Bartlett v Arbuckle
[2004] WASC 169
•6 AUGUST 2004
JURISDICTION : SUPREME COURT OF WESTERN AUSTRALIA
IN CIVIL
CITATION: BARTLETT & ANOR -v- ARBUCKLE & ORS [2004] WASC 169
CORAM: COMMISSIONER ODES QC
HEARD: 9-11, 17, 18, 21 & 22 JUNE 2004
DELIVERED : 6 AUGUST 2004
FILE NO/S: CIV 1396 of 2004
BETWEEN: ROGER MAXWELL BARTLETT
ALISON CATHERINE BARTLETT
PlaintiffsAND
ASHLEY VAUGHAN ARBUCKLE
First DefendantSUSAN ALEXIA CHEN ARDREY
Second DefendantG & R ROSSEN PTY LTD (ACN 0076 368 584)
Third Defendant
Catchwords:
Sale - Double sale of property - Whether first contract terminated - Estoppel - Conditions precedent and subsequent - Damages for physical inconvenience discomfort and associated mental distress - Capital Gains Tax - Award of - Turns on own facts
Legislation:
Trade Practices Act 1974 (Cth), s 52, s 82
Transfer of Land Act 1893 (WA), s 140
Result:
Plaintiffs' action succeeds against first and second defendants
Action dismissed against third defendant
Second defendant's counterclaim dismissed
Second defendant to indemnify plaintiffs, first and third defendant against costs and damages
Category: C
Representation:
Counsel:
Plaintiffs: Ms K F Banks-Smith
First Defendant : Mr B H Taylor
Second Defendant : Mr J Gilmour QC & Mr M A MacLennan
Third Defendant : Mr P Mendelow & Ms T Nderitu
Solicitors:
Plaintiffs: Freehills
First Defendant : Talbot & Olivier
Second Defendant : Bennett & Co
Third Defendant : Mullins Handcock
Case(s) referred to in judgment(s):
Addis v Gramophone Co Ltd [1909] AC 488
Baltic Shipping Co v Dillon (1993) 176 CLR 344
Commonwealth v Verwayen (1990) 170 CLR 394
Fink v Fink (1946) 74 CLR 127
Gange v Sullivan (1966) 116 CLR 418
Gregory & Anor v MAB Pty Ltd (1989) 1 WAR 1
Hamlin v Great Northern Railway Co (1856) 156 ER 1261
Olympic Holdings Pty Ltd & Anor v Lochel & Anor [2004] WASC 61
Perri v Coolangatta Investments Pty Ltd (1982) 149 CLR 537
Provan v HCL Real Estate Ltd (1992) 92 ATC 4644
Sandra Investments Pty Ltd v Booth (1983) 153 CLR 153
Walton's Stores (Interstate) Ltd v Maher (1988) 164 CLR 387
Case(s) also cited:
Angelo-Pacific Trading Company Pty Ltd v Steadfast Insurance Co Ltd [1955] VLR 228
Australian Hardwoods Pty Ltd v Commissioner for Railways [1961] 1 All ER 737
Bailey v Bullock [1950] 2 All ER 1167
Bedford Properties Pty Ltd v Surgo Pty Ltd [1981] 1 NSWLR 106
Brown v Heffer (1967) 116 CLR 344
Buhrer v Tweedie (1973) 1 NZLR 517
Forder and Ors v CEMcorp Pty Ltd (2001) 51 NSW LR 486
Georgieff v Athans (1981) 26 SASR 412
Green v Sommerville (1979) 141 CLR 594
Grundt v Great Boulder Goldmines Pty Ltd (1937) 59 CLR 641
Hadley v Baxendale (1854) 9 Exch 341
Hamill v Kenyon [1924] St R Qd 78
Heath v Parkinson (1926) 42 TLR 693
Henville v Walker (2001) 206 CLR 459
Hobbs v London and South Western Railway Co (1875) LR 10 QB 111
Holland v Wiltshire (1954) 90 CLR 409
Hungerfords v Walker (1989) 171 CLR 125
Jessica Holdings v Anglican Property Trust Diocese of Sydney (1992) 27 NSWLR 140
Johnson v Perez (1988) 82 ALR 587
Kuper v Keywest (1990) 3 WAR 419
Lanphier v Phipos (1838) 8 C & P 475
Legione v Hately (1983) 152 CLR 406
Macquarie Generation v CNA Resources Ltd [2001] NSWSC 1040
Marks v GIO Australia Holdings Ltd (1998) 196 CLR 494
Pan Foods Co Importers & Distributors Pty Ltd v ANZ Banking Group Ltd (2000) 74 ALJR 791
Re Daniel [1917] 2 Ch 405
Sampson v Clifford [2002] WASC 102
Stern v McArthur (1988) 165 CLR 489
Tallerman Co Pty Ltd v Nathan's Merchandise (Victoria) Pty Ltd (1957) 98 CLR 93
Trevilyan v Donaldson [1997] SASC 6502
Wroth v Tyler [1974] Ch 30
COMMISSIONER ODES QC: This is an action listed in the expedited list in which the issues relate to the rights of the parties to a double sale of property. The pleadings in this case are voluminous, the papers for the Judge running into 107 pages. Much of it is repetitive. Reducing the entire case to its simplest form, the principal factual dispute emerges from the conflicting versions of the third defendant (the agent of the vendor (the first defendant)) and the second defendant who was the first purchaser of the property. The former (the agent of the vendor) alleges, in effect, that the first contract was terminated when the finance condition therein remained unfulfilled by the agreed date. The second defendant refutes that version stating that she orally agreed with the third defendant to an extension of the date for compliance with the finance condition, that the later sale to the plaintiffs was entered into while her contract was still on foot and that she eventually complied with the finance condition. Within the parameters of the above précis are a number of defences, claims, counterclaims, and interlocking claims for contribution or indemnity, the outcomes of which depend on the factual version accepted by the Court. What follows is a summary of the salient issues raised in the pleadings.
The Main Action
(a) Statement of Claim
In the main action the plaintiffs have instituted a claim against the first defendant (the vendor/owner) for specific performance of a contract of sale of land by offer and acceptance dated 24 January 2004 ("the second contract" or "the Bartlett contract") in terms whereof the plaintiffs agreed to purchase from the first defendant a property situated at 11 Stanley Street, Nedlands being Lot 31 on Plan 1747, being the whole of the land in Certificate of Title, Vol 1828, Folio 596 ("the property") for the sum of $850,000. The plaintiffs allege that the first defendant has been in breach of his contract being unable to complete the sale of the property due to an absolute caveat having been lodged by the second defendant. In the alternative the plaintiffs claim damages for breach of contract and interest on the award of damages together with an indemnity for legal costs which they may be ordered to pay to the second and/or third defendant. They also claim an indemnity for any Capital Gains Tax which they may be required to pay and the costs of the action.
The claim by the plaintiffs against the second defendant (an earlier purchaser of the property) is for an order that the second defendant's caveat I777550 registered against the title of the property be removed and for an injunction against the second defendant that she does so. They also claim similar indemnities mutatis mutandis to those claimed against the first defendant.
The plaintiffs claim that the second defendant who entered into a contract to purchase the property for $865,000 on 21 December 2003, ("the first contract") does not have a caveatable interest in the property because the first contract was terminated when the second defendant was unable to satisfy the finance condition by 13 January 2004 as agreed, alleging that the third defendant on behalf of the first defendant sent her a notice of termination on the 28 January 2004.
Alternatively, the plaintiffs plead that the first contract was terminated by agreement when the second defendant requested a return of her deposit under the first contract which she received on 30 January 2004 and which she has since retained. The termination is further established by a series of statements allegedly made by her to Greg Rossen ("Rossen") a director of the third defendant during January 2004 that she was unable to raise the finance to purchase the property and that the first defendant was entitled to re‑offer the property for sale. The second defendant is further alleged to have told Rossen that she was not in a position to make another offer for the property even though a lower price ($850,000) was sought by the first defendant. The plaintiffs therefore allege that the first contract was terminated by agreement or alternatively that the second defendant is estopped from now asserting that the first contract has not been terminated or from asserting that she has an interest or estate in the property because she consented to, or alternatively acquiesced in, the third defendant offering the property for sale.
The plaintiffs' claim against the third defendant (the estate agent of the owner) is for damages for misleading and deceptive conduct pursuant to s 52 and s 82 of the Trade Practices Act 1974 (Cth) ("the TPA"). The basis of this claim is that should the Court find that the first contract was still on foot on 24 January 2004 (which is denied), the third defendant is liable to them in terms of s 52 of the TPA by reason of the third defendant's representations to the plaintiffs that the property was available for sale to them or alternatively damages for negligence for breach of its duty to ensure that the representations were accurate and its failure properly to terminate the first contract. The plaintiffs also claim interest on those damages and an indemnity for any legal costs which the plaintiffs may be ordered to pay the first and/or second defendant.
(b) The First Defendant's Defence
The first defendant as the owner has little or no dispute with the plaintiffs' allegations save to the extent of the damages which the plaintiffs claim against him.
(c) The Second Defendant's Defence
The principal issue in the main action is with the second defendant who basically pleads by way of defence that the first contract was still on foot when the later sale was entered into. She also claims that the later sale was invalid because that sale was subject to a "special condition" relating to the provision of a current white ant clearance certificate which condition was not satisfied or alternatively was not satisfied until 4 February 2004 by which time the finance condition in the first contract was fulfilled. She asserts further that prior to the satisfaction of the special condition the plaintiffs did not have an interest in the property because the "special condition" on a proper construction of the contract was a condition precedent which was unfulfilled.
The second defendant further denies the allegations by the plaintiffs that she failed to obtain the finance approval required in terms of the first contract stating that there had been a written extension of time to 13 January 2004 and that thereafter by a series of telephone conversations on 12, 16, 20 and 23 January that date was extended as a result of an undertaking by the first defendant represented by Rossen that the first defendant would not exercise his right to terminate the contract pursuant to condition 1.5 of the first contract. The four telephone conversations during the course of January 2004 referred above and an oral representation at the property on 24 January are the representations upon which the second defendant relies in averring that Rossen on behalf of the first defendant agreed that the second defendant was able to obtain the finance approval "at least until after 27 January 2004". In the alternative, the second defendant pleads that the first defendant is estopped from asserting that the first contract was terminated or denying that the first contract was unconditional and enforceable.
(d) The Third Defendant's Defence
The third defendant in its defence to the plaintiffs' statement of claim avers that there were no discussions between Rossen and the second defendant in relation to the signing of a waiver of the finance condition. The defence basically mirrors the allegations made by plaintiffs in their statement of claim forming the basis of the plea of estoppel and the agreement to terminate allegation. The content of the various telephone conversations and the conversation at the property on 24 January constitute the main areas of dispute between Rossen and the second defendant around which the outcome of the action primarily depends. It is therefore necessary to set out the third defendant's allegations in relation thereto more fully.
The third defendant avers that on 13 January 2004 the second defendant informed Rossen that she had not obtained finance approval and inquired whether the first defendant would agree to an extension of time. It is alleged that, acting on the instructions from the first defendant, Rossen informed the second defendant that no extension of time would be agreed to whereupon the second defendant stated words to the effect that she accepted that the first contract was at an end.
The third defendant avers further that on that same day the first defendant instructed Rossen to reoffer the property for sale on 17 January 2004. On 16 January 2004 Rossen telephonically informed the second defendant that the property was being readvertised for sale on 17 January to which she responded that the property was not ideal for her needs and in any event the exchange rate between the Australian and the American dollar was unfavourable to her. (The second defendant and her husband had lived in the USA until recently).
The third defendant further alleges that on or about 17 January 2004 or alternatively 24 January 2004, the second defendant attended a "home open" of the property and stated to Rossen that it was the right of the vendor to resell the property to another purchaser in light of her inability to obtain finance approval.
