New South Wales Supreme Court CITATION : Tuedwell Pty Ltd v J.C. Craig Constructions Pty Ltd and Anor [2003] NSWSC 450 HEARING DATE(S) : 23 May, 2003 JUDGMENT DATE : 23 May 2003 JURISDICTION: Equity Division JUDGMENT OF : Palmer J DECISION : Declaration that vendor entitled to terminate contract and forfeit deposit. CATCHWORDS : VENDOR AND PURCHASER - NOTICE TO COMPLETE - Whether in the absence of any evidence of special circumstances, a fourteen day Notice to Complete gives reasonable time - whether a vendor giving Notice to Complete may unilaterally extend time for compliance - whether vendor validly rescinded contract. HELD: fourteen day Notice to Complete gave reasonable time - vendor entitled to terminate. - Castle Hill Tyres Pty Ltd v Luxspice Pty Ltd (1996) 7 BPR 14,959 CASES CITED : - Fekala Pty Ltd v Castle Constructions Pty Ltd [2002] NSWCA 297 - Paclyn Pty Ltd v G.P. Harris Real Estate Pty Ltd (1987) 4 BPR 9,267 - Sindel v Georgiou (1984) 58 ALJR 515 Tuedwell Pty Ltd - Plaintiff PARTIES : J.C. Craig Constructions Pty Ltd - First Defendant John Christopher Craig - Second Defendant FILE NUMBER(S) : SC 1526/03 COUNSEL : V. Culkoff - Plaintiff B.J. Skinner - First and Second Defendants SOLICITORS : Steven Klinger - Plaintiff A.C. Knibb Kaine & Associates - First and Second Defendants Ex tempore Introduction 1 By its Summons filed on 20 February 2003 the Plaintiff claims a declaration that it has validly rescinded a contract dated 10 September 2002, whereby it agreed to sell to the First Defendant land known as 195 Fox Valley Road, Wahroonga. The Plaintiff further seeks a declaration that it is entitled to forfeit to itself the 10% deposit paid under the contract; in addition it seeks damages. 2 The Second Defendant is joined as a party to the proceedings because he is a guarantor of the First Defendant's obligations under the contract for sale. 3 By their Cross Claim filed on 1 April 2003 the Defendants seek declarations that the Plaintiff has wrongfully repudiated the contract for sale, that the First and Second Defendants have validly terminated the contract, and that they are entitled to a return of the deposit paid thereunder. The Defendants also claim damages against the Plaintiff for breach of contract, such damages to be ascertained by enquiry before a Master. Facts 4 The evidence in the case is extremely sparse. Mr Skinner, who appears for the Defendants, says that the case turns upon a few letters passing between the parties' representatives in the period from exchange of contracts until purported termination on 23 December 2002. Mr Christie, who appears with Ms Culkoff for the Plaintiff, did not refer in his oral submissions to any other evidence. The undisputed facts therefore are within a very short compass. 5 The contract for sale was entered into on 10 September 2002. The purchase price was $910,000, the deposit being $91,000. The contract provided that the completion date was the 70th day after the contract date, that is, 19 November 2002. Time for completion was not made of essence. 6 On the day before the completion date, i.e. 18 November 2002, the Defendants asked the Plaintiff for an extension of time to complete the contract. On 19 November the request was refused. On the following day, the Plaintiff's solicitor, Mr Klinger, gave to the First Defendant a Notice to Complete dated 20 November 2002 requiring completion at 12 noon on 4 December 2002. 7 On 2 December 2002 the licensed conveyancer acting for the First Defendant, Mr A. Bahar, sent a letter to Mr Klinger simply stating: "We are instructed to advise that the purchaser rejects your Notice to Complete, that you have not provided sufficient time, that 14 days is not a reasonable time for the notice to complete." By letter dated 3 December 2002 Mr Klinger denied that the Notice to Complete was invalid. The letter continued: "However, in good faith and to afford your client further time to complete but without prejudice to my client's rights under the Notice and otherwise for your client's breach, my client agrees to vary the Notice by extending the time for completion under the Notice to provide that completion is to take place on or before 3.00 pm on Friday 20 December 2002 . Time is and remains of the essence." 8 By letter dated 19 December 2002, sent to Mr Klinger by facsimile, Mr Bahar said: "We are instructed to advise that the Notice to Complete has been rejected by the purchaser, as it has not provided sufficient or proper time." By letter dated 19 December 2002, Mr Klinger responded that the assertion that the Notice to Complete was invalid was rejected and that time for completion remained of the essence. The letter advised details of payments due on completion and confirmed that the Plaintiff was ready, willing and able to settle. Settlement did not take place on 20 December. 