Borgese v Revolution Gosford Pty Ltd

CATCHWORDS : VENDOR AND PURCHASER - whether vendors had validly terminated contract for sale of land - whether deposit forfeited to vendors - whether indemnity costs should be ordered against purchasers

CASES CITED : Carpenter v McGrath (1996) 40 NSWLR 39 Louinder v Leis [1982] HCA 28, 149 CLR 509

Vincent Borgese (first plaintiff) PARTIES : Paula Frances Borgese (second plaintiff) Revolution Gosford Pty Ltd (first defendant) Chapman and Frazer Real Estate Pty Ltd (second defendant)

SOLICITORS : Gary Cassim & Associates (plaintiffs)

IN THE SUPREME COURT OF NEW SOUTH WALES EQUITY DIVISION

2009/00322334 VINCENT BORGESE v REVOLUTION GOSFORD PTY LTD EX TEMPORE JUDGMENT 1 HIS HONOUR: On 11 August 2008 the plaintiffs, as vendors of certain land at Gosford (the Vendors), entered into a contract (the Contract) for the sale of land with the first defendant as purchaser (the Purchaser). By summons dated 18 December 2009 the Vendors seek declarations that the Contract has been validly terminated by the Vendors; a declaration that the deposit has been forfeited to the Vendors; and an order against the second defendant, as stakeholder of the deposit (the Vendors' Agent), to pay the deposit and interest to the Vendors. 2 The Purchaser has not served any affidavit evidence and does not appear today. The Vendors' Agent has filed a submitting appearance. FACTUAL BACKGROUND 3 The completion date provided for under the Contract was 30 September 2008. On 29 October 2008 the Purchaser's solicitor wrote to the Vendors' solicitor stating that the Purchaser's lender would not be in a position to complete on 30 September 2008. In reply, the Vendors' solicitor sent a facsimile marked urgent on 30 September 2008 to the Purchaser's solicitor which stated: "We refer to your recent facsimiles received by us in respect of the above matter.

Please be advised that the vendors are ready, willing and able to settle and accordingly our client has instructed us to charge default interest pursuant to the contract from 1 October, 2008.

In the event that appropriate arrangements to settle the matter by tomorrow afternoon are not made, we have been instructed to issue a Notice to Complete." 4 Settlement did not take place on 30 September 2008. Accordingly, the Vendors' solicitors served on the Purchaser's solicitors a Notice to Complete on 1 October 2008 which stated in part: "1. The Vendor is ready and willing to complete the sale to you of the whole of the land comprised in Folio Identifiers...comprised in Agreement for Sale of Land dated 11 August 2008 and made between the Vendor of the one part and yourselves of the other part in accordance with the terms of the said agreement. 2. The Vendor has supplied particulars of Title to the Purchaser's Solicitors. 3. The Vendor has replied to Requisitions on Title raised by the Purchaser's Solicitors. 4. You have failed to comply with and to complete the purchase in accordance with the provisions of the First Schedule of the said Agreement. 5. You have failed to complete the purchase despite requests by the Vendors' Solicitors to your Solicitors for completion. 6. The Vendors require you to complete the above agreement for the purchase of the above property at Espreon, Level 5, 77 Castlereagh Street, Sydney at 2.30pm on the 15th October, 2008 AND in this respect time is of the essence. 7. If you fail to complete the agreement at the time mentioned the Vendor will forfeit the deposit money paid by you and terminate the Agreement and thereafter either sue you for breach of Contract or, without notice to you, resell the property in accordance with the provisions of Clause 9 of the Agreement for Sale and recover from you the amount of the deficiency (if any) arising from such sale and all expenses of and incidental to any such sale as provided by the said Clause and will exercise all remedies (if any) conferred upon by the provisions of the Agreement or otherwise and arising by reason of your delay and default in performing the said Agreement." 5 On 10 October 2008 the solicitor for the Purchaser had a telephone conversation with the Vendors' solicitor to the effect that the Purchaser would be unable to settle, notwithstanding the Notice to Complete on 15 October 2008, and a request was made for a further two weeks for completion. On instructions, the Vendors' solicitors agreed to extend the time for completion to Wednesday, 29 October 2008 on condition that the Purchaser did not dispute the validity of the Notice to Complete. 6 On 28 October 2008 the Purchaser's solicitor had a further conversation with the Vendors' solicitor in which he said that the Purchaser was still unable to complete. 7 On 29 October 2008 the Vendors' solicitors wrote to the Purchaser's solicitors by facsimile stating: "We refer to previous correspondence in respect of the above matter.

We note that our client is ready, willing and able to complete this matter and that same is to be effected at Espreon, Level 5, 77 Castlereagh Street, Sydney at 2.30pm today. The writer will be in attendance at that time.

We note your advices that your client is unable to complete.

We now enclose settlement figures which would enable your client to complete today.