The third defendant alleges further that on 22 January 2004 Rossen received instructions from the first defendant to reduce the asking price of the property from the advertised price of $875,000 to $850,000 and that Rossen telephoned the second defendant informing her of the price reduction. In response to the question whether she was interested in submitting an offer at the reduced price the second defendant stated that she could not do so because she could not obtain finance.
The third defendant further avers that on 24 January 2004 the plaintiffs submitted the offer to purchase at $850,000 in cash but prior to the acceptance of the offer by the first defendant Rossen telephoned the second defendant informing her that an offer had been made for the property and invited her to submit a new offer. She stated that she was unable to make an unconditional offer because she did not have the necessary finance approval and that the first defendant should therefore proceed to accept the second offer.
On 27 January 2004 the second defendant's husband telephoned Rossen and stated that he had located a new source of finance and wished to acquire the property from the plaintiffs for an additional consideration of $100,000 and requested Rossen to ascertain from the plaintiffs if they were prepared to consider such an offer. The plaintiffs were not prepared to sell the property to the second defendant.
The third defendant avers further that on 27 January the second defendant contacted the third defendant and requested a return of a deposit paid under the first contract, in the sum of $30,000. Accordingly by a letter dated 28 January 2004 addressed to the second defendant, the third defendant confirmed that her finances had not been approved and that the first contract was at an end and tendered the return of the second defendant's deposit of $30,000. That letter together with a sum of $30,000 was collected by the second defendant from the third defendant's office on 30 January 2004.
The third defendant accordingly avers that, by reason of the failure on the part of the second defendant to obtain finance approval by 13 January 2004 and the subsequent telephone conversations and actions referred to above, the first contract was discharged. Alternatively, by reason of the representations made to Rossen by the second defendant in the conversations referred to above, the third defendant assumed that the contract was at an end and, based on that assumption, the first defendant reoffered the property for sale to the plaintiffs who purchased it. As a result it is alleged that it would be unconscionable and to the detriment of the first defendant and the third defendant if the second defendant were permitted to depart from that assumption.
In the further alternative the third defendant refers to the terms of the first contract requiring the second defendant to provide written notice to the first defendant immediately after an inability to obtain finance approval and that, in the event of a failure to provide such written notice, the second defendant was deemed to be in default under the first contract entitling the first defendant to terminate their first contract by notice in writing to the second defendant. It is alleged that as at 13 January the second defendant had failed to obtain finance approval and had further failed to provide written notification of such failure as a result of which the second defendant was in default under the first contract entitling the first defendant to terminate it. It is alleged that, by the conduct of the third defendant in the various conversations (prior to accepting the Bartlett offer, inviting the second defendant to submit a new offer) and the readvertising of the property referred to above, the first defendant unequivocally evinced an intention to no longer proceed with the first contract thereby terminating it as it was entitled to do.
In the further alternative it is averred that upon a proper construction of the condition requiring the second defendant to inform the first defendant of its inability to obtain finance approval that condition (condition 1.3 of the first contract) operated to the benefit of the second defendant only insofar as she may have sought to legitimately resile from the first contract in the event that no finance approval was obtained by the latest date (13 January 2004) and otherwise operated for the benefit of the first defendant and was capable of being waived by the first defendant. It is alleged by the third defendant that the first defendant waived compliance with the condition requiring notice in which event the first contract came to an end.
(e) The Second Defendant's Counterclaim against the Plaintiffs and the First Defendant
The second defendant has counterclaimed against the plaintiffs and the first defendant seeking enforcement of the first contract relying basically on the grounds set out in her defence and claiming against the plaintiffs that the caveat placed by them on the property be removed.
The plaintiffs' defence to the counterclaim is basically a denial of the second defendant's allegations. In his defence to the second defendant's counterclaim the first defendant pleads a denial or non‑admission of the contents of the discussions held by its agent, the third defendant, with the second defendant. The first defendant avers that if the third defendant did make the statements alleged by the second defendant in the telephone conversations, it did so without the first defendant's authority.
The Indemnity/Contribution Proceedings
Arising out of the allegations and counter‑allegations referred to above, indemnity proceedings were instituted by certain of the parties to the main action against others.
(a)The first defendant has instituted indemnity proceedings against the second defendant based on the caveat which she caused to be lodged on the property without reasonable cause. That caveat has prevented the first defendant from completing the second contract despite being ready, willing and able to do so. By reason of the second defendant's conduct, the first defendant has been sued by the plaintiffs for the damages specified above. He therefore claims against the second defendant a contribution or indemnity with respect to any damages, interest or costs he may be ordered to pay to the plaintiffs or with respect to any indemnity he may be ordered to provide them, compensation in terms of s 140 of the Transfer of Land Act (1893) WA together with interest and indemnity costs.
In her defence, the second defendant relies basically upon the same defence she has raised to the plaintiffs' statement of claim namely the telephonic and other oral extensions of time and representations of the third defendant not to exercise the rights of termination under the first contract. She also pleads the estoppel which she pleaded to the claim against her by the third defendant above.
(b)The first defendant has also instituted indemnity proceedings against the third defendant, his agent, in the event of the Court finding that he is liable to the plaintiffs. The basis of the claim by the first defendant against the third defendant is a breach of the agency agreement and/or negligence as well as a breach of s 52 of the TPA in advising the first defendant in a telephone conversation on 15 January 2004 that the first contract was at an end as a result of which instructions were issued to re‑offer the property for sale when (on the second defendant's version) the first contract was still on foot. The first defendant therefore claims against the third defendant orders of indemnity in respect of any damages which he may be ordered to pay to the plaintiffs or to the second defendant, depending on which version is to be accepted. He also claims an indemnity with regard to any indemnity he may be ordered to provide to the plaintiffs for breach of contract or negligence alternatively damages under the TPA and costs.
In its defence to those indemnity proceedings the third defendant repeats its allegations which in effect support the plaintiffs' claim and therefore denies that it was in breach of the agency agreement with the first defendant or that it was negligent or that it breached the TPA in advising the first defendant that the first contract had been terminated.
(c)Indemnity proceedings have also been taken by the third defendant against the second defendant in terms whereof the third defendant claims damages under s 140 of the Transfer of Land Act 1893, claiming to be entitled to be compensated in full by the second defendant which includes an entitlement to indemnity costs in defending the main action, the third defendant's commission in relation to the second contract insofar as the plaintiffs are unable to now pay any commission by reason of the delay in proceeding to settlement and the loss of the use of the commission monies payable. In these contribution proceedings the issue between the third and the second defendant similarly relates to the conversations and the conduct of the parties during January referred to above. The allegations made by the third defendant are, with minor differences which are referred to later in these reasons, identical to those made by it in its defence to the plaintiffs' statement of claim as set out above.
In her defence, the second defendant relies essentially upon the same allegations pleaded by her in her main action defence.
The Agreed Statement of Facts
The parties have agreed to a statement of facts which provide a fairly detailed background to the dispute in this case. I set out the agreed statement of facts because I do not intend to deal with them in any detail (save to the extent that it is necessary to do so) when analysing the evidence adduced.
My treatment of the evidence of the various witnesses must accordingly be viewed against the background provided by the agreed statement. These reasons consequently concentrate on what transpired between the parties during the telephone conversations referred to as well as exchanges between the parties, both oral and written during the period from 21 December 2003 to early February 2004. The agreed statement of fact is as follows.
On 21 December 2003 the first and second defendants entered into a contract for the purchase of the property for the sum of $865,000 (the first contract). The contract was conditional upon financial approval being obtained by 24 December 2004. The Real Estate Institute of Western Australia Joint Form of General Conditions for the Sale of Land (2002) are incorporated into the first contract.
The second defendant paid a deposit of $30,000 in accordance with the provisions of the first contract.
On 24 December 2003 and in writing the first and second defendants extended the date for finance approval to 13 January 2004 but such finance approval was not obtained by that date.
(As indicated above there were various telephone conversations between the second and third defendants during the period 12 and 16 January 2004. The determination of what was said during these conversations and those referred to below is crucial to the outcome of these proceedings.)
The property was then advertised for sale in the West Australian newspaper ("the newspaper") on 17, 21 and 24 January 2004. The advertised price for the property on 24 January 2004 was $850,000.
On either Saturday 17 January 2004 or Saturday 24 January 2004 the second defendant attended a home open for the property and had a conversation with the third defendant.
There were various telephone conversations between the second and third defendants between 20 and 24 January 2004.
On 24 January the plaintiffs inspected the property and entered into a contract with the first defendant to purchase it for $850,000 (the second contract). The second contract was not subject to finance. Settlement under the second contract was due on or before 9 March 2004.
On 27 January 2004 Mrs Bartlett, one of the plaintiffs, paid a deposit of $85,000 pursuant to that contract at the offices of the third defendant. On the same day the second defendant's husband Dr William Ardrey had a conversation with Greg Rossen and proposed that the Ardreys pay the plaintiffs an additional $100,000 to purchase the property from the plaintiffs.
On 30 January 2004 the second defendant at the same time as she uplifted her $30,000 deposit, uplifted a letter dated 28 January 2004 from the third defendant addressed to the second defendant, regarding the return of her deposit, and stating that it confirmed that the contract had previously been terminated.
Settlement under the first contract did not occur.
On 2 February 2004 the second defendant lodged caveat I777550 against the title of the property while on 12 February 2004, the plaintiffs lodged caveat I788346 against the title of the property.
On 24 February 2004 a notice of default was issued by the second defendant to the first defendant in relation to the first contract.
On 4 March 2004 the plaintiffs by their solicitors, Freehills wrote to the first defendant's solicitors, Talbot and Olivier, asking whether the first defendant was ready to settle. Talbot and Olivier responded that the first defendant was unable to settle due to the second defendant's caveat.
Settlement of the sale of the property under the second contract was due on or before 9 March 2004 but did not occur.
On 16 March 2004 the plaintiffs served a default notice on the first defendant.
During mid to late March 2004 Mrs Bartlett made enquiries about rental accommodation and inspected various properties and on 5 April 2004 she entered into a short term lease of 32 Florence Road, Nedlands.
The plaintiffs have paid stamp duty on the second property in the sum of $46,455 and the second defendant has paid stamp duty on the first contract in the sum of $47,400.
On 23 March 2004 the second defendant offered to purchase the property from Bankwest (the mortgagee of the property) for the purchase price of $901,000.
The Issues to be Determined
The recital of the pleadings and the agreed statement of facts above reveal that the following are the issues to be determined:
1.Whether the time for satisfaction of the finance condition under the first contract was extended to 2 February 2004 (as alleged by the second defendant).
2.Whether the conduct of Rossen on behalf of the third defendant was such that it cannot deny the time for satisfaction of the finance condition was extended to 2 February 2004 (as contended by the second defendant).
3.Whether the first contract terminated:
(a)by failure to obtain finance approval by 13 January 2004;
(b)by agreement between the parties prior to 24 January 2004;
(c)by written notice dated 28 January 2004;
(d)by conduct prior to 28 January 2004;
(e)by the second defendant accepting the alleged repudiation by the first defendant and/or at all.
4.Whether the conduct of the second defendant was such that she cannot deny the first contract was terminated (as alleged by the plaintiffs, first defendant and third defendant).
5.The construction of clauses 1.4 and 1.5 of the first contract including whether requirements for written notice can be waived.
6.Whether, upon execution of the second contract, the plaintiffs had a right to specific performance and therefore an equitable proprietary right to the property (the non‑fulfilment of the condition precedent argument as alleged by the second defendant).
7.If the second defendant is granted specific performance or the plaintiffs do not otherwise obtain specific performance to what damages and indemnities are the plaintiffs entitled and from whom.
8.Which party should be liable to indemnify which other parties for liability and costs under the various contribution proceedings.
