Jeppesons Road P/L v Di Domenico & Anor [2005] QCA 391

CONTRACT - GENERAL CONTRACTUAL PRINCIPLES - CONSTRUCTION AND INTERPRETATION OF CONTRACTS - OTHER MATTERS - where the appellant and the respondents had entered into two interdependent contracts for the sale of land - where one parcel of land included a tenanted caravan park - where each contract was in the standard form approved by the Real Estate Institute of Queensland and the Queensland Law Society - where cl 5.3 of each contract provided that, among other things, the vendor would deliver to the purchaser, in exchange for the purchase price, a notice to each tenant advising of the sale in "the form required by law" - whether the learned trial judge was right to conclude that notice in "the form required by law" was notice in the form required by s 148(1)(b) Residential Tenancies Act 1994 (Qld)

CONTRACT - GENERAL CONTRACTUAL PRINCIPLES - DISCHARGE, BREACH AND DEFENCES TO ACTION FOR BREACH - ELECTION AND RECISSION - LOSS OR WAIVER OF RIGHT TO RESCIND - where the parties had nominated a specific date and time for settlement - where the appellant's representative was late arriving at the settlement venue - where the respondent's solicitor telephoned the appellant's solicitor on expiration of the deadline and purported to terminate the contract - where the respondent's solicitors were not in a position to hand over the notices required by cl 5.3 of the contracts of sale at the time when they purported to terminate those contracts - whether a right to rescind arises when a party is only in a position to perform those obligations under a contract of sale that can be seen to be "essential" - whether, despite the respondent's admitted lack of the necessary notices, it could still be said that the respondents were ready, willing and able to perform their contractual obligations at the time they purported to terminate the contracts for the appellant's breach - whether it made any difference that the respondents were in a position to obtain the necessary notices within a short time had they been called upon to perform in accordance with their contractual obligations - whether substantial compliance with concurrent and interdependent obligations is enough to found a right to rescind

Beard v Wratislaw [1993] 2 Qd R 494, cited

Dainford Ltd v Yulora Pty Ltd [1984] 1 NSWLR 546, considered

Foran v Wight [1989] HCA 51; (1989) 168 CLR 385, applied

Ireland v Leigh [1982] Qd R 145, followed

Lohar Corporation Pty Ltd v Dibu Pty Ltd (1976) 1 BPR 9177, distinguished

Re Ronim Pty Ltd [1998] QCA 444; [1999] 2 Qd R 172, applied

Tramways Advertising Pty Ltd v Luna Park (NSW) Ltd (1938) 38 SR (NSW) 632, distinguished

P L O'Shea SC, with M J F Burnett, for the respondents

[1] McMURDO P: I agree with Keane JA's reasons for allowing the appeal and with the orders he proposes.

[2] KEANE JA: On 22 May 2003, the appellant and the respondents entered into two interdependent contracts for the sale by the respondents to the appellant of two parcels of land at Toogum. One parcel of land included a tenanted caravan park. I shall refer to the contract pertaining to that land as the "caravan park contract". On 19 January 2004, the due date for settlement, the appellant did not tender the purchase price because of a failure on the part of the appellant's financiers to make the necessary funds available to the appellant in time to enable it to settle the contracts. As a result, the respondents purported to terminate the contracts.

[3] The appellant brought an action for specific performance of the contracts. The learned primary judge concluded that the contracts were properly terminated by the respondents and gave judgment for the respondents.[1]

[4] The appellant's challenge to the learned trial judge's decision is put on the basis that the respondents were not entitled to rescind the caravan park contract because, at the time fixed for settlement, the respondents themselves were not able to deliver to the appellant the attornment notices required to be given to the tenants of the caravan park under the contract. The respondents accept that, if the appellant is successful on this point, specific performance should be awarded in respect of both contracts.

[5] Some brief reference to the terms of the contracts and to the findings of the learned trial judge in relation to events on the date of settlement is necessary for an appreciation of the appellant's arguments.

[6] Each contract was in the standard form approved by the Real Estate Institute of Queensland and the Queensland Law Society for the sale of residential houses and land. They provided relevantly as follows:

(1) Settlement must occur between 9am and 5pm on the Settlement Date.

(1) In exchange for payment of the Balance Purchase Price, the Seller must deliver to the Buyer at settlement:

(a) any instrument of title for the Land required to register the transfer to the Buyer;

(b) unstamped Transfer Documents capable of immediate registration after stamping;

(c) keys, codes or devices in the Seller's possession or control for all locks and security systems on the Property; and

(d) if there are any Tenancies:

(i) the Seller's copy of any Tenancy agreements;

(ii) a notice to each tenant advising of the sale in the form required by law; and

(iii) any notice required by law to transfer to the Buyer the Seller's interest in any Bond.

6.1 Time is of the essence of this contract, except regarding any agreement between the parties on a time of day for settlement."

[7] There were 26 tenants living within the caravan park. It was common ground that the tenancy agreements were not in writing and, therefore, that there were no documents which needed to be handed over in accordance with cl 5.3(1)(d)(i) or (iii) of the contract for the caravan park.[2]

[8] Her Honour held that the notices required by cl 5.3(1)(d)(ii) to be "in the form required by law" are the notices referred to in s 148(1)(b) of the Residential Tenancies Act 1994 (Qld).[3] Section 148 provides relevantly as follows:

(a) if the lessor proposes to transfer the lessor's interest in the premises to another person (the purchaser) - give written notice of the tenancy to the purchaser; and

(b) if the lessor transfers the interest subject to the tenancy - give written notice of the transfer (the attornment notice) to the tenant.

(2) The attornment notice operates as an attornment as tenant to the purchaser by the tenant at the rent, and on the other terms of the agreement applying when the notice is given, but only if the notice -

(b) directs the tenant to make all future payments of rent to the purchaser.

..."

