Gough Family Holdings Pty Ltd v Ramiza Aktareen Khan & Bobby Bakar Ali

The contract for sale

1. The contract for sale dated 15 May 2018 was in the standard form. It contained the following additional special condition: "The vendor and purchaser agree, notwithstanding to the contrary herein contain, that the following additional special conditions be annexed to and form part of the contract for sale: (a) The purchaser may rescind the contract at any time before 5pm on the 10th business day after the day on which the contract was made. The purchaser will pay the full 10% deposit to the vendor's agent as follows: (b) As to $2037.50 on or before the date of this agreement and (c) As to the balance of $79462.50 before 5pm on the expiration of the cooling off period."
2. The contract for sale contained the following standard conditions: "2 Deposit and other payments before completion 2.1 The purchaser must pay the deposit to the depositholder as stakeholder. 2.2 Normally, the purchaser must pay the deposit on the making of this contract, and this time is essential. 2.3 If this contract requires the purchaser to pay any of the deposit by a later time, that time is also essential. 2.4 The purchaser can pay any of the deposit by giving cash (up to $2,000) or by unconditionally giving a cheque to the depositholder or to the vendor, vendor's agent or vendor's solicitor for sending to the depositholder. 2.5 If any of the deposit is not paid on time or a cheque for any of the deposit is not honoured on presentation, the vendor can terminate. This right to terminate is lost as soon as the deposit is paid in full. … 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); … 20 Miscellaneous 20.6 A document under or relating to this contract is - 20.6.1 signed by a party if it is signed by the party or the party's solicitor (apart from a direction under clause 4.3); 20.6.2 served if it is served by the party or the party's solicitor; 20.6.3 served if it served on the party's solicitor, even if the party has died or any of them has died."

The email purporting to terminate the contract

1. The defendants failed to pay the deposit by 5pm on Monday 25 June 2018. The email forwarded by the plaintiff's solicitor to the defendants' solicitor on 27 June 2018 became Exhibit A. It read as follows: "Dear Colleague Gough Family Holdings Pty Limited Sale to Khan & Anor Property: 22 Twenty-Seventh Avenue, West Hoxton The contract in this matter between the parties, dated 15 May 2018, became unconditional when the extended cooling-off period expired at 5.00pm on Monday, 25 June 2018. It is term of the contract that the purchaser must pay the deposit. The payment of the deposit in accordance with the contract, and on time, is an essential term. As at the time of writing this message, the purchaser has failed to pay the full deposit. I am instructed to advise that the vendor has elected to terminate the contract dated 15 May 2018 because of the purchaser's failure to pay the deposit in accordance with the contract. (sic)"
2. There is no issue that the purported notice was received by the defendants' solicitors on 28 June 2018 and their copy was Exhibit B in the proceedings.

The Defence

1. The defendants denied that the plaintiff validly terminated the contract. They pleaded that the email in Exhibit A: 1. Did not constitute a valid notice terminating the contract; 2. Did not purport to terminate the contract; and 3. Was not a document served in accordance with clause 20.6 of the contract.
2. There was no issue in the proceedings that the email was served in accordance with clause 20.6 of the contract.
3. The defendants also relied on a Notice of Acceptance of Repudiation of the contract dated 7 October 2020 (Annexure A to the Affidavit of Rayyaan Rahiman Ali affirmed 11 May 2021). That notice on its terms set out that the vendor did not terminate or complete the contract, that by entering into the subsequent contract to sell the property the vendor was unable to complete the contract and the purchasers gave notice that they accepted the vendor's repudiation of the contract. The notice also set out that the purchasers required the vendor to refund the deposit and other monies paid under the contract.
4. The defendants therefore gave notice that they accepted the vendor's repudiation and required the refund of the deposit and other monies paid under the contract.
5. The defendants did not cross-claim for any sum of money.
6. It was therefore the defendants' case that if the email dated 27 June 2018 did not constitute a valid notice of termination then the contract had come to an end by repudiation, which the defendants accepted. It was now common ground that the contract had been abandoned by the parties.

