Supreme Court of WA|2010-06-01|Before: Mr J, Beech J

SAS GLOBAL FORRESTDALE 2 LTD -v- CLAYCORP INVESTMENTS PTY LTD as Trustee for Claycorp Investment Trust [2010] WASC 114 (1 June 2010)

JURISDICTION : SUPREME COURT OF WESTERN AUSTRALIA

CITATION : SAS GLOBAL FORRESTDALE 2 LTD -v- CLAYCORP INVESTMENTS PTY LTD as Trustee for Claycorp Investment Trust [2010] WASC 114

CLAYCORP INVESTMENTS PTY LTD as Trustee for Claycorp Investment Trust

Contract - Sale of land - Subject to finance clause - Whether parties conducted themselves on basis of conventional assumption about terms governing their relationship - Whether contract should be construed or rectified to identify plaintiff as seller - Whether termination notices given by seller - Whether seller needs to be ready, willing and able at time of termination - Whether sufficiently clear to make summary disposal appropriate - Turns on own facts

Barroora Pty Ltd v Provincial Insurance Ltd (1992) 26 NSWLR 170

Club Cape Schanck Resort Co Ltd v Cape Country Club Pty Ltd [2001] VSCA 2; (2001) 3 VR 526

DTR Nominees Pty Ltd v Mona Homes Pty Ltd [1978] HCA 12; (1978) 138 CLR 423

Henderson v Curtis [2008] WASC 283

Jeppesons Road Pty Ltd v Di Domenico [2005] QCA 391

Jones v Barkley (1781) 99 ER 434

Mander Pty Ltd v Clements [2005] WASCA 67; (2005) 30 WAR 46

Peter Turnbull & Co Pty Ltd v Mundus Trading Co (Australasia) Pty Ltd [1954] HCA 25; (1954) 90 CLR 235

Pukallus v Cameron [1982] HCA 63; (1982) 180 CLR 447

Ryledar Pty Ltd v Euphoric Pty Ltd [2007] NSWCA 65; (2007) 69 NSWLR 603

1 I have before me three summary judgment applications in two actions CIV 2980 of 2009 and CIV 2981 of 2009. The two actions have the same defendant, Claycorp Investments Pty Ltd (Claycorp), but different plaintiffs.

2 The principles about the power to grant summary judgment and the caution with which it is exercised are not in issue. See Henderson v Curtis [2008] WASC 283 [2]:

Summary judgment will be granted only when there is no real question to be tried. Conflicts of evidence on affidavit are not to be determined in the context of an application for summary judgment. It is only in the clearest of cases, when there is a high degree of certainty about the ultimate outcome of the proceedings if it went to trial that summary judgment ought properly be granted: Agar v Hyde [2000] HCA 41; (2000) 201 CLR 552 [57]; Batistatos v Roads and Traffic Authority of New South Wales [2006] HCA 27; (2006) 226 CLR 256 [46].

3 For the reasons that follow, on all three applications I am not satisfied that there is a sufficiently high degree of certainty about the ultimate outcome to make summary judgment appropriate.

4 I will deal first with action CIV 2981 of 2009. In this action the plaintiff, SAS Global Forrestdale (SAS), applies for summary judgment for its claim to specifically enforce three contracts of sale.

5 In this outline, I will set out the view of the facts most favourable to Claycorp, as the defendant. That is consistent with the principles on which a summary judgment application is to be resolved.

6 On 8 August 2007 Mr Clayton Chapman, on behalf of Claycorp, signed offers in corresponding terms to purchase three proposed lots, 306, 307 and 318, in what was called Forrestdale Business Park. SAS signed these contracts as seller on 7 September 2007. Each contract incorporated the SAS Global Forrestdale standard industrial conditions (SAS Industrial Conditions), and the 2002 Law Society REIWA Joint Form of General Conditions for the Sale of Land (General Conditions), so far as they were not varied by or inconsistent with the conditions or special conditions of the contract.

7 The effect of the SAS Industrial Conditions was that each contract was subject to and conditional upon the Western Australian Planning Commission giving approval for subdivision on or before nine months from the contract date (ie, on or before 7 June 2008), and the issue of a certificate of title by 1 March 2009. Settlement was deemed to be within a stipulated number of days from the issue of title. The number of days varied in the three contracts.

8 Arguably, at least, each of the contracts was subject to finance. Condition one, the subject to finance clause, was in the following terms:

If the Buyer signs the 'Finance Clause is not Applicable' box in the Schedule then this clause 1 does not apply to the Contract.

If any information is completed in or the Buyer signs the 'Finance Clause is Applicable' box in the Schedule then this clause 1 applies to the Contract.

1.1 Buyer's Obligation to Apply for Finance and Give Notice to the Seller

(1) immediately after the Contract Date make an application for Finance Approval to the Lender using, if required by the Lender, the Property as security; and

(2) use all best endeavours in good faith to obtain Finance Approval.

(b) If the Buyer does not comply with clause 1.1(a) or 1.1(c)(1) then the Contract will not come to an end under clause 1.2 and the Buyer may not terminate the Contract under clause 1.3. The rights of the Seller under this Clause 1.1 will not be affected if the Buyer does not comply with Clause 1.1.

