Reported Decision : (2003) NSW ConvR 56-058 New South Wales Supreme Court CITATION : Dalsor Pty Limited v Roberts [2003] NSWSC 469 HEARING DATE(S) : 16 May 2003 JUDGMENT DATE : 4 June 2003 JURISDICTION: Equity Division JUDGMENT OF : Davies AJ DECISION : Order for rectification and specific performance. See para 26. CATCHWORDS : Sale of land - whether contract unilaterally rescinded - requirements of notice of rescission - whether notice was an unequivocal notice of rescission or a mere warning of intention to rescind LEGISLATION CITED : Fair Trading Act 1987, s 42 CASES CITED : Lakshmijit v Sherani [1974] AC 605 at 616 Re Weston and Thomas's Contract [1907] 1 Ch 244 PARTIES : Dalsor Pty Limited (Plaintiff) Mervyn Thomas Roberts & Carol Jean Roberts (Defendants) FILE NUMBER(S) : SC 6096/02 COUNSEL : D Cassidy QC (Plaintiff) D Charles (Defendants) SOLICITORS : Galland Elder Lulham (Plaintiff) Lamond Howard & Associates (Defendants) IN THE SUPREME COURT OF NEW SOUTH WALES EQUITY DIVISION DAVIES AJ 4 JUNE 2003 6096/02 - DALSOR PTY LTD v MERVYN THOMAS ROBERTS & ANOR Reasons 1 HIS HONOUR: By an agreement in writing dated 4 September 2002, the defendants Mervyn Thomas Roberts and Carol Jean Roberts, sold a block of land, on which a cottage and sheds was erected, to the plaintiff, Dalsor Pty Ltd. The contract was in the form issued by the Law Society of New South Wales and the Real Estate Institute of New South Wales, 2000 ed. The completion date was six weeks from the date of the contract, which would have expired on 16 October 2002. 2 The central issue between the parties is whether the contract was rescinded by a letter dated 31 October 2002 sent by the purchaser's solicitor, Galland Elder Lulham ("Gallands"), to the vendors' solicitors, Lamond Howard & Associates ("Lamonds"). However, I shall need to refer also to some other events which were addressed by counsel. 3 The contract contained a typed special condition 39 which read as follows: "This Contract is conditional upon the Purchaser obtaining Development Approval from the Goulburn City Council for the demolition of the structures erected on the subject land within a period of 4 weeks or any mutually agreed extension thereof from the date hereof. In the event that the approval is not obtained within the time prescribed or approval is obtained in terms not acceptable to the Vendor, the Purchaser may by notice in writing to the Vendor rescind this Contract whereupon the provisions of clause 19 hereof shall apply. In the event that the Vendor does not rescind the Contract within 14 days of the date of approval being communicated to it then this Contract shall proceed to completion." 4 It is agreed that there were two errors in that clause. The word "Purchaser" should be substituted for the word "Vendor" in the fifth last line where it appears in the expression "not acceptable to the Vendor" and in the third last line where it appears in the expression "In the event that the Vendor". Counsel are agreed that an order for rectification should be made. 5 The period for obtaining the development approval lapsed on 2 October 2002. On the following day, 3 October, the solicitors for the purchaser, Gallands, wrote to the solicitors for the vendors, Lamonds, as follows: "No approval has been obtained and we understand from the lodging Architect that no decision will be made by the Council until at least 1st November, 2002. Accordingly, we be grateful if you could extend the period of 4 weeks referred to in the Contract for a period of a further 30 days which would have the effect of amending the Contract by substituting 58 days for the 4 weeks in the Special Condition 39 in the contract. We would be pleased to hear from you. If the 14 day period referred to in Special Condition 39 of the Contract expires before a favourable response from your client, we would be pleased if you would treat this letter as a notice of recission on the 13th day ie. 15 October, 2002." 6 For reasons which will become apparent later, I am of the view that that letter did not amount to a notice of rescission. In any event, that issue did not arise as Lamonds wrote on 10 October to say that their clients agreed to extending the period of four weeks to one of fifty eight days. 7 That time expired 1 November 2002. On 31 October 2002, Gallands wrote to Lamonds as follows: "We regret to advise in this matter that Mr Dutaillis estimate of when Council will make a final decision on the Application for demolition was not accurate. The Council require additional information recently which was immediately provided by Mr Dutaillis to the Council. He is now reluctant to indicate when we might have an answer. Accordingly, we have no alternative on behalf of our client but to seek a further extension of time and suggest perhaps the 22nd November, 2002 be the date. We have no objection to your client contacting Mr Dutaillis direct about this matter as he is certainly doing the best he can but has been frustrated by the delays and lack of action at the other end. We would be grateful to have your reply before 1st November, 2002. We would be pleased if you treat this letter as a notice of recission to operate after the 1st November, 2002, unless an agreement can be reached as to the variation of the terms of the Contract to cope with the present situation." It is the operation of that letter which is the crux of the issue between the two parties. 