Charitou v The Owners – Strata Plan No 10394

1. [1]

   These proceedings arise out of a dispute under a contract for the sale of part of the common property in a strata title building. The building in question is a three-storey block in Parramatta. The block contains ten units. The strata scheme is designated SP 10394. I will refer to the defendant owners’ corporation as the Strata Corporation.

2. [2]

   The plaintiff purchaser, Greg Charitou, occupied one of the units as a tenant of the owner. His purpose in entering the contract was to acquire the common property in question (which was surplus to the Strata Corporation’s requirements) and convert it into a flat of his own.

3. [3]

   The parties exchanged contracts on 1 March 2016. The purchase price was $150,000. Mr Charitou paid a deposit of $15,000 to the Strata Corporation. In the end, the contract was never completed.

Claims for determination

1. [4]

   The contract made completion of the purchase conditional upon a plan of re-subdivision for the new flat (which was to be lot 11) being registered. This in turn required works to be carried out to convert the common property into a residential space. The lot was also to include a car parking space. The contract provided that upon the grant of development approval by Parramatta City Council (“the Council”), Mr Charitou was to have a licence of the space to enable him to carry out the works.

2. [5]

   The contract required completion to take place within twelve months (1 March 2017), but contained provision for an extension in some circumstances. The maximum period of extension was eighteen months.

3. [6]

   Mr Charitou applied for development approval but encountered difficulties in obtaining it, for which he blames the Council. Approval was eventually granted in late April (that is, after the twelve month period provided by the contract had expired).

4. [7]

   Following the grant of approval, Mr Charitou’s solicitors wrote to the Strata Corporation’s solicitors in an attempt to obtain confirmation that the contract was still on foot, so that Mr Charitou could proceed with the conversion works. The correspondence went on for several months but in the end the Corporation declined to give the assurances sought. The conversion works were never undertaken.

5. [8]

   Mr Charitou commenced the proceedings in December 2017. Initially he sought orders in the nature of specific performance. Later he confined his claim for damages for alleged breach of contract. The parties agree that the contract formally came to an end some time in 2019 at the latest. The Strata Corporation has cross-claimed for a declaration that it has validly terminated the contract and is entitled to retain Mr Charitou’s deposit.

6. [9]

   It is agreed that there are two main issues in the proceedings. In order to succeed in his claim (and resist the Strata Corporation’s cross-claim), Mr Charitou must establish that:

   1. (1)

      he became entitled to an extension before the expiry of the twelve month period for completion on 1 March 2017; and

   2. (2)

      thereafter he remained entitled to enforce the contract notwithstanding his failure to undertake the conversion works and obtain the re-subdivision.

7. [10]

   Formerly there was a further issue, namely the quantum of Mr Charitou’s damages. Mr Charitou’s evidence at the hearing dealt with that question. But in the course of the hearing the parties agreed that further evidence, and submissions, would be required. With the parties’ agreement, I made an order that the quantum of any damages to which Mr Charitou might be entitled was to be determined as a separate question after the determination of all other issues in the proceedings.

Chronology of events

1. [11]

   The parties had previously entered into a similar agreement in 2009. This resulted in the drawing up of a survey plan depicting the alterations. An application for development approval was lodged and consented to by the Council. The parties then fell into dispute. The contract was never completed and the consent lapsed. The previous contract and application are not in evidence, but I was told that the consent issued by the Council for the December 2009 plan was similar to the consent issued for the later plan.

2. [12]

   After the exchange of contracts on 1 March 2016, Mr Charitou was obliged to prepare and lodge another application for development approval. For this purpose, he retained the assistance of John Xenos, solicitor. Mr Xenos helped Mr Charitou with the preparation of the application. But Mr Charitou was identified in the application as the contact person, and all dealings with the Council took place through him.

3. [13]

   The application was lodged on 22 June 2016. The Council employee who had immediate responsibility for it was Stan Mendis. On 27 June Mr Mendis wrote to Mr Charitou acknowledging receipt of the application. He stated that the application had been registered and was in the process of preliminary assessment:

4. [14]

   After advising that the application would be notified to adjoining owners for comment, Mr Mendis stated that Mr Charitou could check the progress of his application online, or by contacting him at the Council.

