Barrak Corporation Pty Ltd v Jaswil Properties Pty Ltd

THE COURT: On 23 October 2014, the appellant as vendor and respondent as purchaser entered into a contract for the sale of land at Parramatta. For ease of reference in these reasons, we refer to the appellant as the Vendor and the respondent as the Purchaser. The contractually agreed date for completion of 30 January 2015 having passed, the Vendor, on 2 February 2015, issued a notice to complete, requiring completion “on or before 3 pm on Tuesday 17 February 2015”. Time was made of the essence.

The contract was not completed on or before 17 February 2015 for reasons that are discussed below. On 26 February 2015, the Vendor gave notice of termination of the contract. The Purchaser brought proceedings in the Equity Division of the Supreme Court, seeking a declaration that the contract had not been terminated and an order for specific performance. Alternatively, the Purchaser sought the return of the deposit. The Purchaser also sought equitable relief should the contract have been validly terminated.

The matter was heard and determined by Bergin CJ in Eq on 9 April 2015. Formal orders in the matter were made by her Honour on 13 April 2015. Her Honour held that the contract had been validly terminated but granted to the Purchaser equitable relief by way of an order that the parties complete the contract no later than 30 April 2015. In respect of that order, time was of the essence. The contract was ultimately completed on 21 April 2015.

Her Honour also declared that the Vendor was entitled to the payment of interest on the balance of the purchase price under further cl 33 of the contract, calculated daily from and including 31 January 2015 until and including the day of completion. Her Honour further ordered the Purchaser to pay to the Vendor at completion its costs, on an indemnity basis, of the issue of the notice to complete in the sum of $330 and the notice of termination, also in the sum of $330.

The Vendor appealed against her Honour’s orders granting equitable relief to the Purchaser and sought by way of relief on the appeal, a declaration that the contract had been terminated and that the Vendor was entitled to forfeit the deposit. The Vendor also sought orders under the Uniform Civil Procedure Rules 2005 (NSW) (UCPR), r 51.54 that the Purchaser re-transfer the land to the Vendor against a refund of the purchase price.

The Purchaser cross-appealed against her Honour’s orders, contending that her Honour had erred in her finding that the contract had been terminated by the Vendor on or about 26 February 2015. The Purchaser sought declarations that the contract had not been terminated and remained effective and on foot as at 13 April 2015, the date upon which the orders were made. The Purchaser also sought an order that the matter be remitted for the determination of damages.

The Vendor and the Purchaser entered into a contract for the sale of land at Parramatta on 23 October 2014. That contract was in the form of the 2005 edition of The Law Society of NSW and The Real Estate Institute of NSW standard form “Contract for the Sale of Land”. The contract contained a number of special conditions, none of which are relevant to the issues on the appeal, other than in the manner in which they were executed. The sole director and secretary of the Vendor was Mr Barrak, who executed the contract in that capacity in accordance with the Corporations Act 2001 (Cth), s 127(1).

Mr Barrak was also the principal of Barrak Lawyers, the solicitors for the Vendor on the transaction. Legal One Services Pty Ltd (Legal One) acted for the Purchaser.

The contract contained terms as to the preparation of the form of transfer: cl 4; the contractual consequences in the case of the Purchaser’s default: cl 9; the completion date: cl 15; and the obligations on completion of the Vendor and Purchaser respectively: cl 16. The contract, in cl 20, also contained certain miscellaneous provisions.

The terms of these provisions were as follows:

Clause 32 provided for the circumstances in which either party was entitled to give a notice to complete:

Clause 4 imposed upon the Purchaser an obligation to serve upon the Vendor the form of transfer of the property. In all, the Purchaser’s solicitors forwarded three forms of transfer to the Vendor’s solicitors. The first transfer, forwarded on 24 October 2014, contained a spelling error in the Vendor’s name. Mr Barrak wrote to the Purchaser’s solicitor, Ms Raic, on 28 October 2014, pointing out the error and querying whether she wished Barrak Lawyers to “amend and initial the amendment”, or whether she preferred to provide a fresh transfer. Ms Raic opted for the latter course and forwarded a second form of transfer correcting the spelling error.

