Bieri v Ottoman Enterprises Pty Ltd as trustee for Yucel Family Trust [2015] NSWSC 563 | Case summary

Bieri v Ottoman Enterprises Pty Ltd as trustee for Yucel Family Trust [2015] NSWSC 563 | Case summary | Zoe

These proceedings concern a contract for the sale of land entered into by the plaintiff, Mr Bieri, as vendor and the first defendant, Ottoman Enterprises Pty Ltd, as purchaser.
The proceedings were conducted with admirable economy by Mr Southwick, who appeared for Mr Bieri, and Mr Coles QC, who appeared with Mr Carroll for the defendants. A number of issues originally at play were not pressed. Thus, a case listed for two days was completed in a little over half a day; enabling me to give judgment today.
Mr Bieri was the registered proprietor of a property at Dover Heights ("the Property").
By contracts exchanged on 16 March 2011 ("the Contract"), Mr Bieri agreed to sell the Property to Ottoman for $5.6 million.
The second defendant, Mr Guven, who is known as Mr Yucel, is evidently the sole director of Ottoman and executed the Contract on behalf of Ottoman.
Clause 2.8 of the Contract provided that if, as happened (see below), Ottoman released the deposit to Mr Bieri prior to completion, the deposit was a charge over the Property in favour of Ottoman until either termination or completion of the Contract by Mr Bieri.
Clause 9 of the Contract provided relevantly: "9 Purchaser's default If the purchaser does not comply with this contract (or a notice under or relating to it) in an essential respect, the vendor can terminate by serving a notice. After the termination the vendor can - 9.1 keep or recover the deposit (to a maximum of 10% of the price); …and 9.3 sue the purchaser… 9.3.2 to recover damages for breach of contract." [Emphasis in original]
Clause 18 provided relevantly: "18 Possession before completion 18.1 This clause applies only if the vendor gives the purchaser possession of the property before completion. 18.2 The purchaser must not before completion - 18.2.1 let or part with possession of any of the property; … 18.6 If this contract is rescinded or terminated the purchaser must immediately vacate the property." [Emphasis in original]
Special Condition 13 of the Contract was in the following terms: "13. If the purchaser of the property is a Company, the officers or persons who sign this Contract on behalf of the Company or who attest the Seal of the Company on this Contract: 13.1 jointly and separately guarantee all obligations of the purchaser under this Agreement including the payment of the purchaser price; 13.2 jointly and separately indemnify the vendor in respect of any default of the purchaser under this Agreement."
At all relevant times, the parties were represented by solicitors.
Ottoman entered possession of the Property on exchange.
At all relevant times, Bank of Western Australia Limited ("the Bank") held a mortgage over the Property to secure a debt owed to it by Mr Bieri. That debt was in the order of $4.8 million. Mr Bieri was, on 16 March 2011, in default under that mortgage. By coincidence (I assume), shortly after 16 March 2011 the Bank served on Mr Bieri a notice under s 57(2)(b) of the Real Property Act 1900 (NSW) dated that day.
Correspondence passing between the solicitors makes clear that Ottoman and Mr Yucel were well aware of Mr Bieri's position so far as concerned the Bank.
Under the terms of the Contract, completion was due on 8 June 2011.
Ottoman failed to complete by that date.
On 14 June 2011, Mr Bieri, by his solicitors, served on Ottoman a notice to complete calling for completion by 29 June 2011. The solicitors also served a notice to vacate calling on Ottoman to vacate the Property by 22 June 2011.
Thereafter, by exchange of emails and letters between the solicitors, the parties agreed to extend the completion date to 11 August 2011 on the basis that, amongst other things, Ottoman would release the deposit ($560,000) to Mr Bieri. The deposit was so released.
Completion did not take place by 11 August 2011.