[9] At this point, it may be noted that the respondents argue that her Honour erred in concluding that cl 5.3(1)(d)(ii) of the contract for the caravan park referred to the notices required in s 148(1)(b) of the Residential Tenancies Act. The respondents' first argument on this point is that s 148(1)(b) requires "written notice of the transfer" to be given by a lessor to a tenant and so, it was submitted, this notice cannot be given to the tenant by a purchaser. As to this, it may be accepted that the Residential Tenancies Act requires written notice of the transfer to be given by a vendor to the vendor's tenants; but it does not follow that notice signed by the vendor and given to the tenant by the purchaser does not satisfy the requirements of the statute. There is nothing in the terms of the section to suggest that such notice must be given personally to the tenant by the vendor. A notice signed by the vendor given to the tenant by the purchaser may still be taken as notice given by the vendor: qui facit per alium facit per se.[4]

[10] In any event, cl 5.3(1)(d)(ii) requires a vendor to deliver to the purchaser at settlement a notice in the same form as the statute requires to be given to tenants of the vendor. The contractual requirement seems to be intended to enable a purchaser to ensure that the tenants of the property become its tenants in accordance with

s 148(2) of the Residential Tenancies Act. Clause 5.3(1)(d)(ii) contemplates the arming of a purchaser with an attornment notice from the vendor so that the purchaser may, if the vendor fails to perform the statutory obligation cast upon it by s 148(1)(b), ensure that it still receives the benefit of s 148(2) of the statute.

[11] Counsel for the respondents also submitted that s 148(1)(b) contemplates only one notice being given (by the vendor) to each tenant, that this notice must be the original and that therefore cl 5.3(1)(d)(ii) cannot be read as requiring the vendor to deliver that same notice to the purchaser. The answer to the respondents' objection seems to me to be that a vendor may be required to sign two original notices, one to be given by the vendor to the tenant in accordance with s 148(1)(b) of the Residential Tenancies Act, and one to be given to the purchaser under

cl 5.3(1)(d)(ii) of the contract. To say that is merely to recognise that a vendor is under two obligations, one statutory and one contractual. That the statutory obligation on the vendors also serves to identify the notice required by

cl 5.3(1)(d)(ii) of the contract and to supply its content does not deny the force of this answer to the respondents' argument. The contractual obligation is in addition to (and in no way in contradiction of) the obligation imposed by statute. Further, the respondents' argument on this point does not merely trivialise the importance of an express term of the contract: it would effectively render it a dead letter.

[12] In my respectful opinion, the respondents' argument that the learned trial judge erred on this point must be rejected.

[13] The parties had nominated 1.30 pm on 19 January 2004 as the time for settlement. The parties attended at that time at the offices of the respondents' solicitors. At that time, the appellant did not have the necessary bank cheques for the adjusted balance of the purchase price because there was, as the appellant's solicitor told the respondents' solicitor, "a hitch with the cheques".[5] This hitch occurred because the appellant's financier had sought to transfer the funds for settlement to a bank account which had been closed.[6]

[14] The appellant's solicitor then sought to make alternative arrangements with the financier to ensure that the funds would be available to enable the appellant to settle. Upon making what he believed were the necessary adjustments, the appellant's solicitor telephoned the respondents' solicitors and arranged for settlement to take place later that afternoon at 4.45 to 4.50 pm.[7]

[15] At about 4.56 pm, the respondents' solicitor telephoned the appellant's solicitor to say that the respondents' solicitor was waiting at the settlement venue and would only be willing to settle up to 5.00 pm, that being the deadline. At this stage, the appellant's solicitor still believed that the necessary bank cheques would be available by 5.00 pm and communicated that belief to the respondents' solicitor along with an explanation of the activities being undertaken in order to provide the required cheques.[8]

[16] Shortly after 5.00 pm, the appellant's representative had not arrived at the settlement venue. The respondents' solicitor thereupon telephoned the appellant's solicitor and told him that the contracts were terminated.[9] The appellant's representative arrived at the settlement venue with the necessary bank cheques at 5.05 pm.[10]

[17] At no time on 19 January 2004 did the respondents' solicitors have the notices required by cl 5.3(1)(d)(ii) of the contract for the caravan park. The notices had not been prepared.[11] The respondents sought to argue on appeal that if their solicitors had been alerted at 4.45 pm or 4.50 pm on 19 January the necessary notices could have been obtained in time for settlement. As I will explain, that argument is, having regard to the events which actually happened, irrelevant to the real question, which is whether the respondents were entitled to rescind immediately after the appellant's failure to tender the purchase price before 5.00 pm.

[18] The appellant argued at trial and on appeal that, because the respondents were not able to deliver the notices contemplated by cl 5.3(1)(d)(ii) of the contract for the caravan park at 5.00 pm on 19 January 2004, the respondents were not then entitled to rescind the contract because of the appellant's failure to tender the purchase price by that time.[12]

[19] The learned trial judge's rejection of the appellant's argument was based on two conclusions. First, the learned trial judge held that delivery of the attornment notices by the respondents to the appellant was not an essential obligation of the respondents.[13] Secondly, the learned trial judge concluded that, had the appellant requested the respondents provide the attornment notices required by cl 5.3(1)(d)(ii) prior to settlement, that could have been swiftly achieved.[14] The appellant challenges these conclusions and the respondents seek to support them. I shall deal in turn with the arguments in relation to each conclusion.

[20] In relation to the first of the conclusions of the learned trial judge, the appellant contends that her Honour erred in failing to appreciate that the delivery of the attornment notices was a step which the appellant was bound to perform in order to trigger the appellant's obligation to pay the contract price and that an ability to deliver these notices was a necessary precondition of the respondents' right to terminate the contract because of the appellant's failure to tender the purchase price. In my respectful opinion, the appellant's contention must be accepted.

[21] To enquire whether cl 5.3(1)(d)(ii) of the contract is to be characterised as an "essential term" of the contract is to be distracted from the real issue. As was emphasised by the majority of the court in Beard v Wratislaw,[15] the provisions of the contract in relation to what is required to be provided at settlement "in exchange for payment of the Balance Purchase Price" are of critical importance because "the obligations of a purchaser and vendor under a clause in that form are dependent, concurrent and reciprocal". Absent compliance by the vendor with those provisions or proof of the vendor's readiness, willingness and ability to comply,[16] the purchaser cannot be charged with breach of contract by reason of its failure to perform its dependent, concurrent and reciprocal obligation to tender the purchase price.

