Perri v Coolangatta Investments Pty Ltd
149 CLR 53741 ALR 441
(Decision by: GIBBS CJ)
Between: PERRI
And: COOLANGATTA INVESTMENTS PTY LTD
Judges:
Gibbs C.J.Stephen J.
Mason J.
Wilson J.
Brennan J.
Subject References:
Contract
Judgment date: 11 May 1982
Canberra
Decision by:
GIBBS CJ
This is an appeal from a decision of the Supreme Court of New South Wales (Court of Appeal). The respondent company was the vendor, and the appellants were the purchasers, under a contract made on 7 April 1978 for the sale of land at Cronulla in New South Wales for a price of $220,000. The contract provided for payment of a deposit of $22,000 on the signing of the agreement but in fact the deposit had already been paid before the contract was signed. No time was fixed for completion of the sale, and the contract did not expressly provide that time was of the essence of the contract. Clause 6 of the special conditions of the contract provided as follows:
"This Contract is entered into subject to Purchasers completing a sale of their property No. 9 Korokan Road, Lilli Pilli."
The appellants did not enter into a contract for the sale of their property at Lilli Pilli until 9 March 1979 and that contract was not completed until 13 June 1979. The learned trial judge in effect found that the appellants had not made reasonable endeavours to sell their property at an earlier date. He found that they had put the property on the market at a price that was too high and had acted unreasonably in not reducing the price to a reasonable level until January 1979. He did not make any finding as to the date on which a reasonable time for performance of special condition 6 expired, but he did find that a reasonable time had expired by 29 September 1978, when the present proceedings were commenced. Before that date the respondent had pressed the appellants to complete the contract, and had given them two notice s to complete. The second of those notices was given on 17 July 1978, and required completion by 8 August 1978. When the sale had not been completed by that date the respondent on 10 August 1978 gave a notice rescinding or terminating the contract. The learned trial judge did not decide whether a reasonable time for completion had elapsed by 17 July 1978, or whether the respondent was entitled to give a notice to complete on that day, for he held that once a reasonable time for the fulfilment of special condition 6 had elapsed without that condition having been either fulfilled or waived, it was not necessary for the respondent to give a notice to complete. He accordingly declared that the contract had terminated on 29 September 1978 and ordered repayment to the appellants of the deposit. His decision was affirmed by the Court of Appeal.
In my opinion special condition 6 made the completion of the sale of the property at Lilli Pilli a condition precedent to the performance of certain of the obligations of the parties under the contract, including the obligation of the respondent to complete the sale. It has sometimes proved difficult to decide whether a particular condition of a contract should be classified as a condition precedent or a condition subsequent, and as Profession Stoljar has pointed out in "The Contractual Concept of Condition", Law Quarterly Review, vol 69 (1953) 485, at p. 506, if the words "precedent" and "subsequent" are to make sense they must be connected with a definite point of reference; since they express a relationship in time, the question which must be asked is "Precedent to what? Subsequent to what?" However, provided the effect of a condition is clearly understood, its classification may be merely a matter of words. The condition in the present case was not a condition precedent to the formation of a binding contract. It is clear that a binding contract came into existence immediately upon signature, and that the parties to it were from that moment subject to certain obligations. For example, the appellants became liable to pay a deposit. Further, there was implied a promise by the appellants that they would do all that was reasonable to find a buyer for the Lilli Pilli property and to complete a sale to him. It was held in Lombardo v. Morgan (1957) VR 153 that a term of that kind should be implied in a contract for the sale of land which contained a condition making the sale subject to the vendor disposing of his business within ninety days; and that decision is consistent with authority, including decisions of this Court: Butts v. O'Dwyer (1952) 87 CLR 267 , at p 280 ; Kennedy v. Vercoe (1960) 105 CLR 521 , at p 526 . The fact that a promise of this kind is implied is quite inconsistent with the notion that no binding contract has come into existence.