It will be seen that a number of issues overlap to an extent and that a resolution of one will either determine the outcome of the others or render the resolution of others unnecessary. Thus issues 1, 3, and 5 are intertwined in the above sense while issues 2 and 4 are interrelated.
The above issues can therefore be grouped together and be dealt with as follows:
(a)the termination of the first contract (issues 1, 3 and 5 above);
(b)the estoppel defences (issues 2 and 4 above),
(c)the non‑fulfilment of the condition precedent (issue 6),
(d)damages (issue 7).
The liability of which of the parties to indemnify the others (issue 8) will to a large extent follow upon the outcome of the others.
Central to the determination of all of these issues will be the factual findings made by me and the consequences flowing from those findings.
In order to resolve the various issues, it is therefore necessary to analyse the evidence adduced before me and to make factual findings in light thereof and in light of the probabilities as I perceive them to be. This involves a careful examination of the testimony of the two main witnesses in the trial (Mrs Ardrey and Rossen) as well as that of the other witnesses to the extent that the latter support or conflict with the versions adduced by the main witnesses.
The evidence of the plaintiffs and that of the first defendant and his wife are, to a large extent, covered by the agreed facts. I therefore do not intend to refer specifically to their evidence save to the extent that it is necessary to do so. I shall therefore focus my attention on the evidence adduced on behalf of the second and third defendants.
The Evidence of the Second Defendant
A brief recital of the backgrounds of Mrs Ardrey and her husband is germane to the assessment of their evidence. Mrs Ardrey struck me as an intelligent person with a strong personality. She holds a Bachelor of Science degree from New York University majoring in marketing. After completing that course which covered a four year period, she obtained employment at Bankers Trust which is a merchant bank in Wall Street, New York. She worked for two and half years in the corporate investment department of that firm dealing with securities and investing funds on behalf of clients (TS 309‑310).
Her husband holds a doctorate in technology from Georgetown University and has been in business since 1987 (TS 261). He also holds a Masters degree in both Business and East Asian Studies (TS 268). His evidence was interrupted to enable him to fulfil a commitment to teach an MBA class at the Adelaide University Graduate School of Business in Hong Kong (TS 271).
Leaving aside the facts agreed between the parties Mrs Ardrey gave evidence broadly to the following effect. She first saw the property on 20 December 2003 and telephoned Rossen that afternoon indicating that she wished to make an offer. On Sunday, 21 December 2003 she and her husband met Rossen and after a brief discussion the asking price of $875,000 was reduced to $865,000. The offer for the latter sum was written out by Rossen and after she had stipulated that the offer was to be subject to finance approval by Bankwest for 100 per cent of the purchase price, she signed it. She testified that she was in a position to pay cash but preferred to raise loan funds for the purchase. She stated that Rossen set the finance approval date at 4.00 pm on 24 December 2003. He indicated that he would still continue to show the house but he could not sign another contract unless her financing fell through.
The offer was accepted but the finance was not forthcoming on 24 December 2003 with a result that she signed a form extending the contract finance approval date to 13 January 2004. She stated that at that time she also signed a document waiving the need for a white ant certificate and a building certificate for which provision had been made in the contract.
On 8 January 2004 she met with Michael Walker of Challenge Bank ("the bank") and made an application for a home loan. She and her husband departed on 9 January 2004 for Shanghai. Prior to her leaving, she noticed that Rossen had advertised in the newspaper on a number of occasions (mainly in the Saturday and Wednesday editions) that the property had been sold.
She also informed Rossen that she would take a form with her to Shanghai waiving the finance clause which she would sign and fax from China when the bank provided a written confirmation that finance had been approved.
On 12 January the day before the extended date was due to expire she telephoned Walker from Shanghai and he assured her that the finance was not a problem. She was told that it was a matter of obtaining a confirmatory valuation and preparing the paper work. She then conveyed that information to Rossen to whom she emphasised that she really wanted the property and was pushing the bank to get the paper work done quickly.
She informed Rossen that she was due to be back in Perth on 16 January. She told him that when she got back and the bank had completed the valuations and the paper work, she would then waive the finance clause. Rossen said words to the effect "Great, the house is yours. You are blue chip clients. I have told the Arbuckles this". He told her he wanted to put a "sold" sticker on the sign outside the house for them. She took this to be a clear indication that the time for obtaining finance had been further extended to allow the bank to sort out the paper work. If she had thought otherwise she would have waived the finance condition. She denied that she had told Rossen that she had not obtained finance. She denied also that Rossen said to her that the vendor would not extend the time for finance. On the contrary, Rossen said, in effect, that the date for obtaining finance approval was being extended to allow the bank to do the paper work. She strenuously denied Rossen's statements in the pleadings that she had considered or accepted that the contract was at an end.
On her return to Perth on 16 January 2004 she spoke to Walker and was again assured that finance was not a problem. She contacted Rossen telephonically, told him that she was back and confirmed that finance was still on track. He told her that the house was hers but said the owners wanted him to show the house anyway on Saturday 17 January 2004 and invited her to look at the house again. She did not go. Her understanding after this discussion was that the vendor was again going to give her more time to confirm finance and that he would not terminate the contract without giving her the option of waiving the finance condition which she would have been prepared to do.
On Tuesday, 20 January she again spoke to Walker and was told that everything was in order in relation to her application. She called Rossen immediately afterwards and assured him that everything was on track and that she would have a letter for finance approval in hand shortly. She then asked him to assist in getting their two units appraised for rental to satisfy the security requirements of the bank. He suggested that she phone Peta Buchanan, his office manager, to arrange the valuation of the two units in Clark Street, Crawley, owned by her and her husband to satisfy the requirements of the bank. Rossen then told her that the vendor was in distress and would like the money as soon as possible.
On Wednesday, 21 January Peta Buchanan sent a fax to her husband's office confirming the rental advice which was immediately faxed to the bank. On Friday, 23 January Walker was in Melbourne but she spoke to him by phone. He said that the finance approval had been given but he could not give her a letter to that effect until Tuesday when he would be back in office (Monday being Australia Day). Walker told her that from his point of view she could go ahead and waive the finance clause. He said he would have a letter ready for her upon his return to his office on Tuesday.
She then reported this information to Rossen that day stating that she would be getting a letter from the bank on Tuesday, 27 January. She told him that the bank required a valuation of the property to be done on Tuesday. Rossen again assured her, in effect, that the house was hers. He repeated that the owners were in distress and that he had to show the house again on Saturday 24 January. He then informed her that the vendors intended to reduce the asking price by $25,000 from $875,000 (being the price advertised in the property section of the newspaper) to $850,000. He suggested that she visit the house on Saturday 24 January.
On Saturday, 24 January she decided that it would be fun to inspect the house again, which she did. She stated that her husband who was suffering from influenza and did not feel well, her two children and her mother accompanied her. She spoke to Rossen who told her that he was going to Rottenest Island that afternoon and would be back on Monday, 26 January. He asked her to call him on Tuesday 27 January. She again told him that she had an appointment with the bank for Tuesday to collect the finance approval letter.
On the afternoon of Saturday 24 January she had a telephone conversation with Rossen who told her that the owners wanted to sell the property to a couple who was offering $850,000 cash. Rossen asked her if she wanted to sign another contract on the same terms ie for the purchase of the property for $850,000 in cash. She told him that "our contract was good and we were planning on waiving the finance clause on Tuesday morning as we had discussed earlier that day". Rossen asked her to sign another contract and she told him that she did not feel that she had to. She told him her husband was suffering from the flu and they (the owners) could wait until Tuesday morning. Rossen told her that the owners needed the money as soon as possible or they would lose their cheese factory. He told her that they did not want to wait in case the second purchasers changed their minds. When she asked Rossen to wait until Tuesday morning Rossen said words to the effect that the sellers did not want to sell to them (the Ardreys). They wanted to sell to this couple at a lower price because they were offering cash. Rossen told her that Arbuckle was intending at that point to sign up with the new purchasers. She stated that she did not know how to respond to this and said that she would deal with it on Tuesday.
She was very upset and did not know what her legal position was in relation to the contract. She thought that perhaps she might lose the property. She stated that it was against that background that she went looking at other houses for sale on 27 January. She did not make an offer for any other house.
On Tuesday morning 27 January Rossen rang in response to her message left earlier that morning. She asked him if the vendor had in fact signed another contract to which he replied affirmatively. She was upset and asked if it was possible at that point to uphold her contract. Rossen indicated that she could buy the property from the second purchaser which gave rise to a discussion about offering to buy the property from the Bartletts (the plaintiffs). After a discussion as to the stamp duty that had to be paid Rossen suggested that she should increase her price at least to cover that duty to make it worthwhile. She indicated with the stamp duty in mind, that she could offer to purchase it for $950,000 which would cover the stamp duty and provide an incentive to the Bartletts.
At that point she was upset. She had her letter in her hand confirming finance and was ready to waive the finance clause. She denied having told Rossen that she accepted that the vendor had a right to resell the property. She thought she still had a contract on foot. She was told a few days later by Rossen that the Bartletts were not prepared to consider an offer.
On either Tuesday 27 January or Wednesday 28 January she contacted Peta Buchanan and asked her: "what happens about a deposit?" At that stage she says she was confused and did not know what was to happen to the deposit. Mrs Buchanan told her that the deposit would be returned to her. She testified that she did not ask for the return of the deposit. She stated that on 30 January 2004 she went to collect the deposit cheque and a covering letter dated 28 January 2004. When she received the letter she immediately referred it to her husband who sent it to her solicitor.
She had received a letter from the bank dated 27 January 2004 (Ex 52 Tab 58) addressed to her husband and herself confirming finance. In order to meet the bank's requirements she had to arrange for the bank's valuers to inspect the property and her units which had been scheduled for 27 January 2004 but stated that the bank's valuers had been refused access to the property. That was the reason for the delay and the provision of the final loan approval certificate furnished on 10 February 2004 (Ex 55 Tab 107).
She denied Rossen's statement that she said to him on 24 January 2004 that the Arbuckles should proceed as she was not in a position to make a new and unconditional offer at that point in time, although she admitted that Rossen did inform her that another offer had been made which the Arbuckles intended to accept.
In cross‑examination she stated that she was concerned about the fact that only three working days were initially given in December 2003 for obtaining finance approval. She said that this aspect was raised in discussion with Rossen at the time of signing the contract, keeping in mind that they had just bought a unit in July 2003 with a 100 per cent financing from BankWest. Rossen then told her on that occasion that the vendors needed the money and were in distress. When it was put to her that Rossen did not tell her that on that date she disagreed saying that when they were signing the contract he told her that the vendors needed the money.
I find it improbable that an estate salesman of Rossen's experience would have compromised his client's position by informing a purchaser, before any problems had been encountered in the deal, that his client was in financial difficulty.
She then asked whether they could obtain an extension if the finance could not be arranged by 24 December to which Rossen agreed.
Her attention was drawn to handwritten condition 8 of the contract which provided that the sale was "subject to the purchaser checking with her solicitor and receiving advice that payment of deposit moneys was normal". She could not recall the exact details as to whose idea it was nor could she recall whether in fact she saw a solicitor about that matter.
I find that the idea of inserting the above condition into the contract emanated from the Ardreys (who were fairly recent arrivals in Australia) as Rossen knows that the payment of deposit moneys is a usual term found in similar contracts. The insertion of cl 8 into the contract was in my view a significant indicator that the Ardreys from the inception desired 100 per cent financing and were not prepared to part with any of their own finances unless it was absolutely necessary to do so. This also explains to some extent why, at a later stage, they were not prepared to waive finance approval until they had received written confirmation to that effect from the bank.
She stated further in cross‑examination that she did not recall ever saying to Walker that the time period for approval had lapsed prior to 21 January 2004 nor does she recall having had a discussion with him about the time period for approval being extended beyond 13 January 2004 but she deposed that if the date had not been extended she would have told him. She did not think that it was necessary to get a written extension beyond 13 January. Rossen did not at the time give her the impression that there was going to be a problem.
