District Court New South Wales Medium Neutral Citation: Patricia Mary Christopherson v Ralph Christopherson (And Ors) [2014] NSWDC 338 Hearing dates: 28 November 2014 Decision date: 19 December 2014 Jurisdiction: Civil Before: Judge P Lakatos SC Decision: Judgment for the Plaintiff, (see paragraph 103) Catchwords: Contract – Time of Essence – Breach of Contract – Void or Voidable – Election – Waiver - Estoppel Legislation Cited: District Court Act Cases Cited: Tropical Traders Ltd v Goonan (1963-1964) 111 CLR 41 Suttor v Gundowda Pty Ltd (1950) 81 CLR 418 Gange v Sullivan (1966) 116 CLR 418 Perri and Another v Coolangatta Investments Pty Ltd (1982) 149 CLR 537 Rudi's Enterprises Pty Ltd v Jay (1987) 10 NSWLR 568 Sargent v ASL Developments Ltd (1974) 131 CLR 634 Green v Sommerville (1979) 141 CLR 594 Commonwealth v Verwayen (1990) 170 CLR 394 Grundt v Great Boulder Pty Gold Mines Ltd (1937) 59 CLR 641 Con-Stan Industries of Australia Pty Ltd v Norwich Winterthur Insurance (Australia) Ltd (1985 – 1986) 160 CLR 226 Texts Cited: Cheshire and Fifoot's Law of Contract (9th edition, Australia) Category: Principal judgment Parties: Patricia Mary Christopherson (Plaintiff) Ralph Christopherson (First Defendant) Craig Anthony Christopherson (Second Defendant) Darien Frances Neville (Third Defendant) Representation: Counsel: Plaintiff D McGovern SC and R P Battley First Defendant in person Second and Third Defendants D Toomey Solicitors: Plaintiff – Garvins Solicitors First Defendant in person Second and Third Defendants – Whiteley, Ironside and Shillington File Number(s): 2013/00218945 Judgment 1. The Plaintiff, Patricia Christopherson, seeks damages from Ralph Christopherson, the First Defendant (and former husband) and Craig Christopherson, the Second Defendant and Darien Neville, the Third Defendant (two of the children of the Plaintiff and the First Defendant). Pleadings 1. The Plaintiff pleads that on or before 21 March 2011, the Defendants executed an agreement or deed ("the Agreement") in which they promised to pay the Plaintiff the sum of $400,000 before 16 March 2013 and also to pay her $1080 per month from 16 September 2011 until $400,000 was paid to her. 2. The Plaintiff asserts that the Defendants have failed to pay her $400,000 and failed to pay the $1080 due to her between the months of April to the date of the hearing. 3. The claim is brought pursuant to the provisions of section 134 (1) (h) of the District Court Act 1973 ("the Act"). That provision provides that the District Court has the same jurisdiction as the Supreme Court in relation to – any equitable claim or demand for recovery of either liquidated or a liquidated money or damages, which does not exceed the jurisdictional limit of the Court (section 4 (1) of the Act). 4. The First Defendant appeared at the hearing without legal representation, however counsel who appeared for the remaining Defendants made submissions in their interest, which appeared not to be materially different to that of the First Defendant. 5. The respective Defences of the Second and Third Defendants concede that each of them signed a document on or about 21 March 2011, entitled "Agreement", but denied that that document operated as a deed. Furthermore they denied that any agreement existed except where the conditions contained particularly in clause 13 of the Agreement had been satisfied and claimed that they had not been satisfied. The Second and Third Defendants also pleaded that clause 13 (c) had not been satisfied and that they had no obligation under the Agreement by reason of that omission. 6. The Plaintiff's Reply contended that upon the proper construction of clauses 13 and 14 of the Agreement, any failure to comply with those provisions rendered the Contract voidable only. Notwithstanding any asserted breaches of the Agreement, the Second and Third Defendants did not terminate the Agreement and accordingly they remained bound to perform their obligations under it. Objection to Paragraphs 18 and 19 and annexures "O", "P" and "Q" in Plaintiff's affidavit of 8 October 2014 1. Counsel for the Second and Third Defendants objected to the evidence of the Plaintiff contained in the paragraphs referred to above. The basis of the objection was that as the Plaintiff was not a party to the Supplementary Agreements, they were not relevant and should not be admitted. The annexures comprise a covering letter from a firm of solicitors, Rickards Whiteley, enclosing two Supplementary Agreements dated respectively 16 August 2011 and 19 August 2011. The letter is addressed to the plaintiff's solicitors and states that "the First Defendant intends to rely upon" the agreements "at any hearing of this matter". 2. The First Supplementary Agreement is between the First, Second and Third Defendants; the Second Supplementary Agreement is between the three Defendants and a further sibling, Grant Christopherson. 3. In Cheshire and Fifoot's Law of Contract (9th edition, Australia), the authors note at paragraph [10.10] that "the parties to a contract are always free to vary it by a further contract, and evidence of such a variation is always admissible." 4. The Supplementary Agreements, are, in my view, self-evidently variations of the original Agreement, as is confirmed by paragraphs A. and B. under the heading: "Introduction". It is also salient to note that the final paragraph of each of the Supplementary Agreements (clause 5 and 3 respectively) state that "in all other respects the parties confirm the terms of the Primary Agreement", a reference back to the original Agreement. 5. In my opinion, it is plain from these Supplementary Agreements that the parties to them (at least) considered that the original Agreement was still on foot. I do not consider that the absence of the Plaintiff as a party to these Supplementary Agreements, affects this conclusion. Indeed, it is understandable given that the Plaintiff was required to take no steps in performing the original Agreement, except filing consent orders with the Family Court and the Supplementary Agreements spoke of obligations and steps to be taken by others to reorder the affairs of the Family. 6. It is also relevant that in August 2011, when the Supplementary Agreements were entered into, the ninety day time limit for the filing of the consent orders, had expired. Evidence 1. The hearing proceeded on the basis of the affidavit evidence of the Plaintiff and her solicitor (in relation to the issue of quantum) and the evidence of the solicitor for the Second and Third Defendants. There was no significant dispute between the parties as to the majority of the facts, but substantial contest as to the conclusions to be drawn from those facts. 