Berrell v Combined Pastoral Pty Limited

Supreme Court of NSW|2015-09-02|Before: Lindsay J

Solicitors: Plaintiffs: Russell Kelly & Associates First Defendant: Grays Legal File Number(s): 2015/00057660

INTRODUCTION

In a vendor and purchaser suit, commenced by summons, the plaintiffs (vendors) seek a declaration that they validly terminated a contract for the sale of land at Blacktown, with consequential relief designed to enforce forfeiture of the deposit paid by the first defendant (the purchaser) on exchange of contracts, and withdrawal of a caveat lodged by the first defendant against the title to the land.
The first defendant both resists the claim for such relief and, by a cross summons filed (with the Court's leave) at the final hearing, seeks an order that the contract be specifically performed.
The first defendant has made no claim (under the Conveyancing Act 1919 NSW, section 55(2A)) for a return of the deposit.
The deposit ($63,300,00, representing 10% of the purchase price of $633,000.00) is held by the second defendant as a stakeholder.
Having filed a submitting appearance, the second defendant took no part in the final hearing.

THE CONTRACT : A SALE BY AUCTION

The contract was made on, and is dated, 27 September 2014. The date ultimately appointed for completion of the Contract, with time of essence of the contract, was 11 December 2014. The first defendant did not tender the purchase price to the plaintiffs on that day. The plaintiffs purported to terminate the contract by a notice of termination served on 12 December 2014.
The sale for which the contract provided was effected at a public auction, at which that the property was knocked down to the first defendant as the highest bidder, and following which contracts were formally exchanged.
The first defendant was represented at the auction by Mr Luigi Zaurrini, who describes his occupation as that of a licensed builder and property developer. He inspected the property for about one hour before the commencement of the auction, read the contract document before the auction, bidded at the auction for the first defendant, and signed on behalf of the first defendant the purchaser's counterpart of the contract exchanged with the vendors' counterpart at the conclusion of the auction.
The first defendant's accountant also attended the auction but his role was subsidiary to that of Mr Zaurrini, upon whose experience and expertise the first defendant relied in decisions made at the auction.
The subject matter of the sale was a dilapidated property, including a "liveable" house: occupied by a tenant at the time of the auction, but sold subject to "vacant possession".
Description of the house as "liveable", despite its dilapidated state, is that volunteered by Mr Zaurrini under cross-examination.

THE CENTRAL ISSUE : A VENDOR'S OBLIGATION TO GIVE VACANT POSSESSION

The short, central issue between the parties at the final hearing was whether, at the time the plaintiffs purported to terminate the contract (for a failure or refusal of the first defendant to complete the contract when called upon, by the service of a notice to complete and extensions of time, to complete) the plaintiffs were ready, willing and able to perform their obligation under the contract to provide "vacant possession" of the property: PJ Butt, The Standard Contract for Sale of Land in NSW (Law Book Co, Sydney, 1985, and 1987 Supplement), pp 58-61, 444-449 and 812.
The first defendant's obligation to pay the purchase price, and the plaintiffs' obligation to give vacant possession, on completion of the contract were interdependent: Austral Standard Cables Pty Limited v Walker Nominees Pty Limited (1992) 26 NSWLR 524 at 532B; Warringah Contractors Pty Limited v Pike (1981) NSW Conv R 55-036 at 56,240; (1982) ANZ Conv R 304 at 309.
A failure by the plaintiffs to provide vacant possession on completion would have precluded them from terminating the contract, leaving it on foot and, therefore, susceptible to an order for specific performance at the suit of the first defendant.
Procedurally, the course of these proceedings is similar to that encountered in Point Glebe Pty Limited v Lidofind Pty Limited (1988) NSW Conv R 55-412, with similar issues litigated, and a similar result.
The plaintiffs were required, as vendors, to give vacant possession on completion: contract clause 17.
The obligation of the plaintiffs to give vacant possession did not merge on completion: D Skapinker and P Lane, Sale of Land in NSW: Commentary and Materials (Law Book Co, Sydney, 5th ed, 2010), paragraph [13.20], page 437. Clause 20.8 of the contract (in the same form as that mentioned in Skapinker and Lane) provides, inter alia, that "[rights] under [clause] 17 continue after completion, whether or not other rights continue".
Procedurally, it may have been open to the first defendant to complete the contract on the day appointed for that purpose, and thereafter to have sued the plaintiffs for damages for breach of their covenant to give vacant possession: King v Poggioli (1923) 32 CLR 222. However, the course the first defendant took was not to complete the contract, but to run the risk that the plaintiffs would be entitled to terminate the contract if completion did not occur on the appointed day. An inference that it took that risk because not in funds to complete the contract is open.

