Question 1
10The amended statement of claim pleads the contract, the payment of the deposit, the completion date of 30 December 2011, the term that if completion did not take place by 30 December 2011 for any reason not attributable to the plaintiff, the defendants were to pay interest at 10 per cent on the balance purchase price less half of the deposit from 31 December 2011 until completion, and if completion did not take place by 30 December 2011 then the purchaser would pay the plaintiff's liability for land tax for the 2012 tax year calculated as if the land was subject to a special trust. Paragraphs 4A to 7B then proceed as follows:
"4A It was a further essential term of the agreement that the defendants would complete the agreement and would not renounce their obligations thereunder or evince any intention no longer to be bound thereby.
4B It was a further term of the agreement that:
i. In the event the defendants did not comply with the agreement in an essential respect, the plaintiff was entitled [to] terminate the agreement by serving a notice of the termination upon the defendants; and
ii. After that termination the plaintiff could inter alia:
a. Keep or recover the deposit (to a maximum of 10% of the purchase price); and
b. Sue the defendants (where the plaintiff has resold the property under a contract made within 12 months after the termination) to recover:
1. The deficiency on the resale (with a credit for any of the deposit kept or recovered and after allowance for any capital gains tax or goods and services tax payable on anything recovered under this claim); and
2. The reasonable costs and expenses arising out of the defendants' non-compliance with the agreement and or the resale or any attempted resale.
Particulars
Clauses 9, 9.1 and 9.3 of the agreement
5 In breach of the agreement the defendants failed to complete the sale by 30 December 2011 and thereafter have failed and refused to complete the purchase of the property.
6 On 30 December 2011 and thereafter the defendants have informed the plaintiff of their intention not to proceed to completion of the agreement.
Particulars
i. Email from David Carr (solicitor for the defendants) to Michael Osborne (solicitor for the plaintiff) sent at 10.12 am on 30 December 2011.
ii. Letter from David Carr (solicitor for the defendants) to Michael Osborne (solicitor for the plaintiff) dated 4 January 2012.
iii. Email from Toni Galafassi to Nick Kelly (the plaintiff's husband) sent at 8.13am on 24 February 2012. And
iv. In other correspondence.
6A Further the defendants have by their conduct disabled themselves from their performance of the agreement with the plaintiff by entering into an agreement for purchase of a residential property with another vendor.
Particulars
Email from Toni Galafassi to Nick Kelly (the plaintiff's husband) sent at 8.13am on 24 February 2012.
7A In the premises the defendants have by their conduct and in the circumstances pleaded in paragraphs 1, 2, 4A, 5, 6 and 6A of this Amended Statement of Claim, failed to comply with the agreement in an essential respect and repudiated the agreement and their obligations thereunder.
7B On or about 24 April 2012 and in reliance on the defendants' non-compliance with the agreement and continued, persistent and unretracted repudiation thereof, the plaintiff terminated the agreement."
11In their defence the defendants, as to the interest and land tax provisions, state that the obligation was conditional upon completion taking place which it has not. In reply to paragraph 7A and 7B of the amended statement of claim the defendants plead as follows:
"7A The defendants deny paragraph 7A of the Amended Statement of Claim and say:
a) at no time did the plaintiff issue a notice to complete pursuant to clause 15 of the agreement or otherwise;
b) any failure by the defendants to complete the sale by 30 December 2011 was not a failure by the defendants to comply with the agreement in an essential respect;
c) if (which is denied) the plaintiff had a right to terminate the agreement at or prior to 17 April 2012, the plaintiff elected to treat the agreement as remaining on foot including by filing a Statement of Claim on 17 April 2012 seeking specific performance of the agreement;
d) after the plaintiff's election there was no basis for regarding the agreement as repudiated by the defendants where the plaintiff did not fix a further time that was of the essence of the agreement by issuing a notice to complete or otherwise;
e) further, or in the alternative, by filing a Statement of Claim on 17 April 2012 seeking specific performance of the agreement the plaintiff waived or abandoned its right to terminate based on conduct of the defendants prior to that date.
7B As to paragraph 7B of the Amended Statement of Claim the defendants:
a) admit that on or about 24 April 2012 the plaintiff purported to terminate the agreement;
b) repeat sub-paragraphs (a) to (e) of the previous paragraph and say that the purported termination by the plaintiff was wrongful and itself amounted to a repudiation of the agreement by the plaintiff;
c) admit that the agreement has been terminated by reason of the acceptance by the defendant of the wrongful repudiation by the plaintiff;
d) otherwise deny the paragraph."
