Clay v Pesch
[2009] SADC 124
•13 November 2009
District Court of South Australia
(Civil: Minor Civil Review)
CLAY v PESCH
[2009] SADC 124
Judgment of His Honour Judge Tilmouth
13 November 2009
CONTRACTS - PARTICULAR PARTIES - VENDOR AND PURCHASER
A contract of sale and purchase obliged the purchaser to obtain $300,000 by 13 December 2006, which he did not do. The purchaser succeeded at trial in his action claiming recovery of his deposit.
Held: Allowing the vendor's application to review the decision
1. Properly construed, the special condition relating to finance was a condition precedent to the obligation of the purchaser to settle.
2. The purchaser failed to use his best endeavours to obtain the finance because he did not comply with a simple request from the financier and in fact openly sought refusal of his application for a loan.
3. Even though finance was not obtained as of 13 December 2006, the contract remained on foot unless and until lawfully terminated, so that the purchaser remained under a continuing obligation to secure the finance.
4. Attempting to secure a loan of $348,000 with respect to the contract, was not one answering the description referred to in the special condition.
Magistrates Court Act 1991 (SA) s 38; Magistrates Court (Civil) Rules 1992 MCR R 111, r279A; Hadeler v Antoniou and Antoniou [2009] SADC 113; Meehan v Jones (1982) 149 CLR 571; Progress Properties (Strathfield) Pty Ltd v Rumblin (1984) 3 BPR 9; Property and Bloodstock Ltd v Emerton [1968] 1 Ch. 94; Tait v Bonnice [1975] VR 102; Fay v Sheridan [1999] WASCA 61, referred to.
Perri v Coolangatta Investments Pty Ltd (1982) 149 CLR 537; Fragoulis v Mountzouris (1973) 6 SASR 456; Harbray Nominees Pty Ltd v Ongley (2003) 230 LSJS 82; [2003] SASC 329, applied.
Aberfoyle Plantations Ltd v Cheng [1960] AC 115 (PC); Zieme v Gregory [1963] VR 214; Clark v Refeld and Refeld (1980) 25 SASR 246, discussed.
CLAY v PESCH
[2009] SADC 124The issue
The issue of consequence in this application for review of a minor civil action, relates to the proper interpretation of a “subject to finance” provision in a standard form contract for the sale and purchase of real property.
Background
The parties to this action entered into a contract for the sale and purchase of a home and land situated in Mount Barker, at an agreed price of $480,000 on 23 November 2006. The respondent purchaser paid a deposit of $5,000. The contract was due to settle on 20 December 2006 subject to the purchaser obtaining finance. The deposit was initially retained in a trust account by Elders Real Estate.
Finance was not obtained, so on 2 January 2007 the appellant vendor served a notice to complete, asserting the failure to make every reasonable endeavour to obtain approval for finance. Then by notice dated 7 January 2007 the vendor purported to give notice of termination, on the basis that the purchaser was unable to comply with the special condition to obtain finance.[1]
[1] Book of documents pp 47-49
Terms of the contract
Clause 6 of the contract stated:
6. Special Conditions
The party required to comply with a Special Condition must make every reasonable endeavour to do so. If the Special Condition is not complied with before the date specified in the Special Condition (or if no date is specified, within 21 days of the date of this agreement) then,
6.1if the failure to comply with the Special Condition is not due to the neglect or default of the Vendor or the Purchaser, the Vendor or, unless the Purchaser has waived such condition and communicated such waiver in writing to the Vendor or the Agent, the Purchaser, upon giving seven days notice to the other party, may terminate this Agreement and upon its termination (unless the condition is complied with in the meantime) all monies paid under this Agreement must be repaid to the Purchaser and all rights and liabilities under this Agreement will cease.
6.2if the failure to comply with the condition is due to the neglect or default of the Vendor or the Purchaser, the party not in default may terminate this Agreement. If the Vendor is in default, the Purchaser may, upon giving seven days’ written notice to the Vendor, terminate the Agreement and all monies paid by or on behalf of the Purchaser must be repaid to the Purchaser upon the termination or otherwise clause 7.2 will apply If the Purchaser is in default, clause 7.1 will apply.
