PANE ENTERPRISES P/L v. PERONACE & ANOR [2003] NSWSC 310

After some assertions about the position taken by the purchaser in the conversations the letter said: We have advised our clients that they may either elect to remove the [unapproved] work, or, carry out the work as set out in Council's letter dated 22 January 2003 and upon them obtaining a Building Certificate and presenting same to your client that your client will be obliged to settle as a result of the agreement made on 5 December 2002. As a result of this matter we would be grateful if you could confirm that your client will be in a position to complete the contract in the week commencing the 9th February 2002 if our clients are in a position to provide it with a Building Certificate at that time. 19 The purchaser's solicitors' reply of 3 February 2003 said: … our client will complete the Agreement for Sale of Land dated 23 May 2002 strictly in accordance with that contract and Terms of Settlement dated 05 December 2002. 20 The vendors' solicitors replied on 5 February 2003. After making a number of assertions about events in the parties' dealings the letter said: As stated to you in our letter dated 31 January 2003 our clients have now elected to remove the non-complying work so that they may obtain a building certificate over the premises. We advise that when providing us with these instructions Mr Peronace client indicated that he had had discussions with a Director of the purchaser who indicated that he wished to retain the upstairs terrace area. As this is inconsistent with the agreement reached at court on the 5th December 2002 we ask that you confirm that your client will complete the contract upon our client presenting it with a building certificate from [Council] after the non-complying work is removed and the building certificate obtained. As our client is desirous of commencing the removal of the non-complying work at the earliest possible time, we ask that you confirm that your client is agreeable to the above matters prior to 5.00 pm 6 February 2003. 21 The purchaser's solicitor replied on 6 February 2003 in these terms: Reference is made to your fax dated 05 February 2003. We must confess that we have some difficulty in understanding your letter. The obligation of the Vendors under the Terms of Settlement is to obtain a Building Certificate. How it obtains the Building Certificate is clearly a choice for the Vendors and the Purchaser has no say in the matter. Our reference to the fact that the Purchaser will settle both in accordance with the Terms of Settlement and the Contract is that it is not to be interpreted that the Vendors are to be relieved from any residual contractual obligation simply because it produces a Building Certificate. We reiterate that if a Building Certificate is produced then we have an obligation to settle in accordance with the Terms of Settlement namely 4 working days. However, if in fact the work carried by the Vendors is of such nature that it gives rise to the Purchaser making a claim then obviously the Vendors have a contractual obligation to set aside up to 5% of the purchase price on a claim being made by the Purchaser. The difficulty is that we are not in a position to tell you in advance whether that will arise or not because we do not know what is the exact work necessary by why of demolition and in what way that would result in our client not obtaining what it had contracted to get. Your clients should make up their own minds as to which course they take to avoid a potential compensation claim arising. We have taken the liberty of giving such a comprehensive explanation so as to avoid future confrontation if it can be avoided. Our client is concerned at the delay involved particularly when there was such a degree of confidence at the Hearing on 05 December 2002 that the Certificate was forthcoming in the subsequent week or at least before Christmas. We trust that this clarifies the issue. 22 The Vendor's solicitors replied on 10 February 2003 and said: We note your contention that your client would be entitled to compensation if our clients exercise their right to obtain a building certificate over the property by removing the unauthorised work and advise that we reject the same. We note that your contention is inconsistent with the discussions held between us, our Counsel and your Mr Nesci at Court on the 5th December 2002, wherein it was stated by him that the purchaser had no objection to our clients obtaining a building certificate over the property by removing the unauthorised work. Mr Nesci should recall that our clients reserved the right to this election because Council had provided them with the option of either rectifying the non complying work or removing the same. As a result we consider your suggestion that your client would be entitled to compensation to be totally without substance. Furthermore we submit that your client's failure to confirm that it will complete the contract upon being presented with a building certificate to be in breach of the agreement made on 5 December 2002. We advise that unless you confirm with us prior to 5.00pm 12 February 2003 that your client will complete the purchase within four days of our client's presenting it with a building certificate under Section 149D of the Environmental Planning and Assessment Act 1979, upon removing the non complying work, our clients intend to accept your clients breach of the agreement as repudiatory conduct entitling them to terminate the contract for sale dated 23 May 2002. 