(c) The Buyer must immediately give to the Seller or Seller Agent:

(1) an Approval Notice if the Buyer obtains Finance Approval; or

(2) a Non Approval Notice if Finance Approval is rejected at any time while the Contract is in force and effect.

1.2 No Finance Approval by the Latest Time: Non Approval Notice Given

This Contract will come to an end without further action by either Party if on or before the Latest Time:

(a) written Finance Approval has not been obtained; and

(b) the Buyer gives a Non Approval Notice to the Seller or Seller Agent.

1.3 No Finance Approval by the Latest Time: No Notice Given

(a) the Buyer has not given an Approval Notice to the Seller or Seller Agent; and

(b) the Buyer has not given a Non Approval Notice to the Seller or Seller Agent;

then this Contract will be in full force and effect unless and until either the Seller gives written Notice of termination to the Buyer or the Buyer terminates this Contract by giving a Non-Approval Notice to the Seller or Seller Agent.

If by the Latest Time, or if clause 1.5 applies, before the Contract is terminated:

(a) written Finance Approval has been obtained; and

(b) the Buyer has given an Approval Notice to the Seller or Seller Agent;

then this Clause 1 is satisfied and this Contract is in full force and effect.

1.5 Notice Not Given by the Latest Time: Seller's Right to Terminate

If by the Latest Time the Buyer has not given an Approval Notice or a Non Approval Notice to the Seller or Seller Agent then at any time until an Approval Notice is given, the Seller may terminate this Contract by written Notice to the Buyer.

(a) If requested in writing by the Seller Agent the Buyer must advise the Seller or Seller Agent of:

(2) provide evidence in writing of the making of a Finance Application, in accordance with clause 1.1(a) and of any loan offer made, or any rejection; and

(3) if applicable the reasons for the Buyer not accepting any loan offer.

(b) If the Buyer does not comply with the request within 2 Business Days then the Buyer authorises the Seller or Seller Agent to obtain from the Lender the information referred to in 1.6(a).

If a Party has the right to terminate under this Clause 1, then:

(a) termination must be effected by written Notice to the other Party;

(b) Clauses 23 and 24 of the 2002 General Conditions do not apply to the right to terminate;

(c) upon termination the Deposit and any other monies paid by the Buyer must be repaid to the Buyer;

(d) upon termination neither Party will have any action or claim against the other for breach of this Contract, except for a breach of clause 1.1 by the Buyer.

The Buyer may waive this Clause 1 by giving written Notice to the Seller or Seller Agent at any time before the Latest Time, or if clause 1.5 applies, before the Contract is terminated. If waived this clause is deemed satisfied.

Amount of Loan means either the amount referred to in the Schedule or any lesser amount of finance referred to in the Finance Application. If the amount referred to in the Schedule is blank, then the amount will be an amount equivalent to the Purchase Price.

Approval Notice means a Notice in writing given by the Buyer or the Lender to the Seller, or Seller Agent to the effect that Finance Approval has been obtained.

Finance Application means an application made by or on behalf of the Buyer to the Lender to lend any monies payable under the Contract.

(a) a written approval by the Lender of the Finance Application or a written offer to lend or a written notification of an intention to offer to lend made by the Lender; and

(b) for the Amount of Loan; and

(c) which is unconditional or subject to terms and conditions:

(1) which are the Lender's usual terms and conditions for finance of a nature similar to that applied for by the Buyer; or

(2) which the buyer has accepted by written communication to the Lender, but a condition which is in the sole control of the Buyer to satisfy will be treated as having been accepted for the purposes of this definition; or

(3) which, if the condition is other than as referred to in paragraphs (1) and (2) above includes:

(a) the time and date referred to in the Schedule; or

(b) if no date is nominated in the Schedule, then 15 Business Days after the Contract Date.

(a) the lender or mortgage broker nominated in the Schedule; or

(b) if the Buyer makes a finance application to, or if no lender is nominated in the Schedule then, any bank, building society, credit union or other institution which makes loans and in each case is carrying on business in Western Australia or a mortgage broker carrying on business in Western Australia.

Non Approval Notice means a Notice in writing given by the Buyer or the Lender to the Seller, or Seller Agent to the effect that Finance Approval has been rejected or has not been obtained.

9 On 15 August 2007, that is after Claycorp signed the offers and before SAS accepted them, Mr Chapman wrote to Mr Peter Hawdon of Absolute Financial Solutions. Mr Hawdon was a finance broker who had acted for Claycorp. The letter was, relevantly, in the following terms:

As discussed earlier, following are the O&A contracts for the land [in] Forrestdale. Can you source someone to give an approval for the funding of these to 100% of the purchase price. Settlement is not until end of 2008 so the market value of these will be substantially higher and this is the value we would like the financier to use at the time of settlement.

I need the finance approval to have a clause in it subject to assessment closer to settlement on the banks terms, so we can fail finance if required.

10 Following this, Mr Hawdon told Mr Chapman that banks only approve finance when settlement is about three months away, so that it was unlikely that he could obtain finance approval. After having been told this Mr Chapman then asked Mr Hawdon to try to obtain finance: affidavit of Mr Chapman sworn 25 January 2010 [18].

11 Mr Hawdon spoke to financial institutions within one or two days of speaking to Mr Chapman. He did not ask for any special conditions as suggested in Mr Chapman's letter. When he explained the circumstances, including the fact that titles had not been issued and that settlement may be over a year away, none of the lenders were interested: affidavit of Mr Hawdon [6].

