Adelaide Brighton v Ostabridge - [2005] NSWSC 737

No judgment structure available for this case.

CITATION:
Adelaide Brighton v Ostabridge [2005] NSWSC 737

HEARING DATE(S): 25/7/05 & 26/7/05

JUDGMENT DATE :

5 August 2005

JURISDICTION:
Equity

JUDGMENT OF:
Campbell J

DECISION:
Specific performance ordered

CATCHWORDS:
CONTRACTS - GENERAL CONTRACTUAL PRINCIPLES - discharge, breach and defences to action for breach - whether contract repudiated - CONVEYANCING - LAND TITLES UNDER THE TORRENS SYSTEM - mortgages, charges and encumbrances - transfer by mortgagee exercising power of sale - concerning what breaches notice under section 57(2)(b) Real Property Act 1900 or section 111(2) Conveyancing Act 1919 is required - CONTRACTS - GENERAL CONTRACTUAL PRINCIPLES - construction and interpretation of contracts - one party obliged to provide evidence to the reasonable satisfaction of the other concerning a particular fact - nature of obligations imposed - WORDS AND PHRASES - "reasonable satisfaction" - DEEDS - delivery - how established - CONTRACTS - GENERAL CONTRACTUAL PRINCIPLES - construction and interpretation of contracts - when compliance with one provision of a contract is a condition precedent for performance of another provision of that contract - CONVEYANCING - RELATIONSHIP OF VENDOR AND PURCHASER - matters arising between contract and conveyance - if transfer is to someone other than the purchaser, when does standard form of contract require purchaser to give a written direction to effect such a transfer - CONVEYANCING - RELATIONSHIP OF VENDOR AND PURCHASER - matters arising between contract and conveyance - payment of deposit - when deposit paid "unconditionally" - CONTRACTS - GENERAL CONTRACTUAL PRINCIPLES - construction and interpretation of contracts - principles for construction - construction of clause conferring contractual power to terminate - CONTRACTS - GENERAL CONTRACTUAL PRINCIPLES - discharge, breach and defences to action for breach - termination pursuant to contractual power - construction of particular clause conferring such a power

LEGISLATION CITED:
Conveyancing Act 1919
Conveyancing (Sale of Land) Regulation 2000
Duties Act 1997
Local Government Act 1993
Real Property Act 1900

CASES CITED:
Alcatel Australia Ltd v Scarcella (1998) 44 NSWLR 349
Alghussein Establishment v Eton College [1988] 1 WLR 587
Australian Broadcasting Commission v Australasian Performing Rights Association Limited (1973) 129 CLR 99
Blatch v Archer (1774) 1 Cowp 63
Brothers v Park and Anor [2004] ANZ ConvR 451; [2004] NSWCA 241
Browne v Dunn (1893) 6 R 67
Burger King Corporations v Hungry Jacks Pty Ltd [2001] NSWCA 187
Edwards v The Hunter Valley Co-op Dairy Co Ltd (1992) 7 ANZ Ins Cases 61-113
Heggies Bulkhaul v Global Minerals Australia [2003] NSWSC 851
Heggies v Shirlaw [2004] NSWSC 805
Ho v Powell (2001) 51 NSWLR 572
Hooker Industrial Developments Pty Ltd v Trustees of the Christian Brothers [1977] 2 NSWLR 109
Hunyor & Anor v. Tilelli (1997) 8BPR [97667] 15,629
Hyhonie Holdings Pty Ltd v Leroy [2003] NSWSC 624
Isherwood v Butler Pollnow Pty Ltd (1986) 6 NSWLR 363
Kennard & Others v IE Featherston, Superintendent of Wellington (1867) 1 NZCA 15
Laurinda Pty Ltd v Capalaba Park Shopping Centre Pty Ltd (1989) 166 CLR 623
McDougall v Aero Marine of Emsworth Ltd [1958] 1 WLR 1126; [1958] 3 All ER 431
Meehan v Jones (1982) 149 CLR 571 at 591
Metropolitan Brick Company v Hayward & Another [1938] SASR 462
Mitchell v Pattern Holdings Pty Limited (2002) 11 BPR 20,241; [2002] NSWCA 212
Munro & Anor v Bodrex P/L (2002) 10 BPR 19,403; [2002] NSWSC 122
New Zealand Shipping Co Limited v Société Des Ateliers et Chantiers de France [1919] 1 AC 1
The Ombudsman v Moroney [1983] 1 NSWLR 317
Pierce Bell Sales Pty Ltd v Frazer (1973) 130 CLR 575
Plumor Pty Ltd v Handley (1996 ) 41 NSWLR 30
The Progressive Mailing House Pty Limited v Tabali Pty Ltd (1985) 157 CLR 17
Ross T Smyth & Co Ltd v T D Bailey, Son & Co [1940] 3 All ER 60
Ruthol Pty Ltd v Mills [2003] NSWCA 56
Secured Income Real Estate (Australia) Ltd v St Martins Investments Proprietary Limited (1979) 144 CLR 596
Shevill v Builders Licensing Board (1982) 149 CLR 620
Smith v Sadler (1880) 6 VLR (L) 5
Sullman v Sullman [2002] NSWSC 169; (2002) DFC 95-248
TCN Channel 9 Pty Ltd v Hayden Enterprises Pty Ltd (1989) 16 NSWLR 130
VL Credits Pty Ltd v Switzerland General Insurance Co Ltd (No 2) [1991] 2 VR 311
Walsh v Johnston (1869) 6 WW & a'B (L) 77
West v Mead [2003] NSWSC 161
Young & Another v The Ballarat and Ballarat East Water Commissioners (1878) 4 VLR (L) 306

PARTIES:
Adelaide Brighton Limited - Plaintiff
Ostabridge Pty Limited (In Liquidation) (Receiver and Manager Appointed) - First Defendant
Kevin Richard Shirlaw (in his capacity as Receiver and Manager of Ostabridge Pty Ltd (In Liquidation) and personally) - Second Defendant

FILE NUMBER(S):
SC 2870/05

COUNSEL:
GC Lindsay SC; IE Davidson - Plaintiff
B Coles QC; G Sirtes - Defendants

SOLICITORS:
Johnson Winter & Slattery - Plaintiff
Swaab Attorneys - Defendants

LOWER COURT JURISDICTION:

INDEX

Nature of the Case 1

Background to the Entry of the Contract For Sale 1

The Contract 3

The Standard Form 3

Provisions Relating to Date of Completion 8

Other Special Conditions 9

Result of Proceedings 3054 of 2004 15

Outline of Defendants’ Case Concerning Termination 16

The Dramatis Personae 17

The Sequence of Events 18

Was the Contract Repudiated? 70

“To the Reasonable Satisfaction of the Purchaser” 74

Was the Plaintiff Actually Satisfied? 76

Ought the Plaintiff have been Satisfied? 77

Conclusion Concerning Repudiation 85

Entitlement to Terminate Under Clause 2 85

Contractual Right to Terminate Under Clause 41 86

Construction of the Right to “Rescind or Terminate” in Clause 41(a) 86

Has the Condition for Exercise of the Power in Clause 41 Arisen 90

Ready Willing and Able 95

Plaintiff’s Claim for Damages 96

Orders 97

**********

IN THE SUPREME COURT
OF NEW SOUTH WALES
EQUITY DIVISION
EQUITY LIST

CAMPBELL J

5 AUGUST 2005

2870/05 ADELAIDE BRIGHTON LIMITED v OSTABRIDGE PTY LTD (IN LIQ) (RECEIVER & MANAGER APPOINTED) & ANOR

JUDGMENT

HIS HONOUR:

Nature of the Case

1 This is an application brought by the purchaser of land against the vendors. It seeks specific performance of a Contract for Sale of Land made on 7 July 2004, damages, and alternatively relief against forfeiture of the deposit. The land in question is five parcels of Torrens title land (“the Penrose Land”), which are the site of a quarry at Penrose, NSW.

2 The vendors cross-claim, seeking a declaration that they have validly terminated the contract and validly forfeited the deposit. They seek an order for the removal of a caveat which the purchaser has placed over the property. A claim by the vendors for damages in addition to forfeiture of the deposit was not pressed.

Background to the Entry of the Contract For Sale

3 The registered proprietor of the Penrose Land at all relevant times was Global Minerals Pty Ltd (“Global”). Mr Kevin Shirlaw had been receiver and manager of Ostabridge Pty Ltd (in Liq) (Receivers and Managers Appointed) (“Ostabridge”), since July 2000. Global granted a mortgage over the land to Ostabridge and Mr Shirlaw on 24 February 2003. That mortgage was lodged for registration on 7 May 2003, and was allotted Dealing No. 9585643. However, because of the presence of caveats on the title, it had not been registered by the time the contract was entered.

4 Heggies Bulkhaul Limited (“Heggies”) claimed that it was entitled to a lease of the quarry, by reason of its dealings with Global. Austin J, in Heggies Bulkhaul v Global Minerals Australia [2003] NSWSC 851 upheld one of the ways in which Heggies claimed to be entitled to such a lease. On 1 October 2003 Heggies lodged a caveat against the land to protect that right to a lease.

5 On 24 May 2004, Heggies commenced proceedings 3054 of 2004 in this Court against Mr Shirlaw, Mr Christopher Palmer (the liquidator of Ostabridge), Mr Daniel Cvitanovic (the receiver and manager of Global), Mr Michael Jones (the liquidator of Global), Collex Waste Management Pty Ltd (“Collex”), and the Registrar General. In those proceedings Heggies sought registration of its lease over the quarry, and also sought registration of two mortgages over the Penrose Land. One of those mortgages was alleged to have been given to Heggies and Collex in 1995 by Australian Machinery Sales Pty Ltd (“AMES”). AMES was the registered proprietor of the Penrose Land immediately before Global. That 1995 mortgage was one alleged to have been created for the purposes of a Joint Venture Agreement made on 5 December 1995 between AMES, Heggies and Collex for a proposed landfill operation upon the Penrose Land. The other mortgage was alleged to have been given in 2000 over the Penrose Land to Heggies and Collex, in connection with that same Joint Venture Agreement.

6 By 7 July 2004 the title to the Penrose Land was subject to the following caveats:

2988685	By Heggies and Collex
691505 and AA33289	By Heggies, relating to its claim to have a lease of the quarry
9589067 and AA96948	By Mr Cvitanovic, claiming an interest arising from his appointment as receiver and manager of Global, and by Global

The Contract

7 The contract in question identifies the vendors as Ostabridge and Mr Shirlaw. Mr Shirlaw was stated in the contract to enter it in two capacities – as receiver and manager of Ostabridge, and also in his personal capacity pursuant to powers of sale arising under a particular unregistered mortgage. The purchaser was Adelaide Brighton Limited (“ABL”). The contract was in the form of the 2000 edition of the standard NSW Contract for Sale of Land, with some Special Conditions. The front page of the Contract for Sale of Land stated the price to be $4,150,000, and the deposit to be $400,000. The front page of the contract identified the vendors’ solicitor as Carroll & Associates (Ref Michael Carroll), and the purchaser’s solicitor as being Johnson Winter & Slattery (“JWS”) (Ref Kate Whitburn). The deposit holder was stated to be the vendors’ solicitor. At the time of exchange an instalment of the deposit, of $100,000, was paid, as required by Special Condition 46 (para [14] below).

The Standard Form

8 The following provisions of the printed part of the contract bear upon this case:

“1. In this contract, these terms (in any form) mean -

…

normally

…

requisition

rescind

…

terminate

…

2.1 The purchaser must pay the deposit to the depositholder as stakeholder.

Normally

2.3 If this contract requires the purchaser to pay any of the deposit by a later time, that time is also essential.

cheque

solicitor

cheque

terminate

…

Normally

serve

…

serves

…

requisition

serving

within

served

within

service

within

…

Vendor’s right to rescind

rescind

requisition

serves

rescind

requisition

serve

requisition

within

service.

Purchaser’s default

terminate

serving

9.1 keep or recover the deposit (to a maximum of 10% of the price);

9.2 hold any other money paid by the purchaser under this contract as security for anything recoverable under this clause -

termination

within

9.3 sue the purchase either -

within

termination

§ the deficiency on resale (with credit for any of the deposit kept or recovered and after allowance for any capital gains tax or goods and services tax payable on anything recovered under this clause); and

§ the reasonable costs and expenses arising out of the purchaser’s non-compliance with this contract or the notice and of resale and any attempted resale; or

9.3.2 to recover damages for breach of contract.

