Cong Xu v Austino Property Development Pty Ltd

Introduction 1This case concerns a contract for the sale for land between the plaintiff as purchaser and the defendant as vendor, entered into on 26 May 2011. The central issue is whether the plaintiff validly rescinded the contract by notice of rescission given on 8 October 2012. In purporting to rescind the contract the plaintiff relied upon Special Condition 40.1 of the contract which is in the following terms: 40.1 Completion of this Contract is conditional on the registration of the Strata Plan of Subdivision by the Registrar General. If the Strata Plan of Subdivision is not registered by 31 August 2012 then either party may by notice in writing to the other rescind this Contract. 2There is no dispute that the relevant Strata Plan of Subdivision had not been registered by 31 August 2012, and that, accordingly, rights of rescission under SC 40.1 arose. However, the defendant contends that by reason of certain conduct on the part of the plaintiff, which took place in September and early October 2012, the plaintiff affirmed the contract and thereby made an election which precluded the plaintiff from rescinding on 8 October 2012. 3The conduct said to amount to an affirmation of the contract was the participation of the plaintiff in negotiations with the defendant to take early occupation of the property the subject of the contract.

Facts 4The evidence adduced at the hearing, which was not the subject of dispute, may be summarised as follows. The contract concerned land described as Lot1/15 Borrodale Road, Kingsford and, in particular, "Lot 1 in an unregistered plan which is part of Lot B Deposited Plan 312697 Part Folio B/312697." The lot was part of a five townhouse development. The purchase price was $1,260,000 and a deposit of $126,000 was paid by the plaintiff. 5The deposit was in fact paid to a real estate agent known as Property Square Realty. It was pleaded by the plaintiff, and admitted by the defendant, that the deposit was paid to the defendant's agent as stakeholder. The agent is not a party to these proceedings. 6The contract is in the form of the 2005 edition of the standard form, as supplemented and amended by a number of Special Conditions. Special Condition 38.1 provided: The completion date shall be no later than 3.30pm on the later of: (i)42 days from the date of this Contract; (ii)21 days from the date of the Vendor notifying the Purchaser in writing of the registration of the Strata Plan of Subdivision by the Registrar General; or (iii)21 days from the date of the Vendor provides [sic] to the Purchaser an occupation certificate. 7Special Condition 40.2 provided that, notwithstanding the time limit for registration of the Strata Plan of Subdivision referred to in SC 40.1, the vendor had an entitlement to extend the time limit by the number of days the Vendor was delayed, by reason of certain events, in completing the Development or causing registration of the Strata Plan of Subdivision. Under SC 40.2 the parties agreed that the Vendor's architect would be the sole determiner of the Vendor's entitlement to extensions of time, that the Vendor's architect would act as an expert and not as arbitrator, and that his decision would be final and binding on the parties. 8Clause 18 of the contract governs possession of the property by the purchaser prior to completion of the contract, but applies only if the vendor gives such possession to the purchaser (see clause 18.1). 9Clause 19 of the contract provides: - 19.1. if this contract expressly gives a right to rescind, the party can exercise the right - 19.1.1 only by serving a notice before completion; and 19.1.2 in spite of any making of a claim or requisition, any attempt to satisfy a claim or requisition, any arbitration, litigation, mediation or negotiation or any giving or taking of possession. 10As noted earlier, the Strata Plan of Subdivision was not registered by 31 August 2012 and the parties henceforth had rights of rescission pursuant to SC 40.1. 11On 24 September 2012 the vendor's solicitor sent a letter by facsimile to the purchaser's solicitor enclosing an Occupation Certificate (which incorrectly described the land the subject of the contract). The letter contained the following statement: Our client expects to finalise the registration of the Strata Plan within four weeks. 12On 25 September 2012 the purchaser's solicitor, who is not the plaintiff's solicitor in this litigation, replied to the letter dated 24 September 2012. The reply, also sent by facsimile, contained the following statement: Please advise the licence fee if our client would like to move in the property before the settlement. 13The plaintiff and members of his family inspected the property in the afternoon of 25 September 2012 in the company of Cheng Yi Lin, a real estate agent employed by Property Square Realty. On that occasion, and also in a number of earlier conversations with Cheng Yi Lin, the plaintiff expressed his keenness to move into the property as soon as possible. 14The vendor's solicitor replied to the 25 September 2012 letter by facsimile on 2 October 2012, advising that the vendor was agreeable to granting occupation of the property prior to settlement for a fee of $140 per week and payment of legal costs for the preparation and execution of a Licence Agreement. The purchaser's solicitors were requested to obtain their client's instructions. 15On 3 October 2012 the purchaser's solicitor replied by facsimile, stating that she was instructed that the purchaser would occupy the property before settlement and agree to pay a licence fee of $140 per week and the legal costs for the preparation of the Licence Agreement. Requests were made for the Licence Agreement to be provided for execution, and an Occupation Certificate, amended to correctly describe the property, to be provided "before our client occupy the property". The facsimile concluded: Our client intends to move in the property on 5 October 2012 and please advise the procedure for collecting the keys. 16The plaintiff and members of his family conducted a "defects inspection" of the property in the afternoon of 3 October 2012, in the company of Cheng Yi Lin. During this inspection a number of photographs were taken, some of which appear to show defects of a relatively minor nature. The precise nature and extent of any defects, and the plaintiff's assessment of them, were not the subject of submissions. 