McCourt v Cranston - [2009] WASC 56

JURISDICTION : SUPREME COURT OF WESTERN AUSTRALIA
IN CIVIL

CITATION: MCCOURT -v- CRANSTON [2009] WASC 56

CORAM: TEMPLEMAN J

HEARD: 23 & 24 FEBRUARY 2009

DELIVERED : 17 MARCH 2009

FILE NO/S: CIV 1072 of 2009

BETWEEN: DANIEL PATRICK REDDEN MCCOURT
RUTH ELLEN MCCOURT
Plaintiffs
AND
SHARNE MARY CRANSTON
Defendant
ACTON REAL ESTATE PTY LTD
First Third Party
AMANDA GRAY
Second Third Party

Catchwords:

Contract - Sale of land - Construction of terms - 120 days allowed for time between contract and settlement - Vendor drafts clause to extend time by mutual agreement - Clause also provides that settlement of sale of purchaser's land is concurrent with settlement of sale of vendor's land - Whether contract unconditional - Harmony between all parts of contract - Whether ambiguity - Application of contra profertum rule

Contract - Termination - Purchaser selling her land to buy vendor's land - No offers for purchaser's land - Whether reasonable endeavour by purchaser to sell her land - Alleged representation that vendor would extend time for settlement to enable purchaser to sell her land - Whether misrepresentation - Whether inducement to contract - Whether entitlement to termination

Agency - Vendor's real estate agent acting for his purchaser in sale of her land - Irreconcilable conflict between duties

Legislation:

Nil

Result:

Plaintiff's claim against defendant dismissed
Defendant's counterclaim for deposit successful
Defendant entitled to indemnity from the third parties

Category: B

Representation:

Counsel:

Plaintiffs:     Mr H R Robinson
Defendant:     Mr M M Mony de Kerloy
First Third Party            :     Mr J L Sher
Second Third Party       :     Mr J L Sher

Solicitors:

Plaintiffs:     Haydn Robinson
Defendant:     Mony de Kerloy
First Third Party            :     DLA Phillips Fox
Second Third Party       :     DLA Phillips Fox

Case(s) referred to in judgment(s):

Aintree Holdings Pty Ltd v Ground & Foundation Supports Pty Ltd [2008] WASCA 225
Andar Transport Pty Ltd v Brambles Ltd [2004] 217 CLR 424
Australian Broadcasting Commission v Australasian Performing Right Association Ltd (1973) 129 CLR 99
Beach Petroleum NL v Abbott Tout Russell Kennedy (1999) 33 ACSR 1
Bristol and West Building Society v Mothew [1998] Ch 1
Castle Constructions Pty Ltd v Fekala Pty Ltd (2006) 65 NSWLR 648
Hadley v Baxendale (1854) 9 Exch 341
Insurance Commission of Western Australia v Container Handlers Pty Ltd [2004] 218 CLR 89
Maguire v Makaronis (1997) 188 CLR 449
NEA Pty Ltd v Magenta Mining Pty Ltd [2005] WASC 106
Palasty v Parlby [2007] NSWCA 345
Perri v Coolangatta Investments Pty Ltd (1982) 149 CLR 537
Seven Seas Properties Ltd v Al‑Essa (No 2) [1993] 3 All ER 577
Sumy Pty Ltd v Southcorp Wines Pty Ltd [2004] NSWSC 1000

TEMPLEMAN J:

Introduction

In this action, the plaintiffs, Daniel Patrick Redden McCourt and his wife, Ruth Ellen McCourt, as vendors of a property at 1 Agett Road, Claremont (Agett Road), seek an order for the specific performance of a written contract for the sale of that property against the defendant, Sharne Mary Cranston, as purchaser.
Mr and Mrs McCourt contend that Ms Cranston repudiated the contract by purporting to rescind it, shortly before the date fixed for settlement.
Ms Cranston denies that she has repudiated the contract. She contends that on its true construction, the contract was conditional on the sale of her property at 23 Minora Road, Dalkeith (Minora Road): that the condition was not satisfied within a reasonable time, and that accordingly, she was entitled to rescind when she did. Ms Cranston uses the term 'rescind' in this context to mean the termination of the contract for non‑satisfaction of the condition referred to above.
Ms Cranston contends further, that she was entitled to rescind the contract (in the strict sense) on the ground that she was induced to enter into the contract by various misrepresentations made to her by the vendors' selling agent.
Ms Cranston therefore counterclaims for the return of the deposit she paid on entering into the contract. There is also a counterclaim for rectification, but this was not pursued.
The agent was Acton Real Estate Pty Ltd (Acton). At all material times, Acton was represented by Amanda Jane Gray, who was employed as a sales representative.
Ms Cranston has joined Acton and Ms Gray as third parties. In her third party notices, Ms Cranston claims to be indemnified against (or to recover a contribution to) any loss or damage in respect of which she might be found liable to Mr and Mrs McCourt. The causes of action referred to in the third party notices include misrepresentation, negligence and breaches of s 52, s 53A and s 82 of the Trade Practices Act 1974 (Cth) and s 10, s 12 and s 79 of the Fair Trading Act 1987 (WA).
The claim against Acton and Ms Gray is pleaded extensively in the third party statement of claim. However, the scope of the claim was reduced considerably in the course of the closing address of counsel for Ms Cranston. I shall refer to it in more detail below.
It is apparent from this overview of the case, that the first issue to be considered is the true construction of the contract. I therefore commence by setting out the relevant provisions.