8 The submission of Mr DG Charles, counsel for the vendors, is that the letter of 31 October 2002 constituted an effective notice of rescission as at the close of 1 November 2002 and that that notice of rescission could not be withdrawn. That was not how Mr Lamond viewed the letter for, on 4 November 2002, he wrote to the vendors requesting their instructions on the requested extension of time. However, that is the submission which counsel put. Counsel for the purchaser, Mr DI Cassidy QC, submitted that the letter, if it was a notice of rescission, was to operate in the future after 1 November 2002 when it was ascertained that an agreement could not be reached as to a variation of the terms of the contract. Mr Cassidy submitted that the notice was subsequently withdrawn by Gallands before it had been ascertained that such an agreement could not be reached. 9 Condition 39 made the contract voidable at the option of the purchaser in the event that the Council's approval to the demolition of the structures on the land was not obtained or that the approval was obtained in terms not acceptable to the purchaser. No time for the exercise of the option to rescind was expressed where the approval was not obtained but the last sentence of the clause gave 14 days for the exercise of the right to rescind where the approval obtained was in terms not acceptable to the purchaser. Presumably that 14 days would be a guide to the time allowable in the event that approval was not obtained. Clause 39 referred to and incorporated the provisions of printed clause 19 of the contract but there is nothing in that to which I need refer. 10 Under a clause such as clause 39, the giving of a notice of rescission operates to bring the contract to an end and entitles the purchaser to the return of the deposit. The exercise of the right of rescission is a unilateral act which takes its force and effect from the agreed contractual terms. 11 A notice of rescission cannot be given by a purchaser under such a term until the right to rescind arises and then only during the period during which the right to rescind subsists. A party exercising the right to rescind must make his or her intention unequivocally clear to the other party. In Lakshmijit v Sherani [1974] AC 605 at 616, Lord Cross, delivering the judgment of Lord Diplock, Viscount Dilhorne and himself, said: "No particular form of communication is needed. It is sufficient if the vendor make it unequivocably clear to the purchaser that he is treating the agreement as being at an end: see Car and Universal Finance Co Ltd v Caldwell [1965] 1 QB 525." 12 Butt on The Standard Contract for Sale of Land in New South Wales, 1985 edition, states at 416, "A notice of intention to rescind which is equivocal as to the vendor's intention to rescind – as where it is expressed to be "without prejudice" - is not an effective notice." Butt refers to Re Weston and Thomas's Contract [1907] 1 Ch 244 where Swinfen Eady J held at 248 that "a letter written "without prejudice" was not a valid notice". 13 Voumard on The Sale of Land in Victoria, 1986 edition, states at 337, "Once a party who is entitled to rescind elects to do so and [communicates] that election to the other party his act cannot be withdrawn…" That is because the service of a notice of rescission given by a person entitled to rescind brings the contract to an end. 14 In the present case, the letter of 31 October 2002 was written before the purchaser had a right to rescind. For that reason alone, the letter was not a notice of rescission. It was not a notice given by someone who, having the right to rescind, unequivocally does so. Moreover, the letter was not an unequivocal act terminating the contract. The letter invited the vendors to reach an agreement as to a variation of the contract to cope with the situation which had arisen. The date for the operation of any rescission was left uncertain. The letter did not make it clear that a reply had to be received immediately, although it did request a reply by 1 November 2002. It did not demand a reply "today" or before a specified time on 1 November 2002. The words "after the 1st November 2002" were equivocal. It is not surprising that Mr Lamond understood the letter to be an invitation to negotiate and thus, some days later, forwarded the letter to the vendors for their instructions. 