Supreme Court of WA|2002-05-03|Before: Hasluck J

Maroubra Pty Ltd v Murchison Queen Pty Ltd & Ors [2002] WASC 98 (3 May 2002)

JURISDICTION : SUPREME COURT OF WESTERN AUSTRALIA

CITATION : MAROUBRA PTY LTD -v- MURCHISON QUEEN PTY LTD & ORS [2002] WASC 98

Contract - Whether intention to create legal relations manifested - Negotiations for sale of mine - Memorandum of Understanding signed by parties - Agreement allegedly induced by misrepresentations - Whether agreement repudiated by subsequent conduct - Turns on own facts

BP Exploration Co (Libya) Ltd v Hunt (No 2) [1979] 1 WLR 783

BP Refinery (Westernport) Pty Ltd v Hastings Shire Council (1977) 180 CLR 266

Casinos Austria International (Christmas Island) Pty Ltd v Christmas Island Resort Pty Ltd, BC9807016; SCt of WA; 16 December 1998

Maguire & Tansey v Makaronis [1997] HCA 23; (1997) 188 CLR 449

Mercantile Bank of Sydney v Taylor (1891) 12 LR(NSW) 252

Pavey and Matthews Pty Ltd v Paul [1987] HCA 5; (1987) 162 CLR 221

1 HASLUCK J: The plaintiff in these proceedings, Maroubra Pty Ltd, seeks declaratory relief in relation to the purported sale of a mining operation being conducted on Mining Lease 20/263 known as the Eagle Hawk Mine. The first and second defendants deny that the plaintiff is entitled to the relief sought. By way of a counterclaim, they seek certain declarations and other forms of relief including an order for specific performance that the plaintiff do transfer to the first defendant, Murchison Queen Pty Ltd, the relevant mining lease in accordance with the terms of a Memorandum of Understanding or "MOU" dated 13 December 1999.

2 This brings me to the position of the third defendant, Steve Uremovic. This defendant was not represented at the trial of the action. The solicitors representing the first and second defendants had been representing the third defendant but ceased to act in that capacity several months prior to the trial date. Attempts to contact him were unsuccessful and the Court was therefore obliged to assume that he was not aware that the matter had been entered for hearing or of the trial date. It seemed that he had taken no steps to keep himself informed as to the progress of the legal proceedings.

3 Against this background, and having regard to the fact that on the face of the pleadings there appeared to be little likelihood of any order adverse to the third defendant being made against him, the trial was allowed to proceed. There was a faint prospect that the third defendant, as an investor who had provided some financial support to the defendants, might arguably have some claim to the return of monies he had outlaid in the course of the relevant negotiation. I note, however, that when the third defendant was represented by solicitors he did not appear to press such a claim and such a claim is not reflected on the pleadings.

4 It became apparent from the evidence that prior to 1997 a company known as Westgold Resources NL and its subsidiaries had a large number of mining tenements in the Cue area generally known as Tuckabiana. These tenements were more or less contiguous. Castle Hill Resources NL was a subsidiary of Westgold and was the proprietor of Mining Lease 20/263 known as the Eagle Hawk Mine. To avoid any misunderstanding, I will henceforth refer to the mining tenement as the "Eagle Hawk Lease" and to the mining operation (including the tenement), related equipment and extracted ore as the "Eagle Hawk Mine".

5 Westgold's view was that the gold prospectivity associated with the Eagle Hawk Lease was poor and that known gold resources would be difficult to extract profitably. Castle Hill therefore agreed to sell the Eagle Hawk Lease to Maroubra, the directors of which included Mr Terrance Reid, Mr Reid's wife Gwen Reid and his son Shayne Reid.

6 The terms of the sale were set out in a written agreement described as a Purchase, Sale and Call Option Agreement ("the Castle Hill Agreement") dated 31 July 1997. The effect of the agreement was that Castle Hill agreed to transfer the Eagle Hawk Lease to Maroubra for a consideration of $100 plus royalty payments calculated by reference to a formula set out in the agreement.

7 Maroubra agreed to give Castle Hill an option to repurchase the tenement for $100 upon the happening of various events such as the expiry of two years from the date of the agreement, or the expiry of 30 days after a breach of the agreement remained unremedied, or in the event of Maroubra not carrying out mining operations for a period of three months.

8 Clause 8 of the agreement provided that if in the reasonable opinion of Castle Hill, the possibility of a forfeiture of the lease was imminent, Castle Hill could take any action which it thought reasonably necessary to rectify or prevent any such imminent default.

9 Clause 12 of the Castle Hill Agreement was to the effect that Maroubra was not to transfer, mortgage, charge or otherwise encumber all or any of its rights or obligations under the agreement or the tenement except with the written consent of Castle Hill. Mr T Reid guaranteed performance of the agreement.

10 The Eagle Hawk Lease was transferred into the name of Maroubra. However, the effect of the agreement was that Castle Hill held a form of transfer in its favour executed by Maroubra so that if Castle Hill wished to exercise its option it could merely date and lodge the transfer without having to go to the trouble of getting Maroubra to execute a transfer at that time.

11 Mr T Reid gave evidence to the effect that he and his son Shayne commenced work at the mine site. They were assisted by a friend of the Reids named John Benton. In the course of their work on the site they became acquainted with the second defendant, Jefto Radovanovic, who had an interest in a mine nearby.

12 I understand from the evidence of Shayne Reid that by May 1998 the scale of the operations on the lease had been reduced. Shayne Reid said in evidence that whilst working at the Eagle Hawk Mine he lived in Cue with his wife and children. Until May 1998 he was basically at the mine every day working as a winch operator but after that he did isolated work on the mine for maintenance and de-watering.

13 Mr T Reid acknowledged under cross-examination that mining operations at the Eagle Hawk Mine had ceased by September 1998. Thereafter, he said, two friends of the Reid family, Mr Higham and Mr Giles, checked the mine site on a regular basis. Mr Higham confirmed in his evidence that the mine was no longer operational after September 1998.

14 In mid 1998 some discussions took place between Mr T Reid and Mr Radovanovic concerning the future of the mine. The nature and effect of these discussions were matters of acute controversy at the trial of the action. It will therefore be necessary for me to look at this aspect of the matter in more detail in due course. However, for the sake of an orderly narrative, it will be sufficient to say for the moment that on the plaintiff's pleaded case it is said that in or about mid 1998 at the mining lease Mr Radovanovic verbally offered to purchase the lease, mined ore and all equipment for $534,000. Subsequently, it is alleged, the plaintiff by its director Mr T Reid verbally accepted the offer at the second defendant's residence in Cue. For ease of reference, I will call the verbal agreement allegedly constituted by these events the "alleged contract of sale."

15 Mr T Reid said in his evidence in chief that in or about mid 1998 Mr Radovanovic approached him at the mine site. Mr Radovanovic said that he had a company that could buy the mine if Mr Reid was interested in selling. Mr Radovanovic asked how $534,000 sounded for "the lot". When Mr Reid enquired whether this was on a walk in walk out basis, Mr Radovanovic, according to Mr Reid responded "Yes, I've got a buyer for that." Mr Reid said he would think about the proposal. This discussion is said to have taken place in the presence of Mr Benton and Mr Reid's son Shayne.

16 According to Mr T Reid, later that afternoon he and John Benton went into Cue, whereupon a further conversation took place on the rear verandah of Mr Radovanovic's home. According to Mr Reid, in his evidence in chief, he said: "We are happy with the price." Mr Radovanovic then replied: "Good. I will have that money for you in two weeks." Mr Radovanovic indicated that the purchase price would be coming from various sources and that his wife would draw up the necessary documentation because she was a solicitor.

17 Mr T Reid went on to say in his evidence in chief that Mr Radovanovic rang about every two weeks promising the money. He also sent a draft document described as an Agreement for Sale of Mining Tenement in which Maroubra was named as vendor and a firm called Gascoyne Mining of 271 Stewart Street, Cue was named as the purchaser. The purchase price of $534,000 was to be paid by way of a non-refundable amount of $1,000 to be paid on the signing of the agreement, a sum of $150,000 within 45 days thereafter, and with the balance to be paid within 90 days.

18 Mr T Reid said in evidence that he read the document. He was somewhat equivocal as to when he received the document but I am satisfied he received it in mid 1999 as alleged in his evidence in chief, that is to say, shortly after the discussions concerning Mr Radovanovic's proposal to buy the mine. Mr Reid told Mr Radovanovic later that he would not sign the document or transfer the tenement unless the purchaser was able to pay the full purchase price.

19 On the plaintiff's case at trial, this state of affairs ran on for many months, that is to say, promises were made by Mr Radovanovic as the prospective purchaser that the purchase price would be forthcoming but nothing eventuated. It was common ground at the trial that there is no signed document of any kind constituting or evidencing an agreement for the sale of the Eagle Hawk Mine by Maroubra to Mr Radovanovic or any firm or company associated with him. The unsigned Gascoyne Mining document appears to be the only documentary evidence bearing upon Mr Radovanovic's wish to acquire the Eagle Hawk Mine. It is not clear from this document whether the first defendant, Murchison Queen, was to be the purchaser of the mine. I note in passing that by s 119(2) of the Mining Act 1978 a legal or equitable interest in or affecting a mining tenement is not capable of being created or dealt with except by an instrument in writing signed by the person dealing with the interest.

20 The first and second defendants by their pleaded case deny that there was an offer and acceptance of the kind relied upon by the plaintiff giving rise to a concluded and enforceable contract for the sale of the Eagle Hawk Mine. Mr Radovanovic accepted in his evidence in chief that he was involved in discussions with Mr T Reid concerning a sale of the mine for $534,000. His evidence was to the effect that no agreement was made because he had to go back to his associates in order to organise finance for the deal. His position was less clear under cross-examination. I will return to his testimony in that regard later.