The contract

The contract is written on a standard form, published by the Real Estate Institute of Western Australia (REIWA) 'For Sale of Land or Strata Title by Offer and Acceptance'. The form has apparently been adapted by Acton. It sets out the location and addresses of each of Acton's offices. Thus, the form is addressed to Acton, at each office, as agent for the seller.
The buyer's name is given as Sharne Mary Cranston of 23 Minora Road, Dalkeith. The form goes on to provide that Ms Cranston offers to purchase the land and property chattels set out in the schedule, with vacant possession, unless stated otherwise in the Special Conditions, at the Purchase Price on the terms set out in the Schedule, the Conditions and the Special Conditions.
In the schedule, the address and title details of Agett Road are set out. There is then provision for the payment of a deposit of $20,000 to be paid within five working days of acceptance, and to be held by Acton in its trust account.
The purchase price is stated as $2,875,000.
The contract then provides for the settlement date to be:
On or before 120 days of acceptance of this offer by mutual agreement.
There is then a list of chattels included in the sale. It is not necessary to refer to this list for present purposes.
Following the list of chattels, the document contains two boxes, set out side by side. The first box has the heading:
FINANCE CLAUSE IS APPLICABLE
A line has been drawn through this box, apparently to indicate that it is not applicable.
The second box contains the heading:
FINANCE CLAUSE IS NOT APPLICABLE
The box contains an instruction requiring the buyer to sign within the box if the finance clause is not applicable. However, on the line intended for the buyer's signature, the word 'CASH' appears. This has been initialled by all parties and dated 7 July 2008.
There is then a heading 'SPECIAL CONDITIONS', under which three such conditions are set out.
Condition A, is printed on the form. It states that:
The parties are aware that some directors of Acton have a financial interest in the settlement agency Currie & Reeves Conveyancing and also in the finance brokers Mortgage Masters Financial Services Pty Ltd and Loancom.
Condition B is crucial to this case. It is written in Ms Gray's hand and provides as follows:
The vendor agrees if necessary to an extension of time for the settlement on 1 Agett Road Claremont with the buyer - by mutual agreement. When 23 Minora Road Dalkeith is sold settlement is to be concurrent with 1 Agett Road Claremont settlement.
The third condition is Condition D. It is also written in Ms Gray's hand and is in the following terms:
All electrical to be in good working order at time of settlement.
(The absence of a Condition C is, I think, explained by the fact that the word 'concurrent' in Condition B appears to commence with a capital letter and is at the beginning of the final line of Condition B, such that, it might have appeared, at a cursory glance, to be the opening word of a Condition C.)
The front page of the contract bears the stamp of the Commissioner of State Revenue, certifying that the original contract, or a copy, has been lodged for the assessment of duty. This satisfies the requirement of s 27 of the Stamp Act 1921 (WA).
The second page of the contract contains four conditions. The first is headed 'SUBJECT TO FINANCE'. It is clearly the finance clause referred to in the boxes on the front page of the contract. The clause provides that it will not be applicable to the contract if the buyer signs the 'finance clause is not applicable' box in the schedule.
Condition 2 relates to communication of acceptance; condition 3 incorporates the REIWA 2002 General Conditions; and condition 4 relates to goods and services tax. None of those conditions is relevant to the question of construction.
The contract bears the signature of Ms Cranston as the buyer and both Mr and Mrs McCourt as sellers. Each signature is witnessed by Ms Gray. The contract is dated 7 July 2008, although the evidence of Mr McCourt and Ms Cranston, which I accept, is that the provisions for the settlement date and Special Condition B did not reach their final form until 8 July. Nothing turns on this for the purposes of construction.
In construing the contract, I respectfully follow the approach set out by the Court of Appeal in Aintree Holdings Pty Ltd v Ground & Foundation Supports Pty Ltd [2008] WASCA 225. There, Buss JA, with whom Martin CJ and Le Miere AJA agreed, adopted the principle stated by Gibbs J in Australian Broadcasting Commission v Australasian Performing Right Association Ltd (1973) 129 CLR 99:
It is trite law that the primary duty of a court in construing a written contract is to endeavour to discover the intention of the parties from the words of the instrument in which the contract is embodied. Of course the whole of the instrument has to be considered, since the meaning of any one part of it may be revealed by other parts, and the words of every clause must if possible be construed so as to render them all harmonious one with another. If the words used are unambiguous the court must give effect to them, notwithstanding that the result may appear capricious or unreasonable, and notwithstanding that it may be guessed or suspected that the parties intended something different. The court has no power to remake or amend a contract for the purpose of avoiding a result which is considered to be inconvenient or unjust. On the other hand, if the language is open to two constructions, that will be preferred which will avoid consequences which appear to be capricious, unreasonable, inconvenient or unjust, 'even though the construction adopted is not the most obvious, or the most grammatically accurate', to use the words from earlier authority cited in Locke v Dunlop ((1888) 39 Ch D 387, at p 393), which, although spoken in relation to a will, are applicable to the construction of written instruments generally; see also Bottomley's Case ((1880) 16 Ch D 681, at p 686). Further, it will be permissible to depart from the ordinary meaning of the words of one provision so far as is necessary to avoid an inconsistency between that provision and the rest of the instrument. Finally, the statement of Lord Wright in Hillas & Co Ltd v Arcos Ltd ((1932) 147 LT 503, at p 514), that the court should construe commercial contracts 'fairly and broadly, without being too astute or subtle in finding defects', should not, in my opinion, be understood as limited to documents drawn by businessmen for themselves and without legal assistance (cf Upper Hunter County District Council v Australian Chilling and Freezing Co Ltd ((1968) 118 CLR 429, at p 437)) (109) ‑ (110). [35]
Buss JA went on to say:
The construction of a written contract is concerned with ascertaining what a reasonable person would have understood the parties to mean. Consideration should ordinarily be given not only to the language of the document, but also to the surrounding circumstances known to the parties, and the apparent purpose and object of the transaction. See Toll (FGCT) Pty Ltd v Alphapharm Pty Ltd [2004] HCA 52; (2004) 219 CLR 165, where Gleeson CJ, Gummow, Hayne, Callinan and Heydon JJ said:
'This Court, in Pacific Carriers Ltd v BNP Paribas ((2004) 218 CLR 451), has recently reaffirmed the principle of objectivity by which the rights and liabilities of the parties to a contract are determined. It is not the subjective beliefs or understandings of the parties about their rights and liabilities that govern their contractual relations. What matters is what each party by words and conduct would have led a reasonable person in the position of the other party to believe. References to the common intention of the parties to a contract are to be understood as referring to what a reasonable person would understand by the language in which the parties have expressed their agreement. The meaning of the terms of a contractual document is to be determined by what a reasonable person would have understood them to mean. That, normally, requires consideration not only of the text, but also of the surrounding circumstances known to the parties, and the purpose and object of the transaction (Pacific Carriers Ltd v BNP Paribas (2004) 218 CLR 451 at 461 ‑ 462 [22]) [40].'
Also see Maggbury Pty Ltd v Hafele Australia Pty Ltd [2001] HCA 70; (2001) 210 CLR 181 [11]; Pacific Carriers Ltd v BNP Paribas [2004] HCA 35; (2004) 218 CLR 451 [22]; International Air Transport Association v Ansett Australia Holdings Ltd [2008] HCA 3; (2008) 82 ALJR 419 [8], [53]; Jumbo King Ltd v Faithful Properties Ltd [1999] 3 HKLRD 757, 773 ‑ 774. [36]
I think it important to emphasise that part of the last quoted passage, in which the High Court said that it was not the subjective beliefs or understandings of the parties about their rights and liabilities that govern their contractual relations. That is a particularly apposite statement in the present case because it is clear that Mr McCourt and Ms Cranston had entirely different subjective beliefs about the effect of the contract. In essence, Mr McCourt believed the contract to be unconditional, while Ms Cranston believed it to be conditional upon the sale of her house in Minora Road.
I refer only to Mr McCourt in this context. Although Mrs McCourt is a part‑owner of Agett Road, and is therefore a necessary party to the contract, she left all matters relating to the sale to Mr McCourt.
There is, I think, some disagreement between the parties as to which of the surrounding circumstances should be taken into account. The crucial circumstance, so far as Mr McCourt is concerned, is that he was prepared to accept only an unconditional cash offer. The crucial circumstance as far as Ms Cranston is concerned, is that she would not be able to fund the purchase of Agett Road, unless she sold her house in Minora Road at a sufficiently high price.
If surrounding circumstances are to be taken into account, it is essential that they were known to the parties when they entered into the contract.
In the present case, for reasons which I shall refer below, I find that Ms Cranston did not know that Mr McCourt required an unconditional contract: and Mr McCourt did not know that Ms Cranston needed to sell Minora Road in order to purchase Agett Road.
I can therefore take neither of these circumstances into account in construing the contract. However, in my view, the contract is sufficiently clear in its terms such that resort to extrinsic evidence as an aid to construction is unnecessary.
I would take the same view, even if Mr McCourt's requirements were to be imputed to Ms Cranston - and vice versa - through the knowledge of Ms Gray, who was the selling agent for both parties and aware of their respective requirements. Mutual knowledge of inconsistent requirements could not assist the construction process.

