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[1998] WASCA 75
Court of Appeal (WA)
1998-04-03
Mr P, Pidgeon J, Franklyn J, Ipp J
Original judgment source is linked above.
For the reasons expressed by Pidgeon and Franklyn JJ I consider that the purchaser complied with the duty to act honestly. Accordingly, I agree with their Honours that the appeal fails. In coming to this conclusion, I express no opinion on whether the decision in Meehan v Jones [1982] HCA 52; (1982) 149 CLR 571 requires that "subject to finance" clauses should generally be construed to require the purchaser to act both honestly and reasonably.
If contrary to the view that I have expressed, the purchaser was obliged to act reasonably, then I accept for the reasons expressed by Pidgeon J that on the evidence as a whole, Mr Gunzburg acted reasonably. Underlying this conclusion are two concessions made by counsel for the appellant during the course of argument. First, that the applicable test was whether a person in the circumstances of the particular purchaser acted reasonably; and second, that the projected rental income of the property would not be sufficient to make the capital repayments required by the lender.
The appellant submitted that the words "lender acceptable to the purchaser" in clause 1(1.1) refer only to the personal characteristics of the lender. Having regard to fact that the property was a commercial one, the amount involved and the value of the land, the likelihood was always that an institutional lender would have been required. It would not in my view be reasonable to detach the persona of the lender from the terms on which such a lender might offer to lend. To suggest in this context that clause 1 (1.1) would be satisfied by the mere identification of the particular idiosyncratic characteristics of the lender would be absurd. Obviously the terms of any loan would be determinative of the purchaser's decision on whether to proceed with this transaction.
The appellant submitted that the obligation to use "best endeavours to obtain the loan" qualified the words "lender acceptable to the purchaser" and that there was a positive obligation imposed on the purchaser to obtain a loan which could not be satisfied by only making inquiries. This cannot be correct. In my opinion, there could be no obligation to obtain a loan unless the purchaser first found terms in the market which were acceptable to it.
Erley Pty Ltd & Ors
Gunzburg Nominees Pty Ltd & Anor [1998] WASCA 75
Abalos v Australian Postal Commission [1990] HCA 47; (1990) 171 CLR 167
Allen v Carbone [1975] HCA 14; (1975) 132 CLR 528
Causer v Browne [1952] VicLawRp 1; [1952] VLR 1
Copping v ANZ McCaughan & Ors [1995] SASC 4917; (1994) 63 SASR 523
DTR Nominees Pty Ltd v Mona Homes Pty Ltd [1978] HCA 12; (1978) 138 CLR 423
Foran v Wight [1989] HCA 51; (1989) 168 CLR 385
Gange v Sullivan [1966] HCA 55; (1966) 116 CLR 418
Howard F Hudson Pty Ltd v Ronayne [1972] HCA 3; (1972) 126 CLR 449
Perri v Coolangatta Investments Pty Ltd [1982] HCA 29; (1982) 149 CLR 537
Rigg v Lee Loy Seng [1987] WAR 333
Sargent v ASL Developments Ltd [1974] HCA 40; (1974) 131 CLR 634
Sinnatamby Pty Ltd v Cooper Corporation Pty Ltd [1986] WAR 36
Suttor v Gundowda Pty Ltd [1950] HCA 35; (1950) 81 CLR 418
Tropical Traders Ltd v Goonan [1964] HCA 20; (1963-64) 111 CLR 41
Westralian Farmers Ltd v Commonwealth Agricultural Service Engineers Ltd [1936] HCA 6; (1938) 54 CLR 361
Had his Honour stopped there I would have seen some difficulty, but his Honour went further and propounded a test in different terms, this being the test which he, in fact, applied. He said (AB18) that he would hold in this case that the relevant condition in the contract required the respondent to act honestly and reasonably and to use its best endeavours to obtain a loan in an amount and on terms satisfactory to it. He referred at length to reasons in Meehan v Jones [1982] HCA 52; (1982) 149 CLR 571, particularly the reasons of Mason J (as he then was) at p589 onwards. He referred to the fact that Mason J said that in that particular case it was not necessary to decide whether the purchaser, in deciding whether finance is on satisfactory terms, is bound to act honestly or whether he is also bound to act reasonably. The trial Judge considered, however, that the terms of the particular contract he was considering required the respondent to act both honestly and reasonably. His Honour said subsequently:
The quotation further indented was taken from Hospital Products Ltd v United States Surgical Corporation [1984] HCA 64; (1984) 156 CLR 41 at 64 per Gibbs CJ.
(1990) 171 CLR 167
(1975) 132 CLR 528
(1990) 170 CLR 394
(1994) 63 SASR 523
(1993) 10 WAR 532
(1978) 138 CLR 423
(1989) 168 CLR 385
(1966) 116 CLR 418
(1989) 1 WAR 1
(1972) 126 CLR 449
(1991) 6 WAR 85
(1982) 149 CLR 537
(1974) 131 CLR 634
(1950) 81 CLR 418
(1938) 54 CLR 361
(1982) 149 CLR 571
(1984) 156 CLR 41