Kheng v Secola
[2000] WASC 148
•15 JUNE 2000
KHENG -v- SECOLA & ORS [2000] WASC 148
| SUPREME COURT OF WESTERN AUSTRALIA | Citation No: | [2000] WASC 148 | |
| Case No: | CIV:1231/1999 | 10 & 11 MAY 2000 | |
| Coram: | SCOTT J | 15/06/00 | |
| 11 | Judgment Part: | 1 of 1 | |
| Result: | Judgment for the defendants | ||
| PDF Version |
| Parties: | GHEONG SWEEK KHENG ANTHONY GUISEPPE SECOLA JENNIFER LEE SECOLA BIAGIO SECOLA PRISCILLA MAY SECOLA |
Catchwords: | Contract General contracting principles Offer and acceptance Vendor and purchaser Discharge, breach and defences to action for breach Contract for the sale of land General conditions for the sale of land Contract conditional on approval from Foreign Investment Review Board ("FIRB") Deposit forfeiture Plaintiff informed of FIRB requirements before entering into contract Plaintiff must act reasonably to obtain FIRB approval Equity General principles and maxims of equity Equitable doctrines and presumptions |
Legislation: | Foreign Acquisition and Takeovers Act 1975 (Cth) Sale of Land Act 1970 |
Case References: | Butts & Anor v O'Dwyer & Anor (1952) 87 CLR 267 Erley Pty Ltd v Gunzburg Nominees Pty Ltd (1998) Aust Contract Reports 90,779 Gange v Sullivan (1966) 116 CLR 418 Lombardo v Morgan [1957] VR 153 Meehan v Jones & Ors (1982) 149 CLR 571 Perri & Anor v Coolangatta Investments Pty Ltd (1982) 149 CLR 537 Yashima v Carroll (1994) 6 BPR 13,663 Brauer & Co (Great Britain) Ltd v James Clark (Brush Materials) Ltd [1952] 2 All ER 497 Coolangatta Investments Pty Ltd v Perri (1980) 1 BPR 9516 Kennedy v Vercoe (1960) 105 CLR 521 New South Wales Cancer Council v Sarfaty (1992) 28 NSWLR 68 Paltara Pty Ltd v Dempster (1961) 6 WAR 85 |
JURISDICTION : SUPREME COURT OF WESTERN AUSTRALIA
- IN CIVIL
- Plaintiff
AND
ANTHONY GUISEPPE SECOLA
JENNIFER LEE SECOLA
BIAGIO SECOLA
PRISCILLA MAY SECOLA
Defendants
Catchwords:
Contract - General contracting principles - Offer and acceptance - Vendor and purchaser - Discharge, breach and defences to action for breach - Contract for the sale of land - General conditions for the sale of land - Contract conditional on approval from Foreign Investment Review Board ("FIRB") - Deposit forfeiture - Plaintiff informed of FIRB requirements before entering into contract - Plaintiff must act reasonably to obtain FIRB approval
Equity - General principles and maxims of equity - Equitable doctrines and presumptions
(Page 2)
Legislation:
Foreign Acquisition and Takeovers Act 1975 (Cth)
Sale of Land Act 1970
Result:
Judgment for the defendants
Representation:
Counsel:
Plaintiff : Mr G M Abbott & Mr J M Lemmon
Defendants : Mr P G McGowan & Ms T C P Ling
Solicitors:
Plaintiff : Freehill Hollingdale & Page
Defendants : Corsers
Case(s) referred to in judgment(s):
Butts & Anor v O'Dwyer & Anor (1952) 87 CLR 267
Erley Pty Ltd v Gunzburg Nominees Pty Ltd (1998) Aust Contract Reports 90,779
Gange v Sullivan (1966) 116 CLR 418
Lombardo v Morgan [1957] VR 153
Meehan v Jones & Ors (1982) 149 CLR 571
Perri & Anor v Coolangatta Investments Pty Ltd (1982) 149 CLR 537
Yashima v Carroll (1994) 6 BPR 13,663
Case(s) also cited:
Brauer & Co (Great Britain) Ltd v James Clark (Brush Materials) Ltd [1952] 2 All ER 497
Coolangatta Investments Pty Ltd v Perri (1980) 1 BPR 9516
Kennedy v Vercoe (1960) 105 CLR 521
New South Wales Cancer Council v Sarfaty (1992) 28 NSWLR 68
Paltara Pty Ltd v Dempster (1961) 6 WAR 85
(Page 3)
1 SCOTT J: By a contract dated 14 December 1998 the plaintiff as purchaser agreed to buy from the defendants a property known as 7 Tuart Street, Applecross, being the whole of the land comprised in Certificate of Title Vol 1156 Folio 817 ("the Land"). The contract was in a standard real estate institute form, which by cl 3 incorporated the joint form of general conditions for the sale of land.
