Solicitors for plaintiff: Butler McIntyre and Butler

UNDERWOOD J This action concerns a contract for the sale of a house known as "Kilnsey", at Swamp Road, Franklin. The plaintiff bank claims it lawfully terminated this contract after repudiation by the defendant and is entitled to damages for breach of contract. The defendants, Dr and Mrs Burgess, deny breach and wrongful repudiation on their part, and counterclaim for the return of the deposit and interest thereon.

2. Kilnsey is built on 3,221 square metres of land described in Certificate of Title Vol3437 Fol91. In 1987, the then registered proprietors of Kilnsey mortgaged the property, firstly to the Australia and New Zealand Savings Bank Limited and secondly to the Australia and New Zealand Banking Group Limited. It appears that the registered proprietors were subsequently in default of their obligations under the second mortgage and the plaintiff bank exercised its power of sale. It instructed Mr Lord of Realty World to act as its agent and sell the land. An auction was held on 11 February 1989 but the bidding failed to reach the reserve price. That day, the defendants were driving in the Huon area looking for a home to buy. They saw Kilnsey and according to a note in Dr Burgess' diary, he and his wife "fell in love with it at first sight". They immediately telephoned Mr Lord who told them that the property had not sold at auction. At the defendants' request, Mr Lord immediately went to Franklin and showed the defendants around Kilnsey which was then vacant. They were very enthusiastic about buying the property but told Mr Lord that they needed to find the money by selling their own house in Roslyn Avenue, Kingston. Mr Lord explained to the defendants that the bank was selling as mortgagee and would not accept a conditional contract. He offered to assist the defendants with the sale of their house in Kingston. The defendants and Mr Lord then repaired to Roslyn Avenue. Mr Lord looked at the property and advised the defendants to do some work about the house to make it a more attractive proposition on the market. He told the defendants that he considered the best price they could expect to receive was $135,000. There was a discussion about the purchase price for Kilnsey. Dr and Mrs Burgess were most anxious to buy. I accept Mr Lord's evidence that he reiterated to the defendants that the bank would not sign a contract, the completion of which was subject to the defendants selling their property or obtaining finance. I find that Mr Lord said that to obtain time within which the defendants could sell their house at Roslyn Avenue, Mr Lord would ask the bank to postpone the date for completion for ninety days. That afternoon, within a few hours of first seeing Kilnsey, the defendants signed a Law Society of Tasmania standard form contract of sale to purchase it for $93,000 and appointed Mr Lord their agent for the sale of their house at Roslyn Avenue, Kingston. The defendants gave Mr Lord a cheque for $3,000 deposit.

3. Mr Lord took the contract to the bank on Monday 13 February 1989 and it was then dated and signed by the bank's attorney and manager. The contract provided for completion within ninety days of its date. The only condition precedent to that completion was cl4(a) that provided in effect, that there were no restrictions on the use of the property for the purpose of a private dwelling house.

4. A copy of the contract was sent to the plaintiff's solicitors Messrs Butler McIntyre and Butler and to the defendants' solicitor, Mr Munnings of C Johnstone and Co. Miss Taglieri, then an articled clerk with Butler McIntyre and Butler, was put in charge of the file under the supervision of a partner. On 28 February 1989, Miss Taglieri wrote to Mr Munnings, drew attention to the settlement date and asked for a draft transfer. Mr Munnings did not respond to that letter. On 30 March 1989, Miss Taglieri wrote to Mr Munnings again. She set out figures for completion and again asked for a transfer. On 12 April 1989 Mr Munnings replied - as he said in his evidence - in haste, for he miscalculated the settlement date as being 14 April 1989. The correct date was 14 May 1989. With his letter, Mr Munnings enclosed a draft transfer and, as described in evidence, the usual requisitions. On the same day, Mr Munnings wrote to the defendants setting out details of the amount required to complete the contract. Although Mr Munnings was acting for them in other matters it appears that at this stage, he had not received any instructions from the defendants about their purchase of Kilnsey. I infer from a note on a copy of the letter, that one of the defendants rang Mr Munnings immediately after receiving his letter and asked him to see if an extension of time for completion could be arranged.

