Grieve & Anor v Enge & Anor [2006] QCA 213

Judgment (70 paragraphs)

[1]

[1] de JERSEY CJ: The appellants and the respondents are, respectively, spouses. The proceeding concerns a residential property at 7 Avicennia Street, Rose Bay, Bowen. The respondents claimed specific performance of a contract in writing by which they agreed to purchase certain property from the then registered proprietor, the male appellant (Mr Enge) for $170,000.

[2]

[2] The learned trial Judge held, in light of s 365 of the Property Agents and Motor Dealers Act 2000 (Qld), that the respondents and Mr Enge became bound by the contract on the afternoon of 17 July 2002 when the plaintiffs first received a copy of the signed contract. On that day, as his Honour found, Mr Enge repudiated the contract. The respondents did not accept that repudiation.

[3]

[3] The contract was conditional upon the respondents' securing finance by 29 July 2002. By 5.00 pm on 29 July, the respondents were to give notice whether or not finance had been arranged, failing which Mr Enge could give notice terminating the contract. The respondents gave no notice. Notwithstanding Mr Enge's attempted termination of the contract on 17 July 2002, Mr Enge's solicitors purported to terminate the contract (again) by specific reliance on the respondents' failure to give that notice, by their letter of 22 December 2004. It is the validity of that termination which arises on the appeal.

[4]

[4] The Judge held that for two reasons, the respondents' failure to give notice under the finance provision did not disentitle the respondents to specific performance. The first reason was that Mr Enge's repudiation of the contract implicitly involved an intimation that it would be pointless for the respondents at that stage to take any further steps to obtain finance.

[5]

[5] The second reason was that on 17 July 2002, Mr Enge had denied the respondents' valuer, Brett Thorne, access to the property for the purpose of his carrying out a valuation to support an application for finance. As his Honour held, Mr Enge thereby breached his obligation to refrain from doing anything to prevent the carrying into effect of the contract.

[6]

[6] The Judge therefore made a declaration that the contract between the parties subsisted, and that it should be specifically enforced. He could not at that stage make more detailed orders, because the respondents still needed to obtain finance. The "finance date" of 29 July 2002 would on his Honour's approach plainly need to be adjusted, by court direction if the parties could not agree.

[7]

[7] Another complication confronting the Judge concerned the transfer of the property by Mr Enge, on 7 September 2004, to himself and Mrs Enge as joint tenants. That transfer was registered that day under the Land Title Act 1994 (Qld). A caveat over the property previously lodged by the respondents had earlier lapsed.

[8]

[8] The Judge held that the purpose of the transfer was to defeat the respondents' interest in the land as purchasers under their contract, so that Mrs Enge was guilty of fraud within the meaning of s 184(3) of the Land Title Act and the exception to indefeasibility, under s 184, applied.

[9]

[9] His Honour made a declaration that Mrs Enge holds her interest in the land subject to the respondents' equitable interest arising from the contract.

[10]

[10] The grounds of appeal are expressed in the notice of appeal as follows:

[11]

"1. The learned trial judge erred at law in not finding as a matter of law that (Mr Enge) had properly and validly terminated the contract the subject of the proceedings on 22 December 2004.

2. The learned trial judge erred at law in failing to find that (Mrs Enge) had an indefeasible title as proprietor of one half of the real property the subject of the proceedings.

3. By reason of the fact that (Mrs Enge) had an indefeasible title as proprietor of one half of the real property the subject of the proceedings, the learned trial judge erred at law in ordering specific performance of the contract the subject of the proceedings which in the circumstances was impossible."

[12]

Respondents' failure to give notice under finance provision

[13]

[12] Mr Enge contended that he duly terminated the contract under cl 3.3 because of the respondents' failure to give notice by 29 July 2002 (the 'finance date') under cl 3.2. The terms of cl 3 are:-

[14]

"3 Finance

3.1 This contract is conditional on the Buyer obtaining approval of a loan for the Finance Amount from the Financier by the Finance Date on terms satisfactory to the Buyer. The Buyer must take all reasonable steps to obtain approval.

3.2 The Buyer must give notice to the Seller that:

(1) approval has not been obtained by the Finance Date and the contract is terminated; or

(2) the finance condition has been either satisfied or waived by the Buyer.

3.3 The Seller may terminate this contract by notice to the Buyer if notice is not given under clause 3.2 by 5 pm on the Finance Date. This is the Seller's only remedy for the Buyer's failure to give notice.

