Jeppesons Road Pty Ltd (ACN 103 503 760) v Romeo Di Domenico and Shirlee Rosemary Di Domenico

CONVEYANCING - RELATIONSHIP OF VENDOR AND PURCHASER - MATTERS ARISING BETWEEN CONTRACT AND CONVEYANCE - TIME - time of the essence - generally - inability to pay balance purchase price at time for settlement

CONVEYANCING - RELATIONSHIP OF VENDOR AND PURCHASER - BREACH OF CONTRACT - BREACH BY THE PURCHASER: REMEDIES OF THE VENDOR - rescission - where time of the essence

EQUITY - EQUITABLE REMEDIES - SPECIFIC PERFORMANCE - PARTICULAR CONTRACTS - sale of land - whether unconscientious for vendors to exercise right of termination - whether relief on the ground of "accident" or "mistake" available in face of essential time stipulation

Land Title Act 1994 (Qld)

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

Darter Pty Ltd v Malloy [1993] 2 Qd R 615

Di Domenico v Hervey Bay City Council [2000] QPE 021

Foran v Wright [1989] HCA 51; (1989) 168 CLR 385

Goldsborough Mort & Co Ltd v Quinn [1910] HCA 20; (1910) 10 CLR 674

Green v Sommerville [1979] HCA 60; (1979) 141 CLR 594

Legione v Hateley [1983] HCA 11; (1983) 152 CLR 406

Lohar Corp Pty Ltd v Dibu Pty Ltd (1976) 1 BPR [97014]

Mehmet v Benson [1965] HCA 18; (1964) 113 CLR 295

Neild v Davidson [1890] NSWLawRp 53; (1890) 11 Lr (NSW) Eq 209

Rawson v Hobbs [1961] HCA 72; (1961) 107 CLR 466

Re Ronin Pty Ltd [1998] QCA 444; [1999] 2 Qd R 172

Sattel & Ors v The Proprietors Be Bee's Tropical Apartments Building Units [2001] QCA 560; [2002] 2 Qd R 427

Stern v McArthur [1988] HCA 51; (1988) 165 CLR 489

Tanwar Enterprises Pty Ltd v Cauchi [2003] HCA 57

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

White v White (1872) 15 Lr Eq 247

[1] The plaintiff, Jeppesons Road Pty Ltd ("Jeppesons Road"), seeks specific performance of two contracts of sale dated 22 May 2003 by which the defendants, Romeo and Shirlee Di Domenico, agreed to sell a caravan park and vacant land at Jeppesons Road, Toogum, to the plaintiff. Toogum is a beachside town of about 800 people at the northern end of Hervey Bay about 300 kilometres north of Brisbane.

[2] The contracts were in the form of two standard REIQ contracts for the sale of houses and land. Mr Di Domenico is the registered proprietor of land being Lot 102 on RP 891898 in the County of March, Parish of Vernon Title Reference 50084181 having an area of 2.423 hectares ("the land"). The purchase price of the land was $310,000.00. A deposit of $1,000.00 was payable when the purchaser signed the land contract and a further deposit of $19,000.00 was payable 21 days from the date of the land contract. The second contract was for the sale of 1.012 hectares of adjacent land described as Lot 1 on RP142419 County of March, Parish of Vernon, Title Reference 15306101 (the "caravan park"). The purchase price of the caravan park was $800,000.00. It had similar provisions as to payment of the deposit.

[3] The contracts had special conditions which tied together the contract for the sale of the land (the "land contract") and the contract for the sale of the caravan park (the "caravan park contract"). Special condition 1.1 of the land contract provided that it was subject to the buyer obtaining within 180 days from the date of the land contract, the approval of Hervey Bay City Council (the "Council") to the subdivision of the land into at least 25 residential lots, on terms and conditions which were to be wholly satisfactory to the buyer in its absolute discretion. Special condition 6 provided that the settlement date of the land contract was to be the date which was 60 days after the condition in clause 1.1 had been fulfilled or waived, whichever occurred first. Clause 1.2 of the special conditions of the land contract provided that if the buyer gave written notice to the sellers that it had been unable to obtain the approval of the council within such period or if any of the terms and conditions of the approval were unsatisfactory to the buyer, then the contract would be at an end and all monies paid by way of deposit would be refunded to the sellers and neither party should have any claim against the other. Special condition 7 provided that the land contract was subject to and conditional upon the simultaneous completion of the caravan park contract.

[4] As one might expect, significant amounts of moneys were outlaid by the buyer engaging consultants and paying fees in relation to seeking council approval for the proposed sub-division.

[5] By special condition 1.1, the caravan park contract was subject to and conditional upon the simultaneous completion of the land contract and if the land contract was terminated pursuant to special condition 1.2 of the land contract or any other default of the buyer, the caravan park contract would be at an end. Special condition 1.2 of the caravan park contract provided that the settlement date was the same settlement date as under the land contract.

[6] Special condition 4 of the caravan park contract provided that the buyer and seller agreed that the supply of the caravan park was the supply of a going concern "for the purposes of the GST Act". This was to the advantage of the buyer and sellers for tax purposes. There was also a provision in the special conditions of the caravan park contract for the buyer to purchase the stock in trade. By clause 4.5 of the special conditions, the sellers warranted that at the date of settlement there would be no occupiers of the caravan park other than as weekly or monthly tenants.

[7] In addition to the special conditions, the land contract and the caravan park contract had a number of conditions which were common to both of them. In particular there were similar standard clauses in each contract with regard to the settlement. Clause 6.1 provided that "time is of the essence of this contract, except regarding any agreement between the parties on a time of day for settlement". Clause 5.1(1) provided that settlement must occur between 9.00am and 5.00pm on the settlement date. Clause 10.5(1) provided that if anything was required to be done on a day that was not a business day, it must be done instead on the next business day.

[8] Clause 2.5(1) provided that on the settlement date the buyer must pay the balance purchase price by bank cheque as directed by the seller. Adjustments to the purchase price were set out in clause 2.6. This clause had particular significance in the case of the caravan park because it provided that the seller was liable for outgoings and was entitled to rent up to and including the settlement date and thereafter the buyer would be liable for outgoings and would be entitled to rent. There were detailed provisions for adjustment of arrears of unpaid rent and paid rent.

[9] Clause 5.3 dealt with the documents and keys required to be delivered by the seller to the buyer at settlement in exchange for the balance of the purchase price. The relevant requirements for the purposes of this action were found in clause 5.3(d) which provided that, if there were any tenancies, the seller must deliver at settlement:

(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".

It appears that prior to the time fixed for settlement no-one involved in the transaction gave any consideration as to what might be required by clause 5.3(d)(ii).

[10] Clause 3 was the usual finance clause which was satisfied after the buyer received a satisfactory offer of finance from Bridgecorp Finance Limited ("Bridgecorp"), a financier in Sydney, on 26 September 2003. The finance obtained also allowed for the purchase of an adjacent property in Shellcott Street, Toogum, from an unrelated seller and for some of the costs to be incurred in pursuing the development application for all of the lots.

[11] Clause 9 provided that if the buyer failed to comply with any provision of the contracts, the sellers might affirm or terminate the contract. In this case the sellers terminated the contracts for breach by the buyer of the requirement to settle by 5.00pm on the settlement date.

[12] The questions to be decided are whether the buyer was in breach of a provision of the contracts so as to entitle the sellers to terminate; whether the sellers were themselves ready, willing and able to settle when they purported to terminate the contract for breach; and, whether the buyer was, in the circumstances, entitled to specific performance.

[13] After a dispute arose as to whether or not the buyer was in breach of the contracts by failing to pay the deposit by the due date, the parties agreed in writing to vary the contracts. By exchange of correspondence between the buyer's solicitor, Terry Pyne, and the seller's solicitor, Peter Pagliarino of Carswell and Company ("Carswell"), dated 29 and 30 October 2003 respectively, the contracts were affirmed and made unconditional as from 30 October 2003. The buyer's decision to proceed unconditionally was taken knowing that the council might not have given its approval by the time the contracts were due to settle. The buyer took that risk. Settlement was agreed to be on 17 January 2004. As it turned out, 17 January 2004 was a Saturday so pursuant to clause 10.5 of the contracts, Monday 19 January 2004 was taken to be the settlement date ("the settlement day").

[14] To understand what then occurred and how the transaction unravelled it is necessary to describe the people involved and the events that unfolded.

[15] The plaintiff, Jeppesons Road, is a company that was created for the purpose of purchasing and developing the land and the caravan park and other nearby land. Its principal is Craig McDermott. The solicitor for Jeppesons Road was Terry Pyne, a solicitor who practises at the Gold Coast. He is an in-house lawyer with the Maxen Group, a group which includes the plaintiff company. He is also its general manager.

[16] The defendants, Romeo and Shirlee Di Domenico, are a married couple who acquired the caravan park in 1985. Mr Di Domenico acquired the land in mid 2000. Since the land's acquisition he used it for the storage of the caravan park's surplus needs including old equipment and materials incidental to the conduct of the business of the caravan park. However the majority of the land remained vacant and not utilised. In 1996 Mr Di Domenico was ill and required surgery and started thinking about retirement.

[17] The caravan park had a number of tenants some of whom had been there for many years. Mr and Mrs Di Domenico lived on the premises and operated the caravan park and a busy kiosk. They had day to day contact with the caravan park residents. There were 52 sites in the caravan park, which included six cabins, various facilities, a tent area and shop or kiosk and office. Mrs Di Domenico kept records of the tenancies in the caravan park manually by a card system. There were no written tenancy agreements and no bonds taken in respect of any of the rentals.

[18] Neither the land nor the caravan park were listed for sale but Mr Di Domenico had been approached by various people who were interested in buying them. Mr McDermott and a business colleague walked in off the street into the kiosk and asked if the property was for sale. They discussed the price for which Mr Di Domenico would sell the caravan park and the land. The contracts of sale were entered into about two months later.

[19] Unlike the land contract, the caravan park contract was not subject to any condition about subdivision but rather was sold as a going concern. Once Mr and Mrs Di Domenico realised that the caravan park was definitely to be closed and subdivided and the residents evicted, they were inclined to terminate the contracts if they lawfully could. Mr Di Domenico was aware of this no later than September or October 2003. Indeed it appears that Mr and Mrs Di Domenico knew from the time of signing the contracts that the buyer was unlikely to operate the caravan park for long. They knew that they had sold the land and the caravan park to property developers. However they were concerned about the buyer's plans to close the caravan park for two reasons. The first is that they were concerned that the caravan park residents would regard them as being a party to termination of their residences. Secondly, they were concerned because they were acting on their accountant's advice that for taxation purposes the caravan park had to be sold as a going concern.

[20] The initial offer from Jeppesons Road had included the sale of the caravan park and the land in one contract. Two contracts had been prepared to accord with instructions from Mr and Mrs Di Domenico that only the land contract should be conditional upon sub-division approval and the caravan park should be sold as a going concern.

[21] It appears that while Mr and Mrs Di Domenico elected to affirm the contract on 30 October 2003, they retained misgivings about it. In November, they refused to sign an IDAS form 1 application in respect of the caravan park to enable the buyer to proceed with a proposed residential subdivision of it into 12 lots in spite of a number of requests and the offer of $10,000.00 for them to do so. They retained a desire to terminate the contract if an opportunity arose to do so lawfully.

[22] Mr and Mrs Di Domenico used as their solicitor in this conveyance, Peter Pagliarino, who had been their solicitor for a long time. He is employed as a consultant at Carswell at their office at Hervey Bay. Because of his prior professional relationship with the Di Domenicos, he acted for them in this transaction in spite of the fact that he is a solicitor who specialises in litigation rather than the conveyance of property. Other personnel from Carswell also became involved in this transaction: John Richards, a partner; Brosnan Freeman, a solicitor whose area of practice was conveyancing and who became involved on the settlement day as Mr Pagliarino was in court on that day; Rona Swain, receptionist; and the conveyancing clerks, Patricia Riley and Tamara Hogbin. Ms Riley was absent on leave from 20 December 2003 and so Ms Hogbin took over the file under the supervision of Mr Pagliarino until she left the firm on 16 January 2004.

