The plaintiffs, Glenn Parkes and Leigh Parkes, are the puchasers under a contract for the sale of land entered into on 30 June 2015. The defendant, Ian Mamo, is the vendor under the contract.
By their Summons, the plaintiffs seek a decree of specific performance in respect of the contract. This is resisted by the defendant, who claims that he validly terminated the contract on 11 January 2016. The purported termination was based on the ground that the plaintiffs were in default of their obligations concerning the payment of the deposit. The defendant, by way of a Cross-Summons, seeks an order that the plaintiffs pay the amount of the deposit.
[2]
Summary of salient facts
The property the subject of the contract is described as lot 1 in a proposed plan of sub-division of the land contained in Folio Identifier 155/752021. The proposed sub-division would create two lots: lot 1 with an area of about 2.023ha, and lot 2 with an area of about 3.345ha. A house and other improvements are located on proposed lot 1.
The contract consists of the 2005 standard Law Society and Real Estate Institute form, together with special conditions and various attachments. The contract was not stamped. However, it was allowed into evidence on the basis that the plaintiffs through their counsel gave the "usual undertaking by person liable" to transmit the contract to the Chief Commissioner of State Revenue within 21 days (see Uniform Civil Procedure Rules 2005 (NSW) r 31.13(1)).
On the front page of the contract the completion date was stated to be "pursuant to Special Condition 8". That condition required completion 14 days after the vendor notifies the purchaser in writing that the sub-division plan has been registered as a deposited plan, or 42 days after the date of the contract, whichever is later.
Special Condition 4 provides:
The vendor shall proceed with all due dispatch to obtain consent of the council to a plan of sub-division substantially in the form attached and marked "A" and thereafter will lodge the sub-division plan at Land and Property Information NSW for registration as a deposited plan. If the sub-division plan has not been registered as a deposited plan within six (6) months after the date hereof either party may at any time thereafter, but prior to the sub-division plan being registered as a deposited plan, rescind this agreement by notice in writing given to the other. In no event shall the vendor be liable for any delay in such lodgement or registration unless it is due to a failure to do all things reasonable to achieve registration.
Clause 28 of the contract also provided for registration of the plan of sub-division.
The price was stated on the front page of the contract to be $1,400,000, with a deposit of $140,000. The deposit is further addressed in clause 2, which relevantly provides:
2.1 The purchaser must pay the deposit to the depositholder as stakeholder.
2.2 Normally, the purchaser must pay the deposit on the making of this contract, and this time is essential.
2.3 If this contract requires the purchaser to pay any of the deposit by a later time, that time is also essential.
2.4 The purchaser can pay any of the deposit only by unconditionally giving cash (up to $2,000) or a cheque to the depositholder or to the vendor, vendor's agent or vendor's solicitor for sending to the depositholder.
2.5 If any of the deposit is not paid on time or a cheque for any of the deposit is not honoured on presentation, the vendor can terminate. This right to terminate is lost as soon as the deposit is paid in full.
2.6 If the vendor accepts a bond or guarantee for the deposit, clauses 2.1 to 2.5 and 3 do not apply.
2.7 If the vendor accepts a bond or guarantee for part of the deposit, clauses 2.1 to 2.5 and 3 apply only to the balance.
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Clause 9 of the contract relevantly provides:
If the purchaser does not comply with this contract (or a notice under or relating to it) in an essential respect, the vendor can terminate by serving a notice. After the termination the vendor can -
9.1 keep or recover the deposit (to a maximum of 10% of the price);
…
Clause 16.7 (which was amended by Special Condition 1(vi)) requires that, on completion, the purchaser must pay the price (less any deposit paid) and any other amount payable by the purchaser under the contract (less any amount payable by the vendor to the purchaser under the contract).