5. [15]

   In evidence is a quote obtained by Mr Charitou from a builder to undertake the conversion works. The quote was for about $80,000, with construction to take twelve weeks. According to Mr Charitou, he orally accepted the quote on the basis that he would advise the builder when the works were ready to proceed.

6. [16]

   The notification process appears to have proceeded in the ordinary way. According to Mr Charitou, his next contact from the Council came in late October 2016 when Mr Mendis called him about a difficulty with the application.

7. [17]

   The Parramatta Local Environment Plan (“LEP”) limited the floor space ratio (“FSR”) of the building to the land to 0.8:1. The conversion works, including the carpark, increased the floor area of the building slightly, by 92 square metres, resulting in an FSR of 0.836:1. Under clause 4.6 of the Parramatta LEP the Council was entitled to dispense with the FSR requirement but this required a written request by the applicant to justify the contravention.

8. [18]

   Mr Mendis advised Mr Charitou of the problem and told him that a written submission would be required under clause 4.6. Mr Charitou retained the assistance of a professional town planner to prepare such a document. It was lodged with the Council on 14 November.

9. [19]

   The precise date of the conversation between Mr Mendis and Mr Charitou is unknown. In an email dated 3 November from Mr Charitou to the strata manager for the property, he recorded that the Council had “just got back” to him and that a clause 4.6 submission had not been required for the earlier DA.

10. [20]

    According to Mr Charitou, at around this time he was told by Mr Mendis that the application would be approved either at the next council meeting or the one after that, which was to take place before Christmas. But by February no approval had been forthcoming. According to Mr Charitou he repeatedly rang the Council but received no response.

11. [21]

    Mr Charitou then tried to contact Mr Xenos. At the time, Mr Xenos appears to have been practising in association with another solicitor, Patrick Gentile. Mr Gentile’s firm was called PJG Solicitors.

12. [22]

    On 15 February 2017 Mr Charitou sent an email to Mr Gentile. The subject heading was “Matter that John [Xenos] was looking after”. It seems that Mr Xenos was temporarily uncontactable.

13. [23]

    In his email Mr Charitou described the background:

14. [24]

    Mr Charitou continued:

15. [25]

    In evidence is a letter from PJG Solicitors dated 21 February to Mr Charitou. The letter stated:

16. [26]

    The letter bears a signature over the name of Mr Xenos, but it is unclear whether it is Mr Xenos’ signature. Mr Charitou was asked about the letter in cross-examination. He said he remembered receiving it and regarding it as advice that he could proceed with an application to the Land and Environment Court. But it was not until 9 March, after the expiry of the 1 March deadline, that an application was actually filed. The delay was not explained in the evidence.

17. [27]

    In the meantime, unknown to Mr Charitou, Mr Mendis had been advised by one of his colleagues that there was a need to obtain a report demonstrating compliance with the Building Code of Australia (“BCA”) requirements. Mr Charitou was advised of this requirement by Mr Mendis by telephone on 3 March.

18. [28]

    It is not necessary to go into the further dealings between Mr Charitou and the Council in any more detail. A BCA report was eventually prepared and lodged. The first mention of Mr Charitou’s proceedings against the Council in the Land and Environment Court took place on 6 April. The proceedings were adjourned to a date in June.

19. [29]

    On 28 April, the Council granted the necessary approval. Notice of approval was issued on 2 May. Thereafter the Land and Environment Court proceedings became unnecessary. The proceedings were eventually discontinued on 17 June.

20. [30]

    By this stage, Mr Charitou appears to have fallen out with Mr Xenos and PJG Solicitors. He retained another solicitor, Angelo Andresakis, to act for him. Mr Andresakis’ firm is called Andresakis & Associates. The Strata Corporation had retained Peter Fagan of Le Page Lawyers as its solicitor.

21. [31]

    On 18 May Mr Andresakis sent a letter to Mr Fagan. The letter was headed “without prejudice save as to costs”. Mr Andresakis wrote:

22. [32]

    Mr Fagan did not reply within the fourteen day period, but he did respond on 9 June:

23. [33]

    On the same date Mr Fagan sent a further letter to Mr Andresakis which was headed “Notice to Complete”. The letter recited that Mr Charitou had failed to complete the contract and gave notice requiring completion within 14 days, specifying the time and place for completion as 1.00 pm on Friday 23 June at the Land and Property Information office in Sydney.

