Jalfire Pty Ltd v Sherron Lee Gallimore as Trustee for the Houghton Family Trust
[2010] QDC 2
•25 January 2010
DISTRICT COURT OF QUEENSLAND
| CITATION: | Jalfire Pty Ltd v Sherron Lee Gallimore As Trustee For The Houghton Family Trust [2010] QDC 2 |
| PARTIES: | JALFIRE Pty Ltd ACN 010 366 266 AS TRUSTEE UNDER INSTRUMENT K264487Y v SHERRON LEE GALLIMORE AS TRUSTEE FOR THE HOUGHTON FAMILY TRUST |
| FILE NO: | D133/2008 |
| PROCEEDING: | Trial |
| ORIGINATING COURT: | District Court Southport |
| DELIVERED ON: | 25 January 2010 |
| DELIVERED AT: | Southport |
| HEARING DATE: | 14 October 2009, 9 November 2009 |
| JUDGE: | Newton DCJ |
| ORDER: | Judgment for the plaintiff in the amount of $81,465.40. Defendant to pay plaintiff’s costs. |
| CASES: | Hill v Terry [1993] 2 Qd R 640. |
| CATCHWORDS: | Conveyancing – relationship of vendor and purchaser – matters arising between contract and conveyance – transactions subject to finance – vendor exercising power to terminate contract where purchaser not doing so or making contract unconditional – availability to purchaser of relief against forfeiture |
| COUNSEL: | Mr G Beacham for the plaintiff Mr T Houghton for the defendant |
| SOLICITORS: | Rudkin Hitchcock for the plaintiff Provest Law for the defendant |
The plaintiff in this action (“Jalfire”) was the owner of a factory situated at 3 Enterprise Street, Molendinar. The defendant (“Gallimore”) was the proposed purchaser of the factory pursuant to a contract for sale and purchase of commercial land and buildings dated 1 February 2007.
Gallimore paid $1000.00 deposit upon signing the contract. The contract provided:
(a)that the purchase price was to be $1,250,000.00;
(b)the deposit was $62,500.00;
(c)settlement was to occur on or before 2 April 2007; and
(d)the deposit was payable in the sum of $1000.00 on signing of the contract and $61,500.00 by deposit, bond or bank guarantee in favour of the vendor within three business days of the purchaser confirming satisfaction of the finance clause.
In paragraph five of the amended statement of claim it is pleaded that pursuant to the contract or in equity the defendant with the consent of the plaintiff, or jointly with the plaintiff, waived the benefit of clause 31 and/or clause 26 and expressed satisfaction of clause 31 of the contract on 20 February 2007.
Clause 31 of the contract is in the following terms:
“ 31 FINANCE CLAUSE
31.1If items S, T and U are not deleted, this Contract is subject to the Purchaser obtaining from the lender or class of lender specified in Item S on or before the approval date specified in Item T approval of a loan not being less than the amount of loan specified in Item U on terms and conditions satisfactory to the Purchaser and if the Purchaser does not obtain such approval for any reason not being attributable to the Purchaser’s own default, the Purchaser may terminate this Contract by notice in writing given to the Vendor.
31.2The Purchaser shall take all steps reasonably necessary to obtain such approval, and the onus of establishing this shall be upon the Purchaser.
31.3The Purchaser may waive the benefit of the condition contained in clause 31.1 by giving notice in writing to the Vendor within 2 Business Days from the approval date.
31.4If the Purchaser obtains such approval the Purchaser shall give notice in writing of such approval to the Vendor promptly and in any event within 2 Business Days from the approval date.
31.5If the Purchaser:
(a)neither terminates this Contract pursuant to clause 31.1 nor waives pursuant to clause 31.3 the benefit of the condition contained in clause 31.1; and
(b)does not give notice pursuant to clause 31.4 that the Purchaser has obtained such approval;
within 2 Business Days from the approval date then, instead of any other remedy available to the Vendor by reason of the failure of the Purchaser to fulfil the Purchaser’s obligations under this clause 31 and despite any continuing right which the Purchaser may have to terminate this Contract under clause 31.1, the Vendor may at the Vendor’s option, by notice in writing to the Purchaser (which notice shall specify that it is given pursuant to this clause 31.5) terminate this Contract.”
By clause 26 of the contract time was of the essence of the contract.
The contract provided for payment of the deposit as follows:
“SPECIAL CONDITIONS
1. The deposit shall be payable as to:(a)$1,000.00 on signing; and
(b)
as to the balance $61,500.00 by cash (paid to the Stakeholder) or an unconditional bank guarantee in favour of the Vendor upon terms that are satisfactory to the Vendor, either paid to the Stakeholder or deposited with the Vendor as the case may be within 3 business days of a Purchaser confirming satisfaction or waiver of clause 31 of the standard conditions (Finance Clause)…”
Gallimore’s solicitor wrote to the plaintiff on 20 February 2007 as follows:
“Bill, I received instructions a short while ago to waive the benefit of the finance clause even though my client only has a ‘verbal’ approval at present. You can take this e-mail as confirmation of that waiver.