12 Mr Hawdon then told Mr Chapman that no lender had expressed any interest.

13 In about October 2007 Mr Chapman told Mr Hawdon that the agent for the seller wanted a letter from the financier to confirm what Mr Hawdon had been told: affidavit of Hawdon [8]. Mr Hawdon procured a letter from Challenger Commercial Lending Ltd (Challenger) dated 17 October 2007.

14 The letter stated that Challenger was not in a position to provide a formal approval for finance because the proposed property was incomplete, but that once a date for settlement was established and the property was completed, a submission could be reviewed in accordance with the then new guidelines. The letter stated that the document did not constitute an approval or a commitment to provide funds, but served only as notice to favourably consider a formal application in the future.

15 It is accepted that the letter of 17 October 2007 was sent to Mr De Freitas, the sales agent for SAS.

16 Some time after that, Mr De Freitas telephoned Mr Chapman and said that he had received the letter of 17 October 2007. He said words to the effect that the seller would not accept this: affidavit of Mr Chapman sworn 17 March 2010 [5].

17 In March 2008 Mr De Freitas telephoned Mr Chapman and said that SAS were chasing up the balance of deposits: affidavit of Mr Chapman sworn 17 March 2010 [7]. Within a week or so of this conversation, Mr Chapman paid the balance of deposit, namely $100,000.

18 Some time before 14 July 2008, Mr De Freitas telephoned Mr Chapman and said that the sellers wanted to vary the contract to extend the time to complete the subdivision and to extend the time to get the title. The written variation was executed on 14 July 2008. It replaced the SAS Industrial Conditions with another set of conditions. One effect of the variation was to extend the latest date for the issue of titles from 1 March 2009 to 1 September 2009.

19 By letter of 7 May 2009 Challenger wrote to Mr De Freitas. The letter referred to the letter of 17 October 2007 and stated that due to current market conditions and based on the financial information provided, Challenger was unable to approve finance for the acquisition of lots 266, 267, 306, 307 and 318.

20 By letter of 11 June 2009, Mr Chapman on behalf of Claycorp wrote to Mr De Freitas saying that finance had been declined by Challenger and that they had also approached other lenders with the same result. The letter requested the return of the deposit.

21 By email of 30 June 2009 a settlement agent for Claycorp wrote to SAS's solicitors stating that finance had been declined and that the contracts had come to an end.

22 By email of 6 July 2009 Mr Chapman wrote to SAS's solicitors. The email referred to correspondence from SAS's solicitors. Mr Chapman's affidavit says that by then he had received default notices, however these are not in evidence. (Mr Beamish's affidavit sworn 21 December 2009 annexes default notices from September 2009.) The email of 6 July 2009 from Mr Chapman stated that Claycorp considered all the contracts to be void on the basis that finance was reassessed closer to settlement and had been declined.

23 Mr Cook, solicitor for SAS, telephoned Mr Chapman and said that Challenger was no longer in the business of lending money.

24 Mr Chapman then applied to the National Australia Bank for finance. By letters of 14 July 2009 the National Australia Bank advised that 'after full financial assessment' it was unable to assist.

25 By letter of 14 July 2009, solicitors for Claycorp wrote to SAS's solicitors. The letter referred to five notices of default they had received. The letter attached letters from the National Australia Bank rejecting the finance applications and gave notice that finance approval had been rejected.

26 By letter on 15 July 2009 (incorrectly dated 15 June 2009) solicitors for Claycorp stated that the subject to finance clause applied and the buyer had terminated the contracts by the non-approval notice of 14 July 2009.

27 Default notices were sent following this in September and October 2009 (affidavit of Mr Beamish sworn 21 December 2009, annexures AJB11 - AJB13).

28 There is no doubt that SAS and Claycorp entered binding contracts for the sale of the three proposed lots. The question is whether, in the events that happened, Claycorp arguably had the right to terminate the contracts in 2009 on grounds of the failure of the subject to finance condition.

29 For the reasons that follow, I consider that Claycorp's defence is reasonably arguable, so that summary judgment should not be granted.

Did Claycorp arguably comply with its obligations under cl 1.1(a) of the subject to finance clause?

30 The first issue that emerges from the parties' submissions is whether Claycorp as buyer complied with its obligations under cl 1.1(a) of the subject to finance clause. That clause imposed two obligations on Claycorp as buyer. First it was obliged immediately after the contract date to make an application for finance approval. Secondly, Claycorp was obliged to use all best endeavours in good faith to obtain finance approval.

31 Claycorp submits that it made an application for finance approval in compliance with cl 1.1(a)(1). It says that it did so through its finance broker who, at its request and on its behalf, spoke to lenders with a view to ascertaining their interest in providing finance. When the finance broker identified certain features of the proposed transaction, namely the time period before title would be issued, the lenders indicated that they were not interested. That, Claycorp submits, constitutes the making of an application.

32 There may well be room for doubt about that proposition but, in my opinion, it is reasonably arguable.

33 SAS's submissions emphasise the statement in Mr Chapman's letter dated 15 August 2007 to Mr Hawdon that 'I need the finance approval to have a clause in it subject to assessment closer to settlement on the bank's terms, so we can fail finance if required'.

