Neate v Parfit
[2006] WASC 121
•23 JUNE 2006
JURISDICTION : SUPREME COURT OF WESTERN AUSTRALIA
IN CIVIL
CITATION: NEATE & ANOR -v- PARFIT & ANOR [2006] WASC 121
CORAM: TEMPLEMAN J
HEARD: 15 & 16 JUNE 2006
DELIVERED : 23 JUNE 2006
FILE NO/S: CIV 2283 of 2005
BETWEEN: ANDREW RAYMOND NEATE
SALLY MARIE LARDER
PlaintiffsAND
CHRISTOPHER PARFIT
LIEN DIEP HONG
Defendants
FILE NO/S :CIV 2284 of 2005
BETWEEN :NICHOLAS JOHN HARRADINE
LISA JAYNE HARRADINE
PlaintiffsAND
CHRISTOPHER PARFIT
LIEN DIEP HONG
Defendants
FILE NO/S :CIV 2285 of 2005
BETWEEN :MICHAEL SIMEON ARNDT
ANGELA LEAH ARNDT
PlaintiffsAND
CHRISTOPHER PARFIT
LIEN DIEP HONG
Defendants
FILE NO/S :CIV 2286 of 2005
BETWEEN :GARY JOHN SMITH
ELIZABETH FLORENCE SMITH
PlaintiffsAND
CHRISTOPHER PARFIT
LIEN DIEP HONG
Defendants
Catchwords:
Contract - Sale of strata titled residences "off the plan" - Standard offer and acceptance documents completed before execution of Formal Contracts - Purported termination by vendor for breach of subject to finance clause - Whether specific performance should be granted - Legal effect of the Formal Contracts
Legislation:
Nil
Result:
Specific performance granted
Category: B
Representation:
CIV 2283 of 2005
Counsel:
Plaintiffs: Mr N D C Dillon
Defendants: Mr R E Birmingham QC & Mr P J Hannan
Solicitors:
Plaintiffs: Wojtowicz Kelly
Defendants: Tottle Partners
CIV 2284 of 2005
Counsel:
Plaintiffs: Mr N D C Dillon
Defendants: Mr R E Birmingham QC & Mr P J Hannan
Solicitors:
Plaintiffs: Wojtowicz Kelly
Defendants: Tottle Partners
CIV 2285 of 2005
Counsel:
Plaintiffs: Mr N D C Dillon
Defendants: Mr R E Birmingham QC & Mr P J Hannan
Solicitors:
Plaintiffs: Wojtowicz Kelly
Defendants: Tottle Partners
CIV 2286 of 2005
Counsel:
Plaintiffs: Mr N D C Dillon
Defendants: Mr R E Birmingham QC & Mr P J Hannan
Solicitors:
Plaintiffs: Wojtowicz Kelly
Defendants: Tottle Partners
Case(s) referred to in judgment(s):
Erley Pty Ltd v Gunzberg Nominees Pty Ltd (1998) Australian Contract Reports 90‑093
Immer (No 145) Pty Ltd v The Uniting Church in Australia Property Trust (NSW) (1993) 182 CLR 26
Larking v Great Western (Nepean) Gravel Ltd (In Liq) (1940) 64 CLR 221
Masters v Cameron (1954) 91 CLR 353
Meehan v Jones (1982) 149 CLR 571
Perri v Coolangatta Investments Pty Ltd (1982) 149 CLR 537
Shakibaee v Chan (2001) 24 WAR 97
Suttor v Gundowda Pty Ltd (1950) 81 CLR 418
Case(s) also cited:
Adderley v Dixon (1824) 1 Sim & St 607
Badat v DTZ Australia (WA) Pty Ltd [2006] WASC 13
Bahr v Nicolay (No 2) (1988) 164 CLR 604
Christiansen v Klepac [2001] NSWSC 385
Coomera Resort Pty Ltd v Kolback Securities Ltd [2004] 1 Qd R 1
Etablissements Chainbaux SARL v Harbormaster Ltd [1955] 1 Lloyd's Rep 303
GR Securities Pty Ltd v Baulkham Hill Private Hospital Pty Ltd (1986) 40 NSWLR 631
Kirk Contractors v Lasnom Pty Ltd, unreported; SCt of WA; Library No 950262; 31 May 1995
Kuper v Keywest Constructions Pty Ltd (1990) 3 WAR 419
Lewis v Cook (2000) 18 ACLC 490
Martello v Walton, unreported; SCt of WA; Library No 990038; 4 February 1999
O'Connor v SP Bray Ltd (1936) 36 SR (NSW) 248
Oceanic Sun Line Special Shipping Co Inc v Fay (1988) 165 CLR 197
Olsson v Dyson (1969) 120 CLR 365
Rawson v Hobbs (1961) 107 CLR 466
Royal Bristol Permanent Building Society v Bomash (1887) 35 Ch D 390
Sampson v Clifford [2001] WASC 102
Snowlife Pty Ltd v Robina Land Corporation Ltd (No 2) [1993] 1 Qd R 584
Tait v Bonnice [1975] VR 102
Tropical Traders Ltd v Goonan (1964) 111 CLR 41
TEMPLEMAN J: In 2004, each of the plaintiffs in these four actions, which have been tried together, entered into a Preliminary Agreement with the defendants, Christopher Parfit and Lien Diep Hong, to purchase a strata titled residential property ("the units") to be constructed by the defendants in Cannington.
