McIntyre v Marshall

IN THE SUPREME COURT OF NEW SOUTH WALES EQUITY DIVISION

1699/04 IAN GREGORY MCINTYRE v NEVILLE NOEL MARSHALL JUDGMENT 1 A contract for sale of land from the defendant to the plaintiff was executed by the parties. The defendant purported to terminate that contract. 2 In the period leading up to the execution of the contract, the plaintiff became aware of road widening proposals by the local authority that would affect the boundary of the land. The plaintiff caused a survey to be carried out and took account of the road widening in plans forming the basis of a development application for the construction of self storage units on the land. The plaintiff said what was not clear to him was whether compensation had been paid to the defendant by Hastings Council and whether any lease-back arrangements had been entered into. 3 There was also discussion in the period leading up to the execution of the contract of the retention of two lean-tos and an awning constructed on the land without Council approval. The contract included a shed. The awning was demolished by the defendant. He had initially said this occurred after the contract had been executed but in a later affidavit he said this occurred prior to contract. He was cross examined on this issue. In light of that evidence, Mr Taylor SC who with Mr Harper appeared for the plaintiff, did not press any submissions with respect to that event. 4 The counterparts were exchanged on 6 August 2003. Requisitions were issued on 12 August 2003 well within the time prescribed in the contract. Requisition 12(f) asked whether the vendor was aware of the erection or alteration after 16 April 1958 of any building or improvement on the land. Requisition 22(d) asked whether the vendor was aware of any proposal to realign or widen any road adjacent to the property. 5 The contract defined a requisition as an objection, question or requisition not including a claim. Mr Wilson, who appeared for the defendant, submitted that the above requests were not requisitions. 6 The requests for information fell within the broad definition of a requisition. Furthermore, they were not mere reminders to the vendor of his obligations under the contract. They were inquiries related to structures on the land and defects as to title. They fall within the types of inquiry that can be made properly by way of requisition identified by Sir Garfield Barwick in Godfrey Constructions Pty Ltd v Kanangra Park Pty Ltd (1972) 128 CLR 529 at 536. 7 Clause 10.1.9 of the standard conditions of the contract provided that the purchaser could not make a requisition in respect of anything the substance of which was disclosed in the contract. The contract was for the sale and purchase of two lots, described in the contract as 199-207 Hastings River Drive and Lot 2 Hibbard Drive, Port Macquarie. A planning certificate under the Environmental Planning and Assessment Act 1979, s 149 with respect to the former stated that the land was affected by proposed road widening and attached a plan. The certificate in relation to the latter stated that the land was not so affected. It was submitted on behalf of the defendant that requisition 22(d) was not a valid requisition and required no answer. I will return to this issue because the defendant did respond in the negative and that led to further requisitions. 8 Clause 5 of the special conditions of contract provided that completion was to take place on 1 October 2003 and if not completed on that date, either party was entitled to give the other a notice to complete within 14 days of the notice, time being of the essence and it being agreed that 14 days was a reasonable period of notice. 9 Settlement did not take place on 1 October 2003 and on 16 October 2003 the defendant issued a notice to complete. The plaintiff complained that he had not received answers to his requisitions. On 30 October 2003, the defendant withdrew the notice to complete and provided answers to requisitions. In answer to requisition 12(f) the defendant said he was not aware of such alterations. He answered requisition 22(d) in the negative. 10 The next day, the defendant gave a further notice to complete requiring settlement on 19 November 2003 and making time of the essence. 11 On 17 November 2003, the plaintiff issued further requisitions. With respect to the answer to requisition 12(f) it was noted that there were two sheds and a wash bay on the land and further inquiry was made as to the year when the improvements were constructed, the identity of the person who constructed them, whether any plans had been prepared, whether Council approval had been sought or was to be sought prior to settlement and if not how the defendant intended to compensate the plaintiff. 12 With respect to the answer to requisition 22, it was pointed out that the plaintiff was aware that there was a proposal to widen the road adjacent to the properties and the defendant was asked what notification had been received in respect of the proposed road widening, whether he had negotiated an amount of monetary compensation from the authority wishing to widen the road and, if so, what amount had been negotiated, whether any agreements had been executed by him in respect of the road widening and, if so, what parts of the property being purchased would be lost as a result. 13 On 18 November 2003, the defendant responded to the requisitions. He said he had constructed two lean-tos, had offered to demolish them but the plaintiff requested they remain. He said the wash bay shed had been approved by Council and a copy of the construction certificate was enclosed. He said the plan of acquisition with respect to the road widening had been disclosed in the contract and in the certificates under the Environmental Planning and Assessment Act 1979, s 149. He said the Council had not paid for the acquisition of the property. 14 The plaintiff did not attend on settlement on 19 November 2003. The defendant served a notice of termination on the plaintiff on 24 November 2003. 