Maniaty v Fenedisto Pty Ltd [2004] VSC 177

6. Before I turn to the detail of this case, I should record that it appeared when this case was opened that the pleadings regrettably did not raise the issues which the parties wished to have determined. With the agreement of the parties these pleadings have, therefore, been put to one side in favour of the issues as disclosed to me by counsel. It is convenient, therefore, that I should at the outset, record what was, in this way, identified as common ground and what were issues for determination.

(1) There was no issue as to the making of the contract of sale or its terms.

(2) On 17 May 2001 prior to the date for possession, the purchaser entered into occupation of the land and remained in occupation at least until 4 January 2002 paying no rental or other fee for this.

(3) On 28 September 2001 an occupancy permit for the unit was issued by the local authority's building surveyor.

(4) On 30 October 2001 the plan of subdivision was registered at the Land Titles Office.

(5) The vendor was in a position to settle in November 2001 and called upon the purchaser to pay the balance.

(6) The vendor insisted that the purchaser at settlement pay an amount for her occupation of the land.

(7) The purchaser refused to settle on this basis and no settlement took place.

(8) On 4 January 2002 the purchaser moved out of the unit, leaving it locked and unoccupied.

(9) On 8 March 2002 the vendor gave a notice of rescission pursuant to cl. 6 of Table A to the Transfer of Land Act 1958, asserting as the default to be remedied:

"Failure to pay balance of purchase money and occupation rental."

(10) On 19 March 2002 the purchaser lodged a caveat on the title asserting an equitable interest as purchaser under the contract of sale.

(11) On 25 March 2002 the vendor re-entered and has remained in possession. He has let the unit since about October 2002.

(12) On 3 April 2002 this writ was filed on behalf of the purchaser.

(13) On 12 April 2002 the writ was served on the vendor.

(14) At all material times the vendor and the purchaser assert a readiness to settle but each on their own terms.

Points of Contention

(1) Whether the purchaser was in breach of the contract of sale in refusing to settle on the terms insisted upon by the vendor.

(2) Whether the vendor was justified in making its demand for payment of the occupation rental on any of the following bases, which are denied by the purchaser:

(a) the vendor and the purchaser agreed that the purchaser would be let into occupation as licensee pending settlement on the basis that she paid an occupation fee of $200 per week.

This agreement was particularised as arising out of a message from the vendor's solicitor left on the answering machine of the purchaser's solicitor to the effect that the purchaser could go into occupation for a rental of $200 per week and that this was accepted by the purchaser going into occupation soon thereafter.

(b) The purchaser who was let into possession before settlement became by operation of law the tenant at will of the vendor and therefore liable to pay a reasonable rental.

(c) The purchaser who entered into possession before the date fixed in the contract of sale for completion without payment of the balance of the price became liable to pay interest on the balance.

(3) Whether the notice of rescission was ineffective, as the purchaser contends, on any of the following grounds, which are denied by the vendor:

(a) The obligation to pay occupation rent is not an obligation arising out of the contract of sale but (if it existed) arose out of a collateral agreement between the parties.

(b) The notice does not specify the amount to be paid to remedy the default. The period of the occupation and the amount of rental is not specified.

(c) The interest rate of 15% demanded in the notice is not referable to one or other or both of the particulars of default.

(d) At the time of the giving of the notice of rescission time had ceased to be of the essence and the period of 14 days specified in the notice is not sufficient to restore it as an essential term.

(4) Whether the purchaser had repudiated the contract and the vendor had accepted the repudiation.

(5) Whether the purchaser was and is ready and willing and able to settle.

(6) Whether, as a matter of discretion, specific performance should be ordered and, if so, upon what terms.

27. The subject matter of the sale on 25 March 2001 was one of a number of units then under construction and in respect of which no Plan of Subdivision had been registered. Accordingly, it was a prescribed contract of sale within the meaning of s. 9AA(7) of the Sale of Land Act 1962 and it had to comply with the applicable statutory requirements for such a contract. These included a requirement that the deposit moneys payable had to be paid into a special interest bearing account held by the solicitors for the vendor. There was no issue before me as to the contract's compliance with these requirements or that a deposit of $26,000 was duly paid and applied.

30. The contract also provided in the particulars of sale for payment of the balance of the price on the latter of -

"(a) the 18th day of May 2001;[1] (b) the date of expiration of fourteen (14) days from the date the Vendor notifies the Purchaser that the Registrar of Titles has registered the Plan of Subdivision."

Settlement date is defined in the contract as the date upon which vacant possession or receipt of the rents and profits of the Property and Chattels must be provided, namely, upon acceptance of title and payment of the price.

