Ar Marr Pty Limited v Robert Hugh Chaplin [1986] ACTSC 37 (27 May 1986)

SUPREME COURT OF THE ACT

A.R. MARR PTY LIMITED v. ROBERT HUGH CHAPLIN
S.C. No. 340 of 1986
Specific Performance

COURT

IN THE SUPREME COURT OF THE AUSTRALIAN CAPITAL TERRITORY
Kelly J.(1)

CATCHWORDS

Specific performance - Decree made by consent - Liberty to apply reserved in order fixing date for completion of agreement - Plaintiff vendor failing to complete agreement on date fixed by consent order - Whether consent decree made the date fixed thereby of the essence - Whether, if not, just that it be declared that agreement continue on foot - Whether, if time thereby became of the essence, there had been a waiver in connexion therewith - Procedure for rescission of agreement after making of such a decree considered - Meaning of "liberty to apply" considered.

Foligno v. Martin (1853) 16 Beav. 586: 51 ER 906.

Austins of East Ham, Limited v. Macey (1941) 1 Ch 338.

Singh (Sudagar) v. Nazeer (1979) 1 Ch 474.

Johnson v. Agnew (1980) AC 367.

Hoad v. Swan [1920] HCA 50; (1920) 28 CLR 258.

Purcell v. F.C. Trigell Ltd. (1971) 1 QB 358.

Permanent Trustee Co. (Canberra) Ltd. v. Stocks & Holdings (Canberra) Pty. Ltd. (1976) 15 ACTR 45.

Dowdle v. Hillier (1949) 66 WN (N.S.W.) 155.

Legione v. Hateley [1983] HCA 11; (1983) 152 CLR 406.

Samuel v. McGillivray (1882) 14 VLR 784.

Mehmet v. Benson [1965] HCA 18; (1964) 113 CLR 295.

HEARING

CANBERRA
27:5:1986

ORDER

that the Agreement for Sale ("the Agreement") made the 4th day of June 1985 by and between the plaintiff and the defendant remains on foot and should be carried into execution.

The defendant specifically perform and complete the Agreement by 11.00 a.m. on Friday, 30 May 1986.

By the time and date fixed the plaintiff deposit with the Registrar of the Court all of the Title Deed, Memorandum of Transfer, Certificate of Fitness and any other documents which the plaintiff is obliged to deliver to the defendant upon completion of the transfer between them.

By the time and date fixed the defendant pay to the plaintiff the sum agreed between the parties as payable on 6 May 1986, namely, $228,919.34, subject to the following adjustments:-

(a) the plaintiff is to allow $0.78 per day from 6 May

1986 until completion for rates;

(b) the defendant is not to allow interest from 14
days after the notice to the defendant of the
issue of a Certificate of Fitness, being 26
February 1986 to 31 March 1986;

(c) the defendant is to allow interest at $110.96 per
day from 7 May 1986 until completion.

The defendant pay the plaintiff's costs of and incidental to the defendant's

Notice of Motion dated 12 May 1986 and the plaintiff's costs of and incidental to the application of the plaintiff pursuant to the grant of liberty to apply made on 27 March 1986.

DECISION

By an agreement dated 4 June 1985 the plaintiff agreed to sell to the defendant the residue unexpired of the lease in respect of Unit 8 in Units Plan 390 erected on Block 31, Section 103, Yarralumla for the sum of $250,000. A deposit of $25,000 was payable under the agreement. On 27 February 1986 a writ issued out of this Court seeking specific performance. On 7 March 1986 the plaintiff took out a vendor's summons for specific performance. On 14 March 1986 Gallop J made an order for specific performance with consequential orders, there being no appearance by or on behalf of the defendant. On 27 March 1986, by consent, the orders made on 14 March 1986 were vacated. Additionally, the following orders were made:-

"(2) That the agreement for sale ('the
agreement') made the 4th day of June
1985 by and between the Plaintiff and
the Defendant remains on foot and should
be carried into execution.

(3) That the Defendant specifically perform
and complete the agreement on or before
the 6th day of May 1986 and that the
Plaintiff have liberty to apply in
respect of this Order.

(4) That the deposit of $25,000.00 paid to
the stakeholder named in the agreement
be released to the Plaintiff.