21 I note also that it was common ground at the hearing before me that Maroubra had not obtained any written consent from Castle Hill of the kind envisaged by cl 12 of the Castle Hill Agreement to a transfer of the Eagle Hawk Mining Lease to Mr Radovanovic. At trial, Mr Reid's stance was that he foresaw no difficulty in that regard. The consent could be easily obtained if matters reached a point when a transfer had to be executed. Nonetheless, there was no evidence before me of any formal approach being made to Castle Hill for their consent in the months following the making of the alleged agreement.

22 I pause to say that Mr T Reid produced at the trial of the action a previously undiscovered letter dated 5 November 1998 from Westgold to his son Shayne Reid with a view to supporting the plaintiff's contention that Westgold's consent had been sought and obtained. This letter did not fit comfortably with the plaintiff's case. The letter makes no mention of a proposed sale of the mine to a third party purchaser such as the first defendant and simply indicates that Westgold might be prepared to sell the tenement for $100,000 if a letter of reference from a respectable banking institution was provided to confirm that funds were available to the purchaser to settle the proposed sale. There is no hint of urgency in the letter, or anything to suggest that as at 5 November 1998, being at least three months after the making of the alleged contract of sale on the plaintiff's case, the plaintiff was under a binding obligation to convey an unencumbered title to the first defendant in order to complete the alleged contract of sale.

23 I have noted already that the first and second defendants appeared to concede at trial that a sale of the Eagle Hawk Mine for $534,000 was discussed in mid 1998. However, they denied that a binding contract of sale was made between the parties. The case for the first and second defendants was that the events in mid 1998 were followed shortly afterwards in September 1998 by arrangements whereby Mr Radovanovic would be the caretaker of the Eagle Hawk Mine while he was raising funds through his associates to buy the mine. He would be at liberty to show prospective investors around the mine. The defendants say that the alleged Caretaker Agreement included an implied term whereby the second defendant, Mr Radovanovic would receive credit for the reasonable costs incurred by him for his caretaker work and expenses. He would be entitled to set off these costs against the purchase price of the Eagle Hawk Mine.

24 According to Mr Radovanovic, Mr T Reid left Cue in September 1998 and did not carry out any work at the Eagle Hawk Mine thereafter. Mr Radovanovic, as part of his caretaker role, did all the repairs, maintenance and dewatering of the mine, being work which occupied approximately three to five days in every month and involved travelling to and from the mine from Cue, a distance of approximately 50 kilometres. In the meantime, he was trying to raise finance to purchase the mine.

25 The evidence of Mr Radovanovic was that in March 1999 he entered into an Option Agreement with Mr John Buckley of Buckley & Associates which provided that firm with an opportunity to acquire a 50 per cent share in the Eagle Hawk Mine in exchange for Buckley carrying out a feasibility study and raising funds for the purchase of the mine. With a view to securing his position as prospective purchaser, Mr Radovanovic sent Mr Reid in March 1999 a cheque for $5,000 as a down payment on the purchase of the mine. The cheque was drawn against the account of Mr Radovanovic's company Radman Mining Pty Ltd. The cheque was cashed and cleared through the Radman Mining account on 26 March 1999.

26 It seems that Buckley did not proceed with the option arrangements negotiated with Mr Radovanovic. However, in mid 1999, according to the evidence of Mr Brett Dickson of Castle Hill, Buckley offered to purchase certain mining tenements including the Eagle Hawk tenement from Castle Hill for $120,000. Mr Dickson said that with a view to including the Eagle Hawk Lease in the sale, Castle Hill exercised its option to take back the tenement from Maroubra on the grounds that Maroubra had not made royalty payments and had not carried out mining operations on the tenement for three months. In the event, however, the transfer executed by Maroubra and held in escrow by Castle Hill was not lodged for registration because the negotiations with Buckley fell through. This fact is evidenced by letters from Mr Dickson to Buckley dated 22 November and 8 December 1999 respectively.

27 Before leaving this aspect of the matter, I digress briefly to note that consistently with the expenditure obligations under the Mining Act 1978, an operations report for the Eagle Hawk Lease in respect of the period 18 October 1998 to 17 October 1999 was lodged with the Department of Minerals and Energy on 28 October 1999 confirming that $17,567 had been spent during the relevant period consisting of repairs and maintenance $2,300; mine dewatering $6,700; metallurgy report $3,815; and travel and mine inspection cost $4,000 plus administration of $1,000.

28 The relevant form suggests that the form was lodged by Hetherington Exploration and Mining Title Services Pty Ltd on behalf of Castle Hill as holder of the relevant tenement. There is a controversy between the parties as to how these figures were arrived at.

29 The first and second defendants say that they provided the figures in the operations report to Mr Reid and that such figures are referable to expenses incurred by the defendants. They say they engaged Buckley & Associates to do metallurgy and assay reports for the mine. Mr Radovanovic said in evidence that on 15 November 1999 he issued plaint number 16/990 to forfeit the Eagle Hawk Lease to himself because Reid had not contributed any expenditure for the year ending 17 October 1999. The case for the plaintiff was that the defendants did not incur the expenses in question. Further, and in any event, expenses incurred by the defendants (if any) were incurred independently of any so-called caretaker agreement and with a view to getting Buckley interested in the mine as a prospective investor.

30 In the course of his evidence Mr Radovanovic said that in the period following the mid 1998 negotiations, while he was trying to raise finance, he asked Mr Reid on a number of occasions to provide him with an option to purchase the mine. It was against this background that he pursued his negotiations with Buckley and sent Mr Reid a cheque for $5,000 in March 1999 as a down payment in the hope that this would secure the option agreement he was seeking to achieve.

31 Mr Radovanovic went on to say that by November 1999, as far as he was concerned, any negotiations or arrangements entered into with Mr Reid on behalf of Maroubra for a sale of the mine for the sum of $534,000 were at an end because Castle Hill had resumed control of the tenement. Maroubra might continue to be the owner of equipment and stockpiles of ore on the site but so long as it was not in a position to transfer title to the mining lease, no sale could proceed. It was accepted by the first and second defendants at the trial of the action that the title remained registered in the name of Maroubra throughout. On their case, however, the reality was that the Maroubra mining operations were at a stand still and the consent of Castle Hill was necessary before any further arrangements could be made.

32 The plaintiff's case at trial was to the contrary. The plaintiff's case was that a binding agreement was brought into existence in mid 1998 and the alleged contract of sale remained in force thereafter. It was not performed because the first and second defendants failed to come up with the agreed purchase price of $534,000, notwithstanding Mr Radovanovic's frequent protestations and promises that he could raise the money.

33 It is against this background that I must now proceed to the events of December 1999.

34 The plaintiff contends on its pleaded case that in or about December 1999, by telephone, Mr Radovanovic represented to Mr T Reid that he had engaged an accountant called Murray Rowett to organise the funds necessary to complete the purchase of the lease, mined ore and the equipment. Mr Radovanovic wished Reid to meet with him at Rowett's office in Perth to complete the transaction.

35 It is then pleaded that on 13 December 1999 at Rowett's office Mr Radovanovic verbally represented that he required the transaction to be in two parts. The first would be the purchase of the Eagle Hawk Lease for $50,000 in respect of which a deposit of $30,000 would be paid. He and his wife were preparing a second document for the second part which would be an acquisition of the mined ore and equipment for $484,000. Maroubra would receive a document in respect of the purchase of the mined ore and equipment in a matter of days so that the total transaction could proceed.

36 It is pleaded further that in reliance upon these representations Maroubra by Reid met with Rowett, Mr Radovanovic and the third defendant, Steve Uremovic at Rowett's office on 13 December 1999. At that meeting Rowett drafted a Memorandum of Understanding or MOU. This was signed by the parties and Mr Uremovic then handed to Reid a bank cheque in favour of Westgold for $30,000.

37 It is pleaded further that in the course of the meeting Mr Rowett, acting as agent/accountant to Mr Radovanovic, represented to Maroubra, in effect, that the MOU was an interim document pending preparation of an agreement by a solicitor and/or not an agreement which would give rise to binding and enforceable obligations. Implicit in the representations was the notion that Mr Radovanovic would not seek to enforce any parts of the MOU or the MOU generally save in circumstances where he had tendered to Maroubra payments to the total of $534,000 for the purchase of the lease, mined ore and the equipment. Induced by these representations and in reliance upon the same Maroubra executed the MOU.

38 The first and second defendants admit executing the MOU but otherwise deny the allegations just mentioned. They say further that on or about 13 December, and pursuant to a contract constituted by the MOU, the first and second defendants paid or caused to be paid the sum of $30,000 to Maroubra in the form of a cheque drawn in favour of Castle Hill.

39 Again, the evidence presented on each side reveals striking differences between the parties.

40 Mr Reid said in evidence that as a consequence of the telephone call he received from Mr Radovanovic he was able to negotiate an arrangement with Castle Hill whereby the Eagle Hawk Lease would be "transferred" to him for $40,000, bearing in mind that the Castle Hill negotiations with Buckley had now fallen through. In strict analysis, no formal transfer of the lease was required because the tenement had remained registered in the name of Maroubra throughout. In essence, however, it was agreed that Maroubra was free to deal with the lease on the assumption that Castle Hill would relinquish any residual interest in the same for a consideration of $40,000.

41 It was against this background that Mr Reid signed the MOU and arranged for Mr Uremovic's cheque for $30,000 to be made out in favour of Castle Hill. Mr Reid added to that amount $10,000 of his own funds with the result that the requirements of Castle Hill were satisfied. It would then only remain for the balance of $20,000 due to Maroubra under the MOU to be paid on 13 February 2000 as prescribed by the MOU. Mr Reid's account of these events is corroborated by a letter from Westgold to Maroubra dated 20 December 1999, signed on behalf of both parties, in which Westgold acknowledged that it had no further interest in the tenement and that it had received the purchase price of $40,000 from Maroubra.

