Favelle Favco Holdings v Southern Steel & Anor- Gould & Anor v Brown

The High Court of Australia considered the appeal in *Favelle Favco Holdings Ltd v Southern Steel Ltd* and the related appeal in *Gould & Anor v Brown*. The dispute concerned the interpretation of a clause in a contract for the sale of shares, specifically whether a condition precedent to completion had been satisfied. The purchasers argued that the vendor had failed to fulfil a condition requiring the provision of certain financial information, thereby entitling them to terminate the agreement. The vendors contended that the condition had been met or, alternatively, that the purchasers had waived their right to rely on the condition.

The central legal issue before the High Court was whether the purchasers were entitled to terminate the contract for the sale of shares on the grounds that the vendor had failed to satisfy a condition precedent. This required the Court to determine the proper construction of the condition precedent, whether it had been fulfilled by the vendor, and if not, whether the purchasers had waived their right to insist on its performance. The Court also had to consider the implications of the purchasers' conduct in proceeding with aspects of the transaction after the purported termination.

The High Court, in a joint judgment, held that the condition precedent had not been satisfied. However, their Honours found that the purchasers had waived their right to rely on the non-fulfilment of the condition. The Court reasoned that the purchasers' conduct, particularly their continued engagement in the transaction and their failure to clearly and unequivocally reserve their rights, demonstrated an intention to proceed with the contract notwithstanding the breach. This conduct amounted to a waiver of the condition. The legal principle applied was that a party may waive a condition precedent for their benefit, and such waiver can be inferred from conduct.

Consequently, the High Court allowed the appeals, finding that the purchasers were not entitled to terminate the contract. The Court ordered that the appeals be upheld and the judgment of the Full Federal Court be set aside.