5. The defendants were having difficulty selling their property at Roslyn Avenue. They were also in financial difficulties generally. Dr Burgess said that these difficulties arose principally from the fact that an employee of his medical practice, one he conducted in partnership with others, had been stealing large sums of money from the practice over a considerable period of time. The defalcations had only just been discovered and at the time of signing the contract to buy Kilnsey, the practice was being thoroughly investigated by accountants and others. Further, a retail business that Mrs Burgess conducted at Kingston was not financially successful and was in the process of being sold. Consequently, in the weeks following the signing of the contract the defendants were having frequent discussions with their banker, who coincidentally, happened to be the plaintiff. However, the sale of Kilnsey was being handled by the manager of the North Hobart branch of the plaintiff bank and the defendants were dealing with Mr Pinkard, the manager of the Liverpool Street branch of the plaintiff bank. In April, the shop at Kingston was sold but it then appeared that there would be a loss in the order of $25,000.

6. On 12 April, Mr Munnings wrote to Miss Taglieri to enquire if she had instructions for an extension of time within which the contract might be completed. Miss Taglieri contacted her client and received instructions that there was to be no extension of time. On 19 April, she wrote to Mr Munnings accordingly and suggested that as the due date for settlement was a Sunday, the settlement take place on 12 May. The probabilities are that on receipt of that letter Mr Munnings realised that he had miscalculated the settlement date as 14 April.

7. Settlement day arrived and Miss Taglieri made two or three attempts to speak to Mr Munnings on the telephone to arrange a time for completion but without success. Miss Taglieri was ready to complete the contract on behalf of the vendor. She had in her possession answers to requisitions, a duly executed transfer, the certificate of title and a duly executed discharge of the first mortgage to the Savings Bank. I find that the Bank was then able to give vacant possession as the property had been vacated by the mortgagor and the plaintiff's agent had a key to it. At some stage after the contract was signed, the agent gave a key to the defendants. Settlement day passed. Again, Miss Taglieri tried to contact Mr Munnings by telephone. Again she was unsuccessful. On 16 May 1989, she wrote to Mr Munnings advising that the completion date had passed and that thereafter the defendants would be required to pay interest.

8. Meantime, Mr Munnings had spoken to the manager of the North Hobart branch of the plaintiff bank and arranged for an extension of time within which the defendants were required to settle. The basis on which the indulgence was granted was to give the defendants time to find the money. On 23 May 1989, the plaintiff's manager of the North Hobart branch instructed Miss Taglieri to wait for the time being and see if the defendants would complete the contract.

9. About this time, the defendants instructed Mr Munnings to see if they could escape their obligations under the contract. I find that by now, the defendants' initial enthusiasm for the purchase of Kilnsey was on the wane. There was no buyer in sight for the house at Kingston and the investigation of Dr Burgess' medical practice had revealed that he was in considerable debt. On 20 May 1989 another reason arose for not wishing to complete the contract. On that day Mrs Burgess was told that she had been accepted by the Royal Hobart hospital as a trainee nurse to start in August that year with the last intake of trainees at that hospital. Dr Burgess conceded that Mrs Burgess was not "as keen to move" because of the travelling between Hobart and Franklin that would be involved after she started the course. I find that on 26 May 1989, Dr Burgess told the relieving manager of the Liverpool Street branch of the plaintiff bank that he could see no advantage in moving to Swamp Road particularly when Mrs Burgess was about to take up nursing. The manager's advice to Dr Burgess was that he needed to quickly sell either the Kingston house or Kilnsey. Mr Munnings' advice to the defendants, conveyed by letter dated 23 May 1989, was that they were bound to complete.

10. In February, not long after the contract was signed, the defendants made an unsuccessful attempt to borrow the money to complete the contract from the Savings Bank of Tasmania. On 31 May 1989 the plaintiff's relieving manager at the Liverpool Street branch wrote to Dr and Mrs Burgess with respect to their finances generally and said (inter alia):

"The immediate matter of concern is to seek a solution to

the purchase or otherwise of the Franklin property. As I

see (sic) you have the alternative of raising bridging

finance on an interest only basis pending the sale of

either your Kingston or the Franklin property."

