Slarke v Ultima Constructions Pty Limited [2004] ACTSC 29 (20 May 2004)

Last Updated: 23 June 2004

LYNDA MARIE SLARKE v ULTIMA CONSTRUCTIONS PTY LIMITED

[2004] ACTSC 29 (20 May 2004)

REAL PROPERTY - conveyancing - Notice to Complete - certain inclusions not fitted to property at time of notice to complete - not a bar to issue of Notice to Complete.

Unit Titles Act 2001, s 75(1)

McNally v Waitzer [1981] 1 NSWLR 294

Golding v Vella [2001] NSWSC 567

Nelson v Bellamy [2000] NSWSC 182

Mulkearns v Chandos Developments Pty Ltd [2003] NSWSC 1132

Colbourne v Kaydot Pty Limited [1995] ACTSC 74

P Butt, `Notices to Complete: Ready, Able and Willing' (2004) 78 ALJ 162

No SC 231 of 2004

Judge: Connolly J

Supreme Court of the ACT

Date: 20 May 2004

IN THE SUPREME COURT OF THE )

) No SC 231 of 2004

AUSTRALIAN CAPITAL TERRITORY )

BETWEEN: LYNDA MARIE SLARKE

Plaintiff

AND: ULTIMA CONSTRUCTIONS PTY

LIMITED

Defendant

ORDER

Judge: Connolly J

Date: 20 May 2004

Place: Canberra

THE COURT ORDERS THAT:

1. The plaintiff's application for a declaration that the defendant's Notice to Complete was not valid be denied.

1. This is an application by a purchaser of a unit in a townhouse development in Gungahlin in the Australian Capital Territory for a declaration that the defendant had no right to terminate the contract of sale on 23 March 2004. The plaintiff by contract of 6 December 2002 agreed to purchase the unit, which at that stage had not been constructed. A settlement was to proceed on 23 February 2004, but this did not happen. On 8 March 2004 the defendant issued the plaintiff with a Notice to Complete, setting 22 March 2004 as the date for settlement, but this again did not occur, and the defendant on this date sought to call on a deposit bond that had been lodged by the plaintiff. On 23 March the defendant sought to terminate the contract of sale.

2. The plaintiff argues that the property was not fit for sale on either date because the unit was incomplete. It is common ground between the parties that as at 23 February and 22 March 2004 certain items, being the oven, hotplates, and hot water service, were not installed in the unit. The plaintiff says that this puts the defendant in breach of its obligations under the contract as the unit was not fit for habitation. The defendant says that, in accordance with common practice in the building trade, it does not install these items in new unit accommodation until a date agreed with the purchaser, usually just before the purchaser goes into occupation. It says it does this because such items are commonly stolen from unoccupied units in new development areas, and that the plaintiff never complained about this until after the failure of the second settlement on 22 March 2004. It says the real reason the sale did not proceed was because the plaintiff was not in a financial position to settle because an on-sale by the plaintiff to a third party had not been completed. The defendant says that it was always ready and willing to complete the sale, and install the items. It is admitted in an affidavit from the plaintiff's husband that a sale to a third party that was scheduled to settle on 22 March 2004 had to be postponed and -

the Plaintiff was not able to arrange finances to settle on 22 March 2004, but was able to do so shortly thereafter and is still able and wishing to complete the contract.

The plaintiff issued a Notice to Complete to the defendant on 26 March 2004.

3. An injunction was sought by the plaintiff to prevent the defendant from enforcing the deposit bond, and on 2 April 2004 orders were made before the Master, by consent, to the effect that the deposit bond would not be enforced and the plaintiff would not proceed with the Notice to Complete pending the final determination of the question.

4. There was no real dispute between the parties as to the effect of the contract of sale, which was in accordance with the ACT Law Society Contract of Sale, before me as exhibit A. Item 6 of the contract identifies the description of goods included in the price as being inclusions on the attached list. Special Condition 1 amplifies this by requiring that the seller shall erect a dwelling on the land substantially in accordance with the approved plans, and that the attached list of inclusions amplifies the plans. The attached list of inclusions requires the seller to provide an oven and hotplates, with the buyer having the opportunity to choose the style up to a price point, and requires a specified type of external hot water system to be installed.

5. The date for completion is set out in item 12 of the contract as being "as per special condition 6", which provides that -

completion of this Agreement shall be effected within 14 days of the date of written notification to the Buyer's solicitor of the issue of Certificate of Compliance.

