Reported Decision : (2004) NSW ConvR 56-093 New South Wales Supreme Court CITATION : Coset No 15 Pty Ltd v Blagojevic [2003] NSWSC 418 HEARING DATE(S) : 16/05/03 JUDGMENT DATE : 22 May 2003 JUDGMENT OF : Gzell J DECISION : Contract rectified by deletion of car parking space. Order for specific performance of contract as rectified. CATCHWORDS : EQUITY - Equitable Doctrines and Presumptions - Rectification for common mistake - Car parking space included in contract for sale of a residential unit in error - Whether specific performance available in same proceedings - Whether relief available to plaintiff who drew the contract - Whether failure to read contract should deny relief LEGISLATION CITED : Conveyancing Act 1919 Jones v Dunkel (1959) 101 CLR 298 Australia Hotel Co Ltd v Moore (1899) 20 LR(NSW) Eq 155 Joscelyne v Nissen [1970] 2 QB 86 Craddock Brothers v Hunt [1923] 2 Ch 136 United States of America v Motor Trucks Ltd [1924] AC 196 CASES CITED : Dundee Farm Ltd v Bambury Holdings Ltd [1978] I NZLR 647 Ex parte Wright (1812) 19 Ves Jun 255 (34 ER 513) Collett v Morrison (1851) 9 Hare 162 (68 ER 458) Ball v Storie (1823) 1 Sim & St 210 (57 ER 84) Spry, Equitable Remedies, 6th ed, LBC Information Services, Australia, 2001 at 616 Meagher, Gummow and Lehane, Equity Doctrines and Remedies, 4th ed, Butterworths Lexis Nexis, Australia, 2002 PARTIES : Coset No 15 Pty Ltd - Plaintiff Kristina Blagojevic - Defendant FILE NUMBER(S) : SC 5825/02 COUNSEL : A Blank - Plaintiff M B Duncan - Defendant SOLICITORS : Cass Lawyers Lighthouse Law Group IN THE SUPREME COURT OF NEW SOUTH WALES EQUITY DIVISION GZELL J THURSDAY 22 MAY 2003 5825/02 COSET NO 15 PTY LTD v KRISTINA BLAGOJEVIC JUDGMENT 1 The plaintiff sought a declaration that a contract for sale of land did not express the agreements of the parties and was executed under a mistake of fact, rectification and specific performance of the contract as rectified. In the alternative, a declaration that the contract was void from its inception was claimed. 2 The plaintiff was the vendor under the contract for sale of a residential unit at 25 Market Street, Sydney being lot 48 in a strata plan together with a car parking space in the building being lot 110 in that strata plan. The plaintiff claimed that the contract mistakenly included lot 110. 3 Lawrence Robert Pike was a director of the plaintiff. On 9 August 2002 he instructed David Anthony Cass, a solicitor, to act for the plaintiff and instructed him to prepare a contract for sale of the residential unit and car parking space. Mr Pike informed Mr Cass that the agent for the sale was Tom Bakovic of Knight Frank Residential (NSW). 4 On 12 August 2002, Mr Pike entered into an exclusive agency agreement instructing Mr Bakovic to sell the residential unit plus car parking space or, preferably, the residential unit alone. Mr Pike accepted Mr Bakovic's appraisal and instructed him to list the residential unit at $305,000 and the car parking space at $70,000. On 21 August 2002, Mr Cass sent the contract to Mr Bakovic. 5 On Saturday 31 August 2002 and Saturday 7 September 2002, Mr Bakovic caused an advertisement to appear in the Sydney Morning Herald in the following terms: " CITY $375,000 BERKELEY Perfect city investment, large 1 brm apt, int laundry, balcony + carspace, located 1 min to QVB shops and townhall station." 6 The defendant was employed by a bank to advise customers about internet transactions. She was interested in acquiring an inner city residential unit as an investment. In the fortnight leading up to her contact with Mr Bakovic, she searched the internet for such residential units and had obtained an indication from the bank that a loan of approximately $300,000 could be made available to her. She inspected approximately six residential units with other agents. 7 On 3 September 2002, the defendant inspected a residential unit in Bridge Street, Sydney with Mr Bakovic. The unit did not appeal to her. It was too small. Mr Bakovic informed her that the Market Street property would be open for inspection on the following Saturday. The defendant said that a few days later she spoke with Mr Bakovic who informed her that the Market Street property was a one bedroom apartment with a car parking space. He told her what the strata levies were. She visited the property on Saturday 7 September 2002 and said she was informed by Mr Bakovic the price was $300,000. She was not informed that the price excluded the car parking space. 8 Mr Bakovic said that on or about 2 September 2002 he had a telephone conversation with the defendant about another property in which he informed her that an apartment was available in Market Street. He said the defendant told him she had a budget of $300,000 and he said the owner would separate the residential unit and the car parking space and the defendant indicated she would attend the open day on Saturday 7 September 2002. 