MCINNES v Davies - [2014] SADC 136

DISTRICT COURT OF SOUTH AUSTRALIA
(Civil)
MCINNES v DAVIES
[2014] SADC 136
Reasons for Decision of His Honour Judge Stretton
30 July 2014
CONVEYANCING - BREACH OF CONTRACT FOR SALE AND REMEDIES - PURCHASER'S REMEDIES - SPECIFIC PERFORMANCE - PARTICULAR CASES
CONVEYANCING - BREACH OF CONTRACT FOR SALE AND REMEDIES - VENDOR'S REMEDIES - RESCISSION OR TERMINATION - PURSUANT TO CONDITION GIVING RIGHT TO RESCIND OR TERMINATE
REAL PROPERTY - TORRENS TITLE - CAVEATS AGAINST DEALINGS - REMOVAL - PARTICULAR CASES
The plaintiff contracted to purchase a house from the defendants.The contract was subject to finance, which if not granted was terminable by either party. Finance was not granted by the due date, nor by an extended further due date. The plaintiff told the defendants finance had been refused. The defendants sent a notice of termination which “crossed in the post” with a letter from the plaintiff saying finance had now been granted. The defendants had signed a contract to sell to a third party. The plaintiffs sought to enforce their contract of sale, and extend a caveat over the property pending trial.
HELD
1. To succeed the plaintiffs must have a caveatable interest, there must be a serious issue to be tried, and the balance of convenience must favour extending the caveat.
2. Whilst the better view is that where, as here, a vendor accrued a right to terminate due to the purchaser failing to satisfy a subject to finance clause, and the vendor does nothing to waive it, the vendor’s accrued right to terminate is not extinguished by the purchaser satisfying the condition at some later time, there is a contrary view supported by older authority, and hence there is a serious issue to be tried.
3. The defendants have a strong case based on all the circumstances of the case and persuasive recent authority, all the default in the case is the plaintiff’s, the defendants gave the plaintiff the opportunity to settle, were told that finance was refused and then terminated and sold to a third party. The premises are a single, modestly priced residential home. In all the circumstances the balance of convenience does not favour extending the caveat.
Real Property Act 1886 191(G) & (K), referred to.
Clarke v Refeld (1980) 25 SASR 246; Willing v Baker (1992) 58 SASR 357; Cobbald v Barrett [2006] WASC 252; Gilbert v Healey Investment Pty Ltd [1975] 1 NSWLR 650; Brien v Dwyer (1978) 141 CLR 378; Donaldson v Bexton [2006] QCA 559, considered.

MCINNES v DAVIES
[2014] SADC 136
The application

This is an urgent application pursuant to sections 191(G) and/or (K) of the Real Property Act 1886 (“the Act”).
The plaintiff seeks to extend a caveat over the defendants’ land comprising Certificate of Title Register Book Volume 5979 Folio 717 (“the property”), until the plaintiff’s claim to specific performance of a contract of sale of the property is determined at trial. In the alternative the plaintiff seeks leave to lodge a further caveat over the land, for the same purpose.[1]
[1] The application to extend was made a day late due, I am satisfied, to an arithmetical error by the plaintiff’s solicitor, hence the claim in the alternative to lodge a further caveat. I accept it was an honest error. I deal with the matter on the basis that the application had been made within time, although it was in fact made a day late.
To succeed, the plaintiff must have a caveatable interest over the land, there must be a serious issue to be tried, and the balance of convenience must favour extending the caveat. It is not disputed that the plaintiff has a caveatable interest in the defendants’ land.
The issue
There is a contract for the sale of the defendants’ property to the plaintiff.
The plaintiff says that although the contract for sale was subject to finance, and it did not obtain finance within the period specified in the contract, the contract remained on foot such that when the plaintiff subsequently obtained finance the contract became unconditional, and accordingly the plaintiff is entitled to enforce the contract and purchase the property.
The defendants say that when the plaintiff failed to secure finance, the defendants were entitled to terminate the contract and sell to a third party, which they did.