2 Clause 6 of the offer and acceptance provided:
"This offer is conditional upon approval by the Foreign Investment Review Board within 45 days from acceptance hereof."
3 Pursuant to the offer and acceptance and on the 16 December 1998 the plaintiff's husband, H Rahardja ("Mr Rahardja"), paid into the account of the plaintiff's solicitor, Freehill Hollingdale & Page, slightly less than 10 per cent of the purchase price of $1,620,000, namely $160,000.
4 The problem in this case arises out of the fact that the application for approval to the Foreign Investment Review Board ("FIRB") was declined so that the transaction was unable to go ahead. The plaintiff claims a refund of the deposit of $160,000. The defendants as vendors seek to have the deposit paid to them.
5 The plaintiff in her statement of evidence says that she is a resident of Singapore and she confirmed that her own personal wealth and that of the companies which she controls is valued in tens of millions of dollars. She deposed to the fact that she has property in Singapore, Hong Kong, the United States of America and in Australia. Based upon the plaintiff's evidence, she is both wealthy and experienced in property dealings.
6 When the plaintiff and her husband came to Western Australia they were interested in purchasing residential property in Perth for investment purposes. For that purpose, the plaintiff inspected the property at 7 Tuart Street, Applecross. The plaintiff had sufficient funds available to her to enable the purchase of a property for $1.6M.
7 On 14 December 1998 the plaintiff and her husband met with the defendants' agent, Davorin Milenko Banovich ("Banovich") and inspected the property at 7 Tuart Street. The plaintiff was attracted to the property, which was then vacant land.
8 Eventually after some negotiations, the plaintiff made an offer to purchase the property for the sum of $1.62M, with a deposit of $160,000
(Page 4)
- to be paid within two working days. Settlement was to be 14 days after approval by the FIRB. Whilst the defendants' agent, Banovich, believed that he was to apply for FIRB approval, the plaintiff decided that her solicitors, Freehill Hollingdale & Page, should make that application on her behalf.
9 A dispute arises as to the discussions between Banovich and the plaintiff at the time the offer and acceptance was entered into. Those discussions are crucial to the disposition of this action. The plaintiff's evidence was that she was not told of the requirements of the FIRB and in particular, that she was not told of a standard requirement that she would be obliged to construct a house on the land at a cost equal to 50 per cent or more of the purchase price of the land. Banovich's evidence, on the other hand, was that he advised the plaintiff of this requirement before the offer and acceptance was executed by her.
10 In his proof of evidence, Banovich says that before the offer and acceptance was entered into, he told the plaintiff that as a non-resident she would require the approval of the Australian Government before she could purchase the Land. He said that he told her that she would have to carry out continuous construction of a dwelling on the vacant land within 12 months of approval and that the cost of the dwelling would have to be no less than 50 per cent of the purchase price of the land.