42 Mr Reid said in his evidence in chief that he signed the document on the basis that this was simply part of a broader transaction under which he would sell the lease, all plant and equipment on the mine site and the ore together for $534,000. It had been put to him by Mr Radovanovic that it was necessary to split the transaction in the manner proposed for tax reasons and he went along with that suggestion in reliance upon what had been said to him.

43 According to Mr Rowett the Memorandum of Understanding or MOU was prepared by him as a result of having been contacted by Mr Radovanovic who required assistance in the course of raising funds for his company Murchison Queen for a mine development. It was in that context that he met with Mr Radovanovic, Terry Reid and Mr Uremovic on 13 December 1999 and prepared the document by asking questions of the various parties in his office.

44 Mr Rowett said in the course of his evidence in chief that prior to the signing of the document he told Mr Reid that the document was an interim step pending the preparation of the formal contract by a solicitor. I note in passing that it does not appear from the evidence of Mr Rowett that he was given any information by any of the parties concerning an existing agreement for the sale of the Eagle Hawk Mine for $534,000.

45 The parties to the MOU prepared by Mr Rowett are the third defendant, the plaintiff and the first and second defendants. Omitting the formal parts and signatures, the document reads as follows:

• Murchison Queen Pty Ltd is acquiring the Eagle Hawk mine being number M 20/263 from Maroubra Pty Ltd and being located district of Cue Western Australia.

• The agreed purchase price of acquiring the Eagle Hawke mine being $50,000, being payable as to a deposit of $30,000 and the balance of $20,000 being payable 13 February 2000.

• It has been agreed that Steve Uremovic will advance to Murchison Queen Pty Ltd the deposit amount of $30,000.

• Steve Uremovic will lend to Murchison Queen Pty Ltd the sum of $30,000 for a period of 90 days.

• Upon advance of the sum of $30,000 Jefto Radovanovic will transfer to Steve Uremovic 20 shares of his present holding in Murchison Queen Pty Ltd, representing 20% of the issued capital of Murchison Queen Pty Ltd.

• The loan amount of $30,000 is repayable by Murchison Queen Pty Ltd to Steve Uremovic in full on 13 February 2000.

• The unpaid balance of $20,000 due to Maroubra Pty Ltd shall accrue interest of 10% annually calculated on a daily basis.

• The title to the Eagle Hawk mine will transfer to Murchison Queen Pty Ltd on the payment of the unpaid amount of $20,000 (including accrued interest)."

46 Mr Radovanovic said in evidence that he understood that the MOU and the payment of $30,000 would provide Murchison Queen with the right to secure title to the Eagle Hawk Lease from Maroubra. Had that not been the case he would never have signed the document and nor would he have permitted Uremovic to hand over $30,000 to Reid. As far as he was concerned, at no time did Reid (or Rowett) say that the MOU was subject to a legal agreement being prepared by solicitors.

47 The tenor of Mr Radovanovic's evidence was that in his mind the arrangements made in mid 1998 were no longer of any effect because Castle Hill had resumed control of the lease. The effect of the MOU was to constitute a discrete transaction for transfer of the mining lease to Murchison Queen and without any requirement that further documents be prepared or executed. The first and second defendants recognised an obligation to pay the balance of $20,000 due on 13 February 2000.

48 An extension of time to pay the outstanding balance of $20,000 was sought by Murchison in early 2000. Under cross-examination, Mr T Reid referred to this aspect of the matter as follows:

"Mr Reid, did Mr Radovanovic ever refuse to pay the $20,000 owing under the memorandum of undertaking? --- No, sir. He always told me, 'Within 2 weeks. The money will be there within 2 weeks.

So he was always willing to pay. Yes? --- Always 2 weeks, 'The money is 2 weeks off.'

Insofar as his request for an extension of time in which to pay ---? --- Yes.

--- did you respond to that request? --- I spoke to him on the phone, sir.

What did you say? --- 'Well, do your best, Jeff.'

So you were prepared to grant him an extension of time? --- Well, we did. We spoke and said, 'Do your best.'

We know that you then engaged the services of Mr Metaxas --- ? --- Yes.

--- to issue a letter on your behalf? --- Yes.

Or should I say, more correctly, to issue a letter on Maroubra's behalf. Correct? --- Yes.

We have sighted that letter, page 64? --- Yes. 64, yes.

You confirm that that letter was written pursuant to your instructions to Mr Metaxas? --- Yes.

Did you read a copy of that letter before it was issued to the recipient Mr Radovanovic? --- I think - I would have done. I would have read it. I can't remember reading it but I would have read it; I would have read it."

49 The letter written by the plaintiff's solicitors, Metaxas & Vernon, dated 22 March 2000, to Mr J Radovanovic at 271 Stewart Street, Cue reads as follows:

"Dear Mr Radovanovic

I act for Maroubra Pty Ltd. My client has provided to me a copy of a memorandum of understanding between Steve Uremovic, my client, Murchison Queen Pty Ltd and yourself dated 13 December 1999.

My client denies that there was ever any intention that this document would give rise to any legally enforceable rights. Rather, the document is as it purports to be, a memorandum of an understanding but not a contract or an agreement.

I am further instructed that no payments have been made to my client pursuant to the agreement.

I would be obliged if you would confirm by written response that you agree with my client's position that there is no legally enforceable agreement in place.

If you contend that there is an enforceable agreement in place then my client's instructions are that the document referred to was part of a larger transaction involving the possible sale of the mine lease and plant and equipment at the mine site for a total of $530,000. Payment of the entire purchase price has not been made. My client is of the view that he was induced to enter into the agreement by your misleading and deceptive conduct. By reason of that conduct my client elects to rescind the agreement.

Yours faithfully

Arthur Metaxas

cc: client"

50 I note in passing that the assertion in the letter that no payments had been made to the plaintiff was literally true. It is apparent from the narrative, however, that the sum of $30,000 had been paid to Castle Hill at the plaintiff's direction and on the plaintiff's behalf. It is significant that the letter does not make any demand for payment of the sum of $20,000 which, according to the MOU, should have been paid by Murchison on 13 February 2000.

51 It is significant also that the author of the letter does not begin by asserting that the MOU was part of a "larger transaction". That thought seems to have been put up more as a bargaining position than as an assertion of a binding agreement between the parties which remained in force. I note also, that the larger transaction is described as one involving the "possible" sale of the Eagle Hawk Mine.

52 As a consequence of receiving this letter, on 23 March 2000, Mr Radovanovic lodged a Mining Act caveat claiming an interest in the subject lease referable to the MOU. It is not entirely clear to me why he, being simply a director of the prospective purchaser under the MOU, Murchison Queen Pty Ltd, should be thought to have a caveatable interest in the relevant tenement. The evidence is rather confused on this point, but I am left with an impression that Mr Radovanovic was simply not accustomed to distinguishing between his own position and the position of his company. On 27 June 2000 Mr Radovanovic lodged plaint number 51/990 in the Warden's Court to have the lease transferred to Murchison Queen.

53 On 30 June 2000, the plaintiff company filed the writ of summons in this action. This produced a response from Williams & Co, a firm of solicitors acting on behalf of the first and second defendants. They wrote to the plaintiff's solicitors by letter dated 19 July 2000. The letter addresses certain procedural matters and goes on to say:

"3. this firms initial instructions indicate that:

3.1 paragraph 2 of your client's Statement of Claim is incorrect, in that your client is not and/or was not the lessee of mining lease 20/263 ("the Lease");

3.2 your client's Statement of Claim fails to particularise this firms clients payments (pursuant to the memorandum of understanding dated 13 December 1999) to a Director of your client, Mr T Reid. For example, on or about 13 December 1999, this firm's clients caused a bank cheque in the sum of $30,000.00 to be paid to Mr Reid;

3.3 despite their previous request for an extension of time within which to do so, this firm's clients are now ready, willing and able to complete payment of the purchase price (detailed in the above Memorandum of Understanding).

We estimated the balance of the purchase price (detailed above) is $20,000.00 in addition to interest at the rate prescribed in the Memorandum of Understanding. Please contact the writer to confirm the correct balance of the purchase price, in order that same may be remitted without further delay."

54 The plaintiff did not confirm the amount due as requested. Pleadings were exchanged by the parties. The plaintiff has consistently maintained that it is not bound by the arrangements reflected in the MOU document and is therefore not bound to accept the balance payable under the MOU agreement of $20,000 plus accrued interest. I note in passing that a claim based on the alleged contract of sale was not reflected in the statement of claim until it was clear the matter would proceed to trial.

55 I note also that amendments to the first and second defendants' defence and counterclaim to include claims referable to the Caretaker Agreements and misrepresentations allegedly made in relation to the same were not formulated until 9 January 2002, that is to say, shortly before the trial began. Neither party raised any issue on the pleadings as to whether the agreements in question complied with s 119(2) of the Mining Act but, as will appear later, I doubt that anything turns on this.

56 The plaintiff seeks a declaration that the MOU is not a contract enforceable between the parties. The plaintiff says that it was induced to execute the document by various misrepresentations. In that regard, reference is made to the plaintiff being led to believe that the MOU was simply a step in the completion of the alleged contract of sale and, in any event was an interim document pending preparation of a formal document by a solicitor. It was not a document which would give rise to binding and enforceable obligations. Further, the plaintiff contends, it was implicit in the representations that the first defendant would not seek to enforce the MOU without paying the full price of $534,000. The plaintiff says also, in the alternative, that the MOU should be set aside as induced by false and misleading conduct.