17On the same day the vendor's solicitors sent a further facsimile, enclosing a form of Licence Agreement and an invoice for legal costs. It was stated that the vendor was attending to the amendment of the Occupation Certificate. The recitals to the Licence Agreement (in which the vendor was described as the licensor and the purchaser as the licensee) stated that the parties had agreed that the licensee will take possession of the property pending settlement of the sale on the following terms and conditions. Those conditions included the following: 1. The licensor grants the licensee a licence to occupy the property as a residence at a weekly licence fee of $140 from the agreed date of occupation being 3 October 2012 until settlement or the due date for settlement of the contract for sale or upon vacation of the property by the licensee following termination or rescission of the contract or termination of this agreement whichever occurs first. 2. In the event that settlement of the contract is not effected on or before the due date due to the default of the purchaser and the licensee continues in occupation of the property, then on and from the due date for settlement until settlement or upon vacation of the property by the licensee following termination or rescission of the contract or the termination of this agreement the licence fee will be increased $550 per week. 3. This agreement does not create the relationship of landlord and tenant between the parties. In the event of the termination or rescission of the contract to purchase the property or the breach by the licensee of any of the provisions hereof the licensor shall be entitled to serve a notice of termination of the licence on the licensee or the solicitor or conveyancer of the licensee requiring the licensee to vacate the property within 48 hours of service of the notice and the licensor may immediately re-enter and re-take possession of the property at the expiration of the notice period... 18On 4 October 2012 the solicitors for the purchaser sent a facsimile to the solicitors for the vendor. Reference was made in the facsimile to a conversation on the previous day between the respective solicitors in relation to the Licence Agreement. It was then stated that: We are advised that the Vendor agreed to the payment of licence fees and the legal costs for the preparation of Licence Agreement on settlement. The intended occupation date is 5 October 2012 subject to the acceptance of both parties. We are further informed that the typo in the Occupation Certificate will be fixed and the amended Occupation Certificate will be forwarded to us shortly. We are also informed that the estimated registration of strata plan will be completed around the end of October. 19As noted earlier, on 8 October 2012 the plaintiff gave notice of rescission of the contract. The rescission was effected by way of letter and accompanying Notice of Rescission sent by facsimile by the plaintiff's solicitor to the defendant's solicitor. The notice stated that the rescission was "pursuant to Clause 40.1 of the contract and the provisions of Clause 19 of the Contract thereof shall apply." 20The defendant disputed the validity of the rescission. By letter dated 11 October 2012 to the plaintiff's solicitors, the defendant's solicitors stated, inter alia: By the purchaser's behaviour since 31 August 2012, up to and including your letter of 4 October 2012, together with the express intention that the purchaser take up occupation of the property under licence on 5 October 2012, in circumstances where the purchaser was on notice that the estimated registration of the Strata Plan will be completed around the end of October (2012), the purchaser has either waived his rights (if any) in relation to the requirement for registration of the Strata Plan by 31 August 2012 or is estopped from now asserting such rights. In these circumstances the purchaser is required to give reasonable notice to the vendor of an alternate date by which the Strata Plan must be registered and to make time for registration of the essence. The purchaser failed to do so. Further, Clause 40.2 envisages that a number events listed therein may impact upon the registration date of 31 August 2012, up to a maximum of 12 months as provided by Clause 40.3. We are in the process of verification from the vendor's architect the number of days the vendor was delayed in securing registration of the Strata Plan by virtue of the events listed in Clause 40.2. Although not effective to rescind the contract, the Notice does indicate that your client does not intend to perform the contract according to its terms. Accordingly, your client's Notice is capable of amounting to a repudiation of the Contract which the vendor may elect to accept as bringing the Contract to an end. The Vendor reserves its rights in this respect. 21On 16 October 2012, the defendant's solicitors wrote to the plaintiff's solicitors and advised that "pursuant to Clause 40.2 of the Contract for Sale of Land ('the Contract'), the vendor gives the purchaser notice to extend the registration date of the Strata Plan of Subdivision under Clause 40.1, from 31 August 2012 to 30 April 2013." 22Enclosed with that letter was a certificate from the vendor's architect concerning the delays experienced by the vendor. The architect's certificate was dated 12 October 2012. 23On 16 October 2012, the plaintiff's solicitors wrote to the defendant's solicitors, taking issue with their interpretation with of the contractual position. A refund of the deposit, together with interest, was demanded. 24The defendant's solicitors wrote further letters to the plaintiff's solicitors on 19 October 2012 and 23 October 2012. In the first letter they requested the withdrawal of the Notice of Rescission (by 22 October 2012) failing which the vendor would treat the rescission as a repudiation of the contract. In their letter of 23 October 2012 the defendant's solicitors stated: Given your client's attitude and his notification of failing to comply with the Contract we are instructed to accept your letter of 16 October 2012 as a repudiation of the Contract by your client. We hereby notify you that our client has terminated the Contract and rely upon this letter as notification and service of the termination notice in accordance with Clause 9 of the Contract. Pursuant to Clause 9 the vendor will now take steps to forfeit the deposit and reserves its right to claim damages pursuant to the Contract. 25The Strata Plan of Subdivision (being SP 86876) was in fact registered on 7 November 2012.