9 In cross-examination, the defendant agreed that she did not inspect residential units that were outside her budget. She accepted that she had informed Mr Bakovic of her budget before the open day at Market Street and it was in that context that he suggested she attend the Market Street open day. She said that Mr Bakovic might have told her the asking price before the open day but she could not remember. She said that from her internet research she had an idea of what it would be. 10 Mr Bakovic said that at the open day he told the defendant she could have the residential unit and car parking space for $375,000, or the residential unit for $300,000, or the car parking space for $75,000. He said the defendant responded that she was only interested in the residential unit as she could only afford $300,000. 11 A few days after the inspection, the defendant telephoned Mr Bakovic and made an offer of $280,000. She said she stated it was for the residential unit and the car parking space. Mr Bakovic telephoned Mr Pike and informed him he had an offer of $280,000 for the residential unit without the car parking space. Mr Pike subsequently accepted that offer. 12 On 12 September 2002, Mr Bakovic sent Mr Cass a sales advice with respect to 48/25 Market Street stating it had been sold for $280,000. There was no mention of Lot 110. Mr Bakovic did not, otherwise, draw Mr Cass's attention to his sale of the residential unit alone. 13 On the same day, Mr Cass received a facsimile from Leesa McNeice of the NSW Conveyancing Centre informing him that she acted for the purchaser and asking that the contract for sale be forwarded as soon as possible. The caption to that letter identified the property as 48/25 Market Street, Sydney. Mr Cass responded on the same day enclosing the contract for sale. The caption to that letter identified the property as 48/25 and 110/25 Market Street, Sydney. 14 On 18 September 2002, Mr Cass wrote to the NSW Conveyancing Centre inquiring what arrangements they wished to make for the exchange. That letter again identified the property as 48/25 Market Street and 110/25 Market Street, Sydney. 15 On the same day Mr Cass wrote to Mr Pike informing him that the contract had been sent to conveyancers acting for the defendant. That letter contained the caption: "COSET No 15 PTY LIMITED to BLAGOJEVIC Property: 48/25 Market Street, Sydney 2000 110/25 Market Street, Sydney" 16 Mr Pike was retired. He had been in business for thirty five years operating a dental laboratory and regarded himself as a normally prudent and careful person. He said he did not read the letter carefully and did not realise that Mr Cass was referring to a sale of the residential unit and the car parking space. 17 On 20 September 2002, the NSW Conveyancing Centre wrote to Mr Cass requesting changes to special conditions. The caption to that letter was different from the earlier correspondence from the conveyancers. It described the property as: "Unit 48 and 110/25 Market Street, Sydney." 18 On 26 September 2002, Mr Cass responded to the request to vary the special conditions and on 30 September 2002, he received from the NSW Conveyancing Centre under cover of a letter dated 24 September 2002 the defendant's copy of the contract duly executed together with a solicitor's certificate under the Conveyancing Act 1919, s 66W dated 25 September 2002. 19 On 2 October 2002, Mr and Mrs Pike affixed the common seal of the plaintiff to the contract for sale at the offices of Mr Cass. Mr Cass said that while many issues relating to the contract were discussed, he did not recall discussing the issue of the car parking space with Mr and Mrs Pike. Mr Pike said a number of things were discussed but not the car parking space. He did not read the contract. He did not know that the contract referred both to the residential unit and to the car parking space. He took it for granted that things were in order. 20 Mr Pike said he still could not forgive himself for not reading the contract. He said at $280,000 for the residential unit alone the defendant got a good deal. He said a residential unit further down the building, and not as well appointed, had sold three weeks beforehand for $269,000. Mr Bakovic had valued that unit at $270,000 to $280,000. 21 Following the exchange, Mr Cass wrote to the NSW Conveyancing Centre confirming the exchange and enclosing the contract executed by the plaintiff. 22 Requisitions on title were issued. The residential unit and car parking space were leased to different people. The answers to the requisitions with respect to tenancies, consistent with Mr Cass's understanding of his instructions, did not indicate that the car parking space was excluded from the sale. 23 On 24 October 2002, Mr and Mrs Pike went to the office of Mr Cass to sign the transfer in anticipation of settlement. Mr Cass did not recall any discussion with respect to the car parking space on that occasion. Mr Pike said that the car parking space did not come up in conversation. Mr Pike delivered the certificate of title with respect to the residential unit but had retained the certificate of title for the car parking space. 