The subject of the deposit was raised in correspondence between the solicitors for the respective parties prior to the exchange of contracts. On 3 June 2015 the plaintiffs' solicitor, Direct Law, sent a letter to the defendant's solicitor, Napier Keen. The letter included the following:
I am instructed to seek the following changes to/information in relation to the contract:
1. That there be a 5 day cooling off period. I am ready to exchange immediately to bring this about;
2. That the vendor accept a deposit bond at the end of the cooling off period;
…
On 23 June 2015 Napier Keen sent a letter to Direct Law which included the following:
We refer to the above matter and are instructed to reply to your correspondence of 3 June as follows:
1. We note that it is agreed by the parties that the Purchasers will provide a s 66W certificate on exchange of contracts.
2. We confirm that the Vendor has agreed to accept a 5% deposit bond on exchange.
…
In reply to your email of 18 June we are instructed to advise as follows:
(a) The Vendor has obtained conditional approval from Council to the sub-division. Some of those conditions have already been complied with and the Vendor is hopeful of being able to prepare and lodge a linen plan of sub-division with Council in the near future.
(b) The Vendor is ready to exchange contracts this week as he plans to obtain the NSW Swimming pool certificate today. We will provide that certificate to you as soon as it is received.
On 26 June 2015 Direct Law sent a letter to Napier Keen in the following terms:
Please find enclosed deposit bond and purchaser executed contract for sale.
Please call is [sic] to confirm that exchange is to proceed.
Thereafter proceed to exchange and forward duly exchanged contract to my offices.
The deposit bond referred to in the letter was a Deposit Power Guarantee issued by CBL Insurance Limited as guarantor by its authorised manager, Deposit Power Pty Limited. The guarantee had a date of issue of 24 June 2015, with an expiry date of 24 December 2015. The plaintiffs were named as the purchasers and the defendant was named as the vendor. The maximum amount of the guarantee was stated to be $70,000. The printed conditions of the guarantee included the following:
In consideration of the Vendor accepting this Guarantee from the Guarantor instead of the Vendor's entitlement to some or all of the deposit under the Contract of Sale, the Guarantor will, within two (2) clear business days of receiving from the Vendor, prior to the expiry of the Guarantee, the original Guarantee and a copy of:
i) …
ii) where the Property to be Purchased is outside Victoria, the notice of termination which has been served on the Purchaser,
and which, in either case, would consequently entitle the Vendor to keep, recover or declare forfeited the deposit, pay the amount demanded by the Vendor up to but not exceeding the Maximum Amount of Guarantee or 10% of the Purchase Price or the amount of the deposit specified in the Contract of Sale, whichever is the lesser.
…
The Guarantor will be required to make payment under this Guarantee only if the above conditions are strictly complied with prior to the expiry of the Guarantee.
Such payment shall be made to the person nominated in the Contract of Sale to hold the deposit.
…
This Guarantee expires on the earliest of when:
1. The Contract of Sale is completed; or
2. The Guarantor pays the amount required to paid under this Guarantee; or
3. The Contract of Sale is terminated or rescinded and, in either case, the Vendor has accepted in writing the termination or rescission and the Purchaser is entitled to a refund of the deposit; or
4. 5.00pm Sydney time on the earlier of the Date of Expiry or, if the Date of Expiry falls on a weekend or a public holiday in Sydney, the immediately preceding business day.
The rights of the Purchaser to resist forfeiture of the deposit or recover the deposit are not impaired by any payment by the Guarantor under this Guarantee.
On 30 June 2015 Napier Keen sent a letter to Direct Law in the following terms:
We acknowledge receipt of your correspondence of 26 June together with the contract and Deposit Bond which were enclosed thereto.
We refer to the writer's telephone conversation with Glen Pitt today and confirm your advice that the Purchasers are aware the property is on tank water; that special condition 7(i) can be appropriately amended and that exchange of contracts can now proceed.
We confirm that contracts have been exchanged with effect from today. We enclose herewith Vendor's copy of the contract which is now in identical terms to the Purchasers' counterpart copy.
We shall communicate with you again when the sub-division has been registered whereupon we can provide you with particulars of title.
Napier Keen sent numerous letters to Direct Law in the months following the exchange of contracts. On 16 July 2015 Napier Keen sent a letter to Direct Law which stated:
We refer to the above matter and to our correspondence of 30 June last confirming exchange of contracts.