Mr McCourt's construction

The construction for which Mr McCourt contends, in substance, is that whether or not Minora Road was sold, Ms Cranston was bound to settle on the purchase of Agett Road, at the latest by 120 days of acceptance (that is, by 4 November 2008 on the basis that the contract came into existence on 7 July), but that settlement might take place earlier 'by mutual agreement'.
It will be recalled further, that the first sentence of Special Condition B is in the following terms:
The vendor agrees if necessary to an extension of time for the settlement on 1 Agett Road Claremont with the buyer - by mutual agreement.
Mr McCourt contends that although the opening words might suggest that the vendors had already expressed their agreement to an extension of time for settlement 'if necessary', the reference to 'mutual agreement' evinces an intention that settlement must take place by 120 days of acceptance, unless the vendors agree to an extension. It is therefore submitted that the words 'if necessary' are superfluous.
It will be recalled that the second sentence of Special Condition B is in the following terms:
When 23 Minora Road Dalkeith is sold settlement is to be concurrent with 1 Agett Road Claremont settlement.
Mr McCourt contends that this provision means that if Minora Road is sold on terms such that settlement of that sale is to take place within 120 days of the Agett Road contract, the purchaser is to settle on Agett Road at the same time. However, if Minora Road is not sold within 120 days of the Agett Road contract, or is sold on terms such that settlement will not take place until after that period has expired, there will be a concurrent settlement only if the vendors agree to an extension. Thus, it is submitted, the second sentence only becomes operational in those circumstances.

Ms Cranston's construction

The construction advanced by Ms Cranston focuses on the second sentence of Special Condition B, which provides for concurrent settlements of the sale of Agett Road and Minora Road.
The contract does not say expressly that Minora Road is being offered for sale, but that, I think, must be the inference, having regard to the fact that Ms Cranston's address is given on the contract as 23 Minora Road, Dalkeith.
In my view, this gives rise to the further inference that because the settlements of Agett Road and Minora Road are to be concurrent, the proceeds of sale of Minora Road are to be used to purchase Agett Road.
Thus, if settlement of the sale of Minora Road cannot take place within 120 days, it will be 'necessary' for the vendors to extend that period. And by the opening words of Special Condition B, they have agreed to do so.
In my view, the words 'by mutual agreement' are used in the first sentence in the same sense as they are used in the clause relating to the settlement date. That is to say, although the vendors have agreed to extend the settlement date if necessary, so as to enable concurrent settlements to take place, the actual date of settlement would have to be agreed.

The preferred construction

In my view, Ms Cranston's construction is to be preferred. It renders all parts of the contract 'harmonious with one another'; that being the objective identified by Gibbs J in Australian Broadcasting Commission.
The construction proposed by Mr McCourt, does not have this result. As I have noted, that construction does not give effect to the words 'if necessary' in Special Condition B; nor does it explain why the second sentence of that condition will only take effect if the vendors agree to an extension, whereas, they have already agreed to an extension 'if necessary'.
Further, Mr McCourt's construction does not explain the discrepancy between the opening words of the first sentence of Special Condition B - 'the vendor agrees' - and the final words - 'by mutual agreement'.

In my view, therefore, on its true construction, the contract for the sale of Agett Road is conditional on the sale of Minora Road.
I do not accept the contention advanced on behalf of Mr McCourt that the contract could not be conditional because it made reference to 'cash'. The effect of that provision was, as I have noted above, only to make the finance clause inapplicable. It did not prevent the parties from including other conditions in their contract.
The condition in the present case is non‑promissory. That is to say, Ms Cranston did not promise that she would sell Minora Road.
No time was specified in the contract for the satisfaction of the condition. In these circumstances, the law is as stated by Gibbs CJ, Stephen, Wilson and Brennan JJ in Perri v Coolangatta Investments Pty Ltd (1982) 149 CLR 537. The following part of the head note provides a concise summary:
When the time has elapsed for performance of a condition which is not a promissory condition, but a condition precedent to the obligation to complete a contract of sale, either party, if not in default, can elect to treat the contract as at an end if the condition has not been fulfilled or waived. (538)

If the contract is ambiguous

If I am wrong to construe the contract as conditional, then it is arguably ambiguous. In the passage from the judgment of Gibbs J in Australian Broadcasting Commission set out above, his Honour said that if the language of a contract was open to two constructions:
[T]hat will be preferred which will avoid consequences which appear to be capricious, unreasonable, inconvenient or unjust …
In my view, there would be nothing capricious, unreasonable, inconvenient or unjust, in either a conditional or an unconditional contract. It was open to either party to accept the risk that Minora Road might not be sold in sufficient time to settle within 120 days of the Agett Road contract.
I therefore consider that in the absence of any other basis for resolving ambiguity, it would be necessary to have regard to the contra proferentem rule.
It is now settled that the contra proferentem rule is to be applied only as a last resort, where an ambiguity exists which cannot be resolved otherwise: NEA Pty Ltd v Magenta Mining Pty Ltd [2005] WASC 106 per EM Heenan J, citing Andar Transport Pty Ltd v Brambles Ltd [2004] 217 CLR 424 [122] ‑ [124] and Insurance Commission of Western Australia v Container Handlers Pty Ltd [2004] 218 CLR 89 [97].
In the present case, the offer was Ms Cranston's. However, as will appear below, the second sentence of Special Condition B was drafted by Mr McCourt and submitted to Ms Cranston who accepted that sentence in the belief that it rendered the contract unquestionably conditional.
Mr McCourt is a property developer of considerable experience. His evidence was that he was a settlement agent and that he had developed industrial parks and residential subdivisions. He accepted that he would have seen '20, 30, 40, 50 offer and acceptances' in which he had been involved.
Mr McCourt was much more experienced in this field than Ms Cranston. I accept her evidence that this was the first property transaction she had undertaken on her own account.
I shall refer below to Ms Cranston's evidence, which I accept, that she read the second sentence of Special Condition B as meaning that she would not be required to settle on the purchase of Agett Road until she had sold Minora Road. That is not, of course, what Mr McCourt intended, but in my view, because he drafted that sentence, he must accept the consequence that any ambiguity it created would be resolved against him.
I therefore consider that if the contract is ambiguous, the application of the contra proferentem rule would also result in Ms Cranston's construction being preferred: that is, that the contract was conditional on the sale of Minora Road.

Was Ms Cranston entitled to treat the contract as at an end?