11. I find that thereafter, the defendants did nothing to try and raise the required finance. By notice dated 8 June 1989 and served on the defendants that day, the plaintiff gave the defendants notice that it required them to complete the contract on or before 22 June 1989. The notice went on to provide that "the provisions as to the time for completion of the contract are now and henceforth of the essence of the contact" and, "if the purchaser fails to complete the contract on or before the 22nd day of June 1989, the vendor will treat itself as entitled to rescind the contract."

12. I find that by the time the notices were served the defendants had decided not to complete the contract for the purchase of Kilnsey. Dr Burgess left the notices at Mr Munnings' office the morning after they were served without giving Mr Munnings any instructions. Mr Munnings said in his evidence, that when he read the notices he considered that they were ineffective to make time of the essence of the contract because the requisitions had not been answered and the time within which completion was required was unreasonable. With respect to the former proposition it may be noted that Mr Munnings had not at any time asked for delivery of answers to requisitions prior to settlement nor had he raised any question or expressed any doubt about the capacity of the plaintiff to complete in accordance with the terms of the contract. I find that between the time the notice to complete was served and the date provided by it for completion, there was only one communication between Mr Munnings and his clients. That was a telephone conversation on 20 June between Mrs Burgess and Mr Munnings. What Mrs Burgess told Mr Munnings is encapsulated in the following diary note made by the latter:

"Not instructed anyone to sell Swamp Road. Let them do

what is necessary and then 'fight'. Not move there anyway

because accepted into nursing. No travelling from S Road.

- Hope to sell Roslyn Avenue anyway]"

13. As completion did not take place in accordance with the notice Miss Taglieri wrote to Mr Munnings on 26 June (inter alia):

"Your clients have failed to comply with the terms of the

Notice and accordingly, we advise that the contract is now

at an end."

14. In evidence is a telephone message which I infer was written by a member of staff in Mr Munnings' office. It is dated 29 June and advises that "Dr Bob Burgess" telephoned. On the bottom of the message Mr Munnings has written "phoned re letter, will advise." Whether Mr Munnings then told Dr Burgess that the plaintiff's solicitors had written and advised that the contract was at an end I am unable to say for Mr Munnings' recollection of the events at this time was uncertain. However, I do find that 4 days later, the defendants were at the plaintiff's Liverpool Street branch and told Mr Pinkard that they had decided not to go ahead with the purchase of the house at Franklin. It was submitted that this was no more than advice, in effect, that the plaintiff had declared the contract at an end but I reject that submission. Even if Mr Munnings had told the defendants that the plaintiff had written to that effect, all the events over the preceding month or so plainly indicate that the defendants were telling Mr Pinkard that it was their decision not to proceed with the purchase of Kilnsey.

15. The agent was advised by the bank or Miss Taglieri that the contract had not been completed due to the default of the defendants and the deposit was paid to the plaintiff. The property was resold for $8,000 less than the defendants had agreed to pay for it and that sum together with interest, and agents' and solicitors' fees are claimed by way of damages.

(i) the defendants breached a fundamental term of the

contract by failing to complete after the time for

completion had been made of the essence of the contract and

consequently, the plaintiff was entitled to and did

terminate the contract;

(ii) alternatively, if the notice purporting to make time

of the essence of the contract was ineffective, the

defendants had, by their conduct, repudiated the contract

and the plaintiff had accepted that repudiation and

terminated the contract;

(iii) alternatively, the defendants are in breach of cl9 of

the contract which provides:

"SHOULD the Purchaser fail to complete this agreement

(unless prevented by the wilful default of the Vendor) in

accordance with the terms of this agreement the deposit

shall be forfeited to the vendor who shall also be at

liberty in addition to any other remedy he may have for the

recovery of the balance of purchase money to resell the

Property either by Public Auction or private contract on

such terms and conditions as he may think fit and to claim

any loss on resale from the purchaser as liquidated damages

and any profit on resale shall belong to the vendor."

(iv) in the case of each of the foregoing, the plaintiff is

entitled to recover damages for breach of contract.