3.4 The Seller's right under clause 3.3 is subject to the Buyer's continuing right to terminate this contract under clause 3.2(1) or waive the benefit of this clause 3 by giving written notice to the Seller of the waiver."

[15]

[13] The primary Judge considered the manner of Mr Enge's repudiation of the contract on 17 July 2002 relieved the respondents of the need to comply with cl 3, notwithstanding they did not accept that repudiation. It is necessary for me to set out his Honour's findings in relation to the repudiation.

[16]

[14] Mr Enge's purported withdrawal from the contract began with Mrs Enge's delivery of a letter to the respondents on 17 July 2002, in these terms:

[17]

"I am writing this letter to you both to explain what has happened since Saturday the 13th of July. On Saturday at about 11.00 am Century 21 Bob Heywood rang from Townsville and told us he had a contract for us to sign at $170,000 and it was most urgent that I contact Henry as Bob wanted it signed by ½ hours (sic) time. I then contacted Bobs (sic) wife and told her we needed the weekend to think about this offer. When I rang her and told her this she was quite angry. On Monday the 15th July my husband Henry and myself decided we would not be signing the contract as we thought we could get a better price for our property. When we turned up at Century 21 we told Bob Heywood we are not signing we want another 2 weeks to see if we could get a better price. For the next 45 min all he did was pressure Henry into signing which I was most annoyed that was at 5.00 pm Mon. We went home and discussed the situation, I then was very angry with my husband Henry which caused a lot of bitterness between us. Henry is a train driver and shift worker he had not had sleep for 24 hr before he saw Bob Heywood and was feeling weak and vunerable (sic) and that's probably why he signed.

On Tuesday morning I rang Joy at Century 21 and told her we were backing out of the contract because of the pressure Bob had put on Henry.

Bob also told us we had a 5 day cooling off period if Henry signed anyway on the Monday.

I just thought that you both should know what has gone on. We regret any inconvience (sic) to you both. But I will not allow my husband to be pressured into things that affect our lives greatly."

[18]

[15] The Judge did not make any finding whether or not Mrs Enge wrote that letter with her husband's knowledge and consent, but Mrs Enge's evidence was she wrote the letter with Mr Enge's authority (p. 226).

[19]

[16] On the same day, Mr Enge delivered a letter to the respondents, in his own handwriting, under the letterhead of his real estate agent. The letter was in this form:

[20]

"I have made retraction of sale of my property 7 Aveccinia St Bowan.

This retraction was made for resons which will only be revealed in the case of personnal litigation in this matter. I will make certain complanets regarding this matter to the REIQ and the banking ombudsmans for purpose of notation.

I make appoligies for any inconvic in this matter.

Some of this inconvienience could have been reduced if agent Bob Heywood had relayed this information earlier."

[21]

[17] The matter did not end there. Also on that day, Mr Enge entered into a fresh contract, to sell the land to new purchasers for the sum of $180,000. That contract was abandoned in August 2002 (after the "finance date" under the finance provision of the subject contract, cl 3).

[22]

[18] The primary Judge held that in these circumstances, the respondents were relieved of the need to comply with the finance clause. He relied on the following passages from the judgment of the High Court in Foran v Wight [1989] HCA 51; (1989) 168 CLR 385:

[23]

"[I]f an executory contract creates obligations which are mutually dependent and concurrent and, before the time for performance of the obligations arrives, one party, A, gives the other party, B, an intimation that it will be useless for B to tender performance and B abstains from performing this obligation in reliance on A's intimation, B is dispensed from performing his obligation and A's obligation is absolute provided that B had not repudiated the contract and he was ready and willing to perform his obligation up to the time when the intimation was given." (p. 427, per Brennan J)

"The position is, however, different if one party has unambiguously informed the other party that he will not perform his obligations within the time made of the essence of the contract. In such a case, the refusal to perform constitutes an intimation to the other party that the tender of performance of his concurrent obligations will be nugatory and futile." (p. 433, per Deane J)

"I have said that there is a qualification to the proposition that a party who elects not to accept the repudiation of a contract remains bound by the terms of the contract to perform the obligations which it imposes upon him. Whilst the contract remains on foot for both parties, if the repudiation by one party makes it futile or pointless for the other party to attempt to perform an obligation, the law does not require him to do so. The obligation remains - it does not disappear from the contract - but the other party is treated as if he had performed it in the limited sense that he is absolved from the consequences which would otherwise flow from his non-performance." (p. 442, per Dawson J)

[24]

[19] But his Honour did not mean by that finding to suggest that the contract had become unconditional. He said this:

[25]

"The contract remains conditional upon finance. The plaintiffs have to show as part of their cause of action that they remain ready, willing and able to perform what is required of them under the contract. This would seem at present to require them to be prepared to take all reasonable steps to obtain finance and to do what is required of them under the finance clause. I am satisfied that they have acted reasonably in that they have taken reasonable steps in seeking to obtain finance and they are in my view ready, willing and able so far as it is necessary for them to be so up until this time. In Foran v Wight it was suggested by Brennan J and Dawson J that all that would be necessary for a party in the circumstances of that case was to show that the purchaser was not incapacitated from raising the necessary funds and had not resolved against doing so."

