Amazon Creek Pty Ltd v DVLPMNT Group Pty Ltd & McLeod
[2025] VCC 29
•31 January 2025
| IN THE COUNTY COURT OF VICTORIA AT MELBOURNE COMMERCIAL DIVISION | Revised (Not) Restricted Suitable for Publication |
GENERAL LIST
Case No. CI-23-01663
| Amazon Creek Pty Ltd (ACN 639 390 917) as trustee of Amazon Creek Unit Trust | Plaintiff |
| v | |
| DVLPMNT Group Pty Ltd (ACN 650 140 088) | First defendant |
| Campbell John McLeod | Second defendant |
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JUDGE: | HIS HONOUR JUDGE WISE | |
WHERE HELD: | Melbourne | |
DATE OF HEARING: | 9 October 2024, 9 & 10 December 2024 and 23 January 2025 | |
DATE OF JUDGMENT: | 31 January 2025 | |
CASE MAY BE CITED AS: | Amazon Creek Pty Ltd v DVLPMNT Group Pty Ltd & McLeod | |
MEDIUM NEUTRAL CITATION: | [2025] VCC 29 | |
REASONS FOR JUDGMENT
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Subject:Contract Termination and Estate Agent’s Authority
Catchwords: CONTRACT LAW – Contract of sale of land – Termination under due diligence clause – Special conditions – Whether real estate agent authorised to receive notice of termination – Whether vendor provided purchaser with 14 days’ access to property – Condition precedent – Whether purchaser in default – Whether vendor entitled to damages – Principles of contractual interpretation
Legislation Cited:
Cases Cited:Lo v Russell [2016] VSCA 322; Peterson v Moloney (1951) 84 CLR 91; Brien v Dwyer (1978) 141 CLR 378; Markson v Cutler [2007] NSWSC 1515; Flexirent Capital Pty Ltd v EBS Consulting Pty Ltd [2007] VSC 158; Cubillo v Commonwealth (2000) 174 ALR 97; Christmas v Nicol Bros Pty Ltd (1941) 41 SR (NSW) 317; S v M (1984) 36 SASR 316; O’Donnell v Reichard [1975] VR 916 at 929; Payne v Parker [1976] 1 NSWR 191; EMR Capital Investment (no 6B) Pte Ltd v Carl Hallion [2024] VSC 805; Adaz Nominees Pty Ltd v Castleway Pty Ltd [2020] VSCA 201; Perri v Coolangatta Investments Pty Ltd (1982) 149 CLR 537
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APPEARANCES: | Counsel | Solicitors |
| For the Plaintiff | Shaun Clement | DSA Law (Vic) Pty Ltd |
| For the Defendant | Patrick Noonan | Hughes Legal Pty Ltd |
Contents
Introduction
Summary of conclusions
Background
Evidence at Trial
Issues for Determination
Issue 6 Did Mr McLeod say to Mr Johnson words to the effect that the purchasers would not be proceeding with the purchase pursuant to the Contract of Sale?
Issue 5 For the first defendant to terminate the Contract of Sale pursuant to Special Condition 23, was it obliged to communicate that termination to the vendor, the vendor’s legal practitioner or vendor’s conveyancer, rather than the vendor’s real estate agent, having regard to:
(a) .................................. the provisions for service in the contract of sale; and
(b) .... whether the estate agent was authorised to receive notice of termination?
Conclusion on Issues 5 and 6
Issue 1 What is the proper construction of special condition 23 of the Contract of Sale?
Issue 2 As part of the question for determination in paragraph 1, was the first defendant’s obligation to purchase the property subject to a contingent condition of performance, or condition precedent, requiring the plaintiff to provide the first defendant with access to the property for 14 days to evaluate the extent of underground contamination and potential for redevelopment of the Property?
Issue 3 If the construction of special condition 23 in paragraph 2 is applicable, did the plaintiff satisfy that contingent condition of performance or condition precedent?
Issue 4 If the answer to question 2 is “no”, then by what date did the due diligence period in special condition 23 expire?
Issue 7 If the due diligence period had not yet expired by 4.33pm on 6 December 2022, then was the email sent at that time by the first defendant’s solicitor at that time effective to terminate the contract of sale pursuant to special condition 23?
Issue 8 If the first defendant did not terminate the contract of sale prior to the expiry of the due diligence period, then did the first defendant default on its obligations under the contract of sale and, if so, is the plaintiff entitled to recover from both defendants the following loss and damage:
(a) Damages of $550,000, which is calculated on the basis of the difference between the original purchase ($2,650,000) price and the final sale price ($2,100,000)?
(b) Interest calculated pursuant to the contract of sale (alternatively pursuant to statute)?
Conclusion and orders
HIS HONOUR:
Introduction
On 21 November 2022, the Plaintiff, Amazon Creek Pty Ltd (vendor), executed a contract of sale with the First Defendant (purchaser), to purchase 4 Grantville Drive, Grantville (property) for $2,650,000. The second defendant (Mr McLeod) guaranteed the purchaser’s obligations under the contract.
The contract called for a deposit of $265,000, to be paid upon the contract becoming unconditional.
The vendor contends that the purchaser failed to pay the deposit after the due diligence period expired on 5 December 2022. The vendor issued a notice of default and rescission on 23 December 2022. The purported default was not remedied and the vendor now claims that the contract was rescinded on 6 January 2023. The property was later sold at a reduced price, and by this proceeding the vendor now seeks $550,000 in damages, comprised of the difference in sale price, agent’s commission, and legal costs.
The purchaser and Mr McLeod (who will hereafter be referred to together as the purchasers) contend that the contract was subject to a condition giving them a 14 day due diligence period during which they could give notice of their intention to terminate the contract (SC23). They say that they validly gave notice of their intention to terminate the contract under that clause. In the result, the purchasers say that the deposit never became due and that the vendor’s notice of default and rescission was of no effect.
The purchasers also contend that upon a proper construction, SC23 was a condition precedent to the operation of the contract and that their obligation to purchase the property was contingent upon the vendor providing them with 14 days to assess the extent of underground contamination of the property and to evaluate the property's redevelopment potential. They contend that the vendor did not provide them with physical access to the property for 14 days so as to enable them to make the assessments as required under SC23 and consequently, the contract never became unconditional or enforceable.
The vendor disputes the purchasers’ claim of termination, arguing that the purchasers did not give notice within the 14 day due diligence period, and contends that the purported oral notice given to the vendor’s estate agent was invalid. It also denies that, properly construed, SC23 is a condition precedent to the operation of the purchasers’ obligations under the contract and that it was required to provide physical access to the property as alleged. Therefore, it contends that the contract became unconditional on 5 December 2022, making the failure to pay the deposit a breach of contract.
The Court must determine whether the purchasers lawfully terminated the contract on 2 December 2022, thereby relieving them of any further obligations; whether SC23 operates as a condition precedent affecting the contract's enforceability; and whether the vendor’s purported rescission of the contract on 6 January 2023 was valid, entitling it to recover damages.
Summary of conclusions
For the reasons which follow I find that:
(a) Notice of termination was given by Mr McLeod in his conversation with Mr Johnson on 2 December 2022 and that such notice was effective to meet the requirements of SC23;
(b) The proper construction of SC23 is that it operated as a condition precedent, meaning that the purchaser’s obligations under the contract did not become unconditional unless and until the vendor provided the purchaser with 14 days’ access to the property to evaluate underground contamination and redevelopment potential;
(c) The vendor failed to satisfy SC23, as it did not provide the purchaser with the required access for 14 days before asserting that the contract had become unconditional. The due diligence period, therefore, had not expired when the vendor contended that the contract became unconditional;
(d) Given that the vendor did not return the executed Access Agreement until 1 December 2022, the due diligence period ran for 14 days from that date, meaning it expired on 15 December 2022;
(e) Mr Johnson had actual and ostensible authority to receive notice of termination under SC23. Further, the notice of termination was in fact relayed to the vendor’s director, Mr Du Rieu, on the same day, so that notice was given to the vendor itself. As a consequence, any issue of the estate agent’s authority to receive such notice is moot;
(f) If termination had not been effected on 2 December 2022, the email sent by the purchaser’s solicitor at 4.33 pm on 6 December 2022 constituted valid written notice of termination, as it unambiguously communicated the purchaser’s decision not to proceed; and
(g) Given the valid termination of the contract, the first defendant did not default on its obligations, and the plaintiff is not entitled to recover damages. The claim for $550,000 in damages (representing the price difference between the original sale price of $2,650,000 and the subsequent sale price of $2,100,000) and interest must therefore fail.
Background
On 29 August 2022, the vendor entered into an exclusive sales authority agreement with Cameron’s Real Estate to sell the property.