I will liaise with my client for payment of the deposit as now required. Do I communicate with PCCR[1] or continue to deal with you?”
[1] The reference to PCCR I understand to be the plaintiff’s firm of solicitors, Primrose Couper Cronin Rudkin.
The plaintiff responded on the same day in these terms:
“Thanks Rod. Once the deposit is paid to Jalfire as stakeholder the legal process of settlement can proceed via David Tierney of PCCR. There will be no need to communicate with me any further thereafter. I will liaise with Tierney accordingly.”
The deposit was not paid within the time required by special condition 1(b). The solicitors for Jalfire wrote to Gallimore about this on 28 February 2007 and foreshadowed a termination of the contract if the deposit was not paid forthwith. Gallimore sought and obtained from Jalfire an extension for the payment of the deposit, giving her until 8 March 2007. Again, the deposit was not paid by the new agreed date and on 2 April 2007 Jalfire threatened to terminate the contract if payment of the deposit was not received by 16 April 2007. The deposit remained unpaid as at that date and accordingly the contract was terminated by Jalfire by correspondence dated 20 April 2007.
In her amended defence Gallimore pleads as follows:
“4. ….
(e)by clause
31.131.4 of the contract, the defendant was entitled to terminate the contract if it did not obtain loan approval in terms satisfactory to the defendant on or before 15 February 2007;(f)by clause
31.231.3 of the contract, the defendant could waive the benefit of clause 31.1 by giving notice in writing to the plaintiff within 2 business days from the approval date, namely 17 Feburary 2007;(g)the defendant did not obtain approval in terms satisfactory to the defendant on or before the approval date;
(h)the defendant did not waive the benefit of clause 31.1 by 17 February 2007;
(i)in the premises, the defendant lost the right to waive the benefit of clause 31.1 and the alleged waiver of the finance clause in paragraph 5 of the defence was not a waiver as alleged or at all;
(j)insofar as the waiver is alleged to be a waiver in equity, the alleged waiver was ineffective because it was governed by the Contract;
(k)further or in the alternative, the alleged waiver was outside of the time limits imposed by clauses 31 and 26. Time being of the essence, the parties could not waive in equity the stipulation that time be of the essence with respect to clause 31 after time had expired for the plaintiff to provide the notice pursuant to clause 31.3 or 31.4.”
In effect Gallimore argues that the waiver communicated in the e-mail of 20 February 2007 was not effective because it came outside the period provided for in clause 31.3 of the contract. It therefore was ineffective to waive the benefit of the clause and, therefore, to trigger the obligation to pay the deposit under special condition 1(b).
Jalfire argues that an effective waiver could occur outside the timeframe contained in clause 31.3 of the contract. The plaintiff submits that the exchange of e-mails on 20 February 2007 evidences:
(a)a joint waiver of clause 31.3 by the parties;
(b)alternatively an acceptance of Gallimore’s late waiver by Jalfire (that is, a waiver of the contractual term that time is of the essence);
(c)alternatively a waiver of the benefit of clause 31.3 by Gallimore, along with an election by both parties to affirm the contract and not to terminate under clause 31.5.
It is submitted on behalf of Jalfire that the e-mails of 20 February 2007 dispensed with any further need to consider clause 31.3 which was, by those e-mails, effectively waived. Therefore, it is submitted, the obligation to pay the deposit was triggered and the failure to pay it justified the termination of the contract. The obligation having arisen prior to termination, the deposit can be recovered as a debt due under the contract.
Gallimore submits that the Court of Appeal decision in Hill v Terry [1993] 2 Qd R 640 is conclusive of the issue in this case. In Hill, the contract was for the sale of a dwelling house at a purchase price of $65,000.00. A deposit of $3,500.00 was payable as to $100.00 forthwith and as to the balance on or before 5 January 1988. The date for completion was 8 February 1988. Time was in all respects to be of the essence. The contract contained a “subject to finance” clause (clause 29). Paragraph (a) of that clause made the contract subject to the purchaser’s obtaining from a named lending institution on or before the approval date namely 25 January 1988, approval of a loan not being less than $58,000.00 on the security of a registered first mortgage over the land. If the purchaser did not obtain such approval for any reason not being attributable to his own default he was entitled to terminate the contract by notice in writing to the vendor. Paragraph (b) required the purchasers to take all steps reasonably necessary to obtain such approval. Paragraph (c) entitled the purchasers to waive the benefit of the condition contained in paragraph (a) by giving notice in writing to the vendor not later than two business days after 25 January 1988. Paragraph (d) provided that if the purchasers obtained such approval they were required to give notice in writing of such approval to the vendor promptly and in any event not later than two business days after 25 January 1988. Clause 29 then provided in paragraph (e) that if the purchaser-
(i)does not terminate the contract pursuant to paragraph (a); or
(ii)does not waive pursuant to paragraph (c) the benefit of the condition contained in paragraph (a); or
(iii)does not give notice pursuant to paragraph (d) that he has obtained such approval;
the vendor may at his option by notice in writing to the purchaser (which notice shall specify that it is given pursuant to this paragraph) terminate the contract.
