Anthony John Silvestro v Jiang Guang Ming

PARTIES : Anthony John Silvestro (Plaintiff) Jiang Guang Ming (Defendant)

COUNSEL : G A Sirtes (Plaintiff) T O Bland (Defendant)

SOLICITORS : Coleman & Greig (Plaintiff) Johninfo Lawyers (Defendant)

LOWER COURT JURISDICTION : Supreme Court (Associate Judge)

LOWER COURT FILE NUMBER(S) : 14450 of 2005

LOWER COURT JUDICIAL OFFICER : Harrison AsJ

LOWER COURT DATE OF DECISION : 4 April 2006

LOWER COURT MEDIUM NEUTRAL CITATION : Silvestro v Ming [2006] NSWSC 229

• 1 - IN THE SUPREME COURT OF NEW SOUTH WALES COMMON LAW DIVISION PROGRESSIVE LIST

14450 of 2005 Anthony John Silvestro v Jiang Guang Ming

1 HIS HONOUR: By an Ordinary Statement of Claim filed in the Local Court on 28 January 2006, Jiang Guang Ming ("the defendant") sued Anthony John Silvestro ("the plaintiff") for damages. It will be necessary in due course to return to the precise terms of that document because the way in which the case was pleaded is at the heart of certain of the issues raised before me. However, it is sufficient for present purposes to observe that the defendant sued upon a handwritten agreement made between him and the plaintiff dated 25 April 2004 pursuant to which the defendant paid the plaintiff $15,000, described in the agreement as "a deposit". In order to understand the basis upon which the deposit was paid, and the rights, if any, which the defendant had either to sue for its return, or for damages for breach of the agreement, it is necessary to have regard to it in full. The agreement was as follows: - "Property; 2 Storey Full Brick Residence Address; 68 Oldfield St, Greystanes, NSW Agreed Purchase Price; ($738,000) Seven Hundred and thirty eight thousand dollars only in full.

Deposit; ($15,000) Fifteen thousand dollars paid on 25th April 2004 - Non Refundable as per the mentioned terms:

Exchange Contract; within 1 week of this date including $58,800 to be paid at time of exchange being a total of 10% including the deposit $15,000 = $73,800.

Settlement Within 6 weeks of this agreement to the 31st May 2004 and the balance of $664,200 to be paid on Settlement.

In the event of Non Councill [sic] Approval and/or Non Compliance Sewer Connection under the house/dwelling and irrepairable [sic] structural damage. Subject to any future Council development plans".

2 The plaintiff was the owner of the property at 68 Oldfield St Greystanes ("the property"). It is tolerably clear that the defendant wanted to purchase the property at the price set forth in the agreement but that he was concerned, if he were to commit himself to do so, that he could be released from the bargain, and obtain a refund of his deposit, if certain conditions were not met. These were described as "non refundable conditions". In the events that occurred, the defendant paid the sum of $15,000 at the time of signing the agreement. If the words "exchange contract within one week of this date" as they appear in the agreement contemplated the exchange of a formal written agreement for the sale of the property, this did not occur. Indeed, by no later than 7 May 2004 the plaintiff had exchanged contracts for the sale of the property with a third party and had purported to forfeit the deposit. I note in passing that the agreement does not in terms make the period of one week referred to an essential time stipulation and at no time did the plaintiff, by the giving of a notice to complete or in some other way, attempt to make time of the essence. In fact, as far as I am able to determine, the plaintiff did not give notice to the defendant in any form at all of his intention to forfeit the deposit prior to entering into a contract for the sale of the property with another purchaser. These issues curiously received no attention during the course of the hearing in the Local Court.

3 The matter was heard before his Honour Magistrate Lulham who gave judgment on 26 August 2005. He ordered the plaintiff to pay the sum of $15,000, together with interest on that amount calculated from 1 June 2004, to the plaintiff plus costs. From that decision the plaintiff appealed to this Court pursuant to section 74 of the Local Courts Act 1982. That appeal was heard by Associate Justice Harrison on 29 March 2006. Her Honour gave judgment on 4 April 2006: see Silvestro v Ming [2006] NSW SC 229. From that decision the plaintiff appeals pursuant to UCPR r 49.4 by Notice of Motion filed in this Court on 2 May 2006. At the hearing of the appeal before me Mr Sirtes of Counsel, who appeared for the plaintiff, sought leave to file in court an Amended Notice of Motion. Mr Bland of Counsel, who appeared for the defendant, opposed the amendment. But for the matters discussed in paras 25 to 31 below, I would have considered that the plaintiff should have leave to rely upon the two additional grounds numbered five and six in the Amended Notice of Motion. Accordingly, the six grounds of appeal upon which the plaintiff relied at the hearing before me are as follows: 1. The Learned Associate Justice erred in law in failing to find that Magistrate Lulham in the Local Court erred in law by construing the contract between the parties herein (entered on 25 April 2004) as being subject to a requirement that the plaintiff provide the defendant with a building certificate together with the contract of sale of the plaintiff's former residence at 68 Oldfield Street, Greystanes.

