Supreme Court New South Wales Medium Neutral Citation: Tony Saab v Earlwood Animal Pharm Pty Limited [2014] NSWSC 436 Hearing dates: 10 April 2014 Decision date: 10 April 2014 Jurisdiction: Equity Division Before: Young AJA Decision: Judgment for the plaintiff for $16,500. The defendant to pay the plaintiff's costs of the proceedings. Dismiss the cross-summons with costs. Catchwords: CONTRACTS - contract for lease - special conditions not fulfilled - rescinded by purchaser - terminated by vendor - can party rely on their own wrong when rescinding Cases Cited: Suttor v Gundowda (1950) 81 CLR 418 New Zealand Shipping Co Ltd v Societe des Ateliers et Chantiers de France [1919] AC 1 Sedrak v Star (2010) 15 BPR 28, 751 Nu Line Construction Group Pty Ltd v Fowler [2014] NSWCA 51 Category: Principal judgment Parties: Tony Saab (plaintiff) Earlwood Animal Pharm Pty Limited (defendant) Representation: Counsel: Ms T. Fishburn (plaintiff) Mr Q. Nguyen (defendant) Solicitors: Bradfield & Scott Lawyers (plaintiff) Legal & Company Solicitors (defendant) File Number(s): 2014/00042051 Publication restriction: None Judgment 1On 25 September 2013 the parties entered into a contract for sale of a pharmacy at Earlwood for $325,000. The contract was in the form of the Contract of Sale of Business 2004 edition under the aegis of the Law Society of New South Wales and the Real Estate Institute of New South Wales. 2The plaintiff was the purchaser, the defendant the vendor. The pharmacy was conducted on premises which had been leased by a company associated with the vendor from a series of individuals. I will not complicate these reasons by going into detail of the head leases - and there were two of them because they were two sets of lessors - suffice it to say that there were lessors to an associated company with the vendor. 3The contract was subject to a number of special conditions. Special condition 33 is as follows: This contract is conditional upon: (a) The Purchaser obtaining the approval of: (i) The Pharmacy Council of New South Wales; and (ii) Medicare Australia; to conduct the business. (b) The Vendor procuring the consent of the Lessors of both leases... to the transfer of such leases from GRWA Enterprises Pty Limited ... to the Purchaser. 434 reads as follows: The parties agree that as and from the date hereof they and each of them will diligently process all necessary applications and satisfy the requisitions of any relevant party whose consent and/or approval is required. 541 reads: In the event that all of the approvals and/or consents have not been obtained within 90 days of the date hereof then either party may by notice to the other rescind this Contract whereupon the provisions of clause 23 shall apply. 623 refers back to the printed terms of the standard contract and normally under 23.2.1 the deposit and any other money paid by the purchaser under the contract must be refunded. 7The plaintiff obtained the consent of the Pharmacy Council of New South Wales subject to conditions. There has been no debate problem concerning that consent. 8As to the Medicare application, on the day after the contract, the plaintiff filled out the appropriate form so far as he could and sent it to the estate agent to have the vendor set out the details required by Medicare, which only the vendor would know. It is clear that Mr Wade, the controller of the vendor, completed the form and sent it on to Medicare. 9There was some debate before me as to whether Mr Saab, the purchaser, had sent a copy of his part of the form to Medicare before Mr Wade sent his form. At one stage Mr Wade agreed that he had sent the whole form on, though he said three or four times that he assumed that Mr Saab had sent his part of the form and that he (Mr Wade) was merely completing the form. 10I prefer the plaintiff, but it really does not matter. There is no real contest that cl 33 requires the purchaser to obtain the approval, but whether the former was sent to Medicare by Mr Wade or by Mr Saab makes no difference. 11The application which was originated by Mr Saab was being considered by Medicare and that was an application by the purchaser for approval under cl 33(a)(ii). 12Medicare raised a requisition that the application was incomplete as there was no copy of the lessor's consent. 13Mr Wade, in his first affidavit, at para 25, said that there was correspondence between himself and Medicare and that on 14 November 2013 Medicare wrote to him saying: Just following up on this email in relation to the change of ownership. Is this progressing any further? If so, could you please supply a lease and a future date when settlement will occur. 14Mr Wade replied: The sale is still progressing but are at a temporary hurdle with the landlords over the assignment of the current lease... 15He then said that this correspondence left him with the impression that the consent had been obtained but was itself conditional upon Medicare receiving the transfer of the leases. 16The problem was that the landlord initially declined consent. Although the evidence is a bit vague, it would seem that there was some dispute about a problem that is not really germane to the present case. 17The defendant sought review by the Administrative Decisions Tribunal of the landlord's failure to consent. In accordance with their normal practice, a conference was held involving all relevant parties including Mr Saab and it would seem that as a result of the discussions in their conference the landlords indicated that they may well consent provided that Mr Saab provided certain documents and subject to certain conditions. 18Initially the consent was conditioned on the lessee for the time being reinstating a wall. There were other conditions, but that was the most significant one, and that gives the flavour that there were some other problems between landlord and tenant than the character of the proposed assignee. 