Ostabridge Pty. Limited & Anor. v. Adelaide Brighton Limited [2007] NSWCA 59 (23 March 2007)

Last Updated: 27 March 2007

NEW SOUTH WALES COURT OF APPEAL

CITATION: Ostabridge Pty. Limited & Anor. v. Adelaide Brighton Limited [2007] NSWCA 59


FILE NUMBER(S):
40706/05

HEARING DATE(S): 21 September 2006

JUDGMENT DATE: 23 March 2007

PARTIES:
Ostabridge Pty. Limited - 1st appellant
Kevin Richard Shirlaw - 2nd appellant
Adelaide Brighton Limited - respondent

JUDGMENT OF: Beazley JA Hodgson JA Hunt AJA

LOWER COURT JURISDICTION: Supreme Court - Equity Division

LOWER COURT FILE NUMBER(S): SC 2870/05

LOWER COURT JUDICIAL OFFICER: Campbell J

LOWER COURT DATE OF DECISION: 5 August 2005

LOWER COURT MEDIUM NEUTRAL CITATION:
[2005] NSWSC 737

COUNSEL:
Mr. M. Oakes SC for the appellants
Mr. G. Linsdsay SC with Mr. I.E. Davidson for respondent

SOLICITORS:
Malcolm Johns & Company, Sydney for appellants
Johnson Winter & Slattery, Sydney for respondent

CATCHWORDS:
CONVEYANCING - Relationship of vendor and purchaser - Matters arising between contract and settlement - Whether deposit paid conditionally - Whether purchaser insisted on performance of conditions to which it was not entitled - Whether purchaser could rely on s.58 of Real Property Act - Whether purchaser repudiated contract

LEGISLATION CITED:
Real Property Act 1900 s.58
Conveyancing Act 1919 s.112

CASES CITED:
Butts v. O’Dwyer [1978] HCA 50; (1978) 141 CLR 378
Cox v. Esanda Finance [2000] NSWSC 502
Isherwood v. Butler Pollnow Pty. Limited (1986) 6 NSWLR 363
Mathieson v. Mercantile Finance & Agency Co. Limited (1891) 17 VLR 271
Midland Montagu Australia Limited v. Cuthbertson (1989) 17 NSWLR 309

DECISION:
Appeal dismissed with costs.


JUDGMENT:

IN THE SUPREME COURT
OF NEW SOUTH WALES
COURT OF APPEAL

CA 40706/05

SC 2870/05

BEAZLEY JA

HODGSON JA

HUNT AJA

Friday 23 March 2007

OSTABRIDGE PTY. LIMITED & ANOR. V. ADELAIDE BRIGHTON LIMITED

Judgment

1 BEAZLEY JA: I agree with Hodgson JA.

2 HODGSON JA: On 5 August 2005, in proceedings brought by the respondent (ABL) against the appellants (respectively Ostabridge and Mr. Shirlaw), Campbell J ordered that a contract made on 7 July 2004 between the appellants as vendors and ABL as purchaser be specifically performed, and also made ancillary orders including the dismissal of a cross-claim brought by the appellants.

3 The appellants appeal from that decision.

CIRCUMSTANCES

4 The land that is the subject of the contract (the Penrose Land) is five parcels of Torrens Title land which are the site of a quarry at Penrose, New South Wales.

5 In his judgment ([2005] NSWSC 737) the primary judge gave the following account of the background to entry into the contract, related proceedings brought by Heggies Bulkhaul Limited (Heggies) and the people involved in the conveyancing transaction:

Background to the Entry of the Contract For Sale
3 The registered proprietor of the Penrose Land at all relevant times was Global Minerals Pty Ltd (“Global”). Mr Kevin Shirlaw had been receiver and manager of Ostabridge Pty Ltd (in Liq) (Receivers and Managers Appointed) (“Ostabridge”), since July 2000. Global granted a mortgage over the land to Ostabridge and Mr Shirlaw on 24 February 2003. That mortgage was lodged for registration on 7 May 2003, and was allotted Dealing No. 9585643. However, because of the presence of caveats on the title, it had not been registered by the time the contract was entered.
4 Heggies Bulkhaul Limited (“Heggies”) claimed that it was entitled to a lease of the quarry, by reason of its dealings with Global. Austin J, in Heggies Bulkhaul v Global Minerals Australia [2003] NSWSC 851 upheld one of the ways in which Heggies claimed to be entitled to such a lease. On 1 October 2003 Heggies lodged a caveat against the land to protect that right to a lease.
5 On 24 May 2004, Heggies commenced proceedings 3054 of 2004 in this Court against Mr Shirlaw, Mr Christopher Palmer (the liquidator of Ostabridge), Mr Daniel Cvitanovic (the receiver and manager of Global), Mr Michael Jones (the liquidator of Global), Collex Waste Management Pty Ltd (“Collex”), and the Registrar General. In those proceedings Heggies sought registration of its lease over the quarry, and also sought registration of two mortgages over the Penrose Land. One of those mortgages was alleged to have been given to Heggies and Collex in 1995 by Australian Machinery Sales Pty Ltd (“AMES”). AMES was the registered proprietor of the Penrose Land immediately before Global. That 1995 mortgage was one alleged to have been created for the purposes of a Joint Venture Agreement made on 5 December 1995 between AMES, Heggies and Collex for a proposed landfill operation upon the Penrose Land. The other mortgage was alleged to have been given in 2000 over the Penrose Land to Heggies and Collex, in connection with that same Joint Venture Agreement.
6 By 7 July 2004 the title to the Penrose Land was subject to the following caveats:

