Gogard Pty Limited v Satnaq Pty Limited - [1999] NSWSC 1283 - NSWSC 1999 case summary — Zoe

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Gogard Pty Limited v Satnaq Pty Limited

[1999] NSWSC 1283

Supreme Court of NSW|1999-12-23|Before: Santow J, Bryson J

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Source facts

Court

Supreme Court of NSW

Decision date

1999-12-23

Before

Santow J, Bryson J

Source

Original judgment source is linked above.

Judgment (280 paragraphs)

[1]

Introduction 1 This dispute arises out of the Defendant's termination of a contract for the sale to the Plaintiff of an industrial commercial property ("the Gogard Contract"). 2 The property is at 156 to 158 Parramatta Road, Camperdown ("the property). It consists of two parcels of land, namely, that land in Auto Consol 154549-22 and that in Folio Identifier 12/79120 being Lot 12 in Deposited Plan 79120. The vendor was Satnaq Pty Limited ("the Defendant"). 3 The vendor's agent was an entity trading as Taylor Nicholas. The sale was handled by Mr Nick Spasevski. 4 The property was, at all material times and until 18 March 1998, owned by the Defendant. The Defendant is a trustee company, its principals and directors being Mr Donald Arthur Carruthers and Mr Allen Barry Wickham. 5 Gogard Pty Limited ("the Plaintiff") is also a trustee company. The principal on behalf of the Plaintiff is Mr Graeme Hayes. 6 Mr Graeme Hayes also provided consulting services to Carbest Pty Limited and Yengrin Pty Limited.

[2]

Overview of Matters in Dispute 7 The dispute in this case arises primarily over the deposit paid by the Plaintiff to the Defendant under the Gogard contract for the sale of the property and the damage said to arise to the Plaintiff from the loss of a discount on the market price which occurred when the contract to sell the property to the Plaintiff was terminated. 8 The Defendant terminated the Gogard contract because of an alleged failure on behalf of the Plaintiff to complete the contract according to its terms. 9 The property was sold to a third party while the deposit paid by the Plaintiff to the Defendant under the supposedly terminated first contract for sale has been retained by the agent of the Defendant. 10 The Plaintiff seeks return of the deposit and damages for wrongful termination of the contract of sale. The Defendant, in cross-claim, seeks reasonable costs and expenses arising out of the failed sale.

[3]

Factual Background 11 In 1997 Mr Spasevski listed the property for sale. The property was offered to the Plaintiff through October and November and until 4 December 1997. During that time there were some discussions between the parties about the terms of the Gogard contract. The topics discussed included the time for completion of the contract and the amount of the deposit to be paid. 12 The Plaintiff pursued the purchase of the property in order to provide for the goals of a joint venture agreement to which it was a party. The joint venture was between the Plaintiff company and another company, Lassgol Pty Limited. The Plaintiff, at all material times, had been the registered proprietor of a property at 180 Salisbury Road, Camperdown ("the Salisbury Road property"). The Plaintiff's course of action was to be as follows. The Plaintiff would purchase the property from the Defendant. The lessor of the Salisbury Road property at that time would move its operations to the property. The Salisbury Road property would then be used for the purpose of a residential development undertaken by the joint venture between the Plaintiff and Lassgol Pty Limited. 13 The funds required for the Plaintiff company's purchase of the property was to be raised from the sale of a property at 41-57 Mallet Street, Camperdown ("the Mallet Street property") by Carbest Pty Limited ("Carbest"). Carbest was, in 1997 the owner of the Mallet Street property. Carbest intended, at that time, to sell the Mallet Street property subject to a development application being approved by the South Sydney Council. It was the intention of Carbest to provide monies out of the proceeds of sale of the Mallet Street property to Gogard Pty Limited for the purposes of purchasing the property the subject of these proceedings. 14 On 2 October1997, Mr Spasevski, Mr Hayes and Mr Wickham met and inspected the property. At that meeting, they had a conversation, to the following effect about a lease over that property: HAYES: "How long has the O'Briens lease to run?"

[87]

Is the Defendant entitled to reasonable costs and expenses incurred in the attempted sale? 61 The Plaintiff argues that a completion date of 27 February 1997 was never a term of the Gogard contract. Rather, it is contended that the term concluded by the parties was to the effect that the contract was to be completed on a date that the parties agreed on, but that the contract was to include a nominal date for completion of 27 February 1997. 62 The Plaintiff seeks rectification of the Gogard contract in order to reflect the contended real agreement between the parties that completion would occur on a date agreed by them. 63 As to the Notice to Complete, the Plaintiff contends that the Defendant, according to clause 15 and clause 33 of the contract for sale of the property was never entitled to issue a Notice to Complete. Any Notice to Complete issued, therefore is said to be ineffective. 64 If as the Plaintiff contends, the Defendant was never entitled to issue a Notice to Complete, a Notice of Termination could never be effective. 65 In the circumstances, then, the Plaintiff says that it is entitled to relief under s55 of the Conveyancing Act 1919 and that the deposit paid under the contract should be returned to the Plaintiff. 66 Further, the Plaintiff asserts that the Defendant is not entitled to its "reasonable costs and expenses" because the Gogard contract does not entitle it to such relief. 67 In reply, the Defendant argues that the Gogard contract accurately reflected discussions between the parties in respect of the completion date, namely that the contract was to be completed 27 February 1998. This was a nominal date leaving completion for whatever date was later agreed. The Plaintiff failed to complete the contract on 27 February 1998 and the Defendant is thus entitled to issue a notice to complete on 27 February 1998. 68 The Defendant also asserts that, by reason of the Plaintiff's failure to comply within the time specified in the notice to complete, the Defendant was entitled to serve a notice of termination on 17 March 1999. 69 Further in reply, the Defendant argues that, pursuant to clause 9 of the contract, the Defendant is entitled to retain the deposit paid under the contract together with its reasonable costs and expenses.