[23] On 25 November 2003, Ms Riley, on behalf of Carswell, wrote to Terry Pyne enclosing copies of transfer forms for stamping purposes and saying, "with reference to Clause 5.1 of the contract, we advise that any time nominated by us for settlement is so nominated as a matter of convenience only. We hereby reserve our clients' rights to settle at any time on the contractual date for completion."

[24] On 26 November 2003, Mr and Mrs Di Domenico entered into a contract to purchase a house at 8 Archer Drive, Point Vernon (the "Point Vernon house contract"). The Point Vernon house contract was conditional upon the sale and settlement of the contracts in respect of the land and the caravan park. Settlement was due to be effected later on the same day as the settlement of the land and the caravan park contracts.

[25] By letter from Carswell dated 13 January 2004, arrangements were made for settlement to occur at the offices of Morton & Morton Solicitors, Hervey Bay, ("Morton & Morton) at 1.30pm on Monday 19 January 2004. Morton & Morton were the solicitors for the sellers' mortgagee, Suncorp. The people from that firm involved in this transaction were Andrew List, a partner, and Judy Millward, an articled clerk.

[26] In Carswell's letter of 13 January 2004 to Mr Pyne setting the settlement time as 1.30pm, Carswell included the following statement:

"Notwithstanding that a specific time, date and place for settlement is arranged whether by mutual agreement or otherwise, any such arrangement shall be deemed tentative, and we reserve our clients' right to effect settlement at any time on the day appointed pursuant to the terms of the contract".

[27] The plaintiff pleaded that this represented a variation to the contract between the parties so that settlement could take place after 5.00pm on settlement day. There are a number of reasons why this is not correct. Firstly, the statement is in the form of a reservation of rights not an offer to vary rights. It was consistent with the rights given under clauses 5.1(1) and 6.1 of the contracts. Secondly, even if it were an offer, it was not accepted so as to effect a variation to the agreement between the parties. Thirdly, when read in the context of clauses 5.1(1) and 6.1 of the contracts, it did not reserve a right to effect settlement after 5.00pm. Nor did it act as a representation that the seller reserved the right to settle after 5.00pm. Mr Pyne knew at all relevant times that the contract was liable to be terminated by the seller if settlement did not take place by 5.00pm. The statement was merely a reservation of the right given under the contract to settle at any time between 9.00 am and 5.00pm, notwithstanding the nomination of 1.30pm as the time for settlement.

[28] As the contract was not varied, the legal position in Queensland is quite clear. It was held by the Court of Appeal in Re Ronim Pty Ltd[1] that the rigid regime set by the contract must be respected. Performance tendered after 5.00pm, albeit only by a few minutes, was not in accordance with the contract and, prima facie, entitled the seller to rescind for non-performance by the buyer of an essential term.

[29] On 28 November 2003, Mr Pyne wrote to Carswell seeking confirmation that there would be no tenants at settlement other than on a casual, weekly or monthly basis. He followed up the request by email on 9 December 2003. On 12 January 2004, after Ms Hogbin sent an email to Mr Pyne saying that the sellers would be providing her with a list of current tenants to enable an adjustment to be made for rent, Mr Pyne asked for details of the tenants who would be in residence on settlement day. On 15 January, Carswell sent Mr Pyne a number of documents including a "current list of tenants in caravan park". It is a one page list which was prepared by Mrs Di Domenico giving the site number, surname, date paid to and the usual payment period relating to 26 tenants. It appeared that some paid weekly, some fortnightly and some "periodically" ie one paid on a six monthly basis. Mr Pyne responded by email on 15 January 2004 referring to the warranty in the contract that no tenants would be in occupation other than as monthly or weekly tenants. He said that they proposed to give notice to quit to all tenants immediately following settlement. An hour later Ms Hogbin replied firstly confirming that no tenants would be in occupation other than as monthly or weekly tenants. Secondly she noted that the buyer proposed to give notice to quit to the tenants. She then said, "We specifically request that no one on the purchaser's behalf make it know[n] to the tenants that this is the course proposed until AFTER settlement" [emphasis in original].

[30] On Friday 16 January 2004, MacGillivrays formally instructed Gayler to act as their agents at the settlement. Included in the letter of instruction was a paragraph regarding the payment of funds from Bridgecorp at the settlement. MacGillivrays said they would arrange for funds to be telegraphically transferred to Gayler's trust account on 19 January 2004 and set out the details including the account name, the bank name, the account number and the BSB number. The trust account was at the Pialba branch of the ANZ Bank ("the ANZ trust account"). Also set out in the letter of instruction were the documents that Gayler were to collect on behalf of Bridgecorp. Unfortunately, the ANZ trust account was no longer the trust account operated by Gayler. In August 2003, Gayler had changed its trust account from the ANZ to the National Australia Bank at Pialba ("the NAB trust account").

[31] The solicitors for the buyer's financier, Bridgecorp, were MacGillivrays. The people involved from that firm were Philip Heraghty, a partner, and Mark Lightfoot and Shelley Parsons, solicitors. They were instructed to act in the matter of Bridgecorp's financing of the purchase by Jeppesons Road of the land and the caravan park. Their usual town agents in Hervey Bay were Gayler & Co Solicitors ("Gayler"). Involved from that firm were Don Gayler, a partner, and Sasha Hemsley, a conveyancing clerk.

[32] On 16 January 2004, Mr Pyne told MacGillivrays the details of the cheques required at settlement. The final amounts were subject to a stock take which was to take place before settlement.

[33] On Sunday 18 January 2004, MacGillivrays sent a fax to Gayler setting out that they had arranged for $1,074,915.59 to be telegraphically transferred to Gayler's trust account, repeating the details of the ANZ trust account as previously set out and asking them to draw specific cheques as they had been instructed by their client. MacGillivrays then asked Bridgecorp to telegraphically transfer the money to Gayler's ANZ trust account for settlement on the following day.

