Supreme Court New South Wales

• Medium Neutral Citation: Wang v Garland Lot 3 Pty Ltd [2013] NSWSC 1112
• Hearing dates: 15-16 July 2013
• Decision date: 19 August 2013
• Jurisdiction: Equity Division
• Before: Robb J

Decision

1The plaintiff is entitled to an award of damages against the first defendant for breach of contract of $113,000 plus interest to be calculated.

2The plaintiff's proceedings against the second and third defendants are dismissed,

3The parties are to bring in short minutes to reflect these reasons for judgment.

4The court will hear submissions as to costs.

• Catchwords: CONTRACTS - disagreement as to purchase price - wrongful termination of contract - whether inclusion of powder room express or implied term - counterpart contracts contained different amendments - whether parties agreed to be bound by terms in defendants' counterpart that were not included in plaintiff's counterpart
• Legislation Cited: First Home Owner Grant Act 2000; State Revenue and Other Legislation Amendment (Budget Measures) Act 2012 No 46; State Revenue Legislation Amendment Act 2009 No 46; State Revenue Legislation Further Amendment Act 2009 No 51
• Cases Cited: BP Refinery (Westernport) Pty Ltd v Shire of Hastings (1977) 180 CLR 266; Georgiou v Sindel [1982] 1 NSWLR 435; Hadley v Baxendale (1854) 9 Exch 341; Musumeci v Winadell Pty Ltd (1994) 34 NSWLR 723; Sindel v Georgiou [1984] HCA 58; (1984) 154 CLR 661; Zaccardi v Caunt [2008] NSWCA 202
• Category: Principal judgment
• Parties: Linfeng Wang (Plaintiff); Garland Lot 3 Pty Ltd (ACN 124 669 469) atf Garland Lot 3 Unit Trust (1st defendant); Phillip John Bartlett (2nd defendant); Janet Elizabeth Pennington (3rd defendant)
• Representation: Counsel: A Sullivan (Solicitor) (Plaintiff); A E Munro (Defendants); Solicitors: Edrison Lawyers (Plaintiffs); McCullough Robertson Lawyers (Defendants)
• File Number(s): 2012/143155

Judgment

1 In these proceedings the plaintiff, Linfeng Wang, sues the first defendant, Garland Lot 3 Pty Ltd (Garland) for damages for the wrongful termination of a contract dated 25 May 2009 by which Ms Wang agreed to purchase from Garland a property known as Apartment 601 "GARLAND 77", 19 Gadigal Avenue, Zetland, New South Wales, 2017. The second and third defendants, Phillip John Bartlett and Janet Elizabeth Pennington are sued on the basis that they were the directors of Garland at all relevant times and caused Garland to breach its contract with Ms Wang.

2 Ms Wang is now 27 years old. She was born in the People's Republic of China and migrated to Australia in 2003.

3 Garland purported to terminate the contract of sale on 26 March 2012 following its service upon Ms Wang on 1 March 2012 of a notice to complete which required completion to take place on 16 March 2012. Completion did not take place on that date because of a disagreement between the parties as to the amount of the purchase price which was payable under the contract, and as to whether Garland was entitled to charge Ms Wang an amount of penalty interest.

4 On 29 March 2012 Mr Truong, Ms Wang's solicitor, of Edrison Lawyers, advised Garland's solicitors, who were then DibbsBarker, that Ms Wang would seek specific performance of the contract of sale. Ms Wang's summons seeking that relief was filed on 4 May 2012.

5 However, on 10 April 2012 Garland had entered into a new contract to sell Apartment 601 to a different purchaser for a price that was $60,000 greater than the price stated in Ms Wang's contract of sale. The new contract of sale was completed by means of a transfer dated 23 May 2012.

6 Consequently on 14 September 2012 Ms Wang filed the statement of claim which raises the issues for determination in these proceedings.

7 The principal issue between the parties is whether the contract of sale, which does not contain any express written term to that effect, required Garland to construct Apartment 601 with an additional toilet and wash basin on the lower floor of the apartment (which the parties have called the "powder room") for an additional payment above the $460,000 purchase price specified in the contract of an amount of not more than $8000. The defendants assert that the contract of sale contained a term to this effect which was partly express and partly implied. In submissions Ms Wang's position was that Garland was required to construct the powder room, but was not entitled to any payment greater than the $460,000 specified as the purchase price.

8 The purchase by Ms Wang was, as is commonly said, "off the plan" and, following completion of the development, the first appointment for settlement of the contract was made by the parties for 22 December 2011. There followed a number of unsuccessful appointments for settlement. Settlement did not take place because of the difference between the parties as to the price that was payable by Ms Wang and whether penalty interest was also payable.

Contract for Sale

9 Ms Wang and Garland exchanged contracts for the sale of Apartment 601 on 25 May 2009. Both counterparts of the contract are in evidence.

10 The contract provides for a price of $460,000, with a deposit of $46,000, leaving a balance of $414,000 to be paid on completion.

11 Special Condition 31.1 provides that the completion date is 21 days after the later of the date when the vendor serves a Registration Notice and the date when the vendor serves a copy of an interim or final occupation certificate under section 109C of the Environmental Planning and Assessment Act 1979. "Registration Notice" is defined in Special Condition 51.1 as a notice served by the vendor that the Strata Plan is registered. Special Condition 31.2 provides that the vendor must use all reasonable endeavours to ensure that the Strata Plan is registered on or before the Sunset Date, and notify the purchaser promptly after the Strata Plan is lodged for registration. The Sunset Date is defined as meaning the date specified in schedule 2, which is 31 December 2010, as extended under clause 38.

12 Under Special Condition 36.1 if the purchaser completes the contract after the completion date, then on completion the purchaser must pay the vendor interest at the Interest Rate on the balance of the purchase price and any other amount payable by the purchaser to the vendor under the contract, from but excluding the completion date to and including the date of actual completion. The Interest Rate is defined as being 10 per cent per annum. Special Condition 36.3 provides that the purchaser need not pay interest under clause 36 for as long as the purchaser is ready, willing and able to complete and completion cannot take place because the vendor cannot complete.

13 Special Condition 36.4 provides that if a party is entitled to serve a notice to complete, then 14 days (excluding the day on which the notice is served) is a reasonable period to allow for completion in that notice.

Facts leading to Contract

14 Following negotiations between Ms Wang and Garland's agent, CB Richard Ellis, on 12 May 2009 the agent forwarded an agents sales advice to Garland's solicitors, with the request that the solicitors prepare a contract of sale. The Sale Price stated was $460,000.

15 The sales advice included the following Special Conditions:

"- Vendor agrees to rebate $5,000 on settlement conditional to contracts exchanging on or before 22nd May 2009.

- Vendor agrees to add a powder room behind the door in the living/kitchen room which is to be produced at cost to a maximum of $8,000.

- Purchaser will receive a credit back of cost for study desk and wardrobe.

- All construction details of improvements will be specified on a plan provided to the purchaser for their approval with an estimated cost during the construction phase of the project."

16 Garland's solicitors, who were then Mallesons Stephen Jaques (Mallesons), issued a draft contract to Mr Truong on 12 May 2009.

17 Mr Truong responded on 15 May 2009 by facsimile in which he stated that he had been instructed to request certain amendments to the contract. The relevant requests made by Mr Truong were:

"2. Inclusions to include dryer and air conditioner. In the event of no air-conditioner being included the vendor is to have the electrical wiring and tundish for the airconditioner install [sic].

3. Floor tiles at the entrance as indicated on the floor plan attached (where relevant).

4. A powder room including one toilet in the powder room where indicated on the floor plan attached. The maximum cost for the powder room must not exceed $8,000.00.

5. No study table or wardrobe to be installed in the bedroom. Vendor to give credit of reasonable costs of these items in favour of the purchaser. Please advise the costs of these items.

6. Settlement to be 21 days after notification of registration of the Strata plan.

7. 10% penalty interest..."

18 As well as Mr Truong's 15 May 2009 letter requesting amendments to the draft contract, he sent a further letter dated 18 May 2009 in which he relevantly requested the following amendments to the contract:

"1. Inclusions to also include gas cook top with 4 burners and the gap between the fridge and the cook top to be no less than 50 cm.

2. Vendor to provide electrical wiring and tundish in suitable areas for airconditioners (to be installed by purchaser) for both the living room and the bedroom."