57 The defendants say that the alleged contract of sale did not give rise to binding obligations and, in any event, was no longer binding upon the parties when the MOU was signed. The defendants say further that the agreement constituted by the MOU remains in force and, subject to payment of the outstanding balance of $20,000, the defendants are entitled to enforce specific performance of the agreement.

58 Before turning to the issues raised by the pleadings, it will be useful to look at some legal principles bearing upon the matters in dispute.

59 It is of the essence of contract, regarded as a class of obligations, that there is a voluntary assumption of a legally enforceable duty. An intention to contract is essential. In Taylor v Johnson [1983] HCA 5; (1983) 151 CLR 422 at 428 a majority of the High Court indicated, consistently with what has been described as the "objective theory" of contractual assent, that the law is concerned, not with the real intentions of the parties, but with the outward manifestations of those intentions.

60 There are various decided cases to similar effect. For example, in Australian Broadcasting Corp v XIV Commonwealth Games Ltd (1988) 18 NSWLR 540 at 549 Gleeson CJ indicated that the relevant intention of each party is the intention which was reasonably understood by the other party to be manifested by that party's words or conduct notwithstanding that he did not consciously formulate that intention in his own mind or even acted with some different intention which he did not communicate to the other party.

61 Gleeson CJ also explained (at 550) that, in the search for an objective determination of the intention of the parties, it may be "both appropriate and necessary to have regard to the commercial circumstances surrounding the exchange of communication and, in particular to the subject matter of those communications." This approach was approved by Burchett J in Vass v Commonwealth [2000] FCA 47; (2000) 169 ALR 486. Also see Seven Cable Television Pty Ltd v Telstra Corp Ltd (2000) 171 ALR 89 at 115 where Tamberlin J said that the decisive issue is always the intention of the parties objectively ascertained from the terms of the contractual document read in the light of the surrounding circumstances.

62 This line of reasoning was recently affirmed by Gaudron, McHugh, Hayne and Callinan JJ in Ermogenous v Greek Orthodox Community of SA Inc (2002) 187 ALR 92 as follows:

"It is of the essence of contract, regarded as a class of obligations, that there is a voluntary assumption of a legally enforceable duty. To be a legally enforceable duty there must, of course, be identifiable parties to the arrangement, the terms of the arrangement must be certain, and, unless recorded as a deed, there must generally be real consideration for the agreement. Yet [t]he circumstances may show that [the parties] did not intend, or cannot be regarded as having intended, to subject their agreement to the adjudication of the courts.

Because the inquiry about this last aspect may take account of the subject-matter of the agreement, the status of the parties to it, their relationship to one another, and other surrounding circumstances, not only is there obvious difficulty in formulating rules intended to prescribe the kinds of cases in which an intention to create contractual relations should, or should not, be found to exist, it would be wrong to do so. Because the search for the 'intention to create contractual relations' requires an objective assessment of the state of affairs between the parties (as distinct from the identification of any uncommunicated subjective reservation or intention that either may harbour) the fact that the circumstances which might properly be taken into account in describing whether there was the relevant intention are so varied as to preclude the formation of any prescriptive rules. Although the word 'intention' is used in this context, it is used in the same sense as it is used in other contractual contexts. It describes what it is that would objectively be conveyed by what was said or done, having regard to the circumstances in which those statements and actions happened. It is not a search for the uncommunicated subjective motives or intentions of the parties."

63 In Masters v Cameron [1954] HCA 72; (1954) 91 CLR 353 at 360 a majority of the Court noted at 360 that where parties who have been in negotiation reach agreement upon terms of a contractual nature and also agree that the matter of their negotiations shall be dealt with by a formal contract, the case may belong to any of three classes. It may be one in which the parties have reached finality in arranging all the terms of their bargain and intend to be immediately bound to the performance of those terms, but at the same time proposed to have the terms restated in a form which will be fuller or more precise but not different in effect. Or, secondly, it may be a case in which the parties have completely agreed upon all the terms of their bargain and intend no departure from or addition to that which their agreed terms express or imply, but nevertheless have made performance of one or more of the terms conditional upon the execution of a formal document. Or, thirdly, the case may be one in which the intention of the parties is not to make a concluded bargain at all, unless and until they execute a formal contract. The first and second categories will give rise to a binding agreement.

64 If an agreement is reduced to writing, the general rule as stated in Codelfa Construction Pty Ltd v State Rail Authority of New South Wales [1982] HCA 24; (1982) 149 CLR 337 per Mason J at 347 applies. Parol evidence of what the parties did or how they may have themselves interpreted or applied the contract is inadmissible to subtract from, add to, vary or contradict the language of a written instrument. The question of whether post contract conduct is admissible to establish that a contract is made has not been finally resolved in Australia. Royal Botanic Gardens and Domain Trust v South Sydney Council [2002] HCA 5; (2002) 186 ALR 289 at par 108. For present purposes, I will proceed from the premise that evidence of the subsequent actions or statements of the parties is generally inadmissible, unless it evidences a new agreement upon the basis of an estoppel. There are some exceptions to the parole evidence rule, such as evidence admitted to explain technical expressions, identify the subject matter of the agreement or resolve a latent ambiguity. Nonetheless, ambiguity is not to be equated with difficulty of construction. Posgold (Big Bell) Pty Ltd v Placer (WA) Pty Ltd (1999) 21 WAR 350.

65 Where an agreement is reached in a commercial context which contains clearly defined terms of a promissory nature supported by consideration there is a strong presumption that the agreement was intended to be legally enforceable. Edwards v Skyways Ltd [1964] 1 WLR 349. A clear statement of intent to exclude legal relations is needed to displace such a presumption. Banque Brussels Lambert SA v Australian National Industries Ltd (1989) 21 NSWLR 502.

66 I must now proceed to the question of whether the plaintiff and the first defendant in or about mid 1998 (or in March 1999) made a verbal agreement for the sale of the Eagle Hawk Mine and related assets for $534,000.

67 Mr T Reid, on behalf of the plaintiff, gave evidence in support of the plaintiff's pleaded case that on a day in mid 1998 Mr Radovanovic made a verbal offer to purchase at the mine site and this was followed by a verbal acceptance of the same by Mr Reid in the presence of Mr Benton on the verandah of Mr Radovanovic's home at Cue. This is denied by Mr Radovanovic.

68 It is clear from all accounts of the negotiations that no date for payment of the proposed price was fixed by the parties and that Mr Radovanovic required time to raise the necessary finance. It is also clear that the matter was allowed to run on. The plaintiff cannot point to any letter or document prior to the signing of the MOU which establishes that the mine was being acquired by the defendants. I have already noted that no formal approach was made to Castle Hill for its consent to the sale. The parties to the negotiations were two men with a background in mining, but no signed agreement was brought into existence of the kind contemplated by s 119 of the Mining Act 1978. The letter written by the plaintiff's solicitors dated 22 March 2000 speaks of the "possible" sale of the mine.

69 In addition to these incongruities in the evidence, there were inconsistencies in regard to what particular witnesses said in evidence in chief and what was said under cross-examination.

70 Let me turn firstly to the evidence of Mr T Reid and to some exchanges that occurred while he was being cross examined by counsel for the defendants. In the course of cross-examining Mr Reid about the events of mid 1999, counsel for the first and second defendants had this exchange with the witness:

"Perhaps assist me if you can, Mr Reid. Is it not your evidence that you entered into a verbal agreement with Mr Radovanovic in mid-1998 to sell the tenement and the mine and equipment for $530,000? --- In mid - we agreed - he come up and offered us a price, sir, in the presence of my son and, I think, Mr John Benton - what you're referring to, I think. There was no price agreed to before this. Jeff had come and made suggestions that he would like to buy the mine, buy out the total lot. He wanted to buy all our equipment as well.

Okay? --- And I think there was no deal done until I went down and actually put a deposit on this, and then from there we went out to Rowett's office and that's the only time that this deal was done.

I see? --- We just spoke about it.

I see. Right. Just so that I understand the situation you are saying that no agreement had been concluded between yourself and Mr Radovanovic or Murchison Queen Pty Ltd in mid-1998? --- Verbal, talk. Nothing was done until he give me a deposit. There was never any - the only time that there was really a contract for him to recognise, or so I could recognise the contract, was in Rowett's office."

"Perhaps I can put it to you this way: what do you recall was verbally discussed between yourself and Mr Radovanovic in mid-1998? --- In mid-1998?

Yes? --- Mr Radovanovic came to our mine and told me that he had a buyer for the lot and he put it to me and, well, he offered $534,000 and I said, "What, walk-in, walk-out?" and he said "The lot."

What was your response to that proposal by Mr Radovanovic? --- We had to think about it.

Did you get back to him in relation to it? --- We went to Mr Radovanovic's house.

What was said at Mr Radovanovic's house? --- We were quite happy with the $534,000. Mr Radovanovic was fully aware that we had to deal with Westgold. He was 100 per cent aware that we had to deal with Westgold.

In simple terms what did you say to him in relation to the proposal that you allege he put to you? --- Jeff realised we had to buy the mine. Jeff fully understood we had to buy the mine from Westgold and he wanted to buy from us when we did the deal. He wanted to buy from us for $534,000, the whole lot, walk-in, walk-out. He had a buyer.

Did you accept that proposal? --- We discussed it.

No, did you accept it? --- I'm not sure whether we accepted it right there and then but we were quite happy with the numbers he was talking about."

72 A further exchange then occurred shortly afterwards which was in these terms:

"Do you know how the sum of $534,000 was arrived at? --- Mr Radovanovic give us that price, sir. Yes, that was the price he offered.

Did you accept that offer? --- We had to think about it, sir.

After you thought about it, did you eventually accept that offer? --- We thought it was a good price, a fair price, after discussion.

Listen to the question, Mr Reid. After thinking about, thinking about it being a good price, did you accept that offer? --- Yes.

How did you accept that offer? --- Face to face.