2988685	By Heggies and Collex
691505 and AA33289	By Heggies, relating to its claim to have a lease of the quarry
9589067 and AA96948	By Mr Cvitanovic, claiming an interest arising from his appointment as receiver and manager of Global, and by Global

The Contract
7 The contract in question identifies the vendors as Ostabridge and Mr Shirlaw. Mr Shirlaw was stated in the contract to enter it in two capacities – as receiver and manager of Ostabridge, and also in his personal capacity pursuant to powers of sale arising under a particular unregistered mortgage. The purchaser was Adelaide Brighton Limited (“ABL”). The contract was in the form of the 2000 edition of the standard NSW Contract for Sale of Land, with some Special Conditions. The front page of the Contract for Sale of Land stated the price to be $4,150,000, and the deposit to be $400,000. The front page of the contract identified the vendors’ solicitor as Carroll & Associates (Ref Michael Carroll), and the purchaser’s solicitor as being Johnson Winter & Slattery (“JWS”) (Ref Kate Whitburn). The deposit holder was stated to be the vendors’ solicitor. At the time of exchange an instalment of the deposit, of $100,000, was paid, as required by Special Condition 46 (para [14] below).
The Standard Form
8 The following provisions of the printed part of the contract bear upon this case:

“1. In this contract, these terms (in any form) mean -
...
normally subject to any other provision of this contract;
...
requisition an objection, question or requisition (but the term does not include a claim)
rescind rescind this contract from the beginning;
...
terminate terminate this contract for breach
...
2.1 The purchaser must pay the deposit to the depositholder as stakeholder.
2.2 Normally, the purchaser must pay the deposit on the making of this contract, and this time is essential.
2.3 If this contract requires the purchaser to pay any of the deposit by a later time, that time is also essential.
2.4 The purchaser can pay any of the deposit only by unconditionally giving cash (up to $2,000) or a cheque to the depositholder or to the vendor, vendor’s agent or vendor’s solicitor for sending to the depositholder.
2.5 If any of the deposit is not paid on time or a cheque for any of the deposit is not honoured on presentation, the vendor can terminate. This right to terminate is lost as soon as the deposit is paid in full.
...
4.1 Normally, the purchaser must serve the form of transfer at least 14 days before the completion date.
...
4.3 If the purchaser serves a form of transfer and the transferee is not the purchaser, the purchaser must give the vendor a direction signed by the purchaser personally for this form of transfer.
...
5 If the purchaser is or becomes entitled to make a requisition, the purchaser can make it only by serving it –
5.1 if it arises out of this contract or it is a general question about the property or the title – within 21 days after the contract date;
5.2 if it arises out of anything served by the vendor – within 21 days after the later of the contract date and that service; and
5.3 in any other case – within a reasonable time.
...
8. Vendor’s right to rescind
The vendor can rescind if -
8.1 the vendor is, on reasonable grounds, unable or unwilling to comply with a requisition;
8.2 The vendor serves a notice of intention to rescind that specifies the requisition and those grounds; and
8.3 the purchaser does not serve a notice waiving the requisition within 14 days after that service.
9. Purchaser’s default
If the purchaser does not comply with this contract (or a notice under or relating to it) in an essential respect, the vendor can terminate by serving a notice and after the termination -
9.1 keep or recover the deposit (to a maximum of 10% of the price);
9.2 hold any other money paid by the purchaser under this contract as security for anything recoverable under this clause -
9.2.1 for 12 months after the termination; or
9.2.2 if the vendor commences proceedings under this Clause within 12 months, until those proceedings are concluded; and
9.3 sue the purchase either -
9.3.1 where the vendor has resold the property under a contract made within 12 months after the termination, to recover -
§ the deficiency on resale (with credit for any of the deposit kept or recovered and after allowance for any capital gains tax or goods and services tax payable on anything recovered under this clause); and
§ the reasonable costs and expenses arising out of the purchaser’s non-compliance with this contract or the notice and of resale and any attempted resale; or
9.3.2 to recover damages for breach of contract.
...
19.1 If this contract expressly gives a party a right to rescind, the party can exercise the right -
19.1.1 only by serving a notice before completion; and
19.1.2 in spite of any making of a claim or requisition, any attempt to satisfy a claim or requisition, any arbitration, litigation, mediation or negotiation or any giving or taking of possession.
19.2 Normally, if a party exercises a right to rescind expressly given by this contract or any legislation –
19.2.1 the deposit and any other money paid by the purchaser under this contract must be refunded;
19.2.2 a party can claim for a reasonable adjustment if the purchaser has been in possession;
19.2.3 a party can claim for damages, costs or expenses arising out of a breach of this contract; and
19.2.4 a party will not otherwise be liable to pay the other party any damages, costs or expenses.
...
29.1 This clause applies only if a provision says this contract or completion is condition on an event.
29.2 If the time for the event to happen is not stated, the time is 42 days after the contract date.
29.3 If this contract says the provision is for the benefit of a party, then it benefits only that party.
29.4 If anything is necessary to make the event happen, each party must do whatever is reasonably necessary to cause the event to happen.
29.5 A party can rescind under this clause only if the party has substantially complied with clause 29.4.”