34 SAS submits that that demonstrates, beyond reasonable argument, that Claycorp failed to comply with its obligations under cl 1.1(a)(2) to 'use all best endeavours in good faith to obtain finance approval'. SAS submits that this 'further conduct' by Claycorp eliminated any right it might have had to rely upon the subject to finance clause to terminate the contract.

35 One difficulty with this submission is that it appears to invite attention to the letter of 15 August 2007 in isolation from any other steps or conduct. The evidence of both Mr Chapman and Mr Hawdon is that after the letter of 15 August 2007 Mr Chapman requested Mr Hawdon to apply for finance. Mr Hawdon did not seek any condition of the kind referred to in the letter of 15 August 2007. It is arguable that the request after 15 August was not qualified by or to be understood in the same way as the statement in the letter of 15 August 2007.

36 On that analysis, Claycorp asked its finance broker to find finance and the response was that it was not available. Thus I consider it arguable that there was no failure by Claycorp to use its best endeavours in good faith from the time that it made the application.

37 Consequently, it seems to be to be reasonably arguable that Claycorp complied with its obligations under cl 1.1. On that basis, I proceed to analyse how condition 1 applied to the events that happened.

38 By the Latest Time (as defined in cl 1.9) (ie, 6 October 2007) no notices were given by either party. In particular, the buyer had not given an Approval Notice or a Non-Approval Notice, as those terms are defined in cl 1.9. That engaged cl 1.3, with the result being that the contract was in full force and effect unless and until either the seller gave written notice of termination to the buyer, or the buyer terminated the contract by giving a Non-Approval Notice to the seller or his agent.

39 Claycorp submits, and SAS accepts, that the letter from Challenger dated 17 October 2007 was a Non-Approval Notice. By cl 1.3, the effect of the giving of a Non-Approval Notice is that the buyer terminates the contract, bringing it to an end.

40 However, it is common ground that the contracts did not come to an end as a result of Claycorp passing on to SAS, Challenger's letter of 17 October 2007. The parties' subsequent conduct makes it clear that they proceeded to conduct themselves on the basis that they remained in a contractual relationship. The question, however, is whether that contractual relationship was governed by the terms of the contracts in an unaltered form, or in some different form.

(1) Claycorp's options under cl 1.3 were either to bring the contract to an end or to affirm the contract, notwithstanding that Claycorp had not obtained finance;

(2) the letter of 17 October 2007 was a Non-Approval Notice under cl 1.3;

(3) notwithstanding that, the letter of 17 October 2007 did not, when sent by Claycorp to SAS, bring the contract to an end because that was 'not the parties' intention';

(4) the parties' intention in that regard is revealed by the subsequent payment by Claycorp, and acceptance by SAS, of further parts of the deposit; by their execution of the variation in 2008; and by their failure to assert, at any time from October 2007 until 2009, that the contract was at an end; and

(5) accordingly, the contract remained on foot in its original form.

42 In my opinion, there is room for argument about the basis on which the parties conducted themselves after the letter of 17 October 2007 and whether that gave rise to a conventional estoppel. In particular, it is arguable that after 17 October 2007 the parties acted on the basis that the finance approval process would be deferred until a later point in time when the finance application could be considered on its merits, and that the parties' rights under the subject to finance condition would apply to that later finance application and approval process.

43 The following matters seem to me to be reasonably arguable:

(1) After SAS received a copy of Challenger's letter of 17 October 2007 it knew that Claycorp had not obtained finance and that Claycorp's financier would not consider the application at that stage;

(2) SAS knew that Claycorp's financier had expressed a willingness to consider favourably a further application at a later time;

(3) Claycorp had not expressed any preparedness to proceed with the contracts in the absence of obtaining finance;

(4) Claycorp did not clearly and unequivocally waive its rights under the subject of finance condition in accordance with cl 1.8;

(5) arguably, it must have been understood by the parties that Claycorp was not binding itself unconditionally to proceed with the purchase regardless of whether finance was or was not subsequently approved.

(6) after receiving the letter of 17 October 2007, SAS's agent told Mr Chapman on behalf of Claycorp that the seller 'will not accept this'. In the circumstances, the conversation referred to in Mr Chapman's evidence arguably made it clear that the parties understood that Claycorp was proposing to proceed only on the basis of a subsequent finance application in accordance with the letter of 17 October 2007, and that if SAS did not accept that approach, it would terminate the contracts or clearly communicate its position in writing; and

(7) thereafter SAS did not terminate the contracts or write to communicate its rejection of Claycorp's position.

44 In the circumstances, it seems to me to be arguable that, after 17 October 2007, the parties proceeded on an assumed state of affairs differing from the strict legal position, so as to give rise to an estoppel by convention. It does not seem to be in doubt that as a matter of law, estoppel by convention is capable in principle of operating in the way contended by Claycorp. See in that regard Ryledar Pty Ltd v Euphoric Pty Ltd [2007] NSWCA 65; (2007) 69 NSWLR 603 [194] - [201].

45 In view of these conclusions it is not necessary to deal with Claycorp's alternative argument that the parties' conduct after 17 October 2007 gave rise to an implied or inferred further contract.

(a) Claycorp failed to make an application for finance in 2009;

(b) accordingly, no right to terminate for failure of the subject to finance clause, assuming it applied in 2009, arose.

47 SAS submits that there was no evidence that Claycorp made an application to Challenger for finance in 2009. I would not grant summary judgment on this basis. First, it is arguably open to infer that Challenger's letter of 7 May 2009 was prompted by an application by Claycorp. Secondly, there is evidence that Claycorp also applied to the National Australia Bank. Whether that application was made in good faith is not appropriate for summary determination.

48 For these reasons, I would not grant summary judgment in favour of SAS.

49 I turn to the applications for summary judgment in the other action, CIV 2980 of 2009.

50 This claim is brought by a different company, SAS Global Forrestdale 2 Ltd (SAS 2). SAS 2 is a public company.

51 In this action SAS 2 sues for liquidated damages under contracts for the purchase by Claycorp of proposed lots 266 and 267 in the Forrestdale Business Park.

52 A contract by offer and acceptance for each lot was signed by Claycorp as purchaser on 8 August 2007, and then on 7 September 2007 by Mr Beamish in the place shown for a person to sign on behalf of the seller when the seller was a corporation. The seller was not identified in the contracts. One contract was subject to finance. It is accepted that it is arguable that the other contract was also subject to finance. The terms of the subject to finance clause are set out in [8] of these reasons.

53 Events relevant to the subject to finance clause occurred as set out in [9] - [26] of these reasons.

54 In July 2008 Claycorp and SAS (not SAS 2) executed documents entitled Variation Of Contract For Sale Of Land. Each variation document referred to a contract dated 7 September 2007 in respect of lots 266 and 267 and stated that the seller was SAS.

55 On 18 September 2009 and 13 October 2009 default notices were sent by solicitors on behalf of SAS. In the notices, SAS was stated to be the seller under the contracts in respect of proposed lots 266 and 267.

56 Earlier, solicitors for Claycorp had written by letter dated 15 June 2009, but evidently sent and written 15 July 2009, stating that the contracts had been validly terminated by Claycorp on the ground that the subject to finance condition had not been satisfied.

57 On 19 November 2009 SAS 2 commenced this action seeking rectification of the contracts to identify SAS 2, not SAS, as the seller and for specific performance. SAS is not a plaintiff in this action.

58 SAS 2 then sold the properties to another purchaser by contracts dated 26 November 2009. These contracts (at least arguably) were conditional on the termination of the contracts with Claycorp. The contracts with the other purchaser were settled on 11 January 2010. Taking into account the costs of sale and the forfeiture of the deposit, SAS 2 claims that the difference between the amount held by it and the purchase price under the contracts is $621,206.

59 Termination notices dated 11 January 2010 were sent on that day to Claycorp. That was the same date as the settlement of the contracts to sell to the other purchaser. Counsel for SAS 2 said in submissions that SAS 2 admitted that the termination notices were nevertheless sent after settlement of the new contracts. I will say more about the termination notices later in these reasons.

60 By an amended statement of claim dated 13 January 2010, SAS 2 claims rectification, forfeiture of deposits and liquidated damages.

62 The reasons I have already given in action CIV 2981 of 2009 declining the plaintiff's application for summary judgment apply equally to this action. There are several further reasons why I would not grant summary judgment in favour of the plaintiff.

63 In my view, SAS 2's application for summary judgment should not have been pursued. SAS 2's action can succeed only if it succeeds in relation to all several hurdles, as identified in Claycorp's submissions. On each of these hurdles there is, at best for SAS 2, room for considerable argument. Indeed, on some I have had to give careful consideration to whether Claycorp's position was so clearly correct that summary judgment should be given in Claycorp's favour. In the end, I have come to the view that, notwithstanding the force of some of Claycorp's points, the matter should not be summarily determined.

64 The first hurdle for SAS 2's claim, and thus for its application for summary judgment, is to establish that it is a party to the contracts. It seeks to do that in two alternative ways: as a matter of construction of the contracts, or by rectification.

Construction of the contract - is SAS 2 a party as seller?

65 The identification of parties to the contract is a matter of construction: Barroora Pty Ltd v Provincial Insurance Ltd (1992) 26 NSWLR 170, 174; Seddon NC & Ellinghaus MP, Cheshire & Fifoot's Law of Contract (9th Aust ed, 2008) [7.2]. In a case like this of a disclosed agency with an unidentified principal, extrinsic evidence is, arguably at least, admissible to identify the principal: Reynolds F, Bowstead and Reynolds on Agency (18th ed, 2006) [9-041].

66 The first difficulty for SAS 2's construction argument on its summary judgment application is that it is not pleaded. Summary judgment ought not be given on an unpleaded basis. In any event, for reasons to which I now turn, on the merits of the construction argument I would not grant summary judgment to either party.

67 The essence of SAS 2's argument is that because it was the owner of the parent lot from which the lots the subject of these contracts were to be derived, the contracts should be construed to identify SAS 2 as the seller. To my mind, that is an inadequate foundation for summary judgment on this point of construction. It is not inevitable that the seller under a contract of sale be the party which, as at the date of the contract, owned the land the subject of the contract, or the land from which lots are proposed to be subdivided.