Evidence
The plaintiff tendered three affidavits from their solicitor Mark Eric Hamilton attaching relevant documentation and recounting the history of the matter. The defendants tendered two affidavits from their solicitor Robert William James Heaven, also attaching documentation and exhibiting an affidavit from each of the defendants.
No objection was taken to any of this material, which I accordingly take at face value for the purposes of this application.
Factual background
On 3 April 2014 the plaintiff executed a contract with the defendants to purchase the land. The contract was expressed as being subject to the plaintiff obtaining finance by 24 April 2014.[2] That day went by without the plaintiff obtaining finance.
[2] Exhibit MEH1 to the affidavit of Mark Eric Hamilton dated 15 July 2014.
On 7/8 May 2014 the parties executed a written agreement to extend the date for approval of finance to 16 May 2014.[3] That day also went by without the plaintiff obtaining finance.
[3] Exhibit MEH4 to the affidavit of Mark Eric Hamilton dated 15 July 2014.
On 16 May 2014 finance was declined by the lender specified in the contract, and that advice was conveyed to all parties.[4]
[4] Exhibit MEH6 to the affidavit of Mark Eric Hamilton dated 15 July 2014.
On that day the defendants’ real estate agent asked the second defendant whether the defendants were prepared to grant the plaintiff a further extension to obtain finance, and they replied that they were not prepared to do so.[5] The agent said she would let the plaintiff know,[6] however at this stage there is no evidence per any of the tendered affidavits to indicate that she conveyed that to the plaintiff.
[5] Paragraph 10 of the affidavit of Bradley Neil Davies dated 24 July 2014, exhibited to the affidavit of Robert William James Heaven dated 24 July 2014.
[6] Paragraph 10 of the affidavit of Bradley Neil Davies dated 24 July 2014, exhibited to the affidavit of Robert William James Heaven dated 24 July 2014.
On 26 May 2014 the defendants emailed their real estate agent that they wished to ensure that “all dealings of this sale are and have been cancelled”. The real estate agent conveyed this to the defendants’ conveyancer, who advised that “it needs to be official”.[7]
[7] Exhibit MEH9 to the affidavit of Mark Eric Hamilton dated 15 July 2014.
At 9.47am on 27 May 2014 the defendants emailed to their real estate agent a signed termination notice addressed to the plaintiff, which such notice also instructed the agent to return the deposit to the purchaser. The covering email indicated that the defendants were also going to post the notice to the plaintiff.[8]
[8] Exhibit MEH10 to the affidavit of Mark Eric Hamilton dated 15 July 2014.
About two hours later, at 11.40am on 27 May 2014, a bank, (not the nominated lender in the finance clause), emailed a letter to the defendants’ real estate agent, indicating that finance had been approved “to assist with the purchase of the property”.[9]
[9] Exhibit MEH11 to the affidavit of Mark Eric Hamilton dated 15 July 2014.
The plaintiff’s then solicitors must have become aware that the defendants had purported to terminate the contract by at least 5 June 2014, as on that day they wrote to the defendants noting that the defendants were asserting that the contract had been terminated. The plaintiff’s then solicitors claimed the contract was on foot, their client’s default had been remedied when finance was granted, and the contract was binding.[10]
[10] Exhibit AMD9 to the affidavit of the first defendant, itself annexed to the affidavit of Robert William James Heaven dated 24 July 2014.
The plaintiff’s current solicitors subsequently wrote to the defendants’ solicitors claiming that their client had not received the notice of termination until 6 June 2014, and that as at 27 June the contract had still been on foot and that upon satisfaction of the finance clause on 27 May, the contract had become unconditional.[11]
[11] Exhibit MEH13 to the affidavit of Mark Eric Hamilton dated 15 July 2014, and see Third Affidavit of Mark Eric Hamilton dated 24 July 2014 wherein the plaintiff’s more detailed instructions that he did not receive the notices until 6 June 2014 are set out.
Both parties have filed affidavits setting out the communications between them over the period.