…

party

rescind

party

serving

requisition

Normally

party

rescind

legislation

19.2.1 the deposit and any other money paid by the purchaser under this contract must be refunded;

party

…

29.1 This clause applies only if a provision says this contract or completion is condition on an event.

29.2 If the time for the event to happen is not stated, the time is 42 days after the contract date.

party

rescind

party

Provisions Relating to Date of Completion

9 The front page of the contract defined the “completion date” by saying “see additional clause no 34 and 44 hereto”. Clause 34 is not presently relevant. Clause 44 says:

“Prior to Completion, the Vendor shall procure the written acknowledgment of Heggies Bulkhaul Limited (ACN 003 707 499) that on Completion, the purchaser is not liable to it for any claim whatsoever in relation to the land arising prior to Completion or the vendor will otherwise provide evidence to the reasonable satisfaction of the purchaser that it is not so liable.”

10 Clause 45 says:

“Completion of this Contract shall occur upon that date which is the latest of the following:

(a) 90 days after the date of execution of this Contract;

(b) satisfaction of the condition set out in clause 44 of this Contract; and

(c) any extension of the time fixed for completion permitted or allowable under Special Conditions 41 or 42 of this Contract.”

11 Submissions before me were made on the basis that the contract fixed a completion date in accordance with Clause 45. The parties were correct in adopting that basis.

12 Clause 15 of the printed form provides:

party

serve

party

13 Special Condition 35.4 says:

“At the end of clause 15, add the following:

15.1 Subject to the special conditions of this contract, if either party is unable or unwilling to complete by the completion date, the other party is entitled to issue a notice to complete making the time for completion essential. Such notice must give not less than fourteen (14) days notice from the date of service of the notice and may nominate a specified hour on the last day as the time for completion and a notice to complete of such duration is agreed by the parties to be reasonable and sufficient to render the time for completion essential.

15.2 If completion does not occur on or before the completion date, due to a default of the purchaser unless that default is caused by the vendor, then the vendor being ready, willing and able to complete may recover from the purchaser as liquidated damages payable upon completion simple interest on the unpaid balance of the purchase price at the rate of ten per cent (10%) per annum calculation at a daily rate from the completion date (or such later date as the vendor is ready willing and able to settle) to the actual date of the completion, to compensate the vendor for the delay, to be added to the balance payable on completion as a genuine pre-estimate of the vendor’s loss to be allowed by the defaulting purchaser as an additional adjustment on completion.””

Other Special Conditions

14 Other Special Conditions which are relevant are:

Inconsistency of provisions

In the event of any conflict or inconsistency between the provisions of the subsequent clauses and the provisions of the preceding clauses of this contract then the provisions of the following clauses shall prevail.

…

Caveats Dealing No. O691505 and AA33289

37.1 The purchaser acknowledges that the following entities have registered Caveats over the title to the property:

(a) Heggies Bulkhaul Limited (ACN 003 707 499) and Collex Waste Management Pty Limited (ACN 051 316 584) (now being Collex Pty Ltd) – Caveat, Dealing No. 2988685; and

(b) Heggies Bulkhaul Limited (ACN 003 707 499) – Caveats, Dealing Nos. 0691505 and AA33289

(“the caveats”)

37.2 The vendor and purchaser acknowledge and agree that:

(a) completion of this contract shall be subject to and conditional upon the vendor obtaining and providing to the purchaser on or before the date of completion registrable Withdrawals of the Caveats provided always that the sale and transfer of the property pursuant to this Contract shall be subject to recognition and registration of the Lease claimed in Caveat AA33289 by Heggies Bulkhaul Limited;

(b) no warranty or representation has been given by the vendor concerning the removal or withdrawal of the Caveats; and

(c) the vendor shall use best endeavours to remove or obtain withdrawals of the Caveats and any other caveats which may be lodged on the titles to the property prior to completion of this Contract;

(d) the purchaser shall not raise any enquiry, requisition, objection, claim for compensation, loss or damage, or seek any other form of remedy or relief, whatsoever, in connection with the existence of the Caveats or any other caveats or their ability to be withdrawn or removed or not withdrawn or removed (as the case may be), except as to any right of termination without compensation expressly conferred upon the purchaser under this Contract.

Caveat Dealing Nos. 9589067 and AA96948

The vendor and purchaser acknowledge and agree that completion of this contract shall be subject to and conditional upon the vendor providing to the purchaser at completion registrable Withdrawals of the Caveats Dealing Nos 9589067 and AA96948.

Issuance of New Certificates of Title

39.1 Application Number 9585644 has been made for the insurance of new certificates of title to the property by reason of the loss of the Certificates of Title on issue.

39.2 In the event that the new Certificates of Title have not yet issued to the vendor upon completion of this Contract, this contract shall be subject to and conditional upon the vendor procuring a written direction, duly executed by the Registrar General, Department of Lands agreeing to release or deliver the new certificates of title to the purchaser or in accordance with any written direction given by the purchaser to the Registrar General in lieu of delivery of the Certificates of Title.

Joint Venture Agreement

40.1 The purchaser acknowledges that:

(a) annexed hereto is a copy of a Joint Venture Agreement between Heggies Bulkhaul Limited (ACN 003 707 499), Collex Waste Management Pty Limited (ACN 051 316 584) (now being Collex Pty Ltd) and Australia Machinery Equipment Sales Pty Limited (ACN 050 035 053) (In Liquidation) dated 5 December 1995, being the Annexure “B” (being entitled “Joint Venture Agreement”); and

(b) there may be in existence and the vendor represents that it does not have a copy of a Deed of Assignment of the Joint Venture Agreement allegedly made between Heggies Bulkhaul Limited (ACN 003 707 499), Collex Waste Management Pty Limited (ACN 051 316 584) (now being Collex Pty Ltd), Australia Machinery Equipment Sales Pty Limited (ACN 050 035 053) (In Liquidation) and/or Global Minerals Australia Pty Limited (ACN 090 740 177) being entitled “Deed of Assignment”).

(the Joint Venture Agreement and the Deed of Assignment being collectively and singularly referred to as the “Assigned Joint Venture Agreement”).

40.2 Prior to completion, the vendor shall use its best endeavours to locate a stamped duly executed copy of the Deed of Assignment, including by liaising with the Heggies Bulkhaul Limited (ACN 003 707 499), Collex Waste Management Pty Limited (ACN 051 316 584) (now being Collex Pty Ltd).

40.3 If prior to completion the vendor is unable to locate a stamped duly executed copy of the Deed of Assignment that is binding on Global Minerals Australia Pty Limited (ACN 090 740 177), then the vendor shall:

(a) procure the written acknowledgment of both Heggies Bulkhaul Limited (ACN 003 707 499) and Collex Pty Limited (ACN 051 316 584) (“the Joint Venturers”);

(b) obtain an order for declaratory relief from the Supreme Court of New South Wales; or

(c) otherwise provide evidence to the reasonable satisfaction of the purchaser,

that the purchaser is not and will not be bound by the Joint Venture Agreement.

40.4 If the vendor is able to locate a stamped duly executed copy of the Deed of Assignment, then the vendor shall procure:

(a) the consent of the Joint Venturers to the assignment of the Assigned Joint Venture Agreement to the purchaser; or

(b) the acknowledgement of the Joint Venturers of the surrender, termination or determination of the Assigned Joint Venture Agreement or that it will otherwise not be binding on the purchaser.

Vendor restrained from completing this Contract

Notwithstanding any other provision of this Contract, if the vendor is restricted, restrained or otherwise prevented from completing this Contract by any injunction, caveat or by any other act, deed or intervention of a third party, or court order including (without limitation) any matter arising under or in connection with the matters referred to in Special Condition 40, the Vendor may, at its option elect by giving a written notice to that effect to the purchaser to:

(a) rescind or terminate this Contract without the payment of any form of compensation, loss or damage; or

(b) extend the completion date for a period of up to three (3) months to enable the vendor to procure or obtain withdrawal of any such injunction, caveat or other restraint, so that the vendor can give title and possession of the property to the purchaser in accordance with the terms of this Contract,

and the purchaser cannot make an object [sic], requisition or claim for compensation, loss or damage or seek any other form of relief or remedy, whatsoever, or rescind or terminate this Contract because of such rescission or extension and for the avoidance of doubt no amount of interest arising under clause 15.2 will be payable by the vendor to the purchaser or vice versa by reason of such extension.

Registration of Mortgage Dealing 9585643

The vendor and purchaser hereby acknowledges and agrees that:

Mortgage Dealing

(b) registration of that Mortgage Dealing shall be a condition precedent to completion of this Contract;

(c) this condition has been inserted in this Contract for the benefit of the purchaser and may be waived by written notice to that effect being given by the purchaser to the vendor.

…

Deposit

The purchaser must pay a deposit of $400,000.00 of the price as follows:

(a) 2.5% ($100,000.00) payable on execution of this Contract; and

(a) 7.5% ($300,000.00) payable upon satisfaction of all conditions precedent set out in the Contract.”

15 The percentages and monetary amounts in Clause 46 do not match each other. This arose because the form of contract was prepared at the time when the purchase price was to be $4m. There was a last-minute consensus that the price should be raised to $4.15m, which resulted in some handwritten changes to the contract. Clause 46 was not amended at that time. It was common ground that Clause 46 was understood to operate so that the monetary amounts, not the percentages, were what the purchaser was obliged to pay.

Result of Proceedings 3054 of 2004

16 On 27 August 2004 the claim by Heggies in proceedings 3054 of 2004 (see para [5] above) to have its lease registered came before me, when Heggies sought summary judgment on that claim. I granted that summary judgment: Heggies v Shirlaw [2004] NSWSC 805. A lease from Global to Heggies was accordingly registered. During the week commencing 18 October 2005 Heggies transferred that lease to Boral Resources (NSW) Pty Ltd (“Boral”). That transfer of lease had been registered at least by 22 March 2005.

17 After summary judgment was granted on Heggies’ claim in proceedings 3054 of 2004 to have its lease registered, its claim to registration of the mortgages over the Penrose Land still remained. On 25 November 2004 Mrs Voula Kekatos was substituted as a plaintiff for Heggies in proceedings number 3054 of 2004. Mrs Kekatos claimed, in proceedings number 3054 of 2004, that she had acquired the rights of Heggies and Collex as mortgagees concerning the Joint Venture Agreement, including their rights under both the 1995 joint venture mortgage, and the 2000 joint venture mortgage. It appears that if the 1995 joint venture mortgage or the 2000 joint venture mortgage were binding, they would secure a little less than $30,000.

18 In April 2000 Global had granted an equitable charge to Mrs Kekatos, Rhonda Stafford and Susan Stafford. Mrs Kekatos also claimed to be the assignee of that charge and of a supporting mortgage. That supporting mortgage secured a principal advance of the order of $1.2m.

19 The part of proceedings 3054 of 2004 which had not been summarily disposed of came on for hearing before White J on 9 March 2005. Those proceedings were settled on 10 March 2005. The parties to those proceedings at that time were Mrs Kekatos, Mr Shirlaw, Mr Palmer, Mr Cvitanovic, Mr Jones, Ostabridge, Heggies, Collex, Global, and the Registrar-General. The court orders involved a declaration of the validity of the mortgage of Ostabridge and Mr Shirlaw over the Penrose Land, that it secured a total sum of $2.55m, and that Mr Cvitanovic had an equitable lien over certain money in his trust account derived from rents and royalties of the land, but not over the proceeds of sale of the land. Orders were made for the removal of various caveats on the land, and the tidying up of some interlocutory orders that had been made. As well, the court noted an agreement between Mrs Kekatos, Ostabridge, Mr Shirlaw and Mr Cvitanovic that the net proceeds of sale of the Penrose Land under the contract to ABL would be divided 61.44% to Ostabridge and Mr Shirlaw, and 38.56% to Mrs Kekatos. Other terms of that agreement were that if that contract was terminated, Ostabridge and Mr Shirlaw would notify Mrs Kekatos, who would have 28 days within which to redeem the Ostabridge Mortgage by paying $2.55m, and if she did not redeem within the 28 days the Ostabridge Mortgage would bear interest from the date of the termination.

Outline of Defendants’ Case Concerning Termination

20 On 28 April 2005 the solicitors for the defendants sent a letter to JWS which said that the defendants terminated the contract and forfeited the deposit (“the Letter of Termination”). The defendants submit that there are three separate bases upon which they were entitled to send that letter. The first is that the plaintiff has repudiated the contract.

