Bruggemann, Bruggemann & Babilda Pty Ltd v Knight

[1992] QCA 390

[1992] QCA 390

COURT OF APPEAL

FITZGERALD P
DAVIES JA

de JERSEY J

Appeal No 110 of 1992

HERBERT JOHN BRUGGEMANN AND

MARIE BERNADETTE BRUGGEMANN	First Appellants (First Plaintiffs)
and
BABILDA PTY LTD	Second Appellant (Second Plaintiff)
and
KEITH ROBERT KNIGHT	First Respondent (First Defendant)
and
MADELEIN DENISE KNIGHT	Second Respondent (Second Defendant)
and
MARSHALL KEITH KNIGHT	Third Respondent (Third Defendant)
and
RODNEY WILLIAM SCOTT trading as
SPRINGSURE AGENCIES REAL ESTATE	Fourth Respondent (Fourth Defendant)
BRISBANE ..DATE 03/11/92 JUDGMENT

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THE PRESIDENT: This is an appeal from a judgment dated 5
May 1992 which dismissed the appellants' claims, allowed the
respondents' counter-claims and ordered the appellants to
pay the respondents' taxed costs of the action. The claims
and counter-claims related to deposits paid by the
appellants under 3 interdependent contracts, which the trial
Judge held that the first, second and third respondents, who
were the vendors under the various contracts, were entitled
to forfeit and retain, together with accrued interest.

On 22 June 1990 a contract was entered into between the first appellants, Herbert John Bruggemann and Marie Bernadette Bruggemann, as purchasers, and the first respondent, Keith Robert Knight, as vendor, for the sale of a property known as "Bottletree Downs" for the sum $2,015,000. A deposit of $1,000 was paid and provision was made for a further deposit of $200,500 immediately upon the approval of the first appellants' application for finance. By clause 25, the contract was subject to the appellants obtaining finance by a specified date.

On the same day, 22 June 1990, a contract was entered into between the second appellant, Babilda Pty Ltd, as purchaser, and the first, second and third respondents, Keith Robert

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Knight, Madelein Denise Knight and Marshall Keith Knight, as
vendors, for the sale of the cattle then depastured on
"Bottletree Downs" for the sum of $550,000. The deposit
paid under that contract was $1,000 and the balance purchase
price was to be paid by 6 equal annual instalments of $91,
500.

The third contract entered that day was between the second appellant as purchaser and the first and third respondents as vendors for the sale of a tractor then situated on "Bottletree Downs". Once again, a deposit of $1,000 was paid. The balance purchase price, $34,000, was to be paid on delivery of the tractor.

The contracts for the sale of the cattle and the tractor
were conditional upon the completion of the contract for the

sale of "Bottletree Downs".

Because of the first appellants' inability to arrange
finance in accordance with clause 25 of the Contract of Sale
of "Bottletree Downs", all contracts came to an end on 15
July 1990. However, the parties did not abandon the
transaction, but continued to negotiate on the basis that,
apart from the finance clause 25 in the contract for the

sale of "Bottletree Downs", any new contracts would be on

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the same terms as those which they had previously entered

into.

Negotiations commenced at "Bottletree Downs" on 16 July
1990. The respondents contend, and the trial Judge held,
that "... letters exchanged on 31 July 1990 set out the
agreement the parties reached. The effect of this agreement
was to introduce a new finance clause in the contract.

Nothing else was changed and no other change was suggested."

The dispute between the parties essentially turns upon the
letters of 31 July 1990 and some subsequent correspondence
which it is necessary to set out. The first letter of 31
July 1990 was from the appellants' solicitors, Messrs

Melrose & King, and its terms are as follows:

"We refer to the writer's telephone conversation

with Mr Peacey this morning.

We confirm that our clients have obtained approval
for a loan of $300,000 from the Commonwealth Bank
at Toowoomba for this purchase. We are further
instructed that your clients will be providing
Vendor finance by way of a First Mortgage in the
sum of $700,000 over a period of five (5) years,
but subject to the Commonwealth Bank being
granted priority to the extent of $300,000. The
loan is to be interest only at 13 per cent per
annum and interest is to be paid in arrears
annually, the first payment of interest therefor
to be made one (1) year after the date for
completion and the whole of the Principal and
interest to be repaid five (5) years from the date

of completion.

