EQUITY - consent orders reflecting agreement by parties to compromise proceedings - whether stipulations as to time of the essence - whether waiver of those stipulations
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EQUITY - consent orders reflecting agreement by parties to compromise proceedings - whether stipulations as to time of the essence - whether waiver of those stipulations
Judgment (3 paragraphs)
[1]
Solicitors:
Paladin Law (Plaintiffs/Respondents)
Giles Payne & Co (Defendant/Applicant)
File Number(s): SC 2013/136032
[2]
EX TEMPORE Judgment (REVISED)
The plaintiffs and defendant are registered proprietors as tenants in common of a property in Rosebery ("the Property"). The plaintiffs hold a 3/8th share in the Property and the defendant a 5/8th share.
The proceedings were commenced by the plaintiffs by summons filed on 2 May 2013 seeking an order under s 66G of the Conveyancing Act 1919 (NSW) that the trustees for sale be appointed to the Property.
The proceedings were settled in accordance with orders made by Darke J on 3 September 2013 ("the Orders") as follows:
"The Court Orders:
1. Within 14 days the parties to jointly engage an expert Registered Valuer as nominated by the President of the Australian Property Institute to provide a market valuation of the real estate property known as Suite 206, 414 Gardeners Road, Roseberry [sic] NSW 2018 being Folio: 10/SP62353 ('the Property').
2. Within 14 days of receipt of the market valuation referred to in order 1 the Defendant to nominate to the Plaintiffs whether or not it intends to purchase the Plaintiff's share of the property.
3. In the event the Defendant nominates that it will purchase the Plaintiff's [sic] share of the Property, the Defendant shall, within 42 days of receipt of the market valuation referred to in paragraph 1 above, pay to the Plaintiffs a sum equal to 3/8 of the market value of the Property in consideration for which the Plaintiffs shall transfer their right, title and interests in the Property to the Defendant.
4. In the event the Defendant notifies the Plaintiffs that it will not purchase the Plaintiffs share of the Property, the Property is to be listed for sale by the parties with a real estate agent as nominated by the…President of the Australian Property Institute within 14 days of the date of the Defendant's notification being sent to the Plaintiffs.
5. Within 28 days the parties to appoint an independent auditor as nominated by the President of the Institute of Chartered Accountants Australia to finalise the financial accounts referred to in paragraph 48 of the affidavit of Karen Kelly sworn 30 July 2013 and determine the amount of income payable to the Plaintiffs, which the Defendant shall pay within 14 days of determination.
6. Upon completion of the sale and/or transfer of the Property (pursuant to orders 2 to 4 above) and payment to the Plaintiffs of any amount due and owing in respect of income (pursuant to order 5 above) the Plaintiffs shall provide to the Defendant a signed transfer of the units for the units held by them or any entity controlled by them in the Kelly and Mina Property Trust."
By a notice of motion filed on 30 January 2015 the defendant seeks, in substance, to enforce those Orders. In particular, the defendant seeks the following orders:
1. An order that the plaintiffs sign the transfer of property comprising all that land in Folio Identifier Lot 10 in Strata Plan 62353 to effect the transfer of their 3/8th share to the defendant.
2. An order that within seven days of the date of these orders the plaintiffs provide the executed transfer to the defendant in return for a cheque from the defendant to the plaintiffs in the sum of $121,875.
In effect, the defendant seeks to have the agreement which is constituted by the Orders specifically performed. I am satisfied that this is the appropriate procedure by which to resolve this dispute: see Western Land Developments Pty Ltd v Maganic Brothers and Sister Pty Ltd [2013] NSWSC 1574 per Slattery J at [2] and [33].
I have been greatly assisted by the clear and succinct submissions of Ms Nolan who appeared for the defendant and Mr Lawson who appeared for the plaintiffs.
The Orders reflect an agreement between the parties whereby the defendant was, in effect, given an option to purchase the plaintiffs' interest in the Property for a price reflecting the outcome of the "market valuation" referred to in pars 1, 2 and 3 of the Orders.
