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High Court of Australia |
NEETA (EPPING) PTY. LTD. v. PHILLIPS [1974] HCA 18; (1974) 131 CLR 286
Vendor and Purchaser
High Court of Australia
Barwick C.J.(1), Stephen(2) and Jacobs(1) JJ.
CATCHWORDS
Vendor and Purchaser - Contract of sale - Stipulation as to time - Time not of the essence - Failure of purchaser to complete on due date - Notice to complete - Validity - Notice of rescission - Validity - Conveyancing Act, 1919 (N.S.W.), s. 13.*
* Section 13 of the Conveyancing Act, 1919 (N.S.W.) provides: "Stipulations
in contracts, as to time or otherwise, which would not before the commencement
of this Act have
been deemed to be or to have become of the essence of such
contracts in a court of equity, shall receive in all courts the same
construction
and effect as they would have heretofore received in such court."
HEARING
Sydney, 1974, April 4, 8; May 14. 14:5:1974DECISION
May 14.
2. Tate as the dairy farmer in possession was the holder of a registration
certificate from the Dairy Industry Authority and thereby
was entitled to
supply to that authority the quota of milk referred to in cl. 26 which
provided as follows:
"The vendor warrants that there is a Milk Quota of 11,090 lbs. per week
attaching to the property and agrees that she will
do all things necessary to
enable the purchaser to obtain the benefit of the said Milk Quota." (at p290)
3. After the exchange of contracts the vendor's solicitors wrote to Messrs
Philip Malouf & Co., whom they understood to be the
purchaser's
solicitors, on
5th May 1972 furnishing particulars of the vendor's title pursuant to cl. 3 of
the contract. The letter
drew attention
to the fact that the contract provided
for completion on or before 15th June 1972 and stated that settlement
arrangements
should
be made accordingly. It proceeded:
". . . We will let you have the Memorandum of Mortgage for approval and
execution shortly.
We understand that your client Company wishes the existing Lessee Mr R.
W. Tate to continue operating the dairy business for
the time being. Please
let us have confirmation of this as soon as possible. A surrender of the
existing Lease Registered No. M.295280,
duly executed and stamped will be
handed over on settlement and registered.
Please let us have your requisitions on title and Transfer for execution
as soon as convenient." (at p291)
4. Philip Malouf & Co. were in some doubt whether they were acting in the
matter and informed the vendor's solicitors accordingly,
but by 17th May 1972
the purchaser informed the vendor's solicitors that Philip Malouf & Co. would
be acting. By cl. 7 of the
contract
the purchaser had twenty-one days from
delivery of the particulars before objections or requisitions, which had not
been
by then
made and delivered, should be deemed to be waived and within that
period, namely on 24th May, requisitions were delivered
by the
purchaser's
solicitors to the vendor's solicitors. By the covering letter it was stated
that, subject to satisfactory replies
to
requisitions, the purchaser's
solicitors would forward stamped and marked memorandum of transfer for
approval. (at p291)
5. Replies to requisitions were sent by letter dated 8th June 1972 and received by the purchaser's solicitors on 13th June. On the following day, by letter of 14th June, questions were raised by the purchaser's solicitors in respect of certain of the answers to requisitions. In reply to requisition 1, which required that at settlement the vendor must be registered as proprietor in fee simple of the subject property free of all mortgages, charges, caveats and other interests and dealings and free from all objections to the registration of the transfer, the vendor's solicitors had stated "purchaser should satisfy itself". In reply to requisition 25, which required that tenancies (including date of commencement) should be furnished, the vendor's solicitors stated again that the "purchaser should satisfy itself". Also, in reply to requisition 26, which dealt with the question whether the property was the subject of registered lease under s. 5A of the Landlord and Tenant (Amendment) Act, 1948 (N.S.W.) as at 1st January 1969, again the vendor's solicitors stated that the "purchaser should satisfy itself". (at p291)
6. By the letter of 14th June, the purchaser's solicitors claimed further
answers to these requisitions amongst others. These requisitions
were regarded
as of particular importance because of the lease to the dairy farmer, Mr Tate.
There had been the suggestion in the
correspondence that he should continue
operating the dairy business and the purchaser had stated that it would
arrange to discuss
the matter with Mr Tate and advise the outcome. However the
purchaser's solicitors were concerned about his position and, in particular,
were concerned about any rights that he might have under the provisions of the
Agricultural Holdings Act, 1941 (N.S.W.). Therefore
the letter of 14th June
proceeded as follows:
"We are most concerned at our client's position relating to the Lease to
Tate. As suggested earlier we would appreciate receiving
a photocopy of this
document otherwise it will be necessary for us to send someone to your office
to transcribe same.
Would you please advise whether a Notice to Quit within the meaning of
the Agricultural Holdings Act, 1941 has been given by
either party of the
Lease to the other. If so, please furnish a copy of this notice. It would
appear that by s. 24(1) twelve months
notice must be given for the termination
of the tenancy." (at p292)
7. The contract date for completion passed and on 20th June 1972 the vendor's
solicitors replied to the request for further answers.