In Aberfoyle Plantations Ltd. v. Cheng (1960) AC 115 , where a contract of sale was expressed to be conditional on the vendor obtaining a renewal of certain leases, it appears from the judgment of Lord Jenkins that it was thought that the condition was one on whose fulfilment the formation of a binding contract of sale depended. If that view of the condition was correct, it can only be because of particular provisions peculiar to the contract there considered. However, the correctness of what Lord Jenkins said on this point was doubted in Property and Bloodstock Ltd. v. Emerton (1968) 1 Ch 94, at p 116 , and I respectfully share those doubts. It seems to me that the condition was one on which the performance of the relevant obligations under the contract depended rather than a condition precedent to the formation of a binding contract. On the other hand in Maynard v. Goode (1926) 37 CLR 529 the contract of sale contained the words "And providing that the transfer of purchaser's block goes through in reasonable time". Knox and Isaacs JJ. held that this was a condition subsequent (1926) 37 CLR, at pp 536,538 . Higgins and Rich JJ., with, I think, more accuracy, said that the completion of the transfer was not a condition precedent to the operation of the agreement (1926) 37 CLR, at pp 541,544 . If it was right to say that the condition was a condition subsequent, that may have been because the contract provided for possession being given on a date which might arrive before the condition had been performed (1926) 37 CLR, at p 536 . However as Isaacs J. pointed out (1926) 37 CLR, at p 540 , in one sense the stipulation might be a condition precedent to the performance of a particular term of the contract, while in another sense it was a condition subsequent in relation to the whole contract, since the failure of the stipulation would have entitled the vendor to retire from the transaction altogether. There are other authorities which illustrate the difficulty of attaching a label to conditions of this kind. In Zieme v. Gregory (1963) VR 214 and Tait v. Bonnice (1975) VR 102 conditions making the contract conditional upon the purchaser obtaining a loan were held to be conditions subsequent, whereas in Scott v. Rania (1966) NZLR 527 a similar condition was held to be a condition precedent to the formation of a binding contract. The latter case accepted the view taken in Aberfoyle Plantations Ltd. v. Cheng that no binding contract came into existence until the condition was fulfilled. That view must, as I have indicated, depend on particular terms of the contract; on the other hand, the description of the condition as a condition subsequent may be a mere matter of terminology, and may reflect an unwillingness to describe a condition as a condition precedent unless the formation of a binding contract depends on its fulfilment. Nevertheless, it probably does not matter in the present case whether the condition is described as "precedent" or "subsequent", provided that it is understood that its non-fulfilment did not prevent a binding contract from coming into existence but did have the effect that the respondent was under no obligation to complete the sale unless the condition was fulfilled or waived.
Special condition 6 did not fix any time within which the sale of the property at Lilli Pilli was to be completed, nor did it fix a date for completion of the sale. In Aberfoyle Plantations Ltd. v. Cheng (1960) AC, at p 124 it was said that in such a case the condition must be fulfilled within a reasonable time. This statement is clearly correct; it is entirely consistent with the principle that "An implication of a reasonable time when none is expressly limited is, in general, to be made unless there are indications to the contrary": Reid v. Moreland Timber Co. Pty. Ltd. (1946) 73 CLR 1 , at p 13 .
The condition was in my opinion one for the benefit of the appellants, who were therefore entitled to waive it, but since there was no waiver before proceedings were commenced that question need not be further considered.
Although by September 1978 a reasonable time had elapsed, the condition had not then been fulfilled. The question then arises whether the respondent was entitled to terminate the contract without first giving to the appellants a notice requiring them to fulfil the condition, or to perform the contract, within a reasonable time. Aberfoyle Plantations Ltd. v. Cheng is authority that no notice is necessary when the contract, expressly or by implication, fixes a date by which the condition is to be fulfilled. Their Lordships laid down the rule applicable to such a case as follows (1960) AC, at p 125 :
"where a conditional contract of sale fixes (whether specifically or by reference to the date fixed for completion) the date by which the condition is to be fulfilled, then the date so fixed must be strictly adhered to, and the time allowed is not to be extended by reference to equitable principles."
Their Lordships did not explain why equitable principles are inapplicable. The explanation given by Professor Treitel, in his work on The Law of Contract 4th ed. (1975 ), p. 570, is that the equitable principle that time is not of the essence of the contract does not apply, because "until the condition is performed the whole existence of the contract remains in doubt". However, their Lordships went on to say that if they had accepted counsel's argument that the vendor was entitled to a reasonable time to fulfil the condition, they would have been disposed to agree that time, not being originally of the essence of the contract, could not be made so by service of a notice when the vendor had not been guilty of any delay or default such as had to be shown in order to entitle the purchaser to serve such a notice (1960) AC, at p 128 . Those observations, as Cooke J. said in Hunt v. Wilson (1978) 2 NZLR 261, at p 271 "certainly tend towards the view that, if no time is fixed for completion and a condition is to be satisfied within a reasonable time, the equitable requirements as to notice apply". Again, however, their Lordships did not explain why the equitable principles might apply in the one case but not in the other.
In Maynard v. Goode (1926) 37 CLR, at p 542 , Higgins J. said that he strongly thought "that a right to put an end to the contract or to refuse to perform it would not arise thereunder automatically without some warning notice from the vendor, fixing a reasonable limit of time for completion." Isaacs J. may have been of a similar opinion (1926) 37 CLR, at pp 539-540 . These remarks were obiter, because in that case it was held that the condition was performed within a reasonable time.
In Gange v. Sullivan (1966) 116 CLR 418 a contract for sale contained a provision that the contract was subject to the purchaser obtaining a certain development approval of the local council and that in the event of the council not granting such approval by 31 May 1965 the contract was to be at an end. By 31 May 1965 the council's approval had not been given and the purchaser had not waived the condition. It was held that the contract did not automatically come to an end. Taylor, Menzies and Owen JJ. said (1966) 116 CLR, at p 441 :
"Whilst the effect of a condition must in every case depend upon the language in which it is expressed and a decision upon the meaning of one condition cannot determine the meaning of a different condition, the authorities cited do show a disposition on the part of the courts to treat non-fulfilment of a condition such as that here under consideration as rendering a contract voidable rather than void in order to forestall a party to a contract from gaining some advantage from his own conduct in securing, or contributing to, the non-fulfilment of a condition bringing the contract to an end. Accordingly . . . we are prepared to treat non-fulfilment of the condition as rendering the contract voidable rather than void."