On 17 November 2022, the purchasers offered to purchase the property by sending an executed contract of sale to the vendor’s estate agent, David Johnson (Mr Johnson). The offer was accepted and the contract was executed by the vendor on 21 November 2022.
On the same day, the vendor’s solicitors sent an email to the purchasers’ solicitor enclosing the fully executed contract together with a draft Access Agreement to provide the purchasers with access to the property during the 14 day due diligence period. The email set out a number of milestones for the contract including that the due diligence period under SC23 would expire on 5 December 2022.The email also contained the following paragraph:
“Further to the contract, we refer to the original offer letter and the agreed proposal for your client to access the property for due diligence purposes, and subsequent to the due diligence condition being satisfied, in order to progress marketing and/or planning steps for the Property. We have therefore drafted the further attached Access Agreement for your client's consideration, which is provided subject to our client's instructions in the interests of efficiency of time. This agreement will need to be finalised and executed by your client prior to access being officially available.”
The due diligence clause SC23 in the contract provided as follows:
“The purchaser (sic) is subject to an exclusive due diligence period of 14 days to evaluate the extent of underground contamination and potential for redevelopment of the above-mentioned sites. If at any time during that period the purchaser establishes that the redevelopment potential is not to its liking the purchaser can terminate this agreement.”
In a further email on 21 November 2022 the vendor’s solicitor noted that its sales agent, Mr Johnson, was attending to having the purchaser’s director sign the Guarantee & Indemnity contained in the contract.
On 22 November 2022, Mr McLeod sent an email to Mr Johnson, attaching the executed contract of sale along with a completed guarantee and the Access Agreement, which had been executed by the purchaser.
On 1 December 2022 the vendor’s solicitor returned to the purchasers’ solicitor an executed version of the Access Agreement.
Clause 1.2(a) of the Access Agreement provided to the purchasers during the period of 14 days commencing on the day of sale (21 November 2024) (DD Access Period) access to the property as follows:
“For the DD Access Period, access to and of the Property by the Purchaser and the Purchaser's Employees for the purpose of undertaking due diligence, including soil testing, surveying or other non-invasive testing;
It should be noted that notwithstanding that the contract provided to the purchasers a due diligence period of 14 days to “evaluate the extent of underground contamination and potential for redevelopment of the above-mentioned sites”, the Access Agreement was not returned by the vendor to the purchaser until 9 days after an executed version had been provided by the purchasers.
The purchasers allege that as a result of this, they did not enjoy the 14 day due diligence period that was contemplated by SC23. They say that were not given 14 days access to the property as they contend was required by SC23 with the result that a condition precedent to the operation of the balance of the contract was unfulfilled. They say that this is a full defence to the vendor’s claim.
On 2 December 2022 a telephone call took place between Mr McLeod and Mr Johnson. There is a dispute about what was said in that conversation. Mr McLeod says that he told Mr Johnson that he would not be proceeding with the contract. In essence he says that he gave oral notice of termination of the contract under SC23. Mr Johnson says that no notice of termination was given. He says that Mr McLeod told him that he was having difficulty making the deal “stack up” and that he was having a meeting with investors later in the day. He says that Mr McLeod said he would revert later that day. He says that he did not hear from Mr McLeod again that day.
Mr Johnson and Mr McLeod agree that in the 2 December 2022 conversation Mr Johnson asked Mr McLeod if he would be prepared to make a further offer at a lower price of $2,200,000.
Mr McLeod says that after his call with Mr Johnson, he spoke with Ben Griffiths, with whom Mr McLeod was working on the purchase deal, about the possibility of proceeding at the lower price.
In the evening of 2 December 2022, Mr Griffith emailed Mr McLeod that his associates were not comfortable with the price and therefore would not be proceeding with the deal.
The vendor alleges that the due diligence period expired on 5 December 2022 without notice of termination having been given by the purchasers, with the result that the contract of sale became unconditional.
On 6 December 2022, the vendor’s solicitor sent an email to the purchasers’ solicitor advising that the contract was now unconditional and called for payment of the deposit of $265,000.
In response, the purchasers’ solicitor sent an email on 6 December 2022 in the following terms:
“I am instructed that notice was provided by the purchaser to the selling agent on Friday 2 December 2022 advising the Due Diligence Period had been completed and the purchaser was not satisfied with its findings.
The contract has been ended pursuant to special condition 23.”
The purchasers rely on this email in support of an alternative defence. They say that as access was not granted to the property by the Access Agreement until it was executed and returned by the vendor on 1 December 2022, the 14 days due diligence period permitted under the contract of sale did not commence to run until 1 December 2022. They therefore allege that the email from their solicitor of 6 December 2022 constituted notice of termination under SC23. The vendor denies this alternative defence.
After consulting with Mr Johnson, by email on 7 December 2022, the vendor’s solicitor disputed the purchaser’s contention that the contract had been terminated as alleged.
On 22 December 2022, the vendor entered into a new contract of sale with a third party for the reduced price of $2,100,000.The next day, 23 December 2022, it issued a notice of default and rescinded the contract with the purchasers.
Evidence at Trial
The plaintiff called the following witnesses at trial:
(a) Mr David Mr Johnson, estate agent engaged by the vendor.
The defendants called the following witnesses at trial:
(a) Mr Campbell Mr McLeod, director of the purchaser.
(b) Mr Benjamin Griffith, who worked with Mr McLeod on attempting to find investors for the purchaser.
Issues for Determination
By the conclusion of trial the parties had agreed the following list of issues for determination.
1. What is the proper construction of special condition 23 of the Contract of Sale?
2. As part of the question for determination in paragraph 1, was the first defendant’s obligation to purchase the property subject to a contingent condition of performance, or condition precedent, requiring the plaintiff to provide the first defendant with access to the property for 14 days to evaluate the extent of underground contamination and potential for redevelopment of the Property?
3. If the construction of special condition 23 in paragraph 2 is applicable, did the plaintiff satisfy that contingent condition of performance or condition precedent?
4. If the answer to question 2 is “no”, then by what date did the due diligence period in special condition 23 expire?
Subject to the answers to questions 1 to 4:
5. For the first defendant to terminate the Contract of Sale pursuant to Special Condition 23, was it obliged to communicate that termination to the vendor, the vendor’s legal practitioner or vendor’s conveyancer, rather than the vendor’s real estate agent, having regard to:
(a) the provisions for service in the contract of sale; and
(b) whether the estate agent was authorised to receive notice of termination?
6. Did the first defendant terminate the contract of sale pursuant to special condition 23 on the morning of Friday, 2 December 2022? (Specifically, by way of a telephone call between David Mr Johnson and Campbell Mr McLeod at about 9.44am on that day.) Within this issue:
(a) Did Mr McLeod say to Mr Johnson words to the effect that the first defendant would not be proceeding with the purchase pursuant to the Contract of Sale?
(b) Was Mr McLeod’s communication to the estate agent on that telephone call effective to terminate the contract of sale, having regard to the answer to question 5?
7. If the due diligence period had not yet expired by 4.33pm on 6 December 2022, then was the email sent at that time by the first defendant’s solicitor at that time effective to terminate the contract of sale pursuant to special condition 23?
8. If the first defendant did not terminate the contract of sale prior to the expiry of the due diligence period, then did the first defendant default on its obligations under the contract of sale and, if so, is the plaintiff entitled to recover from both defendants the following loss and damage:
(a) Damages of $550,000, which is calculated on the basis of the difference between the original purchase ($2,650,000) price and the final sale price ($2,100,000)?
(b)Interest calculated pursuant to the contract of sale (alternatively pursuant to statute)?
I intend to deal with Issues 5 and 6 first, as in my opinion they are dispositive of the proceeding. By that I mean that I have found that Mr McLeod did, in the telephone call of 2 December 2022, notify Mr Johnson of the purchasers’ intention not to proceed with the contract and that Mr Johnson was authorised under the contract to receive that notice on behalf of the vendor. I have also found that Mr Johnson relayed the contents of that conversation to Mr Joseph Du Rieu, the vendor’s director, on 2 December. In this way notice of termination was given in fact to the vendor. Mr Clement, counsel for the vendor, rightly conceded that if I made the findings of fact that I have about that conversation and it having been conveyed to the vendor, then the argument about the authority of the agent to receive notice became redundant.
Issue 6 Did Mr McLeod say to Mr Johnson words to the effect that the purchasers would not be proceeding with the purchase pursuant to the Contract of Sale?
As set out in paragraphs 19 and 21 above Mr McLeod and Mr Johnson had a conversation on the morning of 2 December 2022.
They both gave evidence about this conversation. Their evidence agreed as to a number of matters of detail about this conversation. But they disagreed as to the critical matter.