23 The purchaser's solicitors replied on 10 February 2003 in these terms: Your fax dated 10 February 2003 is acknowledged. You misunderstand the position not only by what has been conveyed in your letter but also by what took place in Court. The way your client proceeds to obtain the Certificate is a matter purely for your client. We are simply putting you on notice that depending on what course your clients take it may or may not lead to certain consequences namely the possibility that the Purchaser is entitled to make a claim for compensation. Surely, you are not suggesting that your clients are entitled to demolish willy nilly what they decide simply to obtain a Building certificate and that our client would have no recourse. We want to make it quite clear that your clients should not have any fear that our client will not settle in accordance the Terms of Settlement but will not settle in the event that there is detriment to the land unless the funds which may be claimed pursuant to notice for compensation are set aside in accordance with the Contract. Your threat that this is intended to be a repudiation of the Contract is simply nonsense and it is another provocative act like the last occasion when you forced our client to go to Court. Accordingly, we require you to withdraw this threat not later than 4.00 p.m. on 11 February 2003 otherwise we have no option but restore the matter for argument. There seems to be a reluctance on the part of your clients to proceed with the work and obtain the Building Certificate. Is there a hidden agenda? 24 The purchaser's solicitors wrote again on 12 February and said: Reference is made to prior correspondence, the lengthy conversation yesterday afternoon and this morning. We wish to reiterate in clear terms. Our client is prepared to settle the matter within the Terms of Settlement within 4 days of the Building certificate being provided, however, our clients reserve their position in making a claim for compensation pursuant to the Contract if the nature of the demolition work is such that it entitles them to make a claim for compensation. We do understand your position that you indicate that irrespective of what the demolition work is, that our clients are not entitled to make a claim for compensation. We have invited you to indicate with precision what is the demolition work and you keep referring to the non compliant work. Such label, with respect, is not helpful. If you want us to give you a positive and absolute answer now as to whether we would be making a claim or not then we need to know with precision what is being demolished. We have indicated in prior correspondence the absurd situation which would arise if the reading of the Terms is as you indicate. Your clients, clearly, have an option as to how they obtain the Certificate. From the correspondence it appears that they can either upgrade part of the building or carry out some demolition. Clearly, if they go down the road of upgrading, we can clearly indicate now that no claim for compensation will be made. If on the other hand your clients opt to demolish, whether our clients will or will not make a claim for compensation will depend on the nature of the demolition. You then indicated that you are going to interpret this as being anticipatory breach. We gave our reasons why we feel that you cannot do so and that you have to put the purchaser to the rest by obtaining the Certificate, tendering the Certificate and then the onus shifts to the Purchaser as to what he does or does not do in terms of completion. You indicated that you intend terminating the Agreement based on anticipatory breach. We indicated to you that this is unreasonable and should await further declaratory relief from the Court on the matter being restored pursuant to leave. We indicated that it would be unconscionable for you to do so pending a ruling. We also note that you indicated that you are not willing to wait till Friday for the Court to be asked on Friday to restore the matter to the list for next week. On this basis, I have no choice but to request the Registrar this afternoon to restore the matter to the list next week for argument. We wish to emphasise that we believe that your clients are being unreasonable in this regard and will submit this letter on an argument for costs. 25 Later on the same day 12 February they wrote again in these terms: Further to our correspondence of this morning, would you kindly indicate as to what steps your clients have taken since this matter was last in Court in obtaining the Building Certificate. If no steps have been taken why are your clients not in breach of the Terms in that they are acting unreasonably and are delaying the matter. It is our view that we would be entitled to seek Specific Performance. 