On 12 August 2011, Mr Bieri's solicitors issued a further notice to complete calling for completion by 29 August 2011 in the following terms: "A. By Contract for the Sale of Land (contract) dated 16 March 2011 you agreed to purchase from Dimitri Bieri, the vendor upon terms and conditions contained therein the property known as XXX, Dover Heights. B. The vendor has complied with the terms and conditions of the contract and is willing and ready to complete the sale to you of the property in accordance with the terms of the contract. C. The vendor required you to pay the balance of purchase money and complete the contract in accordance with its terms, on or before 29 June 2011 and (without the waiver of any of his rights under the Contract) as extended to 11 August 2011. D. The vendor appoints on or before 3:00pm on 29 August 2011 at…George Street, Sydney as the time and place for completion or at such other place as the vendor may direct. E. If you fail to comply with this notice on or before 3:00pm on 29 August 2011 the deposit payable by you will be forfeited and the contract will be terminated and thereafter the vendor may either sue you for breach of contract or resell the property as owner and claim from you any deficiency arising on such resale and all expenses of and incidental to such resale or attempted resale and all costs, damages, losses and expenses incurred by the vendor by reason of your delay or default in performing the said contract."
On 22 August 2011, the Bank appointed Mr Robert Moodie and Mr Geoffrey Reidy as its agents in respect of the Property.
Mr Yucel met with Mr Moodie on 22 August 2011. The next day he wrote to Mr Moodie: "I will not be able to settle in the time frame required…I will need 5 weeks to vacate."
On 23 August 2011, Mr Bieri's solicitors wrote to Ottoman's solicitors in the following terms: "…we maintain that the Notice to Complete expires on 29 August, 2011. The vendor will after this date be entitled to terminate the Contract. The vendor requires that the purchaser vacate the property by the 29 August, 2011 and pay all arrears of licence (occupation) fees. We note that the Occupation/Licence Fee has been paid up to 11 August, 2011 and that the increased Licence Fee is due and payable from that date."
On 26 August 2011, Mr Bieri's solicitors sent an email to the Bank's solicitors which included: "Whilst I appreciate that your client is the Bank, there is a common goal in seeing that the property is sold, the Bankwest mortgage extinguished and any surplus (as much as possible) is paid to the mortgagor. I note that the Bank must act in good faith. It is important that the purchaser is not placed in a position where it can claim a defence to invalidate the Notice to Complete on the basis that it was not aware who was the person or entity entitled to sell or serve the Notice to Complete or any subsequent Notice of Termination."
Settlement did not take place by 29 August 2011. There is no dispute before me that Ottoman was not in a position to settle that day, or at all.
Ottoman's solicitors contended that Mr Bieri's notice to complete of 12 August 2011 was not valid because, it was said, Mr Bieri was not on 29 August 2011 ready, willing and able to complete.
Ottoman's solicitors wrote to Mr Bieri's solicitors on 30 August 2011: "We have also communicated with [the Bank's solicitor] earlier today [who] has advised in no uncertain terms that 'the bank is in possession' of the property at [Dover Heights]. In these circumstances your client was not as you have set out in the alleged Notice to Complete 'ready, willing and able' to complete. You have suggested that: a. The existing contract be terminated. b. Our client forfeits the deposit which has already been released to your client. c. A new contract is to be entered into between our respective clients with a new time to complete and a new price. You were to return to us with what you[r] client believes to be a fair price. We again assert that your client has not been and is not today in a position to complete the contract given the assertions of the bank."
Before me, Mr Coles endeavoured to support that position, albeit only faintly. However, I see no basis to conclude that Mr Bieri was not ready, willing and able to complete on 29 August 2011. The fact that Mr Bieri was in default under his mortgage with the Bank did not have the effect that he was not able to deliver title to Ottoman and complete the Contract.
Indeed, it appears that the Bank was encouraging Mr Bieri to do just that.
Thus, on 29 August 2011, Mr Bieri's solicitors wrote to Mr Bieri as follows: "We spoke to [the Bank's solicitor] this afternoon. The Bank has a formal position which they must adopt but without prejudice and off the record the Bank has advised that they want us to negotiate with the purchaser and they do not want to lose the purchaser."
