Kraguljac v A & B Property Developments Pty Ltd - [2009] SASC 184

SUPREME COURT OF SOUTH AUSTRALIA
(Civil)
KRAGULJAC v A & B PROPERTY DEVELOPMENTS PTY LTD
[2009] SASC 184
Judgment of The Honourable Justice Kourakis
30 June 2009
CONVEYANCING - RELATIONSHIP OF VENDOR AND PURCHASER - MATTERS ARISING BETWEEN CONTRACT AND CONVEYANCE - CONDITIONS PRECEDENT AND SUBSEQUENT
CONTRACTS - GENERAL CONTRACTUAL PRINCIPLES - DISCHARGE, BREACH AND DEFENCES TO ACTION FOR BREACH - REPUDIATION AND NON-PERFORMANCE
Plaintiff and defendant entered into a contract for the sale of land – it was a special condition of that contract that settlement would take place within 90 days of the defendant removing all of its rubbish, property and materials from the land or earlier as agreed to by both of the parties – the defendant served a Notice to Complete on the plaintiff on 5 March 2008, claiming that the plaintiff had agreed to unconditionally settle on the land on 28 February 2008 – the plaintiff did not settle and the defendant then served a Notice of Termination on the plaintiff – the plaintiff brought proceedings against the defendant claiming that the notices served by the defendant were invalid because the plaintiff did not agree to settle unconditionally on 28 February 2008, that the contract was still on foot and seeking special performance of the contract – the defendant cross-claimed against the plaintiff seeking an order that the contract has been validly terminated and an order cancelling the plaintiff’s caveat over the land – the trial was limited to the defendant’s cross-claim – whether the parties had agreed to unconditionally settle on 28 February 2008 – whether the Notices served by the defendant were valid.
Held: The plaintiff did not agree to settle unconditionally on 28 February 2008 – the Notice to Complete and Notice of Termination served by the defendant were therefore invalid – in the alternative, the Notice to Complete was invalid in that it was not served in accordance with the terms of the contract – the contract remains on foot.
Land and Business (Sale and Conveyancing) Act 1994 (SA) s 6; Law of Property Act 1936 (SA) s 26, referred to.
McBride v Sandland (1918) 25 CLR 69, applied.
Empirnall Holdings Pty Ltd v Machon Paull Partners Pty Ltd (1988) 14 NSWLR 523; Phillips v Ellinson Brothers Pty Ltd (1941) 65 CLR 221; Neeta (Epping) Pty Ltd v Phillips (1974) 131 CLR 286, considered.

KRAGULJAC v A & B PROPERTY DEVELOPMENTS PTY LTD
[2009] SASC 184
KOURAKIS J
Summary

The defendant, A & B Property Developments Pty Ltd, is the registered proprietor of industrial land at Victoria Road, Largs Bay. I will refer to it as the Largs Bay land. The directors of the defendant are Artur Dyna and William Slipper. On 16 January 2007 the defendant contracted to sell the Largs Bay land to the plaintiff, George Kraguljac, “and/or his nominee”. The contract did not specify a particular date for settlement. Instead, the parties contracted that settlement would take place within 90 days of the defendant “removing all its property materials and rubbish from the Land” or “earlier, as mutually agreed to by both parties”. The defendant’s case is that in late November 2007, at a time when much of the defendant’s materials and goods remained on the land, the parties agreed unconditionally to settle on an earlier date, namely 28 February 2008.
Mr Kraguljac did not settle on 28 February 2008. On 5 March 2008 the defendant’s solicitor sent a Notice To Complete to Mr Kraguljac, calling on him to settle on 20 March 2008. It is common ground that the defendant was ready, willing and able to settle on that date, but Mr Kraguljac did not settle. The defendant’s solicitor then served a Notice of Termination on Mr Kraguljac. Mr Kraguljac disputes the effectiveness of both notices, on the grounds that he did not agree to settle on 28 February and that the primary condition for settlement – removal of the defendant’s property from the Largs Bay land 90 days prior to settlement – was never satisfied.
The Largs Bay land was by and large cleared of the defendant’s goods during February 2008, but from 28 February 2008 the defendant has refused to settle, claiming that the Notice of Termination was effective.
Mr Kraguljac has brought proceedings seeking specific performance of the contract that he claims is still on foot. However, it was agreed between the parties that the trial would proceed only on the defendant’s cross claim. The defendant by its cross claim initially also sought a declaration that the contract was void because it was varied to provide for the payment of more than three instalments towards the purchase price contrary to s 6 of the Land and Business (Sale and Conveyancing) Act 1994.[1] At the commencement of the trial it was announced that that claim was not pursued. The central issue at trial was therefore whether an agreement had been made to settle on 28 February 2008 irrespective of the state of the Largs Bay land.
[1] 6—Abolition of instalment purchase or rental purchase arrangements
(1) A contract for the sale of land or a business that provides for the payment of part of the purchase price of the land or business (except a deposit) before the date of settlement is void.
…
(3)In this section—
"deposit" means an amount paid by a purchaser in a lump sum, or in not more than three instalments, towards the purchase price of land or a business before the date of settlement;
"rent" includes any amounts payable in respect of a right to occupy land.
I am not persuaded that Mr Kraguljac agreed to settle on 28 February 2008 irrespective of the state of the Largs Bay land. The evidence of Mr Dyna and Mr Slipper that he did so is denied by Mr Kraguljac. I was not favourably impressed by the testimony of any of those three men. However, the weight of the objective evidence contradicts the accounts of Mr Dyna and Mr Slipper. An agreement to settle early is inconsistent with Mr Kraguljac’s correspondence with the defendant in December 2007. It is also inherently improbable that Mr Kraguljac would have given up the considerable advantage that the settlement clause gave him by agreeing to an unconditional settlement date. I have accepted Mr Kraguljac’s account of his conversations with Mr Dyna and Mr Slipper in late November 2007 because it is supported by the objective considerations to which I have referred. I set out that evidence and my reasons in greater detail below.
Mr Kraguljac also contends that the Notice to Complete was invalid in that it was not served in accordance with the term of the contract which required that the breach forming the basis of the Notice had remained un-remedied for a period of 14 days. By [28] of its cross claim the defendant claimed that it served the Notice to Complete on or about 5 March “as it was entitled to do”. By [7] of the plaintiff’s defence to that cross claim, Mr Kraguljac denied that the defendant was entitled to serve the Notice to Complete and pleaded that he had not unconditionally agreed to settle on 28 February. He did not expressly plead that the Notice was ineffective because it was served too early. In my view, Mr Kraguljac’s defence, properly understood, was limited to a denial of the early agreement to settle; it should not be understood to deny the defendant’s entitlement to serve the Notice to Complete on other, unspecified grounds. Mr Kraguljac now seeks leave to amend his statement of claim to plead, in the alternative, that the Notice to Complete was served prematurely because his alleged default had continued un-remedied for less than 14 days. Given my finding that the parties had not unconditionally agreed to settle on 28 February 2008, it is strictly unnecessary to deal with the application to amend. However, it is appropriate that I deal with the application lest my primary finding be disturbed on appeal. I would allow the application to amend, and find against the defendant on that ground also, for the reasons I give in [106]-[110] below.
After the completion of the evidence, and on the day on which final submissions were made, the defendant applied to amend its pleadings to allege in the alternative that in the course of a meeting with Mr Dyna and Mr Slipper on 5 February 2008, Mr Kraguljac had unconditionally agreed to settle on 28 February 2008. The defendant’s application to amend should also be refused. The evidence of Mr Dyna and Mr Slipper does not support that claim and it is bound to fail. I explain my reasons further in [111] below.
