Dalton v Warren [2007] QSC 123

SUPREME COURT OF QUEENSLAND CITATION: Dalton v Warren [2007] QSC 123 PARTIES: PRUDENCE MAREE DALTON (applicant) v SHIRREE GAEL WARREN (respondent) FILE NO/S: BS2980/07 DIVISION: Trial Division PROCEEDING: Application for summary judgment for specific performance of a contract for sale of land ORIGINATING COURT: Supreme Court of Queensland DELIVERED ON: 1 June 2007 DELIVERED AT: Brisbane HEARING DATE: 18 April 2007 JUDGE: Moynihan J ORDER: 1. Applicant’s application for specific performance of the contract for the sale of land is granted. 2. Respondent’s cross-application is dismissed. CATCHWORDS: EQUITY – EQUITABLE REMEDIES – SPECIFIC PERFORMANCE – PARTICULAR CONTRACTS – SALE OF LAND – where applicant and defendant disagree on interpretation of contract – where respondent terminates contract - whether contract for the sale of land specifically enforceable Alghussein Establishment v Eton College [1988] 1 WLR 587, considered. Hope Island Resort Holdings Pty Ltd v Jefferson Properties (Qld) Pty Ltd [2005] QCA 315, considered. Inness v Waterson [2006] QCA 155, considered. Re Priestley’s Contract (1947) 1 Ch 469, considered. Maniaty v Fenedisto Pty Ltd [2004] VSC 177, considered. Sandhurst Mutual Permanent Building Society v Gissing (1889) 15 VLR 329, considered. COUNSEL: JB Sweeney with C Johnstone for the applicant. LD Bowden for the respondent. -- 1 of 4 -- 2 SOLICITORS: Plastiras Lawyers for the applicant. Qld Law Group for the respondent. [1] The applicant seeks summary judgment for specific performance of a contract for the sale of land on which a dwelling was erected and the respondent in a cross application seeks declarations that the contract was validly terminated and the forfeiture of the deposit. [2] By a contract of 9 February 2007 the respondent agreed to sell the land and improvements to the applicant for $1,610,000 with an $80,500 deposit. The contract was on the standard REIQ form for residential houses and land and the settlement date was 9 March 2007. Time was of the essence of the contract. [3] On 5 March 2007 the respondent’s solicitors notified the applicant’s solicitors that she faced difficulty in settling on the date for completion, her mortgage debt exceeded the balance of the purchase price and she could not pay out the mortgage. [4] The contract was unconditional and the respondent’s failure to settle on the due date would have constituted a breach of her obligation under the contract. [5] On 7 March 2007 the respondent’s solicitors requested an extension of the date for settlement for six weeks so that she could arrange finance to pay out her mortgage and allow her to settle. The applicant declined to agree unless she was granted possession on 9 March 2007 at no cost to her. [6] At noon on 8 March 2007 the applicant carried out a final inspection under the contract and found a large hole in the floor and that under the house was full of boxes and rubbish. [7] Early in the afternoon of 8 March the respondent sought a further week’s extension to obtain funds to allow her to complete. Her solicitor stated that he was instructed that his client was willing to grant the applicant:- …. possession of the property from 9 March 2007 on the basis your clients accept the property in its present condition and they have appropriate insurance in place. [8] The request for one week’s extension was accepted on 8 March 2007 and the applicant went into possession on 9 March 2007. The respondent was not able to arrange finance and her solicitors applied for a further week’s extension which was granted with time remaining of the essence. [9] The applicant had made arrangements for painters and decorators to carry out work on the property – that is why she wanted possession. The work commenced the week of 17 March 2007. The workmen took out rotten floor boards in a bathroom and reduced it to a shell in preparation for refurbishing it. On 22 March 2007 the respondent entered the property and discovered works being carried out and took exception to this. [10] On 23 March 2007 the applicant called on the respondent to complete and reserved her rights under the contract. The respondent’s solicitors purported to terminate the contract under clause 9.1 on the basis of a breach of clause 8.5 the applicant having ‘demolished part of the property and changed the locks’. -- 2 of 4 -- 3 [11] Clause 9.1 of the contract provided to the effect that the respondent could affirm or terminate the contract if the applicant failed to