By a Summons filed on 15 June 2021 the plaintiff purchaser seeks a declaration that a contract for the sale of a unit in Enfield entered into the with the defendant vendor is valid and enforceable. The plaintiff also seeks an order in the nature of specific performance of the contract, and orders ancillary thereto.
The defendant resists the plaintiff's claims primarily on the ground that the contract was validly terminated pursuant to clause 9 of the contract following the plaintiff's breach of an essential term of the contract.
At the hearing, the plaintiff relied upon the affidavits of her solicitor, Seoghohn Yun, of 11 June 2021 and 21 September 2021. The defendant relied upon the affidavit of her solicitor, George Li, of 16 September 2021. There was also a statement of agreed facts which became exhibit A. The statement of agreed facts dealt with one particular aspect of the matter. There was no cross-examination of any witness.
The salient facts may be stated fairly briefly as follows. The contract for sale was entered into on about 9 February 2021. The purchase price for the unit was $600,000 (plus GST if applicable) with a deposit of $60,000. There is no dispute that the deposit was duly paid by the plaintiff.
The contract took the form of the Law Society/Real Estate Institute standard form (2019 edition), as amended and supplemented by a number of special conditions. The date for completion stated on the front page was "90 days after the contract date" of 9 February 2021. That is, I think, 10 May 2021. By Special Condition 33(g) the completion date was stated to be essential.
Special Condition 56 of the contract provided:
The purchaser must not register any caveat against any of the Certificate of Title relating to the Land or Property notifying its interest under the Contract. This is an essential term of the contract.
As will be seen, the defendant relied upon an asserted breach of that Special Condition by the plaintiff to justify her termination of the contract. The termination was effected pursuant to printed clause 9 which provides that if the purchaser does not comply with the contract in an essential respect, the vendor can terminate by serving a notice.
Although the contractual date for completion was 10 May 2021, and was stated to be essential, the plaintiff requested that settlement occur on 21 May 2021. The defendant was apparently willing for that to become the completion date. The plaintiff later reverted to the position that 10 May 2021 would be the date for completion, but it seems that the outgoing mortgagee was unable to move the date back to 10 May 2021. Settlement thus remained booked in the PEXA system for 21 May 2021.
On 19 May 2021, the defendant's solicitor sent an email to the plaintiff's solicitor in which it was stated that the vendor's position was that the contract had not been properly exchanged so that it could not be binding on either party. On 20 May 2021 the plaintiff's solicitor responded by email in which it was stated that the plaintiff was ready, willing and able to complete the conveyance in accordance with the contract and that if the vendor did not complete by 26 May 2021 the purchaser would proceed with legal action accordingly. Settlement did not proceed on 21 May 2021. The defendant's solicitor withdrew from the PEXA work space at about noon on that day.
The assertion that the contract was not binding was repeated by the defendant's solicitor on 21 May 2021. It seems that the plaintiff's solicitor may have sent a notice to complete to the vendor's solicitor on that day but the notice itself is not in evidence. In any event, the plaintiff's solicitor sent a further notice to complete on 25 May 2021 stating that the earlier notice should be disregarded. The notice to complete dated 25 May 2021 called for completion to occur by 8 June 2021, and stated that in that respect time was of the essence.
There was no settlement of the contract on 8 June 2021. On 9 June 2021 the defendant's solicitor sent an email to the plaintiff's solicitor in which it was again stated in effect that the contract was not binding because certain amendments to the contract had not been authorised.
However, it is significant that on 19 May 2021 the plaintiff had lodged a caveat (AR 87272) against the title to the property the subject of the contract for sale. The caveat was signed by the plaintiff's solicitor on 19 May 2021 after he received the defendant's solicitor's email on that day. The caveat was lodged shortly thereafter. The plaintiff's solicitor deposed that he lodged the caveat on an urgent basis in order to protect the plaintiff's interest.
The caveat appears to have been recorded in the Register on 27 May 2021. The interest claimed in the caveat by the plaintiff was described as a charge by virtue of an agreement dated 9 February 2021. The details supporting the claim were "Contract for the purchase of land".
