Beynon v Wongala Holdings [1999] NSWCA 66 | Case summary

3 As far as "Inglebar North" was concerned, the misdescriptions were less extensive. The expression "Lots 26,27,32 and 46 in DP 753732" was used instead of "Lots 26,27,32 and 46 in DP 752298." 4 It is not necessary to investigate the causes or dates of these misdescriptions. Suffice it to say that they existed on 19 October 1988, when the vendors agreed, by written contract, to sell the land to the purchasers. 5 The purchasers , all unaware of these misdescriptions, kept requesting and being granted extensions of time in which to complete after the vendor had served them with a notice to complete. Eventually when each party contended that it had validly terminated the contract - the vendor because of the purchasers' failure to comply with its notice to complete; - the purchasers (when they eventually discovered the existence of the misdescriptions) because of the vendor's inability to complete the contract, (it being unable to convey the land which it did not own, nevertheless would be required to do if the contract were read literally). 6 The central fact about this litigation is that it is a lawyers' dispute. There is no doubt that the vendors owned, meant to convey, and were capable of conveying "Inglebar Homestead" and "Inglebar North". There is no doubt that the purchasers wanted to buy, provided they had the money, what the vendor wished to sell. So there was no dispute "on the ground", as it were. 7 Moreover, despite the formidable appearance of the list of misdescriptions, they were really only of minor importance. After hearing evidence from three or four expert conveyancers, his Honour came to the conclusion the misdescriptions could all be eliminated in about a day - the documents enshrining them could have been rectified by the vendor before settlement, or by the purchasers after settlement. His Honour said: "I am firmly of the view that the land which the parties intended to be the subject of the agreement was the land which made up Inglebar, more properly described as I have set out above. It was established in evidence given for the Benyons that the plaintiff did not own the lots in the parish map and deposited plans as they appeared in the contract and further, that those lots did not make up any of the property Inglebar. There could be no doubt that the vendor intended to sell what it owned and not what it knew that it did not own. What it must be taken to have intended to sell, was the land contained in the properly numbered lots but in the deposited plans bearing the correct numbers. I have referred to the intention of the parties, but the intention of the Benyons can only be inferred, since they did not give evidence. There is nothing to suggest that they were misled or that they were of the belief that they were buying land other than what I have stated was the land making up the property Inglebar. I can reasonably assume that the Beynons intended to buy what they knew as Inglebar, which they referred to in correspondence, and that they understood what it consisted of in a physical sense." 8 These conclusions were , as I have said, amply supported by the evidence. In any event, they are obvious enough. 9 Once one has reached that position, the answers to the principal questions are clear: the vendor was entitled to specific performance, at all material times it had good title, it was entitled to rectification of the contract, it was justified in serving a notice to complete, and the purchasers were not justified in their attempt to terminate the contract, nor were they entitled to any relief under s.55 of the Conveyancing Act. That disposes of the central questions in the case. 10 The purchasers sought to buttress their case against the vendor in another way: they alleged breach of statutory warranty. It is an allegation of some subtlety. Section 52A of the Conveyancing Act requires, inter alia, that any contract contains such warranties as are "prescribed." The "prescribed" warranties are those contained in the Conveyancing (Vendor Disclosure and Warranty) Regulation 1986 . Regulation 5 "prescribes" the appropriate warranty: "The vendor warrants that, except as specifically disclosed in the contract, the land contained in the contract for sale is not affected at the date of the making of the contract for any of the following; any matter prescribed by Schedule 2 of the Environmental Planning and Assessment Regulation 1980." 11 There was a certificate given under s.149 of the Environmental Planning and Assessment Act attached to the contract. However, the certificate was infected with the same errors as the contract. The purchasers' argument, therefore, was that there was no certificate as to the land truly sold, and that amounted in law to a representation that the land was not affected. Cohen J dismissed this argument fairly summarily, but quite correctly, by pointing out that the certificate stated that the land sold had certain affectation, and the certificate correctly represented that affectation; it did not matter if the land was misdescribed. 