9 On 23 December Mr Klinger wrote to Mr Bahar stating that the Plaintiff elected to terminate the contract because of the First Defendant's failure to complete in accordance with the Notice to Complete dated 20 November 2002, as extended by his letter of 3 December 2002. The letter further advised that the deposit paid under the contract would be forfeited. 10 Mr Bahar responded by facsimile on the same day advising that the Defendants rejected the Plaintiff's termination of the contract " due to the invalidity of your notice to complete for reasons already stated" . 11 That is the sum total of the evidence upon which, according to the submissions of the parties, this case is to be decided. Whether Notice gave reasonable time 12 Mr Skinner submits that the Notice to Complete dated 20 November 2002 was invalid because it did not give reasonable time for completion. There is no dispute that the Notice was served on 20 November. Excluding the date of service, the Notice required completion within fourteen days, that is, by the close of business on 4 December 2002: see Paclyn Pty Ltd v G.P. Harris Real Estate Pty Ltd (1987) 4 BPR 9,267 and Castle Hill Tyres Pty Ltd v Luxspice Pty Ltd (1996) 7 BPR 14,959. 13 While the reasonableness of the time for completion given in a notice to complete depends upon the particular circumstances of the case, it is, generally speaking, accepted that fourteen days is the norm: see, for example, Castle Hill Tyres at 14,964 per Young J (as his Honour then was). In Sindel v Georgiou (1984) 58 ALJR 515, at 518, the High Court, while referring to a case in which the circumstances justified a six day notice to complete, said that strong circumstances must be shown to justify the giving of a notice to complete which allows less than fourteen days for completion. 14 In the present case, the First Defendant had already had seventy days to complete the contract before the Notice to Complete was given. Clause 15 of the contract entitled the Plaintiff to serve a Notice to Complete once the date for completion had passed, if it was otherwise entitled to do so. Mr Skinner has not submitted that the Plaintiff was not lawfully entitled under the contract to serve a Notice to Complete on 20 November. The Notice required completion by the 85th day after exchange. 15 There was no evidence of any particular difficulty in which the First Defendant was placed by the giving of a notice requiring completion by 4 December. All that Mr Bahar said about the notice, and said repeatedly, was that the time for completion therein given was insufficient. He did not say why it was insufficient, either in his correspondence or in evidence in this case. 16 In those circumstances, bearing in mind that, as the High Court has said in Sindel at 515, it is very much a matter of impression whether the stipulated time for completion given in a notice is reasonable in light of the facts of a particular case. I am of the opinion that the time for completion given in this case was reasonable and that the Notice to Complete was valid. Whether termination valid 17 Mr Skinner's second point is that the purported extension of time for compliance with the Notice to Complete, which Mr Klinger purportedly gave by his letter of 3 December, was invalid. He says that the purported extension was unilateral, despite Mr Klinger's statement in the letter, "My client agrees to vary the notice" . I accept the submission that the variation was unilateral because there is no evidence at all of any communication between the parties concerning an extension of time for compliance with the Notice to Complete. The Defendants' attitude was and always had been that the Notice to Complete was invalid. 18 Mr Skinner submits that a unilateral extension of time for compliance with a notice to complete, given prior to the expiry of that notice by the party who has served it, is of no effect in law. He relies on the decision of the Court of Appeal in Fekala Pty Ltd v Castle Constructions Pty Ltd [2002] NSWCA 297. In that case, as in this case, the vendors had given a notice to complete and, prior to its expiry, had purportedly extended unilaterally the time for compliance. At paragraph 29 of the judgment Hodgson J, who gave the leading judgment, set out the submissions on the point made by the purchaser's counsel, Mr Officer QC: "As regards the submission that the Vendors could extend the time specified in the notice, Mr Officer submitted that a Notice to Complete binds both parties, and the giver of the notice cannot waive compliance with it: Finkielkraut v Monohan [1949] 2 All ER 234, Halfpenny v Wilson (1967) 87 WN (Pt1) (NSW) 547, Quadrangle Developments, Merns v Parras Holdings Pty Ltd [1994] NSW Conv R 55-705, Falconer. Although none of these cases expressly dealt with a notice given in advance purporting to extend the time, the principle was that the notice bound both parties as if it were a term of the contract, and therefore could be extended only by consent. Any other view would introduce great uncertainty: for example, it would raise a question as to how long before the specified time would the notice extending the time have to be given." At paragraph 37 his Honour said: "Although no previous case has dealt with the situation where a party giving a Notice to Complete has purported to extend the time specified in it, the matter is I think determined by the principle that both parties are bound by a valid Notice to Complete, once it has been given. In addition, as pointed out by Mr Officer, any other view would be productive of great uncertainty. Presumably, any notice extending the time would have to be given a reasonable time before the time specified, producing real questions as to what would be a reasonable time. Once a Notice to Complete has been given, the other party would presumably feel obliged to incur whatever trouble and expense was necessary to comply with it, which could be wasted if the party giving the Notice to Complete could simply extend the time which it specified." 19 It will be seen that the Court, in effect, accepted as correct the submission made by Mr Officer QC. The result in the present case is that, as Mr Skinner contends, Mr Klinger's letter of 3 December 2002 could not operate to waive compliance by the First Defendant with the requirement of the Notice to Complete to complete the contract by 4 December 2002. But this does not really take the Defendants' case anywhere. Time remained of the essence for completion as at 4 December and as the contract had not been completed on that date the Plaintiff was thereafter entitled to terminate. As I have noted, the settlement did not occur on 4 December 2002. 20 It is a fair inference from Mr Bahar's assertions that the Notice to Complete was invalid, that the First Defendant was indicating that it would not attend settlement on 4 December, so that Mr Klinger would be justified in not attending at the time and place specified for settlement in his Notice to Complete. 21 Nothing happened after 4 December except that Mr Klinger required completion on 20 December but Mr Bahar continued to deny the validity of the 20 November Notice to Complete. When settlement did not occur on 20 December, time for completion on 4 December having been made of the essence and the First Defendant being in breach of that extension condition, the Plaintiff was entitled to terminate. 22 It is important to emphasise that no allegation has been made by the Defendants of any conduct after 4 December founding an estoppel or waiver or amounting to an election on the part of the Plaintiff which would deny it the right to rescind on 23 December, as it has done. The case has been fought entirely upon the issue whether the Notice to Complete given on 20 November was effective in the circumstances which thereafter occurred. 23 The result is that, in my opinion, the Plaintiff validly rescinded the contract on 23 December 2002 for the First Defendant's non-compliance with the Notice to Complete which had been given on 20 November. 24 As to forfeiture of the deposit, Mr Skinner said at the outset of his submissions that if it were decided that the contract had been validly rescinded by the Plaintiff, he would not press any submission that the deposit should not be forfeited to the Plaintiff. 25 The Plaintiff is therefore entitled to the declarations sought in paragraphs 1 and 2 of its Summons. There will also be an order in terms of paragraph 3 of the Plaintiff's Summons. There will be a reference to the Master to enquire as to what damages, if any, have been occasioned to the Plaintiff by the breach of contract by the First Defendant. It follows from what I have said that the Defendants' Cross Claim will be dismissed. The Defendants will pay the Plaintiff's costs of the Summons and the Cross Claim on a party/party basis. 26 I will stand the proceedings over for a short time to enable the parties to bring in Short Minutes of Order reflecting these reasons and the orders which I propose to make, and providing for a calculation of interest on the deposit. If desired, I will set a timetable for a reference to the Master for an enquiry as to damages. – oOo – Last Modified: 05/28/2003 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.