There is attached to the contract eight pages entitled Project Specifications which set out in fairly non-specific terms the scope of works for the unit development. These included, not surprisingly, the provision of the usual services such as gas, water, electricity, sewerage and telephone lines.

"In the event that the said Plan of Subdivision not being registered by the Registrar of Titles within twelve months from the date hereof the Vendor or the Purchaser may avoid the Contract and thereupon the deposit shall be refunded to the Purchaser without any deduction whatsoever."

42. As 18 May 2001 approached the purchaser made ready to settle and to take possession of her new home. She gave notice to terminate her existing tenancy as from that date. She said, too, that she had made arrangements with her bank so that the necessary funds would be available. She retained her solicitors, Blackberry & Associates, who set about preparing for settlement. She said that she did this because the selling agent had told her at the time she signed the contract of sale that there would be no difficulty settling on or about 18 May.

45. In early May, however, it became apparent that settlement could not take place at this time. The Plan of Subdivision had not been registered and no certificate of title for the unit had issued. Moreover, the unit was not complete and no occupancy permit could be issued.

48. The solicitors for the respective parties then sought to negotiate some basis upon which she might take possession pending settlement. These continued without resolution until 16 May when there occurred a meeting at the unit at which were present Ms Maniaty, Arkady Shtrambrandt, a director of the vendor, a man called Boris who was its builder, and two representatives of the selling agent, Damien Neil David Sweeney and a woman identified only as Eva. Also present was the purchaser of Unit 4, Norma Pitchford Freeman, who had already taken possession of her unit under an arrangement with the vendor.

51. It seems that a good part of the discussion at this meeting concerned the work required to finish off Unit 3. The purchaser had had the unit inspected by her own building practitioner a few days previously and the report of this inspection was in evidence. Apart from some minor finishing and touch-up items it shows that the garage was being used as a builder's store and no appliances had been fitted. Presumably, this refers to kitchen appliances, such as oven, hot plates and rangehood which were provided for in the specifications. Mr Shtrambrandt said, too, that there was no water or power connected. The discussions at this time between the solicitors gave Ms Maniaty the impression that these matters would be attended to over the following two to four weeks.

54. Notwithstanding this, she was keen to move in immediately for she had nowhere to live. She declined the suggestion of Mr Shtrambrandt that she stay at his place pending completion because she was expecting her mother to stay with her on a visit from Sydney. In the end, he said that she could move into the unit and arrange for the connection of the utilities herself and on the basis that the builder would have access to complete the outstanding work. Rental was not discussed. Mr Shtrambrandt said that he told her that she could move in when the works were completed and on the same basis as Mrs Freeman was in occupation of Unit 4. Nevertheless, I prefer her evidence that he simply agreed that she could move in immediately and without any discussion of rental. This is confirmed by the evidence of Mr Sweeney and is consistent with the fact that she was permitted to take the key from the agent's office and went into occupation the following day. It is consistent with the evidence of her solicitor, Kim Charles Blackberry, who said she telephoned him after the meeting to ask him if she might move in. Accordingly, I find that she took possession with the concurrence of the vendor but without any agreement as to payment of rent or any other occupation charge.

57. For a short time thereafter the solicitors discussed the rental which might be payable. Philip Christopher Carey, then a partner in the firm McGrath Carey Katz, the solicitors for the vendor, had insisted on $200 per week but this was never agreed to by Mr Blackberry on behalf of the purchaser. I should add at this point that the vendor's suggested basis for an agreement to pay $200 per week, namely an unanswered message left on Mr Blackberry's answering machine, was not the subject of any evidence.

60. And so the purchaser entered into occupation of the unit. She said, and I accept, that when she moved in, the premises had not been cleared of builders' materials and debris and that water was not connected. This had the consequence that the toilet would not flush so that the bathroom and some kitchen facilities were not operational.

63. The completion works progressed but, by 25 May 2001 the council's building surveyor was still of opinion that the units were not completed sufficiently to warrant an occupancy permit. In an exchange between the solicitors about this time, Mr Blackberry asserted that the appliances had been delivered and that the work was expected to be finished on 28 May. He maintained his client's position that no rental was payable, this time on the basis that the unit was not in a state fit for occupation. An occupancy permit was issued on 28 September 2001.

66. Over the months from May, Mr Blackberry on behalf of the purchaser had pressed Mr Carey for a date for settlement and on 30 October 2001 the Plan of Subdivision was registered and Certificate of Title Volume 10611 Folio 717 issued in respect of the unit. The solicitor for the purchaser was advised of this fact on 8 November. Settlement was then due in terms of the contract of sale by 22 November.

