NORGARD -v- ABCO HOLDINGS PTY LTD & ANOR [2001] WASC 324

Jurisdiction:	SUPREME COURT OF WESTERN AUSTRALIA	Citation No:	[2001] WASC 324
Case No:	CIV:1211/2000	Heard:	9 NOVEMBER 2000, 26 & 27 MARCH 2001
Coram:	PARKER J	Delivered:	28/11/01
No of pages:	50	Judgment Part:	1 of 1
Result:	Specific performance ordered
Category:	A
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Parties:	ROSS STEWART NORGARD ABCO HOLDINGS PTY LTD (ACN 009 350 298) M J PASSMORE NOMINEES PTY LTD (ACN 008 837 554)
Catchwords:	Partnership Dispute between partners Deed of Settlement Provision for sale and transfer of partner P's interest to partner A Provision that if A "fails to settle" within stipulated time P may elect to cancel the sale and transfer Purported election Whether A "failed to settle" Whether election valid Counterclaim by A for specific performance Delay Readiness and willingness of A to perform
Legislation:	Nil
Case References:	Bahr v Nicolay (No 2) (1988) 164 CLR 604 Foran v Wight (1989) 168 CLR 385 Gurney v Gurney (No 2) [1967] NZLR 922 Hensley v Reschke (1914) 18 CLR 452 Mackay v Dick (1881) 6 App Cas 251 Mehmet v Benson (1965) 113 CLR 295 Paltara Pty Ltd and Anor v Dempster and Ors (1991) 6 WAR 85 Pianta v National Finance and Trustees Ltd (1964) 38 ALJR 232 Secured Income Real Estate (Australia) Ltd v St Martins Investments Pty Ltd (1979) 144 CLR 596 Blisset v Daniel (1853) 68 ER 1022 BP Refinery (Westernport) Pty Ltd v Shire of Hastings (1977) 180 CLR 266 Codelfa Constructions Pty Ltd v State Rail Authority of New South Wales (1982) 149 CLR 337 Dillon v Bepuri Pty Ltd (1989) NSW Conv R 55-436 Eriey Pty Ltd v Gunzberg Nominees Pty Ltd Aust Contract Rep 90-093 Financings Ltd v Baldock [1963] 2 QB 104 Legione v Hateley (1983) 57 ALJR 292 Sheldon v Phillips (1894) 15 LR (NSW) 98 Shiloh Spinners Ltd v Harding [1973] AC 691 Stern v McArthur (1988) 62 ALJR 588 Tang v Chong (1989) NSW Conv R 55-449 TCN Channel 9 Pty Ltd v Hayden Enterprises Pty Ltd (1989) 16 NSWLR 130 Union Eagle Ltd v Golden Achievement Ltd [1997] AC 514 White and Carter (Councils) Ltd v McGregor [1962] AC 413

JURISDICTION : SUPREME COURT OF WESTERN AUSTRALIA

IN CHAMBERS

CITATION : NORGARD -v- ABCO HOLDINGS PTY LTD & ANOR [2001] WASC 324 CORAM : PARKER J HEARD : 9 NOVEMBER 2000, 26 & 27 MARCH 2001 DELIVERED : 28 NOVEMBER 2001 FILE NO/S : CIV 1211 of 2000 BETWEEN : ROSS STEWART NORGARD

Plaintiff

AND

ABCO HOLDINGS PTY LTD (ACN 009 350 298)

First Defendant

M J PASSMORE NOMINEES PTY LTD (ACN 008 837 554)

Second Defendant

Catchwords:

Partnership - Dispute between partners - Deed of Settlement - Provision for sale and transfer of partner P's interest to partner A - Provision that if A "fails to settle" within stipulated time P may elect to cancel the sale and transfer - Purported election - Whether A "failed to settle" - Whether election valid - Counterclaim by A for specific performance - Delay - Readiness and willingness of A to perform

Legislation:

Nil

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Result:

Specific performance ordered

Category: A

Representation:

Counsel:

Plaintiff : No appearance

First Defendant : Mr S M Davies

Second Defendant : Mr E M Corboy

Solicitors:

Plaintiff : Phillips Fox

First Defendant : Edwin Leech

Second Defendant : David Rawlinson

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

Bahr v Nicolay (No 2) (1988) 164 CLR 604
Foran v Wight (1989) 168 CLR 385
Gurney v Gurney (No 2) [1967] NZLR 922
Hensley v Reschke (1914) 18 CLR 452
Mackay v Dick (1881) 6 App Cas 251
Mehmet v Benson (1965) 113 CLR 295
Paltara Pty Ltd and Anor v Dempster and Ors (1991) 6 WAR 85
Pianta v National Finance and Trustees Ltd (1964) 38 ALJR 232
Secured Income Real Estate (Australia) Ltd v St Martins Investments Pty Ltd (1979) 144 CLR 596

Case(s) also cited:

Blisset v Daniel (1853) 68 ER 1022
BP Refinery (Westernport) Pty Ltd v Shire of Hastings (1977) 180 CLR 266
Codelfa Constructions Pty Ltd v State Rail Authority of New South Wales (1982) 149 CLR 337

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Dillon v Bepuri Pty Ltd (1989) NSW Conv R 55-436
Eriey Pty Ltd v Gunzberg Nominees Pty Ltd Aust Contract Rep 90-093
Financings Ltd v Baldock [1963] 2 QB 104
Legione v Hateley (1983) 57 ALJR 292
Sheldon v Phillips (1894) 15 LR (NSW) 98
Shiloh Spinners Ltd v Harding [1973] AC 691
Stern v McArthur (1988) 62 ALJR 588
Tang v Chong (1989) NSW Conv R 55-449
TCN Channel 9 Pty Ltd v Hayden Enterprises Pty Ltd (1989) 16 NSWLR 130
Union Eagle Ltd v Golden Achievement Ltd [1997] AC 514
White and Carter (Councils) Ltd v McGregor [1962] AC 413

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1 PARKER J: The nominal plaintiff is a receiver appointed in respect of the business of a partnership between the first and second defendants. Having formally commenced these proceedings by originating summons the plaintiff has been excused from further participation, it being left to the disputing partners to conduct them.

2 The defendants are each companies. The first defendant Abco Holdings Pty Ltd ("Abco") had as its directors at the relevant times a husband and wife Mr and Mrs Lynch. The second defendant M J Passmore Nominees Pty Ltd ("Passmore") at relevant times had as its directors Mr M J Passmore and his son Mr R J Passmore.

3 As partners the defendants were each the registered proprietors of an undivided half interest in land at Kalbarri, which was comprised in Certificate of Title Volume 1699 Folio 342 ("the land"), upon which the proprietors conducted the business of a caravan park as co-partners in equal shares. In April 1997 notice was given on behalf of Passmore of its intention to dissolve the partnership. This seems to have been in consequence of growing matters of dispute or dissatisfaction as between the partners. On 15 July 1997 by interim Order of this Court the plaintiff was appointed receiver and manager in respect of the partnership. Proceedings CIV 1767 of 1997 having been instituted in this Court between the partners in respect of the matters of dispute, those proceedings came to be compromised in accordance with the terms of an undated Deed of Settlement which was executed on 2 November 1998 ("the Agreement"). This compromised all matters in dispute between the defendants in CIV 1767 of 1997. The Agreement was executed by Mr and Mrs Lynch on behalf of Abco and Mr M J Passmore and Mr R J Passmore on behalf of Passmore.

4 The Agreement was prepared by Passmore's legal advisers and delivered to Abco's legal advisers as an offer to compromise CIV 1767 of 1997 on its terms. It was accepted by Abco as offered, save for the deletion of two provisions which are irrelevant for present purposes.

5 The Agreement provided for the sale and transfer by Passmore to Abco of the whole Passmore’s share and interest in the partnership, which included its interest in the land. Abco was to pay to Passmore $480,000, of which a deposit of $50,000 was to be paid within two business days of 2 November 1998. In addition, Abco agreed to repay at settlement all amounts owing by the partnership to Bankwest to secure the discharge of a mortgage over the land and any other encumbrances which Bankwest held in respect of assets of the partnership. This required the repayment

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to Bankwest by Abco of some $1,150,000. The Agreement provided for the plaintiff as receiver to continue to manage the caravan park under the interim Order of this Court until settlement. There were also provisions, applying until settlement, for payment by the plaintiff of partnership accounts, distributions of anticipated profits to both partners and, on the date of settlement, for the division and payment of certain accumulated funds in agreed percentages to the two partners.

6 The agreement also made provision for the preparation of final financial statements for the partnership from 1997 to the date of settlement and provided inter alia that after settlement Abco and its directors, Mr and Mrs Lynch might recover debts due to the partnership but were to indemnify Passmore and Mr John Passmore against all partnership liabilities. By cl 13 of the Agreement the partners were also to arrange for the dissolution of the partnership.

7 By cl 15(a) it was provided that on acceptance of the offer the partners should apply jointly for the adjournment of the trial then pending in this Court of action CIV 1767 of 1997, and by cl 15(b), upon and subject to settlement being effected, Abco was to discontinue its claims in that action and Passmore was to discontinue its counterclaim. Notwithstanding this provision, it appears that by consent the action was dismissed on 20 December 1999, even though settlement pursuant to the Agreement had not then occurred.

8 The deposit of $50,000 required by the Agreement was duly paid by Abco. The Agreement provided in cl 3 that settlement "shall occur 60 days after acceptance of this offer", ie 60 days after 2 November 1998 which is 1 January 1999. Settlement did not take place at or about 1 January 1999. It was further provided by cl 24 of the Agreement that if for any reason Abco "fails to settle within 90 days after the date of acceptance of this offer", ie within the period ending Sunday 31 January 1999, "then, at the election of Passmore" the sale and transfer shall be cancelled and Abco and Passmore shall immediately instruct the receiver to sell the whole of the partnership property including the land by public auction, the partnership then to be wound up by the receiver. The last working day for settlement within the 90 days specified in cl 24 of the Agreement was Friday 29 January 1999. That day passed without settlement having taken place. On Monday 1 February 1999 Passmore purported, by its Managing Director Mr M J Passmore, to make the election contemplated by cl 24. Abco disputed that Passmore was entitled to make the election. In view of the dispute between Abco and Passmore concerning the validity of Passmore’s purported election the receiver

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declined to act to sell the property and wind up the partnership. Proceedings were instituted by Passmore but they lapsed. Eventually, the receiver instituted these present proceedings with a view to the dispute between Abco and Passmore concerning cl 24 being resolved. In the meantime, the receiver has continued to conduct the business of the partnership.

Pleadings

9 While these proceedings were commenced by way of originating summons for the construction of cl 24 of the Agreement, directions were made for pleadings. By its statement of claim as now amended Passmore essentially seeks declarations that, pursuant to cl 24 of the Agreement, it has validly determined the sale and transfer provisions of the Agreement, and that Passmore or Abco are entitled to authorise the plaintiff as receiver to offer the land and the entirety of the assets of the partnership for sale by public auction, and that the receiver is entitled to wind up the partnership as soon as possible after the completion of the sale by public auction. Other specific relief is sought including damages and a declaration in respect of a matter of dispute that had arisen concerning the deposit. The dispute concerning the deposit has been resolved and need not feature further in these reasons. An issue concerning the "accumulated funds" for which cl 8 and cl 22 of the Agreement made provision was also raised.

10 By its defence Abco denies that in the circumstances Passmore is entitled to any relief and counterclaims for declarations in equity and under s 87 of the Trade Practices Act 1974 (Cth) that Passmore was and is not entitled to exercise the election in cl 24 of the Agreement and an order for Passmore to specifically perform the sale and transfer as provided by the Agreement. Damages and other relief are also sought.

11 There is also an extensive reply and defence to the counterclaim by Passmore by which, as amended, many of the allegations in the defence and counterclaim are denied or not admitted. In particular, it is denied that at the date of the counterclaim and thereafter Abco was ready, willing and able to effect settlement of the transfer of the land.

12 During the hearing an issue as to amendment of the reply arose. By par 1 of the reply Passmore inter alia admitted an allegation in par 8 of the defence which had alleged it was a term of the Agreement that Passmore would use its best endeavours to allow settlement to occur on or before 29 January 1999. By way of particulars it was pleaded that this

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term was the effect of cl 17 the Agreement or was to be implied. At trial Passmore sought to withdraw this admission in its reply and to deny the alleged term of the Agreement. Abco resists the amendment noting it had stood on the record for some months before trial, and even though the reply had been amended in other respects shortly before the trial. The first defendant emphasises that the application to amend was not made until after the close of evidence and during closing submissions, although I see it had been foreshadowed in the written outline of submissions of Passmore made available pre-trial. It is further stressed by Abco that there has been no attempt to explain, whether by way of oversight or otherwise, the formal admission in the reply and that the allegation and its admission are not surprising or obviously misconceived. Further, it is submitted that the amendment is not sought to bring the pleading into conformity with evidence led at trial or to raise an alternative legal consequence of facts already in issue. The amendment, though, has the effect of withdrawing an admission of law. No obvious consequences as to evidence would appear to arise from the application, although it would introduce a new live issue in the trial to which it was obvious that Abco had not directed particular attention in its preparation in view of the admission. The application is somewhat finely balanced. There is no particular justification for allowing the amendment. It is preferable as a matter of fairness that it be refused. I would note, however, that for reasons given later this is not material to the result.

Relief

13 During the hearing, by consent, it was ordered that all issues as to relief, apart from specific performance, be deferred. These reasons will therefore not deal with any issues of relief other than specific performance.

Onus

14 The parties were in strong disagreement as to which of them carried the onus of proof in this action. Passmore advanced the view that as it was Abco that was challenging the validity of Passmore's exercise of its rights under cl 24 it should be Abco which bore the onus of proof despite what Passmore seemed to regard as a somewhat misguided pre-trial direction that Passmore should plead its case as plaintiff. This submission overlooked the circumstance that it was Passmore which claimed to be entitled, in the circumstances in which that entitlement was not obvious, to exercise the election for which cl 24 made provision. Given the overall

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circumstances and the nature of cl 24 it appears to me that the procedural direction correctly placed Passmore in the role of plaintiff, and that it should bear the onus of proof. Its entitlement to relief depends on the validity of its purported election pursuant to cl 24. It is seeking declarations as to its entitlement to treat the sale and transfer as cancelled and to be able to require the receiver to sell the land and other assets of the partnership.

15 As will appear, however, it is only in one respect which I will identify in the reasons that the view I take as to onus affects the factual findings set out later and the ultimate view I take of the case would be the same even if Abco bore the onus.

Facts

16 At the time of entering into the Agreement on 2 November 1998 Abco did not have the means to fulfil the obligations it had undertaken. Discussions with Bankwest and with a syndicate of three investors of which Mr Timms is the manager ("the Timms syndicate") had provided Mr and Mrs Lynch with an expectation that Abco would be able to put into effect arrangements by which it could meet its obligations pursuant to the Agreement, but these expectations were by no means assured as at 2 November 1998. In this respect, therefore, Abco and its directors, Mr and Mrs Lynch, were at some risk. These expectations were then pursued. Without exploring the details, tentative arrangements were put in place for Abco to raise the funds necessary to meet its commitments under the Agreement. At settlement, Abco was to sell the land to the Timms syndicate on a lease back basis and by this means, together with further borrowing from Bankwest, it would have the funds necessary to meet its obligations under the Agreement in particular, the payment of the balance of the $480,000 to Passmore and the repayment to Bankwest of the partnership borrowings.

17 By this arrangement the outcome anticipated after settlement was that Abco would have a lease over the land and would be the owner of the caravan park business which it would conduct on the land. It would owe money which it had borrowed from Bankwest to be repaid in time out of funds generated by the caravan park business.

18 It seems, nevertheless, that the financial arrangements contemplated by Abco were tight. Two events which occurred in December 1998 upset those arrangements. One of these was a dispute between Abco and Passmore concerning what were described in cl 8 and cl 22 of the

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Agreement as “accumulated funds”. These were defined in cl 22 and were to be distributed by the receiver on settlement to the partners in the proportion of 55.35 per cent to Passmore and 44.65 per cent to Abco. The essence of the dispute was whether or not moneys held by the business, having been received as deposits on future bookings or as bonds, were included in the accumulated funds. It appears that Abco had proceeded on the basis that they would not be and that at settlement it would have access to 100 per cent of these funds for use as working capital. Passmore took the view that the deposits and bond moneys were accumulated funds so that on settlement Abco would have access only to 44.65 per cent of these monies. The dispute having arisen it came before Heenan J in this Court and by an order made by Heenan J on 22 December 1998, 55.35 per cent of the deposit and bond moneys held by the business were required to be paid into a trust account, so effectively denying Abco the prospect of access to those funds on settlement.

19 The second issue concerned stamp duty in respect of the Agreement. It appears that Abco had anticipated that the stamp duty would be in the order of $18,000 on the basis that the consideration for the purposes of duty was the figure of $480,000. Mr M J Passmore for Passmore, however, was concerned that the true consideration was very much greater, in particular, as it included the repayment of the Bankwest loan. He took it upon himself to write to the Stamp office expressing his concern. As a consequence, the transaction came to be assessed for duty at $45,972.50 rather than the anticipated approximately $18,000. Abco was advised by its solicitors on 24 December 1998 that it would be difficult to challenge this assessment. The stamp duty was to be met by Abco under the Agreement so that the assessment required it to find some additional $28,000. This, together with the fact that by virtue of the order of Heenan J it would not have access as it had anticipated to the whole of the deposit and bond moneys following settlement, left Abco unable to meet all the obligations it had undertaken in the Agreement. It appears that for this reason no attempt was made by Abco to settle on or about 1 January 1999, ie the 60 days settlement date contemplated by cl 3 of the Agreement. Mr Nixon of Glyn and Gray, the solicitors acting for Abco, had been advised by Passmore’s solicitor, Mr Rawlinson on 24 December 1998 that if settlement did not occur Passmore would demand penalty interest as contemplated by the Agreement. No other action was taken by Passmore in respect of the failure to settle in accordance with cl 3 of the Agreement. In particular, no notice of default was given.

20 Mr and Mrs Lynch set about trying to raise additional finance for Abco early in January 1999 so as to enable it to meet its obligations under

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the Agreement. An application was made to Bankwest to increase the borrowing which had been previously sought and approved. In addition to the two matters already identified, Abco also sought further additional borrowing to compensate it for the loss of the income it had anticipated from the heavy January holiday patronage of the caravan park which was now denied to it, of course, because of its failure to settle in accordance with cl 3 of the Agreement. Bankwest was not prepared to increase the amount of its loan.

21 Mr and Mrs Lynch for Abco then turned to the Timms syndicate and were successful in renegotiating the earlier arrangement tentatively agreed with that syndicate. A new arrangement evolved by which, on settlement, Abco would now sell to the Timms syndicate not only the land but also the business of the caravan park for $1,875,000, and would thereafter lease back both the land and the caravan park business. By this means, Abco anticipated it was in a position to settle with Passmore pursuant to the Agreement. The necessary documentation between Abco and the Timms syndicate was concluded on 20 January 1999. On 21 January 1999, however, Abco was advised that the Timms syndicate was not prepared to pay stamp duty which had to be paid if settlement was to be effected. It appears that this had not been anticipated by Mr and Mrs Lynch for Abco. Once again Abco was not in a position to settle Abco tried unsuccessfully to borrow the funds needed for the stamp duty from both Bankwest and the Timms syndicate, and it was not until 22 January 1999 that it was able to raise the additional moneys from other sources. The additional moneys became available to Abco on the morning of 27 January 1999 and the stamp duty was immediately paid by its solicitor, Mr Nixon.

22 Mr Nixon had advised Abco on 12 January 1999 that the last “safe” date for settlement pursuant to the Agreement was Friday 29 January 1999. On 18 January 1999 Mr Nixon had advised Mr Rawlinson for Passmore that Abco hoped to settle on 22 January 1999 but added that it would depend on the banks whether that could be achieved. He was to keep Mr Rawlinson informed. That date was revised, however, on 20 January 1999 when Mr Nixon advised Mr Rawlinson by facsimile that settlement was rescheduled for Thursday 28 January 1999 “at the request of another party”, which in the circumstances was no doubt the Timms syndicate, and Mr Nixon was to keep Mr Rawlinson informed. During a conversation on 20 January 1999 the possibility that the transfer of land between Passmore and Abco might need to be sent to Kununurra for execution by Mr R J Passmore was mentioned to Mr Nixon by Mr Rawlinson. This possibility was again mentioned on 22 January 1999

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and, in response to an enquiry, Mr Rawlinson also advised that he doubted that there could be any lee-way agreed in respect of the date fixed by cl 24 of the Agreement. On Monday 25 January 1999 Mr Nixon advised Mr Rawlinson that settlement was not yet arranged although he saw no reason why it wouldn’t be on Thursday 28 January 1999 as he had proposed on 20 January.

23 Early in the morning of Wednesday 27 January 1999 Mr Nixon rang Mr Rawlinson but in the absence from the office of Mr Rawlinson he spoke to the receptionist. He advised that the transfer of land would be delivered to Mr Rawlinson’s office at about noon and queried whether it would need to go to Kununurra for execution. Mr Rawlinson’s receptionist agreed to clarify this and advise Mr Nixon. Before she did so, however, a little later in the morning Mr Nixon and Mr Rawlinson spoke by telephone. During this conversation Mr Rawlinson indicated that he thought the transfer would need to go to Kununurra, although he was not certain of the position. It was suggested by Mr Nixon that if no other execution arrangement was possible Mr Rawlinson should be able to send it by courier that night to enable it to be returned to Perth by the overnight courier on Thursday 28 January. Mr Nixon advised that all other parties would be ready for settlement on 28 January and he asked to be advised as soon as possible whether the transfer needed to go to Kununurra and, if so, when it could be expected back so that he could finalise the actual time and date of settlement with all affected parties. Mr Nixon telephoned Mr Rawlinson again later that day to be told that Mr Rawlinson was still awaiting contact from Mr Passmore. Mr Nixon asked that Mr Rawlinson make urgent enquiries and if necessary make arrangements to have the transfer delivered to Kununurra and returned for settlement by Friday 29 January 1999. The transfer of land duly stamped and duly executed by Abco was delivered to Mr Rawlinson's office at about 1 pm on Wednesday 27 January 1999. At 2.24 pm on that day Mr Nixon sent to Mr Rawlinson by facsimile a letter in which he said that all parties to the proposed settlement "apart from your client" are ready for (settlement) to occur on Thursday 28 January or Friday 29 January 1999. He suggested that the last day for settlement was Monday 1 February 1999. He confirmed the request he had made by telephone that all necessary arrangements be made for the documents to be executed as soon as possible for settlement tomorrow or on Friday. His letter also dealt with other details of the settlement.

24 While there was some inconsistency between the oral and affidavit evidence of Mr M J Passmore about his movements during the afternoon of Wednesday 27 January 1999 it was originally his evidence that he

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called at Mr Rawlinson's office at about 3.30 pm and during a brief conversation with Mr Rawlinson declined Mr Rawlinson's offer that he would arrange for the sending of the transfer to Kununurra as he preferred to make those arrangements himself. He took the transfer of land with him. He called at the Mount Hawthorn Post Office near his home and there purchased two Express Post envelopes. Later at his home he addressed one envelope to his son Mr R J Passmore in Kununurra at his post office box number, and addressed the second Express Post envelope to himself at his home in Mount Hawthorn intending it to be used for the return of the transfer. He placed the transfer of land, which he had neither sealed nor signed himself, together with the return envelope in the envelope addressed to his son. This envelope he then posted at the Mount Hawthorn Post Office at about 5.30 pm in time for the normal mail collection at 6 pm.

25 At around 5.30 pm that night Mr Rawlinson also replied to Mr Nixon by facsimile advising that his client was arranging for transmission of the transfer to Kununurra and its return to Mr Rawlinson on 29 January 1999 was anticipated. In this communication Mr Rawlinson objected to the views expressed in Mr Nixon's earlier facsimile about the settlement day noting, correctly, that the 90 days expired on Sunday 31 January. He also objected to the suggestion in Mr Nixon's facsimile that "all parties … apart from your client" were ready to settle, saying that his client had in fact been ready for settlement for some weeks and suggesting that the late delivery of the transfer could not be construed to mean that his client was not ready to settle.

26 It is the evidence that the envelope did not arrive in Kununurra on Thursday 28 January 1999 and was in fact collected by Mr R J Passmore from his post office box at the Kununurra Post Office at about 4 pm on Friday 29 January 1999. He took it home and the next day signed in the place provided for the second director or secretary to sign as a witness to the fixing of the seal of Passmore to the transfer. At that time the seal had not been affixed nor had the other director, Mr M J Passmore, signed the transfer. It is Mr R J Passmore's evidence that later that day he posted the return envelope containing the transfer of land at the Kununurra Post Office. It was of course addressed to his father, Mr M J Passmore, at his Mount Hawthorn home where the envelope was delivered on Wednesday 3 February 1999. The envelope was post marked in Kununurra on 1 February 1999 and it is now endorsed apparently by Mr M J Passmore with the notation "received at 2.35 pm on 3/2/99". The evidence of Mr M J Passmore confirms the correctness of this endorsement.

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27 In the meantime, on 28 January 1999 Mr Nixon had been told by a member of Mr Rawlinson's staff that Mr M J Passmore had informed her that the transfer had been sent by urgent overnight post to Kununurra. This led Mr Nixon to take steps towards finalising settlement arrangements with other interested parties. Mr Nixon confirmed to Mr Rawlinson by facsimile late on the afternoon of 28 January that settlement had been arranged for 3.00 pm on 29 January 1999. I accept from the evidence that, leaving aside Mr Rawlinson for Passmore, all necessary parties had been prepared to attend settlement of the sale of the land and business pursuant to the Agreement at the date and time arranged by Mr Nixon namely, at the Commonwealth Bank at 3.00 pm on Friday 29 January 1999, with a view to effecting settlement pursuant to the Agreement at that time. Settlement did not take place, however, as at that time the unexecuted transfer of land had not been collected from the Kununurra Post Office by Mr R J Passmore. This fact was confirmed to Mr Nixon by facsimile sent from Mr Rawlinson's office shortly after 3.00 pm on 29 January 1999.

28 Settlement not having occurred on Friday 29 January 1999, Mr Nixon immediately notified all necessary parties that settlement was rescheduled for 3.30 pm on Monday 1 February 1999. I accept from the evidence that a representative of Abco and all other necessary parties except for Passmore attended at 3.30 pm on Monday 1 February 1999. There was no attendance on behalf of Passmore and no duly executed transfer of land was available in Perth so that settlement did not take place at that time. It has not occurred since then.

29 On the morning of Monday 1 February 1999 Mr M J Passmore, on behalf of Passmore, advised the directors of Abco that:

"The 90 day settlement period stipulated in the court-registered agreement expired yesterday, 31 January 1998.

It is my intention to exercise Clause 24 and proceed to auction through the Receiver as soon as possible."

On the same day Mr M J Passmore also sent a facsimile message to Mr Lynch. It was on the letterhead of Passmore and its subject matter indicates he was addressing Mr Lynch as a director of Abco. It was headed "Settlement – KTCP" and concluded:

"It will give me great satisfaction to go to auction. You have 24 hours to agree to pay me $650,000 out of the proceeds or auction arrangements will commence PM on 2/2/99."

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Among the attachments to this facsimile was a calculation of Mr Passmore to support a contention he had made in the facsimile that he had lost some $750,000 from his involvement in the caravan park. Also included was a copy of the settlement authorisation form which had previously been completed by the partners authorising Bankwest to pay at settlement the sum of $433,958.08 to Passmore (being the balance due under the Agreement of $430,000 with adjustments). This figure had been changed by Mr Passmore to read $650,000 with a corresponding reduction on the authorisation form of the balance payable to Abco's solicitors on settlement. The alterations were signed by Mr Passmore.

30 The effect of these two letters from Mr Passmore on 1 February 1999 is clearly that either Abco should agree within 24 hours to pay $650,000 to Passmore at settlement, rather than the previous figure of $430,000 with adjustments, or Passmore would proceed to instruct the receiver to sell the land and the other partnership property pursuant to cl 24. Neither letter expressly conveys an election to cancel the sale and transfer pursuant to cl 24(a) of the Agreement, although that may well be implied from the stated intention to instruct the receiver to sell. No issue is raised in these proceedings as to the adequacy and form of Passmore's purported election on 1 February 1999. The parties proceed on the basis that there was a purported election on that date.

31 There was some uncertainty during the hearing which arises from a possible ambiguity about the words in the facsimile of Mr M J Passmore, viz "agree to pay me $650,000 out of the proceeds". The uncertainty was whether this meant a revised total purchase price for Passmore's partnership interest of $650,000 instead of the previously agreed $480,000, ie an increase of $170,000, or the sum of $650,000 at settlement which would be in addition to the deposit already paid by Abco of $50,000, ie a total price of $700,000, which would be an increase of $220,000 over the previously agreed price. The amended settlement authority as endorsed by Mr Passmore and sent with the facsimile provided for the payment of a further $650,000 to Passmore at settlement. This suggests that the intention was that the total price payable by Abco to Passmore was $700,000. Nothing turns on this uncertainty for the purposes of this decision.

32 Abco did not agree to pay the additional sum proposed by Passmore and Passmore sought to instruct the receiver to proceed to sell the partnership property including the land and business by auction. As noted earlier the receiver did not act on this instruction. He continues to manage the business.

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33 Kununurra is, of course, a township in the far north of the State near to the Northern Territory border and a little south of the port of Wyndham. The evidence establishes that at the relevant time there were regular airline services between Perth and Kununurra, although at times via Darwin, provided by Ansett Airlines. No doubt mail was carried by this service. The normal daily service from Perth to Kununurra typically left Perth in the early daylight hours arriving in Kununurra mid morning. Accordingly, a scheduled flight departed Perth at about 6.30 am on the morning of Thursday 28 January 1999 and arrived at Kununurra at approximately 10.20 am. There were similar flights at approximately the same hours between Perth and Kununurra on Wednesday 27 January and Friday 29 January 1999. A scheduled flight departed Kununurra a little before 6.00 pm on 28 January 1999 arriving in Perth at 10.20 pm on the evening of that day. There was also a scheduled flight from Kununurra at approximately 10.45 am on 29 January which arrived at Perth at 3.03 pm on 29 January 1999.

34 The evidence demonstrates that Ansett Air Freight provided a courier service between Perth and Kununurra at the relevant time. An article to be sent from Perth to Kununurra could be delivered to the Perth Airport up to one hour before the departure of each flight. Alternatively, an article could be collected from any place in the city or the suburbs of Perth at any time of the day and night to be taken by Ansett to the airport, so long as it reached the airport one hour before the departure of the flight. Delivery of an article in Kununurra would be made within 45 minutes of the arrival of the plane. For the return from Kununurra again an article needed to be delivered to Ansett either in the town or at the nearby aerodrome an hour before departure of the flight, and delivery would be effected in Perth within 60 minutes of the arrival of the plane. I accept from this evidence that there would have been no difficulty for either Mr Rawlinson or for Mr M J Passmore to have arranged for collection of the transfer of land by Ansett Air Freight from either Mr Rawlinson's office or Mr Passmore's home during the afternoon or evening of 27 January, in which event the transfer could have been delivered to Mr R J Passmore in Kununurra shortly after 11.00 am on 28 January, and the transfer could have been sent by return air freight on the 6 pm service out of Kununurra that same evening to either Mr Rawlinson or Mr M J Passmore to be available to them in Perth first thing on the morning of Friday 29 January 1999. Equally, the article could have been delivered to Ansett Air Freight at the Perth Airport at any time before approximately 5.30 am on Thursday 28 January 1999 and collected from the Perth Airport shortly after the arrival of the service from Kununurra at

(Page 16)

10.20 pm on 28 January 1999. Should it be relevant a return delivery from Kununurra could also have been effected on the flight at about 10.45 am on Friday 29 January in which event the transfer would have been delivered to Mr Rawlinson's office within a few minutes of 4.00 pm that day.

35 The movements and decisions of Mr M J Passmore on Wednesday 27 January 1999 require consideration. While his original affidavit, which stood as his evidence-in-chief, lacks some precision, nevertheless, its clear effect is that he collected the transfer of land from Mr Passmore's office, which is in Irwin Street in the City of Perth, at about 3.30 pm that afternoon. He also deposed that he purchased two Express Post envelopes at the Mount Hawthorn Post Office. A receipt which he tendered showed that this purchase had been made at 3.49 pm, which is consistent with the collection of the transfer in the City at about 3.30 pm. It was his evidence that later that afternoon, apparently at his home, he had addressed both envelopes, one to his son at Kununurra and the other intended for the return posting was addressed to himself at his home at Mount Hawthorn. He then inserted the transfer and the return envelope in the envelope addressed to his son, which he then took to the Mount Hawthorn Post Office where he posted it. It was his evidence that the posting was made at about 5.30 pm to be sure to catch the 6.00 pm mail collection.

36 During the cross-examination of Mr M J Passmore, however, what emerged introduced quite a different picture of his movements that afternoon. It became his oral evidence that, in contradiction of the effect of his affidavit, he had purchased the two Express Post envelopes at the Mount Hawthorn Post Office before he collected the transfer of land from Mr Rawlinson's office in the City. While this would help to explain why he did not address and post the envelopes with the transfer "over the counter" at the Mount Hawthorn Post Office at 3.49 pm, as he hadn't then collected the transfer, its inevitable consequence is that he could not have collected the transfer until sometime after 4.00 pm from Mr Rawlinson's office, probably between 4.05 and 4.15 pm. This is not consistent with Mr Passmore's affidavit that it was collected at about 3.30 pm. More troublesome is Mr Passmore's oral evidence that after picking up the transfer of land he then drove to Safety Bay to pick up some fish before returning to his home where it appears he addressed the envelopes and then posted them to his son at 5.30 pm. What is troublesome is the apparent physical impossibility, given the distance and the traffic volumes at that hour of the day, of all of this being accomplished within the times nominated by Mr Passmore. I accept that he purchased the two envelopes at 3.49 pm. He then drove into the City, parked his car, went to

(Page 17)

Mr Rawlinson's office where he spoke to Mr Rawlinson and collected the transfer of land, he then returned to his car and drove all the way to Safety Bay, collected fish, then retraced most of this long journey to Mount Hawthorn, where he addressed the envelopes and then went to the Mount Hawthorn Post Office to post them. The probability is clear, in light of what has now emerged, that the letter could not have been posted until much later than 5.30 pm, and there can be no confidence that the posting was in time for a 6.00 pm mail collection.

37 There are other issues. I accept that Mr Rawlinson had stressed to Mr Passmore the need to ensure the return delivery from Kununurra of the transfer in time for settlement on Friday 29 January, and that Mr Rawlinson had offered to Mr Passmore that he would arrange for the transmission of the transfer to Kununurra to ensure this was achieved. There is no effective or satisfactory explanation from Mr Passmore, however, why he did not leave it to Mr Rawlinson to arrange the return delivery of the transfer to Kununurra. As indicated a little earlier in these reasons this could have been readily accomplished and without any inconvenience whatever to Mr Passmore.

38 The evidence is clear that it was Mr M J Passmore's decision to use Express Post. On the evidence he sought no advice on this from Mr Rawlinson, neither did he make any enquiries of Australia Post whether the Express Post service extended to Kununurra or whether return delivery could be assured by 29 January and, if so, what he should do to ensure this. His evidence was that he didn't bother to read the information on the Express Post envelopes concerning the express delivery network and the method of posting to achieve next day delivery. It is his evidence that from his previous experience he thought the Express Post envelope would reach Kununurra the next day. This previous experience was explained as being one occasion when his son had sent a cheque from Kununurra to Mr Passmore. It was Mr Passmore's evidence that the envelope had been posted by his son on one day and was received by Mr Passmore the next. This evidence did not detail in any respect how, where or when his son had posted the envelope at Kununurra, nor when the next day it was received by Mr Passmore. Nor did it involve any experience of sending Express Post mail to Kununurra from Perth, especially if posted in a Perth suburb in an ordinary mail collection box late in the afternoon.

39 In his evidence Mr Passmore placed emphasis on the printed statement on the front of Express Post envelopes, "Guaranteed next day delivery". There is, however, an asterisk immediately after those words

(Page 18)

which directs attention to an explanation, immediately below the space for the address, that the guarantee of delivery is only over specified routes. It is stated that conditions apply and details are set out on the back of the envelope. Mr Passmore had to turn to the back of both of the envelopes he purchased to complete the sender's details. Immediately alongside the space for the sender's details there is set out the Express Post network in Western Australia. The postcodes given do not include the Kununurra postcode which Mr Passmore had used on the envelopes. It is also stipulated that next business day delivery to remote areas is not guaranteed. Mr Passmore accepts that Kununurra is a remote area. Also set out on the back of the envelope and immediately below the place for the sender's details are the conditions applicable to the posting of an Express Post envelope. To ensure a guaranteed next day delivery within the Express Post network it is necessary that the envelope be posted in a special Express Post GOLD street posting box, these are said to be located in major business areas, or that the envelope be posted "over the counter" at "most post offices" within the appropriate Express Post networks. It is also stipulated that posting times are to be found on the Express Post GOLD posting boxes or the sender should check at a post office.

40 I note that the evidence of Mr M J Passmore as to the posting is only that it was posted at the Mount Hawthorn Post Office. At 5.30 pm this would be too late for the posting to have occurred "over the counter" and it is not the evidence that there was an "Express Post GOLD post box" at the Mount Hawthorn Post Office or that the envelope was posted in such a post box. It is my finding that the envelope was posted in an ordinary mail collection box at the Mount Hawthorn Post Office.

41 In these circumstances it is apparent, in my finding, that delivery to Kununurra the next business day of the envelope containing the transfer was not guaranteed. Kununurra was in a remote area and in particular, whatever the actual time of posting, the envelope was posted in an ordinary mail box at the Mount Hawthorn Post Office rather than in an Express Post GOLD street posting box or "over the counter" at a post office.

42 I note that the only explanation Mr M J Passmore offered for not using the Ansett Air Freight overnight courier service himself was that he hadn't thought about it, and his only explanation for not having Mr Passmore attend to the transmission of the transfer to Kununurra was that he could deal with the matter himself. I also note Mr Passmore's insistence, when pressed, that he had not deliberately delayed posting the envelope containing the transfer until after business hours and that it was

(Page 19)

not clear to him when he posted the envelope that it would not reach Kununurra the next business day. Despite this, on the evidence canvassed so far, it is my finding that in choosing to use Express Post and to do so in the manner that he did, there was no reasonable basis for any understanding or expectation on the part of Mr M J Passmore that the envelope he posted in Mount Hawthorn on 27 January 1999 would be available to his son in Kununurra on 28 January, or that by this means his son could effect a return Express Post delivery to Mr M J Passmore at Mount Hawthorn so as to enable the transfer of land to be available for settlement in Perth on 29 January 1999.

43 That is not the full extent, however, of the relevant evidence on this issue. Although it was not expressly raised in the pleadings of Abco there was raised without objection and fully explored at the hearing the question whether there was need for the transfer of land to be sent to Kununurra to enable Passmore to execute the transfer. Leaving aside the adequacy of the seal of Passmore being affixed "in the presence" of two directors, one being in Kununurra and the other in Perth, which is not pursued by the parties, there is a live issue whether it was necessary for Mr R J Passmore in Kununurra to be a party to the execution by Passmore of the transfer. As a matter of law the seal could equally have been affixed by one director and the company secretary. The company secretary, a Mr Ballato, was a shareholder of Passmore and its accountant. He practised in a suburb of Perth.

44 It is the effect of the evidence that, once again, it was the decision of Mr M J Passmore that the transfer should be sent to his son, the other director, in Kununurra for signature. He said that was the usual practice. It is not suggested he sought advice about this. He merely informed Mr Rawlinson, it seems, when he collected the transfer that it would be sent to Kununurra. Until then, of course, as noted earlier, Mr Rawlinson had merely advised Mr Nixon that this might prove necessary. When cross-examined about this decision the evidence of Mr M J Passmore was again unsatisfactory. He first said it was his understanding that all documents needed to be signed by the directors of the company, a somewhat surprising statement from an experienced and apparently successful businessman and company director, it seems with real estate experience. That answer is the more surprising when regard is had to the transfer of land itself which, as prepared and delivered to Mr M J Passmore, expressly made provision for the seal of Passmore to be affixed in the presence of two witnesses, one described as "director" and the other as "director/secretary". When questioned further about this, Mr M J Passmore's answer involved a shift of ground. When asked

(Page 20)

wouldn't it have been simpler for him to execute the transfer with Mr Ballato, it was no longer his answer that on his understanding Mr Ballato couldn't do so as he was not a director. Instead, it was his answer that he kept his son fully informed as to the business of the company so that he could take over.

45 It is Mr M J Passmore's evidence that he made no enquiries as to the availability of Mr Ballato on 27 January. His explanation in the end was that he didn't think to do so. In evidence he sought, in a quite unconvincing and apparently contrived manner, to raise some possible uncertainty about this by commenting that it was school holidays and Mr Ballato usually went away at that time. There was no other evidence on this issue.

46 Further, there are the facsimile letters sent by Mr M J Passmore on Monday 1 February 1999, the effect of which was to demand a much higher payment than that fixed by the Agreement, failing which action would be taken under cl 24 to cancel the sale and transfer and have the receiver sell the assets of the partnership. Despite Mr M J Passmore's evidence in effect that this was a hollow gesture as he held the view that Abco couldn't raise additional money, I find from the full text of these letters and the evidence of Mr M J Passmore that, at least by late January 1999, he then strongly held the view that he, more accurately that Passmore, should receive a much larger payment than that for which the Agreement provided, in essence to compensate it for perceived losses from the partnership, and that it was then also his view that if the assets of the partnership including the land were sold by auction by the receiver the return to Passmore would be greater than that for which the Agreement provided. It is also apparent from his evidence and these letters that there was also an element of personal animosity to the directors of Abco, for the trouble and loss which Mr M J Passmore considered they had caused, which was influencing him.

47 Having considered all this evidence and observed with some care the demeanour of Mr M J Passmore as he gave evidence I am not able to accept that when he decided to post the transfer to his son in Kununurra he understood at the time that only the directors could execute the transfer, or that he sent the transfer to Kununurra for that reason. Nor do I find that he did so in the belief or understanding that the company secretary Mr Ballato was not available in Perth to witness with him the affixing of the company seal, or that he then considered it was desirable for the due administration of the company that the transfer be sent to Kununurra. In this regard the director at Kununurra could have been kept

(Page 21)

fully informed of this aspect of Passmore's activities without it being necessary for him to sign the actual transfer of land, and the evidence of Mr M J Passmore provided no answer to this and gave no other insight as to why he might have though his son would be better informed or the company's affairs better managed if his son signed the transfer rather than the company secretary Mr Ballato. In this regard the evidence also discloses that father and son were in telephone communication with each other.

48 Neither is there any explanation, which I find to be satisfactory, in the evidence for Mr M J Passmore's failure to accept Mr Rawlinson's offer to arrange for the transmission of the transfer of land to Kununurra, or to use the Ansett Air Freight courier service himself; or of his surprising failure to make any enquiries whatsoever as to the ability of the Express Post service to deliver the transfer to Kununurra in time to enable its return by Friday afternoon, or to have any regard to, or make any effort to comply with, the requirements for the due posting of Express Post mail. Further, for the reasons just canvassed there is in my finding no satisfactory explanation for Mr M J Passmore's failure at least to enquire as to the availability of Mr Ballato.

49 In my view of the evidence the probabilities are that when Mr M J Passmore posted the transfer to his son on 27 January 1999 at the Mount Hawthorn post office he did not do so in the understanding or expectation that by the use of Express Post the transfer would be returned to Perth in time for settlement pursuant to the Agreement to occur on Friday 29 January 1999. I am further persuaded, on the balance of probabilities, that had Mr M J Passmore been genuinely concerned to enable Passmore to be in a position to settle pursuant to the agreement before the end of Friday 29 September 1999 he would have made enquiries as to the availability of Mr Ballato to witness the execution of the transfer and, had he found that was not possible or convenient, he would either have accepted Mr Rawlinson's offer to arrange for the transmission of the transfer to Kununurra or would himself have made use of the Ansett Air Freight courier service, each of those courses being in my finding known to him and readily and conveniently open to him.

50 Had it proved necessary because of the unavailability of Mr Ballato or for whatever reason for the transfer to be sent to Kununurra, the probabilities are strong in my finding that by use of the Ansett Freight courier service, whether by Mr Rawlinson or Mr M J Passmore , the transfer signed by Mr R J Passmore would have been returned to Perth in convenient time for Passmore to be able to tender the transfer, apparently

(Page 22)

duly executed, at the settlement arranged by Mr Nixon for 3.00 pm Friday 29 January 1999.

51 While Mr M J Passmore was clear in the effect of his evidence that he did not act with respect to the transfer so as to deliberately seek to prevent settlement occurring on or before 29 January 1999, the effect of these various circumstances is to leave me with the conclusion, from his evidence, that Mr M J Passmore did not act on and following 27 January 1999 in respect of the transfer with a genuine concern to enable Passmore, of which he was managing director, to be in a position to settle pursuant to the Agreement, whether on 28 January 1999 as proposed by Mr Nixon from 20 January, or on 29 January 1999 as ultimately arranged by Mr Nixon. Further, in my finding, the actions of Mr Passmore on and following 27 January were neither reasonable nor appropriate for that purpose; and that is the position whether the matter is viewed objectively according to what might reasonably be expected of a director in Mr Passmore's position, or subjectively. By his conduct, in my finding, Mr M J Passmore unreasonably prevented settlement occurring on or before Friday 29 January 1999.

52 I should note that in reaching these findings I have had regard to a submission for Passmore that I should accept that it simply did not occur to Mr Passmore at the time to use Mr Ballato to execute the transfer. In support of this it was contended that not only was this his evidence, and he had no time to reflect calmly over the possibilities, but also the idea was so unusual that it did not even occur to Abco and its legal advisers when pleading or until virtually the eve of the hearing. In this last respect, however, I notice that the possibility of the transfer being executed by someone other than Mr R J Passmore in Kununurra was effectively raised by Mr Nixon with Mr Rawlinson on Wednesday 27 January 1999 when he observed to the effect that 'if no other execution arrangement was possible' then Mr Rawlinson should be able to send the transfer to Kununurra by courier.

53 In my view, it is not so surprising in light of this, that, the transfer having then being sent to Kununurra, Mr Nixon and Abco should have been prepared to accept at that time that there was good reason for it to go to Kununurra. The absence of any indication of such a reason in the affidavits to be relied on by Passmore as the evidence-in-chief of its witnesses no doubt rekindled interest in the issue. Of course, this omission from the affidavits may have been merely a reflection of the issues posed by the pleadings but, on closer examination, more has

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emerged. Otherwise, for the reasons canvassed earlier I have not been persuaded by this line of submission.

54 These findings that have been detailed do not turn on the onus of proof. They are the views to which I have come on the evidence, irrespective of the onus. There is one material further finding, however, which I make but which turns on the onus of proof. On the basis indicated earlier that the onus lies on Passmore, it is also my finding that it has not been established that Mr Ballato, the company secretary, was not conveniently available in Perth for the execution of the transfer of land, and as a consequence it has not been established by Passmore that it was necessary for the transfer to be sent to Kununurra, or, that Mr M J Passmore understood on 27 January 1999 that it was necessary for the transfer to be sent to Kununurra. That being so it is also my finding that it has not been established that Passmore could not readily and conveniently have been able to settle pursuant to the Agreement, with the transfer of land duly executed by Mr M J Passmore and Mr Ballato, in Perth on the afternoon of Thursday 28 January or at any time during business hours on Friday 29 January 1999.

The Agreement

55 Many of the provisions of the Agreement were summarised at the commencement of these reasons. Particular attention should be drawn to the precise terms of a few provisions viz:-

"3. Settlement shall occur 60 days after acceptance of this offer."

"6. Subject to clause 24 and the other provisions hereof (and to the extent not varied by or inconsistent with clause 24 and the other provisions hereof) Conditions 2(1), 3, 4, 5, 17. 18. 19 and 20 of the Law Society and REIWA 1998 Joint Form of General Conditions for the Sale of Land shall be incorporated in and apply to the sale and transfer described in this offer, except that:-

(a) …

(b) as to Condition 4, the settlement date shall be the date described in clause 3 hereof; and

(Page 24)

"17. Each party shall, at its own cost and expense, execute any and all documents and do any and all other acts which may be necessary or reasonably desirable to give effect to the matters and provisions contained herein or contemplated hereby, and to the final dissolution of the partnership."

"24. Notwithstanding any other provisions hereof, if for any reason (and whether or not within its control of any or all of Abco and/or its nominee and K and J Lynch) Abco and/or its nominee fails to settle within 90 days after the date of acceptance of this offer, then, at the election of Passmore:-

(a) the sale and transfer referred to in clauses 1 and 4 hereof shall be cancelled

(b) Abco and/or its nominee and Passmore shall immediately instruct the Receiver to arrange for the whole of the partnership property (including the caravan park land and business) to be offered for sale as soon as practicable by public auction on such terms and conditions as the Receiver considers reasonable.

(c) The partnership shall be wound up by the Receiver as soon as possible after completion of the sale referred to in sub-clause (b) above.

(d) The provisions of clauses 1 to 8, 11, 12, 14 and 15 hereof shall be superseded by this clause.

(e) The provisions of clauses 9, 10, 13 and 16 to 24 hereof shall continue to apply."

The conditions incorporated by cl 6 of the Agreement included:

GC4. "Settlement

(1) A reasonable time prior to the Settlement Date the Purchaser must at the Purchaser's expense tender a duly executed and stamped Transfer of the Land to the Vendor or the Vendor's Representative.

(2) …

(Page 25)

(3) The settlement of the sale and purchase shall be effected on the Settlement Date stated in the Contract ….

(4)-(8) …"

GC5. "Delay in Settlement

(1) If for any reason not attributable to the Vendor, settlement is not effected on or within 3 Business Days after the Settlement Date, the Purchaser must pay to the Vendor on settlement interest at the Prescribed Rate on the balance of the Purchase Price and other moneys payable on settlement calculated from and including the Settlement Date to but excluding the actual date of payment in full settlement of any claim the Vendor may have against the Purchaser arising from that delay.

(2) …

(3) …"

GC17. "Time of the Essence.

Time is of the essence of the Contract in all respects."

GC18. "Default Notice

(1) Except as otherwise specifically provided in these Conditions:-

(a) …

(b) neither the Vendor nor the Purchaser is entitled to terminate the Contract on the ground of the other's default in performing or observing any obligation imposed on that other party under the Contract, unless

(i) the party not in default has first given the party in default Notice in writing specifying the default complained of, which Notice must require that the default be remedied within the period stipulated in the Notice; and

(Page 26)

(ii) the party in default fails to remedy the default within the period stipulated in that Notice

(2) …

(3) …

(4) This Condition will not apply where either party repudiates the Contract."

GC19. "Default

(1) If the Purchaser is in default in performing or observing any obligation imposed on the Purchaser under the Contract or if the Purchaser repudiates the Contract, then the Vendor in addition to any rights or remedies under the Contract or otherwise may:-

(a) affirm the Contract and sue the Purchaser for damages for breach;

(b) affirm the Contract and sue the Purchaser for specific performance of the Contract and damages for breach in addition to or in lieu of specific performance of the Contract;

(d) subject to Condition 18 and if the Notice given pursuant to Condition 18 states that unless the relevant default is remedied within the time specified in the Notice the Contract will or may be terminated, terminate the Contract and

(i) forfeit the deposit paid …;

(ii) sue the Purchaser for damages for breach; and

(iii) …

(2)-(6) …"

56 By the incorporation of GC4(1) Abco was required to tender a duly executed and stamped transfer of land to Passmore or its representative "a

(Page 27)

reasonable time prior to the settlement date". By GC4(3) and cl 3 of the Agreement the Settlement Date was 60 days after acceptance of the offer on 1 January 1999. By GC17 time was of the essence. Further, by cl 17 of the Agreement both Abco and Passmore were required to execute any and all documents and do any and all acts which may be necessary or reasonably desirable to give effect to the Agreement.

57 In view of these provisions it appears that Abco was in default from 1 January 1999 with, it seems, all the normal consequences of default. Neither party took any formal action, however, in respect of the default until 1 February 1999 when Passmore purported to invoke cl 24, save that Passmore had taken advantage of the penalty interest provision because of the delay in settlement.

58 The primary submission of Passmore is that in these circumstances because settlement did not occur within the 90 days for which cl 24 provides, it was open to it to elect pursuant to cl 24 to cancel the sale and transfer on 1 February 1999.

59 The Agreement is less than clear as to the intended interrelationship between the provision of cl 3 for settlement to occur 60 days after acceptance of the offer, ie "the Settlement Date" within the meaning of the Agreement and GC4, and the provision of cl 24 which operates where for any reason Abco fails to settle within 90 days after the date of acceptance. Passmore submitted that default by Abco as to settlement having occurred as at 1 January 1999, cl 24 was in the nature of a guillotine provision which achieved an end to that default. In its submission it read cl 24 as having the effect that if settlement did not occur within the 90 days "for any reason (and whether or not within the control of … Abco ..)", at the election of Passmore the sale of Passmore's partnership interest was cancelled and the entire partnership property was to be offered for sale by the receiver. It was put that it was the effect of this provision either that settlement occurred within the 90 days contemplated by cl 24 or Passmore was able to bring the sale and transfer to an end and follow the procedures of cl 24 for the sale of the partnership property and the dissolution of the partnership. Hence, it was submitted that the 90 day period stipulated having expired on 31 January 1999 without settlement having occurred by that date, as and from 1 February 1999 Passmore was entitled to make the election for which cl 24 provided, and it did so.

60 The primary submission of Passmore as to the construction of cl 24, in effect, involves a reordering of the words of the clause and ignores the significance which appears to attach to the express words of the clause

(Page 28)

that it operates where "Abco … fails to settle" within the 90 days. It is true that if Abco should fail to settle within 90 days, then it matters not what was the reason for Abco's failure and whether or not that reason was within the control of Abco or its directors. But it remains the language of cl 24 that "… if for any reason … Abco … fails to settle within 90 days … then, at the election of Passmore …" (the sale and transfer shall be cancelled etc). The provision by its plain language focuses on a failure by one party, Abco, to settle, for whatever reason, and in that event provides for an election which is exercisable only by the other party. It does not appear to be consistent with the language or the scheme of the clause to give it the effect for which Passmore contends that if settlement does not occur within 90 days for any reason, then at the election of Passmore the sale and transfer might be cancelled etc. It was submitted for Passmore that cl 24 focuses on Abco as it had the carriage of the settlement, but it appears to me that this rather too lightly brushes aside the precise words of the clause. In my view the language of the clause clearly contemplates that it will only operate where Abco has failed to settle within 90 days, whether or not Abco's failure was within its control or the control of its directors. It is only where it is the case that it is Abco that has failed to settle, however, that an election may be made by Passmore pursuant to the clause.

61 It was also submitted by Passmore that the effect of the Agreement is that either settlement occurred, or, if it did not within the 90 days for which cl 24 provided, then the partnership was to be wound up as provided in cl 24. This approach not only overlooks the language of the provision and its context in the Agreement as discussed above, but it also ignores the significance that cl 24 only provides for an election which may be exercised by only one of the parties, Passmore, but need not be. If the election were not exercised even though there had been a failure by Abco to settle within 90 days, the parties would appear to be left with their other contractual, common law and equitable rights and remedies. Further, at least in the contemplation of cl 15(b) of the Agreement, they might then revive the original partnership dispute litigation, although this is now no longer possible because, by the consent of the parties, that action has been dismissed.

62 Although it is not necessary to finally resolve all of the issues to which the Agreement gives rise it would appear that on the failure of settlement to have been achieved as provided by cl 3 it was open to the parties to pursue their contractual and other remedies as they chose. Where, as happened here, that was not done, then, in the further event of Abco failing to settle within the 90 days contemplated by cl 24, a further

(Page 29)

remedy became available to Passmore at its election, ie to cancel the sale and transfer and have the receiver sell the assets and dissolve the partnership pursuant to cl 24. Whether that would be a desirable option for Passmore in the event that it became open to it to exercise the election would no doubt depend on a variety of practical and commercial considerations. It could be that it would have held little or no attraction for Passmore by the time the 90 days had expired or, as I accept was the view of Passmore in the present case, it may have offered a clearly preferable course to that of attempting to enforce the performance of the Agreement or seeking damages for breach.

63 In this case, whatever other remedies may have been open, the only remedy which Passmore has sought to pursue was that contemplated by cl 24.

64 Whether or not there has been a failure by Abco to settle within the 90 days necessarily depends upon the facts. It would be clear that this had occurred if Abco failed to arrange for settlement to occur within the stipulated period when Passmore was ready and willing to settle, or if Abco had failed to attend at settlement or was unable to meet its settlement obligations when Passmore was ready and willing to fulfil its part. Settlement, of course, involves mutual actions by at least the purchaser and vendor and, as in the present case, may also necessarily involve other parties such as those providing finance or discharging mortgages. Given the nature of a settlement involving a sale and transfer of land and a business it is easy to see that there will be circumstances where settlement does not occur within an agreed period but where that is not due to failure by the purchaser to settle.

65 The evidence in this case establishes that the immediate reason why settlement could not be effected on Thursday 28 January 1999 as had been proposed by Abco's solicitor Mr Nixon from 20 January, and why settlement did not take place on Friday 29 January 1999, is that the vendor Passmore was not on either of those days in a position to tender at settlement a transfer of the land duly executed by it. Subject to other considerations to which I will turn shortly, on the face of it a failure by the vendor Passmore to fulfil an essential obligation which it had at settlement would not, in my view, constitute a failure by the purchaser Abco to settle within the meaning of cl 24 of the Agreement.

66 In the present circumstances, however, it is the case for Passmore that its inability to tender a duly executed transfer of the land at settlement, whether on 28 or 29 January 1999, was due to the failure by

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Abco to duly perform its obligation arising under GC4(1), which was to tender to Passmore a transfer duly stamped and executed by Abco "a reasonable time prior to the settlement date". By virtue of GC 4(1) and cl 6(3) and cl 3 of the Agreement Passmore contends that Abco was required to tender the transfer to it a reasonable time before 1 January 1999. It is Abco's failure to do this on which Passmore first seeks to rely. While it is clear that Abco was in default in this respect, given what followed as outlined earlier, it cannot be concluded in my view that this default relevantly caused Passmore to fail to settle on 28 or 29 January 1999. The failure to settle on the "Settlement Date" for the purposes of cl 3 and GC4(1) passed without Passmore taking any action in respect of the default by Abco. Both parties continued to accept the Agreement as in force and it is clear they took steps toward settlement on a later day, in particular 28 or 29 January 1999. Such a possibility was clearly within the contemplation of the Agreement, especially having regard to cl 24 and its provision in the event that Abco failed to settle within 90 days, ie on or before 31 January 1999.

67 Settlement, pursuant to the Agreement whether it was to be on 28 January 1999 as proposed by Nixon on 20 January, or on 29 January as revised by Nixon when the transfer was sent to Kununurra, being then in the contemplation of the parties to the Agreement, it appears to me that by virtue of the opening words of cl 6, GC4(1) operated with respect to these further dates for settlement. Whether or not that be so, by cl 17 of the Agreement each party had an obligation to do what was necessary or reasonably desirable to give effect to the Agreement or to the matters contemplated by it. In the circumstances in my view, the tendering to Passmore by Abco of a duly executed and stamped transfer of the land a reasonable time before a proposed delayed settlement, to enable the transfer to be executed by Passmore, so that the delayed settlement could occur, is a necessary step within the meaning of cl 17. Further, each of Abco and Passmore were subject to an implied obligation to do all that was reasonably necessary to secure the performance of the Agreement – a duty of cooperation, see Mackay v Dick (1881) 6 App Cas 251 at 263, Secured Income Real Estate (Australia) Ltd v St Martins Investments Pty Ltd (1979) 144 CLR 596 at 607 per Mason J. Whichever be the precise basis it can be readily accepted that Abco was under a duty to provide to Passmore a duly stamped transfer executed by Abco at a reasonable time before a delayed settlement to enable Passmore itself to execute the transfer.

68 It was clearly the case, and it was well appreciated by Passmore and Mr Rawlinson on 27 January 1999, that if settlement was to be achieved

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within the 90 days contemplated by cl 24 it needed to take place at the latest on Friday 29 January 1999. As indicated earlier, Abco delivered a duly stamped transfer executed by it to Passmore's solicitor at about 1 pm on Wednesday 27 January. It is obvious that this was very close to the expiration of the 90 day period. However, the proposal of Abco's solicitor that settlement should occur on 28 January had been known to Passmore's solicitor since 20 January and they had been in discussions in the intervening period. Passmore was a company with its registered office in Perth, carrying on business in Perth, with its Managing Director resident in Perth, and with its Secretary and solicitor each practising in Perth. While the possibility that the transfer might need to go to Kununurra for execution had been raised with Abco's solicitor and had been left unresolved, and while it is the fact that in 1997 Abco's director, Mr Lynch knew that Mr R J Passmore then lived in Kununurra, it is not the effect of the evidence in my finding that the directors of Abco or its solicitors were aware or had been put on notice that the transfer could not be duly executed by Passmore in Perth as at 27 January 1999.

69 What is a reasonable time within the meaning of this Agreement necessarily must be determined objectively and having regard to the object and the particular circumstances. The object is merely the execution of the transfer to enable settlement. In addition to the matters just considered it is submitted by Passmore that it is relevant that there had been nearly 90 days for Abco to effect stamping and execution whereas it did not deliver the transfer to Passmore until very close to the proposed day for settlement and the last possible day for the purposes of cl 24. And, of course, Abco had been in default since 1 January 1999. This must also be considered, however, in light of the dispute between the parties in December 1998 in this Court over the accumulated funds issue and a dispute concerning apportionment on settlement which arose in January, as well as the stamp duty issue, all of which served to explain, though not to excuse, why Abco had been delayed until 27 January. The delay was not deliberate or due to neglect or perversity.

70 In the end though, the issue is whether the tendering of the transfer at 1 pm on Wednesday 27 January 1999, with a view to settlement either on Thursday afternoon 28 January 1999 or Friday 29 January 1999 was a reasonable time, objectively viewed, prior to settlement, to enable Passmore to execute the transfer. In particular, having regard to the nature of Passmore and the normal location in Perth of its necessary officers, and the communications to its solicitor for over a week preceding 27 January 1999, it is my view that in the circumstances of this case the transfer was tendered to Passmore, by delivery to its nominee

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Mr Rawlinson, at a reasonable time prior to settlement, and that this was so whether settlement was to be on 28 January or on 29 January 1999.

71 If, contrary to the view I prefer, it should be thought that Abco was on notice that the transfer's execution by Passmore would require it to be sent to Kununurra, it is my view in the circumstances, that the tendering of it to Passmore's nominee at about 1.00 pm on 27 January 1999 was nevertheless at a reasonable time prior to settlement on the afternoon of Friday 29 January 1999. In this regard, I am not persuaded there is any reason to regard the use of a courier service for the transmission of documents for this purposes to be unusual or an unreasonable imposition on Passmore, or that an unreasonably short time was available to make the very limited arrangements which this required.

72 Whether or not Abco was in breach of any obligation it had as to the tendering of a duly stamped and executed transfer to Mr Rawlinson at about 1.00 pm on Wednesday 27 January 1999, the position and capacity of Passmore then to be ready to settle on 28 or 29 January 1999 must also be considered. There were other minor matters for it to attend to but these were accomplished readily by Mr M J Passmore and Mr Rawlinson and there is no issue about them in these proceedings. Relevantly what was required to enable settlement was for Passmore to hand over at settlement the executed transfer. Passmore's obligation under cl 17 of the Agreement on which Abco relies was to do what was necessary or reasonably desirable. It is pleaded by Abco and admitted that the effect of this was to require Passmore to use its best endeavours to allow settlement to occur on or before 29 January 1999. On that basis this would appear to require that Passmore do all it reasonably could in the circumstances to allow settlement so to occur; see Paltara Pty Ltd and Anor v Dempster and Ors (1991) 6 WAR 85, 89. As is there explained, what was required of Passmore to satisfy such an obligation once it received the transfer at about 1 pm on 27 January 1999 must be determined objectively. It would require consideration of what in fact was necessary to be done, and Passmore's reasonable capacity to do what was required in the circumstances as they existed.

73 Even if it were thought that Passmore's admission in the pleadings was too generous, in my view on any view of cl 17 Passmore was at least required to take reasonable steps to execute the transfer so that settlement could occur and or before 29 January 1999. What those reasonable steps might be should also be determined objectively. On the basis that so formulated this would impose a less stringent obligation on Passmore than the admitted obligation to use its best endeavours, for the reasons already

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well canvassed, it is my view that, judged objectively, with little effort by either Mr M J Passmore or Mr Rawlinson and taking only reasonable measures readily available to it, Passmore could have been ready to settle with a duly executed transfer of land at the ultimately appointed time of 3.00 pm on Friday 29 January 1999. This would be so, in my view, even were it necessary, or thought necessary (they are not my findings) for the transfer to be sent to Kununurra. Hence, even on the view of cl 17 which is more generous to Passmore, in fact Passmore could have and it ought to have attended settlement with a duly executed transfer at 3.00 pm on Friday 29 January 1999.

74 Further, on the basis identified earlier in these reasons that Passmore has failed to establish that Mr Ballato was not conveniently available in Perth to execute the transfer, it follows, in my finding, that it has not been shown that by taking only reasonable measures Passmore could not readily have provided the transfer, duly sealed in the presence of Mr M J Passmore and Mr Ballato, at settlement on the afternoon of Thursday 28 January 1999 as well as on Friday 29 January 1999.

75 For these reasons, in my view, the failure of Passmore to be ready to settle on 28 January or to be ready to settle at the appointed time of 3.00 pm on Friday 29 January was not relevantly caused by Abco or by any breach by Abco of its obligations under the Agreement.

Abco's readiness and willingness to settle

76 It is submitted by Passmore that as the settlement date had been programmed for the last possible afternoon before the expiry of the 90 days contemplated by cl 24 of the Agreement, and as pleaded by Abco, it is also necessary that Abco demonstrate that settlement would have occurred on that afternoon had Passmore fulfilled its obligations in respect of the settlement, ie it is submitted that Abco must establish that, in every respect and detail, arrangements were in place, and would have been effective, to ensure that settlement would have occurred in accordance with the Agreement on 29 January 1999. In part this submission appears to rely on the view of cl 24 that its effect is "if for any reason there is a failure to settle within 90 days", and also on the view that it is Abco which carries the onus of establishing that Passmore was not entitled to make an election under cl 24. For reasons already noted, I do not accept either of these views.

103 These deposits and bonds appear to me to be neither in the nature of accounts payable or receivable at the time of settlement. Neither, in my view, are they then moneys of the partnership. At the time of settlement, although in the possession of the partnership, the entitlement of either the partners or the patrons to those moneys will turn on future and not then presently ascertainable facts. In my view, they are not moneys which the receiver has on hand or at the bank within the true meaning of cl 22(a) of the Agreement, as that provision contemplates only moneys of the partnership.

104 For these reasons, in my view neither Passmore nor Abco are entitled to have distributed to it pursuant to cl 8 any share of the deposit and bond moneys on settlement of the sale and transfer. The accumulated funds

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should in due course, after any such settlement, be paid by the receiver into the custody of Abco, to be held by it until such time as it can be determined in light of relevant future events what part, if any, of each deposit and bond is to become the property of the business, and what if any is to be returned to each relevant patron.

Specific Performance

105 As indicated earlier the only issue as to remedy to be dealt with at this stage of these proceedings is Abco's claim for an order that Passmore specifically performed the Agreement, ie that it sell its interest in the partnership including the land to Abco.

106 For reasons already canvassed, while Abco had failed to settle in the 60 days as provided by cl 3 of the Agreement, Passmore took no steps in respect of that default and continued to treat the Agreement as on foot, claiming penalty interest by virtue of the delay in settlement in accordance with its provisions, and, once the 90 day period for settlement contemplated by cl 24 had expired, purporting to exercise the election for which cl 24 provided by way of special remedy. Otherwise, Passmore took no steps in respect of the failure to settle in accordance with cl 3. The cl 24 election, if validly exercised, did not terminate the Agreement but would have been a continuing acceptance by Passmore of its binding operation (according to its terms as varied by cl 24 following an election by Passmore). Thus, in these proceedings, both Passmore and Abco seek to enforce aspects of the Agreement.

107 Abco seeks inter alia the equitable, and therefore discretionary, remedy of specific performance. While the Agreement was in settlement of litigation concerning a partnership dispute, its critical element was the sale to Abco of Passmore's interest in the partnership including the land at Kalbarri on which the partnership's business was and is conducted. Throughout the existence of the partnership to the time of the Agreement the directors of Abco, Mr and Mrs Lynch, had the day to day management of the business at Kalbarri for the partnership. Mr and Mrs Lynch had made Kalbarri their home. They lived on site. It was their occupation and livelihood. Thus it is the fact that not only the land itself – see Pianta v National Finance and Trustees Ltd (1964) 38 ALJR 232 at 233 per Barwick CJ – but also the business, had for Abco and its directors a unique interest, such that other remedies would be inadequate for Abco and would defeat the just and reasonable expectations it had. In my view, that remains so even though, in more recent times, during the continuance

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of the receivership following 1 February 1999, the receiver has appointed others to conduct the caravan park.

108 Of course, specific performance will not be granted if it would be unjust in the circumstances. Passmore raises a number of matters which it submits would make a grant of specific performance unjust. In particular, it points to delay by Abco in seeking specific performance and matters of hardship to Passmore which would arise were specific performance ordered.

109 Following 1 February 1999 and the receiver's refusal to act to sell the assets of the partnership including the land and to dissolve the partnership pursuant to cl 24, in circumstances in which Abco and Passmore were in dispute as to the validity of Passmore's purported election, Passmore sought to pursue legal proceedings in this Court to affirm the validity of its election pursuant to cl 24 and to achieve the sale of the land and business and the dissolution of the partnership by the receiver. There were procedural deficiencies with Passmore's efforts in this regard including, and no doubt due to the fact, that Mr M J Passmore sought to conduct the proceedings for the company. The proceedings were allowed to lapse.

110 In the meantime, the receiver continued to manage the business and the land and for this purpose, for some time, the receiver continued to utilise the services of Mr and Mrs Lynch to live on site and to conduct the day to day operations of the caravan park.

111 Passmore indicated it would take fresh proceedings. Abco's directors, Mr and Mrs Lynch, were advised by their solicitors that there would be advantages for Abco at least as to costs if it allowed Passmore to take the initiative with respect to legal proceedings and I accept that acting on this advice Abco took no steps itself to institute proceedings. The proceedings foreshadowed by Passmore did not eventuate. There was effectively a stale mate or a standoff between Passmore and Abco. The receiver was conducting the business and neither Passmore nor Abco moved to institute proceedings to resolve the clearly demarcated dispute between them as to whether Passmore had validly exercised the election contemplated by cl 24.

112 Eventually, by about the end of 1999 the receiver became persuaded he should himself initiate these proceedings as it was necessary that the dispute be resolved one way or the other. The evidence suggests that Passmore was influential in persuading the receiver to do this. The

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originating summons by which the receiver commenced these proceedings issued on 24 February 2000. The declaration sought reveals something of the way in which the dispute was then perceived. It sought a declaration whether cl 24 applied in circumstances where failure to complete the settlement within the 90 days limited by cl 24 had been caused by a breach by Passmore of cl 17 of the Agreement.

113 Procedural directions by a Registrar followed in due course. These led to Passmore filing its nominal statement of claim on 19 April 2000, followed by Abco's defence and counterclaim on 19 May 2000. It was in the counterclaim that Abco first formally sought specific performance. It is in these circumstances that Passmore contends that Abco is guilty of delay in that it did not seek to specifically enforce the Agreement for the sale of Passmore's interest in the partnership until 19 May 2000.

Delay and its effects

114 That is true in the sense indicated, and the delay is significant in its length. The delay, however, must be evaluated in light of the particular circumstances. While the Agreement involved the sale to Abco of the interest of Passmore in the land, that was part of a wider Agreement in settlement of a dispute between two partners and by which Passmore's other interests in the partnership were also to be sold to Abco and the partnership dissolved. Pending that dissolution, the partnership business was under the management of a receiver inter alia as contemplated by the Agreement. Thus there was an ongoing partnership relationship between Abco and Passmore between 1 February 1999 and 19 April 2000, and it continues. There was also a partnership dispute between them which is unresolved, save for the terms of the Agreement. In that context it cannot be concluded, in my view, that the delay reflected or gave rise to any implication of acquiescence by Abco, or acceptance by it of the validity of Passmore's purported election pursuant to cl 24. Indeed, there was a degree of mutuality in the delay.

115 While delay is a relevant, and may be a material, factor telling against an exercise of discretion to grant specific performance, I am not persuaded in the particular and somewhat unusual circumstances of this case that the mere fact of this lengthy delay should tell against the grant of this relief.

116 The delay has, however, involved consequences which it is submitted should weigh against a grant of specific performance. First, it is submitted that by virtue of the nature of the partnership business of a

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caravan park, the value of the business is susceptible to fluctuation, particularly as a primary method of valuation involves profit projections based on current and past performance. Hence, it is submitted that the terms of the Agreement may have a different value and commercial significance for the parties at the present time than was the case when the Agreement was struck on 2 November 1998 or as at 1 February 1999. The evidence has not developed this possibility with any particularity, however, so that apart from an assertion that values may fluctuate it does not appear in the evidence that this has occurred in any material way or that an order now to specifically perform the Agreement would involve some particular loss or hardship to Passmore. Nor does the evidence provide any basis for concluding that Abco has delayed to gain some advantage from any fluctuation of value.

117 Secondly, it is the case that during the receiver's management of the business he has made repayments to Bankwest as were required of the partnership under the terms on which it had borrowed from the Bank. The repayments have been some $100,000 with the consequence that Abco's obligation to repay the borrowed sum for which the Agreement provided would now require Abco to repay $1,050,000, rather than $1,150,000 which was the amount required on 29 January 1999 and 1 February 1999. Passmore contends that this involves a material change of the essential elements of the Agreement and that if specific performance were now ordered Abco would have gained material advantage from its delay.

118 It is the case, however, as Abco submits, that as the loan repayments effected by the receiver came from the trading profits of the business, had Passmore settled pursuant to the Agreement on or about 29 January 1999, Abco would have had the entirety of these profits since then and its loss in this respect remains the subject of damages which it has also claimed in these proceedings. Abco submits that because of these matters, in truth, it will not gain any advantage by virtue of the repayment of $100,000 if specific performance is granted as, in general terms, there will be a corresponding reduction in the damages to which it is entitled.

119 In the somewhat unusual circumstances presented in this case I am persuaded that the loan repayments made by the receiver since 29 January 1999 will not have the effect in these proceedings that it would involve an injustice to Passmore to grant specific performance. The repayments should not preclude an exercise of discretion in favour of a grant of specific performance.

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120 Thirdly, Passmore submits that as an ongoing partner, since 1 February 1999 it has earned undistributed income from the trading of the partnership business by which it has incurred liabilities to pay income tax. The only details of the extent of this liability before me suggests that it totals some $19,078 to the end of June 2000.

121 The possibility of amending past income tax returns in the event that specific performance is ordered, on the basis that in fact since 1 February 1999 the income earned by the partnership was for the benefit of Abco, was briefly and incompletely explored in submissions. Clearly, that possibility would require further exploration, in particular by the receiver, but, in the event that amendment of income tax returns could not be achieved, Abco proposes that a condition should attach to a grant of specific performance which it detailed in submissions. The effect of this condition would be that if Passmore did have an income tax liability in respect of partnership income since 1 February 1999, Abco should indemnify Passmore in respect of that liability. The precise terms of such an order can be resolved after delivery of these reasons, but such an indemnity would, in my view, adequately meet the issue of Passmore's income tax liability from the partnership since 1 February 1999. On that basis, this should not be a reason for refusing specific performance.

122 Fourthly, it is submitted by Passmore that by virtue of the continuing receivership it has not had access to its share of the income or capital of the partnership since 1 January 1999. Previously to that date it had received an income distribution of $2,500 per month. I note that both this monthly payment, and its cessation on 1 January 1999, were in accordance with the express provisions of cl 8(a) of the Agreement. Further, Passmore submits that since 1 February 1999 the partnership has continued to incur receiver's costs as to half of which it has thereby suffered loss. Given that the prolongation of the partnership is due to each of Passmore and Abco failing to act more promptly and more effectively to resolve their dispute over cl 24 of the Agreement, and as this is an ongoing liability which each shares equally, I do not see that this would give rise to injustice to Passmore such as should preclude an exercise of discretion in favour of specific performance.

Abco's Readiness and Willingness

123 As Abco seeks specific performance to compel Passmore to perform its obligations for the sale and transfer under the Agreement, it must itself demonstrate that it is in a position, and is prepared, to do so – as it is commonly framed it must show it is ready and willing (sometimes

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unnecessarily the word able is also added) to perform its obligations under the Agreement;

Hensley v Reschke

(1914) 18 CLR 452. That is so, at least in respect of the "essential terms of the contract";

Mehmet v Benson

(1965) 113 CLR 295 at 308, 314. In this case, by amendment to its reply, Passmore disputed that Abco was and is ready and willing to perform its obligations. In these circumstances it is clearly for Abco to establish that it is so ready and willing, although the onus is not necessarily a very heavy one;

Foran v Wight

(1989) 168 CLR 385, 451-4 per Dawson J. This is an issue to be determined in light of all the relevant circumstances;

Bahr v Nicolay

(No 2) (1988) 164 CLR 604. It is one of substance, not to be resolved in any technical or narrow sense;

Mehmet v Benson

(

supra

) at 307. Normally, the critical time at which Abco's readiness and willingness is to be determined is the date of institution of proceedings –

Gurney v Gurney

(No 2) [1967] NZLR 922 at 925. It is also necessarily material that Abco now be in a position to perform its obligations under the Agreement if specific performance is to be of any practical value.

124 I have canvassed, much earlier in these reasons, the evidence which satisfied me that despite its earlier difficulties, on 27 January 1999 and until 1 February 1999 Abco was ready and willing to settle pursuant to the Agreement. Its ability to do so depended on the Timms syndicate being prepared and able, in turn, to purchase the land and business from Abco, they then being leased back to Abco pursuant to the agreement that had been concluded between Abco and the syndicate. The Timms syndicate depended, in part, on borrowings from the Commonwealth Bank, as well as on contributions by the three members of the Timms syndicate, for it to be in a position to pay the agreed $1,875,000 to Abco for the land and business.

125 I accept from the evidence that the Timms syndicate remained, until the end of June 1999, ready and willing to purchase the land and business from Abco as had been agreed between them. And that it remains willing to do so. In this respect I note the submission for Passmore that the evidence concerning the financial capacity and willingness of the members of the Timms syndicate comes only from Mr Timms who, although the manager of the syndicate, is not directly involved in the management of two of the three companies which comprise the syndicate. It is submitted that it should not be accepted, therefore, that his evidence sufficiently establishes either the capacity or the willingness of two of the three companies which comprise the syndicate to perform what had been agreed with Abco. It appears to me, however, that this ignores the role of Mr Timms as the manager of the syndicate and the authority he has exercised on behalf of its members such that, in my view, it would be

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placing too absolute an evidentiary onus on Abco not to accept the unequivocal evidence of Mr Timms as to the relevant position of the syndicate and its members.

126 I note from his evidence that the Timms syndicate has not sought a refund of the stamp duty of $85,742.50 which it paid on its agreement with Abco and that this is so because the syndicate continues to expect that settlement with Abco will take place. Indeed, by Mr Timms, the syndicate has instructed its solicitors to keep a watching brief on these proceedings, to which it is not a party, because of its continuing interest to know when settlement with Abco might occur. I accept that the Timms syndicate remains willing and, subject to what follows, ready to purchase the land and the business as was agreed with Abco in January 1999. This was the position not only at the time of the hearing, but also on 19 May 2000 when Abco formally sought specific performance by its counterclaim.

127 There has, however, been one significant change of circumstances affecting the Timms syndicate. While I accept from the evidence that at times since 1 February 1999 the Timms syndicate has been in a position to purchase the land and business without the need to borrow from the Commonwealth Bank, its intention remains to fund this purchase partly by borrowing $750,000 from the Commonwealth Bank as had been arranged with and approved by that Bank in January 1999. As a matter of its normal policy, however, the approval of that loan by the Commonwealth Bank lapsed on 29 June 1999. It would now be necessary for the Timms syndicate to make a fresh application if it was to proceed to borrow from the Commonwealth Bank to purchase the land and business. I accept from the evidence of Mr Kantor that the Commonwealth Bank remains willing to consider a fresh application and I accept from Mr Timms that he knows of no matter which might cause the Bank to view differently a fresh application from the syndicate to borrow $750,000, and that there are no significant changes in relevant valuations or in the financial information relating to the syndicate, or the land, since the syndicate first obtained approval from the Bank.

128 I also accept from the evidence of Mr Timms, however, as the syndicate had no control over the conduct of these proceedings and has not been in a position to know when Abco could be in a position to settle with the syndicate, that Mr Timms decided for the syndicate that it would wait until the position in relation to settlement was clearer before making a fresh application to the Bank. His reason for this is that a substantial fee is payable by the syndicate each time a fresh application is made

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(applications would have been required at six monthly intervals from 29 June 1999), and it is necessary to gather current information as required by the Bank each time an application is made, including obtaining a fresh valuation, all of which would involve the syndicate in significant expenditure. It is understandable, therefore, that currently, and as 19 May 2000, the Timms syndicate did not have a current formal approval from the Commonwealth Bank for a loan of $750,000, although there had been such approval until 29 June 1999, and the syndicate would require to obtain a fresh approval for it to proceed with the purchase of the land and business from Abco.

129 I am satisfied, however, that the syndicate stands committed to its agreement with Abco and ready to make a fresh loan application to the Commonwealth Bank should Abco be in a position to proceed to sell to the syndicate the land and business, and that there are no circumstances known to the syndicate manager why the Bank would not once again approve the finance which the syndicate desires. I also accept from the evidence of Mr Kantor that once they syndicate has gathered the necessary current information and made a fresh application the Bank would require three weeks or so to consider the application. If it were to be approved, further time would be required of course to complete the necessary loan agreement and securities, etc.

Specific Performance Ordered

130 In light of these matters, and on the basis that it is subject to the Timms syndicate securing approval of the finance pursuant to a renewed application to the Commonwealth Bank, I accept that it has been sufficiently demonstrated that Abco remains ready and willing to settle both with the Timms syndicate and pursuant to the Agreement with Passmore, and that this was also the position as at 19 May 2000.

131 For these reasons, in my view, the particular circumstances of this case are such that specific performance is the most appropriate remedy to do justice as between Abco and Passmore. Because Abco's readiness to perform its obligations under the Agreement is necessarily subject to the ability of the Timms syndicate to, in turn, purchase the land and business from Abco on settlement with Passmore, it is appropriate that a date be ordered by which settlement pursuant to an order for specific performance is to occur. In this respect I notice the circumstances and the orders contemplated in Mehmet v Benson (supra) at 315 – 317 to deal with the uncertainty as to performance in that case.

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132 It will also be appropriate to condition the order on an undertaking by Abco as to any income tax liability of Passmore as considered earlier in these reasons.

133 I will hear counsel as to the precise terms of the order including the date for settlement.

Other Relief

134 Given the findings I have made it has not been necessary to consider a number of other issues raised before me. Even so, other issues as to relief remain to be considered at a later time in these proceedings.

Norgard v Abco Holdings Pty Ltd

[2001] WASC 324

NORGARD -v- ABCO HOLDINGS PTY LTD & ANOR [2001] WASC 324