21 The second way in which the defendants say their entitlement to terminate arose is that the plaintiff did not pay the second instalment of deposit required by Clause 46 at the time it was required to be paid, and in the manner in which Clause 2 required it to be paid. The defendants allege that, while $300,000 was handed over, before the contract was terminated, it was not handed over unconditionally, as Clause 2.4 requires. Thus that payment was not a payment of a “deposit” within the meaning of the contract. Because Clause 2.3 made it an essential obligation to pay a deposit at the time required, the termination was justified.

22 The third is that the defendants had a contractual power to terminate the contract, under Clause 41. The particular way in which that contractual power is alleged to have arisen is that the defendants had done all they could reasonably be expected to do to comply with Clause 40.3, that a substantial reason for the non-compliance was that Heggies would not co-operate with the defendants in allowing anything more to be done to comply with Clause 40.3, and hence a situation had arisen where the defendants were “restricted, restrained or otherwise prevented from completing this contract by … any other act … of a third party”, within the meaning of Clause 41.

23 Examination of these contentions requires detailed consideration of the facts.

The Dramatis Personae

24 This conveyancing transaction was unusual in the degree of communication which occurred between the clients on the opposite sides of the transaction, and between the client on one side of the transaction with a solicitor on the opposite side of the transaction.

25 For the plaintiff, Mr Mark Finney (the General Manager – Aggregates and Recycling of ABL) and Mr John Oakes (the Financial Controller of ABL) were involved. Mr Finney was based in Sydney. Mr Oakes was based in Adelaide.

26 Mr Leo Smits had been a friend of, and solicitor for, Mr Shirlaw for many years, but had moved to Queensland in mid-July 2003. He continued to be actively involved in advising Mr Shirlaw concerning the Ostabridge receivership. Mr Shirlaw was based in Sydney. Mr Michael Carroll, of Carroll & Associates, was the solicitor in Sydney principally responsible for the conveyancing transaction for the defendants. He was assisted on occasions by Ms Julie Lewig. His involvement in the transaction ceased abruptly on 26 April 2005, the same day that Mr Shirlaw instructed Mr James Loel, of John M O’Connor & Company, of Brisbane, to act for the defendants. It was Mr Loel who wrote, on 28 April 2005, the Letter of Termination.

27 Ms Kate Whitburn, of JWS, was the solicitor who had conduct of the transaction for ABL until, after the alleged termination, it became apparent that the transaction would result in litigation. She was based in Adelaide.

The Sequence of Events

28 In this account of events I give the times at which various events occurred. I have taken those times from either file notes, the times recorded on emails, or the times shown on fax transmission records. I have not tried to correct for the difference between the time in New South Wales and Queensland on the one hand, and the time in South Australia on the other, which is only half an hour once daylight saving has ceased. Daylight saving ceased in New South Wales and South Australia on 27 March 2005. Thus, statements of time appearing on documents, for the period critical to this case, are not complicated by the fact that Queensland does not observe daylight saving. Not correcting for the difference between Eastern Standard Time and Central Standard Time does not have any material effect on the factual findings.

29 ABL knew of proceedings 3054 of 2004, but no-one from ABL was closely involved in the stage of the proceedings which resulted in White J’s orders of 10 March 2005. Ms Whitburn became aware on 14 December 2004 that Heggies and Collex no longer had an active role in the proceedings, and also became aware on that date that Mrs Kekatos’ solicitor was alleging that Mr Shirlaw had no power of sale.

30 On 22 February 2005 Mr Smits sent an email to Mr Finney, saying:

“The Cross Claim of the Global Receiver & Manager has been dismissed by consent.

The Claim filed by Voula Kekatos has no prospects of success because of Clauses 6(a) and (c) of the Deed of Variation.

The Joint Venture cannot be in issue because it has been terminated and the participants executed mutual releases.

Heggies have written to us confirming that $29K was secured by the Joint Venture Mortgage which was tendered and rejected by the assignee, Voula Kekatos.

In the circumstances, I cannot see the case lasting for long at the hearing starting on 9 March for 3 days. This is the last throw of the dice by Kekatos the fraudster and his number is up.

It follows that settlement of the sale is imminent and I expect that Orders confirming the registration of the Osta/Shirlaw Mortgage and Kevins power of sale to be entered shortly after the hearing at which time settlement can occur immediately.

Substantial funds have been borrowed and expended on this litigation but the end is clearly visible.

There is no light at the end of the tunnel for Kekatos.”

“confirming … Kevin’s power of sale …”

31 The conveyancing connected with the sale could not proceed until it became likely that the various caveats on the title would be removed, and until the mortgage on which Mr Shirlaw had relied in entering the contract was registered. The orders of White J of 10 March 2005 made it reasonable to suppose that those events would happen. The conveyancing, which had been becalmed up to that time, started to move rapidly thereafter.

32 On 15 March 2005 Ms Lewig phoned Ms Whitburn, and informed her that settlement had been achieved in the Supreme Court proceedings the previous week, and that Mr Shirlaw hoped that settlement of the sale of the land could take place that week. Ms Lewig also said, however, that she was still trying to obtain clear title through the Land Titles Office, and that it would not be available before the end of the week. She said that Mr Shirlaw would be in a position to settle when the certificates of title were issued.

33 Ms Whitburn asked for a copy of the court orders. They were provided to her on 18 March 2005.

34 On 17 March 2005 Mr Carroll discovered that the Office of State Revenue had placed a caveat on the title, in connection with some unpaid land tax. On 21 March 2005 he phoned Ms Whitburn, and told her that payment of the land tax was the only thing holding up the issue of the certificates of title and settlement. He asked that the deposit be released in order to pay the land tax. Ms Whitburn told him that her client had requested “a short due diligence exercise to get comfortable that we can now settle in accordance with the Contract”. She asked for access to the court file in the Supreme Court proceedings. Mr Carroll phoned back, and wrote a confirmatory letter, the same day, granting consent to that access. In fact, she did not exercise that access (though a Sydney partner of JWS exercised it once it was apparent, after the Letter of Termination, that the transaction would become litigious.)

35 On 22 March 2005 Ms Whitburn arranged for the carrying out of a title search of the land, which showed that, while Heggies’ caveat 691505 had been removed, the other caveats to which the land was subject at 7 July 2004 were still registered, and in addition there was a caveat lodged by the Office of State Revenue, and another caveat lodged by Mrs Kekatos.

36 On 30 March 2005, having first made a list of the issues she wished to raise with him, Ms Whitburn telephoned Mr Carroll. The conversation included:

CARROLL: “The Registrar-General will not process the withdrawals of the various caveats until the land tax is paid. The land tax was paid yesterday but the outstanding interest on that amount is still due. Mr Shirlaw does not have the funds to pay the outstanding interest. I suggest that as part of the purchase price for the Land, a cheque be made payable to the LPI [Land and Property Information Division of the Department of Lands NSW] to satisfy the outstanding interest, which would cause all withdrawals of the caveats to be registered. This can all be done on completion.”

WHITBURN: “Copies of the withdrawals of the caveats that have been lodged are not available for viewing from the LPI. Please provide us with copies of the withdrawals so that we can reconcile the registered caveats with the withdrawals.”

CARROLL: “I will provide copies of the caveats lodged to date.”

37 Later, Mr Carroll told her that he did not have copies of the caveat withdrawals, and she should contact a particular officer at the LPI to see if she could get them.

38 On 31 March 2005 Mr Smits emailed Ms Whitburn, saying that he understood from Mr Shirlaw that settlement had been fixed tentatively for Wednesday, 6 April. He continued:

“If you require payment of the interest first to OSR, please let me know and I will pay it tomorrow am. Then all the conditions precedent to payment of the balance of the deposit will be satisfied without question. What else do you want? Can you confirm that the purchase price was increased to $4.5M in accordance with my previous emails? I need to resolve these points urgently, so that we can settle on Wednesday.”

39 The reference to increasing the purchase price to $4.5m related back to a conversation which Mr Finney and Mr Shirlaw had had in November 2004, when they had talked about lifting the price to $4.5m in a particular eventuality. They disagree about what that eventuality was, that disagreement has never been resolved, and ABL has never conceded that the appropriate eventuality has come about. Settlement had never been “fixed”, whether tentatively or not, for 6 April, so far as Ms Whitburn was aware. This email is an example of a theme repeated in the next few weeks, of Mr Smits hustling people on ABL’s side of the transaction to settle very soon.

40 Ms Whitburn replied to Mr Smits (with a copy to Mr Carroll) on 31 March 2005, saying:

“We have been dealing with Michael Carroll in relation to the settlement of this matter and are working towards settlement as soon as possible. We are advised by our client yesterday that Kevin has suggested that settlement can occur Wednesday however in our view this is unlikely.

There are steps to be taken under the Sale Agreement (ie the exchange of transfers) which will not occur before then. Aside from that we are still conducting a due diligence on behalf of our client in relation to the method of sale of the land. This amongst other things requires us to deal directly with the LPI in relation to the withdrawal of caveats (we are unable to obtain copies of the withdrawals lodged and so cannot be sure we will get clear title on completion). Michael Carroll is also providing us with information requested during a telephone conversation yesterday.

In relation to interest on land tax, we were advised yesterday that interest would be required to be paid out of the purchase price as Kevin did not have funds to pay it before hand. We understand from your email that you are in a position to pay it out as early as tomorrow. Accordingly, we would require payment of the interest to OSR prior to the payment of the second instalment of the deposit.

We will review the contract again with respect to the second instalment of the deposit and arrange for this to occur as early as possible. It is now unlikely that payment will be organised until Monday.”

“We are working towards settlement as early as possible. However, we need to be sure that our client is acquiring clear unencumbered title to the land and will do everything necessary to get that comfort.”

41 Once Ms Whitburn had, on 18 March 2005, received the court orders made on 10 March 2005, she requested a copy of other court orders, concerning the summary judgment granted on 27 August 2004, and the substitution of Mrs Kekatos as plaintiff on 25 November 2004, because they were referred to in the orders of 10 March 2005. Mr Carroll supplied those other orders to her on 31 March 2005.

42 On Friday, 1 April 2005 Mr Smits emailed back to Ms Whitburn, saying that the land tax had been paid in full that day, and the withdrawal of the Crown caveat procured that day. He said that in his view “the contract was not formally extended by ABL, [and] that it is probably determinable by either party …”. He said that Mr Shirlaw had a higher offer, which, if accepted, would result in him receiving more than an additional $500,000. “Please consider this carefully because Kevin is under a lot of pressure from creditors to maximise their returns”.

43 The land tax, and interest on it, had been paid by a company associated with Mr Smits, which advanced the money to Mr Shirlaw.

44 On Monday, 4 April 2005 Mr Carroll collected from the revenue authorities, and lodged with the Land Titles Office, a withdrawal of the Crown caveat. However, a search of the title which Ms Whitburn made on 5 April 2005 showed that the Crown caveat, and all the other caveats which her search of 22 March 2005 had disclosed, were still registered.

45 ABL had also lodged a caveat against the title to the land, to protect its interest under the contract. On Wednesday, 6 April 2005 at 2.30pm Ms Lewig telephoned Ms Whitburn, and said that the ABL caveat was preventing the obtaining of titles. She asked Ms Whitburn to fax a letter to Mr Booth at LPI providing ABL’s consent. On Friday, 8 April 2005, before 10.00am, Ms Whitburn faxed such a consent to Mr Booth.

46 Also on 8 April 2005 Ms Whitburn drew up a seven-page schedule which identified all the steps which needed to be taken in connection with completion of the contract, by whom each step needed to be taken, when that step was due to be taken, and the clause of the contract (if any) that was relevant to it. It divided those steps into ones required prior to completion, ones required at completion, and one required after completion. She emailed a copy of that schedule to Mr Carroll on 8 April 2005, said that she was sending a copy to her New South Wales agents who would attend settlement on JWS’s behalf for their comments, and also asked for any comments from Mr Carroll.

47 In her conversation with Mr Carroll on 30 March 2005, she had asked for copies of the notices which Mr Shirlaw had issued under the mortgage, and also of the notices issued under the Real Property Act 1900, relating to his exercise of power of sale as mortgagee in possession. She was aware that, in December 2004, the solicitor for Mrs Kekatos had questioned the existence of Mr Shirlaw’s power of sale. On Friday, 8 April she reminded Mr Carroll that she was still waiting for those notices.