[34] On Saturday 17 January 2004, Mr Pyne drove to Hervey Bay. From about 3.30pm to 7.00pm on the following day, Sunday 18 January 2004, he conducted a detailed stock take with the assistance of Anne Luhrmann, who would be managing the caravan park immediately after settlement, and Mrs Di Domenico. The stock take took longer because of the rather hostile attitude of Mr and Mrs Di Domenico. They became even more hostile when Mr Pyne made it clear to them that the buyer did not intend to continue operating the shop. Its operation was a lawful non-conforming use[2] and as such could not be continued without approval of an application to council. Mr Pyne, probably quite correctly, was of the view that such approval was unlikely.

[35] Mr Pyne made a complete handwritten list of all of the items. Mrs Di Domenico took the handwritten list to put in the cost of each item overnight so the total figure for the stock could be agreed upon the next morning. She did not give a copy of the list to Mr Pyne. This is somewhat contrary to the version given in evidence by Mrs Di Domenico. The differences in evidence are unimportant for the resolution of the dispute in this matter but, to the extent there is a difference, I prefer the more careful evidence of Mr Pyne of what did occur. Both Mr and Mrs Di Domenico were unhappy about what was happening, and their recollection has been coloured by that. Further support for Mr Pyne's version can be deduced from the circumstance that the original of page 13 of the list is now missing and there is no copy of it. Had it been copied on the day it was made, it is most unlikely that the copy of that page would also have been lost, quite independently of the loss of the original. All copies of the stock take have page 13 missing although from the figures on the final version it can be seen that Mrs Di Domenico had it when she wrote in the figures on the evening of Sunday 18 January, after Mr Pyne had left. If she had given a copy of the whole of the stocktake to Mr Pyne before he left, as was her evidence, that copy, which would have included page 13, would still be available.

[36] Mr Pyne arrived at the caravan park at 8.15 on the morning of Monday 19 January 2004 to get the appropriate figures for rental adjustment and stock take. At that time Mrs Di Domenico had not yet finished putting the figures in to complete the stock take however, working together, Mr Pyne and Mrs Di Domenico completed the stock take and agreed a figure of $7,400.09 for stock. They then completed the rental and power adjustment resulting in a credit in the buyer's favour of $1,859.88. With the electricity adjustment, the total adjustment in favour of the sellers was $5,740.21 which Mrs Di Domenico said she wanted in a cheque drawn to R & S Di Domencio. Mrs Di Domencio told Mr Pyne that she would telephone Mr Pagliarino to inform him of the adjustment figure. She handed Mr Pyne the keys to the caretaker's cottage and the shop. After Mrs Di Domenico started talking about arrangements for the shop, Mr Pyne said again that the buyer would not be opening the shop because it would not be lawful for it to operate it. Mrs Di Domenico was very unhappy about that. Mrs Di Domenico had assumed until then that the caravan park and shop would still be operating for a time after the sale of the caravan park but then knew with certainty that this would not be the case.

[37] At about 9.00am on Monday 19 January 2004, Mr Pyne advised MacGillivrays that the amount required at settlement had increased due to an amount for stock in trade and so MacGillivrays sent a further facsimile to Bridgecorp requesting them to telegraphically transfer the sum of $1,080,468.80 plus agent fees of $187.00 to Gayler's ANZ trust account.

[38] Mr Pyne telephoned Mr Pagliarino at about 9.45am and told him of the adjustment in favour of the sellers of $5,740.21. Mr Pagliarino had not heard from the sellers and told Mr Pyne that, as he would be in court that afternoon, someone else from Carswell would be attending the settlement. That person was Brosnan Freeman, another solicitor from Carswell.

[39] During the morning of Monday 19 January 2004, at about 10.41am, MacGillivrays again faxed Gayler setting out the amount that would be transferred into their ANZ trust account and giving specific details of the cheques required. The details of the ANZ trust account were again set out.

[40] At 1.30pm Mr Pyne and Mr Freeman attended at the offices appointed for settlement, Morton & Morton at Hervey Bay. Settlement did not take place. Mr Freeman had with him what he believed to be all the documents necessary to hand over at settlement - the issued certificate of title of the caravan park and the release of mortgage granted to Suncorp. The transfer documents were with the buyer and had been stamped. The documents relating to the release of the mortgage over the land were held by Morton & Morton as solicitors for the mortgagee.

[41] At 1.35pm on Monday 19 January 2004, Ms Hemsley, the settlement clerk at Gayler, rang MacGillivrays to tell them that the funds had not arrived in Gayler's trust account for settlement that day. Bridgecorp had made the telegraphic transfer at approximately 1.20pm. Ms Hemsley rang Mr Pyne and told him that the funds had not yet arrived. Mr Pyne told the representatives of Carswell and Morton & Morton that there had been "a hitch with the cheques" and he would let them know when the funds arrived. At that point, Mr Pyne and Mr Freeman left the offices of Morton & Morton.

[42] At 2.50pm on Monday 19 January 2004, as Gayler had not yet received the telegraphic transfer, Ms Hemsley checked the correspondence from MacGillivrays and only then realised that the Bridgecorp funds had been transferred to a trust account which Gayler had previously operated at the ANZ. That account had been closed as Gayler now banked at the National Australia Bank. Ms Hemsley rang Mr Lightfoot at MacGillivrays and told him that the funds had been transferred to an account that had been closed and gave him the details of the NAB trust account. Ms Hemsley then rang the manager of the Hervey Bay branch of the ANZ Bank, Ron Pearce, to see if they could locate and receipt the funds for settlement that afternoon. Bridgecorp were unable to reverse their telegraphic transfer as the funds had already left their bank account. The ANZ were unable to locate the money until it "bounced back" as mismatched funds after close of business on that day. Mr Pearce suggested that Gayler reopen their ANZ trust account to see if the funds "would hit there".

[43] Ms Parsons then telephoned Mr Pyne at about 2.55pm. She told him that the sums had been forwarded to the ANZ trust account which could not be accessed and their investigations had showed that there was nothing further that could be done and that it was very unlikely that any funds would be available for settlement on that day.

[44] A number of telephone calls then occurred between Mr Pyne and Mr Freeman. Mr Freeman made no notes of the telephone calls. On the other hand Mr Pyne did keep notes although they were hurried notes made in between and often after later phone calls. Nevertheless they provide a more accurate record of what occurred than Mr Freeman's memory alone. In any event, the differences in the memory of each of them as to what happened were not significant.

