Landbank Tinana P/L v McKay & Ors

[1] de JERSEY CJ: By a contract dated 26 November 2003, the defendants agreed to sell, and the plaintiff agreed to purchase, land comprising lot 1 on registered plan 173593 in the County of March, Parish of Tinana, situated at 8 and 14 Teddington Road, Maryborough. The purchase price was $800,000. The contract became unconditional, with settlement ultimately being required (after various extensions) between 9am and 5pm on 19 July 2004. When the plaintiff did not tender the balance purchase monies by 5pm that day, the defendants terminated the contract. The plaintiff challenges the validity of that termination, and sues for specific performance.

[2] The evidence was largely non-contentious. I accepted it save in some respects the evidence of Mr Karavelas, a director of the plaintiff, as indicated in what follows. I will now set out my findings on essential matters.

[3] The contract provided for payment of deposit monies totalling $75,000. It was subject to Maryborough City Council's approval of a development application. That approval was forthcoming. As the defendants knew, the plaintiff intended to subdivide the land.

[4] The plaintiff's director Mr Karavelas gave evidence of the substantial steps taken in that regard, which involved the plaintiff's expenditure of sums aggregating $191,644.79. Mr Karavelas conceded that the plaintiff incurred that expenditure at its own risk, and that retaining its value depended on completing the purchase.

[5] The contract was also subject to a condition as to finance, which also was satisfied.

[6] The contract specified "Caloundra" as the place for settlement. (The plaintiff's solicitors, Carswell and Company, were located in Maryborough, and the defendants' solicitors, Griffiths Parry, in Caloundra.) Clause 5 of the "terms of contract" provided:

"5. Settlement

5.1 Time and Date

(1) Settlement must occur between 9am and 5pm on the Settlement Date.

(2) If the parties do not agree on where settlement is to occur, it must take place in the Place for Settlement at the office of a solicitor or Financial Institution nominated by the Seller, or, if the Seller does not make a nomination, at the land registry office in or nearest to the Place for Settlement."

While the defendants contend that there was agreement (or nomination) that the settlement occur at the offices of their solicitors in Caloundra, the plaintiff contends there was no such agreement, or nomination by the defendants, with the result that settlement was to occur at the nearest land registry office, which was in Nambour.

[7] Clause 2.5 of the 'terms of contract' provided for settlement by bank cheque:

"2.5 Payment of Balance Purchase Price

(1) On the Settlement Date, the Buyer must pay the Balance Purchase Price by Bank cheque as the Seller directs.

(2) Despite any other provision of this contract, a reference to a "Bank cheque" in clause 2.5(1):

(a) includes a cheque drawn by a building society or credit union on itself;

(b) does not include a cheque drawn by a building society or credit union on a Bank;

and the Seller is not obliged to accept a cheque referred to in clause 2.5(2)(b) on the Settlement Date."

[8] Clause 6 provided that time was of the essence of the contract. The vendor's right to terminate for non-completion by the purchaser was accorded as follows by clause 9:

"9. Buyer's Default

9.1 Seller May Affirm or Terminate

If the Buyer fails to comply with any provision of this contract, the Seller may affirm or terminate this contract.

...

9.3 If seller Terminates

If the Seller terminates this contract under clause 9.1, it may do all or any of the following:

(1) resume possession of the Property;

(2) forfeit the Deposit and interest earned on its investment;

(3) sue the Buyer for damages;

(4) resell the Property."

[9] Consequently upon the contract becoming unconditional on 25 May 2004, the date for completion pursuant to clause 3.1 of the "special conditions" became 24 June 2004.

[10] On 3 June 2004, the plaintiff requested an extension of the time for completion to 8 July 2004. That was granted on 16 June 2004, subject to the plaintiff paying interest on the balance purchase monies for the period of the extension to completion.

[11] The plaintiff sought a second extension, on 6 July 2004, to 15 July 2004. The defendants agreed to that on 8 July 2004.

[12] On 8 July 2004 the plaintiff sought a third extension, to Monday 19 July. On 12 July 2004, Emma Rennie-Hynes, of the defendants' solicitors, advised Shelley Beardmore, of the plaintiff's solicitors, that the extension was granted. They were secretaries/conveyancing clerks. In the case of each extension, the essentiality of time was preserved.

[13] In the course of a telephone call on 15 July 2004, Emma Rennie-Hynes told Mrs Beardmore that further extensions may not be granted, and queried whether the purchaser would be ready to settle on 19 July (Ex 17). That day, Mrs Beardmore informed Mr Karavelas that she needed funds for completion the following day, for the purposes of settlement on 19 July, and passed on that the vendors' solicitors had indicated no further extension would be granted (Ex 18, transcript p 130 ll 14-31). I did not accept the contrary evidence of Mr Karavelas that that advice was not passed on. I accept that Mrs Beardmore impressed on Mr Karavelas that whether or not an extension were granted remained a matter for negotiation (transcript p 127, ll 40-50).