(i) that they are not in breach of any fundamental term

because:

(a) the time specified by the notice within which

completion was required was unreasonable; and/or

(b) the plaintiff was not entitled to make time of the

essence of the contract because, at the time it purported

to do so and/or at the time completion was required:

(i) it was in breach of implied terms of the contract;

and/or

(ii) it had not answered the defendants' requisitions;

and/or

(iii) it was not ready to complete;

(ii) the defendants had not by their conduct, repudiated

the contract;

(iii) the defendants were not in breach of the contract;

and

(iv) the plaintiff had wrongfully terminated the contract

and the defendants were thereby entitled to the return of

their deposit and interest.

18. There is some overlapping in the above submissions but it is convenient to deal first with the implied term argument. By the defence it was pleaded that the following were implied terms of the contract:

1 "That the plaintiff would perform its obligations

thereunder in accordance with the best customary practises

of solicitors engaged in conveyancing transactions."

2 "That the plaintiff would answer requisitions as to the

title of the plaintiff and as to the capacity of the

plaintiff to perform its obligations under the contract."

3 "That the plaintiff would answer any such requisitions

delivered by the defendants at a time sufficiently in

advance of any proposed date for completion of the purchase

to enable the defendants to determine whether the plaintiff

was able to satisfy its obligations as to completion under

the contract."

4 "That the plaintiff would not deliver any notice to the

defendants effective to require the defendants to complete

the purchase until such time as the plaintiff had answered

any requisitions as to the title of the plaintiff and as to

the capacity of the plaintiff to perform its obligations

under the contract."

19. The advice of the Judicial Committee of the Privy Council in BP Refinery (Western Port) Pty Ltd v President, Councillors and Ratepayers of the Shire of Hastings [1977] HCA 40; (1977-1978) 16 ALR 363 at 376 included this:

"Their Lordships do not think it necessary to review

exhaustively the authorities on the implication of a term

in the contract which the parties have not thought fit to

express. In their view, for a term to be implied, the

following conditions (which may overlap) must be satisfied:

(1) it must be reasonable and equitable; (2) it must be

necessary to give business efficacy to the contract so that

no term will be implied if the contract is effective

without it; (3) it must be so obvious that 'it goes without

saying'; (4) it must be capable of clear expression; (5) it

must not contradict any express term of the contract."

20. None of the pleaded implied terms satisfy those criteria. However," (i)t is a general rule applicable to every contract that each party agrees, by implication, to do all such things as are necessary on his part to enable the other party to have the benefit of the contract". Per Griffith CJ Butt v M'Donald (1896) 7 QLJ 68 at 70-71, adopted by Mason J (as he then was) in Secured Income Real Estate (Aust) Ltd v St Martins Investments Pty Ltd [1979] HCA 51; (1979) 144 CLR 596 at 607. It might also be implied that each party has the duty of complying with reasonable requests made by the other. See Electronic Industries Ltd v David Jones Ltd [1954] HCA 69; (1954) 91 CLR 288 at 297. However, in the case of each of the claimed implied terms it could not be said that without it the contract is ineffective nor could it be said that its inclusion is so obvious that "it goes without saying". The contract clearly spelled out the obligations of the parties. The plaintiff's primary obligations were to convey a good marketable documentary title in accordance with the terms of cl6, and to give the defendants vacant possession of the property. The defendants' primary obligation was to pay the purchase price and other monies in accordance with the terms of the contract. Both parties to the contract were obliged to co-operate with each other in a reasonable way to achieve those ends.

21. The defendants' failure to complete on the day specified in the contract for completion did not constitute a breach of a fundamental term entitling the plaintiff to terminate the contract. See the Supreme Court Civil Procedure Act, s11(7). It did entitle the plaintiff to give a notice making time of the essence of the contract provided it was not then in default of its contractual obligations and was ready, willing and able to proceed to completion. The law in Australia is that a party who is not in default of his or her contractual obligations and is ready, willing and able to proceed to completion may make time of the essence by the service of an appropriate notice. See Neeta (Epping) Pty Limited v Phillips [1974] HCA 18; (1974-1975) 131 CLR 286; McNally and Ors v Waitzer (1981) 1 NSWLR 294. In the former case, Barwick CJ and Jacobs J said at 299:

"In cases where the contract contains a stipulation as to

time but that stipulation is not an essential term then

before a notice can be given fixing a time for performance,

not only must one party be in breach or guilty of

unreasonable delay, but also the party giving the notice

must himself be free of default by way of breach or

antecedent relevant delay. Only then may a notice be given

fixing a day a reasonable time ahead for performance and

making that time of the essence of the contract."

