Dodds v Kennedy (No 2)
[2011] WASCA 131
•15 JUNE 2011
JURISDICTION : SUPREME COURT OF WESTERN AUSTRALIA
TITLE OF COURT : THE COURT OF APPEAL (WA)
CITATION: DODDS -v- KENNEDY [No 2] [2011] WASCA 131
CORAM: PULLIN JA
MURPHY JA
HALL J
HEARD: 4 APRIL 2011
DELIVERED : 15 JUNE 2011
FILE NO/S: CACV 89 of 2010
BETWEEN: SUZANNE DODDS
TIMOTHY DODDS
AppellantsAND
GILLIAN KENNEDY
DONNCHA KENNEDY
Respondents
ON APPEAL FROM:
Jurisdiction : DISTRICT COURT OF WESTERN AUSTRALIA
Coram :BOWDEN DCJ
Citation :KENNEDY & ANOR -v- DODDS & ORS [2010] WADC 122
File No :CIV 249 of 2009
Catchwords:
Contract - Contract for sale of land - Subject to finance clause - Lender nominated - Buyer failed to make application to nominated lender - Whether compliance by the buyer
Legislation:
Nil
Result:
Appeal dismissed
Category: A
Representation:
Counsel:
Appellants: Mr B W Ashdown
Respondents : Mr D H Solomon
Solicitors:
Appellants: Holborn Lenhoff Massey
Respondents : Solomon Brothers
Case(s) referred to in judgment(s):
Acorn Consolidated Pty Ltd v Hawkeslade Investments Pty Ltd [2000] WASCA 322
Australian Broadcasting Commission v Australasian Performing Right Association Ltd [1973] HCA 36; (1973) 129 CLR 99
Bowler v Hilda Pty Ltd (in liq) [2001] FCA 342; (2001) 112 FCR 59
Cachia v Westpac Financial Services Ltd [2000] FCA 161; (2000) 170 ALR 65
Caltex Oil (Australia) Pty Ltd v Alderton & Knox [1964‑65] NSWR 456
Custom Credit Corporation Ltd v Lynch [1993] 2 VR 469
Dainford Ltd v Smith [1985] HCA 23; (1985) 155 CLR 342
Gange v Sullivan [1966] HCA 55; (1966) 116 CLR 418
Glynn v Margetson & Co [1893] AC 351
Gwyn v The Neath Canal Navigation Company [1868] LR 3 Exch 209
Homburg Houtimport BV v Agrosin Private Ltd (The Starsin) [2004] 1 AC 715
Insurance Commission of Western Australia v Container Handlers Pty Ltd [2004] HCA 24; (2004) 218 CLR 89
McCann v Switzerland Insurance Australia Ltd [2000] HCA 65; (2000) 203 CLR 579
Meehan v Jones [1982] HCA 52; (1982) 149 CLR 571
Morlend Finance Corporation (Vic) Pty Ltd v Westendorp [1993] 2 VR 284
North v Marina [2003] NSWSC 64
Robertson v French (1803) 4 East 130; (1803) 102 ER 779
Ryan v Ferguson [1909] HCA 47; (1909) 8 CLR 731
Steele‑Smith v Liberty Financial Pty Ltd [2005] NSWSC 398
Toll (FGCT) Pty Ltd v Alphapharm Pty Ltd [2004] HCA 52; (2004) 219 CLR 165
1PULLIN JA: This is an appeal against the judgment of Bowden DCJ, who held that the appellants breached a contract to purchase land and who awarded damages to the respondent vendors. The issue was whether the appellants complied with the subject to finance clause. The respondent contended, and the judge found, that an application for finance was not made by the appellants.
Facts not in dispute and unchallenged findings
2On 4 April 2008, the appellants entered into a contract for sale of land employing the REIWA standard form (September 2006 revision). This contained a printed standard 'Subject to Finance' condition which applied when the contract was made subject to finance. On the first page of the contract, a box headed 'Finance clause is not applicable' was struck out and a box headed 'Finance clause is applicable' was completed showing the following information:
LENDERANZ Bank
LATEST TIME: 4pm on: 21/04/08
AMOUNT OF LOAN: $667,500.00
The words capitalised in upper case in the first column were part of the printed form. The second column showing 'ANZ Bank', the date, and the dollar figure was added by the parties in manuscript and the box was signed by the appellants.
3Clause 1 of the printed standard condition read:
If any information is completed in or the Buyer signs the 'Finance Clause is Applicable' box in the Schedule then this clause 1 applies to the Contract.
1.1Buyer's Obligation to Apply for Finance and Give Notice to the Seller
(a)The Buyer must:
(1)immediately after the Contract Date make an application for Finance Approval to the Lender using, if required by the Lender, the Property as security; and
(2)use all best endeavours in good faith to obtain Finance Approval.
(b)If the Buyer does not comply with clause 1.1(a) or 1.1(c)(1) then the Contract will not come to an end under clause 1.2 and the Buyer may not terminate the Contract under clause 1.3. The rights of the Seller under this Clause 1.1 will not be affected if the Buyer does not comply with Clause 1.1.
(c)The Buyer must immediately give to the Seller or Seller Agent
(1)an Approval Notice if the Buyer obtains Finance Approval, or
(2)a Non Approval Notice if Finance Approval is rejected at any time while the Contract is in force and effect.
1.2No Finance Approval by the Latest Time: Non Approval Notice Given
This contract will come to an end without further action by either Party if on or before the Latest Time:
(a)written Finance Approval has not been obtained; and
(b)the Buyer gives a Non Approval Notice to the Seller or Seller Agent.
…
1.9Definitions
In this clause:
Amount of Loan means either the amount referred to in the Schedule or any lesser amount of finance referred to in the Finance Application. If the amount referred to in the Schedule is blank, then the amount will be an amount equivalent to the Purchase Price.
Approval Notice means a notice in writing given by the Buyer or the Lender to the Seller, or Seller Agent to the effect that Finance Approval has been obtained.
Finance Application means an application made by or on behalf of the Buyer to the Lender to lend any monies payable under the Contract.
Finance Approval means:
(a)a written approval by the Lender of the Finance Application or a written offer to lend or a written notification of an intention to offer to lend made by the Lender; and
(b)for the Amount of Loan; and
(c)which is unconditional or subject to terms and conditions:
(1)which are the Lender's usual terms and conditions for finance of a nature similar to that applied for by the Buyer; or
(2)which the Buyer has accepted by written communication to the Lender, but a condition which is in the sole control of the Buyer to satisfy will be treated as having been accepted for the purposes of this definition; or
(3)which, if the condition is other than as referred to in paragraphs (1) and (2) above includes:
(i)an acceptable valuation of any property;
(ii)attaining a particular loan to value ratio;
(iii)the sale of another property, or
(iv)the obtaining of mortgage insurance;
and has in fact been satisfied.
Latest Time means:
(a)the time and date referred to in the Schedule; or
(b)if no date is nominated in the Schedule, then 15 Business Days after the Contract Date.
Lender means:
(a)the lender or mortgage broker nominated in the Schedule; or
(b)if the Buyer makes a finance application to, or if no lender is nominated in the Schedule then, any bank, building society, credit union or other institution which makes loans and in each case is carrying on business in Western Australia or a mortgage broker carrying on business in Western Australia.
Non Approval Notice means a Notice in writing given by the Buyer or the Lender to the Seller, or Seller Agent to the effect that Finance Approval has been rejected or has not been obtained.
4On 9 April 2008, the appellants paid the deposit specified in the contract. On 11 April 2008, the appellants met with a mortgage broker, a Mr Blackburne, and asked him to obtain finance for them. Mr Blackburne was a mortgage broker, carrying on business in Western Australia. Although he was an accredited mortgage broker with the ANZ Bank, and therefore entitled to submit loan applications to the ANZ Bank, he was not entitled to grant approval of such applications. Mr Blackburne was not a credit provider, nor was he authorised to approve loans on behalf of any credit provider. His role was that of an intermediary.
5At the meeting the appellants had with Mr Blackburne on 11 April 2008, an ANZ Home Loan low document application form was completed in part and signed by the appellants.
6Mr Blackburne advised the appellants that they did not comply with the criteria for an ANZ loan. The appellants accepted that advice and the application was not submitted to ANZ. As a result they made no direct approach to the ANZ because they believed they would be unsuccessful and that a refusal could adversely affect their ability to obtain future loans (at [118]). Mr Blackburne made some telephone inquiries with other financial institutions, but the trial judge held that these were not 'applications for Finance Approval' (at [149]).
7On 19 April 2008, the appellants wrote to the respondents, advising that they had contacted their finance broker to apply for finance. The letter read in part:
After analysing our financial situation the mortgage broker told us there was no way we could get finance unless we sold [an] other property first which would free up equity to make the 20% deposit needed for a low doc loan … Notifying [Mr Rance] of our problem he informed me that I needed a letter from the finance broker explaining the situation. This I received the next day. At this stage Rebecca Rance then informed me that we actually needed a letter from the ANZ saying declined for finance. Our broker has recommended that we don't apply if we know we won't get finance as this will affect any future applications with any other lenders. At this stage we again reiterated our desire to still purchase the property if the vendors were willing.
The appellants did not apply to the ANZ Bank and did not complete performance of the contract. The respondents issued default notices and terminated the contract stating that they were ready, willing and able to settle on the settlement date and that the appellants failed to provide the balance of the purchase price on that date. The respondents then sued for damages.
The trial judge's construction of the contract
8The trial judge correctly directed himself that the meaning of the terms of the contract was to be determined by what a reasonable person would understand them to mean and that this required a consideration not only of the text but surrounding circumstances known to the parties and the purpose and object of the transaction: Toll (FGCT) Pty Ltd v Alphapharm Pty Ltd [2004] HCA 52; (2004) 219 CLR 165 [40]. His Honour also correctly directed himself that the whole of the contract had to be considered and that if the language of a contract was open to two constructions, the preference would be to adopt the construction which was not capricious, unreasonable, inconvenient or unjust even though the construction adopted was not the most obvious or the most grammatically accurate: Australian Broadcasting Commission v Australasian Performing Right Association Ltd [1973] HCA 36; (1973) 129 CLR 99, 109.
9The respondent contended before the trial judge that the appellants were obliged to apply to the ANZ Bank for finance. The trial judge held that on a proper construction of the contract, an application for 'Finance Approval' did not have to be made to the 'Lender nominated in the schedule' and that a buyer 'may make an application for Finance Approval to the lender nominated in the schedule or any bank, building society, credit union or other institution which makes loans' and in each case is carrying on business in Western Australia or to a mortgage broker carrying on business in Western Australia (at [62], [63]). The trial judge held that as a result, 'an application for Finance Approval' could be made to a 'mortgage broker carrying on business in Western Australia notwithstanding the ANZ was nominated as the lender in the schedule' (at [64]). That reasoning is challenged by the respondent in a notice of contention. The respondent maintains that the application had to be made to the ANZ.
10The trial judge, having found that the application for 'Finance Approval' could be made to Mr Blackburne as a mortgage broker, then held that the reference within the definition of 'Finance Approval' to the phrase 'written approval by the Lender of the Finance Application or a written offer to lend or a written notification of an intention to offer to lend made by the Lender' (cl (a)) and to the phrase 'the Lender's usual terms and conditions for finance' (cl (c)) and the ordinary, natural meaning of the word 'approve' led him to the view that the contract should be interpreted as meaning an application for 'Finance Approval' must be made directly, or through an intermediary, to an entity which was a 'Lender' as defined in the contract and was one which was actually capable of approving the application (at [139]).
11His Honour added that if an application for 'Finance Approval' is made to a mortgage broker who is an intermediary in the true sense of the word, the mortgage broker must submit the application to an entity with authority to approve the loan if there is to be compliance with cl 1.1(a)(1) (at [140]). The trial judge concluded that interpreting the clause in that manner did not result in any ambiguity, and that an application for 'Finance Approval' was not made by the appellants to either the ANZ or any other 'Lender' defined by cl 1 which was capable of approving the loan. As a result, the trial judge found that the appellants had failed to comply with cl 1.1(a)(1) (at [157]).
12The trial judge's ultimate finding was that there was no application for Finance Approval within the meaning of the contact. In consequence, the trial judge held that the respondent was entitled to damages and payment of the deposit.
The grounds of appeal
13The appellants appeal on the following grounds:
1.The trial Judge erred in law or in fact in finding that the Appellants had not made an application for Finance Approval to either the ANZ Bank or any other Lender as defined by clause 1 of the Contract and that the Appellants had accordingly failed to comply with clause 1.1(a)(1) of the Contract.
2.The trial Judge erred in law or in fact in finding that an application for finance approval by the Appellants had to be made to a Lender as defined in clause 1 of the Contract which was actually capable of approving the application.
3.The trial Judge erred in law or in fact in finding that commercial efficacy requires an application for Finance Approval to be made, even through an intermediary, to an entity which actually has authority to approve the loan and is a Lender as defined in clause 1 of the Contract.
4.The trial Judge erred in law in finding that no ambiguity was caused by interpreting clause 1 of the Contract to mean that an application for Finance Approval, even through an intermediary, had to be made to an entity which had the authority to approve the loan.
Particulars
(a)The definition of Lender in the Contract includes a mortgage broker carrying on business in Western Australia;
(b)The definition of Lender in the Contract also draws a clear distinction between banks, building societies, credit unions or other institutions which make loans and mortgage brokers which, by definition, do not ordinarily make or have the authority to approve loans;
(c)Other than the requirement that a mortgage broker carry on business in Western Australia, the definition imposes no other qualification;
(d)Consequently, all mortgage brokers who carry on business in Western Australia are Lenders for the purposes of the Contract;
(e)Insofar as other clauses in the Contract are inconsistent with any mortgage broker practising in Western Australia, whether or not authorised to approve loans, being a Lender, then to that extent there is an absurdity or ambiguity in the Contract.
5.The trial Judge erred in law or in fact in finding that if an application for finance approval is made to a mortgage broker who is an intermediary in the true sense of the word, the mortgage broker must submit the application to an entity that has authority to approve the loan to comply with clause 1.1(a)(1) of the contract.
The respondents' notice of contention
14The respondents' notice of contention read:
The judgment of the primary Court should be affirmed on the following ground additional to those relied on by the primary Court:
A.The Contract did not come to an end under clause 1.2, and the appellants were precluded from terminating the Contract under clause 1.3, because the appellants failed to make an application for Finance Approval to the Lender nominated by them in the Schedule to the Contract (the ANZ Bank) as they were required to do by clause 1.1(a)(1).
The submissions of the parties
15The appellants submitted that if, as the trial judge held, an application for 'Finance Approval' could be 'made' (meaning perhaps, 'lodged') with a mortgage broker carrying on business in Western Australia, then the finance application so made or lodged with the mortgage broker also had to be considered and dealt with by the mortgage broker and not by or on behalf of a lender 'capable' of giving approval and making the loan (ts 122). If the first page of the contract is examined on its own, then the position is clear. The 'Lender' is the 'ANZ Bank' and no‑one else. However, the contract has to be read as a whole. The appellants submit that the 'Lender' was not necessarily the 'ANZ Bank'. The appellants submitted that there is no significance in the existence of two subparagraphs in the definition of 'Lender' and that (a) and (b) read together provide a series of alternatives so that 'Lender' means either:
(a)the lender nominated in the schedule; or
(b)the mortgage broker nominated in the schedule; or
(c)any bank, building society, credit union or other institution which makes loans and in each case is carrying on business in Western Australia; or
(d)a mortgage broker carrying on business in Western Australia.
16That construction, if correct, means that there is no point in the parties writing in the name of a lender in the box 'Finance clause is applicable' because even if a name is written in, as in this case, the buyer may at his or her option apply either to the nominated lender or to any bank, building society, credit union or other institution which makes loans and is carrying on business in Western Australia or to any mortgage broker carrying on business in Western Australia.
17In written submissions, the appellant submitted that if there were ambiguity, then because the contract was prepared for the respondents by their agents, the contract should be construed contra proferentem, that is, in the way least favourable to the respondents.
18The respondents argued in support of the notice of contention. They submitted that the use of the definite article 'the' in cl 1.1(a)(1) of the contract and in par (a) of the definition of 'Lender' obliged the appellants to make an application for finance approval to the ANZ Bank.
19The respondents submitted that par (a) and par (b) of the definition of 'Lender' dealt with the obligation of the buyer to apply for finance and par (b) dealt with the buyer's right to apply to some other lender if the nominated lender would not grant finance (ts 104).
Construction of the contract
20The printed 'Subject to Finance' condition undoubtedly contains some clumsy and ambiguous drafting. For example, cl 1.2 provides that the contract will come to an end without further action by either party if on or before the latest time, written finance approval has not been obtained. It does not state that if finance approval has been 'rejected' it will come to an end and yet this is an alternative to the failure to 'obtain' finance (see the definition of 'Non Approval Notice' in cl 1.9). The definition of 'Finance Approval' in (a) refers to a written approval by the 'Lender of the Finance Application'. The intent behind that phrase is clear enough but the wording is clumsy.
21Paragraph (b) in the definition of 'Lender' is particularly difficult, if not impossible, to understand. The subdivision into pars (a) and (b) with an 'or' at the end of par (a) suggests that (a) and (b) are alternatives and that either (a) or (b) will apply depending on the circumstances.
22Paragraph (a) is clear in its meaning but par (b) is confusing because the paragraph begins with 'if', suggesting that a condition has to be satisfied. It makes sense, as an alternative to (a) insofar as it refers to the case where no lender is nominated in the schedule. However, it is rendered ambiguous by the opening words 'If the Buyer makes a finance application to, or … then'. If the appellants' submission about the correct construction of the definition of 'Lender' is accepted, then the words at the commencement of par (b) 'If the Buyer makes a finance application to, or if no lender is nominated in the Schedule then' are otiose.
23It seems likely that par (b) was intended to cover the circumstances where no lender was nominated in the schedule, in which case the lender would be any 'bank, building society, credit union or other institution which makes loans and in each case is carrying on business in Western Australia or a mortgage broker carrying on business in Western Australia'. If that is so then the buyer would be obliged to make an application to one such entity of the buyer's choice. If that were the intention, then par (a) would apply where a lender or mortgage broker was nominated and (b) would apply where there was no such nomination.
24Having concluded, as one must, that the definition of 'Lender' is clumsily worded and ambiguous, it is necessary nevertheless, to determine what reasonable parties examining the words used in the contract, would have concluded that the parties intended. This is not a case where the contra proferentem rule will assist. It is a rule of last resort and does not afford an alternative to proper legal analysis: McCann v Switzerland Insurance Australia Ltd [2000] HCA 65; (2000) 203 CLR 579 [74]; Insurance Commission of Western Australia v Container Handlers Pty Ltd [2004] HCA 24; (2004) 218 CLR 89 [98]. The rule could not be applied in the circumstances of this case because if the real estate agent for the respondents proffered the blank form to the appellants, it was the appellants' choice to adopt that form for the purpose of making the offer. There was no finding that they were obliged to make an offer on the form that was proffered.
25The ambiguity is caused in part by the interaction between the standard printed condition and the words written in by the parties. The appellants made an offer and written in to it was that the ANZ Bank was the 'Lender'. The respondents agreed by accepting the offer. The appellants signed the box containing those words. It is 'common sense' that greater weight should attach to terms which the contracting parties have chosen to include in the contract than to pre‑printed terms: Homburg Houtimport BV v Agrosin Private Ltd (The Starsin) [2004] 1 AC 715 [11]. An early statement of this rule was by Lord Ellenborough in Robertson v French (1803) 4 East 130; (1803) 102 ER 779, 136, which was cited with approval by Lord Halsbury in Glynn v Margetson & Co [1893] AC 351, which was in turn referred to with approval by Griffiths CJ in Ryan v Ferguson [1909] HCA 47; (1909) 8 CLR 731, 735.
26A construction of the contract which would allow a purchaser to select as the 'Lender' a mortgage broker or some bank or lending institution other than the ANZ Bank would contradict the parties' express nomination of the ANZ Bank as the 'Lender'.
27The definition of 'Lender' in par (a) undoubtedly picks up the agreement of the parties that the ANZ Bank was to be the 'Lender'. The only commercially sensible way to make sense of (b) is to hold that par (b) meant to specify that if no lender were nominated in the schedule but the 'Finance Clause is applicable' box was signed by the buyer, then the word 'Lender' where it is used in the 'Subject to Finance' condition means 'any bank, building society, credit union or other institution which makes loans and in each case is carrying on business in Western Australia, or a mortgage broker carrying on business in Western Australia'. Thus, if there were no nominated lender, the buyer would be obliged to use best endeavours to obtain finance from one of the generally named institutions. That construction means that the words 'if the Buyer makes a finance application to, or' at the beginning of par (b) serve no purpose and should be ignored but it is a better alternative to ignoring all of the words down to and including 'then'.
28It is true that a court is usually required to give effect to all the words the parties have used in their contract. However, Kelly CB said in Gwyn v The Neath Canal Navigation Company [1868] LR 3 Exch 209, 215 that the rejection of words repugnant to the objectively determined intention of the parties is an acceptable method of construction. This statement by Kelly CB has been approved in Australia: see Dainford Ltd v Smith [1985] HCA 23; (1985) 155 CLR 342, 364 (Brennan J); Acorn Consolidated Pty Ltd v Hawkeslade Investments Pty Ltd [2000] WASCA 322 [2] ‑ [3] (Pidgeon J); Bowler v Hilda Pty Ltd (in liq) [2001] FCA 342; (2001) 112 FCR 59 [11] (Drummond J). The identification of the ANZ Bank as the financier in the manuscript portion of the contract leads to the conclusion that the objectively determined intention of the parties was that the ANZ Bank was to be the lender to which the appellants were obliged to apply for finance.
29The construction arrived at means that the definition of 'Lender' should read:
(a)the lender or mortgage broker nominated in the Schedule; or
(b)
if the Buyer makes a finance application to, orif no lender is nominated in the Schedule then, any bank, building society, credit union or other institution which makes loans and in each case is carrying on business in Western Australia or a mortgage broker carrying on business in Western Australia.
That construction then means that par (b) is a default provision which applies when no financier is nominated but the buyer does sign the 'Finance clause is applicable' box. Thus, if the buyer merely signs the 'Finance clause is applicable' box but inserts no information, then the condition applies with the consequence that the 'Amount of Loan' is specified by default in cl 1.9, the 'Latest Time' is specified by default in cl 1.9 and par (b) of the definition of 'Lender' specifies by default the type of institution which is to be the 'Lender' to which the buyer must make application for finance.
30In the circumstances of this case, and in all cases where a lender is nominated, then 'Lender' means the nominated lender. It is not in dispute that no application was made to the ANZ. On this basis, the trial judge's decision should be affirmed.
31The notice of contention should be upheld. All of the grounds of appeal should be dismissed. The appeal should be dismissed.
MURPHY JA:
Introduction
32Pullin JA has set out the relevant background facts and findings.
33In this matter, the court is concerned with the proper construction of the 'subject to finance' condition in the REIWA Standard Form (September 2006 Revision) contract for the sale of land in Western Australia. There are, in essence, two issues raised for determination. First, the appellants contend that the learned primary judge erred in finding, in effect, that the appellants had failed to comply with their obligations under the 'subject to finance' condition in that they had failed to make an application to a lender (in the sense of a person who can lend or approve the lending of funds) and that the appellants' application to a finance broker was not, on its own, sufficient where the broker had not made an application on their behalf for a loan to obtain funds in order to complete the contract. Secondly, the respondents, by notice of contention, contend that the judge's finding that the appellants had not made an application for finance in accordance with the 'subject to finance' condition should be affirmed on the additional basis that the appellants had failed to make an application for finance to the lender nominated by them and specified in the relevant part of the schedule to the contract, namely the 'ANZ Bank'.
34For the reasons which follow, I would dismiss the appeal and reject the notice of contention. My reasons for dismissing the appeal accord in substance with the views expressed by the learned primary judge as to the proper construction of cl 1.1(a)(1) of the 'Subject to Finance' clause, although (perhaps inevitably, given the difficulties in construing the language used in the standard form contract) the precise formulation and elaboration of the reasoning differs somewhat from that of the judge.
The contract and the 'subject to finance' condition
35In the schedule on the first page of the relevant contract, there was a box headed 'FINANCE CLAUSE IS APPLICABLE'.
36In that box there appeared the following:
LENDER - ANZ Bank
LATEST TIME: 4pm on: 21/04/08
AMOUNT OF LOAN: $667,500.00
37On the following page, under the heading 'Conditions', there appeared a clause referred to as '1. Subject to Finance'. The 'Subject to Finance' clause appears as a schedule to these reasons.
The scheme of the 'subject to finance' clause
38The scheme of the Subject to Finance clause is as follows.
The application of cl 1
39By cl 1, if any information in the box in the schedule designated 'Finance Clause is Applicable' is completed, or if the buyer signs in the 'Financial Clause is Applicable' box in the schedule, then cl 1 (containing the special conditions relating to finance) applies to the contract.
The buyer's obligations
40If cl 1 applies, the buyer has a number of obligations. First, the buyer must, immediately after the contract date, make an application for 'Finance Approval' to the 'Lender' using, if required by the 'Lender', the property as security: cl 1.1(a)(1).
41Secondly, if requested in writing by the seller, the buyer must: (1) advise the seller of the progress of the 'Finance Application', (2) provide evidence to the seller of the making of a 'Finance Application' under cl 1.1(a) and any loan offer made or any rejection, and (3) advise the seller, if applicable, of the reasons for the buyer not accepting any loan offer: cl 1.6(a). (The significance of 'acceptance' arises in the definition of 'Finance Approval' - see [53] below.)
42Further, if the buyer has not provided such information to the seller within two business days of the request, the buyer is taken to have authorised the seller to obtain the information directly from the 'Lender': cl 1.6(b).
43Thirdly, the buyer must use all best endeavours, in good faith, to obtain 'Finance Approval': cl 1.1(a)(2).
44Fourthly, if the buyer obtains 'Finance Approval', it must give immediate written notice (called an 'Approval Notice') of that fact to the seller: cl 1.1(c)(1).
45Fifthly, if 'Finance Approval' has been rejected at any time while the contract is on foot, the buyer must immediately give written notice (called a 'Non Approval Notice') of that fact to the seller: cl 1.1(c)(2).
Termination where Finance Approval not obtained and notice given - operative for each party
46Clause 1.2 provides that the contract comes to an end without further action by either party if, on or before the date specified in the schedule for that purpose or, in the absence of a specified date, 15 business days after the contract date (called the 'Latest Time'):
(a)'Finance Approval' has not been obtained; and
(b)the buyer gives notice to that effect (also called a 'Non Approval Notice') to the seller.
The seller's termination if Latest Time passes without notice
47If, by the Latest Time, the buyer has not given either an Approval Notice or Non Approval Notice to the seller, then the seller may terminate by notice in writing at any time prior to being given an Approval Notice: cl 1.5.
48If, however, prior to the seller so terminating, the seller is given an Approval Notice by the buyer ('Finance Approval' having been obtained), then albeit that it is after the Latest Time, it is too late for the seller to terminate: cl 1.4. In that event, cl 1 is satisfied and the contract has full force and effect: cl 1.4.
Satisfaction of cl 1 - Finance Approval obtained and notice given
49Clause 1 is satisfied and the contract has full force and effect, if both 'Finance Approval' has been obtained and an Approval Notice has been given, either before the Latest Time, or after the Latest Time, but prior to the seller terminating in accordance with cl 1.5: cl 1.4.
Contract remains on foot pending termination
50Consistently with cls 1.2, 1.4 and 1.5, where the Latest Time passes without the buyer giving either an Approval Notice or a Non Approval Notice, the contract remains on foot until either the seller terminates, or the buyer gives a Non Approval Notice: cl 1.3.
Waiver
51The buyer may waive cl 1 at any time prior to the Latest Time, or prior to termination by the seller under cl 1.5. In each case, cl 1 is deemed to be satisfied: cl 1.8.
The definitions in cl 1
52The scheme of the clause referred to above relies upon, principally for present purposes, the definitions of 'Finance Approval', 'Finance Application', and 'Lender'.
'Finance Approval'
53The term 'Finance Approval' is defined (cl 1.9) to mean, in effect, for the Amount of Loan (itself defined to include an amount up to the purchase price payable by the buyer under the contract):
(a)(i) a written approval by the 'Lender' of the 'Finance Application'; or
(ii)a written offer to lend; or
(iii)a written notification of an intention to offer to lend made by the 'Lender'; and
(b)which, in each case, is:
(i)unconditional; or
(ii)subject to terms and conditions; and
(c)where it is subject to terms and conditions, they must be 'usual' terms and conditions, or ones 'accepted' by the buyer, or, if neither of the above, ones which are of a specified kind and which, moreover, have been 'satisfied' (as referred to in (d) below);
(d)in relation to such terms and conditions:
(i)'usual' terms and conditions are the Lender's usual terms and conditions for finance similar to that applied for by the buyer;
(ii)terms and conditions are 'accepted' if they have been expressly accepted by the buyer, in a written communication to the Lender, or if they are in the sole control of the buyer to satisfy - in which case there is, in effect, a deemed acceptance of such terms and conditions;
(iii)terms and conditions not being 'usual' terms or 'accepted' terms are ones which provide for:
• an acceptable valuation of the property;
• attaining a particular loan to value ratio;
• the sale of another property; or
• the obtaining of mortgage insurance,and which have, in fact, been satisfied.
54For present purposes, it is important to note that the definition of the term 'Finance Approval', read as a whole, and placing it in the context in which it appears directly in cls 1.1(a)(1) and (2), 1.1(c), 1.2(a) and 1.4(a), and indirectly through the definitions of 'Approval Notice' and 'Non Approval Notice' in cls 1.3, 1.4(b) and 1.5, is concerned with, objectively, the making available of loan funds to the buyer to enable the buyer to complete the purchase. Its subject matter is, in broad terms, a written communication from or on behalf of a lender who has signified to the buyer (conditionally or unconditionally as described earlier) that it will lend or intends to offer to lend funds to the buyer for the purposes of the contract. The nature of 'Finance Approval' disclosed by these provisions is, in substance, that loan funds are being held out to be available to the buyer for its use in completing the contract. A 'Finance Approval' is necessarily a communication directly from the lender or from someone with the lender's authority.
55It will be necessary to consider shortly the term 'Finance Application' where it appears in the definition of 'Finance Approval', but first some general observations need to be made about the definition of 'Finance Application'.
'Finance Application'
56The term 'Finance Application' means 'an application made by or on behalf of the Buyer to the Lender to lend any monies payable under the Contract'.
57The wording is somewhat clumsy, but, subject to one further observation referred to below, it must mean an application by or on behalf of the buyer to the Lender, for the Lender to lend to the buyer any moneys payable under the contract. The additional observation is this: the word 'Lender' may include a mortgage broker (as discussed below). Ordinarily, a mortgage broker will not be a 'lender' or an agent for a 'lender' (in the ordinary sense of that word). Commonly, a mortgage broker will be regarded as the agent of the borrower who is requested or instructed by the borrower to obtain a loan for the borrower from a lender or finance provider: Custom Credit Corporation Ltd v Lynch [1993] 2 VR 469; Morlend Finance Corporation (Vic) Pty Ltd v Westendorp [1993] 2 VR 284; Steele‑Smith v Liberty Financial Pty Ltd [2005] NSWSC 398 [104]. Where a mortgage broker (in the ordinary sense described above) is the 'Lender' for the purposes of the definition of 'Finance Application', that definition has, in my view, two aspects to it. First, it must involve an application (in the sense of a formal request) by the buyer to the mortgage broker to procure, on behalf of the borrower, the lending to the buyer of any money payable under the contract. Secondly, there must in addition be a consequential application made by the mortgage broker on behalf of the buyer to obtain a loan from a lender or finance provider (I use the terms interchangeably). Both aspects are necessarily comprehended in the definition of 'Finance Application' where a 'Lender' is a mortgage broker, in order to give full effect to the seller's rights to check the progress of the 'Finance Application' in accordance with cl 1.6.
58It is necessary to bear both aspects in mind, particularly the second aspect, when considering the term 'Finance Application', where it appears in the definition of 'Finance Approval'.
59Paragraph (a) of the definition of 'Finance Approval' includes 'a written approval by the Lender of the Finance Application'. The word 'by', in its ordinary meaning, includes 'through the means of' (the Australian Concise Oxford Dictionary 3rd ed). Where the 'Lender' is a mortgage broker, the words 'a written approval by the Lender of the Finance Application' mean an approval, obtained through the means of the broker, of the 'Finance Application' where the 'Finance Application' involves an application made to a lender or finance provider to lend money to the buyer.
'Lender'
60The definition of 'Lender', insofar as par (a) of the definition is concerned, is clear. It means either the 'lender' or the 'mortgage broker' nominated by the buyer in the schedule. Unlike par (b) of the definition, the lender or mortgage broker nominated by the buyer in the schedule need not carry on business in Western Australia.
61By the use of the word 'or' between par (a) and par (b), par (b) of the definition is clearly intended to operate as an alternative to par (a).
62Paragraph (b) of the definition of 'Lender', as Pullin JA has observed, lacks sense if read literally. In Bowler v Hilda Pty Ltd (in liq) [2001] FCA 342; (2001) 112 FCR 59 [11], Drummond J said:
[A]n instrument is to be construed according to the intention of the parties appearing from the whole of its contents and, to that end, corrections may be made which a perusal of the document shows to be necessary': Re United Pacific Transport Pty Ltd [1968] Qd R 517 at 523. In such a case, no question of rectification arises: 'It is simply a matter of the interpretation of the document': ibid. The dictum in Fitzgerald v Masters (1956) 95 CLR 420 at 426 is a well‑known example of the application of this principle by a court of construction to give effect to the objective intention of the parties, so ascertained. The principle is an old one. In Gwyn v Neath Canal Co [1868] LR 3 Exch 209, Kelly CB formulated it in this way at 215:
'The result of all the authorities is, that when a court of law can clearly collect from the language within the four corners of a deed, or instrument in writing, the real intentions of the parties, they are bound to give effect to it by supplying anything necessarily to be inferred from the terms used, and by rejecting as superfluous whatever is repugnant to the intention so discerned … On the other hand, it is only when it is impossible upon the face of the deed to collect the true intention, or when something appears showing that it does not truly express that intention, that extrinsic evidence can be resorted to by a court of equity to supply or correct that deficiency [by rectification].'
63Similarly, in North v Marina [2003] NSWSC 64 [43] ‑ [45], Campbell J said:
In construing a document, one seeks to ascertain the intention of the parties arising from the document as a whole, and reading the document with such background information as was known by all parties to it. In McEntire v Crossley Bros (1895) AC 457, at 462‑3 Lord Herschell LC said, in words quoted with approval by Isaacs J in Australian Guarantee Corporation Ltd v Balding (1930) 43 CLR 140 at 151:
'...the agreement must be regarded as a whole - its substance must be looked at. The parties cannot, by the insertion of any mere words, defeat the effect of the transaction as appearing from the whole of the agreement into which they have entered. If the words in one part of it point in one direction, and the words in another part in another direction, you must look at the agreement as a whole and see what its substantial effect is. But there is no such thing, as seems to have been argued here, as looking at the substance, apart from looking at the language which the parties have used. It is only by a study of the whole of the language that the substance can be ascertained.'
In Gwyn v Neath Canal Co (1868) LR 3 Ex 209 at 215 Kelly CB said:
'...
The court tries, if it can, to give a meaning to all parts of a contract, and will only reject one clause as inconsistent if an attempt to read the contract in its entirety, and harmonise the provisions, fails ... '
64The principle in Gwyn v The Neath Canal Navigation Company [1868] LR 3 Exch 209 has also been approved by Brennan J in Dainford Ltd v Smith [1985] HCA 23; (1985) 155 CLR 342; by the New South Wales Full Court in Caltex Oil (Australia) Pty Ltd v Alderton & Knox [1964‑65] NSWR 456, 457 ‑ 458; and by Hely J in Cachia v Westpac Financial Services Ltd [2000] FCA 161; (2000) 170 ALR 65 [59].
65Paragraph (b) of the definition of 'Lender' seems to me to incorporate four distinguishing features. The first is that the first line addresses two topics as alternatives, as is evident from the use of the word 'or'. Another is that the second of those alternatives applies where no 'lender' (which, having regard to the rest of the sentence is, I think, intended to mean 'lender' or 'mortgage broker') is nominated by the buyer in the schedule. The third feature is that the first of the two alternatives in the first line, when read with the words to which it is linked through the word 'then' (the link word also equally applies to the second alternative 'if no lender is nominated'), addresses the position where the buyer makes an application for finance to 'any bank, building society, credit union or other institution which makes loans' or to 'a mortgage broker'. Fourthly, it requires the lender or mortgage broker to whom any application for finance is made to carry on business in Western Australia.
66The second feature I have mentioned, namely, where the lender is not nominated in the schedule, is clearly an alternative to par (a), which refers to the lender or mortgage broker nominated in the schedule. The third feature may also be seen as an alternative to par (a) if it operates with respect to a lender or mortgage broker other than the one nominated by the buyer in the schedule. This would require reading in to par (b) (albeit that the syntax of the sentence would still not be elegant) the words 'some other person' after the words 'makes a finance application to' and before the word 'or' in the first line of par (b). In my view, that is the construction to be given to par (b) which does the least violence to the language used, which is consistent with the plain intention that the whole of par (b) is to be read as an alternative to par (a), and which avoids rendering the topic addressed prior to the disjunctive in the first line in par (b) otiose.
67In my view, the construction referred to above also gives a meaning to par (b) which operates harmoniously with par (a) and the remainder of the 'subject to finance' terms.
68Paragraph (a) permits cl 1 to operate by reference to the buyer applying for finance to a mortgage broker or finance provider outside of Western Australia. That might, from the seller's point of view, raise the prospect of practical difficulties being encountered which would not otherwise be encountered if the mortgage broker or lender was carrying on business in Western Australia, with the result that there might be a greater risk that Finance Approval would not be granted. It may also raise, in relation to a finance provider outside of Western Australia, issues about the nature of the lender's 'usual terms and conditions' for the purpose of par (c)(1) of the definition of 'Finance Approval'. It may also make it more difficult for the seller to check the progress of the Finance Application in accordance with cl 1.6.
69To the extent that any such difficulties or issues could arise, they would do so as a result of the parties' agreement that cl 1 may operate by reference to any 'Lender' nominated by the buyer in the schedule.
70If, on the other hand, no 'Lender' were nominated, or the buyer wished to seek finance elsewhere than from its nominated source, the application must be made to an entity carrying on business in Western Australia. If the buyer were allowed to seek finance from other sources outside of Western Australia, it could introduce uncertainty and risks into the operation of cl 1 to which the seller had not agreed. On the other hand, it may be supposed that the parties were content to allow cl 1 to operate absent an agreed nominated 'Lender' by reference to entities carrying on business within Western Australia, with respect to which both the seller and the buyer would, generally speaking, have equal familiarity.
71Further, a 'subject to finance' clause has been regarded as primarily for the benefit or protection of the buyer: Meehan v Jones [1982] HCA 52; (1982) 149 CLR 571, 588, 592. The right given to the buyer in cl 1.8 to waive the condition tends to confirm that the clause in this case is, at least primarily, for the buyer's benefit: cf Gange v Sullivan [1966] HCA 55; (1966) 116 CLR 418, 430, 443. That consideration also suggests that the court would be reluctant to read down the definition of 'Lender' against the buyer if another construction were reasonably open on the language.
Proper construction of cl 1.1(a)(1)
72As noted earlier, the term 'Finance Approval' refers to a communication, which, by its nature, involves a lender, or somebody on behalf of a lender, signifying to the buyer that loan funds will be made available to the buyer for the purpose of the contract. 'Finance Approval' relates to the provision of loan funds by a lender. That point is confirmed by cl 1.1(a)(1), which, in the context of the obligation on the buyer to make an application for 'Finance Approval', refers to the buyer 'using, if required by the Lender, the property as security'. It is a lender or provider of finance (and not, for example, a broker) who would 'require' security for the lending. The words 'an application for Finance Approval' within the meaning of clause 1.1(a)(1) mean an application to a lender, either directly by the buyer to the lender or by a mortgage broker applying to a lender on behalf of the buyer.
73The appellants, nevertheless, submit that such a construction would lead to an absurdity. It was submitted (appellant's written submissions 10 ‑ 11) that if:
... a mortgage broker approached by a buyer formed the view that any application for finance would, given the financial circumstances of the buyer, be hopeless then, because of the inclusion of mortgage brokers in the definition, there would be no need to go through the futile ritual of making a finance application to a financial institution that does make loans merely to comply with the provisions of the contract.
74There are two answers to that submission. One is that there is no foundation in the language of the provision for the proposition that the contract only calls for the buyer to obtain a 'view', or opinion, from a mortgage broker about the prospects of obtaining finance. The second answer is that the asserted futility cannot be regarded as self‑evident. The 'view' of the broker might be formed in the absence of reasonable care. The buyer might, of course, have an action against the broker for negligence in that case, but for the purposes of the operation of cl 1, it
cannot be assumed that it is futile to require the decision of the lender rather than the opinion of a broker.
Conclusion
75For the above reasons, and on the basis of the judge's findings of fact, the primary judge, in my view, was correct to find that the appellants had failed to comply with cl 1.1(a)(1). There was, certainly, no application to the ANZ Bank. Nor was there any application by the appellants (directly or through the agency of a mortgage broker) to a lender who could approve a loan to them, or make a written offer to lend to them, or provide written notification of an intention to offer to lend moneys to them. Accordingly, the appeal should be dismissed.
76As to the notice of contention, for the reasons outlined earlier, on the proper construction of the word 'Lender' in the definition in cl 1.9, the appellants were not bound to make an application to ANZ as the 'Lender' nominated in the schedule. The notice of contention ought be dismissed.
77HALL J: I agree with Pullin JA.
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