[14] At 4.38pm on Friday 16 July 2004, by fax, the plaintiff's solicitors requested a yet further extension, to Friday 23 July. Having received no reply, the solicitors again faxed, at 4.50pm, offering to increase the purchase price by $10,000 in the event that an extension were agreed to.

[15] By way of prompt response, at 5.10pm on Friday 16 July, the defendants' solicitors faxed the plaintiff's solicitors in these terms:

"Our client is currently away from the area and is difficult to contact so we may not be in a position to respond to today's facsimile transmission until Monday.

In the meantime, we have no other instructions than to request settlement as scheduled on Monday 19 July 2004 with time to remain the essence of the contract.

As we obtain our client's instructions in relation to the requested extension, we will advise you immediately."

[16] The plaintiff's solicitor Mr Ponti (in Maryborough) rather surprisingly did not remain at his office after 5pm on Friday 16 July, notwithstanding he had not by the time of his departure received a response to his faxes sent at 4.38pm and 4.50pm. He first saw the above fax received in his offices at 5.10pm on Friday 16 July, between 8am and 8.30am on the day for completion, Monday 19 July, and sent a copy by fax to Mr Karavelas at 8.13am that day. Then at 10.42am on 19 July, the defendants' solicitors faxed in these terms:

"We refer to our facsimile transmission to you of 16 July 2004 and advise that we have now received our client's further instructions.

Our client is not prepared to extend the settlement date as requested by you and insists upon settlement of the matter today as scheduled.

We confirm that we hold the certificate of title volume 6064 folio 17 in readiness for settlement today. We also confirm that the settlement amount is $729,952.19 as discussed and agreed which sum is to be made payable to the credit of our trust account.

We nominate 4.00pm today as the time for settlement of the matter but remain ready to settle up to 5.00pm today if required."

[17] Having been informed of the defendants' refusal of any further extension, Mr Karavelas commenced (from about 11.30am on 19 July) to assemble the balance funds required for completion - an amount $760,593 (transcript p 74, ll 5-20). He did not commence those efforts until about 11.30am even though aware from between 8am and 8.30am on that day that no further extensions were likely (transcript p 58, ll 13-25, 41-47). The required monies were nevertheless obtained and paid into Carswell and Company's trust account with the ANZ Bank at Maryborough.

[18] It was agreed between the parties that for the purposes of completion, the defendants' solicitors in Caloundra were to act as the plaintiff's Maryborough solicitors' unpaid agent. Part of that involved their collecting, from the ANZ Bank in Caloundra, a bank cheque for the purchase monies. Mr Ponti and his staff at Carswell and Company, in consultation with the ANZ Bank at Maryborough, made substantial efforts, as did that bank, to arrange for the availability of a bank cheque at Caloundra, but to no avail, especially because of the lateness of the attempt. Instructions were not given to the bank as to the amount and destination of the funds until 3.30pm to 3.40pm that day, which was simply too late for the bank. In the result, no cheque was made available at Caloundra by the ANZ Bank to Brooke White, the employee of Griffiths Parry who attended at the ANZ Bank in Caloundra from 4pm until 5.15pm that day to collect the cheque, and returned to her employers' offices empty-handed.

[19] The defendant regarded the plaintiff as therefore in breach of clause 5.1(1) of the "terms of contract" set out above.

[20] At 5.07pm on 19 July 2004, Emma Rennie-Hynes, of the defendants' solicitors Griffiths Parry, informed Mr Ponti, of Carswell and Company, that the contract was terminated. That was confirmed by fax at 5.23pm.

[21] On 21 July 2004, Mr Caffo, a director of the plaintiff, wrote to the defendants in these terms:

"I am writing to you on behalf of Landbank Tinana Pty Limited.

As you are aware, due to an error from our solicitor's Bank, the settlement did not take place yesterday as there was a delay in the Bank drawing the cheques. We apologise for the inconvenience which was caused to you and your solicitors.

I wish to confirm to you that the funds were available for settlement Monday and are available for settlement now, subject to our solicitor's instructions to their bank the ANZ Bank in Maryborough instructing the ANZ in Caloundra to draw the cheques.

Landbank Tinana Pty Limited is ready willing and able to effect settlement with you immediately. The company wants to avoid lengthy and expensive court proceedings and we believe you would want to do the same. This is in the best interests of all parties concerned.