19There was further correspondence and it was only 19 December 2013 that the landlord indicated that it had received the documents that it required from Mr Saab and that it had now gave unconditional consent to the assignee. This was indicated to the defendant's solicitor on 19 December. However, no transfer of the lease or deed of consent was actually provided. 20The 40 day period under cl 41 expired on 24 or 25 December 2013. As at that date, there was no consent or approval communicated by Medicare with respect to the transfer. I think that it is fair to say that once the consent of the landlord, or probably better still the transfer of the lease duly signed, had been given to Medicare they would have approved, but that stage was never actually reached. 21The period expired under cl 41. I think the fair reading of cl 41 is that time is of the essence because it is rather meaningless if that is not so. 22Accordingly, were there not a problem as to whether Mr Saab himself was at fault or has waved his rights, he had a vested right of recision. This way of putting it picks up the words of the High Court in Suttor v Gundowda (1950) 81 CLR 418, 441, that the event had not occurred because of the fault of Mr Saab, 23If one takes the words of the Privy Council in New Zealand Shipping Co Ltd v Societe des Ateliers et Chantiers de France [1919] AC 1 at 9, the test is that a party who by his own act or omission brings about the non-event of the act cannot rely on it. 24Alternatively, if one takes the test stated by Sackville AJA, with whom Beazley and Campbell JJA agreed in Sedrak v Star (2010) 15 BPR 28, 751 at [72], that what must be shown is something that was not caused or materially contributed to by the other party's fault, a right to rescind came about. Once that right to rescind came about it was a vested right but it could be, of course, waived by the person who had the right. 25There is no evidence to show that Mr Saab ever did waive his right even though there was some small amount of correspondence after Christmas 2013. 26On 13 January 2014 the defendant's solicitor sent an email saying that he did not intend to pursue a deed of consent that would rely on the transfer. 27On 20 January 2014 the defendant issued a notice to complete. 28On 21 January 2014 the plaintiff personally emailed Mr Wade saying: As far as I am aware the (landlords) have not provided us with any transfer documents or any documents for that matter. 29That seemed to be the situation because it only appears to be on 22 January that the landlords were in a position to furnish the appropriate documentation for execution. The email of the landlord's solicitors to the defendant's solicitors of 22 January says: We ... enclose a deed of consent and assignment of lease in triplicate ... Please arrange for your client to execute the deed. We will require the original signed counterparts of the deed from your client and Mr Tony Saab. Upon receipt of those we will arrange for our clients to execute the counterpart of the deed and provide you with the original. 30So then there was no document that could be sent to Medicare as the transfer until after 22 January. 31Thus it could not be said that the non consent of Medicare was because of a fault of the plaintiff. 32On 22 January the plaintiff purported to rescind the contract under cl 41. The defendant's solicitor peremptorily dismissed the notice of rescission and instead shortly afterwards gave notice to terminate. 33There was some threat to remit the deposit to the vendor company. The plaintiff, whose counsel said to me that he had some doubt about the solvency of that company, then came to this Court seeking an injunction to prevent that, and an undertaking was given to hold the deposit pending the decision of this Court. 34The plaintiff filed his summons on 10 February 2014 for a declaration that the contract had been rescinded and he was entitled to refund of the deposit. 35The defendant filed a cross-claim on Thursday March 2014 claiming a declaration that the contract be terminated and for damages for wrongful termination. 36The case came on before me today with Mr Nguyen of counsel, appearing for the plaintiff, and Ms Fishburn, appearing for the defendant. 37Essentially, this case is a documentary case and, I must confess, that I was not assisted one whit by the rather long cross-examination that each counsel indulged in. It is the responsibility of counsel to limit their consideration to the real point in the case and, I regret to say, that I did not think that that happened in this case. 38I have already set out, I think, most of the relevant details. 39Ms Fishburn, however, relies on the document called "Applicant's Handbook Pharmacy Location Rules" put out by the Department of Health of the Australian Government. That, at p 14, sets out a section called "Evidence of Legal Right to Occupy the Proposed Premises" and says that to support an application to, inter alia, change the location of a pharmacy or to change the ownership of a pharmacy Medicare needs to be satisfied that the applicant has a legal right to occupy the proposed premises and that such evidence may include a lease or agreement for lease but, "Please note that providing a copy of an unsigned lease or agreement to lease is not sufficient to demonstrate legal right." 40Ms Fishburn says that it must be remembered that the handbook covers three situations, including a new pharmacy, relocation of a pharmacy and change of ownership, and that it can be seen that the requirements for the third category are lesser than for the other categories. That may be right, but it is important to look at what is in the handbook including what is under the heading "Leasing Premises" which is: If the proposed premises are to be leased by the applicant, the application should include a complete copy of a fully executed lease. Alternatively, other evidence may be sufficient provided that it demonstrates that agreement has been reached between the lessee and landlord on the terms and conditions of the lease and which has been signed by both parties to indicate offer and acceptance. 