The contract
The parties used the standard form contract for the sale and purchase of land of the Law Society of South Australia (the contract).
The contract was executed on 16 January 2007. Mr Dyna was in Poland when he subscribed to the contract. He testified that he did not have the entire contract and in particular the special conditions with him. Nonetheless, he sent a facsimile of the page containing the execution clause with his signature to Australia. The defendant does not contend that the agreement is in any way vitiated by the way in which the contract was executed.
Clause [7] of the contract provided for the payment of the purchase price by way of a deposit, in accordance with item [12] of the contract, and the balance at settlement. Item [12] stipulated a deposit of $70,000 but did not specify a time for payment. However, the deposit was in fact paid on execution of the contract.
The following special conditions, which form part of annexure A to the contract, are central to the dispute between the parties.
Conditions Precedent
3.1This agreement is subject to the Vendor removing all its property materials and rubbish from the Land and upon the Vendor leveling [sic] all the piles of dirt currently situated on the Land as agreed between the parties.
3.2The Vendor will use its best endeavours to complete the work contemplated in clause 3.1 above immediately upon the execution of this agreement.
3.3The parties agree that this condition precedent is for the benefit of the Purchaser and that subject to clause 3.4 below, the Purchaser may elect to settle the land and undertake to remove any rubbish, materials or property of the Vendor from the Land.
3.4The Vendor agrees to pay the Purchaser the cost of removing and disposing or storage (as appropriate) of any rubbish, materials or property of the Vendor left on the Land after the Settlement Day.
Settlement Date
8.1The settlement date under this agreement is to be within 90 days from the Vendor satisfying the condition precedent pursuant to clauses 3.1 and 3.2 of this Agreement, or earlier, as mutually agreed to by both parties.
Access to the Land Before Settlement
12.1The Vendor grants to the Purchaser and its servants, agents, contractors and invitees with effect from the date of the agreement a non-exclusive licence to enter upon the Land prior to the date of settlement for the purpose of:-
12.1.1erecting advertising signage relating to the Purchaser’s proposed intention to market the land to prospective tenants and/or Purchasers;
12.1.2taking prospective tenant’s purchasers to inspect the land;
12.1.3undertaking any Environment Assessments or building inspections of the property; and
12.1.4undertaking such renovations or improvements to the Land as approved by the Vendor at the written request of the Purchaser.
Clause [21] of the contract provided that if either party defaulted in the performance of any term to be observed and performed at settlement, and the default continued un-remedied for a period of not less than 14 days, the other party could give a Notice to Complete. It can be observed here that the Notice to Complete to which I referred in my introductory remarks relied on a breach alleged to have been committed on 28 February 2008, but was dated 5 March 2008; it was therefore given well before the expiry of the period of 14 days referred to in clause [21].
By clause [21](3) the time appointed for settlement in the Notice to Complete was deemed to be fair and reasonable if it was not less than 14 days after the date of service of the Notice. The Notice to Complete given by the defendant required settlement on 20 March 2008 and was therefore deemed to be fair and reasonable by clause [21](3).
Clause [21](4) of the contract provided that if the defaulting party failed to settle on the appointed time, the complying party could terminate the agreement by notice given at any time after the appointed time for settlement. Notice of Termination was given on 28 March 2008. Clause [22] of the contract made time of the essence in respect of the time appointed under clause [21].
Early attempts to settle
Correspondence from Mr Dyna to Mr Kraguljac early in 2007 shows that he was anxious to settle on the sale of the Largs Bay land. He took the view that settlement should take place within 90 days of the execution of the contract. Indeed, Mr Dyna testified that the pre-contractual negotiations had taken place on that basis. In his evidence before me, Mr Dyna emphasised that he considered that the special condition as to settlement had been wrongly and unfairly included in the contract that he had signed. However, the defendant did not seek rectification of the written terms of the contract to which I have referred.
On 5 April 2007 Mr Dyna wrote to Mr Kraguljac confirming that the land would be cleaned up and ready for settlement by 30 April 2007. He asked whether Mr Kraguljac could settle in early May 2007. Mr Dyna threatened to review his position on the sale of the Largs Bay land if settlement did not take place. Despite his threat, Mr Dyna was in no position to demand settlement in May having regard to special conditions [3] and [8].
On 17 April 2007 Mr Dyna wrote again expressing disappointment that there had not been any response to his earlier communication. Mr Kraguljac replied on 19 April 2007, expressly referring to the special conditions requiring that the site be cleared for a period of 90 days before settlement. Mr Kraguljac suggested that Mr Dyna should arrange for independent confirmation that the site had been cleared so that he could attend to settlement soon thereafter. Mr Kraguljac suggested that a settlement date in early August might be possible if there were prompt compliance with the special conditions.
Counsel for the defendant criticised the request for independent confirmation on the ground that there was no contractual requirement that Mr Dyna provide independent confirmation that the site was cleared. The observation that there was no such contractual obligation is plainly correct. However, Mr Kraguljac can hardly be criticised for suggesting that the parties might be assisted by an independent assessment of the state of the site. Much of the factual disputation at trial, if not the entire controversy, might have been avoided if Mr Dyna had accepted that suggestion.
Mr Dyna, Mr Slipper and Mr Kraguljac attended a meeting held on the Largs Bay land on 13 May 2007. At that meeting Mr Kraguljac agreed to consider settling on the Largs Bay land on 1 August 2007 and to advise Mr Dyna and Mr Slipper if he was prepared to do so. All three agreed that there would be an inspection of the land on 18 June 2007.
On 20 June 2007 Mr Kraguljac wrote to the defendant. That letter, like his subsequent correspondence, was addressed personally to Mr Dyna and Mr Slipper. Mr Kraguljac’s letters were always sent electronically, although, as will appear, on some occasions a hard copy was also delivered to the Largs Bay land. By its defence the defendant admitted receiving the letters to which I refer in these reasons. On 20 June Mr Kraguljac informed the defendant that, in accordance with special conditions [3.1] and [3.2], he would not settle any earlier than 90 days from the confirmation that the site was cleared. Mr Kraguljac referred to Mr Dyna’s claim that the site could be cleared within 14 to 30 days and offered to settle on Friday 28 September 2007 if the Largs Bay land was cleared by 30 June 2007.
Mr Kraguljac sent a similar letter on 13 August 2007, but because the site had not yet been cleared he suggested that the settlement be moved forward to 26 November 2007, subject again to the defendant clearing the site within two weeks of his letter.
Mr Kraguljac again sent a letter to the defendant on 26 October 2007 emphasising that he was not prepared to settle unless the defendant complied with the special conditions. On 31 October 2007 Mr Kraguljac wrote to the defendant in the following terms:
You have advised us of many dates that you would have the site cleared and we have yet to be advised that the site is cleared of your goods. You are aware from our many previous assurances that as soon as we have confirmation of the site having been cleared, we will settle 90 days thereafter. So, the sooner the site is cleared, the sooner we can settle. The last date we were advised of was to be 31 October 2007 (today) and, we have not received you [sic] request to inspect the site.
Therefore, we will give you until the end of the month to comply and, based on a 30^th of November 2007 completion date for the clearing of the site, (as required by clause 3.1 and 3.2 of the Contract), and, taking the full 90 days to settle from the confirmation of the clearing of the site, it will give a (latest) settlement date of the 28^th February 2008.