As noted earlier, the Summons was filed on 15 June 2021. On 16 September 2021 the defendant's solicitor conducted a title search in respect of the property. He discovered the existence of caveat AR 87272. Later on 16 September 2021 the defendant's solicitor sent a letter to the plaintiff's solicitor in the following terms:
We act for the vendor in respect of the contract for sale of the above property, dated 9 February, 2021.
Please be advised that on further consideration our client now accepts that she was in error to assert that the contract was not formed. She repents of that position and accepts that there is a contract.
We note that special condition 56 of the Contract provides:
"The Purchaser must not register any caveat against any of the Certificate of Title relating to the Land or Property notifying its interest under the Contract. This is an essential term of the Contract."
Our enquiries indicate that on or about 19 May, 2021 your client lodged caveat number AR87272. This is a breach of an essential term of the Contract.
The Vendor hereby terminates the contract.
The issues between the parties are identified in the written submissions of counsel for the respective parties and also in further oral submissions made in Court today. The plaintiff challenges the validity of the termination on several grounds. The arguments raised are: (a) that Special Condition 56 is not an essential term or a condition of the contract such that a breach of it would give the defendant a right to terminate the contract; (b) that any breach by the plaintiff of Special Condition 56 was induced by the conduct of the defendant in asserting that there was no binding contract in existence; (c) that the failure of the defendant to complete the contract was itself a breach of an essential term of the contract and the plaintiff was thereby "absolved from any adverse consequences which would otherwise have attached to her breach"; (d) that the defendant's conduct overall, including a repudiation of the contract over a substantial period and failure to complete the contract even after the service of a notice to complete, meant that she was not ready, willing and able to complete, and hence was not entitled to terminate for the plaintiff's breach; and (e) that the defendant failed to exercise any right of termination within a reasonable time.
I will deal with each of these arguments in turn.
[2]
(a) Is Special Condition 56 an essential term of the contract?
In this regard the plaintiff referred to part of Special Condition 44 of the contract which includes the following:
"The Purchaser must complete this Contract despite any caveat lodged by the Purchaser, or any person claiming an interest through the Purchaser, and the Vendor will not pay any fees".
The plaintiff submitted that Special Condition 44 appeared to accept that caveats may be lodged by the purchaser and (at least if to register a caveat is regarded as the same as lodgement of a caveat) there is a clear inconsistency between Special Conditions 44 and 56. The plaintiff further submitted that the defendant had failed to swear any affidavit to the effect that she would not have entered into the contract unless she had been assured of strict or substantial performance of the promise contained in Special Condition 56. The plaintiff submitted that for these reasons Special Condition 56 is not an essential term the breach of which would entitle the defendant to terminate the contract.
I am unable to accept those submissions. Special Condition 56 must be construed as part of a contract viewed as a whole. As was stated in Koompahtoo Local Aboriginal Land Council v Sanpine Pty Ltd (2007) 233 CLR 115; [2007] HCA 61 at [48]:
"It is the common intention of the parties, expressed in the language of their contract, understood in the context of the relationship established by that contract and (in a case such as the present) the commercial purpose it served, that determines whether a term is "essential", so that any breach will justify termination."
Plainly, there is no occasion for an affidavit of the character suggested by the plaintiff.
The Special Condition itself contains a clear statement of the parties' intention that it be an essential term of the contract. The parties to a contract may express such an intention even if the subject matter of the promise might appear to be of little importance (see Bettini v Gye (1876) 1 QBD 183 at 187).
I do not think that the clear statement of intent is undercut by the terms of Special Condition 44. The contract must, of course, be construed if possible so as to render its different provisions harmonious with each other. Special Condition 44 merely provides that if any caveat is lodged by the purchaser or someone claiming an interest through the purchaser, the purchaser is still obliged to complete the contract. There is no real inconsistency between Special Conditions 56 and 44. A breach of Special Condition 56 does not automatically bring the contract to an end. The vendor might choose to not exercise the right to terminate. Special Condition 44 itself operates in circumstances where the contract remains on foot and the purchaser is under an obligation to complete.
In my opinion a breach of Special Condition 56 by the plaintiff is a breach of an essential term of the contract. Moreover, I think it is clear that the plaintiff, by taking steps to lodge the caveat which claimed an interest under the contract and was recorded on the title to the property on 27 May 2021, breached Special Condition 56. The plaintiff must be taken to have thereby registered a caveat within the meaning of Special Condition 56. That is so even if the actual recording of the caveat in the Register is not something done by the plaintiff. It is sufficient that the plaintiff took steps which effectively caused the caveat to be so recorded.
