GROOM v EARTHMOVING CONTRACTORS ASSOC OF SA INC No. SCCIV-00-785 [2001] SASC 49

Supreme Court of SA|2001-04-20|Before: Gray J

Judgment No. [2001] SASC 49

GRAY J This is an action for specific performance.

The plaintiffs Stephen Barry Groom and Pamela Dawn Groom are husband and wife.[1] The defendant accepted that the plaintiffs were the negotiating parties notwithstanding the use of business and corporate letterhead.

The defendant Earthmoving Contractors Association of SA Inc ("the Association") was incorporated pursuant to the Associations Incorporation Act 1985 (SA). Robert Osborne is the executive officer of the Association. He acted in the negotiations as its authorised agent.

Paul Harris was the plaintiffs' financial adviser. He acted as their agent when dealing with Mr Osborne.

The Association is the registered owner of the whole of the land comprised in Certificate of Title Volume 5674 Folio 178 being described as Lot 402 Henschke Street Dry Creek ("the land"). The land is a vacant allotment fronting Henschke Street.

The Association decided to dispose of the land by tender. On 22 May 2000 it placed an advertisement in the Advertiser newspaper:

Mr Groom responded to the advertisement by telephoning Mr Osborne. The Association provided the following written information:

"The subject site comprises the land held in Certificate of Title Volume 5674, Folio 178 in Deposited Plan 51365, which is subject to a light services easement as indicated. We suggest you confirm the easement type with Mr David Fotheringham from Epic Energy on telephone number 8 343 8100.

The site has a frontage of 67.91 metres to Henschke Street, a depth of 101.32 metres and an area indicated on the title as 6,893m2. The land has been filled and consolidated to engineering standards.

Lot 402 is located next to a modern training facility, which is accessed off Magazine Road. It abuts a paved street with concrete kerb and water table. The property is in an area where power and mains water are provided.

Attached is a Land Title Office diagram of Lot 402 showing the easement. The Civil Skills Centre is located on Lot 400."

On 20 June 2000, three days before close of tenders, Mr Osborne wrote to Mr Groom:

"Please be advised that tenders for above land closes at 2.00 pm Friday 23 June 2000 in our office 198 Greenhill Rd Eastwood.

On 22 June 2000 Mr Groom submitted a written tender as follows:

"Please accept our tender for the parcel of land, Lot 402, Henschke Street, Dry Creek.

A deposit of $10,000-00 payable on acceptance with settlement within 30 days."

There is little dispute about these events. However, there is considerable dispute about subsequent dealings.

The plaintiffs claimed to have a binding and enforceable agreement to purchase the land. Agreement was reached on 26 June 2000 when Mr Osborne told Mr Groom in a telephone conversation that his bid was the highest and that it had been accepted.

The plaintiffs asserted that the agreement was varied on 28 June 2000 when Mr Osborne spoke with Mr Harris. During that conversation it was agreed that the contract would be made subject to the attainment of bank finance approval by 5.00pm on 6 July 2000. Settlement was to be six weeks from 28 June 2000.

The terms of the contract were pleaded as follows:

- Payment by the plaintiffs of a deposit of $10,000;

- Settlement on the Contract within six weeks of 28 June 2000;

- The Contract being subject to the purchasers obtaining bank finance approval in writing by 5:00pm on 6 July 2000; and

- The terms of the Contract would be formally recorded on a standard form Contract Note."

It is the plaintiffs' case that a further variation of the contract was agreed on 6 July 2000. The time in which the plaintiffs could obtain bank finance approval was extended to 10.00am on 7 July 2000.

Shortly before 10.00am on 7 July 2000 Mr Groom met Mr Osborne. He provided a written contract form signed by him and his wife. He also delivered a deposit cheque of $10,000.00.

The contract form contained a subject to finance clause. The clause had been crossed out. It was the plaintiffs' case that the subject to finance clause was solely for the plaintiffs' benefit. It was said to have been expressly waived. It was asserted that a binding and enforceable agreement was concluded on 7 July 2000.

The plaintiffs contended that by refusing to settle, the Association acted in breach of contract. Specific performance is sought. The plaintiffs claim to be ready, willing and able to settle.

The Association denied that any valid, binding or enforceable agreement existed.