She testified that she saw the advertisement in the newspaper in early January indicating that the property had been sold. The next time she saw an advertisement was on 24 January in which the property was offered for sale. She denied that when she spoke to Peta Buchanan she had asked her why the property was advertised as sold, although she admits that she did discuss the advertisement with her. The nature of the discussion about the advertisement is unclear (TS363). She denied having said to Buchanan that she was concerned that she may have inadvertently signed the finance approval waiver when she visited the office on 24 December 2003. (TS364).
She understood that the loan approval was granted on 23 January but she did not think that to be strange even though the valuation of her units had not been performed. She stated she understood that those valuations were not tied to the finance approval and that the bank was going to give such approval anyway because they (the Ardreys) would make up the difference in cash if the valuation came in lower than anticipated. She therefore denied that as at 5 February 2004 the loan approval was still conditional.
Mrs Ardrey indicated that as at 20 January 2004 she was confident that everything was in order in relation to the application for finance as told to her by Walker. In response to the question that if that had been the position why she did not waive the finance condition at that point of time, her reply was that she was not told to do that at any point. She left it to Rossen to advise her. Bearing her educational qualifications and business experience and that of her husband in mind I find this reply to be improbable and unconvincing.
Similarly her evidence that if Rossen had asked her on 24 January to waive the finance condition she would have waived it but that she did not do so because he did not ask her, borders on a naiveté which in my view neither she nor her husband possesses. Instead he asked her to sign another contract which she did not sign because she was going to uphold the contract for $865,000 to which she had agreed and felt to be bound. She was questioned at length as to why she was not prepared to make a matching cash offer for $850,000 when advised by Rossen of the offer made by the Bartletts.
I was unimpressed by Mrs Ardrey's evidence that she was not willing to purchase the property for $850,000 when offered that deal by Rossen on the basis that she regarded herself bound to a contract for the payment of $865,000. If the vendor through his agent was prepared to sell the property at an amount less than she had previously agreed to pay on what possible basis would she refuse to do so save that she was not willing to match a cash offer for that lesser amount. Her evidence to the effect that the difference of $15,000 meant little to them does not bear scrutiny when it is considered that they, in December 2003, "beat" the asking price of $875,000 down by $10,000 (TS 287).
Her response that she had a signed agreement for $865,000 and that she did not feel aggrieved at the offer for $850,000 because she believed that she had a really good house for the price of $865,000 stretches one's credibility considerably and I do not accept that evidence as probable.
In response to the question as to whether she specifically asked Rossen on 12 January for an extension of time, her answer was most evasive, initially being that she did not ask him in so many words but ending up by stating that she believed that she did ask him expressly for an extension of time. Her evidence in that regard was most confusing. It took several pages of cross‑examination before obtaining an answer to the question whether it was her understanding from her conversation with Rossen that she could have more time or whether he actually said so. Answers to that question differed on several occasions during cross‑examination (TS 354‑357, 399‑402).
In further cross‑examination she indicated that her husband did not express the view to her that he required written confirmation from the bank approving finance. She stated that if it meant that she would lose the property the written confirmation was not that important and she would have waived it. This evidence is in direct conflict with that of her husband. I deal more fully later in these reasons with this conflict and the probabilities relating thereto, as the question of the preparedness of the Ardreys to waive the finance approval condition in the contract without the written confirmation of the bank plays a significant role in the determination of the issues referred to above.
She admitted in cross‑examination that on Tuesday 27 January she visited several homes for sale in the area and was taken through those homes by various agents. She denied the suggestion that the reason for inspecting those homes was that she considered her contract with the Arbuckles was at an end and sought to explain the inspections on the basis that she was upset and had not been thinking about her contract. She admitted further that she looked at other properties on 28 and 29 January although she said that they were not "serious" inspections but were just "drive‑bys" or that she just happened to see them.
In support of her case, the second defendant relied on the evidence of her husband and Mr Michael Walker of Challenge Bank.
The Evidence of William Ardrey
I found the evidence of the second defendant's husband, Dr Ardrey to be vague and improbable in a number of respects. I found it remarkable that a person with his educational background and business experience frequently needed to ask what apparently were fairly simple questions to be repeated. The phrase "I can't recall" appeared in his evidence as a constant refrain. He often did not reply pertinently to the questions put to him.
His evidence that he left most of the dealings with Rossen and Walker to his wife and that he was ill on his return from Asia on 18 January onwards perhaps explains the vagueness and his lack of recall in relation to the details of the negotiations and conversations, although he did concede that he did not have a very good memory (TS 489). However there were aspects of his evidence which I find totally unconvincing. He testified for example that he was unaware on 24 January (and indeed on 27 January) (TS 490) that there had been a buyer for the property who had agreed to purchase it for $850,000 (TS 483). That evidence is surprising particularly in light of the fact that it is common ground between his wife and Rossen that the latter informed her on 22 or 23 January that the property was being advertised at $850,000 and that the offer of the second purchasers on 24 January was disclosed to her in a telephone call from Rossen on the afternoon of the same day.
It is inconceivable in my view that that information would not have been imparted to Ardrey by his wife and that all she had told him was that Rossen required her to sign a new offer as he deposed. The probabilities are that he was apprised of the new offer by his wife of the lesser contract price and was asked to match the offer made by the second purchasers but that he refused to do so because, for reasons of his own, he did not want to pay cash. His evidence that he was not prepared to agree to a lower purchase price offered him by the seller's agent because he already had an agreement to purchase at $15,000 more than the price at which he could have acquired the property (TS 482 – 483) is equally unconvincing. His evidence that he was unaware whether the agent still had the deposit (TS 499) is also difficult to accept.
I reject Ardrey's evidence that it was Rossen who suggested that the Ardreys attempt to buy out the second purchasers (TS 488, 491 ‑ 492). That evidence is denied by both Rossen and Buchanan who state that it was Ardrey who proposed that course of action. The evidence of Rossen and Buchanan is confirmed in the Logged Message Report (Ex 83 Tab 169 at p 657) where a message recorded by Buchanan on 27 January 2004 at 11.53 am is:
"Pls. call William Ardrey – would like to know if there is any chance of buying out the other parties interest – finance has come through for them (PB)."
This evidence serves not only to refute that of Ardrey on this point but indicates the improbability of his evidence that he believed that his wife's contract was still on foot.
On the basis of the probabilities dealt with more fully below, I accept his evidence when he stated that although his wife had been given an oral confirmation of finance approval by the Bank on 23 January, he required that confirmation to be given in writing (TS 253, 471). The request for written confirmation was conveyed by him to Walker on 23 January but, because written confirmation had not been obtained by Saturday 24 January when he was invited to make a new offer for cash, the Ardreys declined to do so. That attitude was consistent with his oft repeated evidence and that of his wife, that although he was in a position to make a cash offer for the property he elected not to do so because that was not the preferred structure.
The Evidence of Michael Walker
Mr Michael Walker is a home finance manager of Challenge Bank. It was he who handled the application for finance made by Mrs Ardrey. He in effect confirmed the evidence of Mr Ardrey in that most of the contact with him came from Mrs Ardrey and he had relatively little contact with her husband. I accept his evidence that he had indicated to Mrs Ardrey on several occasions that the loan had virtually been approved but that it was just a matter of seeing to the paper work before formal approval could be obtained.
Walker's own position was being made difficult by the senior credit managers at the bank's head office in Adelaide who were continually calling for more detail (TS 514, 537). I find that this resulted in him being reprimanded by his superiors (TS 537‑538). Walker clearly was keen to have the loan approved but was being frustrated by his head office. His repeated assurances given to the Ardreys were, on the probabilities, aimed at retaining that business. I accept his evidence that he informed the Ardreys on 23 January that the loan had been approved and that he would send a letter of confirmation to them on Tuesday 27 January (TS 514). Walker informed them that they could go ahead even though valuations of the property and the units had not been undertaken. He was confident that the valuations of the property and the units would "come up to the value" and he knew the Ardreys were prepared to put in any extra cash required to make up the difference. I find that the effect of his evidence is that the letter of confirmation furnished on 27 January was not an unconditional approval of the loan in that the property had still to be valued and that without such valuations, the bank "would not have been able to move into the phase of mortgage production" (TS 521) which was essential to secure its loan. The valuation of the property was received by the bank on 9 February (TS 543) and final approval of the loan was given by the bank when it issued the loan approval certificate on 10 February 2004 (TS 541‑542).
The Evidence of Greg Rossen
Rossen testified that on the afternoon of 24 December 2003 he had a conversation with Mrs Ardrey who advised him that while she was in a position to sign the waiver letters confirming that the building inspection and the white ant clearance had been obtained to her satisfaction she was not prepared to sign a similar waiver that she had obtained finance approval by 24 December. She provided him with a letter from BankWest stating that finance totalling $930,000 had been conditionally approved but as far as Rossen was concerned conditional approval by BankWest did not comply with the terms of the contract. Mrs Ardrey advised him that she would certainly receive finance approval for the property but this was a mere formality and that she would need an extension of time because of the Christmas/New Year break and because the bank would need to get valuations. As a result of that discussion an extension of time until 13 January 2004 was granted within which to obtain finance approval. A Variation of Contract document was prepared by Rossen's office and signed by Mrs Ardrey on 24 December 2003 (Ex 35).
Rossen gave evidence which indicated the precise times, dates and duration of numerous telephone calls made and messages received. He was able to do this by refreshing his memory and having recourse to a Logged Messages Report (Ex 83 Tab 169) which indicated the date and duration of telephone calls which were made by the third defendant to various telephone numbers. The report details messages received by Rossen on his pager from his office and provides not only the date, time and name of the caller but also a brief note of the content of the message with the initials of the employee of the third defendant who sent it. Rossen also handed in a report from Hutchison Telecommunications detailing messages which were sent to the third defendant's answering service during the period in question indicating the date, time and a brief message (Ex 82 Tab 129). From these documents it appears that numerous telephone calls were made to and from the Ardreys, the vendor as well as the vendor's settlement agents Acton Properties Settlements and McGregor Settlements who were the agents for the Ardreys.
Late in the evening of 12 January 2004 Rossen again spoke to Mrs Ardrey who at that stage was in China. She confirmed to him that she had not yet obtained finance approval and asked whether the seller would be prepared to agree to a further extension of time. Rossen told her that the Arbuckles would not agree to any extension whatever and if she could not obtain finance or waive the finance clause, the contract would come to an end at 4.00 pm on 13 January 2004. Rossen testified that he told Mrs Ardrey that the seller needed to sell the property and because the Ardreys had not obtained finance approval on two occasions, the property would need to be re‑offered for sale. He stated that Mrs Ardrey said that she understood this.
The next telephone call of importance was one which occurred on 16 January at 6.11 pm with Mrs Ardrey lasting approximately 10 minutes. During that call, Rossen testified that she informed him that she had not obtained finance approval, that the exchange rate from the United States was unfavourable to them and that she was of the view that in any event the property was not ideal for her needs. She gave Rossen the distinct impression that she was losing interest in the property. He advised her, during this conversation that the contract was at an end and informed her that the property was going to be offered for resale. He denied that he told her: "The house is yours. You are blue chip clients. I have told the Arbuckles this". Rossen testified that approximately $1,000 was spent in re‑advertising the property and that it was accordingly ridiculous to suggest that such an assurance had been given.
