Widodo v Hamdan
[2008] WASCA 113
•15 MAY 2008
JURISDICTION : SUPREME COURT OF WESTERN AUSTRALIA
TITLE OF COURT : THE COURT OF APPEAL (WA)
CITATION: WIDODO -v- HAMDAN [2008] WASCA 113
CORAM: MARTIN CJ
McLURE JA
EM HEENAN AJA
HEARD: 21 FEBRUARY 2008
DELIVERED : 15 MAY 2008
FILE NO/S: CACV 32 of 2007
BETWEEN: SRI WAHJUNI WIDODO
Appellant
AND
JAMAL OSMAN HAMDAN
Respondent
ON APPEAL FROM:
Jurisdiction : SUPREME COURT OF WESTERN AUSTRALIA
Coram :JOHNSON J
Citation :HAMDAN -v- WIDODO [2007] WASC 26
File No :CIV 1813 of 2004
Catchwords:
Contract - Sale of land - Interpretation - Finance approval condition - Whether finance approved - Whether approval subject to a condition precedent
Legislation:
Nil
Result:
Appeal dismissed
Category: A
Representation:
Counsel:
Appellant: Mr J L H Formby
Respondent: Mr R J Nash
Solicitors:
Appellant: Formbys
Respondent: Williams & Co
Case(s) referred to in judgment(s):
Gange v Sullivan [1966] HCA 55; (1966) 116 CLR 418
Meehan v Jones [1982] HCA 52; (1982) 149 CLR 571
Newmont Pty Ltd v Laverton Nickel NL (1982) 57 ALJR 348
Perri v Coolangatta Investments Pty Ltd [1982] HCA 29; (1982) 149 CLR 537
Sampson v Clifford [2001] WASC 102
Sandra Investments Pty Ltd v Booth [1983] HCA 46; (1983) 153 CLR 153
Waltons Stores (Interstate) Ltd v Maher (1988) 164 CLR 387
MARTIN CJ: I agree with the reasons to be published by McLure JA and E M Heenan AJA.
McLURE JA: The appellant appeals from the decision of Johnson J made on 9 February 2007 granting specific performance of a contract in writing made on 6 August 2003 between the appellant and the respondent (contract). The contract was for the sale by the appellant to the respondent of property situated at 20 John Street Bentley (the property).
The trial took place on 22 November 2005. The reasons for judgment were delivered on 9 February 2007. The primary issue in the action and in the appeal is the narrow question of whether finance approval had been granted within the time specified in the contract. The trial judge answered that question in the affirmative.
The contract was in the standard form REIWA 2002 Revision. The finance condition provides that:
1.Finance
1.1This contract is conditional upon Finance Approval being obtained before the Latest Time.
1.2The Buyer shall:
(a)make an application for Finance Approval to at least one Lender using, if required by the Lender, the Property as security;
(b)use best endeavours to obtain Finance Approval and if required in writing by the Seller or the Seller's Agent provide evidence in writing of the making of an application in good faith for Finance Approval, any loan offer made, and the reasons for the Buyer not accepting any loan offer made;
(c)on receipt of the Finance Approval immediately notify in writing the Seller or the Seller's Agent whereupon the condition in paragraph 1.1 will then be satisfied.
1.3 If on or before the latest time:
(a)the Buyer is notified by the Lender that the application for Finance Approval is rejected; or
(b)no Finance Approval is obtained
then the Buyer shall immediately in writing notify the Seller or the Seller's Agent of such rejection or no receipt as the case may be, and provide evidence in writing of the rejection.
1.4UNLESS the Buyer has waived this condition and communicated such waiver in writing to the Seller or the Seller's Agent prior to the Latest Time, then if:
(a)the condition in paragraph 1.1 is not satisfied; and
(b)the Buyer has complied with paragraphs 1.2(a), 1.2(b) and 1.3
THEN this Contract shall be deemed to have come to an end without the necessity of either party giving to the other notice to that effect. The Deposit and all other monies (if any) paid pursuant to this Contract shall then be refunded to the Buyer (less all bank and government charges) and there shall be no further claim under this Contract by either party in law or in equity against the other.