48 Her request for the notices had been passed on to Mr Shirlaw. At some stage in early April 2005 Mr Shirlaw asked Mr Smits whether such notices had been issued. Mr Smits told him:

“Kevin, I have no recollection of issuance of notice of default to Global, but that does not mean that none were sent. All of our files were given to Carrolls or left in storage when we (Smits Leslie) terminated our practice in 2003. The files are now located in four storage centres without suitable indexes and have been put into disarray by searches for other files. It will be difficult for someone who is not familiar with the files to look for or to find the notices. I am not able to spend four days looking for those notices, especially without being paid for it. I just do not have the time to do it. There are hundreds of boxes and over a hundred files relating to Penrose. They have all been cannabilised for the litigation. What I can recall is that this issue was raised with ABL’s solicitors in correspondence before you sold the property to ABL. Why are they raising it again and so late? I cannot understand their concern because the Liquidator and Receiver & Manager of Global both consented to the Orders made by the Court on 10 March, 2005. The Receiver & Manager asked you to take over the sale process and consented to the sale. As I recall one of the Court of Appeal decision in Re Pollnow, it was the effect that a notice of default is not required if you are entitled to rely upon an irremediable, non monetary default to ground your power of sale. I do not understand why we have to give legal advice to (JWS) about this question at this late stage of the sale. I really have to ask why this point is being raised now. Global has been in liquidation since 2003.”

49 Also on 8 April 2005 Ms Lewig telephoned Ms Whitburn, to tell her that the titles were now registered. From that, Ms Whitburn assumed that the caveats had been removed.

50 On Monday, 11 April 2005, at 6.21pm Mr Carroll faxed a letter to Ms Whitburn, saying:

“We advise that the registration of the various dealings involving the Withdrawals of Caveats and the Mortgage to Ostabridge have now been effected; see copy of title search attached.

Friday, 15 April 2005

We note that we have not received the Transfer for execution by our client. Please provide us with same as a matter of urgency together with the balance of the deposit. We also await receipt of settlement figures including adjustment. Once these are at hand we will confirm that they are in order and will notify you as to how settlement cheques are to be drawn.”

51 That letter enclosed a title search conducted at 4.49pm that day, which showed that all the caveats except that of ABL had been removed from the title, that a new certificate of title had issued pursuant to dealing 9585644, and that the mortgage to Ostabridge and Mr Shirlaw was now registered.

52 On 11 April 2005 Mr Smits told Mr Shirlaw that he had asked Mr Carroll to take certain steps (which he identified), and could not see why ABL would not be able to settle on Friday.

53 On Tuesday, 12 April 2005, just after noon, Ms Whitburn telephoned Ms Vickers, of JWS’s Sydney agents, told her that the mortgage had now been registered, and that they wanted to proceed to settlement. Ms Whitburn asked her to arrange for all the government searches to be done which were required for settlement. Ms Vickers said she would do that, and that the searches should take around one week.

54 The copy of the contract which is in evidence does not have annexed to it any of the documentation which is required, by section 52A Conveyancing Act 1919 and Clause 5 Conveyancing (Sale of Land) Regulation 2000 to be annexed to contracts for the sale of land. The evidence does not establish whether those searches were actually annexed to the contract. Even if those searches were annexed to the contract, by April 2005 they would be at least nine months old, and so in need of updating. As well, up to date certificates were needed to calculate the adjustments to be made at settlement concerning rates and other outgoings on the land.

55 A 4.00pm on 12 April 2005 Mr Carroll phoned Ms Whitburn. Ms Whitburn gives evidence, and I accept, that the conversation included the following:

CARROLL: “My client is anxious to settle this matter. If we don’t complete the Contract by this Friday then I am instructed to serve a notice to complete giving your client 14 days to do so.”

WHITBURN: “We have requested searches to prepare the settlement statement and we have been told by our agent solicitors that this will take one week. We can’t do anything until then. In addition, clauses 40 and 44 of the Special Conditions have not yet been satisfied. How is your client going to satisfy these clauses?”

CARROLL: “My client is entitled to terminate under clause 41 of the Special Conditions if he is unable to satisfy clause 40.”

WHITBURN: “Your client can’t use clause 41 to his advantage if nothing has been done – that is, reasonable endeavours have not been used to procure satisfaction of clause 40.”

CARROLL: “The Joint Venture Agreement was terminated by Deed.”

WHITBURN: “We were not aware of that. If we are provided with a copy of the Deed by which the joint venture was terminated, that may satisfy clause 40.3(c).”

CARROLL: “Well, what will happen if clause 44 cannot be satisfied if Heggies will not give their release?”

WHITBURN: “Then our client could consider waiving the requirement for satisfaction of clause 44. On a further issue, you have not yet answered our request for the Notice of Default given by your client as mortgagee in possession. Can you provide us with these Notices?”

CARROLL: “Kevin had a power of sale in the Orders of 10 March 2005.”

WHITBURN: “It is our view that the Court did acknowledge that there was an agreement for the sale of the Land but not that Kevin was properly exercising the power of sale. We are requesting a copy of the Notice because, despite the fact that the purchaser doesn’t need to make enquiries as to Notices given under the Real Property Act, we are not sure that we can rely on that protection where the mortgage itself requires the Notice to be given.”

56 Mr Carroll recalls (and I accept) that there was one extra component in that conversation. It is that in response to a question on his part, the gist of which was to enquire what would happen if the defendants could not provide her with the documentation she required under the terms of the contract, Ms Whitburn replied:

“You have to use your best endeavours to obtain the documentation and if it can’t be obtained then our client could consider waiving that requirement.”

57 On 12 April 2005, after 6.00pm Ms Whitburn faxed a letter to Mr Carroll, which referred to his letter of 11 April and their telephone conversation on 12 April, and continued:

“Your client has requested that settlement take place no later than Friday, 15 April 2005. We acknowledge that your client is anxious for settlement to occur as is our client. However, as you would be aware that date is impractical given the tasks required to take place prior to completion including preparation, execution and stamping of the Transfer, preparation of settlement figures including adjustments and drawing of cheques.

We have instructed our New South Wales agent to request all necessary statutory searches so that settlement statements can be prepared. We have been advised that it may take up to a week for the relevant government departments to respond to those requests. Accordingly, until we receive a response it is not possible to prepare settlement statements and advise you of a settlement figure. We will prepare settlement statements and provide you with a settlement figure as soon as the information becomes available to us.

Further, we have prepared a Transfer under Power of Sale which will be provided to you shortly for execution by our client. Once this has been executed it needs to be lodged with the Office of State Revenue and stamp duty paid prior to completion. We will attend to this as soon as we receive the executed Transfer from you.

In any event, we have not yet received a copy of the notice of default given by your client under the Ostabridge Mortgage as requested in our telephone conversation on 30 March 2005 and also in our email dated 8 April 2005. Our client requires this notice to satisfy itself that your client has the power of sale it purports to have particularly given that your client has not given any warranties. Whilst the Court Order acknowledges the contract between our clients, it does not acknowledge that your client has properly exercised its power of sale under the Mortgage.

Further, the conditions set out in clause 40 and clause 44 of the Contract for Sale of Land do not appear to have been satisfied to date.

In relation to clause 40, we understand from you that the Joint Venture Agreement has been terminated by Deed. An executed stamped copy of this Deed may satisfy clause 40.3(c) of the Contract for Sale.

Heggies

Boral

Once the above issues have been resolved we will arrange for the balance of the deposit to be paid to you as stakeholder. Completion can then take place as soon as practicable thereafter following preparation of settlement figures including adjustments, stamping of the Transfer and drawing of cheques.

We note that we are also awaiting your comments in relation to the Completion Agenda provided to you by email on Friday, 8 April 2005.

We look forward to the settlement in this matter occurring as soon as possible.”

58 At 7.47am on Wednesday, 13 April 2005 Mr Finney sent a copy to both Mr Oakes and Mr Shirlaw of Ms Whitburn’s letter to Mr Carroll dated 12 April 2005 (para [57] above). The text of the covering email said:

“Kevin/John

Fyi, we are trying to expedite this as fast as possible, JWS need access to documents listed and then we can then do so. John when you are up next week it is probably worth us catching up with Kevin on the Tuesday to review at his office if he is available. We can then link up with whoever to discuss current status and closure date.

Kevin can you make a meeting on Tuesday morning at your office or Goldfields House?”

59 On Wednesday, 13 April 2005 at 5.08pm Ms Whitburn telephoned Mr Carroll. Her account of that conversation is:

WHITBURN: “We have been instructed that Adelaide Brighton is willing to pay the second instalment of the deposit and we require you to confirm your trust account details.”

CARROLL: “The details of the account are [He identified the account].”

WHITBURN: “In satisfaction of the conditions precedent, you are still to provide the Deed of Settlement and Release signed by Heggies and the Deed of Termination in relation to the Joint Venture Agreement. We also still require the Notices of Default from Kevin issued pursuant to the Ostabridge Mortgage. You should note that the deposit is being paid to give comfort to Mr Shirlaw that Adelaide Brighton are committed to completing the Contract. We would expect that in paying the deposit, your client will cease in making threats to issue a Notice to Complete or terminate the Contract.”

CARROLL: “Right.” [Mr Carroll did not disagree with what I had said.]

WHITBURN: “I will forward the account details to Adelaide Brighton who will arrange payment.”

60 Mr Carroll agrees that in that telephone conversation she asked for details of the trust account, which were given to her, that she said that the deposit was being paid as a sign of good faith, and that “they wouldn’t expect us to now issue a Notice to Complete”. He does not recall the other matters which are set out by Ms Whitburn. But he does give evidence that “I can say quite emphatically that I did not communicate that I was in agreement with what she was saying.”

61 All evidence from witnesses in this case was given by affidavit. No witness was cross-examined. All the affidavits, except that of Mr Carroll, were served well in advance of the hearing. Mr Carroll’s affidavit was provided to the lawyers for the plaintiff on Friday, 22 July 2005 (the hearing of the case commencing on Monday, 25 July 2005). The plaintiff took no objection to the filing of the affidavit in court, or to its being read. In those circumstances the effect which the rule in Browne v Dunn (1893) 6 R 67 has in a common law trial is attenuated: West v Mead [2003] NSWSC 161 at [94] – [99]; Hyhonie Holdings Pty Ltd v Leroy [2003] NSWSC 624 at [94]- -[95]. Further, there is no rule of law requiring that evidence not challenged in cross-examination be accepted – Sullman v Sullman [2002] NSWSC 169; (2002) DFC 95-248 at [304] - ]306] and cases there cited. I do not accept the submission of Mr Coles QC, for the defendants, that the appropriate way of dealing with the conflict between the evidence of Ms Whitburn and Mr Carroll is simply to accept Ms Whitburn’s evidence. I shall assume that her statement that Mr Carroll said “right” and did not disagree with what she said counts as an admission by the plaintiff (as the use to which the defendants seek to put that evidence is as part of their contention that the second instalment of deposit was not paid unconditionally), but all the evidence relevant to the topic needs to be evaluated and weighed in the light of the probabilities.

62 In my view, it is more probable that Mr Carroll is correct in saying that he did not communicate that he was in agreement with what Ms Whitburn was saying. First, for a vendor to accept a deposit in a conveyancing transaction where contracts had already been exchanged on the basis that it would not (or would not threaten to) issue a notice to complete or terminate the contract would deprive the deposit of a large part of its legal and commercial purpose – it is intrinsically unlikely that a solicitor for a vendor would agree to any such thing. Further, Mr Carroll later, on, on 26 April 2005 threatened Ms Whitburn with issuing a Notice to Complete (para [101] below). Her response did not include anything to the effect of “but you can’t do that, you’ve agreed not to”. In my view, if Ms Whitburn believed that, by agreement, or any other kind of legally binding inhibition, the defendants were precluded from issuing a Notice to Complete, she would be likely to have communicated that belief to Mr Carroll at that time.

63 As well, Ms Whitburn emerges from the evidence as a meticulous and careful solicitor – it would not be at all surprising if she realised that the best she was likely to achieve by paying the second instalment of the deposit at that stage was to provide an assurance of good faith which would induce the defendants not to issue a Notice to Complete or terminate, but not to achieve any legally binding arrangement to that effect. As well, her contemporaneous file note of the conversation (which, like most of her file notes, is quite detailed) makes no mention of Mr Carroll agreeing.