Mr Kraguljac then referred to conversations with Mr Dyna and Mr Slipper in which they had claimed that they did not have the cash flow to clear the site. His letter continued:
We propose that following the clearance of the site, we will advance to you the amount of $50,000 per month, by way of a further deposit until Settlement, with the first payment to be made at the time the site is certified, as having been cleared. In other words if the site is cleared on 30 November 2007, settlement would be as per the contract, up to 90 days after, (ie 28 February 2008 or earlier if mutually agreed to). We will then advance you $50,000 on 2^nd December 2007, 1^st January 2008 and 1^st February 2008. These amounts would be treated as deposits and deducted from the balance of the Purchase Price due to you at Settlement.
At the time that he wrote that letter Mr Kraguljac had received a preliminary report on the environmental state of the Largs Bay land and had commenced negotiations for a loan from the National Australia Bank (NAB). It is likely that Mr Kraguljac was confident, at that time, that he could secure the finance he required from a combination of joint venture finance and loans from a bank, probably the NAB, and, for that reason, committed to make further deposits prior to settlement. It is significant, however, that he nonetheless continued to insist on his right to have the Largs Bay land cleared.
The November meeting
It is now convenient to turn more directly to the dealings between the parties in late November, in the course of which the defendant contends that an early, and unconditional, settlement date was agreed in accordance with the proviso to special condition [8.1] of the contract. Because the recollections of the parties have necessarily faded over time, and because of their conflicting accounts, it is convenient to discuss those events largely by reference to the letters sent by Mr Kraguljac to the defendant at the time.
On 22 November 2007, shortly after 8am, Mr Kraguljac sent a letter to Mr Dyna and Mr Slipper by electronic transmission. The letter refers to discussion on the previous day in which they had said that they would soon have the site cleared and ready for inspection. Mr Kraguljac gave evidence of the fact of that conversation, testifying that Mr Dyna had said the site could be cleared within a matter of weeks. The letter then offers to settle on the Largs Bay land on the following conditions:
1The land to be cleared by the end of November 2007.
2Settlement to take place on 28 February 2008 (or earlier if agreed).
3The land to be free from any further leases and the defendant to allow immediate and continued access by the plaintiff and its contractors.
4The defendant to allow full and immediate access to environmental consultants and valuers for a total of at least five days so that tests and assessments that had previously been commenced could be completed.
5The plaintiff to pay a further amount by way of deposit in the sum of $150,000 by 26 November 2007.

The letter made provision for Mr Dyna and Mr Slipper to subscribe to the proposed terms. Mr Kraguljac testified that after he sent the letter that morning, he printed two copies of it, and signed both copies in the space provided immediately after they were printed. Mr Kraguljac testified that he and his wife then attended the Largs Bay land later that day with the letters and with a cheque for $150,000.
Mr Kraguljac’s evidence was that at Largs Bay they met Mr Dyna who was there with his daughter, Amanda, and Mr Slipper. Mr Kraguljac presented the letters to Mr Dyna. Mr Dyna did not sign them. Instead he became very agitated and demanded much higher instalments. Mr Dyna instructed his daughter to prepare a document containing terms that he proposed.
Copies of the two letters with the handwritten terms recorded by Ms Dyna appear in the booklet of correspondence D 8, between pages 16 and 18, and as D 11. Mr Slipper identified his signature on D 11, but not on the copy of the letter in D 8. The initials apparent on D 11 are similar to the initials of Mr Slipper as they appear in the schedule to the sale contract.
The amendments provided for further payments: $150,000 in the first week of December, $500,000 in the first week of January and a further $500,000 in the first week of February. They also provided for a further payment, by way of deposit, on another parcel of land over which Mr Kraguljac had taken an option. The handwritten terms then provided that there would be settlement on the Largs Bay land on 28 February 2008.
In his affidavit of 5 May 2008, Mr Kraguljac deposed that he told Mr Dyna and Mr Slipper that he had no authority to agree to their new demands and that he did not agree to settle unconditionally on 28 February. He testified that he told them that he would have to go back to his joint venture partners to discuss the demands and that he did not put his signature to either of the handwritten documents prepared by Amanda Dyna.
Amanda Dyna gave evidence that she wrote out the terms and conditions on which Mr Dyna and Mr Slipper were prepared to settle on the two printed copies of the letter brought by Mr Kraguljac. She testified that the office computer had broken down and so she hand wrote out those conditions on the blank reverse side of the pages of both copies.
Mr Dyna, in his evidence, agreed that Mr Kraguljac indicated that he could not agree to pay the amount demanded without speaking to his partners. Mr Dyna agreed that no terms were concluded on that day. He testified that on that day “we agree that was not finalised the deal because he say he got the problem to get the sum of money”.
Mr Slipper’s recollection, on the other hand, was that a timetable for further payments was agreed on 23 November. I find that Mr Slipper was mistaken. He was, in effect, a spectator to the negotiations conducted between Mr Kraguljac and Mr Dyna.
Mr Slipper gave evidence that Mr Kraguljac went to the Largs Bay land twice in November. On the first occasion he was accompanied by his wife and on the second by the man Leon Milford. Mr Slipper’s recollection was that the handwritten agreement was drawn by Amanda Dyna on the occasion of the visit of Mr Kraguljac and Mr Milford and that they subscribed to it.
Both Mr Kraguljac and Mr Milford testified that Mr Milford was not present on that occasion, but that he had visited earlier in November. Mr Milford gave evidence, relying on diary entries, that he attended the site with Mr Kraguljac in January 2007, on 12 November 2007 and again on 1 March 2008. On 12 November 2007 they were accompanied by Dennis Heath, who was the principal of the company that would be Mr Kraguljac’s joint venturer. They spoke to Mr Dyna about the clearance of the site and access to prepare an environmental report required by the NAB. Mr Dyna responded aggressively. Mr Milford also testified that no documentation was prepared or signed on that occasion. He said that, after Mr Kraguljac had asked about the clearing of the site, Mr Dyna colourfully explained that the site could be cleared very quickly. Mr Milford said that no agreement on any matter was finally reached on that occasion.
In his affidavit dated 21 April 2008, Mr Slipper deposed that the meeting had occurred in the first week of December, but when he gave evidence he accepted that he was mistaken about the date and that the meeting had taken place in November. It is perhaps significant that, as will be seen, agreement was reached on the amount and timing of the further deposits later in December. I also reject Mr Slipper’s evidence that Mr Milford was present at that meeting and not Mrs Kraguljac. Mr Slipper did acknowledge that there was an occasion that Mrs Kraguljac attended the Largs Bay land.
I also reject Mr Slipper’s evidence that Mr Kraguljac signed the handwritten document on that day after the written note was made. Mr Kraguljac’s signature only appears in the space provided by the typed form of the letter. It does not appear alongside the initials of Messrs Dyna and Slipper nor in any other place where it might be expected Mr Kraguljac would have signed it if his intention was to subscribe to the conditions dictated to and written up by Amanda Dyna. For these reasons I can have little confidence in Mr Slipper’s account of the meeting of 23 November.
Mr Dyna and Mr Slipper gave evidence that on 23 November Mr Kraguljac said that he was prepared to settle on 28 February 2008. Mr Slipper testified that Mr Dyna stipulated the 28 February date and that Mr Kraguljac had replied “that’s okay we could do it”. Mr Dyna claimed that by those words Mr Kraguljac unconditionally agreed to settle on that day. Mr Dyna testified that he assured Mr Kraguljac that he could quickly clear the site. Amanda Dyna also testified that an unconditional agreement to settle on 28 February was reached at that meeting.