THE MEANING OF "VACANT POSSESSION"

The meaning of the expression "vacant possession" depends on context: Topfell Limited v Galley Properties Limited [1979] 1 WLR 446 at 449E. The obligation of a vendor to give "vacant possession" is not absolute, and questions of breach must be judged as a matter of substance: Smilie Pty Limited v Bruce (1998) 9 BPR [97750] at 16,725; (1999) ANZ Conv R 412 at 414.
The presence of a substantial quantity of rubbish on property the subject of a sale, if it constitutes an impediment which substantially prevents or interferes with the enjoyment of the right of possession of a substantial part of the property, is capable of constituting a breach of a contractual obligation to deliver vacant possession: Cumberland Consolidated Holdings Ltd v Ireland [1946] KB 264 at 270-271, accepted by the NSW Court of Appeal in both Smilie Pty Ltd v Bruce and Waterhouse v Waugh [2003] NSWCA 139 at [50]-[52] as the leading case on the topic.
An obligation to give vacant possession of property on completion of a sale of land generally requires a vendor, on or before completion, to remove from the land any goods (chattels) not included in the sale of property, including "rubbish" extraneous to the sale, unless the purchaser has consented to such items being abandoned or left on the land permanently: Skapinker and Lane, paragraph [13.20], page 436.
In Cumberland Consolidated Holdings Limited v Ireland [1946] KB 264 at 270-271 the English Court of Appeal formulated the following oft quoted statements of principle: "Subject to the rule de minimis a vendor who leaves property of his own on the premises on completion cannot… be said to give vacant possession, since by doing so he is claiming a right to use the premises for his own purposes, namely, as a place of deposit for his own goods inconsistent with the right which the purchaser has on completion to undisturbed enjoyment. … … [the] right to actual unimpeded physical enjoyment is comprised in the right to vacant possession. We cannot see why the existence of a physical impediment to such enjoyment to which a purchaser does not expressly or impliedly consent to submit should stand in a different position to an impediment caused by the presence of a trespasser. It is true that in each case the purchaser obtains the right to possession in law, notwithstanding the presence of the impediment. But it appears to us that what he bargains for is not merely the right in law, but the power in fact to exercise the right. When we speak of a physical impediment we do not mean that any physical impediment will do. It must be an impediment which substantially prevents or interferes with the enjoyment of the right of possession of a substantial part of the property. Such cases will be rare, and can only arise in exceptional circumstances, and there would normally be (what there is not here) waiver or acceptance of the position by the purchaser.…"
The two distinct passages here extracted have been described in England as providing two separate tests for determination of whether or not vacant possession is given (Ibrend Estates BV v NYK Logistics (UK) Ltd [2011] EWCA Civ 683; [2011] 4 All ER 539; [2011] 2 P&CR 9 at [37]-[42]); but nothing in the present case turns on whether there is one test or two.
The NSW Court of Appeal has been content (in a case such as the present, involving an unwanted deposit of rubbish left by a party obliged to give vacant possession) to cite the whole passage without distinguishing between two tests: Smilie Pty Limited v Bruce (1998) 4 BPR [97750] at 16,725-16,726; (1999) ANZ Conv R 412 at 414-415; Waterhouse v Waugh [2003] NSWCA 139 at [51]. I am content to follow suit.
Whether "rubbish" located on land the subject of a sale constitutes an impediment to the purchaser's right to unimpeded physical enjoyment as an integral feature of "vacant possession" depends, inter alia, on identification of the property the subject matter of the sale. This requires consideration of whether such "rubbish" is of a nature and extent consistent with the nature and character of the property sold.

