Santangelo v Yates Holdings Victoria Pty Ltd

Supreme Court of NSW|2022-02-18|Before: Slattery J, Mr J, Ms P

JUDGMENT

The plaintiffs, Alfio Santangelo and Zina Santangelo bring these proceedings for specific performance of a contract for the sale of certain land in the Sydney suburb of Lakemba ("the Lakemba property") based on the purchaser's failure to complete on various dates appointed for completion. The purchaser, the defendant, Yates Holdings Victoria Pty Ltd ("Yates Holdings") resists their claim, submitting that the Santangelos were not ready, willing, and able to complete the contract at the time of completion. The Santangelos contest this submission.
The contest between the parties reduced to two issues about whether the Santangelos were ready willing and able to complete the contract at the relevant times, namely: whether they had failed adequately to answer the Yates Holdings' requisitions attached to the contract; and whether the Santangelos had done all things necessary under the contract to transfer the benefit of certain tenancies over the Lakemba property to Yates Holdings at or before completion.
These proceedings were heard on 17 & 18 February 2022. Mr D. Sulan SC together with Mr J. Entwisle of counsel, instructed by Ms P. Cable of Hunt & Hunt lawyers appeared for the plaintiffs. Mr M.R. Elliott SC together with Mr D.K. Smith of counsel, instructed by Mr C. Roberts of Roberts & Partners Lawyers appeared for the defendant. The proceedings were conducted efficiently by the legal representatives on all sides and were concluded in just over one day.
The following is a narrative of the relevant history. Few facts were in issue in the proceedings. This narrative represents the Court's findings on the matters covered, except to the extent that the context indicates that only the parties' allegations are being recorded in these reasons.