In my view, it is impossible to consider what was said about the settlement date independently from the terms as to further interim payments. If, as I have found, there was no agreement on the timing and amount of the further payments, it is unlikely that the parties would have agreed on the settlement date. The evidence of all three defence witnesses that a date was agreed unconditionally is inconsistent with the evidence of Mr Kraguljac and with subsequent correspondence to which I will shortly refer. In my view, it is inherently improbable that Mr Kraguljac would have agreed, unconditionally, to a settlement date at the meeting on 23 November 2007, given his insistence in the letter of 22 November 2007 that the site be cleared. His evidence that he did not agree to settle irrespective of the state of the site, or on the strength of a promise by Mr Dyna to use his best endeavours to clear the site, is consistent with his repeated reference to the importance of clearing the site in his subsequent correspondence. After hearing Mr Dyna’s evidence I was left with the strong impression that his account of the meeting was much influenced by his resentment of the insertion of special conditions [3] and [8] of the contract. I find, therefore, that although both parties said at that meeting that they wanted to settle on 28 February 2008, they did not agree to do so unconditionally.
Mr Dyna gave evidence that he left Australia shortly after the meeting of 23 November 2007 and travelled to Poland, returning just before Christmas. After refreshing her memory from her diary, Mr Dyna’s wife testified that Mr Dyna left on 25 November and returned on 23 December.
The December arrangements
Mr Kraguljac wrote again to Mr Dyna and Mr Slipper on 3 December 2007. Mr Kraguljac referred to meetings they had had over the previous fortnight. In particular, he referred to the meeting of 23 November 2007, and recorded that on that occasion Mr Dyna and Mr Slipper had refused the offer made in his letter of 22 November 2007, even though they had indicated agreement to those very terms in a phone call on that day after they had first received it electronically. In my view, it is unlikely that Mr Kraguljac would have referred to those events if they had not in fact occurred. Mr Kraguljac also wrote that Mr Dyna’s demands for a further $500,000 were rejected. He invited Mr Dyna and Mr Slipper to request him to re-submit his offer of 22 November 2007. However, he insisted on compliance with special conditions [3.1] and [3.2] relating to the clearance of the Largs Bay land unless there were a specific agreement to the contrary. Mr Kraguljac indicated that he was prepared to consider a settlement on 28 February 2008 or earlier if agreement could be reached. Mr Kraguljac also complained that his contractors, including valuers and environmental consultants, had been denied access on three occasions in the weeks before his letter. He reminded Mr Dyna and Mr Slipper that they were obliged under the contract to give that access and that a failure to do so might delay settlement.
Mr Kraguljac sent a letter in similar terms on 7 December 2007.
On 20 December 2007, Mr Kraguljac sent yet another letter to Mr Dyna and Mr Slipper in which he offered to settle on the land on the following conditions:
·The Largs Bay land be cleared by 31 January 2008.
·Payments by way of further deposit of $150,000, $100,000 and $250,000 in December 2007, on 7 January 2008 and 15 February 2008 respectively.
·Settlement take place on 28 February 2008, but in the event of any failure to comply with the first condition, settlement will be delayed for each additional day that the site remains uncleared beyond 31 January 2008.
·No further leases be granted over the land.
·Further immediate access to the land to be given to his contractors.
·Environmental consultants and valuers to have full and immediate access for a total of at least five working days to complete required tests.
·Acceptance of the terms and conditions to be signified either by subscribing to the letter in the space provided and returning it by fax or by banking the cheque which was to be provided in the amount of $150,000.
The letters of 3, 7 and 20 December are plainly inconsistent with the defendant’s case that an unconditional agreement was reached in November to settle on 28 February. Neither Mr Dyna nor Mr Slipper replied to those letters. They did not make any written objection to the narrative contained in them, nor did they protest, in writing, that the settlement date had already been fixed. Nor did Mr Slipper and Mr Dyna suggest in their evidence that they made any oral protest to that effect.
In his affidavit of 31 March 2008, Mr Kraguljac deposed that on or about 20 December 2007 he agreed with the defendant that:
·the defendant would clear the Largs Bay land by 31 January 2008.
·the defendant would allow himself and his agents access to the land.
·he would pay a further deposit of $500,000.
·subject to the clearance of the Largs Bay land, settlement would take place on 28 February 2008.
Mr Kraguljac testified that he attended the Largs Bay land on 20 December 2007 and gave Mr Slipper the letter of the same day, a memorandum of transfer executed by him and two cheques. Mr Kraguljac said that he had had an earlier telephone discussion with Mr Slipper, and possibly Mr Dyna, about providing the cheques on that day.
Mr Dyna agreed that some time after the meeting of 23 November 2008 there was some discussion with Mr Kraguljac in which agreement was reached that cheques in the amount of $150,000, $100,000 and $250,000 would be provided by Mr Kraguljac. Mr Dyna’s evidence about the date he received the cheques is not completely clear. He certainly accepted that some cheques were given to him at the time that he received the memorandum of transfer and in advance of the occasions on which they were banked. Mr Dyna testified that he handwrote the date, 28 February 2008, on the memorandum of transfer.
Mr Slipper’s evidence was not completely consistent but he did accept that he received two cheques, one for $150,000 and another for $100,000, from Mr Kraguljac.
From copies of deposit slips which were received in evidence it appears that a cheque for $150,000 was deposited on 27 December 2007 and another, for $100,000, was deposited on 7 January 2008. The fact that Mr Dyna and Mr Slipper banked the cheques, without any protest over the condition requiring the defendant to clear the site by 31 January 2008, is inconsistent with their claim that, on 23 November 2007, Mr Kraguljac had unconditionally agreed to settle on 28 February 2008 irrespective of the state of the site.
On 27 December 2007 Mr Kraguljac wrote again to Mr Dyna and Mr Slipper. He referred to a telephone conversation that morning. The letter effectively repeated the conditions of the letter dated 20 December 2007, although it mistakenly refers to that letter as having been sent on 18 December 2007. The letter also confirmed that the parties had agreed to sign a memorandum of transfer and asked that Mr Dyna and Mr Slipper inform him of their conveyancer.
On the basis of Mr Kraguljac’s oral evidence and its consistency with the documents to which I have just referred, I find that he attended the Largs Bay land on 20 December 2007 and provided Mr Slipper with his letter of that date, the cheques for $150,000 and $100,000 and the memorandum of transfer. I find that Mr Dyna saw, dated and signed the memorandum shortly after his return to Australia on 23 December 2008. I find that in banking the cheque for $150,000, Mr Dyna and Mr Slipper accepted, and the defendant was therefore contractually bound by, the terms and conditions set out in the letter of 20 December 2007.[2]
[2] As to acceptance of an offer by conduct see Empirnall Holdings Pty Ltd v Machon Paull Partners Pty Ltd (1988) 14 NSWLR 523 at 532-5.
I acknowledge that the memorandum of transfer prepared by Mr Kraguljac and provided on 20 December 2007 was dated 28 February 2008. However, the stipulation of that settlement date is equally consistent with a conditional agreement to settle on that date as it is with an unconditional agreement to settle irrespective of the state of the Largs Bay land.
Even if Mr Kraguljac had unconditionally agreed on 23 November 2007 to settle on 28 February 2008, the events of December 2007 have a legal consequence which would deny the agreement to an earlier settlement made in November any legal effect. By accepting the further deposits offered in December on the basis of conditions set out in the letter of 20 December 2007, the defendant must be taken to have released Mr Kraguljac from the consequences of any unconditional commitment made on 23 November to settle in February of the following year. There is no reason to construe special condition [8.1] of the contract in a way which would exhaust its operation on the making of a first agreement to settle earlier than in accordance with the formula it provided. In my view, the parties could, in accordance with special condition[ 8.1], agree to settle on an earlier date but later mutually agree to abridge, or prolong, the time first agreed.
