Bieri v Ottoman Enterprises Pty Ltd as trustee for Yucel Family Trust

These proceedings concern a contract for the sale of land entered into by the plaintiff, Mr Bieri, as vendor and the first defendant, Ottoman Enterprises Pty Ltd, as purchaser.

The proceedings were conducted with admirable economy by Mr Southwick, who appeared for Mr Bieri, and Mr Coles QC, who appeared with Mr Carroll for the defendants. A number of issues originally at play were not pressed. Thus, a case listed for two days was completed in a little over half a day; enabling me to give judgment today.

Mr Bieri was the registered proprietor of a property at Dover Heights ("the Property").

By contracts exchanged on 16 March 2011 ("the Contract"), Mr Bieri agreed to sell the Property to Ottoman for $5.6 million.

The second defendant, Mr Guven, who is known as Mr Yucel, is evidently the sole director of Ottoman and executed the Contract on behalf of Ottoman.

Clause 2.8 of the Contract provided that if, as happened (see below), Ottoman released the deposit to Mr Bieri prior to completion, the deposit was a charge over the Property in favour of Ottoman until either termination or completion of the Contract by Mr Bieri.

Clause 9 of the Contract provided relevantly:

Clause 18 provided relevantly:

Special Condition 13 of the Contract was in the following terms:

At all relevant times, the parties were represented by solicitors.

Ottoman entered possession of the Property on exchange.

At all relevant times, Bank of Western Australia Limited ("the Bank") held a mortgage over the Property to secure a debt owed to it by Mr Bieri. That debt was in the order of $4.8 million. Mr Bieri was, on 16 March 2011, in default under that mortgage. By coincidence (I assume), shortly after 16 March 2011 the Bank served on Mr Bieri a notice under s 57(2)(b) of the Real Property Act 1900 (NSW) dated that day.

Correspondence passing between the solicitors makes clear that Ottoman and Mr Yucel were well aware of Mr Bieri's position so far as concerned the Bank.

Under the terms of the Contract, completion was due on 8 June 2011.

Ottoman failed to complete by that date.

On 14 June 2011, Mr Bieri, by his solicitors, served on Ottoman a notice to complete calling for completion by 29 June 2011. The solicitors also served a notice to vacate calling on Ottoman to vacate the Property by 22 June 2011.

Thereafter, by exchange of emails and letters between the solicitors, the parties agreed to extend the completion date to 11 August 2011 on the basis that, amongst other things, Ottoman would release the deposit ($560,000) to Mr Bieri. The deposit was so released.

Completion did not take place by 11 August 2011.

On 12 August 2011, Mr Bieri's solicitors issued a further notice to complete calling for completion by 29 August 2011 in the following terms:

On 22 August 2011, the Bank appointed Mr Robert Moodie and Mr Geoffrey Reidy as its agents in respect of the Property.

Mr Yucel met with Mr Moodie on 22 August 2011. The next day he wrote to Mr Moodie:

On 23 August 2011, Mr Bieri's solicitors wrote to Ottoman's solicitors in the following terms:

On 26 August 2011, Mr Bieri's solicitors sent an email to the Bank's solicitors which included:

Settlement did not take place by 29 August 2011. There is no dispute before me that Ottoman was not in a position to settle that day, or at all.

Ottoman's solicitors contended that Mr Bieri's notice to complete of 12 August 2011 was not valid because, it was said, Mr Bieri was not on 29 August 2011 ready, willing and able to complete.

Ottoman's solicitors wrote to Mr Bieri's solicitors on 30 August 2011:

Before me, Mr Coles endeavoured to support that position, albeit only faintly. However, I see no basis to conclude that Mr Bieri was not ready, willing and able to complete on 29 August 2011. The fact that Mr Bieri was in default under his mortgage with the Bank did not have the effect that he was not able to deliver title to Ottoman and complete the Contract.

Indeed, it appears that the Bank was encouraging Mr Bieri to do just that.

Thus, on 29 August 2011, Mr Bieri's solicitors wrote to Mr Bieri as follows:

In correspondence with the Bank's solicitors, Mr Bieri's solicitors were at pains to make clear that Mr Bieri had not terminated the Contract.

Thus, on 30 August 2011, Mr Bieri's solicitors wrote to the Bank's solicitors:

Similarly, and a short time later the same day, Mr Bieri's solicitors sent a further indication to the Bank's solicitors as follows:

On 6 September 2011, Mr Bieri's solicitors wrote to Ottoman's solicitors:

That letter was expressed to be "without prejudice", but was admitted before me without objection. As can be seen in that letter, Mr Bieri's solicitors stated Mr Bieri "reserves [his] right to terminate the Contract”, thereby making clear that Mr Bieri had not by then terminated. Thereafter, in the letter, an offer to settle was made, the details of which I need not set out.

Ottoman's solicitors replied on 9 September 2011 in the following terms:

In his final submissions, Mr Southwick submitted that: "On 13 September 2011 the Plaintiff maintained [his] entitlement to terminate". That submission does reflect what happened. Thus, on 13 September 2011, Mr Bieri's solicitors wrote to Ottoman's solicitors as follows:

Again, Mr Bieri's solicitors asserted that Mr Bieri was "entitled to terminate", making clear that no such termination had occurred to date. The letter itself did not purport to be a termination of the Contract.

On 13 September 2011, Ottoman vacated the Property.

Leaving aside some communications between the solicitors concerning damage allegedly sustained to the Property during Ottoman's occupation (a complaint ultimately not pressed before me), there the matter rested.

No notice of termination was served.

That may have been because Mr Bieri and his solicitor lived in hope that the Contract would somehow complete.

