Budiyanto v KPI 6 Pty Ltd [2018] NSWSC 1313

Supreme Court New South Wales

Medium Neutral Citation: Budiyanto v KPI 6 Pty Ltd [2018] NSWSC 1313 Hearing dates: 20 August 2018 Date of orders: 28 August 2018 Decision date: 28 August 2018 Jurisdiction: Equity Before: Darke J Decision: Vendor's termination of contract held to be invalid. Catchwords: LAND LAW – contract for sale of land – failure by purchaser to replace deposit bond within a certain time – whether a breach of an essential term giving vendor right to terminate contract – time stipulation not essential – no notice to perform issued so as to make performance by new time essential – vendor not entitled to terminate contract Cases Cited: Shepherd v Felt & Textiles of Australia Ltd (1931) 45 CLR 359 Louinder v Leis (1982) 149 CLR 509 Neeta (Epping) Pty Ltd v Phillips (1974) 131 CLR 286 Gustin v Taajamba Pty Ltd (1988) 4 BPR 97,274 Category: Principal judgment Parties: Adi Budiyanto (First Plaintiff) Anggayasti Aulia Sutejo (Second Plaintiff) KPI 6 Pty Ltd (Defendant) Representation: Counsel: Ms B K Nolan (Plaintiffs) Mr R Notley (Defendant)

Solicitors: David Leamey Solicitor & Barrister (Plaintiffs) Paramonte Legal (Defendant) File Number(s): 2018/66735 Publication restriction: None

Judgment 1. These proceedings concern a contract for the sale of a lot in an unregistered strata plan to be created as part of a multi-level unit development in Merriville Road, Kellyville. 2. The contract was entered into on 2 April 2014 between the plaintiffs as joint purchasers and the defendant as vendor. The dispute centres upon the provisions of the contract that deal with the deposit. The contract provided for a deposit of $38,500, being 10% of the purchase price of $385,000. The contract contemplates that the vendor might accept a bond as the deposit. That occurred in this case. The contract further provides that in certain circumstances the purchaser must provide a replacement for a deposit bond. 3. The defendant claims to have validly terminated the contract on 25 October 2017 on the ground that the plaintiffs were in breach of essential terms of the contract in relation to the deposit bond and its replacement. The plaintiffs dispute the validity of the termination and claim that the contract remains on foot. 4. The contract employs the 2005 edition of the Law Society of New South Wales/Real Estate Institute of New South Wales standard form, together with Additional Clauses. Clause 2 of the standard form, that would otherwise deal with the deposit, was deleted (see Additional Clause 18.1(a)). The deposit is instead dealt with in the Additional Clauses, notably cll 12, 13 and 14. These clauses are in the following terms: 12. DEPOSIT 12.1 Investment of deposit (a) If this contract says the deposit is to be invested, the deposit holder must invest the deposit (at the risk of the party who becomes entitled to it) with a bank, building society or credit union, in an interest-bearing account in NSW, with interest to be reinvested, and after deduction of all proper government taxes and financial institution charges and other charges, pay the interest to the parties equally if this contract completes or to the party who is entitled to the deposit, if this contract is rescinded or terminated. (b) The parties direct the deposit holder: (i) at the request of the Vendor, to withdraw the deposit and interest on it in anticipation of settlement; and (ii) to withdraw the deposit and interest on it on rescission or termination of this contract. 13. BOND 13.1 When this clause applies This clause applies if the Vendor has accepted a Bond as the deposit or as any part of the deposit. 13.2 Payment of deposit (a) On and as a condition of completion, the Purchaser must pay to the Vendor the deposit in cash or by unendorsed bank cheque. (b) If the Purchaser fails to comply with clause 13.2(a), then: (i) the Purchaser is immediately and without notice in breach of an essential term of this contract; and (ii) the Vendor may demand payment from the issuing party of the lesser of the amount stipulated in the Bond and the amount owing by the Purchaser to the Vendor under clause 13.2(a). (c) If the Vendor serves a notice claiming to forfeit the deposit, then that service will operate as a demand on the Purchaser for payment of the deposit immediately (or so much of the deposit as has not been paid). If the Purchaser fails to pay the deposit within 2 business days of service of the notice then: (i) the Purchaser is immediately and without notice in breach of an essential term of this contract; and (ii) the Vendor may demand payment from the issuing party of the lesser of the amount stipulated in the bond and the amount owing by the Purchaser to the Vendor under clause 13.2(c). 