19 On 22 May 2009 Mallesons responded to Mr Truong's correspondence. Relevantly they said:

"2 The vendor agrees to include dryer however, does not agree to include airconditioner. The vendor will agree to have the electrical wiring and tundish for that airconditioner installed.

3 Agreed.

4 Agreed to a maximum cost of $8,000. The vendor will provide an indicative plan shortly.

5 Agreed. A credit of $600.00 will be adjusted on settlement.

6 Agreed.

7 Agreed."

Amendment of Draft Contract

20 Mallesons forwarded Mr Truong a draft contract of sale on 22 May 2009. The copies of the contract which were exchanged show that some of the terms which were earlier agreed in correspondence were omitted from the contract that was exchanged.

21 The Special Conditions do not include any typed written terms concerning the inclusion of a dryer (paragraph 2 of the letters dated 15 and 22 May 2009), the inclusion of floor tiles at the entrance (paragraph 3), the inclusion of a powder room for a maximum cost of $8000 (paragraph 4), or the giving of credit for the reasonable costs of deleting the study table and wardrobe to be installed in the bedroom (paragraph 5).

22 There are, however, a number of handwritten amendments to both counterparts of the contract of sale.

23 In the space provided on the first page of the contract for Inclusions there is typed: "The items included in the Schedule of Finishes in attachment 8". The words "including dryer" have been written immediately after that typed information on both counterparts. The additional words have been written in different handwriting.

24 Ms Wang's first name was typed in the space allowed for the name of the Purchaser as "Lin-Feng". That name has been corrected in different handwriting on each counterpart to read "LINFENG".

25 Ms Wang's solicitor, Mr Truong's name was also misstated in type as Mr Albert Edrison. In both counterparts "Edrison" has been struck through and "Truong" has been inserted. In each case the handwriting is different.

26 The period for completion in Special Condition 31.1 has been changed in each case from 14 days to 21 days after service of a Registration Notice or interim or final occupation certificate by different handwriting. Mr Truong gave evidence that he initialled the change in the counterpart provided by Ms Wang to Garland.

27 The interest rate in the definition of "Interest Rate" in Special Condition 51.1 has been changed in each case from 12% to 10%. The handwriting is different. Mr Truong initialled the change made by him.

28 Special Condition 52 provides for a rebate of $5000 from the purchase price by way of adjustment on completion if the purchaser exchanges the contract on or before 25 May 2009. In that provision, 22 has been crossed out in the date and 25 inserted in different handwriting in each case. Again, Mr Truong has initialled the change made by him.

29 Special Condition 53.1 referred originally in type to what is defined as the First Home Owner Boost in the sum of $7,000. Special Condition 53.4 refers to an adjustment on completion in the sum of what is printed as $7,000. In both cases the $7,000 has been altered in handwriting to read $14,000. The handwriting again is different in both cases. There are no initials.

30 A handwritten insertion has also been made to Special Condition 53.7, and new Special Conditions 53.8 and 54 have been added in handwriting. Different persons have apparently made the handwriting. There are no initials. Special Condition 54 is: "The gap/distance between the fridge space and the cook top shall be no less than 50 cm". This amendment included in the contract part of the request made in paragraph 1 of Mr Truong's 18 May 2009 letter. It omitted that part of the request which sought the inclusion of a gas cook top with 4 burners.

31 The evidence does not disclose the circumstances in which the handwritten amendments to the contract of sale set out above were made. The court infers that the amendments were made by agreement and that Mr Truong made the amendments on the counterpart provided to Garland, and some unknown person or persons in the office of Garland's solicitors made the amendments on the counterpart provided to Ms Wang.

32 Attachment 8 to the contract of sale is entitled "Floor Plans for the Apartments". It contains a floor plan of Apartment 601. No handwritten annotations or other changes appear on the copy of Attachment 8 in Ms Wang's copy of the contract.

33 The original of Garland's copy of the contract became Exhibit 3, as it contains handwritten alterations to Attachment 8 that have been written in pencil and are not clear in photocopy. This copy of Attachment 8 contains two annotations in what appears to be Chinese characters. Ms Wang confirmed that the characters were in Mandarin, and she translated at least one of the characters as meaning "bathroom". There are also the words "tile", "remove" and "$8000 Max". There is another illegible entry, as well as a number of lines drawn on the floor plan for the lower floor of the apartment which appear roughly to depict the layout of the proposed powder room. In relation to the upper floor which contains the bedroom there is a handwritten arrow pointing away from what appears to be the proposed desk in the study towards the words "remove desk".

34 In cross-examination Ms Wang gave clear affirmative answers to direct questions as to whether she made the hand written pencil notations on Garland's counterpart of the contract of sale (T 22.32 to 23.07). In re-examination Ms Wang was immediately asked whether she made those notations herself or through an agent. She answered: "it's not myself write, writing this one. I haven't..." (T 23.40). Upon objection being made by counsel for the defendants the answer was struck out on the basis that it did not properly arise in re-examination. However, the court, having had the opportunity of hearing Ms Wang give some answers in English to questions asked in that language, observed that the court was not entirely comfortable with the idea that Ms Wang understood questions asked in the English language well enough to give reliable answers. Counsel for the defendants applied for and was granted leave to further cross-examine Ms Wang. When asked again whether the handwriting on the floor plan was hers, Ms Wang answered: "Is not my write" (T 25.1). Ms Wang then specifically denied that the handwriting was hers (T 25.16) or that of Mr Truong (T 25.22).

35 Mr Truong's evidence was that he did not make the handwritten amendments on the floor plan (T 34.47 to 35.11). He also said that when he passed the counterpart of the contract of sale signed by Ms Wang to his staff to be forwarded to the solicitors for Garland he did not know that any handwritten additions had been made to the floor plan (T 37.41).

36 The defendant submitted that the court should "not be comfortable" with the evidence given by Ms Wang. It was submitted that the court should accept the evidence clearly given by Ms Wang in chief. The defendants also submitted that Mr Truong's evidence was implausible, given that he admitted that he had made some handwritten amendments to the counterpart of the contract which was signed by Ms Wang. The defendants went so far as to submit that Mr Truong should not be believed.

37 Although Mr Truong's evidence was brief, the court is satisfied that he appeared to give genuine answers to the questions he was asked. There was nothing in the manner in which he gave evidence which would cause the court to have doubts about his honesty. It was not put to Mr Truong that he was not telling the truth. The submission that Mr Truong should not be believed is not open to the defendants, particularly as no persuasive basis was put forward for disbelieving him.

38 There are in any event a number of factors that make Mr Truong's evidence likely to be accurate, at least on the balance of probabilities. Mr Truong had already provided to Ms Telford, Garland's solicitor, a copy of the floor plan which bore handwritten amendments to reflect Ms Wang's desire for the inclusion of a powder room, which Mr Truong said was prepared by Garland's agent, CB Richard Ellis. Mr Bartlett gave evidence that one of the employees of the agent was Michael Chen, who may be inferred to be Chinese. Mr Chen was not called to give evidence. In the circumstances the court cannot be confident as to the persons who were involved in the transaction who may have been capable of writing Mandarin characters on the floor plan. Mr Truong's copy of the altered floor plan was provided to Ms Telford as an attachment to Mr Truong's 15 May 2009 letter. The counterparts of the contracts of sale as exchanged annexed at Attachment 8 different versions of the floor plan, without the difference being acknowledged or brought to light by either solicitor. In the ordinary course it would be unconventional for a conveyancer knowingly to permit the two counterparts to contain different and inconsistent floor plans. It is improbable that Mr Truong, having provided one amended floor plan to Ms Telford, would casually amend Attachment 8 to the contract signed by Ms Wang, or permit her or some other person to do so with his knowledge, without explicitly bringing the change to the attention of Ms Telford. Mr Truong's 25 May 2009 letter to Mallesons, which enclosed the contract executed by Ms Wang together with the balance of the deposit, made no mention of the floor plan in Attachment 8 being altered.

39 Ms Wang's evidence on the subject was unsatisfactory, as she diametrically contradicted herself over a period of only a few minutes. However, the court infers from the syntax with which she expressed her answers to simple English questions that her understanding of English is suspect, and the court is not prepared to infer that Ms Wang intentionally gave unsatisfactory evidence. Generally her demeanour was such that she appeared to be doing her best to give truthful answers to questions. Ms Wang's evidence that she did not make the alterations to the floor plan is corroborated to some extent by Mr Truong's evidence. The inference that Ms Wang did make the annotations on the floor plan remains open, but the state of the evidence makes it difficult to make any positive finding to that effect.