The Association's case was that the plaintiffs' tender had not been accepted. The tender was only to be accepted if the plaintiffs made financial arrangements satisfactory to the Association.

Mr Groom had said that his financial advisor Mr Harris would contact the Association. Discussion took place between Mr Osborne and Mr Harris. Mr Osborne reiterated the Association's requirement of evidence of Mr Groom's financial arrangements. Mr Harris told Mr Osborne that Mr Groom was "good for the money". Mr Osborne responded by telling Mr Harris that the Association required evidence of bank finance approval by 5.00pm on 6 July 2000.

On 6 July 2000 at Mr Groom's request, the deadline was extended to 10.00am on 7 July 2000. The extension was accompanied by written advice confirming that the Association required:

"... an unconditional agreement from you to buy the land together with bank finance written approval and receipt of a non refundable $10,000 cheque, by the above time."

The Association asserted that on 7 July 2000 Mr Groom failed to meet its requirements. An unconditional agreement was not proffered. No bank finance written approval was produced. Instead, Mr Groom produced a conditional agreement. A clause addressing site clearance had been included. The Association was not prepared to accept these terms. It terminated negotiations.

The Association contracted to sell the land to a third party. It proposes to settle as soon as possible. A caveat prevents dealings in the land.

The plaintiffs called Mr Groom and Mr Harris to give evidence. The Association called Mr Osborne. There was little or no dispute about the documentary material tendered. However issues of credibility and reliability arose for consideration.

Acceptance of Tender - Qualified or Unqualified - 26-27 June 2000

The Association received the plaintiffs' tender on 23 June 1999.

The plaintiffs claimed that the tender was accepted by the Association without qualification. It was their case that Mr Osborne rang Mr Groom on 26 June 2000 and said:

"Your tender was the best we have received and has been accepted."

Mr Osborne's account was different. He gave evidence that on 27 June 2000 he advised Mr Groom by telephone:

"[Osborne]: Your bid was the highest and will be accepted provided you can make financial arrangements satisfactory to the Association. How do you propose financing the land?"

[Groom]: I'll get my financial adviser Paul Harris of Lakes Financial Services to contact you."

It was the Association's case that there was no acceptance of Mr Groom's tender. No agreement would be reached until the Association was satisfied with Mr Groom's financial arrangements.

Mr Osborne's account is supported by other evidence. Mr Groom acknowledged that he referred Mr Osborne to his financial adviser. Had there been unqualified acceptance of the tender, all that remained was the appointment of brokers, the preparation and signing of a formal contract and settlement. Mr Groom already knew of a broker. There would have been no need for any discussion with Mr Groom's financial adviser.

Mr Osborne's account received some support from Mr Groom's cross-examination:

"Q. I am putting to you that the reason why you introduced Mr Harris's name into the conversation, was because you wanted Mr Harris to sort out with the association, evidence of your ability to pay for the land. Isn't that right.

A conversation on 28 June 2000 between Mr Osborne and Mr Harris and a confirmatory facsimile also support Mr Osborne's account. This evidence is discussed later.

I accept Mr Osborne's evidence. I reject Mr Groom's account of that conversation. I am satisfied that the Association would not enter into an agreement with Mr Groom until it was satisfied of his financial capacity to settle.

There was a discrepancy about the date of the conversation. Mr Groom suggested that it occurred on 26 June 2000. Mr Osborne suggested it occurred on 27 June 2000. Nothing turns on the precise date.

Conversation between Mr Harris and Mr Osborne - 28 June 2000

On 28 June 2000 a telephone conversation between Mr Harris and Mr Osborne occurred. It is agreed that Mr Osborne spoke with Mr Harris on the recommendation of Mr Groom. However, the terms of the conversation are disputed.

Mr Osborne gave evidence that he said to Mr Harris:

"[Osborne]: Steve Groom asked me to speak to you regarding financial arrangements for the land purchase and how Steve will ... finance the land purchase.

[Harris]: He's good for the money but it will take a week for him to get bank finance approval. He is looking for an eight week settlement.

[Osborne]: I don't think the association will agree to that. I don't have the final say. I'll have to refer it to the Committee. They may be prepared to give you a week to organise your finance and maybe a six week settlement but then we'll want a deposit lodged as soon as possible. They will want to know that Steve can finance the purchase. I'll let you know what the Committee decides."