22. In Re Barr's Contract (1956) Ch 551 Dankwerts J held that a notice to complete would be invalid if the party giving it was not able, ready and willing to proceed to completion. He said at 556:

"Apart from the provisions of any plain and clear

conditions of sale, the law about making time of the

essence of the contract for the purpose of completion, as I

think is accepted on both sides, is subject to the

following conditions: first of all, the vendor must be

able, ready and willing to proceed to completion ...

Secondly, at the time when the vendor purports to make time

of the essence, the purchaser must be guilty of such

default as to entitle the vendor to rescind the contract

subject to its being done by a reasonable notice. Thirdly,

once the right to serve a notice of the kind in question

has arisen, the time allowed by the notice must be a

reasonable time."

23. Counsel for the defendants submitted that the plaintiff was in default because at the time the notice was given it had not answered the requisitions. Counsel also submitted that at the time the notice issued the plaintiff was not ready, willing and able to complete because:

(a) it had not confirmed that the first mortgage would be

discharged;

(b) it had not satisfied the defendants that the Recorder

would register the transfer;

(c) it had not confirmed that vacant possession would be

given and it had not satisfied the defendants that "any of

the other conditions (of the contract) would be satisfied".

24. In Halkidis v Bugeia (1974) 1 NSWLR 423 Street CJ in Eq held that a notice making time of the essence of the contract was invalid because at the time it was given a tenant was in possession of the premises and had not been given the notice to quit to which he was entitled under the lease. His Honour said at 427, that by reason of the absence of notice the vendors were not in a position "had it become necessary so to do, to comply with certainty with their obligation to provide vacant possession on completion" (my emphasis). His Honour cited Re Barr's Contract (supra) as authority for that proposition. The same approach was taken in Maxsujur Pty Ltd v Asimus and Anor (1980) 2 NSWLR 96.

25. Both these cases were considered by the New South Wales Court of Appeal in McNally and Ors v Waitzer (supra). In that case the court overruled the dictum in Halkidis v Bugeia to the effect that the validity of a notice to complete depends (inter alia) upon the giver having completed all his or her contractual obligations at the time the notice is given. Hutley JA (with whose reasons for judgment the other two members of the court agreed) said at 303:

"The requirement that the party giving the notice to

complete should be ready, willing and able has obviously

been derived from traditional equity pleading of a suit for

specific performance and should be given a similar meaning.

The allegation of readiness does not mean that the

plaintiff has satisfied all that he has been required to do

to complete. If this were not so, it would never have been

possible to specifically enforce contracts which were

dependent (sic) upon ministerial consent for he may be

required to make application to the Minister which he is

not able to do until after he has obtained the order of the

court cf Butts v O'Dwyer [1952] HCA 74; (1952) 87 CLR 267; Dougan v Ley

[1946] HCA 3; (1946) 71 CLR 142. ...

The correct rule, in my opinion, is simply that a vendor

who is in default in respect of things which up until then

should have been done cannot give a notice to complete, but

he can give notice to complete prior to performing all

those other things which he has to perform in order to

complete the contract."