I did not understand the plaintiff to submit that there was no such breach of Special Condition 56, although it was suggested that her conduct was nonetheless consistent with wanting the contract to proceed. That may have been the plaintiff's desire, but I think it is inescapable that her conduct in causing the caveat to become recorded on the Register was a breach of the contract in an essential respect. The defendant thereupon had the right under clause 9 of the contract to terminate it by notice.
[3]
(b) Was the plaintiff's breach induced by the conduct of the defendant?
It may be that the defendant's position, as stated on 19 May 2021, that there was no binding contract in existence was the occasion for, or prompt for, the plaintiff's decision to lodge the caveat. However, the defendant's conduct cannot be regarded as any invitation to breach the contract if the plaintiff (as she did) disagreed with the defendant's position. The plaintiff's breach of the contract was the result of her own decision to lodge the caveat. It cannot reasonably be said to have been induced by the defendant.
[4]
(c) Is the plaintiff absolved from any adverse consequences which would otherwise have attached to her breach?
The principle sought to be invoked by the plaintiff seems to be that conduct of one contracting party might operate to absolve the other party from performance of obligations under the contract. The plaintiff referred to statements made in Foran v Wight (1989) 168 CLR 385 at 396 (Mason CJ) and Peter Turnbull Co Pty Ltd v Mundus Trading Co (Australasia) Pty Ltd (1954) 90 CLR 235 at 246-7 (Dixon CJ).
I do not think that any conduct on the part of the defendant operated to absolve the plaintiff from performance of her obligation under Special Condition 56. Adopting the language of the statements that have been cited, the defendant has not expressly or impliedly intimated to the plaintiff that it would be useless to perform the obligation, or otherwise conducted herself such as to give rise to a waiver of such a performance. The defendant did not say anything at all about Special Condition 56 or the subject matter of the provision until she terminated the contract.
It is, of course, possible that the defendant's conduct in the period from 19 May 2021 would have absolved the plaintiff from any obligation to complete on 21 May 2021 (or 8 June 2021), but that is a different matter. Also, it could be said that the defendant's conduct from 19 May 2021 was repudiatory. However, it is clear that the plaintiff did not accept any repudiation by the defendant and indeed affirmed the contract. In those circumstances, and as submitted by the defendant, the contract remained on foot for the benefit of both parties and the plaintiff remained bound to perform her obligations under it, including her obligation to comply with Special Condition 56.
[5]
(d) Did the defendant's lack of readiness, willingness and ability to complete disentitle her from terminating the contract?
It may be accepted that from 19 May 2021 the defendant was not ready, willing and able to complete the contract. The question is whether that state of affairs prevented the defendant from relying upon the plaintiff's breach of Special Condition 56 in order to exercise the contractual right to terminate that is given by clause 9.
The defendant referred the Court to authorities which support the proposition that a state of being ready, willing and able is not a condition of or a requirement for the exercise of an express contractual right to terminate. These authorities include the decision of the Full Federal Court of Australia in Allphones Retail Pty Ltd v Hoy Mobile Pty Ltd (2009) 178 FCR 57; [2009] FCAFC 85 at [55] to [76]; the decision of the Victorian Court of Appeal in Willis v Crosland [2021] VSCA 320 at [58] to [60]; and the decision of Parker J in this Court in Inlon Pty Ltd v Celli SpA [2017] NSWSC 569 at [97].
I note in passing that the plaintiff submitted that the Allphones case is distinguishable because, unlike the situation there, in the present case the conduct of the defendant caused the plaintiff to breach the contract. For the reasons earlier given I do not accept that to be correct.
In Willis v Crosland (supra), a case which itself concerned a contract for the sale of land, it was said at [58] to [60]:
[58] In our opinion, proposed ground 2 has merit substantially for the reasons advanced by the purchaser. The enquiry as to whether the purchaser was 'ready, willing and able' to pay the balance of the deposit was not a relevant enquiry. It is of course relevant to the mutual or reciprocal performance of obligations. Party A cannot insist on performance by party B unless party A is in a position to perform. However, this state of readiness is irrelevant if party A is entitled, by an express contractual provision, to terminate a contract for breach and does not wish to perform or seek performance by party B.