My conclusion that there was no oral agreement made on 23 November to settle unconditionally makes it unnecessary to decide whether such an agreement would have been unenforceable by reason of s 26 of the Law of Property Act 1936.[3] I might say, however, that it was not obvious to me that the oral agreement alleged was a variation of the contract; rather it seems more like a mutually agreed working out of the settlement date in accordance with the terms of the contract.[4]
[3] 26—Contracts for sale of land to be in writing
(1)No action shall be brought upon any contract for the sale or other disposition of land or of any interest in land, unless an agreement upon which such action is brought, or some memorandum or note thereof, is in writing, and signed by the party to be charged or by some person thereunto by him lawfully authorised.
(2)This section does not affect the law relating to part performance, or sale by the court.
[4] Phillips v Ellinson Brothers Pty Ltd (1941) 65 CLR 221 at 243.
Counsel for Mr Kraguljac argued that an agreement to fix the date unconditionally for 28 February, or 28 days after the eventual clearing of the site, was to replace special condition [8.1] with a different formula, and that it was therefore a variation of the contract. However, in my view the theoretical possibility that the defendant would have cleared the site before the end of November, so as to be entitled to insist on settlement before 28 February, can be discounted. Indeed, any agreement to unconditionally fix the date for 28 February would only have been made on the tacit understanding that the defendant was not going to have the site cleared 90 days before 28 February 2008. Insofar as the letter of 20 December provided that settlement would be delayed beyond 28 February for every day that the site remained uncleared after 31 January, it nonetheless remained an agreement to settle on an earlier date than the date for which special condition [8.1] of the contract provided.
Furthermore, in my view, any such agreement like the agreement which I have found was made by the banking of the cheques on 27 December, could not be described as a “contract for the sale of land” within the terms of s 26 of the Law of Property Act 1936. Nor could it be described as a variation of the contract for sale requiring writing notwithstanding the obligation to pay further instalments.[5] The contract for the sale of the land was not varied to require the payment of further deposits. It could and did continue to operate on its terms. If the defendant failed to clear the Largs Bay land by 31 January 2008, it could still bring the settlement on by a later clearing of the site. The plaintiff could bring settlement on by waiving the condition as to clearing of the site and without paying any further instalments. It is unnecessary therefore for there to be any writing signed by the vendor on either version of when, and the terms on which, the agreement to settle on 28 February 2008 was made.
[5] Phillips v Ellinson Brothers Pty Ltd (1941) 65 CLR 221 at 234, 243.
In any event, if, contrary to my finding, Mr Kraguljac had unequivocally represented that he would settle on 28 February, it may have been unconscionable for him to rely on the requirement of s 26 of the Law of Property Act 1936 if the defendant had refrained from clearing the Largs Bay land earlier on the strength of that representation. Equally, if the contract made on 27 December 2007 did come within the terms of the section, or was a variation of the contract, there was part performance by Mr Kraguljac in the delivery of the cheques which were banked.[6]
[6] McBride v Sandland (1918) 25 CLR 69 at 78-9.
Meeting on 5 February 2008
Mr Kraguljac also testified that he went to the Largs Bay land on 5 February 2008 to deliver the third cheque in accordance with the agreement reached in December. That cheque was for the sum of $250,000. However, the cheque had been post-dated to 21 February 2008, contrary to the agreement that that sum would be paid by 15 February 2008. A cheque for $250,000 was deposited by Mr Slipper and Mr Dyna on 21 February 2008. Mr Kraguljac testified that he approached the meeting with some trepidation because of what he expected would be Mr Dyna’s reaction to the late payment. He gave evidence that in the course of that meeting Mr Dyna became threatening.
Mr Kraguljac testified that on 5 February 2008 he raised the clearing of the site and that Mr Dyna became agitated and claimed that it could be done within a few days. Mr Kraguljac said in evidence that on the occasion of his visit there were still items of the defendant’s property on the site.
It was put to Mr Kraguljac that during the meeting on 5 February he had agreed that settlement would take place on 28 February. He answered:
Subject to clearance of the site and there was the last paragraph here or the next of this letter but there were conditions on it. This was all conditional otherwise we would refer back to our original contract. You know, it got to the point where it was just so frustrating because this guy kept changing his mind all the time telling us one thing and something else was happening.

It was then put to Mr Kraguljac that he had told Mr Dyna that he was satisfied with the progress in clearing the site. Mr Kraguljac replied that he might have commented that things were looking good. It was put to Mr Kraguljac that he reassured Mr Dyna that settlement would take place on 28 February 2008. Mr Kraguljac denied that he had done so and testified that “in general terms I would have told him that the property wasn’t cleared and that settlement was going to be delayed”.
Mr Dyna denied that he threatened Mr Kraguljac. He also denied receiving a cheque on that day. Mr Dyna maintained that all three cheques had been provided in December 2008. However, he had a recollection that there was a delay in the payment of the further deposits. There was no evidence that any cheque was dishonoured or handed back. It would seem to follow that one of the cheques at least was not provided with the others and that it could not be presented until after the promised payment date.
Mr Slipper agreed that a cheque for $250,000 was handed over at a meeting on the Largs Bay land on 5 February 2008. He agreed that Mr Dyna became upset about the late payment. Mr Slipper agreed that the clearing of the site was discussed at that meeting.
Neither Mr Dyna nor Mr Slipper gave any evidence to the effect that at that meeting Mr Kraguljac said that he would settle on 28 February despite the state of the Largs Bay land.
I find that a cheque for $250,000, post-dated to 21 February, was given to Mr Dyna on 5 February 2008. The delivery of that cheque did not amount to a waiver of the condition expressed in the letter of 20 December that the defendant clear the Largs Bay land by 31 January 2008. The payments of the instalments were not, by that letter, linked to the clearing of the land. It is quite understandable that Mr Kraguljac would have made the further payment but at the same time reserved his rights so that he could steer the contract through to a successful settlement at some time in the future. The payment in itself could not have reasonably been understood to be a waiver of the condition. In any event, there was no reliance on it. The defendant’s position was that it always acted on the basis that settlement was unconditional because of the oral agreement that it alleged was made in November.
I find that Mr Kraguljac did not reassure Mr Dyna and Mr Slipper that settlement would take place on 28 February.
On the other hand, I do not accept Mr Kraguljac’s evidence that he told Mr Dyna and Mr Slipper that settlement would be delayed when he met them on 5 February. He made no reference to having so informed them in his letter of 21 February 2008. Even more importantly, if he had told Mr Dyna of the proposed delay, that information would have completely overshadowed his concern about the late payment of the last instalment. No one suggested that there was any argument over the further postponement of settlement on 5 February. There is nothing more certain in this case than that there would have been, at the very least, furious debate if Mr Kraguljac had dared to suggest a further delay in settlement.
I find that on 5 February 2008 Mr Kraguljac deliberately kept his options as open as he could. He had not yet received finance approval from the NAB, because Mr Dyna had earlier obstructed the work necessary to obtain a report on the environmental state of the site, which the NAB had made a condition of loan approval. However, Mr Dyna had, shortly before 5 February, consented to the resumption of that work. Mr Kraguljac would have been anxious not to jeopardise that work by upsetting Mr Dyna. I find that Mr Kraguljac expressed himself in vague and equivocal terms so that he could not be taken to have waived his right to insist on clearance on the one hand, but so that he did not upset Mr Dyna and risk the withdrawal of Mr Dyna’s consent on the other. Mr Dyna’s demeanour on the day was probably also a good reason, in Mr Kraguljac’s mind, not to disclose that settlement would, or might be, delayed. The vague terms in which Mr Dyna, Mr Slipper and Mr Kraguljac testified as to what was said on that day confirm in my mind what I would infer from the position in which Mr Kraguljac found himself.