[22] Reference to cl 5.3(1) of the contract shows that all the things there referred to had to be delivered at settlement if the appellant was to come under an obligation to pay the purchase price. It was a breach of that obligation which would entitle the respondents to rescind. So long as the respondents were not in a position to deliver the things referred to in cl 5.3(1), the appellant's failure to tender performance could not amount to a breach, even if "substantial" compliance with cl 5.3(1) was tendered by the respondents. Otherwise, by a parity of reasoning, the respondents would not have been in breach in failing to complete had the appellant tendered the balance of the purchase price less $1.00. Concurrent obligations in contracts for the sale of land are not to be construed as being subject to such "margins of appreciation". As this Court said in Re Ronim Pty Ltd:[17]

"Where parties have contracted in clear terms, their apparent intention must be respected ... If, as here, the parties have created an apparently rigid framework, then the court must respect, not disregard, the underlying intent."

Here, the clear intent of the parties was that an obligation to pay the purchase price would only arise on the satisfaction of each and every requirement of cl 5.3. As this had not occurred by the time set for settlement, the respondents were not entitled to rescind on the basis that the purchase price had not been paid.

[23] The respondents sought to argue that it would be sufficient to entitle them to rescind if they were ready, willing and able to perform those concurrent and interdependent obligations which were essential, and that the obligation in cl 5.3(1)(d)(ii) was not essential. It was said that this obligation was not essential because the benefit which the clause assured to the appellant was provided by s 148(1)(b) of the Residential Tenancies Act. This argument should be rejected. The benefit promised to the appellant by cl 5.3(1)(d)(ii) was not assured by s 148(1)(b) of the Residential Tenancies Act for the simple reason that the appellant had bargained for the right to have those notices delivered to it, perhaps to reserve the ability to give the required notice itself should the respondents omit to do so, and the respondents were not able to keep that part of their bargain.

[24] The respondents and the learned trial judge[18] supported the proposition that the respondents' contractual obligation to produce the attornment clauses was not an "essential term" of the contract, by reference to the following statement of Jordan CJ in Tramways Advertising Pty Ltd v Luna Park (NSW) Ltd:[19]

"The test of essentiality is whether it appears from the general nature of the contract considered as a whole, or from some particular term or terms, that the promise is of such importance to the promisee that he would not have entered into the contract unless he had been assured of a strict or substantial performance of the promise, as the case may be, and that this ought to have been apparent to the promisor ... If the innocent party would not have entered into the contract unless assured of a strict and literal performance of the promise, he may in general treat himself as discharged upon any breach of the promise, however slight. If he contracted in reliance upon a substantial performance of the promise, any substantial breach will ordinarily justify a discharge."

[25] It may be noted immediately that the test of essentiality being propounded by Jordan CJ is concerned with determining whether a breach gives rise, prima facie, to the right to rescind. The Chief Justice was not concerned with the circumstances in which a party would be entitled to exercise that right as an innocent party. In any event, reliance on this passage was misplaced in the present case for two reasons.

[26] First, the reason advanced by the respondents for treating clause 5.3(1)(d)(ii) as non-essential, ie that it was an unnecessary protection for the appellant because its work was done by statute, cannot be accepted for the reasons set out above.

[27] Secondly, Luna Park was not a case of an alleged breach of a concurrent and interdependent obligation much less one the performance of which on a fixed date is expressly made of the essence by the contract. The importance of an express contractual provision making time of the essence was stressed by Jordan CJ himself in the passage which follows immediately upon that cited above. His Honour said:[20]

"In some cases it is expressly provided that a particular promise is essential to the contract, e.g., by a stipulation that it is the basis or of the essence of the contract: Bettini v Gye (1 QBD 183 at 187); but in the absence of express provision the question is one of construction for the Court, when once the terms of contract have been ascertained: Bentsen v Taylor Sons & Co (No. 2) ([1893] 2 QB 274 at 280 - 281); Clifton v Coffey [1924] HCA 35; (34 CLR 434 at 437-8)."

[28] As to the importance of the concurrent nature of the respondents' obligation in cl 5.3(1)(d)(ii), and the express contractual provision making its timely performance essential, Dawson J said in Foran v Wight:[21]

"Under the contract, the obligation of the purchasers to pay the purchase price ... was simultaneous with the obligation of the vendors to deliver a conveyance. That is to say, they were mutual or concurrent obligations, the performance of each being conditional upon the performance of the other ... Not only were there concurrent obligations to settle but, an essential time having been fixed for settlement, there was an obligation on each side to settle within that time."

[29] Accordingly, Luna Park provides no reason to doubt the proposition that the respondents could only charge the appellant with actual breach of contract in failing to pay the purchase price on the due date, and therefore be entitled to rescind, if they themselves were ready, willing and able to perform all of their obligations on that date.

[30] Counsel for the respondents accepted that performance of the obligation in cl 5.3(1)(d)(ii) on the date fixed for settlement was made essential by the express provision of the contract in that regard. Counsel for the respondents even accepted that performance on the due date of that obligation was necessary to oblige the appellant to pay the purchase price. Notwithstanding these plainly correct concessions, counsel for the respondents sought to argue that the respondents were "ready, willing and able" to perform their contractual obligations so as to entitle them to rescind by reason of the appellant's failure to tender the purchase price on the due date. In other words, the respondents submitted that, even though they could not have performed their side of the bargain had settlement occurred at 5.00 pm, they were entitled to charge the appellant with breach of contract because cl 5.3(1)(d)(ii) was not an essential term. Not the least of the difficulties with this submission is that it fails to appreciate that performance of cl 5.3(1)(d)(ii) at the time fixed for settlement was an essential obligation of the respondents for the simple reason that the contract said so.

