Margush v Maddeford

The appeal concerned a dispute between the vendor, Mrs Margush, and the purchaser, Ms Maddeford, regarding a contract for the sale of a property. The contract stipulated a purchase price of $1.2 million and included special conditions requiring the purchaser to obtain finance by 5 February 2009, and to use her best endeavours to do so. The contract further provided that either party could terminate after 5 February if finance was not obtained, with the purchaser only liable for damages if she failed to use her best endeavours. Ms Maddeford was unable to secure finance, as her sole expected source was an inheritance from a Mr Young, which did not materialise. The vendor purported to terminate the contract and subsequently sold the property for $90,000 less than the contract price, claiming this difference and associated costs as damages for breach of contract. A District Court Judge dismissed the vendor's claim, and the vendor appealed.

The central legal issues before the Full Court of the Supreme Court of South Australia were whether the contract became unconditional after 5 February 2009 due to neither party terminating it, and consequently whether the purchaser was in breach of contract by failing to settle, thereby rendering her liable for damages. The vendor contended that the failure to terminate meant the special conditions ceased to operate, making the contract enforceable. Conversely, the purchaser argued that as she had used her best endeavours to obtain finance, the contract remained conditional, and she was not liable for damages.

The Court, by majority, dismissed the appeal. It was held that the special conditions did not constitute a condition precedent to the contract's operation but rather meant the contract remained conditional upon finance approval, provided the purchaser used her best endeavours. The Court reasoned that the inability to obtain finance did not automatically end the contract but made it voidable at the instance of either party. Since neither party validly terminated the contract after 5 February, it remained on foot, with the special conditions continuing to operate. Crucially, the Court affirmed that damages could only be awarded to the vendor if the purchaser failed to use her best endeavours to obtain finance, a finding of fact that had not been established. Therefore, the purchaser was not in breach of contract in a way that would make her liable for damages.