comply with any provisions of the contract. Clause 9.3 provides to the effect that if the respondent terminated the contract under clause 9.1 she could resume the property, forfeit the deposit and interest, sue for damages and re-sell the property. [12] The application proceeded on the narrow basis that clause 8.5 of the contract did not apply in the circumstances. In that event the respondent had failed to carry out her obligations under the contract. In the event that clause 8.5 applies there are a number of triable issues as to whether it was breached. [13] Clause 8.5 provides:- 8.5 Possession before settlement If possession is given before settlement: (1) The Buyer must maintain the property in substantive condition at the date of possession, fair wear and tear excepted; (2) Entry into possession is under a licence personal to the Buyer revocable at any time and does not: (a) create a relationship of landlord and tenant and; (b) waive the buyer’s rights under this contract; (3) The Buyer must insure the Property to the Seller’s satisfaction; and (4) The Buyer indemnifies the Seller against any expense or damage incurred by the Seller as a result of the Buyer’s possession of the Property. [14] The arrangement whereby the applicant entered into possession of the property made no reference to clause 8.5 and imposed the two conditions of acceptance of the condition of the property and insurance to which I have previously referred. The applicant submits that clause 8.5 did not apply in the circumstances and the entry conditions imposed by the letter of 8 March 2007 were satisfied. [15] The respondent’s solicitor at the time deposed that he had received specific instructions to insert the conditions that the applicant accept the property in its present condition and obtain insurance but that he had no general or other authority to vary the contract. [16] The applicant submitted clause 8.5 did not apply in that it was not explicitly incorporated in the changed obligations as to possession to complete and was inconsistent with terms of the respondent’s letter of offer which was accepted by the applicant. [17] The applicant referred to Alghussein Establishment v Eton College1 and Hope Island Resort Holdings Pty Ltd v Jefferson Properties (Qld) Pty Ltd2 and the ‘presumption’ that it was not intended a party would benefit from their own wrongdoing. On the view I take of the matter it is unnecessary to rely on that rule. 1 [1988] 1 WLR 587. 2 [2005] QCA 315. -- 3 of 4 -- 4 [18] In other words, the exchange of letters was an agreement in writing effecting a change in the parties’ relationship3 in circumstances brought about by the respondent’s inability to complete on the due date. [19] The respondent’s letter of offer made no reference to clause 8.5 which provided for a licence to occupy, the applicant’s non waiver by entering into possession, insurance, maintaining the property and indemnity. The express provision for insurance and the acceptance of the property dealt with those issues and impliedly excluded the other terms of clause 8.5. [20] Moreover, ‘accepting’ the property in its present condition is not congruent with ‘maintaining’ it in its present condition. The latter implies an ongoing obligation to actively maintain, the former to receive the property as it is at the time of taking possession.4 [21] ‘Accepting’ property in general terms put the purchaser who enters into possession under a contract for sale of land in the position of being a tenant at will subject to an equity which prevented the seller from determining the tenancy except by converting it into an estate in fee simple.5 [22] The condition of entry that the applicant accept the property ‘in its present condition’ is inconsistent with clause 8.5(2)(b) of the contract which provides that if possession is given before settlement entry is under a personal licence revocable at any time and does not waive the [applicant’s] rights under the contract. [23] For these reasons in my view clause 8.5 of the contract did not apply so as to found the termination of the contract and the applicant is entitled to specific performance. 3 Inness v Waterson [2006] QCA 155, 2 and 47. 4 See The Oxford English Dictionary (1978), I (A-B) for definition of ‘accepting’; VI (L-M) for definition of ‘maintaining’. 5 See Sandhurst Mutual Permanent Building Society v Gissing (1889) 15 VLR 329, 331; Re Priestley’s Contract (1947) 1 Ch 469, 480; Maniaty v Fenedisto Pty Ltd [2004] VSC 177, [21] -[25]. -- 4 of 4 --