In evidence in chief Mr Johnson said that he was driving when he rang Mr McLeod to see how he was going with his due diligence.[1] He says that Mr McLeod said that he was struggling to get the deal to stack up. Mr McLeod said that he was meeting with investors at 1pm that day to see if they could pull a rabbit out of the hat, and that he would call Mr Johnson back after that. Mr Johnson did not hear from Mr McLeod again that day.
[1] The phone records in evidence suggest that Mr Johnson may have telephoned Mr McLeod and left a short voice message and Mr McLeod then rang him back. Nothing turns on this.
I note that Mr Johnson did not in his evidence in chief give evidence of any part of the conversation in which it was suggested that Mr McLeod might make a further offer at a price below the contract price.
Mr Johnson said that he had a contemporaneous file note of that conversation. The vendor submits that these notes were “relatively contemporaneous”.[2] Mr Johnson conceded that the notes were actually made on 7 December 2022. This was after the dispute between the parties had become evident and at a time when he was potentially implicated in the dispute. I do not regard those notes as being truly contemporaneous. Given the circumstances under which they were made there is a strong possibility that they were self-serving and therefore do not give added credence to his evidence of the conversation.
[2] Plaintiff’s Outline of Closing Submissions dated 6 January 2025 (POCS) at [157].
When taken to the purchasers’ solicitor’s email of 6 December 2022 asserting (in effect) that the purchasers had told the selling agent on 2 December that they would not be proceeding with the contract of sale, Mr Johnson denied that he had been told this in that conversation.
Mr Johnson gave evidence of a further, more animated conversation he had with Mr McLeod on 7 December 2022, after it was apparent that the parties were likely in dispute about the termination, however this conversation has little bearing on what actually occurred in the subject conversation.
Mr McLeod’s evidence of the 2 December conversation was that he telephoned Mr Johnson after he had decided that he didn’t have sufficient comfort to proceed with the purchase. He rang and told him that at that time they could not proceed at that price. Mr Johnson said that was fair enough and asked whether Mr McLeod would consider proceeding at a lower price. Mr McLeod asked what the lower price would be. Mr Johnson said $2.2 million. Mr McLeod’s evidence was then as follows:
Q.I said to him that at that price, I've done no numbers, I don't know if that makes up for anything different, but at this time I can't proceed at our original contract price, but if you'd like me to have a look at it, I've got to speak to my investors, I'll see if I can pull a rabbit out of a hat and see if we can make something happen.
Q.When you said you'd try and pull a rabbit out of a hat, about what?---About getting a deal done at a price that - oh, getting a deal done at all really, but getting a deal done at the price that David [Johnson] had come back to me at.
Q.And what was his response to you saying that to him?---He said to me to speak to my investors and come back to him, "let me know", let him know.
Under cross examination Mr Johnson initially denied that Mr McLeod had told him that the purchasers would not be proceeding with the contract at the price of $2.65 million. He then said that after Mr McLeod told him that he was having trouble to get the deal to stack up, he suggested that Mr McLeod might make a reduced offer on an unconditional basis to see how that went.
Mr Johnson then agreed that he had introduced the idea of Mr McLeod making a reduced offer.
The following exchange then occurred:
Q.And it's your job to get the highest price possible for your client, isn't it?---Yes, it is.
Q.And if you thought that Mr McLeod was proceeding at the higher price you wouldn't have suggested that he proceed at a lower price, would you?---If I thought he could proceed at a higher price, I wouldn't have suggested that, no.
Q.Because your understanding, as you sat there, was that he wouldn't proceed at a higher price, so that you were doing your client a favour to keep him on the hook at a lower price?---Correct.
There was then an exchange about whether Mr Johnson suggested a revised price of $2.2 million. Mr Johnson said was unable to recall a figure or even if a figure was mentioned.
The exchange then continued:
Q.And in response to that Mr McLeod said that he hadn't run the figures or something to that effect at a lower price, and said to you that he'd look into it, didn't he?---No, he said that he would come back to me after he had his meeting at 1 o'clock that day.
Q.But he said that in the context of talking about the lower price, didn't he?---Yes.
It is my view that this passage of cross examination is telling. Mr Johnson agreed that he introduced the idea of Mr McLeod making an offer at a lower price than that contained in the contract of sale. The contract of sale price was $2.65 million. He agreed that he suggested that Mr McLeod offer a lower price than that. I find it difficult to understand why he would do this unless he was clear that Mr McLeod was not proceeding at the contract price. I consider that he would only have made this suggestion if Mr McLeod had already told him that he was not proceeding at the contract price.
On Mr Johnson’s version of the conversation, neither of them had said anything about Mr McLeod making another offer at a lower price. Mr Johnson’s version merely had Mr McLeod telling him that he was having trouble making the deal stack up and that he’d be speaking to his investors at 1pm “to see if they could pull a rabbit out of the hat”, meaning find way of getting the deal to proceed. If this version was correct, then Mr Johnson would have known that, at the point of the telephone conversation, there was still a prospect that Mr McLeod would proceed with the contract at $2.65 million. If that version was correct, then I find it difficult to conceive that an agent of Mr Johnson’s experience would have suggested that Mr McLeod make a lower offer. This would be contrary to his duty to obtain the best price for his client – as he had agreed he was bound to do.
Having agreed that he did introduce the idea of Mr McLeod making a lower offer, I can only conclude that he did this because he had already been told by Mr McLeod that he was not proceeding with the contract of sale at that price.
Mr Johnson conceded that Mr McLeod’s statement that he would come back to him after his meeting at 1pm that day was in the context of discussing the possibility of making an offer at a lower price. This is quite different to Mr Johnson’s version of the conversation in which he said that Mr McLeod’s statement was in the context of seeing whether his meeting with investors would allow them to proceed with the contract of sale.
Now Mr Clement submitted that Mr Johnson may have suggested that Mr McLeod consider making a lower offer in the context of Mr McLeod having told him that he was having difficulty making the “deal stack up.” That is, that given that Mr McLeod had intimated that he may be unable to proceed, but had not yet made a final decision and had a meeting at 1pm to reach a decision, that Mr Johnson suggested that he may like to make a lower offer. The difficulty with this submission is that it runs against Mr Johnson’s evidence given in cross-examination. Mr Johnson said that he would not have suggested that Mr McLeod offer a lower price if he had thought that he could proceed at the higher price. If Mr Johnson is accepted that Mr McLeod had not told him that he was not proceeding at that time at that price, then on Mr Johnson’s evidence he did not yet know whether Mr McLeod could proceed at the higher price. Under those circumstances, on his own evidence, he would not have suggested that he make a lower offer. Yet Mr Johnson conceded that he did make that suggestion. This supports Mr McLeod’s version of the conversation rather than that submitted by Mr Clement.
Mr McLeod was cross-examined about an email he received at 6.49pm on 2 December 2022 from Mr Griffiths, with whom he was working on the proposed deal.
That email read:
“Looks like we're not going to get there mate. My guys aren't comfortable with the price and after further review, the location isn't as good as they first thought. I've canvassed a couple of others but nobody has shown interest. Suggest you let it go unless you want to develop on spec.”
Mr Clement suggested to Mr McLeod that this email demonstrated that, by the evening of 2 December 2022, a final decision not to proceed with the contract had not yet been taken. This was said to support Mr Johnson’s version of the conversation that no such decision had been communicated by Mr McLeod earlier that day.
Mr McLeod said that after Mr Johnson had raised the possibility of him making a lower offer of $2.2 million, he’d discussed that with Mr Griffith during the day. He said that the email was responsive to their discussion about the possibility of making a lower offer.
Mr Clement submitted that Mr McLeod “dissembled” in answering this question.[3] The exchange was as follows:
QUESTION: In this email on Friday at 6.49 pm, Mr Griffith tells you that his investors aren't comfortable with the price, and he suggests that you let it go. I put it to you that Mr Griffith would not be sending this email to you if you'd already told him that you terminated the contract of sale?
MR McLEOD: That's right, but at that point when we were talking through this, as discussed earlier, I cancelled the contract at 2.65 million, I was asked about if we were interested at a lesser price, I said not right now, not until we actually complete any numbers on this, the discussion with Ben, I said "they've put it back to me like this, I'm not interested, but we need to have a chat, need to figure out if you are". He then comes back to me later and sends me that in summary.
HIS HONOUR: So you say that that email is responsive to your discussion with him based on Mr Johnson saying, "would you be prepared to do it at 2.2". Is that your evidence?
MR McLEOD: That's correct.
[3] POCC [162].
