Precision Pest Control Pty Ltd & Ors v Ligon 158 Pty Ltd

1 By contract for sale dated 20 January 2004 the Defendants agreed to sell to the First Plaintiff certain industrial premises comprised in a strata plan to be registered for the price of $404,800. The Second and Third Plaintiffs are the directors of the First Plaintiff. In accordance with Clause 4.3 of the contract the First Plaintiff has directed the Defendants to transfer the property to the Second and Third Plaintiffs. 2 Special Condition 45.1 of the contract provided that completion "must take place at 2:00pm on the Completion Date". "Completion Date" was relevantly defined as meaning the fourteenth day after the day on which the Defendants gave written notice to the First Plaintiff of the registration of the strata plan in respect of the subject property. 3 By the end of August 2004, the First Plaintiff had heard nothing from the Defendants about registration of the strata plan. The Plaintiffs became concerned and made some enquiries, which revealed that other purchasers of premises in the strata plan had apparently already completed their purchases and were in occupation. On 20 September 2004, the Third Plaintiff wrote to the Defendants' solicitor, Mr Binetter, in the following terms: "Further to our numerous discussions over the past nine months concerning the settlement date for our purchase of the above property, can you please confirm in writing when settlement will occur.

It is our understanding that a number of other purchasers have already settled and in some cases this was up to six weeks ago.

We would appreciate receiving your written response no later than close of business on Tuesday 21st September, 2004."

Mr Binetter responded by letter dated 22 September 2004 as follows: "I refer to your letter to me of yesterday.

At the present time my instructions are that I am not in a position to advise you of the vendor's view of a proposed settlement date.

I am instructed that I may be better informed in this regard in the middle of the week after next.

Once I have further instructions, I will contact your solicitor." 4 The Plaintiffs then conducted a search of the title to the property which revealed that a strata plan had, in fact, been registered on 10 August 2004. The Defendants had not given a notice of the registration of the strata plan, thereby fixing a date for completion. Their failure to do so is unexplained. 5 On 5 November 2004, the Plaintiffs commenced proceedings against the Defendants for specific performance of the contract. 6 On 10 November 2004, Bergin J made orders by consent in the following terms: "1. Declare that the first plaintiff is entitled to have the contract for the sale of the property known as Unit 26, 75 Corish Circle, Pagewood, New South Wales, being Lot 26 in Strata Plan 72880 between the first plaintiff as purchaser and the defendants as vendors specifically performed and carried into execution on the basis that the first defendant as registered proprietor will convey to the second and third plaintiffs Lot 26 in Strata Plan 72880 ("the Contract").

2. In the event that the first defendant fails to comply with Order 1 by 2pm on 24 November 2004, order that the Registrar in Equity be empowered, on 24 hours' notice to the parties, to execute all such instruments and do all such things in the name of and on behalf of the defendants as may be necessary in order to specifically perform and carry into execution the Contract.

4.1 The Contract will be completed by 2pm on 24 November 2004 at Kevin Munro & Associates, Level 12, 111 Elizabeth Street, Sydney.

4.2 The defendants agree to pay the plaintiffs' costs, agreed at $6,000.00, to be paid or adjusted on completion of the Contract in accordance with Order 1." 7 The terms of the consent orders were framed by the parties and they are defective in many respects. Although there is a declaration that the First Plaintiff is entitled to specific performance of the contract, there is no order expressly to that effect. However, the terms of order 2 suggest that the parties intended that the declaration in paragraph 1 of the Short Minutes also operate as an order for specific performance, since order 2 specifies what is to happen "in the event that the First Defendant fails to comply with Order 1". 8 I think that it is clear from the combined effect of the declaration in paragraph 1 and the order in paragraph 2 of the Short Minutes that the Defendants were consenting to an order for specific performance of the contract. In that circumstance, the future performance of the contract was, by those orders, brought within the control of the Court and no party to the contract could exercise a right of rescission or serve a notice to complete without the approval of the Court or without first having applied successfully to the Court for an order vacating the orders for specific performance: Jag Investment Pty Ltd v Strati [1981] 2 NSWLR 601; Facey v Rawsthorne (1925) 35 CLR 566; Sunbird Plaza Pty Ltd v Maloney (1988) 166 CLR 245. The Defendants have never applied to vacate the Orders made on 10 November 2004. 9 Further, order 2 was defective. The power of the Court to order that a conveyance or other instrument be executed by an officer of the Court is contained in s.100 of the Supreme Court Act 1970 (NSW), which is in the following terms: " Appointment to execute instrument