[31] Putting that point to one side, the respondents sought, nevertheless, to support this submission by reference to statements in the authorities to the effect that a party need be ready, willing and able to perform only "essential" terms to be entitled to rescind.[22] It is to be emphasised that the statements on which the respondents seek to rely are all concerned with the position of a party who has terminated the contract by reason of the other side's anticipatory breach. That the statements on which the respondents seek to rely are concerned with termination for anticipatory breach rather than actual breach, and that different considerations apply in relation to what is required of the innocent party in terms of its readiness, willingness and ability to perform its contractual obligations, appears from the following passage from the reasons of Dawson J in Foran v Wight.[23]

"Of course, the date for settlement had not arrived at the time the vendors repudiated the contract and, as will appear, it is necessary to consider the purchasers' obligation at that time with that fact in mind. I shall return to that aspect of the matter shortly. First it is necessary to settle the question whether the purchasers were under any obligation to prove, as plaintiffs, that, notwithstanding the vendors' repudiation, they were ready and willing to perform their obligations under the contract. Of course, readiness and willingness implies not only disposition, but also capacity: De Medina v Norman ((1842) [1842] EngR 533; 9 M & W 820 at p 827 [1842] EngR 533; [152 ER 347 at p 350]).

In any action for breach of contract, the readiness and willingness of the plaintiff to perform those mutual obligations remaining to be performed on his part under the contract is a condition precedent to his right to recover: see Hensley v Reschke ((1914) [1914] HCA 88; 18 CLR 452). Under the old rules a plaintiff was required to plead that he was ready and willing but under the present rules that fact is implied with the effect that he is not required to prove it unless the defendant puts it in issue. In that event, the burden of proving readiness and willingness rests upon the plaintiff. See Supreme Court Rules 1970 (NSW) Pt 15, r 11.

But what if the breach is anticipatory rather than actual? The authorities have given conflicting answers to this question, but it is now clear that in cases of repudiation as well as actual breach, readiness and willingness on the part of the plaintiff is part of his cause of action. The position was clearly stated in DTR Nominees Pty Ltd v Mona Homes Pty Ltd ((1978) 138 CLR at p 433):

'A party in order to be entitled to rescind for anticipatory breach must at the time of rescission himself be willing to perform the contract on its proper interpretation. Otherwise he is not an innocent party, the common description of a party entitled to rescind for anticipatory breach ...'

Nevertheless there are those who have held a contrary view. In Bowes v Chaleyer ((1923) 32 CLR at p 198), Starke J said: 'No doubt, if a party repudiates a contract and the repudiation is accepted and acted upon by the other party, then the latter is relieved from proving readiness and willingness on his part to perform the contract.' See also per Higgins J ((1923) 32 CLR at p 192). A similar view was expressed in Taylor v Oakes, Roncoroni and Co ((1922) 127 LT 267), and by Lord Atkinson in British and Beningtons Ltd v NW Cachar Tea Co ([1923] AC 48 at p 66). And support for the proposition is to be found in the judgment of Collins MR in Braithwaite v Foreign Hardwood Co ([1905] 2 KB at pp 551 - 552) and in YP Barley Producers Ltd v EC Robertson Pty Ltd ([1927] VLR 194 at p 209).

The error in these cases lay, I think, in attempting to carry too far the principle that the repudiation by one party of a contract may absolve the other party from the obligation of tendering useless performance. No doubt that principle, when it applies, may reduce the extent, or alter the nature, of the readiness and willingness which a plaintiff is required to show, but there is no reason why it should eliminate the requirement entirely. A party should not be able to sue for breach if he is unable or unwilling to carry out his part of the bargain; where, in other words, he is not the innocent party. Even where a party has been absolved by the repudiating party from performing his future obligations under the contract he must show that at the time of the repudiation he was ready and willing to complete the contract had it not been repudiated. But in proving his readiness and willingness where he has been absolved from tendering performance he may not have to prove a great deal.

For example, in Cort v Ambergate Rly Co ((1851) [1851] EngR 510; 17 QB 127 [117 ER 1229]) the plaintiffs could and did prove that they were ready and willing to manufacture railway chairs in accordance with their contract at the time it was repudiated by the defendants. But they were not required to prove that they had taken steps to manufacture the chairs in order to be able to tender them.

Dixon J recognized the limited scope of the readiness and willingness required of a plaintiff in the case of anticipatory breach of a contract. In Psaltis v Schultz ((1948) [1948] HCA 31; 76 CLR 547 at p 560), he expressed it in this way:

'To be ready and willing to perform a contract a party must not only be disposed to do the act promised but also have the capacity to do it. But the tenor of the promise will show when and how the act is to be performed and it is to that time and mode of performance that the capacity and disposition to fulfil the promise are to be directed. It is enough that he is not presently incapacitated from future performance and is not indisposed to do, when the time comes, what the contract requires.'

And in Rawson v Hobbs Dixon CJ returned to the question. He said ((1961) 107 CLR at pp 480 - 481):

'It is hardly necessary to say that once there has been a renunciation of a contract or of future performance of an essential obligation thereof by one contracting party, the other if he elects to treat that as an anticipatory breach discharging the contract is relieved from all further obligation to perform on his side and in consequence need not thereafter be ready and willing to do what would otherwise be his part. But that is not the question. What is the question is whether up to that point he must not be ready and willing to proceed with the contract and, as and when the time comes to do his part, so far as it is of the essence, to perform the contract on his side. ... One must be very careful to see that nothing but a substantial incapacity or definitive resolve or decision against doing in the future what the contract requires is counted as an absence of readiness and willingness. On the other hand it is absurd to treat one party as tied to the performance of an executory contract although the other has neither the means nor intention of performing his part when his turn comes, simply because his incapacity to do so is not necessarily final or logically complete.'" (emphasis added)

[32] It is apparent from this passage that, in the case of anticipatory breach, because the time for actual performance of the contract has not arrived, no question can arise as to whether the "innocent party" is ready, willing and able to perform its concurrent obligations at the time fixed for settlement. In such circumstances, a party will be an "innocent party" and entitled to terminate the contract for the other side's anticipatory breach or repudiation if it can show that at the time that it purports to rescind the contract it was ready, willing and able to perform the obligations involved on its side of the bargain. To the extent that timely performance was of the essence of the contract, the "innocent party" must be willing and able to perform its obligations within that prescribed time frame.