On 23 January 2015, Ms Saab, from Legal One, advised Mr Barrak that in order to avoid penalty interest they wished to stamp the transfer prior to settlement and asked whether Mr Barrak was “happy” to receive a fresh transfer. Mr Barrak’s agreement with this course was important, as pursuant to cl 4.1 of the contract, the Purchaser was required to provide a form of transfer at least 14 days before the completion date. That date, as already mentioned, was 30 January 2015. Mr Barrak acceded to this request.

Arrangements were made for completion on Friday 30 January 2015. However, on 29 January 2015, Legal One advised Barrak Lawyers that the Purchaser’s lender was not able to complete at the time arranged and said they would be in contact the following week to reschedule settlement.

On Monday 2 February 2015, Barrak Lawyers issued a notice to complete, signed by Mr Barrak, in the following terms:

On 12 February 2015, at the Purchaser’s solicitor’s request, a settlement time of Monday 16 February 2015 at 2:30 pm was agreed. In the ensuing days the parties’ solicitors exchanged correspondence in relation to settlement figures. On 16 February 2015, Mr Barrak prepared settlement instructions for his legal clerk, Ms Barrak, including details of the documents to be handed to Legal One on settlement. This included the “Transfer duly executed and stamped”.

The manner of execution of the transfer became central to what occurred thereafter and to the issues in the proceedings. Above the notation on the transfer form “Signature of the transferor” (section (J)), Mr Barrak signed his name. Ms Barrak witnessed his signature. There was no statement or other indication on the transfer that Mr Barrak had executed the transfer as the sole director/secretary of the Vendor in accordance with the Corporations Act, s 127 and it was common ground in the proceedings that he had not done so. In his evidence, Mr Barrak said he had intended to execute the transfer in the name of the Vendor, but that he did not turn his mind to the proper form of execution as required by the Corporations Act, s 127.

At the settlement on 16 February 2015, the Purchaser was represented by a settlement agent. Westpac, the Purchaser’s lender, was represented by its lawyers HWL Ebsworth. Ms Barrak attended on behalf of the Vendor. Both the Purchaser and its lender had all necessary documents and cheques required for the settlement to proceed. However, when Ms Barrak handed over the form of Transfer, the Purchaser’s settlement agent pointed out that the transfer had been incorrectly executed, as it did not bear the form of words necessary for execution by a company pursuant to the Corporations Act, s 127.

Although Ms Barrak protested that the Purchaser should have advised ahead of time that this was the case, the Purchaser’s settlement clerk advised her that the Purchaser’s lender required the transfer to be executed by the Vendor pursuant to the Corporations Act. He added that the matter could be easily fixed by having Ms Barrak’s principal authorise her to amend the transfer by handwriting the necessary attestation clause on it. He further advised that this was suitable to the lender’s solicitor.

Ms Barrak attempted to contact Mr Barrak but was unable to do so. She informed the other parties that she had left a message for him and advised that she had to leave because she was busy. The Purchaser’s settlement agent indicated to her that if she stayed the matter could be easily fixed, but also added that Legal One would continue to try to contact Mr Barrak. The agent’s attempts to do so, however, were unsuccessful.

Later that day, Ms Eid of Legal One emailed Mr Barrak indicating that settlement had not been able to occur because the Vendor had executed the transfer in a personal capacity, as opposed to execution by a company. She requested that settlement be rebooked for the following day, 17 February 2015 at 2:30 pm.

Although there was a heated telephone conversation on the morning of 17 February 2015 between Mr Barrak and Ms Eid of Legal One as to whose fault it was that settlement had not proceeded the previous day, Mr Barrak nonetheless agreed to contact the Vendor’s mortgagee, AMP, for the purposes of rescheduling settlement at 2:30 pm as requested. However, AMP advised that it required three days’ notice of a settlement date and was thus unable to settle that afternoon.

At 11:30 am on 17 February 2015, Ms Eid attended at Barrak Lawyers with a fresh transfer, together with a covering letter confirming that settlement was booked for 2:30 pm that day. The form of transfer provided on that occasion had the necessary notation for execution by a company for the purposes of the Corporations Act, s 127.