Please note that the balance of the purchase money is to be made in favour of our clients V and P Borgese by bank cheque." 8 On 29 October 2008 the Vendors' solicitor attended the offices of Espreon Law Stationers for the purpose of settlement. He had in his possession the certificates of title and transfer duly executed by the Vendors to enable him to complete the transaction. There was no attendance by the Purchaser's solicitors on 29 October 2008. 9 On 30 October 2008 the Purchaser's solicitor sought a further extension to settle to 31 October 2008. That extension was granted without prejudice to any rights that the Vendors may have under the Notice to Complete and subsequent failure by the Purchaser to settle. However, settlement did not take place on 31 October 2008. 10 On 4 November 2008 the Vendors' solicitors sent by facsimile to the Purchaser's solicitors a Notice of Termination of Contract which stated in part: "1. By Contract of Sale dated 11 August 2008 you agreed to purchase from Vincent Borgese and Paula Frances Borgese the property known as Shops 8, 9 and 10, 153 Mann Street Gosford NSW...

2. The said contract for sale required completion on 30th September 2008 and you failed to complete the contract on that date.

3. As a result of your default under the contract a Notice to Complete dated 1 October 2008 was served upon you. You failed to complete the Contract on 15 October 2008.

4. By agreement with your solicitors the time for completion was extended to 29 October 2008 at 2.30pm at Espreon, Level 5, 77 Castlereagh Street, Sydney. The Vendor was ready, willing and able to complete at that time and you were unable to complete.

5. As a result of your default under the contract and under the Notice to Complete dated 1 October 2008 making time of the essence of the Contract, we give you notice that the Contract is terminated and entirely at an end. The deposit is forfeited to the Vendor who holds you responsible for all damages and losses resulting from your default." 11 During the period 4 November 2008 to 10 November 2008 the Vendors' solicitors entered into correspondence with the Vendors' Agent to account to the Vendors for the deposit held. The Vendors' Agent refused to account until such time as they received an authority from the Purchaser's solicitor to release the deposit. During the period 4 November 2008 to 12 August 2009 the Vendors' solicitors also entered into correspondence with the Purchaser's solicitors for the purpose of releasing the deposit to the Vendors. No authority was provided by the Purchaser to the Vendors' Agent to release the deposit to the Vendors. 12 By letter of 17 November 2008 from the Vendors' solicitors to the Purchaser's solicitors, notice was given to the Purchaser's solicitors that if the Purchaser failed to indicate to the Vendors' Agent that they did not dispute the validity of the termination of the contract the Vendors would be placed in a position where they would be required to take further action to protect their interest which would involve further costs which they would be seeking to claim from the Purchaser on an indemnity basis. An urgent response was requested.

13 On 2 December 2008 the Vendors' solicitors wrote to the Purchaser's solicitors querying the Purchaser's current position as the Vendors were contemplating instituting legal proceedings to recover deposit monies.

14 On 7 January 2009 the Vendors' solicitors wrote to the Purchaser's solicitors again pointing out that the agent was refusing to release the deposit in the absence of an authority or an acknowledgement from the Purchaser that the Purchaser did not dispute the validity of the notice to complete. The letter said that the Vendors required the deposit to be paid to them forthwith and accordingly required the Purchaser to comply with the agent's request. The letter said that failing that happening they had been instructed to approach the Supreme Court seeking orders directing that the deposit be forwarded to their client, and that this would involve the Vendors incurring significant legal costs for which they would hold the Purchaser responsible.

15 By facsimile dated 12 May 2009 from the Vendors' solicitors to the Purchaser's solicitors it was said that instructions to institute proceedings in the Supreme Court seeking a declaration with respect to the deposit currently held in trust by the Vendors' Agent had been received. A final opportunity was afforded to the Purchaser to authorise the release of the deposit from the Vendors' Agent. The letter stated that unless such authority was received within seven days the Vendors had given instructions to institute proceedings against the Purchaser seeking declarations and claiming costs against the Purchaser on an indemnity basis. Correspondence followed between the Vendors' solicitors and the Vendors' Agent seeking a release of the deposit. 16 On 23 October 2009 the Vendors' solicitors wrote to the Purchaser noting that the Purchaser had continually refused to authorise the release of the deposit, notwithstanding the fact that the Purchaser had not disputed the validity of the Notice to Complete. The letter said that the Vendors' solicitors were affording the Purchaser a final opportunity to authorise the release of the deposit to the Vendors which was still being held by the agent as stakeholder pursuant to the Contract. The letter stated that if such authority was not received within seven days then the Vendors' solicitors had been instructed to institute proceedings against the Purchaser seeking declarations in the Supreme Court and to claim costs on an indemnity basis. The letter concluded with the statement: "We afford you this final opportunity to avoid the costs of litigation." 17 On 18 December 2009 the Vendors filed the summons in these proceedings. THE CONTRACT 18 Clause 9 of the Contract states: " 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 per cent of the price);

9.2 Hold any other money paid by the purchaser under this contract as security for anything recoverable under this clause:

9.2.1 for 12 months after the termination ; or 9.2.2 if the vendor commences proceedings under this clause within 12 months, until those proceedings are concluded..." 19 Clause 15 of the Contract states: " 15. Completion Date

The parties must complete by the completion date and, if they do not, a party can serve a notice to complete and that party is otherwise entitled to do so." 20 Clause 16 of the Contract provides: " 16. Completion

16.1 On completion the vendor must give the purchaser any document of title that relates only to the property .

16.3 Normally, on completion the vendor must cause the legal title to the property (being an estate in fee simple) to pass to the purchaser free of any mortgage or other interest, subject to any necessary registration."