15 Before a notice to complete making time of the essence can be given, not only must the other party be in breach or guilty of unreasonable delay, but also the party giving the notice must be free of default by way of breach or antecedent relevant delay (Neeta (Epping) Pty Ltd v Phillips (1974) 131 CLR 286 at 299 per Barwick CJ and Jacobs J, followed in Louinder v Leis (1982) 149 CLR 509). 16 In Winchcombe Carson Trustee Co Ltd v Ball-Rand Pty Ltd [1974] 1 NSWLR 477, Wootton J held a vendor who issued a notice to complete to be in default for failure to answer requisitions until the letter enclosing the notice to complete. 17 The contract did not specify a time within which requisitions were to be answered. It follows that they were to be answered within a reasonable time. In failing to answer the requisitions until 30 October 2003, the plaintiff argued the defendant was in default and not entitled to issue the notice to complete on 31 October 2003, either because he breached the contract by failing to answer the requisitions within a reasonable time, or because he was guilty of antecedent relevant delay in failing to answer them. 18 It was also submitted that the defendant was guilty of a breach of contract in providing inaccurate answers to requisitions 12(f) and 22(d). I accept both submissions. In the context of a contemplated completion within 56 days and the issue of the requisitions in 6 days, the defendant's failure to answer them accurately in under 79 days constituted a breach of contract and unreasonable delay. 19 It was submitted that the plaintiff was precluded from issuing further requisitions with respect to the road widening under cl 10.1.9 of the standard conditions of contract because of the statements in the certificates under the Environmental Planning and Assessment Act 1979, s 149. The plaintiff responded that the substance of the later requisitions was not the road widening as such, but the question whether compensation had been paid and whether there were any lease-backs affecting the property. It was pointed out that the fact of road widening had been accepted by the plaintiff who had caused a survey to be performed and had planned his development of the land taking account of the road widening. 20 It seems to me the later inquiry was permissible. The requisitions were directed to matters resultant from road widening rather than the road widening itself. 21 As to the other inaccurate answer, the defendant submitted that the plaintiff had waived objection to it because in the pre-contract negotiations the defendant had volunteered to knock down the lean-tos but had been requested to leave them there. The plaintiff objected that pre-contractual negotiations could not supplant the contract and it included improvements on the land. 22 The defendant submitted that the plaintiff was not affected by the inaccurate answer. He intended to demolish the sheds. The plaintiff said his ultimate aim was to demolish the structures but he planned a staged development and intended to use the structures on the land for a workshop in the early stage. In my view the history of the structures was a legitimate area of inquiry. 23 In Jillinda Pty Ltd v McCourt (1983) NSW ConvR 55-145, a contract required the vendor to furnish a certificate not less than seven days before completion. A certificate was furnished the day before completion was due to take place. The contract was not completed on the due date and the vendor gave notice within seven days of furnishing the certificate requiring completion 14 days thereafter. McLelland J held that the antecedent breach remained relevant to the relative situation of the parties when the notice to complete was given. The purchaser was entitled to seven days after the furnishing of the certificate before being required to complete. The vendor was not entitled to issue the notice to complete until that period had expired. 24 Clause 5.2 of the standard conditions of contract allowed 21 days after anything served by the vendor for requisitions to be issued by the purchaser. The answers to requisitions were served by the defendant on 30 October 2003. The plaintiff had until 20 November 2003 to issue further requisitions. 25 The defendant submitted that Neeta, Jillinda and Louinder were limited to breaches of provisions specifying specific times for performance and that a more commercial approach should be taken to the question of antecedent relevant delay such as that adopted by Young J in Mulkearns v Chandos Developments Pty Ltd [2003] NSWSC 1132. At par 44 his Honour observed that it would be quite opposed to the presumed intention of parties to contracts that settlement could be delayed indefinitely because of some minor problem and that while the category of breaches that went to readiness, willingness and ability extended beyond matters of title or vacant possession, it was certainly the main subject matter of such breaches. 26 First, the giving of the second notice to complete within the 21 days vouchsafed to the plaintiff for requisitions under the contract, involved the breach of a specific time provision. Secondly, Mulkearns involved the allegation that the vendor was not in a position to give a notice to complete because it was in breach of an obligation to one of its lessees. That is not the situation in the instant circumstances. 27 In Louinda at 523, Mason referred to debate as to whether in Neeta their Honours intended that mere breach of contract as distinct from a serious breach of contract debarred a party giving a notice to complete. His Honour concluded that their Honours meant what it said and they had in mind a breach of contract, whether serious or slight. 28 In my view, the antecedent breach or relevant delay remained relevant to the relative situation of the parties when the second notice to complete was given. I respectfully adopt the approach taken in Jillinda. It follows that the defendant was not entitled to issue the second notice to complete until after 20 November 2003. 