[147]

127 The evidence in chief of Mr Williams was contained in his affidavit of 22 September 1999. Three paragraphs of that affidavit were objected to upon the Defendant seeking to adduce the evidence. The Defendant chose not to read one of the paragraphs subject to objection. The other paragraphs the subject of objections were allowed into evidence on the basis that the Defendant could deal with the objection (which went to the form of the paragraphs) in an oral examination in chief of Mr Williams. 128 Mr Williams expressed an opinion in his affidavit about the action that the Council would or would not (as he deposes) take with respect to the awning. Mr Williams based his opinion on the fact that a registered surveyor's report of 19 July 1956 showed an awning of 3.66 metres wide was sent to the council as part of an application to "cut back" the awning and that the subsequent plan of 16 February 1998 showed an awning of 3.1 metres wide. He also asserted that there was an unwritten "awning standard" with which the awning, at around 3.1 metres wide, complied. The Court was not presented with any argument or evidence in support of an argument that Mr William's evidence as to the existence of an informal 'awning standard' should be disbelieved. On the basis of the facts available to Mr Williams, then, and on the basis of his expertise as a District Building Assessor, evidence of Mr William's opinion as to whether the awning would have needed to be altered or removed is not excluded by the opinion evidence rule. 129 As to relevance, Mr Williams does not represent the position of South Sydney Council and could not purport to do so. His opinion, based on his expertise, is capable, however of rationally affecting the assessment of the probability of the existence of facts in issue in the proceeding and is therefore relevant. The facts in issue are firstly, whether the awning constituted a matter that comes within paragraph 32 of the Plaintiff's requisitions on title of 18 December1997. The evidence also goes to whether the awning constituted a defect in title so as to be capable of being the subject of a requisition on title. These issues are discussed below. 130 Mr William's evidence is admissible.

[157]

150 Mr Hayes could not point to any documentary evidence to support his claim (T, 74.55). Mr Carruthers and Mr Wickham deny that there was any agreement to complete on a date other than 27 February 1998. 151 Mr Hayes also recalls a conversation with his solicitor, Mr Parker on or around 19 November1997 to the following effect: PARKER: "Graham, I have received a contract for sale of the property at Camperdown. The contract provides that the completion date is not to be later than 27 February 1998. Is this what you have negotiated?" HAYES: "Don't worry about that. The vendor has agreed that the time to complete the contract will not be a problem".[Hayes affidavit, 6 May 1999 para 8] 152 While as I have said this statement was subject to an objection on the basis of hearsay, it was admitted into evidence on the grounds that it could be used for a non-hearsay purpose. That purpose, in this instance, is to demonstrate that it was the belief on behalf of Mr Hayes that the completion date was somewhat flexible. The solicitor, Mr Parker did not make a file note of this conversation and he was not called to give that evidence himself. It should be given no weight in the circumstances. 153 Evidence from Mr Minter, the Defendant's solicitor suggests rather that there was no agreement as contended for by Mr Hayes and the Plaintiff. A letter of 14 November1997 from Mr Carruthers to Mr Minter outlining the salient points of the draft contract for sale of the property names the settlement date as 27 February 1998 [Minter affidavit 12 May 1999 annexure A, p12A]. Further, a file note of a conversation between Mr Minter and Mr Parker of 14 November1997 does not mention any agreement to the effect that the date of settlement could be some other date convenient to the parties as asserted by the Plaintiff [Minter affidavit 12 May 1998 annexure A1, p12B]. A conversation of 28 November1997 between the Plaintiff's solicitor and the Defendant's solicitor similarly contained no discussion as to a variation of the settlement date earlier canvassed (Minter affidavit 12 May 1998 para 7). 154 Mr Hayes admitted that the solicitor to the vendor had nominated 27 February 1998 as the date of completion and that there was a real need to complete the contract before that date (T, 76.30-40). For example, the letter of 25 February 1998 from the Plaintiff's solicitor to the Defendant's solicitor contains the words: "We acknowledge your client's refusal to consider our request for an extension of time to complete and in this regard are instructed to request that your client re-consider its position". (Minter affidavit 12 May 1998 annexure "O" p.34)

[159]