40 Each of the witnesses called on behalf of the defendants was asked in evidence in chief whether he or she was able to understand the Chinese characters on Attachment 8 to Garland's copy of the contract. Each witness said that he or she could not read the characters.

41 Mr Bartlett and Ms Pennington gave evidence that, because of the number of draft contracts of sale involved in the exercise of entering into contracts to sell all of the apartments in the development, they only signed the execution page of the contract for the sale of Apartment 601, which was their general practice in signing all draft contracts on behalf of Garland. They did not read the balance of the draft contract at or around the time of exchange, and accordingly were not aware of the handwritten additions to Attachment 8.

42 On the evidence the employees of Garland's solicitors were also not aware of the handwritten additions to Attachment 8 at the time contracts were exchanged.

43 In the circumstances the defendants did not attempt to make out an evidentiary case that they believed that the contract contained a term requiring Garland to construct the powder room for a price additional to the contract price of $460,000 payable by Ms Wang up to a maximum of $8000, on the basis that they understood that that was the effect of the handwritten amendments to Attachment 8.

Events Following Contract

44 On 25 May 2009 a legal secretary at Mallesons, Ms Jackie Pipe, sent an email to Mr Bartlett and Ms Pennington, with a copy to Ms Telford, in which she listed changes that had been made in the contract between Ms Wang and Garland to the standard form of contract used by Garland. Ms Pipe requested confirmation that she could insert the execution page which had already been signed by Mr Bartlett and Ms Pennington on behalf of Garland into the contract and proceed to exchange. The changes were listed as follows:

"· Dryer included

· Dark Colour Scheme

· Clause 31.1 amended - Completion = 21 days

· Interest rate = 10%

· Clause 52 - Rebate of $5,000

· Clause 53 - First Home buyers - Please note this clause has been amended to $14,000 - please confirm you agree to this

· Clause 54-Gap between fridge space and cook top shall be no less than 50cm - please confirm you agree to this"

45 It appears from Annexure A to Mr Bartlett's affidavit, which included Ms Pipe's email, that copies of the pages of the original draft contract of sale which had been marked up in handwriting to reflect the changes set out above were included as attachments with the email.

46 Ms Pipe did not list the amendment agreed in the correspondence between the solicitors on 15 and 22 May 2009 whereby Garland would construct the powder room for an additional price above the $460,000 contract price of no more than $8000. The evidence therefore suggests that Garland, through Mr Bartlett and Ms Pennington, was aware of the amendments which had been made to the draft contract of sale, and that the agreement to construct the powder room had not been included in the contract. However, they were not questioned on this issue in cross-examination.

47 On 14 January 2010 Ms Pennington sent an email to Natalie Lau, who was apparently a solicitor at Mallesons. Ms Pennington requested Ms Lau to "update your comprehensive spreadsheet...so that we can provide to Ying He at NAB...". Ms Lau replied by email on 20 January 2010 in which she stated to Ms Pennington (with a copy to Mr Bartlett):

"I attach the updated sales schedule for Garland 77. Please note that there are 2 apartments for which changes were agreed to in correspondence between the parties but not actually made in either counterpart contract for sale. While the contracts are still enforceable, it is preferable to ensure that the contracts reflect what was commercially agreed between the parties and to prevent any potential disputes from arising prior to settlement."

48 In relation to Apartment 601 the necessary amendments were listed as follows:

"· amended floor plan including floor tiles at entrance (attached, please confirm whether you are also happy for us to cross out the "void" area on the floor plan);

· credit of $600 on settlement (as no desk or wardrobe to be included in the bedroom); and

· electrical wiring and tundish for airconditioning (please confirm whether this was to be installed both in the living room and the bedroom, or whether it was not specified)."

49 Ms Lau's email also stated that Mallesons had prepared attached variation letters to the purchasers' solicitors "which they will need to sign and return to us in order to confirm that the above amendments be incorporated into the contract". Ms Lau sought Ms Pennington's instructions concerning whether the attached letters should be sent.

50 The evidence included what appears to be a draft letter from Mallesons to Mr Truong dated 20 January 2010. Ms Lau was not called as a witness. There is no evidence that the letter was signed or sent to Mr Truong. He was not asked about the letter in cross-examination. The draft letter states: "The vendor proposes to incorporate the amendments which were commercially agreed between the parties prior to exchange but were not made to the counterparts by way of rectification". The document proposes the inclusion of new Special Conditions 55 and 56 relating to the $600 adjustment for deleting the table and wardrobe, and the installation of the electrical wiring and tundish for the airconditioning respectively. Numbered paragraph 1 states: "replacement of floor plan with the attached". It is not possible to identify from the evidence what the attached floor plan was.

51 There is no evidence that Mr Truong accepted any of these changes on behalf of Ms Wang.

52 Mr Bartlett gave evidence that in around August 2010 he asked the solicitors for Garland to provide him with a copy of all documents relating to any variations to the apartments, and that he was provided with a number of documents which included the document which comprised Annexure C to his affidavit. That annexure is a copy of the floor plan for apartment Apartment 601 which became Attachment 8 to Garland's counterpart of the contract of sale. Mr Bartlett did not provide an explanation of his understanding of the significance of this document.

53 Mr Bartlett also gave evidence that in around September or October 2010 he provided the material that he had received from Garland's solicitors to Hutchinson Builders so they would know how the apartments should be constructed. Mr Bartlett annexed the material which he provided to the builder as Annexure D.

54 The material in Annexure D includes a copy of the floor plan which includes the Chinese characters which is identical to Attachment 8 to Garland's counterpart of the contract of sale, save that a number of changes appear to have been made. Beside the floor plan of the lower floor the words "AC IN CEILING" have been added in handwriting. In relation to the upper, bedroom floor the same words have been added. Finally, there is a cross in handwriting where the study is depicted together with the hand written word "Delete". The circumstances in which these additional annotations were made to the document that was Attachment 8 to the contract were not explained in the evidence.

55 Annexure D also includes a copy of Mr Truong's 15 May 2009 letter requesting amendments to the draft contract of sale, as well as a copy of Ms Telford's 22 May 2009 reply. However, handwritten alterations appear on the copy of this reply. In relation to paragraph 4, which concerns the powder room, the copy letter reads:

"Not needed. 4. Agreed to a maximum cost of $8,000. The vendor will provide an indicative plan shortly".

The words "not needed" are handwritten. The line striking through the balance of the paragraph is also in handwriting. Mr Bartlett gave no evidence about this document, and was not asked about it in cross-examination. The evidence does not establish who prepared this document or when. However, as this document was included in the material forwarded by Mallesons to Mr Bartlett at his request, it is probable that a solicitor or other employee of Mallesons prepared the document.

56 There is also a copy of the floor plan for Apartment 601 that was enclosed with Mr Truong's 15 May 2009 letter to Ms Telford in Annexure D, as well as Ms Lau's 20 January 2010 email to Ms Pennington, and the unsigned draft letter from Mallesons to Mr Truong dated 20 April 2010.

57 It is probable on balance that Mr Bartlett formed the opinion on the basis of the documents which he included in his Annexure D that the contract between Ms Wang and Garland required Garland to construct the powder room within Apartment 601. The formation of an opinion of that nature may not have been justified by all of the documents provided to Mr Bartlett. Mr Bartlett did not give evidence concerning the reasons he caused Hutchinson Builders to construct the powder room, and this issue was not explored in cross-examination with him.

Events Concerning Settlement

58 On about 23 November 2011 Apartment 601 had been finished to an extent which permitted Garland to arrange for Ms Wang or her representative to inspect the apartment. Following an inspection on 6 December 2011 Mr Truong wrote a letter to Ms Telford, then at DibbsBarker, in which he observed that Ms Wang had made an inspection of the premises "and found that there is a powder room next to the entry. Please revert the powder room to its intended use as under the contract".

59 On 7 December 2011 Ms Telford forwarded to Mr Truong the Registration Notice required by Special Condition 31.1 and noted that settlement would take place on 28 December 2011.

