Seifert v Two Point Pty Ltd [2001] VSC 394

Supreme Court of Victoria|2001-10-19|Before: Byrne J

LAND - removal of caveat - Contract of Sale - purchaser fails to pay balance of price - vendor wrongfully refuses entry to purchaser's valuer for finance purposes - whether vendor entitled to terminate for non-payment.

Two Point Pty Ltd ("the Vendor") at all material times was and is registered as the proprietor of a house property being the land more particularly described in Certificate of Title volume 10286 folio 554 and being the land situate at and known as 9 Mountain View Parade, Rosanna. The Vendor in proceeding number 7356 of 2001 seeks the removal of a caveat lodged on 28 February 2001 as to the title to the land in dealing X342197C. The caveator, Bernhard Ulrich Seifert, asserts an interest in fee simple on the grounds of a Contract of Sale entered into between him and the Vendor dated 17 August 1999. I shall refer to Mr Seifert for convenience as the Purchaser.

The Contract of Sale dated 17 August 1999 was in fact entered into between the Vendor and a purchaser described as "Bernard Seifert and/or nominee". The price of $335,000 was payable by deposit of 10% on 16 September 1999 with the balance on settlement on 17 November 1999.

The deposit was duly paid but the balance was not. On 7 October 1999 the Purchaser purported to nominate Luxury Developments Pty Ltd, but this nomination has been challenged by the Vendor. It should be noted that Luxury Developments, on 29 May 2001, executed a Deed of Company Arrangement, but nothing turns on this.

Following the default of the Purchaser in November 1999 the Vendor, on 22 November 1999, gave a rescission notice and asserted that the Contract of Sale was rescinded on 8 December 1999.

Nothing appears to have happened for some seven months. On 11 July 2000 the Purchaser and Luxury Developments commenced proceeding number 6058 of 2000 in this Court seeking specific performance of the Contract of Sale or alternatively the return of the deposit. On 14 July 2000 Luxury Developments lodged caveat W913503G as to the title to the land asserting an interest in fee simple on the basis of the Contract of Sale of 17 August 1999 entered into between the Vendor and the Purchaser.

On 5 December 2000 the parties entered into a Deed of Settlement. The deed provided for the discontinuance of the Purchaser's proceeding and for completion of the Contract of Sale on 28 February 2001. The relevant provisions are the following:

"3. The Plaintiffs, jointly and severally, shall pay to the Defendant's solicitor on the record by bank cheque on or before 4 pm on the 28th February 2001 (or such other time and date as the parties shall agree in writing) ("the payments"): (a) the sum of $301,500.00 being the balance of the purchase price due under the contract of sale; (b) the sum of $27,000.00 being the agreed interest on the balance of the purchase price due under the contract of sale for the period 17th November 1999 to and inclusive of the 17th November 2000; (c) a further sum calculated at the rate of $66.00 per day for each day from and including the 18th November 2000 until and including the 28th February 2001 (or such other time and date as the parties shall agree in writing). 4. At 4 pm or such time as soon as practicable thereafter on the 28th February 2001 ( or at such other time and on such other date as the parties have previously agreed in writing in accordance with clause 3 hereof) the Defendant, subject to and conditional upon the Defendant's solicitor having received bank cheques for all of the payments referred to in clause 3 hereof, shall deliver to the Plaintiffs or their solicitors or agents appointed for such purpose an executed Transfer of Land of the premises in such terms as the solicitor for the Plaintiffs shall require and any other document required by General Condition 12 of Table A of the Seventh Schedule of the Transfer of Land Act 1958 and, in addition, shall deliver to the same all copies of keys to the premises. ..... 8. It is expressly agreed between the parties that in the event that the Plaintiffs or either of them fail to make the payments as required by clause 3 hereof then at 4 pm on the 28th February 2001 (or such other time and date as the parties have previously agreed in writing to be the time and date applicable for performance of the obligations in clauses 3 and 4 hereof): (a) the contract of sale, without any further act of any party, shall be and shall be deemed to be absolutely and mutually determined by the Plaintiffs and the Defendants; (b) all right title and interest of the First Plaintiff and/or the Second Plaintiff in the premises, without any further act of any party, shall be and shall be deemed to be absolutely determined; (c) the deposit shall be absolutely forfeited to the Defendant; (d) the Defendant shall be irrevocably released of its obligations pursuant to clause 4 hereof and its obligations pursuant to the contract of sale; (c) the Defendant shall be free to deal with the premises as the absolute legal and equitable owner of the premises. 10. Any time referred to herein and any time agreed between the parties pursuant to clauses 3, 4 and 8 hereof shall be of the essence of the Deed and shall be strictly construed."

