Mr Hennessy then prepared a facsimile.
48 That facsimile was sent from the office of LJ Hooker to Mr Winkler at 10.15am on 20 July 2005.
49 The fax set out details of the full name of the corporation which conducted the relevant LJ Hooker agency, and details of its bank account. The fax continued:
"These are our trust account details to which the agreed sum should be transferred by no later than midday today 20th July 2005.
Should the funds not be received by midday, a Notice of Termination of the contract will be invoked."
50 Between 10.30am and 11.30am on 20 July 2005 Mr Winkler telephoned Mr Hennessy, and the following conversation ensued:
WINKLER: "I am sorry I haven't returned your calls. I will be placing the deposit in your trust account as directed before 12 o'clock today."
HENNESSY: "Thanks very much, we'll wait and see."
51 At 12.15pm on 20 July 2005 Mrs Winterbottom telephoned Mr Hennessy. He was at the time away from his office. She enquired whether the money had been paid. Mr Hennessy told her that he would go to an office where he could get access to a computer, where he could check whether any money had been paid into the trust account, and would let her know. He called into one of the LJ Hooker franchisee offices, discovered from the computer that no payment of $166,000 had been paid into the trust account on that day, and telephoned his secretary and asked her to pass on that information to Mrs Winterbottom. The secretary did so at 12.30pm.
52 It was at 12.41pm that Mrs Winterbottom received the letter from Mr Wilson, which is set out at para [42] above.
53 At 12.55pm Mr Wilson telephoned Mrs Winterbottom, and the following conversation ensued:
WILSON: "I am confirming the information in my fax, but I haven't got information from our bank. We will keep trying and let you known as soon as possible."
WINTERBOTTOM: "I look forward to hearing from you."
54 At 2.35pm on 20 July 2005 Mrs Winterbottom telephoned Mr Wilson, and the following conversation ensued:
WINTERBOTTOM: "When, if, you are able to confirm receipt of $166,000.00. Please would you confirm by fax -
(a) that you have it; and
(b) that you will hold it in escrow on behalf of IRT pending exchange of the new Contract for Sale with 10 Napier Street."
WILSON: "I cannot give you the trust account number but the account is with St George Bank and the BSB number is 112879."
55 On 21 July 2005 at 12.30pm Mrs Winterbottom endeavoured to telephone Mr Wilson, but was informed by the receptionist at Levitt Robinson the Mr Wilson was at lunch. Mr Wilson phoned back at 2.55pm on 21 July 2005, and the conversation was:
WILSON: "Nothing has been paid into trust account, but I have received a copy of a fax sent by 10 Napier Street to the agent. I will fax you a copy."
WINTERBOTTOM: "I will wait to receive it."
56 At 3.02pm on 21 July 2005 Mrs Winterbottom received the promised copy of the fax sent by 10 Napier Street to the agent. Though that fax from the agent is dated 21 July 2005, it bears a fax transmission header showing it as having been sent by Mr Winkler on 20 July 2005 at 4.40pm. Other fax transmission headers, and handwritten notations on the letter suggest it has a date of origin of 21 July 2005. It seems to me more likely that Mr Winkler's fax header did not imprint the correct date and time.
57 The letter in question was not signed. A handwritten notation on it referred to it as "draft letter to Mr Winkler faxed at 1.00pm 21/07/05." It referred to 10 Napier Street "having made a tentative proposal for the purchase" of the property, that it agreed to deposit $166,000 into LJ Hooker's trust account as a holding deposit, and continued:
"…
· New contract for sale to be created by the vendor's solicitors with our details as purchasers, setting out the terms of the sale. This contract to be forwarded to our Conveyancers office to review by no later than Wednesday 27th July 2005.
· Under no circumstances is the deposit of $166,000.00 to be released to any authority, trust or the vendors directly, but it is to remain in your trust account pending agreement between the parties.
· In the event that the parties do not reach an agreement in this matter, then you will be directed to return the said deposit paid by us within two business days.
Please confirm your agreement and understanding of the terms of this letter and advise us accordingly so that we can prepare the deposit."