24 In a second affidavit, Mr Bakovic said that in about mid-October 2002 he telephoned the defendant and suggested that once the property had exchanged they should go out and celebrate over dinner to which the defendant agreed. Mr Bakovic was taken to task in cross-examination on the basis that since exchange took place on 2 October 2002, this telephone conversation could not have taken place in mid-October. Mr Bakovic said he did not, in the witness box, recall exactly when the telephone conversation took place. His memory was better when he swore the affidavit. He was not informed when the contracts were exchanged. 25 The defence relied upon a statement made by the defendant before Mr Bakovic's second affidavit was sworn. The defendant made no subsequent statement, nor was she asked any questions about the telephone conversation in examination in chief. In cross-examination, she said the dinner took place in early October 2002. 26 On 8 November 2002 while preparing for settlement, Mr Cass noted that he had only one certificate of title. He telephoned Mr Pike to ask him for the certificate of title for the car parking space. Mr Pike was astounded and said so far as he was concerned he never included the car parking space at any stage and he was not prepared to proceed if the sale involved both the residential unit and the car parking space. 27 On that day, Mr Cass had a telephone conversation with Ms McNeice and sent her a facsimile indicating that the car parking space was included in the contract in error, was not intended by the plaintiff to be part of the sale and that was the understanding of Mr Bakovic. Ms McNeice responded on the same day by facsimile: "We refer to the above matter and note the improvements listed on the Contract are "home unit" and "carspace". Accordingly, our client is not prepared to release the carspace from the Contract." 28 Mr Bakovic was informed of the problem on 8 November 2002. He said in his second affidavit that he telephoned the defendant and during the course of the conversation she said: "I told my conveyancer that the car space was not included, but they said to me that the car space was on the contract so do not worry about it and sign the contract." 29 Again, the defendant did not controvert Mr Bakovic's testimony in her evidence in chief. In cross-examination, it was put to her that she had made the statement. She denied it. 30 On 12 November 2002, the NSW Conveyancing Centre wrote to Mr Cass stating that they were instructed that at all times prior to exchange of contracts, the defendant was of the understanding that she was purchasing an apartment and car space. 31 In the resolution of this matter, much depends upon the credibility of the witnesses. It was submitted on behalf of the defendant that it was unlikely that Mr Pike did not know that two lots were involved in the sale. I reject that submission. Whilst somewhat garrulous, I regarded Mr Pike as an impressive witness. While his instructions to Mr Cass were to draw up a contract on the basis that both residential unit and car parking space were to be sold, I have no doubt that his instructions to Mr Bakovic were to sell both or, preferably, to sell the residential unit alone. 32 It is understandable that the letter from Mr Cass confirming a copy of the contract had been sent to conveyancers acting for the defendant which mentioned both lots in its heading, did not convey to Mr Pike an understanding that Mr Cass was referring to a sale of residential unit and car parking space. His delivery of one certificate of title alone in preparation for settlement is inconsistent with the submission that he knew that both lots were the subject of sale as was his astonishment when asked by Mr Cass for the second certificate of title. 33 Mr Cass said it was only at the very end that anything was said about the car parking space not being involved. In my view this was a case in which Mr Cass believed his original instructions remained on foot while Mr Pike believed the sale was limited to the residential unit. 34 It was submitted that Mr Cass was not forthright in giving evidence because of his omission of certain correspondence from his affidavit. Mr Cass said that decisions were made as to the relevance of certain material. I agree that the documents omitted from his affidavit were of little relevance. It did not seem to me that Mr Cass was other than totally frank about the error that had been made. 35 It was submitted that Mr Bakovic's evidence was not credible. He freely conceded that his recollection of events when in the witness box was not good. He said he had a better recollection in February and March 2003 when he swore his affidavits. It was submitted that the evidence of his social contact with the defendant and his conversation with her on 8 November 2002 were so significant that if they were true they would have been included in his first affidavit. He was cross-examined as to why, after the residential unit had been sold, he did not advertise the car parking space for sale. He said he did not recall but Mr Pike probably decided to keep it. It was submitted that he volunteered this argument from the witness box, he had not included it in either of his affidavits and I should reject his testimony. 