Crucially, there is no relevant communication between the parties on the topic of any further extension of finance between the expiry of the extended finance date of 16 May 2014, and the time of the notice of termination executed and sent by the defendants on 26/27 May 2014, the communication from the plaintiff’s bank to the defendants later in the day of 27 May, and the admitted receipt of the notice of termination by the plaintiff on 6 June 2014.
There was accordingly no positive agreement or even acquiescence, overt or tacit, by the defendants to any further extension of the date for finance past 16 May 2014. There is no suggestion that the defendants waived any right they may have had pursuant to the contract to terminate for the plaintiff’s non-compliance with the finance condition, nor that they accepted any proposed waiver by the plaintiff.
Indeed, the plaintiff never purported to ‘waive’ the finance clause as it applied to them, they simply maintained that they had satisfied the finance condition, albeit well after the amended date for approval of finance had passed.
Relevant contractual terms
The contract for sale of land is a standard form REISA contract. It also contains a standard form “Subject to Approval of Finance” set of special conditions. They read as follows:
1.This Agreement is subject to the Lender specified in item 1 below agreeing by the date described in item 2 to grant to the Purchaser on or before the settlement date a conditional or unconditional loan of not less than the amount described in item 3 and for the term specified in item 4.
2.The Purchaser will use its best endeavours to apply for and do everything necessary to obtain the loan.
3.If the Lender does not agree by the date specified in item 2 to grant the loan conditionally or unconditionally to the Purchaser at settlement then clause 14.3 of this agreement shall apply.
4.Unless otherwise agreed in writing between the parties, the Purchaser must deliver to the Vendor written notice signed by the Lender that the Lender has agreed to grant the loan conditionally or unconditionally to the Purchaser at settlement by the date specified in item 2 below. Upon notification of the approval to the Vendor this conditional provision will be satisfied and notwithstanding that the lender may subsequently withdraw the approval the Purchaser will be bound by this contract.
5.For the avoidance of doubt, if the Purchaser breaches any of the terms and conditions contained in this Special Condition (including but not limited to the obligation to use best endeavours), then clause 14.3.2 of this Agreement will apply.
6.In the event of any inconsistency between this Special Condition and the Agreement, this Special Condition shall apply to the extent of any inconsistency.
Item 1 Lender: Name: Zobel
Omerod Street
Naracoorte SA 5271
OR any other such person or institution that is deemed acceptable by the purchaser.
Item 2 Date on or before which the Lender is to approve the loan: 24 April 2014
Item 3 Minimum amount of the loan: $394,250
Item 4 Terms of loan: Term of loan (in years): 30. Commencing interest rate of loan not exceeding 5.5% per annum.
It is agreed that the date for approval of finance was formally extended to 16 May 2014.
Clause 14 of the contract provided that the agreement was subject to the special condition, and provided in particular that:
14.3 If a party fails to satisfy a Special Condition then:
14.3.1If the party required to satisfy the Special Condition complies with clause 14.2[12] and such other terms and conditions as specified in the Special Condition, then either party may terminate this agreement upon written notice to the other party.
[12] To use their best endeavours to satisfy the special condition.
The contract also separately gives the parties rights upon default by the other party.[13]
[13] Clause 15 Purchaser’s default, clause 16 Vendor’s default. Relevantly, amongst other things, in each such case the aggrieved party may give the defaulting party notice to remedy the default and then terminate if the default is not remedied.
Analysis of the facts and the contractual terms
Of relevance here, the contract specifically states that the agreement is subject to the satisfaction of the finance clause. Special Condition 3 and clause 14.3.1 provide that if finance is not granted by the specified date then either party may terminate the contract.
There is no dispute that finance was not granted by the specified (extended) date, indeed it was specifically refused on that date, and the defendants notified of the refusal.
It is therefore clear that from 16 May 2014 the defendants had a contractual right pursuant to clause 14.3.1 to terminate the contract.
It is also clear that the defendants served a notice of termination on the plaintiff, pursuant to their apparent right to do so, at the very latest by 6 June 2014.