"Q. In the course of that conversation did Mr Harris say anything and if so what, to indicate the likelihood of Mr Groom obtaining finance from the bank."

A. Well, he did say, in response to the need for that letter, that they were getting a letter of approval from the bank and that would take a week to do, but he was good for the money.

Q. When you spoke of a letter from the bank with Mr Harris, did he talk to you in terms of it being a condition of the agreement that his clients would have a week to provide such a letter to you.

A. He just mentioned that it would take about a week to get bank financial approval."

Following the telephone conversation, Mr Osborne said that he communicated with the Association's sub-committee. He received instructions. Mr Osborne sent a facsimile to Mr Harris on 28 June 2000 summarising the instructions he had received from the sub-committee:

I have referred the land purchase matter to our Sub-Committee who are prepared to extend the following terms:

- Bank Finance approval received in writing by 5.00pm, Thursday 6th July 2000.

- $10,000 deposit lodged as soon as a meeting can be arranged between our respective Conveyancers.

Our Conveyancer is Graham Hollidge from Scammell & Co., he can be

Initially, Mr Harris denied that Mr Osborne spoke with him about Mr Groom's financial arrangements.

"A. [Mr Osborne] asked me whether I thought the finance would be approved and I said, yes, I felt it would be. He also asked me if the client would sign an unconditional contract and I said that it would be my advice to my client that would not be in his best interests, because of the deposit requirement.

Q. I suggest to you that you said words to this effect to Osborne 'He's good for the money but it will take him a week or so to get bank finance approval'.

A. That was in relation to the approval, not in relation to Steve Groom's financial affairs. I did say it would take a week to get the approval".

The Association submitted that the conversation did not conclude or vary any agreement. It also submitted that the telephone conversation was primarily concerned with Mr Osborne's request for evidence of Mr Groom's capacity to settle.

Counsel for the plaintiffs submitted that Mr Harris negotiated a variation with Mr Osborne to make the agreement subject to finance. Mr Harris's evidence did not support this submission. Mr Harris's account was that he advised Mr Groom to make the contract subject to finance. Mr Harris did not suggest that he reached any varied agreement with Mr Osborne. He did not have instructions to do so. Mr Groom did not suggest that he had entered into such a variation or given Mr Harris any instruction to do so. These matters confirm Mr Osborne's account, that there was no variation to any agreement.

I accept Mr Osborne's account of the conversation. I reject Mr Harris's account in so far as it differs.

I am satisfied that the conversation was primarily concerned with the Association's request for information about Mr Groom's ability to obtain bank finance approval. There was no concluded contract. There was no variation to any contract. The Association was not prepared to enter into an agreement until bank finance approval was produced. Such evidence was sought for the benefit of the Association. The Association did not intend to bind itself to a conditional contract.

Conversation between Mr Osborne and Mr Groom - Extension of time for settlement - 6 July 2000

The plaintiffs submitted that on 6 July 2000 the terms of the contract were varied. The time to obtain bank finance approval was extended to 10.00am on 7 July 2000. This variation was confirmed by facsimile from Mr Osborne. Mr Groom gave evidence that in conversation with Mr Osborne he:

"... advised Mr Osborne that I had received the contract and that I had to get my wife to sign it and logistically it wasn't easy for me to have it at his office by 5 o'clock that day, and if it would be okay if I delivered it to him the following morning"

Mr Groom denied that the purpose of the conversation was to enable Mr Osborne to enquire whether the bank approval letter and deposit would be received by 5.00pm that night. Mr Groom claimed that there was only one telephone call followed by the receipt of Mr Osborne's facsimile. Mr Groom said that he only had time to briefly glance at the facsimile before leaving work. He did not reply.

Mr Osborne said that he telephoned Mr Harris on 5 July 2000. During that conversation, Mr Harris was unable to advance matters and suggested that Mr Groom be contacted.

Mr Osborne then telephoned Mr Groom. He said that the following conversation occurred:

"[Osborne]: Steve, I am ringing to see if we will get your bank approval letter and deposit by 5 tonight.

[Groom]: Bob, I've got the contract from my conveyancer. Can you give me until tomorrow morning to get it to you?

[Osborne]: I'll have to get authority from the Committee to do that. I'll let you know."

Mr Osborne subsequently spoke with the Association's sub-committee which authorised an extension of time on terms. Mr Osborne gave evidence that he conveyed those terms to Mr Groom by telephone at about 5.00pm on 6 July 2000. He said:

"I can give you until 10am tomorrow morning but there will be no further extension of time. We'll have to have the unconditional agreement, the bank's approval and non refundable deposit by that time."

Mr Osborne immediately sent a confirmatory facsimile:

"Further to our telephone conversation at 4.50pm tonight, ECA agrees to further extend the time to execute the sale of this land (in accordance with your tender) until 10.00am, Friday 7th July 2000.

As discussed we require an unconditional agreement from you to buy the land together with bank finance written approval and receipt of a non-refundable $10,000 cheque, by the above time."

Mr Osborne said that the facsimile accurately reflected the content of his conversation with Mr Groom.

Mr Osborne explained in evidence that Mr Groom's ability to pay the purchase price was critical to the Association. From the outset of negotiations, he had stressed the need for written finance approval from the plaintiffs' bank.

I accept Mr Osborne's evidence about the events of 6 July 2000. In so far as the evidence about the events of 6 July 2000 differs, I prefer the evidence of Mr Osborne. Mr Groom was well aware of the Association's requirement that a bank finance approval letter be produced. The terms of the conversation and the facsimile were clear.

On 7 July 2000 Mr Groom went to the Association's premises with a written contract form signed by the plaintiffs and a cheque for $10,000.00. Mr Groom gave evidence that he said:

"This contract is unconditional, we've struck out the finance clause"

The plaintiffs submitted that on 7 July 2000 they waived the benefit of the special condition as to finance. They said that this made the purchase of the land unconditional. They paid a deposit of $10,000.00 and proffered an executed contract form. The subject to finance clause was deleted. The contract form and deposit were received by Mr Osborne on behalf of the Association.

Mr Osborne gave evidence that the conversation which occurred was as follows:

"Q. At some stage did he hand you some documents.

A. Yes, he handed me the documents after the discussion that we had, that I just relayed.

A. Before - as he handed me the documents he mentioned, he referred me to the last page, showing that the financial bank finance conditions, special conditions, had been waived by him and his wife. Then I was looking at the document - which I only just scanned I didn't go into detail, I only just scanned it - what I was really looking for was a letter of approval from the bank, and I asked him whether, you know -

Q. Just use the words that you used to him, if you can.

A. I said that 'Steve, as you know, I appreciate that this has been, that the financial arrangements are being changed, but the committee has required a letter from the bank of some assurety of payment, which is not here, and I don't know how the committee will accept this latest development. I'll have to refer that to them'.

A. Then, as best I can recall I think it was just I would get back to him, and I would try to do so that day, but I couldn't guarantee it, because I had to leave around about lunch time, and if I couldn't I would ring him on Monday."

Apart from the failure to produce a "bank finance written approval" letter, the contract form contained a condition not raised earlier. The condition provided that:

"The Vendor must leave the allotment cleared and tidy at the request of the Purchaser after inspection prior to settlement."

Access to the land was blocked by a large mound of dirt and vegetation. The barrier, approximately three metres in width and two metres in height extended along the entire frontage. Its removal was estimated to cost approximately $10,000.00. According to Mr Osborne, the possibility of the Association providing a limited access point had been discussed earlier. However no agreement had been reached. It had never been suggested that the entire mound would be removed by the Association.

Mr Osborne spoke immediately with the sub-committee. A decision was made that the form of contract proffered was unacceptable. The Association's terms had not been met. New and varied terms were being offered by the plaintiffs.

Mr Osborne advised Mr Groom that the Association was not prepared to enter into the arrangement proffered. This advice was given to Mr Groom by facsimile at 1.52pm on 7 July 2000. It read as follows:

"I have discussed your Agreement with our Committee and they have regretfully decided that your terms for settlement of the above property is not in compliance with our facsimiles to Lakes Management Services of the 28th June 2000 and to yourself on the 6th July 2000. We are therefore not prepared to enter into an Agreement of sale.

The $10,000 deposit and the agreement is being returned to you by Certified Mail tonight.

If you have any queries, please ring me on Monday, as I will be unavailable for the rest of the day."

I accept Mr Osborne's evidence of the events of 7 July 2000. I reject Mr Groom's account. I do so having regard to my earlier findings. The confirmatory facsimile of 7 July 2000 directly supports Mr Osborne's account.

Mr Groom did not comply with the terms of the Association's facsimile of 6 July 2000. A bank finance approval letter was not provided. A conditional contract was proffered. I find that Mr Groom was well aware that the Association was not prepared to enter into an agreement unless the plaintiffs complied with its terms.

Mr Osborne sent a further facsimile to Mr Groom on 11 July 2000 confirming the Association's decision:

"... I confirm earlier advice that ECA is not prepared to enter into an agreement of sale of Lot 402 as per our reasons in our fax dated the 7th July 2000.

We further note that the draft contract submitted to us introduces new conditions, which are not acceptable to our association. Consequently, we will not enter into further correspondence with you on this matter."

It is the plaintiffs' submission that this communication amounted to a breach of the agreement reached on 26 June 2000 as varied from time to time thereafter. I find that it amounted to a confirmation of the rejection by the Association of Mr Groom's most recent offer.

Counsel for the plaintiffs attacked Mr Osborne's credibility. It was submitted that he lied whilst giving evidence. His conduct in dealing with other tenderers whilst negotiating with Mr Groom was criticised. It was said that he deliberately misinformed other tenderers about the tender process by suggesting that that process was still being conducted. Mr Osborne explained that he was concerned that the proposed transaction with Mr Groom would not go ahead and he wanted to be able to deal with another tenderer if necessary. I accept this explanation. I do not consider that Mr Osborne's conduct impacts adversely on his credit. To the contrary, he was entirely frank and open in giving evidence about his dealings with other tenderers.

I was impressed by Mr Osborne. His account was clear and consistent. He presented as careful and meticulous. As earlier observed, contemporaneous documents and other evidence directly support his account. I consider Mr Osborne to be credible and reliable.

I was unimpressed with the evidence of Mr Groom and Mr Harris. There were significant differences between the plaintiffs' case as pleaded and the evidence. For example, the pleaded case of a variation on 28 June 2000 was not supported by the evidence of Mr Harris or Mr Groom. Mr Harris had no instructions to negotiate a variation. Mr Groom agreed that he gave Mr Harris no such instructions. Both witnesses were vague and inconsistent. Neither had support from the documentary evidence tendered. In a number of respects, their evidence was contradicted by contemporaneous documents.

Where the evidence differs, I prefer the evidence of Mr Osborne to that of Mr Groom and Mr Harris.

Counsel for the plaintiffs submitted that the Association had failed to explain why the committee members instructing Mr Osborne were not called to give evidence.[2] It was said that an inference should be drawn that the uncalled evidence would not have assisted the Association's case.

I do not consider it appropriate to draw such an inference.

I do not consider that the circumstances required the Association to explain or contradict any matter by calling its committee members. There was no suggestion that Mr Osborne was acting outside of his authority. The plaintiffs' contention was that he acted as the Association's agent. The Association's attitude was conveyed in the facsimiles that have been referred to earlier.

There was no direct challenge in cross-examination which suggested that Mr Osborne had acted contrary to any instruction he had received. No objection was taken to the evidence he gave of his instructions.

The plaintiffs tendered for the purchase of the land. This was followed by negotiations. From the outset, the Association made it clear that it would not enter into an agreement without being satisfied of the plaintiffs' financial ability to settle. This was made clear to Mr Groom and Mr Harris by telephone. It was explicitly confirmed by facsimile. I am satisfied that Mr Groom and Mr Harris were well aware of this requirement. I am also satisfied that the Association stipulated that any agreement had to be unconditional. The plaintiffs did not make an unconditional offer in terms that were acceptable to or accepted by the Association. There was no contract for the sale and purchase of the land.

1 When Mr Groom is referred to in these reasons it is on the basis that he was acting for and on behalf of Mrs Groom. Agency and authority were not in issue.

2 It was common ground that the chairman of the committee had died prior to trial.

[1] When Mr Groom is referred to in these reasons it is on the basis that he was acting for and on behalf

of Mrs Groom. Agency and authority were not in issue.

[2] It was common ground that the chairman of the committee had died prior to trial.

Associations Incorporation Act 1985(SA)

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