McLeod v Mitchell - [2014] SADC 129

District Court of South Australia
(Civil: Minor Civil Review)
MCLEOD v MITCHELL
[2014] SADC 129
Judgment of His Honour Judge Stretton
25 July 2014
CONVEYANCING - BREACH OF CONTRACT FOR SALE AND REMEDIES - ENTITLEMENT TO DEPOSIT - RECOVERY BY PURCHASER
The plaintiff contracted to purchase a property from the defendant. The contract was subject to finance being granted by 31 July 2013. The contract provided that if the plaintiff got finance by 31 July the contract became unconditional and he would lose his deposit if he failed to settle. The contract provided that if he did not get finance by that day, either party could, but did not have to, terminate the contract and the plaintiff would get his deposit back. 31 July came and went without finance approval. Neither party terminated and the parties continued to communicate, with the plaintiff saying he could still get finance and settle. He subsequently got finance, but then had problems with his bank and requested more time. The defendant served notice of default, notice to complete, then terminated the contract and sold to another purchaser for an equivalent price. The defendant retained the deposit. At trial the magistrate held that the finance approval date had been extended by the parties ‘by necessary implication’, to the later date when the plaintiff did obtain finance, so his subsequent failure to settle entitled the defendant to retain the deposit.
HELD:
On close analysis of the parties’ communication, there was no agreement to extend the finance clause date, accordingly after that time if either party purported to terminate the contract, the contract provided that the plaintiff was entitled to the return of his deposit. The defendant must repay the $21,000 deposit to the plaintiff.

MAGISTRATES - APPEAL AND REVIEW
Section 38 of the Magistrates Court Act provides that a minor civil action is a fully inquisitorial enquiry actively managed by the presiding magistrate, rather than an adversarial trial process and accordingly a review by the District Court under section 38(7) is an enquiry to determine whether the fundamentals of a full and fair inquisitorial enquiry have occurred, rather than a process to be addressed by reference to traditional principles applicable to the hearing of an ‘appeal’.
Magistrates Court Act s 38, referred to.
Harradine v District Court of South Australia [2012] SASC 96, considered.

MCLEOD v MITCHELL
[2014] SADC 129

This is an application pursuant to s 38 of the Magistrates Court Act (“the Act”) for a review by the District Court of a minor civil action between the Plaintiff and Applicant Clayton McLeod and the Defendant and Respondent Lisa Mitchell.
The minor civil action concerned a $21,000 deposit pursuant to a contract for the sale of the defendant’s land to the plaintiff in July 2013. In short, a deposit was paid by the plaintiff, however, he did not settle on the property. The defendant subsequently sold the property to another and retained the plaintiff’s deposit. The issue at trial was whether the plaintiff was entitled to the return of his deposit.
The plaintiff said that as finance was not approved by the required date, he was entitled to his deposit back when the contract was later terminated. The defendant said that pursuant to the contract she was entitled to retain the deposit.
The unique nature of a ‘review’ undertaken by the District Court of a minor civil action
Section 38 of the Act was amended in 2000. It provides for the ‘review’ of a minor civil action in the District Court;
(6)The District Court (constituted of a single Judge) may, on the application of a party dissatisfied with a judgment given in a minor civil action, review the matter.
(7)     The following provisions apply to such a review by the District Court:
(a)the right of a party to be represented by a legal practitioner at the review will be determined in accordance with subsection (4);
(b)the Court may inform itself as it thinks fit and, in doing so, is not bound by the rules of evidence;
(c)the Court may, if it thinks fit, re-hear evidence taken before the Magistrates Court;
(d)        in determining the matter, the Court may—
(i)        affirm the judgment; or
(ii)rescind the judgement and substitute a judgement that the court considers appropriate; or
(iii)if the review arises from a default judgment or summary judgment, rescind the judgment and—
(A)substitute a judgment that the Court considers appropriate; or
(B)remit the matter to the Magistrates Court for hearing or further hearing;
(e)in hearing and determining the review, the Court must act according to equity, good conscience and the substantial merits of the case without regard to technicalities and legal forms.
(8)     A decision of the District Court on a review is final and not subject to appeal.