[45] At 3.00pm Mr Pyne phoned Mr Freeman and told him what Ms Parsons had told him and that as it was not the buyer's fault, asked him in the circumstances to obtain the sellers' instructions for a one day extension of settlement. Mr Freeman was aware that Mr and Mrs Di Domenico were intending to use the proceeds of settlement to settle the Vernon Point property so he first rang Lewis and McNamara, the solicitors for the sellers of the Vernon Point property. They told him that they would have to seek instructions but they did not anticipate any problems with granting an extension of one day.

[46] About fifteen minutes later, Mr Pyne called Mr Freeman again. Mr Freeman said he had not yet had an opportunity to speak to his clients to obtain instructions but that he would call back in ten minutes. At 3.25pm Mr Pyne again phoned Ms Parsons who again told him that it was unlikely that the funds would be coming out of the ANZ trust account on that day. Mr Pyne then took the view that the buyer would have to obtain an extension and accordingly he left Hervey Bay to return to the Gold Coast by car. Mr Freeman contacted Mr and Mrs Di Domenico to ask for their instructions. Their instructions were to terminate the contracts if it were possible.

[47] At 3.45pm Mr Pyne had not yet heard back from Mr Freeman about the extension so he called him. Mr Freeman said that his instructions at that stage were to terminate the contracts depending what happened with "his clients' purchase". When Mr Pyne asked what that meant Mr Freeman told him he did not have instructions to say anything else. Mr Pyne was unaware of the arrangements that had been made by the sellers. He did not know that Mr and Mrs Di Domenico had contracted to purchase a house and that the settlement of that property was dependent on the settlement of the caravan park and land contracts. In fact Mr Di Domenico had instructed Mr Freeman to terminate the contracts if the buyer was unable to settle by 5.00pm.

[48] Mr Pyne feared that the sellers would terminate if the buyer could not complete by 5.00pm and told both Mr McDermott and Mr Lightfoot that was what he thought would happen if they were not able to settle by 5.00pm. He believed that time was of the essence and tender of the purchase price after 5.00pm on 19 January would be too late to effect settlement of the contracts.

[49] Gayler then reopened the ANZ trust account and asked the ANZ in Sydney to look for the funds and credit them to their account.

[50] At about 4.00pm, Mr Lightfoot told Ms Hemsley that the funds had been located and that the ANZ bank had sent the misdirected funds back to Bridgecorp's bank account in Sydney. Bridgecorp's bank was now trying to have the funds re-sent to Gayler's now reopened ANZ trust account. The solicitor at MacGillivrays and the conveyancing clerk from Gayler undertook a number of steps to endeavour to ensure that the settlement cheques would be available by 5.00pm.

[51] At about 4.05pm Mr Pyne telephoned Mr McDermott who told him that he had been informed by Bridgecorp that they had done a deal with the bank to fix the situation and that the money was on the way and that the cheques were definitely being drawn that afternoon. Mr Pyne accordingly called Mr Freeman and told him that his instructions now were that the funds were available for settlement that afternoon and as the cheques were being drawn, a new settlement time would be set. He told Mr Freeman that Gayler would be attending on behalf of the buyer. Mr Freeman suggested the settlement time of 4.45pm to 4.50pm and Mr Pyne agreed. Mr Pyne then phoned Ms Hemsley and asked Gayler to act as the buyer's agent on the basis that, as agent for the financier, it was her responsibility to ensure that the Title Deed and releases of mortgage were collected by her at settlement in any event. Ms Hemsley said that she would act as the buyer's agent and telephone Mr Pyne upon settlement.

[52] Ms Hemsley telephoned Ms Millward at Morton & Morton to arrange the settlement at 4.45pm. At first Suncorp said that they would not be able to settle at that time but were then persuaded by Mr List to stay open to allow the settlement to go ahead.

[53] Mr Freeman and Mr Pagliarino, who had returned from court, arrived at the offices of Morton & Morton at about 4.45pm. At about 4.50pm, Ms Hemsley telephoned Morton & Morton and told Ms Millward that her client was walking from the St George Bank in Brisbane to the ANZ Bank Brisbane city branch at that time to deposit the funds for settlement into the re-opened ANZ trust account. She said that the ANZ Bank at Pialba would then draw the cheque and walk it down to the NAB at Pialba who would receipt the monies into Gayler's NAB trust account at which time Ms Hemsley would draw all the bank cheques for settlement. Almost immediately after that, Ms Hemsley left the office to attend at the NAB Pialba to ensure that the bank cheques were drawn. She obtained all of the appropriate bank cheques for settlement. She then walked to the offices of Morton & Morton which were close by. She arrived at 5.05pm.

[54] In the meantime, at about 4.56pm, John Richards of Carswell telephoned Mr Pyne saying that they were waiting for the buyer at the settlement venue. He said that Morton & Morton had agreed that they would settle up until 5.00pm but that 5.00pm was the deadline. Mr Pyne explained to him what was going on and that the cheques were in transit to the settlement venue and should be available at settlement by 5.00pm. As 5.00pm approached, those present in the reception area at Morton & Morton were Mr Freeman, Mr Pagliarino, Mr List and Ms Millward. Shortly after 5.00pm, they all noted the time. Mr Pagliarino rang Mr Pyne and said that it was after 5.00pm, the contracts were terminated and he would confirm that in writing. Mr Pagliarino rang Mr Di Domenico and told him the contracts were terminated.

[55] Ms Hemsley arrived at Morton & Morton at 5.05pm. Mr List told Ms Hemsley that Mr Pagliarino had just left. Ms Hemsley then called Carswell and asked them to come back to settlement. She spoke to an employee at Carswell who arranged to tell Mr Pagliarino to return when he got back to Carswell's office. Ms Hemsley then found out that Mr Pagliarino had in fact elected to terminate the contract on behalf of his clients. Mr Pagliarino accordingly did not return to Morton & Morton to attend to settlement.

[56] At 5.21pm Mr Pagliarino caused a letter to be faxed to the lawyers for Jeppesons, confirming the termination of the contracts because of the failure of the buyer to attend by 5.00pm on the due date for settlement.