When did that occur? --- In the correct time. When I think about the correct time, September-October is the correct time for that, sir. Just my statement, I might be a little bit out with the dates, but I'm just kind of remembering the correct time."

73 I pause at this point to say that the evidence of the plaintiff's principal witness cannot be regarded as compelling testimony in support of the plaintiff's pleaded case. He seems to accept that "no deal was done" until the parties were at Rowett's office in December 1999. His account of the supposed offer and acceptance is somewhat equivocal and, in any event, does not place the moment of acceptance as being on the afternoon of a day in mid July 1998 on the verandah of Mr Radovanovic's home in Cue.

74 According to Mr Reid's friend, Mr Benton, the conversation on the back verandah finished up with Mr Radovanovic saying that he would definitely raise the money. It would be coming mainly from overseas but he had some other investors lined up as well. To that, Mr Reid said: "It sounds good to me."

75 I have some difficulty in characterising Mr Benton's account of what took place as the acceptance of an offer to purchase the mine. Mr Benton did not improve on this evidence under cross-examination.

76 These exchanges and other evidence leaves an impression that a price had been agreed and both parties were keen to proceed further. However, in the absence of any fixed date for settlement, and in circumstances where both parties recognised that Mr Radovanovic had to raise finance, a question inevitably arises as to whether an intention to create binding legal relations was manifested by the conduct of the parties.

77 Mr Radovanovic said in his evidence in chief that a figure of $534,000 was discussed at the mine site. He told Reid that he would go back to his associates with that figure and that it would take him a bit of time to organise the deal. In effect, he refuted any suggestion that there was an offer at the mine site followed by an acceptance on the verandah of his home. However, he had this to say under cross-examination:

"That was the fact; wasn't it? --- What's that?

That was the fact; there was an agreement between Maroubra and you. Gascoyne Mining was the name of an entity or a business name that you had selected. Is that correct? --- Yes. I've drawn this agreement to Mr Reid to sign, yes.

Yes, and Gascoyne Mining was the entity representing your interests? --- At the time.

Yes, and it recites an agreement between you and Mr Reid? --- Yes.

That was the truth. There was an agreement between you and Mr Reid, wasn't there? --- This document, is it signed?

No, don't worry about whether the document is signed please, Mr Radovanovic. The document recites that there was an agreement, and there was an agreement, wasn't there, in 1998? --- I was trying to send the agreement to Mr Reid so we have the agreement, yes. That's what I was trying to achieve.

Mr Radovanovic, wasn't there a verbal agreement in existence in 1998 between you and Mr Reid? --- Yes, there was.

For you to buy the mine? --- That's correct.

And the assets associated with the mine, for $534,000? --- Yes, there was a verbal agreement, yes.

In 1998? --- Yes."

"Mr Radovanovic, you have told me that there was a verbal agreement for the purchase of the mine and its related assets in 1998? --- That's correct.

That was the basis upon which you paid Mr Reid, or Maroubra, more specifically, $5000 in March 1999, wasn't it? --- At the time that was the basis to secure the deal so I can engage the option of someone to do the feasibility study on the lease.

Yes, but the deal - the deal - was the agreement you had made in 1998, wasn't it? --- The verbal deal?

Yes? --- The verbal deal, yes.

That was the deal? --- The verbal deal, yes.

Yes, and that deal, that arrangement or contract, was never brought to an end, was it? That agreement continued right up until 13 December 99? --- No, it's not. It doesn't.

Was that agreement brought to an end? --- On 31 July 99 that agreement was brought to the end.

How was it brought to an end? --- Because Mr Reid was no longer the owner of the lease or had any claim to it.

So your interpretation of that advice was that the agreement came to an end. Is that the position? --- Mr Reid could not sell the lease, to my knowledge, at the time so he couldn't deal."

79 Later, under re-examination Mr Radovanovic had this to say:

"What did you understand were the terms of the agreement that you had with Mr Reid? --- The terms of the agreement were very loose, just the verbal discussion between myself and Mr Reid, because he stopped mining. He was no longer mining. Then we just agreed on the price, as I've mentioned, that allowed me the time to, as I have already mentioned - got the Buckley and Associate people to do the metallurgical work and do the feasibility on the mine, getting them involved, which wasn't fully completed when the lease expired and that was the end of that deal."

80 A further relevant exchange occurred during the course of re-examination as follows:

"And so his Honour can understand what you mean by the agreement that you had with Mr Reid. What had been agreed between you both? --- We have agreed at the time that when we come up with a figure that I go away and raise the funds to purchase the mine and then also at the same time to look after the plant and equipment on site and then, like, obviously the people that were going to come to inspect the mine, to show them through the mine and take them down the shaft, you know, so that I can ascertain the values of it before it's purchase, obviously."

81 I pause to observe that, not surprisingly, counsel for the plaintiff placed considerable weight on the admission supposedly made by Mr Radovanovic under cross-examination that a verbal agreement for sale of the mine was finalised between the parties in mid 1998. He relied also upon a letter dated 6 June 2000 from Mr Radovanovic to Gwen Reid in which reference is made to a "verbal agreement" to purchase the Eagle Hawk Mine on a walk in walk out basis. In reading this letter, however, it is apparent that Mr Radovanovic is referring to ongoing negotiations and proposals with the result that it is difficult to determine what meaning is being given to the term "verbal agreement".

82 I have to say that I do not regard this letter or the answers given under cross-examination as decisive. Mr Radovanovic had an uneasy command of the English language. He was not well-educated and it was possible that when he spoke of an agreement he was referring simply to the fact that both parties were keen to do business at an agreed price. This is not necessarily the same as an intention by both parties, communicated by a process of offer and acceptance, to assume voluntarily legally enforceable duties. The answers given in re-examination suggest that Mr Radovanovic was not in fact prepared to commit himself until he had raised the necessary finance.

83 I consider, having regard to the decided cases, that in determining whether there was an intention to create legal relations I must look at the circumstances as a whole. I must have regard to the effect of what was said and done, viewed objectively. Accordingly, having given careful consideration to the testimony of the parties and the relevant legal principles, I must now proceed to make certain findings.

84 I must preface my findings by saying that both Mr T Reid and Mr Radovanovic were unsatisfactory witnesses. Both were verbose and tendered to avoid giving direct answers to the questions put to them. It is significant that under cross-examination both gave evidence that did not fit comfortably with their pleaded cases and, in any event, was inconsistent with their previously prepared witness statements. The comparatively late amendments to the pleadings on either side may have had something to do with this. Neither witness seemed to have a clear recollection of what had taken place and at times both men seem to be struggling to recall what they were supposed to be saying rather than what they actually recalled.

85 It follows from these observations that I feel obliged to treat with caution what both these witnesses had to say. I give greater weight to the evidence of a comparatively neutral witness such as Mr Rowett and will be guided principally by the contents and inferences to be drawn from the relevant documents.

86 I am not satisfied that the plaintiff and the first defendant in about mid 1998 (or even in March 1999) made a binding verbal agreement for the sale of the Eagle Hawk Mine and related assets in the manner contended for by the plaintiff.

87 The plaintiff's principal director Terrence Reid was working the Eagle Hawk Mine on behalf of his company Maroubra Pty Ltd pursuant to the Castle Hill Resources to Maroubra Agreement dated 31 July 1997. It is true that by that agreement Maroubra became the registered proprietor of the mining tenement and was therefore technically in a position to effect the sale of the same to a third party such as Murchison Queen. However, Reid was well aware that Castle Hill was at liberty to exercise an option allowed to it under the agreement whereby the mine could be returned to Castle Hill. Further, clause 12 of the Castle Hill Option Agreement specifically provided that Maroubra was not to transfer or otherwise encumber all or any of its rights under the agreement except with the written consent of Castle Hill Resources.

88 These provisions inhibited Reid's ability to negotiate freely for the sale of the mine to the third party. Further, it is quite clear from the evidence that he did not at any stage obtain the written consent of Castle Hill Resources to a sale of the mine.

89 The plaintiff's case was that in mid 1998 Mr Radovanovic made a verbal offer to purchase the Eagle Hawk Mine on a walk in walk out basis for $534,000. The surrounding evidence indicates that at the time this verbal offer was made Mr Radovanovic did not know that the mine was subject to an option and did not actually have the money in hand or financial resources to pay such an amount. It is significant that the offer did not make provision for payment of the purchase price on a specified date. The absence of certainty in that regard is corroborated by subsequent events whereby the plaintiff was prepared to let the matter of settlement run on.

90 Mr T Reid said in evidence that he discussed this offer with his son Shayne Reid. The plaintiff's case is that later in the day Mr T Reid and his friend John Benton went to Radovanovic's residence near Cue to discuss the offer. Mr T Reid says in effect that while sitting on the verandah of Radovanovic's home he accepted the offer and a binding agreement for the sale of the entire mine for the sum of $534,000 then came into existence.

91 It is significant, however, that in his evidence in chief Terrence Reid said that the acceptance was conveyed by the words "we are happy with the price". The Benton evidence in chief does not seem to identify any precise moment at which an acceptance of the offer was conveyed to Radovanovic. Further, the evidence of both these witnesses refers to some discussion concerning the need for papers to be drawn up.

92 As I have already noted, the terms of the verbal agreement contended for seem somewhat vague. It is not clear from the description of the negotiations on the plaintiff's case as to when the price was to be paid. The evidence of the plaintiff's witnesses recognises that the purchaser had to raise finance before the sale could proceed. It is also material to note that Shayne Reid spoke of the price being $530,000. As I have already noted, ambiguities of this kind were accentuated during the course of cross-examination. I conclude that there was no clear moment of acceptance.