[33] In relation to the second of the learned trial judge's conclusions, the appellant's contention is that at no time prior to the respondents' purported rescission after 5.00 pm on the settlement date were they able to deliver the attornment notices. It was further submitted that the significance of this fact, in relation to the issue as to the respondents' ability to complete, is not altered by the circumstance that, if the respondents' attention had been drawn to the problem at some earlier time, it could have been swiftly remedied. Once again, in my respectful opinion, the appellant's contentions must be accepted.

[34] It is necessary to refer again to the concurrent nature of the obligations of vendor and purchaser under this contract and to emphasise that in such a case the right of rescission is only available to a party who is ready, willing and able to perform its contractual obligations and is therefore in a position to charge the other with a breach of its concurrent obligations. In Ireland v Leigh,[24] a vendor, who was said to be available to sign documents on short notice, had not executed the transfer capable of immediate registration which the contract of sale required to be delivered at settlement. The vendor sought to rescind by reason of the purchaser's failure to tender the purchase price. The case was decided on the footing that the vendor's solicitors had indicated by other conduct to the purchaser's solicitors that it was useless for the purchaser to attend settlement to tender the purchase price. Of significance to this appeal are the observations of Connolly J, with whom Lucas SPJ agreed. His Honour said relevantly as follows:[25]

"Now it is clear law that a failure, in breach of contract, to pay the balance purchase money precisely on the due date gives the vendor the right to terminate the contract unilaterally: Mehmet v Benson [1965] HCA 18; (1965) 113 CLR 295 at 303 per Barwick CJ; Tropical Traders Ltd v Goonan [1964] HCA 20; (1964) 111 CLR 41 at 50 per Kitto J. But the vendor must be able to charge the purchaser with breach of contract. Now the obligations of vendor and purchaser with respect to completion are plainly concurrent obligations. It follows that the vendor cannot charge the purchaser with breach of contract consisting in her failure to complete on [the due date] unless on that date she herself was ready and willing to complete ... If the purchaser had tendered performance at the office of the vendor's solicitor at the last moment of the working day the memorandum of transfer would still have been executed and unstamped ..." (emphasis added)

[35] Connolly J then referred to the facts of the case and concluded:[26]

"It follows that the defendant was in no position to charge the plaintiff with breach of contract and that she was in no position to rescind, rescission being a right given by the law in vindication of a breach of the contract: Hirji Mulji v Cheong Yue Steamship Company Ltd [1926] AC 497 at 509 - 510 per Lord Sumner delivering the judgment of the Privy Council. Rescission is a right of election which is given to an innocent party: Heyman v Darwins Ltd [1942] AC 356 at 361, 373 and 379."

[36] As to the time at which the respondents were required to be ready, willing and able to perform the contract if they were to be entitled to charge the appellant with breach of contract for failing to tender the purchase price, in Foran v Wight,[27] Mason CJ said:

"... in the case of actual breach the requirement of readiness and willingness is more stringent; it continues through to the time for performance. That is because the termination of the contract does not antedate the time for performance."

[37] In the same case, Brennan J said:[28]

"Readiness and willingness is ascertained at the time of rescission and on the assumption that the other party was then ready and willing to perform. In Psaltis v Schultz ((1948) [1948] HCA 31; 76 CLR 547), Dixon J said (at 560):

'To be ready and willing to perform a contract a party must not only be disposed to do the act promised but also have the capacity to do it. But the tenor of the promise will show when and how the act is to be performed and it is to that time and mode of performance that the capacity and disposition to fulfil the promise are to be directed ...'"

[38] The position is then that, at the time when the respondents asserted their entitlement to rescind the contracts by reason of the appellant's failure to pay the purchase price, the respondents had not been, and were not, ready and able to settle in accordance with their own contractual obligations. At the time the respondents purported to rescind the contract for the appellant's failure to settle, the respondents were themselves not entitled to charge the appellant with a breach of contract in failing to perform its obligation to pay the purchase price because the respondents were not ready and able to perform the obligation on their part which was required to enliven the appellant's concurrent obligation to them. The respondents may have been willing to complete, but the effluxion of time on the date for settlement meant that they were not ready or able to complete at 5.00 pm which was the time for settlement and when the respondents purported to rescind the contracts.

[39] The respondents rely upon observations made by Mahoney JA, with whom the other members of the New South Wales Court of Appeal agreed, in Dainford Ltd v Yulora Pty Ltd:[29]

"Prima facie, a purchaser must tender on settlement the amount required to be paid by him under the contract. However, in some cases, tender of some other amount may, in the circumstances of the case, be a discharge of the purchaser's obligation: at least, the purchaser will not be in breach if some other tender is made and will not thereby be disentitled to take advantage of the vendor's failure to tender performance. Thus, for example, if both parties had forgotten that the purchaser was liable to include in the price a particular sum and (in advance of or at the settlement) the parties agreed, as the amount to be handed over by the purchaser on completion, an amount which omitted that sum, the purchaser would ordinarily be held to have made a sufficient tender of performance on completion if he tendered the agreed amount. This does not depend upon any act of waiver by the vendor of the right to the forgotten amount. Whether the vendor could, after settlement, recover the forgotten amount will depend upon other considerations. But in such a case, the failure of the purchaser to tender the forgotten sum will not put the purchaser in default, so that the vendor having refused to tender what admittedly was the required performance to be tendered by him, the purchaser could not hold the vendor in breach."