In relation to
requisition 1, it was stated that this was the purchaser's responsibility. In
relation to requisitions 25 and 26 (miscalled
in the correspondence 5 and 26)
it was stated:
"Vacant possession will be given on completion as provided for in the
Contract. In view of this, the purchaser should not be
concerned with the
existing Lease or the surrender thereof." (at p292)
8. A request was made for submission of transfer and the letter stated that
as soon as the transfer was submitted and as soon as
the purchaser indicated
its position in regard to Mr Tate then the vendor's solicitors would send the
memorandum of mortgage for
execution. (at p292)
9. On 29th June 1972 the purchaser's solicitors wrote to the vendor's
solicitors as follows:
"Enclosed please find Application for Re-Allocation of Quota. Would you
please have the document signed by your client and
returned to us for
signature by the purchaser so that the consent of the Dairy Industry Authority
of N.S.W. to the transfer of the
Quota can be obtained." (at p292)
10. The reason for this letter arose from special condition 26 of the
contract. By 11th July the memorandum of transfer had not
been received by the
vendor, although under cl. 7 of the contract it ought to have been tendered to
the vendor within twenty-eight
days of delivery of the particulars, that is to
say, by 2nd June. On 11th July 1972 the vendor's solicitors wrote to the
purchaser's
solicitors enclosing both a notice to complete and memorandum of
mortgage and mortgagee's requisitions on title. The letter was as
follows:
"We refer to previous correspondence in this matter and note that,
despite the provision in the Contract requiring completion
on or before 15th
June 1972, and the request in our letter of 20th June 1972, that you submit
Transfer for execution, we have not
received the Transfer. Furthermore, you
have not given any indication of the date on which your client company will
settle. In view
of these matters, we have been instructed to serve Notice to
Complete, and this is enclosed. As the Contract provides for settlement
on
or before 15th June 1972, the vendor is entitled to damages in respect of the
delay. We indicate without prejudice and subject
to adjustment of rates as at
15th June 1972, that the vendor will accept the sum of $730.00 calculated as
follows:-
Interest on $190,000.00 at 9 and a half per centPlease note that not later than 5 o'clock on Tuesday next 18th June, we require to know whether the purchaser company requires vacant possession as provided for in the Contract. If the purchaser has made arrangements with Mr Tate, please let us have a letter confirming this by 5 o'clock on Tuesday next 18th June: otherwise we will arrange for vacant possession to be available on the day of settlement.
from 15/6/72 to 20/7/72 $1,730.00
Less rent received $1,000.00
730.00
11. The notice to complete was in the following terms:
"I, ROGER ALBERT HODGSON of 280 GEORGE STREET, Sydney, as Solicitor for
and on behalf of GRACE MAY PHILLIPS of 5 Norman Street,
Lidcombe, married
woman, HEREBY GIVE YOU NOTICE as follows:
1. The said GRACE MAY PHILLIPS is willing and ready to execute and to
procure the concurrence of all other necessary parties
(if any) to a
conveyance to yourself or as you may direct of the fee simple of the property
situate at Luddenham contracted to be
purchased by you by an agreement dated
4th May 1972 and made between the said GRACE MAY PHILLIPS of the one part and
yourself of
the other part in accordance with the terms of the said
agreement.
2. The said GRACE MAY PHILLIPS requires you forthwith to tender such
conveyance or instrument of transfer for execution and
to pay the balance of
the purchase money together with interest thereon in accordance with the terms
of the said agreement.
3. If you fail to comply with this notice on or before 12 noon on
Thursday the 20th day of July 1972 the said GRACE MAY PHILLIPS
will forfeit
the deposit money of $19,000 paid by you to TEECE, HODGSON & WARD and either
terminate the agreement and thereafter
sue you for breach of contract or
resell the property as owner and claim from you the deficiency (if any)
arising on such resale
and all expenses of and incidental to such resale or
attempted resale, and all costs damages losses and expenses incurred by her
by
reason of your delay or default in performing the said agreement."
12. This letter crossed a letter which the pur-chaser's solicitors had
written, but apparently not yet posted, to the vendor's solicitors.
It is
dated 12th July 1972 and referred back to the earlier letter of the vendor
sending the further replies to requisitions and
was in the following terms:
"We refer to your letter of 20th ultimo and would advise that the
Transfer was lodged for marking on 19th June and has still
not been returned.
Enquiries are being made for the Transfer and Contract to be returned as a
matter of urgency.
We suggest that you let us have Memorandum of Mortgage for approval and
execution without waiting for the Transfer to be received
by you.
As regards your reply to our Requisitions Nos. 5 and 26, we would remind
you that the Title Search shows a Lease to be registered
against the Title for
a term of 5 years commencing on 15th April 1971.
It would appear to be essential that this Lease be surrendered and the
Surrender stamped and registered prior to settlement.
As the Contract provides
for vacant possession, we trust that no dispute will arise regarding this
matter.
We are still not happy about the possible implications of the provisions
of the Agricultural Holdings Act and subject to all
other matters being in
order, our client Company will make its decision on this matter.
We regret that we cannot under any circumstances waive the position
relating to the registration of the Surrender of the existing
Lease as this
would be contrary to the provisions of the Contract and would prejudice our
client's interest in the land.