157 Special Condition 35 does contemplate completion after the Completion date. This is not, however, relevant to deciding that there was a date prescribed for completion or that the Defendant (the vendor) was entitled (assuming it had otherwise complied with the contract) to complete on or after 27 February 1998. Of particular importance in reaching this conclusion are the words "without limiting any right of the vendor". 158 Rectification is the process by which the Court reforms an instrument in which the parties have 'mistakenly' recorded their agreement. Courts "rectify instruments purporting to have been made in pursuance of the terms of contracts.": McKenzie v Coulson (1869) LR 8 Eq 368 at 375 per James V-C. Courts do not rectify underlying agreements that are expressed in documentary form save as set out below: 159 In the present case it is necessary for the Plaintiff to prove that the underlying agreement between the parties was not accurately recorded in the contract instrument on the date that it was executed, namely, on 4 December1997. The question before the court, then, is whether, at the time the contract document was executed, the intention of the parties was accurately recorded in that contract or alternatively whether their intentions conformed with the words of the rectification contended for. 160 In an attempt to delineate the various categories of case, Dr Spry puts the position thus (Spry, I.C.F., "The Principles of Equitable Remedies", 5th edition, (LBC Information Services, 1997), 611-2: "The simplest cases in which a mistake arises are found where a provision that is intended to be included is inadvertently omitted or where there is an inadvertent inclusion of an unintended provision or where a provision is inadvertently mis-expressed. In all of these cases rectification may, where appropriate, be ordered. ….. A more difficult case arises where the parties are aware of the precise terms of the relevant part of the document but misapprehend their effect. Here it appears to be necessary to distinguish between two positions. The first position occurs where the concurrent intention, that is, the intention that the document is desired to effectuate remains the dominant and governing intention. In this event it should not matter that the precise terms of the document have been seen by the parties, and rectification, where otherwise appropriate, should be ordered. So it has been said by Brightman J., "Furthermore, rectification is available not only in a case where particular words have been added, omitted or wrongly written as a result of careless copying or the like. It is also available where the words of the document were purposely used but it was mistakenly considered that they bore a different meaning from their correct meaning as a matter of true construction" : In re Butlin's Settlement Trusts [1976] Ch.251 at 260 per Brightman J. The second position arises where the parties, whatever their previous intention may have been, have ceased to retain that intention as their governing intention and have formed instead an intention to be bound by the precise terms of the document in question, regardless of possible discrepancies between its provisions and prior or other intentions on their part. In this event rectification is not appropriate": Spry, Equitable Remedies 1997, p. 611-2

[160]

161 Were the Plaintiff's contention correct, this case would only fall within Spry's 'more difficult' category of cases. The conversations of 14 October1997, 14 November and 19 November 1997 and the admissions of Mr Hayes (T, 76.30-40), without more and in the absence of assertion otherwise, lead to the conclusion that the principals of the Plaintiff were aware that a term in the contract of 4 December nominated 27 February 1998 as the completion date. Furthermore, the letter of 14 November 1997 from Mr Carruthers to Mr Minter reveals the Defendant's knowledge of that contract would state that it be completed on 27 February 1998. The Plaintiff's case in rectification, then, rests at its highest on the argument that at the time the written contract was executed, the parties shared a common intention that the agreement would operate in a manner at odds with the express terms of the instrument purporting to express that agreement. 162 In Westland Savings Bank v Hancock [1987] 2 NZLR 21, Tipping J followed accepted authority to decide that, for a Court to rectify a written instrument, it must be established that the parties held a single corresponding intention on the point in question right up to the moment of execution of the instrument: at 26. His Honour, after considering the Australian position, considered that outward expression of that common intention is not necessary before rectification can be contemplated. Tipping J (at 30) decided that: "… before rectification can be ordered the Court must be satisfied that the following points are established: [30] (1) That, whether there is an antecedent agreement or not, the parties formed and continued to hold a single corresponding intention on the point in question. (2) That such intention continued to exist in the minds of both or all parties right up to the moment of execution of the formal instrument of which rectification is sought. (3) That while there need be no formal communication of the common intention by each party to the other or outward expression of accord, it must be objectively apparent from the words or actions of each party that each party held and continued to hold an intention on the point in question corresponding with the same intention held by each other party. (4) That the document sought to be rectified does not reflect that matching intention but would do so if rectified in the manner requested": Westland Savings Bank v Hancock at.29-30 per Tipping J

[180]