[57] On the following day, 20 January 2004, another attempt was made by the buyer and the buyer's financier to settle the contract but there was no attendance by anyone on behalf of the sellers. That was hardly surprising as, at 7.35am on that morning, Mr Pagliarino confirmed by letter to Mr Pyne that the contracts had been terminated and claiming the deposits paid. On 20 January 2004, Mr and Mrs Di Domenico elected to terminate the contract for the purchase of the Point Vernon land because of the non-fulfilment of the special condition concerning the sale of the caravan park and land.

[58] Mr and Mrs Di Domenico returned to the caravan park and have remained there since, operating the caravan park and shop. The buyer has been at all times since 5.05pm on 19 January 2004, ready, willing and able to complete the purchase. On 21 January 2004, the plaintiff lodged caveats over the land and the caravan park. On 31 May 2004, Mr and Mrs Di Domenico received a written offer from an unrelated buyer to buy the land for $1,100,000.00 and the caravan park for $1,500,000.00. It can be seen that after they signed the contracts to sell the land and the caravan park to the plaintiff, the value of both has markedly increased. On 3 June 2004, the council granted approval of the plaintiff's application to sub-divide the land. A valuation as at 19 January 2004 prepared for the purposes of this litigation, which is accepted by both parties, showed the value of the caravan park as a raw site at $1,060.000.00, the value of the land as $1,085,000.00, the added value of the approval subsequently given over the land as $225,000.00 and the developer's profit foregone realisable in November-December 2004 at $736,418.00.

[59] The plaintiff submitted that the sellers were not themselves ready, willing and able to settle the contracts and so were not able to lawfully terminate. The basis for this argument is that the sellers or their representatives did not have all the documents required to settle the contracts. In particular, they point to clause 5.3(d)(ii) of each contract. It is common ground that there were no seller's copies of tenancy agreements as Mr and Mrs Di Domenico were unaware of the legislative requirement in s 39 of the Residential Tenancies Act 1994[3] to have such agreements. Neither were any bonds paid. There were therefore no documents which needed to be handed over in accordance with clause 5.3(d)(i) or (iii) of the contracts. Indeed the sellers seemed quite unaware of the many requirements of them as caravan park proprietors under the Residential Tenancies Act. Mrs Di Domenico suggested in evidence that she thought compliance with the statutory regime might be voluntary.

[60] However, the plaintiff argued that there should have been documents which fitted the description found in clause 5.3(d)(ii) ie "a notice to each tenant advising of the sale in the form required by law". The plaintiff submitted that these notices were the notices of attornment required by s 148(1)(b) of the Residential Tenancies Act which provides:

(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[4] 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.

(3) However, if an amount for rent is unpaid when the attornment notice is given, the amount may be recovered by the former lessor as a debt owing to the former lessor by the tenant.

(4) Subsection (1)(a) applies whether the transfer is proposed to be made with vacant possession or subject to the tenancy."

[61] This raises several questions. The first is whether or not the notices required by clause 5.3(d)(ii) were the notices referred to in s 148. The second is whether, if so, a failure to produce the notices meant that the sellers were not able to terminate the contracts because they were not themselves ready, willing and able to complete the contracts in accordance with their terms.

[62] The particular factual context of this case was that neither party nor any of their legal representatives adverted to this clause at the time or gave any thought to what it might require. It was not regarded as essential, or even important, by anybody.

[63] Mr Freeman deposed in his affidavit that if the buyer's representative had requested the production of attornment notices at settlement he could have produced them. He said that the notice of attornment required by s 148(1)(b) is one quickly capable of being drawn down from the Residential Tenancy Authority ("RTA") website. He said he was familiar with the website of the RTA and could have quickly produced the form from that website. Mr List has deposed that had Mr Freeman brought to his attention that notices of attornment were required pursuant to s 148 of the Residential Tenancies Act, he would have given Mr Freeman access to both "a computer with internet access and a photocopy [sic] to remedy that deficiency."

[64] Mr Freeman deposed that the relevant form is RTA Form 5. He had with him at settlement, a list of the tenants and their site numbers and deposed that he could have completed one form, inserting the common information, copied the form and then inserted into each form the individual information. He estimated that this would have taken about ten minutes as he knew the equipment to undertake this activity was available to him at the offices of Morton & Morton. Had the information in his possession not have been sufficient, then he could have contacted Mr Di Domenico to obtain the additional details required. Although I believe Mr Freeman has underestimated the time which would be required to produce the notices, if the buyer had required their production, it could most likely have been done before 5.00pm on the day of settlement.

[65] The defendants argued at trial that it was not in fact necessary to hand over notices of the kind found in Form 5 under the contract. The form itself says, "Please use block letters and enter only tenants who are bond contributors". However, the requirement to give notice is found in s 148 which is not so limited. In any event, any permanent tenants should have fallen within this category. The landlord cannot avoid a statutory responsibility by failing to comply with another statutory responsibility. Although the forms are required to be given by the sellers to the tenants that does not avoid the sellers' duty to provide them to the buyer pursuant to the sale of land contract.

[66] In my view, although the language is by no means a perfect fit, the notices referred to in s 148(1)(b) of the Residential Tenancies Act, which are found in Form 5, are the notices which must be produced at settlement pursuant to clause 5.3(d)(ii). They provide a protection to the buyer and residential tenants as they make clear that the lessor has changed and to whom rent must be paid. The requirement to produce them at settlement assures the buyer that the attornment notices under the Residential Tenancies Act have been completed and signed by the seller/lessor. Further they assist the buyer to comply with s 116 of the Residential Tenancies Act which provides that if the lessor's name and address change then the lessor must give written notice to the tenant of the change within 14 days after the change.

[67] In this case, no attornment notices had been prepared nor given to the tenants as required under s 148(1)(b) of the Residential Tenancies Act.

[68] It is common ground that no request for the notices required under clause 5.3(d)(ii) would have been made on behalf of the buyer at settlement. However the sellers' obligation to produce such documents at settlement is not dependent on a request being made by the buyer. The obligation is found in the contract. The point is raised to test whether the sellers were themselves ready, willing and able to complete at the time set for completion. At the time for settlement, the sellers did not have the required notices but could have produced them in adequate time so that they would not have been in breach.[5] The buyer would, however, have settled without the notices of attornment unless Mr Pyne had realised that they should have been provided, which he did not.