We shall await your further advices." (at p294)
13. This letter was received by the vendor's solicitors on 14th July and they
immediately replied drawing attention to their letter
of 11th July and the
enclosed notice to complete. It went on: "The vendor requires compliance with
the Notice: she will comply with
the Contract". (at p294)
14. Also, on 14th July, the purchaser's solicitors wrote to the vendor's
solicitors in answer to the letter enclosing the notice
to complete. It denied
the vendor's right to issue that notice and stated what they regarded as the
position on the transaction.
First, they explained or attempted to explain the
delay in forwarding the memorandum of transfer upon the ground that the Stamp
Commissioner
had retained it and was issuing requisitions arising out of
special conditions included in the contract. To that date the requisitions
had
not been received and prompt attention was promised. Next, the letter drew
attention to the requisition for prior registration
of the surrender of the
memorandum of lease. Advice on progress in this regard was requested. Then the
letter reverted to the question
whether a notice to quit under the
Agricultural Holdings Act was necessary. Next in par. 5 of the letter they
drew attention to the
fact that the vendor had not returned the relevant form
required to transfer the milk quota as provided by the contract. The letter
proceeded to argue the inefficacy of the notice to complete drawing attention
to the time of receipt of the mortgage documents and
mortgagee's requisitions,
the lack of unencumbered title in fee simple, and denying liability for
payment of any sum over and above
the purchase price. The letter went on:
"We assure you that the Memorandum of Transfer will be submitted to you
after all requisitions and outstanding matters have
been satisfactorily
completed by the vendor so that the purchaser may become entitled to an
interest in the land in fee simple in
possession free from encumbrances.
As regards the allocation of Milk Quota, we feel that the consent of the
Dairy Industry Authority should be obtained prior
to settlement. The Authority
has indicated that upon return of the form completed by the vendor and the
purchaser its consideration
will be further given to the matter. For this
reason we request that the duly completed and executed form be returned to us
without
delay." (at p295)
15. It concluded with answers to the mortgagee's requisitions on title and
its final paragraph was:
"We should be pleased if you would give the matters your urgent
attention so that consideration may be given to effecting settlement
of the
matter." (at p295)
16. By letter of 17th July 1972, received on 18th July, the vendor's
solicitors wrote to the purchaser's solicitors as follows:
"We have to-day received your letter of 14th July 1972. We have noted
carefully what you have said, but maintain that the Notice
to Complete was
properly given and insist that the vendor is entitled to compensation for the
delay in settlement.
We do not propose to reply in detail to your letter, as the vendor's
position is already set out in previous correspondence."
(at p295)
17. On 19th July 1972 the purchaser's solicitors received from the
Commissioner of Stamp Duties the memorandum of transfer duly
stamped and
forwarded it to the vendor's solicitors by a letter of that date. (at p295)
18. The next communication was a letter of 27th July from the vendor's solicitors to the purchaser's solicitors enclosing a notice of rescission given "in consequence of the default by Neeta (Epping) Pty Limited in completing the purchase" and terminating the contract, forfeiting the deposit and claiming rights to damages for breach of contract or to resell and claim deficiency. Further correspondence took place between the parties and on 18th August 1972 a summons was taken out in the Equity Division of the Supreme Court of New South Wales by the purchaser claiming a declaration that the contract for sale had not been validly rescinded by the defendant. This was the only order sought. No further relief was sought, either specifically or generally, except an order for costs. (at p296)
19. The relief by way of declarations was sought under s. 75 of the Supreme
Court Act, 1970 (N.S.W.) which provides that:
"No proceedings shall be open to objection on the ground that a merely
declaratory judgment or order is sought thereby and
the Court may make binding
declarations of right whether any consequential relief is or could be claimed
or not." (at p296)
20. However it must be borne in mind that s. 63 of that Act provides that:
"The Court shall grant, either absolutely or on terms, all such remedies
as any party may appear to be entitled to in respect
of any legal or equitable
claim brought forward in the proceedings so that, as far as possible, all
matters in controversy between
the parties may be completely and finally
determined, and all multiplicity of legal proceedings concerning any of those
matters avoided."
(at p296)
21. The form of proceedings does not make it clear whether the declaration
sought by the plaintiff is preliminary to a claim for
specific performance or
to a request that matters in dispute as to title or conveyance between vendor
and purchaser be determined
by the Court. It must, therefore, in the state of
the pleadings or absence of pleadings be assumed that at this stage the only
matter
raised was the question whether the contract had been validly rescinded
by the vendor for breach. This is the question which was
determined by Holland
J. in favour of the vendor and he therefore dismissed the summons with costs.
(at p296)
22. Holland J. determined that the notice to complete given on 11th July 1972 was not effective to determine the contract. He found that although the purchaser was in default under the contract the vendor was also at fault at that date. He also found that the notice made in insupportable claim to interest on the balance of the purchase money from 15th June so that it did not require performance of the contract according to its terms. However, he proceeded to find that by 27th July when the notice of rescission was given the purchaser had been guilty of unreasonable delay and of conduct which showed an intention not to proceed with the contract according to its terms so that the vendor could validly rescind. (at p297)
23. The order of Holland J. was made on 15th November 1973. The purchaser
appealed to this Court by a notice of appeal on 5th December
1973. The grounds
of appeal were as follows:
1. That his Honour was in error in holding that the appellant's demand to
have the memorandum of surrender of lease registered
before completion of the
subject contract of sale could not be justified.