69. On 13 November 2001, Mr Blackberry proposed that settlement take place on 23 November. The response of Mr Carey was that it could not take place until such time as the rental rate was agreed so that it could be paid at settlement. The solicitors then sought to resolve the position by negotiation throughout November. Mr Carey on behalf of the vendor offered to accept $200 per week for the period from 16 May; Mr Blackberry on behalf of the purchaser, while denying liability to pay anything, offered to pay $200 per week from the date of the occupancy permit. In terms of money, the amount between them was about $4,000.

72. Nothing then happened between the solicitors until 14 January 2002, some 10 days after Ms Maniaty locked the unit and moved to Sydney. On that date her solicitors withdrew her offer and intimated that, if suitable arrangements for settlement were not made within 14 days, she might seek specific performance. The response on behalf of the vendor was to reiterate their position that it would not settle without payment of a proper occupation rental.

75. A month or more of silence ensued. On 25 February 2002 the solicitors for the vendor stated that they would settle upon payment of $8,000 for occupation rental and that, if this was not acceptable, they would give notice of rescission. This proposal was rejected on 1 March with a counter proposal that the purchaser would settle with a payment of $4,000 for the occupancy provided that certain outstanding work should be first carried out. Alternatively she proposed to settle on the basis that she would be responsible for this work and would pay $1,500 on settlement.

78. As I have mentioned, the rescission notice was served on 8 March. The response of the purchaser was to lodge her caveat on 19 March and to file this writ for specific performance on 3 April. The vendor resumed possession on 25 March 2002.

82. Central to this litigation is the obligation, if any, of the purchaser to pay an occupation fee and, if so, whether the vendor was entitled to refuse to settle without payment of it.

85. As I have mentioned, the vendor's contention that the plaintiff agreed to pay $200 per week has not been made out.

88. It was next put on the authority of Sandhurst Mutual Permanent Investment Building Society v Gissing[2], that there arose in this case between the vendor and the purchaser a relationship of landlord and tenant under a tenancy at will. Since no rental had been agreed, this relationship must carry with it an obligation to pay a fair and reasonable rental or, perhaps, income profits. In any event, this obligation arose in circumstances which were inseverable from those under the contract of sale, so that the purchaser's failure to pay was a default under the contract of sale.

91. The Sandhurst Trustee's case involved questions whether the defendant, Gissing, was entitled to the protection of s. 49 of the Transfer of Land Statute[3]. He had been the tenant in possession of one Esler and on 5 January 1882 had agreed to purchase the land from Esler. He paid the price and obtained the Crown grant from Esler on 18 January 1884. Somehow, the grant was returned to Esler and litigation between Gissing and Esler ensued with Gissing seeking specific performance of the contract of sale. It seems that this litigation was not concluded when Esler died in 1887. Meantime, Esler borrowed money from the Society and executed a transfer of land in its favour as security together with a deed of defeasance. On 27 October 1885 a certificate of title was issued to the Society, Gissing all the while remaining in possession. The question before the court was whether the Society's title was subject to the right of possession of Gissing as tenant. Gissing contended that, by s. 49 of the statute, a certificate of title is subject to the interest of any tenant, so that he might resist the Society's action for ejectment by asserting his undetermined tenancy. The Full Court dismissed an appeal against a judgment in favour of Gissing on the basis that, as purchaser in possession under a contract of sale to him, Gissing was a tenant at will of the vendor, Esler, so that he could not be ejected without a demand from his vendor. Further, he had, under the contract of sale, an equity which would not allow his vendor to determine the tenancy otherwise than by converting it into an estate in fee simple.

94. The decision, which is binding upon me has been acted upon as recently as 1956 by Sholl J in Nicholas v Smith[4] where his Honour was prepared to accept on its authority that the purchaser in possession under a terms contract which had been rescinded by the vendor for default, remained, nonetheless, a tenant at will of the vendor. His Honour determined, adversely to the purchaser, an agreement that the tenancy was not protected by the provisions of the Landlord and Tenant Act 1954.

97. The Sandhurst Building Society case does not, I think, assist the vendor in this proceeding where the issue is not whether the relationship between the vendor and the purchaser is that of landlord and tenant, but rather whether the purchaser is obliged to pay any particular sum to the vendor for the tenancy.

100. The third submission put on behalf of the vendor was that by the rule in Birch v Joy[5]. A purchaser, having entered into possession before the date for completion, must pay to the vendor interest upon the unpaid part of the price. The principle of equity upon which this rule depends is that, subject to any express contractual provision, a purchaser who enters into possession before completion and who therefore obtains the benefit of the land, is treated as having paid the price:

"A Court of Equity, as a general rule, considers this to follow. The parties change characters; the property remains at law just where it was, the purchaser has the money in his pocket, and the seller still has the estate vested in him; but they exchange characters in a court of equity, the seller becomes the owner of the money, and the purchaser becomes the owner of the estate. That is the settled rule of a court of equity; and in applying that rule to this contract, the Court would not have had the slightest difficulty."[6]

104. It follows that the purchaser was obliged to pay this interest upon settlement and, correspondingly, the vendor was entitled to refuse to settle unless this interest was tendered. The interest is to be calculated by reference to the balance unpaid, not by reference to the quality of the premises at any time, so that it must run from 17 May 2001 when the purchaser entered into possession notwithstanding the condition of the premises at that time.