Provisions Relating to Date of Completion
9 The front page of the contract defined the “completion date” by saying “see additional clause no 34 and 44 hereto”. Clause 34 is not presently relevant. Clause 44 says:

“Prior to Completion, the Vendor shall procure the written acknowledgment of Heggies Bulkhaul Limited (ACN 003 707 499) that on Completion, the purchaser is not liable to it for any claim whatsoever in relation to the land arising prior to Completion or the vendor will otherwise provide evidence to the reasonable satisfaction of the purchaser that it is not so liable.”

10 Clause 45 says:

“Completion of this Contract shall occur upon that date which is the latest of the following:
(a) 90 days after the date of execution of this Contract;
(b) satisfaction of the condition set out in clause 44 of this Contract; and
(c) any extension of the time fixed for completion permitted or allowable under Special Conditions 41 or 42 of this Contract.”

11 Submissions before me were made on the basis that the contract fixed a completion date in accordance with Clause 45. The parties were correct in adopting that basis.
12 Clause 15 of the printed form provides:

“The parties must complete by the completion date and, if they do not, a party can serve a notice to complete if that party is otherwise entitled to do so.”

13 Special Condition 35.4 says:

“At the end of clause 15, add the following:
15.1 Subject to the special conditions of this contract, if either party is unable or unwilling to complete by the completion date, the other party is entitled to issue a notice to complete making the time for completion essential. Such notice must give not less than fourteen (14) days notice from the date of service of the notice and may nominate a specified hour on the last day as the time for completion and a notice to complete of such duration is agreed by the parties to be reasonable and sufficient to render the time for completion essential.
15.2 If completion does not occur on or before the completion date, due to a default of the purchaser unless that default is caused by the vendor, then the vendor being ready, willing and able to complete may recover from the purchaser as liquidated damages payable upon completion simple interest on the unpaid balance of the purchase price at the rate of ten per cent (10%) per annum calculation at a daily rate from the completion date (or such later date as the vendor is ready willing and able to settle) to the actual date of the completion, to compensate the vendor for the delay, to be added to the balance payable on completion as a genuine pre-estimate of the vendor’s loss to be allowed by the defaulting purchaser as an additional adjustment on completion.””

Other Special Conditions
14 Other Special Conditions which are relevant are:

“30. Inconsistency of provisions
In the event of any conflict or inconsistency between the provisions of the subsequent clauses and the provisions of the preceding clauses of this contract then the provisions of the following clauses shall prevail.
...
37. Caveats Dealing No. O691505 and AA33289
37.1 The purchaser acknowledges that the following entities have registered Caveats over the title to the property:
(a) Heggies Bulkhaul Limited (ACN 003 707 499) and Collex Waste Management Pty Limited (ACN 051 316 584) (now being Collex Pty Ltd) – Caveat, Dealing No. 2988685; and
(b) Heggies Bulkhaul Limited (ACN 003 707 499) – Caveats, Dealing Nos. 0691505 and AA33289
(“the caveats”)
37.2 The vendor and purchaser acknowledge and agree that:
(a) completion of this contract shall be subject to and conditional upon the vendor obtaining and providing to the purchaser on or before the date of completion registrable Withdrawals of the Caveats provided always that the sale and transfer of the property pursuant to this Contract shall be subject to recognition and registration of the Lease claimed in Caveat AA33289 by Heggies Bulkhaul Limited;
(b) no warranty or representation has been given by the vendor concerning the removal or withdrawal of the Caveats; and
(c) the vendor shall use best endeavours to remove or obtain withdrawals of the Caveats and any other caveats which may be lodged on the titles to the property prior to completion of this Contract;
(d) the purchaser shall not raise any enquiry, requisition, objection, claim for compensation, loss or damage, or seek any other form of remedy or relief, whatsoever, in connection with the existence of the Caveats or any other caveats or their ability to be withdrawn or removed or not withdrawn or removed (as the case may be), except as to any right of termination without compensation expressly conferred upon the purchaser under this Contract.
38. Caveat Dealing Nos. 9589067 and AA96948
The vendor and purchaser acknowledge and agree that completion of this contract shall be subject to and conditional upon the vendor providing to the purchaser at completion registrable Withdrawals of the Caveats Dealing Nos 9589067 and AA96948.
39. Issuance of New Certificates of Title
39.1 Application Number 9585644 has been made for the insurance of new certificates of title to the property by reason of the loss of the Certificates of Title on issue.
39.2 In the event that the new Certificates of Title have not yet issued to the vendor upon completion of this Contract, this contract shall be subject to and conditional upon the vendor procuring a written direction, duly executed by the Registrar General, Department of Lands agreeing to release or deliver the new certificates of title to the purchaser or in accordance with any written direction given by the purchaser to the Registrar General in lieu of delivery of the Certificates of Title.
40. Joint Venture Agreement
40.1 The purchaser acknowledges that:
(a) annexed hereto is a copy of a Joint Venture Agreement between Heggies Bulkhaul Limited (ACN 003 707 499), Collex Waste Management Pty Limited (ACN 051 316 584) (now being Collex Pty Ltd) and Australia Machinery Equipment Sales Pty Limited (ACN 050 035 053) (In Liquidation) dated 5 December 1995, being the Annexure “B” (being entitled “Joint Venture Agreement”); and
(b) there may be in existence and the vendor represents that it does not have a copy of a Deed of Assignment of the Joint Venture Agreement allegedly made between Heggies Bulkhaul Limited (ACN 003 707 499), Collex Waste Management Pty Limited (ACN 051 316 584) (now being Collex Pty Ltd), Australia Machinery Equipment Sales Pty Limited (ACN 050 035 053) (In Liquidation) and/or Global Minerals Australia Pty Limited (ACN 090 740 177) being entitled “Deed of Assignment”).
(the Joint Venture Agreement and the Deed of Assignment being collectively and singularly referred to as the “Assigned Joint Venture Agreement”).
40.2 Prior to completion, the vendor shall use its best endeavours to locate a stamped duly executed copy of the Deed of Assignment, including by liaising with the Heggies Bulkhaul Limited (ACN 003 707 499), Collex Waste Management Pty Limited (ACN 051 316 584) (now being Collex Pty Ltd).
40.3 If prior to completion the vendor is unable to locate a stamped duly executed copy of the Deed of Assignment that is binding on Global Minerals Australia Pty Limited (ACN 090 740 177), then the vendor shall:
(a) procure the written acknowledgment of both Heggies Bulkhaul Limited (ACN 003 707 499) and Collex Pty Limited (ACN 051 316 584) (“the Joint Venturers”);
(b) obtain an order for declaratory relief from the Supreme Court of New South Wales; or
(c) otherwise provide evidence to the reasonable satisfaction of the purchaser,
that the purchaser is not and will not be bound by the Joint Venture Agreement.
40.4 If the vendor is able to locate a stamped duly executed copy of the Deed of Assignment, then the vendor shall procure:
(a) the consent of the Joint Venturers to the assignment of the Assigned Joint Venture Agreement to the purchaser; or
(b) the acknowledgement of the Joint Venturers of the surrender, termination or determination of the Assigned Joint Venture Agreement or that it will otherwise not be binding on the purchaser.
41. Vendor restrained from completing this Contract
Notwithstanding any other provision of this Contract, if the vendor is restricted, restrained or otherwise prevented from completing this Contract by any injunction, caveat or by any other act, deed or intervention of a third party, or court order including (without limitation) any matter arising under or in connection with the matters referred to in Special Condition 40, the Vendor may, at its option elect by giving a written notice to that effect to the purchaser to:
(a) rescind or terminate this Contract without the payment of any form of compensation, loss or damage; or
(b) extend the completion date for a period of up to three (3) months to enable the vendor to procure or obtain withdrawal of any such injunction, caveat or other restraint, so that the vendor can give title and possession of the property to the purchaser in accordance with the terms of this Contract,
and the purchaser cannot make an object [sic], requisition or claim for compensation, loss or damage or seek any other form of relief or remedy, whatsoever, or rescind or terminate this Contract because of such rescission or extension and for the avoidance of doubt no amount of interest arising under clause 15.2 will be payable by the vendor to the purchaser or vice versa by reason of such extension.
42. Registration of Mortgage Dealing 9585643
The vendor and purchaser hereby acknowledges and agrees that:
(a) the vendor shall use best endeavours to procure registration of Mortgage Dealing 95854643 (“Mortgage Dealing”) within ninety (90) days after the execution of this Contract;
(b) registration of that Mortgage Dealing shall be a condition precedent to completion of this Contract;
(c) this condition has been inserted in this Contract for the benefit of the purchaser and may be waived by written notice to that effect being given by the purchaser to the vendor.
...
46. Deposit
The purchaser must pay a deposit of $400,000.00 of the price as follows:
(a) 2.5% ($100,000.00) payable on execution of this Contract; and
(a) 7.5% ($300,000.00) payable upon satisfaction of all conditions precedent set out in the Contract.”