190 The answer given to this requisition was "No" [PX5 49]. 191 The Plaintiff maintains that the party wall, the air conditioning unit and the awning were all physical defects of the subject property. It is argued, however, that the 'defects' complained of do not have any detrimental effect on the value or amenity of the property. 192 The question to ask, according to the terms of the requisition is not whether the contested encroachments constitute defects in title. Rather, it is whether they "detrimentally affect the value or amenity of the property". Physical defects in title, or other matters referred to in paragraph 32 are not the subject of the requisition unless they detrimentally affect the value or amenity of the property. 193 With respect to the party wall, it is clear from the survey documents that there are encroachments by the wall on either side of the boundary line. Any latent claim attaching to the subject property on the part of the adjoining land holder could be offset by a corresponding claim against the holder of that adjoining land balancing each other out. There thus can be no relevant affectation of the value or amenity of the property. 194 It is also clear that even were the party wall encroachment a 'defect' potentially within paragraph 32, it would have been readily curable after sale by means which refute any detrimental affectation to value or amenity. That is, in fact, what appears to have occurred. The third party purchasers of the property have since registered a plan showing the encroachment complained of and have, by virtue of s88BB of the Conveyancing Act 1919 (NSW), thus created an easement, curing any defect caused by the encroachment (Souter, affidavit 16 September 1999 para 20). The plan was registered on 22 April 1999. 195 The party wall, therefore, does not come within the words of requisition 32. 196 Similarly, the encroachment by the air conditioning unit could have been cured without detrimental affectation to value or amenity by removing the unit from the wall and placing it inside the building. As of 27 February this had not occurred. However, while the air conditioning unit may be capable of being described as an encroachment according to the Encroachment of Buildings Act, it cannot reasonably be said to detrimentally affect the value or amenity of the property. 197 With regard to the awning, it is necessary to have reference to the evidence of Mr Williams. I have dealt with the admissibility of Mr William's evidence above. 198 It was given in evidence by Mr Williams that the council, at the time of completion would not have required the owner of the property to remove or otherwise alter the awning [Williams affidavit 22 September 1999 para 6]. The evidence of Mr Williams suggests that even though, at the time of sale, there may not have been any infringement of council policy arising from the awning, the policy that determined infringement could be changed by the council at any time [T, 161.30]. 199 Further to Mr William's evidence, a certificate issued pursuant to s172 of the Local Government Act 1993 was issued on 4 May 1998. The document certifies that the Council will not take proceedings in relation to any encroachment by the building or part onto land vested in or under the control of the Council (such as the awning). 200 The point raised by the Plaintiff is that, while the Defendant has proved that after 4 May 1998 the awning could not properly be said to come within paragraph 32, nonetheless at any time until the issue of the s172 certificate, the awning remained a matter "which may detrimentally affect the value or amenity of the property". 201 The situation that we are faced with, then, is the following. The Defendant has answered "No" to a requisition while not having the requisite knowledge so to answer. That is, there has been no evidence to suggest that the Defendant inquired of the council their attitude to the awning before issuing the notice to complete. As it turns out, however, on the evidence, the Defendant's answer has been vindicated by subsequent events. Without the evidence of Mr Williams, then, it is unlikely that "No" would have constituted a proper answer to the requisition. The evidence of Mr Williams, however, changes the matter. On the basis of Mr Williams' opinion evidence, it can be said that it was, at all material times, the case that the awning did not constitute a matter "which may detrimentally affect the value or amenity of the property". Does the fact that it was possible that the situation could change, due to Council minute or ordinance, any time until 4 May 1998 make the answer "No" an insufficient one? 202 It was at least true to say that no notice pursuant to s124 of the Local Government Act 1993 had been issued by South Sydney Council requiring that the awning be altered or removed. Was it the duty of the vendor to alert the purchaser, then, that such a notice may be issued in the future? The use of the word "may" in paragraph 32 of the requisitions does make the requisition one of some breadth. But it is not rendered of such scope as to bring with its ambit speculative consequences of no demonstrated likelihood. The requisition could not validly require of the vendor in answer, to speculate as to what may, in the future affect the value of the property. It is conceivable that all manner of things could then come within the scope of the requisition at paragraph 32. I therefore find that the answer "no" to the requisition at paragraph 32 was sufficient and proper with respect to the awning. 203 Requisition 32 was, then, properly answered.

[192]

224 The contractual definition of "requisition" encompasses both a "requisition" on title and an "objection" to title. 225 As already mentioned above (see paragraph 180), requisitions, properly called, can cover a wide range of subjects. Further requirements of a valid requisition are as follows (see Stonham para 1014ff): 226 Requisitions firstly should be specific: A requisition should not constitute a general interrogatory or "catch-all": Re Ford and Hill (1879) 10 Ch D 365 per James LJ at 369 and see Butt, "The Standard Contract for Sale of Land in New South Wales" para 5.15 at 266. 227 Requisitions secondly should not insinuate a failure on the part of the vendor to include a matter in the particulars of title which the vendor knows to be material to the title: Re Ford and Hill. While this requirement might, for example, go against a 'requisition' alleging an omission or misdescription capable of fulfilling the requirements of s183 of the Conveyancing Act 1919 (NSW), it does not prevent a purchaser from inquiring as to matters that do not appear in the particulars of title or from asserting that the title as particularised is deficient nor does it prevent requisitions concerning matters affecting the title discovered outside the particulars provided by the vendor with the contract of sale: Butt (supra) para 5.15 at 266 228 Requisitions thirdly should be clearly framed. A requisition ought to be framed so as to explain its materiality if otherwise the materiality of the requisition is not obvious. 229 Finally, requisitions must be made in time. Subject to the terms of the particular contract for sale of land, requisitions may be made at any reasonable time up until the time for completion. In the present case, the contract nominates the point from which time is to run as the execution of the contract for sale. 230 Requisitions (which are included in the salient definition of "requisition": see clause 1 of the contract) are of four broad types, as identified by Barwick CJ in Godfrey Constructions Pty Limited v Kanagra Park Pty Limited (1972) 128 CLR 529 at 536 (omitting footnotes): "… it is possible to maintain the distinction between an objection to title and an objection to conveyancing in respect of land held under the Real Property Act . An objection to title involves and assertion that there is a defect in the vendor's title to the estate in the land which he has sold. An objection or requisition as to conveyance is an objection or requirement as to the form of the memorandum of transfer as, for example, the absence of or the need for parties to join in the transfer. But solicitors are accustomed, it seems to me, to make both demands and inquiries which cannot be fitted into either of these categories. Some of these requisitions may relate to structures on the land or to physical features connected with it which may not accord with the contractual terms as, for example, the connexion of water or sewerage services through common facilities. These are, in my opinion, truly requisitions demanding something of or some action on the part of the vendor. Other "requisitions" are merely inquiries for information. Some of this information the purchaser might have been able to ascertain by his own endeavours: perhaps he really seeks the vendor's admission of the facts. Then, it seems to me, that there are other so-called "requisitions" which are not more than reminders to the vendor of his obligations under the contract. Paragraphs 2 and 33 of the appellant's requisition in this case, in my opinion, form a good example of this class of so-called "requisitions". The are not objections to title nor demands as to the form of conveyance, nor do they related to the physical condition of the land or the structure thereon. They do no more than remind the vendor of what is expected of him according to the terms of the contract as a performance of his obligations. The respondent's answers to requisitions so treated them."