(5) That notwithstanding the provisions of
Special Condition 7 of the agreement the
Defendant shall pay interest on the
balance of the purchase monies from the
1st day of April 1986 until completion.

(6) That the Defendant pay the Plaintiff's
taxed costs."

2. It is agreed that the order as taken out, part of which I have just quoted, represents accurately the agreement between the parties and the consent orders made on 27 March 1986. It is also agreed that the orders of 27 March 1986 were deliberately made with full knowledge and with the full agreement of the solicitors on both sides. The order as taken out carries the usual indorsement, addressed to the defendant, advising him of the effect of non-compliance with it.

3. The events that bring the matter before the Court again are recounted in the affidavit of Lynette Ann Smith, a clerk employed by the plaintiff's solicitors. She had the day to day carriage of the matter and in the course of her duties was to attend to the settlement arrangements in respect of the agreement.

4. On 1 May 1986 she received a letter from the defendant's solicitors dated 30 April 1986. A stamped Memorandum of Transfer and Requisitions on Title were attached to the letter. The copy Memorandum of Transfer annexed to the affidavit shows the Memorandum to have been stamped on 30 April 1986. The letter said, inter alia, "We expect to be able to settle by 6 May 1986." On 2 May 1986 Ms Smith had typed and delivered to the defendant's solicitors replies to the requisitions. In the accompanying letter she said:-

"We note that the requisitions were tendered
out of time and supply answers thereto
without acknowledging your rights to
requisitions."

5. Again on 2 May 1986 Ms Smith spoke to Virginia Edlington, whom she understood to be an employee of the defendant's solicitors and with whom she had dealt on all previous occasions in relation to the matter. They discussed arrangement for settlement. During the discussion Ms Edlington said words to the effect of:-

"I require the answers to Requisitions on
Title urgently so that I can relay some of
the information to the Advance Bank. . . . Mr
Chaplin is obtaining his finance from the
Advance Bank and their solicitors say that
the Advance Bank requires at least 4 days
notice of settlement. There is a possibility
that we may not be able to settle on Tuesday
as they are not yet ready to give him the
money."

6. Ms Smith then prepared settlement figures based on the assumption that settlement would take place on Tuesday, 6 May 1986. Later again on 2 May 1986 she telephoned Ms Edlington to give her the settlement figures. She also said to Ms Edlington:-

"Let's book this settlement in tentatively at
the Land Titles Office for 2.30 p.m. on
Tuesday."

and Ms Edlington replied, "All right, but I'll have to confirm that".

7. Still on 2 May 1986 Ms Smith made inquiries of the plaintiff's directors to see when they would be able to attend to execution of the Memorandum of Transfer. She was unable to contact one of the directors who had gone to the South Coast of New South Wales. She rang that director's home number several times on the afternoon of 2 May 1986 but received no reply. She again rang that number on 5 May 1986 to be told by a daughter of the director that her mother (the director) had gone to the coast and would not be back until midday on Tuesday.

8. Again on Monday, 5 May 1986, Ms Smith spoke to Ms Edlington. During that conversation Ms Edlington said to her words to the effect that:-

"The Advance Bank might not be prepared to
give us our money tomorrow. I am waiting on
Richard Arthur to confirm whether or not they
will be able to settle. When I have heard
from Richard Arthur, I will let you know."

Ms Smith replied, "Oh well, we will wait until we hear from you". In the result no time or date for settlement was confirmed. Ms Smith expected that the time would be agreed upon between the parties some time during the next 24 hours.

9. By the close of business on 5 May 1986 the appointment tentatively made on 2 May 1986 still remained to be confirmed.

10. At mid-morning on 6 May 1986 Ms Edlington rang Ms Smith and said words to the effect that:-

"Richard Arthur has just confirmed to me that
our funds will be telegraphically transferred
from Sydney today. It looks as if we will be
able to settle this afternoon."

11. By approximately noon on that date it became apparent to Ms Smith that the director of the plaintiff who was travelling from the South Coast might not arrive in time for the seal to be affixed to the Memorandum of Transfer before the time tentatively fixed for settlement. She received no reply to a number of telephone calls she made to that director's home at approximately half hourly intervals during the morning. At about 12.15p.m. on 6 May 1986 Ms Smith telephoned Ms Edlington to tell her that she had been unable to contact one of the plaintiff's directors but that she (the director) was expected in town shortly. She asked Ms Edlington whether the settlement could be delayed until 3.30 p.m. Ms Edlington agreed. At 3 p.m. she again telephoned Ms Edlington and said that she had been unable to contact the director. She asked whether it would be possible for the matter to be settled at Civic Permanent a little later. Ms Edlington replied:-

"Richard Arthur and I will hold our files
ready to come whenever you should require
us."