[40] The present is not a case where one party accepted the purported performance by the other as entitling that other party to performance by the first party of its concurrent obligations, whether by mutual inadvertence or otherwise. Further, while the parties' solicitors in the present case had discussed what had to be done by each side at settlement, and no mention had been made of the attornment notices, the silence of the solicitors on this aspect of the respondents' obligations cannot be treated as a contractual variation absolving the respondents from their clear obligation in this regard. The parties' solicitors had no authority to vary the contracts made by their principals,[30] and there is no reason to view the discussions which proceeded in relation to settlement as involving an unauthorised attempt to vary the parties' contracts. The truth is that the solicitors for each side did not advert to the need for the vendors to provide the attornment notices required by cl 5.3(1)(d)(ii) at settlement. That inadvertence, even if mutual, did not relieve the vendors of their obligation in that regard. To the extent that the respondents sought to contend that the conduct of the parties was indicative of the non-essential nature of the obligation in cl 5.3(1)(d)(ii), that conduct cannot affect the operation of the express provisions of the contract.[31]

[41] In Dainford Ltd v Yulora Pty Ltd, Mahoney JA went on to say:[32]

"What constitutes a failure to discharge the concurrent obligations which arise for discharge on settlement was discussed in Michael Realty Pty Ltd v Carr. If the parties come together for settlement and the performance which one is able to tender is defective in a matter which, on the same day and within an appropriate time, can be rectified, the fact that the performance initially tendered has to be rectified does not constitute a breach for this purpose."

[42] It is to be noted that in this passage Mahoney JA contemplates that the rectification of defective performance may occur by the time for settlement. That possibility was not relevant in this case because the respondents had never, before they purported to rescind, rectified their inability to perform. It should be remembered that the result in Dainford was that a purchaser who had attended a settlement meeting ready and willing to hand over the specified purchase price was held to be entitled to rescind when the vendor was unable to remedy an outstanding charge for land tax as required under the contract of sale. The decision in that case has not been seen to date as being authority for any wider proposition than that if one party is unable to complete in accordance with the terms of the contract on the date fixed for completion and the other party to the contract is ready and willing to perform then that latter party may rely on the breach of the first party as entitling it to rescind the contract.[33]

[43] The respondents also relied upon observations by Hutley JA in the decision of the New South Wales Court of Appeal in Lohar Corporation Pty Ltd v Dibu Pty Ltd.[34] In that case, Hutley JA said:[35]

"When Mr Conway, solicitor for the appellant, attended at the office of Messrs Perkins, Stevenson & Linton, who were the solicitors for the first mortgagee on 31 May 1974, he did not have with him all the lease documents or notice of attornment, nor the bond moneys in respect of the various leases. His Honour found, however, that he was in a position to complete within a very short time and the delay which would have been caused was not such as to entitle the respondent's solicitor to say he was not ready to settle.

I see no basis for any challenge for this finding of fact."

[44] In Lohar, this passage from the reasons of Hutley JA is followed immediately by his Honour's explanation for the view which he has expressed which shows clearly that the other side had dispensed with the need for the appellant to be ready, willing and able to settle on the due date. His Honour said:[36]

"Even if Mr Conway had not been ready to settle, I am of the opinion that it would not avail the respondent in that the appellant's solicitor had already received notice that there was to be no settlement because the respondent had not obtained the money to enable it to settle, and such notice justified him in not going through the laborious and expensive processes involved in an abortive settlement."

The present case is radically different. Here, the appellant's conduct was not such as to dispense with the need for the respondents to be ready, willing and able to perform their part of the bargain. It was clear that it was the appellant's intention that the contract should be settled and that the appellant was making every endeavour to obtain the money to enable it to settle.

[45] The present case is not one where the respondents could have remedied the deficiency in their readiness and ability to perform on the day fixed for settlement at the time of their purported rescission. There was, at that time, no time left on the settlement date for rectifying the deficiency in the respondents' readiness and willingness to perform. It was essential to the decision of Hutley JA that there was time on the settlement date in which to rectify the deficiency. In this regard, Hutley JA went on to say:[37]

"It was submitted that his Honour should have found that the vendor was not ready, willing and able to complete at the time appointed for settlement. The vendor came to the settlement appointment without the lease documents and without the bond money. It was conceded that he could have laid his hands on them within ten minutes. But it was contended that the vendor having appointed 2.30pm as the time for settlement (in which respect time was essential), he was bound equally with the purchaser and the inability of his solicitor to produce at that precise moment certain necessary documents established fundamental breach. The proposition implied, and counsel did not flinch from submitting, that the same result would ensure if the vendor's solicitor had inadvertently left certain documents at his office or had arrived five minutes late. It is true that a notice of completion binds both parties so that the party receiving it can rescind for failure of the party giving it ... But this does not imply that the party in default can always defeat a right to rescission by establishing a failure of the rescinding party to report for settlement in a condition of perfect readiness. The governing principle is that the party alleging contractual default must show that it was ready and willing to perform its obligations under the contract ... except to the extent that it was absolved from performance by the conduct of the defaulter ... But, absolution apart, it is in my view a mistake to believe that when time for the completion of a contract for the sale and purchase of land becomes essential, nothing less than strict and literal performance of every obligation is acceptable. It matters not whether the Court is judging the failure of the defendant to perform or the failure of the plaintiff to be ready and willing to perform. The answer to both questions must depend on all the circumstances practically viewed and upon the nature of the obligation in question. The tenor of some contractual duties is such that exact performance is required to avoid default. With others, substantial compliance is sufficient ... There is no universal rule that conveyancing performance is to be 'measured out by coffee spoons'."

[46] If any part of this passage might be thought to provide any assistance to the respondents it would be where Hutley JA distinguishes between those contractual duties where "exact performance is required to avoid default" and others where "substantial compliance is sufficient". Putting to one side the question of whether anything less than complete fulfilment of a contractual obligation should be taken as fulfilling the obligation in question, the difficulty the respondents face in seeking to rely upon this approach is that there had been no compliance, substantial or otherwise, with the obligation contained in cl 5.3(1)(d)(ii) as at the time of settlement. This is not a case, for example, where 25 of the 26 relevant notices were available: none of them were. In truth, the appellant is better placed to take advantage of the relaxed approach adverted to by Hutley JA. It was only five minutes late in arriving at settlement with the purchase price.[38] In that regard, it may be noted that this Court in Re Ronim Pty Ltd[39] has held that arriving after the scheduled time for settlement, even if it is only a matter of minutes, amounts to a breach of the contractual requirement that settlement be effected by a certain time.[40] If nothing else, the decision of this Court in Re Ronim suggests that the approach described by Hutley JA in Lohar (which was relied upon unsuccessfully in Re Ronim[41] by the respondent) is not one that justifies departure from the previous decisions of this Court and of the High Court to which reference has been made above in relation to dependent, concurrent and reciprocal obligations. It is unnecessary for the disposition of this appeal to pursue that issue any further.