The defendant was to exercise this option "within 14 days of receipt of the market valuation" of the Property. In that event, the defendant was "to pay to the plaintiffs a sum equal to 3/8 of the market value" of the Property "within 42 days of receipt of the market valuation", in consideration for which the plaintiffs would then "transfer their right, title and interests in the Property" to the defendant.
Ms Nolan drew my attention to s 13 of the Conveyancing Act. The effect of that section is that stipulations in contracts as to time are not to be treated as being of the essence, unless they would be so regarded in equity.
So far as it concerns options to purchase, the position is summarised in J W Carter, E Peden and G J Tolhurst, Contract Law in Australia, (5th ed 2007, LexisNexis Butterworths) at [28-37] as follows:
"An option is like a unilateral contract in that the optionee, that is, the person to whom the option is granted, does not promise to exercise it. The optionor's obligation to perform, for example, to sell land, becomes enforceable on the fulfilment of a contingency, namely, exercise of the option. The requirements of the option must be strictly complied with." [citations omitted]
Thus, usually, time is of the essence in an agreement such as that incorporated in the Orders.
It is common ground that the "market valuation" contemplated by the Orders was received by the parties on 16 May 2014. Accordingly, the time by which the defendant was to exercise the option (that is, nominate "that it will purchase the plaintiffs' share of the Property") expired on 30 May 2014. The time by which the defendant was to "pay to the plaintiffs a sum equal to 3/8 of the market value" of the Property expired on 28 June 2014.
The defendant did not nominate that it would purchase the plaintiffs' share in the Property until 4 June 2014: five days late.
The defendant did not offer to pay the purchase price by 28 June 2014.
In those circumstances, the issues that arise are whether the plaintiffs have conducted themselves so that time ceased to be of the essence, or waived their right to insist that it was.
Mr Lawson submitted that par 4 of the Orders had the effect that, in the events that have happened, I should not make the order sought by the defendant. Rather, the Property should now be "listed for sale" by the parties through a real estate agent as nominated by the President of the Australian Property Institute.
Paragraph 4 provides that if the defendant notifies the plaintiffs "that it will not purchase" the plaintiffs' interest in the Property, the Property is to be so listed for sale.
This paragraph is not, in terms, enlivened in this case, as the defendant gave the plaintiffs no such notification. Mr Lawson submitted, however, that the parties must have intended to make provision in their agreement for all eventualities, and therefore must have intended par 4 to be enlivened if the defendant did not timeously or effectively exercise the option set out at pars 2 and 3 of the Orders.
I do not accept that submission. In my opinion, on their proper construction, the Orders simply make no provision for the circumstance that the defendant did not effectively exercise its option.
In any event, the question does not arise, as my opinion is that the plaintiffs have waived any entitlement to contend that the defendant has not effectively exercised the option.
Indeed, Mr Lawson, with admirable candour, accepted that the parties had conducted themselves as if the option had been effectively exercised.
In my opinion, this concession was well made.
On 4 June 2014, the defendant's solicitor wrote to the plaintiffs' solicitor stating:
"We refer to the above matter and advise that our client will proceed with the purchase of your client's share of the subject property.
Our client has 42 days within which to complete the purchase."
As I have said, that letter was sent five days out of time. It also incorrectly stated that the defendant had 42 days from 4 June 2014 to "complete the purchase". In fact, the Orders provided for settlement within 42 days of the valuation; that is, by 28 June 2014.
On 25 June 2014 the plaintiffs' solicitor replied to the defendant's solicitor as follows:
"We refer to your letter of 4 June 2014.
Please forward to us Transfer at a price of $134,062.50 (inclusive of GST) with respect to our client's interest in the above property."
The letter made no protest that the defendant's solicitor's letter of 4 June 2014 was out of time or that her nomination of the completion date was incorrect.
There followed a debate, in correspondence, between the solicitors as to whether the transfer should be for 3/8ths of the valuation figure ($121,875) or that figure plus GST ($134,062.50). Mr Lawson submitted that this question was never resolved, and that it followed that there had been no agreement as to the purchase price such as to warrant the orders now sought by the defendant.