11 Having considered the evidence of both the plaintiff and Banovich, and in particular the documentation in the document book, to which I will refer shortly, I have come to the conclusion that the evidence of Banovich is to be preferred to that of the plaintiff. In the ensuing correspondence between Banovich and the plaintiff's solicitors, Banovich repeatedly refers to the conversation that he had with the plaintiff. It is to be noted that nowhere in the exchange of correspondence is that assertion denied by the plaintiff's solicitors. In addition, Banovich forwarded to the plaintiff's solicitors a pro-forma of a document to be signed by the plaintiff to facilitate FIRB approval. That draft was forwarded to the plaintiff's solicitors under cover of Banovich's letter of 18 December 1998 and included in that letter is a paragraph which reads:
"At the time of making her offer, I explained to Madam Cheong that FIRB would require her to build a residence at a cost of no less than 50 per cent of the purchase price of the land and that they will require her to start construction within 12 months of their approval rate. I have enclosed a draft copy of a letter
(Page 5)
- which we normally submit with our FIRB applications to expedite them."
12 A condition of the offer and acceptance was that the deposit was to be held in trust by the purchaser's solicitors, Freehill Hollingdale & Page, for the vendors and purchaser jointly. It is common ground that the deposit has remained in that trust account ever since.
13 By her amended statement of claim, the plaintiff seeks a return of the deposit of $160,000 based upon the fact that the FIRB failed to approve the purchase of the Land within the 45-day period stipulated in the contract.
14 In dealing with the plaintiff's claim it is important to note that the evidence of Banovich was that after the offer and acceptance was executed by all the parties, a copy was faxed to the plaintiff's secretary at the hotel where the plaintiff, her husband and the secretary were staying.
15 On the morning of 16 December 1998, the plaintiff's husband and another man attended Banovich's office. The plaintiff's husband, Mr Rahardja, advised Banovich that he had decided that he and his wife would not continue with the contract. Banovich in response said that the contract was binding and that if they did not pay the deposit, he would contact the Federal Police. On the same day, as I have already indicated, Mr Rahardja paid the deposit to the plaintiff's solicitors.
16 By the statement of claim, the plaintiff seeks a refund of the deposit on the basis that a condition of the contract failed in that the FIRB ultimately determined that approval would not be given to the transaction.
17 It is common ground that FIRB approval was refused by order made under the Foreign Acquisition and Takeovers Act 1975 (Cth). A notice dated 10 February 1999 advised of that refusal. The notice indicated that the refusal was because the proposed acquisition would be contrary to the national interest. The correspondence, however, reveals that the plaintiff failed to comply with a policy requirement of the FIRB that a minimum of 50 per cent of the acquisition cost be spent on the development of the property to commence within 12 months and to continue until completion.
18 The plaintiff testified that the reason why she did not comply with that requirement was that she could not sell the property; she did not know the consequence to her if she was unable to comply with the undertaking when given; that she did not have time to complete a feasibility into the profitability of the project if the undertaking was complied with; that she
(Page 6)
- had to determine the funding for the development and as to whether it was preferable to borrow or finance the development in some other way; and finally, it was not feasible in the time available for her to determine the most tax effective structure for the development to be carried out.
19 The facts indicate that the plaintiff never provided an undertaking to the FIRB in the terms which their policy required and it was as a consequence of that failure that the FIRB refused to approve the transaction. There was no evidence, however, to indicate that the FIRB would have approved the transaction had the undertaking be given.
20 The defendants' counterclaim against the plaintiff seeking forfeiture of the deposit based upon cl 18 and cl 19 of the joint form of general conditions for the sale of land, which were included in the offer and acceptance by reference. Those clauses provide:
"18 Default Notice
(1) Except as otherwise specifically provided in these conditions :-
(a) the Vendor is not entitled to forfeit any money paid by the Purchaser or take or recover Possession of the Property on the ground of the Purchaser's default in performing or observing any obligation imposed on the Purchaser under the Contract; and
(b) neither the Vendor nor the Purchaser is entitled to terminate the Contract on the ground of the other's default in performing or observing any obligation imposed on that other party under the Contract; unless
(i) the party not in default has first given to the party in default Notice in writing specifying the default complained of, which Notice must require that the default be remedied within the period stipulated in the Notice; and
(ii) the party in default fails to remedy the default within the period stipulated in that notice.
(Page 7)
- (2) The period stipulated in the Notice in writing referred to in Condition 18(1) must not be less than 14 days from the date of service of that Notice, or, if the Contract is a terms contract, not less than the period of Notice stipulated in section 6 of the Sale of Land Act 1970.