58 It was at 4.30pm on 21 July 2005 that Mrs Winterbottom sent the Notice of Termination of the contract by facsimile to Mr Wilson. It said:
"I have been instructed to advise that the Vendor has elected to terminate contract dated 8th June, 2004, as amended, for the sale of the abovementioned property because of the Purchaser's breach of an essential term of the agreement between the parties, namely, failure to pay the sum of $166,000.00 as agreed, or at all, within the time specified in my letter to you of 19th July, 2005 - ie before noon on 20th July, 2005."
59 On 22 July 2005 the Vendor exchanged contracts with the new purchasers, to sell the land to those new purchasers for the same total purchase price as had been agreed between the plaintiff and the first defendant.
The Plaintiff's Position
60 The plaintiff contends that the handwritten amendment which was made to the Second Ancillary Agreement had the effect of incorporating into it only paragraph 5 of the letter of 19 July 2005. The plaintiff points to the fact that Clause 3 of the Second Ancillary Agreement (para [15] above) is an agreement to withdraw the Notice to Complete, not to extend it. Further, when the condition of agreeing to withdraw the Notice to Complete was that certain events would happen on or before expiry of the Notice to Complete, time was not said to be of the essence for the performance of those conditions. Further, the effect of incorporation of Clause 5 of the letter of 19 July into Clause 3b of the Second Ancillary Agreement was to require the sum of $166,000 to be paid on exchange of the new contract. Thus, the plaintiff contends, the effect of the Second Ancillary Agreement, as varied by the incorporation of paragraph 5 of the letter of 19 July 2005, was to withdraw the Notice to Complete, and extend the time for settlement of the contract to 7 September 2005, on condition that the plaintiff paid $166,000 to the first defendant at the time when the first defendant entered into a new contract to sell the subject property to 10 Napier Street Strathfield Pty Ltd. There was no condition requiring the plaintiff to pay $166,000 to the first defendant's agent by noon on 20 July 2005. Indeed, it was only after there had been an exchange of the counterparts of the document that Mrs Winterbottom said anything at all to Mr Wilson about money being paid into the agent's trust account. Prior to exchange Mrs Winterbottom had agreed in principle with Mr Ishak that the money should be paid into the agent's trust account, but that agreement was not one that the purchaser was party to.
61 Thus, the plaintiff contends, it was not in breach of the Second Ancillary Agreement when it failed to make any payment to the agent by noon on 20 July 2005, and the first defendant was not entitled to terminate the contract as it purported to do on 21 July 2005.
62 An alternative submission of the plaintiff is that even if the Second Ancillary Agreement contained a term requiring payment of $166,000 by noon on 20 July 2005, the contract did not provide that time was essential in relation to that payment. Thus, it says, the failure to make the payment may have entitled the first defendant to damages, but did not entitle the first defendant to terminate the contract.
63 For either of these reasons, the plaintiff contends that the contract has not been effectively terminated, and hence that the plaintiff is entitled to have it specifically performed, or alternatively to recover damages for its breach.
64 I do not accept that the effect of the handwritten words in Clause 3(b) of the Second Ancillary Agreement is to incorporate by reference only Clause 5 of the letter of 19 July 2005. Clause 5 of the letter of 19 July 2005 contains the expression "the sum of $166,000 held in Levit Robinson's trust account", and meaning should be given to those words. The meaning is ascertained from Clause 2 of the letter of 19 July 2005. Indeed, given that both the documents which Mr Winkler had signed were shown to Mrs Winterbottom immediately before the exchange, the whole of both those documents needs to be taken into account in deciding the contractual significance of the exchange.
65 Even if it were appropriate to regard any contractual relations on the terms of the Second Ancillary Agreement as arising at the moment of exchange of the counterparts, there has been no operative agreement entered for the vendor to withdraw the Notice to Complete. That is because any agreement to withdraw the Notice to Complete had two preconditions. Those preconditions were ones which needed to be met on or before expiry of the Notice to Complete. While the Notice to Complete had nominated 3:00pm on 19 July 2005 as the time to complete, and the counterparts were not exchanged until around 5:00pm on 19 July 2005, the better view is that by their conduct the parties treated the Notice to Complete as not having expired. Thus, at the time of exchange of the counterparts, the precondition that the purchaser sign the Second Ancillary Agreement had been performed.
66 On the assumption on which I am operating, the second precondition required there to be a sum of $166,000 which had been paid into Levitt Robinson's trust account. That precondition was not satisfied at the time of exchange, and never came to be satisfied prior to the termination notice being served. Thus, the agreement to withdraw the Notice to Complete never came into operation.