64 At 6.00pm on 13 April, Ms Whitburn sent Mr Carroll a confirmatory email, in the following terms:

“I refer to our telephone discussion this afternoon.

I confirm that Adelaide Brighton will make payment of the second instalment of the deposit to Carroll & Associates as stakeholder pursuant to clause 9 of the Contract for Sale. I will provide Adelaide Brighton with your trust account details for this purpose.

This payment is made notwithstanding the outstanding matter set out in our letter dated 12 April 2005, to show your client that Adelaide Brighton are committed to the acquisition of the Penrose Quarry. In relation to the matters set out in our letter, I understand that you will shortly be providing us the following documents.

- a copy of a Deed of Settlement and Release signed by Heggies confirming that Adelaide Brighton has no liability to it for any claim in relation to the land in satisfaction of clause 44 of the Contract for Sale; and

- a copy of the deed of termination in relation to the Joint Venture Agreement in accordance with clause 40.3(c),

(both subject to our satisfaction).

The only other outstanding matter is a copy of the notice of default given by your client under the Ostabridge Mortgage.

We would expect that in accepting the deposit your client will not issue a notice to complete or purport to terminate the Contract for Sale as previously advised by you and by your client directly to Adelaide Brighton.”

65 I find it most unlikely, given the usual course of her behaviour in this matter, that she would not state clearly in the fax that Mr Carroll had agreed to make good what she said “we expect”, if indeed he had so agreed.

66 On 13 April 2005 at 4.48pm Ms Whitburn had emailed Mr Finney, saying:

“As discussed, Shirlaw is anxious to settle the sale of the Penrose Quarry. In an attempt to force us into early settlement they have made various threats to terminate the contract or issue notices to complete.

We have currently paid a deposit of $100,000 on the purchase of the quarry. Under the Contract (clause 46), a further $300,000 is payable upon satisfaction of the Conditions Precedent.

The only outstanding conditions under the contract are in clause 40 and clause 44. They relate to the Joint Venture Agreement and Heggies’ acknowledgement that Adelaide Brighton will have no liability in relation to the land. These items are not expressed to be conditions precedent (as the other conditions precedent are) and if they cannot be satisfied prior to completion then Adelaide Brighton will have the option of waiving them.

We are also waiting on notices issued by Shirlaw under the Ostabridge Mortgage pursuant to which he is exercising his power of sale.

With a view to giving Shirlaw comfort that you intend proceeding with the purchase and to avoid an attempt by him to terminate the contract (and the issues that will flow from that), you may want to consider whether you are prepared to pay the balance of the deposit now (if it is not already payable, which Shirlaw claims it is).”

67 Mr Finney emailed back very promptly, saying he was happy to pay the remainder of the deposit on the basis it “sits with Carrolls”. There was no instruction either requested by Ms Whitburn, or given by Mr Finney, that the deposit was to be paid only on the basis that no Notice to Complete was issued or termination occurred. That is consistent with her having conducted her phone call with Mr Carroll, less than half an hour later, in a way which did not establish any consensus that the deposit was paid on any such basis.

68 On 13 April 2005 at 6.03pm Ms Whitburn passed on to Mr Oakes details of the trust account of Carroll & Associates, so that he could arrange for payment of the balance of the deposit.

69 On or about 13 April 2005 Mr Carroll’s office received the new certificates of title which had issued for the Penrose Land.

70 On 13 April 2005 (it is not clear at what time of day) Mr Carroll sent a fax to Ms Whitburn, saying:

“We attach copy of the Deed of Settlement and Release dated 15 October 2004 with Annexure “B” being Deed of Termination and Release of the Joint Venture Agreement.

As discussed with you, the above document should satisfy Special Conditions 40, 44 and 46(b).

Please confirm by return that the above document does so satisfy Special Conditions 40, 44 and 46(b).”

71 The enclosed document was a copy of a Deed of Settlement and Release bearing date 15 October 2004, and expressed to be between Heggies and Global. The form of deed made provision for Global to execute, contemporaneously upon execution of the Deed of Settlement and Release, a Deed of Consent to Transfer of Lease, a copy of which was Annexure A. That annexure was expressed to be between Global, Heggies and Boral. Its terms effected an assignment of Heggies lease of the Penrose Quarry to Boral, and a consenting by Global to that assignment.

72 The form of the Deed of Settlement and Release also made provision for both Heggies and Global to execute and deliver, contemporaneously upon the execution and delivery of the Deed of Settlement and Release, a Deed of Termination and Release of the Joint Venture Agreement, a copy of which was Annexure B.

73 The Deed of Settlement and Release contained provision, in Clause 14.1, for it to be signed in any number of counterparts.

74 The copy of the Deed of Settlement and Release which Mr Carroll sent to Ms Whitburn was executed by Heggies, but not by Global. Neither of its annexures were executed. It had no stamp duty imprint on it.

75 On Thursday, 14 April 2005 Mr Shirlaw telephoned Mr Oakes, and a conversation to the following effect occurred:

“SHIRLAW: “Why can’t we settle this straight away? I need the money urgently – my arse is hanging out due to the costs that I have incurred in the Court proceedings. All these outstanding searches could have been done by Kate 5 weeks ago when the Orders were made by the Supreme Court.”

OAKES: “Kevin, I understand your concern. I will see what I can do from my end to push through the settlement.”

SHIRLAW: “It seems to me that you are delaying settlement. I am forgoing interest on a daily basis from the money payable under the Contract and I could abandon the Contract pursuant to two clauses and accept the offer from Boral for $4.5m.”

OAKES: “Kate is in the process of preparing a succinct summary of the outstanding issues, which I expect to receive shortly. Once I have this I will forward it to you in order that you have our view of the process to settlement.”

76 At 2.28pm on 14 April 2005 Ms Whitburn sent an email to Mr Oakes summarising the issues which were outstanding prior to completion:

“Satisfaction of Special Conditions 40 and 44

Michael Carroll provided us last night with a copy of a Deed of Settlement and Release between Heggies, Global and Cvitanovic which annexed a Deed of Termination of the Joint Venture Agreement in purported satisfaction of the special conditions in clauses 40 and 44 of the Sale Contract. Neither of these documents have been fully executed.

We reviewed these Deeds this morning and are satisfied that fully executed copies of both the Deed of Release and Deed of Termination will satisfy clauses 40 and 44. Unless the Deed have been fully executed they are not binding on the parties.

At the moment the Deed of Release is only executed by Heggies – we need to see a counterpart executed by Global accepting the release. Further, the Deed of Termination has not been executed by any of the parties. We need to see a fully executed copy of this document. I have discussed this with Mr Carroll this morning and will follow up in writing this afternoon.

Notice of Default

We are awaiting a copy of the notice of default given by Mr Shirlaw pursuant to clause 22 of the Ostabridge Mortgage. We have requested this from Mr Carroll on at least 4 occasions now since 30 March 2005.

Under the Real Property Act a purchaser does not need to inquire as to whether a mortgagee in possession has properly given all notices required under the Act. However, this relief does not appear to extend to notices required under the Ostabridge Mortgage. We need to see this notice so that we can see that Mr Shirlaw is in fact exercising his power of sale as mortgagee in possession. This is particularly important given that there are no warranties under the Contract for Sale.

Mr Carroll has suggested that in the Court Order of 11 March 2005 the Court has ratified Mr Shirlaw’s power of sale. The Court Order only acknowledges the sale agreement with Adelaide Brighton, it does not ratify Mr Shirlaw’s exercise of the power of sale.

Balance of Deposit

As discussed, you are arranging for the payment of the deposit today, despite the fact that Special Conditions clause 40 and 44 are still outstanding.

Searches

Prior to settlement a settlement statement needs to be prepared showing the final adjusted settlement figure.

In order to prepare this statement searches need to be made with Government Departments so that the adjustments can be calculated. These searches need to be undertaken as soon close as possible to the settlement date so that they are up to date (ie. so that payments made in the interim or new charges incurred are included). We have requested these searches and are waiting for the Government Departments to provide the results to us. As soon as we have these results we will prepare settlement statements and deliver them to Mr Carroll for his review. Once we have the results of the searches this shouldn’t take long at all. Mr Carroll then needs to provide us with payment details.

Transfer Under Power of Sale

We have prepared a Transfer Under Power of Sale which has been provided to our NSW agents for their sign off. I asked that this be completed yesterday but have not yet received it. I have left a message with our agents to provide this to me this afternoon as I want to be able to send the Transfer to you today for execution so that we can send it to Mr Carroll for execution by Mr Shirlaw.

Once executed, the Transfer will need to be stamped at the NSW Office of State Revenue prior to completion. This should be relatively straightforward and I will advise you of the stamp duty payable shortly so that you can be ready to pay it to avoid any delay.

Assignment of Lessor’s interest in Lease

We are preparing a Deed of Assignment of Lease which will be sent to Mr Carroll this afternoon. This deed assigns Global’s interest in the Lease as Lessor to Adelaide Brighton and requires Boral to acknowledge that Adelaide Brighton will be the Lessor following completion (and hence entitled to all royalties etc in relation to the land). This will need to be produced at Completion by Mr Shirlaw executed by both himself and Boral.

Completion Agenda

On 8 April 2005, we sent a completion agenda to Mr Carroll setting out all of the steps required both prior to and at completion. We asked Mr Carroll to provide his comments in relation to this agenda. To date we have not received any comments from him. Accordingly, we are not aware Mr Carroll agrees with the agenda or if there is anything further required by Mr Carroll prior to completion.

In summary the key outstanding issues are:

We confirm that we are doing everything within our control to ensure that settlement occurs as soon as possible.

Please telephone me if you wish to discuss. In the meantime, I will keep you up to date with the progress of the above.”

77 At 3.00pm on 14 April 2005 Mr Oakes sent that email on to Mr Shirlaw, attached to Mr Oakes’ own email which said:

“Attached is the summary (as discussed) of the matters which JWS require to complete the sale process.

There are some points herein you may choose to follow up with Carroll & Associates.

The balance of the deposit will be paid today to Carroll’s.

We would appreciate any assistance you can apply from your end to accelerate the process.

Hopefully, Mark and myself can meet up with you on this coming Tuesday.”

78 On 14 April 2005 at 2.53pm Ms Whitburn emailed Mr Carroll, saying:

“We refer to your facsimile dated 13 April 2005 attaching unexecuted copies of the Deed of Settlement and Release between Heggies, Global and Cvitanovic which annexes the Deed of Termination of the Joint Venture Agreement.

We confirm that fully executed copies (or executed counterparts) of the Deed of Settlement and Release and the Deed of Termination of Joint Venture will satisfy clauses 40 and 44 of the Contract for Sale of Land. As you are aware, unless the Deeds have been fully executed they are not binding on the parties.

We await provision of fully executed copies (or executed counterparts) of both the Deed of Settlement and Release and the Deed of Termination in satisfaction of clauses 40 and 44 of the Contract for Sale of Land.

Please note that Adelaide Brighton wish to use one of its wholly-owned subsidiaries to acquire the land. That company is Cement Resources Consolidated Pty Ltd ABN 36 101 696 226.

We will also be providing you this afternoon with a Deed of Assignment of Lease to be executed and provided at Completion in accordance with our completion agenda dated 8 April 2005.”

79 The second instalment of the deposit, namely $300,000, was paid, by an electronic transfer to the trust account of Carroll & Associates, in the afternoon of 14 April 2005.

80 On 14 April 2005 at 6.00pm Mr Carroll faxed Messrs Gordon & Johnstone, solicitors. They are, I infer, the solicitors for the receiver of Global. Mr Carroll informed them that he anticipated that settlement of the sale of the quarry to Adelaide Brighton would take place on Friday, 22 April. He requested, “to allow settlement to take place”, that they forward by fax, as a matter of urgency, a copy of the executed Deed of Termination and Release of the Joint Venture Agreement between Heggies, Collex and Global which was annexure “B” to the Deed of Settlement and Release.

81 On Friday, 15 April and Monday, 18 April Ms Whitburn was not in her office. On 18 April 2005, at 5.40pm, Mr Carroll faxed PricewaterhouseCoopers Legal. That firm appears, from the coversheet of the form of Deed of Settlement and Release which had been faxed to Ms Whitburn on 13 April 2005, to have drafted that Deed and its two annexures. I infer it acted for Heggies. Mr Carroll’s fax said:

“We refer to the writer’s telephone discussion with you this morning when we indicated that in respect of the sale of the Penrose Quarry, our client’s purchaser requires confirmation that Heggies Bulkhaul Ltd will not hold it liable to it for any claim whatsoever in relation to the land arising prior to completion. This could be satisfied by either providing the purchaser with an executed and dated copy of the Deed of Termination and Release of the JVA (a copy of which we already have unsigned) or a letter of acknowledgement from Heggies Bulkhaul Ltd.

