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[1983] HCA 46
High Court of Australia
1981-01-02
Brennan JJ, Dunn J
Original judgment source is linked above.
High Court of Australia Gibbs C.J. Mason, Murphy, Wilson and Brennan JJ. Sandra Investments Pty Ltd v Booth [1983] HCA 46
ORDER Appeal allowed with costs. Order of the Full Court of the Supreme Court of Queensland set aside and in lieu thereof order as follows:Appeal allowed with costs.Order that the order of Dunn J. be set aside and in lieu thereof order that there be judgment for the plaintiff for specific performance of the contract referred to in par. 3 of the statement of claim, and that the defendant pay to the plaintiff the costs of the action. Remit the matter to the Supreme Court of Queensland generally to proceed in accordance with the judgment of this Court.
This appeal is brought from a judgment of the Full Court of the Supreme Court of Queensland affirming the decision of the learned trial judge who gave judgment for the defendant (the present respondent) in an action brought by the present appellant for specific performance of a contract for the sale of land.
By a contract in writing dated 2 January 1981 the respondent ("the vendor") agreed to sell and the appellant ("the purchaser"), a land development company, agreed to buy for a price of $410,250 certain land at Logan Village in the State of Queensland. The contract was in the printed form adopted by the Real Estate Institute of Queensland (1977 version) but contained in Annexure "A" additional conditions upon the effect of which the present case depends. The contract recited that the vendor had received the sum of $2,000 dollars by way of deposit and in part payment of the purchase money and went on to provide that "if the deposit is paid by cheque which is not duly honoured on presentation, the vendor may at his option cancel this Contract". Clause 1 of the conditions provided for payment of the balance of the purchase money "on the date for completion stated in the Schedule hereto" in exchange for possession and a duly executed memorandum of transfer capable of immediate registration and accompanied by all instruments of title. Clauses 12 and 13 respectively provided that rates and taxes should be paid by the vendor, and possession or receipt of the rents and profits should be retained by the vendor, up to the date of possession, and for any necessary apportionment to be made accordingly. Clause 16 provided that possession should be given and taken "in accordance with paragraph 1 hereof or upon such other date as may be mutually agreed in writing between the parties hereto". By cl. 22 it was provided: " Time shall in all cases and in every respect be deemed to be of the essence of the Contract." In the Schedule opposite the words " Date for Completion " appear the words "See Annexure "A" hereto". Annexure "A" contained a number of special conditions which are to be read and construed as forming part of the contract. They include the following:
(e) in the event that the Purchaser sells any lot or lots subdivided by the Purchaser's plan prior to the full repayment of all moneys owing under the mortgage then the Vendor shall in consideration of a payment calculated at the rate of One thousand two hundred and fifty dollars ($1,250) per hectare or part thereof execute a Release by Consent or Partial Discharge of Mortgage in respect of the lot or lots so sold and on settlement of any such sale or sales furnish such release to the Purchaser, or at its direction.
Notwithstanding that, as was admitted by the vendor, the purchaser used all reasonable endeavours to obtain the approval of the council referred to in cl. 24 of the contract, that approval was not obtained. On 24 June 1981 the solicitors for the vendor agreed to extend the time for obtaining such approval for one month, that is until 2 August 1981, subject to certain variations of the contract which it is unnecessary to mention. On 3 August 1981 the solicitors for the purchasers wrote to the vendor as follows:
We hereby confirm our verbal advices to Mr Brennan that the Purchaser Company has not, as yet, received subdivisional approval to the plan of subdivision from the Local Authority. However, we have waived this Condition of the Contract of Sale thus making the Contract fully unconditional. The vendor however refused to complete.
The approval referred to in cl. 24 was expressed in the form of a condition precedent, but it was a condition precedent not to the formation of the contract but to the obligation to complete it: see Perri v. Coolangatta Investments Pty. Ltd. [1] ; see also Newmont Pty. Ltd. v. Laverton Nickel N.L. [2] . The condition was of course not fulfilled. The learned trial judge considered that the critical question in the case was whether or not the condition was solely for the benefit of the purchaser, because if it was, the purchaser was entitled to waive it. In my opinion the matter may be approached more directly, simply by inquiring whether the contract itself provides for the consequences that flow from a failure to fulfil the condition. However similar considerations fall to be considered on either approach.