14. REPLACEMENT OF BOND 14.1 General The Purchaser must arrange for the replacement of the Bond in the circumstances required by this clause. Where in this clause 14 the Purchaser is required to replace the Bond, the Purchaser may provide cash or an unendorsed bank cheque for the amount stipulated in the Bond, or a replacement bond in identical terms as the Bond with an issuing party approved by the Vendor. 14.2 Insolvency Event (a) If prior to completion, termination or rescission of this contract an Insolvency Event occurs in connection with the issuing party, then at any time after the Insolvency Event the Vendor may serve written notice on the Purchaser that the Bond is no longer acceptable to the Vendor and requiring the Purchaser to replace the Bond. (b) The Purchaser must replace the Bond and provide the Vendor with the replacement Bond within 10 business days of receiving a notice under clause 14.2(a). 14.3 Replacement of Bond (a) If the Registration Date is extended then the Purchaser must replace the Bond and provide the Vendor with the replacement Bond within 10 business days of being advised of the extended date. The replacement Bond must have an expiry date not earlier than 3 months after the Registration Date (as extended in accordance with this contract). (b) If the Bond expires prior to the Registration Date or prior to 3 months after the Registration Date then the Purchaser must replace the Bond and provide the Vendor with a replacement Bond no later than 1 month prior to expiration of the Bond. 14.4 Vendor's obligations On receipt of the cash or replacement Bond as required by this clause 14, the Vendor must give the Purchaser the Bond for cancellation. Cash must invested as the deposit in accordance with clause 13. 14.5 Re-issue of Bond to another party The Vendor may require the Purchaser to have the Bond reissued to another party in the following manner: (a) the Purchaser must deliver to the Vendor the replacement Bond within 7 days of written request from the Vendor; and (b) the Vendor must pay the Purchaser's reasonable costs in complying with this clause. 14.6 Expiry date of Bond It is an essential term of this contract that the Bond (or any replacement bond) has no expiry date or an expiry date not earlier than 3 months after the registration date (as extended in accordance with this contract). 1. Additional Clause 13 applies because the vendor accepted a Bond (as defined) as the deposit. In particular, it appears that the vendor accepted a deposit guarantee issued on behalf of CBL Insurance Limited for a maximum amount of $38,500. The Bond was issued on 20 March 2014, and had an expiry date of 31 March 2017. In that regard, the Bond did not comply with Additional Clause 14.6 because the registration date was 31 March 2017 when the contract was entered into (see the definition of Registration Date). 2. There is evidence that the Registration Date was subsequently extended to 15 January 2018. It is not clear when that occurred, other than that it was before 6 September 2017. 3. The Registration Date can be extended in accordance with Additional Clause 3.5 which provides: 3.5 Extension of the Registration Date (a) By written notice or notices served on the Purchaser, the Vendor may extend the Registration Date by a day for each day construction of the Building is delayed by an Event of Delay by specifying the number of days in the relevant notice. (b) The Registration Date will be automatically extended by that number of days when a notice is given. (c) The number of days shall be determined by the Vendor's architect or project manager, whose decision shall be final and binding on the parties. (d) The Purchaser may not make any objection, requisition, claim or rescind, terminate or attempt to rescind, terminate or refuse to complete or threaten not to complete this contract as a result of anything arising out of this clause. (e) Notwithstanding the clauses above, the vendor must not extend the Registration Date past 12 months from the original Registration Date. 1. On 6 September 2017 the solicitors for the vendor sent a letter to the solicitors for the purchasers in the following terms: We refer to the above matter and to exchange of contracts on 2 April 2014. Pursuant to special condition 3.5 of the Contract of Sale, we hereby give you notice that the Vendor extends the Registration date by 112 days, from 15 January 2018 to 7 May 2018. Please find enclosed the Notice from the Vendor's project manager, explaining the events of delay. Should you have any queries please do not hesitate in contacting our office. 