[69] The question is whether the sellers' failure to have the attornment notices at the time fixed for settlement deprived them of the right to terminate because they were not themselves ready, willing and able to settle. As de Jersey CJ held in Sattel & Ors v The Proprietors Be Bee's Tropical Apartments Building Units:[6]

"It is trite law that a party who is not ready willing and able to perform a contract is not entitled to terminate for the other party's breach (DTR Nominees Pty Ltd v Mona Homes Pty Ltd [1978] HCA 12; (1978) 138 CLR 423 at 433, Foran v Wight [1989] HCA 51; (1989) 168 CLR 385 at 398-402, 451; Segacious Pty Ltd v Fabrellos [1991] 1 Qd R 471 at 478)."

[70] In an action for specific performance, a plaintiff is ordinarily required to show that he or she is ready, willing and able to perform. Much of the judicial authority on the meaning of "ready, willing and able" or "ready and willing" occurs in this context. The courts have not taken a narrow view of the expression. Barwick CJ held in Mehmet v Benson:[7]

"The question as to whether the plaintiff has been and is ready and willing to perform the contract is one of substance not to be resolved in any technical or narrow sense ...

Of course, the plaintiff must not by his unreadiness or unwillingness to perform have disowned his obligation to do so, or abandoned his rights to the benefit of the contract. But it is the essential terms of the contract that he must be ready and willing to perform."[8]

[71] In Rawson v Hobbs[9] Dixon CJ held that:

"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."[10]

A party, who at the time for performance is unable to perform an essential term, demonstrates an absence of readiness that goes to the heart of the agreement.

[72] These and other authorities led Mason J to conclude in Green v Sommerville[11] that the breach of a term, which is not an essential term, does not disentitle a party to specific performance of a contract on the ground that he or she was not ready and willing.

"It is well settled that a plaintiff in a suit for specific performance is not required to show that he has strictly complied with all of his obligations under the contract; it is enough that he has performed and is ready and willing to perform the substance of the contract."

[73] The contractual obligation to produce the attornment notices could not, however, be said to be an essential term of the contracts. The test of essentiality was set out by Jordan CJ in Luna Park (NSW) Ltd:[12]

"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."

[74] The promise to produce the attornment notices was not, in these circumstances, of such importance to the buyer that he would not have entered into the contract without that promise. In fact, it was of no moment to either party.

[75] The failure to produce the attornment notices was not therefore a breach of an essential term. The sellers would have been entitled to specific performance had the buyer refused to complete.[13] A failure to comply with a nonessential term does not mean that a party is not ready, willing and able to complete the contract.

[76] In this case, the sellers were in all respects ready, willing and able to complete the contracts except for their inability to immediately perform a non-essential term. That inability could have been swiftly remedied and, in any event, as the authorities show, it did not prevent the sellers from being ready, willing and able.

[77] When the buyer was not able to perform an essential term of the contract, the sellers were entitled to accept the repudiation and bring the contracts to an end. The contracts were therefore validly terminated.

[78] Notwithstanding the circumstances, the plaintiff sought specific performance of the contracts. The plaintiff also sought relief against forfeiture. But as was held by the High Court in Tanwar Enterprises Pty Ltd v Cauchi,[14] relief against forfeiture is not available in these circumstances. Once contracts for the sale of land have been validly terminated, the relief available to the buyer is specific performance rather than relief against forfeiture. This is because the buyer has no interest in the land so as to attract relief against forfeiture.[15] A buyer who has breached an inessential term may be granted specific performance.[16] In the usual case, however, a buyer who has breached an essential term, will not be granted specific performance.

[79] If the contract has been lawfully terminated by the sellers, then the remedy of specific performance is only available to the buyer if it is unconscientious for the sellers to rely on their contractual right to terminate. The equitable remedy of specific performance is not available merely "to reshape contractual relations into a form the court thinks more reasonable or fair where subsequent events have rendered one side's situation more favourable."[17]

[80] The particular unconscientious behaviour here must be the reliance by the sellers on the breach of the essential time stipulation as founding their right to terminate. The question to be answered is why the sellers ought not to be heard to assert the exercise of their legal right to terminate in answer to the claim by the buyer for specific performance.[18] The fact that to allow the sellers to exercise their legal rights will cause hardship to the buyer is no answer.

[81] While the majority of the High Court in Tanwar[19] preferred the dissenting judgment of Mason CJ in Stern[20], they nevertheless did not agree with his view that equity intervenes only where the seller has, by the seller's conduct, caused or contributed to a circumstance rendering it unconscionable for the seller to insist on its legal rights. Cases falling within the categories of mistake or accident may call for the intervention of equity but may not necessarily be the result of activity by the seller.[21] However, where mistake or accident are not involved, it is necessary for the buyer to point to the conduct of the seller as having in some significant respect caused or contributed to the breach of the essential time stipulation.[22] It is not, however, necessary for the buyer to show that the circumstances were "exceptional" before equity will intervene. The majority in Tanwar[23] referred with approval to the joint judgment of Deane and Dawson JJ in Stern[24] which explained the approach of Mason and Deane JJ in Legione v Hateley[25]:

"Mason and Deane JJ were not saying that there must be unconscionable conduct of an exceptional kind before a case for relief can be made out. Rather, what was being said was that a court will be reluctant to interfere with the contractual rights of parties who have chosen to make time of the essence of the contract. The circumstances must be such as to make it plain that it is necessary to intervene to avoid injustice or, what is the same thing, to relieve against unconscionable - or, more accurately, unconscientious - conduct."

[82] In this case, the circumstances were that the buyer's incapacity to comply with the essential term as to time was not caused or contributed to by the sellers but was caused by the wrong direction of funds by the buyer's financier's solicitors. This was not a "mistake" in the sense in which that term is used in equity. There was no error in the documents which might call for rectification;[26] the contracts were not entered into as a result of a mistake;[27] there was no transfer of moneys or assets by mistake which required the intervention of equity to have the transfer reversed;[28] nor was there a concluded contract entered into under a mutual or common mistake.[29]

[83] Nor was it an "accident" in the equitable sense. The use of the term "accident" was considered by the majority in Tanwar where their Honours held:[30]

"The jurisdiction with respect to accident was recognised at a time before the development of any settled body of equitable principles. The point is well made by Professors Keeton and Sheridan[31]:

'Accident' was a vague term which covered many situations, in their nature unforeseen, and it could, in particular situations, shade off into fraud. The law of mistake, particularly in relation to contracts and conveyances, is included under this head, and it led in turn to the development of the equitable rules governing the rectification of contracts and other instruments, and the rescission of documents of all kinds.'