[26]

[20] What his Honour has held amounts to this. The manner of Mr Enge's repudiation of the contract relieved the respondents of the obligation to comply with the finance provision in accordance with its prescribed time-frame. For them to have done so would have had no practical utility. That is because by his repudiation, which the respondents did not accept, Mr Enge established a position which could only, absent compromise, be resolved by litigation. Mr Enge's repudiation was unlawful, and the contract therefore remained on foot. To secure a decree for specific performance, the respondents must prove their readiness, willingness and ability at all material times to complete. That they did not comply with the finance provision did not in these circumstances mean they were not, at any relevant time, ready, willing and able to complete. Their obligation to take all reasonable steps to obtain finance, and otherwise comply with cl 3, was effectively suspended, by reason of the repudiation effected by Mr Enge, until a determination whether or not that repudiation was lawful. It will remain for the court, as necessary, to designate a new time-frame in relation to the finance provision.

[27]

[21] Mr Moon, who appeared for the appellants, relied on the decision of the Full Court in Kelly v Desnoe [1985] 2 Qd R 477. In that case the vendor rescinded on the basis of the purchaser's failure to give notice under a finance provision. Unbeknown to the purchaser, the vendor had in the meantime repudiated the contract by selling the land to others. The Full Court upheld the validity of the vendor's rescission.

[28]

[22] The critical distinction between that case and this rests in Mr Enge's repudiation on 17 July 2002, which the Judge reasonably characterised as amounting to an implicit intimation from Mr Enge that it would be pointless for the respondents to comply with the finance provision. There was nothing in Kelly v Desnoe from which any such intimation could be drawn, a point emphasised by the judges who constituted the majority.

[29]

"His Honour held, in effect, that the respondent (vendor) had not done anything to lead the appellants (purchasers) to form the view that, in the circumstances, written notice of the securing of the approval of the loan ... need not be given as required by the contract."

[30]

His Honour, referring to the purchasers' contention, said (p. 480) that it was:

[31]

"based upon a misapprehension of statements to the effect that an innocent party is not required to take a step which he would normally take in execution of his promise under a contract in a mutual performance exchange, if it is seen as a result of some intimation by the other party that it would be nugatory."

[32]

He later set out what Dixon CJ said in Peter Turnbull & Co Pty Ltd v Mundus Trading Co (Australasia) Pty Ltd [1954] HCA 25; (1954) 90 CLR 235, 246-7:

[33]

"... a plaintiff may be dispensed from performing a condition by the defendant expressly or impliedly intimating that it is useless for him to perform it and requesting him not to do so. If the plaintiff acts upon the intimation it is just as effectual as actual prevention."

[34]

[24] Williams J raised a similar consideration at p. 495, where he referred to the principle that:

[35]

"... a party may be dispensed from performing a condition precedent to completion by the defendant expressly or impliedly intimating that it is useless for him to perform it and requesting him not to do so."

[36]

[25] Mr Moon submitted that the approach in Foran v Wight is confined to a case of mutual and concurrent obligations: here the finance provision created an independently operating condition for the benefit of the respondents alone. The primary Judge referred to Nyhuis v Anton [1980] Qd R 34 in which Wanstall CJ (with the agreement of the other members of the court) endorsed (p. 41) the following expression of principle in Halsbury (4th ed) vol 9, para 518:

[37]

"The performance of a condition precedent is excused where the other party has prevented its performance, or has done something which puts it out of his power to perform his part of the contract or has intimated that he does not intend to perform his part. In such cases he will have made himself liable for breach of contract and dispenses with the performance of any promise which was originally a condition to his liability."

[38]

That is of course consistent with the recognition, in Kelly v Desnoe, of the point of distinction between that case and this to which I have just referred. I agree with the primary Judge that Foran v Wight should not be read in the restrictive way for which Mr Moon contended.

