Van Minh Lam v Tuan Hung Nguyen

IN THE SUPREME COURT OF NEW SOUTH WALES EQUITY DIVISION

2816/03 Van Minh Lam v Tuan Hung Nguyen JUDGMENT 1 BURCHETT AJ: This is a suit for relief, including declaratory relief, relief against forfeiture and specific performance, in respect of the purported termination by the defendants (the vendors) of an agreement for the sale of land entered into with the plaintiff (the purchaser). 2 It is admitted that by a contract in writing dated 10 December 2001 the plaintiff agreed to purchase and the defendant agreed to sell for the sum of $90,000 land known as 8/158 John Street Cabramatta. By clause 15 of the contract it was provided: "Completion date The parties must complete by the completion date and if they do not a party can serve a notice to complete if that party is otherwise entitled to do so." By an annexure to the contract, certain additional clauses (unfortunately, somewhat carelessly drafted) were inserted in it, including:

"31 NOTICE TO COMPLETE Should any event arise entitling either party to issue a Notice of [ sic ] Complete upon the other then the parties agree that a period of fourteen (14) days from the service of such a Notice making time of the essence shall be a property [ sic ] and reasonable time. ... 50 The purchaser acknowledges and agrees that any encumbrance, mortgage or caveat appearing on the register, the purchaser shall not be entitled to have a discharge or withdrawal thereof registered prior to completion but the vendor shall on completion hand over to the purchaser a proper discharge of any such encumbrance or mortgage or withdrawal of caveat in a registrable form and shall allow on completion such a registration fee in respect thereof as the Land Titles Office may prescribe from time to time. The parties hereto agree that fourteen (14) days shall be [an] adequate period for any notice required to be given under or [in] relation to this contract provided [ sic ] either party is unable or unwilling to complete by the completion date, the other party shall be entitled at any time after the completion date to serve a Notice to Complete making the time for completion essential. Further, if it becomes necessary for the Vendor to issue a Notice to Complete pursuant to this clause then the Purchaser shall pay to the Vendor the costs of issue of such notice assessed at $120.00. " 3 The form of contract provided for a completion date to be specified, although not so as to be made an essential term; and it drew attention, in connection with that completion date, to clause 15. In this case, the appropriate space was filled in by the insertion of the following: "30-1- 2002" 4 The first mishap to befall the parties in respect of the contract was the defendants' inability to settle on 30 January 2002 caused, as was admitted on the pleadings, by their failure to clear the land tax charged against the land. They were afterwards required to complete by notice in writing, and it was arranged between the parties that completion would take place on 1 March 2002, but again the defendants were unable to complete on that day, this time because they could not give vacant possession, there being then a tenant who had been let in and not evicted. 5 Following the defendants' second failure to complete as appointed, it was arranged that completion of the contract would take place on 31 July 2002. On this occasion, yet another obstacle presented itself to prevent the fulfilment by the defendants of their contractual obligation in respect of settlement. This time, the admitted impediment was their inability to produce the Certificate of Title for the land, which had been mislaid by their bank, although, as will appear, evidence emerged at the hearing suggesting the defendants were, in any case, not in a position to settle. 6 It was not until 27 August 2002 that a secretary employed by the defendants' conveyancers telephoned the secretary of the solicitor handling the transaction for the plaintiff to advise that the Certificate of Title had been located, and to suggest that settlement take place at the defendants' bank at 12:30 pm two days later, that is, on 29 August 2002. After checking with the purchaser's bank, by which the necessary finance was to be provided, and having been told that four to five days were required under the loan arrangements for the bank to be ready to settle, the solicitor's secretary telephoned back on the same day to change the date of settlement to 2 September 2002 at 2 pm at the Commonwealth Bank. But the next day, 28 August 2002, at about 10:30 am, a representative of the bank advised the solicitor's secretary that the loan had been "de-activated" and that the purchaser (plaintiff) would need to sign a new loan agreement and a new mortgage. The bank clerk said: "Everything has to be done again; it will take two to three weeks." She promised to "send out the loan agreement as soon as possible". A couple of days later, on 30 August 2002, the same bank clerk advised that the paper work had been sent to head office "to process the loan and mortgage documents", and that they should be sent to the purchaser "[e]arly next week". In fact, the evidence shows the fresh loan arrangements received internal approval in the bank by 10 September 2002. 