60 On 14 December 2011 Ms Telford forwarded to Mr Truong a number of documents necessary to effect settlement as well as a "settlement statement". The settlement statement which was provided by Ms Telford for settlement on 22 December 2011 contained an allowance by Garland of $5000 for the rebate which was to be allowed under Special Condition 52, and also a rebate of $600 for the omission of the desk and wardrobe in the bedroom. The contract of sale did not expressly provide for this rebate, although it had been agreed in the exchange of correspondence between the solicitors on 15 and 22 May 2009. The settlement sheet did not provide for Ms Wang to pay an additional $8000 for the inclusion of the powder room. The settlement sheet specified the amounts of cheques which were to be provided on settlement in favour of the NAB, Mallesons and DibbsBarker.

61 On 21 December 2011 Mr Truong forwarded to Westpac a direction to pay in relation to a loan that Ms Wang had arranged from Westpac to finance the settlement of her purchase of Apartment 601. The cheques requested were for the precise amounts which Ms Telford required in the settlement sheet, save that instead of Westpac providing one bank cheque in favour of the NAB for $406,170.96, Mr Truong requested that Westpac provide at settlement a bank cheque in favour of the NAB for $386,170.96, on the basis that Ms Wang would be responsible for obtaining a bank cheque in favour of the NAB for $20,000 herself.

62 On 19 December 2011 Ms Pennington advised Ms Telford by email that:

"The apartment has been built with a powder room which we believed was to be charged to the purchaser at maximum of $8,000.

We have received an email from purchaser to request re-instate without powder room. We are not going to do this. If the purchaser is not satisfied, they can rescind - this is our position. We need to get a response back to their solicitor on this.

For the settlement sheet it should have:

Cost of powder room: $8,000

Credit for desk: ($600)

TOTAL: $7400"

63 Ms Telford apparently failed to act upon this instruction by revising the settlement sheet which she provided to Mr Truong on 21 December 2011 before the scheduled settlement on 22 December 2011.

64 Settlement did not take place because of the failure of Ms Wang to provide a cheque to cover the $8000, although it appears that there is some dispute as to whether Ms Wang otherwise had all of the necessary funds available for settlement.

65 Mr Truong spoke to Ms Telford and asserted that an inspection of the contract of sale would not disclose any obligation upon Ms Wang to pay $8000 for any powder room.

66 Ms Telford responded by email on 22 December 2011 in which she stated that she was "instructed to advised [sic] that despite there being no reference to the powder room in the contract, your client had approached our client after [sic] exchange of contracts requesting the installation of the powder room". Ms Telford advised that Garland would not settle without being paid the $8000. She attached revised figures for settlement on 23 December 2011 which included the $8000 payment. Further email correspondence took place between the solicitors on 22 December 2011. Ms Telford insisted upon payment of the $8000. Mr Truong relied upon the contract of sale and noted: "there was no correspondence to you request [sic] for the powder room after exchanged [sic] of contract".

67 On 23 December 2011 Ms Telford sent to Mr Truong copies of certain earlier correspondence between the solicitors as an attachment to an email to support Garland's claim. The attachment includes a copy of the floor plan which was enclosed with Mr Truong's 15 May 2009 letter, and not the different floor plan which was Attachment 8 to Garland's counterpart of the contract of sale. There is also a copy of the first page of the Mallesons 20 January 2010 draft letter to Mr Truong (which has been considered above as part of Annexure D to Mr Bartlett's affidavit). The only reference to the floor plan in that draft letter is in: "1. replacement of floor plan with the attached". As noted above, there is no evidence that the letter was signed or sent to Mr Truong, or that he responded to it at all.

68 Each party resolutely maintained its position and settlement did not take place on 23 December 2011.

69 On 28 December 2011 Mr Truong served a notice to complete on Garland, which required completion of the contract of sale by Monday, 16 January 2012.

70 It appears that Ms Wang and Ms Pennington then personally entered into negotiations to settle the dispute. On 4 January 2012 Ms Pennington made an email offer to Ms Wang that proceeded on the basis of a claim made by Ms Wang that she did not currently have $8000 to pay for the variation works. Ms Pennington suggested that the amount be paid in instalments. Ms Wang replied that because of a shortage of funds the limit on her capacity to pay was $4,000. Ms Pennington at first understood the offer made by Ms Wang as involving a $4,000 payment on settlement, with the balance of $4,000 being paid one month later when Ms Wang received her first home owners grant.

71 The penultimate step in the negotiation was that at 4.54pm on 16 January 2012 Ms Telford sent an email to Mr Truong in which she said:

"We are advised by our client that your client has agreed to pay $4,000 towards the additional works our client undertook on your client's behalf (despite our client being owed $8,000). To progress this matter to settlement and as an act of good faith, the vendor will agree to accept this amount of $4,000 as full and final payment. Below is correspondence from your client.

Accordingly, please advise us urgently on a date for settlement once you have spoken with your client's bank".

72 Mr Truong responded by email at 11.03am on 17 January 2012: "We would like to booked [sic] in the settlement for 19, January 2012, 2:30pm at your office. Please kindly confirm with us and send the amend [sic] figures at your earliest convenience".

73 The settlement sheet which Ms Telford provided to Mr Truong contained an allowance by Ms Wang of $4,000 for the powder room, but also included a charge of $3062.34 as interest at the rate of 10% per annum, purportedly under Special Condition 36.1 of the contract of sale.

74 The claim by Garland for interest produced another stand off. Emails were exchanged. Settlement did not take place on 19 January 2012.

75 On a number of occasions Garland offered to permit a mutual recission of the contract whereby Ms Wang's deposit would be returned (less any costs of recission).

76 The evidence shows that Ms Wang remained ready willing and able to complete the contract of sale, and that she was keen to do so to secure the property to live in; she was prepared to pay the additional $4000 compromise amount, but was not prepared to pay penalty interest as she thought that was not fair, and she was short of funds.

77 On 1 March 2012 Garland served a notice to complete on Ms Wang, which required completion on 16 March 2012. Garland required Ms Wang to pay the full amount of $8000 for the powder room. Mr Truong responded on the same day to assert that the notice to complete was defective, and that it was Garland that was in default. The settlement sheet provided by DibbsBarker for settlement on 16 March 2012, however, contained an allowance of $4000 for the powder room, but made a claim for interest of $8847.12.

78 On 26 March 2012 Garland purported to terminate the contract of sale by issuing a Notice of Termination to Ms Wang.

79 On 29 March 2012 Ms Wang again offered to settle the purchase on the basis of settlement figures which contained the $4000 allowance, but no payment of penalty interest.

80 On 23 April 2012 Mr Truong advised the solicitors for Garland that Ms Wang would apply to the Supreme Court for specific performance of the contract.

81 Earlier on 10 April 2012 Garland had exchanged contracts to sell Apartment 601 to an alternative purchaser for $520,000. That contract was completed by a transfer dated 23 May 2012.

Consideration

82 All parties accept that Ms Wang and Garland entered into a valid contract for the sale of Apartment 601 on 25 May 2009 when contracts of sale were exchanged between their solicitors. The issue is whether the contract contained a term which required Garland to cause Apartment 601 to be constructed with the powder room, and if so whether the powder room had to be provided within the contract price of $460,000, or whether Ms Wang was required on completion to pay an additional price to a maximum of $8000.

83 It was submitted on behalf of Ms Wang that the contract required Garland to include the powder room but that Garland was not entitled to receive any consideration above the $460,000 contract price. How that legal outcome may have arisen was not explained in the submissions given on behalf of Ms Wang.

84 CB Richard Ellis' agents sale advice stated that the "Sale Price" was $460,000. The relevant Special Condition read: "Vendor agrees to add a powder room behind the door in the living/kitchen room which is to be produced at cost to a maximum of $8000". The natural way to read this document is that the $8000 cost would be payable by Ms Wang in addition to the purchase price of $460,000. The alternative way of reading the document would be to conclude that Garland had an obligation to include the powder room within the purchase price of $460,000, but in doing so it was not obliged to incur costs of more than $8000. That is a commercially improbable meaning, as it would oblige Garland to include the powder room for no additional consideration, but leave Garland free to incur as little cost as possible below the $8000 maximum.