Our client has been advised by his surveyor that your clients are constantly contacting him to obtain information regarding progress of the plan of sub-division and also requesting information about a water meter for the property being sold.
We would appreciate your co-operation in advising your clients that they are not permitted to contact the Vendor's surveyor and that any information regarding the progress of the plan of sub-division must be sourced via this office. We advise that the surveyor has been directed not to speak with your clients in the future.
In relation to the water meter, your clients are well aware that the property is being sold to them on the basis that it is on tank water and we fail to understand why they are now making requests for a water meter.
We will communicate with you again when the plan of sub-division has been approved by Council and consented to by our client's mortgagee.
On 27 July 2015 Napier Keen sent a letter to Direct Law in which it was stated that the linen plan of sub-division had been lodged with Penrith Council.
On 17 August 2015 Napier Keen sent a letter to Direct Law in the following terms:
We refer to the Vendor's sub-division in the above matter.
As a matter of courtesy, we have been instructed to advise you that Endeavour Energy has lost the Vendor's application for the sub-division. Our client's surveyor has now re-submitted the application, however, due to Vendor being overseas during the months of December, January and February next, registration of the sub-division will be delayed.
We shall provide you with further information when this is available.
In the meantime, we point out that the Deposit Power Guarantee provided by the Purchasers expires on 24 December 2015.
On 24 November 2015 Napier Keen sent a letter to Direct Law in the following terms:
We refer to the above matter and to the provisions of special condition 4 of the contract.
Pursuant to the Conveyancing Amendment (Sunset Clauses) Act 2015 which inserts a new Division 10 into the Conveyancing Act 1919, Ian David Mamo hereby gives notice that he intends to rescind the contract dated 30 June 2015, between himself as Vendor and Glenn William Parkes and Leigh Ann Parkes as Purchasers for the sale of Lot 1 in the Vendor's plan of sub-division of property known as 192-222 Hinxman Road, Castlereagh.
The reason for the Vendor's intention to rescind the contract is that, due to unforseen delays experienced by the Vendor to date, he has been unable to comply with Penrith Council's requirement of providing water and power services to his 2 lot sub-division as depicted in the plan marked Annexure "A" to the contract.
As a result of the aforesaid unforseen delays, the Vendor will be unable to obtain final approval from Penrith City Council to his plan of sub-division nor have that plan of sub-division registered by the sunset date of 30 December, 2015.
We request written consent from the Purchasers by return mail to the Vendor's proposed rescission.
A further letter was sent by Napier Keen on 27 November 2015 which enclosed a Notice of Intention to Rescind Contract. The notice set out reasons why the vendor would be "unable to comply with Special Condition 4 of the contract" as the plan of sub-division would not be registered by 30 December 2015. The notice also contained a request that the purchasers consent to the vendor's proposed rescission.
Direct Law responded with a letter sent on 10 December 2015. The letter included the following:
In relation to the Notice of Intention to Rescind, the matters set out therein do not seem to justify a basis for rescission under the legislation and cannot be consented to by my clients in its current form.
Furthermore my clients are quite happy to consider an extension of the sunset date if this is something that will assist your client.
Please advise as to your client's position in the light hereof.
On 11 January 2016 Napier Keen sent a letter to the plaintiffs enclosing a Notice of Termination of Contract. The notice was dated 11 January 2016 and included the following:
2. The contract provided for a deposit of $70,000 (the deposit) to be paid by the purchasers which the vendor accepted by way of a Deposit Bond provided by the purchasers from CBL Insurance Limited (the bond), such bond being effective from 24 June, 2015 to 24 December, 2015.
3. On 17 August, 2015 the vendor's Solicitors wrote to the purchasers' solicitors advising that the bond was to expire on 24 December, 2015. Notwithstanding the aforementioned you have failed to provide the vendor with a replacement bond or a cash deposit to the value of $70,000.
4. As a result of your default pursuant to clause 2 of the contract, the vendor gives you notice that the contract is terminated and is entirely at an end. The vendor is now entitled to take action for recovery of the deposit and for damages resulting from your default.