[197]

239 These contractual provisions point to consequential agreement that the Plaintiff purchaser would take the property in the state in which it was left by the departing tenants of whose existence they were well aware from the outset. That allows the conclusion to be drawn that the first objection made is more in the nature of a reminder of what is claimed to be the vendor's obligations under the contract than a valid requisition. But the vendor either had no obligation in this respect or had sufficiently discharged that obligation. 240 The first objection cannot be said to fall within the class of requisitions that can be said to be general inquiries. The objection seeks to oblige the vendor to improve the quality of the property where there was no such obligation arising otherwise under the contract or in the general law (for example, the vendor was not required to clean the property in order to allow for the transfer of the title described in the contract for sale). 241 The first objection, therefore, is not a valid requisition when regard is had to the terms of the contract. The Defendant was not under any obligation to reply or to engage in any positive action in respect of the first objection. 242 As to the second objection, there a reference is made to the accompanying survey report. That survey report, dated 16 February 1998 contained what purport to be two significant points relied upon by the Plaintiff as evidencing "non-compliance". I assume here that the 'non-compliance' referred to is in reference to some non-compliance with the contract. The Plaintiff maintains that the survey report discloses three otherwise undisclosed encroachments. The Plaintiff further contends that the undisclosed encroachments constituted defects in title that required to be corrected before the Defendant could issue a notice to complete. I will deal with each of the 'encroachments' in turn. 243 First, there is the matter of the party wall. Paragraph 3 survey report read: 3. Part of the eastern boundary of the land passes through a 355mm wide brick party wall and a 240 mm wide brick party wall. This party wall is common with the adjacent shop, No. 154 Parramatta Road, is also shown on Lot 1 of Deposited Plan 538241.

[203]

263 The Plaintiff's response is that the relevant date is not 4 May 1998 but 27 February 1998. The survey prepared on behalf of the Plaintiff and served upon the Defendant's solicitors before 27 February 1998 clearly showed the encroachments the subject of the requisition. 264 It is evident that many, if not, the majority of properties along Parramatta Road in the vicinity of the property in question have awnings of the type present on the building. It would be highly unlikely, therefore, that Council approval would not have been either in de facto existence at the time of settlement or that the Council would not have approved the awning upon application being made for it so to do. The Defendants rely on evidence of Garry Raymond Williams, an employee of South Sydney City Council to assert that the awning was, even before 4 May 1998, in compliance with the general policy of the Council and that it would not need to be altered or removed to comply with the Council regulations (see Williams affidavit 22 September 1999 paras 4-7). 265 While, as discussed above (see paragraph 196), the awning did not constitute a matter detrimental to the value of the property, it cannot be similarly said that the awning did not constitute an encroachment not disclosed in the contract. As an encroachment not disclosed in the contract, the awning amounted to a defect in title and could be the subject of a valid demand on title. In Svanosio v McNamara (1956) 96 CLR 186, the High Court stated that: "If the contract states that certain premises are erected on the land sold, that is a representation that the vendor will make title to land on which those premises are erected… If the premises are not erected wholly on the land sold the vendor will fail to fulfil the promise or in other words will fail to make a good title to the whole of the land described in the contract. … When the purchaser discovers that part of the building is not on the land he should object to the title. Such a misdescription is an objection to the title": at 205 per McTiernan, Williams & Webb JJ.

[212]

That the defendant vendor was not able, ready and willing to proceed to completion: defects in title 282 While there were no valid requisitions issued that remained unanswered by the Defendant, that is not to say that there were no defects in title at the time the notice to complete was issued. For example, the awning, which as I have already concluded, amounted to a defect in title and remained so as at 27 February 1998. Similarly, although it cannot be said that a valid requisition was issued with respect to the encroaching party wall, that encroachment did still amount to a defect in title (although an extremely minor one). The air-conditioning unit, on the other hand, could not be said to amount to a defect in title (see above). 283 The argument is put by the Plaintiff that the non-disclosed encroachments constitute defects in title and that the defects in title constitute breaches of the contract for the sale of the subject property. The Plaintiff claims that the vendor was not "willing and ready to complete the contract" [PX5 56] for sale as the Defendant so claimed in the notice to complete dated 27 February 1998. It is well established that a notice to complete can only be valid if the party issuing the notice is ready, willing and able to proceed to completion at the time he give notice to the other party to complete: Abraham v Mallon (1975) 1 BPR 9157 at 9160 per Holland J; see Re Barr's Contract [1956] Ch 551 at 556. 284 In the English case of Johns v Deacan (English CA, , 23 January 1985, unreported) discussed in Clowes Developments (UK) Limited v Mulchinock [1998] 1 WLR 42 at 49-50), the vendor had issued a notice to complete in circumstances where there was a misdescription contained in the contract for sale. The particulars included reference to a stable block. After exchange of contracts the parties discovered that the stable block had been removed and could not be replaced. The contract for sale contained a clause similar in terms to clause 6 of the present contract that a misdescription should not annul the sale but should entitle the purchaser to compensation. Browne-Wilkinson LJ said in that case: "A valid notice to complete could not be served… since the vendor at that stage was not able and willing to complete. He could not complete on the terms that he was to receive the full £100,000, because, by reason of the misdescription provisions, that no longer was the full purchase price payable. The purchase price payable was £100,000 less the compensation. Unless and until that reduction in the purchase price had been agreed, he could neither make title to the whole of the property contract to be sold not make title to the lesser amount, being the property less the stable block. Accordingly, he was in no position to say at that stage that he was able and willing to complete … the contract": cited in Clowes Development Limited v Mulchinock at 50