12. I set out the text of paragraph 17 of Ms Smith's affidavit:-

"I again telephoned Virginia Edlington at
4.00 p.m. and told her that the Transfer was
still not executed. I also said to her words
to the effect 'Can we make arrangements for
settlement to take place tomorrow morning?'
She replied 'If we settle tomorrow morning,
you won't charge us another day's interest,
will you?' I clarified this question with a
solicitor in our firm and then said 'No.
Interest won't be charged in these
circumstances'. She said words to the
effect: 'Okay. We will settle tomorrow
morning. What time?' I suggested 'Let's
settle at 11.00 a.m.' and she replied: 'That
time wouldn't suit me; 11.30 a.m. would be
better'. I then said, 'That's fine. I will
see you at the Titles Office at 11.30 a.m.'."

13. At 11.20 a.m. on 7 May 1986 Ms Smith attended at the Land Titles Office with all documents necessary to settle the transaction. Shortly after 11.30 a.m. she was called to the telephone. A person who identified herself as the secretary of Mr Colquhoun of the defendant's solicitors said to her that Mr Colquhoun had just left the office and had asked her to ring Ms Smith to tell her that the Chaplin settlement was off for the morning. Ms Smith asked why and was told that the person telephoning her did not know. Shortly afterwards, Ms Smith, still at the Land Titles Office, answered a telephone call for Ms Edlington so that she might inform the caller that Ms Edlington was not there. The caller was Mr Colquhoun. Ms Smith said to him:-

"It's Lyn Smith speaking. I was to have done
a settlement with Virginia Edlington this
morning but she is not here."

He replied in words to the effect of "I know. I don't want her to settle Chaplin." She asked why and he replied that he could not tell her anything more except that he was seeking advice and that his firm would be in touch.

14. Later on that day the plaintiff's solicitors received from the defendant's solicitors a letter, the text of which was as follows:-

"re: R.H. CHAPLIN ats A.R. MARR PTY LIMITED

We refer to the orders made by Mr Justice
Kelly herein.

We note that you were unable to complete the
contract on the date specified in the order
ie. the 6th May, 1986 and that your declared
reason for being unable to complete was that
you did not have a transfer executed by your
client company.

We note that we were ready to complete and
that completion was not effected through your
default.

We are of the view that the order made time
of the essence of the contract and that it
bound both parties. It also may be that by
its failure to settle your client has
abandoned its equitable right to specific
performance.

We are instructed to take Senior counsel's
advice in relation to our client's (position)
and we will be in further touch with you when
this advice as been received."

15. By letter dated 8 May 1986 the plaintiff's solicitors gave notice that an application would be made to the Court on Friday 9 May 1986 for an order that the agreement be specifically performed. This notice was given purportedly pursuant to the leave to apply reserved by the order of 27 March 1986.

16. On 12 May 1986 the defendant, by his solicitors, gave notice that he would move the Court on 16 May 1986, as he did, for orders that he have leave to rescind the agreement for sale of 4 June 1985 and that the order for its specific performance made on 7 (sic) March 1986 be stayed.

17. The plaintiff contends:-

(a) that the agreement remains on foot and should be
carried into execution;

(b) that the liberty to apply reserved by the order
made on 27 March 1986 was intended to deal with a
situation such as has arisen in this case so that
the Court might vary the date of completion -
effectively, counsel for the plaintiff was
submitting that, despite the fact that the order
of 27 March 1986 fixed a time for completion, time
did not thereby become of the essence of the
contract because liberty to apply had been
reserved in respect of the order;

(c) that upon its true construction the order that,
notwithstanding the provisions of the agreement,
the defendant should pay interest on the balance
of the purchase moneys from 1 April 1986 until
completion meant that the consent orders envisaged
that completion might take place on a date later
than 6 May 1986.