The plaintiff's submissions

1. The plaintiff relied on a detailed written outline of submissions. It submitted that the termination notice pursuant to clause 9 of the contract did not require any particular form of words, rather it was the substance of what was conveyed in the email that mattered, relying on Balog v Crestani (1975) 132 CLR 289; [1975] HCA 16. The plaintiff submitted that the words used are sufficient as long as they make the election to terminate manifest to the relevant party, relying on Karacominakis v Big Country Developments Pty Ltd [2000] NSWCA 313 at [155].
2. The plaintiff submitted that there could be no doubt about the substance conveyed by Exhibit A. It stated that the purchaser had failed to pay the deposit and that the vendor has elected to terminate the contract because of that failure. It was further submitted that there is no alternative reading of the email whereby the contract remains on foot.
3. The plaintiff submitted that the defendants sought to construe the terms of Exhibit A in a way which was artificial and uncommercial. By the expression "the vendor has elected to terminate the contract" the vendor's solicitor was simply stating that he was acting on the plaintiff's instructions.
4. The plaintiff noted the defendant relied on Coefficiency Pty Ltd v Workforce International Pty Ltd [2005] NSWCA 300 and sought to distinguish that decision on its facts. The plaintiff noted that at paragraph [27], Bryson JA stated: "A hypothetical reasonable person receiving the letter and considering what effect it had on rights under the contract would not and in my opinion could not regard it as effecting a termination under clause 18." The plaintiff submitted here that a hypothetical reasonable person who received Exhibit A would have no doubt that the contract was terminated.
5. In his oral submissions, counsel for the plaintiff rehearsed his submission that there was no requirement under the contract for a precise form of notice or a particular form of words providing notice. Rather, the test was whether by the email in Exhibit A there was an unequivocal statement that the contract for sale was at an end due to the defendants' breach.
6. In response to the defendants' submission that the vendor's solicitor could have used different words, it was submitted that there could be no alternative reading of the email. Rather, the email should be construed as giving notice of the effect of the vendor's decision, namely, that it has elected to terminate the contract. The High Court decision in Balog v Crestani was authority for the proposition that no specific form of words are required for the notice.

The Defendants' submissions

1. The defendants also relied on a detailed written outline of submissions. They submitted the following were relevant principles in construing whether the email in Exhibit A constituted a valid notice: 1. It is not necessary unless required by statute or the parties' contract that a notice under a contract should take any particular form or use any particular words as per Gibbs J in Balog v Crestani. 2. An appropriately worded letter may suffice to constitute a "notice" in the absence of any contractual or statutory requirement to the contrary. 3. However it is necessary that the communication should express clearly and in unequivocal language what is occurring or has occurred, citing Dixon J in Ballas v Theophilos (No 2) [1957] HCA 90; (1957) 98 CLR 193 where at [196] his Honour said: "The clause contains no express provision saying how he is to do it and any definitive communication of an election would suffice. But it was necessary that the communication should express clearly and unequivocally the fact that the surviving partner, the Plaintiff, then and there elected to acquire the deceased's interest upon the terms of the clause." 1. A communication asserting that a contract has already been terminated, by a prior notice or other course of events, is not an effective notice of termination, relying on Coefficiency Pty Ltd v Workforce International Pty Ltd.
2. The defendants submitted that by saying in Exhibit A, "at the time of writing this message… I am instructed to advise that the vendor has elected to terminate the contract…" those words were no more than an expression by the plaintiff's solicitor as to what the vendor had already done. The email did not say that it was a "notice" for the purpose of clause 9 of the contract but rather described itself as a "message". Nor did the email state the vendor "terminates the contract pursuant to clause 9". Nor did the email state the vendor "elects to terminate".
3. Rather, Exhibit A was merely speaking of "some historical event" of which there is no evidence, nor can there be, because no such event occurred.
4. The defendants further submitted that to be relied on as a notice terminating the contract, the email should have used words to the following or similar effect: "The Contract of Sale is hereby terminated." "The vendor terminates the Contract of Sale by this email." "The vendor terminates the Contract of Sale." It was submitted that as such clear and unequivocal language is not used, the email is not effective as a notice of termination for the purposes of clause 9 of the contract.
5. The defendants sought to establish that in analogous situations where clear and precise language is required for the purposes of notices under the Law Society Standard Contract for Sale, there were examples of precedents commonly used by conveyancers contained in the LexisNexis conveyancing service for NSW, being a Notice of Rescission (at [19010]) and a Notice to Complete (at [19015]).
6. The defendants submitted that the facts were not substantially different from the facts in Coefficiency Pty Ltd v Workforce International Pty Ltd.
7. In his oral submissions, learned counsel for the defendants submitted that for an effective termination of the contract for sale pursuant to clause 9, two matters were required: 1. Establishment of non-compliance in an essential respect; and 2. Service of a notice terminating the contract.
8. There was no dispute here that the purchasers had not complied with an essential term of the contract by failing to pay the balance of the deposit.
9. The defendants submitted that the email in Exhibit A did not state that the vendor terminated the contract, rather, it stated that "the vendor has elected to terminate". This amounted to a statement of either: 1. The vendor's intention to terminate the contract hereafter; or 2. The vendor's decision to terminate made in the past. What the email did not say is that the contract for sale is terminated.
10. Learned counsel submitted that clause 9 of the contract for sale makes no reference to an election and hence the email did not constitute a valid notice.
11. Learned counsel rehearsed his submissions as to the need for clear and unequivocal language, rehearsing also his submissions relying on Coefficiency Pty Ltd v Workforce International Pty Ltd, highlighting the test set out by Bryson JA at [27] and his Honour's finding in that case that "there was no room for a doubtful or ambiguous indication to fulfil the requirements of clause 18 because of the effect of such a notice on the rights of the parties" (at [26]).
12. Here, there were two possible interpretations of Exhibit A, namely: 1. That the vendor's solicitor was communicating that the vendor has decided to terminate the contract. This did not amount to an effectual termination but rather a message of the vendor's intention; 2. Alternatively, it amounted to a communication of a situation by which the contract had already been terminated by some prior act. Counsel acknowledged that the latter was of lesser possibility.
13. In responding to the plaintiff's submissions, counsel submitted that the email does not precisely say what was being done. Namely, it did not make clear that it constituted a notice of the vendor's right to terminate. By comparison, the purchaser's notice of acceptance of repudiation used precise language to convey what was intended.
14. Finally, the defendants submitted that there was no relevance to the defendants' subjective reaction to the email and that subsequent events were not relevant to the construction of the email.