What then remains as the subject-matter of accident in modern equity? In Baird v BCE Holdings Pty Ltd[32], Young J referred to various writings on the subject which distinguish mistake as supposing an operation of the will of the agent in producing the event, albeit by reason of erroneous impressions on the mind. Spence, writing in 1846, said that the kinds of accidents or cases of extremity which might be relieved against were only to be ascertained from an examination of the cases.[33] He instanced forfeiture and penalties. Other instances include the accidental diminution of assets in the hands of an executor, lost evidence and the defective execution of powers of appointment[34], all far from the present case.

However, the learned writers on the subject emphasise and put to one side those situations where the event which has come to pass is one for which an express exculpatory provision might have been made, but was not sought or was not agreed to, and where to relieve against its consequences after it has occurred would deprive the other party to the contract of an essential right.[35] In particular, equity will not relieve where 'the possibility of the accident may fairly be considered to have been within the contemplation of the contracting parties'.[36] Story wrote:[37]

'And this leads us naturally to the consideration of those cases of accident in which no relief will be granted by Courts of Equity. In the first place, in matters of positive contract and obligation created by the party (for it is different in obligations or duties created by law), it is no ground for the interference of equity that the party has been prevented from fulfilling them by accident, or that he has been in no default, or that he has been prevented by accident from deriving the full benefit of the contract on his own side. ... The reason is, that he might have provided for such contingencies by his contract if he had so chosen; and the law will presume an intentional general liability where he has made no exception.'[footnotes omitted]"

[84] It does appear that this is a case in which there could have been provision in the contract to exculpate such a delay. Furthermore, the negligence of the buyer's financier's solicitors was not an "accident". These circumstances are not sufficient to invoke the assistance of equity to grant specific performance notwithstanding the breach of the essential term as to time by the buyer and the sellers' reliance upon that breach to terminate. It was not unconscientious of the sellers to rely on their legal rights to terminate the contracts once the essential term as to time was breached by the buyer. The contract was clear and the outcome of its breach, while unfortunate, was predictable. The plaintiff must find its remedy, if it has one, elsewhere. It is not entitled to specific performance of the contracts and its claim must be dismissed. The defendants are entitled to the relief sought in their counterclaim.

(a) the contract dated 22 May 2003 in respect of Lot 1 on RP 142419 County March Parish Vernon in respect of 1.012 hectares being all that land contained in Title Reference 15306101; and

(b) the contract dated 22 May 2003 in respect of Lot 102 on RP 891898 County March Parish Vernon containing 2.423 hectares being all that land contained in Title Reference 50084181;

were properly terminated by the Defendants by notice given on 19 January 2004.

(a) $20,000.00 in respect of contract concerning Lot 1 on RP 142419;

(b) $20,000.00 in respect of contract concerning Lot 102 on RP 891898.

(a) 707401713 in respect of Lot 1 on RP 142419 County March Parish Vernon containing an area of 1.012 hectares relating to title reference 15306101; and

(b) 707401709 concerning Lot 102 on RP 891898 County March Parish Vernon containing an area of 2.423 hectares concerning title reference 50084181;

be removed pursuant to the provisions of s 127 of the Land Title Act 1994.

[1] [1998] QCA 444; [1999] 2 Qd R 172.

[2] Di Domencio v Hervey Bay City Council [2000] QPE 021.

[3] The RTA has created Form 18b for these agreements.

[4] An attornment is an acknowledgment of the tenancy relationship between the tenant and new lessor.

[5] See Dainford Ltd v Yulora Pty Ltd [1984] 1 NSWLR 546 per Mahoney JA at 551; Lohar Corp Pty Ltd v Dibu Pty Ltd (1976) 1 BPR [97014] at 9184.

[6] [2001] QCA 560 at [45]; [2001] QCA 560; [2002] 2 Qd R 427 at 439

[7] [1965] HCA 18; (1964) 113 CLR 295 at 307-308.

[8] See also Darter Pty Ltd v Malloy [1993] 2 Qd R 615 at 621.

[9] [1961] HCA 72; (1961) 107 CLR 466 at 481.

[10] See also Foran v Wight [1989] HCA 51; (1989) 168 CLR 385 at 409, 425, 453.

[11] [1979] HCA 60; (1979) 141 CLR 594 at 610.

[12] (1938) 38 SR (NSW) 632 at 641-642.

[13] Mehmet v Benson [1965] HCA 18; (1965) 113 CLR 295 at 307.

[14] [2003] HCA 57.

[17] Stern v McArthur [1988] HCA 51; (1988) 165 CLR 489 at 503 per Mason CJ quoted in Tanwar at [37].

[25] [1983] HCA 11; (1983) 152 CLR 406 at 449.

[26] cf White v White (1872) 15 LR Eq 247.

[27] Neild v Davidson [1890] NSWLawRp 53; (1890) 11 LR (NSW) Eq 209.

[28] Meagher, Gummow and Lehane's Equity Doctrines and Remedies (4th ed) at [14-005] - [14-025].

[29] Goldsborough Mort & Co Ltd v Quinn [1910] HCA 20; (1910) 10 CLR 674.

[32] (1996) 40 NSWLR 374 at 385-386.

[33] The Equitable Jurisdiction of the Court of Chancery, (1846), vol 1 at 628.

[34] Snell's Equity, 30th ed (2000) at 603-606.

[35] Bispham, The Principles of Equity, 6th ed (1903), SSSS175, 176; Merwin, The Principles of Equity and Equity Pleading, (1895), SS419.

[36] Smith, Principles of Equity, 4th ed (1908) at 243-244.

[37] Commentaries on Equity Jurisprudence, 13th ed (1886), vol 1, SS101.