Harbray Nominees Pty Ltd v Ongley No. Scciv-03-906

HARBRAY NOMINEES PTY LTD v ONGLEY
[2004] SASC 62
Civil

ANDERSON J This matter already has a history in this Court. It came before Perry J, who delivered judgment on 24 September 2003, (2003) LSJS 82. This action involves a special condition as to finance contained in a contract for the sale of land. There is also a business contract for the sale of the business conducted upon the land. The business contract nominated the same settlement date as the land contract.
One of the special conditions contained in the business contract was that there should be contemporaneous settlement with the land contract. The special condition as to finance in the land contract was therefore relevant to both contracts.
In this action the plaintiff seeks declarations in relation to both contracts. Namely that there was a lawful termination on 14 October 2003 of the land contract and therefore a frustration of the business contract.
The defendant seeks specific performance of both contracts.
The matter proceeded without pleadings and discovery.
Background facts up to 24 September 2003
The background in this matter is set out in some detail in the judgment of Perry J referred to above. I will not repeat that background but respectfully adopt it. His Honour said:
“Factual background
[12]There were some factual differences in the affidavits filed in support of and in opposition to the application for immediate relief, but the facts upon which the application turned were not in contention.
[13]The land contract is in the common form adopted by the Real Estate Institute of South Australia. The contract provides for a price of $740,000 against which a deposit of $35,000 was to be paid “by way of a deposit bond from Royal Sun Alliance Insurance”.
[14]The land contract provided that settlement was to take place on 17 April 2003 “or such other date as is mutually agreed, in writing, by the vendor and purchaser”.
[15] The land contract contains a special condition expressed as follows:-
“R.    Special Conditions [Clause 6]
This Agreement is subject to:-
*1.     FINANCE
The Lender agreeing on or before the 26^th 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.”
[16]$1,000,000 was, of course, in excess of the price specified in the land contract. But the land contract was linked to the business contract by a further condition in the land contract as follows:
“This agreement and settlement hereunder is conditional upon contemporaneous settlement under the business contract of even date.”
[17]The purchase price stated in the business contract is $210,000. The business contract did not provide for a separate deposit. In the space in the business contract where the amount of the deposit might have been inserted appear the words “see land contract”.
[18]The business contract nominated the same settlement date as the land contract. The business contract contained a number of special conditions, but it was not expressly said to be conditional on finance being raised by the defendant. However, one of the special conditions in the business contract was “for contemporaneous settlement with land contract”.
[19]That clause and the corresponding clause in the land contract meant that the condition as to finance in the land contract effectively operated as a condition applicable to both contracts.
[20]Both contracts were later altered to provide for settlement to take place on 24 April 2003. That date was written in to both contracts in place of 17 April 2003, and in the land contract the date referred to in condition R was altered to 18 April 2003.
[21]On 14 April 2003, the defendant came to the premises and had a conversation with Mrs Harris, during the course of which he said that the contract was going ahead.
[22]In the events which happened, settlement did not take place on 24 April 2003.
[23]On 30 April 2003, Mr Harris met with the defendant, who stated that he still intended to go ahead and would “settle as soon as his finance came through”.
[24]On 13 May 2003, the defendant telephoned Mr Harris and said that he was still intending to settle in the very near future.
[25]This was followed up by a call by the defendant at the premises of the business on 15 May 2003, when he explained that he was expecting a valuation for the purpose of the “finance facility” to take place within a few days, and that by about 23 May 2003 he expected that the loan facility would be available.
[26]On that occasion, Mrs Harris told the defendant that she and her husband were not prepared to extend the time for settlement indefinitely, and required settlement to be effected before the end of the financial year. In response, the defendant intimated that he would be ready to settle on Thursday 5 June 2003.
[27]On 22 May 2003, Mrs Harris was informed through her land and business agent that the defendant had made a request for the vendor to finance $50,000 of the total purchase price. Some discussions then ensued between the parties, as a result of which on 5 June 2003 Mrs Harris informed the defendant that the vendor would be prepared to lend $50,000, subject to personal guarantees from the defendant and his partner. The defendant indicated that on that basis, he would have loan approval “within 24 to 48 hours”.
[28] This did not eventuate.
[29]On 11 June 2003, he spoke again to Mrs Harris and informed her that he still did not have the finance to settle. In one of her affidavits, Mrs Harris deposes to the fact that she then told the defendant:
“... that as far as we were concerned his contracts had expired on the 24^th April when he had failed to settle. I said new contracts would need to be done. He said to me that the contracts were still in place until such time as we cancelled them.”
[30]At that stage, neither Mr or Mrs Harris had sought legal advice and were operating on the assumption which I have just referred to, as conveyed by Mrs Harris to the defendant.
