Real property - Contract for purchase of land - Standard conditions - Subject to finance approval - Approval not obtained in time - Immediate right to termination - Whether exercised - Affirmation of contract - Waiver - Estoppel - Words and phrases 'immediate'

1 This case was heard at the same time as CIV 1436 of 2006 Developments (WA) Pty Ltd v Whittle-Herbert. The same counsel appeared and broadly speaking the same issues arose. I have set out the law in Developments (WA) Pty Ltd v Whittle-Herbert [2008] WASC 261 and incorporate the relevant principles there set out into this judgment.

2 As a result, I limit this judgment to factual findings and the legal consequences that flow from those findings by application of the principles set out in Whittle-Herbert.

3 On 16 February 2004, Mr Price entered into a contract to buy off the plan Unit 3, 41 George Street, Midland. The purchase price of the property was $179,000. The finance approval clause provided the 'Lender' to be 'Any lender of the purchasers choice' and the 'Latest Time' to be '4.00 pm on 25 March 2004'. The 'Amount of Loan' was to be $189,000 which Mr Price explained covered the purchase price and some of the costs associated with the purchase, such as stamp duty. The contract was executed by Mr Price on 16 February 2004, and on behalf of the vendor on 17 February 2004. A deposit of $1,000 was paid on 3 March 2004. That deposit has been retained by the vendor and has not been refunded.

4 Mr Price gave evidence by way of a witness statement and was cross-examined. Mr Paine's evidence formed part of Mr Price's case as well as that of Mr Whittle-Herbert. I formed a favourable impression of Mr Price's evidence and have no reason to doubt the truthfulness of his account.

5 Mr Price entered into the contract as the purchaser, 'Mr Leslie Matthew Price and or nominee'. The clause of the contract said:

For the sake of this offer the nominees are Catherine Anne Poole and Geoffrey Alan Poole and/or Michael James Price and Lily Price and/or Peter Richard Price and Vicki Price.

6 In the course of his evidence, Mr Price was cross-examined about those persons named and his relationship with them. They were family members or relations. Although some point was made about these persons' ability to access finance, I do not consider there is an issue. Mr Price was included in the contract and he obtained finance approval for this and other properties from the Challenge Bank. He was telephoned on 25 March 2004 and advised that he had three unconditional loan approvals including the one for Unit 3. The Challenge Bank approvals were faxed through by Mr Bickford of the Bank to Mr Paine on 25 March 2004 and they meet the description of 'Finance Approval'; that is, an offer to lend made by the lender on reasonable terms and conditions.

7 Although I am satisfied that Mr Paine received the loan approvals on 25 March 2004, there is no evidence as to the time at which these were received. Specifically, I am unable to find whether they were received before 4.00 pm, the Latest Time under the contract. They may have been, but there is no evidence one way or the other. This is a matter upon which Mr Price bears the burden and he has failed to discharge this burden to affirmatively establish that Finance Approval was received by the vendor before the Latest Time. I will proceed on the basis that Finance Approval was received, however in circumstances where the vendor's right to immediate termination was triggered.

8 On 14 September 2004, the vendor's settlement agents, West End Settlements, wrote a letter in identical terms to that in the case of Mr Whittle-Herbert. This letter was sent to Mr Price's solicitors and said:

With reference to the abovementioned property, we wish to advise that the Certificate of Title is approximately three months away from issuing.

We will keep you informed on the progress of this dealing.

9 On 22 February 2005, West End Settlements sent a further letter to CS Legal as follows:

We refer to the abovementioned transaction and advise that we have now been notified by the vendor that the contract for this transaction is now at an end. Please arrange for the stamp duty cancellation form to be forwarded to this office for vendor's completion.

10 Mr Price gave evidence, which I accept, that he purchased Unit 3 to use it as an investment property and to rent it to tenants:

My purchase of Unit 3 was an 'off the plan' purchase meaning that at settlement, the plaintiff was to transfer to me an unlived in, newly constructed and vacant property.

I wanted my investment property to be newly constructed and unlived in so that I would not have to carry out any maintenance work prior to renting it to a tenant. Further, I wanted to ensure that I could control to whom the property was let and, accordingly, control the risk of an inconsiderate tenant being placed in the property. I also thought that with a new and unlived in property, I could attract good tenants and achieve a high rent.