68 SAS 2 also relies upon s 13 of the Sale of Land Act 1970 (WA). Section 13 relevantly makes it an offence for a person to sell five or more lots in a subdivision unless he or she is the proprietor or agent of the proprietor. That section does not, in its terms, render contracts void. The existence of the offence under that section, with its stated exceptions, seems to me to fall well short of leading to a conclusion that the construction of the contracts is sufficiently clear to justify summary judgment in favour of SAS 2.

69 Likewise, I am not persuaded by Claycorp's argument that summary judgment should be granted in its favour on this point of construction. Claycorp points to the absence of evidence that it knew of any arrangements between the proprietors of the various lots. Further, it submits that the foundation of SAS 2's case, that it (SAS 2) owned the parent lots, is an inadequate foundation for the construction contended for by SAS 2. These matters do not seem to me to justify summary determination of the construction issue.

70 In my opinion, the position is fairly arguable on both sides. Summary judgment is not appropriate on this point.

71 Summary judgment in favour of Claycorp in relation to rectification does not arise, given my view on the construction question.

72 Summary judgment in favour of SAS 2 on its rectification claim is, in my opinion, inappropriate for a number of reasons.

73 Rectification is available to rectify instruments, not agreements. Rectification is available to correct disconformity between the parties' common intention and the instrument intended to embody that intention. It is not available when there is a mistake in the formation of the common intention: Mander Pty Ltd v Clements [2005] WASCA 67; (2005) 30 WAR 46 [11], [67], [85]; Club Cape Schanck Resort Co Ltd v Cape Country Club Pty Ltd [2001] VSCA 2; (2001) 3 VR 526 [38].

74 At trial, a common intention supporting rectification must be established by clear and convincing proof: Pukallus v Cameron [1982] HCA 63; (1982) 180 CLR 447, 452; Mander v Clements [11], [54]. That burden of persuasion at trial bears on whether it can be said that there is no real question to be tried of whether the evidence establishes the rectification claim.

75 The statement of claim pleads an agreement between SAS 2 and Claycorp. In par 4 of the pleading, SAS 2 is tendentiously defined as 'the Seller'.

76 Paragraph 6 of the statement of claim pleads that the contracts 'identified the Seller as [SAS] by an oversight on the part of [SAS 2]'. The reference to 'Seller' is presumably intended to be a reference to the Seller under the contract, rather than to the Seller as defined in par 4 of the statement of claim. Paragraphs 7 and 8 plead that it was the common intention of SAS 2 and Claycorp that the contracts should identify the registered proprietor as the Seller (presumably as defined under the contracts) and that SAS 2 was the relevant registered proprietor.

77 That pleading appears to me to give rise to a conceptual difficulty. It appears to distinguish between who was a party to the contract and who was the seller under the contract. To my mind, in the context of these contracts, those amount to the same question. There were only two parties to each contract: the buyer; Claycorp, and the seller; whoever that was. Consequently, there may be room for doubt as to whether rectification is available in the circumstances of this case. The question may be one of identification of the seller. If the seller was SAS 2 then no question of rectification arises. If, on the other hand, the seller was SAS, there would seem little room for rectification. At the least, the way in which the claim for rectification is pleaded may need to be revisited.

78 In any event, leaving those difficulties aside, there are other impediments to SAS 2's claim for summary judgment on rectification. There is room for doubt as to whether Mr Beamish's evidence is sufficient to support the claim for rectification. His evidence goes to his intention, as director of SAS and SAS 2, but not specifically the intention of the two separate legal entities, SAS and SAS 2. Moreover, it has not been the subject of cross-examination. The position at trial will need to take account of the fact that in July 2008 a variation contract in the name of SAS, not SAS 2, was executed and that default notices were issued on behalf of SAS in September and October 2009. Further, it is not sufficiently clear, for the purposes of summary judgment, that any intention on the part of the SAS parties was a common intention. Mr Chapman's evidence is that he did not turn his mind to the question of the identity of the seller. Indifference or a failure to turn one's mind to the question does not necessarily equate with a common intention: see Mander v Clements [58], [90].

79 The default notices were issued in the name of SAS, not SAS 2. Moreover, the notices allowed 10 business days for completion.

80 In written submissions Claycorp submitted that these matters were grounds for summary judgment in its favour. However, in oral submissions, counsel rightly accepted that these matters were arguable and therefore not appropriate for summary judgment.

81 These matters seem to me to be among the several reasons why summary judgment in favour of SAS 2 is not appropriate. Given that there are many other reasons, I do not propose to set out in any detail the reasons for that view. It is sufficient to say that I accept that the matters raised in Claycorp's submissions in this respect are arguable.

82 In par 1 of each of the notices of termination, the notice recited a contract dated 7 September 2007 in terms that the buyer had agreed to purchase from SAS, who was then defined as the Seller, the property the subject of the contract.

83 The notices stated that the vendor (meaning the Seller) thereby terminated the contract.

(1) termination by the Seller is an essential step in bringing into existence the right of the Seller under cl 24 of the General Conditions to resell the property and claim any difference by way of liquidated damages;

(2) in this case, it was clear from the terms of the notices that SAS gave the notices of termination, not SAS 2; and

(3) this is sufficiently clear to warrant summary judgment.

86 I consider the second proposition to be arguable. Consequently, this issue is a further ground for refusing SAS 2's application for summary judgment. However, I am not persuaded of the third proposition. In other words, I consider the position to be arguable both ways. My reasons are as follows.