The Sale of The Lakemba Property - July 2021 to February 2022

The Contract for Sale

Mr and Mrs Santangelo contracted to sell the Lakemba property to Yates Holdings on 9 July 2021 in the form of the Law Society and Real Estate Institute contract for sale, 2019 edition. The contract provided for completion 120 days after the contract date, implying completion was required on 8 November 2021.
At the time of the contract the Lakemba property comprised a block of six units on a single title, each of which was leased pursuant to the standard form residential tenancy agreement made under the Residential Tenancies Act 2010 and the Residential Tenancies Regulation 2019, Schedule 1, Clause 4 (1). The sale was "subject to existing tenancies", not for vacant possession.
The contract attached several documents relevant to the issues joined between the parties. These included the current certificate of title for the Lakemba property, a plan of the land, the current residential tenancy agreements over the six units, a schedule summarising the terms of these leases, and a form of requisitions from the purchaser to the vendor. The contract annexed other documents that are not presently relevant.
The consideration for the sale was $2,260,000. A deposit of $56,500 was paid and a balance of $2,203,500 was payable on completion. Some of the standard terms and the special conditions of the contract were relevant to the issues joined between the parties.
The parties referred to the following standard terms of the contract in their submissions: "5 Requisitions 5.1 If a form of requisitions is attached to this contract, the purchaser is taken to have made those requisitions. 5.2 If the purchaser is or becomes entitled to make any other requisition, the purchaser can make it only by serving it - 5.2.1 if it arises out of this contract or it is a general question about the property or title - within 21 days after the contract date; 5.2.2 if it arises out of anything served by the vendor - within 21 days after the later of the contract date and that service; and 5.2.3 in any other case - within a reasonable time. … 10 Restrictions on Rights Of Purchaser 10.1 The purchaser cannot make a claim or requisition or rescind or terminate in respect of - … 10.1.9 anything the substance of which is disclosed in this contract (except a caveat, charge, mortgage, priority notice or writ). … 15 Date for Completion The parties must complete by the date for completion and, if they do not, a party can serve a notice to complete if that party is otherwise entitled to do so. 16 Completion Vendor 16.1 On completion the vendor must give the purchaser any document of title that relates only to the property. … 16.3 Normally, on completion the vendor must cause the legal title to the property (being an estate in fee simple) to pass to the purchaser free of any mortgage or other interest, subject to any necessary registration. 16.4 The legal title to the property does not pass before completion. Purchaser 16.7 On completion the purchaser must pay to the vendor, by cash (up to $2000) all settlement check - 16.7.1 the price less… … 20 Miscellaneous 20.1 The parties acknowledge that anything stated in this contract to be attached was attached to this contract by the vendor before the purchaser signed it and is part of this contract. 20.2 Anything attached to this contract is part of this contract. … 20.8 Rights under clauses 11, 13, 14, 17, 24, 30 and 31 continue after completion, whether or not other rights continue. … 20.12 Each party must do whatever is necessary after completion to carry out the party's obligations under this contract. … 20.14 The details and information provided in this contract (for example, on pages 1 - 3) are, to the extent of each party's knowledge, true, and are part of this contract. … 21 Time Limits in These Provisions 21.1 If the time for something to be done or to happen is not stated in these provisions, it is a reasonable time. 21.2 If there are conflicting times for something to be done or to happen, the latest of those times applies. … 24 Tenancies 24.4 If the property is subject to a tenancy on completion - 24.4.1 the vendor must allow or transfer - any remaining bond money or any other security against the tenant's default (to the extent the security is transferable); any money in a fund established under the lease for a purpose and compensation for any money in the fund or interest earnt by the fund that has been applied for any other purpose; and any money paid by the tenant for a purpose that has not been applied for that purpose and compensation for any of the money that has been applied for any other purpose; 24.4.2 if the security is not transferable, each party, must do everything reasonable to cause a replacement security to issue for the benefit of the purchaser and the vendor must hold the original security on trust for the benefit of the purchaser until the replacement security issues; 24.4.3 the vendor must give to the purchaser - a proper notice of the transfer (an attornment notice) addressed to the tenant; … 24.4.4 the vendor must comply with any obligation to the tenant under the lease, to the extent it is to be complied with by completion; and 24.4.5 the purchaser must comply with any obligation to the tenant under the lease, to the extent that the obligation is disclosed in this contract and is to be complied with after completion. … 30 Electronic Transaction 30.1 This conveyancing transaction is to be conducted as an electronic transaction if - 30.1.1 this contract says that it is an electronic transaction; 30.1.2 the parties otherwise agree that it is to be conducted as an electronic transaction; or … 30.10 Before completion, the parties must ensure that - 30.10.1 all electronic documents which a party must digitally sign to complete the electronic transaction are populated and digitally signed; 30.10.2 all certifications required by the ecnl are properly given; and 30.10.3 they do everything else in the electronic workspace which that party must do to enable the electronic transaction to proceed to completion. … 30.15 If the parties do not agree about the delivery before completion of one or more documents or things that cannot be delivered through the electronic workspace, the party required to deliver the documents or things - 30.15.1 holds them on completion in escrow for the benefit of; and 30.15.2 must immediately after completion deliver the documents or things to, or as directed by; the party entitled to them. …"
The parties' contests included submissions in relation to the following special conditions in the contract: "34. Notice to Complete (a) where for any reason other than default or delay by the party proposing to give a notice to complete this contract is not completed by the completion date, then at any time after the completion date the party not in default may serve on the party in default a notice to complete which makes time of the essence of this contract. Any notice to complete shall nominate a date by which this contract must be completed, which date must be at least 14 days after the date of service of the notice to complete (calculated exclusive of the date of service but inclusive of the nominated date). The parties acknowledge that this period of 14 days is reasonable for all purposes. The party serving a notice to complete may at any time withdraw the notice to complete by further notice to the party in default and/or, at its option, extend or issue a further notice to complete. … 38. Warranties The purchaser warrants: (a) that it has inspected the property and unless stated otherwise in this contract, it has not entered into this contract in reliance on any statement, representation, promise or warranty made by or on behalf of the vendor in respect of: (i) the property; (ii) the neighbourhood in which the property is located; (iii) the suitability of the property for any use; (iv) any rights or privileges relating to the property; or (v) any matter which has or may have an effect on the property. … 51. Purchaser Applications The vendor consents to the purchaser and any nominee of the purchaser: a) lodging any development application, variation of any development application, planning proposal or variation of any planning proposal with the council and any other relevant authority, in respect of or relating to the property; b) lodging any application to vary any approvals or consents, including any development consents, arising from such applications or proposals; c) inspecting and obtaining copies of all records held by any local or other government authority in connection with the property; d) lodging any other documents or submitting any other correspondence in relation to any application or approval or proposal referred to in the paragraphs above; e) dealing with council and every other authority in relation to the property, including inspecting their records and taking copies of records and documents in relation to the property f) meeting, discussing and corresponding with the local authority, any government departments and all statutory bodies in respect of the property and any applications concerning the property g) filing, perusing and pursuing any application or appeal in the planning and environment Court and any of its appellate Courts, concerning the property the vendor must promptly upon request sign all documents and do all things reasonably requested by the purchaser to give effect to this clause 51. 52. Vendor Warranties The vendor represents and warrants to the purchaser that: … (f) the vendor is not aware of any residential tenancy agreement, leases, subleases, licences or other occupancy rights in respect of the property granted to any tenants or lessees other than those disclosed in this contract; … 53. Purchaser Access and Repairs (a) The parties acknowledge and agree that the purchaser and its consultants and agents shall be permitted unrestricted access to the property to attend to urgent repairs to the property (including repairs to cracks within the walls and flooring), with such repairs to be undertaken at the purchaser's own cost and expense. (b) The purchaser will not undertake any works or repairs to the property, until it has at the purchasers cost and expense, provided to the vendor a copy of its public liability insurance in respect of all workers, consultants and agents attending to any repair to the property. (c) If: this contract is lawfully terminated by the vendor due to the purchaser's sole default; and at the time of termination, the purchaser's repair works have been commenced by not completed, then the purchaser must indemnify the vendor for the cost of completing the repair works."
A set of purchaser's requisitions was annexed to the contract. Only requisitions 2 and 3 are reproduced here. Contests about the other requisitions fell away during argument in the proceedings. "Possession and Tenancies …
Is anyone in adverse possession of the property or any part of it?
(a) what are the nature and provisions of any tenancy or occupancy? (b) if they are in writing, all relevant documentation should be produced, found in order and handed over on completion with notices of attornment. (c) please specify any existing breaches. (d) all rent should be paid up to or beyond the date of completion. (e) please provide details of any bond together with the rental bond board's reference number. (f) if any bond money is held by the rental bond board , the appropriate transfer documentation duly signed should be handed over on completion."