Where any person does not comply with a judgment or order directing the person to execute any conveyance, contract or other document, or to indorse any negotiable instrument, the Court may, on terms, order that the conveyance, contract or other document shall be executed or that the negotiable instrument shall be indorsed by such person as the Court may nominate for that purpose, and a conveyance, contract, document or instrument so executed or indorsed shall operate and be for all purposes available as if it had been executed or indorsed by the person originally directed to execute or indorse it." 10 Order 2 was, presumably, intended to be made pursuant to the power conferred on the Court by s.100. However, no order had then been made by the Court directing the Defendants to execute a transfer to the Second and Third Plaintiffs. It is well established that an order under s.100 directing an officer of the Court to execute an instrument should not be made in anticipation of a failure by a party to execute a document unless that party has already shown by words or conduct that he or she refuses and will continue to refuse to execute the document: Savage v Norton [1908] 1 Ch 290, at 297; Daniels v Pynbland Pty Ltd (No 2) (1985) 4 BPR 1796 per Young J; Shehata v Hussein [2004] NSWSC 617 per Barrett J. 11 Further, the practice of the Court is that if an order is properly to be made under s.100, it is made only after a stated time for compliance in an order directing execution of a document has passed. The matter is then brought back before the Court and the Court nominates the officer of the Court who is to execute the document, not by general description by reference to the office held, such as "the Registrar", but by naming the particular Registrar or Deputy Registrar who is to carry out the Court's order. 12 Despite these deficiencies in the form of the consent orders, one thing remains clear and that is, as I have said, that future performance of this contract was brought under the supervision of the Court by the orders made on 10 November 2004 and performance still remains under the Court's supervision. 13 On 29 November 2004, the Plaintiffs applied ex parte for an order that the Registrar execute a transfer in accordance with paragraph 2 of the orders. I required notice of the application to be given to the Defendants and stood the matter over to the following day. On 30 November 2004, Mr Weaver of Counsel appeared for the Plaintiffs and Mr Angyal SC appeared for the Defendants. 14 Although Mr Weaver did not expressly formulate the Plaintiffs' application as such, I take the application to be one whereby the Plaintiffs seek the Court's supervision as to how this contract is now to be performed. The relevant facts are as follows. 15 There is no dispute that settlement of the conveyance had not occurred on 24 November 2004. The Plaintiffs say that they attended at the appointed time and place for settlement and were ready, willing and able to settle but that the Defendants wrongfully refused to settle, so that the Plaintiffs were entitled to a transfer executed by the Registrar in accordance with Order 2 of the orders made on 10 November 2004. 16 The Defendants say that the Plaintiffs did not tender performance of the contract according to its terms on 24 November 2004. They say that Order 2 did not, therefore, take effect. As I have observed, this is really a false issue, as Order 2 is defective. 17 There is no question that the Plaintiffs not only have the necessary funds to settle the purchase but that they are most anxious to settle in order that they may move their business operations into the subject premises. 18 The Defendants issued a Notice to Complete on the day following settlement day. Under that Notice completion must take place on 9 December. The Plaintiffs are extremely anxious to settle as soon as possible and have been endeavouring to settle since 24 November. However, the Defendants insist on a contractual term which provides that if a Notice to Complete is issued by them they cannot be compelled to complete before the last day fixed by the Notice. 19 The Plaintiffs do not want to wait until 9 December before settling; they are required to vacate the premises in which the First Plaintiff is conducting its business on 1 December and they say that they are entitled to have the Registrar execute a transfer now. The Defendants do not want to settle until 9 December and they say that they are contractually entitled to make the Plaintiffs wait until then. They say that because the Plaintiffs did not tender performance of the contract on 24 November in accordance with its terms, they themselves did not fail to comply with Order 1 of the Short Minutes, for the purposes of Order 2. The Defendants are quite happy to let the Plaintiffs into possession of the property now but only if they pay a licence fee for their occupation between now and 9 December. It seems that this dispute is all about a licence fee of $800 per week for a period of two weeks. 20 The undisputed evidence is that the Plaintiffs' solicitor arrived at the offices of the Defendants' solicitor on 24 November 2004 at the appointed time of 2 o'clock. He was accompanied by the Second and Third Plaintiffs. The Defendants' solicitor refused to settle the conveyance for three reasons. 21 Firstly, one of the two cheques for the settlement monies was incorrectly made payable to "Ligon Pty Ltd". The correct payee was "Ligon 158 Pty Ltd". The other settlement cheque was in favour of the correctly identified payee. When the error in the description of the payee on one of the cheques was pointed out by the Defendants' solicitor, the Second Plaintiff immediately offered to go to the nearest branch of the St George Bank and get a replacement cheque. He said that it would only take half an hour. The Defendants' solicitor, however, said that he would not wait as he had another appointment and he declined to make another appointment that day to allow settlement to take place with a cheque correctly describing the payee. 22 Mr Angyal SC submits that because the Plaintiffs failed to tender a cheque with the payee correctly described at precisely 2:00pm on 24 November, the Plaintiffs failed to tender performance as required by the contract, justifying the Defendants in refusing to settle the contract even half an hour later. 23 I am unable to accept this submission. Order 2 of the consent orders, even though defective for the reasons which I have give, was an order of the Court, not a variation to the contractual terms by agreement of the parties even though the parties agreed to the Court making an order in those terms. The terms of the order did not have the effect of inserting into the contract a term making time for completion of the essence: the order was only in purported exercise of the Court's supervision of future performance of the contract. The agreement noted in the consent orders as to time and place for settlement was only an appointment for settlement; it did not become a contractual term. If the Plaintiffs were not able to complete the contract precisely at 2:00pm on 24 November they could always approach the Court for a direction as to how performance of the contract should be carried out in the circumstances then obtaining. 24 How the Court supervises the performance of a contract within its control is a matter for the Court's discretion: see Jag Investment Pty Ltd v Strati (supra). The Plaintiffs' failure to bring to the settlement a cheque in favour of the correct payee was a mistake easily corrected, as the Plaintiffs immediately offered to do. Mr Binetter unreasonably refused them the opportunity to correct the mistake. In my opinion, the Defendants cannot rely upon the Defendants' mistake as a ground upon which the Court should now refuse to give such directions as will ensure due performance of the contract by the Defendants. 25 The second ground upon which the Defendants refused to complete the purchase on 24 November was that the First Plaintiff did not then provide a deed executed by the Second and Third Plaintiffs in accordance with the provisions of Special Condition 41.3(a)(iii) of the contract. Under that provision, a deed "in such form as the vendor reasonably requires" is required to be provided by the First Plaintiff in the present case only if at the time of completion the Defendants had not completed the sale of all lots in the subject strata plan. 26 Whether or not the Defendants had, as at the time for completion, completed the sale of all lots in the strata plan was obviously a matter exclusively within their knowledge. The Defendants' solicitor did not, prior to the time for completion, notify the Plaintiffs' solicitor that the Defendants had not completed the sale of all lots in the strata plan and that, accordingly, a deed as required by Special Condition 41.3(a)(iii) of the contract would be required to be delivered on completion. Nor did the Defendants ever indicate what form of deed they would require. 27 In my opinion, it is a necessarily implicit term of the contract that the Defendants are not entitled to refuse completion for failure by the First Plaintiff to procure a deed in accordance with Special Condition 41.3(a)(iii) unless they have first notified the First Plaintiff that the factual circumstance upon which the requirement for the deed is predicated has occurred and have also notified the First Plaintiff of the form of the deed which they require to be procured. If such a term were not implicit, the Defendants could quite deliberately cause the First Plaintiff to be in breach of its contractual obligations simply by withholding information from the First Plaintiff without which it would be impossible for the First Plaintiff to comply with its contractual obligations. 28 I conclude, in the exercise of discretion, that the Defendants cannot rely upon a failure of the First Plaintiff to tender a deed pursuant to Special Condition 41.3(a)(iii) as a ground upon which the Court should now refuse to give such directions as will ensure due performance of the contract by the Defendants. 29 The third ground upon which the Defendants refused performance of the contract on 24 November was the failure of the First Plaintiff to hand over on completion a proxy form, executed under its common seal, relating to voting at meetings of the relevant body corporate under the Strata Schemes Management Act 1996, as required by Special Condition 41.2 of the contract. 30 The Plaintiffs' solicitor mistakenly thought that Special Condition 41.2 required proxy forms to be executed, not by the First Plaintiff as purchaser, but by the Second and Third Plaintiffs as transferees by direction from First Plaintiff as purchaser. He sent proxy forms executed by the Second and Third Plaintiffs to the Defendants' solicitor for approval prior to 24 November. The Defendants' solicitor did not indicate at any time prior to the appointment for settlement that the proxy forms were not in order. 31 The evidence of the Plaintiffs' solicitor, Mr Prassas, as to what occurred at the settlement is not disputed. Mr Binetter said: "The proxy forms are unacceptable".

Mr Prassas said: "Can we re-schedule for tomorrow?"

Mr Binnetter said: "I will need to get instructions. If you want I can take a copy of the proxies and let you know before 5:00pm tomorrow what is wrong with them and I will also inform you as to what my instructions are regarding another time for settlement." 32 Mr Prassas gave the two proxy forms to Mr Binetter. Mr Binetter left the room, presumably to photocopy them, returned and handed back the original proxies to Mr Prassas. A minute or two later, Mr Prassas said: "Please advise me as to what problems you have with the proxies, the buyers are here and we can correct any mistakes if there are any."

Mr Binetter said: "No, I am not going to do that." 33 As I have noted, the Second and Third Plaintiffs, who are the directors of the First Plaintiff, were present at the settlement. If Mr Binetter had said that he required the proxies in a certain form to be executed under the seal of the First Plaintiff, the Second and Third Plaintiffs would have done what was required. There is no evidence that, if the Second and Third Plaintiffs did not have the common seal of the First Plaintiff with them, they could not have obtained it within a short time. 34 In summary, the First Plaintiff was not offering performance of Special Condition 41.2 at the settlement only in a certain manner which was contrary to the requirements of that Special Condition. The First Plaintiff was, in fact, offering to perform Special Condition 41.2 in whatever way the Defendants required. But Mr Binetter refused to tell the Plaintiffs what was wrong with the proxies which had been tendered and what the Defendants required for correct compliance with that Special Condition. 35 Indeed, the uncontradicted evidence as to Mr Binetter's responses when asked what was wrong with the proxies strongly suggests that Mr Binetter himself did not know what, if anything, was wrong with the proxies executed by the Second and Third Plaintiffs which had previously been proffered. 36 In my view, the Defendants have not shown that the Plaintiffs were not ready, willing and able to perform what was required by Special Condition 41.2 on 24 November. On the contrary, the evidence satisfies me that the Plaintiffs were requesting direction from the Defendants as to what was required for due performance and were refused such direction. They were deliberately kept in the dark by Mr Binetter. 37 In those circumstances, I do not regard a failure by the First Plaintiff to tender a proxy form on 24 November in the terms required by Special Condition 41.2 as a ground for disentitling the Plaintiffs from such further direction of the Court as will ensure due performance of the contract by the Defendants. 38 It remains only to say the Notice to Complete given by the Defendants on 25 November 2004 is invalid because it was given without the prior approval of the Court of a time when the performance of the contract was still under the Court's supervision: Jag Investment Pty Ltd v Strati (supra); Sunbird Plaza (supra). 39 In the exercise of the Court's supervision of the future performance of this contract, I order that the Defendants deliver to the solicitor for the Plaintiffs by 12 noon on 2 December 2004 a duly executed transfer in favour of the Second and Third Plaintiffs of the property being Lot 26 in Strata Plan 72880. 40 I stand these proceedings over before me to 2pm on 2 December 2004. If the Defendants fail to comply with the order which I have made, I will make an order under s.100 Supreme Court Act. In that event, the Plaintiffs' solicitor will need to ascertain the name of the Deputy Registrar then on duty in the Equity Division so that the name of that person can be inserted in the Short Minutes of Order which the Plaintiffs should have available. 41 I will hear the parties as to costs. ~ oOo ~

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