Clause 24 does expressly deal with the situation that arises when the approval of the council is not obtained within the stipulated time. It provides that in such an event the purchaser at its option may cancel the contract. These words, which are in all material respects the same as those that govern the consequences of the dishonour of a cheque given in payment of a deposit, gave the purchaser the choice of cancelling the contract or of allowing it to remain on foot. The plain implication is that if the purchaser does not choose to cancel the contract the vendor has no right to treat it as being at an end.
The fact that under the express terms of the contract the date of settlement could be determined only by reference to the date on which the council gave approval (see cll. 1 and 27) is no necessary obstacle to acceptance of the view that the purchaser was entitled to insist on completion notwithstanding that the approval was not obtained. On the date of settlement the vendor was obliged to give possession (cl. 1), and the purchaser was obliged to make payment of a further sum of $75,000 (cl. 28) and to grant a bill of mortgage (cl. 28); moreover the apportionment of rates, taxes, rents and profits had to be made as at that date (cll. 12 and 13). Those matters merely serve to emphasize what is obvious, that if the date of settlement cannot be ascertained the contract cannot be enforced. It was submitted on behalf of the vendor that no term that settlement should be made within a reasonable time could be implied, because that would be to imply a term inconsistent with the express provisions of the contract and would materially alter its effect. Further, reliance was placed on the provisions of cl. 27, which, by providing that settlement shall take place within thirty days from the date of the vendor's receipt of the council's approval, suggest that the obtaining of the council's approval is an essential condition precedent to completion of the contract. However the express provisions of cl. 24, which give the purchaser the option to cancel the contract if the approval is not obtained, and which plainly imply that the purchaser may choose to carry out the contract in that event, would be rendered ineffective if the contract could not be completed in the absence of the council's approval. The overriding intention of the parties must be found in its express provisions, rather than in inferences to be drawn from cl. 27. Once it is decided that the purchaser can choose to allow the contract to remain on foot, notwithstanding that the council's approval is not obtained, there is no difficulty in holding that completion shall take place within a reasonable time from the date on which the purchaser exercises its option - in the present case, 3 August 1981. There is no provision in the contract which fixes the date for completion in the absence of the council's approval, and accordingly when the contract is to be performed notwithstanding the absence of that approval it should be implied that completion will take place within a reasonable time.
If the matter is approached by asking whether cl. 24 was a condition solely for the benefit of the purchaser, so that the purchaser was entitled to waive performance of it, the same result is reached. It was argued that the condition was not one solely for the benefit of the purchaser for two main reasons. First it was submitted that the provisions of cl. 24 were "so inextricably mixed up with other parts of the transaction that they could not be severed", to use the words of Hawksley v. Outram [3] . I have already dealt with the relationship between cll. 24 and 27. If cl. 24 did not contain the words giving the purchaser the option to cancel the contract the case might resemble Heron Garage Ltd. v. Moss [4] , where a provision in the contract that completion would take place on the expiration of one month from the receipt of a planning consent was regarded as supporting the conclusion that a stipulation making the agreement conditional upon the obtaining of the consent could not be waived: see at p. 154. Similarly in Sheridan v. Nikolic [5] the date for completion was expressed to be "within 14 (fourteen) days of notification of registration as per clause 24", and cl. 24 provided that the contract was subject to and conditional upon a realignment of a boundary and the registration of a plan of subdivision; by cl. 25 it was provided that in the event of that condition not being complied with the contract should become null and void. It was held that the condition stated in cl. 24 could not be unilaterally waived by the purchaser, because the date for completion could only be determined if the condition was fulfilled. However in neither of those cases was there any provision giving the purchaser a right to choose whether or not the contract should be cancelled if the condition was not fulfilled, and the cases are distinguishable for that reason.
Secondly, it was submitted that the approval by the council to subdivide the land would enhance its value and therefore the value of the security given by the bill of mortgage which cl. 28 required the purchaser to grant. Although the evidence shows, and the learned trial judge found, that the approval "would have increased the market value and "marketability" of the land" there is no evidence or suggestion that the land will provide an inadequate security in its unsubdivided state. Assuming that the purchase price was a fair one, the land in its unsubdivided state necessarily provided an adequate security for the purchase price. It was the obvious intention of the parties to the contract that any increased value due to subdivision should be reaped by the purchaser. Further, reliance was placed on cl. 29(e), under which if the purchaser sold a subdivided lot a payment was to be made to the vendor, but the object of that provision was to enable the purchaser to sell the subdivided portions on payment to the vendor of a sum regarded as appropriate to compensate him for the reduction in his security, and it does not indicate that the approval to subdivide was for the vendor's benefit.