24. [34]

    On 20 June, Mr Andresakis responded to the Notice to Complete:

25. [35]

    Consistently with this letter, Mr Andresakis did not attend at the nominated appointment for settlement on 23 June. On 5 July, not having received any further response from Mr Fagan, he wrote again:

26. [36]

    On 5 July Mr Fagan made two responses to Mr Andresakis’ letter of 20 June. The first was by email, sent at 2.12pm. Mr Fagan wrote:

27. [37]

    On the same date Mr Fagan wrote by letter:

28. [38]

    On 14 July Mr Andresakis wrote by way of response to Mr Fagan’s letter:

29. [39]

    Mr Fagan responded by email on 31 July:

30. [40]

    The EGM referred to in Mr Fagan’s email did take place, but it did not result in any response to Mr Charitou’s proposals, or any counter-proposal. On 31 August Mr Andresakis wrote to Mr Fagan in response to his 31 July email:

31. [41]

    On the following day, Friday 1 September, Mr Fagan wrote to Mr Andresakis advising that the Corporation would not be extending the contract and his firm was no longer acting.

32. [42]

    These proceedings were commenced on 20 December 2017. In May 2019 Mr Charitou’s statement of claim was amended so as to abandon a claim for specific performance. Later that year, in September, the Corporation’s solicitors wrote to Mr Charitou’s solicitors purporting formally to terminate the contract to the extent that it might still then have been on foot.

33. [43]

    As already mentioned, the parties agree that the contract has come to an end. If (as is contended on behalf of Mr Charitou) the Strata Corporation had in its 2017 correspondence repudiated the contract, then the amendment abandoning the claim for specific performance and claiming damages represented an acceptance of that repudiation and a termination of the contract. If the Corporation did not repudiate the contract, it came to an end with the Corporation’s letter of September 2019.

Entitlement to extension

1. [44]

   The contract was a Law Society standard form contract for the sale of land (2005 edition) which consisted of 29 standard form clauses. To this were added special conditions numbered as clauses 30 to 79.

2. [45]

   The special conditions required the Strata Corporation to consent to the application for development approval required to undertake the conversion works (clause 60) and, upon approval being obtained, to grant a licence to Mr Charitou to enable him to undertake the works (clause 61).

3. [46]

   The completion date on the front page of the contract contained a cross-reference to the special conditions. Clause 72 provided:

4. [47]

   Clause 74, referred to in clause 73 below, was ruled out of the contract at a late stage. The clause had provided:

5. [48]

   The key clause was clause 73, which provided:

6. [49]

   The parties agreed that the reference in sub-clause 73(a) included the Council. But because Mr Charitou did not begin his proceedings against the Council until after 1 March 2017, he was not entitled to an extension under that sub-clause. Counsel for Mr Charitou contended however that delay by the Council in dealing with the development application entitled Mr Charitou to an extension under sub-clause 73(b).

7. [50]

   It was common ground that the parties in preparing the contract would have had in mind the regulations under the Environmental Planning and Assessment Act 1979 (NSW) which impose time limits for the determination of development applications. The relevant regulation provided (and continues to provide) for a deemed refusal forty days after the application has been lodged, allowing an application to be made to the Land and Environment Court: Environmental Planning and Assessment Regulation 2000 (NSW), reg 113(1)(a). That forty day period could be extended, but only if within twenty-five days of the application being lodged the consent authority sought further information about the application, and then only for the period of time which it took for the information to be provided: reg 109.

8. [51]

   In the present case, the forty day period for the Council to determine Mr Charitou’s application expired on 1 August 2016. Mr Charitou was not notified of development consent until 2 May 2017, ten months and one day afterwards. Counsel for Mr Charitou submitted that in the circumstances he was entitled to an equivalent extension of time after 1 March 2017.

9. [52]

   In response counsel for the Strata Corporation took two points:

   1. (1)

      Sub-clause (b) did not apply to delays in the process of obtaining development consent. That was the exclusive domain of sub-clause (a), which did not apply in this case.

   2. (2)

      Even if sub-clause (b) was available, the delay was not one outside the control or influence of Mr Charitou in the relevant sense.

