Peter James Cronin v Keverne Henry Yuncken and Stephen Punke No. SCGRG 89/1085 Judgment No. 3919 Number of Pages 31 Contracts Equity

[1993] SASC 3919

COURT IN THE SUPREME COURT OF SOUTH AUSTRALIA ANDERSON J

CWDS
Contracts - particular parties - vendor and purchaser Principal and agent - sale and purchase of business contract contained "subject to finance clause" which was not satisfied. Purchaser paid deposit and further monies and duty of licensed landbroker sought their return. Land Agents, Broker and Valuers Act, 1973 s89. Bosbury Pty Ltd v Comgrigg Pty Ltd (1992) 57 SASR 241 and Neagle v. Power (1967) SASR 373, applied.
Contracts - general contractual principles construction and interpretation of contracts. Effect of special condition considered. Laird v Pim and Anor
(1841) 151 ER 852 and McDonald v Dennys Lascelles Ltd (1933) 48 CLR 457, applied. Perri v Coolangatta Investments Pty Ltd (1982) 149 CLR 537; Conlon v Biggs (1943) SASR 43 and Clifton v. Coffey (1924) 34 CLR 434, considered.
Equity - Notwithstanding purchaser's entitlement consequent upon non fulfilment of special condition the vendor is to have some adjustments in his favour as a consequence of purchaser carrying on business. Hodder v Watters
(1946) VLR 222, applied.

HRNG ADELAIDE, 1-9 March 1993 #DATE 30:4:1993
Counsel for plaintiff:             Mr M A Crawley
Solicitors for plaintiff:         Moody Rossi and Co
Counsel for defendant Yuncken:     Mr G A Stevens
Solicitors for defendant Yuncken: Hume Taylor and Co
Counsel for defendant Punke:        Mr M Hoile
Solicitors for defendant Punke:     Fisher Jeffries

ORDER
On the claim: judgment for the plaintiff against the first defendant in the sum of $19,957.09 and judgment for the second defendant against the plaintiff. On the counterclaim: judgment for the plaintiff against the first defendant.
On the first defendant's/second defendant's claim: judgment for the first defendant in the sum of $1,000.

JUDGE1 ANDERSON J In this action the plaintiff claims, from the first defendant, a declaration that the agreement between them is void pursuant to Section 89(1) of the Land and Business Agents Act, 1973 together with consequential orders and, in the alternative, an order that the contract between them has been terminated and that monies be repaid to him. From the second defendant the plaintiff seeks an accounting and an order for the repayment of monies found to be due. In consolidated proceedings the first defendant claims from the second defendant damages for alleged breach of an oral agreement, breach of duty and negligence. That defendant, in his counterclaim in the principal action, seeks declarations and damages for breach of contract from the plaintiff. 2. The proceedings arise from a contract for the sale by the first defendant to the plaintiff of his business on Jetty Road, Glenelg, known as "The Bay Pharmacy" ("the Pharmacy") dated 29 July, 1986. The second defendant is a landbroker. The chronology will appear subsequently but it is necessary to note at the outset that this contract, which was never completed, has resulted in over six years of effort, emotion and legal expense to come to trial. That such a situation was allowed to develop was the subject of quite pointed comment by Mr. Hoile, of counsel for the second defendant, particularly in his final address. It is with some regret that I find myself substantially compelled to agree with those comments. 3. This dispute cried out for a pragmatic commercial resolution in the final quarter of 1986. That it was not so resolved is a matter of great regret but no good is now served by further comment except to say that had that occurred, then this seven day trial which is really about who will pay the legal expenses would not have been necessary. 4. Before I go to the chronology it is necessary to say something about the parties. The relevant events occurred from July until December 1986 and particularly from early August until mid-September. That there was uncertainty of recall is to be expected - the alternative would be cause for some suspicion. Even the plaintiff, who had the benefit of a contemporaneous diary, was not able to fill in all detail and, like the defendants, was somewhat uncertain in his recollection from time to time. I have no doubt that each of them gave his evidence to the best of his ability and I am not able to prefer Mr. Yuncken to the plaintiff and the second defendant as Mr. Stevens, of counsel for that defendant, urged that I do. Clearly, at times Mr. Yuncken's recollection was as uncertain as the others. 5. So it is that the chronology must be put in place, on balance, having regard to the evidence and with the plaintiff's diary having a significant degree of objective value as to when events occurred, accepting as I do that it is contemporaneous with those events. This chronology is as I find events to have occurred. 6. The plaintiff and first defendant are pharmacists. In 1986 the first defendant had been running the business known as "The Bay Pharmacy" in Jetty Road, Glenelg for several years. It was quite profitable for him as an owner/operator. He decided to sell and made known his intention to Mr. Bill Spraggs of the pharmaceutical supply company Sigma. It was usual for drug companies to act as go-betweens for the sale of such businesses. When Mr. Yuncken bought the business he had done so through Fauldings. He subsequently changed suppliers and so it was to Sigma he turned in 1986. 7. In that year Mr. Cronin and Mr. Russell, a friend and professional colleague, had thought of purchasing a pharmacy in partnership. They almost had a contract for the purchase of a business in Payneham. Thereafter, the plaintiff heard of the Pharmacy. It was not large enough for a two-man partnership. 8. In the course of negotiations concerning Payneham the plaintiff had instructed the second defendant, a landbroker, to act for him. They met because Mr. Punke had his office in the same building as the plaintiff's accountants. 9. The plaintiff became aware of the intent of the first defendant from Mr. Spraggs on 17 June, 1986 and, according to his diary, made contact with the first defendant on that day. Discussions occurred and the plaintiff obtained information as to a price from Mr. Spraggs. On 24 June, 1992 the plaintiff worked as a locum at the Pharmacy and was given full access to the shop and all relevant records by the first defendant. The plaintiff remained interested and on 22 July, 1986 he and the first defendant agreed between themselves on a price of $65,000 plus stock at valuation for the business. It was apparent from the evidence that the $65,000 was $62,000 as to goodwill and $3,000 being the written down value of fixtures and fittings. 10. On 24 July, 1986 the plaintiff spoke to the second defendant to instruct him to prepare a contract. He obtained more information from the first defendant and passed it to the second defendant at an interview later that day. The second defendant maintains that in so acting the plaintiff was in fact also instructing the first defendant to act for him as vendor. This is denied by both the plaintiff and the second defendant and I prefer their evidence on the topic and find that on this day the plaintiff instructed the second defendant in such a way as to have it clearly understood that it was the plaintiff only who was instructor and therefore principal to the second defendant. 