That same evening Rossen telephoned Arbuckle and advised him that Mrs Ardrey had been unsuccessful in obtaining finance and that they needed to re‑offer the property for sale at the next opportunity Saturday, 17 January. Arbuckle gave approval to that suggestion. This conversation must have taken place earlier than the evening of 16 January because the advertisement for the resale of the property appeared in the newspaper of 17 January. The deadline for inserting advertisements is Thursday afternoon (TS 691) ie 15 January. Rossen further advised Arbuckle that based on his experience, he had gained the distinct impression that Mrs Ardrey was unreliable and that her representations concerning her ability to pay finance within promised timeframes could not be depended upon. He accordingly advised Arbuckle that he was of the view that there was little point in obtaining a new offer from her which was subject to finance approval.
As a result of this discussion a prominent advertisement was placed in the newspaper on 17 January 2004 advertising the property for sale at $875,000. The same advertisement appeared on Wednesday 21 January and both advertisements provided details of the home opens for inspections to be carried out on each of those dates.
Rossen testified that there was a strong need on the part of the sellers to sell the property and it was necessary to re‑offer the property for sale. While he was hopeful that Mrs Ardrey might find a new source of finance and be able to re‑offer on the property, Rossen's primary objective was to secure a purchaser for the Arbuckles. That the above discussions took place and that these instructions were given to Rossen ring true as Arbuckle had at that stage received a formal demand from his bank (the mortgagee) for repayment of loans owing by him (TS 163).
Rossen stated that on or about 20 or 21 January in response to a call from Sally at McGregor Settlements (the vendor's settlement agents) he informed either Sally or Jenny of that office that the Ardrey contract had fallen over due to failure to obtain finance approval. This evidence is corroborated by Jennifer McGregor of McGregor Settlements who tendered a note written by her (Ex 93) dated 21 January 2004 reading: "11 Stanley Street. Fallen over. Advised by Greg Rossen". Evidence to a similar effect was given by Peta Buchanan that when she returned from leave on 19 January, she was told by Rossen that the contract had fallen through.
On 20 January a further phone call took place between Rossen and Mrs Ardrey. Rossen was unable to recall the precise content of those discussions but he did recall that they were related to her request that he arrange for her properties at Clark Street to be appraised for potential rental return in order that that information could be provided to the bank to assist her in obtaining supporting evidence for a new finance application.
On or about 22 January he received a call from Mrs Arbuckle providing him with instructions to reduce the asking price of the property from the advertised price of $875,000 to $850,000. After receiving those instructions he immediately telephoned Mrs Ardrey and informed her of the price reduction which was now $15,000 less than the amount for which she had offered to purchase the property in December. He asked her if she was interested in submitting an offer at the reduced price and she advised him that she could not do so because she had not obtained finance.
On the afternoon of 23 January he received a message to telephone Mrs Ardrey. He advised her that there would be another home open the following day and encouraged her to have another look at it hoping that she would become re‑interested and that she would submit a new offer.
On Saturday 24 January the property was again advertised in the West Australian for $850,000. A home open was held at the property from 10.00 am to 10.45 am on that date. Both Ardreys attended.
Rossen, after receiving the Bartletts' unconditional offer to purchase for $850,000, then called Mrs Ardrey at approximately 3.34 pm on the afternoon of the 24th and informed her that another offer had been made and that if she wanted to re‑submit an offer it would have to be one that was not subject to finance approval. She advised that the seller should accept the offer as she was not in a position to make a new and unconditional offer at that point in time.
Later that same afternoon at approximately 3.51 pm he received a message to telephone Mrs Ardrey. He later telephoned Arbuckle at approximately 4.46 pm that afternoon during which conversation Arbuckle advised him that he decided to accept the offer from the Bartletts.
On 27 January (being a Tuesday) after the Australia Day weekend, at approximately 8.16 am he received a further message from Ardrey. His office had then also received a message to call Ardrey advising Rossen that Ardrey wanted to know if there was any chance of buying out the other party's interest in the property as finance had come through for them. Rossen telephoned Ardrey and during that conversation Ardrey said that he had been very happy with the efforts that the third defendant had made on their behalf and had done everything to keep the Ardreys informed. He told Rossen that although his wife was disappointed at having missed out he felt that they had been given every opportunity to purchase the property. Ardrey advised that he had located a new source of finance and that he wished to acquire the property from the new purchaser. He asked whether it was possible to buy out their contract. Rossen informed him that a payment made to the purchasers to abandon the contract may fall foul of the taxation provisions and that he, Rossen, could not be a party to that proposal. Ardrey then suggested that they would be prepared to pay the Bartletts $100,000 more for the property than they had agreed to pay if they would sell the property to them. They specifically requested Rossen to sound the Bartletts out on their proposal.
Rossen telephoned Mr Bartlett at about 5.17 pm on 27 January and put the Ardreys proposal to him to purchase the property. Bartlett indicated that they had bought the property to reside in and that he did not think that they were interested in reselling.
The following day at 8.35 am he received a message to call Bartlett and on returning his call, was advised that they were not interested in the Ardrey proposal. Later that morning in response to a message from Ardrey he phoned and informed him of the Bartletts' decision. Ardrey advised him that his wife had expressed disappointment in not purchasing the property and was very keen to buy from the Bartletts. Rossen then suggested that they might wish to contact Bennett & Co because they may be able to help them as to a way in which an offer to acquire the property may be put to the Bartletts.
On or about 28 January Rossen informed his office manager, Mrs Buchanan that Mrs Ardrey had requested the return of her deposit moneys of $30,000. Mrs Buchanan informed him that Mrs Ardrey had also been in contact with her to request the return of the deposit moneys. Rossen accordingly wrote to the Ardreys on 28 January confirming their request for a refund of the deposit moneys and confirming further that their finance had not been approved and that the "contract is at an end as previously advised" (Ex 46).
At approximately 3.13 pm on 30 January Rossen received a message on his telephone (pager) advising him inter alia that Mrs Ardrey had collected her deposit cheque and that a facsimile had been received from Bennett & Co in which the solicitors confirmed the receipt of the letter of 28 January.
Rossen testified further that on 2 February he received a fax from Bennett & Co advising that the Ardreys had received finance approval contending that the Ardrey contract was unconditional. This was, according to Rossen, the first occasion on which the third defendant had received written notice that the Ardreys had received finance approval in relation to the property.
Rossen's further evidence deals with the correspondence and contact with the solicitors, the most detailed of which was a letter dated 4 February 2004 which he wrote to Bennett & Co setting out his version of the negotiations and discussions between himself and the Ardreys (Ex 69).
In elaborating on certain of the discussions held with Mrs Ardrey, Rossen told her when she signed the offer that if her conditional offer was accepted and Rossen received an enquiry from another potential buyer prior to Christmas, Rossen could elect to show that buyer the property in case her finance was not approved. At no time did Mrs Ardrey tell Rossen that she did not want the third defendant to continue to show the property.
After the Arbuckles had accepted the Ardrey offer, Rossen arranged for a series of advertisements to be placed in the West Australian newspaper showing that the property amongst others had been "sold" (Ex 49). Rossen believed that Mrs Ardrey would obtain finance and considered that the property was sold. A list of "sold" properties is a common way of advertising an agent's ability and of canvassing for new listings.
Rossen denied the evidence of Mrs Ardrey that it was his suggestion which was made on 27 January that the Ardreys offer to purchase the property from the Bartletts. He testified that an "on‑sale" requires a significant expenditure by a new purchaser because of the impost of State and Federal taxes and that in his experience it leaves a bad taste in the mouth of the original vendor who queries the integrity of the selling agent in regard to the negotiations of the first sale. Rossen's evidence that the suggestion emanated from the Ardreys is supported by Mrs Buchanan who testified to that effect. She stated that she then typed a message received by her from Mr Ardrey who "would like to know if there is any chance of buying out the other parties interest …" (Logged Messages Report Ex 83 Tab 169 p 657).
The Evidence of Peta Buchanan
Mrs Buchanan is the office manager of the third defendant She first met Mrs Ardrey at the offices about 4.30 pm on Christmas Eve 2003. She deposed to a conversation which she had with Mrs Ardrey the burden of which was that she advised Mrs Buchanan that she needed further time to obtain finance approval. Although Mrs Ardrey was prepared to sign waivers in relation to the white ant and building inspection certificate which she signed in the witness' presence she said she was not prepared to sign a waiver for finance because the bank needed more time for their valuers to inspect the property. She informed Mrs Buchanan that she was going overseas and was hoping to have it all sorted out before she went but she needed about three weeks to ensure that the finance would be approved. The witness accordingly drafted a variation of contract document in relation to the finance condition reflecting the latest date as 13 January 2004.
Mrs Buchanan stated that on 27 and 31 December 2003 and 3 January 2004 advertisements were run in the newspaper advertising generally for potential sellers to contact the third defendant. The advertisement noted that a number of properties in the agency of the third defendant had been "sold" amongst which was the property at 11 Stanley Street. She recalled that some time after 27 December but prior to 1 January 2004 Mrs Ardrey telephoned her and queried why the property was advertised as "sold". The witness advised Mrs Ardrey that this was a marketing exercise in order to attract other potential sellers by means of noting recent sales. Mrs Ardrey stated that she was concerned that she may have inadvertently signed the finance waiver when she had visited the office on 24 December 2003 but the witness assured her that she had not done so.
The witness then took leave from 1 January to 19 January 2004 when she returned to the office. On that day Rossen informed her that Mrs Ardrey had failed to obtain finance within the extended time period and that her contract had fallen through. He also advised her that he had arranged for the property to be re‑advertised for sale but told her that there was a possibility that Mrs Ardrey may make a new offer to purchase the property. He advised that the only way he would entertain a new offer from her was if it was not subject to finance. Rossen instructed her to assist Mrs Ardrey to appraise her properties in order to establish their rental value. The purpose of that appraisal was to assist her in obtaining supporting evidence for a new finance application.
Prior to the witness going on leave the finance was to be approved by BankWest but she subsequently found out that a new application had been made to Challenge Bank and it was in that sense that she referred to the finance application as "new".
Mrs Buchanan met Mrs Ardrey at 4.00 pm on 20 January 2004 at her home at Clark Street, Crawley where she appraised the two properties in a group of units. Mrs Ardrey took her to unit 7 which appeared uninhabited and she went through the unit. She was reluctant to permit her to carry out a full inspection of unit 8 stating that it was the Chinese New Year and her parents were busy cooking. However, the witness insisted that it was necessary for her to examine the unit if she was going to supply a rental appraisal.
While undertaking the appraisal she spoke to Mrs Ardrey who informed her that she had no intention of renting out the properties but stated that the bank needed the appraisal for its purposes. She called the appraisal "a paper exercise" and indicated to her that she was losing interest in the property. She was subjected to cross‑examination on the point but was certain in her own mind that this is what Mrs Ardrey had told her.
The witness stated that on or about 22 January 2004 she received a telephone call from Mrs Arbuckle who advised her that they urgently needed to sell the property and she wanted to reduce the asking price from $875,000 to $860,000. Rossen who had been working with her at the time of the call then took the call with the witness standing beside him. She heard Rossen say to Mrs Arbuckle that if they needed to sell the property in the next week then he would suggest a reduction in price to $850,000. She was in Rossen's office shortly thereafter when he made a telephone call during which she heard him say that the sellers would be advertising the property for sale the coming weekend at the price of $850,000.
The next encounter with the Ardreys occurred on the morning of 27 January when she received a telephone call from Mr Ardrey. He informed her that Rossen had sold 11 Stanley Street over the weekend to another party. At that stage the witness had not been in contact with Rossen and this was the first time she became aware that the property had been sold. Ardrey advised her that Rossen had contacted Mrs Ardrey on the afternoon of Saturday 24 January. He (Ardrey) stated that Rossen had asked if the Ardreys wished to submit another offer as he had obtained an offer from a new purchaser. Ardrey was very complimentary about Rossen and the way in which he handled the dealing with them and stated that he was very appreciative of the trouble Rossen had taken in contacting them and giving them an opportunity to submit an offer. Ardrey advised the witness that they were unable to make an unconditional offer at the time of Rossen's call and then stated to her that a few hours after they declined to submit a new offer his moneys had come in from America and he was now in a position to make an unconditional offer.