The plaintiff’s case
Notwithstanding this, the plaintiff’s case is that it has a binding contract to purchase the property.
The plaintiff’s case is that as at 27 May 2014 the contract was on foot in the sense that neither party had served a notice of termination, and at that stage the plaintiff obtained and communicated finance approval to the defendants, and by inference therefore waived its own right to terminate. It argues that the finance clause was entirely or primarily for its own benefit, and accordingly that it could unilaterally waive that clause, such that the contract then became unconditional and binding on both parties.
Is there a serious issue to be tried?
The initial hurdle the plaintiff faces is that the contract specifically provided the defendants with a right to terminate if the plaintiff had not secured finance by the due date, and the plaintiff’s position must therefore be that not only can the plaintiff waive its own rights pursuant to the finance clause, but in doing so it can unilaterally extinguish the defendants’ rights pursuant to the finance clause. That flies in the face of the words of the contract.
The next hurdle faced by the plaintiff is that it never told the defendants that it was waiving its rights pursuant to the finance clause, so any waiver it claims must be implied from its own conduct in forwarding its finance approval to the defendants on 27 May 2014, or by its lawyers asserting in their letter of 5 June that they had remedied their breach and there was accordingly no right to terminate.
No purported ‘waiver’ was ever communicated, and even the plaintiff’s lawyer’s letter did not purport to waive the finance condition. Nor can it be said that the defendants agreed to the plaintiff’s waiver, as they instigated no communication with the plaintiff after the passing of the due date for finance, except to post off a notice of termination. It seems that, in effect, the defendants’ termination notice and the plaintiff’s communication of its finance approval “crossed in the mail”.
The plaintiff relies on several authorities for the proposition that despite the contract providing the defendants with a specific contractual right to terminate, they did not have that right because that right was essentially for the benefit of the plaintiff. The defendant relies on a number of authorities that appear to stand for the opposite proposition, that such a provision exists for the benefit of both parties and can’t therefore be unilaterally ‘waived’ by one party, such that the contract then binds both parties.
The degree to which there is a serious issue to be tried depends on the strength of the legal proposition that in the circumstances of this case, the defendant’s ostensible legal right to terminate clearly articulated in this contract can be cancelled by the plaintiff waving its right to terminate. It is accordingly necessary to set out the law in more detail than usual.
In Clarke v Refeld (1980) 25 SASR 246 the Full Court dealt with a contract for the sale of land expressed to be subject to a certain amount of specific bank finance being granted prior to settlement, however the purchaser had an express right to waive the condition, which also meant that as a matter of law the condition could only act for the benefit of the purchaser. Accordingly if the finance term was waived by the purchaser, the contract was unable to be terminated by the vendor even if the purchaser never got finance. On the facts of the case, the purchaser had available finance through a range of sources, did not accordingly need the contractually specified bank finance, and assured the vendor of his ability to settle as soon as required. However the vendor, on the basis that the specific bank finance had not been granted, purported to terminate and sell to someone else.
Mitchell J held that as the purchaser could have waived the finance condition at any time, and it was only if not waived by the purchaser that a breach of the condition entitled anyone to terminate, the vendor could not call it in aid in circumstances where the purchaser was ready to settle. Zelling J interpreted the finance clause to mean finance in general, rather than the specifics there articulated, and held that the clause had been met. Zelling J also held that continuing negotiations between the parties constituted a waiver of the condition in any event.
In Willing v Baker (1992) 58 SASR 357 the Full Court dealt with a contract for sale of land expressed to be subject to the purchaser selling their existing property by a certain date. Unlike in Clarke v Refeld where the right of either to terminate was entirely subject to the purchaser not waiving the clause, the contract provided a right for either party to terminate if the special condition was not met. Under the Special Condition, waiver by the purchaser did not affect the vendor’s right to terminate. It was not sold by the specified date, and hence the special condition was not met, however several weeks later the purchaser purported to waive the condition and proposed settlement, but shortly after that the vendor purported to terminate pursuant to its apparent contractual right to do so. The court held that the term was entirely for the benefit of the purchaser and could accordingly be waived by him, notwithstanding that such a result appeared to directly contradict termination rights plainly reserved to the vendor in the written contract.