6. On 9 February 2004 the solicitors for the defendant wrote to the solicitors for the plaintiff stating -

We refer to the above matter and advise that the Unit Plan was registered on 9 February 2004 and particulars of title are as follows:

Unit 2 Unit Plan No 2359 Volume 1681 Folio 72

We will forward a settlement statement, the Section 75 certificate and evidence of payment of rates for settlement on 23 February 2004. If your client wishes to settle before the 23 February 2004 please advise accordingly. Kindly note that the hot plates, wall oven and hot water system will be installed by our client the day before the appointed settlement date.

7. It is common ground that the appropriate building approval certificate of compliance had been issued. Mr S Kambouris, the principal of the defendant, gave evidence that the external hot water system was fitted and made operative so that the building inspector may approve the construction, and then the unit, which is fitted to an external wall, was removed for security reasons until the appropriate time when the purchaser goes into occupation. He says that the whole process of fitting the oven, hotplates and heater takes about two and a half hours, and that he had already purchased the equipment, which was being held in secure storage.

8. Annexure C to the contract of sale is in the form of the ACT Law Society standard contract for the sale of unit title land, and contains a requirement in C10.1 that the seller must serve a certificate pursuant to s 75(1) of the Unit Titles Act 2001 on the buyer at least seven days before completion, and that the buyer does not have to complete earlier than seven days after service of the s 75 certificate. This is the certificate referred to in the seller's letter of 9 February 2004, but it is common ground that the certificate was not in fact passed to the solicitors for the plaintiff until 23 February 2004. Accordingly, the seller was not in compliance with its obligations, and the proposed settlement on 23 February did not proceed, due to no fault on the part of the plaintiff. The s 75 certificate having only been served on 23 February 2004, the buyer did not have to complete until seven days after service.

9. On 5 March 2004, which is seven days after service of the s 75 certificate, the solicitor for the defendant issued the solicitor for the plaintiff with a Notice to Complete, stating that -

The date for completion, namely 23^rd February 2004 was set out in the Contract in Schedule Item 12 and completion has not been effected in accordance with Clause 2.8 of the Contract.

The notice asserted that the seller is ready, willing and able to complete the contract, and nominated 22 March 2004 as the date for completion.

10. A Notice to Complete is provided for in Clause 17 of the Contract, which provides:

Clause 17- Notice to Complete and Default Notice

17.1 If Completion is not effected in accordance with Clause 2.8, either party may, at any time after the Date for Completion, serve the other party a notice requiring the party served to complete this Contract ("Notice to Complete").

17.2 A Notice to Complete must:

17.2.1 appoint a time during business hours and a date being not less than 14 days after the service of the Notice to Complete (excluding the date of service) within which and a place in Canberra at which to complete this Contract; and

17.2.2 state that it is served pursuant to this Clause.

17.3 At the time the Notice to Complete is served the party serving the Notice to Complete must:

17.3.1 not be in default under this Contract; and

17.3.2 be ready willing and able to complete but for some default or omission of the other party.

17.4 The Completion of this Contract at the time date and place specified in the Notice to Complete is an essential condition of this Contract.

11. The notice to complete specified a settlement time and place, and otherwise complied with the requirements of the contract and, it seems to me, that the seller was entitled to issue the certificate on this date. This being my finding, the real issue is then whether the defendant was in default under the contract or not ready, willing and able to perform the contract by not having the oven, stove and hot water system installed at the date of issue of the Notice to Complete, or at the date proposed for the settlement, which did not proceed. It is common ground that the contract requires the unit to be constructed with these items. The real question for determination then is whether the fact that the items were not in place at the date of the Notice to Complete makes the seller in breach, and so makes the Notice to Complete ineffective.

12. I am of the view that the seller was not in breach. The relevant legal principle, it seems to me, is well stated by Hutley JA in McNally v Waitzer [1981] 1 NSWLR 294 where his Honour said at 304 -

The correct rule, in my opinion, is simply that a vendor who is in default in respect of things which up until then should have been done cannot give a notice to complete, but he can give notice to complete prior to performing all those other things which he has to perform in order to complete the contract.

(See also note by P Butt, `Notices to Complete: Ready, Able and Willing' (2004) 78 ALJ 162.)