I have some reservations about whether Ardrey in fact told her that the "finance had come through" from America. I find that she probably misunderstood him. The Logged Message Report message which the witness sent to Rossen refers to the fact that "the finance had come through" (Ex 83 Tab 169, p 657). She explained that the omission of a reference to America in the message was attributable to the limited number of characters (130 in all) which can be typed in the space provided. I find that Buchanan probably assumed that the source of the finance thereof was the USA. I find that it was never the intention of the Ardreys to utilise their own funds and that if they did not receive the necessary funding from the bank, they probably would not have purchased the property in the first place.
Ardrey then in the course of the above conversation, asked her whether he could buy the other people out of the contract because his wife really wanted him to buy it and, like any good American husband, he wanted to purchase the property for her.
Mrs Buchanan stated that later the same morning Mrs Ardrey called her and in an annoyed and abrupt tone of voice requested that her deposit moneys be refunded as soon as possible. She told Mrs Ardrey that she had already spoken earlier that day with her husband and that she would draw the cheque from the trust account. Mrs Ardrey said that she would collect it as soon as it was ready.
Mrs Buchanan stated that on 28 January 2004 she drew a cheque for the return of the deposit and also prepared a letter to be sent to Mrs Ardrey on the instructions of Rossen. As she had not collected the cheque by 29 January 2004 the witness left a telephone message stating that if she had not collected the cheque by close of business on 30 January she would post it to her.
On 30 January between 12.30 pm and 1.00 pm Mrs Ardrey attended the third defendant's office and collected her cheque for the refund of the deposit moneys together with a letter she had typed for Rossen.
Under cross‑examination by counsel acting for Mrs Ardrey, she conceded that it was her practice to return deposit moneys within at least a day or two after the contract was terminated. She was asked why she did not return the deposit earlier. She stated that she had been on leave from 1 to 19 January and was unable to follow her usual practice for that reason. She also indicated that she understood that the contract had come to an end after 13 January 2004. She states that because of her absence from the office she was extremely busy on her return and was unable to return the deposit before 28 January.
Factual Findings and Probabilities
As indicated above, the main witnesses in the trial were Mrs Ardrey and Rossen, whose evidence I have dealt with in some detail. I have already made certain findings in dealing with their evidence and I do not intend to repeat them.
Both were subjected to lengthy and detailed cross‑examination and neither emerged unscathed. Cogent criticism was levelled against each by opposing counsel. Much of the criticism was justified.
I found Mrs Ardrey to be evasive, furnishing lengthy responses to simple questions. At times her replies were unrelated to the questions and she had to be requested to answer only what was asked of her. Her evidence on important aspects of the dispute was contradictory, and vague. Thus in testifying on whether Rossen had on 12 January, expressly agreed to extend the time for obtaining financial approval or whether that was merely her understanding of the situation, she appeared to vacillate from one version to the other.
On the other hand, it is clear from the cross‑examination of Rossen that there were important conflicts between his evidence and statements made by him in a letter to the Ardreys' solicitors dated 4 February 2004 (Ex 69). There were omissions in the letter when compared to his evidence while the letter contained statements which were not to be found in his evidence. His evidence was also unsatisfactory in many respects.
Criticisms have been directed at the inability of the Ardreys and Rossen to recall details and dates of specific telephonic discussions. These contradictions, omissions and failure of exact recollection related almost exclusively to the contents of numerous conversations, both personal and telephonic, held between Rossen and the Ardreys over the period from 22 December 2003 and the beginning of February 2004. It would have come as a surprise to me and indeed, would have raised suspicion had both sets of witnesses been able to recall perfectly the times, dates and contents of the numerous telephonic and other exchanges.
I do not accept the submission made on behalf of the second defendant that Rossen deliberately attempted to mislead the court" nor do I accept the argument that his evidence was "inherently improbable". On the contrary, I have found Rossen's version of events to be more probable than that of the second defendant.
Despite the criticisms levelled against his evidence, I accept Rossen as a witness of truth, not only because of the strong probabilities favouring his version but also because his evidence is corroborated in material respects by other witnesses, including Mrs Buchanan whose testimony I accept without reservation.
It should however be noted that but for the corroboration of Rossen's evidence and the probabilities referred to in these reasons, I would have had difficulty in preferring the evidence of one above the other. Standing alone, the evidence of both Mrs Ardrey and Rossen leaves much to be desired.
Of the witnesses who gave evidence in this trial I found Mrs Buchanan to be the most impressive. Her evidence was concise and clear and I was impressed by the manner in which she gave her testimony. I have little hesitation in accepting her evidence and to the extent that her evidence corroborates or is in conflict with the evidence of any of the other witnesses I would accept her evidence in preference to the evidence which contradicts hers, save in the respects expressly referred to.
The evidence of Mrs Buchanan is important in several respects. In the first instance it corroborates the evidence of Rossen that no extension was given to Mrs Ardrey on 13 January. She was told by Rossen that the Ardrey contract had fallen through on the 13th when she had returned to the office from leave on 19 January. That evidence negatives to a large extent the submission made by counsel for Mrs Ardrey that that contract was extended and that Rossen was keeping the options open by allowing the Ardrey contract to carry on or remain on foot in the event of a second purchaser not being obtained. Had that been Rossen's approach and had the latest time for fulfilment of finance approval been extended as deposed by the Ardreys it is highly improbable that Rossen would have told Mrs Buchanan that the contract had fallen through. Her evidence is further supported by Jennifer McGregor of McGregor Settlements whose contemporaneous handwritten note on 21 January that the sale had "fallen over" (Ex 93 TS 741, 756) is inexplicable other than that the contract was considered by Rossen to be no longer on foot.
Mrs Buchanan's evidence that Ardrey had told her that the property had been sold on the weekend and that he wanted to know whether there was any way in which he could purchase the property from the new buyers is also contrary to the evidence given by the Ardreys that they had always regarded the contract to be on foot. If the belief of the Ardreys had genuinely been that the first contract was still on foot on 24 January, a reason for offering to buy the new purchasers out at a greatly increased price, escapes me.
I also accept Buchanan's evidence in preference to that of Mrs Ardrey when she said that it was Mrs Ardrey who asked for the refund of a deposit as soon as possible as opposed to Mrs Ardrey's evidence that she did not request the return of the deposit, but merely wanted to know what "was happening" to it.
Mrs Ardrey's evidence relating to her conversation with Rossen on 12 January to the effect that she was "under the impression" that Rossen had given her an extension of time for an undefined period of time (TS 354‑357) and that the house was hers is so improbable that it needs only to be stated to be rejected. Rossen's client was in urgent need of funds by that time. The mortgagee bank had made formal demand for payment at that stage. Despite assurances on two previous occasions that those funds would be forthcoming, Rossen's client was let down. Both Rossen and Mrs Ardrey were aware that the previous extension of time was given in writing. Within days of that conversation, steps were taken to re‑advertise the house (for $875,000) and to hold time consuming home opens (at an eventual cost of $1,000). There can be no plausible explanation for the time wastage and the expense if Rossen had assured her, as she repeatedly stated in her evidence that "the house is yours". Rossen was aware that extensions of time by way of variations to the contract were required to be given in writing. That much is clear from the fact of his experience in the property business and the fact that he required the earlier extension to be reduced to writing and signed by the parties. With that knowledge, Rossen would not have made an oral agreement as alleged by Mrs Ardrey. Moreover, bearing in mind the caution displayed by Mrs Ardrey in inserting cl 8 in the contract requiring legal verification that the payment of deposits was "normal" and her behaviour in checking with Mrs Buchanan whether the "sold" advertisement in the newspaper in December 2003 did not possibly indicate that she had inadvertently signed a waiver of the finance condition, I find that her failure to insist on following the same procedure as was followed with the first extension of time agreement to be totally out of character. In addition, why would she have accepted the oral assurance of the vendor's agent that there had been an extension of time when she was not prepared to accept the oral assurances of her own banker that finance had been approved until it had been confirmed in writing? Moreover, I find that an oral extension of time given on 12 January for an unlimited period highly improbable.
The evidence of Ardrey that he required the finance approval to be given by the bank in writing sits more comfortably with the conduct of the parties and the probabilities as disclosed by the testimony. It is my finding that the Ardreys, from the inception had decided that they would require 100 per cent finance in order to purchase the property and that, unless they had received a written assurance from the bank that such funding was forthcoming, they were not prepared to purchase the property. I am assuming in Mrs Ardrey's favour that they possess the financial ability to purchase the property with their own resources but I find that they elected not to do so.
Ardrey testified – and I accept his evidence in this regard as being probable – that when Walker informed them on 23 January that the funding had been approved and that they could sign a waiver, he insisted that such confirmation be given in writing.
The cumulative effect of the above evidence points irresistibly to the conclusion that the Ardreys were not prepared to sign a new but unconditional offer for a lesser purchase price. It also explains why Mrs Ardrey made several attempts on a Saturday afternoon of a long weekend to contact Walker in Melbourne.
I therefore reject the evidence of the Ardreys to the effect that they were prepared to waive the finance condition on 24 January but failed to do so because they were not told or advised to do so by Rossen. For the same reasons I reject their evidence that they were not prepared to conclude an unconditional contract for a purchase price $15,000 less than that they agreed to pay, because, according to them, they were happy with their own contract and felt bound to honour their obligations thereunder (TS 476). I find, on the probabilities, that had she in fact been prepared to sign a waiver on the oral assurances of Walker, she would have done so without the need for advice or an instruction from Rossen to that effect. As stated above, the Ardreys are intelligent and highly educated persons. Ardrey himself has been in business since 1987. Mrs Ardrey was aware on the afternoon of 24 January that she might lose the house (TS 299) and knew she could waive the condition (TS 412). I find that the Ardreys knew that they could acquire the property if an unconditional offer was signed by them but, in light of the repeated oral assurances of bank approval given to them by Walker which did not materialise, they were not prepared to commit themselves without such approval being furnished in writing. I accordingly find that Mrs Ardrey probably indicated to Rossen on the afternoon of 24 January that the vendor should go ahead with the sale to the second purchaser.
It follows from the above that the Ardrey's evidence that they would have waived the finance condition on 13 January (or at any later date) if Rossen had asked them to do so (TS 398) is rejected.
I also reject Mrs Ardrey's evidence that the purpose of her phone call to Walker in Melbourne on 24 January was merely to inform him of developments and to seek his advice. I find on the probabilities that there is no reasonable explanation for her attempts to contact him at that time other than to secure some form of written confirmation. Her evidence that she could not recall the purpose of her call to him (TS 404) was, in my view disingenuous.
Mrs Ardrey stated that she received an unconditional approval from the bank on 23 January, even though the bank had still to do valuations on the property arranged for 27 January (TS 355‑356). She testified that approval by the bank was not dependent on the valuations (TS 336).
This evidence is contrary to the allegations made by her in her pleadings in which it is stated, in relation to the telephone conversation on 12 January, that she informed Rossen that she had received advice from the bank that written confirmation of finance approval would be forthcoming after she had obtained certain valuations and after paperwork for the loan had been finalised. (Paragraph 9(1) of the second defendant's defence to the third defendant's claim in the indemnity proceedings; Papers for the Judge p 76; par 7.1 of the second defendant's defence to the first defendant's claim in the indemnity proceedings; Papers for the Judge p 97). Her evidence‑in chief is to the same effect (TS 293). For her to assert that approval from the bank was not dependent upon the valuations in light of the above is, in my view equally disingenuous. Indeed, the obtaining of the valuations and the finalisation of the paperwork appear, on her own evidence, to have been the only matters preventing the grant of the written confirmation she was awaiting. In fact the bank's letter of final approval on 9 February (Ex 63 Tab 101) emphasises, in its opening words, ("Having completed the final valuation …") the importance of the valuations to the confirmation of the loan.