12It is not argued, or at least not strongly, that the commencement of proceedings for specific performance is an election which precludes a subsequent claim for damages for breach. It is perfectly clear that it does not. Cases such as Holland v Wiltshire (1954) 90 CLR 409 and Ogle v Comboyuro Investments Pty Ltd (1976) 136 CLR 444 make that clear, as do the texts such as J W Carter, Carter's Breach of Contract, LexisNexis, 2011 at [10-57] to [10-58] and R P Meagher, J D Heydon and M J Leeming, Meagher Gummow & Lehane's, Equity: Doctrines & Remedies, LexisNexis, 2002, 4th ed at [20-265].
13What is argued by the defendant is that while election to commence proceedings for specific performance does not prevent a subsequent claim for damages for breach of contract, the election amounts to a waiver of rights existing up to that time to terminate for repudiation, so that it is necessary for there to be further repudiatory conduct to bring about a right to terminate. I will come back to this but will say something about it now. While there are some passages in Ogle v Comboyuro Investments Pty Ltd which might support that conclusion, I do not think a complete reading of it does so. But in any event in this case the defendants made it quite clear, in correspondence after service of the summons claiming specific performance, that they could not, and therefore would not, complete. The fact the matter subsequently proceeded to pleadings is not I think some new act so as to preclude reliance on past repudiatory conduct, and Ogle v Comboyuro Investments Pty Ltd does not suggest that a continuing refusal to complete is not a continuing repudiation, particularly as in this case the purchasers after the summons was issued made it clear they could not complete and would give the letter advising of this in evidence if the claim were continued. I would have thought that the earlier statement of inability to complete, the stated continuation of this even after the specific performance proceedings were commenced, and the presumption of a continuing position that they remained unable to complete was a continuing repudiation which the vendor could accept and move to terminate. There is no evidence at all from the purchasers to counter this.
14Next it is argued that no notice to complete was served and this was a pre-requisite of to a right to terminate. Clause 34 of the contract was as follows:
"34 COMPLETION, LIQUIDATED DAMAGES AND NOTICE TO COMPLETE
34.1 Completion must occur on or before 3.30 p.m. on the completion date.
34.2 If completion does not take place on or before the completion date for any reason not solely attributable to the vendor the purchaser must pay to the vendor interest at a rate of 10% per annum calculated on a daily basis on the price (less half the deposit actually paid) for the period from but excluding the completion date to and including the actual date of completion. It is an essential provision of this contract that any interest be paid on completion. The purchaser agrees any interest payable pursuant to this additional condition represents a genuine pre-estimate of the liquidated damages likely to be suffered by the vendor as a result of completion not taking place on or before the completion date. The vendor's right to the payment of interest is in addition to and does not restrict any other rights of the vendor under this contract.
34.3 A party entitled to serve a notice to complete may serve a notice requiring completion of this contract on a day being not earlier than 14 days after the date of service of the notice. The parties agree the period of 14 days after the date of service of the notice is sufficient to make time the essence of this contract.
34.4 If a notice to complete is served on the purchaser the purchaser must as an essential condition of this contract pay to the vendor on completion an amount of $220 on account of the vendor's costs in preparing and serving the notice."
15In some circumstances it may be correct that a notice to complete is required, but I do not consider that special condition 34 requires this in all circumstances. Special Condition 34.3 sets out one means of bringing a contract to an end if termination follows non-compliance with the notice, but that does not mean that if there has been a clear repudiation by a party that cannot be accepted and relied on as a fundamental breach. The law does not require something to be done which is purposeless. For instance, it does not require the vendor to attend an appointment for settlement when the purchaser has indicated that he or she will not be attending and is unable to settle.