2. That his Honour was in error in holding that the appellant was not
entitled to require that the consent of the Dairy Industry
Authority to the
allocation of the subject milk quota to the appellant be obtained before
completion.
3. That his Honour was in error in holding that there had been unreasonable
delay on the part of the appellant in relation to its
performance of the
subject contract for sale.
4. Alternatively to the grounds set out in pars 1, 2 and 3, that his Honour
was in error in holding that the conduct of the appellant
up to the 27th July
1972 amounted to a repudiation by it of its obligations under the subject
contract for sale.
5. That in any event his Honour was in error in holding that notwithstanding
the failure of the respondent to state in her notice
of rescission bearing
date 27th July 1972 that the ground of rescission was repudiation by the
appellant, such notice was still effective
to terminate the subject contract
for sale. (at p297)
24. On the hearing of the appeal it was argued on behalf of the respondent vendor that Holland J. should have found the notice to complete an effective notice so that on the purchaser's failure to complete on 20th July the vendor was entitled to rescind on and after that date and effectively did so by the notice of rescission. Secondly, it was argued that, if the notice to complete was ineffective, nevertheless the purchaser had by 27th July repudiated the contract by its delay and by its declining to complete unless the surrender of lease was first registered and unless the application for reallocation of the milk quota was returned to its solicitors so that approval could be obtained from the Dairy Industry Authority. (at p297)
25. If a party to a contract repudiates it the effect of that repudiation, both at law and in equity, is that the other party may elect to rescind and on doing so the contract is at an end. A difference which arose between law and equity was in the manner in which each regarded breaches of stipulations as to the time for performance of certain contracts. At law a failure to carry out the contract on the day stipulated, if the failure was not due to any default on the part of the other party in performance of his obligations, was a breach of the contract in one of its essential terms. In other words, time was of the essence of the contract. Also, a mere extension of time where time was originally of the essence of the contract and where a new date for performance is substituted for the contracted date does not result in time ceasing to be of the essence: Mehmet v. Benson [1965] HCA 18; (1965) 113 CLR 295, at p 305 . (at p298)
26. Equity took a different view of the construction and effect of a stipulation as to time. A stipulation as to time for performance of obligations was not in proceedings in equity regarded as an essential term unless the contract expressly or by implication made it so. If the contract so provided equity would follow the law. Essentiality would be implied from the nature of the contract in its surrounding circumstances. But a contract for the sale of land where there were no special circumstances was not regarded in equity as one in which a condition as to time was an essential condition. This was part of or by analogy to the benignity of equitable principle in respect of forfeiture. However, perhaps because of a tender feeling arising from the circumstance that it was differing from the law in its view of what was an essential term of a contract, equity allowed time for performance to obtain the same effect in equity as it had at law when the other party had been guilty of default or unreasonable delay (of which evidence would be a failure by the party's own fault to perform the contract on the named date) and when a notice was given fixing a date a reasonable time ahead for performance and stating expressly or by clear implication that in respect of the named date time was to be regarded as of the essence of the contract. (at p298)
27. This then was the position before the passing of s. 13 of the Conveyancing Act, 1919 (N.S.W.). Thereafter in New South Wales, "Stipulations in contracts, as to time or otherwise, which would not before the commencement of this Act have been deemed to be or to have become of the essence of such contracts in a court of equity, shall receive in all courts the same construction and effect as they would have heretofore received in such court". This had been the law in England since the passing of s. 25 of the Judicature Act, 1873. As a result where there is a failure to perform the contract on the day stipulated and the failure cannot in law be excused, although the failure will be a breach of contract, it will not be the breach of an essential term either at law or in equity. Nevertheless, where the failure amounts to a breach of contract notice can be given fixing a reasonable time for performance and making that time of the essence of the contract. (at p299)
28. In cases where the contract contains a stipulation as to time but that stipulation is not an essential term then before a notice can be given fixing a time for performance, not only must one party be in breach or guilty of unreasonable delay, but also the party giving the notice must himself be free of default by way of breach or antecedent relevant delay. Only then may a notice be given fixing a day a reasonable time ahead for performance and making that time of the essence of the contract. (at p299)
29. In relation to such a notice given by a vendor to a purchaser the following questions must be answered: (i) Was the purchaser in breach of any term of the contract or guilty of unreasonable delay? (ii) Was the vendor himself in default by breach of any term of the contract or guilty of any antecedent relevant delay? (iii) Was the time fixed a reasonable time in all the circumstances? (at p299)
30. We proceed therefore to examine in relation to the present case these three questions. Holland J. found that as at 11th July there had been unreasonable delay on the part of the purchaser. He reached this conclusion partly on the basis of delay in relation to acts required to be done under the terms of the contract and partly on the basis of delay in the making of inquiries and doing of other things preliminary to the performance of acts required to be done under the contract. It is at least doubtful whether the relevant delay in the test of unreasonable delay can be in respect of acts other than those required to be done under the terms of the contract itself. Delay in instituting necessary or proper inquiries or in having the contract of sale or transfer stamped is not itself delay in a relevant sense though it may lead to such delay. Of course it follows that a purchaser cannot rely on time spent making inquiries and the like as an excuse for delay in acts required to be done by him under the contract itself though the length of time which such usual inquiries might be expected to take is a relevant matter on the question whether a time has passed which can be regarded as unreasonable delay in performance of obligations under the contract. (at p299)