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Our clients are still endeavouring to obtain full
finance from Mungold Pty Ltd and if that finance
becomes available then they will not require
either the loan from the Commonwealth Bank or your
clients' finance. Would you please confirm these

arrangements?

Our clients are obtaining the payment of the
balance of deposit, a sum of $200,500 making a
total deposit of $201,500 today, which amount is
to be invested pursuant to clause l(b) of the
Contract for Sale of land."

The balance deposit under the contract for the sale of "Bottletree Downs" was payable when the first appellants had obtained finance and as the final paragraph of their solicitors’ letter of 31 July indicates, was paid that day.

The respondents' solicitors, Messrs John Crossan & Company,

replied on the same day:

“We acknowledge receipt of your facsimile letter
earlier today and we have referred its contents to
our client.

Our client confirms that he is willing to provide vendor finance by way of a first mortgage in the sum of $700,000 over a period of five years but subject to the Commonwealth Bank being granted priority to the extent of the $300,000 'all up'.

We are further instructed to confirm that the loan
is to be paid on an interest only basis at 13 per
cent per annum and that interest is to be paid in
arrears. However, our client is of the belief
that repayments were to be six monthly in arrears

and not annually in arrears.

Would you please review this aspect of the

proposal with your client?

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We confirm that according to our instructions the
first repayment will be on that date which is six
calendar months following the date for settlement
and that repayments will be made six monthly
thereafter.

We would be pleased if you would respond to our letter at your earliest convenience."

A further letter was sent on 8 August 1990 by the respondents' solicitors to the appellants' solicitors in the following terms:

“Further to the writer's telephone conversation
with Mr King yesterday we confirm your
instructions to us to proceed to prepare vendor

finance mortgage documents.

However, prior to us embarking on this procedure
would you please reply to our letter of the 31st
July, 1990 with particular reference to the
question of whether payments of interest are to be
made six monthly or annually? As we have
previously advised our client would prefer six
monthly payments and indeed it is his belief that

this was the arrangement.

Please let us have your urgent advices."

A telephone call from the appellants' solicitors to the respondents' solicitors on 9 August 1990 confirmed that interest would be paid 6 monthly in arrears.

On 13 August 1990 the respondents' solicitors received a letter from the Commonwealth Bank in the following terms:

"RE: KEITH ROBERT KNIGHT SALE TO BRUGGEMANN

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We refer to our recent telephone conversation and
enclose letter of priority to $300,000 (in
duplicate) for your perusal and execution.

Please return same to this office as soon as possible."

The Letter of Priority enclosed with the bank's letter provided for the bank to have priority for not only the principal of its loan ($300,000) but also:

"(b) all interest on the said moneys at the rate
or the highest of the rates provided in the

Bank's Security;

(c) all moneys with interest thereon as aforesaid
payable or to become payable to the bank for
discounts charges fees and expenses in connection
with the acceptance payment discount or
endorsement of Bills of Exchange by the Bank
pursuant to any Bills Facility secured by the

Bank's Security; and

(d) all other moneys with interest thereon as
aforesaid which the Bank may from time to time be
entitled to debit and charge under the provisions
contained in the Bank's Security with a view to
protecting or maintaining the mortgaged premises
or enforcing the Bank's Security. PROVIDED
HOWEVER THAT THE combined amounts referred to in
subparagraphs (a), (b), (c) & (d) hereof shall not
exceed in total at any time and from time to time
the sum of $300,000."

On the same day the respondents' solicitors replied to the bank in the following terms:

"RE: KEITH ROBERT KNIGHT SALE TO BRUGGEMANN

We acknowledge receipt of your letter dated 8th
August, 1990 enclosing letter of priority in

duplicate.

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The agreement made in this matter is clear in that
the total amount of the priority to be given by

our client to your client is the sum of $300,000.

We will therefore be recommending to our client
that your letter of priority as drafted be altered
in the manner as per the enclosed copy.

We are presently arranging for our client to sign the amended letter and we will forward it to you as soon as possible."