26 The vendors' solicitors replied on the same day 12 February 2003 and said: We refer to your letter dated 10 February 2003 and subsequent telephone correspondence. We note your advice that your client is unwilling to confirm it will perform the agreement between the parties made at Court on 5 December 2002, that it will complete the above agreement within 4 days of our client presenting it with a building certificate over the property under Section 149D of the Environmental Planning and Assessment Act 1979, due to your client's perception that it may be entitled to compensation under the terms of the agreement. In this regard we respectfully advise that we cannot see how your client would be entitled to compensation as this is inconsistent with the agreement made on 5 December 2002, wherein our clients reserved the right at their election to obtain the Section 149D certificate over the property, either by removing the unauthorised work, or by carrying out further necessary work to satisfy Council. We submit that your client's conduct is a repudiation of the agreement made on 5 December 2002, as for your client to now raise the issue of compensation, when it was aware of our clients foreshadowed intention to demolish the unauthorised work is repugnant to same. As a result of the above matters we confirm that in the event that you do not provide us with written advice that your client will complete the agreement within 4 days of being presented with a building certificate under Section 149D of the Environmental Planning and Assessment Act 1979 upon removal of the unauthorised work, prior to 5.00pm on today's date, we are instructed to thereafter terminate the Contract for Sale dated 23 May 2002. We note your advice that you are seeking to have the Supreme Court proceedings relisted so that you may obtain further relief from the Court. We respectfully note that we do not see that you will succeed in any application for further relief as a result of the agreement reached on 5 December 2002. We reserve the right to tender this letter and previous correspondence on the issue of costs of any further proceedings instigated by you, at the conclusion of same. 27 In a reply also of 12 February the purchaser's solicitor said among other things: We wish to emphasise and emphasise it again. Our client will perform the agreement and will settle within 4 days of the Building Certificate being provided with the proviso that if the circumstances are such that will give rise to a claim for compensation that a claim for compensation will be made. With the greatest respect, this is not to be anticipated by you that we are not willing to perform the agreement by completing. Whether or not the purchaser is entitled to compensation is at this stage theoretical. We have canvassed with you the reasons for this and why in our view your stance is premature. 28 In a further letter also of 12 February the vendors' solicitor said, among other things: Our clients have subsequently obtained a letter from Council pursuant to Section 149D(2) of the Environmental Planning and Assessment Act 1979 detailing the work that Council requires to be carried out prior to it being in a position to issue a building certificate. We confirm that we forwarded a copy of this letter to your office under cover of our letter dated 22 January 2003. Upon receiving the letter from Council, our clients arranged for their building consultants to provide them with a scope of works, which would satisfy Council's requirements for the issue of a building certificate. We note that after receiving advice from their building consultants our clients have elected to proceed with obtaining a building certificate by removing the unauthorised work at the terrace area as it appears that this is the most timely option open to our clients to allow completion to occur as soon as possible. As a result of our instructions that a director of your client had informed Mr Peronace that your client wished to retain the upstairs area, and also, that he was not aware that the agreement made on 5 December 2002 gave our client the right to elect to obtain a building certificate by removing the unapproved work, we were instructed to write to you on 31 January 2003 seeking confirmation from your client that it intended to perform the agreement prior to them proceeding with their election to remove the unauthorised work and obtain the building certificate. In response to our request for confirmation that your client would complete the contract within 4 days of it being presented with a building certificate, you have provided us with a series of correspondence which indicates that your client will not settle within 4 days of being presented with a building certificate without making a claim for compensation in relation to the loss of the unauthorised terrace area. This is clearly a repudiation of the agreement made on 5 December 2002 and an effort to vary the same. As previously advised, we are instructed to accept your clients conduct as repudiation of the agreement made on 5 December 2002 and we hereby give you notice that our clients have now terminated the contract dated 23 may 2002 as varied on 5 December 2002. In relation to your assertion that your client would be entitled to specific performance we respectfully submit that any possible right to this remedy would be affected by the agreement made on 5 December 2002. 29 The purchaser commenced the present proceedings by Summons filed on 20 February 2003 and claims an order that the termination of the contract of sale by the last letter of 12 February 2003 was invalid. The proceedings came before the Registrar twice, there was an application for expedition which was granted by Young CJ in Eq on 4 April 2003, and the proceedings were heard by me on 8 April 2003. 