Subsequently, the parties entered into Formal Contracts for the same purpose. In February 2005, the defendants terminated the contracts without notice and without then giving any reason for so doing. The reason, given later, was said to be "non fulfilment of the finance clauses". This prompted the plaintiffs to lodge caveats and then to seek orders for specific performance and other relief. A claim for damages was abandoned at trial. I am therefore concerned only with the claim for specific performance.
The contracts in each action are in relevantly identical terms. It will be convenient first to summarise those terms.
The Preliminary Agreements
The Preliminary Agreements were in the form of standard Offer and Acceptance documents which incorporated the joint form of conditions adopted in 2000 by the Law Society of Western Australia (Inc) and the Real Estate Institute of Western Australia (Inc) ("the Joint Conditions"), together with additional conditions in an Annexure A.
Conditions (a) and (b) in that Annexure, provided:
"SUBJECT TO FORMAL CONTRACT
(a)The parties acknowledge that this contract constitutes a preliminary agreement between the parties which is to be confirmed and ratified by the execution of a further contract ('Formal Contract') which must be executed by the parties within 180 days of the date of this contract failing which this contract will automatically terminate.
(b)Prior to the execution of the Formal Contract, the Vendor will provide to the Purchaser a statement containing all the information required pursuant to sections 69, 69A and 69B of the Strata Titles Act 1985 as amended."
The Preliminary Agreements were expressed to be conditional upon the plaintiff purchasers obtaining "Finance Approval" before "the Latest Time". The term "Finance Approval" was defined in condition 1.7 as follows:
" 'Finance Approval' means an offer to lend made by the Lender on reasonable terms and conditions or an approval of a finance application by the Lender to the Purchaser, by the Latest Time for a loan of an amount not less than the Amount of Loan shown below. An approval that is subject to the Lenders usual Terms and Conditions shall be deemed to be Finance Approval."
There were therefore, two ways of obtaining Finance Approval: by an offer or an approval.
The "Latest Time" and the amount of the loan were stipulated in each contract.
The conditions relating to Finance Approval were set out in conditions 1.1 to 1.6 of the contracts. They required the purchasers to use their best endeavours to obtain finance: and on receipt of Finance Approval to:
"immediately notify in writing the Vendor or the Vendor's Agent whereupon the condition in paragraph 1.1 will then be satisfied."
That is, the contract would no longer be conditional, even though Finance Approval might have been given subject to reasonable terms and conditions, or on the lender's usual terms and conditions.
If the purchasers were unable to obtain Finance Approval, they were required to notify the vendor or the vendor's agent immediately, and to provide evidence in writing.
If the purchasers did not waive the finance condition (ie, by agreeing to make the contract unconditional) but were unable, despite best endeavours, to obtain finance, and notified the vendor, then the contract would terminate without notice: condition 1.4.
However, if the purchasers failed to notify the vendor either that they had obtained Finance Approval, or that they had been unsuccessful, they would be in default. In either of those circumstances, the vendors were entitled to "immediately terminate the Contract by notice in writing to the Purchaser": condition 1.5.
The Formal Contracts
The Formal Contracts contemplated by the Preliminary Agreements comprised a number of documents. These included the original offer and acceptance forms, with additional annexures.
Clause 1.1.3 of the new Annexure B provided that the Joint Conditions applied to the Second Contract, but that:
"To the extent that there is any inconsistency between these special conditions and either the Contract Form to which they are attached or the Conditions, these Conditions will prevail."