41Ms Fishburn points out that the person that has to give the consent is the secretary of the Department of Health and not a more minor official. That submission is made because there is in the papers indications from a Ms Debbie Parkes, who calls herself the pharmacy programme officer, as to what the requirements are. 42Whilst it is clear that Ms Parkes was not the ultimate decision maker, she was apparently the officer who dealt with these sorts of applications, and when the only evidence one has, as to what the Department's requirements are, are communications from Ms Parkes - and there is no suggestion that she is incompetent or corrupt - then one accepts prima facie what she says, and she said in her email to the plaintiff on 5 February 2014: On 14 November 2013 I forwarded Mr Greg Wade an email explaining that the change of ownership application was incomplete and could not progress any further until a lease of the proposed premises was supplied. 43Mr Saab did not leave it at that. He, on 12 February, sent an email to Ms Parkes: Could you please clarify that for the application to be processed I need to supply a deed of consent and assignment of lease which will be produced by the landlord. A letter from the solicitor of the pharmacy owner, Greg Wade simply stating that the transfer of the lease has been approved would be sufficient so clarification of this point is greatly appreciated. 44To which the reply was: I can confirm that what you stated in the below email is correct. 45Accordingly, the requirements that were needed for Medicare to grant the consent were at least a copy of the lease or transfer of lease. They were not in existence by 24 or 25 December. They were not even in existence on 22 January 2014. Accordingly, there is nowhere, no matter what Mr Saab did, that he was preventing or materially inhibiting the fulfilment of the condition. There was just no disqualifying factor against him relying on the non-compliance with cl 33(b)(ii) or to prevent him from exercising his right to rescind under cl 41 of the contract. 46A submission with which I have not as yet detailed is the submission by Ms Fishburn that the consent of Medicare only operates from the time of completion of the sale of business contract, the reason being that pharmacies evidently need a special number from the Department of Health and the special number is only given to the purchaser at the time when the special number of the vendor is cancelled. 47I think, with respect, that that is a bit of a furphy because it would seem that both parties, being pharmacists, would know that and so that the word "consent" in the contract must mean provisional consent or an indication of consent. But Medicare was not prepared to go even that far until it had seen evidence of occupation, a legal right to occupy the premises certified by a signed lease. 48The solicitor's intimation of 19 December 2013 that it would be forthcoming was not sufficient. 49Accordingly, the plaintiff is entitled to succeed and, as a consequence, the vendor's termination was invalid. Thus, the cross-claim must be dismissed with costs. 50The next question is whether the plaintiff is entitled to any interest. 51Had it been claimed, they might have been a good case for interest after 22 January 2014 because it is now clear on the authorities (see, for instance, Nu Line Construction Group Pty Ltd v Fowler [2014] NSWCA 51 that, in a case of money had and received interest should run from the date when the holder of the money ceased to be entitled to retain it. 52However, it was never claimed and no notice was given to the other side that there would be such a claim until about noon this morning. I think that is too late. Even though under the rules Courts may make orders which are not actually claimed in the statement of claim or summons, fairness dictates that the opposition must be told what are the claims before they can succeed. 53So far as costs, the plaintiff sues for the injunction. That is a matter that only this Court could give and that was dealt with early on. However, the rest of the claim was a claim under common law indebitatus for money had and received, which is purely a common law claim. 54 Under pt 42 r 43, unless such a claim results in a verdict for $500,000 or more, there should be no costs unless the Court otherwise orders. The Court will otherwise order, if the circumstances are such that there is justification for suing in this Court rather than the Local Court where such small claims should be dealt with. 55Mr Nguyen says that clearly and unequivocally - a phrase that he used on about a score of occasions - this was an appropriate case to come to this Court because of the injunction. 56There is some force in that because the correspondence does suggest that the vendor's solicitors were taking the attitude, "Don't write to us again, we're not going to budge". But after the injunction was obtained there was probably no reason to retain the matter in this Court but, on the other hand, no one applied for it to be remitted to the proper Court. The fact that a declaration of rescission was asked for is insufficient. 57There are two types of rescission, one where the parties are able by their own act to effect the rescission, and the other where the help of the Equity Court is needed because substantial restitution is impossible without a decree. This was of the first type of rescission, so there was no need for a declaration or other order of an equity court. 58However, it does seem to me that, on balance, seeing there was no protest about the matter being in this Court, that the matter has taken a day, that there was the injunction, that I should order that the defendant pay the plaintiff's costs of the proceedings. 59Accordingly, the orders that I make are: (1)Judgment for the plaintiff for $16,500; (2)Order that the defendant pay the plaintiff's costs of the proceedings; (3)Dismiss the cross-summons with costs. (4)Exhibits may be returned. ********** 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. Decision last updated: 11 April 2014