The sums payable to the Vendor pursuant to cl. 3 were not paid or tendered on 28 February 2001 or at all. I shall return to the circumstances of this.

On 28 February 2001, also, a second caveat was lodged as to the title to the land in dealing X342197C, this time by the Purchaser. The terms of this caveat are set out in paragraph [1] above. Notice of this caveat was served on the Vendor on 2 March 2001.

On 18 May the Vendor applied to the Registrar of Titles for service of a notice pursuant to s. 89A(3) of the Transfer of Land Act 1958 [1]. I was told that such a notice was in fact served by the Registrar but I do not know the date specified in it for the caveat to lapse. On 2 July 2001 the Purchaser commenced a second proceeding in this Court, proceeding number 6539 of 2001, seeking specific performance of the Contract of Sale of 17 August 1999 or alternatively the return of the deposit.

In the meantime, on 5 May 2001 the Vendor sold the property to other parties. The terms of the second Contract of Sale and the identity of the new purchasers are not disclosed other than that the contract is conditional upon the Vendor causing the second caveat to be removed.

As I have mentioned at the outset, there is before the Court an application in proceeding number 7356 of 2001 brought by originating motion filed on 30 August 2001 for the removal of the second caveat. In proceeding number 6539 of 2001 there is before me also an application by the Vendor by summons filed on 11 September 2001 seeking summary judgment pursuant to R. 23.01. I should add that, as is usual, the Registrar of Titles as thirdnamed defendant to the removal of caveat application has indicated that he does not intend to appear in the action.

The fate of each of these applications depends upon a conclusion as to the continued existence of the Contract of Sale notwithstanding the failure by the Purchaser on 28 February 2001 to pay the balance of the price and the other sums due under the Deed of Settlement. It is to this matter that I now turn.

The Purchaser's account of the events leading to this failure are set out in his affidavit filed in proceeding number 6539 of 2001 sworn 21 September 2001. I will set out the relevant paragraphs.

"10. By mid-February 2001 I had arranged for finance for the settlement by 28/2/01 with Interstar Security. 11. Prior to the settlement Interstar Security required an inspection for the purposes of a re-evaluation because the valuation on file was more than six months old. As a result, on 22/2/01 I telephoned Mr Dal Santo's mobile phone and left a message requesting that he provide a key for the valuer for an inspection on 23/2/01 and asked him to call me back. My diary note reads, `Request key for valuer for 23/2/2001 left message re return call'. Now produced and shown to me and marked "BUS1" is a copy of my diary note for 22-25/2/01. 12. At 9.00 am on 23/2/01, I telephoned Mr Dal Santo's mobile phone again and requested the key for the valuer. Mr Dal Santo said that he would not give me the keys or allow access for valuation or inspection. He said he was going into a VCAT hearing and he just wanted me to settle on the due date. I said to him that it was the lender's requirement to inspect the property after such a long time had passed and Mr Dal Santo said that he did not want to hear and that he had to go to his VCAT hearing. The conversation was then terminated. My diary note of this conversation is part of exhibit "BUS1". 13. The house which is the subject of the contract is an unoccupied house at 9 Mountainview Parade Rosanna, and it has been unoccupied since prior to entering into the contract of sale. 14. As a result of the refusal for access, I was unable to drawdown the finance to settle the contract on 28/2/01. As a consequence on 2/3/01 I lodged a second caveat which is exhibit `DS14' to the Dal Santo affidavit."

The Vendor's version of these events is somewhat different. Duio Enio Dal Santo, a director of the Vendor, in paragraph 32 of his affidavit sworn on 15 August 2001, acknowledged that he received a call from Mr Seifert on his mobile phone on 23 February 2001 in which Mr Seifert asked him to lend him a key of the property for valuation purposes. He then describes his response to this request:

"32. ...I told Mr Seifert that I would not loan him the key but he should arrange for his solicitor to contact the plaintiff's solicitor for any dealings or inspections of the property. I then ended the conversation. I then rang Mr Carlo Bernardi of Scomparin & Bernardi, the plaintiff's solicitors, and told him of the conversation and that he should expect a fax from the defendants' solicitors. 33. I was not prepared to deal with Mr Seifert directly in any way considering the long history of dispute between the parties. 34. I am informed by Mr Bernardi that he did not receive any request at any time from the defendants' solicitors that they be permitted to inspect the property or that there was any difficulty in the defendants settling on 28 February 2001."

In the application for removal of the caveat, the Purchaser bears the burden of showing a serious issue to be tried as to the existence of the asserted interest in the land. In the Vendor's summary judgment application the Vendor must show a clear case for judgment on the basis that any contest of fact will be determined adversely to it. I reject the submission put on behalf of the Vendor that I should, in the caveat removal application, make a final determination of disputed fact. I am satisfied that there is an issue to be tried as to the February telephone conversation or conversations. I shall proceed with these applications, therefore, without determining this conflict and on the basis that Mr Seifert's account will prevail.