On 12 January 2016 Direct Law sent a letter to Napier Keen in which it was stated that the purchasers denied the right of the vendor to terminate the contract and did not accept the purported termination.
The plaintiffs then instructed new solicitors, namely, Muscat and Co. Muscat and Co sent a letter to Napier Keen on 23 February 2016 which included the following:
We refer to your letter to our clients' former solicitors dated 11 January 2016 which enclosed a purported Notice of Termination of contract by the Vendor (Notice of Termination).
…
On 12 January 2016, our clients' former solicitor wrote to your firm referring to the above letter, denied the right of your client to terminate the contract and conveyed that our clients did not accept the purported termination.
The Notice of Termination was ineffective to terminate the Contract for the following reasons.
As the Notice of Termination…makes abundantly clear, the requirements of clause 2 of the Contract could be and were satisfied by delivery of a deposit guarantee bond in the amount of $70,000. The deposit bond in its terms was accepted by your client in satisfaction of our clients' obligations under clause 2 of the Contract.
The Contract provided that the purchasers could pay the deposit by means of a bond which it did (see clause 2.6 of the Contract). The Contract did not include provisions as to the requirements for the bond, namely, as to its term, or a provision that if the registration date were extended or delayed, then the purchasers after being notified of that must substitute a new deposit guarantee bond with an expiry date at a specified time after the extended date.
It is incorrect to assert that the fact that a substituted bond was not provided was a breach of the obligations of the purchasers under the Contract.
If our clients were wrong in this construction, which is denied, your client's entitlement to terminate the Contract subsisted in clause 9 of the Contract. The non-renewal of the bond was not a failure to comply with an essential term of the Contract. Having regard to the provisions of clause 2.6 of the Contract, which is the only provision, which speaks of the nature of the payment of the deposit in the Contract's context, the need to renew the term of the deposit bond, if it were to be implied, it was not an essential term of the Contract.
…
In the circumstances, the purported termination by the Notice of Termination is invalid and constitutes a repudiation of the Contract.
It should be observed that the Notice of Termination followed an erroneous and purported attempt by your client to rescind the Contract by way of Notice of Intention dated 27 November 2015, which purported rescission was not consented to by our clients. The two matters read together convey that your client no longer intends to be bound by the Contract according to its terms. Our clients reserve their rights in respect of these repudiations.
At present we are instructed that our clients wish to affirm conditionally the Contract and pursuant to same wish to make the following open offer:
The Vendor and the Purchaser will enter into a Deed of Variation extending the contract sunset date to 1 June 2016. The Deed will affirm all other provisions of the Contract, subject to clause 2 below.
The Purchaser will pay a sum of $70,000 in substitute of the deposit bond to the agent upon the making of the aforementioned Deed of Variation.
…
On 18 March 2016 the plaintiffs lodged a caveat claiming an interest arising under the contract dated 30 June 2015. On about 11 April 2016 a lapsing notice was issued in respect of the caveat. These proceedings were commenced by the Plaintiffs on 27 April 2016. On 28 April 2016 an order was made by consent for the extension of the operation of the caveat until further order of the Court.
[3]
Was the defendant's termination of the contract effective?
Mr Smallbone of counsel, who appeared for the defendant, submitted that the defendant's termination of the contract on 11 January 2016 was valid because the plaintiffs were in breach of an essential contractual obligation, namely, the obligation to pay the deposit. He emphasised the significance of the payment of a deposit under contracts for the sale of land. Mr Smallbone submitted that the basal obligation to pay the deposit arose from the statement on the front page of the contract that there was to be a deposit of $140,000. He submitted that clauses 2.1 to 2.5 assume rather than establish the obligation to pay the deposit, and are merely regulatory in character.
Mr Smallbone further submitted that when a bond or guarantee is accepted by the vendor "for the deposit" within clause 2.6 of the contract, the payment obligation is postponed by the giving of security for the deposit by way of such bond or guarantee. Alternatively, he submitted that the bond or guarantee could be seen as a conditional payment. Mr Smallbone submitted that if the security or the conditional payment evaporates, the original obligation to pay remains. Mr Smallbone further submitted that clauses 2.1 to 2.5 of the contract are "suspended" while the vendor holds an effective bond or guarantee pursuant to clause 2.6.