67 In my view, however, treating any contractual relations as springing into being at the moment of exchange is, in this instance, an unduly mechanistic approach to contract formation. It is clear that both Mrs Winterbottom and Mr Wilson were in regular communication with their respective clients. Mr Wilson is not shown to have had instructions, at the time of the meeting, to agree to any proposal about paying the money into LJ Hooker's account by noon the next day, but it is apparent, from Mr Winkler's communications with Mr Hennessy on 20 July 2005, that a requirement that the money be paid to the agent by noon that day was communicated to Mr Winker and that he acted as though the purchaser was bound by that requirement. In my view, when, at the meeting at which exchange occurs, a solicitor says that the exchange is being effected only upon a certain condition, then the exchange does not become effective to bring a contract into existence until that condition has been satisfied. Thus, in my view, the preferable analysis of the situation is that, notwithstanding that there was a physical exchange of documents on 19 July 2005, that physical exchange did not result in a contract coming into existence then and there, and would not result in a contract coming into existence until the condition on which the exchange was made was fulfilled. In the present case, that condition never was fulfilled. In my view, the parties, by their conduct, have treated the Notice to Complete as still on foot. Further, it was still on foot at the time the Notice of Termination was sent.
68 Mr Harris SC, for the plaintiff, points out that the Notice of Termination does not say that the reason for the termination is that completion has not occurred within the time limited by the Notice to Complete, either in its original form or in any extended form. Rather, it says that the reason is:
"breach of an essential term of the agreement between the parties, namely failure to pay the sum of $166,000.00 as agreed, or at all, within the time specified in my letter to you of 19 July 2005 - ie, before noon on 20 July 2005."
69 In writing that letter, it seems that Mrs Winterbottom was working on the approach to contract formation which I have described as being unduly mechanistic. However, if a party terminates a contract for one reason, which is not a good reason, but has available another reason for termination, which is a good reason, it is possible to justify the termination by reference to the good reason - Shepherd v Felt & Textiles of Australia Ltd (1931) 45 CLR 359.
70 Objection was taken to evidence being given of the various conversations and letters passing between Mrs Winterbottom and Mr Wilson in the time before the exchange of the counterparts of the Second Ancillary Agreement on 19 July 2005. That objection was based on the parol evidence rule. Mr Harris contended that, in accordance with that rule, it was not possible to vary or supplement the written agreement by reference to material not appearing in it. However, as McHugh JA said in State Rail Authority of NSW v Heath Outdoor Pty Ltd (1986) 7 NSWLR 170 at 191, and Allsop J (with whom Drummond and Mansfield JJ agreed) repeated in Branir Pty Ltd & Others v Owston Nominees (No 2) Pty Ltd and Another (2001) 117 FCR 424 at 506, the parol evidence rule has no operation until it is first determined that there is an agreement, and that the terms of the agreement are wholly contained in writing. I admitted the evidence on the basis that the use, if any, that could be made of it could be the subject of argument. In my view, the evidence should be treated as admitted without restriction in the case. I have taken that evidence into account in holding that the exchange of counterparts of the Second Ancillary Agreement did not amount to the entering of an agreement which was then and there, and without more, binding.
71 Mr Harris drew my attention to Equuscorp Pty Ltd & Another v Glengallan Investments Pty Ltd (2004) 218 CLR 471. In that case, parties who had executed a written loan agreement wished to contend that the document did not contain the real agreement, and that, rather, the real agreement had been entered orally. Gleeson CJ, McHugh, Kirby, Hayne and Callinan JJ at 483 rejected that argument, saying:
"The respondents each having executed a loan agreement, each is bound by it. Having executed the document, and not having been induced to do so by fraud, mistake or misrepresentation, the respondents cannot now be heard to say that they are not bound by the agreement recorded in it. The parol evidence rule, the limited operation of the defence of non est factum , and the development of the equitable remedy of rectification, all proceed from the premise that a party executing a written agreement is bound by it. Yet fundamental to the respondent's case that the operative agreements between the parties were wholly orally, and reached earlier than the execution of the written agreements, was the proposition that the written agreements subsequently executed not only may be ignored, they must be. That is not so. Having executed the agreement, each respondent is bound by it unless able to rely on a defence of non est factum , or able to have it rectified."