So, what is a ‘review’?
Section 38 gives some guidance. The District Court must ‘review the matter’ and in doing so must act according to equity, good conscience and the substantial merits of the case without regard to technicalities and legal forms. It can inform itself as it thinks fit and in doing so is not bound by the rules of evidence. It can also rehear evidence taken before the Magistrates’ Court. It can affirm the existing judgement or rescind it and substitute its own. The Supreme Court has held that a review may proceed in the same non-adversarial inquisitorial manner as the minor civil action was itself conducted.[1]
[1] Harradine v District Court of South Australia [2012] SASC 96, per Blue J.
For all that, the exact nature of a ‘review’ is not defined.
The District Court cannot however remit the matter for rehearing, unless the review is from a summary or default judgement. There is no further appeal.
The legislation envisages a cheap, final, and general consideration of a minor civil action that was held on the merits.
The Act however makes it clear that a minor civil action is not an adversarial trial.
Therefore, first and foremost, any ‘review’ will not be of an adversarial trial, and accordingly many of the principles applicable to appeals that assume or are predicated on the adversarial process will be inappropriate. Secondly, those people will not have been legally represented at trial, and much flows from that as well.
Section 38(1) contemplates that a minor civil action is an inquiry by the magistrate into the areas of dispute between the parties. As such, it is not an adversarial trial, it is an inquisitorial process, akin to many European systems of justice. The court must itself elicit the issues and the facts by enquiry of the parties, from evidence produced to the court, and may itself call and examine witnesses.
Concepts of an ‘appeal’, with all the historical refinements and restrictions the courts have imposed over the years based on the way the proceedings were conducted by legally qualified adversarial advocates, will not necessarily be appropriate in the case of a trial primarily managed and run by a judicial officer rather than lawyers or indeed the parties themselves, where indeed there were no legally trained advocates at all.
In a minor civil action run without lawyers, it is to be expected that parties will often not accurately identify all the issues arising from their dispute or all or any of the relevant legal principles, nor know how to run or prove a case.
Indeed, probably for these very reasons, the Act specifically provides that the parties are not bound by their pleadings and provides that the Magistrate must elicit the relevant issues between the parties.
The Act also provides that the Magistrate should elicit the facts by way of enquiry of the parties and witnesses and any other evidence, and in doing so may call and examine witnesses.
Since the primary responsibility for the issues and evidence at trial rests with the magistrate and not the parties, the range of refinements and restrictions of scope developed by the law over the centuries to efficiently manage the modern appeal process, predicated on a lawyer-managed adversarial trial process having taken place, to conserve finite court resources, to encourage parties to competently and comprehensively address all relevant issues at first instance, achieve finality in litigation and respect the advantages enjoyed by the initial trial court for example in the assessment of witnesses, will have essentially no application on a review of a minor civil action.
In my opinion, therefore, section 38(6) and (7) requires a close examination of the inquisitorial process undertaken by the Magistrate, to determine whether the fundamentals required of a full, fair and comprehensive inquisitorial enquiry identifying all the relevant issues and addressing them with all relevant and available evidence, have been satisfied.
The fundamentals of the trial of any minor civil action must involve:
·      A fair hearing by a competent, unconflicted, unbiased tribunal.
·      The magistrate identifying and addressing the real issues in dispute between the parties, whether or not they are initially pleaded.
·      The magistrate ensuring that all available evidence relevant to the real issues in dispute that the parties can and want to call, should be called, whether by the parties of the magistrate themselves.
·      The identification by the magistrate of the relevant legal principles applicable to the real issues in dispute.
·      A competent fact finding approach by the magistrate, with no apparent errors of logic or conclusion.
·      A correct application of the legal principles to the found facts to arrive at a conclusion and hence the right judgement.
The ‘review’ contemplated by section 38(7) of the Act must accordingly address itself to these matters.
Upon review, the parties will not be restricted to the way ‘they’ pled their claim or ran ‘their’ case, as the primary responsibility for identifying and defining the issues between the parties and eliciting evidence lay with the magistrate not the parties.