Please confirm by return facsimile that you agree to settle and we will instruct our solicitor to contact your solicitor and arrange this immediately.

Please reply to us urgently to allow for sufficient time for the settlement to take place as soon as possible."

[22] The defendants point to the plaintiff's concession, by that letter, that it was delay in the drawing of the cheque which meant that completion was not effected by the prescribed time, and the absence of any contention in the letter that the defendants in any way contributed to the plaintiff's inability to complete.

[23] On 16 July 2004, the defendants entered into a separate contract to sell the subject land to Belela Pty Ltd for an increased purchase price, an amount of $1 million. That contract was unsurprisingly subject to non-completion of the sale to the plaintiff. It contained this "special condition":

"This contract is subject to and conditional upon an existing contract between the Vendors herein and Landbank Tinana Ltd not proceeding beyond 20th July 2004. The Vendors agree not to grant any further extension to the existing contract beyond 20th July 2004. If the existing contract does settle before the 20th July 2004, then this contract shall be at an end and the deposit shall be refunded in full to the Buyers."

[24] The plaintiff contends that had it been informed earlier of the defendants' refusal to extend the completion date beyond 19 July, the plaintiff would have set about assembling the purchase monies earlier, enabling earlier dealings with the bank to secure the necessary cheque in Caloundra. Mr Karavelas gave evidence to that effect.

[25] I accepted the evidence of Mr Griffiths, the solicitor for the defendants, that when he sent the fax at 5.10pm on Friday 16 July, although he was aware that the defendants may execute that further contract (and see Ex 59), he was not aware whether or not they had done so; and notwithstanding its (proposed) special condition, he considered he was obliged to obtain his clients' instructions as to the request for extension, and did all he reasonably felt he could to assist the plaintiff, by affirming the requirement for settlement on 19 July - as per the second paragraph of the parts of the fax extracted in para [15] above.

[26] In my view, Mr Griffiths in that way acted reasonably.

[27] The cause of the plaintiff's inability to complete by 5pm on 19 July, was its failure at a sufficiently early stage to set about assembling the requisite funds and securing the issue of the bank cheque. The plaintiff was foolhardy not to make arrangements against the contingency that a further extension would not be granted. It was certainly not entitled to proceed, and it was not reasonable for it proceed, on an assumption that a further extension would be granted.

[28] Furthermore, the final request for extension was itself made very late, late in the day on the business day immediately preceding the date for settlement.

[29] Mr Karavelas gave evidence that he had no reason to expect the last request for extension would not be granted. Whether or not that was so, his primary obligation was to proceed on the basis that settlement may be required by 5pm on 19 July.

[30] But the reality is that Mr Karavelas - despite his claims - should have appreciated, and (as I find) did appreciate, that the granting of that extension was not a foregone conclusion. I accepted the evidence of Mrs Beardmore that she impressed on Mr Karavelas that extensions were not for the asking (transcript p 127, ll 41-50). The circumstance that Mr Karavelas felt constrained to offer a $10,000 increase in the purchase price, by the fax at 4.50pm on Friday 16 July, indicated that he regarded the question of extension at that stage as a matter for negotiation and bargaining. Under cross-examination, he conceded that whether or not an extension would be granted was a matter for specific negotiation and agreement, and that it may not be granted (transcript p 72, ll 25-52). It was, as I say, foolhardy for the plaintiff, not having secured an extension by the close of business on 16 July, not to use the weekend, if necessary, to assemble the necessary funds, and to take up securing the bank cheque first thing on Monday 19 July. Indeed, prudence dictated arranging those matters substantially earlier even than that. (Recall Mrs Beardmore, on 15 July, asking Mr Karavelas to provide the funds on 16 July, for purposes of completion on 19 July.)

[31] The defendants contend that the place of settlement was their solicitors' office at Caloundra, because that was agreed, or "nominated" by them as sellers (cl 5.1(2)). The evidence discloses that as at 19 July, the relevant certificate of title was held by Griffiths Parry at their Caloundra office.

[32] By letter dated 16 June 2004, Carswell and Company asked Griffiths Parry to "advise where settlement will be effected". On 21 June 2004, Griffiths Parry, in a letter to Carswell and Company, said:

"We hold the unencumbered title deed in this office in readiness for settlement."

That accorded with usual practice, according to Mr Griffiths, which is that completion occurs in the solicitor's office where the certificate of title is held. Mrs Beardmore gave evidence that when she read that passage, she realized settlement was to take place at the Caloundra office of Griffiths Parry (transcript p 121, ll 1-20, p 125, ll 30-40).