I do not consider that Mr McLeod dissembled. His evidence was consistent with the evidence he gave about his conversation with Mr Johnson. It is consistent with Mr Johnson’s concession that he had introduced to Mr McLeod the possibility of him making a lower offer and that Mr McLeod then discussed that possibility with Mr Griffith. This readily explains the reason for the email and its contents.
Mr Griffith was cross examined about this document as well. His evidence generally was less than clear and, having observed him, I formed the view that he was giving his evidence based on what he could infer from the document in front of him rather than giving an account of his actual recollection.
For example, Mr Clement put to him that in the email when he said “my guys aren’t comfortable with the price” he was referring to the price of $2.65 million, he answered “I assume so.” This was clearly not a recollection but an assumption.
When taken to one of several text exchanges and asked what it meant he said “Yeah, so the background of this property, it was more likely, by the sounds of it, conversations with Cam were going to be developed as a mixed use site, commercial site, so that could have included a service station, it could have included some fast moving food, and that's fair that the Carl's Jr., I had some connections at Carl's, and I knew they were looking for sites.” It seems to me that Mr Griffith extrapolated partly from what he had seen in the text message and partly from his own knowledge to give evidence that was not an actual recollection but rather a conclusionary narrative.
Mr Clement put to him that in the email of 2 December he was communicating that the deal was still alive at the time of writing. Mr Griffith said that “this was the nail in the coffin, if it wasn’t already.” I understood by his qualification that he and Mr McLeod may well have already discussed that the project was at an end. Again, it was plain that he had no actual recollection of when it was that they discussed this.
On a number of occasions he said that he had very many conversations in a day and many different projects in process at any one time. He said at one point “As you can see that's moving pretty quick. We don't muck around, we don't have time. So there's lots going on and you need to move quick and make quick decisions, and so - and I understand that of any developer, so I - that's - my business is turning things around pretty quickly, to give responses, so I would have done the same again, it looks like I have.” Again, this is an example of him purporting to give evidence around a conclusion that he was drawing from the document in front of him.
He also said that much more was communicated on the telephone than in writing.
This exchange also occurred between me and Mr Griffith:
Q.So just to understand that evidence, you were asked a question whether … at the point that you knew that you weren't able to provide an investor or funds, or what have you, you were asked whether it's typical to put that in writing. I think you gave a qualified yes, and you said yes, but a lot is in conversation. So do I understand you to be saying, well, sometimes yes, but sometimes it would just be oral - - - ?---Could be, could be both, yeah.
Q.- - - is that the gist of your evidence?---Absolutely. And in this case, I think it was - I'm not sure where I can see where in the information I provided, where I've categorically said no, but there was definitely conversations around it, because I recall that.
I understood his evidence to be that at some point he recalls having a conversation or conversations with Mr McLeod in which he had indicated that his investors were not comfortable to proceed. It is my view that that is the highest that his evidence rises. Beyond that I do not regard his evidence of his recollection as to what occurred and when, to be reliable.
Mr Clement put to him that he was not aware of any other price than $2.65 million, he said “No I don’t think so, not that I’m aware of” and “No, that was the price I was working to.” Based on the entirety of his evidence and from observing him closely, I do not accept that Mr McLeod did not revert to him on 2 December and discuss with him the possibility of putting a lower offer of $2.2 million. I also note that Mr Griffith did not recall whether he had had a conversation with Mr McLeod on 2 December 2022. Yet the telephone records in evidence demonstrated that Mr McLeod spoke by phone to Mr Johnson at 9.44am and then spoke to Mr Griffith by phone at 9.57am for about 10 minutes. I can comfortably infer that Mr McLeod rang Mr Griffith to discuss with him whatever he had discussed with Mr Johnson. Given that Mr Johnson and Mr McLeod both agree that Mr Johnson had suggested that Mr McLeod make a lower offer (whether $2.2 million or not) I can also infer that Mr McLeod and Mr Griffith discussed whether a lower offer should be put. Mr Griffith’s recollection is clearly faulty. Based in the inherent logic of the events and my observation of both Mr Griffith and Mr McLeod, I prefer the evidence of Mr McLeod on this point.
Mr Clement put the following to Mr Griffith in relation to his email of 2 December 2022:
Q.Are you communicating to Mr McLeod that he should exercise his right to terminate the contract before the due diligence period expires?---If I've said "suggest you let it go", that implies to me, in my own language, that I understood he was in a DD period and that he had a right to let it go.
In this answer Mr Griffith is again doing nothing more than speculating based on what he has inferred from seeing the email. It does not suggest that Mr Griffith was aware that Mr McLeod had not already terminated the contract.
Mr Clement continued:
Q.And you're telling him in this email that he should exercise that right?---Well, if he's got the right to do it, yeah, yep, unless he wants to continue on, 'cause I can't help him, is what I'm saying.
Again, the qualification in Mr Griffith’s answer “if he’s got the right to do it” clearly shows that in giving that evidence he had no actual recollection of the events in question.
Mr Griffith made this perfectly clear in the following exchange:
Q.And you wouldn't tell him to terminate unless he wants to continue on unless the contract was still on-foot, to your understanding, right? Up to the point of this email you believed that the contract was still on-foot?---I believe - yeah, it looks like that, but I obviously don't know dates or anything, so yeah.
This evidence is entirely equivocal and unhelpful on the question of whether Mr McLeod told Mr Johnson in the 2 December conversation that the purchasers would not proceed with the contract of sale.
The vendor made substantial submissions about how I should resolve the question of what was said in this conversation.[4]
[4]POCS [150] – [178].
The vendor submits that the authorities require me to decide the question of this contested conversation on the basis of objective factual surrounding material, and the inherent commercial probabilities together with the documentation tendered in evidence. They say that I should rely on the documentary record, together with known or probable facts, to scrutinise personality, motivations and working practices of a witness. They say that the rational resolution of competing witness accounts requires reference to, and analysis of, the evidence independent of those witnesses which is apt to cast light on the probabilities of the oral discussion.[5]
[5]POCS [153].
These statements of principle are uncontroversial. As I have said above the concessions made by Mr Johnson under cross-examination that he did suggest to Mr McLeod that he make an offer at a lower price and that he would not have done so had he thought there was a possibility that Mr McLeod would proceed at the contract price of $2.65 million are telling. I can only infer from this that Mr McLeod had told him that he was not proceeding at $2.65 million. This means that as to that critical question there is in fact no conflict of evidence. Or to put it differently, taking into account the surrounding circumstances including Mr Johnson’s many years of experience as a real estate agent, and inherent commercial logic of his conduct, he would only have suggested a lower price once he had been told that the purchaser was not proceeding with the contract.
It is plain that there was little by way of written communication that addressed this question. The vendor relied on the email of 2 December[6] which I have already dealt with and Mr Johnson’s notes of 7 December, which I have also dealt with.
[6]POCS [174]. I consider that all of the observations made in that paragraph are explicable as relating to the possibility of proceeding to purchase the property at the lower price of $2.2 million.
The vendor says that it is unusual for a party to purport to give notice of termination of a contract of sale of land orally and not to reduce that to writing.[7] That may be so as a general statement, however to the extent that Mr McLeod was satisfied that he had clearly communicated this in his conversation with Mr Johnson, he likely felt no need to do so. That may have been commercially imprudent, however it does not bear on the inherent likelihood of what was said in that conversation.
[7]POCS [173] and [174(e)].
The vendor submits that substantial weight should be given to the evidence of Mr Johnson.[8] This submission appears to focus on Mr Johnson’s evidence in chief and glosses over the concessions he made under cross-examination.
[8]POCS [175].
The vendor then submits that if I find that Mr McLeod did say to Mr Johnson “but at this time I can’t proceed at this price” this statement is ambiguous, speaks of a future intention and does not sufficiently communicate an intention to terminate the contract.[9]
[9]POCS [179] – [180].
I reject this submission. The context for the conversation according to Mr Johnson was that he rang Mr McLeod to see how he was going with the due diligence. Recalling that clause 23 provided a 14 day period for the purchaser to make certain enquiries and investigations and if “the purchaser establishes that the redevelopment potential is not to its liking the purchaser can terminate the agreement.” The focus of the conversation was therefore about whether the purchaser was satisfied with its investigations, whether the development potential was to its liking and whether it would proceed with the purchase. In the light of that context and putting a reasonable construction on them, the words “but at this time I can’t proceed at this price” mean that the development potential was not to its liking and that the purchaser was not proceeding with the contract. This clearly communicates that the purchaser was terminating the agreement. The passages of Mr Johnson’s cross-examination referred to at paragraphs 44 to 46 above make clear that he understood Mr McLeod to have communicated this.
For the reasons given above I conclude that Mr McLeod’s version of that conversation is inherently more likely and I therefore conclude that he did tell Mr Johnson that the purchasers would not proceed with the contract of sale.