2. The Plaintiff and the First Defendant were husband and wife. The Plaintiff brought proceedings against her husband in the Family Court of Australia in or around 2009. (There is no specific indication in the material before the Court of the latter date, but this conclusion is drawn from the Family Court filing number.) 3. The Christopherson family (including the parties to this litigation and other children of the Plaintiff and the First Defendant) were the registered proprietors of five rural properties – "Marginal", "Tulgeywood", "Wanganoo", "The Vale" and "The Back Paddock". The Second Defendant was the registered proprietor of the first two properties as a tenant in common with three of his siblings. The First Defendant was the registered proprietor of the remaining three rural properties. 4. The Second Defendant and his brothers Grant and Shane farmed and grazed the properties in the so-called Christopherson Partnership. From about mid-December 2008, the Second and Third Defendants commenced the so-called Christopherson Neville Partnership, which has managed the business of the earlier partnership since July 2007. The Agreement proceeds on the assumption that the latter partnership would continue the farming and grazing business of the former partnership. 5. In March 2011 (and it is agreed by at least 21 March 2011), the Plaintiff and the Defendants as well as the other adult children, executed an agreement which included in the Introduction the following: B. The Family has extensive property holdings. … G. Ralph and Patricia have agreed upon the terms of a property settlement. … I. Subject to the further provisions of this Agreement, Craig and Darien and the Christopherson Neville partnership have agreed to effect payment to all the various creditors of the Christopherson partnership, to assume liability for the obligations of Ralph to make payment to Patricia in terms of the property settlement, to make payments to Ralph for his maintenance and living expenses and to make payments to various Family members. 1. The parties to the Agreement were the parties to this litigation and the remaining children: Grant Christopherson, Shane Christopherson, Sharon Wright and Traci Armstrong and the parties together, are referred to as the Family. The Agreement was apparently drafted by Garden and Montgomerie, solicitors, a relevant matter because that firm of solicitors appears to have continued to act for some or other of the parties, from time to time. 2. It appears that the intent of the Agreement was to achieve the following results: to transfer all relevant property and assets to and to place the continued running of the farming and grazing interests in the Christopherson Neville Partnership; and for the Partnership to provide the Plaintiff and the First Defendant either lump sums and/or continuing payments for their welfare and upkeep. This was to be achieved by the transfer of some of the properties to the Second and the Third Defendants, the payment of monies by the Christopherson Neville Partnership to specified family members and by obtaining mortgages on various of the properties in order to secure compliance with the obligations in the Agreement. 3. The Agreement defines the term "Start Date" as the date that the agreement was executed by all parties. It then recorded agreements between the First Defendant and the two partnerships (clauses 1 – 7); between the Plaintiff and the First Defendant (clause 8) and between the Family (clauses 9 – 15). 4. Clause 5 provided that the Christopherson Neville Partnership agreed to effect payment of the First Defendant's obligations itemised in clause 8. 5. Clause 7 provided that "Each party has received their own independent legal and financial advice with respect to the Partnership Transition and this Agreement and understands its full effect." 6. Clause 8 provided that the First Defendant and Plaintiff have agreed on the terms of a property settlement and have agreed to suitable consent orders being obtained in the Family Court in the following terms: the First Defendant agreed to pay the Plaintiff - $100,000 within 30 days from the date of the making of Orders in the Family Court; $1080 per month commencing on the first day of the month following the date of the granting of the Orders and terminating on payment of the $400,000 amount specified next and $400,000 within 18 months of the date of the making of the stated Orders. 7. Clauses 13, 14 and 15 are central to the issues in the present litigation and as follows: 13. This entire Agreement and all obligations undertaken by the parties hereto shall be subject to and conditional upon the National Australia Bank agreeing to the following: (a) the release of Grant and Shane from their liability in terms of security held by the National Australia Bank over the property "Marginal"; (b) the release of Ralph, Shane, Grant and Craig and the Christopherson Partnership from the existing partnership debt; and (c) the approval by the National Australia Bank of new loans to Craig and Darien and the Christopherson Neville Partnership on terms that are reasonably satisfactory to Craig and Darien and secured by such a property and assets, but not including the property "Wanganoo", as shall be required by the Bank in an amount sufficient to enable them to give effect to their obligations undertaken in terms of this Agreement. 14. Each party agrees that all obligations undertaken in terms of this Agreement are to be performed within ninety days from the Start Date unless otherwise specified and time of performance is to be of the essence in respect of the following obligations: (a) That machinery and livestock transfers contemplated by the Partnership Transition are executed by the Christopherson Partnership and given full legal effect by registering these transfers with the appropriate bodies …; (b) That consent orders as outlined in clause 8 be filed with the Family Court; (c) That the land transfers contemplated by clause 9 to 12 be executed by the relevant Family members … and lodged with the Land Titles Office; (d) That the arrangements contemplated by clause 13 with the National Australia Bank are completed in accordance with that clause. 