The Learned Associate Justice erred in law in failing to find that Magistrate Lulham in the Local Court erred in law by holding the existence of a term not pleaded nor otherwise contended by the defendant (as plaintiff) in the Court below.

The Learned Associate Justice erred in law in finding that the terms upon which judgment was entered in the Local Court were properly pleaded and, in not holding that any of the terms pleaded in the Statement of Liquidated Claim existed, ought to have allowed the plaintiff's appeal and entered judgment for the plaintiff.

The Learned Associate Justice erred in law in taking into consideration pre contract discussions between the parties as a tool for creating terms that did not exist.

The Learned Associate Justice erred in law by determining the appeal:

(a) as if the defendant (Mr Ming) had filed a Notice of Contention in circumstances where no such notice had been filed;

(c) in denial of natural justice by failing to consider, adequately or at all, the plaintiff's grounds of appeal against the decision of Lulham LCM and deciding the matter on a basis not advanced by the defendant (Mr Ming);

The Learned Associate Justice erred in law by finding that Lulham LCM could have decided the matter adversely to the plaintiff (Mr Silvestro) by finding the non-fulfilment of a condition precedent (or subsequent) in circumstances were such an argument was not pleaded or argued (in such terms) in the Local Court. 4 In order to put these grounds of appeal in context, it is necessary to have regard to the way in which the learned Magistrate disposed of the proceedings before him. First, his Honour said that the words "non refundable conditions" amounted to what he described as a "patent ambiguity". His Honour would appear to have formed this view upon the basis of what he perceived to be an apparent tension between words suggesting that the $15,000 deposit was not to be refunded on the one hand, and a series of conditions, clearly contemplated by those words, which could only have had a meaningful place in the agreement if they described circumstances in which the defendant was to be released from it without further obligation, and recover his payment, on the other hand. His Honour said "[T]he patent ambiguity are the words "non refundable conditions" which appear to then set out a series of conditions which one would think could only have been meant to apply to enable a refund of the $15,000 to be made". On one view, of course, the words created no ambiguity at all. In the context of the agreement as a whole, the otherwise non-refundable nature of the deposit has clearly been qualified by a series of conditions subsequent; in the event that at least one of these conditions is fulfilled, the non-refundable nature of the deposit disappears. 5 Secondly, his Honour had to grapple with an obvious practical problem that the agreement created. If the agreement were to be given some meaningful operation, in a way that afforded adequate protection to the defendant from the affectations with which the conditions dealt, it was obvious that this could not be done within the seven day period for which the agreement provided. There seems little doubt that neither of the parties gave any thought to this issue at the time. Accordingly, his Honour appears to have proceeded upon the basis that the expression "exchange contract within one week of this date" somehow anticipated the execution of an agreement for sale of land in which the four conditions subsequent were repeated. Indeed, there is a clear reference to this concept in the correspondence passing between the solicitors for the parties in the period around May to June 2004. The evidentiary basis for this needs to be briefly explored.

6 The solicitors for the plaintiff at the time wrote a letter dated 29 April 2004 to the solicitor for the defendant enclosing what was referred to as a "draft counterpart contract for approval". The letter enclosed a standard form Contract for the sale of Land - 2000 edition, which related to the property and drew in precise terms, with one exception, upon the contractual framework of the handwritten agreement. That exception was the total absence of any of the so-called non-refundable conditions. The letter included a paragraph that said that the draft was submitted "subject to final approval by our client and is forwarded on the basis that no binding relationship exists prior to exchange".

7 By letter dated 4 May 2004 the defendant's solicitor replied in the following relevant terms: -

We are informed by our client that the vendor is in the process of applying [sic] a copy of the building certificate for the above property.

We are instructed to add the clauses as follows: 1. . . .