15 The percentages and monetary amounts in Clause 46 do not match each other. This arose because the form of contract was prepared at the time when the purchase price was to be $4m. There was a last-minute consensus that the price should be raised to $4.15m, which resulted in some handwritten changes to the contract. Clause 46 was not amended at that time. It was common ground that Clause 46 was understood to operate so that the monetary amounts, not the percentages, were what the purchaser was obliged to pay.
Result of Proceedings 3054 of 2004
16 On 27 August 2004 the claim by Heggies in proceedings 3054 of 2004 (see para [5] above) to have its lease registered came before me, when Heggies sought summary judgment on that claim. I granted that summary judgment: Heggies v Shirlaw [2004] NSWSC 805. A lease from Global to Heggies was accordingly registered. During the week commencing 18 October 2005 Heggies transferred that lease to Boral Resources (NSW) Pty Ltd (“Boral”). That transfer of lease had been registered at least by 22 March 2005.
17 After summary judgment was granted on Heggies’ claim in proceedings 3054 of 2004 to have its lease registered, its claim to registration of the mortgages over the Penrose Land still remained. On 25 November 2004 Mrs Voula Kekatos was substituted as a plaintiff for Heggies in proceedings number 3054 of 2004. Mrs Kekatos claimed, in proceedings number 3054 of 2004, that she had acquired the rights of Heggies and Collex as mortgagees concerning the Joint Venture Agreement, including their rights under both the 1995 joint venture mortgage, and the 2000 joint venture mortgage. It appears that if the 1995 joint venture mortgage or the 2000 joint venture mortgage were binding, they would secure a little less than $30,000.
18 In April 2000 Global had granted an equitable charge to Mrs Kekatos, Rhonda Stafford and Susan Stafford. Mrs Kekatos also claimed to be the assignee of that charge and of a supporting mortgage. That supporting mortgage secured a principal advance of the order of $1.2m.
19 The part of proceedings 3054 of 2004 which had not been summarily disposed of came on for hearing before White J on 9 March 2005. Those proceedings were settled on 10 March 2005. The parties to those proceedings at that time were Mrs Kekatos, Mr Shirlaw, Mr Palmer, Mr Cvitanovic, Mr Jones, Ostabridge, Heggies, Collex, Global, and the Registrar-General. The court orders involved a declaration of the validity of the mortgage of Ostabridge and Mr Shirlaw over the Penrose Land, that it secured a total sum of $2.55m, and that Mr Cvitanovic had an equitable lien over certain money in his trust account derived from rents and royalties of the land, but not over the proceeds of sale of the land. Orders were made for the removal of various caveats on the land, and the tidying up of some interlocutory orders that had been made. As well, the court noted an agreement between Mrs Kekatos, Ostabridge, Mr Shirlaw and Mr Cvitanovic that the net proceeds of sale of the Penrose Land under the contract to ABL would be divided 61.44% to Ostabridge and Mr Shirlaw, and 38.56% to Mrs Kekatos. Other terms of that agreement were that if that contract was terminated, Ostabridge and Mr Shirlaw would notify Mrs Kekatos, who would have 28 days within which to redeem the Ostabridge Mortgage by paying $2.55m, and if she did not redeem within the 28 days the Ostabridge Mortgage would bear interest from the date of the termination.

...
The Dramatis Personae
24 This conveyancing transaction was unusual in the degree of communication which occurred between the clients on the opposite sides of the transaction, and between the client on one side of the transaction with a solicitor on the opposite side of the transaction.
25 For the plaintiff, Mr Mark Finney (the General Manager – Aggregates and Recycling of ABL) and Mr John Oakes (the Financial Controller of ABL) were involved. Mr Finney was based in Sydney. Mr Oakes was based in Adelaide.
26 Mr Leo Smits had been a friend of, and solicitor for, Mr Shirlaw for many years, but had moved to Queensland in mid-July 2003. He continued to be actively involved in advising Mr Shirlaw concerning the Ostabridge receivership. Mr Shirlaw was based in Sydney. Mr Michael Carroll, of Carroll & Associates, was the solicitor in Sydney principally responsible for the conveyancing transaction for the defendants. He was assisted on occasions by Ms Julie Lewig. His involvement in the transaction ceased abruptly on 26 April 2005, the same day that Mr Shirlaw instructed Mr James Loel, of John M O’Connor & Company, of Brisbane, to act for the defendants. It was Mr Loel who wrote, on 28 April 2005, the Letter of Termination.
27 Ms Kate Whitburn, of JWS, was the solicitor who had conduct of the transaction for ABL until, after the alleged termination, it became apparent that the transaction would result in litigation. She was based in Adelaide.

6 I will adopt the abbreviations specified by the primary judge. The primary judge made detailed findings as to the sequence of events leading up to a letter dated 28 April 2005, by which solicitors acting for the appellants purported to terminate the contract for repudiation by ABL; and also as to subsequent events occurring up to the commencement by ABL of proceedings for specific performance on 11 May 2005. These detailed findings are set out in par.[28]-[128] of the primary judge’s judgment.

7 The appellants make some challenge to par.[62]-[67] of the judgment, to which I will come. Otherwise, there is no challenge to any of these factual findings, apart from a dispute raised as to comments of the primary judge to the effect that the conveyancing transaction was unusually complex, and that ABL’s solicitor Ms. Whitburn was acting as a meticulous and careful solicitor.

8 The convenient course in dealing with this appeal is to consider in turn each of the respects in which the appellants allege ABL repudiated the contract, or committed a breach entitling the appellants to terminate it.

9 It is common ground that, although the conveyancing transaction initially had considerable complexity, by 11 April 2005 these complexities had been substantially reduced, in that by that time the appellants were in a position to complete the contract, subject only to issues concerning the giving of notice of default under the mortgage and the provisions of cl.40 and cl.44 of the contract.

10 The issues raised by the appellants are the following:

(1) Was there a breach of contract entitling termination because the second instalment of the deposit was paid conditionally?
(2) Did payment of the second instalment of the deposit disentitle ABL to further performance of cl.40 and cl.44?
(3) Did ABL insist on some performance of cl.40 to which it was not entitled?
(4) Did ABL insist on some performance of cl.44 to which it was not entitled?
(5) Did ABL insist on provision of a notice of default to which it was not entitled?
(6) Was ABL’s conduct repudiatory?

WAS THE SECOND INSTALMENT OF THE DEPOSIT PAID CONDITIONALLY?

11 The appellants relied on cl.2.4 of the contract, according to which payment of any of the deposit could be affected only by “unconditionally giving cash ... or a cheque”. Their contention was that, when $300,000.00 was paid as required by cl.46, it was paid conditionally in two respects: first, in that it was paid on condition that no notice to complete or notice of termination be given; and second, in that ABL continue to insist on cl.40 and cl.44.