CONTRACTUAL TERMS : SPECIAL CONDITIONS

Special conditions 3 and 4 of the parties' contract were in the following terms: 3. NO OBJECTION ETC. The Purchaser [the first defendant] hereby acknowledges that the Purchaser has purchased the property and the improvements thereon in their present physical condition and state of repair and the Purchaser hereby agrees not to make any objection, requisition or claim for compensation with respect to the physical condition and state of repair of the property and/or such improvements. The Purchaser further acknowledges that the Purchaser is not relying on any representations by any persons as to whether the subject property complies with the requirements of the relevant Council and/or any other statutory bodies. 4. NO RELIANCE ON INFORMATION. On execution, hereof the Purchasers [sic] acknowledge that they do not rely on any letters, documents, correspondence or arrangements, whether oral or in writing, as adding to this or amending the terms, conditions, warranties and arrangements set out in this contract. The Purchasers further acknowledge that they have made all their own enquiries in respect of the property and do not rely on any representation of the Vendors [the plaintiffs], their agent or legal representative, or anyone else on their behalf."
Contractual terms of this character do not, of themselves, necessarily entitle a vendor to leave "rubbish" on land sold subject to an obligation to give vacant possession on completion: Cumberland Consolidated Holdings Ltd v Ireland [1946] KB 264 at 268-269. In each case necessity attaches to identification of "the property" the subject of the sale in order to give substantive operation to descriptive expressions such as (in this case) "present physical condition and state of repair": Hynes v Vaughan (1985) 50 P & CR 444 at 455-456.
Contractual terms like special conditions 3 and 4 provide part of the matrix necessary to be consulted in identification of the subject matter of the sale.
Their significance is not to be discounted to nothing as the first defendant would have it. Read objectively, in the context and for the purpose of a sale by public auction (Toll (FGCT) Pty Limited v Alphapharm Pty Limited (2004) 219 CLR 165 at 179[40]), they provide a substantial foundation for characterisation of the subject matter of a sale as that property which was openly exposed to public view at the auction at which the sale contract was made.

UNWRAPPING THE CENTRAL ISSUE

The first defendant contends that the plaintiffs were not ready, willing and able to perform their contractual obligation to provide "vacant possession" on the date ultimately appointed for completion (11 December 2014) because, although they had cleared the property of other rubbish in anticipation of completion of the contract, they had not removed building waste (variously described as "rubbish" or "waste") from a disused, flooded, dilapidated swimming pool on the property that had been used by the plaintiffs, before the time of the auction, as a dumping ground.
No challenge was made at the hearing of the proceedings to the validity of the plaintiffs' notice to complete (the waste in "the pool" appears to have been of a dimension that, if necessary, could have been cleared at short notice, at a cost of $4,400 or thereabouts); but it was said by the first defendant that, not having cleared the pool at the time ultimately appointed for completion on the basis that time was of the essence, the plaintiffs (then, on the first defendant's case, in breach of an obligation to give vacant possession) were not entitled to terminate the contract: McNally v Waitzer [1981] 1 NSWLR 294 at 303E-304D.
Logically, the case involves three discrete but interrelated questions. First, what was "the property" the subject of the sale? Secondly, was any extraneous thing (itself properly of one type or another) located on "the property" of such a nature and extent as to constitute a substantial impediment to the purchaser's enjoyment of "the property"? Thirdly, did the purchaser consent, or otherwise waive any objection, to the extraneous thing remaining on "the property"?
The plaintiffs responded to the first defendant's case by addressing each of these questions.
The plaintiffs' primary contention is that they were under no obligation to clean out "the pool" (as it was conveniently, but inaccurately called during the course of the hearing) because, as indicated by special condition 3, the property (including the pool) was sold in an "as is" state; the first defendant had ample opportunity to inspect the property (including the pool) before bidding at the option and, by Mr Zaurrini, it did so; and Mr Zaurrini, an experienced builder and property developer, read the contract document before bidding on the half of the first defendant.
A secondary contention of the plaintiffs is that the building waste in the pool did not substantially prevent, or interfere with, enjoyment of the property sold, bearing in mind that the house on the land (the primary focus of the first defendant's attention at the auction) is acknowledged by the first defendant to have been "liveable" at all material times.
A third contention is that, after the first defendant complained that the pool had not been cleared of waste by the plaintiffs, it waived any objection to the waste by entry into an agreement with the plaintiffs for the purchase price to be reduced by $4,400.00: Cumberland Consolidated Holdings Limited v Ireland [1946] KB 264 at 271.
The preparedness of the plaintiffs to make such an allowance, expressly without admissions of any kind, reflects the evidence of the first plaintiff of a desire to be rid of the property in a timely way without undue inconvenience or costs associated with "doing up" the property for sale. His evidence was that he and his wife (the second plaintiff) had deliberately opted for a sale by auction "as is", accepting that the state in which it was presented at auction could depress the price available on sale.
That evidence has a counterpart in evidence of Mr Zaurrini that, as an experienced builder and developer, he was prepared to buy the property (despite its deficiencies) "at the right price".
The "physical condition and state of repair" of the property was a selling feature, of which vendors and purchaser were aware in making calculations about price. The plaintiffs were looking for a quick sale. The first defendant was looking for a bargain. It suited both sides to have the property sold "as is".