15. In the event the agreement does not become unconditional due to the failure of the suspensive condition contained in clause 13 or terminates in terms of clause 14 by reason of a default of performance by a party then the parties who are not in default shall have no further obligations arising out of this agreement and shall not be bound as against any other party by any statements of fact, undertakings, representations, releases, indemnities or warranties contained in this agreement. 1. On 13 May 2011, Mr Casey from Garden and Montgomerie, wrote to the Plaintiff advising that conditional approval had been given by the National Australia Bank to the proposed restructure and that "final settlement take place on or about 20 June 2011". The letter indicated that the solicitors had on "this day written to each of the other signatories to the Deed." The Agreement was executed on 21 March 2011, which was the Start Date. Compliance with the ninety day time limit in clause 14 required those obligations to be carried out on or before 19 June 2011. 2. Consequent upon a letter of 29 August 2011 from Garden and Montgomerie and on the same day, the Plaintiff's solicitors forwarded the Terms to the Family Court and those terms were converted into Orders on 16 September 2011. 3. The Plaintiff received $100,000 (consistently with clause 8 (a)) on or about 14 October 2011 (Exhibit A). Until 4 April 2014, the Plaintiff received payments of $1080 per month (consistently with clause 8 (b)), which was the March 2014 payment. She has received no further payments. 4. The Plaintiff has not received any notice terminating the Agreement from the First Defendant, nor from the Second or Third Defendants. She has not spoken to any of the Defendants in respect of the Agreement since 4 March 2011. 5. As at October 2014, transfers had taken place in relation to three of the five properties comprising the holdings of the Family, namely Wanganoo, Marginal and Tulgeywood. Real Property Act transfers disclose that the Marginal and Tulgeywood properties were transferred between Family members on 21 March 2011 and appear to have been witnessed on behalf of the transferors, by a Geoffrey John Casey. 6. Mr Casey provided an address in Cowra and is nominated in other correspondence, as a partner in the firm of solicitors, Garden and Montgomerie, having the same address in Cowra. The parties to these Transfers included the Second and Third Defendants on the one hand and the Second Defendant on the other hand. 7. The third property (Wanganoo) was transferred on 26 August 2011 and Mr Casey witnessed the transfer on behalf of the transferor. The consideration for the transfer was stated as: "Pursuant to clause 12 (a) of the Family Agreement dated 21 March 2011". The parties to this Transfer included the First Defendant. 8. On 11 November 2011, the National Australia Bank provided an altered credit facility to the Second and Third Defendants, in respect of which the First Defendant was the guarantor. On 3 October 2012, the National Australia Back provided the Second Defendant and Pyodoors Pty Ltd (of which it appears the Third Defendant was an officer) with a credit facility expiring on 30 June 2026. 9. On 16 August 2011, the Second Defendant executed a mortgage with the National Australia Bank over part of the family rural holdings, Tulgeywood and Mr Geoffrey Casey witnessed the Defendant's signature on the mortgage. On the same date, the Second Defendant executed a mortgage to the National Australia Bank over part of the family rural holdings – Marginal, which Mr Casey also appears to have witnessed. On the same date, the First Defendant executed a mortgage to the National Australia Bank over part of the family rural holdings, part of The Vale, witnessed once again by Mr Casey. (Exhibit B) 10. The First Defendant tendered bank statements, which disclose that he has been receiving a Centrelink pension from at least 2004. Between April 2013 and February 2014, the First Defendant received monthly payments of $400 (save as to the first payment being $200) from an entity noted as "Christoph/Nevill". I infer that this is a reference to the Christopherson Neville Partnership in the agreement (Exhibit 1). 11. The Plaintiff has calculated her loss (including interest) up until 27 November 2014, as $400,000 plus interest of $45,246.58. The continuing daily rate of interest was computed as $71.23 (see affidavit of the Plaintiff's solicitor of 27 November 2014). It is not clear whether this calculation includes the monthly payments of $1,080.00 – as to which see paragraphs 1 and 2. 12. No evidence was adduced by or on behalf of the Second and Third Defendants, save for an affidavit from their solicitor Mr Tancred. Mr Tancred deposes that he received instructions from his clients on 20 January 2014. Furthermore, he deposes that Garden and Montgomerie, solicitors had acted for the First Defendant in relation to the Agreement and "have also from time to time acted for the Second and Third Defendants". 13. Mr Tancred states that on 21 January 2014, he spoke to an employed solicitor at Garden and Montgomerie, who stated that that firm had "never acted for" the Second and Third Defendants. That position appears to have been confirmed in a letter of 13 February 2014. 14. Finally, Mr Tancred states that in late March 2014, he first learned that the Terms of Settlement between the Plaintiff and the First Defendant were filed in the Family Court on or after 29 August 2011. Consideration Clauses 13 and 14 – precondition to the Agreement or to Performance 1. A review of the Agreement indicates that its intent was to achieve the following objectives: that the Christopherson Neville Partnership was to take over the farming and grazing activities of the Christopherson Partnership and to pay all of the latter partnership's creditors; that the Christopherson Neville Partnership assume liability for the First Defendant's obligation to pay the Plaintiff in relation to the property settlement; that the Christopherson Neville Partnership make payments to the First Defendant for his maintenance and living expenses and payments to various family members, the effect of which was to transfer properties held by those family members to the Partnership, to compensate the family members and to relieve them of any future liability. 2. Although there is some ambiguity, the Agreement evinces an intention that the Christopherson Neville Partnership was to assume liability for the First Defendant's debt of $335,000 (referred to as the "Cowra Loan" in paragraph F in the Introduction). In this regard, clause 3 provides that the Partnership will pay the total liabilities of the First Defendant "to the National Australia Bank". 