[31]Mr and Mrs Harris then took legal advice, and appointed a conveyancer, Mr Ross Marriott.
[32]By a letter wrongly dated 17 March 2003, which was in fact sent to the defendant on 17 June 2003, Mr Marriott gave on behalf of the plaintiff a notice to complete.
[33] Relevantly, that notice was in the following terms:
“I refer to your last conversation with the Vendor in respect to settlement of the above contracts and in particular the last offer made verbally by Pauline Harris to accommodate your financial difficulties by leaving the sum of FIFTY THOUSAND DOLLARS ($50,000.00) of the total purchase price on loan to the purchasing entity subject to same being personally guaranteed by you and your partner.
Settlement on both these contracts was due to be effected on 24^th April 2003 and loan approval was to be granted by 18^th April 2003. It is of concern to the Vendor that neither condition has been made and this matter has dragged on for too long. The Vendor now requires finality in relation to the sale of the Retirement Home and real estate.
Accordingly we hereby give you notice that settlement is required to be effected under both Contracts at 11.30 am on the 26^th day of June 2003 at the Lands Titles Office Adelaide at which time I shall hand to you the relevant Certificates of Title and the existing mortgages duly discharged together with a duly signed Annexure to your transfer.
I confirm that the Vendor will agree to an amendment of the written terms of the Contracts so as to provide for $50,000.00 of the purchase price to remain on loan to the purchasing entity subject to the loan being unconditionally guaranteed by you and your partner prior to settlement and that the sum is repaid in full together with interest at the rate of nine (9%) percent per annum at the expiration of three (3) months from the date of settlement.
Subject to settlement in accordance with the above terms being effected on the 26^th day of June 2003 the Vendor will waive any claim to penalty interest on the contracts. However, if settlement is not made at the appointed time the Vendor reserves the right to claim all or any entitlements, including penalty interest provided for under the Contracts.
Please provide me with details in order that I may prepare the necessary guarantee.
In the event that settlement is not effected on the now due date the Vendor will serve Notice of Termination of both Contracts forthwith after said date.”
[34]Apparently in response to that letter, the defendant consulted Repasky Lawyers, who advised Mr Marriott that the defendant would require a further three weeks in order to settle.
[35]On 24 June 2003, the defendant phoned Mr Harris to say that he would be unable to settle on 26 June 2003.
[36]On 25 June 2003, the defendant called at the business premises and spoke with Mr Harris. Mr Harris told him that as settlement had been appointed for 26 June 2003 he was not prepared to discuss any further extensions of time for settlement.
[37]On the same date, that is, 25 June 2003, Repasky Lawyers wrote to Mr Marriott in the following terms:
“We refer to our previous correspondence in relation to this matter and are pleased to advise that our client has been granted a loan approval from Capital Link Australia.
Please note that our client is desirous to proceed with the purchase of the abovementioned property and is willing and ready to settle on 20^th of August 2003.
Our client instructs us that there were numerous discussions between the Vendor and our client in relation to the formal extension of the settlement date. It was Vendor’s suggestion that there is no need to obtain formal extension of the settlement date and at all times the Vendor appeared to be relaxed about the lengthy waiting period. It was verbally agreed between the parties that once valuation is done and finance is approved in principal they would execute an Addendum to the Contract to incorporate an extension of the settlement date.
Our client was led to believe that the extension of the settlement date would be granted and went ahead to arrange finance. It is now for the Vendor to honour the arrangement. Failure by your client to grant formal extension of time and terminate the Contract for the sale and the purchase of Sunnydale Retirement Rest Home of 247 Military Road Semaphore will inevitably result in a claim being brought by our client for specific performance and/or damages.”
[38]On 26 June 2003, Mr Marriott attended at the Lands Titles Office at 11.00 am, ready to settle, but neither the defendant nor anyone on his behalf attended.
[39]Mr and Mrs Harris then sought legal advice, as a result of which they wrote the letter to which I have referred, being the letter dated 1 July 2003, addressed to Mr Ongley purporting to give notice of termination of both contracts.
[40] The text of the letter is as follows:
“Further to our letter of 17^th day of June 2003 wherein we gave notice that required you to complete the purchase of the business and real estate on Thursday the 26^th June 2003 at 11.30 am at the Lands Titles Office.
Our conveyancer attended at the appointment but no person attended on your behalf to settle the above contracts. There was no tender of the adjusted purchase price in accordance with the settlement statement provided to your conveyancer. Your conveyancer was in attendance at the Lands Titles office presumably on other matters but indicated that she had no instructions from you nor any capacity to settle because you did not have the funds.
As foreshadowed in our previous letter we now give notice of termination of both contracts for fundamental breach.