Events Between the Contract and the Hearing

There is no issue that the present contract for the sale of land is of a kind that can be specifically enforced. The Santangelos contend that Yates Holdings failed to complete the contract in accordance with its terms on 8 November 2021, 10 November 2021 and 30 November 2021. The first date is the date provided for in the contract. The second date is an early date appointed by the Santangelos after non-settlement on 8 November. And 30 November is the date appointed after the issuing of a notice to complete. In general terms the correspondence between the parties' solicitors on and before each of these occasions demonstrates that the Santangelos arranged for completion to occur, but Yates Holdings did not complete on the appointed day.
The Santangelos contend that Yates Holdings' failure to complete on those days was a refusal to perform promises for which the time for performance had arrived and they are entitled to commence proceedings for specific performance: Turner v Bladin (1951) 82 CLR 463 at 472-3 (Williams, Fullagar and Kitto JJ); Fuller v Albert (No 2) [2021] NSWCA 183 at [10]. As will be seen, it is not necessary for the Court to consider the Santangelos' alternative case, that regardless of whether Yates Holdings breached the contract that they are still entitled to specific performance because of Yates Holdings continued refusal to complete the contract since 30 November. All that needs to be considered here are the events and alleged breaches relevant to the Santangelos' primary case.
The plaintiffs commenced these proceedings by Summons on 6 December 2021 after the parties' contest about completion of the contract could not be resolved. That contest arose out of the following principal facts. This factual narrative is supplemented by other findings of fact set out later in these reasons with the Court's analysis of the two contested issues.
When the contract was signed in July 2021 Sutherland Shire Conveyancing (SSC) were acting as the conveyancers for the vendors. Sparke Helmore were acting as the solicitors for the purchaser. SSC replied to the requisitions attached to the contract on 9 September 2021. As the issues developed between the parties at the hearing only the replies to requisitions 2 and 3 remain in contest. SSC replied to them as follows: "2. The purchaser should rely on the contract. 3. (a) Refer to contract. (b) Noted. (c) There are no breaches that the vendor is aware. (d) Noted subject to the contract. (e) Held by NSW Fair Trading. (f) This will be completed by the Rental Agent after completion.
Disputes soon broke out between the parties. Yates Holdings had a right of access to the property under clause 53 of the contract to undertake "urgent repair works" following exchange and before completion. By letter dated 15 October Sparke Helmore wrote to SSC seeking compensation by way of reduction of the purchase price (of $260,000) because of an alleged breach of clause 53.
This dispute is no longer relevant. But Yates Holdings contended that it had commenced works authorised under clause 53 and the Santangelos had subsequently restricted its access in breach of clause 53. The Santangelos claimed through SSC that they had restricted access because the works being done were not "urgent repair works" authorised under clause 53 and were being conducted from 7.00 am to 6:30 pm seven days a week and were disturbing the other tenants in the building. Moreover, SSC alleged that Yates Holdings was trying to obtain vacant possession of all six units before completion.
SSC did not consent to reduction in the purchase price and Sparke Helmore continued to press for a reduction. But by 29 October 2021 Hunt & Hunt (Ms P Cable assisted by Ms Allegra Parker) had taken over the Santangelos' vendors' conveyancing file. Soon after Sparke Helmore sent settlement figures proposing withholding $260,000 at settlement. There was some uncertainty as to which of the six original tenants were still in occupation when Hunt & Hunt took over the conveyancing file for the vendors. On 3 November 2021 Hunt & Hunt sought a schedule from the Santangelos' rental managing agent, PRD, summarising the current status of each of the tenancies and foreshadowing that Hunt & Hunt expected PRD to make the necessary arrangements in relation to any rental bonds that needed to be transferred at settlement, which at that stage were anticipated only to be in respect of units 2 and 6. On the same day, 3 November 2021, Hunt & Hunt sent a revised settlement sheet for 8 November 2021 which did not allow for any reduction of $260,000 in the consideration payable at settlement. Hunt & Hunt arranged with PEXA for a settlement appointment at 2.00 pm on 8 November.
On the appointed date for settlement, 8 November, several emails passed between the parties. At 11.10 am Hunt & Hunt sought confirmation of their settlement figures. No answer was received. In the absence of ordinary professional communication from Sparke Helmore, Hunt & Hunt declared that the vendors were ready, willing and able to settle and revised the settlement time for the purchaser's convenience to 3.00 pm. Hunt & Hunt requested Sparke Helmore to "urgently attend to finalising the PEXA workplace and sign off".
By 3.08 pm still nothing had been heard from Sparke Helmore. So, Hunt & Hunt again declared the vendors readiness willingness and ability to settle and asked, "[p]lease advise as a matter of priority your client's intentions?"
An answer finally came at 4:06 pm. Sparke Helmore reiterated the Yates Holdings claim of a breach of clause 53 and requested reinstatement of Yates Holdings' access rights to the property in accordance with clause 53 and requested an owner's consent form compliant with clause 51 of the contract. The remaining part of this letter is detailed later in these reasons.
At 5:41 pm Hunt & Hunt indicated it would seek instructions about the points raised in Sparke Helmore's 4:06 pm letter, denied any breach of the contract, reserved the vendors rights, and urgently sought "confirmation of when the purchaser will be able to settle".
Hunt & Hunt obtained instructions overnight and at 1:14 pm on 9 November replied contesting the claim for access to the property and any breach of clause 53, pointing out that had Yates Holdings settled on 8 November it would have had possession of the property and would not need access under clause 53.
By 4:42 pm on 9 November, Hunt & Hunt had arranged with PEXA for settlement the following day, 10 November at 3 pm. Hunt & Hunt wrote at that time to Sparke Helmore enclosing updated settlement figures for the following day and referred issues of rental adjustment and the bond money transfers to be handled by PRD following completion. Other matters dealt with in this letter are dealt with later in these reasons.
Arrangements were made for representatives of Yates Holdings to inspect the Lakemba property at 10.00 am on 10 November but settlement did not occur by 3.00 pm that day.
On 12 November 2021 Hunt & Hunt issued a notice to complete to Sparke Helmore requiring completion at 2.00 pm on 30 November 2021 on PEXA. Hunt & Hunt arranged with PEXA for settlement at that time. On 23 November Sparke Helmore contended that the notice to complete was invalid and on 25 November Hunt & Hunt replied rejecting that contention.
On 30 November at 11.32 am Hunt & Hunt sought confirmation from Sparke Helmore that the purchaser was going to settle at 2.00 pm. The pattern of Sparke Helmore's earlier professionally discourteous lack of correspondence was repeated on 30 November. Hunt & Hunt wrote again at 1:04 pm referring to the earlier email that day and also to unsuccessful attempts to contact Sparke Helmore by telephone.
Finally at 2.10pm, 10 minutes after the appointed time for settlement, a reply came from Sparke Helmore. This letter returned to familiar themes of the breach of clause 53 and allegedly inadequate proof that clause 51 had been complied with by the vendors because of the supply of an illegible owners' consent form. It contended that the Santangelos were not ready, willing and able to perform the contract by reason of these "subsisting breaches" and declined to complete. None of the "subsisting breaches" related to either of the matters were argued in these proceedings. On 8 December Hunt & Hunt supplied another clause 51 consent form, denying that the form originally supplied was illegible and denying that there had been any breach of clause 51 on the part of the Santangelos.
Hunt & Hunt commenced these proceedings on 6 December 2021. A directions hearing on the summons took place before Darke J on 17 December 2021. That day the proceedings were set down for hearing on 17 and 18 February 2022.
Yates Holdings then changed lawyers. The defendant's new lawyers, Roberts and Partners Lawyers ("Roberts Lawyers") wrote on 28 January 2022 raising for the first time the two issues that are now in contest in these proceedings. The first issue is the adequacy of the response to requisition 2, "is anyone in adverse possession of the property or any part of it?" and certain other requisitions. And the second new issue is whether the vendors were in a position at completion to provide notices of attornment or executed bond transfer forms, which Roberts Lawyers contended were "required" by the contract at completion and which are mentioned in requisition 3.
Hunt & Hunt sent updated answers to requisitions on 11 February 2022. The answer to requisition 2 was changed to "[n]ot that the vendor is aware". Changes were also made to the responses. To requisition 3(b) the words "[n]otice of attornment will be handed over on completion" were added. A rental bond reference number was added to the answer to requisition 3(e). And requisition 3(f) was altered to read "the transfer documentation will be handed over on completion". These answers were more consistent with the arguments that were advanced on behalf of the Santangelos at trial. But whether the contract was breached in November 2021 depends upon the answers to requisitions as they stood at that time.
These principal facts provide the background to the Court's analysis of the two contested issues that follow. Those contested issues require the making of some more detailed factual findings.