1. The enclosed notice was in the following terms: We hereby advise the Building and associated building Works are delayed due to an Event of Delay as defined below. This statement verifies and sets out the Event of Delay and associated impact on the registration Date of 15/01/2018. We Note the following Events of Delay. 1. Delays in obtaining approval from Endeavour Energy in relation to obtaining consent to install a Substation on the premises – 63 Days 2. Delays in obtaining major rain delays in the first quarter of 2017 – 49 Days Total number of delay days attributed to events of Delay 112 Days. Based on the above the revised Registration Date is 07/05/2018. 1. It should be noted that an extension of the Registration Date to 7 May 2018 is contrary to Additional Clause 3.5(e) which prohibits extension of the Registration Date beyond 12 months from the original Registration Date of 31 March 2017. 2. On 21 September 2017 the vendor's solicitors sent an email to the purchasers' solicitors in the following terms: We refer to the above matter and confirm that contracts were exchanged on 2 April 2014. Please note that your client's Deposit Bond expired on 31 March 2017; however, we have yet to receive a replacement or a deposit cheque for same. We confirm that your client is now is [sic] breach of an essential term of the Contract, time being of essence. Accordingly, we are instructed to demand that your client provides us with the 10% deposit, being the sum of $38,500.00 by no later than Wednesday, 28 September 2017. We further confirm that our client reserves their full rights under the Contract. We look forward to hearing from you as a matter of urgency. 1. This prompted the first plaintiff to instruct his solicitors to seek to have "the deadline pushed back" to the end of October. It appears that such a request was made to the vendor's solicitors, who sent an email to the purchaser's solicitors on 22 September 2017 in the following terms: Further to my email below, we are now instructed that our client is amenable to allow your client an extension until Friday, 20 October 2017. Please note that no further extensions are to be granted in this regard. We look forward to receiving the deposit in due course. Let me know how you go. 1. On 9 October 2017 the first plaintiff instructed his solicitors to see if the vendor would accept, instead of cash, an extension of the bond until May 2018. The solicitor seems to have misinterpreted this request. Later on 9 October 2017 the purchasers' solicitor sent an email to the vendor's solicitors in the following terms: Can I [sic] client arrange for the bond to be lifted and provide a cash deposit instead? Pls asdvise [sic] urgently. 1. Still later on 9 October 2017 the vendor's solicitors responded by email which included the following: We refer to your email below and we are instructed that the Vendor has agreed for your client to replace the deposit bond with a cash deposit. We advise that our Trust Account details for payment of the full 10% deposit are as follows: - … Kindly forward to us a copy of the remittance advice once payment has been made, so that we may account for same. Alternatively, we kindly request that your client arranges for a bank or trust cheque in favour of Paramonte Legal Law Practice Trust Account. We look forward to hearing from you shortly. 1. At about 11am on 20 October 2017 the vendor's solicitors sent an email to the purchasers' solicitors in the following terms: We refer to our email correspondence below. Would you kindly advise whether your client has attended to payment of the deposit? In the event that the funds have been transferred to our Trust Account, we kindly request that you forward to us a copy of the remittance advice evidencing payment. We look forward to hearing from you shortly. 1. About 5 minutes later the purchasers' solicitors sent an email to the vendor's solicitors in the following terms: Can they issue another bond? If not they are refinancing to get the extra money from their home loan and request an extension to mid nov. 1. No payment was made by the purchasers on 20 October 2017 even though no response had been received to the request for an extension of time. 2. On 24 October 2017 at about 11:30am the vendor's solicitors sent a response to the purchasers' solicitors in the following terms: We refer to your email below and we are instructed that our client has agreed to allow the purchaser a final extension on the following conditions: - A replacement Deposit Bond is provided to our office by no later than