Hawkes Menangle Pty Ltd v Brennan

1. [1]

   The plaintiff (purchaser) seeks an order for specific performance of a contract for the sale of land entered into on 8 December 2020 (the Contract) in respect of land situated at Menangle NSW 2568 (the Property). The plaintiff, Hawkes Menangle Pty Ltd, was the purchaser under the Contract. The defendants, Mr Brennan and Mr Holdsworth were the vendors (vendors). The plaintiff entered into the Contract as trustee for the Menangle Unit Trust.

2. [2]

   By summons filed on 19 July 2022, the plaintiff claims that the defendants wrongfully purported to terminate the Contract for breach, and that the Contract remains on foot. The defendants submit that the Contract was validly terminated for breach following the service of a notice to complete on 8 June 2022, and the passing of the time specified for completion of 24 June 2022.

3. [3]

   The primary dispute between the parties is whether that notice to complete was valid.

Background

1. [4]

   The Contract is in the form of the 2019 edition of the standard contract for the sale and purchase of land published by the Law Society of New South Wales and the Real Estate Institute of New South Wales. The Contract also contained a number of special conditions.

2. [5]

   The relevant terms of the Contract are:

   1. (1)

      The “contract date” is specified on the front page as 8 December 2020.

   2. (2)

      The “date for completion” is specified on the front page as “18 months after the contract date”.

   3. (3)

      The contract price was $1,250,000 with a deposit to be paid of $125,000.

   4. (4)

      Clause 15 provides:

   5. (5)

      The parties nominated that the Contract would be an electronic transaction to be arranged through the nominated electronic lodgement network operator, PEXA. This meant that cl 30 of the Contract applied. Relevantly, cl 30 provides:

   6. (6)

      Special condition 34.1 provides:

   7. (7)

      Clause 34.2 provides:

   8. (8)

      Clause 34.3 provides:

3. [6]

   The parties agree that s 52A(2)(b) of the Conveyancing Act 1919 (NSW) applied to the Contract. The effect of this is that terms, conditions and warranties prescribed in the Conveyancing (Sale of Land) Regulation 2017 (NSW) (Regulation) are incorporated into the Contract, as that form of the Regulation was in force at all material times. Clause 6 of the Regulation provides:

4. [7]

   By virtue of cl 6(1)(a)(ii), the term contained in cl 3 of Schedule 2 to the Regulation is implied into the Contract, which provides:

5. [8]

   On 8 December 2020, the purchaser paid the deposit in full, and contracts were exchanged.

6. [9]

   On the same day, the solicitor for the vendors sent a letter to the solicitors for the purchaser which stated:

7. [10]

   On 10 December 2020, the purchaser lodged caveat AQ632732 over the Property to protect its interest as purchaser under the Contract.

8. [11]

   On 14 December 2020, the vendors’ solicitor served a certificate pursuant to s 47 of the Land Tax Management Act 1956 (NSW) (land tax certificate) on the purchaser via its solicitors. That certificate indicated that the land was ‘clear’ of land tax, i.e. that there was no land tax charged on the land up to and including the 2020 tax year.

9. [12]

   On 9 March 2022, the vendors’ solicitor sent an email to the purchaser’s solicitor which relevantly stated (emphasis in original):

10. [13]

    The letter dated 9 March 2022 attached to the email stated relevantly:

11. [14]

    On the same day, the purchaser’s solicitor responded:

12. [15]

    On 19 May 2022, the vendors’ solicitor created a workspace in the PEXA electronic lodgement network (PEXA Workspace) that nominated the date and time of settlement as 8 June 2022 at 2:00pm. On that same day, the purchaser’s solicitor ‘accepted’ the settlement date and time within the PEXA Workspace. By 7 June 2022, there were four participants in the PEXA Workspace:

    1. (1)

       the purchaser’s solicitor, acting for the ‘Incoming Proprietor’;

    2. (2)

       the vendors’ solicitor, acting for the ‘Proprietor on Title’;

    3. (3)

       Westpac as the ‘Mortgagee on Title’; and

    4. (4)

       National Australia Bank (NAB) as the ‘Incoming Mortgagee’

13. [16]

    On 1 June 2022, the purchaser’s solicitor provided to the vendors’ solicitor a settlement schedule that stated 8 June 2022 as the date for settlement. After discussion between the solicitors, the purchaser’s solicitor provided an amended settlement schedule later on 1 June 2022 showing the amount due on settlement to be $1,105,019.41, with no change to the date for settlement. The adjustments in these settlement schedules for council rates and water rates were calculated on the basis that settlement would occur on 8 June 2022.