Issue 5For the first defendant to terminate the Contract of Sale pursuant to Special Condition 23, was it obliged to communicate that termination to the vendor, the vendor’s legal practitioner or vendor’s conveyancer, rather than the vendor’s real estate agent, having regard to:
(a) the provisions for service in the contract of sale; and
(b) whether the estate agent was authorised to receive notice of termination?
Leaving aside the questions raised by Issues 1 to 4, it is common ground that the purchaser was required to give some notice of termination under SC23.
I have already found above that during the conversation on 2 December 2022 Mr McLeod advised Mr Johnson that he was not proceeding with the contract. Upon the assumption that the due diligence period started to run on the day of sale (and was not deferred to the day the vendor executed the Access Agreement as is alleged by the purchaser) the 14 day due diligence period provided under SC23 expired on 5 December 2022. Subject to my findings in paragraphs 127 - 135 below, it is common ground that the oral notification to Mr Johnson was the only form of notice given by the purchaser on or before 5 December 2022.
The issue here is whether that oral notification given to the estate agent was sufficient notice for the purposes of SC23.
The plaintiff says that notice under SC23 must be given in accordance with the terms of the contract and the operation of law.
That submission is of course correct but does not take matters very far. The vendor submits that the scope of an estate agent’s authority at law does not extend to receiving notices required to be given under a consummated contract of sale for which the estate agent was engaged.[10] They rely on a number of authorities for the proposition that at law an estate agent’s authority is limited by the actual authority given by the principal to the estate agent.[11] Such authority can be express and implied.[12] They also establish that an estate agent may be clothed with ostensible authority by some conduct of the principal amounting to a representation to a third party that the estate agent does indeed have the authority concerned.[13] In considering whether such a representation has been made, it is the conduct of the principal that must be considered,[14] although where the estate agent is known by the principal to be engaged in such conduct as may convey such a representation and does not act to prevent the estate agent from doing so, this may amount to a representation by the principal.[15]
[10] POCS [127] – [137].
[11] Lo v Russell [2016] VSCA 323 at [58]; Peterson v Moloney (1951) 84 CLR 91, 95 (Dixon, Fullagar and Kitto JJ) 94-95; Brien v Dwyer (1978) 141 CLR 378; Markson v Cutler [2007] NSWSC 1515.
[12] Peterson v Moloney (1951) 84 CLR 91, 95 (Dixon, Fullagar and Kitto JJ) 94-95; Markson v Cutler [2007] NSWSC 1515; Lo v Russell [2016] VSCA 323 at [57].
[13] Markson v Cutler [2007] NSWSC 1515 at [8].
[14] Law of Agency, (4 th ed, 2020), LexisNexis Australia, at [20.32] and the authorities cited therein.
[15] Law of Agency, (4 th ed, 2020), LexisNexis Australia, at [20.33] and the authorities cited therein.
None of the authorities relied upon by the vendor,[16] foreclose the ability of parties to arrange their affairs in such a way that an estate agent has a more extensive scope to bind their principal than is the position at law. Indeed all of the authorities contain qualifiers making clear that the scope of an estate agent’s authority is always a fact specific enquiry requiring close attention to what was expressly or impliedly agreed between the parties (in the case of actual authority) and what conduct occurred that might constitute a representation to third parties about the agent’s authority (in the case of ostensible authority).
[16] See footnotes 20 and 21 above.
The vendor’s written submissions[17] quoted in part from paragraph [58] in Lo v Russell. The submission read as follows:
“As stated by the Victorian Court of Appeal in Lo v Russell [2016] VSCA 323 at [58]: “an estate agent is not, without more, an ‘agent’ in the ordinary sense of the word…” An estate agent does not ordinarily have authority to accept notice of termination on behalf of the vendor employing it.” (footnote omitted)
[17] POCS [130].
The full text of Lo v Russell at [58] reads as follows:
“Nor does the fact that an estate agent is not, without more, an ‘agent’ in the ordinary sense of the word deny the possibility of such an agency being created, either for limited purposes or more generally. The authorities warning against treating an estate agent as an agent in the legal sense acknowledge that possibility. (Referring in footnotes to Petersen v Moloney (1951) 84 CLR 91, 95 (Dixon, Fullagar and Kitto JJ).
The consequence of the full quoted text of [58] is that the focus of the inquiry is not on the limited scope of an estate agent’s authority at law, but rather on the fact specific extent of the actual or ostensible authority possessed by Mr Johnson in this case to receive the notice that was given for the purposes of SC23.
I should at this point make two further observations about Lo v Russell. First, Mr Noonan, counsel for the purchasers, drew attention to the fact that Mr Clement’s submissions and the authorities he cited at POCS [127] – [137], followed the line of argument and supporting authorities in the decision of Cameron J in Tan v Russell [2016] VSC 93. This was the first instance decision from which Lo v Russell was the appeal. Mr Noonan submitted that the Court of Appeal in Lo v Russell rejected her Honour’s reasoning and found that she had wrongly failed to analyse the case before her on the basis of the specific facts of the authorisations of the agent that flowed in the particular case before her. Rather, she had analysed the matter on the basis of the legally abstracted position of an estate agent at law.
Mr Noonan submitted that the Court of Appeal’s analysis in Lo v Russell at [51] to [60] concluded that in the context of the contract of sale before that Court, the fact that among other things the vendor had completed in the Particulars of Sale the details of the estate agent concerned as well as the details of the vendor and its solicitor,[18] led to the conclusion that the estate agent was an available person upon which the relevant notice could be served in addition to the vendor and its solicitor.
[18] See Lo v Russell [7].
He submitted that the same reasoning applies to the facts before me. He noted that in this case, as in Lo v Russell, the estate agent’s details (including email address and mobile phone number) were provided along with the details of the vendor’s name and address (but without email and phone number) and those of the vendor’s solicitors (with email and landline phone number). He submitted that the Court of Appeal’s dicta at [60] is directly applicable to the case before me. The Court of Appeal concluded:
“As is evident, in our opinion the conduct of the respondent [vendor] in signing the contract did convey that the requisite authority was given to Mr Gibbons (and Marshall White) [the estate agent]. As already mentioned, the fact that the conveyancer’s details were in the contract did not exclude the possibility that the estate agent was also an available person upon whom to serve the notice.
Mr Clement sought to distinguish Lo v Russell principally on the basis that the relevant clause of the contract in that case pursuant to which a notice had to be given was a statutory cooling off notice that used the words “You must either give the vendor or the vendor’s agent written notice that you are ending the contract …” He submitted that the fact that the notice requirement permitted notice to be given to the “vendor’s agent”, whereas in our case SC23 is silent as to whom notice may be given is a relevant distinction. He also referred to GC27 which provided that any notice to be served under the contract “may be served by or on the conveyancer or legal practitioner for the party.”
I do not consider that these distinctions make the carefully considered dicta of the Court in Lo v Russell to be inapplicable. First, the equivalent provision of GC27 was found in the contract before the Court of Appeal.[19] Secondly, the reasoning itself sits around the vendor’s conduct of having prominently included the estate agent’s details in the particulars of sale conveying that it was a person upon whom notices may be served.[20] This fact is present in the case before me. Thirdly, in the case before me, SC23 gave no indication of to whom the relevant notice was to be given. This gives heightened relevance to the fact that the vendor had included the estate agent’s details prominently in the particulars of sale. Fourthly, as with the facts before me, the Court of Appeal noted that “[t]he estate agent with whom a purchaser will have been so dealing is prominently identified as such in the contract. This is an important aspect of the context in which the contract of sale operates.”[21] Fifthly, the Court of Appeal gave a purposive meaning to the notice provisions before it. Such an approach should be applied to this case.
[19] Lo v Russell at [8].
[20] Lo v Russell at [60].
[21] Lo v Russell at [54].
Given all of those circumstances I do not accept the vendor’s submission that the reasoning in Lo v Russell should not be applied to the case before me.
Applying that approach, the purpose of SC23 was to require communication by the purchaser to the vendor so as to permit it to know if the contract was proceeding or not. Given that the purchaser here had most contact with the estate agent, SC23 was silent as to whom the notice in that clause was required to be given and the estate agent’s details were prominently included in the particulars of sale, the communication of notice to the estate agent furthers the clause’s purpose rather than precluding the purchaser from communicating the notice to the estate agent.
For those reasons I conclude that the contract itself provided that notice of the termination under SC23 was able to be given to the estate agent, Mr Johnson.
I also refer to paragraphs 115 - 124 below in which I find that, outside the contract of sale itself, Mr Johnson appears to have had actual authority from the vendor to communicate with the purchaser about the transaction and to relay the contents of those communications to Mr Du Rieu.