We have received from your solicitor a letter threatening proceedings for specific performance and/or damages. At this point of time it is not our intention to make any claim against you for expenses or interest. We reserve our right however to make such claims in the event that you initiate any proceedings as threatened by your solicitor. We have obtained legal advice which is to the effect that any proceedings you might bring against us will be frivolous and vexatious and liable to be struck out. In the event that such proceedings are brought you may expect that apart from seeking the dismissal of those proceedings we will be claiming all our costs, expenses and indemnity costs in relation to such proceedings.” (emphasis added)
[41]Notwithstanding the purported termination of the contracts, further correspondence ensued between the solicitors on both sides. During the course of that correspondence, Sydney G. Maidment Lawyers (“Maidments”), representing the plaintiff, made a formal offer to “revive” the contracts.
[42]That offer finds expression in a document drawn up by Maidments and submitted to Repasky Lawyers on 7 July 2003.
[43]The formal offer sets out the history of the matter by way of recitals, and offers to “revive and reaffirm” the two contracts on the footing that settlement was to take place on 20 August 2003, and providing for the variation of other terms of the two contracts.
[44]Importantly, the formal offer to revive the contracts contained the following paragraph:
“5.    By acceptance of this offer the purchaser expressly waives the special condition relating to finance, more particularly set forth in the contract for sale and purchase of the premises.”
[45]The offer was said to be made by the vendor without any admission that the defendant was entitled to enforce the original contracts. The offer was expressed to be made “bona fide by the vendor for the purposes of resolving any disputation by and between the vendor and the purchaser and to avoid litigation by and between the vendor and the purchaser”.
[46]By letter of 10 July 2003, Repasky Lawyers replied to the plaintiff’s offer, which it rejected, describing the offer as embodying “... harsh and unreasonable conditions and time limitations”.
[47]In the letter, Repasky Lawyers made a counter offer to settle on 29 August 2003, with the plaintiff to “leave $50,000 of the purchase price on loan” on the basis that the defendant would provide a personal guarantee securing repayment of that amount.
[48]The next day, by facsimile transmission dated 11 July 2003, Maidments rejected the defendant’s counter proposal, but indicated that the plaintiff’s offer remained open until 3.00 pm that day.
[49]There does not appear to have been any further communication between the parties before the institution of the proceedings in this Court on 18 July 2003.”
Conclusions of Perry J
It is clear from his Honour’s reasons that his Honour found that the failure of the special condition was “not due to the neglect or default of the vendor or purchaser” (referred to in paragraph [65] of Perry J’s judgment).
Upon that basis his Honour found that clause 7 was wrongly invoked and in particular that clause 7.1 came into play only upon default by the purchaser (referred to in paragraph [70] of Perry J’s judgment). His Honour held that the defendant was not in default and that the contract was still on foot.
His Honour then expressed the following views:
“[87]In my view, for the reasons which I have given, the defendant is entitled now to call upon the plaintiff to settle within a reasonable time. That is subject only to the qualification that settlement must now be in accordance with the terms of both contracts, more particularly on the footing that the whole of the consideration payable under the contracts is paid by the defendant.
[88]I express that conclusion on the assumption that as stated in the letter from Repasky Lawyers dated 25 June 2003, and as restated by Mr Manetta of counsel for the defendant on the hearing of the appeal, the condition as to finance has been satisfied.”
On the basis of the evidence presented to me, which was not available to Perry J, his Honour is unlikely to have expressed those views.
Attempts to obtain finance up to 24 September 2003
The background information which follows was not available to Perry J at the time he decided the matter. The information became available because the plaintiff subpoenaed the relevant financial documents.
On 17 June 2003, Mr Marriott, the conveyancer for the plaintiff, wrote to the defendant (referred to in paragraph [32] of Perry J’s judgment) giving notice of settlement for 26 June 2003. It appears from a letter dated 20 June 2003 that on that date the defendant was applying for finance through the broker Capital Link Australia.
When asked about the history of the applications for finance, the defendant said that applications were made to at least half a dozen traditional lenders. He was very vague in relation to who the lenders were and on what occasion applications were made to those lenders. He indicated that there were files, which would assist in this, and he was invited to produce them but did not do so.
The response to that initial request for finance indicates that although the broker was able to specify the amount of the loan sought, the term, the interest rate and also a proposed settlement date for 20 August 2003, it was all subject to the availability of funds at the time of settlement. Moreover it required a full application to be submitted with documentary proof as required. It was only after all those steps were taken that apparently a formal letter of offer would be made, which of course is quite different to a formal approval. No formal offer was ever made.
The plaintiff submitted before me that this letter was simply an indication from the finance broker that there was a conditional offer. In other words it merely started the ball rolling. I agree with that contention.