The altered letter of priority enclosed with that letter limited the bank's total priority to $300,000. The bank was not prepared to accept the changed letter of priority and on 16 August 1990 the appellants' solicitors wrote to the respondents' solicitors in the following terms:

"RE: BRUGGEMANN FROM KNIGHT

The interdependent contracts dated 22nd June,
1990, were in Clause 25 subject to finance. An
extension to the 11th July, 1990, was granted.
Our clients did not obtain finance by that date
and did not give notification pursuant to Clause
25(c). Therefore, the Contracts determined and
everything subsequent has been mere negotiations

towards a fresh agreement.

Part of the negotiations since have involved the
provision of finance which by your letter of 31st
July, 1990, was made subject to finance from your
client of $700,000.00 and subject to the
Commonwealth Bank being granted priority to the
extent of $300,000.00 'all up'.
The Commonwealth Bank's. approval to our clients
for $300,000 was subject to the Bank's usual
conditions which included 'priority of $300,000.00
from the Vendor and acceptable to the Bank'. The
Bank requires priority of $300,000 plus accrued
interest. Consequently, no agreement has been

reached between our clients regarding finance.

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Any offers our clients have made are hereby
withdrawn and we are instructed to give you notice
that the negotiations are at an end. Please
direct the Agent to refund the Deposit.

If there has been an agreement between our clients which we say there was not it has been subject to finance of $300,000.00 'all up' from the Commonwealth Bank and as the Commonwealth Bank has not approved such finance we give notice that any agreement between our clients is at an end. Again please direct the Agent to refund the deposit."

The reply dated 17 August 1990 from the respondents' solicitors to the appellants' solicitors was as follows:

“RE: KNIGHT SALE TO BRUGGEMANN

We refer to your letter of the 16th August, 1990 the contents of which we have discussed with our clients.

Your assertion that the contract is determined and
that everything subsequent has been mere

negotiations is rejected.

Your alternative assertion that finance has not
been approved such as to entitle your clients to
rescind is also rejected. Should your clients
fail to settle in accordance with the agreement on
the 22nd August, 1990 we are instructed our
clients will enforce all their rights under the

contract."

The appellants sued unsuccessfully for the return of the
deposits and the respondent successfully sought declarations
that the deposits "are forfeit" and that the respondents are

entitled to retain the deposits and any accrued interest.

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The appellants' major contention, indeed - as the matter was
advanced in oral argument - only contention, is that there
was no further contract for the sale of "Bottletree Downs"
concluded between the parties. This submission is not based
upon any alleged absence of authority on the part of the
solicitors to bind their respective clients; any lack of
writing with respect to one or more terms; any want of form
or formality in the documents or any assertion that the
parties did not intend to be bound until formal contracts
were executed and exchanged. The sole foundation for the
proposition that there was no further contract concluded for
the sale of "Bottletree Downs" is an assertion that the
communications exchanged by the parties' solicitors between
31 July and 9 August, left matters in a state of
negotiation.

The appellants' solicitors' letter of 31 July recorded that they had made the necessary arrangements for finance with $300,000 to be borrowed from the bank and the balance to be lent by the first respondent on the terms which were set out. One of those terms was that the bank was to be provided with a limited priority “to the extent of $300,000",that being the amount of the bank loan; i.e. the principal which the bank had agreed to lend.

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In their reply on the same day the respondents' solicitors
referred to the bank being granted priority to the extent of
$300,000 "all up" and that was accepted as correct by the
appellants even as they sought to escape the contract.
In the letter from their solicitors dated 16 August 1990

they said:

“...

If there has been an agreement between our clients
which we say there was not, it has been subject to
finance of $300,000 'all up', from the
Commonwealth Bank ..."

It is unnecessary to say more of this matter than that a perusal of what was written and said in the period from 31 July to 9 August 1990 demonstrates quite plainly that the parties had, by the latter date, concluded a further contract for the sale of "Bottletree Downs" which included new terms concerning finance.

Other matters raised in the written submissions were not pressed on the Court in the oral argument and accordingly it is unnecessary that the Court should express a view on those matters.

In the circumstances the appeal should be dismissed with costs.

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DAVIES JA: I agree.

de JERSEY J: I agree.

THE PRESIDENT: The order of the Court is appeal dismissed with costs.

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