Tanwar Enterprises Pty Limited v Cauchi & Ors S149/2002 [2002] HCATrans 456 (13 September 2002)

IN THE HIGH COURT OF AUSTRALIA

Office of the Registry

Sydney No S18 of 2002

B e t w e e n -

JOSEPH JOHN ROMANOS

First Applicant

JOHN JOSEPH ROMANOS as representative of the Estate of the Late TERESA ROMANOS

Second Applicant

and

PENTAGOLD INVESTMENTS PTY LIMITED

First Respondent

MAROON BROS INVESTMENTS PTY LIMITED

Second Respondent

Office of the Registry

Sydney No S149 of 2002

B e t w e e n -

TANWAR ENTERPRISES PTY LIMITED

Applicant

and

JOSEPH CAUCHI

First Respondent

ANGELO CAUCHI

Second Respondent

MARY CAUCHI

Third Respondent

JULIAN DALLEY

Fourth Respondent

Applications for special leave to appeal

McHUGH J

GUMMOW J

CALLINAN J

TRANSCRIPT OF PROCEEDINGS

AT SYDNEY ON FRIDAY, 13 SEPTEMBER 2002, AT 10.00 AM

Copyright in the High Court of Australia

__________________

MR B.A.J. COLES, QC: In the first of the matters which has been called, I appear with MR D.L. WARREN for the applicants. (instructed by Gordon Robilliard Plowman Merton)

MR D.P.F. OFFICER, QC: If the Court pleases, in the first matter that was called I appear with my learned friend, MR R.J. POWELL, for the respondent. (instructed by Patrick A. Bolster & Son)

MR F.M. DOUGLAS, QC: May it please the Court, in the third matter I appear with MR L.J.W. AITKEN for the applicant. (instructed by Alexander Lee & Associates)

MR I.M. WALES, SC: In this matter I appear with my friend, MR M.A. ASHHURST, for the respondent. (instructed by Low Doherty & Stratford)

McHUGH J: You are in No 2, Mr Coles. Have counsel had any discussion about this matter? Looking at it there seems a real conflict between the Court. There are some important questions involved in it. Arguably, both matters seem a case for the grant of special leave. What are the views of counsel for the respondents, Mr Officer? Do you want to oppose a grant?

MR OFFICER: Yes, your Honour. We say and submit, with respect, that it is a decision on its particular facts where it was held that relief against forfeiture ought to be granted. There is no question of principle involved, merely a finding that it would be unconscionable in the circumstances to permit the vendor to rely upon the strict rights of termination and when coupled with the characterisation of the breach clause as being substantially security for the payment of the balance of the deposit. We submit, with respect, that the view taken by the Court of Appeal was not only right but was clearly open to them and there is no question of principle involved in the present case.

It is not, as my learned friend's application suggests, a case analogous to non-payment of the deposit as such. It is not factually that situation at all. Here, as we know, the first part of the deposit was paid. That was the.....that bound the bargain - the acquisition of the interest of the purchaser in the land - so that the position is not one where the principles in Brien v Dwyer are really at issue and although it was not an instalment contract as some of the other cases have been, it was nevertheless a situation where, as the court rightly characterised it, in our submission, upon payment of the balance of the deposit the object of the rescission clause had been satisfied.

Coupled with that, as we know, the conversations that took place on 1 and 11 December, it was not a situation merely where the vendor had stood back and then gave the notice. As the Court of Appeal, we submit rightly, characterised it, it was a situation where the conversations that took place went directly to the very existence of the contract.

McHUGH J: I know that but the trial judge found that nothing came of those discussions, did he not?

MR OFFICER: I am not sure that he found, with respect, that nothing came of them but the fact of the matter was - - -

McHUGH J: At page 5, is it not? His Honour says at line 21, "but nothing came of those discussions".

MR OFFICER: Nothing came of them in the sense that they were overtaken by a notice of rescission. The discussions are set out in the Court of Appeal judgment commencing at page 18 and there can be no doubt, we would submit with respect, that that conversation on 1 December where the vendor is saying at the top of page 19 line 10:

We want to vary the terms of the contract . . . I would like to have the deposit moneys . . . released to me to use . . . And then I would like an advance on the settlement moneys -

is not merely an affirmation of the contract but it is an affirmation of the settlement of the contract and all that goes with it. Down at the bottom of page 19 in line 50, on 11 December there is the discussion about wanting to arrange an early settlement of the matter.