Clause 7.2 provided for vendor default – not applicable here. Clause 7.1.1 read:
7.1.1If the Purchaser breaches this Agreement and as a result, the purchase of the Property is not completed on the Settlement Date, or the Price or any part of the Price is not paid on its due date, the Purchaser must pay interest on the full Price (less the amount of any deposit monies paid) from the Settlement Date until …
The special condition relating to finance, was as follows:
R. Special Conditions [Clause 6]
This Agreement is subject to:-
1. FINANCE
The Lender agreeing on or before the 13th day of December 2006 to advance not less than $300,000.00 to the Purchaser, and the Purchaser obtaining that advance on or before the Settlement Date. The advance to be for the term of 30 years at an interest rate not exceeding market rate % per annum, repayable as agreed and otherwise on such terms and conditions as the lender requires.
The proceedings in the Magistrates Court
On 27 August 2008 the purchaser issued proceedings in the minor civil jurisdiction of the Magistrates Court against the real estate agents Elders, and the vendor, seeking the return of his deposit. As Elders paid the deposit into court, that part of the action as against them proceeded no further. The only issue in dispute on the pleadings between the purchaser and the vendor was whether or not the purchaser had made every reasonable endeavour to obtain finance as specified in the special condition.
The matter proceeded to hearing on 27 March 2009. In ex-tempore reasons delivered the same day, the presiding Magistrate found for the purchaser.[2] The deposit has since been paid out of court to his credit. His Honour held the respondent, through the agency of a finance broker Mr Stoll, actively tried to obtain finance with the ANZ bank. He found ANZ imposed a series of requirements as late as 15 December 2006, outside the specified date for obtaining finance, including a requirement to provide confirmation that a credit card account had been paid off and the account closed.
[2] Pesch v Clay [2009] SAMC 43
The Magistrate’s critical findings were these:[3]
The special condition was due to be complied with by 13 December 2006. It is clear that Mr Pesch was using his best endeavours at that time. The special condition was not complied with and then the loan was still not approved by the 22 December 2006. Notice was given on the 22 December 2006. The contract may imply with Mr Pesch still had an obligation to continue to pursue the special condition for seven (7) days but in my finding he has proved that he had acted reasonably and was using his best endeavours. The failure of finance was not something that he engineered to get out of the contract. It was a disaster for him and he just had to turn the page and close the book. I find that he can rely on the special condition and he is entitled to a refund of $5,000. Judgment for the plaintiff plus costs $93.00, $264.00 costs on the claim form, $5,357.00.
It appears tolerably clear from this passage his Honour considered that as finance was not forthcoming by 13 December 2006, the contract came to an end and that even if it had not, the purchaser had done his best to secure the finance.
[3] Above at [7]
The application for review
On 15 June 2009 the vendor lodged an application for review pursuant to s 38 of the Magistrates Court Act 1991 (SA). She seeks an extension of time on the basis that the decision did not come to her attention until 21 April 2009, after her solicitors requested a copy of the reasons for decision. In fact those reasons were not forwarded to either, until 25 May 2009. She also relies on the fact that she lives and works in Laos.
Rule MCR R 111 of the Magistrates Court (Civil) Rules 1992 requires that reviews must be instituted under r 279A of the District Court Civil Rules 2006. This rule provides that applications for review are to be brought within 21 days after judgment. By virtue of 6 R 117(2), the court is empowered to dispense with compliance with any rule or to “extend … the time for taking any step in a proceeding” it considers is necessary “for the proper conduct of a proceeding or otherwise in the interests of justice”. A “proceeding” is defined to include an “appellate proceeding”.
The grounds for review were:
The Learned Magistrate erred in finding, against the weight of the documentary evidence, that the respondent had made every reasonable endeavour to comply with the Special Condition relating to finance contained in the relevant contract for sale and purchase of land.
The powers of this court on an application for review are those set out in s 38 of the Act, powers examined in Hadeler v Antoniou and Antoniou.[4]
[4] [2009] SADC 113 at [14-24]
The documentary evidence
At the hearing in this court, Mr Gillam was given leave to speak to his written case, on the condition that the respondent was furnished the opportunity to obtain legal advice and make responsive submissions, if so advised. This he did through the solicitors, Andersons. Such representation was permitted on the footing that the vendor (applicant) would be unjustly disadvantaged if not represented, since she was overseas and unable to appear, and that the purchaser (respondent) was not himself in a position to deal with the complex legal issues involved: s 38(4)(a)(i) & (iii) Magistrates Court Act.