"It is a subject of this contract of sale that the vendor must provide a building certificate for the extended portion of the existing house prior [to] settlement. If such certificate cannot be provided, the purchaser is entitled to rescind this contract and the deposit, including the initial deposit in the amount of $15,000, must be return [sic] to the purchaser". 8 By facsimile dated the same day, the solicitor for the plaintiff replied (relevantly) as follows: - 2. Not agreed. We note that the vendor is applying for a building certificate. If the vendor is unable to obtain such a certificate, the vendor is willing to demolish the awning if the purchaser so requires it [sic] demolition. 9 By a letter of the following day the solicitor for the plaintiff wrote to the solicitor for the defendant. Among other things, that letter included the following exchange: - We refer to the above matter and the agreement signed by the vendor and the purchaser on the 25th April 2004. We advise that the purchaser has not complied with the agreement stating that exchange is to occur within one week from the date of this agreement.

The agreement to exchange contracts by Friday 7 May 2004 is no longer open to your client should we not be notified of your client's decision to proceed with the sale or not by the end of today. 10 By letter dated 20 May 2004 the defendant's solicitor wrote to the plaintiff's solicitor advising that the plaintiff "must provide a clear Council's Building Certificate in respect of the main building and the pergola at [the] rear of the property".

11 Curiously, no response appears to have been provided to that letter. The next relevant letter would appear to be a letter dated 3 June 2004 from the defendant's solicitor to the plaintiff's solicitor in which he said, among other things, "[W]e understand from our discussion that exchange took place with an alternative buyer on 7 May 2004 with settlement to take place on 18 June 2004. We are instructed to lodge a caveat on the property tomorrow". A letter from the defendant's solicitor the following day said "[It appears that your client has attempted to sell the property to two separate parties, keeping the deposit from our client and attempting to sell a separate conveyance [sic] of the property to the other party. This was undertaken without notice to our client".

12 Finally in this sequence, the plaintiffs solicitor wrote to the defendant's solicitor in the following (relevant) terms: - 'The agreement entered into on 25 April 2004 with [the defendant] is not a contract for the sale of land. The Agreement is however an enforceable contract which gives my client the right to retain the payment by [the defendant] as a result of his failure to comply with its terms.

Prior to entry into the Agreement [the defendant] was repeatedly informed by [the plaintiff] that failure to exchange a contract for the sale of land within seven days of the Agreement would result in $15,000 being forfeited. [The defendant] unequivocally accepted those terms;

[The defendant] was also informed prior to the entry to the Agreement that there may be some improvements on the property which were not Council approved and that matter is noted in the Agreement;

[The defendant] was in fundamental breach of the Agreement by failing to exchange a contract for the sale of land within seven days;

[The defendant] was given an extension of time to exchange the contract for the sale of land and failed to do so;

Due to this failure, [the defendant] forfeited $15,000 to [the plaintiff] in accordance with the Agreement; 6 . . . 13 One further relevant matter appearing in correspondence should be noted. On 23 June 2000 the plaintiff's solicitor wrote to the defendant's solicitor. That letter included the following paragraph: - '3. The document and the circumstances surrounding its exchange may give rise to a dispute between the parties as to who is entitled to retain the $15,000 paid by [the defendant] but does not give your client a caveatable interest.' 14 This correspondence, or at least the matters arising from it, was more than adequately dealt with by the learned Magistrate in his judgment. It is important for present purposes to record some sections of that judgment which are as follows: - I am satisfied that . . . in the agreement dated 25 April the heading "non-refundable conditions" was incorrect and the only meaning to be given to those words to make the agreement sensible, effective and also the absolute overwhelming evidence of all of the parties including Mr Silvestro and particularly Mrs Silvestro who all agreed that four conditions were imposed and if those conditions were not met then the purchaser would be entitled not to have to proceed with the contract and would be entitled to his deposit of $15,000 back. The four conditions were non-council approval, non-compliance sewer connections under the house, a dwelling, irreparable structural damage and subject to any future council development plans. (See paragraph 16 below).

There is a clear inference from the contract that the parties became aware that there may have been a problem with council approval for the awning. . . .

In my view the agreement between the parties dated 25 April required that the contract should be subject to the provision of a building certificate to ensure council approval. That is the only way that that condition could have been met.

In relation to the other conditions the purchaser was able to satisfy himself. . . . In my view the condition in the agreement required the contract to be subject to a condition that the buildings on the property had council approval and that a building certificate would be obtained. In my view that clause meant that either the vendor had to obtain such a certificate or that the contract would be subject to the vendor obtaining such certificate.