The plaintiff also placed particular reliance on Cobbald v Barrett [2006] WASC 252. That case also involved a contract for the sale of land conditional on the purchaser obtaining and communicating finance approval by a certain time. The contract provided that if finance was not granted, unless the finance condition was waived by the purchaser prior to the date prescribed for finance approval the contract would come to an end without any further notice. Jenkins J held that it was arguable that the purchaser could waive its rights under the finance clause after expiry of the time for finance, although “the plaintiff’s case is weakened by the fact that par 1.6 requires waiver to occur before … (the date for finance approval) and because par 1.6 states that the finance clause is for the benefit of both the seller and the buyer.”

In Gilbert v Healey Investment Pty Ltd [1975] 1 NSWLR 650 Needham J considered a contract for the sale of land conditional on the vendor subdividing the land, which contract granted each party the right to terminate if that was not done by a due date. After the due date the subdivision occurred, the purchaser enquired whether it had occurred and was told it had occurred, however the purchaser then served notice of termination on the basis it did not occur by the due date. The court held that on the plain words of the contract a right to terminate had arisen and therefore continued and could be exercised by either party, and that the actions of the purchaser in making the enquiry did not amount to a waiver. The court also held that the special condition was not solely in either party’s favour.
In Brien v Dwyer (1978) 141 CLR 378 the High Court considered a contract for the sale of land whereby the deposit was not paid by the date required, giving the vendor a right to terminate. It was however paid at a subsequent time. The court held that absent a waiver, once the deposit was not paid by the required date, the vendor had a right to terminate which was not extinguished by a subsequent payment of the deposit. Stephen J at 398 approved Needham J’s approach in Gilbert v Healey, saying that;
The vendor acquired this entitlement as soon as the breach occurred and no unilateral act on the part of the purchaser can deprive him of it. The position is no different from that of an unfulfilled contingency, precedent or subsequent, upon the timeous fulfilment of which is made to depend the coming into effect, or continuous in being, of the contractual relationship. Needham J., held, in Gilbert v Healey that performance of the contingency out of time did not, in the absence of waiver, prevent the other party from thereafter avoiding the contract.
In Donaldson v Bexton [2006] QCA 559 the Queensland Full Court considered a contract for the sale of land that was expressed to be subject to the purchaser selling another property (“the subject to sale clause”). That was, in effect, a finance clause, in that the overwhelming inference is that such a sale was necessary to enable the purchaser to fund the new property, and accordingly ought be interpreted as being at least as much as for the benefit of the purchaser as the finance clause identified in Willing v Baker. The subject to sale clause gave the right to either party to terminate the agreement if the other sale did not occur by a given date. After that date, and prior to any purported termination, the purchaser waived the condition and said it was ready to settle anyway. The vendor then however terminated the contract. The court held that the contract provided that either party could terminate if the subject to sale clause was not satisfied, and that accordingly the vendor could terminate.
The Queensland Full Court identified the tensions and incongruities that, with respect, obviously arise from any decision, such as Willing v Baker, that says one party can unilaterally extinguish a separate contractual right that another has, and any decision that appears to hold that a right of termination that in the circumstances of the case a vendor keenly wishes to exercise, paradoxically somehow cannot be in the interest of or for the benefit of that vendor who keenly wishes to exercise it and who is actively litigating to enforce it.