It is common ground between the parties that the Formal Contracts are "valid and effectual". However, there is an issue whether the Preliminary Agreements or the Formal Contracts are the operative agreements.
The resolution of this issue must depend on the parties' intentions, to be discerned from the documents. In my view, the fact that the parties contemplated that the Preliminary Agreements would be confirmed and ratified by a Formal Contract, suggests that the Formal Contracts were intended to be the operative documents. They confirmed and ratified some of the terms of the Offer and Acceptance, but added new terms. In particular, the Formal Contracts contained the detailed provisions relating to important matters including the construction of the units, registration of the Strata Plan, the payment of the purchase price and settlement.
That is not to say that the Preliminary Agreements were not binding: in my view they were. I consider that the Preliminary Agreements were in the first of the categories identified by the High Court in Masters v Cameron (1954) 91 CLR 353 at 360.
Contracts in that category are binding, but the parties:
" …propose to have the terms restated in a form which will be fuller or more precise but not different in effect."
Here, the Formal Contracts were slightly different in effect from the Preliminary Agreements. That is because condition 10.1 of Annexure B precluded any party from terminating for breach without giving the other party a written notice specifying the breach and calling for it to be remedied within a specified time, being not less than 14 days after service of the notice.
Condition 10.1 is therefore different in effect from condition 1.5 of the Offer and Acceptance. As I have noted above, under that condition a failure on the part of the purchaser to notify the vendor of (inter alia) receipt of Finance Approval was a breach which entitled the vendor to terminate immediately, without first serving a default notice.
Having regard to condition 1.1.3 above, condition 10 would prevail.
In general terms, the issues arising in these actions are:
1whether the plaintiffs complied with the finance provisions of the Preliminary Agreements; and if not,
2whether the defendants retained any right to terminate the Formal Contracts; and if so,
3whether the defendants were entitled to terminate the Formal Contracts without notice.
There is also an issue as to whether the plaintiffs were able to settle, when they commenced proceedings for specific performance.
Before addressing these general issues, I will summarise the contractual arrangements made between the parties in each action.
Action 2283 of 2005
The plaintiffs are Andrew Raymond Neate and Sally Marie Larder ("the Neates"). On 25 September 2003, they entered into a Preliminary Agreement to pay $199,500 for Unit 5. They required finance of $210,000 from any lender of their choice. The Latest Time was specified as 15 November 2003.
The Neates used the services of a finance broker to assist them in obtaining finance. On 19 January 2004, the Neates' broker informed them that Homeside Lending had "approved in principle the housing loan application" provided by the broker, in an amount of $305,000.
The approval was said to be "subject to the normal terms and conditions associated with property purchase, settlement and facility draw downs.
Those terms and conditions are set out in the letter dated 13 January 2004 from Homeside Lending to the broker. They required the Neates to provide:
•a properly completed loan application;
•satisfactory results to enquiries about the Neates' credit history and current standing;
•a copy of the contract for the purchase of the unit (which might have to be valued);
•an approval from Homeside's mortgage insurer to the proposed loan, if cover was needed.
In my view, this was an approval within the second limb of the definition of Finance Approval set out in condition 1.7 of the Preliminary Agreement.
It appears that the Neates or their brokers informed the defendants (or their agents) immediately they received the approval in principle. I draw that inference from the fact that on 19 January, the defendants' agents, B W Backhouse & Associates ("Backhouse") faxed a copy of the approval to "Norfolk Settlements" [sic, Norfolk Conveyancing], the Neates' nominated conveyancers.
This was well after the Latest Time specified in the Neates' Preliminary Agreement. However, the defendants did not terminate the Agreement. In my view, therefore, the Neates must be taken to have satisfied the finance condition.
It is admitted in the defendants' defence that the Neates entered into the Formal Contract on either 7 or 18 August 2004. This was outside the period of 180 days specified in the special conditions of the Preliminary Agreement. That Agreement therefore terminated automatically.
Action 2284 of 2005
The plaintiffs are Nicholas John Harradine and Lisa Jayne Harradine ("the Harradines"). On 31 May 2004, they presented an offer to purchase Unit 10 for $215,000. The offer was made subject to finance in an amount of $225,000 from any lender of their choice. The Latest Time was 9 June 2004.