16It is necessary to detail some further matters. Mr Carr, the solicitor for the purchasers, advised the plaintiff's solicitor on 30 December 2011 that the purchasers "will not be able to proceed with the purchase of the above". Mr Collier then sent an email on 31 December 2011 to the purchasers pointing out that the risk to them if the purchase was not settled. They sent an email back to him saying inter alia "we feel sick about this, you and vendors nothing but great and we apologise profusely". The vendor's solicitor sent a facsimile to the purchasers' solicitor on 3 January 2012 stating that the vendor did not accept the repudiation and proposed to apply for specific performance. The solicitor for the purchasers responded to this stating that the purchasers were not able to sell a property they owned so that completion was not possible and compliance with an order for specific performance would not be possible. The letter stated that it would be relied upon on any question as to costs and that it was incumbent on the vendor to "minimise damages and mitigate their position".
17On 20 January 2012 a summons for specific performance was filed. On 24 January 2012 the purchasers sent an email to Mr and Mrs Kelly again apologising and making it clear that they did not have the money to complete, stating that their Bronte property had been sold for less than expected, that there was only one purchaser who would not exchange until she had sold her Bronte home, and that they had in effect swapped houses and made an additional payment to the purchaser of their house. Whether this sale happened before or after the letter of Mr Carr of 4 January 2012 saying the purchasers were unable to sell is not clear.
18From about the middle of January 2012, Mr Collier began to show other potential purchasers over the property. I will come back to that when dealing with mitigation. As soon as the price was agreed with Mr Ball, the notice of termination was sent. That notice was in the following terms:
"In view of your failure to complete the contract for sale of land for the Property between Susan Kelly as vendor and you as purchaser dated 30 September 2011 ('contract'), and your advice on 30 December 2011 that you would not complete the contract, and your further advice in your letter dated 4 January 2012 that you could not specifically perform the contract, the vendor elects to treat your conduct as a repudiation. The vendor accepts that repudiation and hereby terminates the contract."
19No defence was filed to the original statement of claim. An amended statement of claim was filed on 6 June 2012 seeking declarations as to repudiation and termination and damages for breach pursuant to clause 9.3.1 of the contract. In addition, interest was sought from 25 April 2012 together with an order that the defendants do whatever is necessary to authorise the agent to account for the deposit moneys. This last order is not opposed if there has been a valid termination by the vendor.
20The question then is whether there has been a repudiation that continued up to termination and whether it is necessary for valid termination that some fresh act of repudiation has occurred after the commencement of the proceedings for specific performance. I should say that according to the texts I have mentioned, Professor Carter says that proceedings for specific performance and damages can be brought in the one action, and the court can hold that the plaintiff is entitled to succeed on either, namely, an order for specific performance or a declaration of a right to terminate for repudiation, and then the plaintiff must elect (Carter at [10-58]). The authors of the fourth edition of Meagher, Gummow & Lehane's Equity: Doctrines and Remedies do not go so far as that: rather, they say (at [20-265]) that it was held in Ogle v Comboyuro Investments Pty Ltd that a vendor having a suit for specific performance did not abandon legal rights to damages for breach if "the purchaser, after the institution of the proceedings, either commits a breach of an essential term of the contract, or otherwise evinced an intention no longer to be bound by the contract". I turn to this.
21In Holland v Wiltshire the High Court was dealing with a situation where a vendor had pressed a purchaser to settle after a settlement date had passed. The vendor in that case had not accepted a clear repudiation of the contract conveyed by the purchaser's solicitor and had insisted on performance. The following appears in the judgment of Kitto J (at 420-421):
"A second opportunity for the vendor to determine the contract arose when the purchasers' solicitor informed him that Mr Holland (implying Mrs Holland also) would not go on with the contract. But the next step he took was to give the purchasers the notice of 17 March. This notice did not accept the repudiation; it ignored it and insisted upon the contract being performed. Beyond a peremptory demand for completion by 28 March, there was nothing in it but a warning that failure by the purchasers to complete by that date would be treated as a breach of contract for which a legal remedy would be sought. After this clear election, the right of the vendor to end the contract because of the repudiation conveyed by the solicitor was plainly gone.