[33] There was debate whether the words "in this office" were to be read as specifying the place for settlement, or just confirming where the deed then was. It would only have been relevant as between the parties, if the former. Mr Griffiths said he meant the letter to be read that way, and one infers from subsequent events it was.

[34] Carswell and Company did not thereafter suggest that settlement should occur elsewhere, and in fact on 8 July 2004 sent Griffiths Parry a "settlement statement" which specified, against the heading "settlement place", "office of Griffiths Parry Lawyers" (Ex 11).

[35] The parties thereafter proceeded on the basis settlement was to occur at the Griffiths Parry offices in Caloundra. Brooke White, as agent for Carswell and Company, was sent to collect the bank cheque from the ANZ Bank in Caloundra and take it back to Griffiths Parry's offices where completion would be effected. Mrs Beardmore gave evidence that she understood settlement was to occur at those offices.

[36] The above communications, of 16 and 21 June and 8 July, evidence an agreement that completion occur at the offices of Griffiths Parry, and the parties acted consistently with that. Alternatively, by the letter of 21 June, the defendants through their solicitors should be seen as having nominated that as the place of settlement.

[37] Mr O'Shea SC, for the plaintiff, relied on this passage in Lowe v Evans (1989) 1 Qd R 295, 298, for a contention there must, to satisfy a provision like cl 1.5(2), be what he termed a "specific agreement":

"The question here is whether some such agreement on the time for settlement was, within the meaning of cl.22, made by the parties, so as to displace the other general provisions of that clause by which the time for completion is left at large between 9.00 a.m. and 5.00 p.m. on the date for settlement. It may be accepted that, in order to attract the application of the first sentence of cl.22, mere advice by one conveyancer or party to the other of a convenient time is not sufficient. What is required is that the time for completion be 'agreed upon', for it is 'in the absence of agreement' that the more general 9.00 a.m. to 5.00 p.m. prescription is to prevail."

That is not to say an agreement may not be inferred from conduct, and that is the case here. What Griffiths Parry said in the letter of 21 June as to the place for settlement was not "mere advice", it was the delineation of that matter, sufficiently adopted by Carswell and Company on 8 July, and confirmed as the definitive position by the parties' conduct otherwise.

[38] In paragraph 22(b) of the amended statement of claim, the plaintiff alleges an agreement that the payment of the balance purchase price by direct transfer to the trust account of Griffiths Parry would discharge the plaintiff's obligation, and the plaintiff alleges that it was able to transfer the funds by about 4pm on 19 July 2004.

[39] The suggested agreement that this suffice derives from a fax of 8 July 2004 from Griffiths Parry to Carswell and Company, in which Griffiths Parry say:

"We also advise that we have been instructed to request that the full amount of the settlement sum be paid to the credit of our trust account."

On the same day, Carswell and Company faxed Griffiths Parry in these terms:

"We advise that on Monday 19 July 2004 we will telegraphically transfer the full amount of settlement funds to your trust account as per your instructions. Please advise us of details of your trust account."

[40] I accepted Mrs Beardmore's evidence that the purpose of these communications was to identify "Griffiths Parry Trust Account" as the intended payee of the bank cheque to be provided at completion (transcript p 119, ll 51-55, p 121, ll 53-55), and that Griffiths Parry did not (in the end) accept that payment might be effected by telegraphic transfer into its trust account.

[41] It is helpful to track the progress of this possible mode of performance through the evidence. One recognizes, first, that the contractual stipulation (cl 2.5) is payment of the balance purchase price be made by bank cheque.

[42] Carswell and Company raised the issue of telegraphic transfer in their letter of 8 July 2004 (para 39 above). Then on 15 July 2004 those solicitors said they would let Griffiths Parry know whether the money would be by TT or by the provision of a cheque (Ex 62). It is clear that it was the cheque method which was adopted. See Ex 45, in which it was confirmed the cheque would be collected from the ANZ Bank at Caloundra. See also Ex 67, and Ex 40 in which Carswell and Company confirm arrangements for the provision of a cheque.

[43] In the result, although payment by telegraphic transfer was floated, that method was not pursued, and the parties are to be taken to have adhered to the contractual position set up by clause 2.5, requiring payment by bank cheque.

[44] In any case, the plaintiff was not in a position to transfer the funds into the Griffiths Parry trust account either by 4pm, or 5pm on 19 July 2004. At best, any such transfer would take place at 8am on 20 July 2004, a day late and contrary to the contractual stipulation (Ex 49, 64 and transcript p 156, l 41 to p 157, l 41).

Plaintiff's plea of being ready willing and able

[45] The plaintiff pleads that it was at all material times ready willing and able to complete. In paragraph 22 of the amended statement of claim it alleges:

"On the day of completion [the plaintiff] was ready willing and able to tender the balance purchase price in performance of the contract."