12 At this point, reference should be made to certain proceedings before Brownie J. After the initiation of these proceedings which are the subject of this appeal, the purchasers successfully brought an action before Brownie J for the recovery of the deposit, under s.55(2A) of the Conveyancing Act. Brownie J, however, did not decide whether or not the vendor was in a position to pass a good title. I shall refrain from commenting on the propriety of pursuing a s.55(2A) application separately from a principal action, when the principal matter has not been determined. Nor shall I allude to the desirability of proceeding with the principal action with disregard to any of the estoppels which may arise as a result of that application. 13 The only significance of the application before Brownie J relates to the question of damages. 14 The vendor sought to recover as damages any costs incurred in that application which are irrecoverable from the purchasers. The obvious targets were the vendor's solicitors and the Registrar General. His Honour held that the solicitors should have taken care, but did not, that the lot numbers were given for the correct parish, that the solicitors should have made a search to ensure that both the general description of the land and the reference to title diagrams were consistent and correct, and that a failure to have a search of the parish map numbers carried out in the circumstances constituted a failure to take reasonable care that the documents of title accurately described the land which was being sold. His Honour also found - and indeed it was conceded by the Registrar General- that the Registrar General was at fault and that there was an error and misdescription within the meaning of s.127 of the Real Property Act, 1900. His Honour held, in effect, that both the vendors solicitors and the Registrar General had by their combined negligence caused the vendor to incur costs in the Brownie J application which they otherwise would not have incurred. This seems to me a little unfair to the solicitors, who did no more than rely on the documents issued by the Registrar General. I should have made no order against them. 15 The orders which I therefore propose are as follows: 1. Orders 1,2,3 and 4 as sought in the third respondents cross-appeal. 2. Otherwise, all appeals and cross-appeals be dismissed with costs. 16 SHELLER JA:I have had the benefit of reading the reasons for judgment prepared by Meagher JA and by Powell JA. For the reasons given by Meagher JA I agree that the appeal should be dismissed with costs. For the reasons given by Powell JA I agree that the cross-appeal should be dismissed with costs. 17 POWELL JA: These proceedings, and this appeal, the broad general facts giving rise to which have been recorded in the Judgment which has been prepared by Meagher JA, which Judgment I have read in draft, provide yet another example of the shambles which is likely to be created, and the time and money which is likely to be wasted, when, as now appears with increasing frequency to be the case, the parties to litigation, either, have no knowledge or understanding of the rules and proper practice in the conduct of litigation, or, if they have such knowledge and understanding, nonetheless see no need to conform with such rules and practice. 18 Although, as Meagher JA has recorded, the principal question and the proceedings is one as between vendor and purchasers - they, as it seems, being the only parties to the proceedings, when commenced - a question conventionally dealt with in the Equity Division of the Court, it would seem (T15) that the proceedings were commenced by summons filed in the Commercial Division of the Court. Although the appeal papers do not contain a copy of that summons, later events would suggest that, in it, the First Opponent ("Wongala") as vendor sought declarations, first, that it had validly terminated the agreement for sale by reason of the Appellants' breach and, second, that it had validly forfeited the deposit paid by the Appellants pursuant to the agreement for sale; and, perhaps sought a judgment for damages by reason of the Appellants' breach. 19 It would further seem - again, the appeal papers are deficient - that, at some time - which must have been prior to July 1993 - the proceedings were transferred from the Commercial Division to the Equity Division of the Court. Thereafter, on 19 July 1993, at which time, so it would seem (SCR Pt 6 r 13; Form 11A) no order for pleadings had been made, the Appellants filed an Amended Cross-Claim (RAB 26) in which they sought against Wongala the following (inter alia) relief: "1. A declaration that the contract for sale of land dated 7 November 1991 showing the plaintiff as vendor and the defendant (sic) as purchaser has been validly rescinded by the purchaser. 