THE FACTUAL DISPUTE

The ambit of the parties' factual dispute is narrow. They agree that there was building waste in the pool at the time of the auction, and that the pool was clearly marked out by a safety tape that surrounded it at the time of the auction. They are at issue over whether waste in the pool was clearly visible at the time of the auction. The plaintiffs contend that it was. The first defendant contends that it was not because it was obscured by water.
The evidence of the first plaintiff, which I accept, was that he did not add to waste in the pool after the time of the auction. The focus, thus, is on a physical state of affairs that did not change between the date of contract and the date of purported termination of the contract.
The first plaintiff was not challenged on his evidence that he had not done anything to mislead potential buyers about the state of the property; but, on the contrary, he had endeavoured to highlight the state of the pool by marking it out with safety tape. There is no challenge to his bona fides.
No photographs of the pool were taken on the day of the auction. Photographs evidently taken on 16 January 2015 clearly depict building waste and a contour of the pool area that is consistent with the plaintiffs' contention that, whatever the level of the water, the waste would have been visible on the date of the auction.
However, caution is required in drawing any inference that the photographs depict the scene as it appeared on the date of the auction. That is because, principally, there is evidence that the auction was preceded by a period of rain; the first plaintiff's most timely inspection of the pool was some 2 - 5 days before the auction, when he surrounded the pool with safety tape; and, although the second plaintiff and the solicitor for the plaintiffs had attended the auction, no evidence was adduced at the final hearing from them, grounding a Jones v Dunkel submission made against the plaintiffs by the first defendant.
That said, I am persuaded that the better view of the evidence is that, whatever the precise level of the water in the pool on the day of the auction, the building waste was visible. The photographs of January 2015, coupled with the first plaintiff's reasonably proximate inspection of the pool before the auction and his familiarity with the contours of the pool (greater than that of the first defendant's witnesses) point in that direction. I prefer the evidence of the first plaintiff to that of the first defendant.
Although I accept the bona fides of Mr Zaurrini, in saying that he did not see building waste in the pool, I do not accept that it follows from that evidence that the building waste was not clearly visible.
Mr Zaurrini allowed himself but an hour to inspect the property before the auction. He focused substantial attention on whether the house on the property was "liveable". He sought, and obtained, an assurance from the plaintiffs' real estate agent that "rubbish" on the property (particularly under the house) would be removed, as it was. His focus (that of the first defendant) was on the house, not the surrounds. The pool and its contents were not of primary significance.
By the time he undertook his "final inspection" of the property the first defendant was looking for points to take to obtain financial concessions from the plaintiffs as a price for a timely settlement. I apprehend that the first defendant's evidence was coloured, albeit unconsciously, by commercial imperatives attending the conveyancing process, and its need to buy time for completion of the contract. The presence of building waste in the pool became a convenient, albeit unfounded, ground for commercial negotiations, strengthened in the first defendant's perception by emphasis on the possibility (not grounded in fact, as events subsequently confirmed) that the waste might have included asbestos.
I find as a fact that the building waste in the pool at the time of contract was clearly visible.
Its visibility aids characterisation of the pool, in its dilapidated state, as part of the property sold. Whether a finding of visibility is essential to the plaintiffs' case is a moot point given the terms of special conditions 3 and 4 of the contract; their setting in a sale by public auction; the position and nature of the waste said to be an impediment on vacant possession; and the dilapidated state of the property generally: Smilie Pty Limited v Bruce (1998) 9 BPR [97750] at 16,725-16,726; (1999) ANZ Conv R 412 at 415; Korogluyan v Matheou (1975) 30 P & CR 309 at 312-313 and 316; Butt, The Standard Contract for Sale of Land in NSW (1985), pages 3-12; Skapinker and Lane Sale of Land in NSW (2010), paragraphs [4.30]-[4.60] and [4.80]-[4.100]. I am inclined to think that such a finding is not essential.
A larger, more critical question in the present proceedings may be whether the waste was of a nature and extent consistent with the nature and character of the property sold.
In any event, I find that the property the subject of the sale included the pool, partially filled with accumulated waste, in the physical condition and state of repair it was in at the time of the auction. It was of a nature and extent consistent with the nature and character of the rest of the property.
Had the first defendant wanted the pool cleared out before completion it was incumbent on it to contract for that: Hynes v Vaughan (1985) 50 P & CR 444 at 456.