The Scope of the Contest

Mr Elliot SC on behalf of Yates Holdings rightly accepted the distinction between requisitions as to title and other requisitions. The principle is as follows. Unanswered requisitions or objections going to a real impediment to the vendor being able to convey title may mean that the vendor should be considered as not ready willing and able to complete: Adolfson v Jengedor Pty Ltd (1995) 6 BPR [9750] 14,147 at 14,154 ("Adolfson"). But this does not mean that whenever a purchaser asks a question of the vendor and does not consider that answer to be satisfactory that the vendor cannot issue a notice to complete: Adolfson at 14,154. And, if the vendor fails to answer a question satisfactorily it is normally for the purchaser to give notice requiring the vendor to answer the question properly within a defined but proper time: Re Stone and Saville's Contract (1963) 1 WLR 163 and Adolfson at 14,154.
Apart from requisition 2, Mr Elliot SC submitted that some of the other answers to requisitions, such as requisitions 4 and 5 and the requisitions from requisition 13 onwards, were not satisfactory. But he rightly accepted they are not requisitions on title and their unsatisfactory nature does not impede the vendors' capacity to issue a notice to complete or seek specific performance for breach of a term requiring completion at a particular date. As result of these appropriate concessions the issues narrowed to requisition 2 and the tenancy documents referred to in requisition 3. These reasons are limited in the same way.