Ms Eid together with Westpac’s solicitors attended at the appointed place for settlement at 2:30 pm. At 2:34 pm, Ms Eid emailed Mr Barrak, advising that they were present for the purposes of settlement and, by reference to the notice to complete and without admitting its validity, that the Purchaser was “ready willing and able to complete” that day. The email acknowledged that the Vendor’s mortgagee might require additional time to re-book settlement, but stated that the Purchaser could not be held responsible for that. Ms Eid further advised that the Purchaser was “happy to rebook settlement at your bank’s first available opportunity”.

Ms Eid also sought an acknowledgement from Mr Barrak that the Vendor was not able to terminate the contract pursuant to the notice to complete as the purchaser was ready willing and able to complete. Mr Barrak, in reply, stated that “the notice to complete stands valid” and that the Vendor was considering its position “in light of … the history of the matter”. In an email in reply on 18 February 2015, Legal One rejected the Vendor’s contentions.

On 20 February 2015, the Purchaser served a notice to complete. Following further emails between the parties, the Vendor served a notice of termination of contract on the Purchaser on 26 February 2015. The notice was relevantly in the following terms:

On 6 March 2015, shortly after receipt of the notice of termination, the Purchaser commenced the proceedings which are the subject of the appeal.

The primary judge observed, at [72], that the first time that the Purchaser through its agents became aware that the transfer had not been executed in accordance with the Corporations Act, was at the settlement on 16 February 2015. Her Honour, however, found, at [73], that it was the Purchaser’s obligation to include in the form of transfer provided to the Vendor the proper clause for execution as a corporation. Her Honour was also satisfied that it was the Purchaser’s obligation to ascertain the manner in which execution was to occur, so as to include the appropriate clause in section (J) of the transfer.

Her Honour concluded, at [81], that settlement could have been effected on 16 February 2015 had the Purchaser included the appropriate execution clause on the transfer. Her Honour observed that a transfer with the correct execution clause was not provided to the Vendor until 11:30 am on 17 February 2015, just three hours before the time the Purchaser had fixed for settlement, and three and a half hours before the expiry of the essential time stipulation in the Vendor’s notice to complete of 2 February 2015.

Her Honour was critical of the Purchaser for not having arranged a time for settlement earlier than 16 February. Her Honour, at [86], considered that a prudent purchaser who had failed to complete within the time specified by the contract would make some time allowance in arranging a settlement time within an essential time period specified in a notice to complete, to take account of the possibility that a problem might occur. Whilst these observations perhaps provide sage conveyancing advice, they do not reflect, and we do not understand her Honour to have intended that they reflect, any legal principle. However, such conduct may be a factual circumstance relevant to relief in a given case.

Her Honour concluded, at [88]-[89], as follows:

We have concluded, contrary to her Honour’s finding, that the Vendor was not entitled to give a notice of termination on 26 February 2015.

It is a fundamental principle of land law that a party who seeks to terminate a contract for breach of an essential stipulation, must itself be ready, willing and able to complete. As was explained by Reynolds JA in McNally v Waitzer [1981] 1 NSWLR 294 at 296, “the vendor must show that he is willing and able to provide the full consideration which is to pass from him at the due time”. See also Hutley JA at 303. The principle is well established and it is not necessary to review the authorities: this has been done many times in other cases. It is sufficient for the Court to refer to the following.

In Malouf v Sterling Estates Development Corporation Pty Ltd [2002] NSWSC 920 Young CJ in Eq (as his Honour then was) observed, at [36]:

To the same effect is the statement of Kourakis J in Kraguljac v A & B Property Developments Pty Ltd (No 2) [2012] SASC 1 at [92]. His Honour, after reviewing the authorities, observed, relevantly:

Clause 4.1 required the Purchaser to serve the form of transfer on the Vendor. Pursuant to the Real Property Act 1900 (NSW), s 46, where land under the Act is intended to be transferred, the proprietor of the land is required to execute a transfer in the approved form. “Approved form” is defined in s 3 of the Act to mean:

Section 104 provides:

Each transfer served by Legal One took the form of Form 01T, an electronically generated version of the Registrar-General’s approved form of transfer. The text of section (J) of approved Form 01T varies depending on the method of execution selected. The text of section (J) of approved Form 01T, as provided on each occasion by Legal One to Barrak Lawyers, was in the following form:

Clause 9 of the contract provided that the Vendor was entitled to terminate by notice for non-compliance with an essential term of the contract. Non-compliance with cl 4 did not constitute a breach of an essential term of the contract, as the Vendor’s counsel readily acknowledged. However, the Vendor had made time of the essence in its notice to complete. The time for completion, thus made essential, was binding on both parties: Halfpenny v Wilson (1967) 87 WN (1) (NSW) 547; Falconer v Wilson [1973] 2 NSWLR 131 at 145 per Mahoney J.

Where a transferor is a company, there are several ways in which the company can execute a transfer. Under s 106 of the Real Property Act, ss 127 to 129 of the Corporations Act are taken to apply to the execution of instruments under the Real Property Act as if those provisions formed part of the Real Property Act.

Under s 127(2) of the Corporations Act, a company with a common seal may execute a document if the seal is fixed to the document and the fixing of the seal is witnessed by:

Under s 127(1), a company may execute a document without using a common seal if the document is signed by:

Section 129(5) provides that a person may assume that a document has been duly executed by a company if the document appears to have been signed in accordance with s 127(1) in that:

Under s 129(6) a person may assume that a document has been duly executed by a company if the company’s common seal appears to have been fixed to the document in accordance with s 127(2) and the fixing of the common seal appears to have been witnessed in accordance with s 127(2).

Mr Barrak’s signature on the first three transfers, purporting to be the transferor, as opposed to the sole director/secretary of the Vendor, would not satisfy s 127 of the Corporations Act. It is common ground that the third transfer, executed as it was, was therefore ineffective to satisfy the obligations of the Vendor under cl 16 to cause an estate in fee simple in the property to pass to the Purchaser, subject to any necessary registration.

The Vendor accepted that it was, therefore, not ready, willing and able to complete on 16 February 2015, the date upon which the parties had agreed to settle. At that time the Vendor was unable to give to the Purchaser the necessary documentation to pass title, in this case a transfer duly executed by the Vendor, as was its obligation under cl 16 of the contract. However, as at 16 February 2015, neither party was in breach of the time provision made essential by the notice to complete, which did not expire until the following day. As we have already observed, the Purchaser made arrangements to have the contract completed on the following day.

However, whilst the Vendor was able to rectify the deficiency in the form of transfer by Mr Barrak signing it as sole director/secretary pursuant to s 127 of the Corporations Act, it was not able to arrange for its mortgagee to be present the following day. Accordingly, the Vendor was still not in a position to settle on 17 February 2015 as it was unable on that date to provide a form of discharge of mortgage. It was thus unable to ensure that legal title to the property would pass to the Purchaser as required by the essential terms of cl 16.3 of the contract.

In the result, the Vendor was not ready, willing and able to complete the sale on 17 February 2015 and thus was not entitled to terminate the contract on 26 February 2015 in reliance on the Purchaser’s failure to complete on 17 February 2015.

We do not agree with her Honour’s finding at [86] that the Purchaser was in default of the time provision made essential by the notice to complete. In this regard, it is apparent that her Honour considered that the contract had not been completed because of the Purchaser’s failure to provide a form of transfer for execution by a company, which in turn caused the settlement not to proceed on 16 February. However, for the reasons we have given, it was the Vendor who was not ready, willing and able to complete within the time period made essential by the notice to complete, whereas the Purchaser was so ready willing and able.

The Vendor sought to counter the argument that it was not ready willing and able to complete on 17 February 2015 with the contention that completion had not occurred on 16 February because of the Purchaser’s breach of cl 4.1 of the contract, in not having served a transfer in a form that the Vendor could execute without altering the wording. The Vendor submitted that its only obligation was to execute the form of transfer submitted by the Purchaser. This was so regardless of whether that meant that at settlement it proffered a transfer that had not been duly executed by the Vendor. On this view, as its only obligation was to execute the form of transfer that had been served on it by the Purchaser, the Vendor was not in breach of its own obligations under cl 16.