In correspondence with the Bank's solicitors, Mr Bieri's solicitors were at pains to make clear that Mr Bieri had not terminated the Contract.
Thus, on 30 August 2011, Mr Bieri's solicitors wrote to the Bank's solicitors: "…I am wondering whether it would be prudent for you to send a letter stating that the lender did not have an interest in the sale and as such by consequence the vendor is entitled to sell the property and the Notice to Complete is valid. If the lender were to exercise its rights as mortgagee in possession then arguably the Notice to Complete is still valid up to the date that the lender serves that notice. … I am concerned that any invalidity of the Notice to Complete will thereby render the Notice of Termination invalid and hence be a repudiation of [the] Contract by the vendor. This ambiguity also makes it difficult to negotiate with the purchaser."
Similarly, and a short time later the same day, Mr Bieri's solicitors sent a further indication to the Bank's solicitors as follows: "I am mindful of the fact that if the contract is terminated (assuming this is successful and not challenged by the purchaser) then a new purchaser will still take another 8-10 weeks to find, if there is such a purchaser and I am not aware at what price or whether there are any interested buyers. I believe that the purchaser requires another 8 weeks."
On 6 September 2011, Mr Bieri's solicitors wrote to Ottoman's solicitors: "We are instructed to maintain the validity of the Notice to Complete. The vendor reserves [his] right to terminate the Contract at any time and to seek immediate payment of the arrears of occupation fee and payment of the utility bills for the property since your client's occupation."
That letter was expressed to be "without prejudice", but was admitted before me without objection. As can be seen in that letter, Mr Bieri's solicitors stated Mr Bieri "reserves [his] right to terminate the Contract", thereby making clear that Mr Bieri had not by then terminated. Thereafter, in the letter, an offer to settle was made, the details of which I need not set out.
Ottoman's solicitors replied on 9 September 2011 in the following terms: "1. The Notice to Complete was not valid as the vendor was not ready, willing and able to complete on the date specified. 2. Any purported termination based on that invalid Notice to Complete would be not be [sic] effected. 3. The purchaser is a third party to the dealings between the vendor and the vendor's mortgagee. Even if the purchaser was minded to accept the vendor's offer, the purchaser would need comfort from the bank that the proposal was acceptable."
In his final submissions, Mr Southwick submitted that: "On 13 September 2011 the Plaintiff maintained [his] entitlement to terminate". That submission does reflect what happened. Thus, on 13 September 2011, Mr Bieri's solicitors wrote to Ottoman's solicitors as follows: "We maintain that we reject the assertion that the Notice to Complete was invalid or that the vendor was not ready, willing and able to settle. The vendor is entitled to terminate the Contract."
Again, Mr Bieri's solicitors asserted that Mr Bieri was "entitled to terminate", making clear that no such termination had occurred to date. The letter itself did not purport to be a termination of the Contract.
On 13 September 2011, Ottoman vacated the Property.
Leaving aside some communications between the solicitors concerning damage allegedly sustained to the Property during Ottoman's occupation (a complaint ultimately not pressed before me), there the matter rested.
No notice of termination was served.
That may have been because Mr Bieri and his solicitor lived in hope that the Contract would somehow complete.
During argument, I had this exchange with Mr Southwick "HIS HONOUR: It would have been so simple though just to say, 'we hereby terminate'. MR SOUTHWICK: Yes, your Honour. I have no doubt that your Honour's already aware of the likely reason, which was that there was a hope on the part of the plaintiff's solicitor that the contract could still complete. But it was going through the motions of issuing the formal notices."
Quite. That does seem the likely reason.
Thereafter, the Bank exercised its power of sale over the Property, and by a transfer dated 14 December 2011, transferred the Property to third parties for $4.2 million.
Mr Bieri commenced these proceedings over two years later, on 13 February 2014.
The critical question in the proceedings is whether Mr Bieri terminated the Contract prior to Ottoman's purported termination on 7 April 2014.
In that regard, I turn first to Mr Bieri's pleaded case.