The defendant gave evidence before me and was asked about that letter. He suggested that there was an oral agreement between himself and Mr Finnimore of Capital Link Australia Limited. He suggested that he and Mr Finnimore had conversations, the result of which was that there was a firm placement of funds available for settlement. As against this evidence, there is no document in any of the material subpoenaed from Capital Link Australia Limited that supports the defendant’s contentions. Mr Finnimore was not called to support this suggestion.
It seems strange that the letter dated 25 June 2003 would not have reflected the firm arrangement, which the defendant alleges was reached between he and Mr Finnimore, rather than using the rather vague and indefinite terminology which was adopted.
I find that the statements made in the Repasky letter of 25 June 2003 (referred to in paragraph [37] of Perry J’s judgment) and by counsel before Perry J were clearly based on the defendant’s instructions and were incorrect and misleading. I believe that the defendant attempted to extricate himself from these earlier misleading statements by his evidence as to this alleged oral agreement with Mr Finnimore. I do not accept the defendant’s explanation. I find that at the time the representations were made as to the financial condition having been satisfied, the defendant knew that it had not been satisfied and knew that there were still a number of crucial steps in the process yet to be undertaken, all of which were necessary before such a positive statement could be made.
I infer from the lack of explanation for the absence of Mr Finnimore, who was not called to give evidence to support the defendant’s contention, that his evidence would not have assisted the defendant: Jones v Dunkel (1959) 101 CLR 298.
It is of interest that on 1 July 2003 Mr Finnimore of Capital Link, on behalf of the defendant, applied to Max Hodby for a loan in relation to a new shelf company, of which the nominated director was Malcolm Edwin Pettingill. The rate specified in the application was 12% whereas the letter of 25 June 2003 from Capital Link to the defendant advised that the interest rate was 10%. Furthermore, “the offer” expressed in the letter of 25 June 2003 was set to expire on 10 July 2003, which raises the question of why, on 1 July 2003, the same Mr Finnimore would be applying in respect of the same applicant for finance but nominating a proposed settlement date of 20 August 2003. It all indicates the very preliminary stage of these attempts to raise finance.

Mr Pettingill was said to be a partner of the defendant in relation to various business ventures. He would also have been an important witness to support the defendant’s version of events at the relevant time and in particular, to support the suggested verbal agreement between the defendant and Mr Finnimore because the evidence indicates that Mr Pettingill and the defendant worked together as partners and were aware of the various applications and their state of progress at all relevant times.
Mr Pettingill was not called to give evidence. There was no explanation given for his absence. I infer again therefore that his evidence would not have assisted the defendant: Jones v Dunkel.
On 10 July 2003, Mr Finnimore wrote to Mr Pettingill regarding a company, 247 Military Road Pty Ltd. This was Mr Pettingill’s company in which the defendant had no apparent involvement. This letter advised that a loan had been conditionally approved. This letter proposed a settlement date of 29 August 2003 and was subject to the same conditions, namely the availability of funds at the time of settlement and a full application to be submitted with documentary proof.
It is of interest that this letter does not nominate any interest rate. On a copy of this letter the defendant has written the word “accepted” and has signed his name underneath that acceptance. In other words, he has apparently purported to accept an offer made to Mr Pettingill but not nominating any interest rate in respect of funds of $980,000.00. This seems a little odd.
The defendant swore an affidavit in these proceedings on 26 July 2003.
In paragraph 35 of that affidavit he swore that Capital Link Australia conditionally approved the loan and gave an approximate settlement date as 20 August 2003. He failed to mention in that affidavit that he had in fact accepted an offer on 10 July 2003, which approved on the face of it a loan for settlement on 29 August 2003. He was asked to explain the absence of this reference to that apparent acceptance in his affidavit. He was unable to do so.
On the same day, namely 10 July 2003, the defendant’s solicitors wrote to the plaintiff’s solicitors raising various matters including a settlement date of 29 August 2003 (referred to in paragraphs [46] and [47] of Perry J’s judgment). In that letter, the solicitors for the defendant said:
“It is our client’s instructions that the finance was approved. The financier initially gave our client a tentative settlement date only, but has now confirmed 29^th August as a settlement date.”
The fact is that the defendant had never been given a tentative date for settlement. The only tentative date for settlement had been given to Mr Pettingill.
In the affidavit of the defendant, which I referred to earlier, he says in paragraph 41:
“I have now obtained unconditional loan approval from Financial Horizons with the settlement date being 29 August.”
Financial Horizons is apparently a company associated with a John West. There is a letter of 22 July 2003 written by John West & Associates Pty Ltd (“John West”) to the defendant and/or his nominee. This letter states:
“I am pleased to advise that the writer as mortgagees agent hereby offers a loan (subject to written instruction and approval of mortgagees and receipt of a valuation(s) Government Values satisfactory to John West & Associates Pty Ltd as agent to the mortgagees) to you as applicant/borrower on the following terms and conditions:”
This letter of offer from John West on behalf of Financial Horizons offers an amount of $1,040,000.00 on certain terms and conditions specified. This letter nominated a commencing interest rate of 3% per month reducing to 1.5% per month provided the first month is paid in full. It appears that it was becoming more difficult to obtain finance at a rate similar to normal commercial rates.
The defendant was cross-examined about his statement in his affidavit regarding the unconditional loan approval from Financial Horizons. He never successfully explained why this application was necessary in view of the firm commitment which the defendant says he had from Capital Link. He was asked why he went to Financial Horizons, his answer was “We always do. We are always speaking to as many parties as possible to raise funds”. He stated further on that “You can’t ever rely on one lender”.
I referred earlier to an application on 1 July 2003 by Capital Link to a Max Hodby. Counsel for the plaintiff attacked the credibility of the defendant in relation to the application to Mr Hodby.
There is no evidence about the fate of that application or its importance. I assume that Mr Hodby was a lender but it may be the case that he was a broker. There was no evidence on this topic apart from the letter of 1 July 2003 referred to above. It is strange therefore that the defendant should seek to seize upon it in his re-examination. This re-examination took place following an overnight adjournment.
It was in re-examination that the defendant said for the first time that the funds which he claimed had earlier been secured were in fact from Mr Hodby. Mr Hodby was not called. He should have been called if in fact he had allocated the funds for settlement back in July. It was an important piece of the whole picture. Once again, I draw the inference that Mr Hodby would not have supported the defendant’s case: Jones v Dunkel.
All previous suggestions by the defendant as to the certainty of available funds were because of an alleged oral agreement between the defendant and Mr Finnimore. In my view, this change in direction was another attempt by the defendant to convince me that he had not misled Perry J. I do not accept his evidence as to the existence or availability of funds from Mr Hodby.
Another important matter not put to Perry J, nor indeed communicated to the plaintiff, was that on 27 May 2003 the defendant by deed of assignment had assigned his rights under the contracts to Mr Pettingill. This fact while it might explain the applications made by Mr Pettingill or his company was, nevertheless not made known either to the Master or to Perry J. It was relevant and should have been drawn to their attention.
Background facts after 24 September 2003
I will now recount the history of what happened after Perry J’s judgment and in particular, the nomination by the vendor of settlement dates respectively on 30 September and 1 October 2003. It is claimed by the defendant that both these dates were unreasonable given the fact that it was said that the funds, which had been allocated for settlement, were no longer available due to the delay caused by the legal proceedings commenced by the plaintiff.
On 25 September 2003 the solicitors for the plaintiff wrote to the solicitors for the defendant indicating that settlement should be arranged for 30 September 2003. This followed a discussion after the judgment of Perry J when the parties and his Honour were discussing what would be a reasonable time for settlement. There was no response to this letter and a further letter was written on 29 September 2003.
The second letter prompted a response by facsimile on 29 September 2003, which raised some suggested difficulties. I will deal with these later.
The plaintiff’s solicitors replied to the defendant’s solicitors the following day, namely 30 September 2003, indicating arrangements for the inspection of the premises and indicating that Mr Marriott, would attend to the other matters raised by the defendant’s solicitors. In that letter the solicitor said:
“… if your client does not appoint a time tomorrow for settlement our client will serve a formal notice to complete consistent with the Reasons of Justice Perry.”
On that same day, 30 September 2003, the defendant’s solicitors enclosed a copy of a Memorandum of Transfer and asked for the adjusted settlement statement. However, by letter of the same date the defendant’s solicitors wrote another letter to the plaintiff’s solicitors indicating that they were waiting for the clearance of $90,000.00 previously deposited in court. This letter advised that their client would be ready and willing to settle on Wednesday, 8 October 2003 provided that a vendor’s statement was provided to them 48 hours before settlement and the funds deposited in court were cleared. This letter met with an immediate response, which pointed out that a representation had earlier been made to the effect that all finance was in place and that there was no basis for any delay of settlement.
A request was then made by the defendants in answer to that letter for a Mr Wayne Smith, a valuer retained by Capital Link, to enter the property and make an inspection. Formal access to the premises was requested. It was later denied by the plaintiff’s solicitor.
Further correspondence was exchanged between the solicitors for the defendant and Mr Marriott for the plaintiff and then on 3 October 2003 the solicitors for the plaintiff wrote to the solicitors for the defendant indicating that they held the view that their client was under no obligation to assist in relation to finance facility arrangements. The 8^th October 2003 was confirmed as the settlement date and the defendant was warned that if settlement did not occur on that day a time for settlement would be nominated in accordance with paragraphs 7.1.3.3 and 7.1.3.4 of the contract.
That letter met with an immediate response on the same day from the defendant’s solicitors, sent to both Mr Marriott and the plaintiff’s solicitors, indicating that the long service leave entitlements had to be adjusted, asking for a confirmation of the time and date of a stock take but confirming that the defendant would retain all the existing staff and would be responsible for staff wages from the settlement date.
Another letter was sent on the same day by the solicitors for the defendant to Mr Marriott asking for updated employee status forms and a correct and complete vendor statement and further alleging that the plaintiff was attempting to frustrate the finalisation of the sale.
On 7 October 2003 the defendant’s solicitors wrote again to the plaintiff’s solicitors. This letter referred to the business contract and the special conditions relating to employees. A request was made to interview all the current employees. The letter also indicated that in those circumstances settlement for the following day was cancelled. The point was made that the special conditions of the business contract relating to employees had to be satisfied before a new settlement date could be arranged.
Mr Marriott immediately wrote to the defendant’s solicitors indicating that the termination of all employees had been confirmed and that the original document would be handed over at the stock take which was arranged for later that day. This letter advised that the request for interviews was too late in view of the settlement arranged for the following day.
On 8 October 2003, the defendant’s solicitors wrote to the plaintiff’s solicitors indicating that a correct vendor statement had not been provided and took various points in relation to the notification of employee details. Once again an allegation was made that it was the plaintiff who was attempting to frustrate the sale.
The plaintiff’s solicitor replied on 8 October 2003 by facsimile and alleged that all of the matters which had been raised in recent days were “a smoke screen for what is clearly your client’s inability to settle”. There followed a reply in which the defendant alleged that the plaintiff’s approach to settlement “has been characterised by a persistent inability to comprehend and properly carry out its contractual obligations”. Specific instances were given.
This latest series of allegations was met in a like manner and in particular, the plaintiff’s solicitors said in response on 9 October 2003:
“It is now approaching seven months since the original date and your client despite requests to produce clear and unequivocal evidence of financial capacity to settle has neglected and declined to produce any such evidence …
For so long as your client remains in default my client reserves the right to terminate the contract at any time.”
The defendant said that when it nominated the date of 8 October 2003 for settlement it did not appreciate at that time that a further valuation was required because the earlier valuation had ceased to be current.
The vendor refused on legal advice to allow the purchaser access to the property for the purpose of a further valuation on the basis that the purchaser had stated in a letter from his solicitor and in a statement by his counsel to the court that the finance condition had been satisfied. Therefore, it was said by the plaintiff, that there was no need for any such further valuation.
The next development was a letter from the defendant’s solicitors to Mr Marriott dated 13 October 2003 attempting to arrange a time for stock take, asking for employment details and asking for a settlement date on Wednesday, 13 October. This should have read 15^th October and not 13^thOctober. The 15^th was the Wednesday. In reply to that letter the plaintiff’s solicitors wrote immediately saying that their client would allow no further indulgences, alleging further delays on the part of the defendant and serving a second and final notice to complete by appointing settlement for the following day (14 October 2003) at 11:00 am at the Lands Titles Office. The letter enclosed an amended settlement statement.
On 14 October 2003, the defendant’s solicitors wrote to the plaintiff’s solicitors giving a series of responses but complaining that they did not have sufficient time. Any breach by the defendant was denied and it was alleged that the notice to complete was invalid. This letter nominated the following day, that is 15 October, at 11:30 am as the time for settlement.
On 14 October 2003 nothing eventuated although Mr Marriott and the mortgagee’s representatives did attend at the Lands Titles Office at the appointed time. A notice of termination was given on that day. It was met with the response that it was invalid. The defendant’s solicitors again nominated 15 October as the time for settlement.
The defendant’s solicitors then attended at the Lands Titles Office on 15 October but even though representatives of the plaintiff attended at the nominated time, the cheque for the larger amount required for settlement, namely, $721,000.00 did not arrive. The plaintiff’s representatives left and it appears that later the cheque did arrive.
Overview of Parties’ contentions
It was paragraphs [87] and [88] of Perry J’s judgment which Mr Millsteed QC, for the plaintiff, focussed upon in his submission to the court. It was put to me that the defendant had misled both the vendor and Perry J in giving false information that the condition as to finance had been satisfied. It was suggested that the false information included the information conveyed to the vendor prior to the court hearing before Perry J, the statements made to Perry J by counsel and the statement made in the letter from the purchaser’s lawyers dated 25 June 2003.
It was submitted that the condition as to finance had never been satisfied and that the conduct of the purchaser in misleading both the vendor and the court, whatever else occurred, precluded the purchaser from the relief sought, namely specific performance of both contracts.
As previously stated, after the decision by Perry J the plaintiff subpoenaed documents to throw some light on the question of the defendant’s attempts to obtain finance. There were two companies involved in relation to the initial attempts to obtain finance, namely, Capital Link Australia Limited and Capital Access Australia Pty Ltd. The former is a finance broker but not a finance provider.
The plaintiff argues that at no time was finance put in place to enable the special condition to be satisfied. There are several matters which are important in support of the plaintiff’s contentions and these include events both prior to and subsequent to the judgment of Perry J. I have dealt with those matters earlier in these reasons.
The defendant argued before me that the dates which were nominated by the plaintiff following Perry J’s judgment were unreasonable because:
1the funds which they say were allocated for settlement lapsed because of the legal proceedings taken out by the plaintiff;
2a sum of $95,000.00 paid into court by the defendant could not be released in time for them to use in the settlement process; and
3the plaintiffs had not provided a vendor’s statement as required and furthermore, had not complied with various special conditions relating to staff.
I have already dealt with the first point in my reasons. There were no funds which were ever allocated for any of the proposed settlements and no formal offer of finance had been made by any lender.
In relation to the need for the $95,000.00 to enable settlement to take place, on the basis of the findings which I have made, it would not have made any difference because there were no funds available at that time.
The vendor’s statement had been provided on several previous occasions when settlement was planned and any adjustments on this occasion could have been made at settlement as often occurs according to Mr Marriott. In fact as it turns out the adjustments were all in favour of the purchaser.
I have set out some of the matters raised by the defendant relating to staff entitlements and other staff matters and I will deal with those later in these reasons.
The Law
Condition Precedent
Perry J found that the condition as to finance set out in paragraph 15 hereof was a condition precedent of the same kind as that referred to in the judgment of Gibbs CJ in Perri and Anor v Coolangatta Investments Pty Ltd (1982) 149 CLR 537.
His Honour found that the contract was still on foot, including the special condition as to finance, at the time when the plaintiff purported to give a Notice to Complete. The special condition did not nominate any specified lender but did nominate the amount of the loan, the term and the interest rate.
The contract in Perri v Coolangatta was for the sale of land subject to the purchasers sale of another property. These “subject to” contracts imply a duty to co-operate and to use ones best endeavours to achieve the fulfilment of the special conditions.
A question will therefore arise on the facts of each particular case as to whether the party seeking the finance has in all the circumstances acted reasonably. I conclude that the defendant in this matter did not act reasonably.
On my findings the condition precedent was never satisfied.
Notice and Reasonableness
It is apparent from the long history of aborted settlements and also from the acquiescence of the vendor, in the earlier part of that history, that time was not made the essence of the contract.
Where time is not made the essence of the contract but one party has been guilty of unnecessary delay, the other party may serve upon the guilty party a notice nominating a time at the expiration of which the contract will be treated as at an end: Stickney v Keeble (1915) AC 386.
When the notice is given, the time nominated must be reasonable. Voumard, The Sale of Land (5^th ed, 1995 at par [93701]) states:
“So far as concerns the period of time to be specified in the notice, the question as to what is reasonable must be judged as at the date of the giving of the notice: and the circumstances to be taken into account will include the nature of the property, whether there are any conveyancing difficulties, what remains to be done by the party in default (for example, if the party in default is the purchaser, the amount of money which he or she is required to pay), whether the party not in default has been pressing for completion and whether he or she has waived prior notices, and whether it is of special importance to the party not in default to obtain early completion.”

I was also referred to an article by counsel for the plaintiff “The Modern Law of Notices to Complete” by Peter Butt (1985) 59 ALJ 260 which summarises the law generally in relation to these notices.
I have also had regard to the decision and comment of Holland J in O’Connor v Slattery [1981] 2 NSWLR 447 where his Honour stated at page 452:
“It is often said that the time given by the notice must be a reasonable time but that is ambiguous because it does not say from whose point of view it must be reasonable. As the goal is the doing of equity between the parties reasonableness must cut both ways, so the positions and interests of both sides are material.
Reasonableness in the above sense is to be judged as at the time the notice was given taking account of the nature and terms of the contract, what needed to be done on both sides to be ready to settle, what remained to be done and past delays and attitudes to time. However, the giver is not required to take account of matters extraneous to the contract affecting the receiver’s ability to perform that are not his business or not known to him or not such that they ought to be known to him.”
It is apparent therefore that in determining the reasonableness of the period of notice that the court will consider not just matters remaining to be completed but will also take into account all the circumstances of the case including any previous delays and the factors causing those delays.
The question of the reasonableness of a period of notice was discussed and the law summarised in the decision of Besanko J in Schmidt v Sturgeon Pty Ltd (2002) 84 SASR 443. His Honour there applied the relevant statement of principle set out in the reasons of Mason J (as he then was) in Louinder v Leis (1982) 149 CLR 509 at 526:
“Accordingly, delay beyond the stipulated date will give rise to a liability in damages. But because equity treats the time stipulation as non-essential, mere breach of it does not justify rescission by the innocent party and will not bar specific performance at the suit of the party in default. Unreasonable delay in complying with the stipulation in substance amounting to a repudiation is essential to justify rescission. It is to this end that, following breach, the innocent party gives notice fixing a reasonable time for performance of the relevant contractual obligation. The result of non-compliance with the notice is that the party in default is guilty of unreasonable delay in complying with a non-essential time stipulation. The unreasonable delay amounts to a repudiation and this justifies rescission.”
Equitable Relief
I find that in all the circumstances as set out in these reasons that the defendant seeking equitable relief has not come to court with clean hands.
In my view the statement in Meagher, Gummow and Lehane in “Equity Doctrines & Remedies” (2^nd Ed) at [323], applies to this situation:
“A plaintiff will not be entitled to a decree of specific performance if the contract he is seeking to enforce was procured by his misrepresentation (fraudulent or innocent), even if the defendant has not availed himself of his right to rescind the contract; Cadman v Horner (1810) 18 Ves 10; 34 ER 221; Viscount Clermont v Tasburgh (1819) 1 Jac & W 112; 37 ER 318.”
Conclusions
It is clear from the whole of this history that since the time of the judgment of Perry J there has been a war of words between the parties. The correspondence set out in these reasons makes that clear. It was the plaintiff who was asking for finalisation and it was the defendant who was delaying. For the reasons which I have already set out, I find that the defendant’s delays were occasioned by the inability to obtain the amount required for settlement and that the various matters which I have set out in the correspondence raised by the defendant were all attempts at delay in various guises. I find therefore that the defendant’s actions during this time were unreasonable because the true situation relating to the lack of finance was never communicated to the plaintiff.
The plaintiff was entitled at various stages to bring an end to this contract, to finally call a halt to this never ending correspondence war, nominate a time for settlement and thereby enforce its rights but it chose not to. It finally did, and I find this to be understandable and in the terms of contract law justifiable.
As to the matters concerning staff, I find that the defendant was not genuine in the reasons being put forward as to why staff requirements and entitlements should make settlement impossible.
The defendant sought to use the lack of a current valuation as a reason why he had to obtain bridging security but for the reasons already expressed, I do not accept this. I find that this was another tactic to delay because behind the scenes the defendant was desperately attempting to put together the finance. The valuation clearly would be unlikely to alter in the short space of time which had elapsed and would, in any event, be sufficient if stated to be subject to the internal state of the property being in the same condition as previously inspected.
In short, I find that all of the excuses put forward by the defendant were just that, namely, excuses without any justification because the funds necessary for settlement were not available.
In my view, it was not reasonable for the defendant to continue to delay and expect that the plaintiff would agree to its delays indefinitely. For these reasons the defendant is not entitled to succeed in its attempts to enforce the contracts, even though one day after the day nominated by the plaintiff, the funds finally did become available.
I find that in the circumstances I have outlined and having regard to the defendant’s misleading statements as to the finance condition being satisfied, the notices which were given on 30 September and then on 1 October 2003 were reasonable. The plaintiff was relying upon the defendant’s statement of a truthful position and was entitled to proceed accordingly.
The defendant blames the plaintiff for losing the funds and having to find other sources of finance because of the court proceedings. I have concluded that there were no funds available for settlement and therefore no funds were lost. The defendant, in relation to its ability to comply with the special condition, was in no different position before or after Perry J’s decision because of any conduct of the plaintiff. The defendant chose to keep the plaintiff in the dark whilst it desperately tried to find finance.
Final Orders
I would therefore order:
1that the plaintiff is entitled to the declarations sought, namely, that both contracts have been validly terminated;
2that the Caveat No 9620697 over the land contained in Certificate of Title Register Book Volume 5839 Folio 725 Register Book Volume 5840 Folio 323 Register Book Volume 5692 Folio 573 be removed; and
3that the deposit paid by the defendant be forfeited to the plaintiff.
It follows from my reasons that there will be no order for specific performance as sought by the defendant.
I will hear the parties as to costs.

[2004] SASC 62

12 March 2004