Mr Noonan for the purchasers did not initially submit that Mr Johnson held actual authority to receive the notice of termination under SC23.[22] The highest his submissions initially rose was to deny that the terms of the Contract of Sale obliged such a notice to be given to the Vendor’s conveyancer or solicitor.[23] Rather, they submitted that Mr Johnson had ostensible authority to receive this notice.
[22] During the course of oral closing submissions, Mr Noonan submitted that the agent did have actual authority from the purchaser to receive this notice. This issue is dealt with at paragraphs 115 - 124 below.
[23] Defendants’ Outline of Closing Submissions date 6 January 2025 (DOCS) at [60] – [61].
The purchasers rely on Whelan J’s summary of the principles relevant to establishing ostensible authority in Flexirent Capital Pty Ltd v EBS Consulting Pty Ltd[24] [2007] VSC 158. After a comprehensive survey of the relevant authorities, his Honour summarised the principles at [203] as follows (which I adopt):
“The principles which I draw from this analysis of the authorities having particular relevance here are the following:
(a) Apparent authority operates as an estoppel preventing a principal from asserting that the principal is not bound by a contract where the principal has held the agent out as having authority.
(b) The holding out may be of a general character, arising for example out of an office or position in which the principal places the agent, or it may be specific to a particular transaction. The holding out may take the form of the setting up of an organisation or structure which presents to outsiders an appearance of authority in the agent.
(c) The holding out must be conduct by the principal, not the agent. A third party cannot rely upon the agent’s own representation as to authority. But this does not mean that the agent’s conduct is to be ignored. The principal may hold out the agent as having authority by permitting the agent to act in a certain way or to make representations about himself or herself, or the principal may hold the agent out by equipping or arming the agent with a document or thing which enables the agent to assert authority with the hallmark of authenticity.
(d) The holding out may also result from permitting an agent to act in a certain manner, or by equipping or arming the agent, or by a failure to take proper safeguards against misrepresentation by the agent.
(e) The principal’s conduct is to be assessed as a whole and in its totality.
(f)The apparent strictness of the approach in Russo-Chinese Bank and in Armagas in relation to the known existence of a limitation upon the agent’s authority must be read in the light of the High Court’s emphasis in Pacific Carriers upon the need to consider the totality of the principal’s conduct, and in the light of the High Court’s analysis in Crabtree Vickers and in Pacific Carriers of the circumstances in which an agent’s assertion of authority may, in the particular context, be a representation or holding out by the principal. As the decision in Essington well demonstrates, the issue is to be resolved upon an analysis of the particular facts of each case. In a particular case a known limitation upon an agent’s authority might prevent an estoppel from arising. It seems to me that that would not invariably be the case, as it is necessary to assess the whole of the principal’s conduct in the particular circumstances, and, in particular circumstances, a holding out may exist which it would be inequitable to allow the principal to resile from, notwithstanding the existence of a known limitation upon the agent’s authority.
[24] [2007] VSC 158 at [203]. They also refer to Lysaght Brothers & Co Ltd v Falk (1905) 2 CLR 421 at 428.
I note also that the reason why an estate agent’s authority in the ordinary case does not extend, for example, to receiving notices to be given under the contract, is that the agent’s engagement generally is to locate a buyer, market the property, communicate offers and perhaps to arrange for the execution of contractual documents before a solicitor or conveyancer is involved. Subject to certain exceptions, the agent’s role is usually concluded at that point and responsibility for handling the contractual aspects of the transaction passes to the vendor’s solicitor or conveyancer.
However, the evidence in this case discloses that Mr Johnson had a more extensive role in the transaction than might be considered usual. The chronology discloses that after the vendor’s solicitor and the purchaser’s conveyancer were already involved in the contractual process, Mr Johnson continued to act as a conduit between the vendor and the purchaser.
For example, the vendor’s solicitor emailed a copy of the Contract of Sale executed by the vendor to the purchaser’s conveyancer on 21 November 2022 at 6.29pm. He followed this with a further email at 6.36pm advising “‘…we are instructed our agent is attending to having your client’s director sign the Guarantee & Indemnity required of him and contained within the contract.”
At 6.40pm on 21 November 2022, Mr Johnson emailed a copy of the contract to Mr McLeod asking him to return the signed director’s guarantee pages.
Having regard to the fact that the vendor and purchaser were each now represented by solicitor and conveyancer respectively, in the ordinary course, one might have expected Mr Johnson to have no further role in acting as a conduit between the vendor and the purchaser. One might have expected the responsibility for arranging for the further execution of the director’s guarantee to have been done by the vendor’s solicitor through the purchaser’s conveyancer.
The following day, on 22 November 2022 at 10.55am Mr McLeod for the purchaser sent the executed contract with the guarantee completed together with the executed Access Agreement back to Mr Johnson. He did not send it to his conveyancer to forward to the vendor’s solicitor. This communication suggests that Mr McLeod understood that communications as between the purchaser and vendor could be made by him to Mr Johnson. This understanding was likely encouraged by the fact that it was Mr Johnson who contacted him to execute the guarantee.
It is significant that on 22 November 2022 at 11.01am, Mr Johnson forwarded the entire email string to, amongst others, Mr Du Rieu, the director of the vendor. In this way, the vendor had notice that Mr Johnson in fact had continued to be involved in the process of communicating with Mr McLeod notwithstanding that the parties were each represented by solicitor and conveyancer. Neither Mr Du Rieu, nor his solicitor, took any step to disabuse Mr McLeod of his evident understanding that he could communicate about the transaction with Mr Johnson. Neither apparently did they instruct Mr Johnson that he was no longer to communicate with Mr McLeod.
Therefore, it is hardly surprising that when, on his version of events, Mr Johnson telephoned Mr McLeod on the morning of 2 December to see how he was going with his due diligence, Mr McLeod continued to labour under the understanding that by giving notice to Mr Johnson that he was not continuing with the contract at that price, he was validly giving the notice to the vendor required under SC23.
The course of conduct adopted by the vendor has the hallmarks of the vendor “hold[ing] out the agent as having authority by permitting the agent to act in a certain way or to make representations about himself …” and “permitting an agent to act in a certain manner, or by equipping or arming the agent, or by a failure to take proper safeguards against misrepresentation by the agent”: Flexirent.
Mr Johnson was cross-examined about the extent of his authority in fact to receive communications for the vendor about contractual matters. The following exchange occurred.
Q.And you had the authority of your client to deal with Campbell [McLeod] in relation to all those contractual matters?---Yes.
Q.And that included to receive information from him about contractual matters?---Um, all I would do would be to pass on something that was sent to me, so I was the middle-man.
Q.But you had the authority to be the middle-man, let's put it that way?---Yeah, correct. In any of your dealings with Campbell [McLeod], you don't say that you didn't have authority to deal with him, do you?---No.
Q.And in saying that you're not just asserting a hypothetical position of your understanding at all, you're talking about factually what your client had given you authority to do?---Correct.
Q.And you never said to Campbell [McLeod], you never said to him that you couldn't deal with him on anything, did you?---No.
Q.No, because the truth was that you had full authority to deal with Campbell [McLeod] in all matters in relation to this transaction, didn't you?---Yes.
The vendor submits that this evidence was general and conclusionary and was clarified in re-examination.[25] I do not agree.
[25] POCS [141].
When Mr Johnson was re-examined about the source of his authority to act for the vendor he was taken to the written sale authority. After being asked whether there were any other authority documents he said that there weren’t. He was then asked this:
Q.Or any oral conversations where you were given authority to act on behalf of the vendor in relation to this property?---No. Unless I was, um, relaying feedback from a conversation, no. (emphasis added)
The re-examination does not assist the vendor. Mr Johnson’s evidence in this respect was cogent and appears to accord with the events as they actually occurred – see particularly the course of conduct that I have referred to above and paragraphs 127 - 133 below. That is, notwithstanding that solicitors and conveyancers were engaged, to the knowledge of Mr Du Rieu, Mr Johnson was continuing to act as a conduit of communications between the purchaser and the vendor.
This is sufficient for me to find, as I do, that Mr Johnson had ostensible authority to receive notice under SC23 that the purchaser terminated the contract.
Further, it is clear from his answer in paragraph 113 above that Mr Johnson was in fact authorised by the vendor to interact further with the purchaser after the contract had been entered into and was to relay the contents of any conversations to the vendor. Contrary to the vendor’s submission,[26] this is enough to establish that Mr Johnson had actual authority from the vendor to receive notice of termination under SC23 and to relay that notice to the vendor.