15 Rescission under a condition such as condition 39, which operates in association with printed condition 19, requires rescission by the service of a written notice. Such a notice cannot operate in conjunction with other facts. The notice must, on its face, bring the contract to an end. The letter of 31 October 2002 did not do that. At best it was a warning that, if agreement could not be reached as to a variation of the contract to cope with the situation which had been reached, then the purchaser would rescind the contract. 16 It follows that the letter of 31 October did not rescind the contract, either at the close of 1 November or at any other time. 17 I turn now to some of the subsequent events. Mr Lamond wrote to the vendors on 4 November but did not receive any instructions from them until 18 November. 18 On 14 November 2002, the Council gave approval for the demolition of the structures on the land. On 15 November 2002, Mr Galland rang Mr Lamond to say that his clients wished to proceed. Mr Galland and Mr Lamond both gave evidence as to the content of this conversation. There were differences between them but those differences are not significant for present purposes. 19 On 18 November 2002, Gallands wrote to Lamonds as follows: "We refer to our letter to you of the 31st October, 2002 and note that we have not heard from you in response thereto. We are now instructed to proceed to settlement as we indicated in our telephone conversation and withdraw the notice of recission. We enclose a Settlement Sheet calculated as at Thursday 21st November, 2002 with a Transfer." 20 Later on the same day, Lamonds responded as follows: "We refer to recent attendances, and advise that our client has instructed us to accept the rescission of the Contract as set out in your letter of the 31 October 2002. This letter can be relied upon to obtain a refund of the deposit paid from the agent." 21 On 7 November 2002, the vendors resold the property to other purchasers at an increased price. Subsequently, the plaintiff lodged a caveat over the property and that caveat has been extended pending the determination of these proceedings. 22 Mr Cassidy submitted that these facts constituted misleading and deceptive conduct by the vendors which breached s 42 of the Fair Trading Act 1987. He also submitted that the conduct of the vendor was unconscionable. 23 However, these submissions were not directed to any end. The letter of 31 October 2002 either rescinded the contract or it did not. I hold that it did not. The contract thus remains on foot. The letter of 31 October 2002 contained an implied offer to terminate the contract which the vendor could have accepted. But they did not do so before the offer was withdrawn during Mr Galland's telephone call to Mr Lamond on 15 November and by the letter from Gallands to Lamonds on 18 November. There was no offer which was open when Lamonds sent its letter to Gallands on 18 November. Mr Charles did not submit the contrary and did not rely upon that letter. 24 No purpose would be served by considering further the submissions on misleading and deceptive conduct and unconscionable conduct. 25 Mr Charles, during the course of his address, submitted that the Court should exercise its discretion not to order specific performance having regard to the resale of the property. Mr Charles did not proceed with that submission after it was pointed out to him that it may be easier for the plaintiff to prove damages against the vendors than for the second purchasers to do so, as the latter agreed to pay a higher price. In any event, the second purchasers have not sought to intervene in the proceedings and have not put forward any facts which the Court should take into account in the exercise of its discretion. In this circumstance, I consider that the plaintiff should have an order for specific performance. 26 Accordingly, I order and declare that: 1. Special condition 39 in the Contract of Sale of Land between the Plaintiff and the Defendants in relation to the property known as 70 Grafton Street, Goulburn, be rectified by substituting the word "Purchaser" for the word "Vendor" in the expressions "acceptable to the Vendor" and "In the event that the Vendor". 2. The said Contract, as rectified, constitutes a binding agreement between the Plaintiff and the Defendants. 3. The said Contract be specifically performed and carried into execution. 4. In default of the defendants complying with Order 3, a Registrar of the Court is empowered to execute all documents and do all things in the name and on behalf of the Defendants as may be necessary to perform the contract. 5. Caveat registered No. 9193320 be extended until Order 2 has been satisfied. 6. The Defendants pay the Plaintiff's costs as agreed or assessed. *********** Last Modified: 06/12/2003 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.