3. The question arises whether by virtue of the terms of clause 13, the agreement of the National Australia Bank and the consequences thereto, were a condition precedent to the contract rather than a condition precedent to the performance of the contract. The distinction and its effect, are illustrated in the following passage in Cheshire and Fifoot's Law of Contract at paragraph [5.21]: It is possible for such a condition to suspend the formation of contract or the condition may suspend the time of the performance. The difference is profound because in the first case there is no contract and therefore no obligations at all while in the second case, there is a contract and therefore the possibility of breach. 1. The opening words of clause 13 are that "this entire Agreement and all obligations undertaken by the parties … shall be subject to and conditional upon" the Bank agreeing to the matters therein. Clause 14 (d) imposed a ninety day time limit on the fulfilment of that obligation. 2. If time is of the essence both in equity and at common law, and performance is not given when due, the other party may forthwith terminate the contract – Tropical Traders Ltd v Goonan (1963-1964) 111 CLR 41. The statement in clause 14 that default in the performance of the obligations in that clause will have the consequence that "the Agreement will terminate forthwith", suggests that there was an agreement in existence from the Start Date and that performance in the stipulated time frame, was an essential condition of the contract. In this sense, the opening words of clause 13, in so far as they state that Bank agreement is a precondition to the formation of the contract, and the consequences of default in clause 14 are inconsistent. In other words, there would be no need for the contract to provide that the Agreement will terminate, when the proper construction is that no agreement ever came into existence. 3. I conclude that reading clauses 13 and 14 together, they indicate an intention that Bank approval for the finances to the Second and Third Defendants, was a condition precedent to the performance of the contract. Furthermore, in my opinion, the clear construction of the opening words of clause 14 dictate that in relation to the four specified obligations, time was of the essence in their performance. As matters transpired, the Agreement was more notable for the time limits missed than those actually achieved in the course of the performance of it. Consequence of Breach – Agreement: Void or Voidable? 1. Given that the Bank agreed to enter into arrangements to finance the transition in the Agreement, the question as to the nature of the pre-condition, is somewhat theoretical, as there is much to support the proposition that the parties continued to perform their obligations under it. However, the more practical issue remains: what consequences flow from breaches of the time limit in clause 14 as to Bank approval and as to the filing of Terms in the Family Court? 2. The Defendants argue that breach of an essential condition rendered the Agreement void. The Plaintiff argues that breach of those conditions rendered the Agreement voidable. 3. The applicable legal principles were considered in Suttor v Gundowda Pty Ltd (1950) 81 CLR 418. In that case, a contract for the sale of pastoral property contained a clause that in the event of the Treasurer not providing consent within a specified time, "the contract should be deemed to be cancelled". The High Court held that the non-receipt of the Treasurer's consent did not effect an automatic cancellation of the contract because the clause should be construed as making the contract void not voidable. The Court considered a number of arguments including that the clause did not make time of the essence and also that the defendant forbore to assert the right to terminate the contract and waived the right to cancel the contract. 4. The High Court (Latham CJ, Williams and Fullagar JJ) at p. 440 and following, quoted with approval Lord Atkinson in New Zealand Shipping Co-Ltd v Societe des Ateliers et Chantier de France as follows: It is undoubtedly competent for the two parties to a contract to stipulate by a clause in it that the contract shall be void upon the happening of an event over which neither of the parties shall have any control, cannot bring about, prevent or retard. … Of course, they might during the currency of the contract rescind it and enter into a new one, or on its avoidance, immediately enter into a new contract. But if the stipulation be that the contract shall be void on the happening of event which one or either of them can by his own act or omission bring about, then the party, who by his own act or omission brings that event about, cannot be permitted either to insist upon the stipulation himself or to compel the other party, who is blameless, to insist upon it, because to permit the blameable party to do either would be to permit him to take advantage of his own wrong, in the one case directly, and in the other case indirectly in a roundabout way, but in either way putting an end to the contract. Their Honours continued at p. 441: Where the event in question is one which cannot occur without default on the part of one party to the contract, the position is clear. The provision is then construed as making the contract not void but voidable: only the party who is not in default can avoid it, and he may please himself when he does so or not. … The provision in question is to be construed as making the contract not void but voidable. The question of who may avoid it depends on what happens. If one party has by his default brought about the happening of the event, the other party alone has the option of avoiding the contract. If the event has happened without default on either side, then either party may avoid the contract. But neither need do so, and, if one party having a right to avoid it does not clearly exercise that right the other party may enforce the contract against him. 1. The disposition of courts to treat the non-fulfilment of the condition as rendering a contract voidable rather than void was again referred to by the High Court in Gange v Sullivan (1966) 116 CLR 418 at p. 441; and Perri and Another v Coolangatta Investments Pty Ltd (1982) 149 CLR 537 at pp. 545 and 553/4. 