In order to answer this question, I make the following findings of fact.
On 7 July 2008, Ms Cranston appointed Acton (Ms Gray) to be her selling agent for Minora Road. The agency agreement, which is contained in a standard REIWA form, specified a price of $2,950,000. The agency was for a three month period, expiring on 7 October 2008.
Minora Road was offered for sale at the specified price for a period of one to two weeks. The price was then reduced to $2.875 million.
There is an issue as to whether Ms Gray told Ms Cranston that Minora Road was worth between $2.6 and $2.8 million (as Ms Gray says) or $2.8 and $2.95 million (as Ms Cranston says).
Ms Gray's evidence is that Acton maintains a database recording details of properties sold in the areas in which it operates.
Ms Gray said that on 7 July 2008, she produced a printout from the database showing details of properties sold in Dalkeith during the period 5 May 2007 ‑ 19 April 2008. Ms Gray said she marked with an asterisk three properties - in Leon Road, Minora Road, and Genesta Crescent - which she regarded as comparable to Ms Cranston's property. These three properties had sold at $2.6 million, $2.95 million and $2.725 million respectively.
The printout contains a comment in Ms Gray's hand saying, apparently in relation to the properties marked with an asterisk:
This is where I feel your house sits.
Ms Gray's evidence is that she showed this printout to Ms Cranston on 7 July. Ms Cranston denies that she did so. It is not necessary to resolve this conflict, because nothing turns on it. However, I accept that whether or not Ms Gray showed the printout to Ms Cranston, she obtained it on 7 July and used the information it contained to advise Ms Cranston as to the likely selling price of Minora Road.
Ms Cranston's evidence is that Ms Gray told her that a house 'down the road' had sold for $2.95 million. Ms Gray's evidence is that she was referring to a house in a better position, being larger than Ms Cranston's house and situated closer to the river.
On 8 October 2008, Ms Gray sent a text message to Ms Cranston saying, in effect, that at some (unspecified) stage, she had been willing to receive offers between $2.6 and $2.8 million. Ms Cranston apparently did not contradict this assertion. However, it is not evidence of the opinion given by Ms Gray on 7 July.
On balance, I prefer Ms Cranston's evidence. My impression was that she had a better recollection than Ms Gray of their discussions. Further, the 'this is where your house sits' comment, showing an upper value of $2.95 million, is consistent with Ms Cranston's evidence.
As I understand it, Acton marketed Minora Road in accordance with normal practice, both in relation to advertising and a weekly 'home open'.
It is common ground that no written offers were presented to Ms Cranston. Ms Gray gave evidence about some verbal offers she had received. However, the substance of this evidence is that she was told by two prospective purchasers that they would be willing to offer $2.2 million and $2.4 million respectively, to purchase the property. Although no objection was taken to this evidence, it is hearsay, and therefore inadmissible. In any event, without evidence as to the precise terms of the proposed offers, I would not place any weight on that evidence.
By mid‑September, Ms Cranston was concerned that she had received no offers and also, because Ms Gray had been overseas for some two weeks, that the sale was not being pursued as actively as it should.
Ms Cranston asked Ms Gray to arrange a meeting with Mr McCourt, which she did. The meeting was held at a coffee shop in Dalkeith on 14 September. There is a conflict of evidence as to what was said at the meeting, between Mr McCourt and Ms Gray on one hand and Ms Cranston on the other.
The evidence of Mr McCourt and Ms Gray was that Ms Cranston said, in substance, that she had changed her mind about purchasing Agett Road and did not wish to proceed with the contract. Ms Cranston's evidence, in substance, was not that she wanted to be released from the contract, but that she expressed her concern at the fact that Ms Gray had not presented any offers for Minora Road. Ms Cranston said that if she could not sell Minora Road, she could not purchase Agett Road. Ms Cranston's evidence was that she told Ms Gray and Mr McCourt that she felt it only fair to release him from the contract so that he could re‑market Agett Road.
It is common ground that Mr McCourt left the meeting as soon as Ms Cranston had stated her position. I accept Mr McCourt's evidence that he did not want to discuss the matter further.
I accept Ms Cranston's evidence that after Mr McCourt left, Ms Gray asked her whether Agett Road was too expensive, and whether Ms Gray could consider it if the price was reduced to $2.7 million. Ms Cranston said she could not consider purchasing Agett Road at any price unless she sold Minora Road.
I prefer Ms Cranston's account of the meeting of 14 September. As I have said, my impression, from the way in which Ms Cranston gave evidence, is that her recollection is generally better than Ms Gray's. Further, there is no doubt that Ms Cranston continued to market Minora Road. On 8 October, she gave Acton an authority to sell the property at $2.875 million on the expiry of the initial agency agreement.
Further again, on 18 September, Ms Gray sent an email to Ms Cranston in which she referred to a request made of her by Ms Cranston to outline the options she might have in relation to the purchase of Agett Road. One of the options to which Ms Gray referred was re‑marketing that property. Ms Gray concluded by saying that she looked forward to working with Ms Cranston
to achieve a great outcome in the sale of your home … so that you can be living in your new home comfortably.
In my view, this is inconsistent with an expressed intention on the part of Ms Cranston not to proceed with the contract.
In reaching this conclusion, I have had regard to a short diary note said to have been made by Ms Gray on the morning of 15 September, to record the meeting of the previous day.
The note was shown to Mr McCourt in the course of his cross‑examination. He said he had not seen it nor discussed it with Ms Gray.
Ms Gray was asked only whether she had made a note. She was not taken to it. In any event, Ms Gray could only have used the note to refresh her memory. It could not have been tendered through her, unless she had been cross‑examined on it.
In these circumstances, I consider that the diary note is inadmissible. However, if I am wrong in that view, I would not place any weight on it because, accepting as I do, Ms Cranston's evidence about the meeting on 14 September, I consider that the note was incomplete and at least a partially inaccurate record of the meeting.
I have made findings about the meeting out of an abundance of caution. Ms Cranston pleads the meeting in par 17 of her defence, which Mr and Mrs McCourt do not admit. However, nothing appears to turn on this issue. It is not contended that Ms Cranston's conduct at the meeting evinced an intention to repudiate the contract: and on the findings I have made, such a contention would not be justified in any event.
On 31 October, Ms Cranston's solicitors wrote to both Mr and Mrs McCourt. In their letters, the solicitors set out their instructions as to the circumstances in which Ms Cranston had entered into the contract to purchase Agett Road. They referred also to Ms Gray's advice to Ms Cranston as to the sale of Minora Road, and the fact that Ms Cranston had not received an offer to purchase it.
The solicitors asserted that Ms Cranston had made reasonable endeavours to sell Minora Road and that a reasonable time for doing so had expired.
Further, the solicitors contended that in entering into the contract for the purchase of Agett Road, Ms Cranston had relied upon several representations said to have been made by Ms Gray as the vendors' agent, which representations were said to have been made unreasonably.
The solicitors therefore asserted that Ms Cranston was entitled to 'rescind' the contract on the ground that the condition relating to the sale of her property had not been satisfied and on the grounds of misrepresentation.
I shall deal below with the issue of misrepresentation.
In relation to the first ground, I consider that Ms Cranston did act reasonably in the way in which she attempted to sell Minora Road; and that a reasonable time had elapsed between 7 July and 31 October 2008 in which to achieve a sale.
31 October was, of course, some four days before the contractual settlement date. However, I think it unreasonable to suppose that even if a contract for the sale of Minora Road could have been signed on 31 October, it would have been possible to arrange a settlement within four days. I accept Ms Gray's evidence that the normal period between the contract and settlement is 30 days. I accept also Ms Gray's evidence that although it is impossible to predict the length of time within which a property might be expected to sell, 'the rule of real estate is 74 days': and that because of the economic downturn, it is sometimes 90 days. On that basis, I consider that 116 days (ie between 7 July and 31 October) was more than a reasonable period in which to achieve a sale, even in the then prevailing economic climate.
For these reasons, I conclude that Ms Cranston was entitled to terminate the contract for the purchase of Agett Road on 31 October 2008, for non‑satisfaction of the condition relating to the sale of Minora Road.
It follows, that Ms Cranston is entitled to the return of her deposit of $20,000, that being the subject of her counterclaim.
Before leaving this aspect of the case, I wish to refer to three further matters.
The first is the fact that Ms Cranston did not reduce the asking price for Minora Road, below $2.875 million. In my view, it was not unreasonable of her to persist in seeking to achieve that price, given that it was the price she was required to pay for Agett Road. (There is no evidence as to the way in which Ms Cranston was proposing to pay the stamp duty on the Agett Road contract or the commission on the sale of Minora Road.)
In any event, there is no evidence that Minora Road would have sold, even if the asking price had been reduced. In this context it is relevant to refer to the judgment of Gibbs CJ in Perri v Coolangatta Investments:
The condition with which we are concerned is not one which it was entirely in the power of the appellants to fulfil. Although they might use their best endeavours to find a buyer and complete a sale, it still remained necessary for them to find someone prepared to buy. Although, in fact, the appellants did not make reasonable efforts to satisfy the condition, it is impossible to say that they must have effected a sale within a reasonable time if they had made all reasonable endeavours to do so. (545)
The second matter is the fact that Ms Cranston did not ask Mr McCourt for an extension of time in which to settle on the purchase of Agett Road. In my view, a reasonable time having elapsed in which to sell Minora Road, and no sale having been effected, Ms Cranston was entitled to elect to terminate the contract. She was under no obligation to seek an extension.
Further, even if Ms Cranston had sought an extension, it is clear from Mr McCourt's evidence that he would only have been prepared to grant an extension of a few days: and only then, to facilitate a concurrent settlement of the sales of both Agett Road and Minora Road.
The third matter relates to a property at 14 Genesta Crescent, Dalkeith (Genesta Crescent). Ms Cranston became the registered proprietor of that property on 26 August 2008, although she knew earlier that it would be transferred to her, as the result of some family arrangement. It is alleged in par 12(d) of the defence to the third party statement of claim that 'at all material times' Ms Cranston told Ms Gray that, if necessary, she would fund the purchase of Agett Road from the sale of Minora Road, supplemented by the proceeds of sale of Genesta Crescent.
Ms Gray's evidence was that on 7 July, Ms Cranston instructed her to sell both Minora Road and Genesta Crescent.
I do not accept that evidence.
I accept Ms Cranston's evidence that she was not in a position to sell Genesta Crescent in July. She did not know its value until on or about 24 July, when she obtained an appraisal from Ms Gray for the purpose of the stamp duty assessment on the inter‑family transfer which, as I have noted above, was registered on 26 August.
In the appraisal letter dated 24 July 2008, Ms Gray expressed the opinion that the then current market price for Genesta Crescent was between $1.45 and $1.5 million. However, Ms Gray was not given any authority to sell the property.
I accept Ms Cranston's evidence that although she is the registered proprietor of Genesta Crescent, her mother owns a half‑share and that any decision to sell that property would not be hers alone. However, she conceded in cross‑examination that Genesta Crescent provided her with an option to raise funds.
I accept the evidence of both Ms Gray and Mr McCourt that Ms Cranston, at some stage, suggested that Mr McCourt might wish to acquire Genesta Crescent himself. Mr McCourt looked at Genesta Crescent but was not interested in that proposal because the property had no development potential.
It is not clear when Ms Cranston made the proposal referred to above: Ms Gray could not recall. Mr McCourt's evidence was that it was some time after 7 July but a few weeks before the meeting of 14 September. Ms Cranston was not asked about that matter.
In my view, Genesta Crescent is irrelevant. That is because it would have been pointless for Ms Cranston to sell that property if she was unable to sell Minora Road. The contract for the purchase of Agett Road was conditional on the sale of Minora Road: and because it was not sold, Ms Cranston was under no obligation to make up any potential shortfall between the proceeds of sale of Minora Road and the price she was required to pay to acquire Agett Road.