31. There was a delay in sending the memorandum of transfer. This was a breach of the contract, a failure to perform the obligation in cl. 7 to send to the vendor a memorandum of transfer within twenty-eight days of the giving of particulars of title. Not only was this a breach but it involved a long delay which cannot be explained by the course of events at the office of the Commissioner of Stamp Duties. If it stood alone it would entitle the vendor to give a notice to complete. Holland J. found delay in two other respects. First, he found delay in sending requisitions on title. However these were sent within the twenty-one days which the contract allowed and there was here no breach or delay which can be called unreasonable. Secondly, he found delay in making the usual inquiries and in getting the contract stamped. However these were not of themselves delays in a relevant sense, but on the other hand neither are they excuses for delay in sending the memorandum of transfer pursuant to cl. 7 of the contract. (at p300)
32. It is necessary now to have regard to the position of the vendor up to 15th June and thereafter until the giving of the notice to complete which was received on 13th July by the purchaser's solicitors. The first delay on the part of the vendor was in not replying to requisitions until the letter dated 8th June and not received by the purchaser's solicitors until 13th June. No time was fixed by the contract for these replies but they had to be delivered within a reasonable time and the time thus taken made completion by 15th June practically impossible. If up to that time the contractual date was still envisaged as the date for completion the delay in answering requisitions put that date out of the question. Furthermore, the replies to requisitions were not adequate. This is conceded and it is not necessary to elaborate on the actual defects which sufficiently appear from the correspondence to which reference has earlier been made. Further replies were given by a letter dated 20th June and delivered the following day, 21st June. Requests for further replies were made by the purchaser's solicitors on the day following receipt of the letter of 20th June, but there was no reply in terms to this letter at all. (at p300)
33. Next, the purchaser on 29th June forwarded a form of application for reallocation of the milk quota but received no answer until in the letter of 11th July accompanying the notice to complete the vendor stated that the signed application would be handed over on settlement. By cl. 26 of the contract the vendor not only warranted that there was a milk quota of 11,989 lb. per week attaching to the property but promised that she would do all things necessary to enable the purchaser to obtain the benefit of the said milk quota. It was apparently the common view of the parties that the milk quota attached to the property. It only did so in a loose sense. The right to supply the quota of milk to the Dairy Industry Authority was a right attaching to the person to whom the quota was given, he being a person holding a certificate of registration as a dairyman: See Dairy Industry Authority Act, 1970 (N.S.W.), ss. 4(1), 24 and 33. The effect of cl. 26 was to require the vendor to do all things necessary to enable the purchaser to obtain the benefit of the quota. The obtaining of the quota involved consent of the Dairy Industry Authority to application for registration and request for reallocation of the quota. More was required of the vendor than that she sign an application for registration and reallocation of the quota. That would be to read the word "obtain" as though it were "apply for". What was necessary to enable the purchaser to obtain the benefit of the quota was to ensure the consent of the Dairy Industry Authority to the allocation of the quota to the purchaser. This the vendor took no step to do. The purchaser was left to its own devices and even here the devices were limited indeed because the vendor declined to hand over the signed application until completion. But the Authority would not deal with the matter at all until an application was received. (at p301)
34. The reallocation of the milk quota was, in our view, an essential term of the contract. If the Authority declined to reallocate, the loss to the purchaser would not sound in damages only. The contract would go off because the warranty of the vendor could not be made good. Clause 26 must be read as a whole. It warranted, in the sense of guaranteed, the availability of the milk quota and it then promised that the vendor would do what was necessary to enable the purchaser to obtain it. This imposed a direct obligation on the vendor which required more than handing over on completion of a signed application form. (at p301)
35. Next, the mortgagee's requisitions were not delivered until the notice to complete was itself sent. The grant of the mortgage in favour of the vendor was an essential circumstance of completion and the vendor could not at the same time require completion within a few days and require that requisitions be answered before such completion. The vendor by requisitioning made it clear that she was only ready and willing to complete if she received satisfactory answers to the requisitions. (at p301)
36. Lastly, the vendor in the notice itself made an untenable claim that on completion she should receive interest on the purchase money. It has been submitted that the notice to complete was good because completion was sought "in accordance with the terms of the agreement" and that therefore the claim to interest should have been ignored by the purchaser if it was not in accordance with such terms. But this cannot be right. By the notice the vendor made the assertion that she was ready and willing to complete but at the same time by a second clause claimed the interest from the purchaser as a condition of completion. If that requirement was not met by the named time and day then, said the vendor, she would forfeit the deposit and sue for breach of contract etc. She plainly showed thereby that she was not willing to complete in accordance with the terms of the agreement. (at p302)
37. Then there is the question whether the length of time allowed by the notice was sufficient. In view of our conclusions on the preceding points, the question need not be determined but we should not be taken to agree with Holland J. that it was sufficient. (at p302)
38. Thus we agree with the conclusion of Holland J. that the notice to complete of 11th July was ineffective, though in important respects we do not agree with his reasons. The learned judge went on to hold that the conduct of the purchaser did by 27th July, when notice of termination of the contract was given, amount to a repudiation by it of the contract. He based this conclusion on the general tardiness of the purchaser and its solicitors throughout and on what he held to be the unjustifiable attitude of the purchaser on the two matters to which we have already referred and to which we shall return presently. First as to delay. If it be determined that a notice is ineffectual to make the named date of the essence so that failure to complete on that day does not entitle the party to rescind for breach of an essential term that party is not entitled to rescind without further notice a short time later when the only change in circumstances is the passage of the further time. Even if the purchaser is in breach of some term of the contract (not being an essential term) and even if the purchaser is guilty of unreasonable delay a failure to complete does not of itself entitle a vendor to rescind unless time has been made of the essence of the contract. The purchaser's actions may amount otherwise either expressly or by inference to a repudiation of the contract which entitles the vendor to rescind but the passage of time does not of itself do so because time is not and has not been made an essential term of the contract. The only exception to this may be such gross and protracted delay that the purchaser must be taken to have repudiated the contract. That is a special case more easily found in contract of a kind where time is usually of the essence. Though it is not impossible it is rare in the case of a sale of land where time is not an essential term. (at p302)
