Plaintiff v Defendant

Supreme Court of Victoria|2005-02-21|Before: KAYE, J.

INTERLOCUTORY INJUNCTION - Contract of sale - Notice of rescission.

1 This is an application by the plaintiff in these proceedings for an interlocutory injunction. The proceedings arise out of a contract of sale entered into between the plaintiff and the defendant dated 7 October 2003. Under that contract, the defendant agreed to sell to the plaintiff premises at 1581-1583 Point Nepean Road, West Rosebud, for the sum of $730,000.

2 Under the contract the deposit consisting of ten per cent was payable except for $1000 within 14 days of the receipt by the plaintiff of a permit to develop the property. The balance was payable within 30 days of the payment by the balance of the deposit. There were substantial delays in the payment of the balance of the deposit by the plaintiff it would seem, brought about at least arguably, by delays in obtaining a permit to develop the property. Ultimately the deposit was paid on 7 January 2005 under protest.

3 The balance of the purchase price has not been paid as it was due on 7 February 2005. Accordingly, on that date the defendant's solicitor sent to the plaintiff a notice under Clause 5 of Table A of the 7th Schedule of the Transfer of Land Act giving the plaintiff 14 days within which to remedy the defect.

4 In these proceedings the plaintiff as its principal relief seeks a declaration inter alia that the defendant was not entitled to serve the notice of recision. The dispute between the parties arises out of the current state of the buildings on the property which is sold. It is the plaintiff's case that between the date upon which it has purchased the property and now the condition of the premises have substantially deteriorated, so much so that upon settlement of the contract of sale the plaintiff would be entitled to abate the purchase price by deducting from it an amount to compensate it in equity for the deterioration of the premises. I interpolate that the contract specifically provides that after contract and until completion the property is at the risk of the vendor.

5 There are competing affidavits as to this issue. The plaintiff alleges in its affidavits that a serious deterioration has taken place in the condition of the premises, so much so that ceilings, floors and the like have been removed and windows broken. In response, the defendant has sworn affidavits that the premises were always in an extremely dilapidated condition including when they were sold to the plaintiff in October 2003.

6 It was common ground that there is a serious issue to be tried at the trial of this action whether the condition of the premises deteriorated between the date of sale and now so much so as to entitle the plaintiff to claim compensation. The real issue is whether, in the circumstances, the plaintiff is now entitled to the interlocutory relief which it seeks, namely, to restrain the defendant acting in accordance with the notice which it served on the plaintiff on 7 February and thus proceeding tomorrow to rescind the contract.

7 Initially the injunctive release sought on behalf of the plaintiff was until trial. At the commencement of the argument before me today, Mr Hurley, who appeared on behalf of the plaintiff, accepted that at most his client would be entitled to an injunction for a shorter period, namely, 14 days, which period would enable the plaintiff to gather evidence and advice so that he could properly calculate the amount of compensation payable to it by the defendant which may thus be deducted from the purchase price to be paid by the plaintiff to the defendant.

8 In the course of further argument, Mr Hurley on instruction, told me that in fact, the injunction would only be needed until next Friday, 22 February. In support of the injunction, Mr Hurley advanced two matters which he said ought to weigh in favour of the plaintiff. First, if the plaintiff was forced to settle tomorrow it would suffer prejudice by having to pay the full amount and having to rely on a reservation of his rights to later obtain compensation from the defendant. Mr Hurley suggested that it may be arguable or debatable whether a reservation of rights in that form may be sufficient to protect the plaintiff's right to obtain compensation after settlement.

9 Secondly, it was submitted that in any event, the plaintiff had been unable to calculate the amount of compensation because of the breach by the defendant of clauses of the contract and specifically General Condition 12 of the contract and Clause 15 of Table A of the 7th Schedule of the Transfer of Land Act entitling the plaintiff to inspect the premises so that it could have now been in a position to calculate the amount of compensation which it would deduct from the purchase price on settlement.

10 In this respect, the plaintiff, it appears, first requested that the defendant make the premises available for inspection on 4 February. Prior to that the plaintiff had inspect the premises from the outside and indeed a builder on his behalf had seen the premises on 18 January. However, the plaintiff did not gain access to the premises until 19 February, that is last Saturday, and says it is now not yet in a position to quantify the compensation which it would seek to deduct from the purchase price.

