis that the subject lot would include a car space" it is in a position to "remedy any error". That is not even an admission that a car space was contractually required, let alone confirmation that the Vendor had always intended that the strata plan would include a car space for Lot 3. Further as Mr El-Hage pointed out, the Vendor was not, in any event, as at any date prior to 31 July 2020 in a position to convey a car space to the Purchaser and, I infer, could not have done so by 8 May 2020. The Vendor had set the date for completion as 24 April (see [2(7)]) and then 8 May 2020 (see [2(22)]), so "rectification" of the car space issue would have had to be achieved by 8 May 2020.
12. Mr El-Hage also contended that even if the omission in the February Strata Plan had occurred by reason of an unintended error, it would not be relevant to the Flight v Booth point because objectively the Vendor was to be taken as insisting on the Purchaser's completion by the Contract without a car space but, whilst I think that may well be correct, I do not need to decide the point.
13. In relation to [14(4)], Ms Williams contended that power and ability to convey was sufficient and that intention is irrelevant: T65.24-25. I think that the formulation in Higgins (supra) as set out at [8] to [9] of these reasons makes it clear that the principle in Flight v Booth is not limited to situations where the vendor is not able to convey what was promised but applies also where the vendor is not willing to convey what was promised, and I do not accept Ms Williams' contention that such a conclusion expands the application of Flight v Booth in an impermissible way. On the contrary, an unwillingness by a vendor to convey what was promised can, in my view, be no less significant than an inability.
14. In relation to [14(5)], the revocation of the Notice to Complete came two weeks after the Purchaser had terminated the Contract (and indeed after the Purchaser had commenced these proceedings) and revocation occurring after the termination was therefore ineffective.
15. Dealing with [14(6)], Forrer (supra) does not support the proposition advanced, but rather supports the proposition that a purchaser entitled to rescind because of a major discrepancy from what was promised may rescind immediately: see Forrer at 860 and see also Victorsen (supra) at [80]. In any event, the Purchaser rescinded four days after the Notice to Complete was received. The Purchaser became aware of the car space issue only a few days before that and raised it with her solicitors either the day of issue of the Notice to Complete or the day before. Even if a prompt response were required from awareness of the absence in the February Strata Plan of the car space or receipt of the Notice to Complete, that requirement was amply met. It was not asserted by the Vendor in its pleadings that the Purchaser or her agents were aware of the absence of a car space for Lot 3 prior to 22 or 23 April 2020, indeed the Vendor pleaded that neither it nor the Purchaser were aware that the registered plan did not include a car space for Lot 3 (see paragraph 19 of the Cross Claim at CB 30) and that the Vendor did not realise that there was no car space until 28 April 2020 (see paragraph 24 of the Cross Claim at CB 30).
16. In relation to [14(7)], the February Strata Plan was registered and was not a "nullity" as Ms Williams contended. Rather, the February Strata Plan was a valid strata plan but one which was inconsistent with the Contract. I accept that if prior to termination of the Contract the Vendor had acknowledged that the strata plan had to be amended and had the Purchaser wanted to proceed with the purchase there would have been no reason why the date for completion could not have been extended by agreement to allow time for the lodgement of a new plan even if the Contract did not in terms permit alteration of the registered plan, but that is not relevant to what occurred here.
17. In my view the Purchaser was entitled from the February Strata Plan, the Completion Notice and the Notice to Complete issued by the Vendor to draw the conclusion that the Vendor was not proposing to convey a car space as part of, or in conjunction with, the commercial lot. Accordingly, she was entitled to terminate the Contract.
18. Whilst there is no contractual provision dealing with return of the deposit, the Contract having come to an end, the Purchaser is entitled to return of her deposit. Ms Williams accepted that if the Purchaser was found to have validly terminated the Contract the consequence would be that she is entitled to a return of the deposit: see T81.10-15.