Anyone in Adverse Possession - Requisition 2

Yates Holdings contends that the Santangelos were not ready willing and able to complete the contract at any of the scheduled times for completion on 8 November, 10 November, or 30 November 2021, because they had not adequately replied to requisition 2.
Citing Winchcombe Carson Trustee Co v Ball-Rand (1974) 1 NSWLR 477, at 488 and Carter v Mehmet [2021] NSWCA 286 at [111], Yates Holdings argues that the relevant principle is that a vendor who has not replied to legitimate requisitions under the contract is in default and that default will constitute reasonable cause for the purchaser not to complete the contract on the basis that the vendor cannot be regarded as ready willing and able to complete.
Yates Holdings says that the Santangelos' response to requisition 2 was not an adequate reply to that requisition and so the relevant principle should be applied. It submits that the Santangelos' failed response will not only prevent them relying upon the notice to complete but will also prevent them from relying upon any breach of the obligation to complete within 120 days of the contract, namely by 8 November 2021, or indeed on 10 November 2021.
Requisition 2, "[i]s anyone in adverse possession of the property or any part of it?" received two answers over time: the SSC answer of 9 September 2021 "the purchaser should rely on the contract"; and the Hunt & Hunt answer, "[n]ot that the vendor is aware". Yates Holdings submits that neither answer was adequate.
Yates Holdings submits as follows. The answer that the purchaser should "rely on the contract" does not provide any real answer to the question asked about "anyone in adverse possession" of the property "or any part of it". Such an answer may point to the fact there are six tenancies (from the schedule of leases annexed to the contract) but that does not exclude the possibility that the reality on the ground may be different. An adequate answer would have to say something like "and there is no one else" in adverse possession. And to be an adequate answer it would have to declare that none of the people that are calling themselves tenants are persons who are in adverse possession. This situation is not alleviated by pointing to the clause 52 warranty as to the vendor's lack of awareness of occupancy rights in respect of the property granted to any tenants or lessees other than those disclosed in the contract, because that is merely a warranty, and does not reflect the situation in fact on the ground.
This argument is not persuasive. The Court accepts the counterarguments advanced by the Santangelos for the following reasons.
First, the question whether anyone, as requisition 2 requests, "is in adverse possession" of the property or any part of it, is a narrow question. It is narrow in two respects. It is a request about who "is" in adverse possession, not about who "may be" in adverse possession in the future. And the term "adverse possession" connotes possession accompanied by a claim to extinguish the title of the registered proprietor. It is not a question about mere occupation nor mere possession. But it is a question about "adverse possession" of this Torrens title land.
The class of persons who may qualify at a certain date as being "in adverse possession" against the registered proprietor of Torrens title land is limited to occupiers who have lodged a "possessory application" over the land in question under Real Property Act 1900 s 45D. Adding Part 6A into the Real Property Act introduced for the first time the concept of possessory title into the Torrens system. But the change attempted at the same time to preserve the conclusiveness of the register: PJ Butt, Land Law, (7th ed, 2017, Thomson Reuters) Chapter 22 at [2243] ('Butt's Land Law').
It achieved this balance by several statutory steps. Real Property Act s 45C(1) reaffirms the principle that no estate or interest in land adverse to the title of the registered proprietor shall be acquired by any length of possession by virtue of any statute of limitations relating to real estate. But the combined effect of s 45C(2) and s 45D is to allow a person in possession of Torrens title land, where the title of the registered proprietor of an estate or interest in that land at or before that time has been extinguished as against the person in possession had the statutes of limitation force applied, to "apply to the Registrar General to be recorded in the Register as the proprietor of that estate or interest in the land". Such a s 45D possessory application will be recorded in the Register.
But until such a possessory application is recorded in the Register, s 45C prevents the acquisition of an estate or interest adverse to or in derogation of the registered proprietor's estate or interest in the land. And s 45C also prevents the recognition of some inchoate estate in the adverse possessor, which would restrict the full enjoyment of the registered proprietor's estate or interest in the land: Refina Pty Ltd v Binnie [2010] NSWCA 192 at [19] ("Refina"). The result is that "[p]urchasers need not be concerned about possessory rights lurking unrecorded beyond the Register": Butt's Land Law at [2243].
Applying those principles here, the plain meaning of the words in requisition 2 "is anyone in adverse possession of the [Lakemba] property" can only be answered and can be fully answered, by verifying whether a possessory application has been filed in respect of the Lakemba property. An answer does not require a survey of the occupants of the land and which of them may possibly have a future claim for adverse possession against the registered proprietor. Such an approach would be contrary to Real Property Act s 45C and Refina at [19].
The answer "the purchaser should rely on the contract" is sufficient because the contract attaches the certificate of title, which is part of the contract, and which shows that no possessory application has been filed under s 45C. An answer "refer to the contract" may be quite sufficient in many situations: Adolfson, at 14,154.
Second, Mr Elliott's argument against this conclusion, undermines itself. Mr Elliott submits that the inquiry demanded by requisition 2 is wider than the Court has here stated it to be. He submits that the enquiry involves a mixed question of fact and law, including examining who was in possession. As Mr Sulan SC submits for the Santangelos, if Mr Elliott's submission were correct the requisition would not be a requisition going to title, so leaving it answered would not be an impediment to granting a decree of specific performance.
And finally, and in the alternative, another obstacle exists to Yates Holdings success on requisition 2. Even if requisition 2 be interpreted as asking merely about persons in occupation and if it be assumed that the requisition may affect the vendors' title, because a person in occupation may have a future claim against it, and if it is also be assumed, contrary to the conclusion reached above that the requisition was not properly answered, there would still be no impediment to the vendors conveying title here.
An occupier or person in possession who managed to stay in possession after settlement and who filed a possessory application after settlement, would be defeated by the indefeasibility principle and could be removed from the property by the purchaser. In those circumstances there would not be a real impediment to the vendors conveying the title they had promised to convey to the purchaser. And an unanswered requisition about such matters does not go to the substance of the vendors' title and will not impair an assessment that the vendor was ready willing and able to complete. This follows from the full text of what Young J said in Adolfson at 14,154: "The proposition in CCH is correct if one limits it as I think the author intended it to be limited, to requisitions or objections strictly so called. Thus, if there is a real impediment to the vendors conveying the title which they promised to convey to the purchaser, and the purchaser has made a requisition which has not been properly answered, then the vendor may well not be considered to be ready, willing and able to complete. Thus, unless the problem can be remedied during the currency of the notice to complete, the notice to complete may be invalid. However, the proposition should not be read as meaning that whenever the purchaser asks a question of the vendor and does not consider that the answer is satisfactory, the vendor cannot issue a notice to complete. As has been pointed out in the authorities; see Re Stone and Saville's Contract [1963) 1 WLR 163, if a vendor fails to answer a requisition it is normally for the purchaser to give a notice to complete which notice is limited to requiring the vendor to answer the requisition properly within a defined but proper time."
Mr Elliot SC submitted that Young J's statements to this general effect in Adolfson at 14,154 do not reflect the law and are not consistent with the Court of Appeal's statement in Mehmet v Carter [2021] NSWCA 286 at [111] ("Mehmet") that a "failure to answer satisfactorily will also preclude the vendor from issuing a notice to complete, as the vendors cannot be regarded as ready willing and able to complete". But Mehmet at [111] does not comment adversely in any way about the correctness of the statement of principle in Adolfson at 14,154.