2. In Rudi's Enterprises Pty Ltd v Jay (1987) 10 NSWLR 568, the New South Wales Court of Appeal considered the principles in Suttor, in the context of a deed of sale which made "actual completion" subject to the written consent of the Director of NPWS. In giving the principal judgment, Samuels JA observed at p. 577: Suttor is regarded as authority for the proposition that express conditions which appear to bring a contract to an end should be construed as giving one or both of the parties a right to terminate the contract if they should wish to do so: … The proposition so stated is subject to the exception that an automatic termination clause will be effective as such where it relates to an event beyond the control of the parties. Where, however the clause relates to an event within the control of either of them, the occurrence of the event will not terminate the performance of the contract. 1. At p. 579, his Honour thought it unlikely that the Court in Suttor, intended to lay down the proposition that parties could not stipulate the automatic termination of a contract except when an event occurs which lies beyond their control. His Honour expressed the view that effect must be given to the parties' intention. 2. His Honour clearly makes the point that the intention of the parties is determinative of the question of whether a breach is to render the contract void or voidable. 3. In the present case, the Agreement provides time limits or dates by which certain other obligations and/or events must occur: for example the payment of monies to the First Defendant (clause 6); the payment of moneys to the Plaintiff (clause 8); the occupation of the house on Tulgeywood by Shane Christopherson (clause 9 (a)); the obligation of parties receiving the transfer of various properties to make payment within the stipulated times (clause 10 (b) and (c); clause 11 (b) and (c)); and the time stipulations in clause 14. 4. It is only in relation to the time stipulations in clause 14 that "time of performance is to be of the essence". The reference in that clause to performance "within ninety days from the Start Date unless otherwise specified", is in my opinion, a reference to other time stipulations contained in the Agreement. 5. I do not consider that the submission of Senior Counsel for the Plaintiff that variations of the time periods in clause 14, may be "specified" by subsequent tacit acceptance by parties of the late performance of the obligations in the Agreement. The submission was made in the context of the reference in the Garden and Montgomerie letter of 13 May 2011 to settlement "on or about 20 June 2011 …" – see paragraph 26. 6. It may well be the case that parties to a contract agree to a variation of the terms of that contract after it has been entered into. If that occurs, then the original agreement is taken to have been overtaken in that regard by the agreed variation. However, I reject the construction urged by the Plaintiff that the terms of clause 14 should be so construed. 7. The task of construing a contract involves a determination of what a reasonable person in the situation of the parties would have intended or assumed. Adopting that approach, the clear intention of clause 14 is to make the completion of the four specified obligations within the stipulated time period, essential terms of the Agreement. 8. It is salient however to observe that three of the four obligations in clause 14, could be performed by the parties to the Agreement. On the other hand, the fourth obligation could only be achieved by agreement with a third party – the requirement to make arrangements with the National Australia Bank for new loans and obtain those loans – clause 14 (d). Whether the time limit was complied with in relation to that obligation, could be influenced by the timeliness of the applications to the Bank but the Bank's ultimate decision concerning the provision of the financial arrangements, was not confined by the time limit. 9. In my view, the requirement in clause 14, that the Plaintiff file the Terms with the Family Court within ninety days, was a condition relating to the performance of the contract. Breach of that condition in my view, made the contract voidable at the hands of the parties affected by the breach. Election 1. It is common ground that the filing of the consent orders in the Family Court (clause 14 (b)) was not undertaken within the ninety day period. The Agreement is not clear as to which party had the obligation to attend to this task, however as the Plaintiff was the applicant in the Family Law proceedings, it is more likely that she was obligated to do so. In my opinion, this is likely to be so because the benefit of compliance with that obligation accrued to the Plaintiff in that she was to be provided for financially. 2. Senior Counsel for the plaintiff argued that given the steps which occurred after the Start Date of the Agreement, the Defendants elected to affirm the Agreement and to continue to perform their obligations under it. Counsel for Second and Third Defendants argued to the contrary, primarily contending that there was no evidence upon which the Court could conclude that they had the requisite knowledge of the facts giving rise to the breaches. 3. The principles relating to the doctrine of election were expounded in two cases. In Sargent v ASL Developments Ltd (1974) 131 CLR 634. Stephen J at p. 641 wrote: The doctrine of election as between two inconsistent legal rights is well established but certain of its features are not without their obscurities. The doctrine only applies if the rights are inconsistent the one with the other and it is this concurrent existence of inconsistent sets of rights which explains the doctrine; because they are inconsistent neither one may be enjoyed without the extinction of the other and that extinction confers upon the elector the benefit of enjoying the other, a benefit denied to him so long as both remained in existence. His Honour considered at p. 642, that for the doctrine to operate, "there must be both an element of knowledge on the part of the elector and words or conduct sufficient to amount to the making of an election as between the two inconsistent rights which he possesses …". Stephen J expounded what level of knowledge was required in the following terms: An elector must at least know of the facts which give rise to those legal rights, as between which an election must be made; without that knowledge, the doctrine of election will not be available to make irrevocable his choice of one particular right, although in appropriate circumstances an estoppel may still arise which produces that very consequence and this without any such requirement of knowledge on the part of the party who is estopped. The extent of knowledge of relevant facts necessary for the doctrine of election to apply has been described as 'full knowledge of the material facts'. 