(3) The giving of a Notice under this Condition does not prejudice the right of either party to give a further Notice under this Condition.
(4) This Condition will not apply where either party repudiates the Contract.
- 19 Default
(1) If the Purchaser is in default in performing or observing any obligation imposed on the Purchaser under the Contract or if the Purchaser repudiates the Contract, then the Vendor in addition to any other rights or remedies under the Contract or otherwise, may:-
(a) affirm the Contract and sue the Purchaser for damages for breach;
(b) affirm the Contract and sue the Purchaser for specific performance of the Contract and damages for breach in addition to or in lieu of specific performance of the Contract;
(c) subject to Condition 18, proceed to take or recover Possession of the Property; or
(d) subject to Condition 18 and if the Notice given pursuant to Condition 18 states that unless the relevant default is remedied within the time specified in the Notice, the Contract will or may be terminated, terminate the Contract and
(i) forfeit the deposit paid, except so much as exceeds 10% of the Purchase Price
(Page 8)
- (which excess, if any, is to be deemed for the purposes of this condition to be an instalment of the Purchase Price);
- (ii) sue the Purchaser for damages for breach; and
(iii) without further Notice to the Purchaser re-sell the Property in such manner as the Vendor in good faith thinks fit and if the Vendor re-sells the Property and the re-sale is settled within 12 Months following the date of termination, any deficiency arising from that re-sale and all expenses incurred by the Vendor (but giving credit for the deposit if it has been forfeited) arising from that resale are recoverable by the Vendor from the Purchaser as liquidated damages."
21 There are other subclauses to cl 19, however they are not relevant for the purposes of these proceedings.
22 It is common ground that the defendants gave the plaintiff notice of default under the contract as required by cl 18 set out above and that the purchaser failed to remedy the default. As a consequence the defendants as vendors sought to exercise the right in cl 19(1)(d)(i) of the general conditions and forfeit the deposit paid, which was less than 10 per cent of the purchase price.
23 As indicated earlier in these reasons, the plaintiff maintains that Banovich never advised her of the requirement that, for FIRB approval, the plaintiff would have had to undertake to construct a dwelling on the land at a capital cost of at least 50 per cent of the purchase price. As I have also said earlier in these reasons, Banovich testified that he did discuss that requirement with the plaintiff before the contract was entered into and that the plaintiff agreed to that condition. I have made clear that, in my opinion, the evidence of Banovich is to be preferred to that of the plaintiff and I accept that the plaintiff was aware of the FIRB requirement before she entered into the contract. It is significant that neither the plaintiff's husband nor the family friend who visited Banovich on the morning of 16 December 1998 were called to give evidence and as I have said, it is also significant that the chain of correspondence that followed, between the plaintiff's solicitors and Banovich, never disputed the fact that
(Page 9)
- the plaintiff was told of the FIRB's requirements before the contract was executed by her.
24 I should also add that in my view the inference is available from the exhibits tendered that had the plaintiff given the undertaking required, it is likely that the FIRB would have approved the transaction. Whilst there is no direct evidence to indicate that such an approval would have been forthcoming, it is a reasonable inference open on all of the evidence.
25 This case is not unlike Yashima v Carroll (1994) 6 BPR 13,663 where Young J of the Equity Division of the New South Wales Supreme Court had occasion to consider a similar contract where special condition 7 provided:
"This contract is subject to the purchaser obtaining all necessary approvals pursuant to the provisions of the Foreign Acquisitions and Takeovers Act(Cth) 1975 which said approvals the purchaser undertakes to seek and obtain within 28 days of acceptance of the contract by the Vendor."
26 Young J held at 13,665:
"… it should be noted that under s 38 of the Foreign Acquisitions and Takeovers Act 1975 (Cth), the contract is not invalidated, non-compliance with the Act merely constitutes an offence. …
The law clearly is that a person cannot rely on a condition as putting an end to his or her obligations under a contract if the non-happening of the event was brought about by that party's own act or omission, because to allow that to happen would be to permit a person to take advantage of his or her own wrong: New Zealand Shipping Co v Société des Ateliers et Chantiers de France [1919] AC 1, 9 and Suttor v Gundowda Pty Ltd (1950) 81 CLR 418, 441."