1.5If the Buyer fails to notify the Seller or Seller's Agent in accordance with paragraphs 1.2 (c) or 1.3 the Buyer shall be in default and the Seller may without prejudice to any other remedies and rights available immediately terminate the Contract by notice in writing to the Buyer.
1.6The clause shall operate for the benefit of both the Seller and the Buyer except that the Buyer by waiving the Buyer's rights pursuant to this clause at any time before the Latest Times shall be deemed to have received Finance Approval.
Definitions
1.7In this Contract the following shall apply:
'Finance Approval' means an offer to lend made by the Lender on reasonable terms and conditions or an approval of a finance application by the Lender to the Buyer, by the Latest Time for a loan of an amount not less that the Amount of Loan shown below. An approval that is subject to the Lender's usual terms and conditions shall be deemed to be Finance Approval.
'Lender' means either the Lender nominated below (if any) or any other Lender acceptable to the Buyer.
Lender:
Any Australian Bank
Latest Time:
4.00pm on the date 10 (ten) working days from date of acceptance.
Amount of Loan:
90 (ninety) per centum of Purchase Price
The parties accepted that the Latest Time for the purposes of cl 1.7 of the contract was 20 August 2003.
Background
The respondent engaged Ahmad Norly Hassan, a finance broker with Your Finance Group Pty Ltd, to assist in obtaining finance to purchase the property. Mr Hassan recommended to the respondent that he finance the property with ING Bank (ING).
Mr Hassan on behalf of the respondent prepared and submitted to ING a finance application which identified the amount of the loan ($202,500), the purpose of the loan (the purchase of a single dwelling for investment purposes), and the type of loan sought (described in the application as 'Home Saver Residential Investment HL at 5.95%'). The security offered was a registered first mortgage over the property.
ING received the respondent's application for finance on 8 August 2003. ING responded by memorandum dated 12 August 2003 headed 'Indicative Approval Advice'. The memorandum stated:
We refer to the recent application for finance for the above applicants and confirm that ING Bank has approved in principle the credit facility referred to above. This letter is only a preliminary advice of our approval in principle, and it is not intended to create any legal liability for the borrower or the Bank.
We will issue a formal letter of finance to the borrowers immediately after:
1.Satisfactory valuation has been received for the proposed security.
2.The further condition (if applicable) are met to our satisfaction.
There were a number of conditions including mortgage insurance approval.
ING's records establish that the respondent's application was processed on 8 August 2003, the Indicative Approval was sent on 12 August 2003, a valuation was received on 14 August 2003, mortgage insurance was approved on 14 August 2003 and credit approved on 14 August 2003.
On 14 August 2003 ING forwarded a memorandum headed 'Approval Advice' to Mr Hassan (Approval Advice). The memorandum was in the following terms:
Date of Decision:
14th AUGUST 2003
Account Name
Loan Type
Repayment Type
Loan Purpose
Loan Amount
J O HAMDAN
HOME LOAN SAVER
PRINCIPAL AND INTEREST
PURCHASE INVESTMENT PROPERTY
$202,500
We refer to the recent application for finance for the above applicants and confirm that ING Bank has approved the credit facility referred to above.
File and instructions will be forwarded to Sydney TONIGHT for the issue of a formal letter of finance to the borrower.
Suzanne Seddon, the credit assessor from ING based in Perth who dealt with the respondent's application for finance, gave evidence. She said ING provides an Approval Advice so the broker has something in writing to show that an applicant's loan has been approved.
Under cover of a memorandum dated 19 August 2003, Mr Hassan provided a copy of the Approval Advice to the respondent's agent who it appears received it on 19 August.
By letter dated 21 August 2003 to the respondent, the appellant by his agent purported to terminate the contract on the ground that 'unconditional Finance Approval has not been received' by the due date.
On 23 August 2003 the respondent received two copies of ING's Home Loan Saver Loan Offer dated 15 August 2003 (loan offer). The loan offer was on the terms and conditions set out in the loan offer, a Terms and Conditions Booklet (July 2003 version) and a fee schedule. The loan offer provided, inter alia, that ING had to have a valuation 'which confirms that all construction and repair work on the property has been satisfactorily completed and that the value of the property is at an amount considered by the Bank to represent adequate security'. Ms Seddon's evidence was that ING had to have a satisfactory valuation of the property in order to issue the Approval Advice and it did not follow that ING would obtain another valuation.
Ms Seddon also gave evidence that the terms and conditions of the loan offer were the usual terms and conditions of an ING Home Loan Saver Loan. The trial judge accepted Ms Seddon's evidence and made a finding that the terms and conditions of the loan offer were both usual and reasonable.
The appellant contended at trial that the Approval Advice was not 'Finance Approval' under cl 1.7 because the Approval Advice (1) was not an offer to lend by ING; (2) was not an approval of a finance application by the respondent; and (3) was subject to a condition precedent, as was the loan offer.
Underlying proposition (3) is a contention that approval of a finance application must result in a contract between the lender and borrower. The appellant relied on Wheeler J's judgment in Sampson v Clifford [2001] WASC 102 as authority for that proposition. The issue in that case was whether the finance clause in an earlier version of a standard form contract for the sale of land had been satisfied. Wheeler J said:
The significance of an approval of finance in the context of a contract such as this is that once the loan is approved, the purchaser will be required to complete the purchase. It is my view that the approval which is contemplated by such a clause can only be an approval of a kind which actually binds a person to 'hand the borrower a cheque'. That is, it must be an enforceable approval [44].
The trial judge distinguished Sampson v Clifford and concluded that the Approval Advice was not conditional and fell squarely within the second limb of the definition of finance approval in cl 1.7 of the contract. She made no finding on whether the first limb of the definition was satisfied.
Although unnecessary to do so, the trial judge considered whether, if the respondent had not obtained finance approval as defined in the contract, the appellant was entitled to terminate the contract. The trial judge concluded that the appellant could not terminate the contract without notice to the respondent of his position that finance approval had not been obtained, thereby giving the respondent the opportunity to exercise his contractual right to waive the condition and make the contract unconditional.
Grounds of appeal and notice of contention
In substance, the appellant challenges the correctness of the trial judge's conclusions that the Approval Advice fell within the second limb of the definition of finance approval in cl 1.7 of the contract and that the appellant could not terminate the contract without first giving notice to the respondent of his position that finance approval had not been obtained so the respondent could waive the condition before the Latest Time.
The respondent seeks to uphold the trial judge's decision on the further grounds that the effect of the respondent giving notice on 19 August 2003 of receipt of loan approval was that the contract became unconditional, alternatively, that notice operated as an implied waiver by the respondent of the finance condition.
Analysis of the appeal
Underpinning the appellant's approach to the construction of the phrase finance approval in cl 1.7 of the contract is the alleged requirement that there be a binding and enforceable agreement between the lender and the buyer for the provision of the finance the subject of the finance condition. A requirement for a binding agreement may be understandable in earlier times when standard form finance conditions provided that the approval had to be on terms and conditions satisfactory to the purchaser (Meehan v Jones (1982) 149 CLR 571) and when contract was the only means of enforcing a promise. Contract is not now the only means of enforcing a promise: Waltons Stores (Interstate) Ltd v Maher (1988) 164 CLR 387.
The first limb of the definition of Finance Approval merely requires an offer to lend on reasonable terms and conditions. Such an offer itself satisfies the finance condition. Acceptance of the offer by the buyer is not required.
For the purposes of this appeal I will assume, as did the parties, that the offer must be a contractual offer, acceptance of which gives rise to a binding and enforceable agreement. However, even a contractual offer is not irrevocable in the absence of consideration to support a promise from the lender to keep the offer open. In the absence of acceptance of the offer, the buyer would have to rely on other causes of action, including estoppel, to enforce a promise to keep the offer open.
I turn now to the second limb of the definition of finance approval. Clause 1.7 does not use the language of contract. It requires a finance application from the buyer to the lender and approval of that application, which approval can be subject to the lender's usual terms and conditions. If put into a contractual framework, an approval without conditions would constitute acceptance by the lender of the buyer's application (the contractual offer). The imposition by the lender of other terms and conditions, as contemplated in the definition, would constitute a counter offer. As with the first limb, the second limb of the definition does not require the buyer to accept the counter offer in order to constitute finance approval.