The vendor told the court during the course of the review that he desperately wanted to settle and the failure to achieve that was a great inconvenience to him as well as a financial catastrophe, as it undoubtedly was. He agreed that he was informed by the finance broker there was a problem with the outstanding Bankwest credit card debt. Unfortunately a late transaction involving the use of the card, delayed closure of the account. He wrote to Bankwest on 18 December 2006 stating:
I have paid in full the amount on the abovementioned visa card. I hereby authorise and request to close account in full. Please confirm this has been done by faxing Tony Stoll. Please do not hesitate to contact me.
The next day the finance broker advised Elders that finance was approved, subject to the credit card being paid out. Bankwest confirmed by email that the visa card had been destroyed and was no longer being used. However ANZ took the stance that this confirmation was insufficient.
It emerges that Mr Stoll prepared a loan inquiry on behalf of the purchaser on 27 November 2006, lodged electronically. This disclosed a purchase price of $480,000 and a “loan amount” in the same sum at that time.[5] Faxes to Mr Stoll of 15 and 22 December 2006 from the ANZ, refer to approvals of a loan totalling $632,000, one for $384,000 and one for $248,000, subject to a number of conditions, including “confirmation from NAB that credit card has been paid out and closed”.[6] Mr Stoll wrote to Elders on 19 December 2006 advising of a difficulty with paying out the credit card because of the late transaction. He expected unconditional approval of the loan within 24 hours of confirmation of closure, and estimated settlement could occur on 4 January 2007.[7]
[5] Book of documents p 56
[6] Book of documents pp 66-71
[7] Book of documents p 73
Then on 22 December 2006 the ANZ again approved a loan of $632,000 as before, subject to:
… email correspondence not acceptable to confirm closure of Bankwest credit card. If limit has been cancelled, applicant should be able to obtain a statement confirming this.
This request was never pursued for reasons remaining far from apparent. As a matter of fact Mr Stoll facsimiled Elders later that day:[8]
I wish to advise that finance for the above-named to assist with the purchase of the property located at 4 Duncan Crescent Mount Barker 5251 had been declined. I trust the above is satisfactory and request that you contact me should you have any questions.
and again on 28 December 2006:[9]
In terms of conditional approval for the above-named I wish to advise that the customer is not able to provide the requested information as evidence of the repayment of the Bankwest credit card facility. As such the application is unable to proceed. Please therefore decline the loan and advise me of that decline to enable me to finalise by records. Please do not hesitate to contact me should you have any questions.
As a consequence the ANZ declined the application, on the ground that “the applicant is unable to provide what we have requested”.[10]
[8] Book of documents p 80
[9] Book of documents p 80
[10] Book of documents p 82
It is clear from this material that the purchaser applied for finance, which was not obtained within the time specified in the special condition, of 13 December 2006. It is equally clear that finance as sought was approved in principle by no later than 15 December 2006, for relevant purposes on the undemanding condition that the purchaser provide better “confirmation from NAB that credit card has been paid out and closed”. Thereafter, as and from Mr Stoll’s email of 22 December, the purchaser pursued the application for finance no further. Moreover, based on the documentary material, it is clear that at all times the purchaser sought a loan of $384,000, as well as re-financing an existing loan of $248,000.