Mr Enge's denial of access to property

[39]

[26] The Judge upheld a second basis for denying Mr Enge a right of termination based on the respondents' failure to give notice under cl 3.2. He found that Mr Enge refused to allow the respondents' valuer access to the property for the purpose of his preparing a valuation to support the respondents' application for finance. The Judge held that it was likely "finance would have been approved subject to a favourable valuation which seems to have been likely". Mr Enge thereby breached his obligation (cf Mackay v Dick (1881) 6 App Cas 251) to refrain from doing anything which would prevent completion of the contract, again bringing the case within the principle discussed above.

[40]

[27] Mr Moon submitted that Mr Enge was not contractually obliged to allow the respondents' valuer access to the property. The contract (cl 8) prescribed the purposes for which access might be allowed, which did not specifically include inspection for the purposes of valuation. In any event, the right of access under cl 8 was dependent upon prior reasonable notice to Mr Enge, which had to be in writing (cl 10.4), and no such notice was given. Because the contract deals with access in a way which does not embrace this situation, to engraft any additional extended obligation on Mr Enge, by resort for example to the principle of Mackay v Dick, would, he submitted, effectively involve recourse to an implied term inconsistently with BP Refinery (Westernport) Pty Ltd v Hastings Shire Council (1977) 180 CLR 266.

[41]

[28] Clause 8.2 of the contract, dealing with access, provides as follows:

[42]

"After reasonable notice to the Seller, the Buyer and its consultants may enter the Property:

(1) once to read any meter;

(2) for inspections under clause 4; and

(3) once to inspect the Property before settlement."

[43]

Clause 4 relates to building and pest inspection reports. The purpose of an inspection under (3) is presumably to ensure the property has been maintained between the execution of the contract and settlement.

[44]

[29] As a matter of interest, the standard form of contract for house and land sale and purchase (REIQ/QLS) has since been amended to add cl 8.2(4) reading:

[45]

"once to value the Property before settlement."

[46]

[30] Mr Moon submitted, in his written outline, that the respondents might not necessarily have raised their finance on the security of the property being purchased. But that runs against a general experience of which we should properly take judicial notice. It would be a most unusual situation for repayment of moneys advanced for the purchase of a residential property not to be secured against the property itself.

[47]

[31] The primary Judge held that once Mr Enge became aware that the respondents needed access to the property, for the purposes of an inspection to facilitate the preparation of the valuation required by the bank asked to advance the necessary funds, Mr Enge was obliged to allow that access. That arose from his fundamental, if unwritten, contractual obligation. As put by Lord Blackburn in Mackay v Dick (p. 263):

[48]

"I think I may safely say, as a general rule, that where in a written contract it appears that both parties have agreed that something shall be done, which cannot effectually be done unless both concur in doing it, the construction of the contract is that each agrees to do all that is necessary to be done on his part for the carrying out of that thing, though there may be no express words to that effect. What is the part of each must depend on circumstances."

[49]

[32] That principle has been repeated countless times since; for example, per Griffith CJ in Butt v M'Donald (1896) 7 QLJ 68, 70-1:

[50]

"It is a general rule applicable to every contract that each party agrees, by implication, to do all such things as are necessary on his part to enable the other party to have the benefit of the contract."

[51]

[33] In Secured Income Real Estate (Australia) Ltd v St Martins Investments Pty Ltd [1979] HCA 51; (1979) 144 CLR 596, 607 Mason J said of this duty:

[52]

"It is easy to imply a duty to co-operate in the doing of acts which are necessary to the performance by the parties or by one of the parties of fundamental obligations under the contract. It is not quite so easy to make the implication when the acts in question are necessary to entitle the other contracting party to a benefit under the contract but are not essential to the performance of that party's obligations and are not fundamental to the contract. Then the question arises whether the contract imposes a duty to co-operate on the first party or whether it leaves him at liberty to decide for himself whether the acts shall be done, even if the consequence of his decision is to disentitle the other party to a benefit. In such a case, the correct interpretation of the contract depends, as it seems to me, not so much on the application of the general rule of construction as on the intention of the parties as manifested by the contract itself."

[53]

[34] In this case, obtaining finance was not necessary just to entitle the respondents to "a benefit" under the contract. Rather, as Mr Enge must be taken to have appreciated, it was necessary to assure their very capacity to complete, and thereby obtain the fundamental benefit of the contract. Obtaining finance was inextricably linked to the respondents' performance of their central obligation, namely, payment of the purchase price (cf. Foran v Wight, p. 433). I would characterise Mr Enge's co-operation, by allowing access to facilitate the preparation of a valuation to found the requisite application for finance, as essential to the respondents' performance under the contract, so that it was something Mr Enge was by implication duty-bound to supply. See also Grubb v Toomey [2003] TASSC 131, where Slicer J considered the implication of a term obliging the vendor to permit access for the purpose of valuation necessary "to make the contract work" (albeit there was in that contract no express coverage of the matter of access).