Was Ms Cranston entitled to rescind the contract for misrepresentation?

As I have noted above, Ms Cranston's claim to have been entitled to rescind the Agett Road contract on the grounds of misrepresentation, was narrowed considerably by her counsel in his closing address.
Counsel relied on the representations pleaded in par 6(b) and 9(c) of the defence.
Paragraph 6(b) is in the following terms:
6.On 7 July 2008 the Defendant and Ms Gray met again at the Minora Road Property. At this meeting:
…
(b)Ms Gray stated to the Defendant that the Plaintiffs were prepared to give the Defendant a very long settlement period of 120 days and a further extension if required, in order to give the Defendant the time necessary to sell and settle upon the Minora Road Property so that the sale proceeds from her property were available for the purchase of the Agett Road Property.
Paragraph 9(c) is in the following terms:
9.In reference to the offer and acceptance Ms Gray represented:
…
(c)that there was no need for the Defendant to be concerned about making a cash offer because the Plaintiff was an honourable man who understood that the Minora Road Property had to be sold in order for the Defendant to be able to settle on the Agett Road Property and was prepared to allow the Defendant 120 days from acceptance of the offer to settle the purchase of the Agett Road Property and was also prepared to give her a further extension of the settlement period, if necessary.
Ms Cranston's evidence was that on the evening of 7 July, Ms Gray came to her house and told her that Mr McCourt was prepared to sell Agett Road for $2.875 million. Ms Cranston said Ms Gray told her she did not think there would be any problem selling Minora Road which, Ms Gray said, was very well presented and very saleable. Ms Gray therefore suggested that Ms Cranston sell Minora Road and purchase Agett Road.