29 In light of that finding, it is unnecessary for me to address the other issues with respect to that notice. However, because of the further submissions made on both sides, I will indicate my views. 30 The plaintiff submitted that he was not guilty of delay when the second notice was given. The defendant relied on the plaintiff's failure to deliver a transfer to enable completion to take place on 1 October 2003. In my view, however, time was not of the essence and that failure did not constitute a breach of the contract. 31 The contract provided that the plaintiff could direct a conveyance to a nominee. The plaintiff wished a nominee to take the conveyance. In an endeavour to avoid further stamp duty, his then solicitor wrote on 3 October 2003 seeking rescission of the existing contract and a fresh contract in identical terms with the nominee. That proposal was not accepted by the defendant and, in those circumstances, it did not constitute a breach of contract. I will return to the question of repudiation later in these reasons. 32 In my view, the plaintiff was not in breach of the contract when the second notice to complete was issued and for that reason, as well, the defendant was not entitled to issue it. 33 The plaintiff submitted that cl 5 of the special conditions of contract enabled a party to issue but one notice to complete and the defendant had expended that right when he issued his first notice to complete. I do not read the clause in that fashion. It was a mechanism by which time might be made the essence of the contract and it was expressed in general terms. If it were meant to be utilised but once, one would have expected the parties to have said so. 34 The plaintiff submitted that the form of the second notice to complete was irregular. What is required, by whatever means are chosen to give notice, is that the attention of the other party should, by the means chosen, be drawn with reasonable explicitness to the acts required of that party in relation to the contract (Taylor v Raglan Developments Pty Ltd [1981] 2 NSWLR 117 at 132). 35 The notice stated that the defendant was ready and willing to transfer the property situate at 199-207 Hastings River Drive in accordance with the contract and required the plaintiff to complete the purchase and pay the balance of purchase moneys at a specified time and place, stating that time was of the essence of the contract. 36 The plaintiff submitted that the notice expressed a willingness to convey only part of the property. It did not expressly require completion of the contract. It did not expressly require payment of the balance of the contract price for the whole land. It did not assert any ability or willingness to convey Lot 2 Hibbard Drive. 37 I reject those submissions. The parties had at an early stage in their communications adopted the heading 199-207 Hastings River Drive to describe both lots. For example, the plaintiff's supplementary requisitions were so headed. The construction of the notice is to be approached objectively and the question is how a reasonable recipient would have understood it, bearing in mind its context (Mannai Investment Co Ltd v Eagle Star Life Assurance Co Ltd [1997] AC 749). In my view, a reasonable recipient aware of the above context would have understood the notice to state that the vendor was ready willing and able to convey the lands and called upon the purchaser to take a conveyance of both lots upon payment of the balance of purchase price. 38 While the defendant relied on the second notice to complete to ground his notice of termination, it was submitted that it could be justified upon any ground that existed at the time whether or not it had been relied upon (Luna Park (NSW) Ltd v Tramways Advertising Pty Ltd (1938) 61 CLR 286 at 305). It was submitted that in failing to pay the balance of the deposit when due (it was subsequently paid), in failing to submit a transfer prior to 1 October 2003, in failing to complete on 1 October 2003, in seeking a four week extension of the completion date on 26 September 2003 and in seeking rescission and the substitution of a different purchaser, the plaintiff had evinced an intention no longer to be bound by the contract. 39 I reject that submission. As I have indicated, time was not of the essence with respect to the completion date of 1 October 2003 and, suggested rescission and new contract not having been accepted by the defendant, the plaintiff continued to indicate that he was subject to the terms of the contract. The correspondence proceeded on the basis of the contractual terms. The issue of the supplementary requisitions was hardly indicative of an intention on the part of the plaintiff no longer to be bound by the terms of the contract. 40 It was submitted that the plaintiff lacked the capacity to finance the acquisition of the land and the issue of the supplementary requisitions was a ploy on his part, playing for time. However, evidence was led from Nasser Kalache that he had indicated to the plaintiff that he would, and he remained prepared to, finance the acquisition of the land on first mortgage in consideration for the payment of fees in the order of $10,000, the provision of a second mortgage over another property of the plaintiff and a deed from the first mortgagee that it would not lend further funds secured in priority to the second mortgage. There was further evidence that such a request from a second mortgagee was standard practice and financial institutions were in the habit of granting such deeds of priority. In my view the plaintiff demonstrated that he was able to take the conveyances. 41 In my judgment the plaintiff has established his case and is entitled to a declaration that there is a binding and enforceable agreement between he and the defendant and he is entitled to specific performance of that agreement. I will hear the parties on appropriate terms of such orders. I will hear the parties on costs. I direct the parties to bring in short minutes of orders reflecting these reasons.

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