7 In the meantime, on the basis that the plaintiff was not able to settle on 2 September 2002, as had been arranged on 27 August, the defendants caused a Notice to Complete to be served on 2 September 2002, requiring completion on or before 17 September 2002. As the plaintiff was unable to complete within that period, the defendants purported to terminate the contract on 19 September 2002. It is admitted, in an affidavit filed on behalf of the defendants, that two days earlier the plaintiff's solicitor advised a solicitor acting for the defendants the finance "will be available…early next week". 8 After the defendants had three times been themselves excused for their own defaults in respect of settlement dates, continued over the period from 30 January to 28 August, their ruthless insistence that the plaintiff must settle within 14 days brings forcibly to mind the parable of the unjust debtor who, himself forgiven a large sum, went straight out and mercilessly enforced payment of a small debt owed to him by one of his fellows (see Matt. 18: 22-34). Among the matters raised by the plaintiff is the question whether, in the eye of equity, the conduct of the defendants was unconscientious so as to support a case for relief against forfeiture. 9 In argument, counsel for the defendants suggested the evidence failed to make it clear that the plaintiff did originally have finance arranged, which only ceased to be available to him because of the inordinate delay in completion caused by the various defaults of the defendants. It is difficult to take this submission seriously. The evidence of the solicitor's secretary was admitted without objection, and there was no challenge to it by cross-examination. While the drafting of her affidavit may be open to some criticism on the ground of almost excessive economy, the statements that the loan had been "de-activated", that a "new loan agreement and new mortgage" were required, that "[e]verything has to be done again; it will take two to three weeks" and that the bank would "send out the loan agreement as soon as possible" leave very little to be inferred. It is plainly implicit in them that a loan had been arranged, so that nothing was now required except to re-activate it. The confident reference to sending out "the loan agreement as soon as possible" plainly suggests that what had to be done was a matter of completion of formalities. The further conversation two days later concerning the need to have paper work sent to head office to process the loan and mortgage documents reinforces the message. All this confirms the plain inference to be drawn from the bank's initial readiness to appoint settlement at five days notice for 2 September 2002. The history of the matter provides good ground for inferring also that any arrangements for finance made by the plaintiff in anticipation of a settlement on 30 January 2002 might well have become stale by 2 September, considerably more than six months later. 10 There was very little conflict between witnesses concerning the broad circumstances as I have stated them. There was, however, some conflict between the version of the facts given by the defendant Linna Zeng, the wife of the other defendant, and certain documents that were put to her in cross-examination. I should say that she made a poor impression as a witness, and I would not accept her evidence except where it is corroborated, or is in accordance with the probabilities to be deduced from other testimony or the circumstances generally. One question raised by her evidence is the extent of the vendors' own unreadiness to settle until immediately before 2 September. It emerged in cross-examination that the vendors' conveyancers had received by fax on 28 August 2002 a letter from the purchaser's solicitors claiming that the premises were "not…in a clean state, and the water meter is also missing". A reply was sent to the solicitors by the conveyancers, dated 30 August 2002, which appears to acknowledge the justice of this complaint, for it says: "We refer to the above matter and wish to advise that the property has been cleared and the water meter shall be replaced this afternoon." An invoice from a cleaning service dated 26 August 2002 refers to cleaning done on Monday 26 August 2002, for which the price was $275 inclusive of GST. But, in her evidence, Linna Zeng said: "The property was cleaned after the tenant has moved out." This seems to imply that the tenant whose presence had prevented settlement early in the story, when the land tax clearance should have enabled completion to take place at once, had in fact remained in the premises for some six months, and that any mislaying of title documents which had occurred was no more than an additional cause of the vendors' inability to fulfil their contract. Such a conclusion would cast grave doubt on the truthfulness of other evidence given by Linna Zeng to the effect that the tenancy in question was only a very short term one, for a mere two weeks. It would also mean that, not only was the plaintiff improperly held out of his entitlement to a prompt settlement, with the consequence that his loan arrangements became stale, but at the same time, the defendants were deriving the benefit of rent for the premises the transfer of which they should have already effected. Indeed, Linna Zeng did at one point in her evidence say: "I always had tenant in there". 