Ms Cranston said she told Ms Gray she would have to sell Minora Road in order to be able to purchase Agett Road. Ms Gray said she was aware of that.
Ms Gray then said she had spoken with Mr McCourt who said he was prepared to reduce the price of Agett Road to $2.875 million only if he received a cash offer. Ms Cranston said she told Ms Gray that the cash would be coming from Minora Road, which was unencumbered. Ms Cranston said Ms Gray told her that Mr McCourt 'was an honourable man, he understood the situation'.
According to Ms Cranston, it was at that point in their discussions that Ms Gray said 'well, let's do the contract'.
Pausing there, I find that Mr McCourt did not understand Ms Cranston's situation. I accept his evidence that although he knew that Ms Cranston was selling Minora Road to fund the purchase of Agett Road, he did not know that she was depending on that sale.
I find that on the evening of 7 July, Ms Gray wrote the offer in its original form, which included only the first sentence of Special Condition B. That is:
The vendor agrees if necessary to an extension of time for the settlement on 1 Agett Road Claremont with the buyer - by mutual agreement.
I accept Ms Cranston's evidence that the word 'cash' was written in the 'finance is not applicable' box, because Ms Gray told her that the contract would otherwise have to contain a 48 hour clause. That is, in substance, a clause which would have entitled Mr McCourt to require Ms Cranston to pay the whole of the purchase price within 48 hours of notifying her that he had a purchaser who was prepared to do so.
I accept Mr McCourt's evidence that he received a telephone call from Ms Gray, who said that there was some concern from Ms Cranston's point of view that the dates between the sale of Minora Road and the settlement of Agett Road 'may not correlate'. Ms Gray asked whether, if there was a requirement for an extra few days, he would consider granting an extension. I refer that the call was made on 7 July.
Mr McCourt said he told Ms Gray he would consider such a request: and as a result, Ms Gray composed the first sentence of Special Condition B.
Ms Gray's evidence was, initially, that on 7 July, she had not discussed with Mr McCourt the basis on which he might extend the contract. However, later in her evidence, Ms Gray said she told Ms Cranston that if Mr McCourt agreed and saw that Ms Cranston 'was doing the correct marketing' he would give an extension of time. Ms Gray understood that that might involve a few days.
The original of the document written on 7 July is not available for inspection. However, there is in evidence a copy of an offer of that date which contains only the first sentence of Special Condition B (including the final three words), and no Special Condition D. It does not have the words 'by mutual agreement' at the end of the settlement date provision in the schedule. I therefore do not accept Ms Cranston's evidence that the three final words of the first sentence of Special Condition B - 'by mutual agreement' - did not appear in the offer as written on 7 July.
The evidence of both Ms Cranston and Mr McCourt, is that the offer did not reach its final form until 8 July. However, Ms Gray's evidence is that she wrote the entire offer on 7 July.
I do not accept Ms Gray's evidence. It is not only contradicted by that of Ms Cranston and Mr McCourt: it is inconsistent with the documentary evidence.
I accept Mr McCourt's evidence that when Ms Gray presented the offer in its original form to him, on 8 July, he requested that the second sentence of Special Condition B be added. That is:
When 23 Minora Road Dalkeith is sold settlement is to be concurrent with 1 Agett Road Claremont settlement.
By adding that sentence, Mr McCourt sought to avoid a situation in which Ms Cranston might sell Minora Road quickly and then wait for up to 120 days before settling on Agett Road. Mr McCourt's evidence, in substance, was that he did not consider that the effect of the second sentence might be to make the contract conditional upon the sale of Minora Road.
Ms Cranston's evidence is that on 8 July, Ms Gray told her that Mr McCourt wanted to add 'by mutual consent' for the extension of time: and that he wanted to add in that when Minora Road was sold the settlements were to be concurrent.
Ms Cranston's evidence was that she said to Ms Gray:
Well, that's great because clearly Minora Road has to sell …
I accept the evidence of Mr McCourt and Ms Cranston as to the way in which the second sentence of Special Condition B came to be included in the contract, and the words 'by mutual agreement' added to the provision in the schedule relating to the settlement date.
I am not persuaded that Ms Gray made any representation to Ms Cranston to the effect pleaded: that is, that Mr McCourt would extend the time for settlement on Agett Road to enable Ms Cranston to sell Minora Road, however long that might take.
In my view, Ms Cranston was not induced to enter into the contract to purchase Agett Road by any misrepresentation, but by a desire to own that property; by the belief, based on Ms Gray's opinion, that she would be able to fund the purchase (or a significant part of the price) from the sale of Minora Road and that - again based on Ms Gray's opinion - it should be possible to achieve a sale of Minora Road well within the unusually long period of 120 days allowed for settlement.
There was no discussion between Ms Gray and Ms Cranston as to the position if Minora Road remained unsold, even after 120 days. Indeed, one of the complaints against Ms Gray in the third party proceedings is that she gave no advice as to that matter; and that, if the contract is held to be unconditional, she failed to protect Ms Cranston from the circumstances which have now arisen. I therefore turn to consider the third party proceedings.