1. It is not necessary for the elector to have knowledge of 'the legal position resulting from the relevant facts'. 2. His Honour also referred to authorities which support the proposition that "the parties to a contract are to be deemed aware of the elections that the terms of their contract give them or at any rate are to be precluded from denying knowledge of them" – p. 644. His Honour also reinforced that the words or conduct ordinarily required to constitute an election "must be unequivocal in the sense that it is consistent only with the exercise of one of the two sets of rights and inconsistent with the exercise of the other" – p. 646. 3. Stephen J also considered the question of whether the knowledge of a party's solicitor of the inconsistent rights was sufficient to affirm an election and concluded at page 649: Now where, as in this case, a vendor employs a solicitor to attend to the carrying out of the legal aspects of a sale, he necessarily authorises that solicitor to attend to all the usual aspects of conveyancing practice; that authority will here extend to the obtaining of the necessary planning certificate and the solicitor's knowledge … may be imputed to his clients since it was acquired both for the purpose of that transaction and in the course of it … The duly authorised conduct of the solicitor, who has acquired the relevant knowledge, will, without either conduct or knowledge on the client's part, constitute an effective election not to rescind the contract. 1. In a similar vein, Mason J considered that: "The solicitor is to be regarded as the alter ego of the client and the rights of the other party to the contract cannot be made to depend upon the diligence or lack of diligence exhibited by the solicitor in his dealings with this client." – p. 659. 2. In Tropical Traders Ltd v Goonan (1964) 111 CLR 41, the High Court considered a contract for the sale of land in which it was agreed that time should be of the essence in all respects. Possession of the land was given and taken on the day of the sale but the balance of the deposit was paid by the purchaser a day late and a number of the instalments were paid some days late. The purchaser failed to pay the final instalment on the due date and the vendor purported to rescind the contract. 3. The High Court held that the acceptance by the vendor of late payments of the earlier instalments did not preclude it from insisting that time should continue to be of the essence. In the leading judgment, Kitto J at p. 52 considered that each acceptance of a late payment operated as an election not to rescind the contract for the non-payment of the relevant amount on the due date, but it would be wrong to construe each late acceptance as a waiver of the time limits for future payments. His Honour said: It may be that repeated acquiescence by one party to a contract in non-observances by the other of stipulations as to time may amount, when considered in the light of the particular circumstances, to an assent to time being treated for the future as not of the essence, notwithstanding a provision in the contract that it is of the essence; and in such a case it may not matter whether the result is described as a promissory estoppel or a waiver or variation of the contract by mutual, though tacit, consent. 1. Kitto J at p. 55 emphasised that election is not a matter of intention but "It is an effect which the law annexes to conduct which would be justifiable only if an election had been made one way or the other …". 2. The key issues are what steps the Defendants took after the breaches and what was their state of knowledge in relation to the facts which gave rise to the right to avoid the Agreement. 3. The following steps and obligations contained in the Agreement, were carried out – on 17 March 2011, Garden and Montgomerie wrote to the Plaintiff's solicitor advising that the First Defendant had executed the Agreement. On 21 March 2011, the Marginal and Tulgeywood properties were transferred to the Second and Third Defendants. On 13 May 2011, Garden and Montgomerie advised the Plaintiff that all counterpart copies of the Agreement had been dated 21 March 2011; that the National Australia Bank had given conditional approval to the proposed financial arrangements and that a provisional settlement was scheduled to occur on or about 20 June 2011. 4. On 13 July 2011, the National Australia Bank advised the First Defendant that it had approved specified funding. On 23 August 2011, Garden and Montgomerie advised the Plaintiff that settlement with the Bank was scheduled on 26 August 2011. On 26 August 2011, the property Wanganoo was transferred to Shane Christopherson. On the same day, settlement occurred. On 16 September 2011, the Family Court converted the Terms into Orders and on 31 October 2011, transfers of Marginal and Tulgeywood were registered, previous mortgages were discharged and new mortgages were entered into. In addition, until April 2014, the Plaintiff received payments which accorded with the schedule of payments set out in clause 8. 5. All these steps occurred in the face of a number of the obligations in the Agreement which were not carried out in the times specified – significantly, that the National Australia Bank had approved new loans and settlement had occurred on 26 August 2011 and subsequently, Garden and Montgomerie had requested that arrangements be made for the filing of the terms of settlement with the Family Court. That settlement should have occurred consistent with the Agreement, on or before 19 June 2011. 6. The facts establish that the parties took the steps set out above in timeframes outside that stipulated by clause 14. It is difficult to avoid the conclusion that the parties to the Agreement acted on the basis that it remained on foot and hence, in my view, they acted in the exercise of a right inconsistent with terminating the Agreement. 7. The question remains whether they did so having the requisite knowledge of the facts underpinning their rights to terminate the Agreement. In my view, this issue falls to be determined having regard to inferences to be drawn from the role of the solicitors, Garden and Montgomerie in the Transition and in particular, inferences from the nature of the transactions themselves. 