[214]

286 The Australian authorities point out that for the principles in the paragraphs quoted to apply, the claim for compensation must have been made before the notice to complete was issued. In Abraham v Mallon (1975) 1 BPR 9157 the purchasers claimed that the vendors were not entitled to issue a notice to complete since, inter alia, at the time of the notice, the vendors were not "able" to complete in that they did not have title to all subject matter of the sale as two outbuildings described in the contract did not stand wholly upon the land to which the vendors did have title. The minor encroachments were identified by a survey report made through the purchaser's efforts. In circumstances similar, though not identical, to the present case, Holland J applied the principles summarised in the judgment of Menzies J in Travinto Nominees Pty Ltd v Vlattas (1973) 129 CLR 1 at 27-28: "At common law, any difference, however trivial, between the land described in the contract and the land produced constituted a defect which entitled the purchaser to rescind. "Where there was only a slight difference, the Courts of Equity began to interfere and introduced the principle of compensation for deficiency: see Erskin L.C. in Halsey v Grant (1806) 13 Ves. Jun. 73 at pp. 76-79. Unless the [28] deficiency was so substantial as to give the purchaser something entirely different from what he had contracted, equity would order specific performance on giving compensation for the deficiency. "Also to avoid the harsh effect of the common law, it became the practice to insert in contracts a clause stating that a difference from the description of the subject matter would not annul the sale. These clauses were of two types: those which allowed compensation to the purchaser for a deficiency, and those which did not. The right to compensation under a clause in the contract was independent of the right to compensation in a claim for specific performance. "However, where there was a clause in the contract preventing the sale from being annulled even if the purchaser had the right to compensation for a misdescription, equity would still permit the purchaser to rescind if the misdescription was a substantial one: see Flight v Booth (1834) 1 Bing NC 370 at 377; 131 ER 1160 at 1162-3; Jacobs v Revell [1900] 2 Ch 858; Lee v Rayson [1917] 1 Ch 613."

[217]

289 Similarly, I find in the present case, that the encroachments amounted to by the party wall and the awning were not substantial defects. They were only those insubstantial defects of the type where the equitable rule would still allow specific performance upon the proffering of compensation. 290 As to the party wall, a document that does identify an encroachment is DP 1001633 [PX7 last page]. DP 1001633 shows that the relevant portion of the wall is 18.3 meters in length. (The balance of the wall is subject to cross-easements for support as discussed above). Of the 18.3m, a length of 6.13 m has a width of 240mm. Of the 240mm, 130mm is located on the subject property and 110mm is located on the adjoining property. This amounts to an encroachment by this part of the wall on the subject property of 10mm. 291 DP 1001633 discloses that the remaining 12.17m of the party wall is 355mm in width. According to the plan, 135mm is located on the subject property and 220mm is located on the adjoining property. Consequently, this equates to an encroachment on the adjoining property of 43mm. The encroachment of the party wall is, then, on any view an insubstantial defect in title. This is supported by the fact that the creation of cross-easements for the wall could be achieved at very little cost in relation to the value of the property (see Abraham v Mallon at 9163). 292 With regards to the awning, the encroachment is an insubstantial defect in title. The size of the awning here is not conclusive. The prevalence of such awnings on buildings in the vicinity of the subject property, the evidence of Mr Williams and the subsequent s.174 certificate obtained by the Defendant vendor indicate that the defect constituted by the awning was insubstantial. 293 In the words of Kearney J in Mayer v Vitale (1981) 2 BPR 9162 at 9168 it "could not be said that the Plaintiffs are not getting substantially what they bargained for and it could not be said that the property with this minor encroachment [by] it is different from the property the subject of the contract so as to justify rescission of the contract on the basis of a substantial defect in title". There is no substantial defect in title arising from or constituting an error or misdescription or otherwise that would invalidate the notice to complete. 294 By adopting reasoning similar to that of Holland J, I also find that the terms of the contract made the proffering of compensation by the vendor without demand so to do unnecessary. Clause 6 in the present contract for sale is in the following terms: "6 Error or misdescription The purchaser can (but only before completion) claim compensation for an error or misdescription in this contract (as to the property, the title or anything else and whether substantial or not".

[249]