11 The principal question argued at the hearing was whether the defendants were entitled to give a notice to complete on 2 September 2002. If they were so entitled, clause 31 specifically provides (correcting obvious errors of expression) that a period of 14 days from the service of the notice would be a proper and reasonable time for it to allow. But the first question is whether the defendants were entitled to serve the notice. 12 Clause 50, which is particularly badly expressed, appears to me to be intended to include a sentence (which in the clause as it appears in the contract neither begins with a capital letter nor is preceded by a full stop to complete the previous sentence) as follows: "Provided either party is unable or unwilling to complete by the completion date, the other party shall be entitled at any time after the completion date to serve a Notice to Complete making the time for completion essential." But it seems to me that the expression "completion date" in this provision must mean the date so described in clause 15 and specified on the first page of the contract as 30 January 2002. It follows that the party "unable…to complete by the completion date" in clause 50 is an expression which, on the facts of this case, points to the defendants, not to the plaintiff. Clause 50 would have given the plaintiff a right to serve a notice to complete, but not the defendants. In fact, the plaintiff did require completion more than once after 30 January 2002, but on each occasion waived any right he may have had to terminate the contract. 13 It follows, from the foregoing discussion of the terms of the contract specifically directed to the right to issue a notice to complete, that the defendants did not have the benefit of any special empowerment to issue such a notice, but were thrown back upon their rights under the general law. Those rights must be considered on the basis that the contractual completion date had disappeared from the contract by reason of the defendants' own default and the plaintiff's waiver of strict insistence upon adherence to that date, in respect of which time was in any event not essential. So the contract had to be seen as if it were one pursuant to which the obligation of the parties was to complete "within a reasonable time": see the discussion by Professor A. G. Lang in NSW Conveyancing Law and Practice volume 1 para 11-580. 14 The question is, where completion within a reasonable time is the requirement of the contract, in what circumstances may a party serve upon the other party a notice to complete? 15 The law governing the entitlement to issue a notice to complete was examined in detail by the High Court in Louinder v Leis (1982) 149 CLR 509. This decision makes it clear that a distinction is to be drawn between a case where the contract stipulates the date for completion, although without making time of the essence, and a case where the contract does not specify a date for completion, so that the obligation of the parties is to complete within a reasonable time. In relation to this distinction, Mason J (with whose reasons both Gibbs CJ and Wilson J expressed general agreement) made it clear (at 523) that "where there has a been a waiver of the breach [of a term stipulating a date for completion] or the innocent party is disentitled to rely on it", the rule is the same as for a case in which there is what his Honour called an "open" contract, that is one specifying no date for completion and therefore simply requiring completion within a reasonable time. For such a case, his Honour stated his conclusion (at 529): "The existence of unreasonable delay on the part of the purchaser was an essential qualification for the giving of a notice." Louinder v Leis being concerned with a contract for the sale of land which did not fix any date for completion, Gibbs CJ, in a brief judgment, said (at 512) "the appellant was not entitled to give the notice requiring completion of the contract unless the respondent had been guilty of unreasonable delay". He also referred with approval (at 513) to the judgment of Fry J in Green v Sevin (1879) 13 Ch D 589 at 599 where his Lordship said, in relation to a similar contract: "What right then had one party to limit a particular time within which an act was to be done by the other? It appears to me that he had no right so to do, unless there had been such delay on the part of the other contracting party as to render it fair that, if steps were not immediately taken to complete, the person giving the notice should be relieved from his contract." Gibbs CJ went on to point out (also at 513) that the cases supporting this proposition "were cases in which no time for completion had been fixed by the contract, or in which a time originally fixed had been waived". His Honour's placing of a case where a stipulation as to time has been waived in the same category as a case where there never was a stipulation as to time is supported by the analysis made by Fullagar J in Carr v J A Berriman Pty Ltd (1953) 89 CLR 327 at 348-349 of the consequences of a party's election not to rescind a contract for breach of a time stipulation. 