The third party proceedings

If, contrary to my view, the contract for the sale of Agett Road is unconditional, Ms Cranston's conduct would clearly constitute a repudiation of the contract. On that basis, Mr McCourt would be entitled to a decree of specific performance and to damages in addition to specific performance, under cl 24.2(b)(2) of the General Conditions of the contract.
On 24 September 2008, Mr McCourt entered into a contract to purchase land in John Street north of Fremantle for $2.3 million. He did so in reliance on Ms Cranston settling on the Agett Road contract. Mr McCourt claims damages against Ms Cranston, for any penalty interest he might incur as a result of any delay in completing settlement of the John Street contract and compensation for any further moneys he might be required to pay the vendor consequent upon any delay in completing that contract. Particulars of damage have not yet been provided.
Pausing there, there is no evidence that Ms Cranston knew, when she entered into the Agett Road contract, that Mr McCourt was a property developer or that he was intending to use the proceeds of sale of Agett Road to purchase another property. In Sumy Pty Ltd v Southcorp Wines Pty Ltd [2004] NSWSC 1000; Castle Constructions Pty Ltd v Fekala Pty Ltd (2006) 65 NSWLR 648; and Palasty v Parlby [2007] NSWCA 345, knowledge of that kind was held to be necessary if a defaulting party was to be held liable for damages under the second limb of Hadley v Baxendale (1854) 9 Exch 341. Accordingly, if Ms Cranston is to be held liable for the kind of loss foreshadowed, such loss could only fall within the first limb of Hadley v Baxendale: namely, that a reasonable person in Ms Cranston's position would have realised that such a loss was likely to occur as a usual consequence of a breach of the Agett Road contract. However, there is authority for the proposition that the first limb has no application in circumstances such as this: Seven Seas Properties Ltd v Al‑Essa (No 2) [1993] 3 All ER 577, 582, cited in Wikrama‑Nayake N, Voumard: The Sale of Land (2007) [12.220].
That is not a matter which has been addressed in argument. I therefore consider that in fairness to the parties, I should regard the third party proceedings as being limited to the issue of liability.
In those proceedings, Ms Cranston seeks an indemnity from Acton and Ms Gray in respect of any loss she might suffer if the Agett Road contract is held to be unconditional. In any event, Ms Cranston seeks an indemnity in respect of the costs of defending the specific performance claim.
In the closing addresses of counsel for Ms Cranston, the ambit of the third party proceedings was narrowed to include only misrepresentation, negligence and breach of duty on the part of Acton and Ms Gray.
The misrepresentation relied on is that pleaded in par 6(b) and 9(c) of Ms Cranston's defence. However, for the reasons given above, I have held that there was no such misrepresentation as alleged. It is therefore unnecessary to refer further to that matter.
The issues of negligence and breach of duty are linked in par 5 of the third party statement of claim. It is there alleged that as and from 7 July 2008, Acton was Ms Cranston's duly appointed agent and owed her the following duties:
(a)the duty to obey the Defendant's instructions;
(b)the duty to exercise due care, skill and diligence;
(c)the duty to act in good faith;
(d)the duty not to act for another whose interests conflicted with the interests of the Defendant.
It is alleged in par 6(c) of the statement of claim that at all material times from 7 July 2008, Ms Gray acted in a position of conflicting duties owed to the McCourts and Ms Cranston. I take this to be an allegation that Ms Gray was in breach of a fiduciary duty she owed to Ms Cranston.
Then, by par 8 of the statement of claim, it is alleged (relevantly) that both Acton and Ms Gray breached their duty of care to Ms Cranston in that:
…
(iv)the Contract and in particular Special Condition B was negligently drafted.
In particulars of that allegation, it is said that Ms Gray, and through her, Acton:
(a)failed to state in the Contract or adequately state that the purchase and settlement of the Agett Road Property was conditional upon the sale and settlement of the Minora Road Property by the settlement date specified in the Contract and if the Minora Road Property did not so sell and settle the Contract would be at an end;
(b)failed to advise the Plaintiffs that the purchase and settlement of the Agett Road Property was conditional upon the sale and settlement of the Minora Road Property by the settlement date specified in the Contract;
(c)alternatively, failed to advise the Defendant prior to the Defendant entering into the Contract that the purchase and settlement of the Agett Road Property was not conditional upon the sale and settlement of the Minora Road Property by the settlement date specified in the Contract;
(d)failed to adequately and fully disclose all relevant facts, matters and things concerning the Plaintiffs intentions, the different interests the Plaintiffs and the Defendant had in connection with the sale of both properties, the difficulties and constraints these different interests placed on the Third Parties including the difficulty of drafting an offer and acceptance in those circumstances, the desirability of taking independent advice, the need for the Defendant to understand the extent of the personal exposure to the proposed transaction and all the other relevant matters so that the Defendant could (but in the circumstances did not) understand that both the First and Second Third Party were acting under a disability and could not give independent advice.
The nature and extent of a real estate agent's duties and obligations in this jurisdiction have been prescribed by the Real Estate and Business Agents Supervisory Board, pursuant to s 101 of the Real Estate and Business Agents Act 1978 (WA). The Board has produced a Code of Conduct (the code), to which some reference was made during the course of Ms Gray's evidence. The code itself was not included in the trial bundle. However, counsel agreed that I should refer to it. I have printed a copy from the REIWA website and marked it as an exhibit. I assume that the code was in its present form as at July 2008.
Clause 2 of the code provides:
An agent must act in the best interests of his or her principal except where it would be unreasonable or improper to do so.
Clause 7 of the code provides:
An agent must exercise skill, care and diligence.
Clause 8(2) provides:
(2)If an agent ascertains a fact which is material to a transaction in which the agent's principal is involved the agent must promptly communicate that fact to any person who may be affected by it unless it is clear that person was already aware of that fact.
Ms Cranston's unchallenged evidence, which I accept, was that when Ms Gray offered to act as her agent on the sale of Minora Road, she asked Ms Gray whether there would be a conflict of interest. Ms Gray replied that there would not, and that 'she does this sort of thing all the time'. Ms Gray said 'Don't worry. Trust me … I will be looking after your interests'.
Ms Gray maintained in cross‑examination that she had no conflict of interest. That is true, in the sense that Ms Gray had no personal interest in the transactions other than (presumably) an entitlement to some part of the commission payable to Acton on completion of the sales of Agett Road and Minora Road. No point is taken about that.
However, in my view, in accepting instructions from Ms Cranston, Ms Gray placed herself in a position in which she had an irreconcilable conflict between the duty she already owed to Mr McCourt and the duty she then undertook towards Ms Cranston.
Having regard to cl 2 of the code, Ms Gray was required to act in the best interests of Mr McCourt. On his instruction to Ms Gray, his best interests involved obtaining an unconditional offer from Ms Cranston to purchase Agett Road at a price of $2.875 million.
It was not, however, in Ms Cranston's best interests to enter into an unconditional contract to purchase Agett Road. As Ms Gray knew, Ms Cranston would only be able to fund the purchase of Agett Road if she sold Minora Road at a sufficiently high price. Ms Cranston's best interests would therefore be served only be entering into a contract to purchase Agett Road which was conditional upon the sale of Minora Road.
Put another way, in acting as Ms Cranston's selling agent in relation to Minora Road, Ms Gray should have advised Ms Cranston that it was in her best interests not to sell Minora Road for the purpose of purchasing Agett Road unless the two sales were linked, such as to make the latter conditional on the former. This, however, was contrary to Mr McCourt's best interests.
Ms Gray apparently thought that she could serve the interests of both Mr McCourt and Ms Cranston by obtaining Mr McCourt's agreement to a long settlement on Agett Road (ie 120 days) which would be time enough for Ms Cranston to sell Minora Road.
The obvious question which arises in these circumstances is 'what will happen if Minora Road is not sold?'
Ms Gray did not address this question in the course of acting for Ms Cranston. Indeed, when asked in cross‑examination whether she would address the issue in a hypothetical situation such as the present, Ms Gray said:
It depends if you ask the question.
In my view, with all respect to Ms Gray, this answer demonstrates a lack of understanding of the duty Ms Gray owed to Ms Cranston in acting as her real estate agent.
Counsel for Acton and Ms Gray submitted that Ms Cranston could not complain about the conflict of interest when she had appointed Ms Gray to be her agent, knowing that Ms Gray was already acting for Mr McCourt. Counsel relied on a passage in Finn PD, Fiduciary Obligations (1977):
But notwithstanding that there is such a conflict, one of the two beneficiaries may be unable to complain of it. This will be so where he alone gave an informed consent to the double employment; or where he knew of the fiduciary's other engagement at the time he engaged him - in which case the resulting conflict is regarded as being of that beneficiary's own making. [583]
That passage was approved by Millett LJ in Bristol and West Building Society v Mothew [1998] Ch 1, 19, a decision that was applied in Beach Petroleum NL v Abbott Tout Russell Kennedy (1999) 33 ACSR 1.
However, even a fiduciary who is acting properly for two principals with potentially conflicting interests should not continue to act if an actual conflict of duty arises. Millet LJ explained the position in the following passage from Mothew's case:
Even if a fiduciary is properly acting for two principals with potentially conflicting interests he must act in good faith in the interests of each and must not act with the intention of furthering the interests of one principal to the prejudice of those of the other: see Finn, p 48. I shall call this 'the duty of good faith.' But it goes further than this. He must not allow the performance of his obligations to one principal to be influenced by his relationship with the other. He must serve each as faithfully and loyally as if he were his only principal.
Conduct which is in breach of this duty need not be dishonest but it must be intentional. An unconscious omission which happens to benefit one principal at the expense of the other does not constitute a breach of fiduciary duty, though it may constitute a breach of the duty of skill and care. This is because the principle which is in play is that the fiduciary must not be inhibited by the existence of his other employment from serving the interests of his principal as faithfully and effectively as if he were the only employer. I shall call this 'the no inhibition principle.' Unless the fiduciary is inhibited or believes (whether rightly or wrongly) that he is inhibited in the performance of his duties to one principal by reason of his employment by the other his failure to act is not attributable to the double employment.
Finally, the fiduciary must take care not to find himself in a position where there is an actual conflict of duty so that he cannot fulfil his obligations to one principal without failing in his obligations to the other: see Moody v Cox and Hatt [1917] 2 Ch 71; Commonwealth Bank of Australia v Smith (1991) 102 ALR 453. If he does, he may have no alternative but to cease to act for at least one and preferably both. The fact that he cannot fulfil his obligations to one principal without being in breach of his obligations to the other will not absolve him from liability. I shall call this 'the actual conflict rule.' (19) (original emphasis)
In the present case, I think it clear that Ms Gray did not (because she could not) serve both Mr McCourt and Ms Cranston as faithfully and loyally as she should have done had each been her only principal. Ms Gray clearly acted in Mr McCourt's best interests. She obtained what she believed was an unconditional offer for the purchase of Agett Road from Ms Cranston.
It was not suggested to Ms Gray in cross‑examination that she acted dishonestly: and I do not believe that she did. However, in my view, Ms Gray must be taken to have acted intentionally, because (if the contract is unconditional) she did advance Mr McCourt's interest over those of Ms Cranston. In circumstances in which Ms Cranston ought to have been advised as to the nature of the risk she was undertaking if she entered into an unconditional contract to purchase Agett Road, Ms Gray did not give that advice; apparently, because Ms Cranston did not ask for it.
I therefore conclude that Ms Gray was in breach of her fiduciary duty to Ms Cranston: and that Acton is equally liable as Ms Gray's employer.
If I am wrong in that view, then I consider that Ms Gray (and Acton) were at least in breach of the duty of skill and care they owed Ms Cranston.