10. [53]

    Sub-clause (b) referred to a delay in the “completion” of the works. Because of the way in which the contract was framed, those works could not begin until after development consent had been obtained. The examples given in sub-clause (b) were all instances of events which prevent the physical carrying out of building work.

11. [54]

    Counsel for Mr Charitou however pointed out that these examples did not necessarily limit the general words of the sub-clause. Counsel argued that a delay in obtaining development consent which led to the works being completed at a later date than they could otherwise have been completed still fell within the wording.

12. [55]

    In my view textual considerations are against this submission. In particular the word “completion” in its ordinary meaning refers to a task which has already begun. In sub-clause (b) it fitted naturally with an event which caused building work to be suspended or slowed down. It may also have covered a case where the building contract had been let and the builder was ready to begin work but an event occurred which prevented the builder from doing so. But it did not fit naturally with an event which delayed (or, in the present case, prevented) the purchaser from proceeding with the works at all.

13. [56]

    I think that practical considerations point in the same direction. For the clause to be workable the parties needed to know where they stood. Where an event caused suspension of the works, this would cause no difficulty. The fact of the delay would be clear and the only issue would be whether the purchaser relevantly had control or influence over the reasons for it.

14. [57]

    It was different where the delay occurred at the anterior point of applying for development consent. A delay for, say, six weeks, in obtaining consent would not necessarily translate into a six week delay in completing the works. The period of delay could be longer or shorter depending on other circumstances.

15. [58]

    Mr Charitou’s construction would produce another practical difficulty in the form of an overlap between sub-clauses (a) and (b). Sub-clause (a) gave an automatic extension on the commencement of proceedings, which extended right up until the proceedings were completed. If in fact the proceedings were delayed as a result of events for which Mr Charitou was responsible, then under the wording of sub-clause (b) he would not have been entitled to an extension for that period, but would have remained entitled to such an extension under sub-clause (a). Counsel for Mr Charitou acknowledged this problem, but did not provide a clear explanation for how it could be solved.

16. [59]

    In my view the natural and harmonious construction of clause 73 is that sub-clauses (a) and (b) addressed different types of delay. Sub-clause (b) did not apply to the delay upon which Mr Charitou relies. His claim to have been entitled to an extension of time fails for that reason alone.

17. [60]

    Counsel’s calculation of the period of delay (see [51] above) did not take into account the time it took Mr Charitou to provide a clause 4.6 submission after he was asked for it by Mr Mendis. Nor did it take into account the time taken to provide a BCA report (see [27]-[28] above). Apparently counsel’s argument assumed that the periods of time during which Mr Charitou was responding to the Council’s request did not count because the Council should have made those requests at an earlier point. Indeed counsel invited me to find that the Council had been “delinquent” in dealing with the application. Counsel suggested that I could infer that a request for a BCA report had been a manoeuvre by the Council designed to head off litigation by Mr Charitou.

18. [61]

    It is not necessary to make any findings on these factual questions. In the usual meaning of the terms “control” and “influence”, they exist whether or not they are exercised. The question is whether Mr Charitou in fact had control or influence over the reasons for the delay. If he had such control or influence, it does not matter whether his conduct was reasonable or not.

19. [62]

    One thing which is clear is that the Council had no statutory obligation to review the application and decide whether it was complete. On one level however there is some justification for Mr Charitou’s complaint about the Council’s conduct. In the light of Mr Mendis’ letter of 22 June 2016, Mr Charitou might understandably have proceeded on the basis that the Council would tell him if there was something missing. The eventual request for a clause 4.6 submission could also understandably have come as a surprise when no request had been made for such a submission for the purposes of Mr Charitou’s previous application.

20. [63]

    The requirement for a clause 4.6 submission was however clear on the face of the applicable LEP, and identification of the contravention in the floor space ratio was a simple matter of calculation. It would always have been open to Mr Charitou, or his advisers, to have identified the requirement and addressed it in the application. In that sense, the delay resulting from the incompleteness in the application was not outside Mr Charitou’s control.

21. [64]

    In any event I consider that there is a broader reason why the delay in obtaining development consent was not beyond Mr Charitou’s control. Once the forty day period had expired, Mr Charitou could always have commenced proceedings so as to force the Council’s hand.