Mr Smallbone submitted that when the Deposit Power Guarantee expired on 24 December 2015 the purchasers became obliged to pay the deposit of $140,000. It was argued that their failure to do so constituted a breach of an essential condition, and that in accordance with well-established principles the vendor was entitled to terminate the contract immediately and without prior notice (Brien v Dwyer (1978) 141 CLR 378).
Ms Nolan of counsel, who appeared for the plaintiffs, submitted that the Deposit Power Guarantee was accepted by the defendant "for the deposit" within clause 2.6 of the contract such that clauses 2.1 to 2.5, which deal with payment of the deposit, did not apply. She further submitted that the Deposit Power Guarantee was so accepted "in all its glory", including that it had an expiry date of 24 December 2015. Ms Nolan pointed out that there was nothing in the contract that required renewal of the Deposit Power Guarantee, and that no term to that effect should be implied. She submitted that in any event there was no breach in an essential respect such as would justify the vendor's termination of the contract.
Ms Nolan submitted in the alternative that the vendor was bound by an estoppel, probably an estoppel by convention, to the effect that the parties were proceeding throughout on the basis that the vendor had accepted the Deposit Power Guarantee in accordance with its terms for the deposit, and that there was thus no continuing obligation upon the purchasers to pay the deposit. Ms Nolan submitted that the estoppel precluded the vendor from terminating the contract on 11 January 2016 without warning.
There does not seem to be any doubt, and indeed it appears to be common ground, that in this case the vendor accepted a bond or guarantee for the deposit pursuant to clause 2.6 of the contract. On 3 June 2015 the purchasers made a request that the vendor accept a deposit bond. On 23 June 2015 the vendor indicated that he agreed to accept a 5% deposit bond on exchange. On 26 June 2015 the purchasers submitted a "deposit bond" together with a contract that had been executed by them, and sought confirmation that exchange of contracts was to proceed. The "deposit bond" submitted by the purchasers was a Deposit Power Guarantee with an expiry date of 24 December 2015 and a maximum amount of $70,000 (5% of the price). The Deposit Power Guarantee provided that, in consideration of the vendor accepting the Deposit Power Guarantee instead of the vendor's entitlement to some or all of the deposit under the contract, the guarantor would in certain circumstances pay an amount demanded by the vendor up to the maximum amount of $70,000. On 30 June 2015 the vendor, after attending to an agreed amendment to Special Condition 7(i), proceeded to effect the exchange of contracts. Later that day, in the course of confirming to the purchasers that exchange had occurred, the vendor specifically referred to the "Deposit Bond" that had been sent by the purchasers on 26 June 2015. In these circumstances, the vendor must be taken to have agreed to exchange contracts on the basis that the Deposit Power Guarantee was acceptable to it.
The contract that was entered into provided on its front page for a deposit of $140,000. Clauses 2.1 to 2.5 of the contract make provision in respect of the payment of the deposit. In brief, payment is required to be made on the making of the contract, and in that respect time is regarded as essential. However, if clause 2.6 operates, clauses 2.1 to 2.5 do not apply.
Clause 2.6 operates if the vendor accepts a bond or guarantee "for the deposit". In this case the vendor, who was willing to accept "a 5% deposit bond on exchange", accepted the Deposit Power Guarantee which in its terms provided that it was accepted "instead of the Vendor's entitlement to some or all of the deposit under the Contract of Sale". It does not appear that it was suggested during the dealings concerning the acceptance of a deposit bond that the vendor would thereafter retain an entitlement to be paid part of the deposit. The vendor's acceptance of the Deposit Power Guarantee should hence in my view be regarded as an acceptance of a bond or guarantee "for the deposit" within the meaning of clause 2.6 (cf clause 2.7 which refers to acceptance of a bond or guarantee "for part of the deposit").
It follows that clauses 2.1 to 2.5 of the contract do not apply. The purchasers did not become subject to the payment obligations set forth in those clauses. No other provisions of the contract impose any payment obligations in respect of the deposit (cf Ari v Decevic [2013] NSWSC 1967 at [59]).