For the same reason, I decline to find, as was contended on behalf of the Vendor, that it was not necessary for the valuer to enter upon the land in order to update the 1999 valuation. This is a matter which would warrant investigation at trial, if trial there be. I will proceed on the basis that the refusal of entry had the consequence asserted in paragraph 14 of Mr Seifert's affidavit which I have set out above.

Against this factual background it was put that the refusal of the Vendor to permit the Purchaser's valuer to enter upon the land was a breach of condition 15 of Table A and a breach of the Vendor's implied duty to cooperate. Condition 15 is in the following terms:

"The purchaser shall assume liability for compliance with any notices or orders relating to the property sold (other than those referring to apportionable outgoings) which are made or issued on or after the day of sale, but the purchaser shall be entitled to enter on the property sold (without thereby being deemed to have accepted title) at any time prior to the settlement date for the purpose of complying with any such notice or order which requires to be complied with before the settlement date. The purchaser may also inspect the condition of the property and the chattels at any reasonable time during the period of seven days preceding the settlement date."

It is the last sentence which is relied on by the Purchaser.

Counsel for the Vendor submitted, first, that the condition should be construed to permit only the Purchaser to enter upon the land and not an agent or valuer on behalf of the Purchaser. There is no substance in this contention. This is a commercial document. It could hardly be supposed that the contracting parties could have contended that the right of last minute inspection should be so limited. It would render the right an illusory one if the physical incapacity or location of the Purchaser or the location or nature of the land was such that a personal inspection was not practicable. It would also be inconsistent with the use of the same word "purchaser" in the first sentence which clearly comprehends persons other than the actual purchaser entering upon the land to carry out work.

Next, it was said that the inspection contemplated by the second sentence does not include an inspection for valuation purposes. It was submitted that the purpose of such an inspection was to determine the condition of the land and chattels sold in order to determine whether there had been a breach of cl. 2 of the general conditions of contract. My impression is that Condition 15 of Table A ought not be read down in such a way but I express no concluded view on this matter. I shall treat it as an arguable contention for determination at trial and shall therefore assume that the Purchaser will succeed on this point.

It follows from this that, for the purposes of these applications, I accept that, in refusing entry upon the land on 22 or 23 February 2001, the Vendor was in breach of Condition 15.

What, then, is the legal consequence of this? Whether the Purchaser could treat the contract as discharged for breach does not arise for his caveat depends upon the continuance of the contract. He may be entitled to damages. What he contends for, however, is entirely different. He argues that the breach relieves him from the burden of complying with the contract without destroying the contract itself. As a matter of ordinary contract law, such an option is not available to a party faced with a breach. There are only two courses of action open, to affirm the contract and seek a remedy in damages or to terminate it if the breach warrants this[2].

Counsel for the Purchaser then called in aid the doctrine of estoppel. This, I think, is of no assistance because what must be found is an assertion, express or implied, by the Vendor that it will not insist upon the Purchaser's performance of a contractual obligation or that the Vendor will not exercise some right in the event of the Purchaser's non-performance[3]. In the present case no such assertion can be found.

Then, it was said on behalf of the Purchaser that, where the Vendor by its breach brought into existence the inability of the Purchaser to obtain the funds to make the payment due on 28 February 2001, it will not be permitted to rescind the contract for the non-payment.

This submission depended upon a long line of cases which impose upon the parties to a written contract an implied duty which has been described as a duty to cooperate. This duty manifests itself in a duty on each party to perform all that is necessary on its part to be done for the performance of the contract or to enable the other party to have the benefit of the contract[4]; it may have a negative operation which would have the effect of preventing a party from doing something which would defeat the performance of the contract.

In the present context, counsel for the Purchaser argued that it may have been supposed from the outset by the Vendor that the Purchaser would require finance for the purchase and that, in any event, he told Mr Dal Santo in February that he required the key for the purpose of valuation in order to meet his lender's requirements. On this basis, the Vendor must have known that the refusal would jeopardise the Purchaser's ability to perform his obligation to make payment under the contract, as was the fact.

Counsel for the Vendor, proceeding for present purposes on the same basis, submitted that, even so, the obligation to make the payment was unconditional; the contract was not subject to finance so that his client had no interest in the source of the Purchaser's funds. He pointed out that the provision for entry upon the land was not an essential term. Indeed, he placed reliance upon the very strong terms of the Deed of Settlement insofar as they imposed upon the Purchaser an obligation to pay on the due date with little scope for extension.