Barwick C.J. was of a similar opinion (1966) 116 CLR, at p 429 . The authority principally relied on by the Court was Suttor v. Gundowda Pty. Ltd. (1950) 81 CLR 418 , a case of condition subsequent. It was not suggested in either of those cases that it was necessary to give any notice to complete. The non-fulfilment of the condition gave the party not in default a right to avoid the contract, but if that party did not exercise the right the other party might enforce the contract against him. In Suttor v. Gundowda Pty. Ltd. the attempt to cancel the contract was made too late, since the condition had been fulfilled in the meantime (1950) 81 CLR, at p 442 . It appears to have been assumed that no notice to complete need be given before the right to avoid the contract was exercised. In both cases however a time for fulfilment of the condition was expressly fixed by the contract.
Suttor v. Gundowda Pty. Ltd. and Gange v. Sullivan are consistent with Aberfoyle Plantations Ltd. v. Cheng, and support the view that where a conditional contract fixes the date by which the condition is to be fulfilled the contract may be terminated if the condition has not been fulfilled when that date arrives, and that it is unnecessary to give any prior notice to the other party. The question is whether a similar conclusion should be reached when no time for fulfilment of the condition is fixed by the contract, and it accordingly must be performed within a reasonable time. There is little authority on the question, and it must be approached from the standpoint of principle. The condition with which we are concerned is not one which it was entirely in the power of the appellants to fulfil. Although they might use their best endeavours to find a buyer and complete a sale, it still remained necessary for them to find someone prepared to buy. Although, in fact, the appellants did not make reasonable efforts to satisfy the condition, it is impossible to say that they must have effected a sale within a reasonable time if they had made all reasonable endeavours to do so. It seems inappropriate that one party to a contract should be able to give a notice requiring the other to complete a sale, when that other party has not promised to do so (his promise only being to do all that was reasonable) and when it is not necessarily within his power to do so. The doctrines of equity enable a party to a contract to obtain specific performance notwithstanding his failure to carry out his obligations within a stipulated time, when that time is not of the essence of the contract. The party not in default has a corresponding power to limit a particular time within which the other contracting party is to perform his obligations. These principles have recently been discussed by this Court in Louinder v. Leis 149 CLR 509 . . They apply, in my opinion, only where the party to whom a notice may be given is under a contractual obligation to act. In the present case no doubt the appellants might have been given a notice requiring them to make reasonable efforts to sell, but they could not have been required to make a sale, for that was beyond their power. Moreover, a notice can only be given when the party to whom it is addressed is either in breach of contract, or guilty of unreasonable delay. A purchaser might have made all reasonable efforts but yet have been unable to complete a sale, and in that situation the vendor would not be able to give a notice to complete, and would, if the appellants' argument is correct, be bound indefinitely to a contract that might never result in a sale. For these reasons I consider that when the time has elapsed for performance of a condition which is not a promissory condition, but a condition precedent to the obligation to complete a contract of sale, either party, if not in default, can elect to treat the contract as at an end if the condition has not been fulfilled or waived, and that it is not necessary first to give a notice calling on the party in default to complete the contract or fulfil the condition. What I have said is, of course, subject to any sufficient indication of a contrary intention in the words of the contract itself. The conclusion that I have reached is supported by the judgment of Lord Keith in T. Boland and Co. Ltd. v. Dundas's Trustees (1975 S.L.T. (Notes). , with whose reasoning I respectfully agree. It accords also with the judgment of Cross J. (as he then was) in In re Longlands Farm [1968] 3 All ER 552 , a decision whose authority on this point is weakened by the fact that a notice to complete had in fact been given. A contrary view was taken in Hunt v. Wilson (1978) 2 NZLR 261 by Cooke J., who considered that a notice making time of the essence is necessary. Although in Aberfoyle Plantations Ltd. v. Cheng (1960) AC 115 an erroneous view may have been taken of the nature of the condition there considered, nevertheless, in my respectful opinion, it was correct to hold that the time fixed by the contract for performance of the condition was not to be extended by reference to equitable principles, and the same conclusion should be reached when the condition is to be performed within a reasonable time.
In the present case the learned trial judge was plainly correct in holding that a reasonable time for the fulfilment of special condition 6 had expired by September 1978. In the view that I have formed, it was then open to the respondent to avoid the contract without first giving any notice limiting a reasonable time for completion. By instituting the proceedings, before the condition had been either fulfilled or waived, the respondent sufficiently evidenced its election to avoid the contract.
I would dismiss the appeal.