8. Whether or not Garden and Montgomerie, was also acting for the Second and Third Defendants, at the time of the Agreement and subsequently, is unclear. Mr Tancred's evidence suggests that that firm acted from time to time for the other Defendants but statements from an employed solicitor and a letter from the firm indicate that they never acted for the other Defendants. There has been no evidence as to the knowledge of the Second and Third Defendants that settlement had not taken place on the specified date or that the Terms were not filed – that is, that terms in respect of which time was of the essence, had not been complied with. 9. Counsel for the Second and Third Defendants correctly submitted that the onus of proof is on the Plaintiff. The issue of what the Defendants knew as to any breaches of the Agreement, is clearly relevant to the question which subsumed much of the argument in the present litigation, namely whether they waived the breach of the Agreement or exercised an election to continue it. 10. It was contended on behalf the Second and Third Defendants that the Plaintiff has failed to prove that they have waived the asserted breach or alternatively to prove that they exercised an election to continue the Agreement. It was argued that the Plaintiff adduced no evidence to show that the Second and Third Defendants knew of the fact or facts which permitted them to rescind the Agreement and hence no waiver or election had taken place. 11. It is self-evident that the entire Agreement was based upon the ability of the Second and Third Defendants to acquire finance to pay out those family members who sought to withdraw from the previous partnership and to refinance various mortgages on properties. Indeed, those Defendants were primarily responsible for making arrangements to acquire bank finance. Absent those measures being put in place, I infer that none of their obligations to provide for payments to the Plaintiff and to the First Defendant, could have been met. It is clear that this was the first and in many respects, the most important step in carrying out the various matters that the Agreement made provision for. 12. In the circumstances, given that the Second and Third Defendants were to be solely responsible for making those payments, even though there is no specific evidence of such, it is difficult to avoid the conclusion that they were aware of the precise time that Bank agreement and consequently bank finance, were obtained. Furthermore, as the Christopherson/Neville partnership of which they were the only members, was obligated to make payments to the Plaintiff and First Defendant, the only rational inference available is that both the Second and Third Defendants were aware of when the Bank agreed to provide finance and the fact that payments were made to the Plaintiff and when they were made. 13. Given the terms of clause 7 and the observations of Stephen J in Sargent (see paragraph 65), I also conclude that those Defendants were aware of the full effect of the time stipulations in the Agreement and hence, aware of the facts which might ground a termination of it. 14. In short, the Defendants (and in particular the Second and Third Defendants) must have been aware that any payments made to the Plaintiff pursuant to clause 8 were preconditioned upon Family Court Orders having been made. According to the Agreement, consent orders were required to be filed within ninety days of the Start Date of 21 March 2011 i.e. on 19 June. According to the Agreement, the first payment to the Plaintiff of $100,000 was to be made within 30 days of that date, namely about mid July 2011. Payment was in fact made on 14 October 2011. In my opinion, it is inconceivable that persons in the position of the Defendants, would not have known about a payment in that amount, when it occurred. 15. Accordingly, in my opinion, there is a clear inference that they were also aware that the Terms were not filed in accordance with the time periods in the Agreement, but nevertheless they commenced the scheme of payments provided for in it. 16. Reference has been made earlier to the various steps taken by the solicitors, Garden and Montgomerie in relation to the Agreement and its performance. The concession by the solicitor for the Second and Third Defendants that those solicitors had acted for his clients from time to time, appears to be borne out by the correspondence. Even though there is a specific denial which was conveyed to Mr Tancred, those solicitors appeared to have communicated directly with the Second and Third Defendants and taken steps in relation to carrying out the obligations in the Agreement. 17. In those circumstances, I conclude that the knowledge of Garden and Montgomerie as to compliance with the terms of the Agreement may be imputed to Second and Third Defendants cf Stephen and Mason JJ in Sargent. 18. Even if that conclusion is not valid, the following conclusions can be drawn: the Agreement was drafted by or on the authority of Garden and Montgomerie. That firm appears to have been the only solicitors, apart from the Plaintiff's solicitors, who were involved in the process (Annexure B) and organised the execution of the Agreement on behalf of the remaining members of the Family (perhaps with the exclusion of Traci Armstrong). 19. As at 13 May 2011, that firm was keeping the other members of the Family informed of the progress of the execution of the Agreement. In that correspondence, the author (apparently Mr Casey) indicates: "it is proposed that final settlement take place on or about 20 June 2011". 20. Indeed, that firm sent letters to each of the Second and Third Defendants advising of the execution of the Agreement and its Start Date (21 March 2011). The letters set out the individual steps to be taken by each of them in executing his or her part of the agreement and advising that each of the other signatories to the Agreement have been similarly contacted. Common to both letters is a reference to the Agreement by those Defendants to take over the First Defendant's obligations to effect payment to the Plaintiff in accordance with clause 8 of the Agreement. In each case, the letters confirm the proposed final settlement "on or about 20 June 2011". 21. The final item of correspondence from Garden and Montgomerie to the plaintiff's solicitors on 29 August 2011, confirmed that settlement took place on 26 August 2011 and requested arrangement for "the filing of the terms of settlement with the Family Court." 22. The net result of this sequence of events is that the non-compliance by the Plaintiff of her obligations to file consent orders in the stipulated time, arose partially due to the failure by the other Defendants to comply with the requirement that they obtain appropriate Bank Finance within that same stipulated time period. 