The defendants accepted the Harradines' offer on 10 June 2004, after the Latest Time. In so doing, the defendants must be taken to have extended the time by which the Harradines were required to obtain finance, while retaining the right to terminate the Agreement if finance could not be obtained.
On 4 July 2004, Norfolk Conveyancing, who were the Harradines' nominated conveyancers also, wrote to Backhouse to inform them that "finance has been approved by the ANZ Bank and the contract is still subject to the conditions specified in Annexures A & B".
It is not clear what level of approval the Harradines had received. However, it is equally unclear whether the obligation imposed on them by condition 1.2(c) of the Preliminary Agreement, to notify the defendants immediately on receipt of Finance Approval, required them to provide details of that approval.
In my view, it is arguable that by saying finance had been approved, but that the agreement was still subject to other conditions, the Harradines must be taken to have waived the finance condition. However, because of my views in relation to the Formal Contract, to which I shall refer below, it is not necessary to decide that point.
The Harradines entered into the Formal Contract on 24 August 2004, within the 180 day period specified in the special conditions of the Preliminary Agreement.
Action 2285 of 2005
The plaintiffs are Michael Simeon Arndt and Angela Leah Arndt ("the Arndts"). On 2 October 2003, they entered into a Preliminary Agreement to pay $215,000 for Unit 13.
The Arndts required finance in an amount of $225,000 from any lender of their choice. Their Latest Time for approval was 10 November 2003.
The Arndts' nominated conveyancers were Jan Simpson Settlements. On 3 November, they sent a fax to Backhouse which included a "pre‑approval finance certificate" for the Arndts. This was a document from the ANZ Bank giving approval for a loan of $172,000, subject to:
"1.Acknowledgment to be witnessed
2.Required for settlement – on completion valuation, certificate of occupancy."
The certificate was, I think, an approval within the second limb of the Finance Approval definition in condition 1.7. However, it was $53,000 less than the amount of the loan the Arndts had stipulated in the Preliminary Agreement.
The reason for this discrepancy is that the Arndts did not intend to rely only on the proposed loan from the ANZ Bank. They had available to them an Equity Manager Account (also with the ANZ Bank) on which they could draw in order to make up the shortfall.
There is no evidence that the Arndts informed the defendants or their agents about the existence of this facility: at least before they entered into the Formal Contract. This they did on 28 August 2004, outside the 180 day period specified in the special conditions of the Preliminary Agreement.
In my view, therefore, the Arndts were in breach of their obligation under condition 1.2(c) of the Preliminary Agreement to notify the defendants that they had Finance Approval. However, the defendants did not terminate the Preliminary Agreement pursuant to condition 1.5, either immediately or at all, before it terminated automatically.
Action 2286 of 2005
The plaintiffs are Gary John Smith and Elizabeth Florence Smith ("the Smiths"). On 19 February 2004, they entered into a Preliminary Agreement to pay $199,500 for Unit 8. They required finance in an amount of $209,500 from a lender of their choice. The Latest Time was 20 March 2004.
With the assistance of a broker, the Smiths obtained conditional approval from the Westpac Banking Corporation ("Westpac") for loans totalling $368,000. The conditions included a valuation of the property which was satisfactory to Westpac and to its mortgage insurers.
The approval notification was dated 29 March 2004. It was faxed by the Smiths' brokers to the defendants' agents on that day.
In my view, Westpac's conditional approval was a Finance Approval within the second limb of the definition. It was obtained after the Latest Date, but it was the subject of immediate notification to the defendants' agents: and the defendants did not terminate the Preliminary Agreement.
The Smiths entered into the Formal Contract on 9 August 2004, within the 180 day period specified in the special conditions of the Preliminary Agreement.
The legal effect of the Formal Contracts
As I have noted above, the Formal Contracts comprised a number of documents, including the original Offers and Acceptances which formed the basis of the Preliminary Agreements.
Those Offer and Acceptance forms contained the provisions for Finance Approval which, by the date of each entry into the Formal Contract, had already been worked out. That is to say, the Latest Times had all long passed. The plaintiffs had each made financial arrangements which were acceptable to them, they had notified the defendants' agents; and the defendants had apparently accepted those arrangements as being satisfactory. In any event, as held by Pidgeon J (with whom Franklyn and Ipp JJ agreed) in Erley Pty Ltd v Gunzberg Nominees Pty Ltd (1998) Australian Contract Reports 90‑093, at 90,785, finance clauses of the kind included in the Preliminary Agreements are primarily for the protection of purchasers.
If the defendants had not been content to proceed with the Arndts (who failed to notify the defendants that they had Finance Approval in terms of the Preliminary Agreement) or the Smiths (who gave late notification of their Finance Approval), they could have terminated the Preliminary Agreements.
Further, the defendants entered into Formal Contracts with the Neates and the Arndts outside the 180 day period referred to above, which marked the automatic termination of the Preliminary Agreements.
Condition 11.1 of Annexure B to each Formal Contract provided that it was to constitute the entire agreement. The condition was in the following terms:
"11.1Entire Agreement
11.1.1This Agreement constitutes the entire agreement between us.
11.1.2There are no prior or other agreements that shall have any effect on this Agreement nor shall any correspondence or documents which may have passed between us before execution have any effect whatsoever on this Agreement." (my emphasis)
In these circumstances, I consider that the intention of the parties was that they would be bound unconditionally, and by the Formal Contracts. On the plaintiffs' side, this, I think, is confirmed by Annexure A to the Formal Contracts which set out a summary of their respective payment obligations.
The plaintiffs' obligation was to pay the balance of the purchase price and any agreed variations which might be due, on the settlement date. If any of the plaintiffs delayed, they would be obliged to pay interest on the balance due at a rate of 12 per cent per annum. The defendants would not be required to give notice to that effect: condition 3.4.2. There was nothing conditional about those obligations.
Neither was there anything conditional about the defendants' obligations arising under the Formal Contracts. They were obliged by the conditions set out in Annexure B to construct the subject units in accordance with the Plans and General Specifications, in a good and workmanlike manner and using quality materials. In addition, the defendants were under an obligation to use reasonable endeavours to ensure that the builder repaired defects in "your villa" which appear within a period of six years: condition 2.3.1.
Further, by condition 2.5.2, the defendants agreed that if it became necessary for them to make some variation to the plans or specifications for the building, they would ensure that no such variation would materially alter or affect the use and environment of the unit "by you". And condition 6.0 provided that the unit was "sold" and "you shall take title …".
By condition 5.2.1, settlement was to take place 14 days after the date on which the duplicate certificate of title had been issued.
Having regard to these provisions, I do not accept the defendants' submission that the defendants were constructing the units for "the world at large" but giving the plaintiffs (who had each paid only $1000 by way of deposit) only "a tentative contractual hold" on the units when constructed, if they were then able to obtain finance.
For the reasons set out above, I consider that the defendants were constructing the units for the plaintiffs who were obliged to pay the balance of the price on settlement.
In fact, of course, the plaintiffs did not have unconditional finance approval. The purchasers (with the possible exception of the Harradines) were all required by their respective lenders to provide acceptable valuations of the completed units. This is only to be expected in cases where lenders are being asked to advance moneys to purchase buildings which are still in the course of construction. However, there was nothing in the Formal Contracts which imposed on the defendants an obligation to construct the buildings to a particular value. In my view, therefore, the plaintiffs must be taken to have accepted the risk that their respective units might not have a sufficient value to satisfy the lenders.
Put another way: once the Finance Approval condition had been satisfied, the contract became "completely binding": see Meehan v Jones (1982) 149 CLR 571 at 582 per Gibbs CJ.
In reaching these conclusions, I have considered the decision of Owen J in Shakibaee v Chan (2001) 24 WAR 97, relied on by the defendants for the proposition stated by his Honour at [53]:
"The law seems to be that a right to waive a condition continues beyond the expiry of the period within which the condition falls to be fulfilled so long as the contract continues on foot …"
However, as Owen J then observed, this will depend on "the resolution of critical questions of construction". Similarly, in Perri v Coolangatta Investments Pty Ltd (1982) 149 CLR 537, at 546, Gibbs CJ (with whom Stephen, Wilson and Brennan JJ agreed) said:
"… I consider that 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, and that it is not necessary first to give a notice calling on the party in default to complete the contract or fulfil the condition. What I have said is, of course, subject to any sufficient indication of a contrary intention in the words of the contract itself."
On the construction of the Formal Contracts which I favour, and the circumstances in which they were executed, the defendants lost any rights they might have had against any of the plaintiffs to terminate. As the High Court said in Suttor v Gundowda Pty Ltd (1950) 81 CLR 418 at 441, in the context of a voidable contract:
"The question of who may avoid it depends on what happens. If one party has by his default brought about the happening of the event, the other party alone has the option of avoiding the contract. If the event has happened without default on either side, then either party may avoid the contract. But neither need do so, and, if one party having a right to avoid it does not clearly exercise that right the other party may enforce the contract against him."
The defendants rely also on a passage in the judgment of Deane, Toohey, Gaudron and McHugh JJ in Immer (No 145) Pty Ltd v The Uniting Church in Australia Property Trust (NSW) (1993) 182 CLR 26, at 42, where their Honours said:
"… where the right to rescind is a continuing one, it is not so readily concluded that the party entitled to rescind has abandoned that right completely as opposed to taking no action to exercise the right at the time in question."
That proposition must be accepted: but the conclusion can be based only on the parties' intentions, as found in the relevant agreement.
In my view, having regard to the circumstances in which the parties had entered into the Formal Contracts, and having regard to their terms, it was not open to the defendants to terminate the Formal Contracts on the grounds that the relevant plaintiffs had either failed to obtain satisfactory finance or to notify the defendants of the terms on which finance was available to them.
Performance of the Formal Contracts
Condition 4.6 of the Formal Contracts imposed on the plaintiffs an obligation to monitor the progress of the construction of their respective units and the registration of the Strata Plan. By way of assistance, the defendants agreed to have their conveyancers inform the plaintiffs or their conveyancers in a timely fashion:
•when the Strata Plan had been registered;
•the number allocated to it by the Registrar of Titles;
•the date when the duplicate certificate of title was expected to be issued;
•the actual date of settlement.
The defendants performed their obligations by constructing the units and, in each case, notifying the plaintiffs of progress in accordance with condition 4.6.
On 14 September 2004, the defendants' conveyancers (West End Settlements) informed the plaintiffs' conveyancers that the certificates of title were approximately three months from being issued.
Then, on 3 December, West End Settlements informed the plaintiffs' conveyancers that they expected settlement to be effected by 23 December; and that as soon as they had the Strata Plan number, the plaintiffs would be informed.
On 8 December, West End Settlements informed the plaintiffs' conveyancers of their respective Strata Plan numbers. They also asked for confirmation in writing that "the finance on this matter is unconditional".
That request appears to have been prompted by a concern raised by Peter Tilli of Primestyle Homes which was constructing the units for the defendants.
Mr Tilli's concern is set out in a letter dated 9 December to Backhouse in which he said:
"We have been advised that the 14 contracts are still not unconditional since the finance is subject to valuation by the respective banks. These contracts are suppose [sic] to be unconditional.
We require confirmation within the next 7 days that the contracts are in fact unconditional and that the purchasers will be in order to settle upon the titles being in order for dealing as per the contracts.
We reserve our rights therein."
On 9 December, Norfolk Conveyancing (acting on behalf of the Neates and the Harradines) sent a fax to West End Settlements in response to their enquiry. They said:
"As we discussed, we understand the complex is not yet completed and in fact some of the front units do not have the roof on yet so we are surprised to hear the vendor anticipates settlement on 23 December 2004.
We advise that our clients' lenders have to value the properties once they are completed to enable unconditional finance approvals to be issued."
Neither the Arndts nor the Smiths responded to West End Settlements' fax of 9 December.
On 11 February 2005, the Harradines' broker informed Norfolk Conveyancing that the Harradines had received unconditional approval of their loan of $225,000 for the purchase of Unit 10.
On 22 February 2005, West End Settlements sent a fax to each of the plaintiffs' settlement agents saying:
"We refer to the abovementioned transaction and advise that we have now been notified by the vendor that the contract for this transaction is now at an end. Please arrange for the stamp duty cancellation form to be forwarded to this office for vendor's completion."
It is not clear on what basis the defendants claimed to be entitled to terminate the Formal Contracts as they did. There is an explanation in letters dated 24 March 2005 written by the defendants' solicitors to the plaintiffs' legal advisers. In the letter, the defendants' solicitor said:
"Your clients have entered into contracts for the purchase of units at the above address.
Initially, after the agreements were signed, approvals of finance were obtained but it was known to all parties that the finance approvals were not to carry through until the completion of the project.
The units are now nearly completed and settlement is imminent. The vendors' settlement agency West End Settlements, wrote to you putting your clients on notice that finance must be obtained to avoid the contracts coming to an end.
You did not reply to correspondence from West End Settlements and the condition for finance has not been met on the contracts.
West End Settlements then wrote to you informing you that your clients' contracts were therefore at an end because of the non fulfilment of the finance clauses.
We confirm that the contracts are at an end."
I do not understand the basis for the proposition set out in the first of the paragraphs quoted above, that all parties knew that the finance approvals "were not to carry through until the completion of the project". For the reasons set out above, that is not how I construe the Formal Contracts. Further, it has not been suggested by the defendants that their relationship with the plaintiffs is governed by any contract, formal or informal, other than the Formal Contracts.
In my view, for the reasons given above, the defendants had no right to terminate the Formal Contracts, as they purported to do, either without notice, or at all.
On the basis of my view that the Formal Contracts were unconditional, the plaintiffs' obligations were to complete their respective purchases by settlement after the units had been completed and certificates of titles issued.
I therefore consider that the defendants' conduct constituted a repudiation of the Formal Contracts which, in my view, entitled the plaintiffs to decrees of specific performance (at least, after the construction of the units had been completed), assuming, of course, that they were then ready and able to settle.
An alternative view
As I understand the submissions presented on behalf of the defendants at the trial, the defendants contend that they were entitled to terminate the Formal Contracts because the plaintiffs had not obtained Finance Approval. However, if any of the plaintiffs failed in that respect, they were required by the finance conditions set out in the offer and acceptance to inform the defendants or their agents of that fact. By condition 1.5, the failure to do so would have been a default: and the defendant was then entitled to "immediately terminate" the Preliminary Agreement by notice in writing.
In my view, the plaintiffs' obligation to notify the defendants involved what Starke J described in Larking v Great Western (Nepean) Gravel Ltd (In Liq) (1940) 64 CLR 221 at 231 as "a definite act". That being so, on the basis of Starke J's analysis, the defendants' actions in permitting the Preliminary Agreements to remain on foot and subsequently entering into the Formal Contracts, amounts to an affirmation of the contractual arrangements and a waiver of the default. The judgments of Rich ACJ and Dixon J in Larking's case (supra) are to the same effect.
If I am wrong in my view that the defendants waived any default on the part of the plaintiffs in relation to notification, then the plaintiffs must have been subject to a continuing obligation in relation to those matters.
If that is the correct analysis, then, in my view, the defendants were not entitled to terminate the Formal Contracts without giving notice of the relevant default and an opportunity to the plaintiffs to remedy it, pursuant to condition 10.1 of Annexure B to the Formal Contract. That is because, as I have noted above, the requirements of condition 10 would prevail over condition 1.5 of the finance conditions set out in the offer and acceptance documents which entitled the defendants to terminate without notice in the event of a default of the kind there specified.
Should the plaintiffs be granted specific performance?
It is well settled that a plaintiff who seeks specific performance of a contract for the sale of land must be ready and willing to perform his own obligations under the contract at the time he commences the proceedings.
In the present case, on 28 February 2005, the plaintiffs lodged caveats on that part of the title to the land on which their respective units were being constructed.
It appears that the construction was still in progress. The date of completion is not clear. However, in the letters dated 24 March 2005 written by the defendants' solicitors to the plaintiffs' legal advisers, the defendants' solicitors said "the units are now nearly completed and settlement is imminent".
It is an agreed fact that duplicate certificate of titles were issued in respect of each of the units on or about 3 May 2005.
The proceedings were commenced by originating summons on 27 May 2005.
Having heard evidence from Mr Neate, Mr Harradine, Mr Arndt and Mr Smith, I find the following facts.
The Neates had finance available to settle as from 10 February 2005 (Annexure ARN 6 to Mr Neate's statement, exhibit 7). Their finance has been available continuously since then. They are now ready and willing to settle.
The Harradines' finance was available from 11 February 2005 (Annexure NJH 5 to Mr Harradine's statement, exhibit 5). Their finance has been available continuously since then. They are now ready and willing to settle.
The Arndts' finance was available from 11 November 2003 (Annexure MSA 7 to Mr Arndt's statement, exhibit 9). Their finance has been available to them continuously since then. They are now ready and willing to settle.
The Smiths' finance was available from 6 April 2004: Annexure GJS 7 to Mr Smith's statement, exhibit 8). Their finance has been available continuously since then. They are now ready and willing to settle.
In all the circumstances, and for the reasons set out above, I consider that each of the plaintiffs is entitled to a decree of specific performance of their respective Formal Contracts with the defendants.
I will hear from counsel as to the precise form of orders to be made in each case.
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