[59] The effect of the authorities is summarised by Parker J in Inlon Pty Ltd v Celli SpA:
[I]f [the terminating party] Celli were seeking to obtain damages for loss of the contract, or orders against Inlon for the specific performance of the Distribution Agreement, it would be necessary for Celli to show that it was ready, willing and able to comply with its own obligations. But all Celli is seeking to do is terminate the Agreement and escape from the obligations thereunder. Even in a case of common law termination, I am not sure that Celli would be debarred by a lack of readiness and willingness from doing so. But in a case of contractual termination, the Full Federal Court has held that a lack of readiness and willingness, on its own, does not prevent the contractual right of termination from being exercised: Allphones Retail Pty Ltd v Hoy Mobile Pty Ltd [2009] FCAFC 85; (2009) 178 FCR 57 at 69-72 [55]-[76].
[60] As Professor Carter notes, '[t]here is a fundamental distinction between a promisee who calls for performance by the promisor and a promisee who seeks to justify a decision to terminate performance of the contract'. In the case of the latter, 'it is not an element of proof of valid termination that the promisee was ready and willing to perform the contract at the time of termination. So much is obvious where the promisee terminates prior to the time for its performance'. Thus, to the extent that the judge relied on this reason for concluding that the purchaser was in default at the time she served the notice of termination, his Honour erred.
In my view the authorities relied upon by the defendant apply to the present situation and ought be followed. Against that, the plaintiff referred to the broad statement of principle made by the Court of Appeal in Barrak Corporation Pty Ltd v Jaswil Properties Pty Ltd (2016) 18 BPR 35,759; [2016] NSWCA 32 at [33], that a party who seeks to terminate a contract for the sale of land for breach of an essential stipulation must itself be ready, willing and able to complete.
However, the statement must be understood in the context in which it was made and in light of what was actually decided in the case. The case relevantly concerned the validity of a termination by the vendor for the purchaser's failure to complete by the time made essential by a notice to complete. It was held (at [59]) that because the vendor was not ready, willing and able to complete by that time it was not entitled to terminate for the purchaser's failure to complete by that time.
The case was thus concerned with the obligations of the parties under a contract for the sale of land to complete the contract. The respective obligations to complete are, of course, regarded as concurrent and mutually dependent obligations and, generally speaking, a party in breach of such an obligation cannot terminate for the other party's breach (see Foran v Wight (supra) at 396).
These considerations do not arise in the present case where the vendor does not base the termination upon any failure of the purchaser to complete. Here, the vendor rests the termination on the purchaser's failure to comply with the obligation cast upon her by Special Condition 56. The obligation rests only upon the purchaser. There is no element of mutual or reciprocal performance (see Willis v Crosland (supra) at [58]).
In my view the plaintiff's breach of Special Condition 56, which is an essential term of the contract, justified the defendant's termination of the contract pursuant to the express right to terminate given by clause 9. The exercise of that right was not conditioned upon the defendant herself being ready, willing and able to complete the contract.
[6]
(e) Is the defendant's termination of the contract invalid because the defendant failed to exercise the right within a reasonable time?
The right to terminate was exercised pursuant to clause 9 of the contract. The clause is not expressed to include a condition that any such right be exercised within a reasonable time. Neither do I think that a condition to that effect should be implied. Such an implication is not, in my view, necessary for the effective operation of the provision.
In these circumstances, even if there was some delay on the part of the defendant in exercising the right of termination, it would not render the exercise invalid. It was not suggested that the defendant's right to terminate was lost in some other way, that is other than by the mere effluxion of time, such as by election, waiver or estoppel.
It is not necessary to decide whether it could be inferred on the evidence that the defendant became aware of the existence of the caveat at some time before her solicitor did.
For these reasons it seems to me that none of the challenges made by the plaintiff to the validity of the defendant's termination of the contract have been made out. In my opinion the contract for sale was validly terminated by the defendant on 16 September 2021 pursuant to clause 9 of the contract. It follows that the plaintiff's claims for a declaration and an order in the nature of specific performance of the contract fail.
The Court will order that the Summons be dismissed. The Court will further order that the plaintiff pay the defendant's costs of the proceedings.
[7]
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Decision last updated: 28 February 2022