[47] It is apparent that, unlike the cases relied upon by the respondents, the present case is not one where, at some earlier time on the due date for settlement, the necessity for the provision of a notice by the vendor had become apparent and, although the vendor could not then tender performance, it was able to remedy that deficit before the expiration of the time for settlement.[42] Nor is it a case where each party made and accepted the tender of the other side's performance mistakenly failing to notice a deficiency in the performance tendered by one of them.[43] Nor is it a case where the appellant could be said to have employed "a manoeuvre ... to catch his vendor unprepared".[44]

[48] In summary, the present case is one where, at the time for determining whether or not the respondents were ready, willing and able to perform their contract, ie "the time of termination",[45] they were not ready and able to do so. This was the case however willing they may have been to do so had there been a further opportunity for them to perform. There was not a further opportunity for them to do so because the time for doing so, which was of the essence, had expired. As a result, they were not entitled to charge the appellant with breach of contract so as to be entitled unilaterally to discharge the contract by reason of the appellant's alleged breach.

[49] In my opinion, the respondents' purported termination of the caravan park contract was not effective. As I have mentioned, the respondents accept that, if the rescission of the caravan park contract was ineffectual, they are content to be bound by both contracts.

[50] In my opinion, the appeal should be allowed. The judgment below should be set aside. It should be declared that the two contracts between the parties dated 22 May 2003 should be specifically performed and carried into execution. For any further directions, the action should be remitted to the Trial Division.

[51] The respondents should pay the appellant's costs of the appeal and of the action including reserved costs, if any, to be assessed on the standard basis.

[52] DOUGLAS J: I have had the advantage of reading Keane JA's reasons for judgment and agree with them.

[53] The reluctance of the courts,[46] where there has been no inequitable conduct, to interfere with the rights of parties who have chosen to make time of the essence of a contract was reflected in the appellant's acceptance of the fact that its five minute delay in arriving at the place nominated for settlement constituted a breach of its obligations under the contract. For the respondents to have been able to rely on that breach to resist this action for specific performance, however, they needed to demonstrate that they were without sin, or, more precisely, that, at settlement, they were ready, willing and able to perform their contractual obligation to deliver to the appellant the notices to each tenant in exchange for payment of the balance purchase price. They could not do that.

[54] It was an obligation they were required to perform at settlement and, for that reason, to examine whether it was an essential term of the contract is, as Keane JA has said, a distraction from the real issue. The fact that the parties made it a concurrent, interdependent obligation with the purchaser's obligation to pay the balance purchase price, where time was of the essence, is, however, a reliable indication that it was an essential term. As Mr Hugh Fraser QC for the appellant submitted, by deduction from a passage in Green v Somerville,[47] although an obligation may be essential yet not interdependent, the converse is unlikely to be true. I agree, at least where the obligation is concurrent or interdependent with an obviously essential term, as here, the payment of the balance purchase price.

[55] Where the parties each failed narrowly to perform their respective contractual obligations, the respondent's attempt to rescind in reliance on the appellant's marginally late tender of payment might be expressed colloquially as a case of the pot calling the kettle black. Alternatively, to revert to biblical language, the solution may be found in this passage:

"For with what judgment ye judge, ye shall be judged: and with what measure ye mete, it shall be measured to you again. And why beholdest thou the mote that is in thy brother's eye, but considerest not the beam that is in thine own eye?"[48]

[56] The appeal should be allowed. I agree with the orders proposed by Keane JA.

[1] Jeppesons Road Pty Ltd (ACN 103 503 760) v Romeo Di Domenico and Shirley Rosemary Di Domenico [2005] QSC 66; SC No 1233 of 2004, 4 April 2005.

[2] Jeppesons Road Pty Ltd (ACN 103 503 760) v Romeo Di Domenico and Shirlee Rosemary Di Domenico [2005] QSC 66; SC No 1233 of 2004, 4 April 2005 at [60].

[3] Jeppesons Road Pty Ltd (ACN 103 503 760) v Romeo Di Domenico and Shirlee Rosemary Di Domenico [2005] QSC 66; SC No 1233 of 2004, 4 April 2005 at [67].

[4] Cf McRae v Coulton (1986) 7 NSWLR 644 at 663; Commonwealth Bank of Australia v Muirhead [1996] QCA 241; [1997] 1 Qd R 567 at 572.

[5] Jeppesons Road Pty Ltd (ACN 103 503 760) v Romeo Di Domenico and Shirlee Rosemary Di Domenico [2005] QSC 66; SC No 1233 of 2004, 4 April 2005 at [42].

[6] Jeppesons Road Pty Ltd (ACN 103 503 760) v Romeo Di Domenico and Shirlee Rosemary Di Domenico [2005] QSC 66; SC No 1233 of 2004, 4 April 2005 at [31].

[7] Jeppesons Road Pty Ltd (ACN 103 503 760) v Romeo Di Domenico and Shirlee Rosemary Di Domenico [2005] QSC 66; SC No 1233 of 2004, 4 April 2005 at [52].

[8] Jeppesons Road Pty Ltd (ACN 103 503 760) v Romeo Di Domenico and Shirlee Rosemary Di Domenico [2005] QSC 66; SC No 1233 of 2004, 4 April 2005 at [55].

[9] Jeppesons Road Pty Ltd (ACN 103 503 760) v Romeo Di Domenico and Shirlee Rosemary Di Domenico [2005] QSC 66; SC No 1233 of 2004, 4 April 2005 at [55].

[10] Jeppesons Road Pty Ltd (ACN 103 503 760) v Romeo Di Domenico and Shirlee Rosemary Di Domenico [2005] QSC 66; SC No 1233 of 2004, 4 April 2005 at [56].