The express repudiation however, was only one incident in a course of conduct by which the purchasers confronted the vendor with a clear and continuing refusal to perform the contract. Even if the refusal conveyed by the solicitor had never been given, it might well have been that the inference would have arisen from the whole course of the matter that the purchasers were in truth refusing to proceed. Delay or neglect without more, if continued long enough, may amount to a refusal; and the other party is not bound to allow an unlimited time after the day named for performance of the contract: De Soysa v De Pless Pol (1912) AC 194, at pp 202, 203; see also Forslind v Bechely-Crundall (1922) SC (HL) 173, at pp 179, 190, 191; Rhymney Railway v Brecon & Merthyr Tydfil Junction Railway (1900) 69 LJ Ch 813, at p 818. So here, the vendor might well contend, if he needed to do so, that in view of the delay of which the purchasers had been guilty before 17 March, their continued failure to complete within the time fixed by the notice of that date amounted to an intimation of their intention to have no more to do with the purchase, so that thereafter the vendor was in a position to put an end to the contract. But however that may be, it is at least clear that the express refusal through the solicitor to go on with the matter, though the vendor lost by his election the right to terminate the contract by reason of it, remained as a fact in the history of the matter and gave an unmistakeable colour to the continued inactivity of the purchasers after receiving the vendor's ultimatum. The only possible inference was that the purchasers were refusing, deliberately and finally, to complete the purchase. Consequently, when 28 March had gone by, the contract unquestionably stood repudiated by the purchasers, and the vendor, if his patience should become exhausted at any time while the repudiation continued, was entitled to treat the contract as no longer binding upon him: Cort v The Ambergate, Nottingham & Boston & Eastern Junction Railway Company (1851) 17 QB 127, at p 148 (117 ER 1229, at p 1237). The case was similar to that with which Lindley J was dealing when he said in Byrne v Van Tienhoven (1880) 5 CPD 344:
'It was contended that by pressing the defendants to perform their contract the plaintiffs treated it as still subsisting and could not treat the defendants as having broken it, and a passage in Mr Benjamin's book on Sales, p 454, was referred to in support of this contention. But, when the plaintiffs found that the defendants were inflexible, and would not perform the contract at all, they had, in my opinion, a right to treat it as at an end and to bring an action for its breach. It would indeed be strange if the plaintiffs by trying to persuade the defendants to perform their contract were to lose their right to sue for its nonperformance when their patience was exhausted. The authorities referred to by Mr Benjamin (viz, Avery v Bowden (1855) 5 El & Bl 714 (119 ER 647) and others of that class), shew that as the plaintiffs did not, when the defendants first refused to perform the contract, treat that refusal as a breach, the plaintiffs cannot now treat the contract as broken at the time of such refusal. But I have found no authority to shew that a continued refusal by the defendants to perform the contract cannot be treated by the plaintiffs as a breach of it by the defendants' (1880) 5 CPD 344, at p 350."
22This passage was referred to and apparently approved by the majority of the High Court in Ogle v Comboyuro Investments Pty Ltd at 458. There is a similar statement in the judgment of Fullagar J in Carr v J A Berriman Pty Ltd (1953) 89 CLR 327 at 349.
23Ogle v Comboyuro Investments Pty Ltd makes it clear that a claim for specific performance is not an election against a right to sue for damages; that although the commencement of an action for specific performance and relying on breach of an essential term of a contract may prevent the subsequent termination (in the case called rescission) in reliance on such breach (at 457-458); if the failure to settle at all amounted to a repudiation of the contract, as distinct from breach of an essential term, then such continued long failure can amount to a refusal to be bound (at 458).
24Thus, the joint judgment continues (at 458):
"In this particular context there is no difference in consequence between regarding the conduct subsequent to the actual breach as a further breach of the contract and regarding it as a refusal to be bound by the contract and consequently a repudiation thereof."
The judgment goes on to say that where there is a time fixed for completion which had become an essential term of the contract and the vendor elects to sue for specific performance rather than to terminate:
"...there will not usually be a basis for regarding the contract as repudiated by a purchaser until a further time has been fixed in a way that shows an intention on the part of the vendor to make that further time of the essence of the contract ...
Thus although mere delay will be no more than an omission to remedy the past breach which has been waived as a ground for rescission, there are cases where the purchaser by further unreasonable delay or by a further act expressly evinces an intention no longer to be bound by the contract. Either the further delay or the further act may constitute a repudiation of the contract."
25I have come to the conclusion that there was a clear continuing act of repudiation by the purchasers who had indicated they could not complete, that they had no intention of completing, and they had in fact sold their property at Bronte and bought another property which, on the basis of their evidence, put it beyond their powers to complete. In those circumstances, I find that the purchasers repudiated the contract, that the vendor was entitled to terminate and did so, and thereupon is entitled to seek damages for breach.