14. [17]

    Also on 1 June 2022, an updated land tax certificate was provided to the purchaser by the vendors’ solicitor, showing no land tax was charged on the land up to and including the 2022 land tax year.

15. [18]

    On 2 June 2022, the vendors’ solicitor sent to the purchaser’s solicitor a further revised settlement schedule showing the amount due on settlement to be $1,125,019.41 but kept the scheduled date for completion as 8 June 2022. The PEXA Workspace was updated by the defendants’ solicitor with this new “Amount due on Settlement” on the same day.

16. [19]

    On 8 June 2022, the settlement failed as not all participants in the PEXA Workspace were ‘ready’. In order to obtain ‘ready’ status in the PEXA Workspace all participants must have completed the required actions assigned to them by the system prior to settlement. Neither the purchaser’s solicitor nor NAB were ‘ready’ in order for settlement to occur.

17. [20]

    The scheduled time for completion on 8 June 2022 was 2:00pm. If a property settlement does not occur at the nominated time, it ‘rolls over’ in half-hour blocks. In this case the system attempted to settle again at 2:30pm and at half-hourly intervals thereafter until 5:00pm, at which point the PEXA Workspace was ‘locked’ and settlement could no longer occur.

18. [21]

    On 9 June 2022, at 9:20am, the vendors’ solicitor sent an email to the purchaser’s solicitor which stated:

19. [22]

    The purchaser’s solicitor responded by email at 10:56am on the same day which stated: “Thanks for your patience, we are awaiting instructions from client/bank and will hopefully have a reply soon”.

20. [23]

    At 11:13am on 9 June 2022, the vendors’ solicitors served a notice to complete on the purchaser’s solicitor by email which nominated 3:00pm on 24 June 2022 as the time for completion in the PEXA Workspace. The notice to complete states relevantly (emphasis in original):

21. [24]

    On 20 June 2022, the vendors’ solicitor sent an email to the purchaser’s solicitor stating:

22. [25]

    On 22 June 2022, the purchaser’s solicitor replied by email to the vendors’ solicitor stating:

23. [26]

    On 23 June 2022, at 4:25pm the purchaser’s solicitor sent an email to the vendors’ solicitor requesting that the time for settlement be extended from 24 June to 29 June 2022. Later the same day, at 4:47pm, the purchaser’s solicitor sent a letter to the vendors’ solicitor in the following terms:

24. [27]

    On 23 June 2022, at 4:52pm, the vendors’ solicitors responded to the first email referred to in [26] refusing the request to extend the date for settlement to 29 June 2023.

25. [28]

    Settlement did not occur on the PEXA workspace at 3:00pm on 24 June 2022. The purchaser’s solicitor did not accept the settlement date and time, nor did NAB.

26. [29]

    On Friday, 24 June 2022, at 3:04pm, the vendors’ solicitor responded to the second email referred to in [26] rejecting the contention that the notice to complete was invalid. An “unfinished version” of a letter setting out the reasoning behind that rejection accompanied the email. On Monday, 27 June 2022, a “complete version” of that letter was sent to the purchaser’s solicitor by email.

27. [30]

    On 24 June 2022, at 3:29pm, the purchaser’s solicitor sent an email to the vendors’ solicitor repeating its claim that the notice to complete was invalid, and stated:

28. [31]

    At 4:26pm on the same day, the vendors’ solicitor sent an email to the purchaser’s solicitor which rejected that contention again, and at 4:55pm served a notice of termination purporting to terminate the Contract. The email of the vendors’ solicitor stated relevantly (emphasis in original):

29. [32]

    On 27 June 2022, the purchaser’s solicitor sent an email to the vendors’ solicitor attaching a letter from NAB dated 23 June 2022 stating that NAB had formally approved a loan to the purchaser of $875,000, and that “the loan documents are in the process of being generated”. The PEXA Workspace records show that the purchaser signed the loan documents required by NAB and NAB created a mortgage document on around 8 July 2022.

30. [33]

    On 8 July 2022, the purchaser’s solicitor (now a different firm), sent a letter to the vendors’ solicitor claiming that the Contract was invalidly terminated.

31. [34]

    On 19 July 2022, the purchaser filed the summons.