I appreciate it may not be philosophically axiomatic that a vendor litigating to support their exercise of their right to terminate a contract, must have an interest in doing so. Theoretically, a party might terminate for absolutely no benefit to itself, and litigate for absolutely no reason. However, nearly all the cases disclose an obvious interest that the vendor will have in bringing the contract to an end. The failure to satisfy a finance condition or a subject to sale condition raises the immediate issue of whether the purchaser will ever be able to settle, whatever his unconditional obligation to do so may be. The ability to terminate will enable the vendor to sell to anyone else, and at that time there may well be purchasers who are far more reliably able to settle, or who may wish to pay more. The satisfaction of a finance or a subject to sale clause will ordinarily provide a significantly increased degree of likelihood that the purchaser will be able to settle, and is therefore significantly in the interest of the vendor. The concept that a finance clause or a subject to sale clause, certainly now in 2014, is entirely or even predominantly for the benefit of the purchaser, is very difficult to support.
Further, as Jerrard JA observed in Donaldson v Bexton at 528 and 531, where a contract provides a right for either party to terminate upon non-fulfilment of a condition, holding that a vendor may do so notwithstanding a purported waiver by the purchaser is the result closest to the position for which the parties bargained or agreed, and is what a reasonable person would understand by the language in which the parties contracted. Keane JA also expressed these views at 533, and elsewhere.
After a lengthy examination of the authorities, Keane JA concluded at 550-551:
[62] In summary, there is no decision which supports the conclusion that the language of the special condition is apt to deny a vendor the exercise of a right of termination which has arisen in favour of both parties if the purchaser indicates a wish to complete the contract, before the vendor's right of termination is exercised.
[63] No doctrine of law or equity, nor any expression of intention by the parties, supports the proposition that the respondents' right of termination was defeasible by the mere indication by the appellants of their wish to complete the contract. It may be the case that the appellants alone could have waived the benefit of the special condition before it failed. It is not necessary to resolve that issue in this case. That is because the appellants cannot deny to the respondents the right of avoidance which arose upon its non-fulfilment. In the events which happened, on the true construction of the special condition, the respondents were entitled to terminate the contract.
[64] To interpret the contract as the appellants contend would do more violence to the language in which the parties have cast their bargain than is warranted by the authorities. That violence would be done for reasons not connected with the principle that a party should be denied the opportunity to take advantage of that party's own default being the principle which informs the decisions in Suttor v Gundowda and Gange v Sullivan. Indeed, such an interpretation would defeat the evident intention of the parties in a way not required by the authorities. The principles of contractual interpretation established by Suttor v Gundowda and Gange v Sullivan do not invite, or encourage, a process of judicial adjustment of the parties' rights of termination in accordance with a judicial assessment of whether a vendor has a sufficient interest in the fulfilment of a particular condition to resist a unilateral waiver of that condition by the buyer before it is fulfilled. To sanction such a process is to introduce a further layer of uncertainty into the enforcement of contracts.
[65] In the end, the appellants' argument involves the following steps:
(a)The only purpose of the right of termination which arises in a vendor upon the non-fulfilment of a condition is to resolve the vendor's uncertainty as to whether the purchaser will complete the contract;
(b) That purpose is satisfied when a purchaser "waives" the condition after its non-fulfilment;
(c)Because the purpose of the right of termination is satisfied, the vendor's right of termination ceases to exist if the purchaser indicates a wish to complete the contract.
As to the first and second of these steps, the proposition that the only relevant interest of the vendor is in being able to resolve the uncertainty of his position involves the notion that the courts can reject, as an interest worthy of protection, the interest of a vendor in being able to free himself or herself from a contract after the expiration of a period of uncertainty of which the purchaser has taken advantage. Whether or not such an interest is worthy of protection is not a matter for the courts: the parties are free to bargain to obtain such protection if they wish. The question is whether they have done so.
[66] As to the third of the steps in the appellants' argument, the rules of construction by which the terms of the parties' bargain are to be understood do not authorise, or proceed by reference to, a judicial assessment of the reasonableness of the parties' bargain. The language of the special condition was so clear that there can be no doubt that both parties well understood that, in the events which happened in this case, neither party could insist on the completion of the contract against the wish of the other. The courts should be wary of defeating the clearly expressed contractual intention of the parties by reference to judicial views as to what the parties should be content to accept. In the present case, the terms of the parties' bargain expressly released the respondents from the binding force of the contract in the events which happened. That the appellants might have prevented that outcome by waiving the condition before its expiration is no reason for the court to reform the parties' rights under the contract. Such an outcome cannot be justified as a matter of interpretation of the parties' bargain. It can only be justified by a process of judicial control of the parties' bargain by judicial inference as to the extent of the parties' legitimate interests to override the parties' clearly expressed intentions.