Counsel for the Purchaser then put a similar argument, but on a basis which depended upon the readiness of equity to relieve against the rescission of a contract in circumstances where it would be unconscionable for the Vendor to do so and to decree a specific performance at the behest of the Purchaser. It was said that the refusal of the Vendor to permit entry upon the property for the purpose of the Purchaser securing finance to settle, bearing in mind that the property was at the time unoccupied, was unreasonable and that to insist upon the Purchaser completing without the benefit of such an inspection amounted to unconscionable conduct[5].

In summary applications such as those now before me, I should not struggle to determine these difficult legal issues. In short, I am not able to conclude that they are so free of doubt that they do not represent serious issues to be tried.

I am satisfied, therefore, that the Purchaser has made out a serious issue to be tried as to the existence of the interest asserted in the caveat and as to his right to obtain specific performance of the Contract of Sale. This conclusion means that the Vendor's summary judgment application in the Purchaser's proceeding must fail.

I turn now to matters of discretion which I must exercise on the Vendor's caveat removal application. I start from the position that the Purchaser may at the trial of proceeding number 6539 of 2001 establish the continuing existence of the Contract of Sale. Furthermore, the second Contract of Sale is subject to the removal of the caveat so that there is no prospect that the Vendor will suffer the embarrassment of two competing purchasers.

That said, there is the troublesome fact, not disputed, that, having failed to make or tender payment on 28 February 2001, some 15 months after he was first obliged to settle the Contract of Sale, the Purchaser took no further step for a further five months other than the lodging of the caveat. Indeed, he took no step as required by cl. 5 of the Deed of Settlement to discontinue his first proceeding so that it was necessary for the Vendor to seek an order from the Master on 3 May to dismiss it.

Insofar as Luxury Developments was obliged under the terms of the Deed of Settlement to make payment on 28 February 2001 and may have been a nominated transferee of the land, it may well be unable to do so. The ASIC company search discloses that, on 6 March 2001, it became subject to external administration; a receiver and manager was appointed over its assets on 21 May and it executed a Deed of Company Arrangement on 29 May 2001, the terms of which are not known to me.

In the exercise of my discretion I am minded not to leave the caveat in place at least without imposing stringent conditions on the Purchaser. My concern is that the property is presently unoccupied and may well be deteriorating as a consequence; and it is likely that it cannot be let pending the disposition of the Purchaser's proceeding number 6539 of 2001. I am concerned, too, that the Vendor is standing out of its money and that this situation has existed now for nearly two years. Accrued interest on the sum outstanding approaches $50,000 and there is no certainty that it can be paid.

I have formed the provisional view that the issues in proceeding number 6359 of 2001 are sufficiently delineated and of such compass that the matter may be tried without pleadings and on affidavit. I am, of course conscious that there will be a contest between Mr Dal Santo and Mr Seifert as to the telephone conversations regarding the request for access. The trial judge may prefer to hear oral evidence as to these or other matters and I would reserve that possibility. It is my impression, too, that the trial might be conducted in two days. I have been advised by the Listing Master that, on that basis, a judge could be made available to hear the trial commencing on Tuesday 30 October 2001. If this course is to be adopted I would be minded to leave the caveat in place for the relatively short time until judgment can be given. The trial judge can then, as part of the final disposition of the matter remove the caveat or not, as is appropriate.

I would then propose the following orders and directions:

a) The defendant's application for summary judgment be dismissed.

c) The proceeding be set down for trial forthwith, such trial to commence on 30 October 2001.

d) Subject to any order of the trial judge the evidence at trial be given by affidavit.

e) Any further affidavit on behalf of the plaintiff be filed and served by 23 October 2001.

f) Any further affidavit in opposition on behalf of the defendant be filed and served by 26 October 2001

g) General liberty to apply to the Listing Master, to the trial judge or to me.

I shall hear counsel further upon the terms of the orders to be made and on costs.

[2] Fercometal SARL v Mediterranean Shipping Co SA [1989] 1 AC 788 at 805, per Lord Ackner; Foran v Wight [1989] HCA 51; (1989) 168 CLR 385 at 409, per Mason CJ (dissenting), at 447, per Dawson J, at 458, per Gaudron J.

[3] Foran v Wight [1989] HCA 51; (1989) 168 CLR 385 at 409-10, per Mason CJ.

[4] Secured Income Real Estate (Australia) Ltd v St Martin's Investments Pty Ltd [1979] HCA 51; (1979) 144 CLR 596 at 607, per Mason J.

[5] CSS Investments Pty Ltd v Lopiron Pty Ltd (1987) 16 FCR 15 at 22, per Fisher J.

At a glance

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Judgment (53 paragraphs)

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