The purchaser was prepared to enter into the contract with a clause making the contract subject to the vendor providing the certificate. My understanding is that it is the owner who has to apply and obtain a certificate or on his behalf. In my view, that is the construction to be given to the contract. It was the clear intention of the parties when they entered into the contract and in my view the purchaser was entitled not to enter into a contract of sale without that condition and if that condition was not included then he was entitled to a refund of his deposit of $15,000.

In my view it does not matter if the certificate was subsequently obtained or not obtained. The agreement said that he would have the right to proceed with the purchase and a refund of his deposit in the event of non-council approval clearly of the buildings. He was entitled under that agreement to have that clause a condition of any condition [ semble contract] of purchase.

On that basis I am satisfied that the plaintiff is entitled to a refund of the deposit. In my view the plaintiff is not entitled to any other damages. It was his decision based on legal advice which led to the unsuccessful Supreme Court proceedings. He is, sadly, as a consequence of those futile court proceedings [dealing with an application to remove his caveat], not entitled to recover those costs in these proceedings. 15 In her judgment, Associate Justice Harrison helpfully recorded relevant portions of the defendant's original Ordinary Statement of Claim filed in the Local Court. Accordingly, with one exception, it is unnecessary to do so again. That exception is paragraph 12 which was as follows: -

12. Further or alternatively, it was an express and/or implied term of the Agreement that the deposit would be refunded in the event of any improvements to the Property not being approved by the local Council. No subsequent paragraph of the Ordinary Statement of Claim pleaded a breach of the alleged express and/or implied term. 16 At paragraph 16 of her judgment her Honour quoted that portion of the learned Magistrate's judgment which is set forth in italics in paragraph 14 above. Then, at paragraphs 17 and 18 of her judgment, the following passages appear: - 17. The Magistrate need not have gone any further except so as to establish that no council approval had been obtained. The Magistrate did not make this finding. The Magistrate made a finding as to the provision of a certificate. Mrs Silvestro was cross-examined and gave evidence that they did not have a certificate (t 23.30). There is evidence in Silvestro's affidavit at [43] that the roof was not council approved. There was no evidence to the contrary.

18. Silvestro submitted that Ming is not entitled to judgment on an unpleaded cause of action. It was pleaded that it was an express and/or implied term of the agreement that the deposit would be refunded in the event of any improvements to the property not being approved by local council. The issue was properly pleaded. This ground of appeal fails. 17 Her honour's conclusion is to be found at paragraph 21 of her judgment. It is as follows: -

21. The Magistrate's decision is not one which this Court would disturb. It is my view that the result was correct. As previously stated once the Magistrate held that one of the refundable conditions was non-council approval he need not to have gone further. He was not obliged to make a further finding as [to] the requirement for a certificate. 18 In those circumstances her Honour dismissed the plaintiff's appeal and affirmed the decision of Magistrate Lulham dated 26 August 2005. Her Honour dismissed the Amended Summons filed 10 February 2006 and ordered the plaintiff to pay the defendant's costs. 19 In support of the plaintiff's case before me, Mr Sirtes produced and relied upon written submissions. Those submissions aided in putting the six grounds of appeal set forth in the Amended Notice of Motion filed in court on 7 March 2007 in context. Those submissions distil into the following series of propositions: -

(a) Magistrate Lulham erred, as a matter of law, in deciding the matter adversely to the plaintiff by finding the existence of a contractual term that was not pleaded by the defendant and which was unsupported by any evidence;

(b) In accordance with principles of both natural justice and contractual construction, as well as principles of pleading, the plaintiff was entitled to be defeated on the basis of the case run in the Local Court, but not upon the basis of a case that was neither conceived by the defendant nor run in that court;

(c) The defendant did not file any Notice of Contention and did not submit to her Honour that he was entitled to succeed in the Local Court in the way conceived by her Honour in her judgment;

(d) Accordingly, the plaintiff lost in the Local Court upon an argument conceived wholly by the learned Magistrate, and when appealing against this decision, her Honour decided the matter upon a basis never argued before her;

(e) It was not open to her Honour to determine the matter in the way that she did in the absence of a Notice of Contention;