close of business Friday, 27 October 2017; OR Proof of your client's re-finance is provided to our office by no later than close of business Friday, 3 November 2017; OR The full 10% deposit is paid into our office Trust Account by no later than close of business Wednesday, 15 November 2017. We note that these details were previously provided to you, and are noted in our email correspondence below. It is essential that you provide our office with a copy of your client's proof of the refinance as soon as possible, noting that the matter has now prolonged for longer than anticipated. We are further instructed that the Vendor puts the Purchaser on final notice, and will reserve its full rights under the Contract in the event that the above conditions are not met. We look forward to hearing from you as a matter of priority. 1. This email was forwarded to the first plaintiff at about 5pm on 24 October 2017. Shortly thereafter, the purchasers' solicitors sent an email to the vendor's solicitors in the following terms: The client wants to know RE the Deposit Bond, can you pls confirm that they will accept with 7-May-2018 expiry date? Need to know what expiry date they are going to accept before applying for extension of the bond. 1. On 25 October 2017 the vendor's solicitors sent a reply in the following terms: We refer to the above matter and to our numerous email correspondence below. Please find attached herewith the [sic] our letter of even date along with its enclosures. We confirm that the original Notice of Termination has also been served on your client today. We trust that this matter will be dealt with in an amicable and prompt matter. We await your urgent and favourable reply in this regard. 1. The attached letter included the following: We refer to previous correspondence in relation to the above matter, and in particular to Mary Marco's email of Tuesday, 24 October 2017 at 5:34PM. Please find enclosed a further copy of Special Condition 14.3 of the Contract for Sale for your ease of reference. You will note that the terms of the contract clearly state that: - A replacement Deposit Bond must have been provided to our office within 10 business days of our office advising you that the Registration Date had been extended; and The replacement Deposit Bond must not have an expiry date less than 3 months prior to the new Registration Date. We confirm that your clients have breached an essential term of the Contract, time being of essence. We are now instructed to withdraw the Vendor's instructions of Tuesday, 24 October 2017 at 11:29 AM, and terminate the contract forthwith as these delays are unacceptable. Please find enclosed for your attention Notice of Termination, and we confirm that our client reserves its full rights under the Contract. … 1. A Notice of Termination was enclosed with the letter. It was in the following terms: NOTICE OF TERMINATION OF CONTRACT … Re: KPI6 Pty Ltd Sale to Budiyanto & Sutejo PPTY: Lot 8/6A Merriville Road, Kellyville By contract for the sale of land dated 2 April 2014 (contract) KPI6 Pty Ltd ACN 147 643 543 of 20 Fennell Street, Parramatta, NSW 2150 (vendor) agreed to sell and Adi Budiyanto and Anggayasti Aulia Sutejo of 13/16 Carson Street, Dundas Valley, NSW 2117 (purchaser) agreed to purchase the property being the whole of the land in title reference known as Lot 8/6A Merriville Road, Kellyville (property) for . As a result of your default under the contract, and in particular Special Condition 14.3 making time of the essence for completion of the contract, we give you notice that the contract is terminated and is entirely at an end. The vendor will take action for recovery of the deposit and damages resulting from your default. Dated: 25 October 2017 1. Later on 25 October 2017 the purchasers' solicitors sent an email to the vendor's solicitors in the following terms: Our client was in a position to respond to you today on acceptance of your 3 options and forward you the required documents as per your email. Our client kindly ask your client to withdraw the termination notice and please find enclosed bond which he applied [sic]. Attached is a copy and email copies of the updated on[e] can be sent tomorrow to you if your client agrees. We look forward to hearing from you. 1. There is evidence that the purchasers were by that time in the process of applying for a new deposit guarantee in the sum of $38,500. An incomplete application form for such was forwarded to the vendor's solicitors shortly prior to 5pm on 25 October 2017. 2. On 27 October 2017 the purchasers paid a total sum of $38,500 into the trust account of the vendor's solicitors.