87 Claycorp submits that there is a fatal hurdle to any construction of the notices as having been sent by SAS 2. Claycorp submits that no process of construction could alter the historical fact that the notices were sent by SAS rather than SAS 2. Thus, it was not merely a matter of construing the document. The historical fact of who had sent the document was of paramount significance. However, I am not persuaded that the question of who sent the notices is clear beyond reasonable argument.

88 The notices were signed and sent by Mendelawitz Morton as Representative of the Seller under the contracts. I have already concluded it is arguable that the contracts should be construed to mean that SAS 2 is a party as Seller. By cl 21.3 of the General Conditions, a notice given by a party's Representative is to be treated as if the notice was given by that party. If, on a proper construction of the contracts, the Seller was SAS 2 then, at least arguably, Mendelawitz Morton sent the termination notice as agent for SAS 2 as the Seller. Against the background of the contract having been construed to mean that SAS 2 was a party, the content of the notice can arguably be construed so that the reference in the document to SAS as Seller might be read as a reference to SAS 2.

Settlement of the new contracts before termination of these contracts: Did SAS 2 need to be ready, willing and able when it terminated?

89 In oral submissions, it was accepted that the entry by SAS 2 into new contracts to sell the lots to another purchaser did not of itself give rise to a defence to SAS 2's claim for liquated damages. That is because it was rightly accepted that condition 1.1 of the new contracts made their performance, arguably at least, relevantly conditional on termination of the contracts with Claycorp.

90 Claycorp's argument focuses upon the admitted fact that settlement of the new contracts occurred before the notice of termination was sent. As I have said, although these two events occurred on the same day, counsel informed the court that it was an admitted fact that settlement had occurred earlier in time. This admission made it unnecessary to consider another of Claycorp's arguments relating to the efficacy of a notice sent by facsimile to Claycorp's solicitors.

(1) SAS 2 could validly terminate a contract only if it was ready, willing and able to perform at the time of termination; and

(2) because it settled on the new contracts before termination, SAS 2 was not ready, willing and able at the time of termination.

92 The first proposition is a question of law. SAS 2 took issue with that proposition. There was no issue about the fact that settlement of the new contracts occurred before termination of the Claycorp contracts. To the contrary, as I have said, that was the subject of an express admission.

94 The circumstances in which it is appropriate to resolve questions of law on a summary judgment application were outlined by McLure JA in Casella v Hewitt [2008] WASCA 13; (2008) 36 WAR 1 [36] as follows:

In a summary judgment application, leave to defend should be given where there is a question to be tried: Fancourt v Mercantile Credits Ltd [1983] HCA 25; (1983) 154 CLR 87, 99. There should be summary judgment if the facts are undisputed and the law is clear: The State of Western Australia v Rothmans of Pall Mall (Aust) Ltd [2001] WASCA 25. In general, however, an application for summary judgment is not the occasion to dispose of difficult or substantial questions of law which cannot be determined without full argument: Theseus Exploration NL v Foyster [1972] HCA 41; (1972) 126 CLR 507, 514, 515. I am satisfied that the master erred in awarding summary judgment in this case. That would be so even if, in the end, I had agreed with his construction of cl 13.5. If the interests of justice would be advanced by the early determination of a reasonably arguable question of law, a preliminary question of law can be ordered under O 31 r 2 of the Rules of the Supreme Court 1971 (WA). However, as the question of law was fully argued before this court and there were no relevant disputed questions of fact, the proper course is for this court to rule on the construction question (Theseus Exploration 514, 515 and 523).

95 Claycorp submits that in a contract for sale of land, in order to terminate, the party terminating must itself be ready, willing and able to perform at the time of termination. In support of this proposition Claycorp cites Foran v Wight [1989] HCA 51; (1989) 168 CLR 385, 408 - 409, 423 - 425, and 450 - 454; DTR Nominees Pty Ltd v Mona Homes Pty Ltd [1978] HCA 12; (1978) 138 CLR 423, 433; and Jeppesons Road Pty Ltd v Di Domenico [2005] QCA 391 [20] - [38].

96 SAS 2 accepts that a party terminating a contract for sale of land must have been ready, willing and able to perform at the time fixed for performance. However, SAS 2 submits that the party need not then remain ready, willing and able subsequently, up to the point of a later termination, in circumstances where the other party's repudiation of the contract makes it futile to remain ready, willing and able to perform.

97 At this stage I see considerable force in Claycorp's submissions, but I do not think it appropriate to determine the point finally on this application.

98 On this application, the issue of whether SAS needed to be ready, willing and able when it terminated was one of a large number of issues between the parties. I am not satisfied that it has been the subject of sufficiently full argument to make it appropriate to determine the questions which arise.

99 The starting point is that in a contract for sale of land the obligations of the purchaser and vendor are (absent provisions to the contrary) concurrent and mutually dependent. Consequently, as a general rule, a party cannot complain of a breach by the other party without having tendered its own performance. That is because the obligation of one party to perform arises only if and when the other party performs: Foran v Wight (396, 417 and 451). However, it has been the law for centuries that if one party gives an intimation to the other party that it will not perform, so that it would be futile for that other party to tender performance, the law would not require such tender: Jones v Barkley (1781) 99 ER 434; Peter Turnbull & Co Pty Ltd v Mundus Trading Co (Australasia) Pty Ltd [1954] HCA 25; (1954) 90 CLR 235.