2. Return and refund of the deposit of $129,000.00 and interest accrued. 3. An order for the return of the defendant's deposit of $129,000.00 pursuant to section 55 of the Conveyancing Act." 20 It is convenient here to record that s.55 of the Conveyancing Act 1919 provides (inter alia): "55 Right of purchaser to recover deposit etc (1) In every case where specific performance of a contract would not be enforced against the purchaser by the Court by reason of a defect in the vendor's title, but the purchaser is not entitled to rescind the contract, the purchaser shall nevertheless be entitled to recover his deposit and any instalments of purchase money he has paid, and to be relieved from all liability under the contract whether at law or in equity, unless the contract discloses such defect and contains a stipulation precluding the purchaser from objecting thereto. (2) If such undisclosed defect is one which is known or ought to have been known to the vendor at the date of the contract the purchaser shall in addition be entitled to recover his expenses of investigating the title. (2A) In every case where the court refuses to grant specific performance of a contract, or in any proceeding for the return of a deposit, the court may, if it thinks fit, order the repayment of any deposit with or without interest thereon." 21 It is also convenient here to record the following: 1. Prior to the enactment of s. 55(1), (2), of the Act: (a) a purchaser could recover his deposit by action if he were entitled to, and did, in fact, rescind the contract ( Nottingham Patent Brick and Tile Company v. Butler (1885) LR 15 QBD 261; affd. (1886) LR 16 QBD 778 ; Swindle v. Knibb (1929) 29 SR 325 ); but not if the contract went off through his own default ( Howe v. Smith (1884) LR 27 Ch.D. 89 ); (b) in a case in which the existence or validity of the contract was not in question a purchaser could obtain an order for the return of his deposit with interest and his costs of investigating title in proceedings under the Fourth Schedule to the Equity Act 1901 in cases in which the vendor could not make title ( In re Hargreaves & Thompson's Contract (1886) LR 32 Ch.D 454 ). 2. Prior to the insertion of sub-s 2A in 1930, s.55 had no application to cases in which there was no defect in the vendor's title, nor to those cases in which the Court in Equity would have refused specific performance because the title was doubtful ( Bennett v. Stuart (1927) 27 SR 317 ). 3. Sub-s. 2A extended the jurisdiction of the Court by giving it jurisdiction to order the return of the deposit not only where it refused specific performance but also in any other suit or proceeding. Sub-s.2A extends to cases in which the contract is binding at law on the purchaser ( Zsadony v. Pizer [1955] VLR 496 ; Maralinga Pty. Limited v. Major Enterprises Pty Limited [1972] 2 NSWLR 101 ; Lucas & Tait Pty. Limited v. Victoria Securities Limited [1973] 2 NSWLR 268 ); however, the making of an order pursuant to the provisions of sub-s. 2A for the return of the deposit does not preclude further proceedings on the contract ( Lucas & Tait Pty. Limited v. Victoria Securities Limited supra ; Wilson v. Kingsgate Mining Industries Pty. Limited [1973] 2 NSWLR 713 ; Pratt v. Hawkins (1991) 32 NSWLR 319 ); 4. If a purchaser is entitled at law to recover the deposit, the jurisdiction conferred on the Court by sub-s. 2A cannot be invoked to negative the purchaser's right to do so ( James Macara Limited v. Barclay [1945] 1 KB 148 ) 22 It will thus be apparent: 1. That if - a claim seemingly not made on the hearing of the Cross-Claim, but made on the hearing before Cohen J and before this Court - the Appellants had validly terminated the agreement for sale because of Wongala's repudiation of it, they were entitled to a return of the deposit without the need to invoke the provisions of s.55. 2. That if as it claimed, Wongala had validly terminated the agreement for sale by reason of the Appellants' repudiation of it, the fact that the Court might - as it did - later make an order pursuant to the provisions of sub-s.2A for the return of the deposit would not relieve the Appellants of their liability for damages for breach of the agreement for sale. 3. That the question of whether or not Wongala had validly terminated the agreement for sale was thus common to both Wongala's claim against the Appellants and the Appellants' claim against Wongala, although, even if answered in favour of Wongala, not necessarily determinative of the Cross-Claim. 