In my opinion, upon a proper construction of the contract, the purchasers did not become subject to an obligation to pay the deposit. The vendor should be taken to have accepted the Deposit Power Guarantee for the deposit pursuant to clause 2.6 instead of the obligation to pay the deposit that would otherwise arise. That is to say, the acceptance of the Deposit Power Guarantee pursuant to clause 2.6, which renders clauses 2.1 to 2.5 inapplicable, should be regarded as having been accepted by the vendor in place of the rights that he would otherwise enjoy pursuant to those clauses.
This conclusion is consistent with the view expressed by Professor Butt concerning clause 2.6 in The Standard Contract for Sale of Land in New South Wales (2nd ed 1998, LBC Information Services) at [2.53]:
This subclause (and the following subclause 2.7) deals with satisfaction of the obligation to pay a deposit by providing a "deposit bond" or guarantee. In such a case, clauses 2.1 to 2.5 do not apply, and rights and obligations regarding the deposit are regulated by the terms of the bond or guarantee.
I am unable to accept Mr Smallbone's submission that the reference to the deposit on the front page of the contract itself provides an obligation to pay the deposit. It seems to me that such reference serves only to identify the amount of the deposit for the purposes of the contract. The rights and obligations of the parties in relation to the deposit are dealt with elsewhere amongst its detailed provisions, especially in clause 2. It would be an odd result if, in circumstances where clause 2.6 operates and clauses 2.1 to 2.5 are expressly stated not to apply, an obligation to pay the deposit nonetheless exists. The language of the contract does not support that conclusion. Moreover, the central rationale for the provision of a deposit bond or guarantee is to obviate the need to actually pay the deposit.
I also do not accept that the payment obligations contained within clauses 2.1 to 2.5 are suspended while the vendor holds an effective bond or guarantee pursuant to clause 2.6. Again, that position is not supported by the language of the contract. Clause 2.6 operates upon acceptance by the vendor of a bond or guarantee for the deposit. Once that occurs, clauses 2.1 to 2.5 do not apply. There is nothing to suggest that this situation may be of a limited duration, related to the terms and conditions of the bond or guarantee accepted. In my opinion, once a bond or guarantee is accepted by the vendor for the deposit within the meaning of clause 2.6, clauses 2.1 to 2.5 can have no application at all.
In those circumstances it is not correct to characterise the bond or guarantee as security for the discharge of an obligation to pay the deposit, or as a conditional payment in discharge of such. Rather, a bond or guarantee accepted pursuant to clause 2.6 "for the deposit" is taken instead of the obligation to pay the deposit.
That is not to say that the purchasers are to be treated as if they had paid the deposit under the contract. They have not paid any deposit. The provision of the Deposit Power Guarantee is not payment of the deposit; it was accepted instead of such payment. The purchasers thus do not have any charge over the land pursuant to clause 2.8 of the contract. In addition, clause 16.7 of the contract would require the purchasers on completion to pay the whole of the price without any allowance for "any deposit paid".
The engagement of clause 2.6 only renders clauses 2.1 to 2.5 and 3 inapplicable. Other provisions of the contract, including those that concern the deposit, remain applicable. One such provision is clause 9.1, which provides that if the vendor terminates the contract due to a failure of the purchaser to comply with the contract in an essential respect the vendor can recover the deposit (to a maximum of 10% of the price). In my view, even when clause 2.6 is engaged, it would remain open to a vendor to recover the deposit in accordance with clause 9.1 from a defaulting purchaser. Even when clause 2.6 operates, the contractual notion of "the deposit", which is identified on the front page of the contract, continues to exist and can be the subject of an action by a vendor pursuant to clause 9.1 of the contract.
In summary, the vendor in this case accepted the Deposit Power Guarantee "for the deposit" within the meaning of clause 2.6. It accepted the performance offered by the purchasers in this respect (see Ma v Adams [2015] NSWSC 1452 at [50]). Clause 2.6 operated so that the provisions of the contract concerning payment of the deposit did not apply. Those provisions remain inapplicable even following the expiry of the Deposit Power Guarantee.
The vendor accepted the Deposit Power Guarantee in accordance with its terms, including as to its expiry date of 24 December 2015. The vendor must be taken to have been aware of the expiry date, which was clearly shown on the instrument that was provided by the purchasers some days prior to the exchange of contracts. (The present case differs in this regard from JR Stevens Holdings Pty Ltd v Von Begensey (1992) 5 BPR 97,377, in which Young J noted that the vendor had not agreed to accept in lieu of the deposit anything less than an unconditional bond for the amount of the deposit.) The vendor did not seek to include any additional provisions to deal with the possibility that the contract would not be completed by 24 December 2015. In particular, no provisions were added to the effect that in those circumstances the purchasers would be required to make a payment or provide a new deposit bond or guarantee. No terms to such effect would be implied.
It has not been shown that the purchasers were in breach of the contract. The vendor was not entitled to terminate the contract on 11 January 2016. His purported termination is invalid and of no effect. The contract remains on foot. Moreover, the defendant was not entitled to demand payment of the deposit. The defendant's Cross-Summons must be dismissed.
It is not necessary to deal with the purchasers' alternative argument based on estoppel. It is also unnecessary to deal with the submission made by Ms Nolan that the vendor waived any right he had to terminate the contract. However, I should note in relation to the estoppel argument that Mr Parkes gave evidence, which I accept, that he was never told by his solicitor that it was essential, or that he needed, to renew the deposit bond. I also accept his evidence to the effect that he did not understand that it was essential, or that he needed to renew, the deposit bond.
[4]
Other issues
Mr Smallbone advanced other reasons why the plaintiffs should not obtain a decree of specific performance. These are:
1. that the conduct of the plaintiffs since the purported termination of the contract amounts to a repudiation of the contract;
2. that the parties have abandoned the contract; and
3. that the plaintiffs have not shown that they are ready, willing and able to perform their obligations under the contract.
As I understand it, the alleged repudiation essentially rests upon the terms of the letter from Muscat and Co to Napier Keen of 23 February 2016, coupled with the continuing failure of the plaintiffs to replace the deposit bond or pay any part of the deposit. As far as the letter of 23 February 2016 is concerned, Mr Smallbone focused upon the statement that the plaintiffs wished to "affirm conditionally" the contract. The notion of conditional affirmation was submitted to be code for repudiation. As far as the failure to replace the deposit bond or pay any part of the deposit is concerned, Mr Smallbone noted that on 3 May 2016 the defendant made a demand for payment of the $140,000 deposit (or at least the payment of that sum into Court or into a jointly controlled account) yet on 10 May 2016 the plaintiffs expressly declined to make any such payment.
I do not accept that such conduct on the part of the plaintiffs can be characterised as repudiatory.
The Muscat and Co letter of 23 February 2016 must be read as a whole and in the context in which it was written. The letter was written in response to the defendant's Notice of Termination of Contract of 11 January 2016. Muscat and Co took issue with the validity of that notice on various grounds and stated that the purported termination was itself a repudiation of the contract. The purchasers' rights in respect of such repudiation were expressly reserved. The letter went on to make an open offer that the "sunset date" under the contract be extended to 1 June 2016 and that the purchasers would pay $70,000 in substitution for the deposit bond.
The words "affirm conditionally" were made in relation to that open offer. Viewed in their context, those words, and the terms of letter more generally, do not evince an intention on the part of the purchasers that they were no longer willing to perform in accordance with the terms of the contract. To the contrary, the letter, which was written in the shadow of the defendant's purported termination of the contract, suggests that the plaintiffs wished to keep the contract on foot, while at the same time being prepared to agree to amendments to it. It is true that the plaintiffs' stated position was that they were under no obligation to pay the deposit, but in my opinion the plaintiffs were correct in holding that view. In those circumstances, the failure of the plaintiffs to provide another deposit bond or pay some or all of the deposit cannot amount to repudiatory conduct.