11 From the materials which are contained in the affidavits it is difficult to understand precisely why the 14 day delay occurred between the request for an internal inspection of the premises and the ability of the plaintiff to have that inspection. In a sense the correspondence between the parties, which I shall not recite, seemed to have passed each other by like ships in the night. Nevertheless, it is sufficient for me to find that there is an arguable case that the plaintiff was deprived of its right to inspect under the clause of the contract to which I have referred.

12 As I stated, the plaintiff has sustained the first leg of the matters which it must establish to entitle it to an interlocutory injunction, namely, that there is a serious issue to be tried. The critical issue is whether the balance of convenience in this case favours the grant of an interlocutory injunction. As I stated, the first concern of the plaintiff is that if an injunction were not granted, it would need to settle tomorrow and reserve its rights to claim compensation. The question of whether the reservation of such rights would adequately protect the plaintiff was a matter of some discussion before me. Mr Aghion, who appeared on behalf of the defendant, drew to my attention a passage from the 4th Edition of Dr Spry's work on Equitable Remedies at pp.302-303 which in substance states that, in circumstances such as this the purchaser can adequately reserve its rights on settlement without thereby losing them. If rights are adequately reserved then, according to Dr Spry, neither waiver nor merger occurs on settlement.

13 Mr Aghion did refer in passing to the debate as being somewhat academic. Mr Hurley was disposed to concede that there was no authority suggesting that the reservation of rights in the manner suggested by Dr Spry would not adequately protect his client's position. However, later he did say that the matter is open to argument. This case is somewhat urgent because, of course, the contract, if I do not grant an injunction, needs to be settled tomorrow. I am not in a position to embark on any research myself. Sufficeit to say that no authority has been drawn to my attention which indicates that the plaintiff may not adequately protect its position by reserving its rights.

14 The other item of prejudice pointed to by the plaintiff was that in ordinary circumstances, if it could quantify the compensation which it might claim from the defendant, it would have two alternatives, the first being to settle and reserve its rights, the second to tender a lesser amount consisting of the balance of the purchase price less the quantified compensation. Mr Hurley submits that the plaintiff is shut out from pursuing the second alternative if it is required to settle tomorrow and it has been so shut out because of the failure of the defendant to provide access to the premises.

15 In response, Mr Aghion contends that the prejudice adverted to by the plaintiff is illusory. First, he points out that when the plaintiff purchased the premises on its own materials it did not take the trouble to inspect the premises internally and that all steps thereafter have been taken to redevelop the premises rather than to renovate or improve them into a lettable condition. More significantly, Mr Aghion points out that the premises were inspected by a builder on behalf of the plaintiff on 18 January and in the plaintiff's own affidavit it refers to that inspection. However, that affidavit does not say that the builder who did inspect the premises from the outside was unable to form at least a realistic assessment of the cost of reinstating the premises to the condition in which the plaintiff says they were in prior to purchase.

16 There is force in that last point made by Mr Aghion. The plaintiff has not in fact specifically gone on affidavit to say that it cannot form a realistic estimate of the compensation which it would claim from the defendant without a more detailed internal inspection. Common sense suggests that the plaintiff would sooner or later need to make an internal inspection in order to be able to assess the damage in some detail. However, nothing has been put forward which shows that the plaintiff by its external examination conducted on 18 January was not able to thereby derive sufficient information to know in reasonably precise terms the quantum of compensation which it would seek from the defendant. Thus, the prejudice which might be sustained by the plaintiff if I refuse the injunction in this case is questionable at best.

17 On the other side of the ledger, the defendant is unable to really point to significant prejudice if I allow the injunction. Mr Aghion points out that the defendant would be held out of its money for a further five days but the contract does provide for a daily assessment of the amount payable if there is a delay in settlement. There is, of course, also the risk which the defendant carries in relation to the property for a further five days. It has, of course, carried that risk for a considerable period of time but I must say, having read the descriptions of the current state of the premises it would seem that each day does constitute at least some type of risk as the property is understandably, uninsurable.

18 There is thus but little prejudice pointed to by either party if I should, on the one hand, grant an injunction, on the other hand, decline an injunction. In fact, it might be said that the issues are fairly evenly balanced. In a case such as this the onus does lie on the plaintiff to point to a reason why I should grant an injunction, albeit for a short time, to hold the defendant out of its legitimate rights. Nothing has been put to me that the plaintiff would suffer irreparable prejudice if I were to refuse the injunction. The onus thus lying on the plaintiff, I find that it has not made out that onus and accordingly I refuse the application for an interlocutory injunction.

At a glance

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Decision date

Before

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Judgment (20 paragraphs)

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