23 In the circumstances, it seems to me, that, as the determination of all of the issues arising on the Amended Cross-Claim would not necessarily conclude the litigation between the parties, any attempt to deal with those issues separately from the issues arising in the proceedings would have been premature, and, thus, contrary to accepted practice (see, for example, Everett v. Ribbands [1952] 2 QB 198, 206-7 per Romer LJ; Carl Zeiss Stiftung v. Herbert Smith & Co. [1969] 1 Ch. 93, 98 per Lord Denning MR; CBS Productions Pty. Limited v. O'Neill (1985) 1 NSWLR 601, 606 per Kirby P). 24 This notwithstanding, and whether or not a formal order pursuant to SCR Pt 31 r 2 for the trial of a preliminary or separate issue was made - the appeal papers disclose no such order - Brownie J proceeded to deal with the Cross-Claim. The apparent absence of an order defining the basis upon which his Honour proceeded to do so not only reveals yet another irregularity (see, for example, American Home Assurance Co v. Ampol Refineries Limited (1987) 18 NSWLR 13, 18)) but has caused difficulties on the hearing of this appeal as the Appellants have disputed what, in his Judgment, Brownie J recorded was the basis upon which he proceeded. 25 In the Judgment - which I regret to say I find anything but satisfying - which he delivered on 21 July 1993, Brownie J said (inter alia): " On 16 January 1992 the plaintiff gave a notice to complete, and on 6 February it agreed to extend the time for completion until 28 February 1992. On 23 March 1992 it gave a notice terminating the contract, and purported to forfeit the deposit of $129,000 which the defendants had paid. The question now litigated is whether the defendants are entitled to relief under Section 55(2A) of the Conveyancing Act, in respect of that deposit. The defendants now acknowledge that, but for Section 55(2A), their deposit would be lost to them. ……… The defendants say that it would be unjust and inequitable to permit the plaintiff to forfeit the deposit, as distinct from leaving the plaintiff to its remedy in damages: the plaintiff could not have made title at the time it gave its notice to complete, which was admittedly valid, or its notice of rescission. The plaintiff responded that, according to the unchallenged evidence of Mr. Channell, a solicitor employed as a Senior Legal Officer in the Land Titles Office, the steps needing to be taken to correct the register would only take one or two days, once the Certificate of Title was produced (by the plaintiff's mortgagee). However, Mr. Channell said this in an affidavit sworn on 17 March 1993, after the defendants had drawn the plaintiff's attention to the problem on 22 December 1992, and the correction was not in fact made until 13 April 1993, and I accept the submission that, on the evidence, it is unlikely that the plaintiff could have made good title in about February 1992 if the defendants had taken the point then. The plaintiff also submitted that the defendants had not acted with real diligence, immediately after the making of the contract. Whilst they could have acted with greater diligence, it does not seem to me this relative lack of diligence means that it ceases to be the case that it is unjust and inequitable for the plaintiff to forfeit the deposit. ……… In all the circumstances I think that justice is best achieved by leaving the plaintiff to its remedy in damages, and by granting the defendants relief under Section 55(2A). I invite submissions as to the further conduct of the matter, and as to costs." 26 Despite the stance taken by counsel for the Appellants on the hearing (T.16-18), I would have thought it transparently clear that the only issue litigated before Brownie J was whether - it being accepted that Wongala had validly terminated the agreement for sale - the Appellants had made out a case for relief under s.55(2A). If it be thought that support for that view be needed, I simply refer to the following passage in the Judgment of Street CJ in Eq (as he then was) in Lucas & Tait Pty. Limited v. Victoria Securities Limited (supra) at 272-3): "It is one thing to recognise that there is a wide discretion conferred upon the court under this section; it is another thing to determine the guide lines for the exercise of that discretion. The section was designed to provide relief to a purchaser against an unjust and inequitable consequence of forfeiture of a deposit. It is clear enough that at law a vendor's right to forfeit a deposit to himself in the event of a purchaser's default bears no necessary relation to the damages actually suffered by a vendor. At law a forfeited deposit could result in a vendor making a profit which in justice and equity he ought not to be permitted to enjoy at the purchaser's expense. In a complementary sense, an order for the return of the deposit does not necessarily affect the vendor's right to sue a defaulting purchaser at law and recover against him such damages