The Environmental Reports
The defendant submits that its case is supported by the evidence which shows that Mr Kraguljac had difficulty obtaining bank finance because of concern over the environmental state of the Largs Bay land. In particular, the defendant argued that the real reason Mr Kraguljac did not settle on 28 February 2008 was that the NAB had not agreed to provide finance to complete settlement because of its concerns. In particular, the defendant relies on the close temporal proximity between Mr Kraguljac’s letter of 21 February 2008, by which he effectively pulled out of the proposed settlement, and the receipt of a report from environmental engineers on 18 February 2008 which documented the asbestos contamination of the soil of the Largs Bay land. An email written by an officer of the NAB early in March 2008 shows that the NAB sighted that report and was concerned by its contents.
On the other hand, Mr Kraguljac’s case was that Mr Dyna had obstructed access by his environmental consultants to the Largs Bay land, which prevented the completion of the environmental reports required by the NAB. Mr Kraguljac also claimed that he had access to other finance if he had wanted to settle on 28 February 2008.
The dispute is in one sense a collateral one because if the agreement to settle on 28 February 2008 remained conditional, Mr Kraguljac’s motive for insisting on compliance with that condition is irrelevant. However, the evidence has some significance because it has the capacity, in a circumstantial way, to support the defendant’s case by ascribing to Mr Kraguljac a motive to deny that he had ever unconditionally agreed to settle on 28 February. It is appropriate therefore to consider it in more detail.
In about July 2007 Mr Kraguljac engaged AEC Environmental Pty Ltd (AEC) to prepare a “phase 1 environmental site history” report with respect to the Largs Bay land. The quoted cost was $3,000 plus GST, and a deposit of $1,660 was paid on 9 August 2007.
In August 2007 AEC investigated the history of industrial use of the Largs Bay land and nearby land for the purposes of determining a sampling and testing plan. The email correspondence between Mr Kraguljac and AEC at the time of the engagement shows that there was some uncertainty about the number of test bores that might be necessary. The Australian Standard for soil testing required about 55 test bores, but AEC suggested that it may be unnecessary to drill that many bores. The final determination was to await the site history report. The final account in the sum of $2,640 for its work was rendered by AEC on 28 August 2007. I infer that the site history report was provided to Mr Kraguljac at about that time.
Mr Kraguljac testified that he provided that report to the NAB shortly after he received it. That evidence is confirmed by an email sent by a senior officer of the NAB to Mr Kraguljac on 12 March 2008 which refers to the site history report. The email also shows that the NAB officers recommended that a “phase 2” report be commissioned. The site history report recommended further investigations “if more definite comments were required” but did not specify what those further investigations should be. I do not know whether the NAB specified the further investigations it required as part of a “phrase 2” report. In any event, it appears that the request from the bank resulted in the further engagement of AEC in January 2008.
On Tuesday 1 January 2008, Mr Kraguljac emailed AEC and advised them that “as of last Saturday (after weeks of constant negotiations and some serious levels of patience) we have access to the whole property at Jetty Road Largs Bay”. Mr Kraguljac asked AEC to arrange for site inspections as soon as possible “while the situation is as it is”. Mr Kraguljac’s reference to obtaining consent to investigate the property corresponds with the statement in his letter to the defendant on 27 December 2007, which confirmed that the basis of settlement included access by environmental consultants. It is also consistent with the assertion in his earlier letter of 3 December 2007 that access had been denied in the weeks preceding that letter. As will shortly be seen, AEC was denied access on 26 November 2007. The sequence of events revealed by those statements in turn corresponds with the receipt by the NAB of the site history report in September or October 2007 and its subsequent request for a “phase 2” report.
Mr Kraguljac deposed in his affidavit of 19 May 2008 that he met Mr Dyna on the Largs Bay land on 3 January 2008, and that Mr Dyna told him that the land would be cleared within one or two weeks. On that occasion Mr Dyna also agreed to allow consultants, real estate agents and valuers on site. Mr Kraguljac deposed to a further telephone conversation with Mr Dyna on 14 January 2008 in which he advised Mr Dyna that the contractors would contact him in the near future to arrange access. Mr Dyna indicated his agreement to that proposal.
An email to Mr Kraguljac of 18 January 2008 from Nick Waniarcha of AEC was admitted unconditionally and without objection. In that email Mr Waniarcha advised that AEC was denied access to the site on 26 November 2007. That fact is admitted by [6.4] of the amended defence dated 18 December 2008. In the email, Mr Waniarcha gave the following summary of the attempts to drill test bores on the property in January:
Thursday 10^th January 2008 – Informed by yourself that Arthur [Mr Dyna] has agreed to let us access for the week of 14-18 January.
Friday 11^th January 2008 – Phone discussion with Arthur to confirm that we will be on-site next week to do the work. He seemed okay at this point.
Tuesday 15^th January 2008 – I met Arthur in the morning to discuss our testing locations on his land. He was generally uncooperative and threatening early but did allow some of our proposed locations to be drilled. We completed the bores around the former underground tank area, former workshop and former oil store. During the day, our on-site staff spoke to Bill [Mr Slipper] about drilling on his allotment (lot 25). Bill had ‘no problems with us doing whatever we wanted on his site’.
Wednesday 16^th January 2008 – Some drilling commenced on lot 25 (Bill’s lot). Arthur stopped us from drilling, locked the gates so our staff and subcontractor could not leave the site and said that he’d called the police to charge us for trespassing (I suspect the police were not called). He also threatened to confiscate all drilling equipment and made numerous threatening remarks to our field engineer and subcontractor. Our staff were ‘held’ on-site with a very angry Arthur for an hour before he eventually unlocked the gate. At this point, Bill kept quiet and did not confirm that he gave us permission to drill.
Mr Burford, who is employed by AEC, gave evidence that in January 2008 he was on the Largs Bay land, with other workers and with trucks and equipment, to carry out drilling work. Whilst they were working on the land, the gates were closed and then padlocked preventing them from leaving the land. The gates were later opened and Mr Burford and the other workers were told to leave.
It is admitted by [6.5] of the amended defence dated 18 December 2008 that the gates giving access to the Largs Bay land were locked, but it is pleaded that they were locked because the workers had trespassed on adjacent land. In an affidavit sworn 26 May 2008, and in his evidence, Mr Dyna admitted that he asked the employees of AEC to leave the Largs Bay land. He explained that he did so because they had trespassed onto adjoining property owned by Mr Slipper and had interfered with the business of a grain exporter, Mr Giles, who had a lease over part the Largs Bay land. No evidence was called from Mr Giles to substantiate that claim. Indeed, in an affidavit sworn by Mr Kraguljac on 19 September 2008, he deposed to a conversation with Mr Giles in which Mr Giles had said that the previous testing had not caused any disruption to his business. Despite the hearsay nature of the affidavit, it was received without objection. I am also satisfied that Mr Slipper had no objection to work being performed on his land. I find that Mr Dyna acted unreasonably in locking the gates.
As a result of that incident on 16 January 2008, Mr Waniarcha sent an email to Mr Slipper and Mr Dyna requesting that they sign a written authority allowing AEC to enter the land. Mr Dyna testified that he threw the first copy of the email given to him in the bin. Another copy of the email was however eventually signed by Mr Dyna and Mr Slipper and returned to AEC.