341 The question to ask, then, in relation to s55(2A) is whether the court is satisfied that there are special or exceptional circumstances where it would be unjust or inequitable for the vendor to retain the deposit: Terry v Permanent Trustee Australia Limited (1995) 6 BPR 14,091; Mearns v Parras Holdings Pty Ltd (1994) NSW ConvR 60,025 per Santow J at 60,033; also see Lucas & Tait (Investments) Pty Limited v Victoria Securities Limited [1973] 2 NSWLR 268, Clurstock Pty Limited v Timanu Pty Limited (1988) NSW Conv R 57,826, Pratt v Hawkins (1991) 32 NSWLR 319 (Young J). 342 From the authorities one is able to ascertain that the court looks to matters such as "the conduct of the parties, especially the applicant, the circumstances which brought about the termination and forfeiture, and the amounts at stake": Terry v Permanent Trustee Australia Limited at 14,105. The court considers matters connected with the contract as well as the conscionability of the conduct of the parties after contracts are exchanged: see Pratt v Hawkins (1991) 32 NSWLR 319 at 324. 343 For example, in Mayer v Vitale, a case in similar circumstances to the present litigation, Kearney J wrote: "This was a case of a purchaser refusing to complete by deliberate reliance on grounds which I have held to be invalid. In all the circumstances it does not seem to me that it is unconscionable on the part of the Defendants to exercise heir right of forfeiture of the deposit having regard to the circumstances referred to in McLaren v Lucas & Tait Pty Limited [1973] 2 NSWLR 268 and other relevant authorities. In my opinion the Plaintiffs' claim for return of the deposit should not be granted": at 9172 344 In the present case I am minded not to order that the deposit be returned to the Plaintiff. I have reached that conclusion for the following reasons. 345 First, there has been no evidence before this court that the Defendant vendor acted unconscionably in the circumstances of the case. The Defendant was willing and able to complete the contract at the time due for performance. In this regard, the present case is not dissimilar to Socratous & Anor. v Koo & Anor (1993) NSW ConvR 59,914, a case in which McLelland CJ in Eq. wrote: "There is no evidence or suggestion of any default, misconduct or unfair dealing on the part of the Plaintiffs. There is no evidence that they acted otherwise than in perfect good faith in their dealings with the Defendants. The position is that the Defendants, for their own reasons, deliberately took a substantial risk, which on any objective view was a foolish one and against the consequences of which, at least so far as the Plaintiffs are concerned, there is no basis for affording them discretionary relief.": at 59,918

[251]

352 The approval was, however, subject to approval by the credit committee of the Mercantile Mutual AJ Mortgage Trust. The mortgage proposal was not approved by that that committee until 25 March 1998 [PX5 52]. By that time the contract for the sale of the Parramatta property had been validly terminated by the Defendant. 353 Even though the result in Pratt v Hawkins (supra), in which Young J cited the fact that the contract failed "because the purchaser did not have enough money to complete it"(at 327) can be distinguished because of other conduct of the purchaser arising in that case, it does stand as authority for the proposition that the financial readiness of the purchaser to complete the contract on the date so agreed is a matter going to the discretion of the court. The present case is one in which "forfeiture of the deposit was a contractual outcome the possibility of which the purchaser incurred open-eyed and as a matter of business in an arrangement in which each party incurred risks": per Bryson J in Smilie Pty Limited v Bruce (1998) NSW ConvR 55-841 at 56,598. 354 Third, whether the risk assumed by the Plaintiff was or was not in the nature of a "gamble", it is at least clear from the facts of this case that it is not of a type similar to that of Blacktown City Council v Fitzgerald and Ors (1990) NSW ConvR 59,032. In that case Cohen J ordered the return of a deposit in circumstances where "the Plaintiff had done all that it could to ensure that completion took place". The Plaintiff in that case had "forwarded the balance of the purchase price to its solicitors upon being advised that completion was to take place… The Plaintiff failed to complete not because of any decision to that effect, nor for any inability, but only because of an omission on the part of its solicitors which turned out to have a most drastic result": at 59,038. 355 In the present case, it cannot be said that the Plaintiff's default was due to a mere administrative error. While the purchaser may have been mistaken about the effect of the date of completion contained in the contract, that cannot be a mistake that could be said to have lead to the failure of the Plaintiff to comply with the contract and especially could not have said to have effected the Plaintiff's failure to comply with the notice to complete. 356 In Clurstock Pty Ltd v Timanu Pty Ltd at 57,831, Young J wrote: "…where the purchaser has been caught up in a situation through little fault of his own or perhaps because of the fault of his solicitor and has endeavoured to do the decent thing, the Court will very often exercise its discretion in his favour, notwithstanding that this will have the effect of depriving the vendor of the right to forfeit the deposit and notwithstanding that the making of such an order will lessen the importance of a deposit as an earnest that the contract will be fulfilled. However, merely because a large amount of money is involved and situations have arisen which were not contemplated by the purchaser and make it inexpedient for the purchaser to pursue the contract will not usually be thought to be a sufficient reason why the parties' respective rights at law should not continue to apply"

[256]

Question Six: The Cross-Claim for Damages, Reasonable Costs and Expenses 364 By cross-claim contained in the Further Amended Cross-Claim filed 9 July 1999, the Defendant claims to be due reasonable costs and expenses as provided for in clause 9.3.1 of the contract and otherwise arising out of the Plaintiff's (Cross-Defendant's) failure to complete the contract. The cross-claim also seeks damages against the Plaintiff. 365 Clause 9 of the contract allows only one of the forms of relief sought by the Defendant (Cross-Claimant). Clause 9.3 allows either relief by way of recovery of deficiency on resale and reasonable costs and expenses or damages for breach of contract. It seems clear that the Defendant must elect to pursue one or the other form of relief: Butt at 482-3. Furthermore, Butt observes that "having elected to pursue one right, the vendor cannot resile from the election and choose the other if it eventuates that the course chosen is the less advantageous one"; at 482. No submissions were made on behalf of the Defendant Cross-Claimant in respect of a claim for unliquidated damages. Although not expressly made, it appears that the Defendant Cross-Claimant has elected to pursue relief under clause 9.3.1: see Jampco Pty Limited v Camerson (No 2) (1985) 3 NSWLR 391 (a case where the opposite conclusion was made). In those circumstances I can dismiss the claim for unliquidated damages by virtue of the doctrine of election. In any event, since the Defendant obtained a higher price on resale of the property, and since the basic principle is that the measure of damages is the difference between the contract price and the value of the property at the date of the breach (see Rossco Developments at 6), the Defendant would not be entitled to such damages. Furthermore, no evidence was proffered as to any consequential damage suffered by the Defendant. 366 The decision of this court to allow the Defendant to retain the deposit cannot affect the Defendant's rights to sue under the contract: "… 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": Lucas & Tait at 273 per Street CJ.