Any assistance you are able to give would be greatly appreciated.”

82 On Tuesday, 19 April 2005 Mr Shirlaw, Mr Finney and Mr Oakes met for lunch at Circular Quay. Each of those men has given evidence about events that transpired at that lunch My findings about events at that lunch are fragmentary because the evidence on that topic was fragmentary. Mr Shirlaw said “your lawyers are continuing to ask for irrelevant documents, some of which are impossible to deliver.” Mr Oakes said words to the effect of “Carrolls have not told JWS which documents are not available nor those considered irrelevant and why”. There is no evidence of Mr Shirlaw making any riposte to that remark. Mr Oakes also said

“We will continue to use all endeavours to promptly resolve this. Can you keep chasing Carroll’s to ensure that JWS are receiving all the information needed to complete. It will be very frustrating if all the searches have been completed but we are unable to complete because JWS are still waiting on documents from Carrolls.”

83 At some stage at the lunch Mr Shirlaw said:

“The Joint Venture was terminated last year. Heggies are no longer involved in the sale. They have no mortgage. Boral has not paid the rent due on 1 April and could be in default of its lease. That might entitle me to terminate the lease. That would considerably enhance the value of the land.”

84 Also at the lunch, Mr Oakes offered Mr Shirlaw legal assistance from Ms Whitburn or Mr Paul Turner (her supervising partner at JWS) on the question of whether Mr Shirlaw could terminate the lease to Boral.

85 With a view to getting that assistance, the three men returned to Mr Finney’s office after lunch, and called Ms Whitburn. The conversation took place on a speaker phone. Mr Finney said “Boral have not paid the rent due on 1 April 2005. Does that mean that the lease to Boral can be terminated?”, and Ms Whitburn said she would look into it. I am not satisfied that anything else of substance occurred during that conversation on the speaker phone.

86 Mr Shirlaw has given evidence that in that conversation he said to Ms Whitburn “… some of the things that you want can’t be delivered. I don’t think a notice of default was issued. Anyway I am advised that it is not necessary. What turns on it?” He also says that in that conversation “we spoke about completing the purchase on 22 April 2005”.

87 Ms Whitburn has also given evidence about this telephone conversation. She cannot recall anything of the kind being said. She has a reasonably full contemporaneous note, which does not record anything of the kind being said. Mr Oakes accepts that something of the kind was said at some stage on 19 April 2005, but does not recall whether it was at the lunch, or in the speaker phone conversation. Nor does Mr Finney recall it being said at that stage. I would accept that Mr Shirlaw said words to that effect on 19 April 2005, but more probably at the lunch. I accept that, while the topic of completing on 22 April 2005 was raised as something Mr Shirlaw would like, that wish was not acceded to by the men from ABL. Indeed, one or other of them said:

“JWS has advised us that completion will occur once all the searches are complete and all the documents that JWS requires from Carrolls have been provided to them. It will not occur before then. If that occurs prior to 22 April 2005 then completion might occur on that date but it is unlikely.”

88 Later on 19 April 2005 Ms Whitburn spoke to Mr Carroll (notwithstanding that he was on leave) and said to him “I’ve explained everything to your client concerning the delay and I’m hopeful of getting the matter settled as soon as possible”.

89 Mr Carroll then spoke to Mr Shirlaw and sought his instructions about issuing a Notice to Complete. Mr Shirlaw told him not to bother issuing one. No Notice to Complete had issued at the time the Letter of Termination was written.

90 On 19 April 2005 Carroll & Associates faxed Ms Whitburn saying:

“We refer to your email to us of 13 April 2005 in respect of the issuance of a notice of default.

It is our understanding that the Mortgagee is not required to give notice to exercise power of sale under the terms of the Mortgage where there has been a non monetary default which is irremediable. In this case, Global has gone into liquidation and no notice is therefore required.”

152 Further, it is possible for a deed to be delivered in escrow, so that it does not become operative until some condition has been performed. The Deed of Settlement and Release was one that provided for mutual releases. In such a situation, it would not be at all unusual for one party not to intend to give a release, until it had received a release in return. Thus, mere production of the copy of the Deed of Settlement and Release by Mr Carroll to Ms Whitburn is not enough to demonstrate that it must be a document that is presently binding on Heggies. As well, when it was unstamped (a) that raises a doubt about whether the parties intended it to be operative, and (b) even if the parties intended it to be operative, section 304 Duties Act 1997 is a barrier to its enforceability.

153 In the present case, it is clear that ABL was acting in accordance with the advice of Ms Whitburn, so whether it was acting reasonably depends upon whether she was acting reasonably. No argument about delivery of deeds, such as that advanced by Mr Coles QC, was put forward by either Mr Carroll, or Mr Loel, to Ms Whitburn, before the sending of the Letter of Termination. However, it concerns a topic which a solicitor acting reasonably ought to consider without having it flagged for them. I am not satisfied that Ms Whitburn fell below the standards of a reasonable person in not regarding the copy of the Deed which was produced to her as sufficient in itself to show that the Deed was presently operative.

154 As well, in deciding whether ABL was in breach of contract because a reasonable person ought to have been satisfied that ABL would not have a liability to Heggies, that reasonable person should be treated as being in the same situation as ABL was in. Before a contracting party is in breach of an obligation to be “reasonably satisfied” – ie of an obligation to be satisfied in circumstances where a reasonable person would be satisfied - it is necessary that a reasonable person in the position of the contracting party would realise that the time for making a decision has arrived, and the body of evidence which needs to be considered is all in. After all, a person is not acting unreasonably if he or she does not make a decision when there is no occasion to do so.

155 Prior to the Letter of Termination, Ms Whitburn had not been told that it was impossible to obtain a copy of the Deed executed by all parties, or why it was not possible to obtain it. She had not been told that such a copy of the Deed could be obtained only by paying a debt claimed by Heggies’ lawyers. She had no reason to believe that the efforts that Mr Carroll had been making to obtain an executed copy would not continue. She had not been told, and was not in a situation where she should have realised without being told, that she already had all the evidence that she was going to get on the topic of whether ABL might have a liability to Heggies. In that situation, her failure to decide that she was satisfied does not show a breach of contract on ABL’s part.

156 Nor is that conclusion detracted from by ABL’s deciding, after the Letter of Termination, that it was willing to complete the contract without any more evidence about any possible liability to Heggies. First, there was extra information provided to ABL by the Letter of Termination itself. It was the information that Heggies declined to provide the Deed. Second, the very fact that ABL knew, after the Letter of Termination, that the time for making a decision had come is in itself a relevant matter. Third, it is only if a contracting party is acting unreasonably that it breaches an obligation to have “reasonable satisfaction” in certain circumstances. There can be a variety of different ways of acting reasonably. Even concerning a particular decision, one reasonable person might decide X, while another reasonable person decides not-X. Even assuming that ABL was acting reasonably when it decided it was willing to settle without any more evidence concerning its possible liability to Heggies, it is defective logic to say that therefore it was acting unreasonably when, earlier, it was persisting with seeking to obtain more information on that topic.

c) Claimed that it was not required to complete the contract on the basis that special condition 40 had not been satisfied notwithstanding that this special condition was not a precondition to settlement

157 Special condition 40.3 (para [14] above) was not expressly stated to be a precondition to settlement, but nonetheless on its correct construction the three alternatives in paras (a), (b) and (c) were things which the vendor was required to do prior to completion. The plaintiff was seeking to have Clause 40.3(c) satisfied, and, so far as Ms Whitburn knew, the defendants were also trying to satisfy it. Her communication of her expectation that the course that the defendants had embarked upon would be continued was not repudiatory.

158 A separate reason is that, where a contract sets out that events are to occur in some temporal order, the occurrence of the earlier event is frequently construed as a condition precedent for the obligation to perform the later event. A common example arises in building and construction contracts, where certification of an amount due is a condition precedent to the proprietor’s obligation to meet a payment claim: Kennard & Others v IE Featherston, Superintendent of Wellington (1867) 1 NZCA 15, at 19; Walsh v Johnston (1869) 6 WW & a’B (L) 77; Young & Another v The Ballarat and Ballarat East Water Commissioners (1878) 4 VLR (L) 306 at 316; Metropolitan Brick Company v Hayward & Another [1938] SASR 462 at 466, 468, 475. In my view, the preferable construction of Clause 40 is that compliance with it was a condition precedent to completion.

d) Insisted on compliance with special conditions 40 and 44 of the contract notwithstanding that these clauses had become redundant by operation of the orders of the Supreme Court of New South Wales in the Equity Division on 10 March 2005 in proceedings 3054 of 2004 and the actions taken by the Defendants pursuant to those Orders

159 The conclusion that special conditions 40 and 44 had “become redundant” was not argued for specifically, so I shall spend little time on it. The Court’s declarations on 10 March 2005 of the validity of the mortgage and the amount secured by it, and of the extent of the lien of Mr Cvitanovic did not deal with whether there was any potential for there being liability for the plaintiff by reason of the Joint Venture Agreement. The agreement about division of the proceeds of sale received from the plaintiff was one which bound only Mrs Kekatos, Ostabridge, Mr Shirlaw and Mr Cvitanovic. Even if it were assumed that Global was bound in consequence of Mr Cvitanovic being bound by that agreement, Heggies and Collex were not bound by it. It is not sufficient to lead to a conclusion that no claim would be made by Heggies or Global under the Joint Venture Agreement. The fact that various caveats were to be discharged, pursuant to orders which bound all parties to the proceedings would, I shall assume, have the practical effect of preventing the assertion thereafter of the validity of the interests claimed in those caveats. That is not enough, in itself, to show that special conditions 40 and 44 had become redundant.

160 I am not persuaded that this head of claim is one which justifies a finding of repudiation by the plaintiff.

e) Demanded that the property be transferred to Cement Resources Consolidated Pty Limited rather than the Plaintiff

161 This allegation was amended by the defendants in the course of address, without objection by the plaintiff. The defendants allege that:

(i) On the proper construction of Clause 4 of the standard contract, a “direction signed by the purchaser personally” , of the kind contemplated by Clause 4.3, must be given at least 14 days before the completion date, and

162 Before one can apply those propositions, one needs to know what is the completion date.

163 I am not satisfied that the completion date had arrived at the time of the Letter of Termination. For the reasons given earlier, the conditions set out in Clauses 40 and 44 had not been satisfied at that date. Nor (if this matters) was it inevitable that they would be satisfied within 14 days after the date of the Letter of Termination. Even if (contrary to the finding I have made) the plaintiff was in breach of Clause 44 by not being reasonably satisfied that it would have no liability to Heggies, that would not mean that the completion date had arrived. If the plaintiff was in breach in that way, that breach might, in itself, justify a termination of the contract – but the basis upon which the contract was terminated would be that breach of Clause 44, not a breach of an obligation to complete under Clause 45.

164 As well, no objection had been raised by Mr Carroll to the transfer being to Cement Resources – indeed, as soon as Mr Carroll heard that ABL wished to transfer to Cement Resources, he altered the heading he put on correspondence in the matter to name Cement Resources as the purchaser.

165 Finally, I am not satisfied that, as a matter of construction, Clause 4 requires the direction to be given at least 14 days before the completion date. If the transferee is not the purchaser, the direction contemplated by Clause 4.3 must be given to the vendor either at, or prior to, completion – otherwise the vendor could not be satisfied that it was obtaining a discharge of its obligation to transfer the land to the purchaser named in the contract – but I do not read the clause as requiring the direction to be served at least 14 days before the completion date.

166 This head of claim does not justify a finding of repudiation.

f) Insisted on compliance with special conditions 40 and 44 of the Contract notwithstanding that it had, by payment of the deposit in accordance with special condition 46, indicated that all conditions set out in the contract had been satisfied

167 The plaintiff at all times contended that it was paying the second instalment of the deposit earlier than it was obliged to, and as a matter of good faith. When the payment was made in that way, the payment does not involve an admission that the time when there was “satisfaction of all conditions precedent set out in the Contract” (within the language of clause 46) had arrived.