The Tenancies at Completion - Requisition 3

Yates Holdings also contends that the Santangelos were not ready willing and able to complete the contract at the scheduled time of completion on 8 November 2021, and the subsequent appointed dates, because they were not able to transfer the rental bond to Yates Holdings in respect of the remaining tenancies and did not have an executed notice of attornment in favour of the purchaser ready to be given to the remaining tenants.
The Santangelos' argument in reply is persuasive both legally and factually. As to the legal issues, they contend that the contract did not require the rental bond and notice of attornment to be provided on completion. As to the factual issues, they contend in any event that they were ready willing and able to perform their vendors' obligations under the contract in relation to the tenancies, as they had done everything possible on their part as vendors to provide these items to the purchasers at completion. These reasons now deal briefly with the legal issues followed by the factual issues.
The Tenancies at Completion - The Legal Issues. Mr Elliott SC on behalf of Yates Holdings centres his argument upon what he submits is a strong indication that the contractual intention of the parties was that the notice of attornment must be given over and rental bond transferred on completion. Yates Holdings submits that the requisitions on title are part of the contract, clauses 5.1 and 20.1 and 20.2. The attached requisition 3(a) asks for the nature and provisions of "any tenancy". Requisition 3(b) asks in respect of any written tenancy that "all relevant documentation should be produced found in order and handed over on completion with notices of attornment". And requisition 3(f) requires that in respect of any bond money held by the Rental Bond Board that "the appropriate transfer documentation duly signed should be handed over on completion". Yates Holdings contends that these provisions of the attached requisition create contractual obligations upon the vendors to hand over the notice of attornment and rental bond transfers on completion. Yates Holdings submits that the word "should" in requisition 3(b) should in context be read as "must". Especially as there is no other clause in the contract which requires that the obligation be fulfilled some other time, it is unlikely that the parties simply left "up in the air" the timing of the obligation to hand over these documents, the rental bond transfer, and the notice of attornment. Yates Holdings also submits that this argument is reinforced by its construction of clause 24.4, which commences with the words, "if the property is subject to a tenancy on completion", which indicates that the obligations created by clause 24.4 must be discharged at completion.
This argument is not persuasive for the following reasons. The contract does not require the transfer of rental bonds and the provision of notices of attornment by or at completion. The contract, clause 20.8 provides that rights that are conferred under clause 24 continue after completion. The vendors' obligations under clause 24.4.1 to "allow or transfer… any remaining or other security against the tenant's default" and under clause 24.4.3 to "give to the purchaser… a proper notice of the transfer (an attornment notice) addressed to the tenant" will continue by force of clause 20.8 after completion, as will the purchaser's corresponding right to seek performance of those obligations.
Clause 20.8 only provides for a limited number of the rights under the contract to continue after completion. These are the rights under clauses 11 (compliance with work orders), 13 (adjustments for GST), 14 (other adjustments), 17 (requirement to give vacant possession or compensation with respect to certain classes of tenancies), 24 (tenancies generally), 30 (electronic transaction) and 31 (foreign resident capital gains tax withholding). The rights and corresponding obligations under the contract that do not continue after completion under clause 20.8 include, for example, the fundamental requirements for the vendors to provide documents of title and for the purchaser to provide the purchase price at completion under clause 16 of the contract. Thus, completion may occur which satisfies the core obligations for completion provided for under clause 16, whilst these other incidental matters can be dealt with after completion.
This provides a workable structure for the operation of the contract. Many of the situations identified in clause 20.8 may involve the conduct of third parties, or liabilities which may not be fully ascertainable at the time of completion. The transfer of bond money under clause 24.4.1 depends upon processing at the Rental Bond Board and falls squarely within the contractual rationale for excluding such obligations as indispensable requirements for completion.
The time for fulfilment of the vendors' obligations under clauses 24.4.1 and 24.4.3 after completion is not expressly stated in the contract. Therefore, as might be expected, the obligations will continue after completion for "a reasonable time": clause 21.1. Completion of this contract has not yet occurred, so the clause 21.1.1 "reasonable" time has not yet commenced to run. The contract contains a workable mechanism in clause 20.12 requiring each party to do "whatever is necessary after completion to carry out the parties' obligations under this contract". Thus, to the extent that the clause 24.4 obligations are to be fulfilled after completion there is a clear contractual mechanism for their performance and enforcement.
And this construction gives greater sense to the expressly contemplated possibility under the contract of the vendors fulfilling their clause 24.4.1 obligation passively. The introduction to clause 24.4 provides "if the property is subject to a tenancy on completion". But that does not mean that what follows must be done "on completion". The words are merely a description of the kind of tenancy which will activate the balance of clause 24.4. The opening words of clause 24.4.1 that "the vendor must allow or transfer (emphasis added)…any remaining bond money or other security against the tenant's default", contemplate the possibility that the vendor may not always be in a position to wholly control the transfer. The passive clause 24.4.1 obligation to "allow" is an alternative obligation, which may come into play where the power to transfer the security is partially or fully in the hands of a third party, emphasising that the parties may not be able to control that this will occur at completion.
Yates Holdings' reliance upon the combined effect of clauses 5.1 and 20.2 and the attached requisition 3(b) do not displace the mechanism provided by clauses 20.8 and 24.4. It is true, as Yates Holdings points out, the requisitions are attached to the contract and by clause 20.2 are "part of this contract". That means that the terms of requisition 3(b) are part of the contract. But the text of requisition 3(b) still needs to be construed with the whole contract. To construe requisition 3(b) as requiring the handing over of notices of attornment and rental bond transfers at completion would be inconsistent with clauses 24.4.1 and 24.4.3. If requisition 3(b) were to require delivery at completion, it would directly conflict with the combined effect of clauses 20.8, 20.12, 21.1 and 24.4, which permit the delivery of notices of attornment and rental bond transfers a reasonable time after completion. They both cannot simultaneously describe the same vendor's obligations.
Several factors indicate clauses 24.4.1 and 24.4.3, not requisition 3 (b), are the relevant source of the vendor's obligation to hand over tenancy related documents. Clause 24.4 expressly deals in detail the whole subject matter of any tenancy over the property to be conveyed and what is to be done in relation to the tenancy at completion. Clauses 24.4.1 and 24.4.3 are expressed in mandatory terms. Requisition 3(b) merely expresses a general expectation as to what "should" happen under the contract. If requisition 3(b) is construed merely as an expression of non-binding intent, it is consistent with clauses 24.4.1 and 24.4.3, which allow a reasonable time after completion for what requisition 3(b) hopes will be done at completion. And it would perhaps be surprising to find the parties' principal contractual obligation on this subject in an attachment to the contract.
This construction is consistent with the ordinary construction of "should" in a contract which also contains the word "must". In such contracts "should" is generally to be taken in a non-mandatory sense: South Australian Housing Trust v The Development Assessment Commission (1994) 63 SASR 35 at [25] - [29]; and see BHP Billiton Ltd v Parker [2012] SASCFC 70; 113 SAS 206 at [228 - 230]. Moreover, the word "should" is commonly used in requisitions as a reminder of what is expected by the purchaser of the vendor: Godfrey Constructions Pty Ltd v Kanangra Park Pty Ltd (1972) CLR 529, at 536, (per Barwick CJ). The word "should" is used in contract requisition 3(b) in this sense.