16 Gustin v Taajamba Pty Limited (1988) NSW ConvR 55-433 was a decision of the Court of Appeal in respect of a notice to complete a contract which did not fix a time for completion. Mahoney JA (with whom Samuels and McHugh JJA agreed) said (at 57,915) that "[t]he vendor could give the notice to complete only if there was ground for it", citing Louinder v Leis. In examining whether there was ground in the particular case, his Honour discussed (at 57,920) the nature of the obligation of a party where the requirement of the contract is that it should be completed "within a reasonable time". His Honour said "what is reasonable for a particular step is to be estimated at the time when it falls to be done", adding: "This may, of course, result in the time for completion being a date beyond that calculated as at the date of the contract. Thus, the parties may, in the course of the progress of the matter to completion, mutually delay what is to be done or there may be other circumstances which relevantly may cause the time taken to perform an obligation to be more than otherwise reasonably it should be." In the particular case, he went on to hold that "the delay which had taken place constituted a ground for the giving of a notice to complete on [the relevant date]." 17 In Sindel v Georgiou (1984) 154 CLR 661 at 670, a joint judgment of five judges of the High Court held "that strong circumstances must be shown to justify the giving of a notice to complete which allows less than fourteen days for completion", adding: "In the present case we agree with the conclusion reached by the primary judge that the time allowed was insufficient. The determination of what is a reasonable time for completion of a contract for the sale of land, judged in the light of the circumstances of the particular case, is very much a matter of impression." In the case with which I am dealing, of course, the contract itself determines that the period of fourteen days is a reasonable period to allow so long as a party is in fact justified in giving a notice to complete. However, if, as the judges of the High Court considered in Sindel v Georgiou, the circumstances justifying the giving of a notice to complete may bear on the period which it is appropriate to allow, it seems to me to follow that, where the contract permits a particular length of notice, then that period must reciprocally be seen as capable, in a given case, of affecting the decision whether the circumstances do justify the giving of such a notice. It is to be borne in mind that the same passage in the judgment in Sindel v Georgiou makes it clear that a clause in a contract to the effect that fourteen days is to be deemed a reasonable time is not the same thing as a requirement that a party giving a notice to complete must specify in it a period of fourteen days, and no other period. 18 Whether or not I am permitted to take account of the length of the period specified in the notice to complete, I am quite satisfied that, in the circumstances of this case, the vendors were not entitled to give that notice at the time it was served. The responsibility for the delays in the case lay overwhelmingly at their door, and, while the purchaser might by the exercise of greater foresight have avoided the temporary difficulty incurred in respect of finance, it actually arose out of the delays imposed upon him by the vendor. At the time the notice was served, there had not been unreasonable delay on his part, nor was any unreasonable delay by him inevitable or to be anticipated. Accordingly, I hold that the purported termination of the contract by the vendors was ineffective, and I shall make a declaration accordingly. 19 That renders it unnecessary to consider the alternative claim for relief against forfeiture. Had it been relevant to consider this claim I would have held that, in contrast to Romanos v Pentagold Investments Pty Ltd [2003] HCA 58 at [25], "the conduct of the vendors caused or contributed to a circumstance rendering it unconscientious for them to insist upon their legal rights to terminate the contract". See also Tanwar Enterprises Pty Ltd v Cauchi [2003] HCA 57 at [58] - [60]. 20 In the result, subject to the plaintiff's readiness, willingness and ability to complete the contract, a question which the parties agreed should be deferred until after I had delivered judgment on the other issues in the case, I would be prepared to make an order for specific performance in the plaintiff's favour. **********

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