"At approximately 5.00pm on 19 July 2004, the staff at the ANZ Bank at Caloundra were in the process of drawing the bank cheque in favour of Griffiths Parry Trust Account;"

[46] The fact is, however, that by 5pm on 19 July 2004, the time by which completion was to be effected, the balance purchase monies were simply not available through the Caloundra branch of the ANZ Bank.

Did the defendants contribute to the plaintiff's inability to complete?

[47] The plaintiff pleads that by not advising the plaintiff that they had determined not to grant any further extension, as confirmed in the subsequent contract to sell to Belela Pty Ltd (per its special condition), when dealing on Friday 16 July with the plaintiff's last request for an extension, the defendants "induced the plaintiff into a belief that a further extension from 19 July 2004 to 23 July 2004 would be granted".

[48] I reject that contention, substantially for the reasons dealt with above under the heading "the reason for non-completion".

[49] The evidence of Mr Karavelas, in particular, does not support any conclusion that he, as the relevant representative of the plaintiff, was induced by the defendants into a belief that the extension sought on 16 July would be granted. I refer again to his evidence summarized above, and to the evidence of Mrs Beardmore. He did not give evidence that when he saw the letter faxed at 5.10pm on 16 July, which occurred between 8am and 8.30am on Monday 19 July, he formed the view an extension would be granted. Any such view would in any event have been utterly unjustified.

[50] Mr O'Shea primarily rested his contention of unconscionability on the content of that fax of 16 July, sent by Griffiths Parry at 5.10pm that day, parts of which I have set out in paragraph 15 above. He submitted that because the defendants' solicitors' then instructions were that no extension should be granted - those being the instructions given the day before by the defendant Dudley McKay (before the request for extension of 16 July had been brought to his attention) - the fax was misleading, in leaving open any possibility an extension might be granted. Mr O'Shea criticized the form of the letter on the basis it unfairly left a "general impression" to that effect.

[51] The letter was precisely in accordance with the instructions of the defendants given the day before, while acknowledging the request for the further extension, about which the defendants' specific instructions had not by then been forthcoming. The writer fairly cautioned that the plaintiff should proceed on the basis that settlement would be required on 19 July.

[52] I consider it was perfectly proper for the defendants' solicitors to have written in those terms, and that they were not misleading.

[53] There was nothing unconscionable (para 26 amended statement of claim) about the defendants' termination of the contract for the plaintiff's failure to complete.

[54] It is not necessary for me to discuss cases in any detail. None of them affords the plaintiff any comfort in these factual circumstances.

[55] Consistently with re Ronim Pty Ltd [1998] QCA 444; (1999) 2 Qd R 172 (cf. Jeppesons Road Pty Ltd v Di Domenico & Anor (2005) QCA 391, para 22), Lowe v Evans (1989) 1 Qd R 295, Tanwar Enterprises Pty Ltd v Cauchi [2003] HCA 57; (2004) 217 CLR 315 and Romanos v Pentagold Investment Pty Ltd [2003] HCA 58; (2003) 217 CLR 367, the defendants' termination of the contract must in these circumstances be upheld and a decree for specific performance denied.

[56] The principle on which the plaintiff seeks to rely was expressed in the following passage in Tanwar (para 58):

"...where accident and mistake are not involved, it will be necessary to point to the conduct of the vendor as having in some significant respect caused or contributed to the breach of the essential time stipulation."

The relevant question was identified in the following terms in Romanos (para 25):

"...one asks...whether the conduct of the vendors caused or contributed to a circumstance rendering it unconscientious for them to insist upon their legal rights to terminate the contracts."

[57] Factually, the plaintiff has plainly not satisfied that requirement. It is pertinent to note another observation by the High Court in Tanwar (para 37), that:

"...the court will not readily relieve against loss of a contract for sale validly rescinded by the vendor for breach of an essential condition; and, in particular, equity was not authorised to reshape contractual relations into a form the court thinks more reasonable or fair where subsequent events have rendered one side's situation more favourable".

[58] The plaintiff's proceeding is dismissed with costs to be assessed.

[59] On 21 July 2004, the plaintiff registered caveat number 707910671 over the subject land, alleging an estate in fee simple under the instant contract. That is the proceeding commenced by the plaintiff in order to establish the interest alleged in the caveat. It follows, the proceeding being dismissed, that there should be an order, under s 127 of the Land Title Act 1994, that the plaintiff forthwith secure the removal of the caveat. Mr O'Shea accepted this order should be made in the event of the dismissal of the proceeding.