Wood v Rockwall No 3 Pty Limited [2008] NSWSC 624

New South Wales Supreme Court

CITATION : Wood v Rockwall No 3 Pty Limited [2008] NSWSC 624

HEARING DATE(S) : 13 June 2008

JUDGMENT DATE : 13 June 2008

JURISDICTION : Equity Division

JUDGMENT OF : Windeyer J at 1

EX TEMPORE JUDGMENT DATE : 13 June 2008

DECISION : Amended summons dismissed

CATCHWORDS : CONVEYANCING - Contract for sale of leasehold interest under 99 year lease of strata lot – covenant in lease requiring lessee to procure Owners Corporation as lessee of common property to do remedial works it was required to under its lease – covenant runs with leasehold interest – whether completion could be delayed until works completed

CATEGORY : Principal judgment

Ronald James Wood (First Plaintiff) PARTIES : Rita Yip (Second Plaintiff) Rockwall No 3 Pty Limited (Defendant)

FILE NUMBER(S) : SC 3174 of 2008

COUNSEL : M W Sneddon (Plaintiffs) K Dawson (Defendant)

SOLICITORS : Macpherson Greenleaf (Plaintiffs)

- 1 - IN THE SUPREME COURT OF NEW SOUTH WALES EQUITY DIVISION

WINDEYER J

FRIDAY 13 JUNE 2008

3174/08 RONALD JAMES WOOD & ORS v ROCKWALL NO.3 PTY LIMITED

JUDGMENT

1 HIS HONOUR: In this matter the plaintiffs seek a declaration and orders by way of final relief to the effect that they are entitled to specific performance by the defendant of a contract for the sale of a leasehold interest of land at The Rocks under contract dated 19 September 2007. I should say at the outset that it is not suggested they are not entitled to specific performance of the contract because the defendant is prepared and wishes to settle it as well. However, what is really sought by the amended summons is an order that the defendant do certain things before settlement of the contract, including carrying out of certain building work as is referred to in a lease between New South Wales Land and Housing Corporation and the Owners Corporation of Strata Plan 69703. The leasehold interest is a lot in Strata Plan 69703. The common property is lot 7 in that strata plan. 2 The New South Wales Land and Housing Corporation, which I will call The Corporation, has entered into 99 year leases in respect of some properties which it owns in the area of The Rocks, and it has entered into a lease with the defendant company here for a strata area for a term of 99 years which leasehold strata interest is the subject of the contract of sale dated 19 September 2007 and the subject of these proceedings. There is no doubt that under the lease between The Corporation and the Owners Corporation certain work was to be done. It is not necessary to go into this in detail but that is the position. 3 The lease, which is the subject of the transaction, contains a covenant that the lessee must procure The Owners Corporation to carry out what is described as remedial works being either essential and urgent works or maintenance works required under a particular conservation plan. It is that work the plaintiffs seek an order the defendant carry out and carry out prior to completion of the contract dated 19 September 2007. 4 The covenant to carry out the work is one between The Corporation and the Owners Corporation. The covenant in the lease of the subject premises is for procuring the work to be done, that is an obligation which is a contractual obligation of the original lessee and the defendant in these proceedings and will remain a contractual obligation upon the assignment of the lease, if it takes place. 5 The problem for the plaintiffs, however, is that upon the assignment of the lease this will be a covenant which will run with the land and, therefore, the plaintiffs will also be in the position of being bound by that covenant and being bound to procure the compliance of its obligations by the Owners Corporation. Thus, the claim of the plaintiffs is that it should not be bound to complete the contract unless and until that work is done. In my view, this is a claim which cannot be sustained under the wording of the lease documents. 6 I should say that in any event there would be difficulties in it being sustained in light of special condition 36 of the contract for sale of the leasehold interest under which the plaintiffs here acknowledge that they shall not be entitled to require the vendor to carry out work in relation to the property for any reason whatsoever. It is not clear from the evidence whether or not it is the work in various conservation plans referred to as work to be carried out on the common property or for work to be carried out on lot 1 or on lots 2 and 3. I am told sales of the leasehold interests in lots 2 and 3 have been settled but it seems to me that this is beside the point. If the plaintiffs here become liable under the covenant that they must procure the Owners Corporation to carry out certain works, then that is something which they must do. But it is not shown at the present stage that there is going to be any difficulty in enforcing that obligation or that the works will not be done. 7 There is evidence that some of the work which was required under the original head lease may not have been carried out, but if it has not been carried out, it does not seem to me that this would entitle the plaintiffs/purchasers to the order which they seek. I should say that the plaintiffs/purchasers were given the opportunity to rescind and did not avail themselves of that opportunity. I have been told that they do not wish to rescind; they wish to purchase the property. 8 The next argument put forward is for a declaration that the plaintiffs are entitled to specific performance of a collateral agreement brought about by a letter of 15 May 2008 which appears behind tab 2 of exhibit A/1. In that letter the solicitors for the defendant company said that the vendor was prepared to allow the plaintiffs to rescind provided such rescission took place by 23 May 2008, in which event clause 19 of the contract would apply, but that if the contract was not rescinded, then the vendor would issue a notice to complete once the building works were finalised. If that was an offer, it was an offer of a right to rescind, which could have been taken up by rescission; it was nothing more than that. There was certainly no conduct or otherwise which would amount to an acceptance of their offer. The fact the right to rescission was not exercised, could not have been, on any basis, an acceptance of an offer to enter into an agreement under which completion would be delayed pending completion of the works. 9 The next matter to deal with is a claim of estoppel, namely, the vendor is estopped from "resiling from its obligations to carry out the building work before the completion of the contract". Firstly, there is no such obligation; second, there is no evidence that the particular building work, which was referred to in the letter from the defendant's solicitors of 15 May 2008, has not been carried out; thirdly, although on the authorities handed up to me this was put on the ground of promissory estoppel or on estoppel by convention, what is really claimed is estoppel by representation. The plaintiffs have suffered no detriment because the plaintiffs wish to continue with the purchase in any event and, therefore, there could be no detriment if the vendor insisted on completion in accordance with the terms of the contract. Even if, on the basis of promissory estoppel, it could be said that there was in some way a suspension of contractual rights, that could be brought to an end by proper notice. In my view, it could be brought to an end by immediate notice. It follows from all of this that the plaintiffs' claim fails; therefore, the amended summons should be dismissed with costs. 10 Order the amended summons be dismissed with costs. The exhibits can be returned. **********