Sullivan v Glennon [1986] HCA 79; (1986) 68 ALR 399; (1986) 61 ALJR 63 (4 December 1986)

HIGH COURT OF AUSTRALIA

KENNETH HENRY SULLIVAN v. THERESE MARY GLENNON
F.C. 86/078

High Court of Australia
Mason(1), Wilson(1), Brennan(1), Deane(1) and Dawson(1) JJ.

CATCHWORDS

HEARING

Canberra
4:12:1986
Solicitors for the Appellant: Whiteley O'Neal & Longman
Solicitors for the Respondent: Yandells Dennis & Co.

DECISION

MASON, WILSON, BRENNAN, DEANE AND DAWSON JJ.: The issue for decision in this appeal is whether the respondent purchaser validly rescinded a contract dated 16 May 1983 by which she agreed to purchase certain land at Byron Bay. The contract was in the Law Society - Real Estate Institute form, 1982 edition. The contract provided that the purchase price of $225,000 was payable as to the sum of $22,500 by way of deposit and as to the balance by cash or bank cheque on completion "which shall take place on 16th July 1983". The contract contained a special condition in the following form:

"Completion of this Contract shall be conditional
upon the issue by the Council of the Shire of Byron
of a Section 317A Certificate for the property and
in this respect the Purchaser shall without delay
order a Surveyor's Report for the property and
forthwith upon receiving the Surveyor's Report
shall apply to the Council of the Shire of Byron
for the issue of a Section 317A Certificate for the
property. In the event that the Council for the
Shire of Byron refuses to issue a Section 317A
Certificate for the property and such refusal is
upon terms unacceptable to the Purchaser (and in
this respect the Purchaser has absolute discretion
whether or not to accept the refusal to issue such
a Certificate and to proceed to complete this
Contract) then either party may by written notice
to the other rescind this Contract and in this
respect the provisions of Clause 19 hereof shall
apply."
refunded.

2. On 20 May 1983 the purchaser made application in accordance with the special condition to the Council of the Shire of Byron for a certificate under s.317A of the Local Government Act 1919 (N.S.W.). The purchaser's solicitors were subsequently informed by Mr White, an officer of the Council, that the application for the certificate would be refused. On 13 July Mr White, in the course of a telephone conversation, informed the purchaser's solicitors that a letter refusing the application had been prepared. Mr White read the terms of the letter to the purchaser's solicitors during a telephone conversation later that same day.

3. On 15 July the purchaser's solicitors sent a written notice of rescission to the vendor and to the vendor's solicitors and informed the agent who held the deposit which had been paid under the contract that the contract had been rescinded. Subsequently the purchaser's solicitors received from the Council a letter dated 19 July refusing the application for a s.317A certificate.

4. On 1 August 1983, the purchaser's solicitors wrote to the vendor's agent, inquiring whether the deposit had been refunded to the purchaser. On the same day they wrote to the vendor's solicitors, seeking confirmation that the agent had been authorized to refund the deposit. On 12 August the vendor's solicitors informed the purchaser's solicitors that the s.317A certificate should not have been refused, that representations had been made to the Council about it and that it was understood that a certificate would be issued.

5. On 15 August the purchaser's solicitors wrote to the vendor's solicitors in the following terms:

"We refer to the telephone conversation of 12th
August, 1983 between Mr. T.A. Whiteley and the
writer's secretary and enclose herewith a copy of a
letter from Byron Shire Council dated 19th July,
1983 refusing the Certificate under Section 317A of
the Local Government Act.

We fail to see how the Council can refuse an
application and reverse its decision at a later
date.

We therefore request that you authorise the agent
to account to our client for the deposit
forthwith."

6. It seems that some time after 19 July 1983 the vendor's agent made application to the Council for the issue of a s.317A certificate on the footing that the Council had wrongly refused to issue a certificate. This approach resulted in the issue by the Council of a certificate which bears date 27 July 1983. However, there is no evidence that this certificate was furnished to either of the parties or their solicitors before 26 August when reference was made to it in a letter of that date sent by the solicitors for the vendor to the solicitors for the purchaser. This letter enclosed a photocopy of the certificate and requested the purchaser's solicitors to make arrangements for settlement.

7. On 14 September 1983 a notice to complete was served on the purchaser requiring completion on 7 October 1983. Completion did not take place. It seems to have been assumed that, because completion did not take place, the vendor purported to terminate the contract and forfeited the deposit.

8. On 19 October 1983 the purchaser commenced proceedings in the Supreme Court of New South Wales for a declaration that it had validly rescinded the contract and for an order for the return of the deposit. At first instance Powell J. held that the purchaser's rescission on 15 July was not effective and amounted to a repudiation of the contract, thereby entitling the vendor to determine the contract on or about 7 October by reason of that repudiation. His Honour declared that the deposit had been validly forfeited and ordered that the proceedings be otherwise dismissed and that the purchaser pay the vendor's costs of the proceedings.

9. An appeal by the purchaser was allowed by the Court of Appeal (Mahoney, Priestley and McHugh JJ.A.) and an order made for the return of the deposit on the ground that the purchaser had validly rescinded the contract. Mahoney J.A. concluded that there was no refusal to issue a s.317A certificate until the date when the letter of 19 July was signed and, perhaps, issued and despatched by the Council. In this situation his Honour held that the notice of rescission dated 15 July was effective to operate as a rescission once the Council issued and despatched its letter of 19 July refusing the application for a certificate. Priestley J.A. concluded that, although the notice of rescission dated 15 July was not effective, the letter of 15 August was an effective rescission. McHugh J.A. considered the notice of rescission dated 15 July was effective because the oral communication by Mr White on 13 July evidenced a refusal of the application for a certificate.

10. Despite the arguments ably advanced in this Court by Mr Ireland for the vendor, we have come to the conclusion that the decision of the Court of Appeal was correct because, if the contract had not been validly rescinded before that date, the letter of 15 August 1983 was an effective rescission. It is not in dispute that the Council's letter of 19 July evidenced a refusal to "issue" a certificate which justified a rescission by the purchaser under the second sentence of the special condition. The purchaser's right to rescind on account of that refusal was available until such time as the Council issued a certificate pursuant to the first sentence of the special condition. Although the certificate which ultimately issued was dated 27 July 1983, an inference must be drawn that it was not furnished to either of the parties or their solicitors before 26 August when it was mentioned for the first time in the letter of that date from the vendor's solicitors to the purchaser's solicitors. The reference to "the issue" of a certificate in the first sentence of the special condition is a reference to the Council's obligation to "furnish" a certificate on an application within the meaning of s.317A(3) of the Local Government Act.

11. The letter of 15 August did not expressly state that it was to operate as a fresh rescission, distinct from the notice dated 15 July. However, the letter of 15 August made it plain that the Council's refusal to issue a certificate, as evidenced by its letter of 19 July, justified rescission and that the purchaser continued to maintain that the contract was rescinded. The terms of the letter are explained by the fact that it was a reply to the earlier telephone conversation of 12 August during which the vendor's solicitors asserted that the Council should not have refused a certificate and that a certificate would be issued. The response to that assertion was that the Council's letter evidenced an existing refusal to issue a certificate and that this refusal justified rescission of the contract on which the purchaser continued to insist.

12. Our endorsement of the ground favoured by Priestley J.A. in the Court of Appeal is not to be taken as a rejection of the reasons given by the other members of the Court of Appeal. We have not found it necessary to consider the correctness of those reasons or, for that matter, other arguments presented on behalf of the respondent in support of the decision of the Court of Appeal.

13. The appeal is dismissed with costs.

ORDER

Appeal dismissed with costs.