39. Next there are the insistence on the prior registration of the surrender of the lease and the insistence upon the assent of the Dairy Industry Authority to the reallocation of the milk quota. These were the same matters which had been raised by the purchaser before the notice to complete was given on 11th July and which thereafter remained outstanding. One was an objection to conveyance and the other was not dissimilar in that there was no question raised as to the entitlement of the purchaser under the contract to have the quota reallocated. All that was in question was the proper course to be taken by the vendor in order to enable the purchaser to perfect that right. Thus neither of the matters related to the primary subject matter of the contract. Both related to the way in which that subject matter should pass to the purchaser. We have already dealt with the question arising under cl. 26. There remains the question whether the purchaser was entitled to the registration before settlement of the surrender of lease. Associated with this was the necessity felt to ensure that after the surrender the lessee had not remained in possession at will so that he had become a tenant within the meaning of the Agricultural Holdings Act, 1941, s. 24. It is little wonder that throughout the period after the exchange of contracts the purchaser's solicitors were concerned concerning the position of Mr Tate and the need to ensure that after completion he would have no rights in the land. The existing lease, it is true, would come to and end on the day of its surrender once it was registered but if the lessee Tate remained in possession of the land for any time after the surrender took effect with the assent of the lessor he would become a tenant at will and as such could claim the protection of the Agricultural Holdings Act, 1931, s. 24. See the definition of "contract of tenancy" in s. 4(1). It was therefore necessary to be sure that either the surrender had not been made before the lessee vacated the premises or that, if this were so, any tenancy which might thereby have been created had itself been surrendered by the lessee having physically vacated the premises and having thereby given up possession of them. If Tate remained in possession as tenant at will registration of the transfer would not protect the purchaser. It would have notice of Tate's occupation or possession and of any tenancy rights flowing therefrom which fell within the Real Property Act, 1900 (s. 42 (d)). (at p303)
40. The vendor relied for her claim that prior registration of the surrender of lease was not necessary upon the decision in Jonray (Sydney) Pty. Ltd. v. Partridge Bros. Pty. Ltd. (1969) 89 WN (Pt 1) (NSW) 568 , where it was held that a purchaser of land under the Real Property Act, 1900 (N.S.W.) could not insist upon the prior registration of a discharge of a mortgage registered on the title but that the sale could be effectively completed by the vendor if he handed over to the purchaser on settlement a registrable discharge of mortgage. The New South Wales Court of Appeal discussed the question whether the transferee was put at any appreciable risk by such a course and concluded that it was not. On settlement the transferee would obtain the protection against notice of equitable interests given by ss. 42 and 43A of the Act. However, in Jonray (Sydney) Pty. Ltd. v. Partridge Bros. Pty. Ltd. (1969) 89 WN (Pt 1) (NSW) 568 the Court was dealing with the usual case where the mortgagee was to be represented on settlement and where the discharge of mortgage would be handed over in present payment of the mortgage debt either to the transferee or to a further distinct party, such as a new mortgagee from the proposed transferee. What was offered in the present case was something different. The surrender of lease was to be handed over but there was no suggestion that any representative of the lessee was to be present in order to receive present payment of the consideration for the surrender. The execution of the surrender had clearly been an execution conditional upon receipt of the consideration and if that consideration were not paid either before or at the time of settlement the surrender would not be effective on settlement even though it might be made so by lodgment and registration. On all these matters the purchaser was in the dark, and in these circumstances it was entitled to claim that the certificate of title be clear. If that did not suit the vendor then it was for her to suggest some other effective mode of settlement such as representation of the lessee on settlement so that the consideration could be paid over in return for delivery of the surrender or possibly settlement at the office of the Registrar-General and immediate lodgment for registration. But certainly the mere offer from the possession of the vendor of a form of surrender of lease purporting to be signed by the lessee, when it was known that the lessee was still in possession of the land, was not a sufficient protection to the purchaser. (at p304)
41. The last communication from the vendor prior to the notice of rescission had been by a letter of 18th July. In that letter the vendor's solicitors stated that they had noted what the purchaser's solicitors had said in the letter of 14th July in which the purchaser's objections were reiterated but maintained that the notice to complete had been properly given and insisted on the demand for compensation which had been made in the notice to complete. On 19th July the purchaser forwarded to the vendor the memorandum of transfer at last remedying its only actual breach of the conditions of the contract. (at p305)
42. In this situation it was the vendor who was at fault. She was declining to complete except on the basis of an untenable claim for compensation and she was claiming to base her rights on a notice to complete improperly given. In addition she was declining to do more in order to ensure that the purchaser obtained the benefit of the milk quota than to hand over a signed application form on completion. The objection to conveyance based on the claim that prior registration of the surrender of lease was necessary was ignored. There was in these circumstances no present act or default of the purchaser which could be regarded as an implied repudiation of the contract. In our opinion the purchaser was entitled to maintain the objections which it had made. (at p305)