168 In any event, even though it is far from clear, it seems to me that the preferable construction of Clause 46 is that the “conditions precedent” to which it refers are those which the contract itself identifies as conditions for completion, namely 37.2(a), 38, 39.2 and 42.(b). My main reason for reaching this conclusion is that, otherwise, the second instalment of deposit would be payable only at, or just before, settlement, which makes little commercial sense. I reach this conclusion even though, for example, as a matter of construction Clause 40.3 is properly regarded as a condition precedent to completion. Ms Whitburn was asserting otherwise at one stage, but by 13 April 2005 (see para [66] above) seems to have come to the view according with my own about what are the “conditions precedent” within the meaning of Clause 46.

169 On either of these bases, compliance with special conditions 40 and 44 was not dispensed with or waived as a result of the payment of the second instalment of the deposit.

g) Alternatively by purporting to make conditional payment of the second instalment of the deposit

170 For reasons given earlier, this basis is not made out.

Conclusion Concerning Repudiation

171 As well as considering these individual alleged repudiatory acts, I have considered the entire course of conduct of the plaintiff. I do not find that, even taken as a whole, it satisfies the legal tests for repudiation set out at paras [129] and [130] above.

Entitlement to Terminate Under Clause 2

172 The basis of this contention by the plaintiff is that the deposit was not paid “unconditionally”, as Clause 2.4 requires. For reasons already given, I do not accept that the deposit was paid only conditionally. Further, the deposit was paid in full well prior to the date of the alleged termination, so any right to terminate which there might once have been, had been lost, pursuant to Clause 2.5.

Contractual Right to Terminate Under Clause 41

Construction of the Right to “Rescind or Terminate” in Clause 41(a)

173 A clause in a contract for the sale of land which confers a power to “rescind or terminate” ignores decades of experience of New South Wales conveyancing lawyers which draws a clear distinction between rescission and termination, of the type reflected in the definitions in Clause 1 of the standard form of contract. Clause 41 of this contract is, therefore, no model for conveyancers to emulate. However, as these parties have used it, and one aspect of the case depends upon it, I must make sense of it as best I can.

174 Clause 1 of the printed form, unlike many definition clauses in contracts, does not state that the definitions contained in it are ones which apply unless the context otherwise requires. Further, the definitions are not ones which state what the defined terms include – they state what the defined terms “mean”.

175 I was attracted at one time to the idea that it would be helpful to apply the definitions of “rescind” and “terminate” to the contractual power conferred by Clause 41, by substituting what the words mean for each of the respective words. If one does that, the power is one to:

“(a) rescind-this-contract-from-the-beginning or terminate-this contract-for-breach [this contract] without the payment of any form of compensation, loss or damage; or

… and the purchaser cannot make an object [sic], requisition or claim for compensation, loss or damage or seek any other form of relief or remedy, whatsoever, or rescind-this-contract-from-the beginning or terminate-this-contract-for-breach because of such rescission … “

176 I was also at one time attracted to the idea that Clause 19.2 could assist in construing Clause 41. However, I have also abandoned that idea. While Clause 19.2 states what is “normally” the consequence of a rescission of contract, (which does not enable any forfeiture of the deposit to occur) Clause 19.2 can, because of the definition of “normally”, be overridden by other provisions of the contract.

177 Further, Clause 30 requires clauses after 30 to prevail in the event of any conflict or inconsistency with clauses before 30, and the opening words of Clause 41 are “Notwithstanding any other provision of this Contract”. Thus Clause 41 is capable of overriding both the definitions in Clause 1, and the statement of the consequences of a rescission in Clause 19.2, if there is any conflict or inconsistency. The correct way of proceeding is first to construe Clause 41 on its own, and only then see whether there is any conflict or inconsistency between it and any other clause in the contract.

178 I record that the plaintiff did not wish to put an argument that Ms Whitburn’s requests for the Deed of Termination and Release amounted to a “requisition” within the meaning of Clause 1, that it had been put at a time which was permissible under Clause 5.3, and was capable of giving the vendor a right to rescind under Clause 8. Given the overriding nature of Clause 41, and that the defendants stated that what they were doing was terminating, not rescinding, that approach was correct.

179 Well recognised principles of contract construction are that a construction should be avoided which leads to capricious and unreasonable results: Australian Broadcasting Commission v Australasian Performing Rights Association Limited (1973) 129 CLR 99 at 109, and that if a contract is open to two constructions it will receive that construction which will avoid consequences which are capricious, unreasonable, unjust or inconvenient: TCN Channel Nine Pty Limited v Hayden Enterprises Pty Ltd (1989) 16 NSWLR 130 at 146. In my view it would be capricious, and also unreasonable, and also unjust, if Clause 41 were construed in a way which resulted in the exercise of the contractual power conferred by it, in circumstances where the purchaser was not in breach, leading to a conclusion that the vendor could forfeit the deposit. Two ways of construing Clause 41 so as to avoid this conclusion are clearly open on its words.

180 The first of them arises from the fact that there is a syntactic ambiguity about whether the words “without the payment of any form of compensation, loss or damage” is an adverbial phrase which qualifies only “terminate” or qualifies both “rescind” and “terminate”. If the expression “without the payment of any form of compensation, loss or damage” was read as meaning that the vendor would have no obligation to repay a deposit, I would construe the phrase as qualifying only “terminate”. In that event, there would be no inconsistency between Clause 41 and the definition clause. This is because the power to terminate under Clause 41 would arise only when, as well as the condition stated in the opening lines of Clause 41 having arisen, there was also a breach on the part of the purchaser.

181 This way of reading Clause 41(a) is equivalent to treating it as having a comma in it, so that it read:

“rescind, or terminate this Contract without the payment of any form of compensation, loss or damage; or”

182 A second way of avoiding the capricious, unreasonable and unjust conclusion which I have mentioned relates to the meaning of “without the payment of any form of compensation, loss or damage”. That expression does not expressly state that there is to be no returning of the deposit. In the circumstance where a vendor has, without fault of the purchaser, exercised a contractual power to bring a contract to an end, and where the vendor subsequently repays the deposit to the purchaser, that payment is, as a matter of strict legal analysis, not one which takes the form of “compensation, loss or damage”. Rather, it is providing restitution to the purchaser of property which, in those circumstances, is properly the property of the purchaser. If Clause 41(a) is read in that way, then, if the power to terminate which it confers is exercised, that is a termination which does not bring with it the power conferred by Clause 9.1 for the vendor to keep or recover the deposit – because that power is, by Clause 9 itself, one which arises only “if the purchaser does not comply with this contract (or a notice under or relating to it) in an essential respect”. In that circumstance, the power to terminate conferred by clause 41 would be a power to terminate other than for breach. The opening words of Clause 41 would then have the effect that the definition of “terminate” in Clause 1 was not applicable in Clause 41.

183 This second way of construing Clause 41(a) would have the effect that, if the conditions for exercise of the Clause 41 power set out before para (a) were met, the contract could be terminated but not (when the purchaser was not in breach) in any sense which enabled the deposit to be forfeited. My reason for not preferring this construction of the power to “rescind or terminate” is that I doubt that the parties intended the strict legal analysis of “compensation loss or damage” upon which it depends.

Has the Condition for Exercise of the Power in Clause 41 Arisen

184 It is to be observed that it is “any matter arising under or in connection with the matters referred to in special condition 40” which is one of the elements for the arising of the contractual power under Clause 41. One of the “matters referred to in special condition 40” is the obligation on the vendor to “otherwise provide reasonable evidence to the reasonable satisfaction of the purchaser”. There can be a “matter arising under or in connection with the matters referred to in special condition 40” short of a situation where the purchaser is in breach of its obligation under Clause 40.3(c) by failing to be satisfied, when a reasonable person ought to be satisfied. If the only relevant consideration were what was the ordinary meaning of the words, there could be a “matter arising under or in connection with the matters referred to in special condition 40” if the vendor took the view that complying with special condition 40.3(c) is proving too difficult for it, or taking longer than it would rather.

185 But the ordinary meaning of the words are not the only relevant consideration. The contractual power in Clause 41 is one which would be read so that there was an implied obligation to exercise the power in good faith: cf Alcatel Australia Ltd v Scarcella (1998) 44 NSWLR 349, as well as a restraint on the vendor exercising the contractual power where it would be unconscionable in the circumstances to do so: Pierce Bell Sales Pty Ltd v Frazer (1973) 130 CLR 575 at 587.

186 Before the contractual power in Clause 41 arises:

(i) the vendor must be restricted restrained or otherwise prevented from completing the contract, and

(ii) that state of being “restricted restrained or otherwise prevented” must come about from a specified type of cause, namely “any injunction, caveat, or any other act, deed or intervention of a third party, or court order.”

“restricted restrained or otherwise prevented”

“act, deed or intervention of a third party”

“of a third party”

“act”

”deed”

“intervention”

187 The meaning of “any other act, deed or intervention of a third party” is expanded, beyond the ordinary meaning of that expression, to also include “any matter arising under or in connection with the matters referred to in special condition 40”. The words “without limitation” I construe as meaning the same as “without limiting the generality of the foregoing”. Thus, the expression “any other act, deed or intervention of a third party” is to have the full extent of meaning that it would have if the words “including (without limitation) any matter arising under or in connection with the matters referred to in special condition 40” were not there, but as well the meaning of that expression is artificially extended to include “any matter arising under or in connection with the matters referred to in special condition 40”.

188 It is the defendants who bear the onus of proving that the condition for operation of Clause 41 has come about.

189 The closest that there is in the evidence to an explanation for the abrupt cessation of the efforts which the defendants were making to obtain executed copies of the Deeds is that Mr Shirlaw gives evidence of having met with Mr Finney on 2 May 2005, and that in the course of that meeting Mr Shirlaw said:

“Mark, we are now in receipt of the royalties of about $26,000 per month plus interest will accrue on our first mortgage, however I would still like to settle with you if you are prepared to increase the price. Here are the through put figures that you asked for and here are the e-mails to and from Boral regarding the negotiations with them. You will see that they have offered $4.3M, but I have told them that the price is $4.5M and it is not negotiable. Here are the letters from Kate to John M O’Connor & Company and their replies. (I tabled a copy of the letters). You will see that Kate has been continually insisting on me giving her documents which are impossible for me to deliver. Heggies Lawyers insist on being paid $2,000 which Kekatos owes them and has not paid them otherwise they will provide nothing.”

“which are impossible for me to deliver”

Blatch v Archer

Ho v Powell

190 I am not satisfied that the defendants were “restricted, restrained or prevented” from completing the contract. That is a state of affairs which must exist at the time that they sent the Letter of Termination. Yet they did not tell the plaintiff, before the termination, of any difficulties which they might have been undergoing in obtaining the executed Deed which Ms Whitburn wanted. It has not been proved that Heggies lawyers would not hand over the Deed without being paid $2,000. Even if it were true that Heggies lawyers would not hand over the Deed without being paid $2,000, it is not shown that that state of affairs existed at the time the Letter of Termination was sent. It is not necessary to go on to consider whether, if it were true that Heggies lawyers would not hand over the Deed without being paid $2,000, and that state of affairs existed at the time of the Letter of Termination, it would be open to the defendants to exercise the contractual power under Clause 41 at a time when they had not paid the $2,000 themselves, nor asked the plaintiff if it wished to pay $2,000 to obtain the Deed. Relevant to that question is that Clause 29.4 makes express the obligation (which would probably have been implied without it) for the defendants to do whatever is reasonably necessary to cause (inter alia) the plaintiff’s reasonable satisfaction, under Clause 40.3(c), to be brought about and the rule (which is at the least a rule of construction) that a party cannot rely on his own wrong: New Zealand Shipping Co Limited v Société Des Ateliers et Chantiers de France [1919] 1 AC 1; Alghussein Establishment v Eton College [1988] 1 WLR 587; TCN Channel 9 Pty Ltd v Hayden Enterprises Pty Ltd (1989) 16 NSWLR 130 at 147-8, 161: Plumor Pty Ltd v Handley (1996 ) 41 NSWLR 30 at 34; Hunyor & Anor v Tilelli (1997) 8BPR [97667] 15,629 at 15,631; Munro & Anor v Bodrex P/L (2002) 10 BPR 19,403; [2002] NSWSC 122; Mitchell v Pattern Holdings Pty Limited (2002) 11 BPR 20,241; [2002] NSWCA 212; Brothers v Park and Anor [2004] ANZ Conv R 451; [2004] NSWCA 241 at [82]; Ruthol Pty Ltd v Mills [2003] NSWCA 56 at [94] – [100].