If there has been any failure by the magistrate to identify the real issues, or elicit all relevant evidence, then the Act is clear that should occur upon the review in this court, as there is power to call evidence and also to rehear evidence, and no power to remit to the summary court for rehearing. The role of this court is to, if necessary to do justice between the parties, remedy any omission in the inquisitorial trial process in the lower court, ie identify any real issues between the parties that were not so identified, hear any relevant available evidence that was not heard, and resolve the issues between the parties fully and finally, in the way they should have been before the magistrate.
As the issue in the review before me today is not any suggested failure to identify the real issues between the parties or call all relevant evidence, I express no more detailed views on the general topic.
The Magistrate’s Decision
The plaintiff gave evidence and tendered the contract and subsequent documentation between the parties, essentially arguing that as he did not get finance, therefore he was entitled to the return of his deposit. The defendant said she was told finance was approved, but that the plaintiff failed to settle, so she was entitled to retain the deposit. The complication arises in this matter due to the fact that the date for finance approval came and went without finance being granted. Each party then proceeded on the basis that the plaintiff would continue to seek finance. Ultimately he did obtain finance approval, which such finance was then insufficient for the plaintiff to settle in light of other loan obligations he had to the same bank.
On 20 May 2014 the Magistrate delivered an ex-tempore decision. He found that the Plaintiff entered into a contract for the sale of the defendant’s land on 9 July 2013, containing a finance condition. That condition provided that the contract was conditional upon the Plaintiff obtaining finance in the sum of $219,000 by 31 July 2013. He found that on that day he Defendant’s conveyancer told the Plaintiff’s conveyancer that extra time was sought for finance approval. On 6 August, advice was conveyed that conditional approval had been given, and on 16 August the plaintiff’s conveyancer emailed the defendant’s conveyancer that that unconditional finance approval had been granted.
The Magistrate found that due to the plaintiff’s other loan commitments, there was ultimately a $23,000 shortfall in what the bank would lend, to enable settlement to occur. That was communicated between the brokers on 3 September 2013. The defendant’s brokers issued a Notice of Default requiring settlement on 12 September, which did not occur. The defendant’s conveyancer issued a Notice to Complete, fixing the 23^rd of September as settlement date. The plaintiff was again unable to settle on that date, and accordingly the defendant terminated the contract on 25 September 2013 and retained the deposit.
The Magistrate held that pursuant to the terms of the agreement, finance having been granted, yet the plaintiff having not settled, the defendant was entitled to retain the deposit.
Review
In light of the issues raised, it is necessary to set the evidence out in some detail. Essentially the plaintiff argues that finance having not been approved by 31^st July, he was not bound by the contract and not liable to forfeit his deposit.
It is agreed that a contract for the sale of residential property was executed by the parties over the 8^th and 9^th of July 2013. That contract provided that premises at Caribbean Terrace, Para Hills owned by the defendant would be sold to the plaintiff for the sum of $219,000. The contract provided that a deposit of $21,000 was to be paid. It is common ground that deposit was paid.
The contract provided for a settlement date of 30 August 2013 or such other date as mutually agreed in writing. The contract contained the following special condition:
SC1: FINANCE
SC1.1 This contract is conditional upon the purchaser obtaining, on or before the date specified below, approval in writing for a loan in the amount specified below (or such lesser amount as the purchaser may accept) at the interest rate specified below and otherwise on such terms and conditions that the lender requires acceptable to the purchaser, to assist in purchasing the property (“the approval”). 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.
SC1.2 The purchaser will use best endeavours to obtain the loan.
SC1.3 In the event that the approval is not obtained on or before the latest date for approval and provided the purchaser has not waived this special condition and communicated such waiver to the vendor in writing then either party (but, in the case of the purchaser, provided it has complied with SC1.2) may immediately terminate this contract by giving notice in writing to the other party.
SC1.4 In the event of termination of the contract pursuant to SC1.3 and provided the purchaser has complied with SC1.2 all monies paid by or on behalf of the purchaser shall be repaid to the purchaser.
SC1.5 In the event of termination of this contract pursuant to SC1.3 in circumstances where the purchaser had failed to comply with SC1.2 the vendor will be entitled to the deposit which is forfeited and to proceed against the purchaser for damages for a breach of contract.
Latest date for approval 31 July 2013.