36 Mr Bakovic paused for long periods of time before he answered questions. I gained the impression he was wrestling with his recollection and when taken to task about testimony on the basis that things would have happened, he freely conceded he had no recollection of certain events. While he did not say in his affidavits that Mr Pike decided to keep the car parking space, he was definite in his recollection that he told the defendant the owner would separate residential unit from car parking space and he told the defendant she could buy both or one or other of them. Furthermore, Mr Pike said his instructions were to sell both or, preferably, the residential unit alone. 37 It is curious that Mr Bakovic did not depose to the defendant's statement of 8 November 2002 in his original affidavit. He did not recall telling Mr Cass about it for the purpose of swearing his first affidavit. Mr Cass may not have suspected that Mr Bakovic spoke with the defendant when informed of the problem on 8 November 2002. Mr Cass may not have asked Mr Bakovic whether he spoke with the defendant and Mr Bakovic may not have volunteered that he did. A number of explanations are open. Mr Bakovic was categorical that the defendant had made the statement to him. He said he recalled it because he was in shock when he was told there was a problem with the sale and he telephoned the defendant to resolve the problem by making it clear to her that he had sold the residential unit without the car parking space. 38 Neither the omission of this conversation from Mr Bakovic's first affidavit, nor his testimony of a social approach to the defendant in mid-October 2002, nor his explanation for not advertising the car parking space for sale cause me to reject Mr Bakovic's evidence as incredible. I formed the impression of a truthful witness struggling with poor recollection, fairly admitting to a lack of memory of certain events, but quite definite about key events. 39 To reject Mr Bakovic's evidence suggests that an experienced real estate agent specialising in inner-city residential properties, who had valued a less desirable residential unit in the building at $270,000 to $280,000, who had appraised the unit in question at $305,000 and the car parking space at $70,000 would tell his client he had an offer for sale for both at $280,000 and that Mr Pike, who was aware of the sale of the other unit for $269,000, would accept $280,000 for both unit and car parking space. Mr Bakovic's sales advice is inconsistent with that theory. It identified the residential unit alone as the property sold. 40 That the residential unit alone was the subject of the bargain is given some support by the first letter written by the New South Wales Conveyancing Centre. It identified the property as the residential unit alone. 41 The letter from the conveyancers of 8 November 2002 also gives some support to a sale of residential unit alone. It put the proposition that residential unit and car parking space were mentioned in the contract and, accordingly, the defendant was not prepared to release the car parking space from the contract. If the defendant had always understood she was buying residential unit and car parking space, one would have expected a statement to that effect. The letter is consistent with the statement Mr Bakovic attributed to the defendant on that day. 42 Ms McNeice was available to be called as a witness. Mr Cass said he had spoken with her the previous day. She was not called and I was invited to draw the inference that her testimony would not have assisted the defendant (Jones v Dunkel (1959) 101 CLR 298). 43 The defendant had investigated the real estate market in the inner city for about a fortnight. She had visited a number of residential units with other agents and she had visited a property in Bridge Street as well as the Market Street property with Mr Bakovic. She had established a budget with the bank. She only visited places within her budget. She had an idea of the asking price of the Market Street property from her researches of the market. She gave me the impression of being a shrewd person. I do not accept that she had little understanding of the relative values of residential units in the inner city. Such knowledge would have indicated to her that $280,000 was a good buy for a residential unit alone and a windfall gain if the car parking space was included. 44 I find that Mr Bakovic told the defendant that she could have both residential unit and car parking space for $375,000 or residential unit for $300,000 or car parking space for $75,000 and that the defendant said she was only interested in the residential unit because she could only afford about $300,000. I find that the defendant made an offer to purchase the residential unit alone for $280,000 and that offer was accepted on behalf of the plaintiff. I find that on 8 November 2002 the defendant said that she had told her conveyancer that the car parking space was not included but they said the car parking space was in the contract and not to worry about it. 45 I am fortified in this conclusion by the inference I draw that any evidence Ms McNeice might have given would not have assisted the defence. 