The defendant, on the other hand, contended:-

(a) that the order that completion take place on or
before 6 May 1986 made time of the essence of the
contract;

(b) that the liberty to apply reserved meant only that
the plaintiff might return to the Court to seek
its assistance in the working out of the order and
that it could not affect the date fixed by
agreement between the parties;

(c) that because the order of 27 March 1986 had been
made deliberately with full knowledge and full
agreement of the solicitors on both sides it could
not be set aside except by consent;

(d) that the order regarding interest was to be
interpreted on the basis that settlement might
have taken place before 6 May 1986 and so it was
necessary to make provision for the date upon
which interest would cease to be payable, a date
which should coincide with the actual date of
completion.

18. The plaintiff by its counsel conceded that the defendant was at all relevant times on 6 May 1986 ready willing and able to complete the agreement.

19. Counsel for the plaintiff took no point that the defendant had been guilty of undue delay in not having the Memorandum of Transfer stamped until 30 April 1986. Obviously the Memorandum, once stamped, was delivered promptly to the plaintiff's solicitors.

20. In support of his submission that the agreement remains on foot and should be carried into execution, counsel for the plaintiff relied upon Foligno v. Martin (1853) 16 Beav 586: 51 ER 906. There Sir John Romilly MR was dealing with a decree which had been made on 2 December 1852 and by which it was ordered that an agreement which had been entered into between the plaintiff and a defendant, Ritchie, should be specifically performed, that Ritchie should on or before 29 January 1853 pay the plaintiff 1650 pounds and interest and that the plaintiff, at the expense of the defendant, should execute an assignment of the property comprised in the agreement. Ritchie neither paid the purchase money nor obeyed the decree in any other respect.

21. On a motion that the contract should be rescinded and the plaintiff's bill dismissed, without costs, or otherwise, that it might be ordered that all further proceedings should be finally stayed, it was argued on behalf of the plaintiff that the defendant was bound to obey the decree, and that, if he did not, the plaintiff was not to be held to a contract which the defendant refused to perform, or be compelled to take proceedings which would ultimately be unavailing, to obtain the consideration money. Counsel for the defendant argued that the plaintiff must proceed to enforce obedience to the decree, and could not, by motion, entirely vary it. Although the plaintiffs were desirous of getting rid of the contract, that could not now be done. He asked no extension of time to enable the defendant to make the payment. Giving judgment the Master of the Rolls said, at p 587: 907:-

"My opinion is that the Plaintiff is entitled
to get rid of the contract, unless the
Defendant pays the purchase-money before the
first day of next term. If not then paid,
the order must be made."

Counsel for the defendant then consented to an immediate dismissal.

22. It will be seen that the decree there considered was very like the order made herein on 27 March 1986, the principal difference being that it appears not to have been made by consent.

23. The judgment of Sir John Romilly was explained in Austins of East Ham, Limited v. Macey (1941) 1 Ch 338. At p 341, Sir Wilfrid Greene MR, delivering the judgment of the Court of Appeal, said of the opinion expressed by Sir John Romilly:-

"That, in my opinion is correct language to
use in relation to the situation. The
contract is still there. Until it is got rid
of, it remains as a blot on the title, and
the position of the vendor, where the
purchaser has made default, is that he is
entitled, not to annul the contract by the
aid of the court, but to obtain the normal
remedy of a party to a contract which the
other party has repudiated. He cannot, in
the circumstances, treat it as repudiated
except by order of the court and the effect
of obtaining such an order is that the
contract, which until then existed, is
brought to an end. The real position, in my
judgment, is that, so far from proceeding to
the enforcement of an order for specific
performance, the vendor, in such
circumstances is choosing a remedy which is
alternative to the remedy of proceeding under
the order for specific performance. He could
attempt to enforce that order and could levy
an execution which might prove completely
fruitless. Instead of doing that, he elects
to ask the court to put an end to the
contract, and that is an alternative to an
order for enforcing specific performance."

24. In Johnson v. Agnew (1980) AC 367, Lord Wilberforce, speaking for the House of Lords said, at p 393:-

". . . if an order for specific performance is
sought and is made, the contract remains in
effect and is not merged in the judgment for
specific performance."

His Lordship then went on to approve the passage from the judgment of Sir Wilfrid Greene MR just quoted.

