New South Wales Supreme Court CITATION : ADDERTON v. WINDY DROPDOWN [2001] NSWSC 410 revised - 18/02/2002 CURRENT JURISDICTION: EQUITY FILE NUMBER(S) : SC 1494/01 HEARING DATE(S) : 05/04/01 JUDGMENT DATE : 23 May 2001 PARTIES : Peter Adderton - Plaintiff Windy Dropdown Pty Ltd - Defendant JUDGMENT OF : Bryson J at 1 COUNSEL : R. McColl SC, S. Kerr - Pltf G.A. Moore - Dft SOLICITORS : Colin Biggers & Paisley - Pltf David Trodden & Associates - Dft CATCHWORDS : COSTS - vendor and purchaser - purchaser claims restraint of termination on premature Notice to Complete and specific performance - interim injunction - sale settled without judicial decision - purchaser seeks costs on indemnity basis - on the facts, vendor was not in compliance with Special Condition dealing with encroachments on easements, was not entitled to give Notice to Complete or to threaten termination and acted unreasonably - principles in which costs are not awarded in compromised proceedings did not apply as the vendor had not adopted reasonable positions. CASES CITED : Re The Minister for Immigration and Ethnic Affairs of the Commonwealth of Australia; Ex Parte Lai Qin (1997) 186 CLR 622 DECISION : Order that the defendant pay the plaintiff's costs, including reserved costs, of the proceedings on the indemnity basis IN THE SUPREME COURT OF NEW SOUTH WALES EQUITY DIVISION BRYSON J. WEDNESDAY 23 MAY 2001 1494/01 PETER ADDERTON v. WINDY DROPDOWN PTY LTD JUDGMENT 1 HIS HONOUR: These reasons deal with the costs of the proceedings. 2 The plaintiff was the purchaser and the defendant was the vendor in a Contract for sale made on 25 August 2000 and varied by later arrangements for the sale of the house property known as 18 Molong Street, North Curl Curl, Lot 16 in an unregistered plan, for $1,150,000. The vendor was to carry out construction works under the Contract and variations. The purchaser claimed specific performance of the vendor's obligations and ancillary orders including an order restraining the vendor from terminating the Contract. Contractual completion time was governed by Special Condition 36 and relevantly turned on the vendor's giving notice of completion of special works and the vendor's giving notice of registration of the deposited plan. The vendor's entitlement to compel completion was also affected by Special Condition 37 which recited that the tennis court encroached onto the site of two easements in favour of Sydney Water; one easement was for access and drainage and one was for sewer line, and the strips of land affected by the two easements coincided largely but not entirely. The vendor was obliged to obtain a partial release of the easement for access and drainage (the First Easement) in so far as any of the improvements were to be constructed over the location of the easement, and was to obtain consent from Sydney Water for any improvements to be erected over the easement for sewer line (the Second Easement). Further, the vendor was to comply with any conditions imposed by Sydney Water in respect of such consent. The vendor was to provide written evidence of the release and consent no later than 7 days prior to completion. These obligations appear more fully in Special Condition 37, which I have abstracted. In my opinion the completion date calculated in accordance with Special Condition 36 could not be availed of by the vendor unless the vendor had complied with its obligations under Special Condition 37; that is to say, notwithstanding any other mechanism in the contract, the vendor could not enforce the contractual completion date by giving Notice to Complete or in any other way, unless the release and consent required by Special Condition 37 had been obtained and evidence of them had been furnished at least seven days before the contractual completion date. 3 In fact a tiled car-parking space was constructed over the easements. The car-parking space was part of the scope of works which the vendor was to undertake and complete under the provisions of the contract. By a variation agreed in November 2000 the car-parking area was to be tiled. 4 The obligation to obtain a partial release of the easement for access and drainage existed "insofar as any of the improvements to be erected on the property are to be constructed over the present location of the First Easement" - cl.37.2. The obligations to obtain consent and to comply with conditions in cl.37.3 relating to the easement for sewer line applied "for any improvements to be erected over the Second Easement". 5 The Vendor's survey report and diagram of 19 February 2001 show that the structures such as the Cabana, Tennis Court, fence, wall and steps did not encroach on the site of either easement. However that survey work did not show the tiled parking area to the east of the tennis court which encroached on the sites of both easements. 6 Both in its first form and in its varied form, the work relating to car-parking space was an improvement. Obligations under subcll.37.2 and 37.3 were to be complied with before settlement. When Sydney Water came to know of the tiled parking area its officers regarded it as an encroachment, and were right to do so. 7 On 13 February 2001 the vendor's solicitor served 14 days' notice to complete according to which the purchaser was required to complete on or before 3 pm on 28 February 2001, time was of the essence, and if the purchaser did not complete the vendor would be entitled to terminate the contract. There was a flow of communications daily and sometimes more frequently about the state of progress. On Friday 16 February 2001 the vendor's solicitors informed the purchaser's solicitors that the vendor expected the purchaser to settle the purchase on Monday 19 February 2001 and said: "In the event that this does not occur, our strict instructions would be to terminate the contract without further notice to you and to enter into a contract for the resale of the property with a further purchaser." The purchaser responded by calling for an undertaking not to take any steps to terminate the contract; the undertaking was not forthcoming, the proceedings were commenced on 19 February 2001 and termination was restrained by an interim injunction. 