Issues

1. [35]

   The purchaser contends that the Contract was not validly terminated because:

   1. (1)

      the completion date under the Contract was 9 June 2022, not 8 June 2022;

   2. (2)

      the notice to complete was invalid, because it was served before the contractual right to serve such a notice had accrued, being 3:30pm on the completion date;

   3. (3)

      further, or in the alternative, the notice to complete was invalid because it was served within 14 days after the service of a valid land tax certificate (1 June 2022).

2. [36]

   The vendors contend that the notice to complete and, therefore, the notice of termination were valid because the parties agreed after the Contract was entered into that the date for completion was 8 June 2022, and the date of service of a land tax certificate is irrelevant to whether the notice to complete was valid.

3. [37]

   Accordingly, the issues which arise are:

   1. (1)

      Whether the date for completion was 8 or 9 June 2022;

   2. (2)

      Whether the notice to complete served on 9 June 2022 was invalid for either of the reasons stated in 35 (2) and (3) above.

Issue 1: Date for completion

1. [38]

   The purchaser submitted that the words ‘18 months after the contract date’ should be interpreted to mean that the 18-month period began on 9 December 2020 and did not expire until the end of 8 June 2020, so that the date fixed for completion was 9 June 2022 being the first day after expiry of the 18 month period.

2. [39]

   The purchaser relies on the decision of Ward J (as her Honour then was) in Proctor v Chahl [2008] NSWSC 1252. In that case a contract for sale of land which was entered into on 20 June 2006 stated on the front page that the date for completion was ‘12 months after the date of this Contract’. The vendors contended that the completion date was 20 June 2007 and completion not having occurred on that date, served a notice to complete on 21 June 2007 requiring completion to occur on or before 3pm on 6 July 2007. When completion did not occur by that time on 6 July 2007, the vendors terminated the contract. Her Honour held that the notice to complete was not valid because it was issued prior to the purchasers being in breach of the obligation to complete. Her Honour concluded that the first day for the calculation of the 12‑month period was 21 June 2006, and that the entire period had to expire before completion could be required so that the completion date was 21 June rather than 20 June 2007. Her Honour said at [39] (emphasis in original):

3. [40]

   I agree with the purchaser’s submission that, applying the reasoning in Proctor, the 18-month period began on 9 December 2020 and concluded at the end of 8 June 2022, so that the date for completion under the Contract was 9 June 2022.

4. [41]

   The defendants do not dispute the correctness of Proctor but rather contend that the parties varied the date for completion by agreeing to a new completion date of 8 June 2022, evidenced by the parties’ correspondence and actions in the PEXA Workspace, being:

   1. (1)

      the correspondence from the vendors’ solicitor to the purchaser’s solicitor on 8 December 2022, 9 March 2022 and 20 June 2022 stating the date for completion as 8 June 2022 (see [9], [12], [13] and [24] above); and

   2. (2)

      the two emails from the purchaser’s solicitor to the vendors’ solicitor on 1 June 2022, attaching settlement schedules showing the date for settlement as 8 June 2022 (see [16] above).

   3. (3)

      the email from the purchaser’s solicitor to the vendors’ solicitor on 24 June 2022 which stated that “settlement in accordance with the contract was due 8 June 2022” (see [30] above).

5. [42]

   Further, the vendors point to the acceptance by the purchaser’s solicitor on 19 May 2022 of the settlement date and time in the PEXA Workspace, as noted at [15] above, as indicating that there was agreement between the parties that completion was to occur at 2:00pm on 8 June 2022.

6. [43]

   In order to succeed on this argument, the vendors must show that the Contract has been varied by the alteration of the completion date from 9 June 2022 to 8 June 2022. The significance of the characterisation of the alteration of the completion date as a variation of the Contract is that because the Contract was required to be in writing by s 54A of the Conveyancing Act 1919, any variation to it will only be enforceable if also evidenced in writing: Morris v Baron & Co [1918] AC 1 at 16 and 31; Dowling v Rae [1927] HCA 5; (1927) 39 CLR 363 at 370–371; Phillips v Ellinson Bros Pty Ltd [1941] HCA 35; (1941) 65 CLR 221 at 234, and 243–244; Radoman Pty Ltd v Vexapu Pty Ltd (2008) 13 BPR 24,903; [2008] NSWSC 8 at [32].