So we would submit, with respect, that as a result of those conversations it was not merely a situation of the vendor standing by, it was not merely a situation of - - -

McHUGH J: I know, but it raises some important questions. You cannot really decide this case without looking in a broader context. It really concerns the extent to which equity will come to the aid of a purchaser who is in breach of a time-essential condition. For the benefit of the parties, if leave is granted, they can do worse than look at an article or a note by Mr Heydon, as he then was, in the Law quarterly Review for July 1997 under the heading "Equitable Aid to Purchasers in Breach of Time-Essential Conditions" where he looks at it in a much broader context. It seems to me, Mr Officer, speaking for myself only at the moment, that there are some very important points of principle involved in this case, not to forget the problems of reconciling certain passages in certain judgments in this Court with those of other members of the Court.

MR OFFICER: We submit, with respect, the questions are, no doubt, interesting and the questions, no doubt, will require answering.

GUMMOW J: Just tell us in a couple of sentences what was the basis of Justice Sheller's decision.

MR OFFICER: It was twofold, as we understand it. It was that it was unconscionable for the vendor in the circumstances to rely upon the - - -

GUMMOW J: Yes, but why?

MR OFFICER: Because primarily of two factors. One, the positive representations and discussions that had taken place on 1 and11 December, which I have taken your Honours to, coupled with the windfall which, undoubtedly, would accrue to the vendor and it was a windfall in the nature not only of the increased value of the land resulting from the development application but the benefit of the substantial expenditure that had gone into that and another factor which his Honour Justice Windeyer refers to, that the vendor's ability on termination to use the plans, and engineering and survey plans, without payment. In addition to that, your Honours, there was the factor that, in this particular case, the right of rescission was tantamount to security for payment of balance of the deposit.

GUMMOW J: I am not saying that it is right or wrong but that way of looking at it does seem to be a different way of looking at it to the way Justice Handley looked at it in the other case.

MR OFFICER: In Justice Handley's case that his Honour dealt with, there were missing, if I can put it that way, some very critical factors that are - in the case in which I am here addressing, there was no conduct by the vendor at all that was of the nature that I have described in the discussions that here took place. There was in that case nothing at all in the nature of the security for the payment of the balance of the deposit argument and there was certainly no windfall in the nature of the ability to use the plans, although there was the other one. But the two cases, we would submit with respect, were just factually poles apart. We would submit, with respect, for substantially those reasons the case does not warrant a grant of special leave.

McHUGH J: Thank you, Mr Officer. Mr Wales.

MR WALES: Your Honours, assuming for the moment against us, or at least against Mr Officer, that Pentagold raises interesting questions, our point is simply this, that no amount of debate about the role of the right of termination consequent upon non-payment of the deposit and no amount of reconciliation of, on one view, conflicting statements in this Court about this question of forfeiture, is going to help the applicant in what is simply a hopeless case.

Your Honours will have read the primary judgment but, at the risk of repeating what your Honours know, can I point out that this case had special features to render it lacking in any utility so far as the ordinary run of conveyancing cases are concerned. This was not a case where the applicant fell foul of a "time of the essence" provision of a standard contract. This was not a case where simply the vendor unilaterally made time of the essence. This was a case where, in August of 2000, completion did not take place. The applicant did not have its funds at that time. Thereafter, debate went back and forth as to who was at fault. The respondent purported to terminate. The applicant, if it wanted, could have litigated to finality its rights consequent upon that termination. It did not; it entered into a deed on 5 June the following year. The terms of that deed appear at page 4 of the application book.

McHUGH J: Did not his Honour also hold that, however, the property would have increased in value between - you relied on it, I suppose - before the deed was entered into?

MR WALES: Indeed, but no one ever suggested that between 5 June and 26 June anything of consequence had happened because it was from that date that the rights of the applicant stemmed. On 5 June what the parties agreed was this, and it starts at page 4:

1. The Notice of Termination . . . is withdrawn.

2. Completion . . . to take place . . . on Monday, 25 June 2001 -

and in paragraph 6, the purchaser - the applicant:

acknowledges that the contents of this Deed are a final arrangement to complete the sale of the Property. If the Purchaser does not complete the sale . . . the Purchaser will:

(a) forfeit all moneys paid -

and, over the page at (c), the purchaser will:

not commence any Court proceedings to dispute the Vendor's termination of the Contract of Sale.