85 Further, Mr Truong's 15 May 2009 letter to Ms Telford requested the inclusion of the powder room on terms that: "The maximum cost for the powder room must not exceed $8000". The use of the words "must not exceed" suggests that the restriction on cost was intended to protect Ms Wang. Additionally, Mr Truong's letter implicitly accepted the additional cost, as Mr Truong did not explicitly require the inclusion of the powder room to be within the agreed purchase price.

86 In the process of revising the original draft of the contract of sale Mr Truong procured a number of amendments to be made to both counterparts in conformity with certain of the agreed special terms, but did not do so in relation to the agreement concerning the powder room.

87 The defendants cannot hold Ms Want to her submission that the contract contained a term that Garland was required to construct the powder room, as they reject the balance of the term asserted by Ms Wang, that the powder room had to be included for no additional cost over the contract purchase price of $460,000. Notwithstanding the final submissions made by the parties as to the contract requiring the inclusion of the powder room, both parties clearly contested the issue of whether the written contract contained any term concerning the powder room. In particular, the parties were at issue about the provenance of the writing on Attachment 8 to Garland's copy of the contract, and as to the contractual effect of that writing. In the circumstances it will be necessary for the court to determine the proper construction of the contract of sale upon the basis of the objective circumstances, and not the assertions made on behalf of Ms Wang concerning its effect.

88 The defendants submitted that the contract contained a term which obliged Garland to include the powder room in Apartment 601 and required Ms Wang to pay an additional price up to $8000 on completion. The obligation to construct the powder room was said to be express and arose out of the circumstance that the floor plan which comprised Attachment 8 to Garland's counterpart of the contract included the handwritten notations which referred to the powder room and its maximum cost. That Ms Wang was obliged to pay up to $8000 in addition to the purchase price was said to be implied.

89 The defendants' argument concerning the proper construction of the contract of sale had to face the fact that the two counterparts of the contract were not identical, and the additional term alleged by the defendants arose out of writing on Garland's counterpart which was not found in the counterpart given to Ms Wang. The defendants relied on the decision of the New South Wales Court of Appeal in Zaccardi v Caunt [2008] NSWCA 202. The principal judgment in that case was given by Campbell JA, with whom Allsop P and Barr J agreed. The President added a number of additional observations.

90 Relevantly, the facts of that case were that after negotiations an agreement in principle was arrived at by two vendors and two purchasers. One of the purchasers was the appellant, two of the respondents were the vendors, and the other purchaser was an additional respondent to the appeal. The vendors instructed their solicitor to prepare a contract that embodied the agreement in principle. After doing so, the solicitor handed one of the purchasers (the appellant) personally a copy of the contract for execution by the purchasers. The purchasers had already paid the deposit of $10,000 required under the contract to the vendors. The appellant said to the solicitor in the presence of one of the vendors that he would have a look at the contract and send it back to the solicitor overnight by courier. The vendors executed the contract and delivered it to the solicitor with an instruction to hold the contract until she received the executed contract from the appellant, when she should attend to exchange of the contracts. The appellant amended the draft contract to alter a material term, which was a warranty that the purchasers were not introduced to the property by a real estate agent, and an indemnity if the warranty was breached, together with an agreement that the warranty would not merge on completion. The part of the contract which was crossed out was initialled by the purchasers and dated. The solicitor advised the vendors of the change and they initially rejected the alteration. Following a change of mind by the vendors they telephoned the solicitor and gave her instructions that she should inform the appellant that they were happy to proceed with the exchange in the form of the contract submitted by the appellant. The solicitor spoke to the appellant who confirmed that he wanted to proceed with the contract in the form submitted by the appellant. The solicitor said that she would proceed with the exchange. The solicitor dated each counterpart and forwarded the copy signed by the vendors to the purchasers. That copy did not have the part of the warranty term struck out in the same way that the copy signed by the purchasers did.

91 In the proceedings the vendors were the plaintiffs. They did not seek rectification of the contract to ensure that both counterparts of the contract were in identical terms, in accordance with the agreement reached with the purchasers. In the circumstances the District Court in which the proceedings were tried would not have had jurisdiction to rectify the contract in any event.

92 In his consideration of whether the parties had entered into a valid contract and whether that contract was enforceable notwithstanding that there had not been any application for rectification, Campbell JA analysed the decision of the High Court in Sindel v Georgiou [1984] HCA 58; (1984) 154 CLR 661, as well as the New South Wales Court of Appeal decision under appeal, Georgiou v Sindel [1982] 1 NSWLR 435. His Honour looked at the Court of Appeal decision in order to gather a fuller understanding of the facts.

93 In that case, after a property was passed in at auction, terms of sale were agreed between a purchaser and the vendor's solicitor, who had authority to negotiate for the absent vendor. The vendor had previously signed a copy of the contract in blank as to the name of the purchaser, the price and the deposit. Contracts were exchanged, but the parties did not realise that the counterpart received by the purchaser bore the vendor's signature, but the spaces for the purchaser's name, the price and the deposit were left blank. The vendor's copy of the contract had the details completed. The purchaser handed over a cheque for the deposit.

94 Campbell JA set out at [52] a number of extracts from the judgments of Reynolds JA and Glass JA in the Court of Appeal, parts of which are extracted below. Reynolds JA said, at 441:

"...the only question is whether at the end of the day the parties had agreed on all the terms and manifested an intention to be bound thereby. In my view that question must be answered in the affirmative. Once the price was agreed the appellant accepted all the other terms of the bargain proffered by the respondent and manifested his acceptance by signing a copy of them and the respondent manifested his acceptance by having his solicitor witness his signature and handing over a copy. The parties intended no further step to be taken before the bargain gained legal efficacy...."

Campbell JA noted at [53] that his Honour dealt with the fact that the ordinary inference from the parties showing that they intended to contract by exchanging contracts was that it was the exchange of identical counterparts that would constitute the contract by saying, at 442:

"In my view, the fundamental principle must be that if parties have the requisite consensus and an offer is accepted with the intention that the agreement be legally binding, then it does not matter that there had been an earlier proposal to enter into a binding contract in some other manner."

95 His Honour also set out at [54] an extract from the judgment of Glass JA, at 448-449, part of which was:

"...the analyses proffered on both sides of the argument agree that a consensus upon terms had been reached and that there was a common intention to cause that consensus to fructify into a binding agreement by the mutual delivery of signed documents.... The evidence here establishes that the parties were ad idem on all the terms of the bargain before any exchange occurred. The plaintiff Georgiou acting for himself and the defendant's agent and solicitor acting for him had hammered out the terms acceptable to both sides upon which the property was to be bought and sold. Those terms consisted of the printed and typed conditions appearing in both copies and the three additional terms which had been negotiated inter partes and then inserted into the vendor's copy. At that moment there existed a complete correspondence between the offers made and accepted on both sides...."

96 Campbell JA noted at [55] that in the joint judgment in the High Court, in response to a submission by counsel that it was the exchange of identical counterpart contracts which brought the contract into existence, so that without such an exchange there could be no contract, and hence no basis on which to found a rectification, it was said at 667-668 (see [56]):

"An unqualified acceptance of the proposition that delivery of two parts in identical terms is crucial to an effective exchange would exclude the parties' intention as the governing or, even as a relevant, factor. The question whether the delivery of parts in identical terms is essential must ultimately depend on the parties' intention. The answer to this question determines the manner in which the contract becomes binding.... And if the parties, through negotiations between their solicitors, have agreed on the terms of their bargain and settle on an exchange of parts in order to seal that bargain, it would usually accord with their intention to treat the exchange as creating a binding contract, notwithstanding the lack of correspondence in the parts, so long as that lack of correspondence is capable of being remedied by rectification. It will be otherwise when it appears that the parties intend to be bound only by an exchange of parts in identical terms or when the prior negotiations do not completely settle the terms of the bargain and the parties look to the parts as exchanged to fix these terms. This approach places less emphasis on the advantage of bringing into existence a document which establishes with certainty the terms of the contract and more emphasis on the intention of the parties in creating a contract by the ceremony of exchange, the terms of the bargain having already been determined. In such a case the importance of exchange lies not so much in the circumstance that it fixes the terms of the contract as in its function in fixing the existence of a binding contract, thereby terminating the period in which each party is free to withdraw from the negotiations. This concept of exchange enables the courts to do greater justice between the parties by precluding one party from acting on the footing that there is no binding contract when, as a result of an undetected error one part of the contract does not correspond with the other. On this view of exchange the availability of rectification is not a problem."