[11] Jeppesons Road Pty Ltd (ACN 103 503 760) v Romeo Di Domenico and Shirlee Rosemary Di Domenico [2005] QSC 66; SC No 1233 of 2004, 4 April 2005 at [68].

[12] Sattel & Ors v The Proprietors - Be Bees Tropical Apartments Building Units Plan No 71593 (No. 2) [2001] QCA 560 at 49; [2001] QCA 560; [2002] 2 Qd R 427 at 439; Foran v Wight [1989] HCA 51; (1989) 168 CLR 385 at 396, 417, 450 - 451, 455.

[13] Jeppesons Road Pty Ltd (ACN 103 503 760) v Romeo Di Domenico and Shirlee Rosemary Di Domenico [2005] QSC 66; SC No 1233 of 2004, 4 April 2005 at [71] - [76].

[14] Jeppesons Road Pty Ltd (ACN 103 503 760) v Romeo Di Domenico and Shirlee Rosemary Di Domenico [2005] QSC 66; SC No 1233 of 2004, 4 April 2005 at [77].

[15] [1993] 2 Qd R 494 at 502 - 503, 515 - 516. See also Sunbird Plaza Pty Ltd v Maloney (1988) 166 CLR 245 at 264 - 265; Foran v Wight [1989] HCA 51; (1989) 168 CLR 385.

[16] Beard v Wratislaw [1993] 2 Qd R 494 at 503; Foran v Wight [1989] HCA 51; (1989) 168 CLR 385 at 396 - 398, 422 - 423.

[17] [1998] QCA 444 at [15]; [1998] QCA 444; [1999] 2 Qd R 172 at 179. See also Highmist P/L v Tricare Ltd [2005] QCA 357; Appeal No 3483 of 2005, 23 September 2005 at [40] - [41].

[18] Jeppesons Road Pty Ltd (ACN 103 503 760) v Romeo Di Domenico and Shirlee Rosemary Di Domenico [2005] QSC 66; SC No 1233 of 2004, 4 April 2005 at [74].

[19] (1938) 38 SR (NSW) 632 at 641 - 642.

[20] (1938) 38 SR (NSW) 632 at 642 (citations footnoted in original).

[21] [1989] HCA 51; (1989) 168 CLR 385 at 450 - 451.

[22] Foran v Wight [1989] HCA 51; (1989) 168 CLR 385 at 404 - 405, 424, 453; Rawson v Hobbs [1961] HCA 72; (1961) 107 CLR 466 at 480 - 481. See also British and Benningtons Ltd v N W Cachar Tea Co [1923] AC 48 at 71 - 72.

[23] [1989] HCA 51; (1989) 168 CLR 385 at 451 - 453 (citations footnoted in original). See also Green v Sommerville [1979] HCA 60; (1979) 141 CLR 594 at 609.

[24] [1982] Qd R 145.

[25] Ireland v Leigh [1982] Qd R 145 at 151 - 152.

[26] Ireland v Leigh [1982] Qd R 145 at 153.

[27] [1989] HCA 51; (1989) 168 CLR 385 at 408.

[28] [1989] HCA 51; (1989) 168 CLR 385 at 425 (citation footnoted in original).

[29] [1984] 1 NSWLR 546 at 549.

[30] Solicitors, like any other agents, only have the authority to do what they have been authorised to do. No special powers attach simply as a result of their office: IVI P/L v Baycrown P/L [2005] QCA 205; Appeal No 11264 of 2004, 10 June 2005 at [34] - [35].

[31] Toll (FGCT) Pty Ltd v Alphapharm Pty Ltd [2004] HCA 52 at [38] - [48]; [2004] HCA 52; (2004) 211 ALR 342 at 351 - 354.

[32] [1984] 1 NSWLR 546 at 551.

[33] See, eg, Austral Standard Cables Pty Ltd v Walker Nominees Pty Ltd (1992) 26 NSWLR 524 at 539; Karfoal Pty Ltd v Lorence [2002] NSWSC 284 at [13]; [2002] NSWSC 284; (2002) 11 BPR 20,129 at 20,133.

[35] Lohar Corporation Pty Ltd v Dibu Pty Ltd (1976) 1 BPR 9177 at 9184.

[36] Lohar Corporation Pty Ltd v Dibu Pty Ltd (1976) 1 BPR 9177 at 9184.

[37] Lohar Corporation Pty Ltd v Dibu Pty Ltd (1976) 1 BPR 9177 at 9186.

[38] Peter Butt, "Strict Compliance with Time for Completion" (1997) 71 Australian Law Journal 410 at 412.

[39] [1998] QCA 444; [1999] 2 Qd R 172.

[40] Re Ronim Pty Ltd [1998] QCA 444 at [15]; [1998] QCA 444; [1999] 2 Qd R 172 at 179. See also Union Eagle Ltd v Golden Achievement Ltd [1997] UKPC 5; [1997] AC 514 at 523. Equity will only intervene, where accident and mistake are not involved, when the conduct of the vendor caused or contributed to the breach of the essential time stipulation: Tanwar Enterprises Pty Ltd v Cauchi [2003] HCA 57 at [58]; [2003] HCA 57; (2003) 201 ALR 359 at 373.

[41] [1998] QCA 444 at [4]; [1998] QCA 444; [1999] 2 Qd R 172 at 176.

[42] Cf Lohar Corporation Pty Ltd v Dibu Pty Ltd (1976) 1 BPR 9177 at 9184.

[43] Cf Dainford Ltd v Yulora Pty Ltd [1984] 1 NSWLR 546 at 549, 551.

[44] Cf Halkidis v Bugeia [1974] 1 NSWLR 423 at 427 - 428.

[45] Foran v Wight [1989] HCA 51; (1989) 168 CLR 385 at 408 - 409.

[46] See Tanwar Enterprises Pty Ltd v Cauchi [2003] HCA 57; (2003) 217 CLR 315, 335 at [59].

[47] [1979] HCA 60; (1979) 141 CLR 594, 608-609 per Mason J with whom Murphy and Aickin JJ agreed.