During argument, I had this exchange with Mr Southwick

Quite. That does seem the likely reason.

Thereafter, the Bank exercised its power of sale over the Property, and by a transfer dated 14 December 2011, transferred the Property to third parties for $4.2 million.

Mr Bieri commenced these proceedings over two years later, on 13 February 2014.

The critical question in the proceedings is whether Mr Bieri terminated the Contract prior to Ottoman's purported termination on 7 April 2014.

In that regard, I turn first to Mr Bieri's pleaded case.

In par 14 of Mr Bieri's amended statement of claim it is pleaded:

Implicit in this pleading is the proposition that the statement in cl E of the 12 August 2011 notice to complete (set out at [19] above) that, absent settlement on 29 August 2011, "the contract will be terminated", was to have a self-executing operation; so that, without more, the Contract would terminate if settlement did not take place as called for.

However, this is to ignore the words of cl 9 of the Contract (set out at [7] above). Those words make clear that if Ottoman did not comply with a notice to complete (being a "notice under or relating to" the Contract for the purposes of cl 9) then Mr Bieri could (but was not obliged to) terminate "by serving a notice"; that is, a notice of termination.

In my opinion, unless and until Mr Bieri took that step, the balance of cl 9 was not enlivened (including any right to retain the deposit or sue for damages).

Assuming, in Mr Bieri's favour, that Ottoman repudiated its obligations under the Contract by not settling on 29 August 2011, Mr Bieri had an election to make. He could accept the repudiation, terminate the Contract and sue for damages. Or not.

As Mr Coles submitted:

In par 20 of the amended statement of claim, it is pleaded that Mr Bieri did accept Ottoman's repudiation of the Contract, "thereby bringing the Contract to an end".

How that was so was not revealed in the pleading.

It is, in any event, inconsistent with what actually occurred. In the circumstances I have described above, on 6 September 2011 and again on 13 September 2011 Mr Bieri's solicitors asserted Mr Bieri's entitlement to terminate. However, that entitlement was not, so far as the evidence reveals, ever exercised.

In par 21 of the amended statement of claim, it is pleaded that on 13 September 2011 the Bank "entered into possession of the property thereby terminating the Contract".

Again, how that was so was not revealed in the pleading. I do not see how the Bank taking possession of the Property had any effect on the rights of the parties to the Contract.

As the Bank's solicitors said in their letter to Mr Bieri's solicitor on 20 September 2011:

In his submissions, Mr Southwick put the matter a little differently.

Mr Southwick drew attention to Mr Bieri's solicitors’ letter of 23 August 2011, referred to at [22] above, requiring Ottoman to vacate the Property by 29 August 2011.

Mr Southwick submitted:

Mr Southwick submitted that Ottoman's subsequent vacation of the Property bespoke an acceptance by it that the Contract had been terminated.

I do not accept this submission for a number of reasons.

First, it is not pleaded.

Second, I do not see how it follows from the prohibition in the Contract against Ottoman parting with possession of the Property prior to completion (Mr Bieri having given Ottoman possession prior thereto: see cl 18.2 of the Contract set out at [8] above), and from Ottoman's obligation to vacate the Property if the Contract was terminated, that Ottoman's subsequent vacation of the Property somehow itself brought about the termination of the Contract.

Third, the submission cannot be reconciled with what actually happened between the parties.

In the same letter on which Mr Southwick relied, Mr Bieri's solicitors referred to the notice to complete expiring on 29 August 2011 and asserted that Mr Bieri would "after this date be entitled to terminate the Contract". That proposition, as I have said, was repeated in the solicitors’ later correspondence. All these letters asserted the existence of a right to terminate; none purported to effect such a termination.

My conclusion is that Mr Bieri did not terminate the Contract.

For that reason, what might otherwise have been Mr Bieri's entitlements under cl 9 did not arise. That is because of the language of cl 9. It is, in any event, consistent with the position that would obtain at general law: for example Sunbird Plaza Pty Ltd v Maloney per Mason CJ at 260 and Gaudron J at 273.

One of those entitlements would have been to retain the deposit. In my opinion, Mr Bieri has no such entitlement and he must now return the deposit.

In that regard, I accept the submissions made by Mr Coles:

Another of the entitlements under cl 9 might have been recovery of damages from Ottoman. In the events that have happened, Mr Bieri has no such entitlement.

In view of these conclusions, I do not need to consider Mr Coles's submission that, as a matter of construction of the Contract, and in particular of Special Condition 13, Mr Yucel has no personal liability for what might otherwise have been Ottoman's liability to Mr Bieri for damages.

Nonetheless, I will express my opinion, albeit briefly.

Mr Coles's submissions were as follows:

As to the belated decision by Mr Yucel to nominate Ottoman, rather than himself, as the purchaser, an earlier defence based on s 18 of the Australian Consumer Law (Cth) and the Contracts Review Act 1980 (NSW) was abandoned immediately before the hearing.

Mr Yucel executed the Contract on behalf of Ottoman.

Mr Coles suggested that he must have done so on the basis of s 127(1)(c) of the Corporations Act 2001 (Cth).

That being so, he executed the Contract on behalf of Ottoman in accordance with Special Condition 13 of the Contract (set out at [9] above).

If Special Condition 13 is to have any operation at all, it must have the effect, in the circumstances of this case, of imposing a personal liability on Mr Yucel. The fact that he may not have read or appreciated the effect of Special Condition 13 is, of course, irrelevant: Toll (FGCT) Pty Ltd v Alphapharm Pty Ltd [2004] HCA 52; 219 CLR 165 at [57] per Gleeson CJ, Gummow, Hayne, Callinan and Heydon JJ.

I invite the parties to bring in short minutes to give effect to these reasons.