30 In substance the dispute is that the vendors contend and the purchaser denies that the position taken by the purchaser in its solicitors' correspondence about the possibility of a claim for compensation being made if the vendor ever does produce a certificate under s.149D and thereby obliges the purchaser to complete within four working days, as required by the agreement in the Short Minutes, amounts to repudiation of the purchaser's obligations under the Contract of Sale, a repudiation which the vendors were entitled to accept and did accept on 12 February 2003. 31 At several points in the correspondence of 10 and 12 February 2003 the vendors' solicitors misstated or greatly overstated, to the point of distortion, the position taken by the purchaser's solicitors in the correspondence to which they responded. Important parts of the context of the dispute are that the vendors have not obtained a s.149D Certificate, and have not carried out the demolition work which it would be necessary to perform to satisfy Council's requirements for a s.149D Certificate. The purchaser made a claim for compensation on 10 September 2002 referred to in Claims 5 and 6 in the Summons in the first proceedings, but the purchaser has not since 5 December 2002 made a claim for compensation, and unless confronted with a s.149D Certificate obtained after alterations have been made, could not really be in a position to make any intelligible claim for compensation. It is difficult to see, through a series of hypotheses, whether the purchaser would be entitled to make any such claim. 32 In the abstract, which is the only frame of reference available, it is difficult to suppose that any large loss would be caused to the purchaser by the removal of works which had been built illegally, because if the purchaser took the property with the works in position it would be exposed to adverse action by the Council. In view of the Agreement in the Short Minutes, the vendors' election to demolish the works and the vendors' need to obtain a s.149D Certificate, the vendors are under a practical necessity, if they are to be entitled to completion, to demolish the illegal works and otherwise to satisfy Council's requirements. Apart from the statements in correspondence which are alleged to constitute repudiation the purchaser has never in any way indicated a lack of readiness to complete the purchase. 33 Although the purchaser claims declaratory relief and bears the onus of proof, the primary facts are not in dispute, any factual questions can relate only to inference and interpretation, and I address the assertion made by the vendors that they have terminated the agreement. 34 The vendors' counsel submitted: The untenable view persisted in by the plaintiff … was, notwithstanding the compromise of proceedings 5762 of 2002, the Plaintiff was entitled to maintain its claim for compensation under cl.7 of the contract for sale of land dated 23 May 2002. 35 The vendors' counsel complained that the letter of 3 February 2003 is opaque as to the attitude of the plaintiff in that it does not confirm what the purchaser's understanding of the meaning of the agreement of 5 December was. However I attribute no force to this observation as there was no obligation on the purchaser to state its position fully; but further, on the correspondence generally, there is no real room for doubt about what the purchaser's position was, and is. 36 Counsel contended that there was an agreement between the parties to the effect that in consideration of the vendors' waiving their rights to oblige the purchaser to settle the Contract for Sale on 11 December 2002: (a) the [purchaser] agreed it would settle the Contract of Sale four days after a s.149D Certificate was provided and (b) the [purchaser] agreed that claims 1 to 7 of the Summons would be dismissed and thereby waived its right to claim compensation under cl.7 of the Contract for Sale arising from the illegal building work. 37 It was contended that the agreement alleged was evidenced by a series of documents and events: the Contract of Sale, Council's letter of 4 September 2002, the purchaser's solicitor's letters of 5 and 10 September, vendors' solicitor's letter of 11 September, Notice to Complete dated 25 November, the Summons in the first proceedings and the claims in the Summons, the Short Minutes of Order and the dismissal of the proceedings on 4 April 2003. Counsel also referred to the fact that the Court was informed, on 5 December, that the proceedings had been settled. In my opinion this has no force to support the contention that there is some implied term relating to a claim under cl.7 no longer being available. 38 It was contended that the effect of the agreement alleged was that there was a variation of the Contract for Sale and a waiver of the right to claim compensation under cl.7 arising from the illegal work. 39 There is no expression in the Short Minutes dated 5 December 2002, or in any other written material referred to, of a waiver of rights to claim compensation under cl.7. The contention was to the effect that, on a whole view of the events, there is no other rational reason why the vendors would give up their right to insist on completion on 11 December in accordance with the Notice to Complete except that they were relieved from the plaintiff's claim for compensation arising from the illegal building work. 40 Counsel contended that the implication was to the effect that the purchaser gave up the right to claim compensation for the illegal building work, and not that the purchaser gave up his rights to claim compensation generally under the Contract of Sale. As counsel pointed out, by coming under the need to obtain a s.149D Certificate the vendors came under significant inconveniences, expense and potential expense in meeting whatever the Council might require; but this is not to my mind a basis for the alleged implication. 