In par 14 of Mr Bieri's amended statement of claim it is pleaded: "The First Defendant in breach of the contract failed to complete on 29 August 2011 or at all. The contract was thereby terminated."
Implicit in this pleading is the proposition that the statement in cl E of the 12 August 2011 notice to complete (set out at [19] above) that, absent settlement on 29 August 2011, "the contract will be terminated", was to have a self-executing operation; so that, without more, the Contract would terminate if settlement did not take place as called for.
However, this is to ignore the words of cl 9 of the Contract (set out at [7] above). Those words make clear that if Ottoman did not comply with a notice to complete (being a "notice under or relating to" the Contract for the purposes of cl 9) then Mr Bieri could (but was not obliged to) terminate "by serving a notice"; that is, a notice of termination.
In my opinion, unless and until Mr Bieri took that step, the balance of cl 9 was not enlivened (including any right to retain the deposit or sue for damages).
Assuming, in Mr Bieri's favour, that Ottoman repudiated its obligations under the Contract by not settling on 29 August 2011, Mr Bieri had an election to make. He could accept the repudiation, terminate the Contract and sue for damages. Or not.
As Mr Coles submitted: "The plaintiff bears the onus of establishing that the Agreement has come to an end (Scarcella v Linknarf Management Services Pty Ltd [(in liq)] [2004] NSWSC 1168 at [11]) but all that is apparent is an unaccepted repudiation which it has been said is a 'thing writ in water and of no value to anybody; it confers no legal rights of any sort or kind' (Network Ten Pty Ltd v Seven Network [(Operations)] Ltd [2014] NSWSC 692 at [137] citing with approval Asquith LJ in Howard [v] Pickford Tool Co Ltd [1951] 1 KB 417 at 421). The damages which the law recognises as flowing to and recoverable by a vendor of land for breach by a purchaser of his obligation to purchase are damages for loss of bargain and consequential loss. But there is no loss of bargain whilst the contract remains on foot. It is for this reason that a vendor must bring his contractual obligation to sell to an end before he can maintain an action for damages for loss of bargain (Sunbird Plaza Pty Ltd v Maloney (1988) 166 CLR [245] at 273)."
In par 20 of the amended statement of claim, it is pleaded that Mr Bieri did accept Ottoman's repudiation of the Contract, "thereby bringing the Contract to an end".
How that was so was not revealed in the pleading.
It is, in any event, inconsistent with what actually occurred. In the circumstances I have described above, on 6 September 2011 and again on 13 September 2011 Mr Bieri's solicitors asserted Mr Bieri's entitlement to terminate. However, that entitlement was not, so far as the evidence reveals, ever exercised.
In par 21 of the amended statement of claim, it is pleaded that on 13 September 2011 the Bank "entered into possession of the property thereby terminating the Contract".
Again, how that was so was not revealed in the pleading. I do not see how the Bank taking possession of the Property had any effect on the rights of the parties to the Contract.
As the Bank's solicitors said in their letter to Mr Bieri's solicitor on 20 September 2011: "Any agreement between Ottoman Enterprises Pty Ltd and your client regarding the matters set out in your emails is a matter for your client and does not concern the Bank. The Bank is now taking steps to sell the Property pursuant to its rights under its mortgage over the Property."
In his submissions, Mr Southwick put the matter a little differently.
Mr Southwick drew attention to Mr Bieri's solicitors' letter of 23 August 2011, referred to at [22] above, requiring Ottoman to vacate the Property by 29 August 2011.
Mr Southwick submitted: "There is nothing in the contract that provides for the right of occupancy in clause 23 to be severed from the remaining obligations in the contract. The 23 August 2011 notice is only consistent with the termination of the contract including the lease."
Mr Southwick submitted that Ottoman's subsequent vacation of the Property bespoke an acceptance by it that the Contract had been terminated.
I do not accept this submission for a number of reasons.
First, it is not pleaded.