8 In my opinion the purchaser was, in practical terms, compelled to commence the litigation and to apply for an injunction because an altogether unreasonable position had been adopted by the vendor in which the vendor was threatening to repudiate the contract; that was the substantial effect of what the vendor was threatening to do when it threatened to terminate the agreement before its own notice to complete had run out and when it threatened to resell to another purchaser. On the vendor's own documents its position was wrong and unreasonable. 9 On 13 February 2001 the vendor provided to the purchaser's solicitors a copy of a letter from an officer of Sydney Water also dated 13 February 2001 relating to the structures over the easements. Having regard to Special Condition 37.4, if this had been a sufficient compliance with subcll.37.2 and 37.3 the vendor was not entitled to enforce the contractual obligation to complete until seven days had passed after written evidence had been provided; and in consequence the purchaser could not be in default of the contractual completion date and the vendor could not be entitled to give notice to complete until seven days had passed after the provision of written evidence. For this further reason the vendor adopted a wrong and unreasonable position in giving the notice to complete and later threatening termination. A further unreasonable aspect of the vendor's position was that 19 February was less than 7 days after delivery of this letter. 10 Sydney Water's letter of 13 February 2001 did not constitute a release or partial release of the first easement in respect of the improvements which were constructed over the location of the first easement. For that further reason the vendor was not entitled to contractual completion, was not entitled to deliver a notice to complete and adopted a wrong and unreasonable position. 11 In fact no release or partial release was ever obtained, and by completing the purchase on 4 April 2001 without obtaining any judicial disposition of the proceedings the purchaser waived his right to object to completion on the ground that there was no partial release. However this waiver did not take place until completion took place. Before making this waiver the vendor insisted on and obtained a further notification from Sydney Water expressing consent after having received fuller information about the structures, including survey information, and an indemnity from the vendor. I leave on one side unexamined the question whether completion affected any entitlement of the purchaser other than an entitlement to object to completion. 12 Sydney Water's letter of 13 February 2001 deals in an unclear way with Sydney Water's attitude to the easement for sewerage line. It says that, for reasons stated, Sydney Water would have no further requirements and would not object to the structures remaining in their present state but would not accept any responsibility for claims of damage. The letter does not in a clear way refer to Sydney Water's relevant entitlements under the easements or show knowledge of how those entitlements were affected. It was not clearly or unequivocally a consent in accordance with Special Condition 37.3 and the vendor adopted a highly doubtful position by putting it forward apparently to show that subcl.37.3 had been complied with. An earlier communication from Sydney Water to the vendor dated 31 January 2001, on which the vendor relied in submissions on costs, does not express any release or consent. 13 While the proceedings were pending collateral disputes developed with respect to the character of a payment which the plaintiff had made and whether it should be credited to the purchase price, and with respect to allegedly defective workmanship. These were relatively minor aspects of the litigation, which is unlikely to have been commenced if the vendor had not adopted thoroughly unreasonable positions on termination and on compliance with Special Condition 37. 14 Where proceedings are compromised the usual outcome is that there is no order as to costs. See Re The Minister for Immigration and Ethnic Affairs of the Commonwealth of Australia; Ex Parte Lai Qin (1997) 186 CLR 622 at 624-625 (McHugh J). When these proceedings were dismissed the parties reserved the right to apply for costs and they did so on 5 April, practically contemporaneously with settlement of the purchase on 4 April. The sale was settled by the purchaser on the clear basis that the purchaser was waiving some objections to which he was entitled. He made it known that he would be applying forthwith for costs. The purchaser's position was so overwhelmingly strong that it would be wrong to see the litigation as having been compromised; the defendant capitulated. In my opinion the circumstances are quite unlike those of which McHugh J spoke at 625. 15 The litigation arose out of the vendor's not complying with its obligations but adopting unreasonable positions while insisting, obviously wrongly, that it had complied. In the circumstances the plaintiff should in my opinion recover the costs of the proceedings on the indemnity basis including the costs of the interim injunction and all interlocutory proceedings. 16 Order: I order that the defendant pay the plaintiff's costs, including reserved costs, of the proceedings on the indemnity basis. Last Modified: 02/22/2002 DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. The onus remains on any person using material in the judgment or decision to ensure that the intended use of that material does not breach any such order or provision. Further enquiries may be directed to the Registry of the Court or Tribunal in which it was generated.