Amount of loan: $219,000.
Interest rate: market rate percentage per annum.
The general conditions of contract included a clause relating to default by the purchaser. Clause 9 provided that:
9.2     Default by purchaser prior to settlement
In the event the purchaser is in default in performing or observing any obligation imposed on the purchaser under this contract prior to settlement then the vendor, in addition to any other rights or remedies it may have under this contract or otherwise, may give the purchaser notice in writing requiring the purchaser to remedy the default within 7 days from service of the notice. If the purchaser fails to comply with the notice the vendor may terminate the contract by further written notice without prejudice to the vendor’s rights and entitlements at law. The vendor will be entitled to serve more than one notice without prejudice to any of its rights and obligations.
9.3     Default by purchaser in settlement
In the event the purchaser defaults in the due observance or performance of the obligations on the purchaser’s part to settle and such default continues for a period of 3 clear business days after the settlement date then the vendor may serve a notice on the purchaser requiring the default to be remedied and appointing a time for settlement being not less than 3 clear business days after the service of the notice requiring the purchaser to settle at the time and date appointed in the notice. If the purchaser fails to comply with the notice the vendor may terminate the contract by further written notice without prejudice to the vendor’s rights and entitlements at law. The vendor will be entitled to serve more than one notice without prejudice to any of its rights and obligations.
9.4     Remedies of vendor
(a)     In the event this contract is terminated by the vendor then the vendor may either retain the property or sell the property and in either event sue the purchaser for damages.
(b)     The vendor will be entitled to retain the deposit if this contract is terminated by the vendor.
(c)     If the vendor resells the property the vendor may retain absolutely any surplus arising from such resale in excess of the original purchase price and expenses arising from the resale and all losses and expenses incurred by the vendor resulting from the purchaser’s default.
(d)     In the event this contract settles on a date after the date for settlement first agreed to by the parties and as stated in the contract (and whether or not subsequently varied by agreement) and provided that the delay in settlement is not due to the vendor’s default, the purchaser will pay at settlement, if demanded by the vendor, interest on the purchase price at the default rate for the period between the date for settlement first agreed and the date of actual settlement. In this event, at settlement all outgoing and income on the property shall be apportioned and adjusted to midnight on the day before the date for agreed settlement.
Clause 13 of the contract provides that subject to other provisions allowing immediate termination, neither the vendor nor the purchaser are entitled to terminate the contract on the ground of the other’s default in performing or observing an obligation imposed on that other party unless the party not in default has first given to the party in default a written notice specifying the default complained of, which notice must require that the default be remedied within a period stipulated in the notice and the party in default fails to remedy the default within the period specified.
Clause 14 provides that time is of the essence of the contract in respect of all special conditions and in respect of clauses 9 and 13 amongst others.
At the review hearing it was accepted that the emails tendered before the Magistrate represent the sum total of the relevant communications between the parties subsequent to the execution of the contract. Those emails contain numerous spelling and grammatical errors, which I will reproduce without the constant insertion of ‘sic’.

The contract was due to settle on the 30^th of August 2013, with finance approval due on the 31^st of July 2013. On the 31^st of July the defendant’s conveyancer wrote to the plaintiff’s conveyancer as follows:
Hi, Mark
We have the above file together, settlement due 30 August 2013. Your finance approval is due today 31 July 2013. Can you provide me with an update as to how this is going? Further, I await the Transfer to send to my client.
Thanks
Nikki
About 4 hours later the plaintiff’s conveyancer wrote back in the following terms:
Dear Nikki,
I have spoken to the banker in regards to the finance approval and the bank is asking for an extra week for finance approval. The banker contacted the real estate agent and said that they should have approval before 7 August 2013. I then rang the real estate agent and he confirmed this as long as it did not affect the settlement date they will not do addendum for finance approval for one week. I will diarise this for early next week to chase up with the banker again. I will forward you the transfer and council advice today.
Regards
Paula Farmer
The next correspondence between the parties occurred on the 5^th of August when the defendant’s conveyancer emailed the plaintiff’s conveyancer as follows:
Hi Paula,
How are you? Do you have another update on the finance approval?