Little advantage is to be derived from comparing the facts of the present case with those of other cases, but it seems desirable to refer to the decision of this Court in Gange v. Sullivan [6] . There the contract contained a condition in the following terms:
This Contract is subject to the purchaser obtaining development approval from the Warringah Shire Council for the following purposes The purchaser agrees to make application to the Warringah Shire Council for such approval within seven (7) days of the date hereof and in the event of the said Council not granting such approval for the purpose aforesaid by the 31st day of May 1965, then this Contract shall be deemed to be at an end and all moneys paid by the purchaser to the vendor shall be refunded but in the event of Council granting the approval aforesaid then the purchaser will complete the contract within twenty days of the granting of such consent. The council's approval was not obtained but the purchaser received a letter over the typed signature of the town clerk stating that the rearrangement of the existing use of the land was approved in principle subject to specific conditions. It was maintained by the purchaser's solicitor that the letter was not an approval and this attitude was continued by him in conversations with the vendor's solicitor at the end of May and on 1 June. By telephone statement on 1 June and by letter of 2 June the vendor's solicitor stated that no extension of time would be given except on terms which the purchaser's solicitor intimated were unacceptable. The purchaser later unsuccessfully sued for specific performance. It was held that the legal effect of the actions of the solicitors for the parties was that the contract had come to an end. In those circumstances it may not have been strictly necessary to decide whether the condition was for the benefit of the purchaser so that it could be waived by him but the Court did consider that question. Barwick C.J. and Windeyer J. were clearly of the opinion that the condition was for the benefit of the purchaser and could be waived by him [7] . The other members of the Court, Taylor, Menzies and Owen JJ. said [8] : The purchaser's solicitor, for his part, whilst maintaining his stand that the letter of 2nd April was not an approval from the council fulfilling the condition of the contract, did not forego the purchaser's right under the condition and insist upon performance of the contract of sale regardless of the condition or its fulfilment. They went on to say that nothing which then occurred "amounted to a decision on the part of the purchaser to complete notwithstanding his right under the condition". These observations indicate that their Honours agreed with Barwick C.J. and Windeyer J. in thinking that the purchaser had a right to waive the condition. Later their Honours said [9] : As a first step to deciding this decisive question, it is necessary to understand the condition and its significance to the parties. Without doubt, it was intended to safeguard the purchaser by making the continuance of the contract depend upon his obtaining the council's approval for using the land for the three purposes therein set out. Yet, although the condition was for the protection of the purchaser, it nevertheless affected the vendor, for it obliged the purchaser to make his application for the council's approval within seven days; it provided for the contract coming, or being brought, to an end if the council's approval was not granted by 31st May; and it fixed the date for the completion of the contract by reference to the only event which could give rise to any obligation to complete - that is, the council's approval. These remarks are not inconsistent with the earlier passages to which I have referred. The clause as a whole obviously did affect the vendor in the manner which their Honours described. The judgments of all the members of the Court in that case support the view that a condition may be for the benefit of a purchaser, who may insist on performance of the contract regardless of the fulfilment of the condition, notwithstanding that the contract expressly fixes the date for completion only by reference to the time when the condition is fulfilled. The judgments are consistent with the conclusion I have reached in the present case. 1. (1966) 116 C.L.R. 418. 2. (1966) 116 C.L.R., at pp. 429-430, 443. 3. (1966) 116 C.L.R., at p. 440. 4. (1966) 116 C.L.R., at p. 441.
Of course, every case of this kind must depend upon the particular words of the contract in question. The provisions of cl. 24 show unequivocally that the parties intended that the consequence of a failure to obtain the council's approval should be that the purchaser would have the option either to cancel the contract or to proceed to carry it into effect. The purchaser chose the latter course.
For these reasons in my opinion the purchaser was entitled to have the agreement specifically performed. I would allow the appeal, reverse the decision of the Supreme Court, order specific performance, and remit the matter to the Supreme Court.
I agree with the reasons for judgment of Gibbs C.J. and with the order which he proposes.
The appeal should be allowed for the reasons given by the Chief Justice.