25. Lord Wilberforce also said, at p 398:-

"A vendor who seeks (and gets) specific
performance is merely electing for a course
which may or may not lead to implementation
of the contract - what he elects for is not
eternal and unconditional affirmation, but a
continuance of the contract under control of
the court which control involves the power,
in certain events, to terminate it."

26. In Singh (Sudagar) v. Nazeer (1979) 1 Ch 474, Sir Robert Megarry V-C said, at pp 480-1:-

". . . it seems clear that when an order for
the specific performance of a contract for
the sale of land is made, the contract
continues to exist and is not merged in the
order. . . . That, however, does not conclude
the point before me. To say that a contract
still exists does not necessarily mean that
the exercise of the rights that it confers
remains unaffected by an order for specific
performance of that contract.

. . . it also seems clear that once an order
for specific performance has been made, there
are adequate remedies available to either
party if the other does not appear to be
proceeding under the order with due
dispatch. Thus an application may be made
for a time and place for completion to be
fixed, or for an order rescinding the
contract, either forthwith, if the other
party is refusing to complete, or else in
default of completion within a limited time.
I need not set out all the possibilities in
detail: . . . By applying to the court for an
order of specific performance, and obtaining
it, I think that the applicant has put it
into the hands of the court how the contract
is to be carried out. As the court has
become seised of the matter, and has made an
order, it seems to me that subject to
anything that the parties may then agree, the
working out, variation or cancellation of
that order is essentially a matter for the
court. The continued existence of the
contract is one thing, its working out is
another.

. . . it seems plain that in ordinary
circumstances the machinery provisions of a
contract for the sale of land are intended to
govern the carrying out of the contract
between the parties out of court, and are not
directed to carrying it out when an order for
specific performance has been made. That
order is made, of course, by reference to the
rights of the parties under the contract;
but, when made, it is the provisions of the
order and not of the contract which regulate
how the contract is to be carried out.
Provisions in the contract as to the
deduction of title, the preparation and
delivery of the conveyance, the mode and date
of completion and many other matters must
all, it seems to me, yield to any directions
on these matters which are given in or under
the order for specific performance. . . . the
order of the court is not independent of the
contract, but is the court's order as to how
that contract is to be carried out, replacing
the mode in which it should have been carried
out had no order been made. In my judgment,
where, as in this case, an order for specific
performance contains not only the declaratory
part but also the consequential directions
. . . those consequential directions regulate
the performance of the contract so long as
they stand and are not varied by the court.
If those consequential directions are not
complied with, then the court may make an
appropriate order in respect of the default,
that default being a breach not so much of
the still subsisting contract as of the order
of the court as to how that contract is to be
carried out: see Griffiths v. Vezey (1906) 1
Ch 796."

27. Dealing with the question before him, whether a completion notice served under the contract after the order for specific performance had been made was valid and effective, the learned Vice-Chancellor concluded for reasons which he elaborated at pp.481-2 that it was not.

28. I am satisfied, after consideration of the authorities just referred to, that when a decree for specific performance of an agreement is made and by the decree a time is fixed for completion of the agreement it does not follow necessarily that time is made of the essence. This appears clearly, I think, from Foligno v. Martin (supra). The effect of the decree is a matter of construction of its terms. What is also clear, I think, is that the right of the party not in default to seek an order of rescission of the contract from the Court is not to be equated with the right of immediate rescission given the party not in default when time is of the essence of the contract. See Hoad v. Swan [1920] HCA 50; (1920) 28 CLR 258.

29. Matters to be taken into account in considering the order and the parties' applications are:-

(a) the degree of and the reasons for the default of
the defaulting party;

(b) what effect, if any, is to be given to the fact
that the date fixed by the order for completion
was fixed by consent; and

(c) whether it would be just in all the circumstances
that the defendant, not having been in default on
6 May 1986, should nevertheless be required to
complete the agreement.

30. As to the first matter, I think the degree of delay which constituted the default was minimal. Admittedly, had time been of the essence and had the matter fallen to be determined only on consideration of the agreement, the default would have justified the defendant in rescinding the contract. Hoad v. Swan [1920] HCA 50; (1920) 28 CLR 258 at p 263. But, for the reasons I have given earlier, the question of the degree of and reasons for default is to be considered in the light of the order, admittedly against the background of the agreement, and, in my opinion, nothing in that order, even against that background, warrants a refusal of the plaintiff's application.