12 The appellants relied on evidence from Ms. Whitburn that, when she told Mr. Carroll (the appellants’ solicitor) that ABL was paying the $300,000.00 she said words to the effect that the appellants were still to comply with cl.40 and cl.44, and also said “We would expect that in paying the deposit your client will cease in making threats to issue a Notice to Complete or terminate the contract”. Ms. Whitburn also said that Mr. Carroll said “Right” and did not disagree with what she had said. However, the primary judge held (at par.[62]-[67] of his judgment) that it was more probable that Mr. Carroll did not communicate that he was in agreement with what Ms. Whitburn was saying.

13 Mr. Oakes SC for the appellants challenged the primary judge’s findings at par.[62]-[67]; and he submitted that in any event, the payment was not unconditional, because to be unconditional the payment must be “with no strings”, that is, with nothing that could at least arguably give rise to an entitlement to recover payment otherwise than in accordance with the terms of the contract, and it must be free of any litigation risks arising from the way in which the payment was made.

14 Mr. Oakes further submitted that, because “all conditions precedent set out in the contract” had been satisfied, within cl.46, cl.2.5 had the effect that the appellants could terminate: see Butts v. O’Dwyer [1978] HCA 50; (1978) 141 CLR 378.

15 No ground was advanced by Mr. Oakes for departing from the primary judge’s factual finding at par.[62]-[67] that Mr. Carroll did not communicate that he was in agreement with what Ms. Whitburn was saying; and in my opinion there is no basis on which this Court would do so.

16 In those circumstances, in my opinion the correct view of the effect of the relevant conversation was that it conveyed Ms. Whitburn’s expectation that payment would provide assurance of good faith that would induce the appellants not to issue a notice to complete or terminate in the immediate future at least, which is to the effect of what the primary judge found at par.[63]. In my opinion, neither that, nor her intimation that ABL would continue to require compliance with cl.40 and cl.44, could conceivably be considered as making the payment itself other than unconditional.

17 In any event, for reasons I will give, the conditions precedent contained in cl.40 and cl.44 were not in fact satisfied at the time, so that the contractual time for payment of $300,000.00 had not arrived; and accordingly, even if the payment that was made was not unconditional, there was no breach of contract. Furthermore, the appellants’ acceptance of the $300,000.00 and subsequent demands for completion would have ended any right of the appellants to terminate the contract for non-payment of the deposit.

DID PAYMENT OF THE SECOND INSTALMENT END ABL’S RIGHTS UNDER CLAUSES 40 AND 44?

18 The appellants’ contention was that, because the second instalment was only payable “upon satisfaction of all conditions precedent set out in the contract”, unconditional payment must mean that cl.40 and cl.44 had to be treated as satisfied.

19 In my opinion, there is nothing to prevent ABL paying this second instalment before the time when it was required by the contract, so that the payment did not preclude subsequent reliance on cl.40 and cl.44, if those provisions were not satisfied.

WAS CLAUSE 44 SATISFIED?

20 The appellants accepted that they had not procured a written acknowledgement by Heggies that, on completion, ABL was not liable to it for any claim whatsoever in relation to the land arising prior to completion, this being one alternative way of satisfying cl.44 (which is set at par.[9] of the primary judge’s judgment). However, the appellants claim that they had “provided evidence to the reasonable satisfaction of the purchaser that it is not so liable”, this being the other way of satisfying cl.44.

21 Mr. Oakes submitted that by 11 April 2005, the following facts were known: Heggies had been registered for its interest as lessee; Heggies had completely divested itself of any interest as lessee by transferring its interest as lessee to Boral; there were no caveats on the land by Heggies; ABL never asserted that it was on notice of any interest of Heggies which might be asserted against it as purchaser; Heggies had dropped out of proceedings 3054/2004 and Voula Kekatos had been substituted for Heggies’ mortgage claim as assignee of Heggies’ mortgage; proceedings 3054/2004 had been settled, including the Kekatos claim; there were no caveats on the title other than ABL’s caveat; and the title as it stood at the Titles Office was completely regularised. Further, he submitted, if ABL had any residual concern, it could have settled the contract at the Titles Office after a final search and immediately lodged its transfer, thereby shutting out any possibility of any other intervening interests and obtaining the protection of s.43 of the Real Property Act 1900. Accordingly, he submitted, the primary judge was wrong to hold that ABL was not satisfied that it was not liable to Heggies for any claim whatsoever (see primary judge’s judgment par.[146]), and also wrong not to find that any failure by ABL to be satisfied was unreasonable.

22 The fact was that, as at 27 April 2005, Ms. Whitburn was seeking, for compliance with cl.44, a fully executed copy of a certain Deed of Settlement and Release and a Deed of Termination and Release, which the appellants’ solicitors had advised her they were obtaining. Prior to the purported termination by the appellants, she had not been told that these copies would or could not be provided, or that she had been given all the evidence on the matter which she was going to get.

23 In my opinion, there is no basis for challenging the primary judge’s decision that, as a matter of fact, ABL was not satisfied in terms of cl.44. Further, in my opinion, in circumstances where the appellants were holding open to ABL that they would provide the evidence it sought, it was not shown to be unreasonable for ABL not to have addressed the question whether it was satisfied on the evidence previously provided, and so it was not shown to be unreasonable for ABL not to be satisfied. The primary judge’s reasons to that effect at par.[151]-[156] of his judgment are correct.

24 The circumstance that the likelihood of any equitable claim by Heggies enforceable against the land was very small, and that the opportunity for this could be eliminated by settlement at the Titles Office, does not defeat the appellants’ obligations under cl.40. At most these considerations would go to the question of reasonable satisfaction, and do not overcome the considerations referred to in the previous paragraph.

WAS CLAUSE 40 SATISFIED?

25 The appellants’ contention was that, from 11 April 2005, ABL had been provided evidence to its reasonable satisfaction that ABL was not and would not be bound by a Joint Venture Agreement allegedly made between Heggies and other parties, so that cl.40.3(c) was satisfied.

26 Mr. Oakes submitted that there was no evidence that the Joint Venture Agreement gave rise to any equitable interest which could be asserted against ABL or the land, or which was being asserted by anyone; and because the title was clear, ABL should have been satisfied within the meaning of cl.40.3(c).

27 One difficulty with that submission is that cl.40.3(c) only assists the appellants if they prove that they were unable to locate a particular document referred to in cl.40, and they did not prove this.

28 In any event, Ms. Whitburn requested, in order to be satisfied under cl.40.3(c), the same documents as she requested in relation to cl.44, and was advised by the appellants’ solicitors that they were being obtained. Accordingly, as before, it was not shown to have been unreasonable for ABL not to have addressed the question of whether it was satisfied, and not shown to have been unreasonable for ABL not to be satisfied.

NOTICE OF DEFAULT

29 It was common ground that, even in relation to non-monetary defaults, cl.22 of the Ostabridge mortgage required notice of default to be given to the mortgagor before the power of sale could be exercised. However, the appellants contended that ABL could not require a copy of such notice to be produced because of the provisions of s.58 of the Real Property Act 1900 and/or s.112 of the Conveyancing Act 1919, which are in the following terms:

58 Power to sell
(1) Where a mortgagee, chargee or covenant chargee is authorised by section 57 (2) to exercise the powers conferred by this section, the mortgagee, chargee or covenant chargee may sell the land mortgaged or charged, or any part thereof, and all the estate and interest therein of the mortgagor, charger or covenant charger, and either altogether or in lots by public auction or by private contract, or both such modes of sale, and subject to such conditions as the mortgagee, chargee or covenant chargee may think fit, and to buy in and resell the same without being liable for any loss occasioned thereby, and to make and execute all such instruments as shall be necessary for effecting the sale thereof, all which sales, contracts, matters, and things hereby authorised shall be as valid and effectual as if the mortgagor, charger or covenant charger had made, done, or executed the same, and the receipt or receipts in writing of the mortgagee, chargee or covenant chargee shall be a sufficient discharge to the purchaser of such land, estate, or interest, or of any portion thereof, for so much of the purchaser’s purchase money as may be thereby expressed to be received.
(2) No such purchaser shall be answerable for the loss, misapplication, or non-application, or be obliged to see to the application of the purchase money by the purchaser paid, nor shall the purchaser be concerned to inquire as to the fact of any default or notice having been made or served as referred to in section 57 (2).
(3) The purchase money to arise from the sale of any such land, estate, or interest, shall be applied, first, in payment of the expenses occasioned by such sale; secondly, in payment of the moneys which may then be due or owing to the mortgagee, chargee or covenant chargee; thirdly, in payment of subsequent mortgages, charges or covenant charges (if any) in the order of their priority; and the surplus (if any) shall be paid to the mortgagor, charger or covenant charger, as the case may be.
(4) (Repealed)

112 Protection of purchaser and disposal of proceeds of sale

(1) A mortgagee or chargee exercising the power of sale conferred by this Act shall have power by deed to convey the property sold for such estate and interest therein as is the subject of the mortgage or charge, freed from all estates, interests, and rights to which the mortgage or charge has priority, but subject to all estates, interests, and rights which have priority to the mortgage or charge.
(2) In the case of a mortgage by demise, such mortgagee shall in exercise of any power of sale vested in him or her have power to convey the reversion for all the estate which was held by the mortgagor at the date of the mortgage, whether the same is by the mortgage deed declared to be held in trust for the mortgagee or any purchaser from him or her or not.
(3) Where a conveyance is made in professed exercise of the power of sale conferred by this Act:

(a) a purchaser shall not, either before or on conveyance, be concerned to see or inquire whether a case has arisen to authorise the sale, or due notice has been given, or the power is otherwise properly and regularly exercised,
(b) the title of the purchaser shall not be impeachable on the ground that no case had arisen to authorise the sale, or that due notice was not given, or that the power was otherwise improperly or irregularly exercised, but any person damnified by an unauthorised or improper or irregular exercise of the power shall have a remedy in damages against the person exercising the power.