97 At [58] Campbell JA concluded:

"The remark appears in a sentence where their Honours are stating what "would usually" happen, concerning a matter of fact. Thus, it is an empirical generalisation, not a proposition of law. The circumstances in which lack of correspondence between the counterparts making up the contract was capable of being remedied by rectification is when there is a common intention as to what the contract shall be, of sufficient specificity to be formulated in the words of an order that identifies with precision what the counterparts should say to give effect to that common intention. As I read their Honours, what they are saying is that, in that circumstance, if the parties have agreed on the terms of their bargain, and that they will exchange counterparts to mark the entering of the contract, the exchange of counterparts would usually show that they intended thereby to enter the contract. In that situation, the law should treat the exchange as giving rise to a contract, even if the counterparts were not identical. That is not saying that any document must be rectified before the contract can be proved."

98 Campbell JA at [59] noted the significance of the analysis in the joint judgment in the High Court of the facts of the particular case before the court, at 668, which was in part:

"In the present case the foundation for saying that the delivery of identical parts was essential is more fragile than in the usual case of exchange between solicitors. Here, exchange took place between the solicitors for the vendors and the first respondent at a time when no solicitor was acting for the purchaser and the evidence is that both the solicitor and the first respondent understood that by their exchange of parts they had entered into a binding contract... The point is that Mr Vaughan and the first respondent, having agreed on the terms, intended by that exchange to reach a concluded contract. To treat the discrepancies between the two parts as producing a different result is to impute to the parties an intention that they did not have...."

99 The effect of the decision in Zaccardi is that the paramount principle is that the evidence must establish that the parties had reached agreement on the terms of their bargain by which they intended to be bound. In a particular case the evidence may establish that the parties agreed in fact to be bound by the terms of one counterpart of a contract of sale, even though that counterpart differed in a material way from the other. It may be the general practice as between solicitors that it is the act of exchanging contracts which is mutually intended to signify that an effective and binding agreement has been achieved on the terms of identical exchanged counterpart contracts, but at most that is only a general rule. In a particular case the evidence may show that the parties have intended to be bound by the terms of one document, and that the act of exchange is only intended to signify the agreement of the parties to be bound by the terms in that document.

100 In the present case the issue is whether the parties intended to be bound by writing contained in Garland's counterpart of the contract of sale, which was not to be found in the document provided to Ms Wang. The case is to be distinguished from Zaccardi because the evidence does not establish that, at the time of exchange, there was a mutual intention on the part of Ms Wang and Garland to enter into a contract on the terms of the Garland counterpart, including the version of the floor plan in Attachment 8 of that document, or that they understood and agreed that the writing on Attachment 8 to Garland's copy of the contract had the contractual effect claimed by the defendants.

101 It is clear that following the agreement stated in Ms Telford's 22 May 2009 letter in response to the request in paragraph 4 of Mr Truong's 15 May 2009 letter that as at 22 May 2009 the parties intended that the contract of sale would include a term which required Garland to include the powder room, and Ms Wang to pay an additional price up to $8000 on completion.

102 In the present case there was no application by Garland for rectification of the contract. The effect of Zaccardi is that the absence of such an application is irrelevant if the evidence establishes that Ms Wang and Garland intended to be bound by the terms of Garland's counterpart, and the effect of that counterpart was to include the term concerning the powder room for which the defendants contend.

103 However, in the present case not only is there no application for rectification, but there is also an absence of the evidence which would normally be expected to be led in a rectification case to establish that the intention of the parties contained in their exchange of correspondence on 15 and 22 May 2009 continued to be the intention that they wished to implement on 25 May 2009 when they exchanged contracts of sale.

104 One barrier in the way of the defendants' success is the fact that the pencil jottings on the floor plan which became Attachment 8 to the Garland copy of the contract are consistent with the author of the jottings having in mind the possibility of Garland being required to include the powder room for an increased purchase price, but the jottings do not formulate a term of the contract in any clear or express manner with the effect contended for by the defendants. The various parts of the pencil additions are disconnected, and the additional Mandarin characters are not consistent with any attempt by the author to add a term to the contract.

105 The court is not satisfied on the balance of probabilities that either Ms Wang or Mr Truong was the author of the pencil additions, or that either of them was aware that those additions had been included in Garland's copy of the contract. The circumstances in which the pencil additions were made are unknown, and it cannot safely be concluded on the probabilities that the additions were made before exchange of contracts, although, of course, that may have been the case.

106 No explanation has been given by the defendants as to why, if Mr Truong was aware that the additional writing had been made on Garland's copy of the contract, and if it was consistent with his instructions that Ms Wang still wanted the powder room to be included at an additional price, Mr Truong did not ensure, first, that the same writing was included on Ms Wang's copy of the contract, and secondly, and more likely, that the proposed term was formulated as an additional, express Special Condition, as occurred for example with Special Condition 54.

107 Even if in fact Ms Wang made the notations on the copy of the contract before it was exchanged with Garland there is no basis for a conclusion that her jottings were intended to have contractual effect, as opposed to recording her understanding of what the parties had earlier agreed.

108 It is clear that the parties cooperated in making a significant number of hand written alterations to the original draft contract of sale. There is no evidence about how that process took place. The court can infer that Mr Truong took part in that exercise on behalf of Ms Wang. It is not clear that Ms Telford did so on behalf of Garland, as there is at least one other solicitor, Ms Lau, who was involved, as was the secretary, Ms Pipe. Ms Telford did not volunteer any evidence on the subject, and Ms Lau and Ms Pipe were not called to give evidence. Nonetheless, there must have been a process whereby the solicitor for one or other party suggested amendments to the draft contract, the other party accepted those amendments, and each solicitor hand wrote the agreed changes on the counterpart of the contract that was to be signed by their client before it was exchanged with the other party.

109 By this process the request in paragraph 2 of Mr Truong's 15 May 2009 letter that the inclusions should include a dryer and airconditioner led to the handwriting of the words "including dryer" in the space provided on the first page for inclusions, but no alteration was made concerning the airconditioner. The requests in paragraphs 6 and 7 of Mr Truong's 15 May 2009 letter that the settlement period be 21 days and that the penalty interest be 10% were not included in the original draft, but found their way into hand written amendments to Special Conditions 31.1 and 51.1 respectively. The request in paragraph 1 of Mr Truong's 18 May 2009 letter that the inclusions should include a gas cook top with 4 burners and the gap between the fridge and the cook top should be no less than 50 cm was included in part in Special Condition 54 in relation to the distance between the fridge space and the cook top, but there was no alteration to include a cook top with 4 burners. These amendments to the draft contract demonstrate a moderately complex series of changes. This process did not lead to the inclusion in the draft contract of any term which required Garland to include the powder room or which required Ms Wang to pay up to $8000 for that benefit. There is no direct evidence which explains the absence of this amendment.

110 The evidence permits the inference being drawn that notwithstanding the earlier agreement concerning the inclusion and price of the powder room, Ms Wang and Mr Truong treated that agreement as having been withdrawn by reason of its omission from the original draft contract, and that they were satisfied with that outcome, and did not pursue an amendment to secure the inclusion of the powder room.

111 The legal representatives of Garland also took no steps to ensure that the term was included in the contract. Indeed, the witnesses for the defendants who participated in the process of preparing the contract did not read the Garland counterpart of the contract of sale, and were not aware at the time of exchange of the hand written additions to Attachment 8.

112 In Ms Pipe's 25 May 2009 email to Ms Pennington and Mr Bartlett, (a copy of which was sent to Ms Telford), which followed the exchange of contracts in relation to Apartment 601, Ms Pipe listed the changes which had been made to the standard form of contract. The email appears to list all of the significant changes which were actually made, and omits any mention of the powder room, as that change was not made. Neither Garland nor Ms Telford appears to have reacted by advising Ms Pipe that the term providing for the inclusion of the powder room had been wrongly omitted from the contract.

113 Ms Lau's 20 January 2010 email to Ms Pennington, which was copied to Mr Bartlett, listed the agreed amendments in relation to Apartment 601 which had been omitted from the contracts which were exchanged. The only omission which could relate to the powder room is that in respect of which Ms Lau stated: "amended floor plan including floor tiles at entrance (attached...)". It is questionable whether this statement was intended to refer to a floor plan which signified the inclusion of the powder room. Mr Truong's 15 May 2009 letter contained the following entries:

"3. Floor tiles at the entrance as indicated on the floor plan attached (where relevant).