[26] At POCS [139]
Now the vendor submits that the written sales authority between the agent and the vendor permitted the agent to “obtain the signatures of the vendor and purchaser to the contract” and “attend to the exchange of the contract between the vendor and the purchaser”. The vendor submitted that in further communicating with Mr McLeod to obtain a signature on the guarantee pages, Mr Johnson was merely executing the actual authority that he had pursuant to the written agency agreement.
The chronology is worth repeating here - the purchaser sent an executed version of the contract of sale to the vendor’s agent by way of an offer on 17 November 2022. The vendor returned the contract counter-executed by the vendor by email on 21 November 2022 at 6.29pm under cover of an email that read:
“Our client has signed the contract today and we provide the fully signed contract by way of attachment to this email for formal exchange.”
By that email and exchange the contract was complete.
It was only by a subsequent email on 21 November 2022 at 6.37pm that the vendor’s solicitor wrote:
“It was remiss of me to leave out the fact that we are instructed our agent is attending to having your client’s director sign the Guarantee & Indemnity required of him and contained within the contract.”
It was only after the contract was completed that the vendor’s solicitor advised that the vendor would send the agent to communicate further with the purchaser to seek to obtain a signature from the purchaser’s director to the guarantee.
Mr Johnson then emailed Mr McLeod on 21 November 2022 at 6.40pm asking him to sign the director’s guarantee pages of the contract.
Mr McLeod sent back to Mr Johnson the executed director’s guarantee and executed Access Agreement on 22 November 2022 at 10.55am.
It must be remembered that Mr McLeod is a stranger to the estate agent’s written agency agreement and the scope of agency contained within it. From his perspective, all he knows is that he is having continued contact from the agent after the vendor and purchaser have solicitor and conveyancer engaged and after the contract has apparently been fully executed and exchanged.
It is entirely reasonable for him to have concluded, as he evidently did, that any further communications in relation to the contract could be passed between himself and Mr Johnson.
Indeed this is clear enough from the fact that not only did he return the signed executed director’s guarantee pages to the agent – but he also sent the executed Access Agreement to Mr Johnson. On no account can it be said that Mr Johnson had actual authority pursuant to the written agency agreement to receive this document. However he did receive it and pass it on to the vendor’s solicitors as well as Mr Du Rieu. In the knowledge that Mr McLeod had so acted, none of the solicitors, Mr Johnson or Mr Du Rieu suggested that this was not the correct method of providing this document. Instead they allowed Mr McLeod to continue to believe that communications in relation to the transaction could be conducted through Mr Johnson.
However, the matter goes one step further. It will be recalled that Mr Johnson accepted in cross-examination that he would not have suggested that Mr McLeod offer a lower price unless he knew that Mr McLeod was not proceeding with the contract at the higher price. It will also be recalled that I have found that Mr Johnson did in that phone conversation give notice that he was not proceeding with the contract at that price.
In his evidence in chief Mr Johnson said that after his phone call with Mr McLeod on 2 December, he spoke to Mr Du Rieu and:
“I told him the exact conversation I just had with Campbell … McLeod.”
As I have found that Mr McLeod gave notice to Mr Johnson that he was not proceeding with the contract, I must infer from his evidence that he “related the exact conversation” that Mr Johnson related this to Mr Du Rieu. In this way it can be seen that not only did Mr McLeod give notice to Mr Johnson, but that this notice was promptly relayed to the director of the vendor. In this way it is the case in fact that Mr McLeod’s notice was relayed to and brought to the attention of the vendor through its director, Mr Du Rieu.
The vendor submits that I should not make such a finding for 2 reasons. First, Mr Clement says that I should not “cherry pick” from Mr Johnson’s evidence some part to accept and other parts to reject. This submission is misconceived. It is trite law that a judge does not have to reject all of a witness's evidence simply because he or she rejects part of it.[27] Each piece of evidence must be weighed according to its own merits. I consider it to be inherently likely that if Mr Johnson had had a telephone conversation in which, as I have found he did, Mr McLeod said that he was not proceeding with the contract at that price, Mr Johnson would have related that to Mr Du Rieu.
[27]A judge is at liberty to accept or reject the whole of a witness’ evidence, or to accept parts of their evidence and to reject the remaining: O'Loughlin J in Cubillo v Commonwealth (2000) 174 ALR 97 [118]-[125] (citing with approval Dublin, Wicklow & Wexford Railway Co v Slattery (1878) 3 App Cas 1155 (at 1201); Christmas v Nicol Bros Pty Ltd (1941) 41 SR (NSW) 317 (at 322); S v M (1984) 36 SASR 316 (at 319-320)).
Secondly, the vendor says that in view of Mr Johnson and the vendor’s subsequent conduct, which was in conflict with that finding, I should not make such a serious finding. This submission goes too far and I do not accept it in its entirety. I have considered the seriousness of the finding in weighing up the probabilities of what occurred during that conversation. The seriousness of the finding is but one matter to be taken into account. So too are the surrounding contemporaneous circumstances or documents, the inherent logic of events and the motivations of the parties. I have taken all of these matters into account and for the reasons given above I have found that I prefer Mr McLeod’s rather than Mr Johnson’s version of that conversation. The fact that in his email of 6 December 2022 at 4.37pm Mr Johnson denied that notice was given by Mr McLeod in the conversation on 2 December 2022 is but one matter to be considered. Insofar as the vendor referred to the emails from their solicitor on 6 and 7 December 2022, they are explicable on the basis of Mr Johnson’s instructions and alternatively that they may have formed the legal view that any notice given in that fashion did not comply with the contract.
I also note that Mr Du Rieu was not called by the vendor to deny that this was so. The vendor says that no Jones v Dunkel type inference should be drawn from their failure to have called him. They say that Mr Du Rieu is “not in their camp” as he is no longer their employee. This is not the relevant test. The question is whether he was available to have been called and whether it was natural to have expected the vendor to have called him.[28] I note that Mr Du Rieu was a former employee of the vendor. No evidence was given that there was any ill-will between Mr Du Rieu and the vendor. Mr Johnson gave evidence that he was in contact with Mr Du Rieu, he had his telephone number in his mobile phone and that he had actually been in contact with him recently. Mr Clement agreed that Mr Du Rieu could have been subpoenaed to give evidence if required. It was clearly known to the vendor that the conversation as between Mr McLeod and Mr Johnson was to be the subject of hot contest and Mr Johnson gave evidence in chief that he had relayed the contents of that phone call to Mr Du Rieu straight after his call with Mr McLeod. Thus, the vendor always knew that what Mr Johnson had related to Mr Du Rieu was a matter relevant to the question of whether notice was given by Mr McLeod to Mr Johnson in that phone call. Given all of these circumstances, I conclude that Mr Du Rieu could have been called by the vendor but that his evidence would not have assisted their case. This means that I can more readily draw the inference available from Mr Johnson’s evidence that he relayed to Mr Du Rieu the fact, as I have found it to be, that Mr McLeod had given him notice that he was not proceeding with the contract. Had the vendor wished to rebut that inference they should have called Mr Du Rieu.
[28] See for example O’Donnell v Reichard [1975] VR 916 at 929; Payne v Parker [1976] 1 NSWR 191 at 2021-202.
Under those circumstances I find not only that notice was given by Mr McLeod to Mr Johnson, but also that this notice was in fact received by Mr Du Rieu for the vendor on 2 December.
This finding is a full answer to the vendor’s argument that the notice given by Mr McLeod to Mr Johnson did not satisfy the requirements of SC23.
I also note that the vendor did not submit that any such notice was required to be given in writing and do not need to address that question.
Conclusion on Issues 5 and 6
On the basis of my conclusions as to Issues 5 and 6 I find that on 2 December 2022 the purchaser validly gave notice to the vendor under SC23 that it was terminating the agreement.
Given those findings the Plaintiff’s claim must be dismissed.
Although it is strictly unnecessary to do so I will give my abbreviated reasons and conclusions on the other Issues below.
Issue 1What is the proper construction of special condition 23 of the Contract of Sale?
Issue 2As part of the question for determination in paragraph 1, was the first defendant’s obligation to purchase the property subject to a contingent condition of performance, or condition precedent, requiring the plaintiff to provide the first defendant with access to the property for 14 days to evaluate the extent of underground contamination and potential for redevelopment of the Property?
There are 2 issues to be determined here.
(a) Whether SC23 operates as a condition precedent to the balance of the obligations contained in the contract?
(b) Whether upon its proper construction SC23 required the purchaser to be given access to the property for 14 days to evaluate the extent of underground contamination?
140Had I been required to answer this question I would have held that:
(a) upon its plain language, particularly the use of the words “the purchase[r] is subject to” a 14 day due diligence period, that the balance of the obligations arising under the contract do not operate unless and until that condition has been satisfied; and
(b) upon its proper construction the vendor was required to permit the purchaser access to the property in order to carry out the due diligence investigations (particularly relating to contamination of the land) for a period of 14 days.