(4) The money which is received by the mortgagee or chargee, arising from the sale, after discharge of prior incumbrances to which the sale is not made subject (if any), or after payment into court under this Act of a sum to meet any prior incumbrance, shall in the absence of an express contract to the contrary be held by the mortgagee or chargee in trust to be applied by the mortgagee or chargee, first in payment of all costs, charges, and expenses properly incurred by the mortgagee or chargee as incident to the sale or any attempted sale or otherwise; and, secondly, in discharge of the money, interest, and costs, and other money (if any) due under the mortgage or charge and the residue of the money so received shall be paid to the person entitled to the mortgaged or charged property or authorised to give receipts for the proceeds of the sale thereof.
(5) The power of sale conferred by this Act may be exercised by any person for the time being entitled to receive and give a discharge for the mortgage money or the money secured by the charge.
(6) The power of sale conferred by this Act shall not affect the right of foreclosure.
(7) The mortgagee or chargee, the mortgagee or chargee’s executors, administrators, or assigns, shall not be answerable for any involuntary loss happening in or about the exercise or execution of the power of sale conferred by this Act or of any trust connected therewith, or of any power or provision contained in the instrument creating the mortgage or the covenant under which the charge arose.
(8) At any time after the power of sale conferred by this Act has become exercisable the person entitled to exercise the same may demand and recover from any person other than a person having in the mortgaged or charged property an estate, interest, or right in priority to the mortgage or charge, all the deeds and documents relating to the property or to the title thereto which a purchaser under the power of sale would be entitled to demand and recover from that person.
(9) This section does not apply to mortgages or charges under the Real Property Act 1900.

30 The argument of Mr. Oakes for the appellants was that those provisions meant that there was no need for ABL to enquire about the notice of default, and so no right to require production of any copy of such a notice. Accordingly, he submitted, ABL’s requirement that such a copy be provided amounted to a repudiation of the contract.

31 It appears that this point is different from the point relied on by the appellants’ solicitors at the time, which was to the effect that the notice of default was not required for a non-monetary default: this contention was not pursued in this case because of the interrelationship of cl.22 of the mortgage with s.57(2) and s.58A of the Real Property Act, and s.112 of the Conveyancing Act. Accordingly, the case of Isherwood v. Butler Pollnow Pty. Limited (1986) 6 NSWLR 363, this being the case relied on by the appellants’ solicitors, in fact had no relevance.

32 During argument, the Court raised the question whether, in circumstances where the mortgage was not registered at the time of the contract, it was s.58 of the Real Property Act or s.112 of the Conveyancing Act that was relevant to the question whether a purchaser needed to enquire about service of a notice of default. Counsel provided a reference to Midland Montagu Australia Limited v. Cuthbertson (1989) 17 NSWLR 309, which decided that, where a mortgage relies on the statutory powers under s.58 after registration of a Real Property Act mortgage, it does not matter that the notice of default was given before registration. This case followed a similar decision of the Full Court of the Supreme Court of Victoria in Mathieson v. Mercantile Finance & Agency Co. Limited (1891) 17 VLR 271. It appears that in both of these cases, the mortgage was already registered when the contract of sale was entered into; but I note that in Cox v. Esanda Finance [2000] NSWSC 502, Hunter J at [201] said that registration of the mortgage before execution of the transfer of the mortgaged property was sufficient.

33 Particularly in circumstances where neither party submitted to the contrary, it is appropriate to hold that ABL in this case would have had the protection of s.58 of the Real Property Act, even though the mortgage was not registered at the time of the contract.

34 It was submitted by Mr. Lindsay SC for ABL to the effect that ABL, being aware that the requirement of notice had not been dispensed with, and being aware that the appellants were contending that notice was not required, was not acting unreasonably in seeking an assurance that notice was given. Mr. Lindsay referred to Fisher & Lightwoods Law of Mortgage (2nd Australian Ed. 2005), at par.20.42, where it is asserted that a purchaser is not protected by the statutory provisions where the purchaser “has notice, actual or constructive, of the impropriety in the sale”.

35 In my opinion, the chance of any impropriety being alleged, much less made out, was extremely small in this case. However, in my opinion it was not shown to have been unreasonable for ABL to request a copy of the notice; and it is important to note that in her letter of 27 April 2005 to the appellants’ solicitors, in relation to this question, Ms. Whitburn expressed concern that s.58 does extend to a notice required by the mortgage, as distinct from a notice required by s.57, and went on “We are happy to consider your views on this issue”.

36 In my opinion, although s.58 dispenses with the need to enquire only in relation to a notice under s.57, s.57 itself ensures that the power to sell arises so long as the notice required by s.57 is given, and does not make the power of sale depend on compliance in addition with any requirement in the mortgage to give notice. The only relevance of a provision in the mortgage as to notice is that a mortgage may dispense with such requirement in relation to non-monetary defaults. Accordingly, this point taken by Ms. Whitburn is not a valid one.

37 However, the assertion that Ms. Whitburn was happy to consider the views of the appellants’ solicitors counts strongly against seeing the request for a copy of the notice as being repudiatory conduct. In my opinion, it is plain that, on this aspect, ABL was not conveying that it would only go ahead on a basis inconsistent with its obligations under the contract. The primary judge’s conclusions that there was no repudiation on this aspect was correct.

CONCLUSIONS

38 Whether one considers the various aspects of the conduct of ABL and its solicitors in isolation or together, in my view it is plain that this conduct did not amount to repudiation. I have also held that the appellants have not shown any breach of any contractual provision giving them a right to terminate.

39 The appellants’ appeal grounds also make reference to error in the primary judge in finding that ABL was ready willing and able to complete the contract. However, the only basis on which this was put forward was on the same basis that it was alleged that ABL had repudiated the contract. In my opinion, the primary judge was correct to find that ABL was ready willing and able to complete the contract.

40 For those reasons, in my opinion the appeal should be dismissed with costs.

41 HUNT AJA: I agree with Hodgson JA.

**********



LAST UPDATED: 23 March 2007