7. [44]

   Section 54A(1) of the Conveyancing Act 1919 provides:

8. [45]

   The vendors have the onus of proof in relation to this argument because a party seeking to rely upon the validity of a notice to complete (whether as a plaintiff or as a defendant) bears the onus of establishing that fact: Sandpiper Kooragang Pty Ltd v Fortis Products Pty Ltd (2020) 19 BPR 40,689; [2020] NSWSC 1256 at [64].

9. [46]

   In Phillips v Ellinson Bros, Williams J referred to the distinction between a parol variation of a contract required to be in writing (which is unenforceable) and an arrangement made orally as to the mode of performance of such a contract (which can be enforced despite the lack of writing). His Honour said at 243:

10. [47]

    An example of an arrangement to alter the mode of performance which is not required to be in writing is the postponement of the settlement date under a contract for sale of land to a later date: Morris v Baron at 31; Inness v Waterson A/T for Cobok Family Trust [2006] QCA 155 at [3].

11. [48]

    In my view, the bringing forward of the completion date from 9 to 8 June 2022 cannot be regarded as a mere alteration of the mode of performance of the Contract, because if it is binding, the effect would be to prevent the Contract from being enforced in its unaltered form: the purchaser could no longer tender performance of its obligation to complete on 9 June 2022 under the Contract in its unaltered form (and would potentially be liable to damages for failure to complete on the altered completion date): see McCausland v Duncan Lawrie Ltd [1997] 1 WLR 38 at 47; Radoman at [36].

12. [49]

    There is a distinction between, on the one hand, a variation of a contract by a discharge of the original contract and the creation of a new contract and, on the other, a further contract which merely varies one or more terms of the original contract which remains on foot, subject to the variations made by the further contract: Commissioner of Taxation v Sara Lee Household & Body Care (Australia) Pty Ltd (2000) 201 CLR 520; [2000] HCA 35 at [22]–[24]. Which of these two alternatives applies is a question of the intention of the parties (see Sara Lee at [23]-[24]), but in each case there are two contracts.

13. [50]

    In the present case, if the Contract has been varied by the alteration of the completion date this would involve a further contract between the parties of the second kind referred to in Sara Lee. However, in order for such a further contract to be binding it would need to be supported by consideration and comply with s 54A of the Conveyancing Act. If a contract of that kind is not established, the Contract will remain on foot unaltered.

14. [51]

    In my opinion, there has been no variation of the Contract for the following reasons. First, it is apparent from the evidence referred to at [41]–[42] that the proposal for completion to occur on 8 June 2022 was made by the vendors’ solicitor and came about not because of an intention to vary the Contract, but rather by reason of an error made by the vendors’ solicitor in the construction of the relevant words of the Contract (ie. “18 months after the contract date”) as requiring completion within 18 months of the contract date: see [13] above. The purchaser’s solicitor went along with the vendors’ suggestion as to what that form of words meant, but did not evince an intention to vary the Contract. In particular, there is no evidence to suggest that either the vendors’ solicitor or the purchaser’s solicitor (let alone their respective clients) had any intention to change the completion date from 9 June to 8 June 2022. Whether the parties to a contract have by a later contract varied that contract depends ultimately on the intention of the parties as noted above, and absent proof of that intention, there can be no variation.

15. [52]

    Second, irrespective of whether the solicitors for the parties intended to change the completion date from 9 to 8 June 2022, the difficulty for the vendors is that there is no document or documents in evidence which can be regarded as an agreement in writing to vary the completion date or a memorandum or note thereof, signed by the parties to the Contract or a person authorised to sign it on their behalf.

16. [53]

    While the solicitors for the parties have communicated by email to each other and made entries in the PEXA Workspace regarding a completion date of 8 June, a solicitor retained by the client to act on a conveyancing transaction does not, absent actual authority, have authority (either implied or ostensible) to vary a contract on behalf of his or her client: Pavlovic v Universal Music Australia Pty Ltd (2015) 90 NSWLR 605; [2015] NSWCA 313 at [137]-[155]; Nowrani Pty Ltd v Brown [1989] 2 Qd R 582 at 586; Inness v Waterson at [49]–[50]; H Clark (Doncaster) Ltd v Wilkinson [1965] 1 Ch 694 at 702; GE Dal Pont, Law of Agency (4th ed, Lexis Nexis, 2020) at [8.28].