22. [65]

    Counsel for Mr Charitou submitted that it was not realistic to expect an applicant facing what appeared to be a short delay to take the heavy-handed step of commencing proceedings on the basis of the deemed refusal. That is hardly an adequate description of the present case. There was more than a two month delay between August and late October, and there is nothing in the evidence to suggest that any representation was made by the Council to Mr Charitou during that period that the application was about to be approved. In any event, as I have already said, the reasonableness of Mr Charitou’s conduct is not in issue.

23. [66]

    From his later correspondence with his solicitors it appears that Mr Charitou believed that he had an entitlement to obtain an automatic eighteen month extension of time. He was also told by them before the deadline of 1 March expired that he was able to commence proceedings but did not do so. It is not necessary to go into the rights and wrongs of this. What it underlines is that the proceedings were not commenced before the deadline because of Mr Charitou’s own failure to act. The means of forcing the Council to a decision were in his own hands. In my view it is clear that he had control, or at least influence, in the relevant sense, over the delay.

24. [67]

    For these reasons, even if I am wrong about the relationship between sub-clauses (a) and (b), Mr Charitou has still not made out the entitlement to an extension which he claims.

Entitlement to enforce contract despite eighteen month time limit

1. [68]

   Counsel for Mr Charitou acknowledged that he never in fact completed the works, but contended that this did not matter. Counsel’s submission was that as a result of the position it took in the correspondence, the Strata Corporation repudiated its obligations under the contract. Thus, counsel submitted, the Corporation was not entitled to rely upon Mr Charitou’s failure to complete.

2. [69]

   Counsel for the Strata Corporation disputed that the correspondence amounted to repudiation on the Corporation’s part. Alternatively counsel contended that, as a matter of construction of the contract, termination took place automatically, and Mr Charitou’s deposit was forfeited on the expiry of the time limit (MK and JA Roche Pty Ltd v Metro Edgley Pty Ltd [2005] NSWCA 39).

3. [70]

   Counsel for Mr Charitou put the repudiation contention in two ways. First counsel submitted that the Strata Corporation had repudiated the contract by breaching it. The breaches alleged were the Corporation’s “failure to acknowledge” the extension of time claimed by Mr Charitou, failure (constructively) to allow access in accordance with the licence and failure to comply with the Corporation’s obligation of co-operation: Secured Income Real Estate (Australia) Ltd v St Martins Investments Pty Ltd (1979) 144 CLR 596 at 607.

4. [71]

   I do not think that these contentions are viable. In fact it is clear that the reason why the works were not begun was because Mr Charitou did not want to make any commitment to his builder unless he could be sure that he would be allowed to complete the works without the Corporation terminating in the meantime.

5. [72]

   While that may have been an understandable commercial decision, the Corporation never in fact did anything to prevent Mr Charitou or his builder from carrying out the works. I do not accept that the correspondence intimated that access would not be permitted in accordance with the terms of the licence. There was nothing else the Corporation was required to do to enable Mr Charitou to undertake the works.

6. [73]

   Repudiatory breach involves an act or omission which contravenes the terms of the contract in question. In the present case there was no such act or omission by the Corporation. All the Corporation did was to refuse to provide Mr Charitou with the assurances that he sought. If Mr Charitou is to succeed, it must be on the basis of anticipatory repudiation, not repudiatory breach.

7. [74]

   Counsel identified three communications which were said to have been repudiatory. These were:

   1. (1)

      Mr Fagan’s letter of 9 June 2017 and the accompanying Notice to Complete (see [32]-[33] above);

   2. (2)

      Mr Fagan’s email and letter of 5 July (see [35] above);

   3. (3)

      Mr Fagan’s email of 1 September (see [41] above).

8. [75]

   It was a bold submission that Mr Fagan’s correspondence on 9 June was repudiatory. The letter was accompanied by a notice to complete. Such a notice would usually represent a contractual affirmation in the clearest and most formal possible terms.

9. [76]

   Counsel submitted that at the time the Corporation was incapable of completing its side of the bargain. Counsel pointed out that the Corporation had nothing to sell, as the plan of subdivision had not even been prepared, let alone registered, and accordingly the subject matter of the contract (the new lot 11) did not yet exist.