93 It is true that the defendant Radovanovic under cross-examination seemed to accept that the parties had entered into an agreement. A question in that form was allowed notwithstanding an objection taken by counsel for the defendants. However, Mr Radovanovic was an unsophisticated witness and one could not necessarily assume that his acceptance that an "agreement" had been made should be taken as a reference to a legally enforceable agreement. His evidence, and the evidence generally, is open to the interpretation that both parties had communicated a willingness to make a deal at the figure of $534,000 but had not committed themselves to a contractual relationship. Put shortly, Mr Radovanovic was minded to purchase the mine for $534,000 but subject to being able to raise finance on terms that were never crystallised.

94 For these reasons, I am not satisfied on the balance of probabilities that a binding verbal contract was entered into by the parties in mid 1998 as alleged by the plaintiff. Put shortly, I am not satisfied that a firm offer capable of acceptance was actually accepted by the second defendant as alleged by the plaintiff. Further, and in any event, when the facts and matters relied upon by the plaintiff are viewed objectively, I am not satisfied that an intention to create binding legal relations between the parties was sufficiently manifested. In my view, the parties managed to agree the price at which the Eagle Hawk Mine was to be sold but otherwise the question of contractual obligations was left in abeyance so that Mr Radovanovic could proceed with his attempts to raise finance.

95 If I be wrong in the finding I have just made, a further question arises as to whether the verbal agreement remained in force as at 13 December 1999. If such an agreement was still in force then it was open to the plaintiff on its pleaded case to assert that the MOU signed by the parties on 13 December 1999 was simply a "segment" of the earlier verbal agreement. In other words, on the plaintiff's case, the MOU could be viewed as a document indicating the way in which the purchaser Mr Radovanovic intended to raise funds through investors such as Mr Uremovic. Viewed in that light, the plaintiff contended, the MOU should not be regarded as a binding agreement. Alternatively, even if it be regarded as a binding agreement, it was subject to performance of the alleged contract of sale. Further, the payment of $30,000 could properly be regarded as a deposit because such a figure would be referable to the overall purchase price of $534,000.

96 I am not satisfied on the balance of probabilities that the alleged contract of sale (if any) did remain in force as at 13 December 1999. I find that Castle Hill Resources exercised its option and retrieved the relevant mining tenement in mid 1999. It proceeded to try and effect a sale of the mine to Buckley. Thus, as at mid 1999 the plaintiff was not in a position to convey title to the mining tenement to Mr Radovanovic. The absence of any attempt to proceed with the sale of the mine prior to December 1999 strongly suggests that the plaintiff by Mr T Reid knew that it was not in a position to proceed.

97 It is true that, in strict legal analysis, the inability to convey title would not, of itself, be sufficient to bring a contract to an end. It was open to the plaintiff as vendor to obtain title to the tenement prior to a settlement date agreed upon by the parties. However, the existence of this difficulty concerning title does have a bearing upon what inferences should be drawn when one looks at the conduct of the parties subsequent to the mid 1998 negotiations.

98 I have already noted that subsequent events should not be used to determine the question of whether the relevant events marked an intention to enter into legal relations. They may be used, however, in determining whether any contract for sale made by the parties remained in force. It is significant that Mr T Reid took no steps to obtain the consent of Castle Hill Resources to such a sale. He did not press for payment of the agreed price in a persistent manner as appears from the lack of any written evidence bearing upon that point. It is significant that the subsequently signed MOU signed by the parties on 13 December 1999 does not refer explicitly to any existing verbal agreement between the parties and there is no other document referring to such an agreement. Further, the Metaxas letter of 22 March 2000 written on behalf of the plaintiff not only does not refer to such a verbal agreement but also speaks only of a "possible" agreement.

99 I take account also of the fact that the existence of a verbal agreement made in mid 1998 was not reflected on the plaintiff's statement of claim until it was clear that the litigation would proceed to trial.

100 Mr Radovanovic said in evidence that as far as he was concerned the verbal "agreement" (which may actually, on my earlier finding, be simply a reference to the fixing of a price) came to an end when the plaintiff lost its title to the mining tenement. However, he agreed under cross-examination that he did not ever communicate his state of mind in that regard to Terrence Reid.

101 Nonetheless, in my view, there is much to suggest that a verbal agreement (if any) in the form of the alleged contract for sale was discharged by the negotiations undertaken by the parties on 13 December 1999. These negotiations focused upon an agreement of an entirely different kind, that is to say, an agreement limited to a conveyance of the mining tenement. The evidence strongly suggests that if there were any prior binding verbal agreement between the parties (in the form of the alleged contract of sale) the agreement was simply put to one side by mutual consent. To my mind, the critical piece of evidence in that regard is the testimony of the accountant, Mr Rowett. He asked questions of both parties in the course of drawing up the MOU, with a view to ascertaining the price and subject matter of the proposed sale, but at no stage was any mention made of the alleged contract for sale or an obligation by the defendants to purchase the mine for $534,000. I infer from this that by mid December 1999 the alleged contract of sale (if any), or any arrangement to similar effect, was viewed by the parties as a dead letter.

102 I digress briefly to say that the evidence of phone calls made by Radovanovic in August 1999 to the effect that the money would soon be forthcoming does not necessarily show that a binding verbal agreement had been made. Statements of this kind, are consistent with ongoing negotiations whereby Radovanovic as the prospective purchaser was simply saying that he would soon be in a position to come up with finance sufficient to permit him to enter into a binding contract.

103 Counsel for the plaintiff placed considerable emphasis upon the fact that the impetus for the 13 December 1999 meeting came not from the plaintiff but from Mr Radovanovic. To my mind, that is an equivocal fact. On the one hand, it suggests that, as indicated earlier, the plaintiff was not pressing for enforcement of an existing agreement. On the other hand, the readiness with which the plaintiff was prepared to enter into negotiations of a different kind, is a recognition that the plaintiff was not in a position to enforce any existing agreement. In my view, this is a case in which both parties had abandoned or abrogated the alleged contract of sale (if any) by their conduct. DTR Nominees Pty Ltd v Mona Homes Pty Ltd [1978] HCA 12; (1978) 138 CLR 423.

104 I consider that the MOU should be regarded as a legally enforceable agreement, and one that complies with s 119(2) of the Mining Act. The situation was confused, and the agreement was badly drawn. However, in essence, the MOU clearly contemplates that the "mine", that is to say, the mining tenement, was to be conveyed to Murchison Queen for a purchase price of $50,000. In making this finding I am guided by the precept mentioned earlier that where an agreement is reached in a commercial context which contains clearly defined terms of a promissory nature supported by consideration there is a strong presumption that the agreement was intended to be legally enforceable. Edwards v Skyways Ltd (supra). To my mind, Mr Rowett's references to some talk about further documentation were not sufficient to displace this presumption.

105 Further, and in any event, having regard to the reasoning of the High Court in Masters v Cameron (supra), I consider that the additional documents in contemplation were intended simply to carry the existing agreement into effect with the result that the MOU agreement should be regarded as a binding contract. It follows from these findings that there was no binding agreement for the sale of the entire mine; the subject matter of the MOU was simply the mining tenement. The terms of the MOU are sufficiently certain to be enforced.

106 I will return to the question in due course as to whether the plaintiff's entry into the MOU was induced by various representations which may give rise to legal consequences. However, for the time being I proceed from the assumption that as from 13 December 1999 there was a binding agreement between the parties.

107 I pause to note in passing that a conclusion to this effect is reinforced by a consideration of Terrence Reid's dealings with Castle Hill Resources. It is apparent from the evidence that Terrence Reid was able to persuade Castle Hill Resources to sell the mining tenement to him for $40,000. This purchase price was met by $10,000 of the plaintiff's own money and by the cheque for $30,000 paid by the third defendant to Castle Hill Resources at the plaintiff's direction. The presence of this opportunity to obtain the mining tenement after a period of ambiguity as to what would be the fate of the mine strongly suggests that the mining tenement was likely to become the subject of a discrete transaction whereby the plaintiff on sold the same to the first defendant for the slightly higher price of $50,000. The first and second defendants, assisted by Mr Uremovic, were in a position to pay that amount in performance of a discrete transaction concerning the tenement. They were not in a position to pay $534,000.

108 For the sake of completeness, I must also refer to an issue raised by the pleadings concerning estoppel. Put shortly, the defendants contended that, in any event, the circumstances were such that the plaintiff is estopped from denying that it was bound to complete the arrangements reflected in the MOU.

109 I must briefly review the legal principles bearing upon this issue.

110 In Waltons Stores (Interstate) Ltd v Maher [1988] HCA 7; (1988) 164 CLR 387, Mason CJ and Wilson J noted that for many years there was a reluctance to allow promissory estoppel to become a vehicle for the positive enforcement of a representation by a party that he would do something in the future. It was thought to be a defensive equity. Generally speaking, they said, a plaintiff cannot enforce a voluntary promise because the promisee may be expected to appreciate that, to render it binding, it must form part of a binding contract. They went on to accept, however, that in some circumstances promissory estoppel may extend to the enforcement of a right not previously in existence when the defendant has encouraged in the plaintiff a belief that it will be granted and has acquiesced in action taken by the plaintiff in that belief. What gave rise to the need for the court to intervene was the defendant's unconscionable attempt to go back on the assumptions which were the foundation of their dealings.

111 Mason CJ and Wilson J, espousing the majority view, summarised their reasoning in this way at 404:

"One may therefore discern in the cases a common thread which links them together, namely, the principle that equity will come to the relief of a plaintiff who has acted to his detriment on the basis of a basic assumption in relation to which the other party to the transaction has 'played such a part in the adoption of the assumption that it would be unfair or unjust if he were left free to ignore it': per Dixon J in Grundt v Great Boulder Pty Goldmines Ltd [1937] HCA 58; (1937) 59 CLR 641. Equity comes to the relief of such a plaintiff on the footing that it would be unconscionable conduct on the part of the other party to ignore the assumption."

112 It is apparent from this passage and the reasoning of other members of the High Court in Waltons' case that the purpose of the doctrine of estoppel is to preclude parties relying on strict rights where to do so would be unconscionable. It is also apparent from later decisions of the High Court in Commonwealth v Verwayen (1990) 170 CLR 394 and Foran v Wight [1989] HCA 51; (1989) 168 CLR 385 that the assumption being referred to in this line of reasoning may be one as to a legal as well as to a factual state of affairs. In other words, a representation as to the effect of a legal agreement or the adequacy of arrangements made between the parties can give rise to an estoppel.

113 The latter case establishes also that where a vendor has intimated that he is unable or unwilling to settle the purchaser need only show that he was not incapacitated from raising the necessary funds and had not resolved against doing so. The intimation of non-performance amounts to repudiation and relieves the purchaser of his dependent obligation though he does not rescind the contract. If the purchaser keeps the contract alive, he does so not only for his own benefit but also for the party guilty of repudiation.

114 According to Mason CJ in Foran v Wight (supra) at 412, if the vendor's intimation of non-performance amounted to a representation that it would be pointless for the purchaser to tender performance, and the purchaser acts to his detriment pursuant to the assumption thus created that a tender of performance is unnecessary, the doctrine of estoppel would operate to protect the purchaser from a claim by the vendor that the omission concerning tender amounted to a breach of the contract.

115 In par 10.18 and following paragraphs of the statement of defence, as an alternative to the enforcement of contractual obligations, the defendants sought to enforce the Caretaker Agreement and the agreement allegedly constituted by the MOU by reliance upon the doctrine of promissory estoppel. The defendants say that in response to representations made by the plaintiff that the Eagle Hawk Lease would be transferred to the first defendant in the manner provided for by the MOU the first defendant was induced to act to its detriment by causing a payment of $30,000 to be made to Castle Hill at the direction of the plaintiff and to incur expenses by acting as caretaker of the mine site.

116 I consider that I am obliged to make a finding as to this issue. In doing so, I will put to one side conduct referable to the Caretaker Agreement, this being a matter I will return to later. I am of the view, however, that the events surrounding the making and implementation of the MOU agreement are sufficient to give rise to an estoppel of the kind contended for by the defendants. To my mind, the plaintiff acted so as to create an assumption that the tenement would be conveyed to the first defendant in response to an initial payment of $30,000 and a further payment to be made of $20,000. The plaintiff would be acting unconscionably if it sought to depart from the assumption it had created by refusing to proceed with the conveyance in circumstances where there was an absence of default on the prospective purchaser's side. In my view, as will appear later, the first defendant was not in default in that at all material times the first defendant sought to perform the MOU agreement. It follows that the first defendant is entitled to enforce the arrangements reflected in the MOU on this ground also.

117 I am conscious, of course, that there is a degree of continuing controversy as to whether equitable relief afforded pursuant to the principles in Waltons' case can overcome the need for formal requirements such as those reflected in s 119(2) of the Mining Act. Waltons' case itself suggests that the equitable rules will prevail, but there is authority concerning this particular provision which raises a doubt in that regard. See Sorna Pty Ltd v Flint [2000] WASCA 22; (2000) 21 WAR 563. In the circumstances of this case, however, it seems to me that if the arrangements reflected in the MOU can be enforced in equity then the document in question can be regarded as a written instrument complying with s 119(2) of the Mining Act. Accordingly, in the present case, there is no need for me to resolve the controversy.

118 Let me now return to the question of whether the MOU was induced by representations made by the defendants as alleged by the plaintiff, and the related question of whether relief is otherwise available to the plaintiff.

119 The plaintiff alleges that the first defendant represented by its agent Rowett that the transaction was to be in two parts with the MOU document to be followed by further documentation concerning the balance of the total price of $534,000. It was represented also that the MOU document was not a document which would give rise to binding obligations. Implicit in these representations, which are said to have induced the plaintiff to execute the MOU document, was the notion that the first defendant would not seek to enforce any part of the MOU unless the larger transaction proceeded.

120 Mr T Reid said in evidence that the representations complained of were made. In my view, for the reasons I have already given concerning credibility, I am obliged to treat his evidence with caution.

121 I am prepared to accept that there may have been some discussion about tax advantages and dealing with the mining tenement separately from the other assets comprising the Eagle Hawk Mine. It follows from my earlier findings, however, that discussions of this kind occurred in the context of a decision made by the parties to deal with the mining tenement as a discrete transaction.

122 Again, I am influenced by the testimony of Mr Rowett that no mention was made of a larger transaction whereby the first defendant was to acquire the mine for $534,000. To my mind, it follows that the plaintiff was not led to believe that the MOU would not be enforced save in circumstances where the first defendant tendered payment of $534,000 for the Eagle Hawk Mine as a whole. Accordingly, I am not prepared to hold that any misrepresentations were made as alleged which induced the plaintiff to enter into the MOU.

123 It follows also that I am not prepared to hold that it was an implied term of the MOU that the first defendant would not seek to enforce the MOU until it had paid $534,000. The parol evidence rule weighs against such a finding. I do not consider that the provisions of the Trade Practices Act 1974 relied on were infringed. To my mind, Rowett's evidence that the MOU was to be an interim document was faintly expressed and not convincing. It is outweighed by the evidence of the surrounding circumstances I have already touched on whereby a sizeable amount of money changed hands upon the signing of the document. This and other circumstances established that the parties had committed themselves to a discrete transaction forthwith.

124 I digress briefly to say that there is no need for me to make any findings concerning the defendants' claim for relief under the Trade Practices Act, as any such findings are rendered superfluous by my findings in favour of the first and second defendants in regard to the contractual and equitable issues.

125 The consequence of my findings to this point is that as at late December 1999 the first defendant had paid $30,000 of an agreed purchase price of $50,000 for the mining tenement and was committed to pay the balance of $20,000 on 13 February 2000.

126 It was common ground at the hearing that the relevant amount was not paid on the prescribed date and that no extension of time was allowed, notwithstanding an attempt by the first defendant to obtain an extension. It is clear from the evidence, however, that the plaintiff did not put the defendants on notice that the MOU agreement would be terminated if the default was not rectified. Instead, the plaintiff by the Metaxas letter dated 22 March 2000 purported to rescind the agreement. The plaintiff's stand at trial was that in the case of an essential obligation it was entitled to rescind the agreement without prior notice.

127 I note in passing, however, that the Metaxas letter is somewhat equivocal. It does not complain of a failure to pay the balance due and is directed principally to the proposition that there was no enforceable agreement in existence between the parties. It did not acknowledge that an initial payment of $30,000 had been made pursuant to the MOU. The conduct said to justify the purported rescission appears to be conduct referable to the so-called "larger transaction". In other words the letter does not contain a clear assertion that the plaintiff is rescinding an agreement constituted by the MOU document because the first defendant failed to pay $20,000 and accrued interest by the prescribed date, namely, 13 February 2000. This, of itself, suggests that the plaintiff did not view the obligation to pay $20,000 by 13 February 2000 as an essential term of an existing agreement.

128 The plaintiff recognised at the trial of the action that the MOU agreement did not include any provision making time of the essence. It relied upon the reasoning in cases such as Associated Newspapers Ltd v Bancks [1951] HCA 24; (1951) 83 CLR 322 at 336. If it appears from the general nature of a contract that the promise is of such importance that the promisee would not have entered into the contract unless he had been assured of a strict performance of the contract, such a term may be regarded as an essential term. It is a term going to the root of the contract. The innocent party in such a case may treat himself as discharged upon any breach of the promise without having to give prior notice to the party in default.

129 It was upon this basis that the plaintiff said it was entitled to and did rescind the MOU agreement (if any) once the prescribed date had passed without any payment being made. It said further that upon the agreement being brought to an end it was entitled to forfeit the sum of $30,000 previously paid, being an amount described in the agreement as a "deposit".

130 I am not persuaded that the obligation to pay $20,000 on 13 February 2000 should be characterised as an essential term. Both parties to the MOU agreement were aware when the agreement was made that the purchaser was still seeking to raise finance. There had been a long period of toing and froing on both sides and there was a degree of ambiguity concerning the plaintiff's ability to convey title. Provision was made for payment of interest. Accordingly, I am not satisfied that the plaintiff was entitled to rescind the contract as alleged.

131 Further, and in any event, there is another reason why the plaintiff was not entitled to rescind the contract as at 22 March 2000. It is apparent from my review of the evidence, and especially that part of the evidence mentioned earlier in which Mr T Reid was being cross-examined on this point, that the first defendant requested an extension of time, and, initially, the plaintiff granted some indulgence in that regard. The request for an extension was met with the reply: "Well, do your best, Jeff."

132 In Mehmet v Benson [1965] HCA 18; (1965) 113 CLR 295 Barwick CJ observed at 303, in the case of a contract stating explicitly that time shall be of the essence, that if the party entitled to insist on the essential quality of the stipulated time leads the other party to understand that its essentiality is not being maintained, time for payment will cease to be essential without some further circumstance, such as a proper notice requiring the default to be rectified in order to restore its essential quality.

133 The High Court held in the case just mentioned that the right to rescind for failure to pay a prescribed instalment on the due date had been lost by the time the notice to rescind was given owing to the reception of late payments on other occasions. The purchaser's default did not establish that the purchaser was not ready and willing to perform the contract. Such a question is one of substance and is not to be resolved in any narrow or technical sense. If the contract remains on foot, and the purchaser is not guilty of breaches, the purchaser is not barred from having a decree for specific performance if the breach can be made good, especially where there is a provision for payment of interest. The decree can be moulded so that the court fixes a date for completion.