That is, under both limbs of the definition of finance approval in cl 1.7 it is sufficient that there be an offer or approval (counter‑offer) that is capable of being accepted by the buyer and which, if accepted, would result in a binding agreement. Thus, an offer on reasonable terms or an approval (counter‑offer) on usual terms satisfies the definition of finance approval. The buyer has the option of accepting the offer or counter offer or deferring acceptance if he or she does not want to lock themselves into the offer on the table. However, that flexibility for the buyer does not prevent the satisfaction of the finance condition. That is consistent with the buyer's obligation in cl 1.2(b) to use his or her best endeavours to obtain Finance Approval.
It will be apparent from this analysis that I do not agree with Wheeler J's obiter observations in Sampson v Clifford [44] that there must be an enforceable approval. Consistently with the assumption on which this approach was argued, there must be an approval that is capable of being enforced if accepted. Moreover, the appellant did not rely on the proposition that there can only be an approval of the kind which actually binds the lender to hand the borrower a cheque. In a typical financing agreement there are a number of steps that have to be taken by, inter alia, the borrower before the lender is obliged to hand over the money.
The appellant's submissions to the trial judge were repeated in the appeal. There is no substance in the appellant's contention that the Approval Advice was not the approval of a finance application made by the respondent. There is a close correlation between what the respondent sought in his finance application and what was approved by ING in terms of the amount of the loan, the purpose of the loan, the type of the loan and as it transpired, the interest rate.
The appellant also contended that ING's approval (counter‑offer) was subject to a condition precedent being the provision of a formal letter of finance to the respondent. If that is correct, there could be no binding agreement even if the offer was accepted and no approval for the purposes of cl 1.7. However, the construction of the Approval Advice contended for by the appellant is not open. The Approval Advice has to be objectively construed in the context of the previous communications between the parties, including the Indicative Approval Advice. On its proper construction, the Approval Advice is approval of the respondent's application on ING's usual terms and conditions. That is a counter‑offer in a form capable of being accepted resulting in a binding and enforceable agreement.
The appellant contended in his written submissions that the usual terms and conditions must 'relate to the formal requirements of the lender that the Buyer execute a mortgage, pay registration fees, costs of the mortgage and similar requirements'. There is no warrant for such a narrow conclusion. Clause 1.7 provides that an approval that is subject to the lender's usual terms and conditions is deemed to be finance approval. The identification of the lender's usual terms and conditions is a question of fact to be determined on the evidence. Ms Seddon's evidence on that subject was uncontradicted and accepted by the trial judge.
The appellant also claimed that the term in the loan offer relating to the valuation of the property was not a usual term and was a condition precedent. Ms Seddon's evidence (accepted by the trial judge) was that the term relating to valuation was one of ING's usual terms and conditions. She also indicated (correctly in my view) that it was intended to be satisfied by the pre‑approval valuation. The term relating to valuation is not and, in light of the objectively determined meaning of the Approval Advice could not be, a condition precedent.
For these reasons, the trial judge correctly concluded that the respondent had obtained finance approval before the latest time.
My provisional view is that the trial judge erred in concluding that the appellant could not terminate the contract without notice to the respondent of his position that finance approval had not been obtained. However, it is unnecessary to determine that matter or the matters raised in the notice of contention.
I would dismiss the appeal.
EM HEENAN AJA: Johnson J made an order for specific performance of a contract for the sale of land dated 6 August 2003 between the respondent (plaintiff) as purchaser and the appellant (defendant) as vendor. This contract was comprised by an offer and acceptance in the format of the 2002 REIWA Revision which incorporated the 2002 General Conditions so far as they were not varied by or inconsistent with the terms of the contract. Importantly, it was made subject to finance, upon the terms set out in condition 1 of the offer and acceptance and so depended upon the purchaser obtaining 'Finance Approval' from any Australian bank within 10 working days of the date of acceptance of an amount not less than 90% of the purchase price of $221,000.
The sole issue upon which the trial of the action depended, and upon which this appeal depends, is whether the respondent purchaser had satisfied the condition of obtaining finance approval by the latest date as specified by condition 1 because, if he had not, the appellant (vendor) had purported to terminate the contract, by letter dated 21 August 2003 (the day after the latest day for complying with the finance condition) and was treating the contract as being at an end.
Upon entering into the conditional agreement for the purchase of the land, the respondent, by his agent, approached ING Bank seeking finance for the transaction. He sought a loan of $198,900 through an intermediary, Finance Group Pty Ltd, where a Mr A Hassan was the person who was communicating with the bank on his behalf. By facsimile dated 12 August 2003, the bank gave indicative approval advice for the proposed loan but emphasised that this was no more than approval in principle and was not intended to create any legal liability for the borrower or the bank. No‑one suggests that this constituted the finance approval required to satisfy the condition in the contract.
However, by facsimile dated 14 August 2003, the bank notified the respondent's agent, Mr Hassan, by a facsimile termed 'Approval Advice', which, after making reference to the respondent's application and identifying the loan amount as $202,500 (to cover mortgage insurance and other expenses), read:
We refer to the recent application for finance for the above applicants and confirm that ING Bank has approved the credit facility referred to above.
File and instructions will be forwarded to Sydney TONIGHT for the issue of a formal letter of finance to the borrower.
After informing the respondent of this development, and discussing it with him, Mr Hassan, on behalf of the purchaser, notified the vendor's settlement agent by facsimile dated 19 August 2003 as follows:
Re Jamal Hamdan – 20 John Street, Bentley WA 6102
Dear William,
Please find an ING loan approval for the above client. The final letter of offer from ING will follow as soon as the valuation is completed.
Please do not hesitate to contact me should you require further information on the above matter.
Regards
Ahmad
The respondent purchaser contended, and the learned trial judge held, that this communication constituted notification in writing to the seller or the seller's agent as required by condition 1.2(c) and, for that reason, satisfied condition 1.1 which provided that the contract was conditional upon finance approval being obtained before the latest time.
The full terms of the finance condition and the definition of Financial Approval contained in subcl 1.7 are set out in the learned trial judge's reasons for decision [3] and in the reasons for decision of McLure JA in this court. It is unnecessary that I repeat them.
The defence of the appellant pleaded that the communication of 19 August 2003 did not constitute satisfaction or compliance with the finance condition as the notification from ING dated 14 August 2003 was not finance approval as required by the contract, because it was no more than notification that ING Bank had approved the credit facility referred to in the notification. The appellant's position is that this was not 'an offer to lend by ING Bank' or an approval, as that term was used in the contract, of the finance application by the purchaser for finance, by the lender ING Bank. The appellant further pleaded that the notice from ING of 14 August 2003 was subject to an unfulfilled condition precedent because there was no obligation to lend the respondent any money until the bank had obtained a valuation of the property which demonstrated that it was adequate security for the loan.
The evidence from the bank's representative in Perth, who processed all such applications in this state, was to the effect that, by the time the letter of approval of 14 August 2003 had been despatched, a valuation had been obtained by the bank which demonstrated satisfactory security value of the property for the purposes of the loan and, further, that satisfactory arrangements had been made by the respondent to purchase adequate mortgage insurance required by the bank as additional security for the loan. The effect of the evidence of the bank's representative was that, although a number of formalities remained to be completed, such as execution by the respondent of the necessary security documents, other documents required by the bank, and the contract of sale proceeding to completion so as to allow the subject property to be mortgaged to secure the loan, the bank regarded the finance approval as firm. It is, of course, to be noted that the 'Finance Approval' defined by condition 1.7 of the contract included a passage:
An approval that is subject to the lender's usual terms and conditions shall be deemed to be Finance Approval.
Under the contract for the sale and purchase of the land and the finance condition, the purchaser was under an obligation, on receipt of the finance approval, immediately to notify in writing the seller or the seller's agent whereupon the condition that the contract be subject to finance approval being obtained by the latest time would then be satisfied (conditions 1.1 and 1.2(c)). The condition further provided:
1.6This clause shall operate for the benefit of both the seller and the buyer except that if the buyer by waiving the buyer's rights pursuant to this clause at any time before the latest time shall be deemed to have received finance approval.
In these circumstances, the learned trial judge found:
It is clearly the case that both the bank and the financial adviser considered the Approval Advice to be binding on the bank and, although further action was required to give effect to that approval, the obligation under cl 1.2(c) of the contract to immediately advise the seller had come into effect [61].
and:
I consider that the prompt provision of the formal letter of finance is consistent with the conclusion that the approval contained in the facsimile of 14 August 2003 is the type of approval contemplated by the finance clauses of the contract rather than being a mere indication of a course which it may adopt in the future, depending upon the circumstances or on a consideration of further matters [63].
and further:
I have concluded that the approval advice was not conditional and fell squarely within the second limb of the definition of finance approval within cl 1.7 of the contract [83].
In my respectful view, the learned trial judge was correct in coming to this conclusion. It is supported by the documentary evidence and confirmed by the evidence of the bank's representative as to its standard procedure in like cases. The only possible basis available to draw conclusions or inferences to support the appellant's case must lie in the terms of the bank's communications of 12 and 14 August 2003. The appellant submits that the approvals referred to were no more than informal and provisional without being intended to, or actually, creating any legal obligation to lend the money sought. Certainly, that character can be ascribed to the first communication of 12 August 2003 but not to the second as the learned judge, in my view, quite rightly found.
Furthermore, the terms of cl 1.2(c) of the finance condition provide that, upon notification by the purchaser to the seller that finance approval has been obtained, the condition that the contract was subject to finance is thereupon satisfied.
This was a condition precedent, not for the formation of the contract, but to the obligation to complete it: Perri v Coolangatta Investments Pty Ltd [1982] HCA 29; (1982) 149 CLR 537, 543, 551, 557 ‑ 558 and 565; Newmont Pty Ltd v Laverton Nickel NL (1982) 57 ALJR 348, 352 and Sandra Investments Pty Ltd v Booth[1983] HCA 46; (1983) 153 CLR 153 [6]. This distinction was referred to as 'largely a matter of words' in Meehan v Jones [1982] HCA 52; (1982) 149 CLR 571 [13].
Notification by the purchaser to the vendor of the availability of finance, in my view, rendered the contract unconditional and imposed an obligation upon the purchaser to complete on the due date. If it had turned out that the purchaser did not in fact have approval for finance when he claimed he did, or that the assurance of finance which he believed he had was not binding and the lender had refused to proceed, it would, at that point, be of no avail to the purchaser. If he had been unable to complete by paying the balance of the purchase price due on settlement, he would have been in default and liable to have the contract terminated, his deposit forfeited, as well as being liable to damages on an action by the vendor if damages could be proved.
That a 'Subject to Finance' condition may also be of benefit to a vendor was acknowledged in Gange v Sullivan [1966] HCA 55; (1966) 116 CLR 418, 443 by Windeyer J and by Wilson J in Sandra Investments Pty Ltd v Booth (165 ‑ 166), but it is very difficult to see how benefit of the condition could continue to be derived by the vendor, after the purchaser had given notification of compliance, or what advantage that might entail. In that postulated position the vendor would be obliged to proceed to completion and to complete if tender of the balance of the purchase price was then offered, but if not, he could terminate the contract, forfeit the deposit and sue for damages. The only possible prejudice to the vendor in that situation might be that he may have to wait from the last date for compliance with the finance condition until the date fixed for completion before taking such steps. It is unnecessary to express any final conclusion about this aspect of the case in view of my acceptance of the characterisation of the communication of 14 August 2003 adopted by the learned trial judge, but my inclination would be to treat the contract as having become unconditional from that point on.
On either view, the position of the respondent purchaser in this case was that, by the time for completion, the purchaser was ready, willing and able to complete and pay the balance of the purchase price. Accordingly, I consider that the learned trial judge was correct in entering judgment for the respondent for specific performance and it follows that this appeal should be dismissed.
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