Ryan J (at p656) explained the effect of this clause as follows:
“This clause provided the purchasers with a period in which to obtain finance. If they succeed, they are required to give notice of the approval to the vendor within the specified time and the contract becomes unconditional. If they do not succeed, they may either terminate the benefit of the finance clause by giving notice to the vendor within the specified time, whereupon the contract becomes unconditional. In this case they did none of those things. They did not give notice of approval within the specified time. They did not waive the benefit of the finance clause by giving notice within the specified time. And they did not terminate the contract. Accordingly the vendor had the option to bring the contract to an end. Notice of termination was given on 1 February 1988.”
It is argued by Gallimore that Hill is authority against the submissions of Jalfire with respect to the purpose of clause 31. In particular, reliance is placed upon a statement of McPherson SPJ (as he then was) at pp650-1:
“By cl. 29(b) the purchasers bound themselves to take steps to obtain finance approval, and by cl. 29(d) to give written notice within the time specified of their having obtained such approval. They made no affirmative promise that they would obtain finance within a specified time. In the present case, they obtained finance approval and they gave notice; but they did so outside the limits of time allowed by cl. 28(d). This involved them in no breach of contract. What it did was to deprive them of the right to assert that the requirement of cl. 28(d) had been satisfied so as to make the contract in that unconditional and binding both on themselves and on the vendor.”
Gallimore submits that clause 31 should be construed in accordance with the construction of the Hill clause by the Court of Appeal. It is argued that this construction should be adopted because the clause was constructed in contemplation that time was of the essence and because clause 31 provides a benefit to the plaintiff in circumstances where the contract is conditional. It requires the defendant to terminate, waive or notify by a certain date and if not the contract remained conditional and by clause 31.5 the plaintiff was able to terminate the contract or wait until settlement to see if the defendant could fulfil the condition. Accordingly, after time had elapsed the plaintiff was in control.
It is further submitted by Gallimore that after 8 March 2007 the plaintiff knew the contract was still conditional and therefore must have believed that the notice was not an effective waiver. The decision in Hill, it is contended, is authority for the proposition that a waiver out of time was not an effective waiver.
It should be noted that the question in Hill was whether the vendor was acting unconscionably in relying upon a right to terminate under the finance clause where the purchaser had notified satisfaction of that clause, albeit out of time. By contrast in the present case there is no reliance upon the right to terminate under the contract. Both parties purported to join in the waiver of clause 31 and proceeded as if the contract was to be performed. It is the purchaser (Gallimore) that now seeks to resile from her own waiver of the finance clause.
The “equitable relief” sought in Hill was relief from forfeiture, sought by purchasers against a vendor who had attempted to terminate the contract. In the present case, Jalfire seeks to rely upon what it characterises as an express and unequivocal waiver, joined in by both parties to the contract, resulting in the obligation to pay the deposit under a special condition of the contract being triggered.
The purchasers in Hill attempted to notify the vendor that they had obtained finance, but did so outside the time required under the relevant clause. They were, therefore, attempting to assert that they had satisfied the clause, but had failed to do so within the required time. In the present case, Gallimore wished to waive the benefit of the clause. In my view the clause does not attempt to prevent waiver outside the time specified (waiver being permissive rather than mandatory). I accept that the conduct of the parties in the present case was unequivocal in that they joined in treating the requirements of clause 31 as having been waived, and the requirement for the deposit to be paid having been triggered.
I accept the submission of Jalfire that clause 31 is intended to permit the termination of the contract if the finance clause is not satisfied, or waived. The purpose of the clause is not to limit the ability to waive the clause. It follows, then, that if the clause has been expressly waived, even out of time, any uncertainty as to the contractual position of the parties is resolved. In continuing to perform the contract, and treating it as subsisting, the parties will also have elected to affirm the contract and will accordingly lose their right of termination under clause 31.5. Clause 31 permits the waiver of the clause in a particular way for the purpose of providing a time by which the vendor’s right to terminate will arise under clause 31.5. However, it does not attempt in any way to limit the ability to waive the benefit of that clause.