Repudiation

1. In view of my conclusion on the first point, I do not strictly need to consider the alternative ground. I will, however, deal with it briefly.
2. As the High Court explained in Koompahtoo Local Aboriginal Land Council v Sanpine Pty Ltd (2007) 233 CLR 115; [2007] HCA 61 at [44]., repudiation is: "…conduct which evinces an unwillingness or an inability to render substantial performance of the contract This is sometimes described as conduct of a party which evinces an intention no longer to be bound by the contract or to fulfil it only in a manner substantially inconsistent with the party's obligations. It may be termed renunciation. The test is whether the conduct of one party is such as to convey to a reasonable person, in the situation of the other party, renunciation either of the contract as a whole or of a fundamental obligation under it. (In this case, we are not concerned with the issues that arise where the alleged repudiation takes the form of asserting an erroneous interpretation of the contract. Nor are we concerned with questions of inability as distinct from unwillingness.) Secondly, it may refer to any breach of contract which justifies termination by the other party. It will be necessary to return to the matter of classifying such breaches. Campbell J said this was the sense in which he would use the word "repudiation" in his reasons. There may be cases where a failure to perform, even if not a breach of an essential term (as to which more will be said), manifests unwillingness or inability to perform in such circumstances that the other party is entitled to conclude that the contract will not be performed substantially according to its requirements." (Citations omitted).
3. I accept, as Ms Williams submitted, repudiation is a serious matter not lightly to be found and that it involves an assessment of all the objective circumstances: see Shevill v Builders Licensing Board (1982) 149 CLR 620 at 633 per Wilson J.
4. Having registered the February Strata Plan with no car space for Lot 3 and by issuing the Notice to Complete the Vendor was clearly indicating an unwillingness to perform the Contract into which the parties had entered. This amounts to a repudiation of the Contract: see Shevill at 625-626 and Koompahtoo (supra).
5. Ms Williams sought to resist this characterisation on the following bases: 1. The Vendor had revoked the Notice to Complete. 2. The Vendor did not maintain the position evinced in the Notice to Complete once the Purchaser had drawn attention to the absence of a car space, and revoked the Notice to Complete pursuant to cl 6(a)(ii) by its notice of 8 May 2020. 3. The Contract required a car space to be transferred and the Vendor proposed as a way forward of rectifying the problem that the February Strata Plan did not match what was required by the Contract. 4. Ms Williams relied on the following passage from DTR Nominees Pty Ltd v Mona Homes Pty Ltd (1978) 138 CLR 423; (1978) 19 ALR 223 in which the plurality at 230 said: "No doubt there are cases in which a party, by insisting on an incorrect interpretation of a contract, evinces an intention that he will not perform the contract according to its terms. But there are other cases in which a party, though asserting a wrong view of a contract because he believes it to be correct, is willing to perform the contract according to its tenor. He may be willing to recognize his heresy once the true doctrine is enuciated or he may be willing to accept an authoritative exposition of the correct interpretation. In either event an intention to repudiate the contract could not be attributed to him. As Pearson LJ observed in Sweet & Maxwell Ltd v Universal News Services Ltd [1964] 2 QB 699 at 734; [1964] 3 All ER 30 at 43: "In the last resort, if the parties cannot agree, the true construction will have to be determined by the court. A party should not too readily be found to have refused to perform the agreement by contentious observations in the course of discussions or arguments …""
6. I am conscious of the fact that when the Purchaser became aware that the February Strata Plan did not provide for a car space for Lot 3 (which on the evidence was on the evening of 22 or 23 April when her husband told her that he had discovered that fact) and after she had raised the matter with her solicitors she did not instruct her solicitors to raise this omission with the Vendor's solicitors but rather simply treated the Notice to Complete as both a ground for termination and as a repudiation of the Contract.
7. There are cases which make it clear that there are circumstances where there is an obligation on a party to a contract to draw to the other side's attention an error in that side's approach or position and to provide it with an opportunity to abandon its "heresy": see, for example, the passage from DTR Nominees cited above, and see also Koompahtoo (supra) and N.C. Seddon and R.A. Bigwood, Cheshire & Fifoot: Law of Contract (11th Australian Edition 2017, LexisNexis) at 21.14. However, when a party issues a formal Notice to Complete with threatened attendant sanctions, I do not think it is incumbent on the recipient of the Notice to Complete to point out or seek to persuade the other party that it has done so in error. This is even more so where it must be inferred that the party issuing the Notice to Complete has had the benefit of legal advice and the notice has been sent by that party's solicitors, as is the situation here. Further, in relation to the Vendor's reliance on DTR Nominees, as Mr El-Hage pointed out, there was no evidence from the Vendor's agents that they believed that a car space was included in the February Strata Plan and hence that they believed because of that error that they were entitled to demand settlement and the email of 8 May 2020 from the Vendor's solicitor does not support such a conclusion either.
8. Although there was a suggestion made on behalf of the Vendor that the Purchaser had affirmed the Contract by seeking transfer of Lot 1, that erroneous and unmeritorious position of the Purchaser was one advanced before the Purchaser had become aware of the car space issue, and further, affirmation with knowledge by the Purchaser of the absence of a car space was not pleaded in the Defence or Cross Claim. For affirmation the party said to have affirmed must have, at the least, knowledge of the facts which entitle him or her to terminate the contract: see Sargent v ASL Developments Ltd; Turnbull v ASL Developments Ltd (1974) 131 CLR 634 per Stephen J at 642 (with whom McTiernan ACJ concurred) and Mason J at 656, and see Khoury v Government Insurance Office (NSW) (1984) 165 CLR 622 at 633-634 per Mason, Brennan, Deane and Dawson JJ (with whom Murphy J concurred).
9. The revocation of the Notice to Complete was ineffective after termination of the Contract on the basis of repudiation by the Vendor.
10. It follows that I would uphold the termination of the Contract also on the basis of the Vendor's repudiatory conduct which the Purchaser was entitled to, and did, accept.
11. Issues [3(5)(a)] and [3(5)(b)] do not arise.

Conclusion

1. It follows that the Purchaser is entitled to return of her deposit and, having succeeded, she is also entitled to an order that the Vendor pay her costs. The deposit should be returned to the Plaintiff by the Second Defendant within seven days of today's date.
2. I will hear the parties on the form of orders to be made in relation to costs.

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