Thanks
Nikki
The following day, the 6^th of August, the plaintiff’s conveyancer responded as follows:
Hi Nikki,
I have just spoken to the banker and she has just been advised that she has just been informed that CONDITIONAL approval being given, valuations being done today (she is escalating the process). I have diarised it for 9 August to chase up again and will advise you accordingly.
Regards
Paula Farmer
The next correspondence occurred three days later on the 9^th of August when the defendant’s conveyancer again followed up the finance issue with the plaintiff’s conveyancer. The defendant’s conveyancer emailed the plaintiff’s conveyance as follows:
Hi Paula,
How are you? Have you heard about finance.
Thanks,
Nikki
The plaintiff’s conveyancer replied:
I have prepared adjustment statement for you regardless. I wait to hear.
Thanks,
Nikki Johnston
Six days later on the 15^th of August the defendant’s conveyancer again contacted the plaintiff’s conveyancer, asking whether finance had been approved:
Hi Paula,
How are you? I was expecting an update yesterday regarding your client’s finance approval status. Can you please let me know of an update today!
Thanks,
Nikki
The following day the plaintiff’s conveyancer replied:
Hi Nikki,
I have finally got finance approval. See attached.
Regards
Paula Farmer
Whatever was attached was not tendered by the plaintiff, however the attachment is described as follows:
“Forward: - unconditionally approved: Ms Nicola Winter, Mr Peter Smyth, Mr Clayton McLeod, Mrs Anne McLeod: M0009FB94.”
The effect of these communications, sparse as they are, is an initial communication by the purchaser that finance would not be approved by the finance approval date and a statement that the bank had said they would need an extra week. The vendor tacitly acceded to that communication, indicating there would be no variation to the contract for such a delay. Eventually, a little more than two weeks after the latest date for approval specified in the contract, the purchaser notified the vendor that they had unconditional finance approval. Accordingly, the conditional finance provision was seemingly satisfied albeit a little over two weeks after the “latest date for approval” of finance as specified in the original contract. So long as the initial emails constituted a request to essend the time for approval of finance, which was granted by the defendant’s agent to a date by which time there was communication by the plaintiff of an unconditional finance approval, the contract became unconditional. That issue sits at the crux of this case.
The defence tendered what seems likely to have been the approval referred to in the earlier mentioned emails. An email sent from the Mortgage Choice help desk to its customer representative at 2.30 pm on the 16^th of August as follows:
Thank you for referring your client’s loan application to Bank SA. Attached is the response to your submission. Please do not reply to this email as the address is used purely for LIXI messaging and is not active.
Application details:
Broker identified: (number given)
Lender identifier: (number given)
Response date: (blank)
Application status: Unconditionally approved
(various phone numbers given)
Conditions:
: This loan application has been formally approved.
Loan type residential
Loan account number (number given)
Documentation the bank requires to enable settlement will be forwarded to the applicable party/s as instructed in due course.
Bank SA is treating electronically lodged loans with the highest priority. Please fax all electronic submission supporting documents for assessment to the dedicated bms fax number detailed above as soon as possible.
The Mortgage Choice customer representative, a Ms Julie Browne, then forwarded that document to Paula Farmer the plaintiff’s broker. At 3.14pm on the 16^th of August Ms Browne sent the following email:
Hi Paula,
Here is the formal approval. Can you please email me the draft title transfer in due course as Bank SA will want this fairly soon I think.
Kind regards
Julie
Julie Browne
It is fairly clear therefore that the plaintiff’s conveyancer forwarded to the defendant’s conveyancer an unequivocal, unconditional, finance approval on the 16^th of August 2013, satisfying the conditional finance term, if that term was still operational at that time, in light of the terms of the contract and the subsequent contact between the parties.
All did not, however, go according to plan. On the 3^rd of September at 8.00am the plaintiff’s mortgage broker Ms Browne emailed the plaintiff in the following terms:
Clayton
Because the available equity in your home is essential for the investment purchase, by increasing the mortgage loan you are decreasing this equity. This will result in a 86.6% and incur LMI insurance, plus the deal would then need to go the insurer for their decision to approve the lend.