as the vendor can prove. The jurisdiction under s.55(2A) does not give a court an overall discretionary supervision of monetary adjustments between parties to a contract under which a deposit was paid but which has been terminated. A vendor who forfeits a deposit in strict enforcement of his legal rights is not to be deprived of it under s. 55(2A) unless it is unjust and inequitable to permit him to retain it. If the court would not, in its discretion, specifically enforce the contract against the purchaser, then it may follow that it would be unjust and inequitable to allow the vendor to retain the deposit. In appropriate cases he should be left to prove the damages payable to him by the defaulting purchaser in accordance with the established rules governing the measure of damages, rather than simply pocketing the deposit, which might in some cases exceed the damages which would properly be recoverable by him at law. Equity has always looked with disfavour upon penalties or stipulation which result in a party to a contract making a profit at the expense of a defaulting party. It is clear that where the court in its discretion refuses specific performance, whether or not it also orders repayment of the deposit under s.55(2A), it will still remain open to the vendor to sue the defaulting purchaser and recover against him whatever damages may be due to the vendor at law in the event of the contract having gone off through the purchaser's breach. The ordinary principles of contract law and of damages stand untouched by this section except in so far as it operates to qualify the ordinary right of a vendor to forfeit and retain a deposit." 27 It is, in my opinion, only if this was the basis upon which the hearing of the Amended Cross-Claim proceeded that that hearing could be regarded as other than irregular. 28 If that were, in fact, the basis upon which that hearing proceeded, then, as it seems to me there should then have been made: 1. a declaration that the agreement for sale had been validly terminated by Wongala; 2. an order for the repayment of the deposit to the Appellants; 3. an order that the Appellants pay the Wongala damages for their breach of the agreement for sale; 4. an order referring the question of damages to the Master; 5. an order or orders as to the costs of the proceedings and of the cross-claim up to and including the date of entry of a minute of the declaration and of those orders; 6. an order reserving further consideration and further costs. 29 If that course had been adopted, much of the time and money which was thereafter wasted would have been avoided, for it would have been clear that, as Brownie J seems at that stage to have contemplated, the only issue between the parties which remained was the amount, if any, of the damages sustained by Wongala for which the Appellants were to be held liable to Wongala. 30 Since it would appear (T.18) that such orders as were then, or later, made by Brownie J have never been entered, it is not possible to know with any degree of certainty what steps were thereafter taken in the proceedings - it would, however, seem clear (T.17) that neither the Appellants nor Wongala sought to appeal against the Judgment delivered, or any orders made, by Brownie J. 31 It would seem (RAB 32) that, at some time prior to November 1993, the proceedings were amended by adding as parties-Defendants the Registrar-General and the solicitors, and a direction as to the filing of pleadings was given. 32 Although it appears (RAB 1 et seq) to have been amended on a number of occasions the Statement of Claim originally filed - prior to February 1994 - on behalf of Wongala contained the following (inter alia) paragraphs: "CLAIM AGAINST THE FIRST DEFENDANTS 5. On 7 November 1991, the Plaintiff as vendor entered into an Agreement for Sale of Inglebar with the First Defendants as purchaser for the sum of one million, one hundred thousand and ninety thousand dollars ($1,290,000.00) (hereinafter referred to as the "Sale Agreement"). The Plaintiff seeks leave to rely upon the Sale Agreement at the hearing as if its terms were fully set out herein. 6. On 7 November 1991, the First Defendants jointly paid to Elders Real Estate, the agent for the Plaintiff, the sum of one hundred and twenty nine thousand dollars ($129,000.00) by way of deposit pursuant to clause 2, particular G of the Sale Agreement (hereinafter referred to as the 'Deposit Moneys'). 7. Clause 2 of the Sale Agreement required completion to take place on or before 15 January 1992. ……… 12. On 23 March 1992, the Plaintiff lawfully terminated the Sale Agreement by Notice of Termination served upon the First Defendants dated 23 March 1992." 