Moreover I find that Mrs Ardrey's conduct was totally inconsistent with a belief on her part that her contract was at all times still on foot. (I interpose at this point to make it clear that I am referring to her and her husband's belief as to the status of her contract prior to consulting her solicitors. Whether that belief in fact reflected the legal position requires separate consideration).
Her belief and that of her husband that her contract was no longer on foot can be inferred, clearly in my view, from the facts (as found by me) that she was informed by Rossen on 12 January 2004 that the vendor was not prepared to grant any further extensions and that if her finance condition was not waived by 4.00 pm on 13 January, the contract would be at an end. Her belief that the contract was at an end manifests itself when she was informed on 23 January that the vendor would be advertising the property at $15,000 less than she had agreed to pay and was asked if she wished to put in a new offer. The evidence that she attended the home open on 24 January, was informed of the new offer and was asked whether she wished to match it, her attempts to contact Walker on that Saturday afternoon, the attempts to buy out the new purchasers, her request for the return of her deposit, her viewing of other houses for sale on 27, 28 and 29 January all point inexorably to the conclusion that she did not believe that her contract was still on foot. Her evidence to the contrary is rejected.
The probabilities are – and I so find – that Mrs Ardrey was told by Rossen that the seller was not prepared to extend the time and that the contract would come to an end if finance had not been obtained or if the finance condition was not waived by 4.00 pm on 13 January. I find that she nevertheless proceeded with pushing the bank in the hope that finance approval would be obtained before the property was purchased by someone else.
What I find most improbable, if her version is to be believed, is that at no time in her evidence‑in‑chief and extensive cross‑examination does she state that she protested to Rossen during the period 13 January to 30 January that he had agreed with her that the period for obtaining finance approval had been extended beyond 13 January, for an indefinite period (as pleaded) or for any other period or that he had agreed not to exercise the right to terminate the contract. Her evidence is to the effect that the agreement to extend was made and that Rossen agreed not to terminate the contract, on 12 January and was confirmed in four telephone conversations thereafter on 16, 20, 23 and 24 January (Papers for the Judge p 75‑79; 96‑98). Bearing her strong personality in mind, I find that had such an extension been expressly agreed or had she understood from her conversations with Rossen that it had been so extended or that he had promised not to terminate the agreement, her evidence would have been replete with references of constant reminders to Rossen to that effect from mid January when she was told that the property was to be re‑advertised for sale and thereafter. The absence of any reference to any such protestations in her evidence and subsequent correspondence lends support to my conclusion that there was no such agreement to extend and that Mrs Ardrey did not understand nor did she believe that an extension had been granted on the dates alleged by her or at all.
It remains to consider the legal consequences of the factual findings made above.
(A) The Termination of the Contract
While the Ardrey contract makes provision for its termination under its express terms, the parties are agreed that that is not the only method by which that result may be achieved. Thus much of the argument was directed at various dates in January 2004 on which the contract was allegedly terminated by agreement.
Counsel for Mrs Ardrey has argued that the third defendant has not pleaded that there was an agreement between the parties on 12 or 13 January that the contract had been terminated. He has argued that all that was pleaded was that Mrs Ardrey "understood" what she had been told. He contended that that allegation did not amount to an agreement. I am unable to accept that submission. The pleaded allegation, in its proper context, is that Rossen informed her that the first defendant would not agree to any extensions and that if she could not obtain finance or waive the benefit of the finance clause by 4.00 pm on 13 January, her contract would come to an end. The pleading of the third defendant proceeds that she stated "words to the effect that she understood the matters referred to" above (pars 9(b) and (c) – Papers for the Judge p 65). It is interesting to note that in the third defendant's defence to the plaintiffs' statement of claim, the third defendant pleaded in relation to the telephone conversation in question that "the second defendant stated words 'to the effect' that the second defendant accepted that the contract was at an end" (par 21(b) Papers for the Judge p 36). I accept that the latter version of the conversation was not pleaded in the proceeding between the second and third defendants but it is significant that both pleadings indicate "the effect" of the words used.
I am of the view, on a proper construction of the pleading against the second defendant that the allegation that the second defendant "stated words to the effect that she understood …" means that she understood that if she did not obtain the finance or waive the benefit of the finance by the given deadline, the contract would come to an end. Her acceptance of that consequence is, in my view, implicit.
I find therefore that Mrs Ardrey understood and accepted that the contract was terminated if by 4.00 pm on 13 January, the finance condition in her contract had not been waived. I find further that the contract, by reason of the above exchange was brought to an end at 4.00 pm on 13 January, when the condition remained unfulfilled.
Should I have come to the incorrect conclusion in relation to an agreement to terminate the first contract on 12 January, I am of the view that the contract was terminated by the parties as alleged by the third defendant in its statement of claim against the second defendant in the indemnity proceedings (see pars 14‑20; Papers for the Judge p 67‑68). The termination of the agreement was effected by the conduct of the parties in a series of events commencing on 24 January when Mrs Ardrey declined Rossen's request to submit a matching offer, by informing Rossen that he should accept the offer of the Bartletts (Ex 89 par 41 Ts 682) and thereafter by requesting the return of her deposit which she accepted together with the letter of 28 January confirming "the termination".
By reason of the conclusions reached by me above, it is unnecessary for me to deal with the arguments on whether the contract was terminated in terms of the express provisions of cl 1 of the contract.
(B) The Estoppel Defences
I find in any event, that should my conclusions in relation to the termination by agreement be erroneous, the allegations of estoppel against the second defendant are, on the basis of the above factual findings, well‑founded.
Mrs Ardrey was told on 12 January that if she did not obtain finance or sign the waiver of the finance condition by 4.00 pm on 13 January, the contract would be at an end and she understood that. She was told that the property was to be re‑advertised for sale on 17 January and was invited to the home open on that day. On 23 January she was told that the property was being offered for resale at $850,000, $15,000 less than the price she had agreed to pay for it. She read the advertisement in the newspaper on 24 January and attended the home open on that day. She was aware that whereas the property had at the end of December 2003 been advertised in the newspaper as "sold", it was now being advertised for sale, with members of the public being invited to purchase it. She knew on 24 January (and well before then) that she could waive the condition (TS 398, 412) but did not do so. That afternoon she was invited to match the Bartletts' offer by signing a new offer for cash which she declined to do. Instead she advised Rossen that the seller should proceed to sell as she was not in a position to make a new and unconditional offer (Ex 89 par 41).
During all that time, from 12 January onwards, she stood by without protest. There is no suggestion on her own evidence that she ever objected to the above events or that she protested that there had been an agreement to extend the date for waiver on 12 January. She allowed each of the above events to occur and permitted the first defendant to conclude a contract for the sale of the property to the Bartletts.
I am satisfied that the requirements for an estoppel namely a representation/assumption, detrimental reliance and unconscionability have been fully met (Walton's Stores (Interstate) Ltd v Maher (1988) 164 CLR 387; Commonwealth v Verwayen (1990) 170 CLR 394).
In light of the fact that I have rejected Mrs Ardrey's version of the events, the defence estoppel pleaded by her cannot succeed.
(C) Non‑fulfilment of Condition Precedent
The Bartlett offer was entered into "subject to the vendor providing prior to settlement a current white ant clearance certificate" (cl 7).
The second defendant has pleaded that the above clause was a special condition "which has not been satisfied or alternatively was not satisfied until 4 February 2004" (par 3 of second defendant's defence and counterclaim, Papers for the Judge p 15).
It is contended by the second defendant that this clause was "a condition precedent. There was no contract until the condition was satisfied. It was merely a conditional offer". It was contended in the alternative that:
"The Bartlett contract did not give the plaintiffs an equitable interest in the land prior to satisfaction of the white ant condition as prior to satisfaction of the condition, the contract did not contain any obligation capable of enforcement in equity by way of specific performance or injunction."
It appears that the basis for the above submission is that the offer was expressed as "subject to" (par 113 of outline of second defendant's submissions dated 22 June 2004 read with pars 1 and 2 of second defendant's List of Propositions of Law dated 4 June 2004).
The mere fact that a contract is expressed as being "subject to" the fulfilment of a certain condition does not mean that there is no binding contract until that condition has been satisfied. Such an argument fails to distinguish between a condition precedent properly so called which is a condition precedent to formation and a condition subsequent or a condition precedent to performance. While in the former case, no binding contract comes into existence until the condition is satisfied, in the case of a condition precedent to performance, a binding contract is immediately created but performance of obligations thereunder may be delayed until satisfaction of the condition. It is a matter of construction of a particular contract as to which of the two types was intended by the parties. (Cheshire & Fifoot, "The Law of Contract", 8th ed, par 5.25, 20.2‑20.4). The authorities indicate that unless it is clearly expressed by the parties that a condition precedent is one which is precedent to the formation of the contract, such conditions will be construed as conditions subsequent. (Gange v Sullivan (1966) 116 CLR 418 at 441, 429; Perri v Coolangatta Investments Pty Ltd (1982) 149 CLR 537; Sandra Investments Pty Ltd v Booth (1983) 153 CLR 153; Gregory & Anor v MAB Pty Ltd (1989) 1 WAR 1 at 9, 21‑22).
In Perri, Mason J (as he then was) expressed the position to be as follows:
"Generally speaking the Court will tend to favour that construction which leads to the conclusion that a particular stipulation is a condition precedent to performance as against that which leads to the conclusion that the stipulation is a condition precedent to the formation or existence of a contract. In most cases it is artificial to say, in the face of the detail settled by the parties, that there is no binding contract unless the event in question happens. Instead it is appropriate in conformity with the mutual intention of the parties to say that there is a binding contract which makes the stipulated event a condition precedent to the duty of one party, or perhaps both parties, to perform." (at 552)
In casu there is nothing which indicates an intention of the parties that their contract would not come into existence until the white ant certificate was provided. On the authorities cited above, it is clear in my view that cl 7 of the Bartlett contract is intended to be a condition subsequent. The requirement that the white ant certificate be furnished "prior to settlement" signifies the creation of a binding contract between the parties which would entitle the purchaser to terminate it if the condition is not satisfied before the date of settlement. Pending fulfilment prior to settlement, the contract was fully binding with neither party at liberty to terminate it, nor to take any step which would infringe the rights of the other thereunder. The evidence reveals that shortly after the receipt of a letter dated 2 February (TS 62 – Ex 4 Tab 69) the plaintiffs signed the document attached thereto waiving the need for compliance with cl 7 of the contract.
It follows from the above that there is no substance in the contention that prior to the satisfaction of the special condition, the plaintiffs did not have an interest in the property. I come to the conclusion therefore that the defence of the second defendant on the basis of this argument cannot succeed.
The effect of the above conclusions and those reached by me in relation to the termination of the first contract is that the counterclaim of the second defendant against the plaintiffs that any interest or equity held by the plaintiffs in the property is subject to the interest or equity of the second defendant must similarly fail.
The further effect of the factual findings and conclusions reached is that the claims made against the third defendant by the plaintiffs in the main action, and by the first and second defendants in their respective indemnity claims cannot succeed. The finding that the first contract was terminated by agreement on the bases outlined above and that in any event, the second defendant is estopped from denying that situation and the rejection by me of the version of the second defendant bear the consequence that the allegations of contractual breach, negligence and/or misleading and deceptive conduct under the TPA have not relevantly been established against the third defendant. Those claims are accordingly dismissed. At the same time, the third defendant has not adduced evidence of damage suffered by him and I do not understand its counsel to suggest an entitlement thereto in its indemnity claim against the second defendant, save for the costs incurred by it in defending the action, and in the indemnity proceedings.
On my findings the first defendant is entitled to be indemnified by the second defendant for all amounts and costs it is ordered to pay to the plaintiffs and the third defendant.