27 In some respects this case is also similar to Gange v Sullivan (1966) 116 CLR 418 although in that case the special condition involved was held by the High Court to be a condition for the benefit of the purchaser. This case, however, involves a special condition, breach of which would constitute an offence. Nonetheless with that distinction in mind, Taylor, Menzies and Owen JJ said at 441:
(Page 10)
- "Whilst the effect of a condition must in every case depend upon the language in which it is expressed and a decision upon the meaning of one condition cannot determine the meaning of a different condition, the authorities cited do show a disposition on the part of the courts to treat non-fulfilment of a condition such as that here under consideration as rendering a contract voidable rather than void in order to forestall a party to a contract from gaining some advantage from his own conduct in securing, or contributing to, the non-fulfilment of a condition bringing the contract to an end."
28 In my opinion the plaintiff failed to take the appropriate steps to comply with condition 6 of the contract by failing to provide the FIRB with the necessary undertaking, notwithstanding the fact that she had been told of that requirement prior to entering into the contract. As a consequence, the plaintiff was seeking to gain some advantage by deliberately failing to fulfil the requirements of a condition and so bring the contract to an end.
29 That conclusion is reinforced when account is taken of the fact that the plaintiff's husband, with whom she was closely associated throughout this and other real estate transactions in Western Australia, approached Banovich (the defendants' agent) on 16 December, and indicated that he and his wife did not wish the transaction to go ahead.
30 In my opinion the construction of cl 6 of the offer and acceptance required the plaintiff to do all things reasonable on her part to obtain the approval from the FIRB: Butts & Anor v O'Dwyer & Anor (1952) 87 CLR 267 per Dixon CJ, Williams, Webb and Kitto JJ at 279-280:
"In other words the parties may enter into a transfer subject to a condition that it is not to become effective unless the Minister's consent has been obtained. Prima facie this would import an obligation on the part of the person giving the transfer to do all that was reasonable on his part to the end that the Minister's consent might be obtained. Such a condition could be either expressed or implied."
31 Counsel for the plaintiff submitted that the plaintiff was only bound to accept conditions which the plaintiff subjectively considered reasonable. In that respect it was contended that the plaintiff had no obligation to accept the condition imposed by the FIRB in relation to an expenditure of at least 50 per cent of the capital cost of the Land on the
(Page 11)
- construction of a house. In my opinion, the authorities upon which the plaintiff relied in that respect (including Lombardo v Morgan [1957] VR 153) are of little assistance. In this case, once it is accepted that the plaintiff was aware of the FIRB requirements prior to entering into the contract, she then knew precisely what that requirement would be in terms of the expenditure on the construction of a dwelling. It follows that the plaintiff entered into the contract with the knowledge that she would be required to spend that sum on the construction of a dwelling and no matter of subjective consideration was involved. There was nothing about the particular clause which involved any subjective assessment by the plaintiff (contrast Erley Pty Ltd v Gunzburg Nominees Pty Ltd (1998) Aust Contract Reports 90,779 per Pidgeon, Franklyn and Ipp JJ at 90,786 and Meehan v Jones & Ors (1982) 149 CLR 571; Perri & Anor v Coolangatta Investments Pty Ltd (1982) 149 CLR 537.
32 The plaintiff had an obligation to do all that was reasonable on her part to comply with the requirements of the FIRB and to provide the undertaking sought by the FIRB in the terms communicated to her solicitors by Banovich under cover of his letter of 18 December 1998.
33 Taking all of those matters into account therefore, I am of the view that the plaintiff's claim must fail and that the defendants' counterclaim succeed.
34 In the end result there will be a declaration that the plaintiff's deposit should be forfeited to the defendants and that the deposit should be remitted from Freehill Hollingdale & Page to the defendants.
35 I will hear the parties as to any further orders required to give effect to these reasons and as to whether the deposit should be paid in one cheque or split in some way between the defendants so as to reflect their respective interests in the Land.
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