141The authorities on the construction of commercial contracts are well known. Mr Noonan relied on a summary of the principles by Lyons J in EMR Capital Investment (no 6B) Pte Ltd v Carl Hallion[29] (which summary I adopt):
[29] [2024] VSC 805 at [185].
“The legal principles expressed in Mount Bruce Mining Pty Ltd v Wright Prospecting Pty Ltd (‘Mount Bruce’) succinctly summarise how courts are to construe commercial contracts. In short:
(a) the ‘rights and liabilities of parties under a provision of a contract are determined objectively’ by reference to text, context, and purpose;
(b) the court must consider ‘what a reasonable businessperson would have understood those terms to mean’, having regard to the ‘language used’, the ‘circumstances addressed by the contract and the commercial purpose or objects to be secured’;
(c) whilst ordinarily the process of construction is to be undertaken by reference to the contract alone, if an expression or phrase is ‘unambiguous or susceptible of only one meaning’, evidence of surrounding circumstances ‘cannot be adduced to contradict its plain meaning’;
(d) recourse to ‘events, circumstances and things external to the contract’ may be necessary; for example, to ‘[identify] the commercial purpose or objects of the contract where that task is facilitated by an understanding “of the genesis of the transaction, the background, the context”’, and the applicable market, or to determine ‘the proper construction where there is a constructional choice’;
(e) in each case, such external matters must be ‘objective’ and known to both parties;
(f) evidence of the ‘parties’ statements and actions reflecting their actual intentions and expectations’ is inadmissible; and
(g) unless the contract indicates a contrary intention, a court may assume that the parties ‘intended to produce a commercial result’, and can construe the contract to avoid making ‘commercial nonsense’ or ‘commercial inconvenience’.
(footnotes omitted)
142In Adaz Nominees Pty Ltd v Castleway Pty Ltd[30] the Court of Appeal said this:
“The objective approach requires reference to the text and its ordinary meaning, together with:
(i) the context, being the entire text of the contract including matters referred to in the text; and
(ii) the purpose.
These matters will ordinarily be identified by reference to the contract alone, but evidence of mutually known objective background circumstances relevant to the purpose is admissible ‘no matter how clear the “ordinary meaning” of the words’. Identification of purpose may allow admission of evidence of the genesis of the transaction, the background, the context and the market in which the parties are operating. (footnotes omitted) (emphasis added)
[30] [2020] VSCA 201 at [70].
As to the first matter, the use of the words “the purchase[r] is subject to” some condition are classic words by which other obligations under the contract are not operable until the subject condition has been satisfied.[31]
[31] See for example Perri v Coolangatta Investments Pty Ltd (1982 149 CLR 537 at 552, 557. See further Seddon and Bigwood, Cheshire & Fifoot: Law of Contract (2023, 12th Aus Ed, LexisNexis) at [20.1].
The clause identifies what the condition is. That a period of 14 days must be provided to the purchaser within which the purchaser may conduct due diligence activities including “to evaluate the extent of underground contamination and potential for redevelopment” of the site.”
In the ordinary course and untutored by any objective surrounding circumstances known to both parties, I would infer that this requires that the purchaser be permitted to enter the land and to take soil samples for testing. That is, that physical access to the land had to be provided in order to permit the due diligence to be carried out by the purchaser.
It is true, as the vendor submits, that the contract of sale did not in terms provide such access to the purchaser nor specify upon what terms any such access would be provided. However, the provision of a draft Access Agreement at the same time as the executed contract of sale was returned to the purchaser under cover of an email that read in part “we refer to the original offer letter and the agreed proposal for your client to access the property for due diligence purposes” makes clear that the parties had, prior to finalisation of the contract of sale, already agreed that the purchaser was to have access to the land for the purposes set out in SC23. This is an objective background circumstance known to the parties that assists in construing SC23. I take notice of this circumstance without having regard to the terms of the proposed Access Agreement. This is because the terms of the Access Agreement are post-contractual relative to the contract of sale and represent a negotiation position of the parties. However, the fact that the parties had apparently agreed that access to the land would be given to the purchaser is a matter that I can have regard to.
Insofar as the parties had agreed that in order for the purchaser to carry out part of its due diligence, access to the land would be required, this aids the construction of SC23. Properly construed, SC23 means that unless and until access to the land was provided to the purchaser for a 14 day period, the condition would not have been satisfied.
As it happens, the same email just referred to also told the purchaser that it was not to access the land until an Access Agreement was “finalised and executed”.
Given that the vendor did not return an executed version of the Access Agreement until 1 December 2022 and the vendor asserted on 6 December 2022 that the contract had become unconditional, it is plain that 14 days for the purchaser to conduct its due diligence was not provided by the vendor. Under those circumstances, the contract of sale never became unconditional.
The vendor relies on other terms of the contract by which the purchaser acknowledged having satisfied itself of the condition of the land including in respect of contamination and had waived its right to terminate the contract for land contamination. Relying on these terms, it submits that the right to terminate under SC23 was limited to termination only if it was not satisfied with the redevelopment potential. In other words it submits that the purchaser could not terminate under SC23 on the basis of contamination.
This construction does violence to the plain language of SC23. If this construction were correct, then there is no reason why SC23 would provide for the purchaser to have 14 days to conduct investigations as to the extent of any contamination. The words would be rendered otiose.
The authorities require that I should construe SC23 in a way that gives meaning to all of the clauses in the contract and to best render them harmonious with each other. This can be done by construing the contract such that the other terms in the contract only become operative once the condition in SC23 is satisfied with the purchaser not having given notice of termination. This construction renders the right to investigate the extent of contamination meaningful as grounding a right to terminate under SC23. However, if after the period has elapsed and the purchaser does not terminate, then under the contract it is no longer able to terminate for land contamination.
The vendor also submitted that SC23 should be construed such that the only right to terminate arises upon the purchaser determining that the development is not to its liking because the redevelopment potential falls short. This construction has 2 problems. First, it is against the plain language of the SC23 which provides 2 purposes for the due diligence and then a conclusion of the right to terminate. The only reasonable reading of the clause is that the right to terminate is connected to both purposes of the due diligence. There is no basis to restrict the right to terminate in the way urged by the vendor.
Secondly, one would expect that the extent of contamination of the land may well impact on the redevelopment potential of the land. So it is unlikely that the two specified purposes of the due diligence in SC23 are disconnected in the way that the vendor submits.
Issue 3 If the construction of special condition 23 in paragraph 2 is applicable, did the plaintiff satisfy that contingent condition of performance or condition precedent?
As should be evident from the discussion of Issues 1 and 2, I find that the vendor did not satisfy the due diligence condition under SC23.
Issue 4 If the answer to question 2 is “no”, then by what date did the due diligence period in special condition 23 expire?
The due diligence period expired 14 days after the vendor returned an executed version of the Access Agreement to the purchaser on 1 December 2022.
Issue 7 If the due diligence period had not yet expired by 4.33pm on 6 December 2022, then was the email sent at that time by the first defendant’s solicitor at that time effective to terminate the contract of sale pursuant to special condition 23?
Yes. The plain words of the email make clear that the purchaser was not continuing with the contract.
Issue 8If the first defendant did not terminate the contract of sale prior to the expiry of the due diligence period, then did the first defendant default on its obligations under the contract of sale and, if so, is the plaintiff entitled to recover from both defendants the following loss and damage:
(a) Damages of $550,000, which is calculated on the basis of the difference between the original purchase ($2,650,000) price and the final sale price ($2,100,000)?
(b)Interest calculated pursuant to the contract of sale (alternatively pursuant to statute)?
Having regard to my findings on the other issues it unnecessary for me to answer this question.
However I do note that there seems to be agreement between the parties that the difference in contract price and subsequent sale price of the property of $550,000 would be payable in damages had I found the purchaser to be liable to the vendor.
The vendor also claimed interest pursuant to contract for the period 5 December 2022 to 11 December 2024 of $150,488.24.
The purchasers put no substantive argument to the contrary.
Conclusion and orders
Based on the above, there will be orders in the proceeding that the plaintiff’s claim be dismissed.
Subject to any matters that the parties bring to my attention on the question of costs (which should be advised to my chambers within 7 days), I propose to order that the plaintiff pay the defendants’ costs of the proceeding (including reserved costs) on the standard basis, to be taxed in default of agreement.
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Certificate
I certify that these 42 pages are a true copy of the judgment of His Honour Judge Wise delivered on 31 January 2025.
Dated: 31 January 2025
Liam Crough
Associate to His Honour Judge Wise.
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