No one relied upon that provision to oust the court's jurisdiction but it is a stark reminder of what it was that the applicant knew on 5 June. It knew that it had a last chance to complete the contract by the date given and if it did not do it by that time the consequences were cutthroat. If you had said to the applicant on 5 June, "What happens on the 25^th if for any reason whatever you cannot complete", the answer would be, "I've had it, it's finished, it's all over".

McHUGH J: I know that, but the applicant's point is that the purpose of the forfeiture provision was to secure the payment of the deposit and so once the payment was made the object of the provision was achieved and that your client would suffer no loss if relief against forfeiture was granted. The argument as a matter of principle may be good or bad, but does it not raise an important point of principle?

MR WALES: Your Honour, no, it does not because that is a feature of every conveyancing transaction. It is a feature of every transaction that if a short time after termination the purchaser can find the money somehow and complete, then no one is the worse off. Does it then mean, rhetorically we ask, that if it is a week later, a fortnight later?

McHUGH J: That is the special leave point.

MR WALES: With respect, that proposition simply cannot be correct because it renders devoid of certainty any contract with an essential term provision. In any event, our case is not that case. Our case is a case where by compromise of a dispute the parties agreed upon the consequences in the clearest possible terms.

McHUGH J: I know, but there are other factors in your case. They may well not be decisive but one argument against you is that if your client is allowed to terminate the contract, they receive the benefit of an increase in the value of the land over the period since the exchange of the contract and, in particular, you receive the benefit of the grant of the development approval which, as the trial judge found, the applicants had incurred expense in. It was not quantified, if I remember rightly, but - - -

MR WALES: Indeed, but the difficulty with all of that is that the applicant knew all of that when it entered into the deed of 5 June. Nothing happened of consequence between the 5^th and the 25^th.

GUMMOW J: That has to be your real point, I guess.

MR WALES: Yes, indeed, because the event which happened was the very event bargained for. On 5 June the applicant chose to enter into this compromise, it chose not to litigate to finality its rights under the earlier arrangement, it was an utterly free agent, it did not have to sign this document, it did so with the benefit of legal advice. This case has none of the features which rendered other cases such as Legione appropriate for relief. This has none of the features of improvement of the value of land or improvement of the land during the continuance of the contract then under review, if I can put it in those terms.

This is a wholly new arrangement made on 5 June whose consequences were utterly clear and - I am being repetitive, I am sorry - but between the 5^th and 25^th nothing of any consequence happened to improve the land or its value. There is no suggestion of misconduct by the vendor. The simple fact is that having agreed to a document with legal advice, the consequences bargained for occurred. That, with respect, cannot be the stuff of which equitable intervention is made unless one has a position where, in effect, "time of the essence" provisions are without meaning and in every case where there is, in effect, no harm done, the court can intervene.

GUMMOW J: They would not have to be a wide as that.

MR WALES: We say it comes close to that. Those are my submissions.

McHUGH J: Thank you, Mr Wales. Mr Coles, you need an extension of time.

MR COLES: There are two procedural matters I need to deal with. One is that we have brought the application in the name of the first applicant on his own behalf and as representative, that being then the state of things in his mother's estate. Probate has now been granted, so we would wish to amend the application to make him executor.

The second point is the extension of time. Your Honours will recall that the Court of Appeal gave judgment on 12 December and the application was filed, I think, on 30 January.

GUMMOW J: Yes, you were away on holidays.

MR COLES: There was some evidence to that effect, your Honour; there is nothing I can say about that. There may have been an apprehension that time did not necessarily run in New South Wales Court vacation, although we do not understand that is a view shared by your Honours and we do not press it before your Honours as one that is material.

GUMMOW J: What is the specific order you want about the probate consequence?

MR COLES: Leave to amend the application to record the second applicant as executor rather than representative.

McHUGH J: Yes, thank you, Mr Coles.

In the matter of Romanos the Court will grant an extension of time and grant special leave to appeal and the applicant has leave to amend the title to the proceedings.

In the matter of Tanwar there will also be a grant of special leave to appeal.

AT 10.21 AM THE MATTERS WERE CONCLUDED