We do not accept that a vendor’s only obligation in respect of the transfer is merely to execute the form of transfer served by a purchaser and that if the execution clause is inapt the vendor is nonetheless entitled to sign the transfer in a manner that prevents it being a registrable instrument. To uphold the Vendor’s argument would create serious difficulties for conveyancing practice, particularly since on the Vendor’s argument it was not required to bring the defect to the Purchaser’s notice. Given that many contracts of sale of land are completed in the shadow of the date set by a notice to complete, the consequences for conveyancing practice are obvious.

We should add that Mr Rollinson, who appeared for the Vendor, accepted that it was open to the Vendor to change the wording in the printed execution clause to ensure that the executed transfer was in registrable form.

The second step in the Vendor’s argument was, as the primary judge held at [88], that the Purchaser had then given an unreasonable period of notice to complete by nominating a time for settlement at 2.30 pm on 17 February 2015. On this argument, the time was unreasonable because, as is common in conveyancing transactions, the Vendor’s mortgagee required three days’ notice of the date for settlement.

In our opinion, the events of 17 February 2015 bear a different complexion to that given to them by the primary judge. The fact that the Purchaser tried to set up settlement on 17 February did not involve it giving unreasonable notice to the Vendor. The Vendor did not withdraw the notice to complete when settlement did not occur on 16 February 2015. The notice to complete therefore remained operative and the Purchaser risked being in breach of an essential term of the contract if it was not ready, willing and able to complete by 3.00 pm on 17 February 2015. Thus the steps taken by the Purchaser on 16 February 2015 to reschedule the settlement for the following day were appropriate and indeed, from its point of view, necessary. The Vendor remained under the same obligation to settle by the time specified in the notice but was unable to do so.

In seeking to support her Honour’s argument, the Vendor placed particular reliance upon Strickland v Grieve (1996) NSW ConvR ¶55-762. Strickland v Grieve was concerned with whether a vendor was entitled to interest on the purchase price from the due date for completion until the actual date of completion. The relevant contractual clause provided that the vendor was so entitled should the delay in settlement occur, “otherwise than for the delay or fault on the part of the vendor”. The due date for completion passed in circumstances where the vendor was not in possession of the certificate of title, as a transmission application necessary to place title in the vendor’ name had not been registered. The purchaser’s lender required 3 days’ notice of settlement. Settlement was arranged 6 days after the vendor gave notice that he was ready to settle. It was at that point that the vendor claimed 6 days interest on the balance of the purchase price.

Young J held that the vendor was not entitled to interest. In his Honour’s view, parties to a contract for sale are expected to give each other a reasonable time in which to make all necessary arrangements for settlement. As the vendor was not ready to settle on the due date for completion, he was required to give the purchaser a reasonable time in which to complete so as to accommodate necessary arrangements to do so, including arranging for the incoming mortgagee to attend.

We consider that the Vendor’s reliance on Strickland v Grieve was misplaced. That case was not one where time had been made an essential term of the contract, as was the case here. For the reasons we have explained, the Vendor was not able to complete the contract within the time made essential by the notice to complete. It was not therefore in a position to terminate for the Purchaser’s failure to complete within the time specified in the notice. Contrary to the finding of the trial judge at [89], there had been no breach of an essential term by the Purchaser.

Mr Ashhurst SC, who appeared with Mr Rogers for the Purchaser, accepted that if the Purchaser was in breach of cl 4.1 of the contract, it would not have been open to the Purchaser to terminate the contract by reason of the Vendor’s breach. This would be so, as the argument went, because the Purchaser’s non-essential breach contributed to the Vendor’s breach of an otherwise essential term: Trollope & Colls v North West Metropolitan Regional Hospital Board [1973] 1 WLR 601 at 607 (House of Lords); Champion Home Sales Pty Ltd v DCT Projects Pty Ltd [2015] NSWSC 616 at [156] per Ball J. The application of what Mr Ashhurst described as the “prevention principle” would not operate to convert a breach of cl 4.1 from an inessential to an essential breach. Nor does it mean that the Vendor was ready, willing and able to complete at any time prior to the expiration of the notice to complete.