26. Counsel for the defendants relied on a number of English authorities in which it was held that a notice to complete was invalid because at the time it was given there remained some matters to be resolved before completion could be effected. In Cole v Rose and Anor (1978) 3 All ER 1121 the purchaser raised a query with respect to a charge on the property not previously disclosed by the vendor and asked the vendor's solicitor to give an undertaking that it would be discharged on settlement. The vendor's solicitor declined to give the undertaking until he had confirmed the nature of this charge but nonetheless gave a notice making time of the essence of the contract. Mervyn Davies QC held that at the time notice was given, the vendor's solicitor was not ready, willing and able to proceed to completion because he had to satisfy himself about this outstanding charge and it mattered not that by the date time expired, he had so satisfied himself and was prepared to give the requisite undertaking (1129). In Horton v Kurzke (1971) 2 All ER 577 the contract of sale provided that the vendor would give the purchaser vacant possession. After the contract was signed and before the date for completion, a third party claimed that he had an agricultural grazing right tenancy over the property. This claim was submitted to arbitration. At the time the notice making time of the essence of the contract was given this issue remained unresolved and Goff J held that accordingly, at the time the notice was given the vendor was not ready, willing and able to proceed to completion. Whether those cases represent the law in Australia in the light of McNally v Waitzer is not entirely clear but, on either the United Kingdom or the New South Wales authorities, the plaintiff was entitled to give an effective notice making time of the essence of the contract on 8 June 1989 because at the time it did so, it was ready, willing and able to proceed to completion. The plaintiff only had to hand over the documents it had ready and receive in exchange the correct amount of money. The plaintiff had no contractual obligation to deliver answers to the requisitions prior to settlement. Evidence of conveyancing practice in Tasmania given at the trial, showed that the general practice was to provide answers to requisitions upon settlement unless earlier answers had been requested by the purchaser's solicitors or there was, on the face of things, some doubt about the vendor being able to make title in accordance with his or her contractual obligations. Mr Munnings raised no doubt about the ability of the plaintiff to make title in accordance with the contract. Mr Munnings did not ask for answers to his requisitions before completion. Indeed, from the letter in which he miscalculated the settlement date, the inference is plain that he was then prepared to accept answers to requisitions at the time of completion of the contract. Nothing occurred subsequently to alter that position. No question was raised about the capacity of the plaintiff to give vacant possession. The property was vacant, the plaintiff's agent had given the defendants a key and the evidence was that they had been inside Kilnsey on several occasions after they signed the contract. The Land Titles Act 1980, s78(6) provides to the effect that the memorandum of transfer the plaintiff was proposing to hand over at settlement "may be accepted by the Recorder as sufficient evidence that the power of sale has been duly exercised." Counsel for the defendants submitted that until the plaintiff was able to satisfy the defendants that the Recorder would accept the transfer executed by the plaintiff's attorney, it was not in a position to proceed to settlement. I reject that submission. No issue was raised by Mr Munnings, or likely to be raised by the Recorder about the registration of the transfer. I find that, at the time the notice to complete was given the plaintiff was ready, willing and able to proceed to completion in accordance with the terms of the contract and was not itself in default of that contract. Accordingly, if the time prescribed by the notice was a reasonable time, the plaintiff was entitled to terminate the contract when the defendants failed to complete by the due date.

27. I do not accept the submission made by counsel for the plaintiff that the measure of what is reasonable is to be taken at the end of the period prescribed by the notice. In support of that proposition counsel relied upon Rudi's Enterprises Pty Ltd and Anor v Jay and Ors (1987) 10 NSWLR 568. That case concerned a contract of sale that was subject to the consent of a third party being obtained within a reasonable time. The New South Wales Court of Appeal held at 576, that what is reasonable must be decided "at the point when the lapse of time is said by the party seeking to rely upon the provision to have occurred." At 575, Samuels JA expressly distinguished the contract then under consideration from one in which a notice is given pursuant to the terms of the contract itself. In O'Connor v Slattery (1981) 2 NSWLR 447 Holland J held that whether the time specified in a notice to complete is reasonable is to be determined in the light of matters as they stand at the time the notice is given. He said at 452:

"Reasonableness in the above sense is to be judged as at

the time the notice was given taking account of the nature

and terms of the contract, what needed to be done on both

sides to be ready to settle, what remained to be done and

past delays and attitudes to time."

28. See also Crawford v Toogood (1879) 13 Ch D 153 at 158; United Scientific Holdings Ltd v Burnley Borough Council (1978) AC 904 at 946-947.