23. Notwithstanding these omissions, the evidence does not disclose that any of the parties to the Agreement notified the defaulting party of the breach, nor did they take any further action to call the defaulting party to account and/or to rescind the Agreement. 24. In Green v Sommerville (1979) 141 CLR 594, Barwick CJ stated at p. 599: The law is … that a vendor, has a right to take steps unilaterally to rescind the contract for the default of the purchaser, loses the right to rescind out of hand if, notwithstanding such default, he treats the contract as continuing on foot. The Chief Justice also observed at p. 600: Equity was always jealous of making time of the essence and it would not seem to me consonant with equitable principle to allow a vendor, whilst maintaining the contract on foot after a radical default as in this case, to treat time nonetheless as continuing of the essence, so as to apply automatically to some substitute date for performance. 1. I consider that these comments apply to the present circumstances – it is plain as the facts disclose, that the approval of the National Australia Bank was not obtained within the stipulated time. Nevertheless, the facts disclose that key parts of the Agreement continued to be performed by the Second and Third Defendants. This also included payments required to be made to the Plaintiff pursuant to clause 8. 2. In my opinion, it would not be consonant with equitable principle to allow the Defendants whilst maintaining that the Agreement was on foot in relation to the transfer of properties, the acquisition of finance and payments to the Plaintiff and the First Defendant, to treat time as being of the essence for the filing of the consent orders in the Family Court. Waiver – Estoppel - Fresh Contract 1. It is unnecessary to conclusively determine whether issues of waiver, estoppel and whether the parties entered into a fresh Agreement arise, given the conclusion that an election had been made to continue the Agreement. These are connected issues as was pointed out by the High Court in Commonwealth v Verwayen (1990) 170 CLR 394 at p. 407: According to its strict legal connotation, waiver is an intentional act done with knowledge whereby a person abandons a right by acting in a manner inconsistent with that right: … (Citations omitted) However, the better view is that, apart from estoppel and new agreement, abandonment of a right occurs only where the person waiving the right is entitled to alternative rights inconsistent with one another, such as the right to insist on performance of a contract and the right to rescind for essential breach: … This category of waiver is an example of the doctrine of election. In these circumstances, the authorities dealing with waiver of statutory rights do not call for special consideration. They speak with different voices, sometimes in the language of election, at times in that of estoppel and at other times in terms of unconscionability: … 1. In the earlier authority of Grundt v Great Boulder Pty Gold Mines Ltd (1937) 59 CLR 641, Dixon J at p. 674 stated: The principle upon which estoppel in pais is founded is that the law should not permit an unjust departure by a party from an assumption of fact which he has caused another party to adopt or accept for the purpose of their legal relations. … In stating this essential condition, particularly where the estoppel flows from representation, it is often said simply that the party asserting the estoppel must have been induced to act to his detriment. … This means that the real detriment or harm from which the law seeks to give protection is that which would flow from the change of position if the assumption were deserted that led to it. 1. Applying the analysis I have undertaken in relation to the doctrine of election, I consider that the steps taken after the Start Date by the Defendants constitute an abandonment of the right to terminate the Agreement by acting in a manner inconsistent with that right. 2. In my opinion, the parties acted on the basis that the Agreement had not terminated on 19 June 2011 and they conducted their affairs on the basis of that common assumption. I conclude that each of them knew and intended that the other parties act on the same assumption. For the Defendants to depart from acting on that basis, would be detrimental to the Plaintiff and in my opinion, the Defendants are estopped from asserting that the Agreement was terminated when the Terms were not filed in the Family Court in the stipulated time. 3. By way of footnote, Senior Counsel for the Plaintiff draws in aid the notion of estoppel by convention, which was referred to by the High Court in Con-Stan Industries of Australia Pty Ltd v Norwich Winterthur Insurance (Australia) Ltd (1985-1986) 160 CLR 226. The High Court considered the question of estoppel by convention in construing a commercial insurance contract and at p. 244 said, as follows: Estoppel by convention is a form of estoppel founded not on a representation of fact made by representor and acted on by representee to his detriment, but on the conduct of relations between the parties on the basis of an agreed or assumed state of facts, which both will be estopped from denying. The existence of an estoppel based on a convention between the parties has often been recognised … (Citations omitted). But in our opinion the doctrine has no application to the present case for two reasons. First, there is no estoppel unless it can be shown that the alleged assumption has in fact been adopted by the parties as the conventional basis of their relationship … 1. The difficulty in relying upon that doctrine in the present circumstances is that it is doubtful that there existed a "conventional basis of their relationship" between the parties to the Agreement. To the contrary, the Agreement was designed to achieve a once and final resolution of family matters and the notion of any conventional basis of a relationship, is misplaced. Conclusion and Orders 1. For the foregoing reasons, I find that the Plaintiff has established her case and is entitled to the relief sought. 2. I make the following orders: 1. Judgment for the Plaintiff against the First, Second and Third Defendants in the sum of $400,000 plus 2. Defendants to pay the Plaintiff's costs. 3. Defendants to pay the Plaintiff interest pursuant to section 100 of Civil Procedure Act 2005 ********** 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: 23 June 2015