107. The contract price unpaid, subject to adjustments, was $234,000. The amount sought by the vendor was $200 per week, representing interest on that sum at the modest rate of 4.44 percent. Unlike some of the cases to which I have been referred, this contract does not make provision for interest for late completion otherwise than at a default rate of 15 percent. This is clearly inappropriate, for the purchaser in the present situation cannot be treated as being in default.

110. The evidence shows that the purchaser offered on 30 November 2001 to settle on the basis of $200 per week calculated from 29 September 2001. This offer was withdrawn on 14 January 2002. On 1 March the purchaser made a further offer to pay $4,000. As a matter of calculation this was a little less than the previous offer of $200 per week from 29 September 2001 and represented a little less than $100 per week for the total period of possession. This is how things stood at the date of the notice of rescission. None of these offers satisfied the obligation of the purchaser to pay interest. Accordingly, the vendor was entitled to refuse to settle the contract.

113. On 8 March 2002, the vendor gave notice of rescission in the form required by cl. 6 of Table A. Logically, the first attack upon the validity of this notice is based upon the purchaser's contention that time had then ceased to be of the essence.

116. I am satisfied that the correspondence since the contract date for completion to which I have referred, shows that the vendor had in fact waived the essential character of the purchaser's obligation to pay the balance on 22 November 2001. The obligation to make the payment nonetheless remained. As at 8 March 2002, the purchaser was guilty of unreasonable delay in making that payment; indeed she had taken the position that she would not settle otherwise than on her own, misconceived, view of her obligation under the contract of sale. The notice of 8 March was effective to restore the essential nature of the purchaser's obligation to pay the amount payable on settlement for the period of 14 days was, in all the circumstances, reasonable[7].

119. Upon the expiration of the 14 day period, it was open to the vendor to rescind the contract of sale forthwith for the repudiatory position adopted and maintained by the purchaser. The vendor then accepted this repudiation and thereby terminated the contract of sale. There was no argument addressed against this step in the vendor's case and I find that the vendor's acceptance was constituted by its re-entry on 25 March 2002 and the position it adopted thereafter.

122. Given this conclusion, the remaining arguments put on behalf of the purchaser fall away. I have concluded that interest was payable as part of the price upon settlement. It did not arise out of any collateral agreement. Furthermore, the submissions addressed as to the form of the notice are beside the point. The notice was not effective as an implementation of cl. 6 of Table A. Its effect was to restore as an essential term the purchaser's obligation to pay the price within time.

125. This conclusion is sufficient to resolve the principal disputes in this case. The contract of sale has been lawfully brought to an end in March 2002. Accordingly, the purchaser's claim for specific performance must fail and the caveat must be removed.

128. The purchaser has sought no relief against forfeiture of the deposit. Given the state of the pleadings I would not for that reason deny her that relief if it were appropriate. In the circumstances of this case, however, I would not give this relief. This is not a case where exceptional circumstances exist which would warrant the return of the deposit[8]. The vendor has been put to trouble and expense by the conduct of the purchaser, following its resumption of possession it no longer had a new unit to sell and, indeed, her refusal to agree to the letting of the unit for many months has denied to the vendor one of the ordinary benefits of ownership.

131. I will hear counsel further as to the orders to be made to give effect to these conclusions.

[1] I omit an irrelevant handwritten addition.

[2] [1889] VicLawRp 63; (1889) 15 VLR 329

[3] The near equivalent of s. 42(2)(e) of the Transfer of Land Act 1958

[4] [1956] VicLawRp 66; [1956] VLR 416

[5] [1852] EngR 382; (1852) HL Cas 565; 10 ER 222

[6] Birch v Joy [1852] EngR 382; (1852) HL Cas 565 at 591; [1852] EngR 382; 10 ER 222 at 233 per Lord St Leonards; In Re Priestley's Contract 1947 1 Ch 469 at 480 per Romer J. See, too, International Railway Co v Niagra Parks Commission [1941] 2 All ER 456 at 463 (PC).

[7] Thornton v Bassett [1975] VicRp 41; [1975] VR 407

[8] Poort v Development Underwriting (Victoria) Pty Ltd [1976] VicRp 83; [1976] VR 779 at 786, per Gillard J