29. In Ajit v Sammy (1967) 1 AC 255 the Privy Council at 258 accepted the following head note from Stickney v Keeble (1915) AC 386 as correctly stating the law:

"Where in a contract for the sale of land the time fixed

for completion is not made of the essence of the contract,

but the vendor has been guilty of unnecessary delay, the

purchaser may serve upon the vendor a notice limiting a

time at the expiration of which he will treat the contract

as at an end, and in determining the reasonableness of the

time so limited the court will consider not merely what

remains to be done at the date of the notice, but all the

circumstances of the case, including the previous delay of

the vendor and the attitude of the purchaser in relation

thereto."

30. In Michael Realty Pty Ltd v Carr and Ors (1977) 1 NSWLR 553 Reynolds JA said at 561:

"The question of whether a notice is reasonable or whether

the time allowed in a notice is reasonable is cognate with

the question of when, in all the circumstances of the case,

the party in default would be considered to have lost his

right to specific performance. This is so because it was

only for the purposes of granting specific performance that

equity, in respect of time stipulations, interfered with

the remedy at law: Stickney v Keeble."

31. The notice to complete prescribed fourteen days. One of those days was said to be a public holiday. Counsel for the defendants submitted that the time prescribed was not reasonable. I reject that submission. The only thing required to be done was the payment of the purchase price, interest and apportioned outgoings. The defendants were in financial difficulties when the contract was signed and the plaintiff, through its agents, knew this. To accommodate these difficulties the plaintiff agreed to give the defendants ninety days within which to complete the contract. That time passed without the defendants making any real attempt to effect settlement. After the due date for settlement had passed and at the request of the defendants' solicitor, the plaintiff agreed to extend the time for completion to give the defendants more time to get the money. Instead of attempting to raise finance the defendants instructed their solicitor to see if there was any way of avoiding their obligations under the contract. Before the notice was issued, the defendants had resolved not to complete the contract. On receipt of the notice the first defendant simply left it at Mr Munnings' office without giving any instructions or seeking any advice. During the period allowed by the notice for completion, the only communication between Mr Munnings and the defendants was the telephone conversation in which Mrs Burgess said that they did not intend to go ahead with the purchase anyway. In those circumstances I find that the time given by the notice to complete was reasonable.

32. It follows from the foregoing that the plaintiff was entitled to terminate the contract. It was no longer obliged to transfer the property to the defendants. By the letter dated 26 June 1989 it elected to terminate the contract. The consequence of such an election is described by Lord Diplock in Photo Production Ltd v Securicor Transport Ltd [1980] UKHL 2; (1980) AC 827 at 849 as follows:

"(a) there is substituted by implication of law for the

primary obligations of the party in default which remain

unperformed a secondary obligation to pay monetary

compensation to the other party for the loss sustained by

him in consequence of their non-performance in the future

and (b) the unperformed primary obligations of that other

party are discharged. This secondary obligation is

additional to the general secondary obligation; I will call

it 'the anticipatory secondary obligation'."

33. Although the primary obligations of the contracting parties are discharged, the other terms of the contract will remain. Eg, a clause providing for the resolution of disputes remains effective; see Port Jackson Stevedoring Pty Ltd v Salmond and Spraggon (Australia) Pty Ltd (1981) 1 WLR 138 at 145. In George Mitchell (Chesterhall) Ltd v Finney Lock Seeds Ltd [1982] EWCA Civ 5; (1983) 1 All ER 108 it was held that termination following fundamental breach did not deprive the party in default of the benefit of clauses excluding or limiting liability. Accordingly, cl9 of the contract remained in full force and effect after termination of the contract. Counsel for the plaintiff argued that cl9 gave the plaintiff an additional right to damages, presumably additional to the right to recover damages for breach of cl3 which specified the date for completion. He further argued that the terms of cl9 were such that it could be invoked even if time had not been made of the essence. I do not accept either submission. The parties agreed that in the event of the breach specified by cl9, their rights are to be regulated in accordance with that clause. The specified breach is a failure "to complete the agreement (unless prevented by the wilful default of the Vendor) in accordance with the terms of this agreement." There will be no failure to complete by the date prescribed by the contract until time has been made of the essence of the contract. In Smith v Hamilton and Anor (1951) 1 Ch 174 Harman J had to consider a similar clause commencing "If the purchaser shall neglect or fail to complete his purchase according to these conditions his deposit shall thereupon be forfeited ..." His Honour held that there was no failure unless time had been made of the essence of the contract. He said at 183:

"Where there is a provision in the special conditions

which, on the face of it, entitles the vendor to forfeit

the deposit and to re-sell - without notice, be it observed

- can that right be exercised on the morrow of the day

fixed for completion, or, as here, a fortnight later, where

the vendor has said that, although he had an immediate

right of forfeiture, he would wait a fortnight before

exercising it? The condition which has to be satisfied is

that the purchaser shall neglect or fail to complete his

purchase according to those conditions. One of them is

that the purchase shall be completed on the day named in

the special condition, that is to say, April 4. But it is

agreed that that date, except in special circumstances, is

not an essential part of the contract, and therefore the

condition is, I think - and I accept Mr Blackett-Ord's

argument on this point - that the purchase shall be

completed on April 4 or within a reasonable time

thereafter. Therefore the right to forfeit and re-sell in

condition 25 does not accrue until there has been a default

by the purchaser in completing either on the day fixed or

within a reasonable time. That right does not in effect

arise until a purchaser has deprived himself of the

equitable remedy of specific performance by his delay or

default, or by a repudiation, express or implied, of the

contract".

34. See also In re Barr's Contract (supra). Counsel for the plaintiff relied on Honner v Ashton (1979) 1 BPR 9478. In that case the majority judgment was written by Glass JA. The relevant clause commenced, "If the purchaser defaults in the observance or performance of any obligation imposed on him under or by virtue of this agreement the deposit paid by him hereunder hall be forfeited to the vendor ..." The majority held that any default "whether or not it is of an essential character which exposes the defaulter to the risk of having his contract terminated" entitled the innocent party to the benefit of the clause. Neither Smith v Hamilton nor In re Barr's Contract is referred to in the majority judgment. In The Standard Contract for Sale of Land in New South Wales Professor Butt said at 424, that Honner v Ashton was responsible for an amendment to the standard form clause considered in that case by the addition thereto of the words "which is or has become essential." Smith v Hamilton is referred to in Thomas and Anor v Monaghan and Anor (1975) 1 NZLR 1. In the latter case the clause under consideration provided (inter alia) that if there is "default ... in the performance or observance of any ... stipulation ... and such default shall be continued for the space of fourteen days ..." the vendor is entitled to rescind the contract. The court of appeal distinguished Smith v Hamilton on the basis that the wording of the clause in that case "varied considerably" from the clause before the New Zealand court. The court of appeal held that the innocent vendor could avail himself of the remedy provided by the clause without making time of the essence and in so holding, were much influenced by the fact that after breach, there had to elapse a period of 14 days before action could be taken. If it were necessary for me to decide, I would conclude that the intention of the parties to this contract was that the vendor could not avail himself of the provisions of cl9 until time for completion had been made of the essence of the contract and the purchaser had failed to complete within that time. Only in those circumstances could it be said that there had been a failure to complete as provided in cl9.

35. However it is not necessary for me to decide this question, for counsel for the plaintiff conceded that the plaintiff had waived the requirement for completion within the time prescribed by cl3 when it acceded to Mr Munnings' request for more time in which to complete. Thereafter there was no failure to complete until the expiry of the time specified by the notice to complete. As I have found that the notice was effective to make time of the essence of the contract the failure to complete entitled the plaintiff to terminate the contract and entitles it to recover damages in accordance with cl9.

36. With respect to the quantum of damage the parties were agreed with respect to the following particulars of the plaintiff's claim.

Loss incurred on resale at lesser price $8,000.00

Real Estate Agent's commission and expenses

on second contract that would have not been

incurred but for the defendants' default $2,360.00

Legal costs incurred on the second contract

which would not have been incurred but for

the defendants' default $396.50

Cost of changing locks $107.00

37. There was a further claim for interest on the loss of use of proceeds of sale of $90,000 for period 13 May 1989 to the date of trial at 19 per cent per annum. Neither counsel made any submissions with respect to this aspect of the claim and I will need to hear them further before proceeding to final judgment on the plaintiff's claim. The defendants' counterclaim will be dismissed.