(D) Damages
The damages claimed by the plaintiffs against the first defendant are set out in a schedule of items filed by them, dated 8 June 2004. I propose to deal with each item on the schedule separately.
Item 1
This claim relates to a loss of bargain/expectation damages of $40,000. The sum of $40,000 represents, (according to the plaintiffs) the difference between the purchase price of the property under the second contract ($850,000) and its alleged actual value ($890,000). The claim only arises for consideration if I were not prepared to grant specific performance. By reason of the order for specific performance which I propose to make, this claim falls away. It should be noted that Bankwest, the mortgagee of the property, in a letter addressed to the first defendant and handed to the Court from the Bar table by his counsel has agreed to abide the decision of the Court (TS 395). Had that undertaking not been forthcoming from the mortgagee, an order for specific performance made by this Court could possibly have been thwarted.
As indicated above, it is not strictly necessary for me to deal with the evidence relating the valuation of the property for the purpose of assessing damages for loss of bargain because of the order for specific performance which I propose to make in favour of the plaintiffs. However, should it transpire, for whatever reason, that such an order cannot be executed, it is necessary briefly to deal with the expert evidence adduced in support of that claim and in opposition thereto, in the event of such an eventuality.
The plaintiffs called Mr Greg Whyte of Christie Whyte Moore who is a real estate agent who gave evidence on the valuation of the property. His report (Ex 31) adopts a comparative value exercise in relation to properties sold in the Nedlands area and comes to the conclusion that the true value of the property is $890,000. The result is that should the plaintiffs be awarded damages in lieu of specific performance or should the second defendant succeed in the action the plaintiffs' loss would be the difference between that valuation and the purchase price namely $40,000.
The witness expressed the view that his valuation was made by considering the location, the size of the land in question and the value of the improvements thereon which he testified are the relevant factors to be taken into account in arriving at a valuation. He admitted that there were a number of elements in a valuation which had to be determined subjectively. Value judgments were required to be made not only in relation to the overall valuation of the property but also as to the cost price per square metre for the improvements on the property (which he assessed at $1,100 per square metre),and the depreciation figure of 40 per cent which he took into account. He conceded in cross‑examination that the views of respected valuers performing the same exercise and adopting the same methodology could well reasonably differ by up to five per cent in the assessments at which they arrive.
Mr Whyte was referred to the expert report of Mr John Garmony who assessed the value of the property on behalf of the first defendant at $850,000. He (Garmony) found that there was no difference in the true valuation of the property and the purchase price paid for it. Mr Whyte indicated that there was no reason why the report of Garmony was not to be regarded as a true valuation. Nor did Whyte have any reason to doubt that Garmony's valuation fell within the definition of "market value" in his own report. The definition of "market value" given by Whyte in his report is "the estimated amount for which an asset should exchange on the date of valuation between a willing buyer and a willing seller in an arm's length transaction after proper marketing wherein the parties had each acted knowledgably, prudently and without compulsion". The witness indicated that he would have suspicion in the instant case that the vendor might well not have acted "without compulsion" in light of the fact that he had originally sold the property at $865,000 and when problems arose he put it back on the market by reducing it to $850,000 as well as the fact that the bank had finally taken possession of the property and put it on the market.
In response to the valuation made by the plaintiffs' expert the first defendant adduced the evidence of Mr Garmony who also conducted a valuation at the property as at 7 May 2004 (Ex 32). Garmony is similarly a valuer of considerable experience who, like his colleague, viewed sales of comparative properties in the Nedlands area from September 2003 onwards. In coming to his conclusion he adopted a similar methodology, having regard to the location of, and improvements on, each property compared to the subject property. He indicated in cross‑examination that some of the houses sold were unrenovated properties but he refused to accept the proposition put forward by Whyte that there was no improvement value on those properties. Garmony reasoned that by virtue of the fact that the purchasers now reside in those properties they accordingly do have some value. He also referred to the fact that to his personal knowledge, the property market in 2004 has cooled somewhat by reason of the fact that there has been an increase in interest rates in November 2003 and a further increase early in 2004. Having regard to all those circumstances he came to the conclusion that the value of the property was $850,000.
In cross‑examination it was put to him that the history of the property indicated that it was passed in at auction in late 2003 at $890,000, that under the first contract the purchaser was prepared to pay $865,000 and that there had been an offer more recently of $901,000. Garmony in fact dealt with each of these propositions noting that in relation to the auction offer of $890,000 there were several vendor bids included therein. He stated further that in relation to the first contract price of $865,000 it was subject to a 100 per cent finance condition which did impose a risk to the vendor. In relation to the offer of $901,000 he indicated that it was made by one of the parties to the present dispute after the dispute arose and had therefore to be largely disregarded. He also pointed out in relation to the latter offer that even his colleague, Mr Whyte, had not been influenced by that offer.
The one matter upon which both experts were agreed was that the giving of a valuation of property is a subjective matter about which responsible and reputable experts may reasonably and legitimately disagree. I was impressed by both of these experts who are clearly persons of considerable experience. However, bearing in mind the concession that there could well be a difference of five per cent in the valuation of properties and that there had been an increase in the interest rates in late 2003 and early 2004 which would normally indicate a fall off of the market I am inclined on a balance of probabilities to prefer the conclusion of Garmony in relation to the value of the property. That being so, I am satisfied that there is in fact no difference between the purchase price of $850,000 and the true value of the property at the date of the trial and that there is accordingly no loss to the plaintiffs in relation to this head of damage.
Item 2
Under this head for an unspecified amount, the plaintiffs seek damages for physical inconvenience, discomfort and associated mental distress. While a breach of contract does not ordinarily give rise to a claim for damages for anxiety, disappointment and distress (Hamlin v Great Northern Railway Co (1856) 156 ER 1261; Addis v Gramophone Co Ltd [1909] AC 488; Fink v Fink (1946) 74 CLR 127, 144) where, in addition, physical inconvenience has been caused by that contractual breach, such a claim may be entertained (Baltic Shipping Co v Dillon (1993) 176 CLR 344 at 363, 383, 387, 405). The difficulty of assessing damages under this head is to be found in each of the judgments in Baltic Shipping while little guidance can be found in the authorities (Olympic Holdings Pty Ltd & Anor v Lochel & Anor [2004] WASC 61). In Olympic Holdings McLure J was confronted with a similar damages claim for a breach of contract relating to the sale of land. There, the mental stress and physical inconvenience occasioned by the breach were far more significant than in the present case. The parties had sent their furniture to Germany and were compelled to move into sparse living conditions to fund the litigation. One of the parties underwent what in effect were personality changes, which included severe depression and panic attacks. Her Honour in that case awarded $30,000.
In the instant case, the uncontradicted evidence of the plaintiffs was that the dispute gave rise to physical inconvenience in moving into rental premises, which were compared unfavourably to the previous home. Because of the difficulty of finding such premises for short term leases, many hours were spent attempting to find such accommodation. Mrs Bartlett, who was clearly distressed by the dispute, had to spend two hours per day driving her five and a half year son to and from a school which he had only commenced attending this year. Both her son and she became ill during that period, she having coughing fits for the first time in her life for which she required asthma medication. Her husband deposed to the stress the dispute put on his relationship with his wife and son. He testified further that the dispute has been a major distraction to him at a time he had deadlines to meet while working on a substantial project for his employer. I am satisfied on the evidence that the physical inconvenience in fact caused mental distress to both. I find that the distress of the second plaintiff was far greater than that of the first plaintiff.
Bearing the above circumstances in mind, I am of the view that an appropriate award under this head is $5,000 for the first plaintiff and $10,000 for the second plaintiff.
Item 3
A claim for out of pocket expenses of $2,818.50 is made. Clearly the plaintiffs are entitled to such expenses, which include components of rental and interest. The rental of $620 per fortnight has been established to my satisfaction. Such rental and interest thereon are payable by the first defendant until the date the plaintiffs terminate the short term lease at Florence Street Nedlands.
The removal costs of $1,380 have been established (Ex 25) and are awarded by me.
I am not prepared to award the claims in respect of damage of $385 (Ex 26) to the reticulation during removal. Nor am I prepared to award the estimated costs for gas/water/telephone of $100 as these expenses and/or losses would have been incurred anyhow whether the plaintiffs had moved into the rental premises or the property itself.
I will allow the claim for power connection of $27.50 (Ex 27) because that fee will have been duplicated when occupation of the property is eventually taken.
Counsel for the first defendant has argued – correctly in my view – that the claim under Item 3 fails to take into account the benefits received by the plaintiffs which should be set off against the damages awarded. These benefits include the interest which the plaintiffs would have been required to pay on the loan of $680,000 on the purchase price of the property had settlement taken place as agreed on 9 March 2004 to the new date of settlement. Account will also have to be taken of the fact that the proceeds of the sale of the plaintiffs' Clydesdale Street property were to be applied in reduction of the loan of $268,000 on the date of its transfer on 20 April 2004 but were not so applied. The interest earned by the plaintiffs on the proceeds of the sale of their property which would not have been earned had they been utilised to reduce the loan must also be offset against the damages claimed by them. That interest is to be calculated from 20 April 2004 to the date of settlement of the property.
Counsel for the plaintiffs and first defendant have indicated to me in argument that they are prepared to calculate and agree to the amount payable under this head.
Items 4 and 5
The claims for stamp duty (Ex 2) in the amount of $46,455 and interest thereon fall away by reason of the award of specific performance which I propose to make.
Item 6
The plaintiffs are entitled to interest on the amount of damages awarded in terms of the Supreme Court Act from the date of this award to the date of payment.
Item 7
Because the claim for specific performance in favour of the plaintiffs will be awarded, there is no liability for Capital Gains Tax and the need for an indemnity for such a liability falls away.
In relation to the remaining damages under the above head, it is correct as submitted on behalf of the plaintiffs, that liability for Capital Gains Tax arises by virtue of the fact that the plaintiffs have "a right to sue" which represents an asset for such purposes. (Section 108‑5 of the Income Tax Assessment Act 1997). It is furthermore correct that an award of damages represents capital proceeds within the meaning of that Act. In their written submissions, the plaintiffs have submitted – correctly in my view – that the imposition of tax should not subvert the principle that the damages which a court awards, must be truly compensatory (Provan v HCL Real Estate Ltd (1992) 92 ATC 4644).
However, in exercising a discretion to grant the indemnity claimed by the plaintiffs I must be satisfied that the potential for the payment of Capital Gains Tax was reasonably foreseeable by the parties to the contract. No evidence has been advanced to satisfy me that either Mr Arbuckle or Mrs Ardrey (the parties primarily liable for any such damages) reasonably foresaw such damages. The plaintiffs have referred me to passages in the transcript which indicate that Mr Bartlett (TS 61) and Mr Rossen (TS 681) were alive to that prospect. In the latter passage, Rossen "thinks" that he told Mr Ardrey and that he "would have" indicated to him "the imposts of both stamp duty and capital gains tax". I am however, not satisfied to the requisite degree of proof that the vendor and the Ardreys were alive to the potential liability and in the exercise of my discretion, I would dismiss the claim for an indemnity under the above item.
Item 8
The plaintiffs are entitled to the costs incurred by them in the action, including the costs in respect of the lodgement by them of a caveat over the property which were, in my view, reasonably incurred
Item 9
The need for an order for an indemnity for all liability to the first and second defendants falls away. The plaintiffs are entitled to be indemnified for the third defendant's costs.
It follows from the above reasons that in essence, I find that the plaintiffs are entitled to specific performance from the first defendant, the removal of the caveat placed on the property by the second defendant, damages and costs. The counterclaim of the second defendant against the plaintiffs and the first defendant is dismissed.
I will hear further from the parties as regards the orders which are necessary to be made in the main action and the indemnity proceedings in order to give effect to my conclusion.
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