10. [77]

    I do not think this matters. Had Mr Charitou sent a representative along to the nominated appointment for completion with a cheque, there might have been a question about whether the Strata Corporation was in breach. But there was no attendance for Mr Charitou and the Corporation was never put to the test.

11. [78]

    Furthermore the letter of 9 June must be understood in the context of the letter of 14 May to which it was responding. The position taken on behalf of Mr Charitou in the 14 May letter was confused. On the one hand, the letter was headed “without prejudice except as to costs” and contained a threat to start court proceedings to obtain a declaration. Those are the sort of things which normally accompany a demand for compliance with a contractual obligation. But elsewhere the letter sought to have the Strata Corporation “confirm” its “agreement” to a completion date of 18 February 2018. There was no contractual basis for that date.

12. [79]

    Clearly the 14 May letter was understood by Mr Fagan as a proposal for the variation of the contract (as, indeed, it was later described by Mr Andresakis himself: see [40] above). On any view it fell short of being a clear demand for the Corporation to comply with specified contractual obligations.

13. [80]

    Similar observations apply to Mr Fagan’s letter of 5 July. What Mr Andresakis had been asking for was an agreement that Mr Charitou was to have an extension. In his letter of 5 July Mr Andresakis was now seeking an extension of ten months, or the time taken to complete the construction and the registration, whichever was the longer. Again there was no contractual basis for this request.

14. [81]

    Furthermore, even if there had been a clear demand to the Strata Corporation to acknowledge that Mr Charitou had a contractual entitlement to complete by a particular date, such a demand could not force the Corporation to accept a construction of the contract with which it did not agree (counsel for Mr Charitou properly disclaimed any suggestion that the Corporation was acting otherwise than in good faith). Mr Charitou’s proper remedy was to begin proceedings for declaration as threatened, but he did not do so.

15. [82]

    Mr Charitou’s position was even weaker by 1 September. Mr Andresakis by this stage had put what was clearly an extra-contractual proposal in his letter of 14 July. That proposal was rejected by the Corporation. No question of compliance with the Corporation’s obligations under the contract arose.

16. [83]

    In any event there is a deeper problem with the submissions from Mr Charitou on this point. The assertion of an incorrect view of the meaning of a contract does not necessarily amount to repudiation, because the party may still be prepared to accept the correct view when it is authoritatively determined: DTR Nominees Pty Ltd v Mona Homes Pty Ltd (1978) 138 CLR 423 at 432. Even if it were correct to characterise the correspondence as involving an assertion by the Corporation of an incorrect interpretation of the contract, it has not been shown that the Corporation was impervious to argument or to having the issue determined by means of a declaration. I repeat that the possibility of court proceedings was foreshadowed on Mr Charitou’s behalf, but never pursued.

17. [84]

    For these reasons I reject counsel’s contentions. Mr Charitou has failed to establish repudiation on the part of the Strata Corporation. This too is fatal to his claim.

18. [85]

    Whether the contract provided for automatic termination is a question of construction which on my findings does not arise. I therefore do not intend to consider the parties’ competing arguments on this point.

Conclusions and orders

1. [86]

   I have concluded that:

   1. (1)

      Mr Charitou was not entitled under the terms of the contract to an extension of the date for completion beyond 1 March 2017;

   2. (2)

      in any event, Mr Charitou has failed to demonstrate that the Strata Corporation thereafter repudiated its obligations under the contract.

2. [87]

   Mr Charitou’s claim accordingly fails and must be dismissed. It is not disputed that in that event, the Strata Corporation’s cross-claim succeeds.

3. [88]

   I see no reason why costs should not follow the event. Any application for any different order may be made under the Rules.

4. [89]

   The orders of the Court on Mr Charitou’s claim are:

   1. (1)

      Order that the plaintiff’s claim be dismissed.

   2. (2)

      Order that the plaintiff pay the defendant’s costs.

5. [90]

   The orders on the Strata Corporation’s cross-claim are:

   1. (1)

      Declare that the contract between the cross-claimant and the cross-defendant as purchaser for the sale of part of the common property of Strata Plan No. 10394 has been validly terminated.

   2. (2)

      Declare that the deposit of $15,000 paid pursuant to such contract has been forfeited to the cross-claimant.

   3. (3)

      Order that the cross-defendant pay the cross-claimant’s costs.