This construction is also consistent with the expected practical operation of this contract when the PEXA electronic settlement system is engaged, as it was here. The contract, clause 30.15 provides that if the parties do not agree about the delivery before completion of documents that cannot be delivered through the electronic workspace, the party required to deliver the documents or things holds them on completion in escrow for the benefit of the party entitled to them and must immediately after completion deliver the documents as directed by that entitled party. Clause 30.15 is a general procedural device for retaining contractual control of documents, such as for example the rental bond transfers and notices of attornment in this case, that the evidence suggests here cannot be delivered through the electronic workspace. And the contractual solution is to provide for delivery after completion.
Thus, the Santangelos were not required to deliver notices of attornment and rental bond transfers at completion and any failure on their part to do so does not show that they were not ready willing and able to complete. But closer examination of the facts shows that they had done everything which was within their power to do, and which was necessary on their part to be done, to deliver these documents at completion.
The tenancies at completion - the factual issues. Yates Holdings contends that the vendors were not ready, willing and able to complete in respect of tenancy documents, because (1) the form which would permit the transfer of the relevant rental bonds held at the Rental Bond Board was only signed by Ms Cable after the appointed date for completion; and (2) no signed notices of attornment to the tenants were ever given, or demonstrated to be in a position to be given at the time of completion. The late dating or non-delivery of these documents is said to be evidence that the Santangelos were not ready in these respects to complete at the appointed time.
But the Santangelos submit, and the facts bear out their submission, that they did everything possible on their part to facilitate the simultaneous transfer of the rental bonds and the provision of the notices of attornment to Yates Holdings at completion, and that any obstacle to their doing so was occasioned by the conduct of Yates Holdings.
As to the notices of attornment, Ms Cable created but did not execute notices of attornment for the two tenanted units, units 2 and 6, in anticipation of completing the contract on 8 November. In her affidavit evidence, which the Court wholly accepts, Ms Cable explains that Hunt & Hunt did not provide executed notices of attornment to Sparke Helmore because settlement did not occur and there was therefore no occasion to provide such documents to Sparke Helmore. She says that had Yates Holdings attended the signing off on PEXA, she would have caused the notices of attornment to be signed and emailed to Sparke Helmore immediately following completion.
As to the transfer of the rental bonds, the relevant facts are slightly more complex but may be shortly stated. The exchanges between the parties are not contested. Completion was to occur at 3.00 pm on 8 November 2021. There was no engagement by Sparke Helmore before that settlement time and date with Hunt & Hunt about the issue of tenancy rental bonds or attornment notices. That date passed without completion occurring, as was described earlier in these reasons.
In their letter of 8 November 2021 Sparke Helmore sought assurance from Hunt & Hunt that adequate arrangements would be made for clause 24.4 rental bond transfers at completion: "The vendor: a. demonstrates that the vendor has made adequate arrangements to transfer (on completion) the remaining bond money held pursuant to a tenancy agreement, as required by clause 24.4 of the contract; b. provides full details of rent received from all tenants occupying the whole or any part of the property for the current period and makes appropriate rental adjustments on completion in accordance with clause 14.1 of the contract.
On 9 November 2021 at 1:14 pm Hunt & Hunt emailed Sparke Helmore referring to the transfer of the remaining bond money, stating as follows: "the vendor's property managing agent, being PRD, will transfer online upon completion the bond to your client's new managing agent. PRD has requested that we provide the purchaser's managing agent's email so they may attend to such on completion. We note that PRD only holds bonds for unit 2 and unit 6, being the amounts of $1,160.00 and $1,360.00 respectively."
The effect of this offer on behalf of the Santangelos was that they would ensure that their managing agent, PRD, would transfer the rental bonds for units 2 and 6 online simultaneously with completion occurring. In reply, the same day at 4:43 pm Sparke Helmore said by email: "Given the recent allegations made by the vendor in relation to the agent and our client, our client is not comfortable with any transfer taken place after completion (as would occur practically in this instance). Our client requires completed rental bond transfers to be handed over simultaneously with PEXA sign off (completion) in addition to tenancy attornment notices. It is proposed that the property be self-managed by the purchaser."
The following morning, 10 November at 8.44 am Hunt & Hunt further responded, with a view to preparing for the possible settlement of the transaction that day at 3.00 pm noting as follows: "We have received confirmation from PRD that all bond money for unit 1, 3, 4 and 5 has been returned to the tenants as they have vacated the property. PRD only holds bond money for unit 2 and 6. Please provide us with an email address, which we can give to PRD, so that they can organise the transfer of the bond on signoff on PEXA. We reattach the settlement figures for settlement to occur today at 3 pm, noting that they do not take into account rental adjustments. Please contact the vendor's managing agent being PRD, who will organise for the rent to be adjusted. As requested yesterday, we request that the purchaser raise any issues it may have now, so that they can be dealt with and settlement occurred today at 3.00pm today, as the vendor is ready willing and able to settle."
This email asks Sparke Helmore for an email address so that PRD can provide the information to facilitate a rental bond transfer simultaneously with settlement. Hunt & Hunt's letter is consistent with Ms Cable's expectations of conveyancing practice that when settlement occurs electronically on the PEXA system, PEXA gives confirmation of settlement to the parties, who can immediately proceed to email the respective supplementary documents to one another. Those documents may for example include the order on the agent or executed notices of attornment.
Sparke Helmore did not respond to Hunt & Hunt's email of 10 November at 8.44am with the requested information before the further appointed time for settlement 3.00pm that day. Hunt & Hunt were thus not given the information they needed to give to PRD before settlement to arrange the simultaneous transfers of bond money. Ms Cable signed and dated the documents later because in the events that occurred that was all she was able to do. She would have been able to sign them on 8 November or 10 November had she been given the necessary information to complete them.
But Sparke Helmore did reply at 4:53 pm to Hunt & Hunt's email of 10 November, not supplying information requested but rejecting the Santangelos' proposal for what should occur at settlement: "the purchaser rejects that the vendor is ready willing and able to complete the contract. as noted in previous correspondence, and without limitation, the vendor is required to make adjustment for rent and bonds held on completion and the purchaser rejects the vendors proposal that the current managing agent (PRD) is to attend to the rental adjustments."
Yates Holdings did not seek to argue that PRD would not follow the Santangelos' instructions about the transfer of rental bonds. It is quite consistent with the vendor's clause 24.4.1 obligation to "allow or transfer" any "remaining bond money" that this process could be executed through or with the cooperation of a third party such as PRD.
Thus, in summary the position in relation to the tenancy documents is as follows. As to the notices of attornment, the Court accepts Ms Cable's evidence that she did not sign them and date them before completion because she had not received PEXA confirmation that settlement had occurred, but she was otherwise ready to sign and date them. And as to the rental bond transfers, it was Yates Holdings that had not provided the relevant information to complete the forms but the Santangelos were otherwise ready, willing and able to provide them with the information when provided.

Relief And Costs

The Santangelo's have succeeded in their primary contentions on the two disputed issues. Mr Elliot SC conceded on behalf of Yates Holdings that if the Santangelos succeeded on the two disputed issues that the Yates Holdings defence would be unsuccessful. It is not necessary therefore for the Court to consider the Santangelos' alternative case that Yates Holdings is by its conduct in not raising the arguments concerning the purchasers' requisitions until January this year, now estopped from deploying those arguments in answer to the Santangelos' claim for specific performance. Nor is it necessary to consider the Santangelos' argument that even if they were to fail upon their breach of contract case that the overall conduct of Yates Holdings so threatens a potential breach of contract such that specific performance should now be granted in any event.
What relief should be granted? the Santangelos have been successful. They have established that Yates Holdings has breached the contract. They seek a declaration that the contract is valid and enforceable and ought to be specifically performed and then they seek a decree for specific performance of the contract.
The Court will grant a decree of specific performance. The contract is for the sale of land. The history of this matter suggests that Court should maintain supervision over the performance of this contract. If the Court grants a decree of specific performance, from that time both the contract and its performance are under the control of the Court: PW Young, C Croft, ML Smith, On Equity (2009, Thomson Reuters) ('On Equity') at [16.1030]. Supplemental orders can always be made after a decree of specific performance: On Equity [16.1030]. When considering whether such an order should be made, it does not matter that the relevant facts arose after the decree: Australian Hardboards Ltd v Hudson Investment Group Ltd (2007) 70 NSWLR 201; [2007] NSWCA 104 at [125] ("Australian Hardboards"). That decree of specific performance gives rights to both parties under the contract, and both are at liberty to apply to the Court for clarification about their rights under the contract and the working out of the specific performance order: Australian Hardboards, at [77].
In addition to granting a decree of specific performance, based on authority such as Australian Hardboards, the Court will grant the parties liberty to apply to resolve any further issues that may arise in completing the contract, the further performance of which is now under the Court's supervision. The file will be retained in the chambers of the trial judge until the Court is informed that the contract has been completed. The grant of a decree for specific performance means that it is not necessary to make a declaration as to the validity and enforceability of the contract as that is implicit in the grant of the degree.
The Santangelos have been successful. Costs should follow the event. Any application for a special cost order should be made within 14 days.

Conclusions And Orders

For these reasons the Court makes the following orders and directions: 1. order that the contract made between the plaintiffs as vendors and the defendant as purchaser on 9 July 2021 for the sale of the Lakemba property described more fully in the plaintiffs' summons dated 6 December 2021 ("the contract") be specifically performed and carried into effect; 2. order that the defendant pay the plaintiffs' costs of these proceedings; 3. any party may apply for a special costs order within 14 days; 4. grant liberty to apply in relation to the working out of any further issues that may arise between the parties before completion of the contract; and 5. direct the plaintiff to inform the Court when the contract has been completed.

DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. The onus remains on any person using material in the judgment or decision to ensure that the intended use of that material does not breach any such order or provision. Further enquiries may be directed to the Registry of the Court or Tribunal in which it was generated. Decision last updated: 06 April 2022

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