On 1 February 2008 Mr Waniarcha wrote to Mr Kraguljac informing him that a report had been drafted but that it was necessary to return to the site to complete the soil investigation and undertake groundwater testing. He hoped that the soil investigation work would be completed between 4 and 8 February 2008. Mr Waniarcha’s letter proposed that the installation of groundwater monitoring wells and sampling of the water proceed between 11 and 22 February 2008. It was put to Mr Kraguljac, but denied by him, that sometime after that letter was sent he instructed AEC not to proceed with the groundwater testing because it was too expensive. I find that to be extremely unlikely. Mr Kraguljac was by then aware that the NAB had required an environmental study of the Largs Bay land. If AEC was instructed not to perform a part of the study, which it thought was appropriate and necessary, it would undoubtedly have qualified its report. Mr Kraguljac is unlikely to have risked a multi-million dollar project for the sake of saving some costs on the groundwater testing.
Mr Burford testified that he and others returned between 8 and 11 February 2008. The soil investigation work was completed in that period, however no groundwater monitoring was undertaken. The development of wells for groundwater monitoring was only undertaken in December 2008 shortly before the trial.
A preliminary soil investigation report with respect to the Largs Bay land was provided by AEC on 18 February 2008. Mr Burford explained that it incorporated the work performed in January and February 2008. He testified that a report identified as 289101 was prepared in 2007, and that it was a “paperwork study of the site”. He described that study as a phase 1 report. The report that was prepared in February was not as extensive as the report Mr Burford expected to produce because it did not deal with groundwater testing. Mr Burford explained in his evidence that he would describe a report dealing with the results of both soil and groundwater testing, and the applicable industry standards, as a phase 2 report.
The report of 18 February 2008 was described as a preliminary report, and expressly stated that it did not “purport to be a comprehensive environmental site assessment”. It shows that on 15 January 2008, 8 February 2008 and 11 February 2008 a total of 17 bores were drilled on the Largs Bay land. The report sets out the analysis of the soil taken from those bores. The report concluded that there was no significant chemical impact on the Largs Bay land, but that there were significant fragments of cement sheeting at most bore sites down to a depth of 2 metres, and that that sheeting was likely to contain asbestos. The report contains no groundwater test results. It is silent as to why that work did not proceed. Mr Burford could not give, from his own knowledge, an explanation for the failure to undertake a groundwater testing.
On 19 February 2008 AEC also invoiced Mr Kraguljac for the preparation of a preliminary environmental management plan. It is exhibit D 15. I infer that it was prepared and provided to Mr Kraguljac on or about 19 February 2008.
In his affidavit of 18 August 2008, Mr Kraguljac deposed that on 13 February 2008 Mr Dyna told him that no one was permitted to access the land, but he was unable to recall the conversation when he gave his evidence in chief.[7] However, in cross examination when it was put to Mr Kraguljac that he had instructed AEC not to conduct the groundwater testing, Mr Kraguljac replied that that work had been frustrated by Mr Dyna. That date of the alleged revocation of permission to enter the land coincides with the period in which Mr Waniarcha had expected to install the groundwater monitoring wells. It is also within about a week of the delivery of the post-dated cheque which angered Mr Dyna.
[7] Mr Dyna’s refusal to allow access was pleaded in [10.2.1](g) of the statement of claim and admitted by [6.4] of the defence filed on 4 August 2008. I gave leave during the trial for that admission to be withdrawn.
The evidence does not disclose any reason why Mr Kraguljac would have called a stop to the work proposed by AEC in order to satisfy the NAB before it was completed. It was contrary to his interests to delay the preparation of a report that was required by his financier. I am satisfied on the strength of his affidavit, his evidence in cross examination and the inherent probabilities of the situation that Mr Dyna again refused access on 13 February 2008, notwithstanding Mr Dyna’s denial and the inability of Mr Kraguljac to recall the conversation when giving his evidence in chief.
I interpolate here that Mr Dyna’s refusal of access on 13 February 2008, in itself, may have disentitled the defendant from giving the Notice to Complete, because it was a breach of special condition [12.1].[8] I appreciate that the introduction of special condition [12.1] refers only to a “non-exclusive licence to enter”, but that licence is expressed to be for the purpose, in part, of “undertaking an Environmental Assessment”. The parties must have contemplated, I think, that an environmental assessment would involve tests such as drilling.
[8] Neeta (Epping) Pty Ltd v Phillips (1974) 131 CLR 286 at 299.
I find that as a result of Mr Dyna’s further refusal to allow an environmental assessment of the site, Mr Kraguljac wrote again to the defendant. On 21 February 2008 Mr Kraguljac emailed Mr Dyna and Mr Slipper. He referred back to his letter of 20 December 2007 which he had provided with further amounts by way of deposit, and drew attention to the requirement in that letter that the site would be cleared by 31 January 2008. Mr Kraguljac then asserted in the letter that the site was not cleared and that access to the site had again been restricted. That assertion and the failure of the defendant to contest it also supports my conclusion that Mr Dyna denied access to AEC on 13 February 2008. Mr Kraguljac referred to the meeting of 5 February 2008 in the following terms:
When we spoke on 5 February 2008 you informed me that you still had some items to move before the site was cleared. As soon as you have completed this, please call. We will then immediately arrange for the site to be inspected as per clauses 3.1 and 3.2 of the contract.
Mr Kraguljac went on to give notice that because the site was not cleared, the settlement would be delayed in accordance with his letter of 20 December 2007. He also asserted that the defendant had recently prevented him from fulfilling item 5 of the letter of 20 December because environmental consultants had been denied access. He called on the defendant to allow uninterrupted access. He reasserted his position that he would settle within 90 days of the clearance of the site.
Mr Kraguljac provided AEC’s preliminary soil examination report of 18 February to the NAB. In an email sent to the bank on 27 February 2008 Mr Kraguljac sought to reassure the NAB that a phase 2 report was unnecessary because the development was not residential. Mr Kraguljac informed the bank that the existing report was sufficient for the purposes of the industrial development that he proposed. The email was also sent to Mr Waniarcha. Mr Waniarcha replied that the level of testing for either type of development depended on the degree of certainty desired. He advised Mr Kraguljac that “an Australian Standard Grid of bores (55 holes for a 5 hectare site) was appropriate even for a commercial-industrial site depending on the degree of certainty required”.

In an email to Mr Kraguljac on 12 March 2008, the NAB informed him that it would need to see a more comprehensive and less qualified phase 2 report. The email shows that the NAB was concerned that the preliminary soil examination report was qualified and that it showed the presence of asbestos fragments down to a depth of 2 metres below the surface.
The email also refers to the preliminary environmental management plan which had been provided to the NAB. I infer that that is the plan for which Mr Kraguljac was invoiced on 19 February 2008. The plan is a rudimentary one which does little more than highlight the risks which must be managed without specifying the process which would be adopted and its costs. The NAB informed Mr Kraguljac that it could “only move forwards on the basis of an unqualified valuation which takes into account the additional costs of managing the environmental issues in further developing the site as proposed”. Mr Kraguljac did take steps to obtain further information about the management of environmental risks on the site. By letter dated 26 March AEC wrote to Mr Kraguljac providing a quotation from McMahon’s for removal of asbestos contaminated soil in the sum of approximately $437,000. At the same time AEC quoted a fee of $5,000 for environmental testing and land fill disposal classification for the excavated soil, and project management fees of 10 per cent of the total value of the work.