The appellant ("the purchaser") is a land developer. By a written contract dated 2 January 1981 it agreed to purchase from the respondent ("the vendor") an unsubdivided parcel of land. The price was $410,250. The salient features of the contract included the following:
Time was to be of the essence of the contract (cl. 22).
The vendor agreed that the property was purchased for subdivision and re-sale (cl. 26).
The contract was subject to and conditional upon the approval of the local authority to a plan of subdivision and engineering plans on terms and conditions satisfactory in all respects to the purchaser within six calendar months from the date of contract (cl. 24).
Settlement was to take place within thirty days from the date of the vendor's receipt of the local authority's approval (cl. 27).
The consideration was to be provided by - (a) a deposit of $2,000 paid on the signing of the contract; (b) $75,000 paid upon settlement; and (c) $333,250 secured by first mortgage over the subject land (cll. 28 and 29).
Provision was also to be made in the mortgage for expedited repayment measured by and conditioned upon the sale by the purchaser of any lot or lots in the subdivision (cl. 29).
The local authority's approval of the subdivision was not obtained within the period of six months stipulated by cl. 24 but the parties agreed to extend the time for such approval to 2 August 1981. The problem in the case arises because notwithstanding the extension of the period the approval was not obtained.
By letter dated 3 August 1981 the purchaser advised the solicitors for the vendor as follows:
We hereby confirm our verbal advices that the Purchaser Company has not, as yet, received subdivisional approval to the plan of subdivision from the Local Authority. However, we have waived this Condition of the Contract of Sale thus making the Contract fully unconditional. However, the vendor took a different view. By letter dated 6 August 1981 his solicitors informed the purchaser that he did not intend to proceed with the contract. The purchaser thereupon sued for specific performance of the contract.
Both at the trial and on appeal to the Full Court of the Supreme Court of Queensland the issue between the parties has been seen as depending upon whether the purchaser was entitled to waive cl. 24 and thereby hold the vendor to the contract. The learned primary judge (Dunn J.) after a careful review of the provisions of the contract held that the clause in question was not inserted in the contract solely for the benefit of the purchaser. The necessary consequence of that conclusion was, as his Honour saw it, that the purported waiver of the clause was ineffective. The approval of the local authority not having been obtained, the vendor was entitled to declare the contract to be at an end. The action was dismissed. The Full Court took a similar view and dismissed the appeal.
With all respect to their Honours in the Supreme Court, it seems to me that the case is to be determined by reference to the express words of cl. 24. It is not a case of construing the contract in its entirety in order to determine whether in all the circumstances there is to be implied in favour of the purchaser a right to waive compliance with a condition which is expressed to be a condition upon the fulfilment of which the contract is to depend. Clause 24 is in the following terms:
This contract is subject to and conditional upon the approval of the Beaudesert Shire Council to a plan of subdivision and engineering plans on terms and conditions satisfactory in all respects to the Purchaser within six (6) calendar months from the date hereof. In the event that such approval is not obtained then the Purchaser may at their option cancel this contract and in that event all deposit moneys paid hereunder by the Purchaser shall be refunded in full to the Purchaser and thereafter neither party shall have any claim upon the other. The Purchaser shall use all reasonable endeavours to secure the said approval within the said six (6) calendar months period. The second sentence of cl. 24 deals expressly with the situation which arose, namely, a situation where the approval of the local authority to the proposed subdivision was not obtained within the agreed time. In such a case, "the Purchaser may at their [sic] option cancel this contract". There is no question of the purchaser having an implied right to waive fulfilment of the condition to which the contract is subject. It is given an option expressly. It may choose to cancel the contract. Conversely, it may choose - for that is what an option confers, the right to choose - not to cancel the contract. In the latter case, the vendor is bound to the contract. It is true that the date for completion which by cl. 27 is dependent on the approval of the subdivision proposals by the local authority cannot then apply, but that circumstance cannot require the express grant of an option to the purchaser to be stripped of its plain and necessary effect. Where the approval is not forthcoming and the purchaser nevertheless elects to carry on with the contract there must be implied in the contract an obligation on the parties to proceed to completion within a reasonable time: cf. Havenbar Pty. Ltd. v. Butterfield [10] . 1. (1974) 133 C.L.R. 449.