However, par 3 of the Orders obliged the defendant to pay the plaintiffs "a sum equal to 3/8 of the market value of the Property"; that is, the market value as determined by the valuer. That was, in my opinion, the agreed price. The debate about whether GST was payable was, in my opinion, beside the point. In any event, as emerges below, by 1 August 2014 the plaintiffs abandoned reliance on this point.
On 25 June 2014 the defendant's solicitor nominated 14 July 2014 for settlement. The defendant caused $121,875 to be transferred to their solicitor's trust account at around this time. There is thus no doubt, in my opinion, that the defendant was at all relevant times ready, willing and able to complete.
On 11 July 2014 the defendant's solicitor submitted to the plaintiffs' solicitor a transfer in the sum of $121,875, but nominating a third party as transferee.
On 1 August 2014 the plaintiffs' solicitors responded by saying relevantly:
"In relation to the transfer of the property, we note the Transfer submitted by your client does not comply with the Consent Orders. Please submit to us a Transfer naming your client as transferee."
There was no protest in this letter about the price mentioned in the 11 July 2014 transfer, nor was there any suggestion that the option had not been effectively exercised.
On 19 August 2014 the plaintiffs' solicitor wrote a letter to the defendant's solicitor which included:
"Orders 2 and 3 of Justice Darke's Orders clearly refer to the Defendant (being Kazbah Holdings Pty Limited) purchasing our clients share of the property. We again request you submit to us a Transfer in accordance with such Orders. In the event such Transfer is not received by us within 14 days we shall assume the Defendant does not intend to purchase our clients share of the property and shall proceed to sell the property pursuant to Order 4."
Again, the plaintiffs made no assertion that the defendant had not effectively exercised the option, or that the fact the defendant had nominated a third party as purchaser somehow disentitled it to enforce its rights under the Orders. Nor did the plaintiffs assert that the nominated purchase price (that is exclusive of GST) was not correct. Indeed, the letter bespoke the plaintiffs' insistence that the Orders be implemented and called on the defendant to submit a transfer within 14 days.
The defendant's solicitor did just that on 28 August 2014 and submitted a transfer nominating $121,875 as the price and the defendant as the transferee.
The plaintiffs' solicitor's only response was on 2 September 2014, and then only to direct attention to matters raised in his letter of 19 August 2014 which are unrelated to the defendant's purchase of the plaintiffs' interest in the Property.
Thereafter, the defendant's solicitor wrote to the plaintiffs' solicitor on several occasions calling for settlement. Settlement did not occur; hence this application.
In these circumstances, it is my opinion that the defendant is entitled to the orders I have set out at [4] above. The plaintiffs have, by the conduct as set out above, waived their entitlement to hold the defendant strictly to the terms of the agreement set out in the Orders. To put it another way, in the events that have happened, equity would no longer regard time as being of the essence of the agreement set out in the Orders.
The defendant, having been unable to perform its obligation under the agreement, is now entitled to specific performance of it.
I therefore make these orders:
1. Grant leave to the plaintiff to file in Court the affidavit of Mark Ronald Davidson sworn 18 March 2015.
2. Order that by 5pm on 27 March 2015 the plaintiffs execute a transfer in the form submitted by Giles Payne & Co to Paladin Law on 28 August 2014, in favour of the defendant of all of their interest in the land at Folio Identifier Lot 10 SP 62353.
3. Order that by 5pm on 27 March 2015, the plaintiffs deliver the transfer to the offices of Giles Payne & Co, 506 Bunnerong Road, Matraville NSW 2036 (attention Ms Paula Becker).
4. Upon presentation of the transfer referred to in order 3 herein, the defendant by its solicitor or agent is to tender by way of exchange, a solicitor's trust account cheque or bank cheque in the sum of $121,875.
5. Direct that the plaintiffs by themselves or their solicitors notify the solicitor for the defendant of their intention to complete the exchange contemplated by order 4 above, on a date and time certain, on no less than 24 hours' notice.
6. Order that the plaintiffs pay the defendant's costs of this application.
7. Grant liberty to apply on short notice for any further order needed to give effect to these orders.
8. Order that these orders be taken out forthwith.
[3]
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Decision last updated: 27 March 2015