41 The position adopted by the vendors seems to imply, or to give an assurance that until their purported termination the vendors were willing to obtain the Building Certificate and to do whatever was required, including carrying out demolition work, to persuade Council to issue one. There is on the evidence no reason to doubt that this was the vendors' intention; however they have not done so in fact. Obtaining a Building Certificate would serve the vendors' interests whether or not they actually completed this contract of sale, as the vendors, even if they continue to own the property, or if they contemplate selling it to someone else, still face possible difficulties if Council maintains that some of the development is illegal. At a crudely practical level, the need of the purchaser to show its intending mortgagee a building certificate meant that obtaining a building certificate conferred on the vendors the practical advantage of actually being able to achieve completion. 42 In my view the submissions of the vendors' counsel attribute more to the events than can reasonably be implied into them. The agreement in the Short Minutes purports to be the entire agreement of the parties on the subject with which it deals, and in my opinion the earlier events which are alleged to evidence an agreement can be referred to for purposes which are important, but to which there are limits; they can be referred to in order to understand the genesis or aim of that agreement, and also so as to identify things referred to in the agreement, and also so as to resolve ambiguities, including ambiguities which appear from the express terms, and ambiguities which appear when the document is understood in the setting in which the parties were placed. See Brambles Holdings Ltd v. Bathurst City Council (2001) 53 NSWLR 153 at 163-164 (Heydon JA): Royal Botanic Gardens and Domain Trust v. South Sydney City Council (2002) 76 ALJR 436 at 439 [10]. 43 In the present case there is in my view no difficulty in identifying any part of the subject matter, and there is no relevant ambiguity. In the setting of the events, including the earlier events which counsel contended form part of the contract, the genesis or aim of the agreement in the Short Minutes is, in my opinion, clear: the parties were in dispute about whether the vendors had made time of the essence for the completion of the Agreement for Sale of Land, the dispute had not been decided, and if the vendors obtained a s.149D Certificate the purchaser was prepared to settle the purchase in a short time; and settling the purchaser was what the vendors had insisted that the purchaser was obliged to do, hence the Notice to Complete. The agreement in the Short Minutes did not set aside the parties' rights under the contract, but dealt only with the manner and circumstances in which the purchaser was to be obliged to settle within four days. Settlement was to be "pursuant to the contract" and no part of the contract was set aside by that agreement. 44 The Agreement in the Short Minutes did not provide for the disposition of any of the claims made by the purchaser as plaintiff in the first Summons, and did not provide for dismissal of those proceedings but provided for their adjournment to a date more than two months in the future. It was reasonable for the parties to contemplate that the sale might well be settled before the adjourned date, and that if that happened they could address, on the adjourned date, whether any of the claims in the Summons needed to be proceeded with. The dismissal of the proceedings ordered by the Registrar on 4 April 2003 was not provided for in the Short Minutes, and, of course, had not occurred at the time of the alleged repudiation and termination. 45 The vendors' counsel suggested that, as a result of some events, as I understand it including the dismissal of the proceedings, the purchaser is now precluded from pursuing any claim to which the purchaser was entitled at the time of issue of the first Summons, or perhaps the proposition was, any claim to which the purchaser was or will be entitled at any time. I am not called upon to reach any conclusion on this suggestion. I leave unconsidered the effect if any produced by the dismissal on the purchaser's entitlement to make a claim or succeed in a claim; since 5 December 2002 the purchaser has made no claim for compensation. 46 My conclusion is that it is not the case that it was an express term, or an implied term of the agreement of 5 December 2002 that the purchaser would waive any right to compensation which might thereafter come into existence, according to whatever events might attend the vendors' obtaining a s.149D Certificate. 47 I was referred to a number of authorities in which the concept of repudiation has been considered. The significant authorities were referred to and reviewed by Young J in Drinkwater v. Caddyrack Pty Ltd 25 September 1997 unreported. Propositions from the case law which I regard as presently important are these:

At a glance

Court

Decision date

Before

Source

Judgment (19 paragraphs)

Legislation Cited (3)

Cases Cited (6)

Cited By (1)