Sampson v Clifford
[2001] WASC 102
SAMPSON -v- CLIFFORD & ORS [2001] WASC 102
| SUPREME COURT OF WESTERN AUSTRALIA | Citation No: | [2001] WASC 102 | |
| Case No: | CIV:1830/1998 | 28 FEBRUARY, 1-2 MARCH 2001 | |
| Coram: | WHEELER J | 26/04/01 | |
| 21 | Judgment Part: | 1 of 1 | |
| Result: | Application dismissed | ||
| PDF Version |
| Parties: | CORALIE JAN SAMPSON CHARLES IAN TIMOTHY CLIFFORD ILZE DAGNIJA STALS REGISTRAR OF TITLES |
Catchwords: | Real property Offer and acceptance Subject to finance condition Approval of finance Private fixed mortgage Lender acceptable to purchaser Real property Offer and acceptance Subject to finance condition Notification Clause 23 of REIWA 1994 Joint Form of General Conditions for the Sale of Land No new point of principle |
Legislation: | Nil |
Case References: | Erley v Gunzberg, unreported; FCt; SCt of WA; Library No 980153; 3 April 1998 Paltara Pty Ltd v Dempster (1991) 6 WAR 85 Codelfa Construction Pty Ltd v State Rail Authority of New South Wales (1982) 149 CLR 337 Elliot v Reading, unreported; SCt of WA (Wheeler J); Library No 980312; 8 June 1998 Fay v Sheridan [1999] WASCA 61 Jet City Pty Ltd v Yenald Nominees Pty Ltd, unreported; SCt of WA (Owen J); Library No 990180; 9 April 1999 John Holland Construction & Engineering Pty Ltd v Lee Kong Nelder Nominees Pty Ltd, FCt SCt of WA; Library No 990183; 16 April 1999 |
JURISDICTION : SUPREME COURT OF WESTERN AUSTRALIA
- IN CIVIL
- Plaintiff
AND
CHARLES IAN TIMOTHY CLIFFORD
ILZE DAGNIJA STALS
First Defendants
REGISTRAR OF TITLES
Second Defendant
Catchwords:
Real property - Offer and acceptance - Subject to finance condition - Approval of finance - Private fixed mortgage - Lender acceptable to purchaser
Real property - Offer and acceptance - Subject to finance condition - Notification - Clause 23 of REIWA 1994 Joint Form of General Conditions for the Sale of Land
No new point of principle
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Legislation:
Nil
Result:
Application dismissed
Representation:
Counsel:
Plaintiff : Mr P B O'Neal
First Defendants : Mr M H Zilko
Second Defendant : No appearance
Solicitors:
Plaintiff : Minter Ellison
First Defendants : Stables Scott
Second Defendant : No appearance
Case(s) referred to in judgment(s):
Erley v Gunzberg, unreported; FCt; SCt of WA; Library No 980153; 3 April 1998
Paltara Pty Ltd v Dempster (1991) 6 WAR 85
Case(s) also cited:
Codelfa Construction Pty Ltd v State Rail Authority of New South Wales (1982) 149 CLR 337
Elliot v Reading, unreported; SCt of WA (Wheeler J); Library No 980312; 8 June 1998
Fay v Sheridan [1999] WASCA 61
Jet City Pty Ltd v Yenald Nominees Pty Ltd, unreported; SCt of WA (Owen J); Library No 990180; 9 April 1999
John Holland Construction & Engineering Pty Ltd v Lee Kong Nelder Nominees Pty Ltd, FCt SCt of WA; Library No 990183; 16 April 1999
(Page 3)
1 WHEELER J:
The Action
2 This action concerns a house in Dalkeith (also referred to as "the property") and the transactions entered into between the plaintiff and the first defendants (whom I propose to call either individually by their surname, or collectively "the defendants", since the second defendant, The Registrar of Titles, abides the decision of the Court) in the first half of 1998 in relation to the sale of that house. In broad terms, it is contended by the plaintiff that by an offer and acceptance dated 4 June 1998 and accepted by her on 5 June 1998, the defendants were obliged to purchase her house, subject only to fulfilment of the finance condition in the offer and acceptance. It is the plaintiff's contention that that condition was fulfilled or that alternatively, if it was not, the failure was due to the breach by the defendants of their obligation to use best endeavours to obtain a loan.
3 I propose to set out a relatively brief summary of what appear to me to have been the relevant events, before turning to look to the finance condition in more detail. Before I do so, it is necessary to make some observations on questions of credibility, since there were many differences in matters of detail between the witnesses for the plaintiff and for the defendants.