43. Even if this were not so and if on both the disputed questions the vendor's claims were sound and the purchaser was mistaken, we still do not think that the vendor was entitled to give notice of rescission. A contract for the sale of land does not go off in this manner, particularly where time is not of the essence of the contract. There are cases where a purchaser may be held by anticipatory breach to have repudiated such a contract by something less than an express statement that he will not perform it but they are rare. The situation which here existed seems to us exactly the kind of situation where in a contract for the sale of land where time is not of the essence a notice to complete is necessary. Whatever may have been the strict legal position on these questions the vendor could not merely state in respect of one of them that vacant possession would be handed over on completion and in respect of the other that the application for reallocation of the milk quota would be handed over on settlement and then because the purchaser did not accede to that statement and without any effective prior notice rescind or terminate the contract. Otherwise objections to title and objections to conveyance stoutly maintained change from being shields of the purchaser to swords of the vendor. Such objections however stoutly maintained do not amount to anticipatory breaches of contract. If a purchaser is raising objections to title or objections to conveyance or is claiming that some step should be taken under the contract which the vendor declines to take, the vendor must expressly warn the purchaser that if he does not withdraw his objection or his claim and complete the contract or take the next necessary step by a named day a reasonable time ahead then the vendor will regard the contract as terminated. Contracts for the sale of land, creating as they do equitable interests in the land, do not easily go off except pursuant to an express condition of the contract or pursuant to an express repudiation or a repudiation clearly to be inferred. Unless the purchaser had made it clear that it absolutely refused to be bound by its contractual obligations the purchaser must in terms of cl. 15 of the contract have defaulted in the observance or performance of an obligation imposed under or by virtue of the contract. The obligation here referred to is an obligation which is of the essence of the contract. Times stated in the contract were not of the essence of this contract and no notice had effectively made them so. By 19th July the memorandum of transfer had been delivered. What then remained outstanding was completion. If the vendor required completion by a particular day (assuming on this approach that the vendor was entitled to completion on the basis which she was claiming) then she was obliged to fix that day and in respect of it to make time of the essence unless it was quite plain that the purchaser had communicated a clear resolve not to perform the contract according to its terms. Holland J. concluded that by 27th July the vendor was entitled to take the view that the purchaser would not complete unless unjustifiable demands by the purchaser's solicitors were met. But with respect we do not think that in the circumstances this conclusion was open. If on the objections which were being taken by the purchaser the vendor wished to bring matters to a head but did not wish to make use of the curial processes designed to deal with such disputed questions, then she was bound to give notice to the purchaser so that the purchaser might have the opportunity of waiving the objections and of completing on the vendor's terms or of itself submitting the dispute to the Court in a suit for specific performance or on what would previously have been called a vendor and purchaser summons. Both are flexible processes which do not overcome breaches of contract where a party is insisting on substantive rights relating to the subject matter of the contract which he does not possess but which do overcome differences and difficulties on the appropriate way in which the subject matter should be transferred to him. (at p306)
44. We are therefore of the opinion that it was not open to Holland J. to find that the vendor validly rescinded the contract on 27th July and therefore the appeal must be allowed.
45. There now arises a difficulty which emerges from the procedure which has been adopted in this case. We have already referred to the statutory provision under which the present proceedings were brought. When the power under s. 75 of the Supreme Court Act, 1970 is exercised the duty under s. 63 must be borne in mind. This is particularly important in relation to subject matters in which the appropriate curial relief depends upon equitable doctrine and rules, especially the rules relating to the specific performance of contracts. These rules have not been substantially changed by the introduction of the judicature system of procedure and pleading. The Court can still grant specific performance of a contract in any case where it could previously do so and cannot grant specific performance in any case where it could not previously do so. (at p307)
46. Unless the parties are agreed on the consequences which flow from a declaration that such a contract has or has not been validly rescinded it is generally undesirable that a court should so declare without any orders for consequential relief. If a party to such a contract claims that a contract has not been validly rescinded such a judicial declaration is proper if that party continues ready and willing at the conclusion of the litigation to perform the contract. A consequence of the declaration should be that the party submit to the performance of the contract on his part and to an order for specific performance of the contract if that is appropriate. If such an order is not or cannot be made nor an inquiry into damages ordered then a declaration that on a certain day the contract has not been validly rescinded serves no purpose in the litigation. Before such a declaration is made the party seeking the declaration may already have elected to treat the other party's purported rescission as a repudiation and may have himself rescinded the contract. All that has then been achieved is an issue estoppel if and when the claim for damages for breach of contract is pursued in other proceedings. This was not the intention of the legislation as appears from s. 63. Conversely, if a declaration be made that a contract has been validly rescinded but no consequential orders for damages or for return or retention of the deposit are made in those proceedings the purpose of s. 63 is not achieved. (at p307)
47. In these circumstances we are of the opinion that the matter should be remitted to the Supreme Court of New South Wales for further hearing in the light of these reasons so that as far as possible all matters in controversy between the parties may be completely and finally determined. (at p307)
STEPHEN J. I have had the advantage of reading the reasons for judgment of the Chief Justice and Jacobs J. and agree that in the circumstances of this case the respondent vendor was not entitled on 27th July 1972 to serve upon the purchaser an effective notice of rescission of the contract of sale which the parties had earlier entered into. I would accordingly allow this appeal. (at p308)
2. However I should state my own views concerning the meaning and effect of
special condition 26 of the relevant contract of sale.