13. I accept the evidence of Mr Kambouris that it was his practice not to install the hot plates, oven and hot water system in units until the purchasers went into occupation because this provided additional security, and I accept his evidence that he had purchased and paid for the items, and had them in secure storage, and would be able to install them quickly. To this extent I am satisfied that he was ready, able and willing to complete the contract by finalising the installation of these items, but had not done so as at the relevant dates. To this extent he was in the position described by Hutley JA of being a vendor who, at the date of issuing the Notice to Complete, still had to perform certain things, but was not in default of things which up to that point he should have done.

14. A similar situation arose in Golding v Vella [2001] NSWSC 567 where Barrett J held that a plaintiff vendor was entitled to give a notice to complete on a date where, at the time, certain kitchen items and a fence had not been installed (described throughout the decision as "the PC items"). There was evidence in that case that Barrett J accepted from the builder that [at 14] -

he had been involved in the construction of about sixty houses and that, because of the theft risk, it was common practice for PC items to be installed only on the day of occupation or settlement. He said that the installation process usually takes less than one hour.

15. Save for the speed of installation, that is the same evidence as was given by Mr Kambouris. Barrett J concluded (at [20]) that -

In the light of the evidence concerning the PC items, I must conclude that the plaintiff had not failed to comply with the contractual requirement as to their installation ...

and so at the date at which the vendor issued a notice to complete the vendor -

was not then in breach of any essential term (the terms as to the PC items and the fencing not being of that character in any event.

See Nelson v Bellamy [2000] NSWSC 182 at [27].

16. I note that the reasoning of Barrett J has been expressly referred to and approved by Young CJ in Eq in Mulkearns v Chandos Developments Pty Ltd [2003] NSWSC 1132 at [38]. I do not regard those decisions as being in conflict with the remarks of Higgins J in Colbourne v Kaydot Pty Limited [1995] ACTSC 74, where his Honour held that a purchaser was entitled to insist on completion of substantial construction work before proceeding to purchase.

17. I am thus of the view that, when the defendant issued the Notice to Complete on 5 March 2004 it was not in default merely because it had not yet installed the kitchen items and hot water service, but that it was ready, willing and able to install the items. It is common ground that the proposed settlement on 22 March did not occur, but that on 22 March the plaintiff's solicitor advised the defendant that they required additional time. The plaintiff, due to illness, did not give evidence beyond filing an affidavit in which she stated that her husband was her agent for all purposes in relation to the transaction. In his affidavit of 29 April 2004 he stated that -

The third party advised on Friday 18 March 2004 that she was not in a position to settle on 22 March 2004. I then instructed [my solicitor] Lesley Christian to obtain an extension for the settlement scheduled for 22 March 2004. On such short notice, 18 March being the Friday before the 22 March which was the next Monday the Plaintiff was not able to arrange finances to settle on 22 March 2004, but was able to do so shortly thereafter and is still able and willing to complete the contract.

18. This is consistent with the affidavit of Mr Mun Ng, solicitor for the defendant in relation to the sale, who said in his affidavit of 19 April 2004 that on 22 March 2004 "the solicitor for the Plaintiff phoned me seeking an extension of time within which to settle".

19. The defendant having issued a valid notice to complete, was entitled, time being of the essence, to insist on the settlement taking place on 22 March 2004. The plaintiff, it is clear from the evidence, was an investor, and had purchased the unit "off the plans", and had then sought to on-sell to a third party. Although the plaintiff had hoped to be able to effect this on sale on 22 March 2004 and so be in a position to complete the original purchase this fell through. I note that on all of the affidavit evidence there was no complaint at all by the plaintiff about the non-installation of the kitchen items and the hot water service until after the failure of the settlement on 22 March 2004. It seems to me that the reason that the settlement did not proceed was not because of any concern at the vendor failing to install the items, but rather, as is stated in the affidavit of the plaintiff's husband, because the plaintiff was not in a position to purchase on the date because the on-sale had not been able to proceed.

20. The plaintiff's application for a declaration that the defendant's Notice to Complete was not valid is denied. I give the parties leave to bring in short minutes of orders to give effect to these reasons, and to argue the question of costs.

I certify that the preceding twenty (20) numbered paragraphs are a true copy of the Reasons for Judgment herein of his Honour, Justice Connolly.

Associate:

Date: 20 May 2004

Counsel for the plaintiff: Mr C McKeown

Solicitor for the plaintiff: Gungahlin Law

Counsel for the defendant: Mr B Meagher

Solicitor for the defendant: Nicholl & Co

Date of hearing: 5 May 2004

Date of judgment: 20 May 2004