134 Against this background, I consider that in order to terminate the agreement constituted by the MOU it was necessary for the plaintiff by its solicitors to specify the default and to put the defendant on notice that as to payment of the balance due, time was of the essence. As this was not done, my finding is that the agreement constituted by the MOU was not brought to an end in the manner contended for by the plaintiff. The MOU agreement remained on foot.

135 Even if I be wrong in the findings I have just made, I am of the view, in any event, that the Metaxas letter did not rescind the MOU agreement because the ground now sought to be relied upon, namely, non-payment of the balance due on or before the prescribed date, was not expressed with sufficient clarity. No mention was made of the failure to pay the amount due.

136 The effect of my findings is that the MOU agreement remained in force. The plaintiff was obliged to observe the terms of the MOU agreement, notwithstanding its principal position at trial that there was no enforceable agreement in existence between the parties. The plaintiff, however, by the letter from its solicitor dated 22 March 2000, and by its subsequent conduct, made it clear that it would not perform. The decided cases establish that a party who insists on an incorrect interpretation of the contractual situation can be said to evince an intention not to perform and is thereby in breach. Summers v Commonwealth [1918] HCA 33; (1918) 25 CLR 144; DTR Nominees Pty Ltd v Mona Homes (supra) at 432.

137 It follows from this analysis that it was open to the defendants to treat the Metaxas letter as a repudiatory breach of the agreement. It is clear from the evidence that they did not elect to accept the repudiation with the consequence that the agreement remained in force. The defendants offered to pay the balance due under the contract by a letter from their solicitors (Williams & Co) to the plaintiff's solicitors dated 19 July 2000, shortly after the commencement of proceedings. They acted in a timely way but got no clear response as to whether any such payment would be accepted.

138 The decided cases indicate that in circumstances of this kind the party seeking to enforce the agreement does not have to go through the process of fixing a settlement date and tendering the amount due. An intimation by the vendor (in this case the plaintiff) of non-performance of an essential term amounts to repudiation and relieves the purchaser (in this case the first defendant) from performance of his dependent or immediate obligation though he does not rescind the contract. Mahoney v Lindsay (1980) 33 ALR 601. The purchaser need only show that he was not incapacitated from raising the necessary funds and had not resolved against doing so. Foran v Wight (supra). In my view, the first defendant as the prospective purchaser in the present case has provided sufficient evidence of its capacity and wish to complete the purchase at the agreed price.

139 I find support for such a view not only in the cases just mentioned, and in Mehmet v Benson (supra), but also in the reasoning of various members of the High Court in Bahr v Nicolay (No 2) [1988] HCA 16; (1988) 164 CLR 604 in which it was recognised that the purchasers were not obliged to tender the balance due except in exchange for a registrable transfer. As in Mehmet v Benson (supra), the purchasers were entitled to a decree of specific performance that permitted them, within a reasonable time to be fixed by the Court, to furnish the balance of the purchase price in return for a transfer.

140 Accordingly, I consider that the first defendant is entitled to obtain specific performance of the MOU in accordance with the terms of the MOU. It follows from this finding that the first defendant will be required to make a further payment of $20,000 plus interest, within a reasonable time to be fixed by the Court, before obtaining title to the mining tenement.

141 The defendants have not specifically sought an injunction to restrain any dealing with the tenement. However, I am prepared to grant an injunction in that form as a matter incidental to the principal equitable relief granted, that is to say, an order for specific performance. Relief of this kind is allowed for by s 24(7) of the Supreme Court Act 1935 and was foreshadowed by counsel for the defendants in the course of his closing address as an alternative to the existing caveat.

142 I pause to note that the existing caveat lodged by the second defendant is an inadequate form of protection because quite clearly the second defendant, who is simply a director of the first defendant as the prospective purchaser or beneficial owner of the tenement, does not have an interest in the tenement. It seems that the plaintiff is entitled to an order for removal of the existing caveat because there is no basis upon which such a caveat can be maintained.

143 It will be necessary for the parties to bring in a minute of proposed orders in order to carry these rulings into effect.

144 I must now return to the matter of the Caretaker Agreement.

145 The position of the defendants at the trial of the action was that they were not under an obligation to pay the further sum of $20,000 in that the plaintiff was indebted to them pursuant to the so called Caretaker Agreement. The first and second defendants say that pursuant to this alleged agreement they were entitled to be reimbursed for expenditure at the Eagle Hawk Mine and to offset such expenditure against a price paid for the mine.

146 I am not persuaded that any such arrangements were made between the parties. Various witnesses for the plaintiff denied the existence of any such agreement. To my mind, the evidence relied upon by the defendants for the making of such an agreement was unconvincing. Further, and in any event, I am not satisfied that the expenses allegedly incurred by the defendant formed part of an agreement whereby such expenses could be offset against the prospective purchase price. It is significant that when Mr Rowett was asked about the events of 13 December 1999 and preparation of the MOU document he said that no mention was made by Mr Radovanovic of any expenditure he had undertaken at the mine prior to that date.

147 A review of the evidence in regard to these issues reveals immediately that on the defendants' case the Caretaker Agreement was entered into soon after the mid 1998 negotiations. I have found that those negotiations did not give rise to a concluded agreement in terms of the alleged contract of sale although the parties had apparently fixed a price at which they were willing to do business if Mr Radovanovic could raise the necessary finance. I am prepared to accept that informal arrangements were made whereby the second defendant was at liberty to take prospective investors to the mine and to make the mine site presentable for that purpose. I will accept that he incurred some expenses in acting pursuant to such an agreement. I will also accept that some of these expenses were incurred after the making of the MOU agreement, and the creation of the assumption engendered thereby that Murchison would obtain the tenement, with the result that these latter expenses can be regarded as part of the detriment underpinning the claim based on estoppel. Against the background of my principal finding, however, I am not satisfied that a binding contractual arrangement was made whereby such expenses could be offset against a purchase price to be paid pursuant to a contract that was still in the course of negotiation.

148 In my view, the expenses contended for by the defendants were incurred with a view to persuading prospective investors such as Buckley to take an interest in the site and to comply with the expenditure requirements of the Mining Act. There is no satisfactory evidence that the expenses were actually incurred by the defendants as alleged. More importantly, I am not satisfied that the amounts claimed can be characterised as expenses referable to a Caretaker Agreement of the kind alleged.

149 Further, in any event, it follows from my earlier findings that the mid 1998 arrangements between the parties were displaced by the making of the MOU agreement. It is clear from the evidence that the caretaking expenses did not form part of the negotiations in Mr Rowett's office and were not addressed in the MOU agreement. Accordingly, I am not satisfied that these expenses can be offset against the price of $50,000 payable for the tenement as alleged by the defendants.

150 It follows, then, that, in my view, the defendants are obliged to pay a further sum of $20,000 with accrued interest at the rate prescribed by the MOU agreement before being able to insist upon specific performance of the MOU, this being the balance outstanding under the MOU agreement. I am obliged to say, for the sake of completeness, that, in my view, the sum of $5,000 paid by the defendants to the plaintiff in March 1999 cannot be brought to account in determining the amount due. I consider that this amount should be characterised as a purported option fee paid to the plaintiff with a view to obtaining access to the site. It is not an amount that can be recovered by the defendants in these proceedings.

151 There is a final matter to be addressed. If I be wrong in the findings I have made, and if it be held that the plaintiff validly rescinded the MOU agreement for breach of an essential term, a question arises as to whether the sum of $30,000 paid to or the direction of the plaintiff can be forfeited as a "deposit", this being the description given to the payment in the MOU document.

152 A deposit is generally regarded as an initial payment made by a purchaser under the contract as a guarantee that the contract will be performed. The mere fact that a payment is called a deposit does not of itself exclude the jurisdiction of the court to relieve a purchaser, in appropriate circumstances, from forfeiture of the amount paid, especially if the so-called deposit is out of all proportion to the damage which the vendor is likely to suffer. Stockloser v Johnson [1954] 1 QB 476; Voumard: The Sale of Land 4th ed at 463.

153 In the present case the so-called deposit represents three fifths of the purchase price and thus, at a first glance, might be seen as too large. The rule is that instalments of purchase money, other than the deposit, cannot be retained by the vendor after the contract has been determined by his election to treat the purchaser's default as a discharge. Instalments which are prepayments on account of the price become repayable in the absence of a stipulation to the contrary, and equity relieves against such a stipulation. McDonald v Dennys Lascelles Ltd [1933] HCA 25; (1933) 48 CLR 457.

154 In the present case, however, the parol evidence rule requires me to give proper weight to the use of the term "deposit" in the MOU agreement. Further, and in any event, if one takes account of the matrix of surrounding circumstances, it is apparent that the amount in question was to be paid immediately to Castle Hill, and will not be forfeited to the plaintiff as vendor in the event of breach.

155 It therefore seems to me, in the special circumstances of this case, that the payment should be characterised as a deposit and can properly be retained by the plaintiff if the MOU agreement is discharged or is held to have been discharged by the first defendant's breach.

156 It follows from this finding that if the first defendant is unable to complete the purchase of the tenement on the date for settlement appointed by the Court's decree for specific performance, the plaintiff will be at liberty to forfeit the deposit of $30,000 previously paid. It will not be open to the first and second defendants to recover the same.

157 In summary, I will dismiss the plaintiff's claim for relief. I will allow the first defendant's claim for specific performance subject to orders and directions providing for payment of the balance of the purchase price and relief by way of injunction pending settlement. I will dismiss the first and second defendant's claim for relief pursuant to the Caretaker Agreement. I will hear from the parties as to the terms of the orders and directions to be made including provision for payment of interest pursuant to the MOU agreement.

Maroubra Pty Ltd v Murchison Queen Pty Ltd & Ors [2002] WASC 98

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Maroubra Pty Ltd v Murchison Queen Pty Ltd & Ors [2002] WASC 98 (3 May 2002)

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