Second, I do not see how it follows from the prohibition in the Contract against Ottoman parting with possession of the Property prior to completion (Mr Bieri having given Ottoman possession prior thereto: see cl 18.2 of the Contract set out at [8] above), and from Ottoman's obligation to vacate the Property if the Contract was terminated, that Ottoman's subsequent vacation of the Property somehow itself brought about the termination of the Contract.
Third, the submission cannot be reconciled with what actually happened between the parties.
In the same letter on which Mr Southwick relied, Mr Bieri's solicitors referred to the notice to complete expiring on 29 August 2011 and asserted that Mr Bieri would "after this date be entitled to terminate the Contract". That proposition, as I have said, was repeated in the solicitors' later correspondence. All these letters asserted the existence of a right to terminate; none purported to effect such a termination.
My conclusion is that Mr Bieri did not terminate the Contract.
For that reason, what might otherwise have been Mr Bieri's entitlements under cl 9 did not arise. That is because of the language of cl 9. It is, in any event, consistent with the position that would obtain at general law: for example Sunbird Plaza Pty Ltd v Maloney per Mason CJ at 260 and Gaudron J at 273.
One of those entitlements would have been to retain the deposit. In my opinion, Mr Bieri has no such entitlement and he must now return the deposit.
In that regard, I accept the submissions made by Mr Coles: "At all times up until the commencement of these proceedings the Agreement was still on foot and neither party intended that it should be further performed. In these circumstances [the] parties must be regarded as having conducted themselves so as to abandon or abrogate the Agreement, a consequence of which is that the deposit should be returned (DTR Nominees Pty Ltd v Mona Homes Pty Ltd (1978) 138 CLR 423 at 434). There being no completion of the Agreement the first defendant maintains a charge over the Property for the amount of the deposit [see cl 2.8 of the Contract]. In the events that have transpired, the Agreement cannot be specifically performed and it is just and equitable that [the] plaintiff should repay the deposit to the first defendant."
Another of the entitlements under cl 9 might have been recovery of damages from Ottoman. In the events that have happened, Mr Bieri has no such entitlement.
In view of these conclusions, I do not need to consider Mr Coles's submission that, as a matter of construction of the Contract, and in particular of Special Condition 13, Mr Yucel has no personal liability for what might otherwise have been Ottoman's liability to Mr Bieri for damages.
Nonetheless, I will express my opinion, albeit briefly.
Mr Coles's submissions were as follows: "At all times up until the morning when the Agreement was executed the parties could not have intended that the special condition was to have any application: up until 10.04am it was common ground that [Mr Yucel] was to purchase the Property which would render the condition nugatory. The natural inference is that [Mr Yucel] changed the purchaser's name on the Agreement as he wanted to use the corporate structure of the first defendant as a shield from any liability that might arise. That [Mr Yucel] should guarantee the obligations of the first defendant was never an intended consequence of the purchase (Black v Smallwood (1966) 117 CLR 52)."
As to the belated decision by Mr Yucel to nominate Ottoman, rather than himself, as the purchaser, an earlier defence based on s 18 of the Australian Consumer Law (Cth) and the Contracts Review Act 1980 (NSW) was abandoned immediately before the hearing.
Mr Yucel executed the Contract on behalf of Ottoman.
Mr Coles suggested that he must have done so on the basis of s 127(1)(c) of the Corporations Act 2001 (Cth).
That being so, he executed the Contract on behalf of Ottoman in accordance with Special Condition 13 of the Contract (set out at [9] above).
If Special Condition 13 is to have any operation at all, it must have the effect, in the circumstances of this case, of imposing a personal liability on Mr Yucel. The fact that he may not have read or appreciated the effect of Special Condition 13 is, of course, irrelevant: Toll (FGCT) Pty Ltd v Alphapharm Pty Ltd [2004] HCA 52; 219 CLR 165 at [57] per Gleeson CJ, Gummow, Hayne, Callinan and Heydon JJ.
I invite the parties to bring in short minutes to give effect to these reasons.

Bieri v Ottoman Enterprises Pty Ltd as trustee for Yucel Family Trust

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