CONCLUSION

A finding that the waste in the pool was visible at the time of the auction having been made, the first defendant accepts (as recorded between transcript page 92 line 37 and transcript page 94 line 17, especially at page 93 lines 33-39 and page 94 lines 11-17) that its case, in opposition to the summons and in support of the cross summons, must fail. The defendant did not complete the contract when called upon to do so, at a time when time was of the essence. The critical issue of fact tendered by the first defendant against the proposition that the plaintiff was ready, willing and able to complete the contract is decided in favour of the plaintiffs.
The property the subject of the sale included "the pool" in the physical condition and state of repair it was manifestly in at the time of contract. The first defendant agreed to take it as it was. The building waste in the pool cannot, objectively, be characterised as personal property of the plaintiffs that they intended to leave behind, without the agreement of the first defendant, as an involuntary encumbrance on the first defendant's enjoyment of the land it had, objectively, agreed to buy.
Factually, the case is distinguishable from Cumberland Consolidated Holdings Limited v Ireland [1946] KB 264, which involved rubbish located in a building, part of which was rendered unusable by the presence of the rubbish. It is closer to Hynes v Vaughan (1985) 50 P C CR 444, a case in which rubbish was located on open land, outdoors. An impediment to use of a building might, in common experience, be more readily inferred than an impediment to use of outdoor terrain. Ultimately, however, each case must be decided on its own facts, including the terms of the parties' contract and the nature of the property sold.
If I am wrong in characterisation of the property the subject of the sale as including the pool "as is", the first defendant must nevertheless fail because the waste in the pool was not (in the language of Cumberland Consolidated Holdings Limited v Ireland [1946] KB 264 at 271, applied in Point Glebe Pty Limited v Lidofind Pty Limited (1988) NSW Conv R 55-412 at 57,777, a case similar to the present one) of such proportions that it substantially prevented or interfered with enjoyment of the land. The house, which was the primary focus of the first defendant at the auction sale of the property, was "liveable" at the time of contract and the time of completion and, indeed, it was actually lived in by a tenant until shortly before the time of completion.
Furthermore, the first defendant must be taken to have waived any objection to the waste in the pool when the parties (as I find), by correspondence exchanged on 9-10 December 2014, agreed upon abatement of the purchase price in anticipation of completion on 11 December 2014. That agreement having been made, the first defendant nevertheless failed to complete the contract, laying the foundation for the plaintiffs' service of a notice of termination the following day.
The contract having been validly terminated by the plaintiffs, the first defendant's cross-claim for specific performance must fail. The time for completion having been of the essence, and the plaintiffs' conduct being untainted by any suggestion of unconcsientious conduct, there is no basis upon which equity will intervene by grant of an order for specific performance of the contract. That reality is reinforced, in the particular case, by an absence of evidence (as distinct from mere assertion) to establish the readiness, willingness and ability of the first defendant to complete the contract at all material times.
The evidence suggests a want of financial capacity to complete the contract in a timely way, giving rise to demands by the first defendant for commercial concessions which, when agreed to by the plaintiffs, did not bear fruit for the plaintiffs in terms of an orderly progress to completion.
On or about 27 February 2015 the first defendant lodged a caveat (with dealing number AJ286731G) against the land. In the circumstances, with it unable to obtain an order for specific performance, the caveat cannot be sustained: Tanwar Enterprises Pty Limited v Cauchi (2003) 217 CLR 315 at [47], [53] and [57]. The plaintiffs are entitled to an order for withdrawal of the caveat.

ORDERS

Accordingly, subject to allowing the parties an opportunity to be heard as to the form of relief to be granted, I propose to make orders and notations to the following effect: 1. DECLARE that the contract dated 27 September 2014 for the sale of the land contained in folio identifier 17/30246 between the plaintiffs, as vendors, and the first defendant, as purchaser, has been validly terminated by the plaintiffs. 2. DECLARE that the deposit of $63,300.00 paid by the first defendant to the second defendant (as stakeholder) pursuant to the contract has been forfeited to the plaintiffs by the first defendant. 3. ORDER that the second defendant account to the plaintiffs for the deposit and interest accrued on the deposit. 4. ORDER that caveat number AJ286731G be withdrawn forthwith. 5. ORDER that the cross summons be dismissed. 6. ORDER that the first defendant pay the costs of the proceedings, on both the summons and the cross summons. 7. RESERVE liberty to apply for orders in the working out of these orders. 8. ORDER that exhibits and subpoenaed material may be returned forthwith; any exhibits returned must be retained intact by the party or person that produced the material until the expiry of the time to file an appeal, or until any appeal has been determined. 9. ORDER that these orders be entered forthwith.

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 September 2015

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