4. A powder room including one toilet in the powder room where indicated on the floor plan attached. The maximum cost for the powder room must not exceed $8,000".

In the absence of evidence it is not possible to be sure whether Ms Lau in her 20 January 2010 email was only referring to the inclusion of the floor tiles, or whether she also meant to refer to the inclusion of the powder room. Both are described by Mr Truong by reference to "the floor plan attached". However, the fact that Ms Lau's comment referred specifically to "including floor tiles at entrance" and not to the powder room suggests that she may only have intended to refer to the floor tiles.

114 Perhaps the most significant evidence is the entirely unexplained handwritten alteration to the copy of Ms Telford's 22 May 2009 letter responding to Mr Truong, which was part of the material provided to Mr Bartlett in late 2010. In that copy of the letter the words "4. Agreed to at a maximum cost of $8000. The vendors will provide an indicative plan shortly" have been struck through, and the words in handwriting "Not needed" have been inserted. This unexplained evidence, in the physical context in which it is found, strongly suggests that the omission from the contract of sale of any term requiring the inclusion of the powder room was not unintentional.

115 In all of these circumstances the court cannot conclude on the balance of probabilities that the contract of sale was intended by the parties to include a term requiring Garland to include the powder room in Apartment 601 for an additional price of up to $8,000.

116 As has been mentioned, in its submissions Garland argued that the obligation on its part to construct the powder room was express and arose from the writing included on its counterpart of Attachment 8 to the contract. The term whereby Ms Wang was required to pay an additional price above the $460,000 contract price up to a maximum of $8,000 was said to be implied, based upon the principles in BP Refinery (Westernport) Pty Ltd v Shire of Hastings (1977) 180 CLR 266 at 283. Garland made submissions as to why each of the requirements for the existence of an implied term was satisfied. It is not necessary to deal with these submissions as the court has found that Garland's argument fails in relation to the express component of the alleged term concerning the construction of the powder room. It may be commented, however, that it is not obvious why, if the writing on Attachment 8 was sufficient to establish the alleged express part of the term obliging Garland to construct the powder room, it would not also have been sufficient to expressly impose upon Ms Wang the obligation to pay an additional price up to $8,000. It is not clear how this payment obligation would arise only as a matter of implication.

117 The court concludes that when Garland purported to terminate the contract on 26 March 2012 it committed a breach of the contract, and is liable in damages to Ms Wang.

118 Further, the court is of the view that by the exchange of emails which occurred on 16 January and 17 January 2012 between Ms Telford and Mr Truong as agents for Garland and Ms Wang respectively the parties entered into a binding compromise of their dispute as to whether the contract did or did not oblige Ms Wang to pay an additional $8,000 on settlement as a result of Apartment 601 having been constructed with the powder room.

119 In her 16 January 2012 email Ms Telford included the statement: "To progress this matter to settlement and as an act of good faith, the vendor will agree to accept this amount of $4,000 as full and final payment". Ms Telford made no mention of any obligation upon Ms Wang to pay penalty interest. At that point Garland's position was that Ms Wang was obliged to pay $8,000, and Ms Wang's position was that she was obliged to pay nothing in excess of the purchase price. Given the evidence set out above as to the terms of the contract of sale as finally exchanged, and the process whereby the original draft of the contract was amended, it appears that the parties had genuinely held different views as to the effect of the contract. If Garland's understanding was correct, then Special Condition 36.1 would have obliged to Ms Wang to pay penalty interest at 10 per cent. On the other hand if Ms Wang was right Special Condition 36.3 would have suspended the obligation to pay penalty interest. Garland was not entitled to proceed upon the basis that it was self evident that the obligation to pay penalty interest applied. Implicitly, Ms Telford's offer on behalf of Garland to accept the amount of $4,000 as full and final payment excluded any obligation upon Ms Wang to pay penalty interest, as that obligation was not expressly mentioned by Ms Telford. The natural construction of Ms Telford's offer was that the $4,000 was the full extent of the payment required to be made by Ms Wang.

120 Mr Truong accepted Ms Telford's offer by the terms of his 17 January 2012 email. The last paragraph of Ms Telford's 16 January 2012 email effectively invited Mr Truong to accept her offer by arranging a date for settlement, which Mr Truong did in his email.

121 Consequently, even if the term requiring the construction of the powder room and payment of an additional price was included in the contract as Garland contends, when Garland served its notice to complete on 1 March 2012 and purported to terminate the contract on 26 March 2012, Garland was not entitled to demand more than $4,000 as additional payment, and was not entitled to require the payment of any penalty interest. The notice to complete was for that reason invalid for the purpose of making time of the essence of the contract, and providing a basis for Garland to terminate the contract.

122 Even if the conclusion that the compromise excluded any obligation on Ms Wang's part to pay penalty interest is wrong, the notice to complete was still not validly served for another reason. The compromise at least bound Garland to accept $4,000 in addition to the purchase price on completion. Settlement did not take place on 19 January 2012 because Garland demanded payment of the penalty interest of $3,062.34 in addition to the $4,000. Ms Wang's refusal to pay the penalty interest did not discharge the compromise and have the effect that she became liable to pay the $8000 initially demanded by Garland. The notice to complete served on 1 March 2012 required Ms Wang to pay the full $8000 for the powder room as well as the penalty interest, which by then had increased to $8,847.12.

123 For the notice to complete to be valid, assuming that the penalty interest obligation remained on foot, it would have to do require Ms Wang to pay $4,000 plus the penalty interest, rather than the $8000. This defect in the notice to complete was not cured by the fact that the settlement sheet provided on 16 March 2012 only contained an allowance to be made by Ms Wang of $4,000.

124 The submissions made on behalf of Ms Wang did not grapple in any orthodox way with the legal basis upon which Mr Bartlett and Ms Pennington should be held liable to Ms Wang to pay damages in respect of Garland's breach of contract. They were alleged to be directors of Garland. Ms Wang alleged that the actions of Mr Bartlett and Ms Pennington were unconscionable, and that they are liable for their unconscionability. There are also allegations that the defendants were unjustly enriched at the expense of Ms Wang, and that the defendants were under a duty of care by reason of the existence of the contract, which they breached by refusing to complete the contract with Ms Wang and selling to a third party.

125 The only defendant who is liable to Ms Wang is Garland, and that liability lies for breach of contract. The nature of the submissions made on behalf of Ms Wang concerning the basis of the liability of Mr Bartlett and Ms Pennington does not warrant a detailed consideration of the legal principles which excuse Mr Bartlett and Ms Pennington from personal liability as directors of Garland to Ms Wang.

Assessment of Damages

126 Ms Wang in her statement of claim claimed damages under six separate heads.

127 First, she claimed general damages of $10,000 for loss of time, stress and disappointment. This head of damages is not allowable for the reason given by Santow J in Musumeci v Winadell Pty Ltd (1994) 34 NSWLR 723 at 752F. The disappointment and distress asserted by Ms Wang did not proceed from physical inconvenience caused by the breach of contract, and the contract was not one which had the object of providing enjoyment, relaxation or freedom from molestation. Furthermore, the evidence given by Ms Wang was not sufficient to cause the court to be able to quantify with any confidence an amount of damages under this head as being appropriate.

128 Secondly, Ms Wang claimed $100,000 as the amount of the appreciation of the property since the contract. No attempt was made in the evidence or the submissions to support the amount claimed. Garland accepted in submissions that if it was found to have breached the contract, the quantum of damages would include the amount of $60,000 which was the difference between the sale price in the contract with Ms Wang and the sale price in the contract with the third party which was completed on 23 May 2012. However, when Apartment 601 was sold for $520,000 it included the powder room, which the evidence showed cost Garland more than $8000 to install. Ms Wang has succeeded on a case in which she argued that the contract of sale did not oblige her to pay an additional $8000 for the powder room. Her damages should not include the $8000 component of the $60,000 increase in sale price which may be attributed to the presence of the powder room. Ms Wang is entitled to damages of $52, 000 plus interest at the Supreme Court rate from time to time. The court will leave it to the parties to bring in short minutes of order which include the correct calculation of the interest amount which is payable.