Submissions in reply

1. Counsel for the plaintiff highlighted Dixon J's judgment in Ballas, where his Honour stated that "any definitive communication of an election would suffice". It was submitted that is what Exhibit A did here. Rather than the "parsing" approach to the email adopted by the defendants, a commercial approach should be taken in its construction. A reasonable person in the position of the plaintiff's solicitor would have understood that the vendors were electing to terminate for non-payment of the deposit, which was an essential term of the contract. No particular form of words was required to communicate that and the fact that a different conveyancer may have used different words does not change the legal effect of the email.
2. Counsel submitted that the Notice of Acceptance of Repudiation relied on by the defendants was not the point, coming as it did two years after the event. It was submitted that this was a very different case to the circumstances that arose in Coefficiency Pty Ltd v Workforce International Pty Ltd. The email represented precisely what was meant and clearly stated the election of the vendor to terminate. As the defendants' solicitor would not have been able to send the notice until the vendor had so elected, the email satisfied the requirements of a valid notice.

Principles to be applied

1. In determining whether Exhibit A constituted a valid notice of termination, the contract between the parties did not prescribe any particular form of notice and it was not necessary that the notice should use any particular form of words. As Gibbs J stated in Balog v Crestani, "it is the substance of what it conveys that matters". Balog concerned the construction of a notice to complete which made time of the essence and further stated that if the contract was not completed within the time set out, "then the vendor will exercise his power under the contract without further notice". The notice was challenged on the basis that those words were ambiguous and unclear and that therefore the notice to complete was deficient in form and the respondent had no right to rescind the contract. The High Court held otherwise.
2. The earlier case of Ballas v Theophilos concerned the construction of a partnership deed which contained a clause giving to the surviving partner an option to purchase the share of a deceased partner in the business of the partnership. The High Court held that to exercise such an option, it was necessary for any communication of such an intention to express clearly and unequivocally the fact that the surviving partner elected to acquire the deceased partner's share in the business.
3. The judgment in Coefficiency Pty Ltd v Workforce International Pty Ltd concerned a contract dated 30 September 2000 by which Coefficiency was to provide Workforce with a Disaster Recovery Centre Facility which was to be established and maintained to provide Workforce with a temporary workplace when Workforce invoked its disaster notification procedure. Clause 18 of the contract provided for termination of the contract in the following terms: "Either party may immediately terminate this contract in whole or in part by written notice to the other party if the other party breaches a provision of this contract and such breach is not remedied within 14 days after receipt of written notice of the breach. In this procedure there is to be a written notice of the breach."
4. By letter dated 6 February 2002, Coefficiency advised Workforce that it was in breach of the conditions of the contract by its failure to pay certain monies. It advised that should payment not be received within 14 days, Coefficiency was entitled to terminate the contract without further notice.
5. In a letter dated 25 March 2002, Workforce asserted it had not received the earlier letter and, inter alia, having paid certain sums of money, Workforce did not consider it had breached the agreement and the agreement had not been terminated. Workforce then went on to state that it intended to terminate the agreement for other reasons, concerning the removal of their equipment from the facility.
6. Bryson JA held at [25] that Workforce's letter did no more than show that it knew Coefficiency was taking a position with respect to termination, but there had been no effectual termination by Coefficiency. To constitute an effectual termination under Clause 18, the terms of that clause must be complied with. That meant either party may immediately terminate the contract in whole or in party by written notice to the other party.
7. His Honour went on to hold at [26]: "There is no room for a doubtful or ambiguous indication to fulfil the requirements of clause 18, because of the effect of such a notice on the rights of the parties. Asserting that a contract had already been terminated or had already come to an end in some way, or that it had been repudiated in an earlier point in time than the notice of termination, would not comply with this requirement."
8. In respect of a letter sent by solicitors for Coefficiency to Workforce on 6 March 2002, his Honour went on to hold that that letter did not assert to effect a termination but asserted there had already been a termination of the contract on foot in February. His Honour went on to state: "A hypothetical reasonable person receiving the letter in considering what effect it had on rights under the contract would not and in my opinion could not regard it as effecting a termination under clause 18."
9. The Court of Appeal decision in Karacominakis v Big Country Developments Pty Ltd sheds no further light on the principles to be applied. That case concerned the question of repudiation of a commercial lease. The plaintiff relied on the following passage from the judgment of Giles JA at [155]: "It is not necessary that the communication of acceptance of a repudiation be in those terms, or by direct notification. Words or conduct may communicate acceptance if they are consistent only with electing to terminate the contract (Sargent v ASL Developments Pty Ltd (1974) 131 CLR 634 at 646), and it is enough to make the election manifest to the relevant party."