As Francis Bacon said: "Judges must beware of hard constructions and strained inferences, for there is no worse torture than the torture of laws."
(footnotes and citations omitted)
In summary, while the Court left open the possibility that if a contractual condition is entirely for the benefit of one party it may be waived while still current, it said a finance clause will rarely if ever be solely for the benefit of one party, and in any event if the finance clause is breached and rights of termination adhere to both parties as a result, those rights persist and one party’s subsequent waiver cannot extinguish the other party’s accrued right to terminate.
Were I finally deciding the case on the material before me, which I am not, I recognise a strong argument that this finance clause was for the benefit of both parties and therefore could not be unilaterally waived by the purchaser at any time, that the time for its satisfaction passed without any purported waiver and that on the plain terms of the contract the vendor accordingly accrued a right to terminate, which was not and in any event could not be inferentially waived by the bare communication of finance approval or the solicitors’ letter that was sent claiming the contract remained on foot due to the satisfaction of the finance clause. On the material before me, which I appreciate may possibly be less than would be called at trial, the defendant has a very strong case that it was entitled to, and did, terminate the contract with the plaintiff.
However, I recognise there is an argument to the contrary, and that it is supported so some extent by the older SA Full Court decisions.
I do find therefore that there is, albeit in my view only just, a serious issue to be tried.
The balance of convenience
I have regard to all counsel’s submissions and the cited authorities concerning where, in these circumstances, the balance of convenience may lie. In particular, I am aware that if the caveat is not extended, then the defendants may sell to a third party. They have indeed signed a ‘cash unconditional’ contract to do so, albeit for slightly less than the value of their contract with the plaintiff.
The inference on the material before me is that the defendants became frustrated with the repeated failure of the plaintiff to obtain finance by the due dates, and wished to terminate and achieve the certainty of a cash unconditional contract with a new purchaser. There is no evidence that the defendants are seeking to evade the contract with the plaintiff to get a better price or for any inappropriate motive. Indeed they are selling for a slightly lower price.
I have regard to the fact that on the material before me, the default to date has been primarily by the plaintiff. On two separate occasions the plaintiff failed to secure finance by the due date, then did not seek to further negotiate an extension of the date, and indeed communicated that finance had been refused.
The defendants immediately took the position with their agents they wished to terminate, and also sent a formal notice of termination. Only after that did the plaintiff send a bare finance approval letter, which I note contained no particulars enabling the defendants to be satisfied that the approved finance satisfied the required particulars in the contract such that it would in fact enable the plaintiff to settle.
The property is a single modestly priced, standard residential home. If the caveat is not extended, the plaintiff will not get the property. The plaintiff will suffer no financial loss. If the caveat is extended, there will need to be a full trial, and based on the submissions of counsel other parties may well need to be joined, for example the respective parties’ agents who variously failed to clearly convey or give effect to their respective clients’ aims. In all, no trial will occur either quickly or economically. There will be considerable time and substantial cost to all.
I add to that that in my view, the defendants have a very strong case, based on a black and white contractual right to terminate. They did nothing which might equate to a waiver on their own part, and they gave the plaintiff two opportunities to satisfy the finance condition, and they then attempted to terminate the contract, and in my view those actions likely did terminate the contract. Whilst there is an argument to the contrary, in the circumstances of this case the equity of the circumstances is so overwhelmingly in favour of the defendants, that I conclude that the balance of convenience does not favour extending the caveat.
Conclusions
1.There is a caveatable interest.
2.There is a serious issue to be tried.
3.The balance of convenience does not favour extending the caveat or allowing the plaintiff to serve a further caveat.