The submissions on review
In a written outline submitted to the court, the vendor contends that as the purchaser asked for finance to be rejected, this was evidence of unreasonable conduct for the purposes of the special condition. Her counsel then submitted the attempt to terminate the contract by Mr Stoll of 22 December 2006 – if it was such an attempt – did not comply with clause 6.1 of the contract in that the requisite seven days notice was not given. Mr Gillam went on to submit that the contract made elaborate provision for dealing with the failure to comply with the special condition, by conferring the right to give seven days notice to terminate. As notice was not given until 7 January 2007,[11] he contended the contract remained on foot carrying with it a continuing obligation to comply with the special condition to use his best endeavours in good faith to secure the finance nominated. In particular he suggested this could have been easily satisfied by simply proceeding to discharge the visa card debt in the manner required. The court pointed out to Mr Gillam that although the covenant required the purchaser to obtain finance of $300,000, he in fact applied for a loan of a different order.[12]
[11] Book of documents pp47-48
[12] Transcript 15 September 2009 T12.33-.11
In extensive written submissions prepared by the solicitors for the purchaser and filed on 16 October 2009, it was contended the type of “subject to finance” condition in issue here, was one that required the finance be obtained on or before the specified date. Failure, it was contended, results in termination. This was in contrast to finance conditions, the breach of which merely entitled the parties to terminate. That being the situation, there was no longer an extant obligation to seek finance, beyond the specified date. In the result it was submitted that “where a condition of contract of sale fixes … the date by which the condition is to be fulfilled, then the date so fixed must be strictly adhered to …”: Aberfoyle Plantations Ltd v Cheng.[13]
[13] [1960] AC 115 (PC)
The submission prepared by Mr Hoelscher of Andersons proceeded to mention that as the approval of 15 December 2006 was two days after the stipulated date, the purchaser acquired the right to terminate the contract on giving seven days notice, which he did by virtue of the facsimile of 22 December 2006 and if not on 18 January 2007, “pursuant to the respondent’s notice of termination dated 7 January 2007.”[14] It was further contended that the vendor’s notice to complete was based on two invalid premises, the first being that the purchaser had failed to make every reasonable endeavour to obtain finance, and secondly that he improperly failed to settle on 20 December 2006. Mr Gillam took issue with these contentions in a written response dated 23 October 2009.
[14] Submission 16 October 2009 para 31
Analysis of the issues
The contract for sale and purchase in this case contained a condition which obliged the purchaser to settle on 20 December 2006, upon the special condition of the “lender agreeing on or before the 13th day of December 2006 to advance not less than $300,000 to the purchaser …”. The ‘lender’ is defined in clause 1.15 to include a Bank. Upon the failure to satisfy that condition, in the absence of default by either party, the option of termination on seven days notice by either was provided for (clause 6.1). In that event the deposit was refundable. In the case of neglectful default, the other party secured the separate right to terminate on seven days notice, bringing different consequences, depending on who is at fault (clause 6.2). The purchaser admitted to having applied to the ANZ Bank for finance totalling $480,000,[15] and he volunteered in the written submission that he applied for $632,000 comprising two parts, “only one of which relates to the relevant property”.[16] Mr Stoll’s facsimile transmission to the ANZ of 2 January 2007, disclose that the component of $248,000 was “originally used to purchase a house at … Port Lincoln”. Whereas the other component of $384,000 was “to assist with the purchase of a house at … Mt Barker.”
[15] T27.17-.20, 15 September 2009
[16] Paragraph 26 written submissions 16/10/09
The question then becomes what to make of these facts! The issues devolve into whether the contract comes to an end once the special condition is not fulfilled, what obligations persist once finance is not obtained, if any, whether the contract must be terminated in order to discharge the obligation to fulfil the special condition, and whether is it incumbent on the vendor to apply for the precise finance provided for in the special condition.
Legal principles
The proper construction of the interrelated provisions of this contract referred to, “must plainly depend on the true construction of the agreement, or in other words on the intention of the parties as expressed in, or to be implied from, the language they have used”: Aberfoyle Plantations Ltd v Cheng.[17]
[17] Above at 124
The case law, yields the following central propositions. Subject to finance provisions oblige purchasers to have taken all reasonable steps to obtain the finance: Zieme v Gregory;[18] and to act honestly and reasonably in so doing: Meehan v Jones,[19] so far as concerns their own efforts: Progress Properties (Strathfield) Pty Ltd v Rumblin.[20] The purchaser should not unreasonably refuse or fail to take advantage of available finance: Zieme v Gregory.[21]
[18] [1963] VR 214 at 223-234
[19] (1982) 149 CLR 571 at 578
[20] (1984) 3 BPR 9, 496: NSW Conv R 55-225
[21] Above at 224
The decision of Aberfoyle Plantations Ltd v Cheng[22] does not assist, as it related to a contract of sale conditional on the vendor obtaining renewal of certain leases. In the opinion of Lord Jenkins this was thought to constitute a condition on whose fulfilment the formation of a binding contract of sale depended, but that viewpoint was doubted by Gibbs CJ and confined to its facts by Mason J, in Perri v Coolangatta Investments Pty Ltd,[23] as it was in Property and Bloodstock Ltd v Emerton.[24]
[22] [1960] AC 115
[23] (1982) 149 CLR 537 at 451 and 551 respectively
[24] [1968] 1 Ch. 94 at 116
The “subject to finance” class of special conditions, are generally although not always, thought to fall within two broad categories. The first is where the condition is extended for the benefit of the purchaser, so that the failure to obtain finance is regarded as a condition subsequent: Tait v Bonnice,[25] Fay v Sheridan.[26]This was the position taken in Clark v Refeld and Refeld.[27] The contract in that case provided specifically for a named bank granting a loan of not less than $25,000 on or before settlement. And it expressly provided that if the condition was “not fully satisfied within the time approved”, either party could cancel the contract on written notice to the other. This special condition was held by Wells J to be a condition subsequent,[28] a view upheld by the Full Court.[29] The second category exists when the obligation to purchase depends on the special condition. Such was the situation in Perri v Coolangatta Investments Pty Ltd.[30]
[25] [1975] VR 102
[26] [1999] WASCA 61 at [23]
[27] (1980) 25 SASR 246
[28] At 266
[29] See particularly Legoe J at 288
[30] (1982) 149 CLR 537
With these principles in mind, the four questions standing for resolution as posed above, may now be approached. As to the first, whether the contract comes to an end once the special condition is unfulfilled, the decision in Fragoulis v Mountzouris[31] is determinative of the issue. The special condition in that case read:
If this condition shall not be fully satisfied within the time appointed then, unless the Purchaser shall have waived this condition and communicated such waiver in writing to the Agent either party shall be at liberty at any time thereafter to cancel this Contract by written notice to the other whereupon the deposit and all other monies (if any) paid by the Purchaser on account of the purchase shall be forthwith refunded to the Purchaser (but the Agent shall be at liberty to deduct any monies properly expended by the Agent by way of Mortgage Application fees and Valuation fees) and there shall be no further claim under the contract by either the Vendor or the Purchaser either at law or in equity.
[31] (1973) 6 SASR 456
Of this Jacobs J held:[32]
Upon these findings, the plaintiff, in my judgment, is prima facie entitled to a decree for specific performance. The vendor submits, however, that I ought not, even in these circumstances, to make a decree for specific performance, by reason of the purchaser's alleged non-compliance with the special condition relating to the obtaining of finance, prior to the date fixed for settlement. He says, in effect, that in the case of a conditional contract, the time for performance of the condition is of the essence, and that if the condition is not performed within that time, then the contract falls to the ground and cannot be specifically enforced. The principle, that in a conditional contract, the date for performance of the contract is the date by which the condition must be performed finds expression in a number of cases, e.g. Smith v. Butler [1900] 1 QB 694; In re Sandwell Park Colliery Company [1928] 1 Ch 277; Aberfoyle Plantations Limited v. Cheng [1959] 3 All ER 910. In my judgment, however, that principle has no application in the circumstances of this case. In the first place, the contract itself provides what is to happen if the special condition is not "fully satisfied within the time appointed". Unless the purchaser shall have waived the condition and communicated such waiver in writing to the agent, either party is given the right to cancel the contract by written notice to the other, and the consequences of such cancellation, e.g. return of the deposit and other purchase monies paid over, are provided for. No such notice was given in this case…the contract accordingly remained on foot, unless otherwise lawfully terminated….
[32] At 462
There is in substance no material difference between that clause and the present case as concerns this particular issue. Here as there, the contract makes elaborate provision for the various contingencies that might conceivably arise when finance is not obtained, so it was obviously intended the solution in that event falls for determination within the four walls of the contract. Accordingly the notion that the contract here came to an abrupt end when finance was not obtained by the due, or as of the date of settlement for that matter, is rejected.
The second issue concerns what obligations remain with the purchaser to pursue the finance? As to this question, the decision of Perry J in Harbray Nominees Pty Ltd v Ongley,[33] is directly in point. The contract of sale and purchase under consideration was an identical standard Real Estate Institute contract. The special condition relating to finance was however slightly different:
R Special Conditions [Cl6]
This Agreement is subject to:-
*1. FINANCE
The Lender agreeing on or before the 26th March 2003 to advance not less than $1,000,000 to the Purchaser, and the Purchaser obtaining that advance on or before the Settlement Date. The advance to be for a term of 3 years at an interest rate not exceeding 9 % per annum, repayable monthly and otherwise on such terms and conditions as the lender requires.
[33] (2003) 230 LSJS 82; [2003] SASC 329; BC200305645
His Honour construed the special condition as “a condition the fulfilment of which is a condition precedent to the obligation of the purchaser, in this case…to settle”,[34] applying the remarks of Gibbs CJ in Perri and Anor v Coolangatta Investments Pty Ltd.[35]The contract therefore remained on foot until validly terminated according to its terms. His Honour added this proviso:
[83] In this case, the right of election to treat the land contract as at an end if the special condition as to finance has not been fulfilled or waived, is expressly confirmed, but with the qualification that the right of termination in such an eventuality can only be exercised on seven days written notice.
[84] That provision would give to the purchaser the opportunity, within the period of seven days, to find the necessary finance to complete.
[34] Above at 62-63
[35] Above at 541
Perry J held that providing the contract was not terminated, it remained “on foot, together with the special condition as to finance”,[36] thus entitling the vendor to call upon the purchaser to settle.[37] Applied to the facts of this case, even though finance had not been secured by 13 December, or for that matter 20 December 2006, as the contract continued on foot, the obligation remained with the vendor to continue to raise the finance specified by the special condition, until of course, the contract was validly terminated. As we have seen the vendor failed to comply with a simple request from the ANZ. More than that he maintained through Mr Stoll that his application was unable to proceed and he positively requested the bank to “decline the loan”.[38] In those circumstances, since he remained under an obligation to honour the special condition, the only conclusion open on the facts is that he completely failed to use his best endeavours by not continuing to do so.
[36] At [80]
[37] Above at [87]
[38] Book of documents p 81
This conclusion leads to the third question, namely that of termination. As we have also seen this contingency is provided for by the contract itself. Absent default, either party was entitled to give seven days written notice to terminate upon the “failure to comply with the special condition”. In that event, the purchaser became entitled to the repayment of his deposit. Assuming Stoll’s communication of 22 December 2006 amounted to a written notice of termination by the vendor, it was ineffective because it failed to give the required seven days notice. It also fails on the above findings since the failure to comply with the special condition was due to the neglect or default of the purchaser, so that he was not on that account entitled to rely on clause 6.1. For the same reason his notice of termination of 7 November 2007 was incapable of bringing about termination.
That being the case, the remaining mechanism for termination was pursuant to clause 6.2 in the event of vendor default, and under clause 7.1 in the event of purchaser default. In this instance rather than rely on clause 7.1 as she became entitled to, the purchaser instead purported to give the notice to complete of 2 January 2007,[39] and then the notice of termination based on the failure to comply with the special condition, on 7 January 2007.[40] This latter notice triggered the right to terminate under clause 6.1, so that it affected due termination seven days later on 14 January 2007. As Perry J concluded in Hazberg Nominees Pty Ltd v Ongley[41] “clause 7 did not authorise giving notice to complete.”
[39] Book of documents pp 45-46
[40] Book of documents pp 47-48
[41] Above at [69]
In the result the vendor’s notice to complete was ineffectual, whilst her notice of termination was effective to bring the contract to an end. However that conclusion yields different consequences: termination under clause 6.1 requires refund of the deposit whereas under clause 7.1 the purchaser becomes liable for the full purchase price, plus interest. As that remedy was never exercised or pursued by the vendor, it is only right and proper that she be confined to an entitlement to the $5,000 deposit.
Finally, as to the fourth question, surprisingly there is no case law that either solicitor or the court has found, dealing with this situation. It is clear however that the Magistrate erred in failing to apply his findings to the precise requirements of the special condition itself. Whilst the authorities demonstrate that a vendor must secure the finance specified in the special finance condition, none were directly concerned with how strict the obligation was quantitatively. What then should be made of the fact that on any view, the purchaser applied for finance of a significantly greater sum than he need have to fulfil his obligations under the special condition?
An analogous issue arose in Zieme v Gregory.[42]The purchaser applied to a finance company for a loan before entering into his contract. Following execution he was offered a loan on terms that he rejected. The specific special condition was:
this contract is conditional upon the purchaser obtaining a first mortgage loan of 4,000 pounds upon the security of the said land … on or before settlement”. At first instance Hudson J held this entailed an obligation not to unreasonably refuse or fail to take advantage of any such loan that was available to him. Based on the facts he was “far from satisfied that had the [purchaser] made reasonable efforts he would not have been able to obtain a loan on more favourable terms than those offered …”. His Honour therefore concluded that “the defendant did not use reasonable endeavours to obtain the stipulated loan …”.[43]
[42] [1963] VR 214
[43] At 218-219
This conclusion was upheld by the Full Court, which added:[44]
But upon the construction of the condition as one of a resolutive character the statement that “the contract is conditional upon the purchaser obtaining” a mortgage loan of the class described on or before settlement, is an elliptical way of saying that if the purchaser does not obtain such a mortgage within that time, he is to have a right (subject to performance of requirements to be obeyed by him) either to treat the contract as at an end or to cause the contract to come to an end.
The facts are distinguishable, since the purchaser considered the interest rate offered to him was too high and the monthly payments were beyond his resources. This much Hudson J accepted.[45] The purchaser failed however, because thereafter “he did nothing”, thus as Hudson J observed “I fail to see how it can be said that the defendant made all reasonable efforts when he made no effort whatever”.[46]
[44] At 222
[45] At 218.35
[46] At 218.55
Of more significance to the present case are the observations in Zieme v Gregory that subject to finance provisions entail obligations “to obtain a loan of the stipulated sum”,[47] or “of the class described”,[48] or “of the kind described”.[49] Similar expressions were used by Wells J in Clark v Refeld and Refeld, such as “financial aid of the kind and to the degree foreshadowed” and “a loan answering the description contained”, in the special conditions.[50] The type of loan described in the agreement in this case was effectively to obtain a bank loan of $300,000.
[47] At 217.12
[48] At 222
[49] At 224.25
[50] Above at 225-226
The conclusion to be drawn from these authorities is that the vendor is obliged to secure finance of the kind and of the class described in the special condition. Although it would be open to comply by obtaining finance of a lesser amount or substantially the same amount specified, it would not when the finance sought was materially different, either qualitatively or quantitatively, to that contracted to be obtained.
On any view of the facts of this case, an application for finance of no less than $384,000 was made with respect to the subject contract. This is unarguably of such a kind and class of finance, as to stand well outside the contracted terms. Accordingly, the vendor was in breach of his obligation to obtain the stipulated sum, or finance of the kind or description agreed by the parties, quite apart from the failure to pursue his application for finance.
Conclusion and orders
On this view of matters, the court below proceeded on erroneous bases. His Honour ought to have found the vendor remained under a continuing obligation to obtain finance until the contract was validly terminated, and additionally that the purchaser failed to direct his best endeavours to that end. Furthermore his Honour erred in failing to examine and apply to the facts as found, the precise obligations entailed in the special condition. It follows that the orders below should be set aside. Based on these considerations and the reasons for filing a late application, it is in the interests of justice to grant an extension of time in which to bring this application for review to the date of lodgement, 15 June 2009.
The order giving judgment in favour of the purchaser in the sum of $5,000 and the attendant orders for costs, are rescinded. In lieu thereof there will be an order in action no. ELCCI-08-8079, that the claim by the respondent is dismissed. In light of the policy captured by ss 38(4) and(7)(a) of the Magistrates Court Act limiting rights of appearance and orders for costs, and in view of the potential importance of these proceedings to the proper construction of these widely used standard form contracts, it is appropriate to simply order that there be no order as to costs of this review.
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