33 In their Defence (RAB 14-15), which appears to have been filed on 7 February 1994 - which, in accordance with the Rules (SCR 15 R 23) was verified (RAB 16) by the First Appellant on 4 February 1994 - the Appellants asserted (inter alia): "3. The first defendants do not admit paragraphs 4 and 5 of the Statement of Claim. 4. The first defendants admit paragraphs 6 and 7 of the Statement of Claim. 5. The first defendants do not admit paragraphs 8 of the Statement of Claim. 5. The first defendants deny paragraphs 9 to 13 of the Statement of Claim. 6. Further, or in the alternative, the first defendant (sic) say: (a) the purported rescission by the plaintiff of the Sale Agreement by Notice of Termination dated 23 March, 1992 was a wrongful repudiation of the Sale Agreement for, inter alia, the reasons set out in Notice of Termination of Agreement for Sale of land dated 21 December, 1992. At the time appointed for completion, 12 noon, 28 February, 1992, (or at any other relevant time) the plaintiff was not able to pass good and valid title to the property the subject of the Sale Agreement to the first defendants. (b) On 22 December, 1992 the first defendants terminated the Sale Agreement by letter of that date, which annexed Notice of Termination of Agreement for Sale of Land dated 21 December, 1992, addressed to the third defendants as the plaintiff's solicitors." 34 Given the claim which the Appellants had raised in their Amended Cross-Claim, and the basis upon which Brownie J had dealt with that Amended Cross-Claim, it seems to me that the Appellant' Defence was vexatious and ought to have been struck out - whether pursuant to SCR Pt. 15 r 26(1)(a) or under the inherent jurisdiction of the Court - as involving an abuse of process. However, for some reason, no such application to have the Defence struck out appears to have been made, nor - despite the fact that, as I have earlier noted, the Statement of Claim appears thereafter to have been amended - was any attempt made on behalf of Wongala to amend the Statement of Claim to have the agreement for sale rectified - as, in my view, it would inevitably have been - a course which would have been open (see, for example, Issa v. Berisha [1981] 1 NSWLR 261; Market Terminal Pty. Limited v. Dominion Insurance Co. of Australia [1982] 1 NSWLR 105) nor was any application made to file a Reply raising an estoppel made prior to the commencement of the hearing before Cohen J in October 1997, when, in the light of his Honour's indication (Black AB 1) that if the application were acceded to, the hearing would be adjourned, the application was not proceeded with (Black AB 2). 35 In the event, the determination of the amount of damages to which Wongala is entitled has been delayed for years, and the costs of a totally unnecessary three day hearing as to the Appellants' liability have been incurred, as the result of the failure of the parties to conform with the rules of Court and with proper litigious practice. 36 I have described the hearing before Cohen J as to the Appellants' liability as totally unnecessary for, even if one sets to one side any question of estoppel, the case which the Appellants sought to raise at trial seems to me - for the reasons given by Meagher JA - to have been totally devoid of merit. 37 For these reasons I agree with Meagher JA that the appeal should be dismissed with costs. 38 I turn - but only briefly - to the several cross-appeals - by Wongala, the solicitors and the Registrar-General - all of which relate to the orders made by Cohen J in relation to the claims made by Wongala against the solicitors - for negligence - and against the Registrar-General - pursuant to the provisions of s.127 of the Real Property Act 1900 by reason of the mistakes in the Register. 39 I agree with Cohen J - for the reasons which he gave - that both the solicitors and the Registrar-General were at fault and, thus, liable to compensate Wongala in respect of any loss which it suffered by reason of that fault. In the circumstances, that loss, as it seems to me - as it seemed to Cohen J - was limited to the costs incurred by Wongala in connection with the hearing before Brownie J in July 1993. However, as Cohen J ordered (RAB 78, 83) that those costs - which had not been dealt with by Brownie J (RAB 30) - should, in the first instance, be paid by the Appellants, it seems to me that the course which was taken by Cohen J in this respect - that is instead of ordering an inquiry as to damages before the Master, to order the solicitors and the Registrar-General to pay such part of Wongala's costs of the hearing before Brownie J as was not recovered from the Appellants - was an eminently practical - and economical - way of achieving the same result. 40 In my opinion, all three cross-appeals should be dismissed with costs.

Beynon v Wongala Holdings

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Judgment (10 paragraphs)

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Cases Cited (3)

Cited By (1)