In my view, the breaches included a failure on Ms Gray's part to advise Ms Cranston that the contract was (or that she believed it to be) unconditional. Those were Ms Gray's instructions: and that was clearly a material fact which in the exercise of skill, care and diligence, Ms Gray ought to have conveyed to Ms Cranston under cl 8(2) of the code.
Further, Ms Gray ought to have advised Ms Cranston about the risk she was undertaking by entering into an unconditional contract to purchase Agett Road, and the consequences to her if she was unable to sell Minora Road in time to settle on Agett Road within 120 days.
Alternatively, Ms Gray ought to have advised Ms Cranston that she could not properly serve her and Mr McCourt's best interests at the same time, and that she should therefore obtain independent advice.
These are essentially the matters alleged against Acton and Ms Gray in par 8 of the third party statement of claim.
I do not think that the allegation can be sustained that the Agett Road contract, and in particular, Special Condition B were negligently drafted. That is because it was Mr McCourt who drafted the second sentence of that condition, which has been the source of difficulty in the present case. In my view, for the reasons given above, Ms Gray's negligence was her failure to advise Ms Cranston, in the context of acting for her in the sale of Minora Road, that she believed the related Agett Road contract to be unconditional.
On the view I take, therefore, the issue of informed consent is irrelevant. However, if I am wrong in that view, it is necessary to consider that question.
Of course, Ms Cranston knew, when she appointed Ms Gray, that Ms Gray was already acting for Mr McCourt. However, I do not think that fact alone constitutes informed consent.
In Maguire v Makaronis (1997) 188 CLR 449, the majority of the High Court held that:
What is required for a fully informed consent is a question of fact in all the circumstances of each case and there is no precise formula which will determine in all cases if fully informed consent has been given. (466)
This, I think, suggests that mere knowledge that a fiduciary is acting in a dual capacity is insufficient. If that were not so, then knowledge alone would constitute a 'precise formula' which would determine the issue in all cases.
This issue is considered in detail in Meagher RP, Gummow WMC and Lehane JRF, Equity: Doctrines and Remedies (4^th ed, 2002) [5] ‑ [115], where the learned authors refer to various factors identified in the cases. They include the experience and sophistication of the client, the need for an explanation of the conflict or for independent advice from a third party.
In the present case, counsel for Acton and Ms Gray submitted that, in substance, because Ms Cranston knew Ms Gray was acting for Mr McCourt and because she herself raised the question of conflict, she must be taken to have given her informed consent to Ms Gray acting for her also.
I accept Ms Cranston's evidence that she raised the question of a conflict of interest because her experience when living in California, was that in circumstances such as those of the present case, parties to related real estate transactions employed separate agents. That is not to say that Ms Cranston understood the nature of the potential conflict between her interests and those of Mr McCourt. It was not suggested to her that she had any such understanding: and her evidence, which I accept, was that she had not engaged previously in a real estate transaction.
In these circumstances, I do not think it correct to say that Ms Cranston's consent was fully informed.

Conclusion

On the view I take of the construction of the Agett Road contract, Ms Cranston was entitled to treat the contract as having been discharged by reason of the non‑satisfaction of the condition that she sell Minora Road. The claim against her should therefore be dismissed: and her counterclaim for the return of the deposit should succeed.
In the third party proceedings, I consider that Ms Cranston has made out her case for an indemnity against Acton and Ms Gray.
As I have noted above, the parties have not dealt with the question of quantum in relation to the third party proceedings. However, on the view I take on the issue of construction and Ms Cranston's entitlement to treat the Agett Road contract as at an end, it is likely that the only issue in the third party proceedings will be Ms Cranston's costs of defending the principal claim.
I shall invite counsel to consider their respective positions further so that any outstanding issues in the third party proceedings may be resolved in the most effective manner.

JURISDICTION : SUPREME COURT OF WESTERN AUSTRALIA
IN CIVIL

CITATION: MCCOURT -v- CRANSTON [2009] WASC 56 (S)

CORAM: TEMPLEMAN J

HEARD: 23-24 FEBRUARY & 26 MARCH 2009

DELIVERED : 17 MARCH 2009

SUPPLEMENTARY
DECISION :8 APRIL 2009

FILE NO/S: CIV 1072 of 2009

BETWEEN: DANIEL PATRICK REDDEN MCCOURT
RUTH ELLEN MCCOURT
Plaintiffs
AND
SHARNE MARY CRANSTON
Defendant
ACTON REAL ESTATE PTY LTD
First Third Party
AMANDA GRAY
Second Third Party

Catchwords:

Costs - Third party proceedings - Plaintiffs unsuccessful against defendant - Inevitable third parties would be joined - No evidence plaintiffs impecunious - Plaintiffs to pay costs of defendant and third parties

Costs - Third parties liable to indemnify defendant - Nontaxable costs incurred by defendant - Whether compensable as damages

Legislation:

Rules of the Supreme Court 1971 (WA), O 19 r 12, O 66 r 11(2)