It reads as follows:
"26. The vendor warrants that there is a Milk Quota of 11,090 lbs. per
week attaching to the property and agrees that she will
do all things
necessary to enable the purchaser to obtain the benefit of the said Milk
Quota." (at p308)
3. I do not understand that condition either as guaranteeing the availability
to the purchaser of the milk quota or as promising
that the vendor will ensure
the granting of consent by the Dairy Industry Authority to an allocation of a
quota to the purchaser.
(at p308)
4. The condition deals with a milk quota, apparently a reference to a quota as defined in s. 39 of the Dairy Industry Authority Act 1970 and warrants that a quota of a specified quantity is attached to the property sold. Even without the benefit of any knowledge of the nature of milk quotas a fair reading of the warranty in the opening portion of the condition would suggest, I think, that what is warranted is the size of the quota; the vendor warrants that at the date of the contract there exists a milk quota of 11,090 lbs. She does not warrant that it is in some way so associated with the land sold that its benefit runs with ownership of that land; the reference to it being attached to the land does no more than identify the quota as being a relevant one, applicable to the dairying activities presently carried on on the land. If the quota so applicable is shown to have been at the date of the contract in fact less than as stated the vendor will no doubt be liable in damages accordingly but no other event will involve her in liability under the first part of this condition. (at p308)
5. If the legislation be examined it tends, I think, to confirm this view; the parties were, by this condition, contracting about a creature of the statute law, a milk quota, and I would be slow to assume a meaning which ignores its statutory nature and attributes. It seems clear that quotas do not attach to properties, they are determined by the Authority in respect of each registered occupier of a dairy farm-see sub-s. 24(3) of the Act. Registration is granted not to a dairy farm but to its occupier and is personal to him-see s. 33. The warranty was, I think, in the present case confined to a statement that the then occupier of the property had been allocated a milk quota of 11,090 lbs. (at p308)
6. The later portion of the condition then imposes an obligation upon the vendor to do all things necessary to enable the purchaser to obtain the benefit of that quota. This cannot in my view mean more than that the vendor will do that lies in her power in that regard, whether it involves the signing of documents, the paying of fees or the taking of any other steps which may lawfully be taken by her by way of aiding in the conferring upon the purchaser of the benefits which the former occupier of the property derived from possession of a quota. If she does all that her contractual obligation is satisfied and if, for any reason unconnected with a default in that obligation, the Authority refuses or fails to give the purchaser, assuming it first becomes registered as a dairyman, the benefit of a like quota this will be no breach of contract nor will it affect the other obligations of the parties under the contract of sale. (at p309)
7. It may be thought that such an interpretation attributes to this purchaser of a dairy farm a strange unconcern as to a vital feature of what it was buying. However this purchaser, having paid close to $1,000 per acre for this property, was not, it seems intending to work the property for any substantial time as a dairy farm; the evidence speaks of only some twelve months in the future during which it was to be run as a dairy farm, perhaps the economics of dairy farming on land of this price not far from Sydney may suggest that some other purpose was in mind. (at p309)
8. I assume, as the parties seem to have to assumed, that, despite its entirely inappropriate terms, the form of application for re-allocation of milk quota was something which the vendor was obliged to sign as being a necessary step towards conferring upon the purchaser the benefit of the quota. However it follows, I think, from the view I have taken of the true meaning of condition 26 that it was enough for the vendor to hand over that form, duly signed, at settlement. Her failure to do so at an earlier date did not, in my view, amount to conduct of itself disentitling her from giving a notice effectively making time of the essence of the contract of sale. (at p309)
9. However, as the Chief Justice and Jacobs J. point out, there were other acts and omissions on the vendor's part which did serve so to disentitle her and accordingly agree that that notice was ineffective, that the conduct of the purchaser did not amount to any repudiation of the contract and that it was not open to the vendor validly to rescind the contract as she purported to do. (at p309)
10. I would allow this appeal and, for the reasons stated by the Chief Justice and Jacobs J., would remit the matter to the Supreme Court for disposal there of all matters in controversy. (at p309)
ORDER
Appeal allowed with costs. Order of the Supreme Court set aside and the matter remitted to the Supreme Court of New South Wales for further hearing.
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