11. Support for such a finding is to be found in the terms of the contract which are quite clearly drawn in favour of the purchaser. To have drawn such a contract whilst purporting to act for both parties would, without specific instructions to the contrary, have immediately placed the second defendant in a position of serious conflict of interest. At that time the second defendant had no instructions from the first defendant. 12. On 29 July, 1986 the three men met at the Pharmacy. This was the first substantial contact between the first defendant and the second defendant. I find that the contract in evidence (exhibit "P1") was there produced by the second defendant with all typing thereon then completed. The clause deletions were, like the typing, present at the outset. They all discussed the terms of the contract and some alterations were made by hand. After making those amendments the contract was executed. I shall return subsequently to its contents. 13. Thereafter, on that day, there was a discussion between the first defendant and the second defendant, instituted by the second defendant as to the first defendant's representation for completion of the contract. I find that the first defendant thereupon instructed the second defendant to act for him to and at settlement (including in relation to termination of his lease) and to pay the proceeds of sale as set out in the authority subsequently prepared by the second defendant and signed by the first defendant on 30 July, 1986 (exhibit "T3"). 14. Again, notwithstanding the suggestion on behalf of the first defendant that there was to be a greater role by the second defendant on his behalf, I am satisfied that the scope of the retainer of the second defendant by the first defendant was as pleaded by the second defendant in his defence to the first defendant's claim and as given by him in his evidence. Indeed, in cross-examination the first defendant was not able to do other than agree to the terms of the discussion between he and the second defendant which led to the latter so acting. I do not accept Mr. Yuncken's evidence that at that meeting the second defendant made a statement to the effect that he was acting for the first defendant in the preparation of the contract. 15. At that meeting Mr. Yuncken first made mention of his intended absence on holidays in late August and early September 1986. That was one reason for altering the settlement and possession date of 15 September, 1986 appearing in the typed contract to 1 September, 1986. The other was that possession on 1 September, 1986 would, at Mr. Yuncken's suggestion, enable the plaintiff to have the benefit of school holidays at the commencement of his occupation. It also saved the first defendant the cost of a locum. The plaintiff then paid the deposit of $1,000 which was receipted by the second defendant on 4 August, 1986. 16. Thereafter, on 31 July, 1986 the plaintiff visited Beneficial Finance Corporation ("Beneficial") to apply for finance. He subsequently obtained a completed Form 6 from Mr. Yuncken's accountant and delivered that to Beneficial Finance. Whilst this contract was not of the type to require the preparation of this document it was required by the financier and was produced with the consent of the vendor, signed, and paid for, by him. No issue is taken that it cost $870 to prepare. 17. At this time the second defendant was securing a new lease in registerable form for the plaintiff. The plaintiff executed this document at the second defendant's office on 18 August, 1986. The second defendant also prepared a surrender of lease for the first defendant to sign. This related to his existing unregistered lease. It was executed by him on 21 August, 1986. I am not persuaded by the evidence of the first defendant that it was on that occasion that he told the second defendant of locations (with telephone numbers) where he could be contacted whilst on holiday. I prefer the evidence of the second defendant that whilst he knew the first defendant was to be absent from conversations on 29 July, 1986 and probably on 21 August, 1986, it was necessary for him to contact the plaintiff subsequent to the first defendant's departure to ascertain precise information as to addresses and telephone numbers at which he may be contacted. 18. It was in this manner that the second defendant was able to send the statutory declaration required by the financier to the first defendant and to leave telephone messages for him after 1 September, 1986. 19. Also on 21 August, 1986, the plaintiff visited the first defendant at the Pharmacy. He was there given keys to both the shop and the security system and details of his locations during his holidays by the first defendant. It was known that a stocktake had been arranged for 31 August, 1986 in anticipation of settlement and as the first defendant was to be absent he, for reasons best known to himself, gave the key to the plaintiff rather than the second defendant to facilitate entry to complete this task. I do not accept that at this time, or at any other, the first defendant told the plaintiff that he could use the key for the purpose of stocktaking but that he was not to use it to enter possession unless what he referred to in his evidence as settlement had occurred by 2.00 p.m. on Friday 29 August, 1986. Clearly, on the evidence the second defendant did not know the plaintiff had the key until 1 September, 1986. He knew only that the plaintiff and the first defendant between them had made arrangements for a stocktake and he expected to ultimately receive the valuation so as to be able to produce final settlement statements. 20. Notwithstanding that the special condition in the contract relating to finance required it to be approved by 14 August, 1986 the behaviour of the parties clearly indicated that, well after the passing of this date, they still expected the contract to go forward. The plaintiff acknowledged as much in his evidence, as did the second defendant. The behaviour of the first defendant in executing the surrender of lease and giving the plaintiff the key on 21 August, 1986 is a similar indication. 21. As I have mentioned the first special condition to the contract related to finance. Its terms were:
    "1. THIS CONTRACT is subject to:
    (1) Beneficial Finance Corporation agreeing on or before
    the 14th day of August 1986 to grant a loan of not less
    than $110,000.00 to the Purchaser and to the Purchaser
    obtaining the said loan on or before the date of
    settlement, upon the security of a mortgage of lease and
    bill of sale over plant, fixtures and fittings of the
    business (a) for the term of 5 years (b) at an effective
    interest rate not exceeding 18% per annum (c) repayable
    monthly (d) and otherwise upon such terms and conditions
    as the aforesaid lender may stipulate or require.
    The Purchaser shall use his best endeavours to obtain
    the aforesaid loan and in the event of the above lender
    agreeing to grant the said loan the Purchaser agrees to
    take and accept the same and to pay all fees in
    connection with preparation stamping and registration of
    the security documents. The Purchaser hereby authorises
    the Agent to apply on behalf of the Purchaser for the
    said loan and agrees to reimburse the Agent all
    application fees and valuation fees properly incurred by
    the Agent in connection therewith.
    (2) (deleted).
    (3) The Vendor or the Agent obtaining or causing to be
    obtained the consent in writing the Landlord named in
    the said Schedule on or before the 14th day of August
    1986 to the assignment of the Vendor leasehold interest
    specified in the said Schedule to the Purchaser.
    (4) If any of the special conditions above or following
    shall not be fully satisfied within the time appointed
    then, unless the Purchaser shall have waived such
    condition or conditions and communicated such waiver in
    writing to the Vendor or to the Agent either the Vendor
    or the Purchaser may at any time thereafter cancel this
    contract by written notice to the other whereupon the
    deposit and all other money paid by the Purchaser on
    account of the purchase shall forthwith be repaid to the
    Purchaser and neither the Vendor nor the Purchaser shall
    have any further claim against the other under the
contract either at law or in equity." 22. From the evidence it is obvious that Mr. Cronin was using his best endeavours to obtain finance. The second defendant was actively involved with the financier and both he and the plaintiff had responded promptly to requests made of them in this regard. An offer of finance came to the plaintiff by letter dated 21 August, 1986. It seems he received it the following day, took it to the second defendant, endorsed his acceptance on a copy and returned the copy letter to Beneficial to facilitate the production of the necessary documents. There seems no doubt that each party, by their behaviour, no longer saw the date of 14 August, 1986 as significant in the operation of the special condition. Notwithstanding that being so each party knew that without finance settlement would not occur. 23. When Mr. Yuncken went on holidays on 24 August, 1986 he expected the second defendant to attend settlement for him. By his action in giving the plaintiff the key to the shop three days before he acknowledged that the contract remained on foot even though the first date had passed. At this time the plaintiff expected that settlement would be achieved when all the paperwork was in place. 24. One of the conditions upon which finance was offered was that Mr. Russell, who, with the plaintiff as tenant in common, owned a block of land at Happy Valley, provide a guarantee. Both the plaintiff and Mr. Russell said in evidence, which I accept, that it was agreed between them that the plaintiff was to be able to use his share of the land as security and to that extent Mr. Russell would provide a guarantee. 25. Unfortunately, it was that guarantee which was the rock upon which this contract was to founder. The finance documents came to the second defendant from Beneficial's solicitor on about 27 August, 1986. The statutory declaration referred to therein and to be executed by the first defendant came directly from Beneficial to the second defendant on about 1 September, 1986. After ascertaining the first defendant's whereabouts from the plaintiff the second defendant sent it to him in Queensland for execution. It was executed on 5 September, 1986 and returned to South Australia. 26. The guarantee was not able to be signed by Mr. Russell because he was away. Mr. Cronin had previously executed the lease and it was held by the second defendant pending settlement so as to enable the mortgage to be registered. Mr. Punke enquired of the plaintiff as to the whereabouts of Mr. Russell. This enquiry was first made when he had received the documents from Beneficial's solicitors. 27. There is some confusion on the evidence as to what happened when and it is not helped by Mr. Cronin's diary entries. On balance, I find that the second defendant told the plaintiff that the documents were available soon after they arrived on about 27 August, 1986. There was a delay because of the absence of Mr. Russell. He did not see the guarantee until 4 September, 1986 by which time the documents had been left with the plaintiff. Mr. Russell then took legal advice upon the guarantee and was advised not to sign it as it was a guarantee of the whole of the plaintiff's loan from Beneficial and was not limited in the manner which the plaintiff and Mr. Russell had intended at the outset and which I accept the plaintiff told Beneficial when he made his initial application for finance. The second defendant was keen to have the documents executed and settle. There was no reason for him to delay unless there was an impediment to execution. That was Mr. Russell's absence. 28. Through all of this the first defendant was absent. He expected settlement to occur. He expected funds into his account by 2.00 p.m. on 29 August, 1986 and again on 1 September, 1986 in accordance with the provisions of the contract. 29. After the stocktake on 31 August, 1986 and knowing that settlement could not occur on 1 September, 1986, because the documents had not been executed and that there had been no payment of funds by him on 29 August, 1986 as the contract required, the plaintiff on 1 September, 1986 went into possession of the Pharmacy. He had the key. He knew there was no locum arranged by Mr. Yuncken for this second week of holidays. Whilst he may have rationalised this act subsequently as being the only real alternative to allowing the shop to remain shut and thus damaging its trading image and goodwill I am satisfied that both he and the second defendant expected settlement ultimately to occur. By this time the problem with the mortgage was unknown. The second defendant found out on 1 September, 1986 that the plaintiff was in possession. He sought and obtained information from him as to where he might contact the first defendant and attempted to do so. On 2 September, 1986 he took the finance documents to the shop for the plaintiff and Mr. Russell to execute and spoke to the plaintiff about being in possession without having paid. He was placated by the plaintiff's answer to the effect that it was, in the circumstances, the only way to preserve the business. 30. On this day the first defendant had required of the second defendant by telephone that the funds due to be paid on 29 August, 1986, being all funds due except as financed, be paid by the plaintiff as he was in possession notwithstanding the delay in settlement. Accordingly, the second defendant sought that sum from the plaintiff who immediately provided two bank cheques aggregating $25,000 payable to the second defendant's trust account. I find that they were paid by Mr. Punke to the first defendant's National Australia Bank account with the knowledge of the plaintiff. At that time both the plaintiff and the second defendant expected that settlement would proceed and that this was to be a part payment of the purchase price as required by the contract. 31. All now depended upon the execution of the guarantee and statutory declaration. Mr. Punke seemed to think that he could organize a settlement with the former even if the latter was still to come from the first defendant. In any event, that was not to occur. On 4 September, 1986 Mr. Russell, having taken legal advice upon the guarantee, told the plaintiff of its extent and that he would not sign it. The plaintiff told the second defendant of this on 5 September, 1986. There was some further discussion with Beneficial as to possibly varying its terms which came to nothing and on 9 September, 1986 Mr. Punke attended on Mr. Russell at his place of work where he finally refused to execute the guarantee. 32. On 8 September, 1986 the plaintiff had told Mr. Punke of concerns about the financial strength of the business vis-a-vis the contract figures. On 9 September, 1986 after Mr. Russell refused to execute the guarantee the second defendant suggested to the plaintiff, in light of the difficulties which then existed, that he take legal advice. He did so on the evening of 9 September, 1986 at the Law Society and saw a solicitor on 10 September, 1986. The second defendant had no more to do with the plaintiff in relation to the contract except as requested by his solicitors. 33. The second defendant had spoken to the first defendant on 1 September, 1986 and again on 5 September, 1986. The first conversation led to the payment by the plaintiff of the $25,000 on 2 September, 1986. The second defendant simply endorsed the cheques to the first defendant and they were in his account when he checked it on 5 September, 1986. He then rang the second defendant to ascertain why all funds were not there and was told of the problems with the guarantee. 34. The first defendant checked his account again on 11 September, 1986 and found that settlement had still not occurred. He rang the second defendant again from Darwin and was told both that the guarantee would not be signed and that the plaintiff had concern with the figures relating to the business. I accept the evidence of the second defendant in this regard. The first defendant then rang his solicitor and rang the plaintiff. This latter conversation was not significant and the plaintiff, as requested by the first defendant, rang him in Darwin on the morning of 12 September, 1986. There was a conversation about the figures. The first defendant asked the plaintiff to stay on in the Pharmacy until he returned. This he did on 15 September, 1986 but made no contact with either the plaintiff or the second defendant. That he should so ask of the plaintiff is an indication that he then still considered the business to be his, the contract not having been concluded. At this time the plaintiff also thought that he was looking after Mr. Yuncken's business. 35. Upon his return to Adelaide Mr. Yuncken consulted his solicitor. He had previously spoken to him from Darwin. On 23 September, 1986 a Notice to Complete was served on the plaintiff. A further letter to the plaintiff from the first defendant's solicitors received on 3 October, 1986 required settlement by 14 October, 1986. On that day there was a meeting between the plaintiff, the first defendant and their solicitors. It was there made plain that the plaintiff could not complete. However, no agreement was reached and, surprisingly, the plaintiff remained in possession of and operating the first defendant's shop. 36. A Notice of Rescission dated 27 October, 1986 was served on 28 October, 1986 but the plaintiff remained in possession until 24 December, 1986 when the first defendant went back into possession after a stocktake. The $25,000 paid by the plaintiff has been put into a trust account pending the outcome of this action. Initially, the plaintiff relies upon the provisions of Section 89 of the Land Agents, Brokers and Valuers Act, 1973. That section provides:

    "89.(1) A contract for the sale of any land or business
    that provides for the payment of any part of the
    purchase price of the land or business (except a
    deposit) before the date of settlement is void.
    (2) Any moneys paid under a contract that is void by
    reason of subsection (1) of this section may be
    recovered by action in any court of competent
    jurisdiction.
    (3) In this section-- 'deposit' means an amount paid by
    a purchaser in a lump sum, or in not more than three
    instalments, towards the purchase price of land or a
    business before the date of settlement.
    (4) Not applicable.
    (5) Not applicable." 37. The contract provided under the heading "Further Deposit":
    "AMOUNT equivalent to the balance of the purchase price
    including an estimated value of the stock in trade (if
    any) (less any moneys being borrowed by the Purchaser in
    accordance with the Special Conditions herein) to be
    paid by cash or bank marked cheque before 2.00 p.m. on
    the last banking day immediately prior to the date of
possession." 38. That a sum of $1,000 deposit was paid on 29 July, 1986 is not in dispute. The sum of $25,000 was paid on 2 September, 1986 by the plaintiff to the second defendant and I have already found that it was paid to the first defendant's bank account with the plaintiff's knowledge. 39. A consideration of the definition of "deposit" in sub-section (3) means, to my mind, that upon the facts which I have found proved there had been, when the plaintiff paid the sum of $25,000 to the second defendant, two "instalments towards the purchase price of ... the business before the date of settlement". This being so, the payment is within the definition of deposit for the purposes of the section and the section, therefore, has no application and is not helpful to the plaintiff. To use the words of Mullighan J in Bosbury Pty. Ltd. v. Comgrigg Pty. Ltd. (1992) 57 SASR 241 at 247: "At no time during the currency of the contract did this sum amount to anything other than a deposit as part of the purchase price." 40. By way of alternative relief the plaintiff seeks a declaration that the contract has been terminated thus entitling him to repayment of the sum of $26,000 from the first defendant. This termination was perhaps on 11 or 12 September, 1986 when the plaintiff told the first defendant on the telephone that he could not pay, or at the meeting of the parties and their representatives on 14 October, 1986 when this was reiterated or as a consequence of the first defendant's Notice of Rescission of 28 October, 1986. 41. Mr. Crawley submitted, and there was agreement from both Mr. Stevens for the first defendant and Mr. Hoile for the second defendant, that there was in existence between the plaintiff and the first defendant a validly binding contract containing in this subject to finance clause, which I have earlier set out, a condition subsequent to its creation and a condition precedent to the obligation to complete. By analogy with the factual situation in Perri v. Coolangatta Investments Pty. Ltd. (1982) 149 CLR 537, where there was a condition to be fulfilled within a reasonable time, Mr. Crawley submitted that there is no obligation upon the purchaser to settle until the condition has been fulfilled. So it is here where the condition precedent to completion is in the hands of a third party, i.e. the financier, he said. 42. In the present circumstances the plaintiff submitted that the subject to finance special condition was in two parts. They were that: (i) Beneficial Finance Corporation agree to grant a loan; and (ii) the plaintiff as purchaser obtain the loan on or before settlement upon such terms and conditions as the lender may require. 43. Should both requirements not be fulfilled he contended that the provisions of sub-clause (4) of the special condition applied and the contract may be cancelled by either the plaintiff or the vendor by written notice to the other. 44. The plaintiff contends that whilst there was quite early verbal notice there was notice in writing from the first defendant to the plaintiff by his Notice on 27 October, 1986 and by letter on 11 November, 1986. In these circumstances the plaintiff seeks the refund of both the deposit and the other monies paid by him on account of the purchase in accordance with the provisions of sub-clause (4). 45. Issues of whether in equity there should be any adjustment of this sum between the parties are separate and consequential upon this initial position. 46. Generally, the second defendant supported Mr. Crawley's submissions as to the meaning of the special condition. Mr. Hoile referred to Stonehouse "The Law of Vendor and Purchaser", 1964 and Conlon v. Biggs (1943) SASR 43 in support of the proposition that the sum of $25,000 was recoverable by the plaintiff as a part payment made in circumstances akin to those in Clifton v. Coffey (1924) 34 CLR 434. He submitted that the plaintiff had the benefit of a clause which required him to obtain the money from the lender at or prior to settlement. The condition precedent was, therefore, not fulfilled and the contract cancellation provisions set out in the special condition came into effect. 47. In relation to this most crucial issue concerning the meaning of the special condition Mr. Stevens was compelled to adopt a quite radical and, in my opinion, impracticable position when addressing as to the meaning of sub-clause (1) of the special condition. He submitted that it was necessary that the lender must agree to grant a loan by the date set out in the contract. In fact, that was not done until seven days later on 21 August, 1986. The second requirement was, in his submission, completed when it was indicated by the financier that the loan would be available at settlement upon the terms set out in the letter of offer which were within the breadth of sub-clause (1). Thereafter the plaintiff, having accepted the offer, had actually accepted the risk of performance of each term and the contract thus became unconditional. When performance became impossible the plaintiff remained responsible to the first defendant by breach of contract for any loss incurred by him. 48. To my mind, such an interpretation flies in the face of the usual meaning of the words used in the clause. It is a forced interpretation which seeks to impose upon any borrower a quite unrealistic burden and converts the deliberate protection given by such a subject to finance special condition from a shield to a sword upon which any hapless would be purchaser impales himself immediately he accepts the financier's offer. In addition, it pays no regard to the real consequence that until there is acceptance nothing further towards preparing documentation for settlement is done by the financier and so it would in all cases be necessary for a would be borrower to sign to start the process thereby abandoning his own protection without having even seen the financier's documentation which he would then be bound to accept. 49. Unless there is something else from the behaviour of the plaintiff, I am of the opinion that because of his failure to obtain finance in the terms of the special condition the condition precedent to completion has not been fulfilled and he is entitled upon cancellation in writing, which there has been, to receive back payments totalling $26,000 from the first defendant. 50. Of course, the first defendant contends that this should not be so because of the actions of the plaintiff. At the trial I permitted Mr. Stevens to amend the first defendant's defence to add a plea of estoppel to that of waiver already pleaded. 51. I understand the first defendant's case in this regard to have been put on the following basis. From the contract the plaintiff had competing contractual rights of termination, if no finance came to him, or upon payment to the first defendant, of entering into possession. Mr. Stevens submitted that the consequence of the plaintiff entering into possession on 1 September, 1986 was in breach of his contractual rights and that by so doing the plaintiff has waived his entitlement to terminate. Put another way, he has elected between two inconsistent legal rights, namely, to rely upon the special condition or to enter into possession, by entering into possession and so is unable to rely upon sub-clause (4) of the special condition. It was further submitted, partly in the alternative, but as part of a general submission upon this topic that the plaintiff was estopped by his action from claiming the benefit of the special condition. It was said that the action of the plaintiff in entering into possession was relied upon by the first defendant (via his agent, the second defendant) to the detriment of the first defendant. 52. In this regard I have some difficulty in seeing that there is an estoppel. It is not disputed, subsequent to the first defendant's late amendment of his claim against the second defendant, that the second defendant did not know in detail about arrangements made by the plaintiff and the first defendant involving the key to the premises. At all times, until several days later, the plaintiff expected the transaction to complete, as did the second defendant in his capacity as a representative of both parties. The plaintiff knew from his conversation with the first defendant on 21 August, 1986 that a locum was arranged for the week prior to 1 September, 1986 - the first week of the second defendant's absence. Both parties had discussed and agreed that the plaintiff would enter into possession on 1 September, 1986. The contract was amended accordingly on 29 July, 1986 and they knew no other arrangements had been made to open the shop on that day. Admittedly, these arrangements expected that settlement would occur. However, by entering into possession in any event the plaintiff has, as he said in evidence, acted in the best interests of the preservation of the business irrespective of what might happen in relation to the contract. That attitude made sense to the second defendant and to the first defendant, when on 12 September, 1986 he asked the plaintiff to remain in possession whilst he completed his holiday. In these circumstances there can be no detriment to the first defendant from the plaintiff's action. He remained in possession because of the first defendant's failure, for reasons best known to himself and his advisers, to re-enter his own business until 27 December, 1986. 53. In light of the requirement of sub-clause (4) that any waiver be in writing and it not being in dispute that that has not occurred, I am not able to find that in the terms of the contract the plaintiff has waived his rights pursuant to that special condition. There was nothing done by the plaintiff to indicate that he was not, at the time of taking possession, still relying upon finance to be available prior to settlement. In such circumstances I cannot see that the plaintiff has waived his rights pursuant to the special condition. 54. It is trite that for a party to elect between two inconsistent contractual rights the elector must have an element of knowledge and use actions or words sufficient to amount to the making of such an election: Sargent v. A S.L. Developments Ltd. (1977) 131 CLR 634 per Stephen J at p 637. When the plaintiff went into possession I have found that his broker, the second defendant, did not know of his intention. There is nothing in the evidence to support a finding that the first defendant and the second defendant had discussed what was to happen should settlement not occur. The predominant inference from the evidence is that the plaintiff would go in anyway so as to protect the business. Nothing done by the plaintiff is capable of amounting to an election as between his inconsistent rights. At no time on or before 1 September, 1986 did he know that there was any real doubt about finance becoming available and settlement then occurring. His entering into possession is consistent with that attitude and in those circumstances not inconsistent with the rights he has pursuant to the special condition. 55. The first defendant submitted that, in any event, by the words of the contract the sum of $25,000 was forfeit as being a further deposit. I am unable to agree. As I have indicated, the plaintiff is entitled to his money back pursuant to sub-clause (4) of the special condition and this includes all monies paid irrespective of how described in the contract. Were the matter at large I indicate that, notwithstanding the words "Further Deposit" appearing on that page of the contract, such a payment is a payment towards the purchase price and not a deposit, or part thereof. Even were the sum of $25,000 forfeit because of the terms of the contract, having regard to the fact that the first defendant obtained his business back he may not retain both: Laird v. Pim and Anor (1841) 151 ER 852 and McDonald v. Dennys Lascelles Ltd. (1933) 48 CLR 457. 56. In such circumstances the first defendant can only recover from the plaintiff damages if he is able to prove a loss from the plaintiff's occupation of the business. I agree with the submission by Mr. Hoile that there is to be implied into the contract a term similar to Clause 12 as applicable to the plaintiff. That clause reads:
    "UNTIL the date of possession as herein provided the
    Vendor shall (a) carry on the business in an efficient
    and proper businesslike manner. (b) keep all the assets
    agreed to be sold and purchased in as good a state of
repair and condition as at the date of this agreement." 57. The plaintiff is obliged to take reasonable care of the business "as if that clause referred to the Purchaser". 58. The onus of proving that he did not do so lies upon the first defendant and, in my opinion, is not discharged. The plaintiff was permitted to remain in the business by the first defendant upon his return from Darwin. This was upon the advice of his then legal advisers. In October 1986 the first defendant knew that the plaintiff could not pay. From then on, or, at the latest, from the Notice of Rescission, the plaintiff remained in the business as a guardian for the first defendant. No sufficient evidence establishes that in that period anything done by the plaintiff caused the business to diminish. See "The Law of Vendor and Purchaser": ibid para. 1176 et seq. To briefly consider the alternative, had I been satisfied that the plaintiff had failed to act as required and were it necessary to consider an assessment of any such loss by the first defendant, I indicate that I prefer the expert evidence of Mr. Weise to that of Mr. Spear as the basis for any such assessment. However, I need not take this topic further as it does not now arise. 59. Notwithstanding my findings to date there needs to be some adjustments in favour of the first defendant consequent upon the plaintiff's occupation: see Hodder v. Watters (1946) VLR 222. It is common ground that when the first defendant retook possession the value of the stock in hand was $4,619.91 less than the previous stocktake in August. He is entitled to this sum. In addition there are other sums to be similarly adjusted:
    (a) the cost of stocktakes $553.00
    (b) the cost of a Form 6 to facilitate the application
    for finance by the plaintiff paid for by the first
    defendant $870.00 I decline to allow the cost of the
    airfare from Darwin to Adelaide as, notwithstanding his
    request of the plaintiff to remain in the Pharmacy until
    he returned, the first defendant did not then contact
    the plaintiff and has been unable to show that it was
    necessary to disburse that sum to regain possession of
his business. 60. Apart from these adjustments which total $6,042.91 other losses should lie where they fall. These include interest, the plaintiff's wages and business losses and non business expenses. 61. Consequently, as against the first defendant the plaintiff is entitled to $26,000.00 less 6,042.91 $19,957.09 to be paid from the sum presently held in trust. The balance (including any accrued interest) is to be paid to the first defendant. 62. I must now consider whether the plaintiff has any basis upon which to recover this sum of $6,042.91 (or any part thereof) from the second defendant. Mr. Crawley submitted that this will be so if the second defendant is shown to be in breach of his duty to the plaintiff. He suggested that this situation arose consequent upon the second defendant failing to advise the plaintiff, upon his receipt of the offer of finance from Beneficial on 22 August, 1986, that acceptance of the offer did not mean that the finance was, to use his words "in the bag". Similarly, a breach of duty is suggested following the failure of the second defendant not to take the finance documents, including the guarantee, to the plaintiff immediately he received them. However, as to this latter suggestion I am satisfied that this was because the plaintiff had told the second defendant that Mr. Russell, who was to execute the guarantee, was away from Adelaide. They came to the plaintiff in reasonable time in the circumstances. Following from this is the failure by the second defendant to check the breadth of the guarantee and in not having made himself familiar with the detail provided by the plaintiff to the financier in relation thereto at the outset. 63. The obligation which the second defendant has to the plaintiff was discussed in Neagle v. Power (1967) SASR 373. Chamberlain J (with whom Bray CJ agreed) said at p 383:
    "A licensed land broker is therefore held out as one fit
    and proper not only to prepare Real Property Act
    documents, but to transact business under the provisions
    of the Act, and for this purpose his fees, and in my
    opinion his responsibilities, are identified with those
    of a solicitor. A licensed land broker therefore, who
    undertakes to act for one or both of the parties to a
    dealing with land under the Real Property Act 1886-1963,
    undertakes that he possesses the requisite knowledge,
    and will exercise the necessary degree of care and
    skill, to protect the interest or interests of those for
    whom he acts." The extent of the duty relates, as Bray
    CJ said at p.377, "not ... to the (second defendant's)
    knowledge of general legal propositions at all, but to
    the reasonableness of his action in the particular
    circumstances, not as a matter of juristic science but
    as a matter of business prudence". 64. Here the second defendant was aware only that the plaintiff had made his application for finance. There was no need for him to be aware of what was said. He knew Mr. Russell was to be guarantor and that he was absent. I am not persuaded that he had a duty to prudently do more than he did. After all, this transaction was substantially run by the plaintiff and the first defendant. They made all the housekeeping type arrangements. Until Mr. Russell saw a guarantee and took advice whether or not he would sign was unknown and what passed between the plaintiff and the financier was irrelevant. I do not see a duty upon the second defendant to warn the plaintiff that his acceptance of the offer of finance did not have any meaning in relation to the respective rights of the parties to the contract. Everything which happened in this matter indicates that the plaintiff knew from the outset that there could be no completion until all the documents were signed. 65. Thus, I am not satisfied that there was any breach of the duty owed by the second defendant to the plaintiff which might in any way be causative of loss. Consequently, the plaintiff is unable to succeed in this claim against the second defendant. 66. The first defendant maintains a counterclaim against the plaintiff and seeks a declaration that the contract was validly terminated. That is so from my earlier findings. He further seeks an order for damages and that the monies paid by the first defendant be forfeit as part thereof. 67. I have dealt with these matters earlier. For the reasons there given the first defendant has failed to establish the breach of contract relied upon, the contract having been terminated pursuant to sub-clause (4) of the special condition and the provisions of that sub-clause then becoming effective. 68. Consequently, this counterclaim fails. In what are essentially separate proceedings but which have in this action been called a counterclaim, the first defendant as plaintiff seeks damages from the second defendant as defendant based upon alleged breach of oral agreement, negligence and/or breach of duty. 69. The essence of this claim was set out in paragraph 6, which in its original form read:

    "6.1 in or about the month of August 1986 the plaintiff
    by Counterclaim and the defendant by Counterclaim had a
    further meeting at the business premises. At the
    meeting the plaintiff by Counterclaim gave to the
    defendant by Counterclaim the keys to the business
    premises and orally instructed the defendant by
    Counterclaim as follows:-
    6.1.1 that the plaintiff by Counterclaim would be
    interstate during the week prior to and subsequent to
    the settlement date and therefore unable to attend at
    settlement;
    6.1.2 the plaintiff by Counterclaim provided to the
    defendant by Counterclaim contact addresses and
    telephone numbers for the purpose of confirming
    settlement or any variation of instructions;
    6.1.3 that the plaintiff by Counterclaim had hired a
    relieving pharmacist who was to manage the business
    until settlement;
    6.1.4 that the defendant by Counterclaim was not to give
    the keys to the business premises to the plaintiff or
    permit him to enter into possession of the business
    until settlement was completed;
    6.1.5 that after settlement the defendant by
    Counterclaim was to pay the purchase price to the
    plaintiff by Counterclaim's bank account at the National
    Australia Bank Jetty Road and Glenelg Account Number
    1980555 ('the plaintiff by Counterclaim's bank
    account').
    The defendant by Counterclaim took the key to the
    business premises and orally acknowledged the plaintiff
    by Counterclaim's instructions and further stated that
    he would perform the plaintiff by Counterclaim's
    instructions." 70. On the second day of the trial the first defendant sought and was granted leave to amend by deleting the words underlined thereby wholly changing the basis upon which he proceeded against the second defendant. 71. This was the second of two significant events which quite changed the nature of these proceedings and will no doubt lead to quite lengthy submissions on the question of costs. At the commencement of his opening, Mr. Crawley, for the plaintiff, indicated that the plaintiff would no longer be proceeding with his claim based upon misrepresentation. This was first raised by the plaintiff with the second defendant and the first defendant in the second week of his occupation of the Pharmacy and pursued steadfastly from that time until trial - a period of six and a half years. 72. Had proper advice on evidence been undertaken then these amendments would and should have been made at an earlier stage. It is quite apparent that the failure to so prepare for trial contributed to the early non resolution of this dispute. The first defendant's counterclaim against the second defendant relies upon a fiduciary relationship being established between the parties in May 1986. This is not supported on the evidence and I have already found that the second defendant was not instructed to act and did not agree to act for the first defendant until 29 July, 1986. That was a restricted retainer relating only to preparing a surrender of lease, preparing for and attending to settlement for the first defendant and paying monies as directed. Naturally for these tasks the second defendant owed to the first defendant a duty of the type referred to in Neagle v. Power. 73. Subsequent to the amendment a significant basis of the first defendant's claim is as to the manner of the plaintiff entering into possession. However, the first defendant gave the plaintiff the key and they discussed entry. I am not satisfied that the second defendant either knew of this or had any other role to play. I accept that he was quite surprised to find on 1 September, 1986 that the plaintiff was in possession. Acceding continued possession so as to preserve the business does not amount to a breach of duty, especially where the second defendant had not received instructions to the contrary or concerning possession at all. It was a sensible commercial decision at the time and is not to be given a different description all this time later. 74. I have also found that the first defendant did not give the second defendant specific information as to his whereabouts whilst on holiday. This information was given to the plaintiff and the second defendant obtained it from him on 1 September, 1986 when he sought to telephone the first defendant and forwarded him the statutory declaration for signature. 75. Mr. Stevens submitted that there was a significant conflict of interest between the duties which the second defendant owed to the plaintiff and the first defendant as time and events went on. This was caused by a merging of the knowledge of the second defendant because he acted for both sides of the transaction (Sargent's Case). No criticism is to be successfully levied at the second defendant for so acting. That is allowed and recognised by the legislature. 76. The circumstances of each transaction are the basis upon which conflict of interest findings are to be made. The delay in finance approval was not a problem because the first defendant executed the surrender of lease one week later and so obviously intended to go on. 77. The second defendant tried to telephone the first defendant on 1 September, 1986 when he knew the plaintiff was in possession. When the first defendant spoke to the second defendant about this he wanted only the unfinanced portion of the purchase money. Nothing said in evidence indicated that he wanted not to proceed. I accept that he was told of the delay and find that all three men still expected to settle. That was so until 5 September, 1986 when the plaintiff became aware of Mr. Russell's problem with the guarantee. There was then a delay in informing the first defendant but in an endeavour to overcome the difficulty the second defendant negotiated with the financier. It was to no avail and when the plaintiff mentioned concern about the takings the second defendant advised both the first defendant and the plaintiff to take legal advice. They did this immediately and he had no part in the matter thereafter as a representative of either. 78. I am not able to find on the evidence that in the circumstances as they existed with an exception, which I shall mention, that the second defendant acted in breach of his duty to the first defendant. In particular I reject the suggestion that he was closer to the plaintiff by the end and thereby favoured him by inaction in relation to his obligation to the first defendant. 79. In any event the first defendant has not suffered any loss. The $25,000 has been preserved and he has obtained his business back and has received in a broad way an adjustment in his favour consequential upon the occupation of the business by the plaintiff. He is not entitled to both the money and the Pharmacy. 80. The exception to which I referred is the manner in which the second defendant used the deposit from his trust account to meet expenses of the plaintiff relating to steps necessary for completion. This sum of $1,000 must be refunded to the first defendant as it was held on his account by the second defendant and is to be returned by him to the plaintiff. 81. As there are no proceedings by the second defendant seeking the monies disbursed on account of the plaintiff towards settlement or his professional costs I am not able to make an order for the payment of same. 82. The proposed formal orders are these: On the claim: judgment for the plaintiff against the first defendant in the sum of $19,957.09 and judgment for the second defendant against the plaintiff. On the counterclaim: judgment for the plaintiff against the first defendant. 83. On the first defendant's/second defendant's claim: judgment for the first defendant in the sum of $1,000. 84. I shall hear counsel as to the final form of the orders and costs.