17. [54]

    There is no evidence before the Court to suggest that the plaintiff’s solicitor had actual authority to vary the Contract. The only document in evidence which refers to the instructions given by the purchaser to its solicitor regarding the completion date is the email set out at [14] above, but this merely states that the purchaser had confirmed it would be ready to settle “in accordance with the contract”. On its proper construction, the Contract required settlement on 9 rather than 8 June 2022.

18. [55]

    Third, the procedures followed in the PEXA Workspace do not alter these conclusions. It was submitted for the vendors that the making of the entries in the PEXA Workspace whereby the solicitors for the parties “accepted” a completion date and time of 8 June 2022 at 2:00pm had the effect of altering the completion date to that date through the operation of cl 30 of the Contract. Clause 30 sets out a regime for completion of the Contract as an electronic transaction. It contemplates that the “date for completion” will be entered into the Electronic Workspace, and prima facie this would be the date prescribed on the front page of the Contract. However, cl 30 must be read in light of the Contract as a whole, including cl 15 which (through the word “by”) contemplates that the parties may endeavour to complete on an earlier date. Nevertheless, unless the Contract is varied to alter the “date for completion”, the failure to complete on that earlier date would not be a breach of the Contract entitling the vendors to serve a notice to complete under cl 34.1. There is nothing in cl 30 to alter that conclusion. Further, once it is accepted that in order for the alteration of the completion date to be legally effective a variation of the Contract was necessary, the taking of the steps to implement completion of the Contract by entries in the PEXA Workspace could not, without an instrument complying with s 54A of the Conveyancing Act signed by a person with authority to bind the purchaser, achieve that result. As stated above, the purchaser’s solicitor did not have that authority.

19. [56]

    I note that the vendors did not advance an argument that the matters referred to at [41]–[42] gave rise to an estoppel which precluded the purchaser from denying that the completion date had been varied.

20. [57]

    It follows in my view, that the completion date was 9 June 2022.

Issue 2: Whether the notice to complete was valid

1. [58]

   It follows from the conclusion that the completion date under the Contract was 9 June 2022, that the notice to complete which was served before 3:30pm on that day was not authorised by cl 34.1 of the Contract and was therefore invalid. The notice of termination served on 24 June 2022, based as it was on the failure of the purchaser to comply with the invalid notice to complete, was also invalid.

2. [59]

   While the purchaser’s alternative argument does not arise in light of this conclusion, I will deal with it briefly, upon the assumption that I am wrong in the conclusion that the completion date was 9 June rather than 8 June 2022. On that premise, the vendors were entitled to give a notice to complete on 9 June 2022 under cl 34.1 provided that they were the innocent party (ie. not in breach of the Contract), and ready, willing and able to perform their obligations as and when required to be performed up to and including completion: Carrapetta v Rado (2012) 16 BPR 30,997; [2012] NSWCA 202 at [27]. Breaches which are minor or trivial, or are not connected with the securing of completion of the contract, will not preclude a party in breach from serving a notice to complete: Sandpiper at [70]. The exception for breaches which are minor or trivial is based on the de minimis principle (McNally v Waitzer [1981] 1 NSWLR 294 at 300–301) and this principle applies equally to cl 34.1 of the Contract which precludes a party from issuing a notice to complete if that party is “in default under this Contract”.

3. [60]

   In the present case, the vendors were in breach of cl 3 of sch 2 to the Regulation at the time they served the notice to complete, because they had failed to serve the land tax certificate at least 14 days before completion, having served it only seven days before completion. However, that breach falls into the category of a minor or trivial breach because the land tax certificate served on 1 June 2022 showed that the land was clear of any charge for land tax. Hence nothing turned on the failure of the vendors to serve it 14 days before completion. Accordingly, if the completion date had been 8 June rather than 9 June 2022, the notice to complete served on 9 June would not have been invalid.

Conclusion

1. [61]

   For the above reasons the notice to complete dated 9 June 2022 and the notice of termination dated 24 June 2022 are both invalid and that the Contract is valid and subsisting and remains on foot. The plaintiff is entitled to declarations to that effect. The plaintiff is also entitled to an order for specific performance of the Contract.

2. [62]

   There is no reason, in my view, why costs should not follow the event and the Court will make an order that the defendants should pay the plaintiff’s costs of the proceedings.

3. [63]

   The summons sought additional relief, including damages or equitable compensation but there was no argument in relation to the additional relief and it was not pressed.

4. [64]

   I direct the parties to confer and within seven days submit a form of short minutes of order to give effect to these reasons.