I do not accept that there has been an abandonment of the contract. It seems to me that since 11 January 2016 the plaintiffs have asserted that the contract remains on foot, have asserted their interest in the land arising under such contract, and have sought the aid of the Court to have the contract performed. The defendant, for his part, has maintained that he validly terminated the contract on 11 January 2016, and has the right to recover the deposit pursuant to the contract. There was no mutual abandonment or abrogation of the contract in this case (see DTR Nominees Pty Limited v Mona Homes Pty Limited (1978) 138 CLR 423 at 434).
I am satisfied that at all relevant times the plaintiffs have been, and remain, ready, willing and able to perform their essential obligations under the contract: Mehmet v Benson (1965) 113 CLR 295 at 307-8. Mr Parkes gave evidence, which I accept, that he and Mrs Parkes are particularly attracted to the property. In addition, there is evidence that both in June 2015 and in January 2016 the plaintiffs were successful in obtaining approval for finance from the Commonwealth Bank to assist with the purchase of the property.
It appears that in June 2015 the plaintiffs obtained approval for two loans. The first approval was for a loan of almost $500,000. It appears that this loan was a refinance of an existing loan secured over the plaintiffs' residential property at Cambridge Park. That loan was settled in about September 2015. As a result of that refinance, funds of about $194,000 were deposited into an offset account held by the plaintiffs with the Commonwealth Bank. The second approval was for two loans totalling about $1.68 million. These funds were evidently intended to be used, at least in part, for the acquisition of the property under the contract with the defendant.
In January 2016 the plaintiffs obtained a further approval for two loans totalling about $1.67 million. Again, it appears that it was intended that such funds would be used, at least in part, to acquire the property from the defendant. A loan approval assessment prepared by the plaintiffs' finance broker, Mr Robert Abdallah, indicates that such loans were intended to be secured over the property and a further property owned by the plaintiffs at Worongary in Queensland. That property had an assessed value of more than $680,000, and was subject to an existing mortgage of about $380,000. The assessment prepared by Mr Abdallah, which was apparently accepted by the Commonwealth Bank, indicates that the two loans, together with other contributions from the plaintiffs, would produce sufficient funds to enable the plaintiffs to complete their contract with the defendant. It appears that the other contributions (totalling about $358,000) could be made using funds totalling at least $188,000 maintained by the plaintiffs since the refinance of September 2015, as well as surplus funds of about $170,000 which would be generated from the loan to be secured over the Worongary property.
An affidavit affirmed by Mr Abdallah was read. He was not required for cross-examination. Mr Parkes was not challenged in cross-examination in relation to the plaintiffs' ability to complete the contract.
There is no reason to think that the plaintiffs will be unable to complete the contract in the future in the event that the proposed plan of sub-division becomes registered.
None of the further grounds advanced by the defendant in opposition to a decree of specific performance have been made out. In my opinion, it is appropriate that orders for specific performance be made as sought by the plaintiffs.
[5]
Relief
Special Condition 4 of the contract requires the vendor to proceed with all due dispatch to obtain the consent of the local council to the proposed plan of sub-division, and thereafter lodge the sub-division plan for registration as a deposited plan. It is not clear what stage this process has reached, although I was informed that registration had not yet occurred. It was not suggested that it is not possible for registration to occur.
In these circumstances I consider that it would be appropriate for orders to be made in the following terms:
1. Declare that the Notice of Termination of Contract dated 11 January 2016 given by the defendant to the plaintiffs in respect of the contract for the sale of land dated 30 June 2015 is invalid and of no effect.
2. Declare that the said contract be specifically performed and carried into effect.
3. Order that the defendant do such acts and take such steps as are required to discharge his obligations under the said contract concerning the registration of the plan of sub-division referred to in the contract.
4. Order that if registration of the plan of sub-division is obtained, the said contract be further performed and carried into effect by the parties.
5. Grant liberty to the parties to apply in respect of the implementation of these orders.
6. Order that the Cross-Summons be dismissed.
There seems to be no reason why costs should not follow the event. Accordingly, the Court will also order that the defendant pay the plaintiffs' costs of the proceedings.
[6]
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Decision last updated: 16 August 2016