I do not accept that the claim by Jalfire for the deposit should be seen as a claim seeking a windfall. Gallimore expressly sought to waive the benefit of the finance clause, thus seeking to keep the contract on foot, and joined with Jalfire in treating the contract as subsisting and the obligation to pay the deposit as having been triggered. The time for payment of the deposit was extended by several weeks by agreement between the parties. I am unable to accept that Gallimore can now be relieved of her contractual obligation upon the basis that her own waiver was made some days outside the time provided for under clause 31.
It has, unfortunately, become necessary to refer to a series of e-mails to my associate from counsel for both parties after the conclusion of the hearing on 14 October 2009. The first was from counsel for Gallimore, sent on Friday 16 October 2009 at 10:04am and was in the following terms:
“I confirm my telephone conversation with your associate this morning and your Honours (sic) grant of an extension for me to file written submissions on behalf of the defendant to next Wednesday 21 October 2009 and for the plaintiff to file any necessary reply by Monday 26 October 2009.”
The second e-mail was again from counsel for Gallimore and was sent on Friday 23 October 2009 at 6:36pm stating:
“I seek leave to briefly reply to the submissions with respect to the amendment point, in particular paragraph 2 or alternatively to have the matter re-listed. Clearly the plaintiff again seeks to rely on a case that is not pleaded.”
This provoked a response from counsel for Jalfire which was sent on Monday 26 October 2009 at 9:37am in the following terms:
“The Plaintiff’s response to Mr Houghton’s email is as follows.
The Plaintiff submits that no further submissions should be entertained. It has already been put to the cost of a further round of submissions. It would be extremely unfair to put it to the cost of dealing with yet another set of submissions. The objection was taken, and it has been responded to. It should not now be the subject of reply, upon reply.”
On the same date at 12:42pm counsel for Gallimore responded as follows:
“With respect to the plaintiff’s response to my email. It is disingenuous for the plaintiff to complain about further costs when it sought to run a new case against my client on the day of hearing.
Your Honour will recall that at the hearing objection was taken with respect to oral submissions by the plaintiff’s Counsel on the plaintiff’s conduct creating a waiver or affirmation and any case put by the plaintiff with respect to estoppel, election to affirm etc. (I particularly mentioned rule 150 which requires estoppel etc. to be specifically pleaded). Of course I did not have time to fully read and consider the plaintiff’s outline handed to me about 5 or 10 minutes before the trial was to commence.
My learned friend is correct, the objection was taken and your Honour ruled that the plaintiff must plead its equitable case against my client. The plaintiff then amended its pleading to put his case in equity by the defendant’s conduct on 20 February 2007. Your Honour rightly suggested to me that there was no prejudice to my client with respect to that amendment. I agreed. Clearly the defendant’s conduct had already been pleaded and the new amendment sought merely to add an equitable waiver on the same conduct by the defendant. I sought an adjournment to consider submissions in response to the amendment. Out of an abundance of caution I renewed my objections in my written submissions on the other grounds sought by the plaintiff that had not been pleaded.
My caution was well rewarded. By ambush, it seems that the plaintiff wishes to continue to pursue another entirely different case to that pleaded namely one relating to the plaintiff’s conduct. It is highly improper for the plaintiff to continue to advance such a case when your Honour has ruled that the plaintiff must plead the case it wishes to put. My client is extremely prejudiced by any case put in equity on the plaintiff’s conduct, despite being a breach of the UCPR’s it is a breach of natural justice. Further, my client abandoned her estoppel case pleaded in the defence on the basis of the plaintiff’s pleaded case. If the plaintiff’s conduct is put in issue then it must be pleaded and the defendant will need to consider all of the parties’ conduct against based on that case and plead a defence.
Of course, the defendant objects to any further amendments. It will require an adjournment, further costs to my client and deprive other members of the public court time to have their cases heard. It has been nearly two years and the plaintiff still has not pleaded its case properly. Conversations between the parties were had and memories naturally fade.
It is not so much that my client seeks to make further reply upon reply. In short my client seeks confirmation that your Honour’s ruling that the plaintiff cannot advance any case based on the plaintiff’s conduct that has not been pleaded is being applied and that the plaintiff is clear about what case your Honour has been asked to decide. If this can be done without incurring the further costs of having the matter re-listed, then my client would be grateful.”
Notwithstanding the obvious undesirability of conducting litigation in this fashion, I should make it clear that my decision in this matter is not based upon any aspect of the plaintiff’s conduct that has not been pleaded. It is unnecessary to have the matter re-listed to hear evidence on this point. In my view, the words of the e-mail of 20 February 2007 from the defendant’s solicitor to the plaintiff unequivocally effect a waiver of the benefit of the finance clause.
I give judgment for the plaintiff in the amount of $61,500.00 together with interest at 11.25% from 8 March 2007, with respect to interest on late payments provided for under the contract and being the rate of interest fixed by the Queensland Law Society ($19,965.40). The total is therefore $81,465.40. The defendant is to pay the costs of the plaintiff to be assessed.
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