Credibility-General Observations
4 On behalf of the plaintiff, most evidence was given by the plaintiff herself, her husband Mr Stephen Sampson, and finance broker Mr Clifton. The plaintiff herself was party to only some of the conversations which revolved around the question of the defendants' efforts to obtain finance, and when she did take part, did so largely in the capacity of a person merely observing the conversation or hearing it or part of it (in the case of telephone conversations). Mr Sampson had some direct dealings with the defendants. The most important evidence as to their dealings with Mr Clifton came from Mr Clifton himself, with whom Mr Clifford met alone on one or possibly two occasions. So far as the defendants are concerned, Mr Clifford took the more active part in attempting to obtain finance and in negotiations concerning what finance would be necessary.
5 Some matters of detail it is in my view not necessary for me to resolve. For example, it does not appear necessary to resolve the question of whether there was or was not a telephone conversation between the
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- plaintiff and her husband and Mr Clifford, when the former were travelling in their motor vehicle, about increasing the amount of vendor finance, or precisely what the terms of any such conversation may have been. The most significant differences are between the evidence of Clifton and Clifford as to what took place at their meeting or meetings. Because of the view which I ultimately take in this case, it is not perhaps necessary to resolve those matters either. However, in case it is necessary to do so, and in order to give a more complete account of the factual matrix against which this contract was entered into, I do make certain observations about the respective credibility of Clifton and Clifford.
6 Although he may well have been doing his best to recount matters as accurately as he recalled them, Clifton did not impress me as a witness with a clear and accurate grasp of the detail of the events which had occurred. There were a number of difficulties with his evidence. Some appeared to reflect confusion in his own mind as to precisely what may have occurred. I set out briefly below the matters which particularly lead me to this conclusion.
7 Mr Clifton was not able to articulate with precision the importance, if any, of the ability of a borrower to repay the amount borrowed, in an application for a loan. When asked whether it would be necessary to have information in relation to that matter to put to a lender, in order to interest a lender in providing funds, he replied, "Not all lenders are interested in serviceability. Some lenders are interested in the quality of a security only". It quickly became apparent that this was a considerable overstatement; Mr Clifton then took the view that some lenders regarded security as their "primary concern" but conceded that the ability of the borrower to repay would be of relevance. It became apparent later in his cross-examination that, whatever emphasis might be placed upon ability to repay at the time of initial enquiry, it was always the practice of his company to provide information about the capacity of borrowers to repay to prospective lenders at a time when the approval of the latter was formally sought for a loan.
8 In his evidence as to the meeting or meetings with Mr Clifford, he appeared to be confused both about duration and about what record, if any, might have existed of such meeting. In relation to what he asserted was the first of two meetings with Mr Clifford (Mr Clifford asserting that there was only one face to face meeting), Mr Clifton said that he recalled that the meeting took 20 to 25 minutes. However, he agreed that in a statement previously signed by him on 26 September 2000 he had asserted that the meeting took 45 minutes. He was unable to explain the
(Page 5)
- discrepancy. The evidence of a Mr Hodge, who recalled being in Mr Clifton's waiting room when that meeting took place, was that the meeting took only about 10 minutes. I am inclined to accept the evidence of Mr Hodge, because although he is a friend of Mr Clifford's, he has no direct connection with these proceedings, and because even Mr Clifton's account of the content of the conversation makes it difficult to see how the meeting could be greatly in excess of 10 minutes. Mr Clifford's estimate of a meeting of about 7 minutes' duration, then, is much nearer the mark than either of Mr Clifton's assessments.
9 A rather odd sequence of replies to questions about what Mr Clifton's diary might reveal as to the relevant meeting or meetings suggested to me that Mr Clifton had a tendency to answer questions in a plausible manner without considering whether the answer which he gave was accurate. Whether these replies were produced by carelessness or deliberate evasiveness, I am unable to ascertain; however, they have contributed towards my reservations about the reliability of his evidence. In broad terms, the sequence was that he was asked whether he kept a diary at the relevant time and replied that he did and that, "It is filed". When asked whether he could bring his diary to Court, he said he could not necessarily do so and that, in any event, the relevant meeting may not be in his diary. He said that he had not looked at his diary to see if the meeting was in it. Those questions related to the first of the meetings which he alleged. In relation to the second, he was asked whether there was an entry for it in his diary and said that he did not know. He said that he had not looked in his diary to see if the meeting was there. However, shortly thereafter, he said, "I know it is not in my diary". Then, in relation to both dates, he said that he had no paper diary and that, although he had had an electronic diary facility available to him at the time, he was confident that he was not using it at the relevant times. His earlier replies had clearly suggested (and in one case directly asserted) that he had kept a diary covering the relevant period. The discrepancy was unexplained.
