Mina v Kazbah Holdings Pty Ltd

The plaintiffs and defendant are registered proprietors as tenants in common of a property in Rosebery ("the Property"). The plaintiffs hold a 3/8th share in the Property and the defendant a 5/8th share.

The proceedings were commenced by the plaintiffs by summons filed on 2 May 2013 seeking an order under s 66G of the Conveyancing Act 1919 (NSW) that the trustees for sale be appointed to the Property.

The proceedings were settled in accordance with orders made by Darke J on 3 September 2013 (“the Orders”) as follows:

By a notice of motion filed on 30 January 2015 the defendant seeks, in substance, to enforce those Orders. In particular, the defendant seeks the following orders:

In effect, the defendant seeks to have the agreement which is constituted by the Orders specifically performed. I am satisfied that this is the appropriate procedure by which to resolve this dispute: see Western Land Developments Pty Ltd v Maganic Brothers and Sister Pty Ltd [2013] NSWSC 1574 per Slattery J at [2] and [33].

I have been greatly assisted by the clear and succinct submissions of Ms Nolan who appeared for the defendant and Mr Lawson who appeared for the plaintiffs.

The Orders reflect an agreement between the parties whereby the defendant was, in effect, given an option to purchase the plaintiffs' interest in the Property for a price reflecting the outcome of the "market valuation" referred to in pars 1, 2 and 3 of the Orders.

The defendant was to exercise this option "within 14 days of receipt of the market valuation" of the Property. In that event, the defendant was "to pay to the plaintiffs a sum equal to 3/8 of the market value" of the Property "within 42 days of receipt of the market valuation", in consideration for which the plaintiffs would then "transfer their right, title and interests in the Property” to the defendant.

Ms Nolan drew my attention to s 13 of the Conveyancing Act. The effect of that section is that stipulations in contracts as to time are not to be treated as being of the essence, unless they would be so regarded in equity.

So far as it concerns options to purchase, the position is summarised in J W Carter, E Peden and G J Tolhurst, Contract Law in Australia, (5th ed 2007, LexisNexis Butterworths) at [28-37] as follows:

Thus, usually, time is of the essence in an agreement such as that incorporated in the Orders.

It is common ground that the "market valuation" contemplated by the Orders was received by the parties on 16 May 2014. Accordingly, the time by which the defendant was to exercise the option (that is, nominate “that it will purchase the plaintiffs' share of the Property") expired on 30 May 2014. The time by which the defendant was to "pay to the plaintiffs a sum equal to 3/8 of the market value" of the Property expired on 28 June 2014.

The defendant did not nominate that it would purchase the plaintiffs' share in the Property until 4 June 2014: five days late.

The defendant did not offer to pay the purchase price by 28 June 2014.

In those circumstances, the issues that arise are whether the plaintiffs have conducted themselves so that time ceased to be of the essence, or waived their right to insist that it was.

Mr Lawson submitted that par 4 of the Orders had the effect that, in the events that have happened, I should not make the order sought by the defendant. Rather, the Property should now be "listed for sale" by the parties through a real estate agent as nominated by the President of the Australian Property Institute.

Paragraph 4 provides that if the defendant notifies the plaintiffs "that it will not purchase" the plaintiffs' interest in the Property, the Property is to be so listed for sale.

This paragraph is not, in terms, enlivened in this case, as the defendant gave the plaintiffs no such notification. Mr Lawson submitted, however, that the parties must have intended to make provision in their agreement for all eventualities, and therefore must have intended par 4 to be enlivened if the defendant did not timeously or effectively exercise the option set out at pars 2 and 3 of the Orders.

I do not accept that submission. In my opinion, on their proper construction, the Orders simply make no provision for the circumstance that the defendant did not effectively exercise its option.

In any event, the question does not arise, as my opinion is that the plaintiffs have waived any entitlement to contend that the defendant has not effectively exercised the option.

Indeed, Mr Lawson, with admirable candour, accepted that the parties had conducted themselves as if the option had been effectively exercised.

In my opinion, this concession was well made.

On 4 June 2014, the defendant's solicitor wrote to the plaintiffs' solicitor stating:

As I have said, that letter was sent five days out of time. It also incorrectly stated that the defendant had 42 days from 4 June 2014 to "complete the purchase". In fact, the Orders provided for settlement within 42 days of the valuation; that is, by 28 June 2014.

On 25 June 2014 the plaintiffs' solicitor replied to the defendant's solicitor as follows:

The letter made no protest that the defendant's solicitor's letter of 4 June 2014 was out of time or that her nomination of the completion date was incorrect.

There followed a debate, in correspondence, between the solicitors as to whether the transfer should be for 3/8ths of the valuation figure ($121,875) or that figure plus GST ($134,062.50). Mr Lawson submitted that this question was never resolved, and that it followed that there had been no agreement as to the purchase price such as to warrant the orders now sought by the defendant.

However, par 3 of the Orders obliged the defendant to pay the plaintiffs "a sum equal to 3/8 of the market value of the Property”; that is, the market value as determined by the valuer. That was, in my opinion, the agreed price. The debate about whether GST was payable was, in my opinion, beside the point. In any event, as emerges below, by 1 August 2014 the plaintiffs abandoned reliance on this point.

On 25 June 2014 the defendant's solicitor nominated 14 July 2014 for settlement. The defendant caused $121,875 to be transferred to their solicitor's trust account at around this time. There is thus no doubt, in my opinion, that the defendant was at all relevant times ready, willing and able to complete.

On 11 July 2014 the defendant's solicitor submitted to the plaintiffs' solicitor a transfer in the sum of $121,875, but nominating a third party as transferee.

On 1 August 2014 the plaintiffs' solicitors responded by saying relevantly:

There was no protest in this letter about the price mentioned in the 11 July 2014 transfer, nor was there any suggestion that the option had not been effectively exercised.

On 19 August 2014 the plaintiffs' solicitor wrote a letter to the defendant's solicitor which included:

Again, the plaintiffs made no assertion that the defendant had not effectively exercised the option, or that the fact the defendant had nominated a third party as purchaser somehow disentitled it to enforce its rights under the Orders. Nor did the plaintiffs assert that the nominated purchase price (that is exclusive of GST) was not correct. Indeed, the letter bespoke the plaintiffs' insistence that the Orders be implemented and called on the defendant to submit a transfer within 14 days.

The defendant's solicitor did just that on 28 August 2014 and submitted a transfer nominating $121,875 as the price and the defendant as the transferee.

The plaintiffs' solicitor's only response was on 2 September 2014, and then only to direct attention to matters raised in his letter of 19 August 2014 which are unrelated to the defendant’s purchase of the plaintiffs' interest in the Property.

Thereafter, the defendant's solicitor wrote to the plaintiffs' solicitor on several occasions calling for settlement. Settlement did not occur; hence this application.

In these circumstances, it is my opinion that the defendant is entitled to the orders I have set out at [4] above. The plaintiffs have, by the conduct as set out above, waived their entitlement to hold the defendant strictly to the terms of the agreement set out in the Orders. To put it another way, in the events that have happened, equity would no longer regard time as being of the essence of the agreement set out in the Orders.

The defendant, having been unable to perform its obligation under the agreement, is now entitled to specific performance of it.

I therefore make these orders: