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

HARBRAY NOMINEES PTY LTD v ONGLEY
[2003] SASC 329
Civil

PERRY J. The plaintiff in its capacity as trustee of the Robert Harris family trust carries on the business of a retirement rest home known as Sunnydale Retirement Rest Home (“the business”) on three parcels of land situated at Semaphore of which the plaintiff is the registered proprietor.[1] Pauline Harris and Robert Harris are the two directors of the plaintiff.
[1] The land is that described in Certificates of Title Volume 5839 Folio 725, Volume 5840 Folio 323 and Volume 5692 Folio 573.
On 27 February 2003, separate written contracts for sale of the land (“the land contract”) and the business (“the business contract”) were entered into by the plaintiff as vendor and the defendant as purchaser. The contracts provided for settlement to take place on 17 April 2003.
Settlement did not take place on that date, and in fact has not so far taken place.
By letter of 1 July 2003 from the plaintiff to the defendant, the plaintiff purported to give “notice of termination of both contracts for fundamental breach”.
On 18 July 2003, the plaintiff instituted the present proceedings.
In the claim endorsed on the inter partes summons, it seeks the following relief:
“1.A declaration that the contract entered into by and between the plaintiff and the defendant for the sale by the plaintiff to the defendant of all that land and premises comprised in Certificate of Title Register Book Volume 5839 Folio 725 Register Book Volume 5840 Folio 323 Register Book Volume 5692 Folio 573 (‘the land’) and dated the 27^th February 2003 has been lawfully terminated by the plaintiff.
2.A declaration that the contract entered into by and between the plaintiff and the defendant for the sale by the plaintiff to the defendant of the business known as Sunnydale Retirement Rest Home carried on by the plaintiff on the land (‘the business’) dated the 27^th February 2003 has been lawfully terminated by the plaintiff.
3.An Order removing Caveat No 9620697 registered by the defendant over the land.
4.An Order that the deposit bond provided by the defendant as deposit in relation to the contract for the sale of the land be forfeited to the plaintiff.”
By an application for specific directions taken out on 18 July 2003, the plaintiff sought an order pursuant to SCR r 25.02 for immediate relief in the form of an order in terms of the whole of the relief sought in the inter partes summons.
The application came on for hearing before a Master who, after hearing argument, gave judgment supported by written reasons delivered on 4 August 2003. He found in favour of the plaintiff, declared both contracts to have been lawfully terminated by it, and pronounced the other relief sought in the proceedings.
By notice of appeal filed on 14 August 2003, the defendant appeals from the orders made by the Master.
In his appeal, the defendant seeks an order that the judgment and order pronounced by the Master be set aside and that in lieu thereof an order be substituted dismissing the plaintiff’s application for immediate relief.
The appeal was argued before me on 8 September 2003, when I reserved my decision.
Factual background
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.
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”.
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”.
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.”
$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.”
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”.
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”.
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.
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.
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.
In the events which happened, settlement did not take place on 24 April 2003.
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”.
On 13 May 2003, the defendant telephoned Mr Harris and said that he was still intending to settle in the very near future.
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.
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.
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”.
This did not eventuate.
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.”
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.
Mr and Mrs Harris then took legal advice, and appointed a conveyancer, Mr Ross Marriott.
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.
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.”
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.
On 24 June 2003, the defendant phoned Mr Harris to say that he would be unable to settle on 26 June 2003.
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.
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.”
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.
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.
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)
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.
That offer finds expression in a document drawn up by Maidments and submitted to Repasky Lawyers on 7 July 2003.
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.
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.”
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”.
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”.
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.
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.
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.
The contentions
The central issue between the parties may be simply stated.
The plaintiff contends that both contracts have been terminated.
The defendant contends that both contracts are still on foot, that he is ready, willing and able to settle, and that he should be permitted to proceed to settlement.
Determination of the issues between the parties requires consideration of further clauses in the land contract, which I have not so far referred to.
Clause 6 of the land contract is as follows:
“6.SPECIAL CONDITIONS
The party required to comply with a Special Condition must make every reasonable endeavour to do so. If the Special Condition is not complied with before the date specified in the Special Condition (or if no date is specified, within twenty one (21) days of the date of this Agreement) then,
6.1 if the failure to comply with the Special Condition is not due to the neglect or default of the Vendor or the Purchaser, the Vendor or, unless the Purchaser has waived such condition and communicated such waiver in writing to the Vendor or the Agent, the Purchaser, upon giving seven days’ written notice to the other party, may terminate this Agreement and upon its termination (unless the condition is complied with in the meantime) all monies paid under this Agreement must be, re-paid to the Purchaser and all rights and liabilities under this Agreement, will cease; or
6.2 if the failure to comply with the condition is due to the neglect or default of the Vendor or the Purchaser, the party not in default may terminate this Agreement. If the Vendor is in default, the Purchaser may, upon giving seven days’ written notice to the Vendor, terminate the Agreement and all monies paid by or on behalf of the Purchaser must be repaid to the Purchaser upon the termination or otherwise clause 7.2 will apply. If the Purchaser is in default, clause 7.1 will apply.”
The relevant parts of the clause which immediately follows, that is, clause 7, are in the following terms:
“7.DEFAULT
7.1 Purchaser’s Default
7.1.1If the Purchaser breaches this Agreement and as a result, the purchase of the Property is not completed on the Settlement Date, or the Price or any part of the Price is not paid on its due date, the Purchaser must pay interest on the full Price (less the amount of any deposit monies paid) from the Settlement Date until either:-
7.1.1.1the date full payment is made; or
7.1.1.2the date of termination (whichever first occurs) at the default rate. Any payment of interest at the default rate is without prejudice to any other legal remedy the Vendor may have by reason of the Purchaser’s default.
............
7.1.3If:-
7.1.3.1the Purchaser breaches this Agreement prior to or on the Settlement Date; and
7.1.3.2any such default continues unremedied for a period of not less than three (3) business days the Vendor may at any time after those three (3) business days give notice to complete to the Purchaser. The notice must:-
7.1.3.3appoint a time for Settlement (between 10.00 am and 3.00 pm on a business day); and
7.1.3.4require the Purchaser to settle at the time appointed in the notice.
If the Purchaser fails to comply with the terms of the notice, the Vendor may, without prejudice to any other legal rights or remedies the Vendor may have, terminate this Agreement by notice in writing to the Purchaser.
A notice of completion may be given more than once.”
Clause 7.3 provides:
“Time is of the essence in respect of any obligation under clause 7.”
Clause 4.3 deals with settlement. It provides:
“Settlement must occur at the Lands Titles Registration Office in Adelaide (or other place nominated by the Vendor and agreed by the Purchaser not later than two (2) business days prior to the Settlement Date) on the Settlement Date.”

Put shortly, the Master regarded the defendant as in default on the footing that he had failed “to settle in terms of the contract”. From that premise, he reasoned that the plaintiff was entitled to proceed under clause 7, more particularly to give a notice to complete under clause 7.1.3, and upon non-compliance with the notice, to terminate the agreement by notice forthwith.
On the hearing of the appeal, Ms Powell QC, who appeared for the plaintiff before the Master and before me, sought to justify the conclusion reached by the Master by submitting that unless and until notice of termination was given by either party to the other pursuant to clause 6, on the expiration of the time limit for satisfaction of the special condition (item R of the land contract) (the altered date being 18 April 2003) the contract remained on foot, but the special condition as to finance was no longer operative.
She then contended that there was a default by the defendant when he failed to settle on the settlement date appointed in each of the contracts, that is, the adjusted settlement date of 24 April 2003. She contended that that default enlivened the plaintiff’s rights under clause 7, in the first place, the plaintiff’s right to give a notice to complete, and in the second place, on a failure to comply with that notice, to terminate the contract.
With respect to Ms Powell QC and to the Master, the starting point of that argument is unsound, and as a result the reasoning which follows cannot be sustained.
Properly construed, the special condition relating to finance is a condition the fulfilment of which is a condition precedent to the obligation of the purchaser, in this case, the defendant, to settle.
It is a condition of the same kind as that referred to by Gibbs CJ in Perri and Anor v Coolangatta Investments Pty Ltd.[2] In that case, Gibbs CJ said:
“In my opinion, special condition 6 made the completion of the sale of the property at Lillipilli a condition precedent to the performance of certain of the obligations of the parties under the contract, including the obligation of the respondent to complete the sale.” (emphasis added)
[2] (1982) 149 CLR 537 at 541.
In the contract now in question, the obligation to settle in accordance with clause 4.3 on the “settlement date” was conditional upon the fulfilment of the special condition as to finance.
Given that the special condition was not complied with within the time provided, that is, on or before 18 April 2003, and given that the failure of the condition to be satisfied before that date was “not due to the neglect or default of the vendor or the purchaser”, either party then had the right under clause 6.1 to give seven days written notice to terminate the agreement.
Neither party chose to do so. Neither party attempted to exercise the rights conferred by clause 6.1.
Instead, the plaintiff continued to treat with the defendant and to endeavour to accommodate the defendant’s requests for further time within which to raise the money which he required to settle.
In the result, the contract was still on foot, including the special condition as to finance, at the time when the plaintiff purported to give the notice to complete. The plaintiff purported to give that notice in the exercise of a right to do so pursuant to clause 7 of the land contract.
But clause 7 did not authorise that action to be taken at that time.
Clause 7.1 comes into play only upon default by the purchaser. The purchaser, Mr Ongley, was not in default at that time. The contractual obligation to settle did not arise unless and until the special condition was satisfied.
The request that he settle in accordance with the notice to complete was, therefore, unsupported by the contract. The defendant was entitled to ignore it and rest upon the non-fulfilment of the condition precedent.
It follows that the purported notice of termination given by the plaintiff, being a notice purporting forthwith to terminate the land contract by reason of the failure of the defendant to comply with the notice to complete, was ineffective.
At that stage, and indeed at any time after 18 April 2003, the plaintiff (and the defendant, for that matter) might have given seven days written notice to terminate the land contract pursuant to clause 6.1.
Ms Powell QC attempted to support her argument by reference to various observations made by Gibbs CJ in Perri and Anor v Coolangatta Investments Pty Ltd (supra).
In that case, a special condition in a contract of sale made the sale conditional upon the purchasers completing the sale of another property. No time was fixed in the contract within which the special condition was to be fulfilled.
As I have explained, the condition was construed to mean that the obligation of the purchasers to complete, that is, to proceed to settlement, depended upon fulfilment of the condition, and did not arise until it had been fulfilled.
In that case, it was further held that, given that fulfilment of the special condition was not subject to any limit of time, the purchasers were obliged to complete the sale of their own property, that is, to satisfy the special condition, within a reasonable time.
Once a reasonable time had elapsed, during which the special condition was not satisfied or varied, it was then open to the vendor to avoid the contract, without giving a notice to complete and without fixing a reasonable time for completion.
In this case, however, the land contract specifically provided that the special condition was to be fulfilled before a certain date. If it was not fulfilled before that date, the parties might exercise a right to terminate the contract pursuant to clause 6.
If the contracts were not terminated pursuant to that clause, and if the purchaser was not in default, such as would be the case if, for example, the purchaser had failed to use reasonable endeavours to raise finance, for the reasons which I have given, I see no reason why the contracts should not still be regarded as on foot, together with the special condition as to finance.
As I have said, the plaintiff was not powerless in that situation, and it could bring matters to a head at any time by giving notice under clause 6.1.
In the Coolangatta Investments case, Gibbs CJ observed:[3]
“... when the time has elapsed for the performance of a condition which is not a promissory condition but a condition precedent to the obligation to complete a contract of sale, either party, if not in default, can elect to treat the contract as at an end if the condition has not been fulfilled or waived and .... it is not necessary first to give a notice calling on the party in default to complete the contract or fulfil the condition. What I have said is, of course, subject to any sufficient indication to the contrary intention in the words of the contract itself.”
[3] Ibid 546.
In this case, the right of election to treat the land contract as at an end if the special condition as to finance has not been fulfilled or waived, is expressly confirmed, but with the qualification that the right of termination in such an eventuality can only be exercised on seven days written notice.
That provision would give to the purchaser the opportunity, within the period of seven days, to find the necessary finance to complete.
I see nothing in the Coolangatta Investments case which throws any doubt upon the construction which I place on the relevant provisions in the contract in question in this case.
I have previously noted that in its “offer to revive” the contracts, the plaintiff by implication recognises the ongoing application of the special condition by stipulating that the acceptance of the offer would operate as a waiver by the defendant of the special condition. That, of course, cannot operate to conclude the legal arguments as to the ongoing applicability of the special condition, but it was a mute recognition of what I find the legal position to have been at that stage.
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.
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.
I do not think that the defendant is now in a position to hold the plaintiff to the plaintiff’s offer to “carry” some part of the purchase price. Clearly, that offer must be taken to have been withdrawn, given the plaintiff’s purported termination of the contracts. In any event, the other terms offered by the plaintiff which accompanied the offer to carry some part of the purchase price, were never accepted by the defendant.
So that the satisfaction of the special condition must now be in the terms of that condition as set out in the contract, save as to the date within which it was to be satisfied. Alternatively, the defendant may now waive that condition.
It follows that the finding that it is open to the defendant to proceed to settlement on reasonable notice to the plaintiff is subject to settlement proceeding strictly in accordance with both contracts.
The appeal must be allowed and an order substituted for the order under appeal, dismissing the plaintiff’s application for immediate relief.
JUDGMENT CITATIONS
LISTED IN ORDER OF APPEARANCE IN JUDGMENT
1. The land is that described in Certificates of Title Volume 5839 Folio 725, Volume 5840 Folio 323 and Volume 5692 Folio 573.
2. (1982) 149 CLR 537 at 541.
3. Ibid 546.

[2003] SASC 329

24 September 2003