129 Thirdly, Ms Wang claimed $3,500 for fees and disbursements paid for conveyancing. In principle Ms Wang is entitled to damages for wasted legal costs which she incurred, but her evidence did not prove the amount of those costs. Ms Wang was not able to rectify that omission when invited by the court during the course of submissions to prove the amount in question. Accordingly, this component of Ms Wang's claim must be disallowed.

130 Fourthly, Ms Wang claimed the amount of the deposit money plus interest since 25 May 2009. The amount of the deposit was $46,000. As at the date of the filing of Ms Wang's statement of claim the deposit plus interest was said to be $54,340. The basis of the computation of interest was not made clear. Garland accepted in submissions that if it was found to have breached the contract, Ms Wang would be entitled to a component of damages represented by the amount of the deposit. Ms Wang is therefore entitled to payment of $46,000 plus interest on an appropriate basis since 25 May 2009. That is an issue which should be dealt with in the short minutes of order. Ms Wang may be able to establish that the interest rate should be on a basis dealt with in the contract of sale from the date the deposit was paid until the contract was breached by Garland, with interest being at the Supreme Court rate thereafter.

131 Fifthly, Ms Wang claimed the amount of $17,000 described as "the difference between the current grant for first home buyers and that at the time of the contract". Ms Wang did not lead any evidence on this issue, and the submission made on her behalf was simply to the effect that the amount payable to first home buyers at different times was a matter of law which could be determined on a review of the relevant statutes. The submissions made for Ms Wang did not make any attempt to assist the court in this exercise.

132 As at the date of the contract of sale, 25 May 2009, the First Home Owner Grant Act 2000 (the "Act") provided in s 18(1) that the first home owner grant was $7,000 for eligible transactions plus $14,000 if the transaction qualified for the first home owner boost for new homes, and $3,000 if the transaction qualified for the NSW new home buyers supplement. The total of the first home owner grant was $24,000.

133 Section 18A(3) provided that where the eligible transaction was a contract for an "off the plan" purchase of a new home the transaction qualified for the first home owner boost for new homes if the contract was made between 14 October 2008 and 30 June 2009 inclusive, and the contract states relevantly that the transaction must be completed before 1 January 2011. As the contract of sale in this case was dated 25 May 2009 it fell within the range of dates required by the section.

134 The term "Sunset Date" was defined in Special Condition 51.1 and Schedule 2 of the contract as being 31 December 2010, as extended under Special Condition 38 (sic 39). Special Condition 39 permitted Garland to extend the Sunset Date by a period not exceeding 12 months in total for a number of specified reasons which would cause a delay in the completion of the construction of the development. Special Condition 31.2 required Garland to use all reasonable endeavours to ensure that the Strata Plan was registered on or before the Sunset Date. Special Condition 31.3 provided that if the Strata Plan was not registered on or before the Sunset Date then either party may, after the Sunset Date, rescind the contract. The nominated Sunset Date of 31 December 2010 was one day before the cut-off date stated in s 18A. If Garland extended the Sunset Date then completion would not take place before the cut-off date.

135 Special Condition 53 contained provisions to deal with the possibility that completion may not occur before the cut-off date for entitlement to the first home owner boost. Special Condition 53.3 contained an acknowledgement by the parties that the purchaser's ability to receive the boost would be lost if completion occurred after 31 December 2010 or such date to which the operation of the boost may be extended. Special Condition 53.4 provided that if Garland had not served the Registration Notice by the date that is 13 days before 31 December 2010 (or such later date to which eligibility to the boost was extended), then Garland would rebate to Ms Wang by way of an adjustment on completion the sum of $14,000.

136 Consequently, as at 25 May 2009 Ms Wang had a right to receive an amount of $14,000, either as the first home owner boost under the Act, or as a rebate on the purchase price from Garland.

137 Section 18C(1) and (3) of the Act entitled Ms Wang to receive the NSW new home buyers supplement for an "off the plan" purchase of a new home if the contract was made between 11 November 2008 and 10 November 2009 inclusive, and the transaction must be completed on or before 10 May 2011, or is completed on or before 10 May 2011 or such later date as the Chief Commissioner may allow for delay caused by circumstances beyond the control of the parties. The contract date fell within the required range of dates.

138 As the Sunset Date was 31 December 2010, unless extended by Garland, completion was required on or before 10 May 2011. Special Condition 53.3 contained an acknowledgement that Ms Wang's eligibility to receive the supplement would be lost if completion occurred after 10 May 2011. Special Condition 53.4 required Garland to give Ms Wang a rebate by way of an adjustment on completion of $3,000 if the Registration Notice was not served by the day that was 13 days before 10 May 2011 or such date to which the entitlement to the supplement may be extended.

139 Therefore, by an equivalent process to that which applied in relation to the first home owner boost, as at 25 May 2009 Ms Garland was entitled to receive the supplement of $3,000, either as a supplement of $3,000 under the Act, or as a rebate from Garland under the contract.

140 It is clear therefore that the contract of sale recognised that the possibility that Ms Wang might lose the benefit of any statutory arrangements for the provision of grants to first home buyers if the contract was not completed by Garland in a way which involved a breach of the contract by Garland. Special Condition 53 establishes that the possibility that Ms Wang might lose some entitlement to the first home owners grant if Garland breached the contract by failing to complete it was clearly within the contemplation of the parties for the purposes of the rule in Hadley v Baxendale (1854) 9 Exch 341.

141 The first home owner buyer boost does not apply for transactions after 31 December 2009. That is the result of Schedule 3 [15] of the State Revenue Legislation Further Amendment Act 2009 No 51, which amended s 18B of the Act and came into force on 26 June 2009. This statute also had the effect of extending the specified date for entry into the contract to 30 September 2009 in relation to eligibility for the full $14,000 boost. The NSW homebuyers supplement does not apply to transactions after 30 June 2010, by operation of Schedule 2 [1] of the State Revenue Legislation Amendment Act 2009 No 46, which came into force on 26 June 2009. The required date for entry into the contract for eligibility for the supplement was extended to 30 June 2010. For completeness both ss 18B and 18C were repealed by Schedule 2 [10] of the State Revenue and Other Legislation Amendment (Budget Measures) Act 2012 No 46, which amended the Act and came into force on 25 June 2012.

142 The effect of all of these changes to the Act is that, when Garland breached the contract of sale by wrongfully terminating it on 26 March 2012, any new contract entered into by Ms Wang for the purchase of an alternative property would fall outside the extended dates under the amendments to the Act referred to above which would entitle Ms Wang to any boost or supplement. Further, if Garland had completed the contract on that date, Ms Wang would have been entitled to rebates of $14,000 and $3,000 equal to the supplement and the boost. It follows that Ms Wang has lost the sum of $17,000 as a result of Garland's breach of contract.

143 However, s 18(1) of the Act in its current form provides for a first home owner grant of $15,000 for eligible transactions with the commencement date between 1 October 2012 and 1 January 2014 inclusive. It is still possible for Ms Wang to take advantage of this entitlement. The basic first home owner grant has therefore increased by $7,000 since the date of the contract of sale.

144 The result is that the net loss suffered by Ms Wang is $10,000, and the effective date of the loss is the date of breach.

145 Finally, Ms Wang claimed the amount of the $5000 rebate on settlement. This rebate was in effect a reduction in the purchase price, so that it is proper that it be added as damages to the $52,000 which represented the nominal difference between the sale price under Ms Wang's contract and the purchase price paid by the other purchaser, less the $8,000 cost of the powder room. Ms Wang is entitled to interest on this sum.

146 Ms Wang is accordingly entitled to an award of damages of $113,000 in total plus interest to be calculated. The court's provisional view is that Garland should be ordered to pay Ms Wang's cost of the proceedings. Further, Ms Wang should pay the costs of Mr Bartlett and Ms Pennington, with those costs being limited to costs related solely to the claim against those defendants which were not also required to be incurred in relation to the claim by Ms Wang against Garland.

147 The parties are directed to confer for the purpose of preparing agreed short minutes of order to implement these reasons for judgment, and if agreement cannot be reached the parties should provide to my associate by email the version of the short minutes which they submit should be made by the court, together with any brief written submissions in relation to the proposed short minutes they wish to make, within seven days of the delivery of these reasons for judgment. The parties are invited to make brief submissions as to the appropriate costs order within the same period.

Decision last updated: 27 August 2013