[54]

[35] The existence of that duty did not depend on express provision in the contract that access must be allowed for purposes of valuation, or that any finance raised must be secured upon the subject property, as Mr Moon submitted: it arose because of the implication of the general duty to cooperate, applicable to ensure fulfilment of this matter of fundamental importance to completion.

[55]

[36] The learned Judge rightly concluded that Mr Enge wrongfully repudiated the contract, and that, the respondents having rejected that repudiation, the contract remained on foot and should be specifically enforced.

[56]

1. that the appeal be dismissed;

2. that the appellants pay the respondents' costs of the appeal to be assessed.

[57]

[38] McMURDO P: The Chief Justice has set out the facts and issues so that I can very briefly state my reasons for also dismissing the appeal with costs.

[58]

[39] It is not disputed that on 17 July 2002, the first appellant, Mr Enge, unequivocally repudiated the contract he entered into with the respondents, Mr and Mrs Grieve. Mr Enge ensured Mr and Mrs Grieve had notice of that repudiation by the delivery of Mrs Enge's letter to them on 17 July 2002 and by the delivery of a further letter to them in his own handwriting later that day. Also on that day Mr Thorne, a valuer from the Grieves' bank, was unable to effect access to the subject property to prepare a valuation for the bank's consideration of the Grieves' application for finance. Mr Thorne then spoke by telephone to Mr Enge who told him the contract with the Grieves was no longer on foot. Ms Schuler, the manager of the Grieves' bank in Bowen, also telephoned Mr Enge whom she knew. He told her that he had signed another contract. Kelly v Desnoe[1] was rightly distinguished by the learned primary judge because, unlike in that case, the Grieves had unequivocal notice of Mr Enge's clear repudiation of the contract.[2]

[59]

[40] Even if the passages cited by the primary judge from Foran v Wightr[3] did not effectively suspend the Grieves' obligation to take all reasonable steps to obtain finance and otherwise comply with cl 3 of the contract, the primary judge was right in holding that Mr Enge was obliged to allow that access once he became aware the Grieves needed access to facilitate an inspection for the preparation of a valuation required by their bank before providing finance for the purchase of the property. At common law there is a fundamental although unexpressed obligation implied, not in fact but by law, in every contract that parties have a duty to do all things necessary on their part to enable another party to have the benefit of the contract: Mackay v Dick;[4] Butt v M'Donald;[5] Secured Income Real Estate (Australia) Ltd v St Martins Investments Pty Ltd;[6] Peters (WA) Ltd v Petersville Ltd;[7] Jackson Nominees P/L v Hanson Building Products P/L.[8]

[60]

[41] It follows that the learned primary judge correctly reached the following conclusions. Mr Enge wrongly repudiated the contract. The Grieves through their conduct rejected that repudiation so that the contract remained on foot, despite the Grieves' non-compliance with cl 3 of the contract as their non-compliance was caused by Mr Enge's refusal to permit access. Mr Enge was not entitled to terminate the contract by his solicitors' letter of 22 December 2004 pursuant to the finance clause under the contract. The Grieves are entitled to have the contract specifically enforced and carried into effect.

[61]

[42] I agree with the orders proposed by the Chief Justice.

[62]

[43] HELMAN J: I have had the advantage of reading the reasons prepared by the Chief Justice and those of the President. I agree with them. The appeal should be dismissed with costs.

[63]

[1] [1985] 2 Qd R 477.

[64]

[2] See Andrews SPJ, 480, and Williams J, 495.

[65]

[3] [1989] HCA 51; (1989) 168 CLR 385 Brennan J, 427, Deane J, 433 and Dawson J, 442.

[66]

[4] (1881) 6 App Cas 251, Lord Blackburn, 263.

[67]

[5] (1896) 7 QLJ 68, Griffith CJ, 70 - 71.

[68]

[6] [1979] HCA 51; (1979) 144 CLR 596, Mason J (with whom Gibbs, Stephen and Aickin JJ agreed), 607.

[69]

[7] [2001] HCA 45; (2001) 205 CLR 126, Gleeson CJ, Gummow, Kirby and Hayne JJ, 142.

[70]

[8] [2006] QCA 126; Appeal No 6093 of 2005, 21 April 2006.

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