100 When such an intimation of non-performance is given, the other party is not required to tender performance. It is enough that the other party is ready, willing and able: Jones v Barkley; Foran v Wight (397 - 404, 417 - 418, 452 - 453). These cases (and others) suggest that an intimation of non-performance does not eliminate the requirement of readiness and ability, although it may alter the nature and extent of the requirement.

101 I turn to the facts of Foran v Wight to explain why that decision was not concerned with whether a party must remain ready, willing and able, after the time due for performance, in order subsequently to terminate the contract. Rather, Foran v Wight was concerned with the requirement of being ready, willing and able when an intimation of non-performance occurred before the time for performance. The contract was not terminated for anticipatory renunciation, but for non-performance when the time for performance arrived.

102 In Foran v Wight settlement was due on 22 June. On 20 June solicitors for the vendors advised that the vendors would not be able to settle on the due date because a certain plan that was required to be registered by settlement, would not be registered prior to that date. By 20 June, the purchasers had obtained finance for part, but not all of the balance of the purchase price. As a result of the telephone call the purchasers took no further steps to obtain finance. No settlement occurred on 22 June. On 24 June the purchasers served a notice of termination on the vendors.

103 Consequently, the termination occurred very shortly after the due date for performance, and was based upon the vendor's failure to perform on the due date.

104 It seems to me that the effect of the judgments of Mason CJ, Brennan and Dawson JJ can be summarised in this way: where there is an intimation of non-performance by the promissor, the promissee must establish that they were ready and willing to perform for valid termination. If the intimation comes only at the time for a performance, then readiness and willingness as at that date must be established. However, in the case of renunciation prior to the time for performance, as occurred in Foran v Wight, it was held to be sufficient to demonstrate potential readiness and willingness at the time of the intimation, if the terminating party's failure to become actually ready and willing was a consequence of the intimation.

105 Mason CJ stated that where termination is for actual breach, rather than repudiation, the innocent party is required to be ready and willing to perform except to the extent that the other party dispensed with his performance (408 - 409). In that passage, Mason CJ stated that the time for determining whether the purchasers would have been ready and willing was the 'time for performance'.

106 Thus, Foran v Wight was not concerned with the question of whether an innocent party must remain ready, willing and able after the due date of performance until a subsequent termination. There was no occasion in that case to distinguish between the time for performance and the date of termination.

107 In the case of termination for anticipatory repudiation or incapacity, the terminating party must be potentially ready, willing and able as at the time of the termination: DTR Nominees v Mona Homes (433); Foran v Wight (406 - 407, 408 - 409, 424 - 425, 452 - 453). The references in Foran v Wight to being ready, willing and able at the time of termination seem to me all, arguably at least, to occur in a discussion of anticipatory repudiation, not after the time for performance.

108 Neither of the other cases relied on by Claycorp deal specifically with whether a terminating party must continue to be ready, willing and able after the due date for performance. DTR Nominees v Mona Homes concerned repudiation and dealt only with the issue of readiness and ability prior to the time for performance. Jeppesons Road v Di Domenico was a case in which termination was based on the failure to perform on the due date and occurred after the close of business on the same day. In that case, the time of termination and the time of performance were effectively the same. It may be arguable that in the passages in Jeppesons Road v Di Domenico [36] - [38] and [48] relied on by Claycorp, the references to the time of termination are to be understood in this light.

109 Consequently, it seems to me that none of the cases relied on by Claycorp deals specifically with the contention raised by SAS 2.

110 Claycorp submits that in principle a party seeking to terminate a contract for sale of land and recover substantial damages must remain ready, willing and able right up to the point of termination. There seems to me to be force in this submission. Nevertheless, I am not persuaded that the matter has been sufficiently argued to make it appropriate finally to resolve this question.

111 Moreover, there might be room for argument as to whether the general law regarding the need to be ready, willing and able is imported into the specific contractual scheme under the General Conditions. I am aware that there are authorities suggesting that that requirement will generally apply to termination under a contractual clause absent an indication to the contrary. In this action, SAS 2 claims liquidated damages under cl 24. No argument was addressed to whether the general law about the need to be ready, willing and able applied to termination under cl 24. I note that a party's rights to interest for late settlement under conditions 4.1 and 4.2 are expressly conditioned by a need to be ready, willing and able: see General Conditions 4.4 and 4.5. Nothing is said in cl 24 about a need to be ready, willing and able in order to terminate.

112 For these reasons, I would not grant summary judgment in favour of Claycorp on this point.

113 For the reasons I have given, both applications for summary judgment in CIV 2980 of 2009 and the application in CIV 2981 of 2009 should be dismissed.

Barroora Pty Ltd v Provincial Insu

At a glance

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Judgment (185 paragraphs)

SAS GLOBAL FORRESTDALE 2 LTD -v- CLAYCORP INVESTMENTS PTY LTD as Trustee for Claycorp Investment Trust [2010] WASC 114 (1 June 2010)

Did Claycorp arguably comply with its obligations under cl 1.1(a) of the subject to finance clause?

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Legislation Cited (1)

Cases Cited (13)