31. The question of the effect of the consent is more difficult. I think it ought to be considered in conjunction with the question of the effect of the liberty to apply reserved.

32. Counsel for the defendant contended that because the order was made by consent, deliberately, with full knowledge and with the full agreement of the solicitors on both sides, it could not be set aside. He referred to Purcell v. F.C. Trigell Ltd. (1971) 1 QB 358 and particularly to the judgment of Lord Denning MR at p 364. But the question at issue in that case was whether an appeal lay in respect of a consent order having regard to the provisions of a statute regulating such appeals. Counsel also referred to Australasian Automatic Weighing Machine Co. v. Walter (1891) WN 170. There an order was made by consent that the defendant should, on or before a fixed date, transfer to the plaintiff's nominee certain shares. On the plaintiff's motion that the time limited should be enlarged North J refused to make an order on the ground that an order made by consent could not be altered without consent. Counsel referred also to Cristel v. Cristel (1951) 2 KB 725, Siebe Gorman & Co. Ltd. v. Pneupac Ltd. (1982) 1 All ER 377 and Nicholson v. Nicholson (1974) 2 NSWLR 59. These authorities, in my respectful opinion, sufficiently establish that a final order made by consent may not be varied without consent. See, generally, Permanent Trustee Co. (Canberra) Ltd. v. Stocks & Holdings (Canberra) Pty. Ltd. (1976) 15 ACTR 45.

33. When liberty to apply is reserved in an order -

"The only effect of such a reservation is to
permit persons having an interest under the
(order) to apply to the Court touching such
interest in a summary way without again
setting the case down. It does not enable
the Court to deal with matters which do not
arise in the course of working out the
(order). Daniell Ch. Pr., 5th ed., p 875;
and see Haviland v. McLeary (1894) 15
NSWLR Eq. 22."

Dowdle v. Hillier (1949) 66 WN (NSW) 155 at p 156, per Roper CJ in Eq. See also In re Porteous Deceased (1949) VLR 383 and Nicholson v. Nicholson (supra).

34. None of the authorities to which counsel for the defendant referred dealt with a decree for specific performance. They are, I think, to be distinguished on the ground that in this case the final order made by consent was that for specific performance, the date fixed for completion being a consequential direction subject to review by the Court in accordance with the principles established by Foligno v. Martin (supra).

35. It follows, therefore, that if it be just in all the circumstances that the defendant be required to complete the agreement no effect need be given to the fact that the date fixed by the order for completion was fixed by consent. The liberty to apply reserved by the order was in respect of, inter alia, just such a circumstance as has arisen here.

36. Paragraph 17 of Ms Smith's affidavit, quoted above, discloses sufficient grounds for requiring the defendant to complete the agreement. Nothing in the facts set forth in that paragraph shows any limitation upon the authority of Ms Edlington to make the arrangements she did in respect of interest and the postponement of the settlement to 7 May 1986. See Legione v. Hateley [1983] HCA 11; (1983) 152 CLR 406 at pp 421-2 per Gibbs CJ and Murphy J and at pp 437-8 per Mason and Deane JJ. Ms Smith and, through her, the vendor, were entitled to rely on the postponement granted without taking such extraordinary steps as may have been necessary to ensure that the agreement was completed on 6 May 1986.

37. Even if I be wrong in the construction I have afforded Order 3 of the orders made on 27 March 1986 and completion on that date was of the essence, I think there would have been a waiver as a result of the making of an appointment to complete the transaction after the right to rescind had arisen. The waiver would have extended only to make completion on 7 May 1986 of the essence but there is no suggestion that the vendor was not ready willing and able to complete on that day. See Samuel v. McGillivray (1882) 14 VLR 784 and Mehmet v. Benson [1965] HCA 18; (1964) 113 CLR 295 at p 305 per Barwick CJ.

38. Accordingly, I reject the defendant's submissions.

39. As to the submission regarding interest, I think that interest remains payable until completion because, in my opinion, having regard to the true construction of the orders made it was envisaged that settlement might not take place on or before 6 May 1986 and that liberty to apply in respect of the working out of the order might be necessary. However, as indicated during the course of argument, I think it would be unjust that the defendant be required to pay interest in respect of 7 May 1986 having regard to the arrangement made between Ms Smith and Ms Edlington.