And so long as the sums came up all right in terms of the costs, the holding costs and things like that, it wasn't as if you were particularly wedded to George Street, was it? I mean, if there had been an equally good development nearby you would have been just as happy, wouldn't you?---At the time we didn't have to consider that, because we executed a contract to purchase that one so we considered it not necessary to look anywhere else. (ts 61)

As a result of what I took to be confirmation from the plaintiff that I had fulfilled the finance condition in the contract and that the contract would proceed to settlement, I did not seek to purchase an alternative property to Unit 3.

I would have invested in or about March 2004 in a property of a similar specification and value as Unit 3 had I been informed by the plaintiff that I had not fulfilled the finance condition in the contract and that the contract would not be proceeding to settlement.

13 I accept that Mr Price has maintained finance approval for the property and has at all times been ready, willing and able to proceed to settlement and is still ready, willing and able to proceed to settlement. He relied on the conduct of the vendor in failing to immediately terminate the contract as a representation that the contract was continuing.

14 For the reasons expressed in Whittle-Herbert, and their application to the facts in this case, I hold that the vendor failed to exercise its right to immediately terminate the contract and as a consequence lost that right. Alternatively, I hold that the vendor by its conduct elected to affirm the contract or alternatively waived its right to rely on the Finance Approval condition by the latest time.

15 For the same reasons as in Whittle-Herbert, I will grant a decree of specific performance in the same terms.

JURISDICTION : SUPREME COURT OF WESTERN AUSTRALIA

CITATION : DEVELOPMENTS (WA) PTY LTD -v- PRICE [2008] WASC 260 (S)

HEARD : 29 AUGUST, 19 SEPTEMBER & 21 NOVEMBER 2008

BETWEEN : DEVELOPMENTS (WA) PTY LTD (ACN 008 952 252)

Decree of specific performance - Return of property to state at practical completion - Turns on own facts

Defendant entitled to offset cost of restoration from purchase price

1 McKECHNIE J: Mr Price's hearing for final orders took place at the same time as that involving Mr Whittle-Herbert: Developments (WA) Pty Ltd v Whittle-Herbert [2008] WASC 261(S). The evidence was similar. Mr Clack, Mr Wilkie and Mr Papas all inspected Mr Price's unit. Each gave a report. I accept Mr Clack's evidence for the same reasons as I accepted his evidence in relation to Mr Whittle-Herbert. I do not accept the evidence of Mr Wilkie or Mr Papas for the same reasons, nor do I prefer the evidence of Mr Tilli over that of Mr Clack for the reasons given in the Whittle-Herbert matter. In respect to the carpets, I prefer Mr Price's evidence on oath over that of comments from Mr Wilkie and Mr Papas.

2 Mr Price is seeking the sum of $15,730. I will make similar orders to those in Mr Whittle-Herbert's case:

1. The agreement dated 16 February 2004 between the plaintiff and the defendant ('Contract') whereby the plaintiff agreed to sell and the defendant agreed to purchase Unit 3 of 41 George Street, Midland being portion of land known as lot 3 on strata plan 45936 and being the whole of the land comprised in Certificate of Title Volume 2601 Folio 437 ('property') be specifically performed and carried into execution.
2. Settlement of the sale of the property will take place on or before 4.00 pm on Friday, 5 December 2008.
3. Settlement will take place in accordance with the contract (except as to cl 3 of annexure A).
4. It is declared that the defendant is entitled to have the property and all fixtures and fittings (including curtains and carpets) restored to their condition at the time of practical completion. To give effect to this declaration it is ordered that the defendant is entitled to deduct the sum of $15,730 (inclusive of GST) from the balance otherwise owing under the Contract at settlement.
5. The plaintiff's action is dismissed.
6. In respect of Supreme Court Action CIV 1791 of 2005 ('caveat action') in which the defendant in this action was plaintiff and the plaintiff in this action was the first defendant:

(b) The plaintiff (in this action) pay the costs of the defendant (in this action), including any reserved costs, such costs to be taxed in default of agreement.

1. The plaintiff pay the defendant's costs of this action including all reserved costs.