Mr. Morley, in a valiant struggle for the vendor, contends that the option which cl. 24 confers on the purchaser is an option which must be exercised if at all within the period of six months or the extended period allowed for securing the approval of the local authority. In the event that the prescribed time expired without the necessary approval being obtained then, he says, the condition had failed and either party could avoid the contract. He further argues that in any event the purchaser did not exercise the option under cl. 24 but purported to waive the clause, a purported waiver which was ineffective because, having regard to other clauses in the contract, the clause was not one which had been inserted exclusively for the benefit of the purchaser. This latter argument adopts the view taken by the primary judge and the Full Court.
Mr. Morley's first argument fails to find a foothold in the wording of cl. 24; indeed, that wording makes it unlikely that the option could ever be exercised within the relevant period and it certainly does not compel its exercise within that period. The clause obliges the purchaser to use all reasonable endeavours to secure the approval within the period. This obligation might well require a purchaser to persist with an application notwithstanding an initial refusal, or to pursue the rights of appeal from the decision which the relevant legislation affords. It is unlikely that all avenues which would reasonably be open to an applicant for subdivisional approval would be exhausted before the expiration of the period in question. The parties must have recognized the possibility, if not the likelihood, that the time for the exercise of the option would not arrive until the expiration of the period because the condition precedent to its exercise - "in the event that such approval is not obtained" - would seldom be satisfied before that time.
With respect to Mr. Morley's second argument, although the purchaser's letter of 3 August speaks of waiving the condition, the necessary effect of the letter is to inform the vendor of the purchaser's decision not to exercise its option to cancel the contract. As was averred in the statement of claim, the plaintiff by that letter "affirmed the contract". In any event, it may be wondered whether any communication from the purchaser to the vendor was necessary. The extended time in which to obtain the approval of the local authority having expired and the purchaser having declined to cancel the contract, it was open to either party to give a notice setting a reasonable time for the completion of the contract. The important consideration which is fatal to the vendor is that any construction of the contract which would give to both parties the right to avoid it on failure of the condition requiring local authority approval of the subdivision is ousted by express conferral on the purchaser alone of an option to cancel the contract. There is simply no room, consistently with the wording of the second sentence of cl. 24, for the operation of the principles based on the voidability of a contract that are embodied in the decisions of this Court in Suttor v. Gundowda Pty. Ltd. [11] and Gange v. Sullivan [12] .
Having come to this conclusion, it is unnecessary for me to consider whether, if the contract had not conferred on the purchaser the option to cancel, that party would have been entitled to waive the condition contained in cl. 24. That hypothetical question raises issues of considerable importance which in my respectful opinion should wait until a case arises which requires their resolution. There is the question whether a purchaser seeking specific performance may waive compliance with a condition precedent only where it is shown to be "exclusively" for his benefit (cf. Brightman J. in Heron Garage Ltd. v. Moss [13] ) or whether it is sufficient if the condition be "primarily" for his benefit (cf. Windeyer J. in Gange v. Sullivan [14] ). It is to be noted that in the last-mentioned case Barwick C.J. [15] recognized as relevant to the question whether the purchaser was entitled to waive the non-fulfilment of the condition with respect to local authority planning approval the fact that the vendor did not retain any interest in the subject land. In a case such as the present one the continuing interest of the vendor as mortgagee would be a relevant consideration. There is also the question whether to be effective the waiver must take place before the expiry of the relevant period. Had it been necessary to decide such a point in Gange v. Sullivan, both Barwick C.J. [16] and Windeyer J. [17] would have answered it in the affirmative. See also the cases discussed by Newton J. in Gough Bay Holdings Pty. Ltd. v. Tyrwhitt-Drake [18] . Finally, there is the question whether the fact that the date of completion in a contract where time is of the essence is fixed by reference to the date when a condition is fulfilled renders the clause imposing the condition so inextricably mixed up with other parts of the transaction that it cannot be severed: cf. Hawkesley v. Outram [19] ; Heron Garage Ltd. [20] ; Sheridan v. Nikolic [21] . It is not appropriate to pursue a discussion of these matters in the abstract because the facts of a particular case will often be of critical importance in discovering the intention of the parties. I would merely observe that in undertaking that voyage of discovery one should not lightly imply a right of waiver in one party to the possible prejudice of the other unless it clearly emerges on the face of the contract.
As I have said, these problems do not arise in the present case. If they had done so, I would have had considerable sympathy with the view taken in the Supreme Court. In the result, however, the parties expressly provided for the event which occurred and no question of waiver arises.
I agree with the order proposed by the Chief Justice and with his reasons for proposing it.
Sandra Investments Pty Ltd
Booth