Eg your home and the investment house total value equals $599K, and the new total borrowing would be $230K plus $289K equals $519. This result in 86.6% lend and would incur LMI insurance of around $10K. This will be the same with Bank SA or ME.
If you keep the personal loan separate as you first intended it will prevent the deal from being more than 80% but this requires you to make this arrangement.
It’s up to you but I’m concerned about the seriousness of the situation and the fact that your financial situation that you signed and presented to the bank was not truthful and how it would affect your ability to recover the deposit paid in the event that settlement is not possible.
I suggest you inform the conveyancer of your financial decision and ask what your rights are in respect to getting the deposit back if the seller is not prepared to wait until the matter is sorted as best as possible.
Kind regards Julie
Julie Browne
At about 6.00pm that day Julie Browne (the mortgage broker for the plaintiff) sent an email to the real estate agent of the defendant, copied to Bank SA, recounting Ms Browne’s version of the events of the last two days. It is headed “settlement failure” and reads as follows:
Hello
I refer to recent contact with Nabal Chehade from Chehade Real Estate this afternoon and Mark from Lyon Conveyancing yesterday.
I was informed yesterday by Mark there was a shortfall of approximately $23K to complete the purchase of Carribean Terrace, Para Hills. According to Mark the shortfall arising because ME Bank required $289K to discharge the mortgage on the property held in the name of Mr and Mrs McCleod. The available equity in that security is required to complete the purchase of the Para Hills Property. I spoke to Mr McLeod yesterday as soon as I was informed and it was only then that he told me he had two loans with ME Bank. One for $245K, which we were refinancing and then another one with ME Bank for around $44K but the latter was a personal unsecured loan. Subsequently Mr McLeod contacted ME Money and was then informed that that $44K was not a personal loan but an additional loan against his property.
Prior to this news I had no knowledge that Mr McLeod has this additional loan commitment that brought his total commitment to $289K and that is now the new amount required for the discharge to occur and settlement to take place. Unfortunately it appears that because Mr McLeod has not been truthful with his dealing with myself or the lender and did not disclose that he had an additional commitment for another loan of $44K against the property a shortfall situation has resulted. The shortfall reflecting the additional discharge amount less the deposit of $21K already paid.
Both myself and the lender have advised and acted in good faith and Bank SA have given unconditional approval based on the information presented to them and their due diligence to verify the information. I can confirm that Bank SA did undertake a title search in accordance with their verification practice. That search confirmed a mortgage with ME Bank but this does not state the amount of the mortgage.
Obtaining additional funds from Bank SA is not an option. The increased lending will put the LVR to 86.6% which means LMI becomes involved. In this instance LMI will not consider the deal under any circumstances because of the non-disclosure of the debt as described.
As the deal is unconditional the clients are required to come up with the shortfall forthwith and asking Bank SA is not possible. Unless the clients source the extra $23K themselves there is nothing more I can do for them.
Kind regards Julie
Julie Browne
The Real Estate Agent passed that email on at about 6.13pm on the 3^rd of September 2013. As a result, on the 5^th of September 2013 the defendant vendor gave the plaintiff purchaser written Notice of Default. That notice asserted that the contract had been entered into and was subject to finance being approved on or before the 31^st of July 2013 and settlement thereafter on the 30^th of August 2013 and asserted that as the purchaser had failed to settle in accordance with it, the vendor gave notice that unless settlement took place by 11.30am on the 12^thof September, the vendor may issue a notice to terminate and would be entitled to retain any deposit paid.
It is common ground settlement did not occur on the 12^th of September 2013.
On 16 September 2013 the vendor on served a Notice to Complete on the purchaser indicating that the vendor was ready, willing and able to settle and requiring settlement to occur at the Lands Titles Office on the 23^rd of September 2013.
On the 20^th of September 2013 solicitors for the defendant wrote to the plaintiff setting out the events of the previous few days in the following terms:
Dear Sir
Contract for the sale of land – residential property (“contract”) property: 13 Carribean Terrace, Para Hills
We act for the vendor Ms Lisa Gai Mitchell (“out client”).