46 I find that the contract for sale embodied a mistake, common to both parties, by the inclusion therein of the car parking space. 47 It has been said that in proceedings for rectification very clear and strong evidence is required (Australia Hotel Co Ltd v Moore (1899) 20 NSWLR (Eq) 155 at 161) or that convincing proof is required (Joscelyne v Nissen [1970] 2 QB 86 at 98). I am satisfied that such proof exists in this case. 48 It was once thought that a plaintiff could not obtain rectification of an agreement and specific performance of it as so rectified in the same proceedings. That proposition has been rejected (United States of America v Motor Trucks Ltd [1924] AC 196 at 201-202). 49 Paragraph 1 of the summons sought a declaration that the contract for sale and, in particular, the description of "land" and of "improvements" did not express the true agreements of the parties and was executed under a mistake of fact. It was submitted that there was no execution under a mistake of fact because Mr Pike did not turn his mind to what the plaintiff executed. 50 Paragraph 2 of the summons sought an order that the contract be rectified so as to express the true agreements between the parties by altering the description of "land" by deleting references to Lot 110 and by altering the description of "improvements" by removing the reference to the car parking space. It was submitted that since Mr Pike did not turn his mind to the terms of the contract upon execution, rectification was not available to the plaintiff. 51 I do not understand the first submission. The documents executed by the parties, on the findings I have made, contained a mistake. They did not record the bargain struck by the parties. They did not reflect the intention of both parties to purchase and sell a residential unit. True it is that Mr Pike did not read the contract before its execution. He assumed that everything was in order. It was not. He caused the plaintiff to execute under a mistake of fact. 52 So far as the second submission is concerned, I am of the view that Mr Pike's failure to read the contract before execution does not deny the remedy of rectification to the plaintiff. Upon my findings, both the plaintiff and the defendant intended to sell and purchase for $280,000 the residential unit alone. The documents executed by them did not reflect their bargain and ought to be rectified. 53 Where the basis for rectification is established, it has been said that only in exceptional cases should relief be refused on discretionary grounds (Spry, Equitable Remedies, 6th ed, LBC Information Services, Australia, 2001 at 616). There is in this case no intervention of third party interests, no laches and no acquiescence. 54 In Meagher, Gummow and Lehane, Equity Doctrines and Remedies, 4th ed, Butterworths Lexis Nexis, Australia, 2002 at par 26-080 the learned authors point out that while it has often been said that a court is less willing to rectify a document where it was prepared by the plaintiff seeking rectification (Ex parte Wright (1812) 19 Ves Jun 255 (34 ER 513), Collett v Morrison (1851) 9 Hare 162 (68 ER 458)) it is clear that in a proper case the court can grant relief at the instance of such a party (Murray v Parker (1854) 19 Beav 305 (52 ER 367)). In that case an agreement for sub-lease stipulated the rent and provided that the sub-lessee should pay land tax. The lease reserved the rent and stated it to include land tax. The lease was rectified at the instance of the sub-lessor. 55 In Ball v Storie (1823) 1 Sim & St 210 (57 ER 84) it was held that a court of equity would reform an instrument which by the mistake of the drawer admitted of a construction inconsistent with the true agreement of the parties although the party seeking to reform it, himself drew the instrument. At p 219 (ER 88) Sir John Leach VC said: "If the true agreement and the consequent mistake in the written instrument be established by the evidence, can a Court of Equity refuse relief, because it appears that the party seeking relief himself drew the instrument, unless it be a principle in a Court of Equity not to relieve a party against his own mistakes? There is no such principle in a Court of Equity. Common mistake is the ordinary head of jurisdiction; and every party who comes to be relieved against an agreement which he has signed, by whomsoever drawn, comes to be relieved against his own mistake." 56 I propose to make orders rectifying the contract for sale and ordering its specific performance. I will hear the parties on costs. I direct the parties to bring in short minutes of orders reflecting these reasons. ********** Last Modified: 05/26/2003 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.