10 Finally, it is to be noted that in cross-examination he was adamant that he had informed Mr Clifford at the second of their meetings that the interest rate for the loan which he could arrange would be 9 per cent, with a 0.35 per cent fee charged by his finance broking firm, giving an effective rate of 9.35 per cent. This is not consistent with the account given in his witness statement of that meeting in which he says that he advised Mr Clifford that there would be "an interest rate between 9-10 per cent but I told him it was probably closer to 9 per cent because of the quality of the security". I accept that on occasions a witness may recall under cross-examination material in addition to that which is contained in
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- the witness statement or may recall an event somewhat differently and perhaps more accurately. However, in recounting the conversation in which he said that he advised Mr Clifford precisely of the 9.35 per cent, Mr Clifton did not present as a person who was recalling something previously unrecalled; rather, he appeared to be unaware of any difference between his witness statement and what he had asserted in cross-examination until it was pointed out to him, and when it was pointed out he was unable to explain it. I should add in relation to this matter that Mr Clifford denied being told that the rate would be 9.35 per cent. His evidence was that various possible rates had been put to him and that he was concerned that they were too high. He was shown in cross-examination some notes that he had made for the purpose of calculating whether the defendants could afford the property, which notes used a calculation based on a 9.35 per cent interest rate. He conceded that he must have got this rate from Mr Clifton. However, it is to be noted that they were but two pages out of some 25 to 30 pages of calculations involving many different variables. In my view, they establish that Mr Clifton had been told that 9.35 per cent was a possible interest rate but they do not establish that he was advised that it was "the" rate at which the loan would issue.
11 One further general comment in relation to credibility needs to be made. It was strongly suggested by the plaintiff's counsel that the similarities between the defendants' witness statements were such that they were only explicable by the defendants having put their heads together and concocted their accounts. I have considered with some care the document produced by the plaintiff, being a comparison of the portions of the defendants' statements upon which reliance is placed for this proposition. It is my view that there is not sufficient similarity to suggest concoction.
12 The defendants have been involved in a relationship of one sort or another for approximately 22 years, although they separated apparently in 1999. There is a child of that relationship, so one would assume that they continue to be in contact with each other. It is to be expected in such a situation that there might well be similarities of expression in some respects, although I accept that, as the plaintiff submitted, Ms Stals and Mr Clifford have different speech patterns. It is also to be expected that parties to major litigation of this kind will have discussed the events leading up to it in a manner which would reinforce any similarities in recollection. Having regard to those facts, the similarities between these witness statements do not appear to me to be such as to suggest concoction.
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13 Some paragraphs of the statements are identical, while others are very different, and in relation to others again there are small disparities. In many cases, the events being recounted are relatively simple ones and there is a limited number of ways in which one could describe them. By way of example, I note that in Mr Clifford's account of the auction of this property, he says:
"Ilze and I attended the auction on 9 May 1998 and did not bid as we had no finance arranged. I thought that the asking price referred to by Samson was in any event well beyond our capabilities. The last bid at the auction was $1,600,000. I do not know whether that was a genuine bid."
- Ms Stals says:
"We attended the auction on 9 May 1998 but did not bid. The last bid at the auction was $1,600,000. I do not know whether that was a true bid."
The Attempts to Purchase the Property
15 In late April 1998 the defendants noticed that the property was for sale. It was advertised for auction on 9 May 1998. Within a day or so of noticing the property was for sale, Clifford spoke to the agent about the probable selling price and he and Stals inspected the property. The next day Stals spoke to an officer of Challenge Bank. She had banked with that bank for some time and it held a mortgage over a home she owned in Mosman Park. That bank officer came to inspect the property with them, but it appeared probable that they would be unable to obtain enough finance from that source.
16 A few days later Clifford telephoned an officer of the National Australia Bank. He had banked with that bank for a long time and the officer had up to date details of Clifford's financial position. That officer advised him that, in his view, the bank would not advance funds to
(Page 8)
- purchase the property because Clifford could not adequately demonstrate an ability to service the repayments. It is clear that from the beginning Stals was very keen to purchase the property. Clifford was also enthusiastic about the property, but had serious doubts about whether they could afford to purchase it. Clifford had had experience over many years with investments and with property development and because his income varied considerably from year to year, he was aware that projections of future income might not be realised.
17 Shortly prior to the auction the defendants met Sampson and discussed the making of an offer for the property which would include some vendor finance. However, the plaintiff was not interested in considering such proposals prior to the auction. At auction the property was passed in at $1.6 million. The day prior to the auction Clifford had set out in a letter to Challenge Bank considerable detail about his business interests.
18 Shortly after the auction, a number of "scenarios" were discussed between the defendants and the plaintiff, through either the real estate agent or Sampson as intermediary. These included discussions of the "trade in" of a number of items owned by the defendants, including a duplex in which Clifford's mother lived at Cottesloe, a vintage Jaguar, and possibly Stals' property at Mosman Park. The defendants signed a number of offers to purchase the property subject to finance being arranged from Challenge Bank. It appears there may have been three which were not accepted. One of them was accepted. It was subject to finance expressed as a "minimum" of $1 million from that bank, together with a variety of other conditions relating to the duplex and the motor vehicle. Clifford provided further information to Challenge Bank, but it advised that finance was not approved.
19 After the failure of the application to Challenge Bank, Sampson suggested that an approach might be made to a private mortgage broker. Sampson had telephoned Clifton, who was a principal in the largest private finance broking firm in Perth, to enquire whether Clifton would be prepared to assist. There is a dispute as to whether Sampson told Clifford that a broker's fee would not be payable. Clifford's evidence was to the effect that he was told that there would not be such a fee and that Sampson would arrange to deal with that himself. Sampson, however, gave evidence that he told Clifford that there would be a brokerage fee but that the amount would be negotiable. The notes of the various calculations put forward by Sampson suggest that the possibility of a brokerage fee was allowed for in those calculations, but that there was
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- uncertainty as to whether any or all of that fee would be payable; at some points in the calculations there is an amount which clearly appears to represent a 1 per cent brokerage fee (which the evidence suggests was the normal brokerage charged) while, at other points, the item for "brokerage" has no figure, but merely a question mark next to it. There was some discussion of the interest rate which might be payable. Sampson agrees that the defendants were concerned about the level of interest rate - 9 to 10 per cent - which he suggested would be likely.
20 On 1 June 1998 the defendants signed a further offer. The purchase price was to be $1,675,000 and the terms included a deposit of $160,000 paid by the vendor's acceptance of Clifford's Jaguar vehicle at a value of $100,000 and vendor finance of $60,000 for six months, and subject to the approval of finance with the lender nominated as "private fixed mortgage" and the amount "$1 million minimum". The latest date for approval of finance was 5 June 1998. That offer was accepted.
21 The next day, Clifford telephoned Clifton and they arranged to meet. They met for a short time, probably in the region of 10 minutes. Clifford provided Clifton with a brochure with respect to the property, and valuations were discussed. A valuer commissioned by Challenge Bank had, as Clifford was aware, valued the property at $1,650,000 while the plaintiff had an oral, "kerbside" valuation at $1,700,000.
22 Clifford says that he was not told that finance could be arranged by Clifton in the sum of $1.2 million, while Clifton says that he advised Clifford that he would be able to arrange such finance, and that he advised Clifford of the terms, being between 9 and 10 per cent interest, brokerage of 1 per cent and a "break fee" (ie, a fee if the loan were repaid early). It is my view that the differences which exist in relation to this matter are very probably due to differences of interpretation of whatever was said. On any view of Clifton's evidence, the "approval" which he at times appeared to assert that he had given orally was not unconditional. It was subject to Clifton obtaining a copy of the valuation, at a sum of $1.7M, which Clifton accepted was his task, and it was also subject to the furnishing of further financial information dealing with Clifford's ability to service the loan.
23 There are also differences about precisely what was said about the terms of any possible loan, but it appears to be common ground that Clifford expressed dissatisfaction with at least some of them, advised that he was still negotiating with Challenge Bank, and generally appeared to be of the view that the terms offered by Clifton were not in that form
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- acceptable to him. There is some dispute as to whether Clifton was to initiate further contact or whether Clifford was to initiate further contact, but it is also common ground that the matter could not be progressed much further without a copy of the valuation, which Clifton was to obtain.
24 It is my view that there was no further meeting. Whichever view of the evidence is taken, there was little that could be accomplished at a further meeting until either the valuation had been obtained, or Clifford had provided further information about his financial circumstances, or both. It is, however, possible that there was, as Clifford asserts, a telephone call in which there was some further discussion of the prospect of obtaining finance through Clifton's firm. That telephone call is likely to have been on 4 June.
25 Also on 4 June, the defendants signed a further offer for the property. It was in similar terms to the previous offer but included additional vendor finance. It provided for a deposit, described as $227,000 payable by transfer of the Jaguar valued at $100,000 and the balance payable on or before six months from settlement. Provision was made for the possibility that it might not be possible to pay the $127,000 within time. Further purchase moneys were to be provided by transfer of the duplex owned by Clifford to the plaintiff and it was a term of the offer that the plaintiff agree to lease to Clifford's mother the portion of the duplex which Clifford's mother then occupied. It is not I think necessary to set out all the terms. The critical one is the finance condition which was in the following terms:
"FINANCE
- 1.1 It is a condition of this contract that before the Latest Time the Lender give Approval of the granting to the Purchaser of the Loan.
1.2 The Purchaser shall,
(a) use best endeavours to obtain the Loan and if required in writing by the Vendor or Vendor's agent to provide evidence in writing of the making of an application in good faith for the Loan
(b) when the Loan is approved immediately to notify in writing the Vendor or the Vendor's agent
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- 1.3 If on or before the Latest Time
(a) the Application for the Loan is rejected, or
(b) the Application for the Loan has not been approved the Purchaser shall immediately notify the Vendor or the Vendor's agent of such rejection or non approval as the case may be.
1.4 If
(a) the condition in paragraph 1 is not fully satisfied; and
(b) the Purchaser has complied with paragraphs 1.2(a) and 1.3(a) or 1.3(b) THEN UNLESS the Purchaser has waived this condition and communicated such waiver in writing to the Vendor or the Vendor's agent prior to the Latest Time, this Contract shall be deemed to have come to an end without the necessity for either party to give the other notice to that effect. The Deposit and all other moneys (if any) paid pursuant to the Contract shall be then refunded to the Purchaser and there shall be no further demand on this Contract by either party, agent or other person in law or in equity.
1.5 If the Purchaser fails to notify the Vendor or Vendor's agent in accordance with 1.3(b) the Purchaser shall be in default and the Vendor may without prejudice to any other remedies and rights available immediately terminate the Contract by notice in writing to the Purchaser.
1.6 This clause shall operate for the benefit of both the Vendor and the Purchaser except that the Purchaser by waiving the Purchaser's rights pursuant to the clause at any time before the Latest Time shall be deemed to have obtained approval of the Loan.
DEFINITIONS
1.7 In this Contract the following shall apply.
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- 'Approval' means approval by the Lender by the Latest Time of a loan of not less than the amount shown below.
'Latest Time' means 4.00pm on the Latest Date for Approval shown below.
'Lender' means the Lender nominated below or any other Lender acceptable to the Purchaser.
'Loan' means the Loan or Loans of the amount shown below."
26 The "Latest Date" was 9 June, the space for "Lender" was filled in as "private fixed mortgage" and the space for "Loan" showed "$1 million minimum".
27 That was accepted by the plaintiff on 5 June.
28 Also on or about 4 June, Clifton telephoned Sampson and they discussed the valuation. Sampson advised Clifton of the identity of the firm which had given the oral valuation and asked if Clifton was happy for them to do the formal valuation. Clifton said he was, and on 4 June Sampson telephoned the valuer and asked if a written valuation could be done.
29 On 6 June 1998 Stals' property in Mosman Park was advertised for sale. It was contemplated by all parties that some funds from this property would be necessary in order to ensure that the defendants' purchase could proceed, although the defendants had from time to time been unsure as to whether it would be necessary to sell the property rather than refinancing the mortgage on it.
30 On 7 June 1998 Clifford went to Singapore; there was no evidence as to his reasons for going. On 8 June 1998 the valuer completed production of the valuation and sent it by facsimile to Clifton at about 5.20 pm. A further copy was forwarded by facsimile on 9 June at about 12.37 pm.
31 Stals rang Clifton on three occasions on 9 June 1998 but was unable to speak to him, as he was not in the office. She finally spoke to him at 4.00 pm on 9 June 1998 and said to him words to the effect that she had received an offer on her Mosman Park property and wanted to make sure that finance to purchase the property had been approved so that she was not left without a home. Stals had had no prior direct dealings with
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- Clifton. Clifton says he orally advised her of an approval, and of its terms, but she insisted on a letter.
32 It was not until 10 June 1998 that Clifton sent to the defendants a facsimile which stated:
"We confirm that finance has been approved to assist in the purchase of [the property] providing $1.2 million advance at 9.35 per cent for a term of 12 months."
- There were further terms contained in the letter of "approval". It went on to say that, "the details of the formal loan approval will be issued today …".
33 On the same day, Clifton wrote to one of his clients, a Mr Coles, to enquire whether any of Mr Coles' clients would wish to make a loan of that nature. It was clear from Clifton's cross-examination that, even though he considered that he had given approval "in principle", or conditional approval of some kind, and even though he was confident in his own mind that he could find from amongst the potential lenders on his books, one or more who would be prepared to enter into the transaction he had discussed with Clifford, there would be no binding contract between any lender and the defendants until a particular lender had agreed to the relevant terms. He would only then be able formally to advise the defendants of the terms and conditions of the proposed loan. This was not done prior to the latest date for approval. It appears that the primary reason that it was not done was because of the absence of a written valuation until late on 8 June. It may also be that Clifton would have required, in order to complete a formal proposal to a lender, further financial information from Clifford, but it seems that this was of secondary importance. Clifton's letter to Coles proceeds from the premise that the information he already had, which he supplied to Coles, was sufficient to enable a prospective lender to make a decision.
Who was the Lender?
34 It is the submission of the plaintiff that the contract of 5 June must be interpreted so that the expression "private fixed mortgage" inserted by the parties opposite the description "lender" means any person or entity which is prepared to provide a loan secured by way of a private fixed mortgage. It is submitted that because the words are the words of the parties themselves added to the printed form, particular emphasis is to be attributed to them, and that those words are given meaning by the "factual
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- matrix". The relevant part of the factual matrix is said by the plaintiff to be the fact that the parties were aware that loans of this kind were obtainable through intermediaries such as Clifton, and so the words refer to any lender introduced by Clifton or by another broker in order to provide finance of that kind.
35 There are a number of difficulties with this submission. The first is in relation to the "factual matrix". It appears to me that any introduction of a notion of a loan obtained through the agency of a broker such as Clifton is doing more than using the factual matrix to understand the expression used by the parties; rather, what is suggested is a significant qualification by the addition of words which the parties have not themselves used. What is being attempted by the resort to the submission that the factual matrix is relevant, is in this case to invite the Court to read the words used as if they meant what the parties subjectively intended to occur by way of application for finance. Not only is this impermissible, but in the present context it is I think impossible. The subjective intentions of the parties may well have been different. The plaintiff and Sampson may have understood that the defendants were prepared to accept any loan obtainable through Clifton, but it is my view that the defendants had not, at the time of signing either of the offers referring to "private fixed mortgage", decided whether terms which they understood might be offered through Clifton would be acceptable to them.
36 The further difficulty with the submission of the plaintiff is that it gives no weight to the fact that the parties have chosen to insert a description of a class of loan, rather than a lender or class of lender. If it had been intended to indicate that any lender introduced by Clifton would be acceptable, words to that effect could have been inserted. Alternatively, Clifton could have been contacted and asked to indicate a likely lender or lenders and that name or those names could have been inserted.
37 While appreciating that the words were inserted by people who do not have legal training, nevertheless, in interpreting the expression, I think it is appropriate to assume that the generality of the expression, and the reference to a type of loan rather than to a lender or class of lenders, is deliberate. If one takes that view, then it appears to me that the alternative interpretation advanced by the defendants is to be preferred.
38 On the submission of the defendants, there being no nomination of any lender or lenders, the operative part of the definition of "lender" for the purposes of the contract is that which refers to "any other lender
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- acceptable to the purchaser". Such a reading does not leave the expression "private fixed mortgage" with nothing to do. It describes a class of loan. In the context of this contract, it is likely, although it is not necessary to express a concluded view, that it qualifies the definition of "loan" so that the loan which the purchaser is required to make best endeavours to obtain is a loan in the amount and of the type specified by the parties; that is, a loan in a minimum sum of $1 million by way of private fixed mortgage.
39 The question of whether a lender is "acceptable" involves the question of whether the terms offered by that proposed lender are acceptable: Erley v Gunzberg, unreported; FCt; SCt of WA; Library No 980153; 3 April 1998. The purchaser must act honestly in determining whether such a loan is acceptable: Erley. It is my view that although the defendants honestly considered whether terms of the type indicated by Clifton would be acceptable to them, no lender acceptable to them was ever identified.
40 Prior to the letter from Clifton of 10 June 1998, it is my view that no firm proposal setting out the terms and conditions upon which a lender introduced through Clifton would be prepared to make finance available was presented to the defendants, so as to enable them to ascertain whether that lender would be acceptable. Even then, the evidence is that not all of the terms and conditions which any prudent purchaser would require to know had been put to the defendants. For example, it appeared from Clifton's evidence that, although the interest rate was said to be 9.35 per cent, the agreement proposed would have provided for an interest rate of 11.35 per cent, with the proviso that only 9.35 per cent would be payable in circumstances where the borrower was not in arrears by more than seven days. The provision for significantly increased interest on arrears would be of importance to almost any prudent borrower. It appears from the circumstances of this case that it would have been of particular significance to these defendants, who were already concerned about their ability to meet repayments at an interest rate of in the region of 9 per cent.
41 To the extent that the defendants had been given an indication of the types of conditions on which finance would be made available, those conditions were not acceptable to the defendants. The evidence was that they were always concerned about the probable rate of interest, and that Clifford also had concerns about the brokerage which was to be charged and the potential "break costs". It appears to me that it is not possible to say that any one of these conditions, on its own, would have been unacceptable to the defendants. Their concern was for their ability to
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- afford the entirety of the "package" as it was presented to them. If, for example, brokerage and break fees could have been waived, then the proposal may have been acceptable, or alternatively, if a lower interest had been applicable, then the other matters would not have been of such concern. It was for that reason necessary for a detailed proposal dealing with all of these matters to be available, before a decision as to the acceptability of the lender could be made by the defendants.
42 The evidence of Clifford as to the many calculations which he undertook, and the pages of those calculations which are in evidence, lead me to the view that he made a genuine attempt to ascertain whether the defendants would have been able to afford the loan indicated to them - and hence whether it would have been acceptable - but that he was not able to conclude that the proposed loan, to the extent that the terms had been identified, was acceptable. It appears to me that Stals relied upon his expertise in this area and, although she no doubt made suggestions of her own, if Clifford's view was that the terms were not acceptable, then that would be a view which she would share.
Was there Approval?
43 It follows from the views that I have expressed that, if there was no lender acceptable to the defendants identified, then there cannot have been an approval obtained from such a source. However, for the sake of completeness, I would make the comment that it appears to me that there was no "approval" within the meaning of the finance condition obtained before 9 June in any event.
44 As it was put in argument by the counsel for the plaintiff, in approaching a broker such as Clifton there was what was described as a "two step process", that is, "the approval initially given in the case of loans like this by the finance broker and then there is a further kind of approval that is strictly necessary before somebody actually hands the borrower a cheque". The significance of an approval of finance in the context of a contract such as this is that once the loan is approved, the purchaser will be required to complete the purchase. It is my view that the approval which is contemplated by such a clause can only be an approval of a kind which actually binds a person to "hand the borrower a cheque". That is, it must be an enforceable approval.
45 There may be an argument as to whether a letter such as that written by Clifton on 10 June is capable of constituting an approval and whether such a letter would give rise to a right in the defendants to require Clifton
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- to advance the loan. It is not necessary to determine that issue, since the letter is plainly subsequent to the latest date for approval of finance. Prior to that date, as I have already indicated, it is my view that any "approval" purportedly given orally by Clifton, was approval of a conditional nature and was conditional upon, at the least, Clifton's receipt of a written valuation in the usual form indicating that the value of the property was indeed $1.7 million.
Best endeavours
46 The plaintiff further asserts that in any event the defendants did not, as required by cl 1.2(a) of the finance condition, use their best endeavours to obtain the loan. The first response of the defendants to this, relying upon Erley v Gunzberg, is that until there is an identified lender, the obligation to use best endeavours does not arise. However, as the plaintiff points out, the question of whether a purchaser is required to do nothing, and may "sit on his hands" until such time as a potential lender and that lender's terms and conditions are identified to him, did not arise in Erley. In that case, there was an identified loan which was rejected for reasons which the trial Judge had described in detail, and it also appears to have been accepted by the trial Judge that the purchaser was honestly and reasonably of the view that he could do no better with any other potential lender.
47 The plaintiff here submits that the requirement to use best endeavours to obtain a loan must necessarily import a requirement to make enquiries with a view to ascertaining whether a loan will be available. I assume for the purposes of this decision that that submission is correct.
48 However, it is my view that in this case the defendants have made their best endeavours to ascertain whether a lender acceptable to them can be found. I adopt what was said by Malcolm CJ about the expression "best endeavours" in Paltara Pty Ltd v Dempster (1991) 6 WAR 85 at 89. Whether best endeavours have been used, "… must be determined objectively in the light of what in fact is required to be done and in the circumstances as they exist. In such a case, the purchaser is required "to do all that he reasonably can in the circumstances".
49 The circumstances in this case include the enquiries which had been made by the defendants prior to entry into of the contract dated 5 June. Each of them had made enquiries with their own banks, with which they had long relationships. In each case, the result of those enquiries
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- suggested that loans would not be available to them from those banks. It was reasonable to conclude that no other bank or similar institution would be more likely to make finance available.
50 So far as the enquiries in relation to private fixed mortgages are concerned, the defendants had, by the date of that contract, had discussions with Clifton. Clifton's firm was the largest finance broker in Perth at the time. It would be a reasonable conclusion that if Clifton was unable to assist them, no other finance broker could do so. Clifford had attended Clifton's office and had discussed with Clifton the concerns which he had about the terms which Clifton indicated would probably be offered. Clifton was in broad terms aware of the nature of his business, and would have understood the difficulty of predicting his income from year to year. Clifford had in my view done all that was reasonable in order to put Clifton in a position where the latter would be able to make approaches to his clients with a view to obtaining finance which might be acceptable to Clifford.
51 It is said on behalf of the plaintiff that Clifford did not make best endeavours for the following reasons:
• Clifton requested a statement of position from Clifford
• Clifford did not provide the information requested
• Clifford never actually requested that finance be arranged
• Clifford absented himself from Perth in order to go to Singapore.
52 As to the first two of these, it seems to me probable that Clifton did advise Clifford that a statement of position would be required before a loan could issue. In any event, Clifford was experienced in financial dealings and would have understood this himself. However, it is also clear from Clifton's evidence that the details of Clifford's financial position were of minor importance in any loan application. What was of prime importance was the nature and value of the security. The conversation between Clifford and Clifton focused primarily on the nature of the security, and it was clear that the most important ingredient in any approach to a potential lender would be formal confirmation of the value of that security. There is no evidence that the provision of detailed financial information at that stage would have made any difference to the progress of Clifton's enquiries of his clients.
53 As to the absence of a formal request that finance be arranged, Clifford clearly indicated to Clifton that he was very interested in purchasing the property and that he desired finance to be arranged if it
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- could be arranged on terms which were acceptable to him. He indicated which of the terms suggested by Clifton caused him concern. Clifton was then in a position, armed with that information, to consider whether finance might be arranged on terms which could prove acceptable to Clifford.
54 So far as Clifford's departure for Singapore is concerned, there is no evidence that he did so in order to impede any applications or enquiries which might be made in relation to finance. Nor is there any evidence of anything which Clifford could reasonably have done during the time that he was absent in order to ensure that progress was made with any enquiries and arrangements for finance.
55 So far as Stals was concerned, she left the organisation of finance largely to Clifford. Having regard to his business experience, that appears to me to have been a reasonable course for her to take. There was no evidence of any endeavours on her part which could have assisted either in identifying a potential lender or in ensuring the success of any possible application for finance which were not made by her.
56 It is therefore my view that the defendants did use their best endeavours in the sense of making reasonable enquiries and providing information reasonably necessary at the enquiry stage, to ascertain whether a lender acceptable to them could be found.
Notification
57 The plaintiff submits that the defendants did not, in any event, "immediately notify" her that the application for the loan had not been approved as required by cl 1.3(b) of the finance clause. It is not easy to apply that provision where there is no "application" in the usual sense, because no lender acceptable to the purchaser, to whom application must be made, has been identified. Assuming for the present, that it may be read as an obligation to notify the vendor that no acceptable lender has approved a loan, the position appears to me to be as follows.
58 Stals orally advised Ransom, the plaintiff's agent, late on 9 June, that the defendants had not obtained finance, and sent a written notice by facsimile on 10 June.
59 The plaintiff submits that there was no written notice as required by cl 23 of the Joint General Conditions, which form part of the contract. It reads:
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- "23 Service of Notice
(1) A notice to be given under the contract must be in writing and signed by the party giving it or that party's representative.
(2) Subject to Conditions 23(3) to 23(7) a notice will be treated as having been duly given to a party if served:-
(a) on a party if not a company
(i) by delivering the notice to the party personally; or
(ii) by posting the notice by certified mail to the party's address specified in the contract.
(3) Where a representative acts for a party a notice served on that representative in accordance with this Condition will be treated for all purposes as if the notice had been served on that party.
(4) If the contract provides for receipt of notices or if at any time a party elects to receive notices by facsimile to a specified facsimile number in Western Australia (which may be changed by notice) then subject to condition 23(7):-
(a) a notice to the relevant party may be transmitted by facsimile to that party's specified facsimile number; …".
61 It is true that a requirement to "notify" the vendor necessarily implies a "communication". If this is sufficient to attract cl 23, it is my view that the facsimile of 10 June was in compliance with cl 1.3(b) of the finance clause. The requirement to notify "immediately" must, if cl 23 applies, be read as a requirement to notify as soon as circumstances (which include the need to prepare a written communication) permit. Since the defendants could not know until the expiry of the "Latest Time" that no acceptable finance would be forthcoming) a facsimile the following day
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- appears to me to comply with this requirement. It was sent to Ransom, the plaintiff's agent. There was no evidence as to whether or not the plaintiff had "elected" to receive notice by facsimile, but that would be a reasonable inference to draw from the fact that the defendants were in possession of Ransom's facsimile number.
62 In the alternative, it may be that cl 23 does not apply at all, since the requirement in cl 1.3(b) is to "notify", not to "give notice", and since its requirement that this be done "immediately" does not appear entirely compatible with the time taken for service by post, as contemplated by cl 23. If this were so, the telephone call on 9 June would be a sufficient notification.
Conclusion
63 For the reasons which I have expressed, it is my view that on whatever basis the plaintiff's claim is put, it does not succeed.
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