Shoreham Park Pty Limited v John Foote Bloodstock Pty Limited

[2002] NSWSC 778

Reported Decision: (2002) Aust Contract Reports 90-154

New South Wales

Supreme Court

CITATION:	Shoreham Park Pty Limited v John Foote Bloodstock Pty Limited & Anor [2002] NSWSC 778
FILE NUMBER(S):	SC 50058/02
HEARING DATE(S):	26/08/02, 27/08/02, 28/08/02
JUDGMENT DATE:	30 August 2002
PARTIES :	Shoreham Park Pty Limited (Plaintiff) John Bloodstock Pty Limited (1st Defendant) Emily Krystna Pty Limited (2nd Defendant)
JUDGMENT OF:	Einstein J

COUNSEL :	Mr F Douglas QC, Mr D Kell (Plaintiff) Mr A Sullivan QC, Mr D Villa (Defendants)
SOLICITORS:	Hemphill & Co (Plaintiff) Moray & Agnew (Defendants)
CATCHWORDS:	Contract - Construction - Condition precedent versus condition subsequent - Auction - Australian Easter Yearling Sales - Valuable colt - Sale 'under the hammer' to defendant bloodstock agent - Post auction colt proved to be a 'wobbler' - Construction of Conditions of Sale providing that sale deemed to be cancelled if lot shall prove to be a wobbler within seven days of sale - Meaning of 'sale' - Meaning of 'prove to be' - Additional x-ray condition - Construction of provision requiring certificate from veterinary surgeon nominated by auctioneer certifying to condition
CASES CITED:	AGC (Advances) Ltd v McWhirter (1977) 1 BPR 9454 Alghussein Establishment v Eton College [1988] 1 WLR 587 Australian Broadcasting Corporation v XIVth Commonwealth Games Ltd (1988) 18 NSWLR 540 BP Refinery (Westernport) Pty Ltd v Hastings Shire Council (1977) 52 ALJR 20 Gilmore v Smith (unreported, 26 March 2002, High Court of New Zealand) Gissing v Gissing [1971] AC 886 Khoury v Government Insurance Office (NSW) (1984) 165 CLR 622 Lakatoi Universal Pty Ltd v Walker [2000] NSWSC 113 Perri v Coolangatta Investments Pty Ltd (1982) 149 CLR 537 Prenn v Simmonds [1971] 1 WLR 1381 Sargent v ASL Developments Ltd (1974) 131 CLR 634 Utico City National Bank v Gunn (1918) 118 NE 607 Wilson v Anderson [2002] HCA 29
DECISION:	Plaintiff vendor of colt entitled to judgment as unpaid vendor

IN THE SUPREME COURT
OF NEW SOUTH WALES
EQUITY DIVISION
COMMERCIAL LIST

Einstein J

30 August 2002

50058/02 SHOREHAM PARK PTY LIMITED v JOHN FOOTE BLOODSTOCK PTY LIMITED AND ANOR

JUDGMENT

The Proceedings

1 These proceedings involve a dispute in relation to an auction of a colt at the 2002 Australian Easter Yearling Sales held at Newmarket, Randwick.

2 The plaintiff, Shoreham Park Pty Ltd ["Shoreham Park"] is a horse breeder and was the owner and vendor of the colt. It brings the proceedings as unpaid vendor in respect of the sale.

3 The first defendant, John Foote Bloodstock Pty Ltd ["John Foote"] is a bloodstock agent carrying on business by way of buying and selling thoroughbred bloodstock for a number of clients. It was the successful bidder at the auction and hence was, on the plaintiff case, the buyer on the fall of the hammer.

4 It was later revealed that John Foote was acting as agent for one of its clients, namely the second defendant, Emily Krstna (Australia) Pty Ltd [“Krstna”], for which John Foote had acted as bloodstock agent for a number of years. Krstna is sued as an undisclosed principal.

5 On the defendant's case shortly after the auction the colt proved to be suffering from wobbler syndrome and an application of what are said to be the relevant Conditions of Sale entitled the defendant in that circumstance to return the colt to the vendor.

6 Wobbler syndrome is a condition suffered by horses which is typically characterised by compression or malformation of the spinal cord that leads to incoordination, spasticity and ataxia. During the course of the hearing both parties accepted that there was no issue but that the wobbler syndrome may arise at any time without any precursor or pre-indications.

7 Condition 5.1 of the Inglis Conditions of Sale referred to below specifies the limited circumstances in which a sale at auction may be cancelled by reason that a horse proves to be a wobbler.

8 The court is not called upon by reference to the issues to make any determination as to whether or not the colt is or was at the material time a wobbler. Rather the proceedings principally raise the narrow legal question as to whether, in the events which happened, the defendants are shown to have brought themselves within the exception provided by Condition of Sale 5.1 referred to below.

9 The auctioneer was William Inglis and Sons Ltd ["Inglis" or "the auctioneer"]. The Inglis Conditions of Sale ["Inglis Conditions of Sale"] were published in the auction catalogue.

10 The issues for determination include:

· The terms pursuant to which the subject option was conducted;

· Whether the auction was subject to any, and if so what, agreement concerning the sale being dependent upon the colt satisfactorily passing an x-ray examination [the "x-ray condition"];

· Whether if there was such an x-ray condition, it was a condition precedent or a condition subsequent to the sale;

· Questions as to the proper construction of certain clauses part of the Inglis Conditions of Sale;

· An issue regarding the post auction conduct of the auctioneer said to have been conduct within its actual or ostensible authority to act on behalf of the vendor and said to constitute an election preventing the vendor or from acting contrary to the position it is said to have taken.

The subject colt

11 On the plaintiff's case the colt in question is a unique animal with exceptional potential. The colt is by Zabeel out of Let’s Elope. This is claimed to represent a remarkable pedigree:

· Let’s Elope was a champion mare. In 1991 she won the much sought after Melbourne Cup/Caulfield Cup double. Only ten other horses in Australian racing history have achieved this feat.

· In 1992 Let’s Elope was crowned Australian Horse of the Year. Zabeel is a champion Australian and New Zealand sire. He is a son of the great Sir Tristram.

· Zabeel was crowned Champion Australian Sire in 1998-1999, 1997-1998 and was Champion First Season sire in 1994-1995. He was runner-up Champion Australian Sire in 1999-2000, 1996-1997 and 1995-1996.

· Zabeel was also crowned champion New Zealand sire in 2000-2001, 1999-2000, 1998-1999 and 1997-1998.

· Zabeel has sired winners of the Melbourne Cup and Caulfield Cup, including Might and Power and Octagonal.

The Inglis Conditions of Sale

12 The Inglis Conditions of Sale are appended to this judgment as Appendix “A”.

13 Whilst the precise form of wording requires to be resorted to for obvious reasons, for present purposes it is sufficient to note that the Conditions of Sale include provisions generally [the precise questions of construction will require to be determined in the treatment given later in this judgment so that the following formulation does not prejudge those questions] to the following effect:

· Subject to any reserve price, the highest bidder shall be the purchaser

(cl. 1.1);

· A bidder is deemed to be a principal and shall be liable as such unless, prior to the bidding, the bidder has given the auctioneer a written authority, in a form acceptable to the auctioneer, to bid for and on behalf of another person as his principal, and the auctioneer agrees to accept bids on that basis (cl. 1.5);

· Upon the fall of the hammer the purchaser must give his name and address details to the auctioneer (cl. 3.1) and as soon as practicable after the fall of the hammer the purchaser must sign a contract or such other memorandum or acknowledgement of purchase as the auctioneer requires (cl. 3.2). If the purchaser fails to comply with these requirements, the auctioneer may elect to cancel the sale and resell the lot (cl. 3.3);

· Limited vendor warranties are set out in cl. 4.1; all other conditions and warranties, express or implied, are excluded to the full extent permitted by law (cl. 4.2);

· Risk and responsibility for a lot passes to the purchaser upon the fall of the hammer (cl. 6.2);

· After the fall of the hammer, title to a lot passes to the purchaser in accordance with and subject to the provisions of condition 7;

· In the absence of other arrangements with the auctioneer, the purchaser shall take delivery of the lot no later than four days after the sale and shall remove the lot from the auctioneer’s stables (cl. 8.1);

· Upon the fall of the hammer, the purchase price becomes due and payable by the purchaser (cl. 9.1);

· The purchaser must accept a lot in its present condition, subject to all faults, imperfections and other defects, whether latent or patent (cl. 4.5). The purchaser also acknowledges that he has made the purchase in reliance on his own enquiries and inspection (cl. 4.6);

· If the purchase price or any part thereof remains unpaid after a period of four days following the date of the sale, then the purchaser shall be obligated to pay interest on the outstanding balance at the rate of 15% per annum computed from the date of sale up to and including the date of payment

(cl. 9.5);

· Either the vendor or the auctioneer may sue the purchaser to recover any unpaid purchase price and interest and any other monies payable by the purchaser in connection with the sale or in accordance with these Conditions. Interest shall be payable on any such monies calculated on a daily basis from the date upon which the debt is recurred up to and including the date of payment at the rate of 15% per annum (cl. 9.7);

· The Inglis Conditions apply to all sales of thoroughbred bloodstock at Inglis auctions (cl. 13.1) and any variation to the Conditions must be in writing and signed by or on behalf of the parties intended to be bound by the variation (cl. 13.2).

14 Condition 5, and particularly cl. 5.1, is central to the issues arising in the proceedings. It is convenient to set out cl. 5.1 and 5.2 in full. Conditions 5 is entitled “Special Characteristics” and cl. 5.1 and 5.2 provide as follows:

“5.1 WINDSUCKERS and WOBBLERS. Should any lot show symptoms of being a wobbler or be addicted to windsucking this must be disclosed in writing by the Vendor to the Auctioneer prior to the sale and the fact will be disclosed by the Auctioneer at the time of the sale. If the Vendor or the Auctioneer shall fail to make the said disclosure and if the lot shall prove to be a windsucker or wobbler within seven (7) days of the sale, then subject to the Purchaser producing at his expense written evidence, signed by a veterinary surgeon selected by the Auctioneer, certifying that the said lot is a windsucker or wobbler and subject to the Purchaser at his own expense returning the said lot to the place of sale, the sale shall be deemed to be cancelled.

5.2 ROARERS Should any lot show symptoms of being a roarer this must be disclosed in writing by the Vendor to the Auctioneer prior to the sale and the fact will be disclosed by the Auctioneer at the time of the sale. If the Vendor or the Auctioneer shall fail to make the said disclosure and if the lot shall prove to be a roarer within twenty-four (24) hours of the sale, then subject to the Purchaser producing at his expense written evidence, signed by a veterinary surgeon selected by the Auctioneer, certifying that the said lot is a roarer, the sale shall be deemed to be cancelled.”

15 The confusing factor which in essence gives rise to the dispute concerns the fact that shortly before the auction, discussions took place between Mr Orton of Vinery Stud (as agent for the plaintiff) and Mr Foote of the first defendant about whether the plaintiff would consent to allowing the colt to be x-rayed following the option. The evidence deals with those discussions.

16 Whilst there were some disputed conversations treated with in the cross-examination of a number of witnesses there were not many areas in respect of which there was a serious dispute of fact. The serious arena in this regard seems to have been, as one might expect, evidence generally given in relation to how the x-ray condition had been communicated to vendors and purchasers (by their respective officers or agents), particularly the content of their inter se communications and precisely what form of words had been used in that regard. Likewise a focus was on the communications between the plaintiff and Inglis and between the defendant and Inglis. For that reason in what follows there is some special focus on the evidence given by Mr Inglis who together with Mr Darcy were the relevant representatives of Inglis who either spoke to or knew of communications to vendors and purchasers.

17 Whilst a number of witnesses gave evidence on both sides of the bar table it has not been necessary to deal with all of their evidence save where strictly necessary, in terms of matters expressly set out or dealt with in this judgment. This is because many matters treated with by a number of witnesses simply furnished adjectival information which could not have been said to be seriously in issue. Indeed the chronology which was furnished to the court shortly prior to the hearing, subject to one or two very minor matters, was agreed between the parties.

18 In those circumstances reliability of the evidence given by a number of witnesses was not seriously in issue. And where reliability became an issue, as it did, it was usually directed to precisely what words may have been said in a conversation.

19 The discussions concerning the x-ray condition followed a conversation between Mr Orton and Mr Inglis regarding Inglis’ decision to allow vendors and purchasers to agree between themselves that a lot could be x-rayed post-auction.

20 Mr Inglis gave evidence that following discussions with the Hong Kong Jockey Club and its requirements for horses which would enter Hong Kong having had x-rays, Inglis determined to include an x-ray clause and put in place a regime for the post auction x-raying of horses. His specific evidence was:

"Following discussions with the breeders and purchasers, we decided to allow people who bought horses to have their horses x-rayed post sale, after the sale, and should they be clear under the conditions of the Hong Kong Jockey Club, then the sale would proceed."
[Transcript 27 August 2002 at 59]

21 This evidence was that Inglis arranged with Randwick Equine to, as soon as possible after the fall of the hammer on certain horses, be in a position, to have them x-rayed to complete the sale. [Transcript 27 August at 161]

22 Mr Inglis gave evidence that on a number of occasions in respect of sales which took place at the 2002 yearling sales, Inglis arranged through its office for horses to be x-rayed at the Randwick Equine office and for the horses to be delivered there for the x-ray. Until the horse was actually x-rayed the horse was located in the stables of Inglis. In some cases such horses were under the control or possession of the Stud which had been the vendor or the Stud that represented the vendor. In other cases, such horses were under the control of Inglis. Following the taking of the relevant x-rays, horses had been delivered back to the Inglis stables and when the x-rays results were notified to Inglis, Inglis notified the vendors of the results. Most of the time the horses, until that notification occurred, were kept under the custody of Inglis but on some occasions where vendor Studs still had their personnel there, they looked after the horses.

23 Mr Inglis gave evidence that he had discussed the arrangements as to what would occur in respect of x-rays with potential vendors and purchasers prior to the sale and typically he had said to them

"that if certain vendors required it, that horses could be x-rayed and on receipt of what we term a 'clean x-ray', the sale would proceed or otherwise ." [Transcript 27 August 162]

24 His evidence was that in discussing with those people before the sale, what would happen to the horse whilst the x-rays were being arranged and taking place and then notified, he typically said that the horses would be in Inglis control until the x-rays were cleared, that is to say until the veterinary surgeon's had given Inglis notification that they had read the x-rays and that the horses had either passed or failed under the conditions. If anyone had asked him about the arrangements prior to the sale this was what he would have told them.

25 Mr Inglis’ further evidence in chief was that typically what he said to purchasers and vendors prior to the Easter Sales was

"that this new condition was being adopted or introduced to the sale and, providing that both the purchaser and the vendor agreed, we would allow x-raying and the sale wouldn't be completed on these horses where this was an agreement until such time as the x-rays had been cleared".

Words to this effect would have been said by him to anyone whether vendor or purchaser who had asked him about that matter. [Transcript 27 August at 166]

26 Under cross-examination Mr Inglis accepted that he went around the sale ring with the x-ray condition document speaking individually to vendors and purchasers saying

"this is the x-ray condition. These are the terms which will govern x-rays so far as William Inglis & Son's are concerned."
[Transcript 169]

27 His further evidence under cross-examination was in relation to the x-ray condition document, that he made it very plain to those persons to whom he spoke that he wished

"to advise that only the conditions referred to in that document would enable a horse to be returned".

He certainly used the word " returned " and he specifically referred to each of the five nominate conditions [see the x-ray condition set out below] quite frequently [Transcript 169].

28 His evidence was that he was very careful to point out to both vendors and purchasers, the section of the x-ray condition document which stated that vendors should make their own arrangements with buyers on a case-by-case basis. This was, on his evidence, because he wanted to be absolutely clear that so far as Inglis was concerned, this was to be an arrangement between the vendor and the purchaser and not between Inglis and the vendors and the purchasers. [Transcript 170]

29 He had also made absolutely clear at the time he was telling vendors and purchasers about the x-ray condition, that section of the x-ray condition referring to the terms and conditions of the 2002 yearling sale remaining the same and all risks to be transferred to the purchaser at the fall of the hammer. [Transcript 170].

30 Mr Inglis evidence under cross-examination included the following:

“Q. So far as you were concerned, this X-ray condition was a private arrangement between vendors and purchasers in your sale ring?

A. Yes.

Q. It was a bit like, for example, a circumstance where a vendor and purchaser may come to an agreement that if a particular purchaser buys a horse, the vendor will stay in for a third of the animal?

A. Yes.

Q. And that sort of arrangement happens quite frequently in the Randwick sale ring?

A. Yes.

Q. And you are not concerned about that, as long as you get your commission on the full purchase price?

A. Yes.

Q. Likewise, you are aware that from time to time vendors and purchasers reach agreements to the effect that the payment of the purchase price can be deferred?

A. Yes.

Q. And in those circumstances, provided that you are paid your commission promptly, you are not concerned about the private arrangements which are made between vendors and purchasers?

A. Broadly speaking, yes.

Q. But what you wanted to ensure was that there was some uniformity of practice about the way in which vendors and purchasers set about having these x-rays?

A. Yes.

Q. So that there couldn't be too much controversy at the end of the day?

A. Yes.

Q. It would appear from the evidence which we have received in this case that some vendors and some purchasers may not have received this particular document. For example, I just want you to assume that neither Mr Foote nor Mr Marks have any recollection of having seen it, and nor does Mr Orton. Now, just assuming that, and assuming that they didn't see it, do you have any particular recollection of having shown it to any of those persons?

A. No, I don't.

Q. You don't. But if, in fact, you didn't actually give the document to someone, may we take it that when you went around talking about this condition to vendors and purchasers, you sought as far as you were able, to accurately relate to them what was set out in this document?

A. Yes.

Q. So that there could be no confusion and so that everyone understood what this x-ray condition was all about?

A. Yes. Can I add, we had a list between three of us in the office that went round and everybody - the senior person at every stud was notified and given a copy of this thing. I can't say that I did it personally to everybody, but between us - and they were all ticked off later to make sure that we had seen everybody.

Q. So if, in fact, someone hasn't seen it, you are saying it is no fault of yours, you tried to distribute it to everyone?

A. Well, every stud would have had - would have been told about it, and given a copy of our literature.”
[Transcript 1 71-1 72]

31 His evidence was that Inglis usually allowed for thirty-day accounts and that the usual practice was for purchasers to pick up yearlings almost immediately following the auction. However in the case of the horses which were to be x-rayed, as a practical matter Inglis would not have permitted a purchaser to take such a horse until the x-raying procedure had been completed and the results notified.

32 His evidence included that the reason why twenty-four hours only was given in the Inglis conditions to determine whether a horse was a roarer was because this could be identified very shortly and possibly within an hour. However other syndromes such as being a wobbler or wind sucker could only be determined when the horse was in other surroundings, hence the seven-day time period.

33 Mr Inglis gave the following evidence:

“Q. What I want to suggest to you is that in light of the evidence which you have given in your cross-examination, what you would have said to the purchasers and vendors with whom you discussed the term was words to the effect of what appears in the printed document, instead of the words "the sale would not be complete" or something to that effect?

A. No, no. I would have said "the sale would not be complete". I wouldn't have referred to the printed document as such…

A. No, my - well, my understanding of the situation is that I would have said that the sale would not be complete until these x-rays have been read by the vets and them given us the answer whether they have passed or not.

Q. Okay. What I want to suggest to you is if you did use those words, those are words which, to your understanding, would have been inconsistent with the provisions of your terms and conditions of sale?

A. Possibly.

Q. For example, under clause 6.1, your terms and conditions of sale say:

“The vendor shall bear the sole risk and responsibility for a lot until it has been sold and notwithstanding the provisions as to passing of title, upon the fall of the hammer the sole risk and responsibility for a lot shall be born by the purchaser who shall thereafter be responsible for all expenses incurred in respect of the lot.


A. Well, that's what it says, yes.

Q. What I want to suggest to you is this: that it is your understanding that your terms and conditions are drawn up in such a way as to make it perfectly clear that sale the which they refer to is the fall of the hammer…

THE WITNESS: My understanding is, I agree with you, except in circumstances where horses may be roarers, windsuckers or wobblers.

Q. I want to suggest to you that your understanding of your terms and conditions of sale in those circumstances is either that the sale can be cancelled - for example where the purchase money is not paid - or it is deemed to be cancelled by virtue of the fulfilment of the conditions in clause 5; it s not that the sale is not complete.

A. Yes.

Q. So whatever your recollection is now, may I suggest to you that when you went around the sale ring, and bearing in mind the importance of certainty so far as the term was concerned in relation to X-rays, you tried as much as you were able to stick as closely as possible to the text?

A. Well, in my discussions with vendors, I didn't discuss the general terms and conditions. The only ones I discussed were the X-ray conditions.

Q. No, but you tried to stick as closely as possible to the text of the X-ray condition which we looked at before?

A. Yes.
[Transcript 181-1 82]

34 The conversation between Mr Orton and Mr Inglis took place on about 27 March 2002 in the Vinery marquee. Mr Orton deposed that the conversation was to the following effect:

Mr Inglis: “I wanted to let you know that, contrary to our previous stand, Inglis will permit purchasers to x-ray yearlings after the sale but only if the individual vendor agrees. If the vendor does agree and a problem is found on x-ray the sale can be cancelled. All the x-raying will have to take place at the Randwick Equine Centre before the yearlings leave the complex.”

Mr Orton: “Personally I’ve got no problems with allowing x-raying because Vinery has always stood by its horses. But I will need to speak to the individual vendors to see whether or not they agree. I’ll be recommending that they do so.”

Mr Inglis: “There are five conditions that will be unacceptable and these are the only basis on which a horse can be returned for failing an x-ray. The conditions are bone cysts, fractures, ringbone, osteochondrosis of stifle or hock; and rotation of the pedal bone resulting from chronic laminitis”.

The x-ray condition document

35 Inglis also circulated a document entitled “Vendors re: x-rays” prior to the Sales. This was the document that Inglis had distributed to vendors prior to the horses being sold. And any vendor who was prepared to enter into the x-ray condition would have been entitled to receive this document. [Evidence of Mr Inglis at transcript 163] That document stated:

“We would like to advise that the following conditions are not acceptable for horses being x-rayed. These are the only conditions that a horse is returnable:

Bone Cysts
Osteochondrosis (OCD) of stifle or hock
Fractures
Ringbone (Periostitis of pastern)
Rotation of the pedal bone as a result of chronic laminitis.

You should insist that horses that you consent to have x-rayed are done by Randwick Equine Centre and are only to be read by Dr Alistair McLean from the University of University [sic].

Vendors should make their own arrangements with buyers on a case by case basis.

THE TERMS AND CONDITIONS OF THE 2002 AUSTRALIAN EASTER YEARLING SALE REMAIN THE SAME. ALL RISK SHALL TRANSFER TO THE PURCHASER AT THE FALL OF THE HAMMER.”

36 Sufficient of the underlying facts has already been set out to permit an explanation of the respective cases.

37 The plaintiff's case is relatively simple. It is that the sale took place on the fall of the hammer on 3 April 2002 and that the seven-day period under clause 5.1 expired on 10 April 2002. The case is that judgment should be entered for the plaintiff. If the court was to find contrary to the plaintiff’s primary submission, an alternative case is advanced that the sale took place on 4 April 2002 when as the evidence set out below establishes, the colt was x-rayed. Other alternatives were advanced.

38 The plaintiff’s submission is that the effect of the limited discussions between Mr Orton and Mr Foote did not have the legal effect that the "sale" for the purposes of the Inglis conditions of sale did not take place at the fall of the hammer. The plaintiff’s submission is that the plaintiff’s consent to the x-raying of the colt had the limited effect that the sale could be cancelled and the colt returned if it relevantly failed the x-ray examination for one of the five nominate conditions given in the x-ray condition document. The plaintiff submits that this is akin to a condition subsequent and not a condition precedent although it may be neither of those and may simply constitute a right to cancel the sale. The plaintiff’s proposition is that the agreement did not freeze the operation of the Inglis Conditions of Sale otherwise . The submission in that regard is that there is no cogent evidence of any consensual term to the effect that clause 5.1 of the Inglis Conditions of sale would not operate until the colt passed the x-ray nor until the results of the x-ray condition were communicated to the defendants. [Transcript 26 August 2002 at 25]

39 The defendant's case requires the taking of the number of steps in the relevant analysis. In short the case appears to involve the following propositions:

Proposition 1 – ‘passing of property’

A careful examination of the Inglis conditions of sale discloses that there is no "sale" which occurs on the fall of the hammer in terms of the passing of property under the relevant contract [the suggested indicia in support of this proposition include:

· the fact that there is no provision which expressly provides that on the fall of the hammer there is a sale.

[The submission is that this is the case for good reason because the vendor seeks to protect itself should something untoward occur between the falling of the hammer and its receipt of the purchase moneys.]

· the fact that a distinction is drawn in a number of the conditions as between the entry into of an agreement to sell and the occasion when property passes under the contract.

[See for example condition 7.2 which provides that title is not to pass to the purchaser until the purchase price and all other costs and expenses owed by the purchaser to the auctioneer or the vendor or in respect of the lot have been paid by the purchaser to the auctioneer.
See also conditions 3.2 and 3.3 requiring the signing of a contract or other memorandum of acknowledgement of the purchase as soon as practicable after the fall of the hammer and giving the auctioneer an election to cancel the sale and resell the lot if the purchaser fails to comply with the requirements.]

Proposition 2 – ‘condition precedent’

The x-ray condition operates as a condition precedent to the sale of the colt. The construction giving rise to this interpretation is said to follow a commonsense approach aimed at ensuring a workable set of rules relating to the sale by auction of thoroughbreds. The proposition is that in order to be workable, the application of these rules must take account of a number of features of the auction system, and the legitimate and recognised concerns of purchasers, including:

· a purchaser does not obtain immediate possession of a lot, but can only take possession of the Colt after that x-ray has been taken and reported on;

· there are significant delays between the fall of the hammer and the purchaser taking possession of the Colt at a large yearling sale such as the 2002 Australian Easter Yearling Sales;

· the practice of keeping Colts in their pens for a number of days prior to allowing them to run in the paddock;

· the acceptance in the industry (reflected in the very existence of clause 5.1) that a purchaser is entitled to return a Colt which proves to be a wobbler or a windsucker, after allowing for a reasonable time for inspection and observation (ie 7 days).

40 The central tenet of the defendants’ case is that it is necessary in construing the Inglis Conditions of Sale, to take the x-ray condition into account. In a word the defendant's contention is that the circumstance that the x-ray condition requires to be taken into account essentially as a consensual variation to the Inglis Conditions of Sale, results in a notional addition at the end of clause 5.1 either in square brackets or as a new condition in words to the following effect:

"Also a horse will be returnable if when x-rayed it reveals the following conditions (1) bone cyst, (2) osteochondrosis, (3) fractures, (4) ringbone, (5) rotation of the pedal bone etc - provided that the x-ray has been done by the Randwick Equine Centre…”

41 To expand, the defendants’ submission takes the following steps some of which are put in the alternative:

· That the x-ray Condition operates as a condition precedent to the sale

· That this is a case where the distinction between a condition precedent and a condition subsequent is critical. This is because the fact of the sale having been effected has the consequence that time starts running for the purposes of other provisions in the Conditions of Sale.

· That in order to give a businesslike interpretation to clause 5.1 as varied, the x-ray condition cannot operate as a condition subsequent.

· That interpreted as a condition precedent, the x-ray condition has the effect that the sale does not occur until the Colt has satisfactorily passed the x-ray examination.

· That since the purpose of the x-ray examination is to permit the purchaser to determine whether or not to accept the Colt (which determination cannot be made until the vendor or the vendor’s agent communicates the results of the x-ray examination to the purchaser), the sensible and reasonable construction is that the Colt cannot be said to have satisfied the x-ray Condition until that fact was communicated to the purchaser.

· That further, or alternatively, the Colt cannot be said to have satisfactorily passed the x-ray examination until the x-ray films have been reviewed and analysed by the appropriate veterinary radiologist or surgeon.

· That as a condition precedent, the x-ray condition ensures that purchasers of lots that are subject to the x-ray condition are in the same position as purchasers of lots that are not subject to the x-ray condition. In other words, purchasers of all lots have a 7-day period, from the day upon which they are able to take possession of the lot, in which to observe whether or not the lot is a wobbler or a windsucker.

42 Focusing upon the submission by the defendant going to the suggested suspension of the running of time, the submission takes the following steps:

· The x-ray condition should be construed in such a way as to suspend the running of time under Clause 5.1 until the x-ray condition has been satisfied.

· This interpretation would have the effect that the sale would occur at the fall of the hammer, but the 7-day period for the purposes of clause 5.1 would not commence to run until the satisfaction of the x-ray condition.

43 There is then the question of the proper construction of the words "proves to be a wobbler within 7 days" and of the words “veterinary surgeon selected by the auctioneer”. In this regard the defendant's case is that:

· Wobbler Syndrome is a clinical syndrome in which a horse displays certain symptoms observable upon clinical examination. Typically these include spasticity and lack of coordination. It is submitted, therefore, that a horse proves to be a wobbler when the horse first exhibits symptoms that are subsequently confirmed by a veterinary surgeon to be the result of Wobbler Syndrome.

· Condition 5.1 does not require that the veterinary surgeon who provides the certificate to have been “selected” by the auctioneer prior to having any involvement with the Colt. The ordinary natural meaning of the word “select” is “choose”.

44 Finally and again in the alternative defendant puts forward an election submission. The submission and the amendment to the defence pursuant to leave, puts the following case:

· that on 18 April or alternatively on 26 April Inglis acting within the scope of its actual or alternatively it's ostensible authority as agent for the plaintiff cancel the sale;

· that on or about 7 May at the request of the plaintiff, the Colt was transported to Edinglassie Stud where it remained under the control of the plaintiff;

· that the said conduct of Inglis amounted to an election on the part of the plaintiff and slash or each authorised agents to treat the sale as cancel and the parties obligations under the contract for sale as being at an end.

45 Returning for the moment to the principal way in which the defendant has put its case, it effectively seeks to rely upon the variation to the Conditions of Sale which is effected by the introduction of the x-ray condition, as giving a different meaning to the words "within 7 days of the sale" as appearing in the Inglis Conditions of Sale in their original form. The proposition is that the practical impact of the inclusion of the x-ray condition would be reasonably understood as a background circumstance by reasonable parties in the position of these parties as resulting in the sale being deemed to have taken place at the time when the x-ray condition "is either satisfied or not satisfied" [transcript 26 August 2002 at 42.15]. In that sense the x-ray condition is said to postpone the point in time when the 7 days commence for the purposes of determining, irrespective of the x-ray result, whether the horse is or is not a wobbler. The proposition marches hand-in-hand with the defendant's submission that Wobbler Syndrome is a clinical syndrome in which a horse displays certain symptoms observable upon clinical examination. Hence the x-ray condition per se has no relevance by reference to any connection between on the one hand, the x-raying of a Colt [to check for bone cysts and the other four nominate conditions] and on the other hand, the discovery of the wobbler syndrome. The x-ray condition is however said to have a relevance to the running of the time within which, for the purposes of Condition of Sale 5.1, the Colt may be proven to be a wobbler.

The facts

Pre auction

10 or 11 October 2001

46 On 10 or 11 October 2001 the colt was inspected at 7 Creeks Farm by Mr Peter Heagney of Inglis.

22 January 2002

47 The colt arrived at Vinery Stud [this Stud, Vinery Australia (NSW) Pty Ltd was the consignor and sales agent of the plaintiff]. The colt remained there until its departure for the Inglis Easter sales on 25 March.

7 March 2002

48 Mr Foote travelled to Scone and inspected the colt at Vinery stud.

20 March 2002

49 Mr Inglis and Mr Darcy inspected the colt at Vinery stud.

25 March 2002

50 The colt departed from Vinery Stud for the Easter Sales.

27 March 2002

51 Mr Orton, the Australian general manager of the Vinery Stud, gave evidence that on or about this date Mr Inglis and he had a conversation including words to the following effect:

Mr Inglis : “I wanted to let you know that, contrary to our previous stand, Inglis will permit purchasers to x-ray yearlings after the sale but only if the individual vendor agrees. If the vendor does not agree and a problem is found on x-ray the sale can be cancelled. All the x-raying will have to take place at the Randwick Equine Centre before the yearlings leave the complex.”


Mr Orton : “Personally, I’ve got no problems with allowing x-raying because Vinery has always stood by its horses. But I will need to speak to the individual vendors to see whether or not they agree. I’ll be recommending that they do so.”

Mr Inglis: “There are five conditions that will be unacceptable and these are the only basis on which a horse can be returned for failing an x-ray. The conditions are bone cysts, fractures, ringbone, osteochondrosis of stifle or hock; and rotation of the pedal bone, resulting from chronic laminitis.”

52 Mr Orton's further evidence was that after speaking with Mr Inglis he and his staff began contacting clients about the x-ray in of horses after the sale. He had such a conversation for example with Mr Marks. Under cross-examination his evidence in relation to what he had said was:

"That Inglis had allowed the purchasers the opportunity to x-ray and that we were the intending for horses of our own and other agents to allow that x-ray to happen and suggested that and asked him whether he would agree to it and we didn't really discuss the actual point of the actual conditions but assuming that he has general knowledge of it." [Transcript 26 August 2002 at 76]

28 March 2002

53 This was the occasion for the first conversation between Mr Orton, and Mr Foote regarding the x-raying of Vinery horses.

54 The statement evidence given by Mr Orton was that the conversation was as follows:

Mr Foote : “Will Vinery be allowing x-raying of its yearlings after sale?”

Mr Orton : “I don’t know. It depends on the horse and the owner, but from Vinery’s perspective it’s OK. But as it depends on other people I’ll have to find out.”

Mr Foote : “That’s not good enough. All the other farms are saying either yes or no.”

Mr Orton : “After I’ve spoken to all the clients I’ll let you know.

55 The statement evidence given by Mr Foote was as follows:

Mr Foote: “Will the sale of all Vinery yearlings be made subject to a satisfactory x-ray?”

Mr Orton: “ Well, if you purchase a Vinery horse, we will look at the question of x-ray examinations then.”

Mr Foote: “That’s not good enough. I’ll get back to you.”

56 Mr Foote also gave evidence by statement that on the same day he spoke with Mr Inglis who had said:

"We have decided to allow the x-ray condition had these sales if you make arrangements with the vendor prior to the auction for the x-ray to take place the sale will be subject to this. The x-rays must be done by our vet and you won't get delivery until notification of a satisfactory x-ray."

57 Under cross-examination it was put to him that it was possible that what Mr Inglis said was that the animal had not passed the x-ray then the sale could be cancelled. His evidence in this regard was that the exact wording was hard to remember but that Mr Inglis led him to believe that the sale was subject to that because Mr Foote would have wanted his own vet carrying out the x-rays. [Transcript 114]

1 April 2002

58 Mr Orton also gave evidence that on this date he advised Mr Foote that he now had obtained clearance from all of his clients for x-raying their horses. Mr Foote could not recall this conversation and gave evidence that there was no conversation to this effect. However he accepted that he had been very busy at the time. [Transcript 115-116]

3 April 2002 - the date of the auction

Before the auction

59 On the statement evidence given by Mr Orton he had a conversation with Mr Foote in which the following was said:

Mr Foote: “Can you confirm that the Zabeel colt can be x-rayed?”

Mr Orton : “I have spoken with the owner and he says its OK.”

60 Under cross-examination he was asked whether he could agree that Mr Foote may have said:

" I need to know whether the sale of the Zabeel colt could be made subject to a satisfactory x-ray ".

His evidence was that he could not say that Mr Foote had said these words but that he could not say one way or the other whether the words put in this way were said. It was possible that Mr Foote’s version was correct. [Transcript 26 August at 77]

61 On the statement evidence given by Mr Foote the conversation was to the following effect:

Mr Foote: “I need to know whether the sale of the Zabeel colt can be made subject to a satisfactory x-ray?”

Mr Orton: “I have spoken with the owner and he said this was ok.”

62 Under cross-examination Mr Foote gave the following evidence:

“Q. You depose to another conversation on 3 April in paragraph 10 of your affidavit. Just to take you back to paragraph 10 in fairness to you, you say you said to Mr Orton, "I need to know whether the sale of the Zabeel colt can be made subject to a satisfactory x-ray", and Mr Orton said, "I've spoken with the owner and he said this was okay." Mr Orton does not dispute the conversation on that day, but suggests in his affidavit that it was limited to this effect: "Can you confirm that the Zabeel colt can be x-rayed?" That is you speaking. And Mr Orton said, "I've spoken with the owner and he says it's okay." Does that seem to you also a version of the conversation which you can agree with?

A. Again, there was more said than what is there in both affidavits. Because of my concern with his previous non-knowledge, or supposed non-knowledge, of the situation, I went on about the condition, the x-ray condition, did he understand the condition.

Q. When you say that, is that a reference to the five nominated conditions which are referred to in that document I took you to before?

A. It's a reference to Mr Inglis' verbal - because I asked him to speak to Mr Inglis after my first conversation with him to get it clear in his head what the situation was, and that was a reference to that.

Q. So are you able to recall this conversation which you are telling us about now?

A. Which one?

Q. What he is saying was said between you?

A. Mr Orton?

Q. Yes. This is on 3 April. You say, as I understand you, that there is more conversation between you than is in your paragraph 10 --

A. Yes.

Q. -- or in the conversation in Mr Orton's paragraph 41 which I've put to you. I just wonder if you could tell us --

A. Words to that effect and I mentioned the x- condition and had he spoken to Reg Inglis.

HIS HONOUR: Q. When you say "words to that effect", what do you mean to that effect?

A. That the sale was subject to X-ray, because that's the way it was put to us.

MR DOUGLAS: Q. And then you said to him, "Have you spoken to Reg Inglis?" Is that what you say?

A. I don't know. I can't remember the exact words, but there was a reference to our earlier conversation.

Q. And whether he had spoken to Reg Inglis?

A. Yes.

Q. If you could just go back to annexure B to Mr D'Arcy's affidavit, you will see that there are five conditions set out on that document….

Q. There are five conditions set out there.

A. Yes.

Q. I won't clutter up the transcript with them, but was it your understanding prior to 3 April that these were the conditions which were not acceptable for horses being X-rayed?

A. Yes.

Q. What was the basis of that understanding?

A. I didn't see this document, as I mentioned, but there was a letter from Aushorse with I think a letter from the Hong Kong Jockey Club that also had been sent around the sale ground, and we briefly saw that.

Q. So you had seen a letter from Aushorse and you'd seen a letter from the Hong Kong Jockey Club?

A. There was, I think, an attachment to their letter and it outlined the conditions.

Q. And you didn't see this document, you say?

A. No.

Q. But you had a discussion with Mr Inglis?

A. Yes.

Q. Was it the situation that when you discussed the matter of Mr Inglis there was some reference to these particular conditions?

A. There was reference, but I can't remember what he said.

Q. So you have no actual recollection of what was said but you have some recollection of discussing the nominated conditions with Mr Inglis?

A. Yes.

Q. Is that a fair summary?

A. Yes. I don't know - I can't remember the conversation exactly.

Q. And did you have one or more conversations with Mr Inglis, can you recall?

A. During the sale?

Q. Well, let's say prior to the commencement of the sale?

A. Yes. It was a brief one about - he reaffirmed that we had to make prior arrangements with the vendors, but that was all.

Q. So is that the conversation you are referring to of 28 March 2002 in paragraph 8 of your affidavit --

A. No.

Q. -- or some other conversation?

A. No, it was subsequent to that.

Q. So there was a subsequent conversation in which he reaffirmed that you had to make your own individual arrangements with the vendors?

A. That's right, a brief conversation.

Q. Is that the thrust of what he said?

A. Yes.

HIS HONOUR: Q. Is that referred to in this affidavit?

A. No.”
[Transcript on 116-118]

63 The Inglis Conditions of Sale were read aloud and in full by an Inglis employee over loudspeaker and the colt was sold [use of the word "sold" at this stage in the judgment is not intended to prejudge the vital issue concerning the alleged condition precedent] at the auction for $550,000 on the fall of the hammer the auctioneer using the word "sold".

After the auction

64 A telephone conversation took place between Ms Carnes of Inglis and Mr Orton.

65 The evidence given by Mr Orton was that the following was said:

Ms Carnes: “John Foote has bought the Zabeel colt – lot 271. He wants to get it x-rayed, is that OK with you?”

Mr Orton: “ Yes, that’s OK.”

66 The statement evidence given by Ms Carnes was that the following was said:

Ms Carnes: “ Can you confirm that the sale of the Zabeel colt was subject to x-ray?”

Mr Orton: “Yes that’s right, there was a pre-sale arrangement.”

Ms Carnes was quite clear under cross-examination that these were the words used.

67 Under cross-examination Mr Orton could not deny that the version of this conversation deposed to by Ms Carnes could have been said.

4 April 2002 - 1 day after the auction

68 On 4 April 2002 the colt was x-rayed at Randwick Equine at center.

6 April 2002 - 3 days after the auction

69 On 6 April 2002 Mr Darcy an associate director of Inglis, received a telephone call from Dr Williams advising that the colt had passed the x-ray. Mr Darcy telephoned Mr Foote advising that the colt had passed this x-ray. Mr Foote then arranged for the colt to be transferred to Arrowfield Stud.

8 April 2002-5 days after the auction

70 The colt was shipped to Arrowfield Stud.

11 April 2002 - 8 days after the auction

71 On 11 April 2002 Mr Jesse Hood the Arrow field Stud Yearling manager noticed that the colt was moving abnormally.

12 April 2002 - 9 days after the auction

72 While performing an examination of another horse, Dr Mark Wylie noticed lower-level weakness and in-coordination in the colts hind limit movement. Dr Wylie observed "abnormal hind action." He became suspicious that the colt may be a low level wobbler and gave instructions for continued observations.

15 April 2002 - 12 days after the auction

73 Mr Foote telephoned Mr Darcy in relation to the colt.

16 April 2002 - 13 days after the auction

74 On this date Dr Wylie carried out a clinical examination on the colt. This determined that the colt was a grade 1/5 wobbler.

75 On the same date Mr Darcy telephoned Mr Orton in relation to the colt, informing him of advice from Mr Foote that the colt had been found to be a wobbler and that the sale may be cancelled and asking him to inform Mr Marks accordingly.

76 On 16 April Dr Todhunter carried out a second clinical examination of the colt at Arrowfield Stud. His findings confirmed those of Dr Wylie. His later letter of 29 July 2002 to Inglis was drafted by Moray and Agnew solicitors and was in the following terms:

“I refer to my vet report dated 17th April 2002. Please accept that the report for the purpose of Condition 5 of the William Inglis & Sons Limited Terms and Conditions 5 of the William Inglis & Sons Limited Terms and Conditions of the Sale applicable for the Easter 2002 yearling sale concerning the above colt.”

17 April 2002 - 14 days after the auction

77 On this date Dr Wylie produced his written report and faxed a copy of it to Mr Foote who in turn on or about this date faxed a copy of the report to Mr Inglis.

18 April 2002 - 15 days after the auction

78 On 18 April 2002 Dr Todhunter produced his written veterinary report and Mr Foote on about this date faxed it to Inglis.

79 Mr Foote gave evidence that on about 18 April 2002 he telephoned Mr Darcy and said to him:

"Arrowfield have had a second vet, Dr Paddy Todhunter examine the horse. I now have his report confirming the colt is a wobbler. Are you happy with Dr Wiley and Dr Todhunter or do you want another vet to look at it and provide an opinion?"

His evidence was that Mr Darcy said:

"No, take it as though those two vets have been appointed by us . They are fine. I'll speak to the owner. The sale will have to be cancelled".

24 April 2002

80 Mr Orton received a facsimile from Mr Darcy attaching copies of the veterinary surgeons reports by Dr Wylie and Dr Todhunter.

26 April 2002

81 Mr Darcy sent a facsimile to Mr Marks confirming that the sale of the colt had been cancelled.

30 April 2002

82 Mr Orton inspected the colt at Arrow field Stud.

27 June 2002

83 Dr Wylie wrote to Inglis asking that Inglis accepts his report of 17 April 2002 for the purpose of condition 5 of the Inglis Conditions of Sale.

Dealing with the case

Identifying the relevant agreement

84 The threshold issue concerns identifying the relevant agreement which is then to be construed. The parties adopt diametrically opposed positions in this regard.

The stance taken by the plaintiff

85 The plaintiff’s submission is that the agreement is comprised by the Inglis Conditions of Sale and by the x-ray condition. The submission is that properly viewed, there were two relevant contracts or agreements between vendor and purchaser. One agreement was for the purchase of the horse, and came into effect, on the fall of the hammer and was in accordance with and incorporated the Inglis Conditions of Sale, including clause 5.1. Inglis is said also to have been a party to that agreement. (Alternatively, the plaintiffs submit that there were two additional agreements between, on the one hand, the vendor and Inglis and, on the other hand, the purchasers and Inglis, whereby in each instance, it was agreed the sale and purchase by auction would be in accordance with and subject to the Inglis Conditions of Sale).

86 The plaintiff then submits that the second agreement was solely between purchaser and vendor and related simply to the x-raying of the horse and included an ability to return the horse if it failed the x-ray. The submission is that the evidence is clear that this agreement was, and was intended to be, quite separate from and independent of the Inglis Conditions of Sale. [See Inglis transcript 170.37 - 44, 171.1 - 5; see also Foote transcript 115.15 - 18]. The submission is that it was an arrangement whereby vendors and buyers were required by Inglis to make their own arrangements so far as consent to x-raying was concerned: [Foote transcript 114.36 - 47]. This arrangement did not, it is said, vary the Inglis Conditions of Sale.

87 The plaintiff’s submission is that the agreement relating to x-raying was similar to other individual arrangements that may be entered into by vendors and purchasers. For example, an arrangement by which the vendor retains a percentage interest in the ownership of the horse sold or the vendor grants to the purchaser extended sales terms: [Foote transcript 113.13 - 47, 114.18 - 34; Inglis transcript 171.1 – 31]. Such individual agreements, it is said, do not have the effect of varying the terms of the Inglis Conditions of Sale and, for example, Inglis is said to be entitled to its commission on the full purchase price upon the fall of the hammer (unless the purchaser has a 30 day account with Inglis).

88 The plaintiff’s case is that in allowing for x-raying in the adjacent Randwick Equine Centre and for the five stated conditions as set out on a written notice, Inglis sought to ensure uniformity of practice so far as x-raying was concerned and to minimise the potential for disputes (eg as to whether a particular condition of the horse was a relevant condition for the purpose of a satisfactory or unsatisfactory x-ray): [Inglis transcript 171.33 – 41].

The stance taken by the defendants

89 The defendants do not accept that it is open on the evidence for the court to find, or alternatively, submit that the court should not on the evidence find that the x-ray condition document in the form [annexure "B" to the affidavit of Mr Darcy] or in any other form or version, ever formed a part of the relevant agreement in issue in the proceedings. The defendants’ proposition is that the relevant agreement in issue in these proceedings is comprised of the Inglis Conditions of Sale and terms derived from the conversations which took place between representatives of the plaintiff and representatives of the defendants. The submission is that one then has the written Conditions of Sale as well as what was described by the defendants in submission as "the oral x-ray condition". That oral x-ray condition, it is said, is established on the evidence to have been "that the sale of the colt was subject to and conditional upon the colt satisfactorily passing an x-ray examination". [defendants’ final submissions paragraph 8]

90 In the result a critical question of fact in the manner in which the parties have addressed the issues involves the Court’s finding as to what was the agreement which the parties entered into. In that sense launching into an examination of fundamental principle concerning the manner in which the court goes about construing written instruments obviously deals only with one part, at least on the defendants submission, of the court's task. Nevertheless, regardless of whether the relevant contract is found to be in writing only or partly oral and partly in writing, it seems to me that the appropriate course is to set out some of the fundamental principles of construction which require to be taken as a given in the case.

Construction – Fundamental Principles

91 Gleeson CJ recently described the proper approach to contractual construction in Wilson v Andersen [2002] HCA 29at paras [8]-[9]:

[8] …The law of contract seeks to give effect to the common intention of the parties to a contract. But the test is objective and impersonal. The common intention is to be ascertained by reference to what a reasonable person would understand by the language used by the parties to express their agreement. If the contract is in the form of a document, then it is the meaning that the document would convey to a reasonable person that matters. The reason for this appears most clearly in the case of commercial contracts. Many such contracts pass through a succession of hands in the course of trade, and the rights and liabilities of parties other than the original contracting parties are governed by them. As Lord Devlin observed, writing extra-judicially, it is only the document that can speak to the third person. In the case of a will, or a deed, or other written instrument, the object of a court is to discover, and give effect to, the intention of the testator, or parties; but it is in the meaning of the instrument, discovered according to established principles of construction, that such intention is found.

[9] This is not to say that the exercise is formal and literalistic. On the contrary, common law and statutory principles of construction frequently demand consideration of background, purpose and object, surrounding circumstances, and other matters which may throw light on the meaning of unclear language.

92 The principles have of course been laid down over an extended period of time and the above restatement of them is naturally followed. In Lakatoi Universal & Walker [2000] NSWSC 113 at 420 – 421 which drew upon some earlier restatements by Gleeson CJ of the principles, the proper approach was summarised as follows:

· There is of course no doubt but that the court is entitled to inquire beyond the language and to "see what the circumstances were with reference to which the words were used, and the object appearing from those circumstances, which the person using them had in view".

[ Prenn v Simmonds [1971] WLR 1381 at 1384 per Lord Wilberforce]

· Hence it is that "the commercial, or business object, of the transaction, objectively ascertained, may be a surrounding fact" [Prenn at 1385]. As Lord Wilberforce points out, Cardozo J thought so in Utico City National Bank v Gunn (1918) 118 NE 607.

"And if it can be shown that one interpretation completely frustrates that object, to the extent of rendering the contract futile, that may be a strong argument for an alternative interpretation, if that can reasonably be found. But beyond that it may be difficult to go: it may be a matter of degree, or of judgment, how far one interpretation, or another, gives effect to a common intention: the parties, indeed, may be pursuing that intention with differing emphasis, and hoping to achieve it to an extent which may differ, and in different ways. The words used may, and often do, represent a formula which means different things to each side, yet may be accepted because that is the only way to get ‘agreement’ and in the hope that disputes will not arise. The only course then can be to try to ascertain the ‘natural’ meaning. Far more, and indeed, totally dangerous is it to admit evidence of one party’s objective - even if this is known to the other party. However strongly pursued this may be, the other party may only be willing to give it partial recognition and in a world of give and take, men often have to be satisfied with less than they want. So, again, it would be a matter of speculation how far the common intention was that the particular objective should be realised ." [ Prenn at 1385]

· In Prenn, Lord Wilberforce upon a close examination of the agreement and of the surrounding circumstances was able to hold that "the appellant’s construction does not fit in any way the aim of the agreement, or correspond with commercial good sense, nor is it, even linguistically, acceptable". His Lordship was however able to hold that the converse of each of those propositions applied to the respondent’s interpretation. [Prenn at 1389]

· Lord Reid, Lord Donovan and Lord Pearson expressed agreement with Lord Wilberforce’s speech. Lord Diplock however, whilst agreeing with the statement by Lord Wilberforce "as to the principles to be applied in the interpretation of a written agreement, and as to the reasons which underlie the rule that evidence is not admissible of the negotiations between the parties or any purpose which either of them hoped to achieve by it does not appear from the words used in the agreement and the surrounding circumstances", was less confident that the application of those principles to the written agreement contended for on behalf of the respondent was to be preferred to the alternative meaning which had commended itself to the Vice-Chancellor. His Lordship then added "but such doubts as I have are not strong enough to justify my differing from the remainder of your Lordships". [Prenn at 1390]

· Hence, even accepting as clear, the statement of principle laid down by Lord Wilberforce, one can see how difficult at times, can be an attempt to apply those principles to specific facts. Lord Diplock’s comment makes plain that different minds may see an application of the principles in different ways.

· The general test of objectivity is pervasive in the law of contract. Two passages from speeches of Lord Diplock illustrate the point (as Gleeson CJ said in Australian Broadcasting Corporation v XIVth Commonwealth Games Ltd (1988) 18 NSWLR 540 at 549).

· In Gissing v Gissing [1971] AC 886, his Lordship said:

‘As in so many branches of English Law in which legal rights and obligations depend upon the intentions of the parties to a transaction, the relevant intention of each party is the intention which was reasonably understood by the other party to be manifested by that party’s words or conduct notwithstanding that he did not consciously formulate that intention in his own mind or even acted with some different intention which he did not communicate to the other party.’

· In Ashington Piggeries v Christopher Hill [1972] AC 441 at 502, his Lordship said:

‘In each of the instant appeals the dispute is as to what seller promised to the buyer by the words which he used in the contract itself and by his conduct in the course of the negotiations which led up to the contract. What he promised is determined by ascertaining what his words and his conduct would have led the buyer reasonably to believe that he was promising. That is what is meant in the English Law of contract by the common intention of the parties. The test is impersonal. It does not depend upon what the seller himself thought he was promising, if the words and conduct by which he communicated his intention to the seller would have led a reasonable man in the position of the buyer to a different belief as to the promise; nor does it depend upon the actual belief of the buyer himself as to what the seller’s promise was, unless that belief would have been shared by a reasonable man in the position of the buyer. The result of the application of this test to the words themselves used in the contract is still "the construction of the contract".’

Findings as to what was the agreement between the parties

93 It has to be remembered that the court determines issues of fact on the basis of all of the evidence and not on the basis of only sections of the evidence. The evidence here throws up a number of versions of conversations given by a number of relevant witnesses and the task of the court is by reference to the whole of the evidence, including the documentary material, to determine on the balance of probability what was said as between the parties and what documents were seen or received by the parties or known by them to exist, in terms of having been read or otherwise brought home to the parties.

94 Here the three groups of parties from each of whom evidence has been adduced are clearly enough the plaintiff, the defendants and Inglis.

95 The evidence given by Mr Foote, already set out, discloses that in the course of his cross-examination in relation to paragraph 10 of his affidavit wherein he had set out a conversation which he had had with Mr Orton on the afternoon of 3 April and before the auction, there was more to the conversation then he had set out in the affidavit.

96 His evidence in the witness box was that in this conversation there was a reference to their earlier conversation but he could not recall the exact words as to what was said. Apparently, at least on his evidence given in the witness box, this involved whether Mr Orton had spoken to Mr Inglis. Mr Foote was not able to recall what Mr Inglis had said in the discussion which he had with Mr Inglis in relation to the 5 conditions [being those which are set out in the x-ray condition document which Mr Foote said he had never seen]. He did have some recollection of discussing the nominated conditions with Mr Inglis but could not remember the conversation exactly.

97 Further Mr Foote in the witness box was asked about whether he had had one or more conversations with Mr Inglis prior to the commencement of the sale and recalled having had a brief such conversation in which Mr Inglis had reaffirmed that the purchaser had to make prior arrangements with the vendors. This was apparently, so Mr Foote said in giving evidence in the witness box, not the conversation which he had referred to in paragraph 8 of his affidavit, but was a subsequent conversation not being one set out in the affidavit.

98 Whilst it is certainly difficult to determine on the balance of probabilities whether to accept as reliable the evidence given by Mr Orton as to the conversations which he had with Mr Foote on 28 March, on 1 April and on 3 April or whether to accept as reliable, the evidence given by Mr Foote as to the conversations of 28 March and 3 April and as to having no recollection of the conversation of 1 April, it seems to me that on the balance of probabilities it is appropriate to accept as reliable the evidence given by Mr Orton. Clearly enough Mr Foote, as one of this country's top five bloodstock agents by quantity of sales, inspected every horse in the sale and had numerous conversations with numerous persons. Taking that into account as well as taking into account the difficulties which he had in cross-examination of recalling the number of conversations and importantly the detail of the conversations which he had had with Mr Inglis and taking into account his failure to include in his affidavit a conversation which he appeared to recall while giving evidence in the witness box and which apparently included discussion, although he could not recall the conversation exactly, of the nominated conditions, it seems to me that Mr Orton's evidence should be accepted as the more reliable in terms of the above described conversations.

99 It is then necessary to consider the probabilities insofar as the conversations which Mr Inglis had with Mr Orton and Mr Foote are concerned. Here again it is difficult to determine the probabilities but this is a task which the court must face up to.

100 In standing back from the evidence given in this regard there is clear substance in the plaintiff submission that the surest guide to the content and effect of relevant conversations which Mr Inglis had with vendors and purchasers would be the written version of the x-ray condition which Inglis had circulated to vendors and purchasers during and in the days preceding the sales. Of course both Mr Inglis as well as Mr Darcy were involved in circulating the document. Mr Inglis when speaking with vendors and purchasers, on his evidence which in this regard, save in the respect concerning discussions with Mr Orton about the post x-ray control and custody of horses, I accept as reliable, sought to accurately relate to them what was set out in the document. In this respect he made absolutely clear when speaking with vendors and purchasers that, as the written notice emphasises, the terms and conditions of the 2002 Australian Easter Yearling Sale remained the same. The plaintiff submits and I accept, that in addition to the relevant concessions which Mr Inglis made in the course of his cross-examination, the inherent likelihood of this matter being impressed upon the parties, including Mr Foote is further emphasised by the fact that these words had been capitalised in the document, obviously to stress their importance.

101 Further in the course of his cross-examination already set out, Mr Foote in giving evidence that he did not see the x-ray condition document which he was shown in the witness box, referred to a letter from Aushorse and also to a letter he thought from the Hong Kong Jockey Club which had been sent around the sale ground and which he briefly saw. He thought that there was an attachment to "their" letter and it outlined the conditions. The evidence did not include either of these letters. The court is forced to infer what the material in the missing letters is likely to have included. To my mind on the probabilities, in standing back from all of the evidence, it seems reasonable to infer that these letters and probably more particularly the attachment to apparently one of them, is likely to have at the least set out the relevant conditions.

102 On the evidence given by Mr Inglis, every attempt was made to avoid confusion and doubt as to what the x-ray condition was about. The evidence is certainly replete with considerable evidence that Mr Inglis spoke both to vendors and purchasers using the x-ray condition document and speaking to it. His office had a list "and everybody-the senior person at every stud was notified and given a copy of [the x-ray condition document". The list was ticked off. Every stud would have had or been told about the document and given a copy of the document. To my mind the probabilities very strongly favour the inference from the evidence that both the vendor as well as the purchaser would either have received the x-ray condition document, or been informed of what it contained. The matter was very important and informality in the context in which the auctioneer was anxious for precision, should not be inferred. It is difficult to see that the auctioneer could have done much more than it did in the circumstances, to ensure full and complete circulation of the x-ray condition document. Effectively this amounts to a finding which to an extent flies in the face of the evidence given by both Mr Foote as well as Mr Orton.

103 That being the finding one moves next to assessing the reliability of the evidence given by Mr Inglis and as to what he said to those to whom he spoke about the x-ray condition and circumstance. As I have earlier indicated I accept that the surest guide to the content and effect of such conversations is the written version of that notice. Having said that I am prepared to accept that Mr Inglis's evidence should be accepted as reliable where he said that what he had stated was that the new condition being adopted or introduced providing that both purchaser and vendor agreed, was that x-raying would be allowed and the sale would not be completed on the horses where the x-ray condition applied until such time as the x-rays had been cleared. His evidence was given confidently. It seems to be supported by the evidence given by Ms Carnes albeit after the event. In that regard in her conversation with Mr Orton she was quite clear that she had asked him to confirm that the sale was "subject to x-ray". Under cross-examination Mr Orton conceded that this could have been said.

104 A further question which arises concerns the state of the evidence as to what was said in relation to what was to happen to the colt following the x-rays having been carried out. Here Mr Orton gave evidence that in their discussions, Mr Inglis did not tell him that the horses would stay at the Inglis premises until such time as the x-rays were proved satisfactory or unsatisfactory. All that he had discussed with Mr Inglis was that the horses had to be x-rayed at the Randwick Equine Centre and “they had to be done before the horses left the ground.” [Transcript 75.43 as corrected by consent by reference to sound recording]

105 This is a not unimportant point because the defendants case would have it that the evidence proves that a term clearly communicated, in whatever way, to the vendor as well as to the purchaser, was that the colt was to remain in the custody and control of the auctioneer or the vendor or at the auctioneer's premises until the x-rays had not only been carried out but the results thereof also notified. In doing the best that I am able, in terms of an assessment of all of the evidence, I am unable to find that this was communicated to the plaintiff. Mr Orton's evidence in this regard given quite firmly, is accepted as reliable. All that he was aware of in this regard, was that the x-rays would have to take place at the Randwick Equine Centre. To the extent that the evidence given by Mr Inglis [that he would typically inform those to whom he spoke that the horses would be in Inglis control until the x-rays were cleared, that is to say until Inglis had received notification, that the horses had passed or failed under the conditions], may be said to conflict with the evidence given by Mr Orton that he had not been so informed, this is an area in respect of which Mr Orton's evidence is preferred as the more reliable. Of course it is clear that the x-ray condition which Mr Inglis was so very careful to circulate and to endeavour to accurately relate to vendors and purchasers did not refer at all to the horses being required to be kept at the Inglis premises until the x-rays were proved satisfactory or unsatisfactory and/or notification took place accordingly. So that insofar as one is able to regard the evidence given by Mr Inglis as reliable by reason of his care in speaking to the x-ray condition document, this plank of reliability is not present on this very precise issue.

106 Hence even on the defendants’ case which would have it that the relevant agreement was comprised by the Inglis Conditions of Sale and the oral communications of relevance, as it cannot be established on the evidence that an important part of the alleged oral agreement was ever communicated to the plaintiff, an important plank of the case is seen to be missing. It is of course trite that every term of an agreement, whether oral or in writing, needs to be clear and in the case of an alleged oral term, the courts finding of fact as to what was said is determinative. Whatever part the oral discussions should properly be held to have played in relation to the formation of the relevant agreement which may have bound the parties, on the evidence there is no place in the agreement for any express term that the colt was to remain in the custody and control of the auctioneer or the vendor or at the auctioneer's premises until the x-rays had not only been carried out, but the results thereof also notified. Nor can such a term be discerned treating with the issue as one of construction. Nor applying the BP Refinery (Westernport) (1977) 52 ALJR 20 at 26] tests, can such a condition be implied. To my mind such an implication is not reasonable and equitable; it is not necessary to give business efficacy to the contract which will be, it seems to me, effective without it; it is not so obvious that it goes without saying.

107 With those findings it is now possible to deal with a number of other matters which are determinative of the proceedings.

Construction of clause 5.1 - advertent failure

108 I reject as of no substance the plaintiffs contention that, for cl. 5.1 to operate, there must have been an advertent failure by the vendor to disclose to the auctioneer prior to the sale that the lot showed signs of being a wobbler (or being addicted to wind sucking), and an advertent failure to disclose that fact by the auctioneer at the time of the sale. This construction cannot be supported by the common sense of the situation and falls well outside the commercial construction of the document.

109 In what follows a number of the plaintiff submissions are accepted as correct and adopted.

Construction of clause 5.1- sale takes place on fall of hammer

110 An auction is an invitation to treat. The bidder is not a conditional purchaser and is no more than an offeror. No contract may come into existence unless and until his bid is accepted, usually by the fall of the hammer: AGC (Advances) Ltd v McWhirter (unreported Supreme Court of New South Wales, 1977, Holland J)

111 While general mercantile law may regard a sale as taking place on completion of an agreement whereupon title passes, it is quite clear that the term “sale” is consistently used in the Inglis Conditions of Sale in a different sense. In the Inglis Conditions of Sale, including in cl. 5.1, a “sale” is regarded as taking place on the fall of the hammer. It is thus not to the point that title in a horse may not pass until the purchase price has been paid. The operative 7-day time provision in cl. 5.1 begins to run from the date of the “sale” (ie the fall of the hammer) not from completion or passing of title.

112 Thus the Inglis Conditions of Sale clearly contemplate that a “sale” (as that expression is used within the meaning of the Inglis Conditions of Sale) takes place on the fall of the hammer. For example:

· cl. 3.1 - if purchaser fails to comply with requirement to give name and address details and sign an acknowledgement of purchase, “the auctioneer may elect to cancel the sale…”;

· cl. 5.1 itself presupposes an existing sale when using the expression “the sale shall be deemed to be cancelled”;

· cl 9.6 - “If the purchaser defaults in the due payment of the purchase price or any part of it… then the vendor…shall have the following rights: * to elect to cancel the sale…”

113 Bearing in mind the above findings the issue squarely raised concerns the difficulty of how one reads together the two documents which following the circulation of the x-ray condition, must, (together with so much of the relevant vendor – purchaser conversations as have been held to have taken place), be taken as constituting the relevant contract. It does not seem to me that it is appropriate to accede to the plaintiff’s submission that there were two separate contracts which regulated the position of purchases of horses which were subject to the x-ray condition. However insofar as it is practicable and possible to do so, of course the above general principles going to construction are pervasive and are followed.

114 At the end of the day the principal question for determination seems to me to be resolved fairly easily and by standing back from the Inglis conditions of sale and the x-ray condition and treating with those formal materials in a commonsense fashion bearing in mind the adjectival information proven by the evidence as the matrix of fact in which the contract for sale was entered into. The short point is that the document which was circulated made clear that the Inglis Terms and Conditions remained the same and very importantly, that all risk was transferred to the purchaser, on the fall of the hammer. To my mind the proper construction of the x-ray condition would be regarded by those familiar with the Inglis Conditions of sale and the x-ray condition as relevantly four square with the general approach whereby, not only in condition of sale 5.1, but also in the following conditions 5.2, 5.4, upon the occurrence of particular circumstances, the sale would be deemed to be cancelled or cancelled. The position with respect to cancellation was also the subject of Inglis Condition 9.6 and the auctioneer's position in respect of commission, where sales would be cancelled, was treated with in Inglis Condition 11.1.

115 In short the x-ray condition would have been appropriately read as providing that should any horse in respect of which, by reason of arrangements made in this regard between purchasers and vendors, the x-ray condition was applicable, upon having been tested by x-ray for the five specified conditions be found to be suffering from one or more of those conditions, then subject to the x-rays having been carried out by the Randwick Equine Centre and furnished to the Auctioneer certifying such result:

· the sale would be deemed to be cancelled; or

· the purchaser may, by notice in writing to the auctioneer forthwith after learning of the x-ray result, cancel the sale.

[I do not see any material difference of relevance for present purposes, as between these two alternatives]

116 None of this seems to me to require that the provisions to be found within condition 5.1 were required to be read otherwise than strictly. If a purchaser of a horse subject to the x-ray condition was sufficiently anxious about the need to inspect a horse in its own premises within seven days of the hammer having fallen, it would of course press for the x-ray exercise to be completed apace. In the ordinary course of events that should not take anything like seven days. In an appropriate case if it could be shown that there had been conduct of the auctioneer frustrating the practicable inspection at other premises by the purchaser for windsucker or wobbler syndrome then the Equity Court would be in a position to deal with that type of wrongdoing without difficulty: ‘nullus commodum capere potest de injuria sua propria’ - ‘no man can take advantage of his own wrong’. The principle and its application to several areas of law has recently been discussed in the House of Lords by Lord Jauncey of Tullichettle in Alghussein Establishment v Eton College [1988] 1 WLR 587, with who's reasons Lord Bridge, Lord Elwyn-Jones, Lord Ackner and Lord Goff agreed. There the principle was expressed as providing ‘that a contracting party will not in normal circumstances be entitled to take advantage of his own breach as against the other party’ (at p591).

117 In my view the evidence does not establish a consensual arrangement to vary the Inglis Conditions of Sale or for the x-ray of the colt to operate as a condition precedent to the sale. Nor do the factual circumstances, as objectively known, provide any support for such non-operation or suspension of the 7 day time period under cl. 5.1. I accept as correct the plaintiff’s submission that the reality of the position is that Mr Foote could have requested a veterinary surgeon examine the colt at Randwick for conditions other than those sought to be observed under the x-raying: [Foote transcript 124.54]. He could have arranged to examine the colt for wobbler syndrome during that period: [Inglis transcript 177.46 - 178.8]. And even if this was not acceptable as a preferred course because it was necessary to have a horse home in other surroundings to determine whether it was a wobbler or a windsucker [evidence given by Mr Inglis at 180] the colt could have been, and was in fact, observed during its time in the run (small paddock) in the first two days after arrival at Arrowfield: [Hood transcript 139.14 - 140.2]. Similarly, the colt could have been taken to Arrowfield on 4 April 2002 after being x-rayed (there being no legal power in Inglis, under the Inglis Conditions of Sale, to detain the horse from a purchaser with extended credit terms).

118 In my view the defendant’s first and primary submission which is that on the evidence the proper construction of the relevant agreement is that the x-ray condition was a condition precedent should be rejected. I take into account the principle that it is only when, in the case of a written contract, the contract read as a whole, compels the conclusion, that a condition will be construed as a condition precedent to the formation of a contract. I see no reason to differentiate in this regard as between on the one hand, a contract which is wholly in writing and on the other hand a contract which is either wholly in writing but comprises more than one document which require to be construed together, or is partly in writing and partly oral. Mason J. put the matter as follows in Perri v Coolangatta Investments Pty Ltd (1982) 149 CLR 537 at 552:

"Generally speaking the court will tend to favour that construction which leads to the conclusion that a particular stipulation is a condition precedent to performance as against that which leads to the conclusion that the stipulation is a condition precedent to the formation or existence of a contract. In most cases it is artificial to say, in the face of the details settled upon by the parties, that there is no binding contract unless the event in question happens. Instead, it is appropriate in conformity with the mutual intention of the parties to say that there is a binding contract which makes the stipulated event a condition precedent to the duty of one party, or perhaps of both parties, to perform. Furthermore, it gives the courts greater scope in determining and adjusting the rights of the parties. For these reasons, the condition will not be construed as a condition precedent to the formation of a contract unless the contract read as a whole plainly compell is this conclusion" .

119 There is too much significance in the time when risk is to pass for the matter to be left relevantly inchoate and the evidence was far from complete in terms of providing any precision to permit an objective bystander to work out precisely at what point in time the risk was to pass to the purchaser. Was it to be upon the completion of the x-ray examination? Was it to be upon the completion of the x-ray examination results duly notified to the auctioneer? Was it to be upon the completion of the x-ray examination results duly notified to the purchaser? If the latter, was the risk to pass upon oral notification? Which officer of the purchaser would suffice for the purpose? Would the risk pass upon oral notification to the purchaser if there was a failure to also notify the vendor? These are matters of obvious great commercial significance to the purchaser and to the vendor.

120 It does not seem to me that in the circumstance where in the material conversations between Mr Foote and Mr Orton, the words "sale … will be made subject to a satisfactory x-ray " or some such are not shown to have been said, the court should infer from the communications between Mr Inglis and Mr Foote, that Mr Inglis should be regarded as relevantly an agent or conduit of Mr Foote for the purpose of completing, in a material part, the terms of the agreement between the vendor and the purchaser.

121 However even if I be wrong in this approach so that part of the oral communications to be taken into account as part of the partly oral and partly written contract should include Mr Inglis as, on behalf of Mr Foote, communicating material words, in this case that the sale would not be completed on horses where the x-ray condition applied until such time as the x-rays had been cleared [see the evidence given by Mr Inglis], I would nonetheless hold that standing back from all the facts, matters and circumstances revealed by the evidence, the x-ray condition is not shown to have been made a condition precedent to the formation of the contract. The reasons for such a finding have already been given in the discussion of the principle as outlined in Perri and in the section of the above reasons which follow that reference.

122 It is then necessary to examine the several alternative ways in which the plaintiff put its case. Likewise the defendants put their cases in several different ways which require to be examined. By and large the first area of dispute concerned the proper finding as to when the sale actually took place. The convenient course is to follow the several alternatives and deal with them also as alternatives by way of findings.

The sale took place on 3 April 2002

123 On the Court’s findings, the sale took place on the fall of the hammer on 3 April 2002. The 7-day period expired on 10 April 2002. The defendants have conceded that the horse did not prove to be a wobbler during the 7-day period expiring on 10 April 2002. Accordingly, and consistently with the plaintiff’s first submission, is appropriate that judgment be entered for the plaintiff.

124 In deference to the other ways in which the plaintiff’s case was put and against the event that I be wrong in the holding that the sale took place on 3 April 2002, I proceed to examine the other alternatives.

Sale taking place on 4 April 2002

125 The defendants advance an alternative case that the sale took place on 4 April 2002 being the date on which the horse was in fact x-rayed. On this basis, the 7-day period would expire on 11 April 2002.

126 For the reasons given above, the vendor’s consent to x-raying the colt did not have the legal affect of preventing the Inglis Conditions of Sale, including cl. 5.1, from operating as from 3 April 2002.

127 However, even if the 7-day period did in fact expire on 11 April 2002, the plaintiff would still succeed. The defendants rely on the observations of Ms Hood and Mr Fairgray made on 11 April 2002 when the colt was released into the paddock at Arrowfield. However, the contractual stipulation is that the horse “shall prove to be a…wobbler within seven (7) days of the sale”. I reject as of no substance, the defendants submission that the words "shall prove", properly construed, mean no more than that a person who receives a horse on a reasonable basis believes that on the balance of probabilities there is ‘some’, or even a ‘reasonable’, or ‘good’ chance, that a clinical examination would definitively show the horse to be a wobbler. What is called for is a clinical/medical diagnosis and not a mere suspicion.

128 The Court’s holding is that the observations of Ms Hood and Mr Fairgray do not constitute the requisite proof within seven days. Thus as the plaintiff pointed out:

· Ms Hood conceded that there are a number of reasons why a horse may appear to walk abnormally, including back sprain and injury in a paddock. She admitted that she required a veterinary surgeon to advise her whether the abnormality of gait arose from one condition or another, and that until Dr Wylie provided an opinion Ms Hood could not be sure what was the nature of the problem with the animal;

· Mr Fairgray similarly observed abnormality of gait but conceded that he needed to call on the opinion of Dr Wylie in order to tell him (ie Fairgray) whether the colt was lame or a wobbler.

Sale taking place on 6 April 2002

129 The defendants advance a further alternative case that the sale took place on 6 April 2002 when the results of the x-ray examination were communicated to Mr Foote by Mr D’Arcy. On this basis, the 7-day period would expire on 13 April 2002.

130 Here again for the reasons given above, the vendor’s consent to x-raying the colt did not have the legal affect of preventing the Inglis Conditions of Sale, including cl. 5.1, from operating as from 3 April 2002.

131 My own view in terms of the proper construction of clause 5.1 is that the clause does not require the provision to the auctioneer within seven days of the sale, of the requisite written veterinary surgeons certificate. In short the correct construction of the 2nd sentence of clause 5.1 is treated as if the clause had read:

"If the Vendor or the Auctioneer shall fail to make the said disclosure and if the lot shall prove to be a windsucker or wobbler within seven days of the sale and subject to the Purchaser producing [within a reasonable time of the lot having been proved to be a windsucker or wobbler ] at his expense written evidence, signed by a veterinary surgeon selected by the Auctioneer, certifying that the said lot is a windsucker or wobbler and subject to the Purchaser at his own expense returning the said lot to the place of Sale, the sale shall be deemed to be cancelled."

132 Even if the 7-day period expired on 13 April 2002 the plaintiff would still succeed.

133 Condition 5.1 upon its proper construction allows for a veterinary surgeon to provide a professional diagnosis within the seven-day period (even if the written report by that person is actually typed and provided later). Indeed the clause properly construed allows for and could be complied with if:

· a veterinary surgeon [person 1] provided a professional diagnosis within the seven day period and produced a written or typed report which was submitted within a reasonable time of the diagnosis to the auctioneer or

· alternatively, some other veterinary surgeon [person 2], within a reasonable time of the diagnosis by a person 1, provided a confirmatory professional diagnosis which, again within a reasonable time of the diagnosis by a person 1, was submitted in a written or typed form to the auctioneer.

134 I accept as correct, the plaintiff’s submission that particularly given the grave consequences when clause 5.1 operates, nothing less than a professional diagnosis is required.

135 Here, it was not until 16 April 2002 that Dr Wylie examined the colt and arrived at a concluded diagnosis that it was, in his opinion, a wobbler. Further, it was also not until 16 April 2002 that Dr Todhunter similarly examined the horse and diagnosed that it was a wobbler. In each instance, the professional diagnosis was made outside the seven day period if expiring on 13 April 2002;

136 The comments by Dr Wylie as to some passing observations he made on 12 April 2002 at which time he was examining another horse for insurance purposes do not constitute a professional diagnosis or evidence within the meaning of cl. 5.1. Dr Wylie did not examine the colt on 12 April 2002, nor did he make a professional diagnosis on that day. At the very least, clause 5.1 requires both these elements (ie examination of the subject horse and professional clinical diagnosis) within the relevant 7 day period.

137 For these reasons, even if the 7-day period expired on 13 April 2002 the plaintiff would succeed.

Selection by the auctioneer

138 The plaintiff submits that neither Dr Wylie nor Dr Todhunter were “selected by the auctioneer” within the meaning of clause 5.1. It is clear that both Dr Wylie and Dr Todhunter prepared their reports at the request of the purchaser (Mr Foote) or his agent (Arrowfield Stud/Peter Fairgray). The reports were faxed by each veterinary surgeon to Mr Foote before being subsequently faxed on by Mr Foote to Mr D’Arcy of Inglis .

139 Inglis played no role in the prior selection of either Dr Wylie or Dr Todhunter. The issue of veterinary appointment is presented by Mr Foote to Mr D’Arcy as a fait accompli.

140 I accept as correct the plaintiff’s submission concerning the importance of the requirement that the veterinary surgeon be “selected by the auctioneer”. It does seem that this requirement, part of clause 5.1, is intended to ensure even-handedness in the operation of a provision that potentially has, as in this case, grave consequences involving as it does (if the requirements are satisfied), the deemed cancellation of the sale of a very expensive and unique chattel. Clause 5.1, I accept, contemplates that there could be great potential for abuse if a purchaser could simply rely on a veterinary certificate sourced from the purchaser’s own resources. Thus, clause 5.1 relevantly imposes a duty on the auctioneer (if the clause is to operate to cancel the sale) to select a competent and independent veterinary surgeon for the purposes of providing written evidence pursuant to the requirements of the clause. See also Gilmore v Smith (unreported, 26 March 2002, High Court of New Zealand, Paterson J) at paras 18, 20.

141 In Gilmore v Smith Paterson J considered a similar, although not identically worded, provision (using the expression “nominated” rather than “selected”) in the Terms of Sale of New Zealand Bloodstock Ltd (the principal New Zealand bloodstock auctioneer). Paterson J construed (at para 20) the relevant provision (clause 13.2) as requiring the veterinary surgeon’s certificate to be provided subsequent to the nomination of that veterinary surgeon by the auctioneer. It is clear that no such prior selection by Inglis was made in the present case.

142 In Gilmore v Smith (above) at para 20 Paterson J said:

“…New Zealand Bloodstock has a duty to the vendor, before the sale is cancelled, to ensure that a veterinary surgeon appointed by it certifies that the horse was a wobbler. This obligation calls for a decision and, in my view, a notification by the auctioneer. The decision is to obtain a competent, appropriate and independent veterinary surgeon to provide a certificate with the meaning of clause 3.2. Unless the veterinary surgeon is appraised of that obligation, the certificate may be prepared for some other purpose. In this case it was, namely, for [the purchaser] to try and persuade New Zealand Bloodstock to cancel the sale. What happened in this case illustrates, in my view, the meaning of “nominated” in clause 13.2. New Zealand Bloodstock had an obligation to ensure a veterinary surgeon was nominated and, in doing so, to advise the veterinary surgeon of the purpose of that certificate. The veterinary surgeon’s duties depend on the terms of his or her retainer. Here the certificate was provided by a veterinary surgeon retained for another purpose with no duty to New Zealand Bloodstock.”

143 The plaintiff submits that there cannot be, within the meaning of clause 5.1, a selection of a veterinary surgeon by what effectively amounts to an alleged subsequent ratification . The plaintiff’s proposition is that Mr D’Arcy’s reputed comment (Foote 1.8.02, para 25) to “take it as though those two vets have been appointed by us” does not meet the contractual requirement that those two vets must have been “selected by the auctioneer”. The submission is that although Mr D’Arcy may indeed have said “take it as though those two vets were appointed by us”, the fact of the matter is that they were not so appointed. It seems to me that there is substance in the submission. Nor it seems to me can there be a deemed appointment within the meaning of the clause (Foote 1.8.02, annex D). I accept as of substance the plaintiff’s submission that it would be contrary to the clear intention of clause 5.1, to speak of a deemed selection.

144 In this respect, the plaintiff contends that the act of selection necessarily entails a deliberate decision having been made prior to the action or event, said to be the subject of the selection (in this case the appointment of a veterinary surgeon for the purpose of preparing written evidence that may satisfy the requirements of clause 5.1 and thus have the effect that the sale is deemed to be cancelled). It seems to me that this is a submission of substance which should be accepted.

145 I reject however as incorrect, the plaintiff’s further submission that it is implicit in clause 5.1 that the selection by the auctioneer has to be of someone who has not previously been utilised by one of the parties.

146 In Gilmore v Smith (above) Paterson J left open a very limited possibility by which a veterinary surgeon, previously utilised by one of the parties (in that instance also, the purchaser) could be validly nominated and provide a report that satisfied the conditions of clause 13.2. Paterson J said (at para 22):

“I do not preclude the possibility that a purchaser may provide a veterinary certificate from his or her veterinary surgeon and that veterinary surgeon is then nominated by the auctioneer to provide the certificate under clause 13.2. However, if this were to be the case, the veterinary surgeon would need to either provide a further certificate or to confirm the original was prepared and forwarded on the basis that he or she was preparing a certificate for the purposes of clause 13.2. Even in such circumstances, the auctioneer may expose itself to liability to the vendor unless it obtained the informed consent of the vendor to such a nomination.”

147 It seems to me that these views expressed by Paterson J. are entirely correct.

148 There is substance in the plaintiff’s submission that adopting the approach taken by Paterson J, the defendants in this case do not bring themselves within the very limited circumstances alluded to in that case. Thus, neither Dr Wylie nor Dr Todhunter were ever asked by Inglis to provide, not in fact provided, a “further certificate” for the purposes of clause 5.1. Nor did either Dr Wylie or Dr Todhunter confirm that the original certificate “was prepared and forwarded on the basis that he or she was preparing a certificate for the purposes of [clause 5.1]”. It is clear that the original reports were prepared for Mr Foote/Arrowfield not for Inglis. There is no cogent evidence that those reports were prepared by the veterinary surgeons, at the time they were done, for the purpose of clause 5.1 (although Mr Foote may subsequently have sought to utilise the reports for such purpose). At the very least, this would have required evidence by the defendants on the detailed instructions provided to each veterinary surgeon and the nature of their retainer. No such cogent evidence was adduced that would satisfy the requirement contemplated by Paterson J.

149 Furthermore, as the plaintiffs point out in their written submissions, the subsequent letters from each veterinary surgeon (dated 27 June 2002 from Dr Wylie and 29 July 2002 from Dr Todhunter also do not satisfy the requirement contemplated by Paterson J. The terms of each letter were drafted or substantively suggested by the defendants’ solicitors, Moray & Agnew: Wylie transcript 155.57 - 156.36; transcript 194.53 - 195.10). (concession noted at transcript page 194) Each letter requests that Inglis “please accept [the] report for the purpose of condition 5” (Wylie 2.8.02, annex V; Todhunter 1.8.02, annex B). By its terms, neither letter would satisfy the requirement contemplated by Paterson J that “it confirm the original certificate was prepared and forwarded on the basis that he or she was preparing a certificate for the purpose of clause 13.2.”

150 For the reasons detailed above, the reports of Dr Wylie and Dr Todhunter do not constitute written evidence from a veterinary surgeon “selected by the auctioneer” and, for this reason alone, the defendants must fail.

Date on which x-ray results looked at by vet

151 The date on which the x-ray results were actually looked at by a veterinary surgeon is not decisive of any matter in dispute in the present proceedings. Nonetheless, the plaintiff does take issue with the contention advanced by the defendant that, in the absence of any direct evidence, the court should draw an inference that the x-ray results were looked at on or very shortly before 6 April 2002 (see T 34). Rather, in the absence of any evidence to the contrary adduced by the defendants (who are seeking to persuade the court for an extended time period in the nature of a condition precedent) the plaintiff submits that the Court is properly entitled to infer that the x-ray results were looked at on 4 April 2002 when the colt was in fact x-rayed. There is some evidence given by Ms Carnes in relation to the general circumstances concerning the x-ray process of horses. The process is apparently a lengthy one, which can take between 3 and six hours for a single horse. It does not seem to me that this evidence really assists the court on what inference should be drawn as to this matter. However bearing in mind the significance to those purchasers who have the benefit of the x-ray condition, it would seem appropriate to infer that the x-raying would have been expedited and that the results would have been given relatively quickly and presumably within hours of the completion of the taking of the x-rays depending upon the number of horses to be x-rayed at the time. Outside of those considerations, it is simply not possible to be precise in terms of the probable occasion when the x-ray of the subject colt would have been inspected and reported upon.

Election defence

152 This defence pleads an election by Inglis (as agent for the plaintiff) to cancel the sale. The election is said to have taken place on either 18 or 26 April 2002. The basis of cancellation is expressly limited to cl. 5.1 of the Inglis Conditions of Sale. [Transcript 103.18-40]

153 The defence of election necessarily fails on the facts. Here there was in fact no election that could conceivably have been made by Inglis. There was no alternative set of rights whereby Inglis was required to chose between a right to terminate a contract or to insist upon its perform. In this respect, it is significant that cl. 5.1 is a self-executing provision. Either clause 5.1 operated and therefore the sale was deemed to be cancelled (which was seemingly the opinion espoused by Inglis) or it did not. Inglis had no relevant role to play and notions of election have no operation. For this reason, the defendants’ pleaded case that “the plaintiff cancelled the sale” (Amended Defence, para 21(a) and (b)) finds no support in the language of cl. 5.1, which is the only foundation of the election defence.

154 Similarly, the doctrine of election does not apply because there were no facts giving rise to the right to avoid the contract of which the elector was aware (there being in fact no right in Inglis to avoid the contract at all): Sargent v ASL Developments Ltd (1974) 131 CLR 634 at 642, 658; Khoury v Government Insurance Office (NSW) (1984) 165 CLR 622 at 634.

155 Furthermore, the court may properly refuse to impute an election to a person who is not shown to have made a conscious decision to elect, particularly in the absence of actual prejudice to the defendant. See Khoury v Government Insurance Office (NSW) (1984) 165 CLR 622 at 633. Here, Inglis proceeded at all relevant times on the basis that the sale had been cancelled according to the terms of cl. 5.1 of the Inglis Conditions of Sale (and not by reason of any conscious act on the part of Inglis). Furthermore, there was no evidence of actual prejudice to the defendants who, in any event, seemingly took the view that the sale had been cancelled at the defendant’s option: Foote 1.8.02, annex F (letter dated 23.4.02 from Foote to D’Arcy relevantly stating that “In accordance with the Conditions of Sale we now void the sale…”).

156 Moreover, the defendants knew at all times from 18 April 2002 onwards that the owner was disputing that the sale had been cancelled within the operation of cl. 5.1. [See Foote transcript 128.11 - 130.56] In this respect, it also appears clear that Mr D’Arcy communicated to Mr Foote the substance of the facsimiles from Mr Marks dated 26 April and 2 May 2002: [D’Arcy transcript 189.38 - 43]

157 The defence is of no substance in all of those circumstances. Mr Sullivan QC elected not to address any submissions in support of the defence during the final section of his oral address.

Relief

158 In my view the present circumstances do not permit the plaintiff to obtain judgment against both defendants on the basis that the liability of the defendants is joint and several or joint. Although the plaintiff submitted detailed submissions going to this issue, I am quite clear that the plaintiff is required effectively to elect to have judgment against either the first defendant or the second defendant but not both. That being the position, the plaintiff seeks judgment against only the first defendant and the short minutes of order will require to be worded accordingly. To the extent that reasons are necessary in this regard they are simply that the liability of the defendants is at the highest, alternative liability and not joint (or joint and several) liability. Clause 1.5 deems a bidder to be a principal and to be "liable as such" unless a written authority has been given by the bidder to the auctioneer to bid on behalf of another person and the auctioneer agrees to accept bids on that basis. A form of written authority circulated by Inglis is part of the evidence but there is no evidence that the first defendant provided the written authority required by clause 1.5 to Inglis.

Short minutes of order

159 Short minutes are to be brought in. Costs may be argued.

I certify that paragraphs 1 - 159
are a true copy of the reasons
for judgment herein of
the Hon. Justice Einstein
given on Friday 30 August 2002

___________________
Susan Piggott
Associate
30 August 2002

Last Modified: 09/18/2002