We confirm that you act for the purchaser, Clayton McLeod (“your client”). We refer to our telephone call at approximately 4.00pm on Friday 20 September 2013. In particular we confirm that you advised us of your client’s instruction to you, namely:
Your client will not be able to settle the contract on the settlement date (being 11.30am on Monday 23 September 2013) (“settlement date”). The reason your client will not settle on the contract is because of an inability to obtain finance required to assist in the purchase price of the property.
On the basis of the above, your client (or any agent for your client) will not be attending at settlement on the settlement date. Please advise your client that our client is ready, willing and able to settle on the settlement date. Concerning your indication that your client still wants to purchase the property, we will take our client’s instructions on a without prejudice basis, however, we note that there was a Notice to Complete served upon your client dated 16 September 2013 which our client will rely upon. Further, your client is in breach of the contract between them date 9 July 2013.
Could you please confirm your client’s instructions in writing.
Yours faithfully
On that same day the plaintiff purchaser wrote directly to the respondent vendor in the following terms:
Dear Lisa
Re: ... Carribean Terrace, Para Hills
I Clayton McLeod of ... Aldrin Crescent, Modbury North would like to ask for an extension of a period of two weeks as of the 20^th of September to settle the property at ... Carribean Terrace, due to issues with the banks. But we will still be going through with the contract. I do apologise for the inconvenience it has caused. We are willing to let you continue to reside at the property ... Carribean Terrace, Para Hills, until the 30^th of November 2013 rent free after settlement.
Kind regards
Clayton McLeod
Purchaser of the property of ... Carribean Terrace, Para Hills SA 5096
I Lisa Mitchell agree to the above variations of the contract for the sale of the property … Carribean Terrace, Para Hills.
Signature ( )
Clearly this was an attempt by the plaintiff vendor to have Ms Mitchell countersign the above letter and thereby agree to allow a further two weeks for settlement. The defendant vendor did not countersign or agree to that proposal and on the 25^th of September 2013 sent a Notice of Termination in the following terms:
(Preliminaries are given of the parties the contract date and the property)
By Notice to Complete dated 16 September 2013 you were served with written notice demanding that you proceed with settlement by 23 September 2013, failing which the vendor would institute proceedings for specific performance of a contract or exercise such other remedies as may be available to it or both (including without limitation terminating this contract, retaining the deposit and seeking damages).
You have failed to comply with the said Notice to Complete.
Now take notice that I, as the duly authorised agent of the vendor, hereby give notice to you that the vendor now terminates the contract effective immediately and does further demand payment of the deposit forthwith.
This Notice of Termination is given without prejudice to any to other rights and remedies that the vendor may have against you pursuant to the contract or at law or in equity.
Dated the 25^th day of September 2013.
(Signed)
Discussion
On the above materials the course of proceedings and communication between the parties is relatively clear.
It is clear that finance was not obtained by 31 August 2013, the last day for finance approval. As earlier indicated, the Magistrate found that the purchaser told the vendor on the 16^th of August, that he had obtained unconditional finance approval, and held that at that stage the contract became unconditional. Accordingly, the Magistrate found the purchaser was in breach of the contract when he subsequently failed to settle on the designated settlement date. Accordingly, so the Magistrate found, the vendor was entitled to terminate the contract and retain the deposit.
Clearly finance approval was not obtained by the latest date for approval, being 31 July 2013. That meant that, absent a waiver or amendment to the contract, the contract was terminable by either party and the plaintiff was entitled to his deposit back.
The fundamental issue accordingly is whether what passed between the parties on and subsequently to 31 July 2013 amounted to an agreement to extend the time for compliance with the finance clause, such that upon subsequent satisfaction of that clause, the contract became binding under SC1.
The matter is complicated in that it is plain that nobody explicitly addressed SC1 on the last day for compliance with it, and the court was left to interpret by inference the effect of communications about settlement that were entirely undirected to the issue of what might happen to the deposit if ultimately settlement did not occur. I have therefore closely examined the reproduced email communication.
The Magistrate held that the email by the plaintiff’s conveyancer that the bank was asking for an extra week for finance approval was “by necessary implication seeking an extension of time for the purposes of the finance clause”. Whilst I am not convinced it amounted to that, in any event the response from the defendant’s real estate agent was “confirmed this – as long as it did not affect the settlement date they will not do addendum for finance approval for one week”.