Parties

Applicant/Plaintiff:

Gogard Pty Limited

Respondent/Defendant:

Satnaq Pty Limited

Legislation Cited (3)

Conveyancing (Sale of Land) Regulations 1995(NSW)

Conveyancing Act 1919(NSW)

Real Property Act 1900(NSW)

Cases Cited (15)

New South Wales Supreme Court CITATION : Gogard Pty Limited v Satnaq Pty Limited [1999] NSWSC 1283 revised - 26/06/2000 CURRENT JURISDICTION : Equity FILE NUMBER(S) : 2290/98 HEARING DATE(S) : 31/08/1999, 01/09/1999, 02/09/1999, 24/09/1999 JUDGMENT DATE : 23 December 1999

COUNSEL : G P George (Plaintiff) S T White (Defendant) SOLICITORS : L G Parker & Co (Plaintiff) Davis O'Neill Sistrom (Defendant) CATCHWORDS : REAL PROPERTY - Contract of Sale - Making time of the essence - Failure to complete - Entitlement to issue notice to complete - Nature of a requisition - Requisitions as to minor encroachments such as awning, party wall and air-conditioning unit - Error or mis-description and contractual stipulations - Timing for and right to make requisitions under contract and by statute - Effect of Schedule 2 of Conveyancing (Sale of Land) Regulations 1995 - Recovery of deposit under s55 of Conveyancing Act 1919 (NSW) - Relevance of availability of specific performance against purchaser - Factors going to court's discretion - Set-off against forfeited deposit of recoverable costs and expenses so injured party placed in same situation so far as money can do as if contract performed. ACTS CITED : Conveyancing Act 1919 (NSW) s13, s55, S88BB, s183 Encroachment of Buildings Act A A Jones & Son Pty Limited v Weeden (1964) 82 WN(NSW) 326 Abraham v Mallon (1975) 1 BPR 9157 Australasian Performing Rights Association Limited v Austarama Television Pty Ltd [1972] 2 NSWLR 467 Bennett v Stuart (1927) 27 SR(NSW) 317 Blacktown City Council v Fitzgerald and Ors (1990) NSW ConvR 59,032 Braidotti v Queensland City Properties Limited (1991) 172 CLR 293 Carpenter v McGrath (1996) 40 NSWLR 39 Ciavarella v Balmer [1983] 2 NSWLR 439 Clarke v Dilberovic (1982) NSW ConvR 55-083 Clowes Developments (UK) Limited v Mulchinock [1998] 1 WLR 42 Clurstock Pty Limited v Timanu Pty Limited (1988) NSW Conv R 57,826 Florencio Delgado v Walker Developments Pty Limited (Bryson J, NSWSC, 18 July 1989, unreported) Godfrey Constructions Pty Limited v Kanagra Park Pty Limited (1972) 128 CLR 529 Hooker Town Developments Pty Ltd v Director of War Service Homes (1973) 47 ALJR 320 Huber v Conroy (1982) 1 NSWLR 143 Jampco Pty Limited v Camerson (No 2) (1985) 3 NSWLR 391 Johns v Deacan (English CA, , 23 January 1985, unreported) Jones v Dunkel (1958) 101 CLR 298 Joscelyne v Nissen [1970] 2 QB 86 CASES CITED : Lucas & Tait (Investments) Pty Limited v Victoria Securities Limited [1973] 2 NSWLR 268 Mallet v Jones [1959] VR 122 Mayer v Vitale (1981) 2 BPR 9162 Mearns v Parras Holdings Pty Ltd (1994) NSW ConvR 60,025 McKenzie v Coulson (1869) LR 8 Eq 368 Neeta (Epping) Pty Limited v Phillips (1974) 131 CLR 286 Payne v Parker (1976) 1 NSWLR 191 Pratt v Hawkins (1991) 32 NSWLR 319 Re Barr's Contract [1956] Ch 551 Re Ford and Hill (1879) 10 Ch D 365 Rossco Developments Pty Limited v O'Halloran and Anor (1980) 29 ACTR 1 Smilie Pty Limited v Bruce (1998) NSW ConvR 55-841 Socratous & Anor. v Koo & Anor (1993) NSW ConvR 59,914 Suburban Constructions Pty Limited v Mancan Pty Limited (1997) 8 BPR 15,529 Svanosio v McNamara (1956) 96 CLR 186 Terry v Permanent Trustee Australia Limited (1995) 6 BPR 14,091 Torr v Harpur (1940) 40 SR(NSW) 585 Travinto Nominees Pty Ltd v Vlattas (1973) 129 CLR 1 Westland Savings Bank v Hancock [1987] 2 NZLR 21 Wilson v Kingsgate Mining Industries [1973] 2 NSWLR 713 DECISION : Defendant entitled to forfeiture of deposit and certain reasonable costs and expenses.

(1991) 172 CLR 293

(1996) 40 NSWLR 39

(1972) 128 CLR 529

(1973) 47 ALJR 320

(1982) 1 NSWLR 143

(1985) 3 NSWLR 391

(1958) 101 CLR 298

(1974) 131 CLR 286

(1976) 1 NSWLR 191

(1991) 32 NSWLR 319

(1956) 96 CLR 186

(1973) 129 CLR 1

(1983) 153 CLR 438