Determination

1. In Exhibit A, the solicitor for the plaintiff set out the relevant background, namely that the contract became unconditional when the extended cooling off period expired at 5pm on Monday 25 June. He also clearly stated that it was an essential term of the contract that the purchaser pay the deposit in accordance with the contract and on time.
2. By stating, "as at the time of writing this message, the purchaser has failed to pay the full deposit", the solicitor for the vendor was stating in clear and unequivocal terms that the purchaser was in breach of the essential term of the contract outlined above. In its context, the word "message" only refers to the email and is qualified by the temporal reference that preceded it.
3. The final paragraph states: "I am instructed to advise that the vendor has elected to terminate the contract dated 15 May 2018 because of the purchaser's failure to pay the deposit in accordance with the contract."
4. I find that this was a clear and unequivocal statement of the solicitor's instructions. Namely, that the vendor had elected to terminate the contract because of the purchaser's breach of the essential term.
5. As outlined above, no form of words is prescribed by the contract and the test is an objective one, namely, whether a hypothetical reasonable person receiving the email in considering what effect it had on the rights under the contract would regard it as effecting a termination under clause 9. Having regard to the circumstances here, in my view, a reasonable person would properly regard the email as effecting a termination of the contract for sale.
6. It is not to the point whether the purchasers themselves used different words in their Notice of Acceptance of Repudiation two years later. Nor are the examples contained in the LexisNexis conveyancing practice determinative of the question to be resolved here. The words used by the vendor's solicitor were clear and unequivocal and the reasonable person in the purchaser's solicitor's shoes would have understood that he was being advised of the vendor's election to terminate the contract as at 27 June 2018. There is no ambiguity in the final paragraph of the email and I reject the defendants' submission that the words amount to no more than an expression by the plaintiff's solicitor as to what the vendor may do in the future, or has done previously by some other or prior act.
7. The substance of the contents of Exhibit A is clear, unequivocal and unambiguous. The email clearly made the election of the vendors to terminate the contract manifest to the purchasers. It is therefore a valid notice of termination of the contract for sale.
8. There will therefore be a judgment for the plaintiff in the agreed sum of $55,288.39. Interest on that sum in the sum of $7,242.47 is payable to 31 August 2021. I propose to give leave to the plaintiff to provide an updated calculation of interest to the date of judgment, namely, 3 September 2021. Judgment for the full amount will then be entered accordingly.

Orders

1. I hereby make the following orders: 1. There will be a judgment and verdict for the plaintiff in the sum of $55,288.39, plus interest in the agreed sum of $7,261.10. 2. The total judgment entered will be $62,549.49. 3. The defendant is to pay the plaintiff's costs.

Amendments 13 September 2021 - Award of interest on the judgment and costs orders included. DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. The onus remains on any person using material in the judgment or decision to ensure that the intended use of that material does not breach any such order or provision. Further enquiries may be directed to the Registry of the Court or Tribunal in which it was generated. Decision last updated: 13 September 2021