21 Clause 35 of the Special Conditions of the Contract states: " 35. COMPLETION

35.1 This Agreement must be completed by 3pm on the completion date.

35.2 If completion does not take place as provided by this agreement then either party hereby may serve on the other party a Notice to Complete stipulating a date for completion and that time is of the essence. The parties acknowledge that a period of fourteen (14) days following the date of issue of any such Notice to Complete shall be deemed to be a reasonable and sufficient time for completion pursuant to such Notice.

35.4 In addition to the provisions contained in Clause 20.6 of this Contract, a notice or document shall be sufficiently served for the purposes of this Contract if the notice or document is sent by facsimile transmission and shall be deemed to be served when the transmission has been completed (and in this respect the production of a transmission report by the sender's facsimile machine shall be prima facie evidence of the time and fact of such transmission)...

35.5 Despite the provisions of this Contract, if this Contract is terminated by either party pursuant to a Notice to Complete then the party terminating the Contract pursuant to such notice is entitled to receive the deposit together with all accrued interest without any further order or other written communication from any party being necessary.

35.6 The parties to this Contract authorise any agent or other person holding the deposit to release the deposit together with all interest accrued on it to the party terminating the Contract pursuant to a notice to complete." 22 Clause 37 of the Special Conditions provides: " 37. MISCELLANEOUS

37.1 In the event of any inconsistency between Clauses 1 to 29 of this Contract and any Special Conditions contained herein then the Special Conditions shall prevail to the extent of any inconsistency." DISCUSSION 23 The completion date provided for in the Contract was 30 September 2008. The Purchaser did not complete on that date. Clause 9 of the Contract provided that in the event that the Purchaser does not comply with the Contract "(or a notice under or relating to it) in an essential respect" the Vendor can terminate the Contract by notice "and keep or recover the deposit (to a maximum of 10 per cent of the price)." 24 Pursuant to clause 15 and in particular clause 35.2 of the Special Conditions of the Contract, the Vendors served on the Purchaser, after the date of completion, a Notice to Complete requiring the Purchaser to complete at 2.30pm on 15 October 2008 and stating that time was of the "essence". The effect of the notice to complete was to make time for completion of the contract "essential": Louinder v Leis [1982] HCA 28, 149 CLR 509. The Notice to Complete made it of the essence of the contract that performance should take place by the date nominated in the notice to complete, 2.30pm on 15 October 2008. The Notice to Complete made it clear that if completion did not take place by that time the Vendors would terminate the contract.

25 At the request of the Purchaser, the date nominated in the Notice to Complete was extended to 29 October 2008 and then to 31 October 2008. The Vendors made it clear that the first extension was made on the basis that the Purchaser did not dispute the validity of the Notice to Complete, and the extension to 31 October 2008 was made without prejudice to the rights the Vendors had under the Notice to Complete. A party who grants an extension of an essential time for completion does not thereby lose the right to insist on the essentiality of time for the extended date; that is, time remains of the essence for the extended date: Carpenter v McGrath (1996) 40 NSWLR 39 at 57-58. The Vendors' extension of time under the Notice to Complete was not an election to keep the contract on foot irrespective of failure by the Purchaser to complete on the extended date.

26 As the Purchaser did not complete on 29 October or 31 October 2008, on 4 November 2008 the Vendors served on the Purchaser's solicitor a Notice of Termination of Contract. The Vendors were at the time nominated for completion ready, willing and able to complete. They had supplied particulars of title and replied to requisitions on title. The Vendors' solicitor had in his possession the certificate of title and transfer duly executed by the Vendors to enable completion to take place.

27 In those circumstances I propose to grant the relief sought in the summons.

28 The summons seeks costs on an indemnity basis from the Purchaser. I propose to order indemnity costs. The Purchaser had every opportunity to respond positively to the Vendors' solicitor's repeated requests for an authority or other indication to the Vendors' Agent whereby the deposit could be released to the Vendors without the necessity for these proceedings. The Purchaser consistently over a substantial period of time did not respond to those requests. In my view, in the absence of any explanation and in the absence of any defence to the Vendors' claim, that was unreasonable conduct justifying an order for indemnity costs. ORDERS 29 The Court makes the following orders:

1. A declaration that the Contract between the plaintiffs as vendors and the first defendant as purchaser for the sale of the whole of the land in Folio Identifiers 8/SP8990, 9/SP38990 and 10/SP28990, being Lots 8, 9 and 10 in Strata No 38990, and being the property known as Shops 8, 9 and 10, 153 Mann Street, Gosford, New South Wales, 2250 ( the Contract ) has been validly terminated. 2. A declaration that the deposit of $56,500 paid pursuant to the Contract has been forfeited to the plaintiffs. 3. An order that the second defendant pay to the plaintiffs the amount of $56,500 held by the second defendant as stakeholder pursuant to the Contract together with accrued interest on that sum. 4. An order that the first defendant pay the other parties' costs on an indemnity basis.

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