Doing the very best I can to interpret this non-legal response, this might amount to an extension of the finance date by seven days, yet it is hand in glove with the proposition that the contract will not be amended for a proposed change of just seven days. In any event, finance was not approved within that seven days. Further, the contract was never amended.
Five days later the defendant’s conveyancer again enquired about finance approval and the following day the plaintiff’s conveyancer said “conditional” approval had been given. Conditional approval is not approval. There was no agreement, acquiescence or response to this, until a further four days had elapsed when the defendant’s conveyancer again asked whether the plaintiff’s conveyancer had heard anything and was told they were still waiting. On the 15^th a further enquiry was made and on the 16^th, the response came back that finance was approved.
The magistrate held that all this amounted to an agreement that “the date for approval of finance was extended from 31 July until approval was finally obtained on 16 August. At that time the contract was unconditional”.
The only agreement to extend Special Condition SC1 that I can detect from any of this, might be the agreement by the defendant’s land agent to the request by the plaintiff’s bank to grant a further seven days, although that carries with it the confusing complication that the agent would however not amend the contract to reflect that. Even if this did extend Special Condition SC1 by seven days, that time itself expired with no finance approval having been granted.
The defendant’s agents never agreed to any further extension of the finance clause, they just kept enquiring whether finance had been granted, until eventually they were told it had. The plaintiff’s agents never asked for the finance clause to be extended, they just kept saying they were waiting for finance and would let the vendor know when and if it was granted.
The Special Conditions provide a clear framework, with time expressed to be of the essence, for the contract to be conditional on finance, and provide exactly for the rights of each party should finance not be obtained by a particular specified date, and to determine who is entitled to the deposit in that event.
The Special Conditions provide that finance must be approved by the said certain date. If not, the contract provides that either party may terminate and the purchaser gets his deposit back.
Where finance is approved by the specified date and the purchaser does not settle after he has communicated that finance is approved, the vendor may keep the deposit even where, for example, finance is then withdrawn, and even when the vendor re-sells and suffers no loss. No doubt these provisions are there to encourage settlement, however they verge on punitive and in some situations act harshly upon a would-be purchaser. Parties are by and large free to conclude a bad bargain, but where, as here, a provision can operate in such a way, the court must carefully examine whether the pre-conditions for such liability have truly occurred.
I cannot conclude that the Special Condition was extended “by necessary implication”, certainly beyond 7 August. From that time, the contract provided that either party had the right but not the obligation to terminate the contract. Both parties also had the right to go ahead and perform the contract, and effect the sale. Any agreement to do that did not necessarily imply an extension of Special Condition 1. The Special Conditions themselves envisage that the contract might not be terminated, despite failure of the purchaser to obtain finance approval.

When the time for finance approval passes, if finance has not been approved, so long as the purchaser has complied with Special Condition SC 2 that he has used his best endeavours to obtain a loan, SC1.4 specifically provides that whoever terminates the contract on the basis of a failure to obtain finance, the deposit must be returned to the purchaser.
So, the mere non-termination of the contract by the vendor, and continuing enquiries as to whether and when finance might be approved, cannot in my view amount to an agreement to extend the operation of clause SC1, in the absence of any actual agreement that such be the case.
The contract could proceed whether or not SC1 was extended, so there is no “necessary implication” that it was extended, simply from the fact that both parties still envisaged the contract proceeding to settlement.
Conclusion
The magistrate erred in concluding that the finance clause SC1 was extended “by necessary implication”. Whilst it may arguably have been extended to 7 August, there is simply insufficient evidence for a conclusion that there was any agreement to extend the Special Condition past that time.
Therefore, at that time the contract became terminable by either party, and if terminated by either party in the absence of the operation of the Special Condition, the plaintiff was entitled to the return of his deposit.
The defendant was entitled to terminate the contract and sell to another, as she did.
In those circumstances however, the plaintiff was entitled to the return of his deposit.
Orders
Pursuant to section 38(7)(d) of the Magistrates Court Act:
1. The judgement of the Magistrate is rescinded.
2. The defendant is to pay the plaintiff $21,000.00.