It follows, in our opinion, that because the Vendor was not ready willing and able to complete the contract within the time made essential by the notice to complete, the Vendor was not entitled to terminate the contract on 26 February 2015. In any event, on the view we have taken of the circumstances that occurred on 16 and 17 February 2015, the Purchaser was not in breach of the essential time provision, and the Vendor did not contend that there was any other essential breach giving it an entitlement to terminate: Shepherd v Felt & Textiles of Australia Ltd [1931] HCA 21; 45 CLR 359.

There is another possible answer to the Vendor’s reliance upon the Purchaser’s conduct in having served a wrong form of transfer for execution by the Vendor, namely, that the Vendor waived the Purchaser’s contractual obligation under cl 4.1 to serve a form of transfer that was appropriate for execution by a corporation.

In Falconer v Wilson the purchaser gave a notice to complete making time of the essence in circumstances where the vendor was in breach of his obligation to answer requisitions on title. The purchaser failed to attend on settlement and the vendor rescinded the contract. The purchaser argued that the vendor was not entitled to do so in circumstances where the vendor was in breach of his contractual obligation to answer requisitions.

Mahoney J, at 144-145, usefully discussed the requirements of a notice to complete as follows:

In Fekala Pty Ltd v Castle Constructions Pty Ltd [2002] NSWCA 297; 11 BPR 20,395 the parties had entered into the standard form of contract of sale of land. Clause 4 was in identical terms to cl 4 in the present contract. Completion did not occur by the date specified in the contract. The vendors gave a notice to complete which was in relevantly similar terms to the notice to complete given by the Vendor in this case.

Two days prior to the date specified in the notice for completion, the purchaser forwarded, amongst other documents, a form of transfer. An amended form of transfer was provided later the same day. As the transfer required execution by 37 separate parties on the part of the vendors, it was not possible for all signatures to be obtained by the date specified in the notice. The vendors purported to waive compliance by the purchaser with the time stipulation in the notice and specified a later date for completion, contending that time was again of the essence.

The Court, (Hodgson JA, Beazley and Santow JJA agreeing) held, at [34], that although the purchaser was in breach of cl 4.1 in not having served the transfer 14 days prior to the completion date, the vendors had waived compliance with that provision. As his Honour stated:

No argument of waiver was advanced by the Purchaser in this case and as it is not essential to the Court’s decision, we make no determination as to whether the Vendor had waived the requirement of the Purchaser to serve a transfer in a form executable by the corporate Vendor. It is sufficient, for present purposes, that the Vendor was not able to complete on either 16 or 17 February 2015, as it acknowledged was the case. The Purchaser was ready willing and able to complete on both dates. Accordingly, as the Purchaser was not in breach of an essential term of the contract, the Vendor was not entitled to terminate the contract on 26 February, 2015. Its purported termination on that date was invalid.

Finally, mention should be made of the question raised by the bench as to whether section (J) of the approved form of transfer was, in fact, part of the approved form. Since the Court was provided with little assistance on this issue, we prefer not to express a view

Having found that the Vendor’s purported termination on 26 February 2015 was invalid, it is unnecessary for the Court to determine whether the primary judge erred in granting equitable relief. However, having regard to the reasoning of the primary judge and the submissions of counsel, it is appropriate to make the following short observations on this issue.

We agree with the view of the primary judge, expressed at [94], that the form of equitable relief in question is appropriately conceptualised as relief against unconscientious reliance by the Vendor on their right of termination, as opposed to relief against forfeiture of the Purchaser’s equitable interest: Tanwar Enterprises Pty Ltd v Cauchi [2003] HCA 57; 217 CLR 315 at [53], [57].

Though expressly not intended as a comprehensive statement of the scope of relief, the High Court in Tanwar identified, at [58], “the special heads of fraud, accident, mistake or surprise” as potentially attracting equitable relief against termination.

In this regard, the primary judge made the following observations:

Had we upheld her Honour’s finding that the Vendor was entitled to terminate the contract, it is sufficient to conclude in this regard that the Vendor was not able to point to error in the evaluative determination of the primary judge in the grant of equitable relief against termination.

Accordingly, the Court makes the following orders: