STIRLINGRAHAM Pty Ltd v Maywood Holdings Pty Ltd
[2003] WADC 192
•5 SEPTEMBER 2003
JURISDICTION : DISTRICT COURT OF WESTERN AUSTRALIA
IN CIVIL
LOCATION: PERTH
CITATION: STIRLINGRAHAM PTY LTD -v- MAYWOOD HOLDINGS PTY LTD [2003] WADC 192
CORAM: WISBEY DCJ
HEARD: 9-12 DECEMBER 2002, 1-4 APRIL 2003
DELIVERED : 5 SEPTEMBER 2003
FILE NO/S: CIV 1458 of 2000
BETWEEN: STIRLINGRAHAM PTY LTD (ACN 084 394 409)
Plaintiff
AND
MAYWOOD HOLDINGS PTY LTD
Defendant(BY ORIGINAL ACTION)
MAYWOOD HOLDINGS PTY LTD
PlaintiffAND
STIRLINGRAHAM PTY LTD (ACN 084 394 409)
First DefendantCOLIN LANDEL STIRLING
Second DefendantLESLIE JAMES INGRAHAM
Third Defendant(BY COUNTERCLAIM)
Catchwords:
Real property - Agreement to purchase a business - Purchaser's liability "subject to finance" - Conditional approval of finance only - Written notification required of approval or waiver - Notice not given
Legislation:
Nil
Result:
Agreement terminated by self-executing condition and plaintiff (purchaser) entitled to return of deposit
Representation:
Original Action
Counsel:
Plaintiff: Mr S M Davies
Defendant: Mr G A Rabe
Solicitors:
Plaintiff: Deacons
Defendant: Stables Scott
Counterclaim
Counsel:
Plaintiff: Mr G A Rabe
First Defendant : Mr S M Davies
Second Defendant : Mr S M Davies
Third Defendant : Mr S M Davies
Solicitors:
Plaintiff: Stables Scott
First Defendant : Deacons
Second Defendant : Deacons
Third Defendant : Deacons
Case(s) referred to in judgment(s):
Nil
Case(s) also cited:
Erley Pty Ltd v Gunzberg Nominees Pty Ltd [1997] ANZ Conv R 500
Evans v Bartlam [1937] AC 473
Gates v City Mutual Life Assurance Society Ltd (1986) 160 CLR 1
Grundt v Great Boulder Gold Mines Ltd (1937) 59 CLR 641
Henville v Walker (2001) 75 ALJR 1410
Legione v Hateley (1983) 152 CLR 406
Maclaine v Gatty [1921] 1 AC 376
Marks v GIO Australia Holdings Ltd (1998) 73 ALJR 12
Meehan v Jones (1981-1982) 149 CLR 571
Newbon v City Mutual Life Assurance Society Ltd (1935) 52 CLR 723
Paltara Pty Ltd v Dempster (1991) 6 WAR 85
Sampson v Clifford & Ors [2001] WASC 102
Sargent v ASL Developments Ltd (1974) 131 CLR 634
The Commonwealth of Australia v Verwayen (1990) 170 CLR 394
United Australia Ltd v Barclays Bank Ltd [1941] AC 1
Wendt v Bruce (1931) 45 CLR 245
Wheeler Grace & Pierucci Pty Ltd v Wright (1989) ATRP 40-940
Yorke v Lucas (1985) 158 CLR 661
WISBEY DCJ: By written agreement dated 10 September 1999 the plaintiff agreed to purchase from the defendant a cabaret/nightclub business known as DC's, Taipan Room, and Club Bon Bon'et, situated at 105 Francis Street, Northbridge for the sum of $600,000. The purchase price was payable by a deposit of $60,000; ($10,000 upon the execution of the agreement, and $50,000 upon approval of finance); the balance of the purchase price being paid by lump sum of $440,000 at settlement on 1 November 1999, and $100,000 by way of vendor finance. The agreement provided that if vendor finance was not required, the purchase price would reduce by $20,000. In the event the plaintiff did not require vendor finance and the purchase price reduced to $580,000. Relevantly the agreement was subject to the plaintiff obtaining finance suitable to it within 28 working days of the date of the agreement, namely by 21 October 1999, and advising the defendant and/or its agent in writing within that period of its approval of finance. Unless the plaintiff waived that condition and notified the defendant in writing of its waiver in the event that the condition as to finance was not met, the agreement was deemed to have come to an end.
The plaintiff alleges that it paid the first deposit instalment, and the balance on 5 November 1999. The plaintiff further alleges that finance was neither obtained nor that requirement waived, by reason whereof the agreement came to an end entitling it to a return of the deposit paid.
In the statement of claim as amended at trial the plaintiff alleges that the latest date for approval of finance was 21 October 1999, alternatively 25 October 1999, alternatively 5 November 1999, or alternatively by 20 December 1999.
The plaintiff claims a declaration that the agreement terminated by reason of the failure of the condition aforesaid, and an order for the return of the deposit.
The defendant essentially alleges that:
(a)the agreement was varied such that it became conditional upon the plaintiff advising the defendant or its agent of the approval of finance by 5 November 1999;
(b)the plaintiff obtained approval of finance on or before 5 November 1999; and its directors orally advised the defendant's agent Thurlow thereof;
(c)in the alternative the plaintiff waived the condition as to finance;
(d)further and in the alternative if the plaintiff did not obtain finance and had not waived the requisite condition, it failed to use its best endeavours to obtain finance by reason whereof it is not entitled to rely upon the condition.
(e)further and in the alternative by its conduct as pleaded in the defence, the plaintiff caused the defendant to act to its detriment and is estopped from asserting that finance was not approved.
The defendant alleges that in accordance with the agreement it served upon the plaintiff a default notice, and the plaintiff having failed to remedy the default, it terminated the contract and the deposit was forfeited.
Further the defendant claims damages for breach of contract; and against the second and third defendants by counterclaim for misleading or deceptive conduct pursuant to s 52 of the Trade Practices Act.
As is apparent, the primary issue for resolution is identifying and determining the plaintiff's situation in respect of its endeavours regarding finance, and the result thereof, and to determine that it is of course necessary to look to the evidence.
Leslie James Ingraham
Mr Ingraham, a 36 year old self‑employed bricklaying contractor, gave evidence that on behalf of the defendant he managed a James Street nightclub in 1991/92, and the Court Hotel in 1997, and whilst holding the latter position was overseeing the nightclub business the subject of the present action. Whilst engaged in those activities he became aware of the transferability of the nightclub's cabaret licence and consequently its capital value.
Mr Ingraham stated that in or about 1999 Mr Thurlow, a director of the defendant, told him that the nightclub was for sale and enquired of his interest in purchasing it. He expressed interest principally because of the transferability of the licence. He spoke to his co‑director and business partner Mr Stirling, explaining to him the position regarding transferability of the cabaret licence. Mr Thurlow provided Mr Ingraham with a copy of the lease of the premises from which the nightclub was conducted (Exhibit P1). Mr Ingraham stated that he examined the lease particularly relating to the transferability of the cabaret licence, and satisfied Mr Stirling and himself that was the position.
Mr Ingraham produced and referred to the purchase agreement dated 10 September 1999 (Exhibit P2) and confirmed that the plaintiff did not require vendor finance and as a consequence the purchase price reduced by $20,000.
Following execution of the agreement Mr Ingraham and Mr Stirling approached Mr Stirling's accountant, Mr Slee, concerning finance, as a result whereof application was made to Mr Brian Cobb, the manager of the Balcatta branch of the Commonwealth Bank.
By letter dated 14 October 1999 addressed to Mr Thurlow (Exhibit P3) the plaintiff advised of its approach to the Commonwealth Bank stating that the funding process was well advanced although a formal letter of approval would not be available until the following week, and requested an extension of time for approval of finance to 25 October 1999. By letter also dated 14 October 1999 (Exhibit P4) drafted by Mr Slee on behalf of the plaintiff and signed by Mr Thurlow on behalf of the defendant, the defendant agreed to extend the date for approval of finance to 25 October 1999.
Because of delays in obtaining finance Mr Ingraham arranged for Mr Slee to draft another letter from the defendant to the plaintiff dated 29 October 1999 (Exhibit P5) agreeing to extend the date for approval of finance to 5 November 1999, and the date for settlement to 19 November 1999. Mr Ingraham handed the letter to Mr Thurlow who signed it on behalf of the defendant.
Mr Ingraham produced a letter dated 5 November 1999 from the Commonwealth Bank to the plaintiff advising that the bank approved finance in the sum of $410,000 to assist with the purchase of the business, subject inter alia to the "provision of a final lease agreement between Stirlingraham Pty Ltd and landlord, which is to be satisfactory to the bank prior to settlement and confirming a five year term" (Exhibit P6). It was about that time that Mr Thurlow contacted Mr Ingraham informing him that the pool table in the nightclub was broken and enquired as to whether he had a replacement table. Mr Ingraham had coin operated pool tables, and stated that he agreed to provide one on the basis that he would share the takings with the defendant. Following the receipt of the Commonwealth Bank letter Mr Ingraham contacted Mr Thurlow informing him that the plaintiff had conditional approval, explaining that one of the conditions was a requirement that there be a five year lease. Mr Thurlow felt that there would not be a problem with the landlord, and Mr Ingraham took the letter to Mr Thurlow's office and gave it to him. Mr Thurlow was pressing for payment of $50,000 being the balance of the deposit. He told Mr Ingraham that there were three other people interested in purchasing the nightclub and that if the plaintiff was genuinely interested in the purchase it should pay the balance of the deposit.
The plaintiff engaged an agent Mr Cartwright of Burgess Rawson to negotiate an acceptable lease on its behalf, and by letter dated 15 November 1999 (Exhibit P7) Burgess Rawson wrote to Paioff Partners, who controlled Bapcor Holdings Pty Ltd (the landlord) regarding terms of the proposed lease. By letter dated 16 November 1999 (Exhibit P8) Paioff Partners responded to Mr Cartwright indicating that solicitors had been instructed to prepare the lease. Mr Ingraham attended upon a director of the landlord. Mr Ingraham stated that it was about that time that Mr Thurlow telephoned Mr Stirling requesting payment of the balance of the deposit, and Mr Stirling advised that the plaintiff would pay the balance of the deposit but it had to be understood that there were still difficulties regarding the lease.
By letter dated 19 November 1999 (Exhibit P9) again prepared by Mr Slee and taken by Mr Ingraham to Mr Thurlow for his signature, the defendant extended the settlement date to 30 November 1999; and by further letter dated 26 November 1999 (Exhibit P10) prepared and executed in similar manner, agreed to extend the date for settlement to 13 December 1999.
On or around 10 December 1999 Mr Cartwright provided Mr Ingraham with a draft lease (Exhibit P11) and upon a perusal thereof he observed that the document did not give the plaintiff the right to remove the cabaret licence from the demised premises – that is it did not have a proprietary right in the licence. Consequently it was arranged for the document to be forwarded to Mr Colin Munro of Deacons Graham & James solicitors with a request that he arrange to have it amended to protect the plaintiff's position. By facsimile transmission dated 14 December 1999 (Exhibit P12) Mr Munro wrote to Ilbery Barblett, solicitors for the landlord, setting out the plaintiff's requirements concerning the lease. Mr Ingraham arranged for a further letter dated 14 December 1999 (Exhibit P13) prepared by Mr Slee to be executed by Mr Thurlow, whereby the defendant agreed to extend the date for settlement to 20 December 1999. At the time of obtaining Mr Thurlow's signature, Mr Ingraham expressed his concern regarding the lease, and Mr Thurlow said that he had arranged for his nightclub manager, Mr Metzger, to contact the landlord and sort it out.
By letter dated 16 December 1999 (Exhibit P14) Mr Munro wrote to Ilbery Barblett addressing the fact that the landlord was not willing to agree to a number of the proposed alterations to the draft lease, in particular the addition of a clause acknowledging that the tenant have the right to apply for the removal or transfer of the cabaret licence at any time. Mr Munro wrote again to Ilbery Barblett on 20 December 1999 (Exhibit P15) having been advised by Mr Ingraham that the plaintiff wished a firm timetable established for completion of the transaction.
On 22 December 1999 Mr Stirling advanced the sum of $8,583.07 to Mr Thurlow to facilitate the purchase of stock for the nightclub and a loan agreement was executed (Exhibit P16).
On 23 December 1999 Ilbery Barblett wrote to Deacons (Exhibit P17) concerning the draft lease. Mr Ingraham at that date had formed the view that "there was no way that this thing was going to come together", because the plaintiff was not prepared to enter into a lease that did not provide transferability of the cabaret licence, and it did not appear that the landlord was prepared to make such a concession. In order to bring the matter to a head Mr Ingraham stated that the plaintiff put a deadline of 24 December on the transaction. The matter not having been resolved by 24 December 1999 Mr Munro wrote to the defendant's agent, Mr Allan Maller of White & Associates, demanding a return of the deposit (Exhibit P18).
Mr Ingraham referred to and produced letters from the Commonwealth Bank dated 7 December 1999 (Exhibit P19) and 20 December 1999 (Exhibit P20).
Mr Ingraham stated that the only contact he had with Mr Metzger, the defendant's nightclub manager, was at a luncheon at Valentino's restaurant attended by Mr Thurlow, Mr Stirling, Mr Mason (the nightclub duty manager), some promotional personnel and himself. During the luncheon Mr Thurlow indicated that Mr Metzger would sort out any difficulties regarding the lease. Mr Ingraham stated that there was general discussion concerning the operation of the nightclub over the Christmas period including such matters as the employment of bands, disc jockeys, advertising, and the like. He stated that Mr Thurlow sought his opinion on certain issues and he responded to the effect that it was not appropriate for him to have any input until the plaintiff obtained possession of the nightclub.
Mr Ingraham claimed to have been in Northbridge during the New Year period and observed social activities to be reasonably quiet.
In cross‑examination Mr Ingraham stated that Mr Stirling and himself were jointly responsible for matters associated with the purchase of the nightclub. He denied that they became interested in the purchase of the nightclub because of the expected millennium effect. He agreed that he probably advised Mr Slee on or about 16 September that the plaintiff was negotiating for a five year lease with a similar option. He denied telling Mr Metzger anything about his business arrangements, and in particular asking him not to speak to Mr Thurlow about the plaintiff's intentions regarding the lease. He agreed that before signing the agreement to purchase the nightclub he had seen financial documentation relating thereto, and it would appear provided that documentation to and advised Mr Slee that in his view there had been an over expenditure in respect to the business in the past. Mr Ingraham agreed that he had seen a fax from MFA Finance to the plaintiff's accountant, Mr Slee, dated 6 October 1999 (Exhibit D1).
Mr Ingraham stated that he did not have direct negotiations with the landlord concerning the lease, having left that to Mr Munro, who only became involved after 5 November 1999. He denied the plaintiff never intended taking an assignment of the existing lease, stating that the demand for a new five year lease came about as a requirement of the Commonwealth Bank. He stated that it was towards the end of November or early December that he began to suspect that there would be problems obtaining a new lease, and employed Mr Cartwright of Burgess Rawson to negotiate the lease. He stated that if the bank had been prepared to advance finance on the basis of an assignment of the existing lease, he would have accepted an assignment.
He stated that he was not aware that there were two liquor licences attached to the nightclub (a cabaret licence and a restaurant licence), and denied having a discussion with a Mr Farrell at Deacons' office on or about 21 or 22 December concerning both licences.
Mr Ingraham stated that he did not see the letter from Ilbery Barblett to Deacons dated 23 December 1999 and enclosed lease (Exhibit P21). He denied that by 20 December 1999 the plaintiff had decided not to proceed with the purchase, desiring instead to acquire another nightclub named Connections.
It was put to Mr Ingraham that the various letters he had prepared and signed by Mr Thurlow referred only to an extension of the settlement date, and were not seeking an extension of the time for finance approval, and he denied that to be the case. He denied having any discussions with Mr Metzger concerning the purchase of an ice cabinet, or taking steps to install one at the business premises prior to Christmas. He was firm in his denial that he had never had any discussions with Mr Metzger concerning the details of the purchase of the business.
Stephen Francis Farrell
Mr Farrell, a legal practitioner admitted in October 2000, was at all relevant times serving articles of clerkship at Deacons, and under the supervision of Mr Munro was dealing with matters relating to the plaintiff's proposed purchase of the nightclub or, as he put it, "coordinating the flow of information between the legal firm and our clients, and also preparing check lists to make sure that certain aspects of the file were done with regard to the client's instructions". He indicated that on day to day matters relating to the lease he generally dealt with a Ms Cardi of Ilbery Barblett, the landlord's solicitors. It was his understanding that Commonwealth Bank finance was conditional upon the plaintiff having a five year tenure of the business. He identified Exhibit P11 as the draft lease forwarded by Ilbery Barblett, and Exhibit P12 as Deacons' response on behalf of the plaintiff to the draft.
Mr Farrell's recollection of events was to an extent dependent upon reviewing his file notes. He stated that following the despatch of Exhibit P12 he had a telephone conversation with Ms Cardi on 15 December when she advised that the landlord was agreeable to certain of the proposed amendments, but would not agree to alter clause 17 being the liquor licensing provisions. On 16 December 1999 Ms Cardi told Mr Farrell that she had not appreciated that the draft lease conferred additional benefits on the landlord in respect to liquor licensing aspects. On 16 December 1999 Mr Farrell forwarded a fax to Ms Cardi (Exhibit P14) stating that the plaintiff would not sign a lease wherein clause 17 was not in the form required by it. In a further conversation on 16 December Ms Cardi reported that the landlord would not agree to the changes to clause 17 as it required the cabaret licence be tied to the premises. The relevant file note made by Mr Farrell recorded that the landlord was not prepared to negotiate on this issue. It appeared that Exhibit P14 was forwarded following the telephone discussions. At about 5.00 pm on 16 December Ms Cardi telephoned Mr Farrell stating that she had not received any further instructions from her client, was to be in the Eastern States on the following Monday and Tuesday, and hoped to have instructions before she left.
On 17 December Mr Farrell had a further conversation with Ms Cardi when she indicated that the landlord would agree generally to an assignment provided that the deed of assignment contained a GST clause and that the plaintiff provided a bank guarantee in respect of six months rental.
Mr Farrell was present on 20 December when Mr Munro had a telephone conversation with Mr Di Francesco, Ms Cardi's supervising partner. During the conversation they focussed generally on trying to resolve the impasse, and it was agreed, subject to the approval of the respective clients, that the draft lease would form the basis of the arrangement between the parties with the necessary amendment to the liquor licensing provisions. It was following that discussion that the letter from Deacons to Ilbery Barblett dated 20 December 1999 (Exhibit P15) was forwarded.
On 21 December 1999 Mr Farrell had a further discussion with Ms Cardi following return from her trip when she did not appear to know what the landlord's attitude was then. It was at that time that there were discussions concerning arranging settlement. Mr Farrell had a discussion with "Heather" from Bankwest who he understood to be organising the settlement, and it was apparently confirmed that settlement was to take place at the liquor licensing offices at 2.30 pm that day. Mr Farrell rang Heather a little later in the day to advise her that settlement had been changed to the Thursday.
Mr Munro contacted Ms Cardi who informed him that the landlord did not want a new lease and would only agree to an assignment of the existing lease but had waived its request for a bank guarantee. The landlord was, however, insisting that rates and taxes be paid up to June 2000. The landlord was not prepared to negotiate further on any aspects of the lease.
In the late afternoon of 21 December 1999 Ms Cardi telephoned Mr Farrell indicating that she had received calls on behalf of the defendant advising that the lease negotiations were jeopardising the deal. She informed Mr Farrell that there was a possibility of further negotiations concerning the tenancy arrangement, but again made it clear that the landlord would not agree to the plaintiff's requirements regarding the liquor licensing provisions. Ms Cardi stated that she would contact the landlord and obtain specific instructions regarding the plaintiff's requirement that the landlord acknowledge it had no interest in the liquor licences.
On 22 December 1999 Mr Farrell had a telephone discussion with Mr Alan Maller who stated he was a business agent assisting the defendant in the sale of the business. He expressed the view that he might be able to assist with a recommendation as to how to deal with the landlord, and requested permission to negotiate on the plaintiff's behalf in that respect.
In a further telephone conversation Mr Maller suggested to Mr Munro that he might get the landlord to agree to guarantee the transferability of the cabaret licence.
On 22 December 1999 Mr Farrell received a telephone call from Philip Metzger who stated that he was Mr Thurlow's solicitor, enquired as to what was taking place, and indicated that he could get the liquor licensing provisions altered in a manner satisfactory to the plaintiff.
Mr Farrell's thinking as at 23 December was that the transaction was unlikely to proceed because of the liquor licensing difficulties. On 23 December Ms Cardi told Mr Farrell that the landlord had instructed her it would allow the plaintiff to remove the liquor licence on the termination of the lease, and Mr Farrell requested confirmation in writing, but none was ever received. Ms Cardi then telephoned Mr Farrell and advised him that the lease would be prepared, executed and forwarded by the close of business that day, with a view to settlement proceeding on 24 December. Mr Farrell was shown the letter from Ilbery Barblett to Deacons dated 23 December 1999 enclosing the deed of lease (Exhibit P21) which he claimed to have seen, and from which he observed that there was no positive indication that the liquor licence was not tied to the premises. He advised Messrs Ingraham and Stirling that the clause they had requested was not included in the document. Mr Farrell stated that he never received an executed lease document from Ilbery Barblett, or written confirmation that the clause the plaintiff required was acceptable.
Mr Farrell stated that he had a number of telephone calls with Ms Cardi on 23 December 1999 during which she indicated inter alia that the executed lease would be at Deacons' office by 5.00 pm, and later that she was having difficulty getting a second signature on the lease. She enquired as to the latest time Deacons could accept the document. When she telephoned at 5.30 pm Mr Farrell explained to her that the lease had not arrived and that it was his understanding that the plaintiff was therefore not prepared to proceed. Ms Cardi indicated she was concerned with that position because she believed the landlord was still willing to make concessions. Mr Farrell told Ms Cardi that if the landlord was willing to make further concessions she should give him details thereof so that he could take instructions, although he said informally that it looked as if the transaction would not proceed, and the plaintiff would be looking to recover its deposit.
Mr Farrell stated that a lease did not arrive on 24 December and he acknowledged receiving a letter from Ilbery Barblett to Deacons dated 24 December 1999 (Exhibit P22) confirming that the matter was not proceeding and forwarding a bill of costs.
In cross‑examination Mr Farrell was referred to and produced a number of his file notes.
Defence counsel handed Mr Farrell a lease document executed by the lessor which he stated he had not previously seen. Mr Farrell stated that his file notes confirmed that at 10.05 am on 24 December he rang Ms Cardi to advise that settlement was off. The relevant file memo was P120 (Exhibit D7). His file memo P118 (Exhibit D8) indicated the position as at 5.30 pm on 23 December.
Mr Farrell's assumption at all times was that there was only one liquor licence relevant to the nightclub. He denied having any discussions with Mr Metzger concerning the liquor licences applicable to the nightclub. He stated that on 22 December he had a telephone discussion with Mr Maller who confirmed that he was holding $60,000 in trust and was of the view that the deposit would be forfeited, that conversation being confirmed by file memo P114 (Exhibit D11).
Mr Farrell's file note P119 recorded a conversation with Mr Cobb of the Commonwealth Bank at 6.00 pm on 23 December when it was indicated that the bank required the lease in its final form. Mr Farrell did not have any recollection of Ms Cardi having then advised that the lease would be available by 10 o'clock the following morning. When it was suggested to Mr Farrell that he was still proceeding on the basis that settlement would occur he stated "one of the arrangements was that we would have an executed copy at our office by close of business. That hadn't occurred. I was still facilitating the possibility that anything might happen. You know, it wasn't up to me to say everything has to stop. I wasn't the partner, I was the person who had to try and make the best out of a bad situation which was what I was trying to do. It wasn't for me to tell the bank manager anything, but just to continue facilitating things. That's what I was doing". He stated that Mr Cobb did not indicate at that stage that settlement would not eventuate, but did say that he was having misgivings about it occurring and that he wanted to see the lease.
Mr Farrell's file memo P121 recorded a telephone conversation he had with Ms Cardi at 8.00 am on 24 December when it appeared she was still of the view that settlement would take place. He disagreed that Ms Cardi had until 10.00 am that morning to get the executed lease to him. He confirmed that Mr Cobb phoned at 8.30 am to advise that Mr Stirling had indicated the matter was not proceeding.
Mr Farrell was of the view that Exhibit P21 was received at Deacons at 3.45 pm on 23 December.
Colin Landel Stirling
Mr Stirling, Mr Ingraham's business partner, was a co‑director of the plaintiff company. He confirmed that during 1999 they became interested in the purchase of a nightclub, and that subsequently Mr Thurlow advised him that the nightclub was for sale. He stated that it was his understanding that the cabaret licence attached to the nightclub was transferable. Mr Stirling stated that after signing the agreement to purchase the nightclub they spoke with their property agent, Michael Cartwright, who recommended they approach the Commonwealth Bank for finance. He recognised Exhibit P6 as having been received from the Commonwealth Bank concerning finance. Mr Stirling confirmed that the handwritten markings on the document were his. He recalled a conversation with Mr Thurlow when the fact that the bank finance was conditional upon a five year lease was discussed.
Mr Stirling stated that Mr Thurlow approached him on several occasions concerning payment of the balance of the deposit and was assured that the money was there, and that he would pay it and he was sure everything was all right.
Mr Stirling produced a letter dated 29 October 1999 (Exhibit P24) signed by him on behalf of the plaintiff and addressed to the defendant seeking an extension of the date for the approval of finance to 5 November 1999 and for settlement to 19 November 1999. He stated that the letter was prepared at their accountant's office. The $50,000 balance of deposit was paid on or about 8/11 November because Mr Thurlow had indicated that there were other parties interested in buying the nightclub. He indicated that he had a discussion with Mr Thurlow regarding the transferability of the cabaret licence.
Mr Stirling said that he had a meeting with Mr Paioff in November 1999 to discuss the lease, and then instructed Mr Munro of Deacons to act for the plaintiff.
Mr Stirling produced letters from the Commonwealth Bank to him dated 7 December 1999 regarding the proposed finance (Exhibit P25). In respect of the draft lease (Exhibit P11) he felt that it was given to him by Mr Cartwright and he paid attention to the particular clauses that had been highlighted by Mr Cartwright. It was after receiving that document that he arranged for Mr Munro to represent the plaintiff, particularly to ensure the transferability of the cabaret licence. He stated that the plaintiff agreed to pay the landlord's solicitors' legal fees in connection with the preparation of a new lease. The Commonwealth Bank refused his proposition that it advance finance on the basis of an assignment of the existing lease.
Mr Stirling stated that he really wanted to acquire the nightclub and was prepared to take all necessary steps to ensure that occurred. He recalled that Mr Thurlow rang him expressing the view that Deacons were not doing enough, and offering the services of Mr Metzger to negotiate with the landlord, which was acceptable to him. It was his view as at 20 December 1999 that the landlord was not prepared to make any concession regarding the transferability of the cabaret licence. His recollection was that there was a deadline set for the resolution of all matters being 20 December, then 23 December and finally 24 December, which were not met because the plaintiff never received a lease satisfactorily addressing the cabaret licence. He was adamant that he would never have agreed to a lease that did not contain an acknowledgment by the landlord that it did not have a proprietary interest in the cabaret licence. He confirmed that Deacons' letter dated 24 December 1999 demanding a return of the deposit (Exhibit P18) was sent on his instructions.
Mr Stirling stated that the loan agreement (Exhibit P16) came about as a result of Mr Thurlow requiring money to meet a liquor delivery to the nightclub, and that the agreement was prepared by Mr Cartwright. Subsequently legal proceedings were taken to recover the money. When it was put to Mr Stirling in cross‑examination that the sum of $8,583.07 was in respect of liquor that the plaintiff required for the nightclub, he could not recall such an arrangement. His understanding of the position was that he just happened to be at the nightclub when the liquor delivery arrived, and as Mr Thurlow was not in a position to pay for it, he advanced the money. He agreed that at the time of the advance he was hoping that the purchase of the nightclub would proceed, and therefore that payment for the liquor would be to the plaintiff's advantage. The preparation of the agreement evidencing the loan was at the instigation of Mr Ingraham, and it was prepared by Mr Cartwright.
On or about 20 December 1999 Mr Stirling arranged to purchase a freezer and install it at the club.
Mr Stirling recalled a meeting with Mr Thurlow and others when promotions people were preparing advertising leaflets for the Christmas/New Year period. Mr Thurlow suggested the defendant might withhold printing the flyers and/or notify a change of management, whereupon Mr Ingraham responded that the defendant was to "keep going as is".
Mr Stirling agreed that he would have called Mr Cobb of the Commonwealth Bank on 24 December 1999 to advise him that the deal was off.
When questioned about the purchase agreement (Exhibit P2) Mr Stirling stated that it was his understanding that the plaintiff was buying Bon Bon'et and the Taipan Room with a cabaret licence covering both premises, plus the chattels. He did not seem to have addressed the restaurant licence.
Dealing with the luncheon at Valentino's, Mr Stirling confirmed his understanding of discussions as being that the business was to be carried on as normal by the defendant, and that upon settlement the plaintiff would take over the staff. He could not recall Mr Ingraham telling Mr Metzger that he was not to concern himself with promoting the business.
Mr Stirling stated that he did not send a copy of the proposed lease to the Commonwealth Bank, but was sure someone would have. He did not advise the bank prior to paying the balance of the deposit. He denied that the purchase did not proceed because the plaintiff decided to purchase Connections nightclub, and further denied that he instructed Mr Munro on or about 20 or 21 December that he did not wish to proceed with the transaction.
Colin John Munro
Mr Munro, a Deacons partner, was asked by Mr Stirling to advise and assist in respect of the purchase of the nightclub. It was his understanding that the purchase was subject to finance and that the financier, the Commonwealth Bank, required a five year lease as a condition of finance. He received and perused the draft lease (Exhibit P11) and responded to the landlord's solicitor, Ilbery Barblett, by letter dated 14 December 1999 (Exhibit P12). He had concerns that the draft lease materially differed from the existing lease, in particular in respect to the transferability of the cabaret licence. Mr Munro stated that the response to Exhibit P12 was that the landlord was not disposed to agree to the changes requested. He confirmed that his letter dated 16 December 1999 (Exhibit P14) made it clear that the plaintiff would not be signing the proposed lease unless the requested alterations were incorporated. During the negotiations that followed there was some discussion concerning an assignment of the existing lease, but that would have necessitated an extension of the term to meet the Commonwealth Bank's requirements. He stated that the landlord was not amenable to an extension of assignment.
Mr Munro recalled a conversation that he had with Mr Di Francesco of Ilbery Barblett when they were trying to work around the problem that had arisen concerning the transferability of the cabaret licence, and it appears that his letter of 20 December 1999 (Exhibit P15) addressing the proposal for a new lease followed those discussions.
As at 23 December 1999 Mr Munro had made the plaintiff's position regarding the transferability of the cabaret licence clear to Ilbery Barblett and was hopeful at that stage that there might be a change in the landlord's attitude to the issue.
Mr Munro recalled a telephone call from Mr Alan Maller, who told him that the landlord's attitude had been instrumental in frustrating earlier attempts to sell the nightclub, and undertook to see what he could do to help achieve settlement.
Mr Munro was shown Exhibit P21, the letter from Ilbery Barblett annexing a draft lease allegedly couriered to Deacons, and was unable to recall having previously seen it. He noted, however, that the accompanying letter made it clear that the landlord had not accepted the draft amendments, and emphasised that he had never seen a version of the lease which incorporated the required transferability clause. He stated that he never made a concession to the landlord's solicitors, nor authorised Mr Farrell to indicate that the plaintiff would proceed without the requisite amendment. He stated that although he signed the letter demanding a return of the deposit, (Exhibit P18) he did not believe that it was dictated by him.
His recollection was that his initial instructions came from an accountant, Mr Slee, and that thereafter he spoke with Mr Stirling and subsequently Mr Ingraham.
Mr Munro was unable to remember any specific discussions that he had with Mr Farrell on the morning of 24 December 1999, and stated that until a quite late stage he held a view that there was a prospect that they would receive an executed lease in acceptable terms.
Brian George Cobb
Mr Cobb who was at all relevant times the senior relationship executive of the Commonwealth Bank's commercial business banking centre in Balcatta, processed the plaintiff's finance application. At that time he had been in the employ of the Commonwealth Bank for 36 years. He confirmed that the letter from the Commonwealth Bank to the plaintiff dated 5 November 1999 (Exhibit P6) set out the bank's position, and contained the terms upon which it was prepared to provide finance. Mr Cobb stated that having made a determination to provide finance, the bank would have contacted either Mr Stirling or Mr Ingraham and advised them. He stated that the bank had some very specific requirements, and in particular that the plaintiff have a five year lease over which the bank could obtain security. He stated that the bank was not prepared to accept a 3½ year term.
Mr Cobb could not recall Mr Ingraham or Mr Stirling asking whether the bank would have been prepared to advance the money on the basis of an assignment, but the bank's attitude is clear. He stated that between the approval date and 23 December 1999 there was substantial contact between himself, Mr Ingraham and Mr Stirling in the form of meetings and telephone calls.
In cross‑examination he stated that his notes indicated that he spoke with Mr Stirling at about 4.30 pm on 23 December when Mr Stirling advised him that the landlord had agreed to the plaintiff's terms and conditions; a new lease would be available on 24 December; and that they were hoping to have settlement at 11.00 am on 24 December. Mr Farrell was going to provide a copy of the lease so that the bank's solicitors could consider it. He had a further note of a telephone discussion with Mr Stirling on 24 December (Exhibit D16) which he thought must have been before 11.00 am when Mr Stirling said that he had not received the lease and settlement was off.
Mr Cobb stated that the bank's position regarding conditional approval was very firm because it regarded the application for finance as "a marginal deal". It was for that reason that the bank wanted to make sure that it was capturing the cabaret licence within the lease.
Mr Cobb stated that Deacons faxed a copy of the lease to the bank at 17.43 hours on 23 December and that document was tendered (Exhibit D17). He stated that although he could not specifically recall it, it was quite possible Mr Farrell had telephoned him at 8.00 am on 24 December to advise that the lease had not been provided to him.
Edward John Thurlow
Mr Thurlow, a director of the defendant, confirmed that it was the holder of the nightclub cabaret licence which was not tied to the premises, and in addition had a restaurant licence. Both licences were current at all material times.
Mr Thurlow stated that Mr Ingraham had worked for the defendant as its nightclub manager in the 1980's. He stated that he approached Mr Ingraham in or about January 1999, but that he was not then interested in purchasing the nightclub, although approximately five months later the position changed. It appears that at about that stage Mr Thurlow gave him a copy of the lease (Exhibit P1). Mr Thurlow identified the purchase agreement (Exhibit P2) and produced a receipt dated 30 September 1999 (Exhibit D19) for the sum of $10,000 being the initial deposit instalment. He also produced some financial documents (Exhibit D20) which he stated he gave to the plaintiff.
Mr Thurlow stated that the various letters agreeing to an extension of the date for finance and/or settlement had been signed by him, but were prepared and handed to him by the plaintiff. When asked whether he was told anything about how the plaintiff's application for finance was proceeding he said "Well, only through these letter they'd bring in."
Referring to the letter from the plaintiff to himself dated 14 October 1999 (Exhibit P3) advising that the funding process was well advanced, Mr Thurlow stated that he received a phone call from Mr Ingraham several days latter advising that finance had been approved, and then requested Mr Ingraham to pay the balance of the deposit. When his attention was addressed to the fact that he signed a letter dated 29 October 1999 agreeing to extend the date for approval of finance to 5 November 1999, Mr Thurlow stated that the phone call might have been a week or so after 14 October 1999. His evidence in this respect was not credible.
Mr Thurlow produced a receipt dated 11 November 1999 for the sum of $50,000 being the balance of the deposit (Exhibit D22). Once the balance of the deposit was paid he concluded that the sale was unconditional.
Mr Thurlow was referred to letters signed by him dated 19 November 1999 (Exhibit P9); 26 November 1999 (Exhibit P10); and 14 December 1999 (Ex P13); which he stated he signed at the request of Mr Ingraham who "said that he needed extra time".
Mr Thurlow stated that because the sale was proceeding, a luncheon was arranged at Valentino's in early December 1999 for the purpose of having Mr Ingraham meet the defendant's public relations team. It was attended by one of the promotional people Lisa Gresham and her partner Rod McGregor, the licensed Manager Mr Metzger, Mr Thurlow, Mr Ingraham and Mr Stirling. The defendant was at that time wanting to book a band, and an international DJ, during the Christmas/New Year period. Mr Thurlow stated that Mr Ingraham told him about a week later not to worry about promotional matters as "we're going to do our own thing". As a result of that intimation the defendant cancelled a band that had been booked.
On or about 13 December 1999 Mr Thurlow instructed BankWest Settlements to act for the defendant at settlement. He stated that during December Mr Ingraham told him on several occasions that a settlement date had been arranged. It was when one such arrangement was cancelled that he became aware from a discussion with Mr Ingraham that the plaintiff had problems with the lease. He claimed that he was never advised as to the nature of the problem, and assumed that it concerned the plaintiff's desire for a rent reduction. Mr Thurlow asserted that he was never shown any documentation relating to the plaintiff's application for finance.
Mr Thurlow was shown the loan agreement (Exhibit P16) which he stated came into existence when he purchased stock to cover the Christmas/New Year trading period, having told Mr Ingraham that the plaintiff would have to pay for the stock on the day it was delivered. Following that discussion Mr Ingraham produced the loan agreement for him to sign. Several weeks before Christmas Mr Ingraham also asked whether he could put his own pool tables in the nightclub, and Mr Thurlow agreed to his request.
Mr Thurlow produced a default notice dated 18 February 2000 (Exhibit D24) and a termination notice (Exhibit D25) which the defendant's solicitors served on the plaintiff.
Mr Thurlow stated that the defendant having cancelled DJ's, a band, and not proceeded with promotional work because of the expected sale, there was no entertainment for New Year's Eve or forward planning for January, and it took several months to restore the nightclub activity to its previous level. It was not until approximately the second week in February that the business started getting back on track. He stated that the defendant kept daily and weekly summaries of the takings of each till, and of the nightclub attendance level, which information was stored on computer and used by the accountant to prepare the financial statements of the business. The defendant tendered summary sheets from and including the week ended 20 October 2000 to week ended 11 February 2000 (Exhibit D27); the bundle of week ending summaries from 21 October 2001 to 10 February 2002 (Exhibit D28); the financial accounts of the defendant for the year ended 30 June 1999 (Exhibit D29); the financial statements of the defendant for the year ended 30 June 2000 (Exhibit D30); and the financial statements for the year ended 30 June 2001 (Exhibit D31).
In cross‑examination Mr Thurlow confirmed that he had considerable experience in commercial matters, having operated (inter alia) an antique business and the nightclub. He agreed that he first put the nightclub on the market through Mr Maller of White & Associates, seeking $600,000 arrived at by allocating $300,000 to the goodwill, $150,000 to plant and equipment, and $150,000 to the cabaret licence. In addition, the proposed purchaser was to pay for stock on hand at date of takeover. He confirmed that on or about 10 May 1999 he obtained an offer from Gold Penny Asset Pty Ltd for $370,000 which he rejected; and somewhat reluctantly confirmed that there was a further offer from Oklahoma Enterprises Pty Ltd for $400,000 which he also rejected. Again, reluctantly, he appeared to confirm having been told by Mr Maller that the price he was seeking for the nightclub was too high. His evidence generally on this issue, particularly having regard to a letter he had received from Mr Maller dated 4 June 1999 (Exhibit P29), was unsatisfactory.
Mr Thurlow agreed that he would have expected any proposed purchaser to be concerned about the terms of the lease relating to the business premises, and also would require that the goodwill would be preserved before settlement.
He stated that as at September 1999 Mr Metzger was the full‑time licensed manager of the nightclub and the balance of the employees including a bar manager, eight bar staff, four glassies, contract security, and promotional people were casuals. He agreed that it had been proposed that the existing staff excluding Mr Metzger would continue in the plaintiff's employ.
Mr Thurlow was cross‑examined about the pleadings, and in particular on a statement made by him in an affidavit sworn 6 February 2001, that the facts pleaded in the amended defence and counterclaim were true. It was brought to his attention that in the further and better particulars the defendant had asserted that one of the factors which constituted a representation by the plaintiff that finance had been approved, was that the plaintiff purchased stock in the sum of $8,583.07, and arranged delivery to the business premises, whereas in the course of cross‑examination of Mr Ingraham the defendant's counsel had put that the defendant had purchased the stock, and that in the event of the contract not proceeding, and the defendant obtaining the benefit of the stock, the defendant would have to repay Mr Stirling. Mr Thurlow stated that proposition put by counsel did not accurately reflect the intention behind the agreement, refusing to accept that as at 22 December when he signed it, there was a possibility that the sale might not eventuate.
Mr Thurlow stated that his belief was that the delay in settlement was due to problems with the lease, and not an inability to obtain finance. He claimed to have been unaware of the fact that the plaintiff's bank required a five year lease before providing finance, and suggested that he was never aware of the problems concerning the lease. He stated that he had always been of the view that there would be no difficulty getting a satisfactory lease from the landlord. Mr Thurlow was adamant that Mr Ingraham did not give him a copy of the bank's letter of conditional approval (Exhibit P6). He denied telling Mr Ingraham and Mr Stirling at the time that he was pressing for payment of the balance of the deposit, that there were three other parties interested in purchasing the nightclub, notwithstanding that there was no challenge in cross‑examination as to their evidence on this subject.
Mr Thurlow agreed that the defendant's counterclaim did not assert that the plaintiff requested the defendant not to promote the nightclub prior to settlement, but notwithstanding insisted that Mr Ingraham in fact told him not to promote post‑settlement activity. Plaintiff's counsel pointed out that defence counsel never suggested to Mr Ingraham that he had said the plaintiff was going to do its own thing, nor suggested that Mr Ingraham and Mr Stirling refused to pay for a band that had been booked. There was no mention of those matters in the counterclaim. It was also pointed out to Mr Thurlow that the defendant had placed advertisements in the X‑Press magazine on 16 and 23 December 1999 advertising post‑Christmas activity, which was inconsistent with an instruction from Mr Ingraham not to promote the business. Mr Thurlow confirmed that each advertisement would have cost something of the order of $1,200. Mr Thurlow was not specific as to the date of the cancellation of any band or DJ, and admitted that the defendant had not discovered any documents touching on the bookings or cancellation.
The defendant's amended claim for damages at trial of $62,280 was calculated by comparing the average gross trading profit over an eight week period commencing at Christmas and terminating in mid‑February 1999, 2000 and 2001, with the actual gross profit for trading over the eight week period between Christmas 1999 and 13 February 2000. Unfortunately Mr Thurlow's capacity to address the financial documentation concerning the business was somewhat truncated, and matters such as the difference in the number of trading days during the respective periods, and other variable trading circumstances, effectively removed any foundation supporting the defendant's claim. In addition the fact that the business was sold as "a going concern" which carried with it an obligation on the part of the defendant to promote the business as it would otherwise have done absenting the sale, would suggest that if there was any trading loss due to inactivity, that was of the defendant's choosing. Nevertheless if the position had been that there was a binding agreement that had been repudiated by the plaintiff it is reasonable to suppose that there would be some loss consequent upon a degree of instability that would have resulted. It is not possible to quantify such loss but the Court is obliged to do the best it can and had I found for the defendant, I would have assessed that loss at $10,000.
Phillip Alexander Metzger
Mr Metzger was at all material times the approved manager of the nightclub and knew Messrs Ingraham and Stirling. He claimed that approximately six weeks before the plaintiff made the offer to purchase the nightclub he was speaking to Mr Ingraham who told him that he had spoken to Mr Paioff concerning the lease of the subject premises and boasted that "we got a very good deal on the terms of new lease".
Mr Metzger claimed to have become aware that there was a problem in relation to the lease on or about 10 December when settlement was postponed. Mr Ingraham rang him from the Liquor Licensing Directory and told him that as the lease had not arrived, settlement would have to be re‑scheduled. In a subsequent phone call on or about 13 December, Mr Ingraham advised that he had received the lease, but it was not satisfactory. A day or two later Mr Stirling attended the business premises to discuss the situation regarding the lease. On about 15 December 1999 Mr Stirling telephoned stating that the plaintiff was not happy to proceed on an assignment of the existing lease, and would negotiate with the landlord.
Because of his concern at the lack of progress, Mr Metzger rang Mr Ingraham, and offered to approach the landlord to clear up the difficulties. His offer of help was accepted and he was given the telephone number of Mr Farrell at Deacons. Having telephoned Mr Farrell, Mr Metzger rang Mr Paioff on 17 December, and was referred to Ms Cardi, the landlord's solicitor.
Mr Metzger stated that the business was operated "as normal" from the date of the offer until late November when he had a conversation with Mr Stirling regarding Christmas and New Year, and the arrangements that had been made concerning the engagement of bands, and the necessity to prepare flyers and other advertisements. Mr Stirling then told him that they were going to do their own thing. As a result of that advice the defendant cancelled "Giluka", the band that had been booked for Christmas, and "Stone Face" and two other supporting bands booked for New Year.
Mr Metzger stated that around 20 December 1999 the ice chest outside the business premises was removed by the owner thereof, and following a discussion with Mr Ingraham it was agreed to buy a second hand one for $800. He claimed that Mr Stirling paid for the ice machine but required Mr Thurlow to sign a short agreement acknowledging that the purchase moneys had been advanced by way of loan.
Mr Metzger claimed that the aborted purchase had a devastating effect on the nightclub because at the request of the plaintiff the defendant had ceased all promotion and ongoing arrangements.
In cross‑examination Mr Metzger stated that on 29 October 1999 Mr Stirling produced a letter which indicated that the plaintiff would have finance approved either later that day or the following day, conditional on accepting the assignment of the lease. He then asserted that his understanding was that the plaintiff had obtained unconditional finance. He stated that he was never told that the Commonwealth Bank required the plaintiff to have a five year lease. Mr Metzger was adamant that some six to eight weeks before signing the purchase agreement Mr Ingraham had boasted to him that he had negotiated a good lease with Mr Paioff. He indicated that the cost of the bands booked for Christmas and New Year was of the order of $6,000, and that there was a further $2,000 for a PA system. When asked whether he expected settlement to proceed before Christmas, Mr Metzger indicated that he was prepared to give the plaintiff the benefit of the doubt, but was very concerned and/or suspicious about that occurring.
Mr Metzger's evidence concerning the execution of an agreement in respect of the purchase of the ice cabinet was less than convincing. His recollection was that the conversation with Mr Stirling as a result of which it became necessary to cancel the entertainment arrangements put in place over the Christmas/New Year period occurred about the middle of November 1999. He was unable to explain the advertisements in X‑Press magazine which he felt would have cost $2,000 each. His evidence that Mr Ingraham had claimed, prior to the purchase agreement, to have had dealings with the landlord, is not plausible. I found his evidence generally unconvincing.
Heather Christine Norfolk
Ms Norfolk, a settlement agent with BankWest, was instructed by Mr Thurlow on or about 10 December to act for the defendant on settlement. Thereafter, she took all necessary steps to arrange settlement at the Liquor Licensing Division at 2.30 pm on Tuesday 21 December 1999. Her file notes indicated that following contact with the plaintiff's solicitor indicating that there were problems with the assignment of the lease, settlement was postponed. The file notes on 24 December 1999 confirmed her understanding that settlement would not take place.
Terrence Paioff
Mr Paioff the principal director of the landlord Babcor Holdings Pty Ltd confirmed that subsequent to execution of the agreement for purchase he met Mr Stirling who requested a new lease. His understanding was that the meeting took place in November 1999. Thereafter, he instructed Ilbery Barblett to act on behalf of the landlord in relation to the preparation of a new lease. He produced a lease which had been executed by him (Exhibit D36).
In cross‑examination Mr Paioff confirmed that he had not met either Mr Ingraham or Mr Stirling until after the agreement to purchase had been executed. He confirmed that the landlord was not prepared to execute a lease which included the clause proposed by Deacons acknowledging that it did not have any interest in the cabaret licence, and acknowledging the tenant's right to apply to the Liquor Licensing Court for its removal or transfer at any time.
Findings of fact
Critical to a determination of the issues before the Court is condition 5 of the agreement to purchase (Exhibit P2) which relevantly provides:
"This Contract is conditional upon the purchaser advising the Vendor or his Agent in writing of approval of finance on or before the latest date for approval specified in paragraph (F) of the particulars, … If this condition shall not be fully satisfied within the time appointed then unless the Purchaser shall have waived this condition and communicated such waiver in writing to the Vendor or his agent, prior to the latest date for approval, then this Contract shall be deemed to have come to an end without the necessity for either party giving notice to that effect … This clause shall operate for the benefit of both the Vendor and the Purchaser."
The agreement provided in par (F) that the entity providing the finance and the amount being borrowed was at the plaintiff's absolute satisfaction, and that the latest date for approval of finance was 28 working days from the date of the contract, namely 21 October 1999.
By letter dated 14 October 1999 (Exhibit P4) executed by the defendant at the request of the plaintiff the latest date for approval of finance was extended to 25 October 1999, and by letter dated 29 October 1999 (Exhibit P5) was extended to 5 November 1999.
By letter dated 19 November 1999 (Exhibit P9) the settlement date was extended to 30 November 1999; by letter dated 26 November 1999 (Exhibit P10) to 13 December 1999; and by letter dated 14 December 1999 (Exhibit P13) to 20 December 1999.
Each of the letters of extension were prepared by the plaintiff's agent and handed by Mr Ingraham to Mr Thurlow, a director of the defendant, for signature. The letters that refer specifically to an extension of the date for approval of finance are headed "approval for finance" and those that refer specifically to an extension of the date for settlement are headed "settlement of purchase of nightclub" and/or "approval for extension of settlement". I am satisfied that the last three documents were not in their terms seeking to vary the contract insofar as it related to the latest date for the approval of finance.
Was finance approved within time or at all?
The plaintiff's position is that it never received an unconditional offer of finance, whereas it is the defendant's case that the letter from the Commonwealth Bank to the plaintiff dated 5 November 1999 (Exhibit P6) constituted approval of finance. The letter in terms advised that the bank had approved an advance facility of $410,000 to assist with the purchase, subject to the conditions therein contained, including inter alia provision of a final lease agreement between the plaintiff and the landlord satisfactory to it. The required lease term was five years. The bank was not provided with a lease in terms acceptable to it, because no such lease was agreed to be entered into by the plaintiff and the landlord. Clearly the inability of the plaintiff to reach an accommodation with the landlord was not the result of unreasonableness by the plaintiff or a failure to use its best endeavours to do so.
The evidence establishes that the plaintiff engaged a finance broker to assist in obtaining finance; and solicitors Deacons to negotiate on its behalf with the landlord to obtain a tenancy acceptable to it and the bank. It was prepared to agree to pay, and in fact paid the landlord's solicitors' costs associated with those negotiations.
The evidence of Mr Munro and Mr Farrell, supported by the documentary material, is eloquent of the fact that up until 23 December 1999 all reasonable effort was made and steps taken to agree lease terms acceptable to all parties. The fact that was not achieved is attributable to the intransigence of Mr Paioff, who made it clear to Ilbery Barblett, and to the Court in the course of his evidence, that the landlord was not prepared to execute a lease which contained an acknowledgment that it did not have a proprietary interest in the cabaret licence, and that the licence was transferable at the will of the plaintiff.
Having regard to the intrinsic value of the licence (effectively the only tangible asset being purchased) the plaintiff's insistence upon the proposed amendments was entirely reasonable. That was also a requirement of the bank. In the result the plaintiff was unable to secure and present to the bank a lease in terms acceptable to either of them, which was a condition precedent to approval of finance.
I accept the evidence of Mr Ingraham and Mr Stirling, supported as it is by the other evidence generally, that from the date of the execution of the agreement to purchase until 23/24 December 1999 the plaintiff genuinely desired to acquire the cabaret/nightclub business. The suggestion that at some stage prior to 24 December it became interested in the purchase of another business called "Connections", lacks any evidential support. There is nothing in the material before the Court which provides any support for the proposition that the plaintiff "left undone that which it ought to have done" in its pursuit of finance. Indeed it appears to have proceeded with considerable energy to secure a lease providing it with appropriate protection of the assets being purchased, and which would have met the requirements of the bank, well after the time when the agreement terminated.
The behaviour of the plaintiff was both ingenuous and reasonable, and at no time was it able to secure unconditional approval of finance.
There is no suggestion in the evidence or the papers that the plaintiff advised the defendant in writing of approval of finance as required by condition 5 of the agreement to purchase. Indeed it is expressly accepted in the defence that the position was otherwise (see par 5).
The latest date for approval of finance
Having regard to my finding that the plaintiff never obtained approval of finance, determination of the latest approval date is perhaps not of consequence. The date originally provided for by the agreement to purchase was 21 October 1999. By agreement in writing between the parties on 14 October 1999 that was extended to 25 October 1999. There was a further attempt in writing on 29 October 1999 to extend the date to 5 November 1999 but it is questionable that was effective because by reason of condition 5 of the agreement to purchase, which is in terms self‑executing, it was deemed to have come to an end on 25 October 1999. The plaintiff pleads (in the alternative) that the latest date for approval of finance was 5 November 1999 and the defence effectively accepts that date. In the result it is appropriate to accept that as the latest date for approval.
Exhibits P9, P10, and P13 which deal with extension of the date for settlement, do not in their terms address finance approval. In my view they have no legal consequence and simply constitute periodic acknowledgments by the defendant that if the plaintiff was in a position to proceed with the purchase by the nominated dates the defendant would be amenable to treat.
I reject Mr Thurlow's evidence that Mr Ingraham advised him subsequent to 14 October 1999 that finance had been approved. I accept the evidence of Mr Ingraham that shortly after he received the bank letter conditionally approving finance he provided a copy thereof to Mr Thurlow and brought the bank's conditions to his attention (it was not put to him that the position was otherwise). I accept that the balance of the deposit was paid in the circumstances outlined by Mr Ingraham and Mr Stirling. If the defendant had considered that finance had been approved, it would have been extraordinary for it thereafter to agree to postpone the date of settlement – that is to delay the date when it was entitled to receive the balance of the purchase price, namely $520,000, when there was no advantage to it. It is also inconsistent with the terms of the agreement executed by Mr Thurlow covering the advance made to him by Mr Stirling for the purchase of stock, which in its terms clearly contemplated that settlement may not eventuate.
Prima facie my findings in respect of finance would dispose of this controversy entitling the plaintiff to a return of the deposit in accordance with condition 5, but it is necessary to specifically address the issues raised in the defence and counterclaim.
Waiver
In par 7 of the defence it is alleged that the plaintiff's conduct in:
(a) paying the balance of the deposit on 5 November 1999;
(b)informing the defendant that finance had been approved;
(c)extending the date for settlement on divers occasions after paying the balance of the deposit;
(d)generally behaving in a manner consistent only with an intention to proceed to settlement
constitute a representation to the defendant that finance had been approved, and waived the necessity to give written notice of approval of finance.
It is further alleged in par 8 that in reliance upon the representation the defendant refrained from otherwise marketing the business and took steps to prepare for settlement – essentially that it acted to its detriment in reliance on the representation and that as a consequence the plaintiff is estopped from asserting that the position was otherwise.
Before embarking upon an analysis of the evidence as it relates to the issues of waiver and estoppel, it is to be noted that condition 5 contains specific provision requiring that any waiver be in writing communicated prior to the latest date for approval. It is not asserted that occurred, and as it seems to me, that was a condition precedent to an effective waiver.
In any event as previously indicated I do not accept that Mr Ingraham advised Mr Thurlow that finance had been approved, and I accept the plaintiff's account as to the circumstances in which the deposit was paid. The evidence does not support the proposition that the plaintiff's conduct (absenting the requirement contained in condition 5) constituted waiver of finance approval, nor do I accept that Mr Thurlow ever contemplated that was the position. As I have already stated it is entirely inconsistent with the terms of the agreement executed by Mr Thurlow covering the advance made to him by Mr Stirling for the purchase of stock.
The various letters signed by Mr Thurlow extending the date for settlement constitute no more than an acknowledgment by him that he was prepared to give the plaintiff further time in which to endeavour to put itself in a position to purchase the business. The letters and the position of Mr Thurlow generally, had as their foundation hope, rather than expectation, and were not the product of any representation by the plaintiff. There was no representation as to the continuing validity of the agreement to purchase which caused or induced the defendant to alter its position or act to its detriment. In any event I am not persuaded that the defendant at any time altered its position in reliance on any representation by the plaintiff or at all.
The conduct of the plaintiff did not at any time between the date of the agreement to purchase and the termination of negotiations on 24 December 1999 constitute an election to treat the contract as unconditional.
Trade Practices Act/Fair Trading Act
The findings of fact already made effectively dispose of the allegations in the counterclaim that the plaintiff was guilty of misleading or deceptive conduct in or about the transaction contrary to s 52 of the Trade Practices Act (Commonwealth) and/or that the second and third defendants by counterclaim were concerned in such conduct or engaged in misleading or deceptive conduct in the transaction contrary to s 10 of the Fair Trading Act (WA).
The plaintiff is entitled to a return of its deposit, namely $60,000 together with interest thereon at the rate of 4 per cent from 24 December 1999 until 31 May 2000, namely $1,039, a total of $61,039.
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