I accept that the relatively late receipt of the AEC report and its limited nature may have led to the withdrawal of the NAB from an understanding that it would provide finance to enable settlement to proceed. There is very little evidence to suggest that those arrangements were very far advanced in any event. The letter from Mr Kraguljac’s solicitor to the defendant’s solicitor dated 27 March 2008 proposing settlement with vendor finance, and the interest which Mr Kraguljac showed in the possibility that the defendant’s bank, the Commonwealth Bank of Australia, might provide finance, shows that no credit facility was firmly in place with the NAB. However, there is insufficient reason in the evidence relating to the environmental testing of the site and the negotiations with the NAB to reject Mr Kraguljac’s evidence about the conditional nature of his agreement to settle. In particular, I am satisfied that he made every effort to obtain the reports so that he could procure finance for settlement on 28 February 2008, or a date soon thereafter, if the site was cleared in accordance with the arrangements made by his letter of 20 December 2007.
Even though no loan appears to have been secured in time for a 28 February 2008 settlement, Mr Kraguljac obviously remained hopeful that the NAB would provide finance. The failure to obtain finance from the NAB before 28 February 2008, was, at least in part, because it was demanding further environmental assessments. I therefore reject the defendant’s submission that no further environmental work was necessary or that Mr Kraguljac was not genuine about seeking further environmental information after 16 January 2008.
In December 2008 AEC completed a more extensive investigation of the site than that which had been proposed for February, but not completed. Mr Burford agreed in cross-examination that the report of February 2008 confirmed the existence of contamination at particular locations and that the investigation in December 2008 was calculated to “map” the extent of contamination throughout the site. The evidence does not disclose why that additional testing, over and above the water sampling, became necessary. It may be that a financier insisted on it, or it may have become necessary in order to obtain development approvals.
I acknowledge that Mr Kraguljac’s motive in insisting on satisfaction of the condition relating to the clearing of the Largs Bay land may have been that finance had not yet been arranged. However, that is of no contractual consequence. Indeed, it may be, as I earlier observed, that even if Mr Kraguljac had agreed to an unconditional settlement, Mr Dyna’s breach of the agreement to give access may have entitled Mr Kraguljac to delay settlement.
State of the site
Given my findings that Mr Kraguljac had agreed to settle on 28 February only if the Largs Bay land was cleared of the defendant’s property by 31 January 2008, it remains to be considered whether that condition was satisfied.
Mr Kraguljac gave evidence that the site was not cleared as at 31 January 2008. When asked how he knew that, he responded:
Firstly, we weren’t advised as requested; and secondly a drive-by, and then thirdly on 1 March and a subsequent visit it was quite obvious to us that it hadn’t been cleared.
It was Mr Dyna’s evidence that the site was cleared on 20 January 2008. Mr Dyna testified that there was not “even a chance” that there were any commercial or business items on the site on 5 February 2008. That testimony was completely contrary to the evidence of his daughter and Mr Slipper to which I will shortly refer. I find that Mr Dyna’s evidence about the state of the site is completely unreliable. He was evasive and argumentative. He gave the impression that he was annoyed by the contractual burden to keep the land clear and that he took the view that it was sufficient if the Largs Bay land was in a state that was capable of being cleared by settlement.
Amanda Dyna gave evidence that a number of auctions were held on the Largs Bay land in January and February 2008. She agreed that much material was cleared from the site in January and February. She testified that items of property were removed by purchasers in the period from January to March 2008. Amanda Dyna acknowledged that there was a considerable amount of auction material on the Largs Bay land as late as February 2008. In particular, she testified that three transportable buildings shown in Exhibit D 12 were only removed on or after 14 February 2008.
In an affidavit sworn on 21 April 2008, Mr Slipper deposed that he and Mr Dyna advised Mr Kraguljac on various occasions between July 2007 and February 2008 that the site had been cleared. That evidence is either plainly inconsistent with Mr Slipper’s later evidence that much of the property on the Largs Bay land was auctioned on site in January 2008, or it demonstrates that the defendant falsely advised Mr Kraguljac that its property had been removed from the Largs Bay land.
Mr Slipper accepted that property was still being removed from the Largs Bay land in February. The defendant accepted that photos taken on the Largs Bay land in March 2008 showed that large bundles of building timber, which had been sold at one of the auctions, had not yet been removed. The defendant submitted that “substantial compliance” with the condition to clear the site was sufficient to discharge either special condition [3.1] of the contract or the stipulation in Mr Kraguljac’s letter of 20 December 2007. In my view, the introduction of the concept of substantial performance from a quite different part of the law of contract is not warranted and unhelpful. Special condition [3.1] speaks of the defendant clearing “all its property”. The letter of 20 December 2007 implies that the site could not be considered as cleared even if “some items” remained on the property.
The question is simply one of fact: was the Largs Bay land cleared of the defendant’s property? I am satisfied that even on the loosest and most generous approach to that question, the defendant had not removed its property, materials and rubbish from the Largs Bay land even by early February 2008.
Plaintiff’s application to amend
The plaintiff, by [14] of its Statement of Claim, pleaded that the defendant’s Notice of Termination was invalid and a breach of contract because the condition relating to clearing the site had not been satisfied. In the course of final submissions the plaintiff sought to amend its pleadings to rely on the defendant’s premature service of the Notice of Termination before the expiry of 14 days from service of the Notice to Complete.
If I were to allow the amendment there is no doubt that, but for my finding that the parties had not unconditionally agreed to settle on 28 February, the defendant would be greatly disadvantaged. If I had found that there was an unconditional agreement to settle on 28 February 2008, but then allowed the plaintiff to rely on the defendant’s failure to allow a sufficient period of grace, the plaintiff would have secured many months of extra time in which to procure his finance. If the insufficiency of time had been pleaded at the outset, the defendant may have served a further Notice to Complete, which complied with the terms of the contract. If the plaintiff was not then ready to settle, the defendant could have proceeded to terminate the contract.
On the other hand, it is very obviously a substantial prejudice to the plaintiff to be denied the benefit of his entitlement to the contractual period of grace.
In my view, a party who seeks to take advantage of contractual provisions, which would deny another party to the contract the benefits of it, has a responsibility to ensure it acts in accordance with those provisions. The other party has no obligation to provide an advisory opinion to the terminating party on the effectiveness of the action taken to terminate. In this case, there is no material on which I could find, or even suspect, that the plaintiff has deliberately refrained from pleading this point in order to obtain a collateral advantage. Nor is there any difficulty in adjudicating on the issue that is raised by the proposed amendment; it can be decided on the face of the contract and the Notice to Complete.
I would therefore permit the plaintiff to amend his defence to the defendant’s cross claim to plead that the Notice to Complete was ineffective by reason of the defendant’s failure to comply with clause [21] of the contract. I would hold that the Notice to Complete, and, therefore, the Notice of Termination were ineffective on this ground.
Defendant’s Application to Amend
This application was precipitated by my remarks during the hearing arising out of the evidence of what appeared to be the equivocal position taken by Mr Kraguljac about settlement when he met the defendants on 5 February 2008. However, my survey of the evidence relating to the meeting of 5 February shows that neither Mr Dyna nor Mr Slipper claimed that agreement was reached on that day to settle on 28 February. The defendant’s case was really that Mr Kraguljac’s failure to expressly call off the settlement in the face of the state of the site on that day supports their contention that he had, in November 2007, agreed to settle unconditionally. After a careful consideration of Mr Kraguljac’s evidence, I have now found that he did not so agree and that he did not say anything on 5 February 2008 that amounted to a waiver of the conditional settlement that had been agreed in December. Accordingly, there is no utility in allowing the amendment because it would be bound to fail. For that reason I refuse the application.
Conclusion
For the above reasons, I find that the Notice of Termination was ineffective.
I would dismiss the defendant’s cross-claim seeking declarations that the contract is void or that it has been validly terminated.
I will hear the parties on the precise form of the orders and on the directions they seek on the hearing and determination of the plaintiff’s claims.