(f) Her Honour committed the same error as the learned Magistrate in that she decided the matter upon the basis of the existence of a condition precedent (or condition subsequent) in circumstances where this was neither pleaded nor argued before the learned Magistrate or her Honour. 20 In my opinion, these submissions proceed upon too narrow a basis, emphasising as they do the literal terms of the pleadings, without any, or at least any proper, regard to the surrounding commercial context out of which the dispute arose. In this regard, I consider that the letter dated 4 May 2004 is critical. It supports, and explains, the way in which the learned Magistrate attempted to make sense of the parties' handwritten agreement. In this respect Mr Sirtes' contention is that the learned Magistrate dealt with the allegation contained in paragraph 12 of the Ordinary Statement of Claim by converting the allegation that the deposit would be refunded in the event of any improvements to the property not being approved by the local council into an allegation that the plaintiff was required to provide a building certificate to establish this. 21 The matter referred to in the letter dated 4 May 2004 from the defendant's solicitor drew a twofold response. Bearing in mind that the exchange of correspondence on this point was dealing with what should be included in the formal contract for the sale of land in contemplation of its exchange, the solicitor for the plaintiff did not agree that the proposed clause 47 should be added. However, in my view significantly, the plaintiff's solicitor's response the following day also noted that the plaintiff was "applying for building certificate". In those circumstances, it is a little difficult to understand why the plaintiff would have been proposing to apply for such a certificate if not for the purpose of establishing whether any improvements to the property had not been approved by the local council. In my opinion, the words "[I]f the vendor is unable to obtain such a certificate, the vendor is willing to demolish the awning" and so on, demonstrate that the plaintiff must at least have understood that the concept underpinning the pleading in paragraph 12 of the Ordinary Statement of Claim incorporated as well an obligation upon the plaintiff to obtain a building certificate or to be obliged to refund the deposit if he could not do so. In my opinion, the case was conducted before the learned Magistrate upon the basis that paragraph 12 had this meaning. I did not understand it to be any part of Mr Sirtes' submissions before me that the absence of a pleading alleging a breach of the term asserted in paragraph 12 was significant.

22 In essence, therefore, the several grounds of appeal brought forward in the Amended Notice of Motion are in truth only different ways of saying what is, in effect, the same thing. Mr Sirtes quite properly and candidly conceded as much in his response to a question from me about this. His concession was not controversial.

23 In these circumstances I consider that Associate Justice Harrison fell into no error in the way in which she dealt with the plaintiff's appeal. In my opinion, the plaintiff has not established that any facts found, or inferences drawn, by her Honour were flawed.

24 But for the matters set forth in paras 25 to 31 below, I would therefore have ordered that the plaintiff's appeal be dismissed with costs. 25 UCPR r 49.4 provides: - An appeal lies to the Supreme Court from any decision of an associate Judge of the Supreme Court, except in any case where an appeal lies to the Court of Appeal. 26 The plaintiff's Notice of Motion would appear to have been filed in purported pursuance of that rule. 27 Part 60 rule 17 provides: - An appeal shall lie to the Court of Appeal in accordance with section 101 and 103 of the Act, subject however to the leave of the Court of Appeal in any case to which subsections (2) and (4) of section 101 apply, from any decision of the Court in a Division constituted by an associate Judge: (a) . . .

(a1) in proceedings referred pursuant to Schedule D Part 3 paragraphs 5, 5A and 5B,

(b) . . . 28 Schedule D Part 3 para 5B refers to: - An appeal from a Local Court in any civil matter. 29 Following the hearing of this matter, I listed it for mention in order that the rules, set forth above, could be drawn to the attention of counsel appearing for the parties, so that any submissions they might wish to make upon them could be heard. No reference had been made to these rules at the hearing, both parties apparently proceeding upon the basis that I had jurisdiction to hear the matter. Both counsel referred me to the decision in Gill & Anor v Residential Tribunal & Ors [2001] NSWSC 896. In my opinion, the decision in that matter supports the conclusions to which I have come. 30 In my opinion, any appeal in this matter from the decision of the learned Associate Justice should have been commenced in the Court of Appeal. Neither of the parties was able to draw to my attention any provision that would have permitted or authorised the commencement of proceedings in the present matter pursuant to UCPR 49.4. In the circumstances, I consider that the purported appeal is incompetent and that I had, and have, no jurisdiction to hear the matter. 31 In these circumstances, it is my view that I should dismiss the plaintiff's Amended Notice of Motion. The proceedings before me could, and should, have been obviated by attention to the relevant provisions by both parties. I consider therefore that I should make no order as to costs.

(2) I make no order as to costs. **********

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