191 Neither an I satisfied that it was an “act deed or intervention of a third party” which was the cause of any restriction, restraint or prevention which there might have been. I am not satisfied that it was an act, deed or intervention of the third party, rather than something peculiar to the defendants themselves, which led to any such restriction, restraint or prevention.

192 In my view, the preferable construction of Clause 41 is that the “matter arising under or in connection with the matters referred to in special condition 40” should be a matter which relates to the activities of a third party. Any other construction seems unlikely, given that the power is one which must be exercised in good faith, and that it is not commercially likely that the parties intended that the vendors could terminate just because they had decided they no longer wished to try to meet their obligations under Clause 40. However, even if I were wrong in that view of construction, I am not satisfied that the effective cause of the vendors’ termination is anything other than the vendors’ own decision. If the effective cause is the vendors’ own decision, it can hardly be said that the vendor “is restricted, restrained or otherwise prevented”, as each of those expressions suggests some form of external constraint on the vendors’ action.

193 For these reasons, I am not satisfied that the contractual power in Clause 41 has been validly exercised. The contract therefore remains on foot.

Ready Willing and Able

194 In that event, the defendants raise only one obstacle to the granting of specific performance. The defendants have contested that the plaintiff is ready willing and able to perform the contract.

195 The plaintiff is a substantial corporation. It is listed on the Australian Stock Exchange. Its financial accounts for the year ended 31 December 2004 showed it as making a net profit of more than $20.2m, and the net profit of the plaintiff and its controlled entities was over $81.4m during that year. Its balance sheet as at 31 December 2004 showed a total equity in excess of $488m in the plaintiff itself, and in excess of $620m in the plaintiff and its controlled entities. The directors’ report, sent to the Australian Stock Exchange on 8 March 2005, stated that no matter or circumstance had arisen since 31 December 2004 that had significantly affected, or may significantly affect future operations or results.

196 The plaintiff’s financial accountant swore an affidavit on 14 July 2005 in which he deposed to the plaintiff and the entities it controls having access to net overdraft facilities of $4m with NAB, and, at the end of April 2005, having an unused $5m of facility with the ANZ Bank. As well it has funds in at lease one bank account in credit. While the facility with ANZ Bank is due to expire on 30 September 2005 the accountant’s evidence (on which he was not cross-examined) was that ‘it is expected that a replacement long term credit facility will be secured during 2005”. On 5 May 2005 the plaintiff arranged for bank cheques to be drawn for the amount which would be needed if ABL were to complete the purchase. Those bank cheques were obtained on the same working day on which they were requested. Copies of them are in evidence. Even after the purchase price of those bank cheques had been debited to its bank account, that account remained in credit more than $15m. At 20 May 2005 (the last day to which the bank statements which were tendered related) that account remained in credit by more than $8.2m.

197 I am satisfied that the plaintiff was ready willing and able to perform the contract at the time these proceedings were instituted, and is likely to remain ready willing and able to perform the contract at the time those obligations will fall due for performance.

Plaintiff’s Claim for Damages

198 The plaintiff claims damages for the breach of contract by the defendants in refusing to complete when the plaintiff ceased seeking to have any further steps taken to satisfy it that it would have no liability connected with the joint venture. It points to the royalties of about $26,000 per month which Mr Shirlaw admitted to Mr Finney he was receiving (para [189] above). The interest which was to accrue on the first mortgage, which Mr Shirlaw also told Mr Finney about, was interest which would start to run on the Ostabridge Mortgage from the date of termination of the contract, pursuant to the agreement between Mrs Kekatos, Ostabridge, Mr Shirlaw and Mr Cvitanovic embodied in the court orders of 10 March 2005. As the contract has not been terminated, interest will in fact not run on that mortgage.

199 The plaintiff sought an order for an inquiry before an Associate Judge, to ascertain the precise quantum of its damage. Before any such order can be made, it is necessary for the plaintiff to prove that it has suffered some damage. I am not satisfied that the plaintiff has provided that proof.

200 While there is an admission from Mr Shirlaw that he has been in receipt of royalties of about $26,000 per month, which the plaintiff would have become entitled to receive if the contract was completed, the plaintiff has been spared the expense associated with ownership of the land. Rates, waste management charges and water and sewage charges for the 2004/2005 rating year were $8,156.03. The plaintiff has not needed to make any contribution towards those rates, or the rates relating to the current rating year, because of the defendant’s failure to complete. More importantly, the plaintiff has been able to retain use of the $3,750,000 it would otherwise have spent in paying the balance of the purchase price of the property. If the plaintiff’s cost of capital was 8½% per annum or more, its cost of providing that $3.75m, when added to the rates which would be payable, would exceed the income from the royalties at the rate of $26,000 per month. Having a cost of capital of 8½% or more is not something which is so unlikely that it should be rejected, when no specific proof is offered on that topic. Neither party attempted to identify any other expenses that the plaintiff has been spared, through not having completed the contract.

201 In these circumstances, the plaintiff has not discharged its onus of proving that it has suffered some damage in consequence of the defendant’s refusal to complete the contract.

1. Order that the contract made on 7 July 2004 whereby the defendants agreed to sell to the plaintiff and the plaintiff agreed to purchase from the defendants the land contained in Folio Identifiers 1/253462, 2/253462, 3/253462, 4/253462 and 5/253462 for a price of $4,150,000 be specifically performed.

2. Defendants to pay costs of the plaintiff of these proceedings.

3. Reserve further consideration.

4. Reserve liberty for either party to apply on 3 days notice.

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Citations

Adelaide Brighton v Ostabridge [2005] NSWSC 737

Most Recent Citation

Birdseye v The Registrar-General of Lands Titles Office & W & R Pty Ltd [2007] SADC 130

Cases Citing This Decision

7

Sidameneo (No 456) Pty Ltd v Alexander [2011] NSWCA 418

Ostabridge Pty. Limited & Anor. v Adelaide Brighton Limited [2007] NSWCA 59

Nursery Nuts v Almond Investors Ltd [2010] NSWDC 71

Cases Cited

23

Statutory Material Cited

5

Brothers v Park [2004] NSWCA 241

Burger King Corporation v Hungry Jack's Pty Ltd [2001] NSWCA 187

Heggies Bulkhaul Ltd v Global Minerals Australia Pty Ltd [2003] NSWSC 851

CITATION:	Adelaide Brighton v Ostabridge [2005] NSWSC 737
HEARING DATE(S):	25/7/05 & 26/7/05
JUDGMENT DATE :	5 August 2005
JURISDICTION:	Equity
JUDGMENT OF:	Campbell J
DECISION:	Specific performance ordered

CATCHWORDS:	CONTRACTS - GENERAL CONTRACTUAL PRINCIPLES - discharge, breach and defences to action for breach - whether contract repudiated - CONVEYANCING - LAND TITLES UNDER THE TORRENS SYSTEM - mortgages, charges and encumbrances - transfer by mortgagee exercising power of sale - concerning what breaches notice under section 57(2)(b) Real Property Act 1900 or section 111(2) Conveyancing Act 1919 is required - CONTRACTS - GENERAL CONTRACTUAL PRINCIPLES - construction and interpretation of contracts - one party obliged to provide evidence to the reasonable satisfaction of the other concerning a particular fact - nature of obligations imposed - WORDS AND PHRASES - "reasonable satisfaction" - DEEDS - delivery - how established - CONTRACTS - GENERAL CONTRACTUAL PRINCIPLES - construction and interpretation of contracts - when compliance with one provision of a contract is a condition precedent for performance of another provision of that contract - CONVEYANCING - RELATIONSHIP OF VENDOR AND PURCHASER - matters arising between contract and conveyance - if transfer is to someone other than the purchaser, when does standard form of contract require purchaser to give a written direction to effect such a transfer - CONVEYANCING - RELATIONSHIP OF VENDOR AND PURCHASER - matters arising between contract and conveyance - payment of deposit - when deposit paid "unconditionally" - CONTRACTS - GENERAL CONTRACTUAL PRINCIPLES - construction and interpretation of contracts - principles for construction - construction of clause conferring contractual power to terminate - CONTRACTS - GENERAL CONTRACTUAL PRINCIPLES - discharge, breach and defences to action for breach - termination pursuant to contractual power - construction of particular clause conferring such a power
LEGISLATION CITED:	Conveyancing Act 1919 Conveyancing (Sale of Land) Regulation 2000 Duties Act 1997 Local Government Act 1993 Real Property Act 1900
CASES CITED:	Alcatel Australia Ltd v Scarcella (1998) 44 NSWLR 349 Alghussein Establishment v Eton College [1988] 1 WLR 587 Australian Broadcasting Commission v Australasian Performing Rights Association Limited (1973) 129 CLR 99 Blatch v Archer (1774) 1 Cowp 63 Brothers v Park and Anor [2004] ANZ ConvR 451; [2004] NSWCA 241 Browne v Dunn (1893) 6 R 67 Burger King Corporations v Hungry Jacks Pty Ltd [2001] NSWCA 187 Edwards v The Hunter Valley Co-op Dairy Co Ltd (1992) 7 ANZ Ins Cases 61-113 Heggies Bulkhaul v Global Minerals Australia [2003] NSWSC 851 Heggies v Shirlaw [2004] NSWSC 805 Ho v Powell (2001) 51 NSWLR 572 Hooker Industrial Developments Pty Ltd v Trustees of the Christian Brothers [1977] 2 NSWLR 109 Hunyor & Anor v. Tilelli (1997) 8BPR [97667] 15,629 Hyhonie Holdings Pty Ltd v Leroy [2003] NSWSC 624 Isherwood v Butler Pollnow Pty Ltd (1986) 6 NSWLR 363 Kennard & Others v IE Featherston, Superintendent of Wellington (1867) 1 NZCA 15 Laurinda Pty Ltd v Capalaba Park Shopping Centre Pty Ltd (1989) 166 CLR 623 McDougall v Aero Marine of Emsworth Ltd [1958] 1 WLR 1126; [1958] 3 All ER 431 Meehan v Jones (1982) 149 CLR 571 at 591 Metropolitan Brick Company v Hayward & Another [1938] SASR 462 Mitchell v Pattern Holdings Pty Limited (2002) 11 BPR 20,241; [2002] NSWCA 212 Munro & Anor v Bodrex P/L (2002) 10 BPR 19,403; [2002] NSWSC 122 New Zealand Shipping Co Limited v Société Des Ateliers et Chantiers de France [1919] 1 AC 1 The Ombudsman v Moroney [1983] 1 NSWLR 317 Pierce Bell Sales Pty Ltd v Frazer (1973) 130 CLR 575 Plumor Pty Ltd v Handley (1996 ) 41 NSWLR 30 The Progressive Mailing House Pty Limited v Tabali Pty Ltd (1985) 157 CLR 17 Ross T Smyth & Co Ltd v T D Bailey, Son & Co [1940] 3 All ER 60 Ruthol Pty Ltd v Mills [2003] NSWCA 56 Secured Income Real Estate (Australia) Ltd v St Martins Investments Proprietary Limited (1979) 144 CLR 596 Shevill v Builders Licensing Board (1982) 149 CLR 620 Smith v Sadler (1880) 6 VLR (L) 5 Sullman v Sullman [2002] NSWSC 169; (2002) DFC 95-248 TCN Channel 9 Pty Ltd v Hayden Enterprises Pty Ltd (1989) 16 NSWLR 130 VL Credits Pty Ltd v Switzerland General Insurance Co Ltd (No 2) [1991] 2 VR 311 Walsh v Johnston (1869) 6 WW & a'B (L) 77 West v Mead [2003] NSWSC 161 Young & Another v The Ballarat and Ballarat East Water Commissioners (1878) 4 VLR (L) 306
PARTIES:	Adelaide Brighton Limited - Plaintiff Ostabridge Pty Limited (In Liquidation) (Receiver and Manager Appointed) - First Defendant Kevin Richard Shirlaw (in his capacity as Receiver and Manager of Ostabridge Pty Ltd (In Liquidation) and personally) - Second Defendant
FILE NUMBER(S):	SC 2870/05
COUNSEL:	GC Lindsay SC; IE Davidson - Plaintiff B Coles QC; G Sirtes - Defendants
SOLICITORS:	Johnson Winter & Slattery - Plaintiff Swaab Attorneys - Defendants