Supreme Court of WA|2001-03-09|Before: Mr J, Owen J

Shakibaee & Ors v Chan [2001] WASC 60 (9 March 2001)

JURISDICTION : SUPREME COURT OF WESTERN AUSTRALIA

CITATION : SHAKIBAEE & ORS -v- CHAN [2001] WASC 60

Contracts - General contractual principles - Construction and interpretation of contracts - Provision as to settlement date - Meaning of phrase "after titles available for dealing"

Contracts - General contract principles - Discharge, breach and defences to action for breach - Failure to settle by due date - Late payment of deposit - Tendering unstamped transfer for execution by vendor - Whether breaches amount to repudiation

Associated Newspapers v Banks [1951] HCA 24; (1951) 83 CLR 322

Bahr v Nicolay (No 2) [1988] HCA 16; (1988) 164 CLR 604

Carr v J A Berriman Pty Ltd (1953) CLR 327

Gordon v Macgregor [1909] HCA 26; (1909) 8 CLR 316

Gregory v MAB Pty Ltd (1989) 1 WAR 1

Hoad v Swan (1920) 28 CLR 259

Metcalf v Permanent Building Society (1993) 10 WAR 145

Permanent Building Society v Wheeler (1992) 10 WAR 109

Robert A Munro & Co Ltd v Meyer [1930] KB 312

Total Gas Marketing Ltd v Arco British Ltd & Ors [1998] 2 Lloyd's Law Reports 209

United States Surgical Corp v Hospital Products International Pty Ltd [1984] HCA 64; (1984) 156 CLR 41

Woodar Ltd v Wimpey Ltd [1980] UKHL 11; (1980) 1 WLR 277

1 OWEN J: The plaintiffs (as purchasers) and the defendant (as vendor) signed a contract for the sale and purchase of some commercial real estate in Mount Pleasant. The transaction did not proceed to settlement. These proceedings involve a claim by the purchasers for damages in lieu of specific performance in relation to the contract. It also involves a counterclaim by the vendor for damages for breach by the purchasers of their obligations under the contract.

2 The defendant is a qualified medical practitioner although she has not worked in that profession since 1993. She has been involved in property developments since 1988. In 1992 the defendant acquired a parcel of land known as Lot 21, 43 Bateman Road Mount Pleasant ("Lot 21") on which was constructed an older style retail building leased out as a delicatessen and an old uninhabited house. The defendant became the registered proprietor of the land on 11 January 1993. From early 1993, the defendant was trying to sell the property.

3 At about the same time the plaintiffs (through Mr Arash Shakibaee) had expressed to a local agent, Mr Bradley Cooper from Ross Hughes and Company, an interest in acquiring property in the area. They were looking for land on which to build a duplex residence. The idea was that Shakibaee would own and live in one of the units and Mr and Mrs Nadiri, the other plaintiffs, would own the other unit.

4 The zoning of Lot 21 was such that it could be used for residential purposes. In approximately May 1993 Cooper approached the defendant with the suggestion that Lot 21 be subdivided into two lots and sold as a residential development site. The defendant expressed interest in the idea and Cooper discussed the prospect with Shakibaee.

5 The defendant appointed the surveyors Zuideveld Bennett to effect the subdivision of Lot 21 into two lots. These proceedings concern the northern lot, being an area of approximately 905 square metres and which was, eventually, to become the subject of Certificate of Title Volume 1975 Folio 144 ("Lot 1"). The delicatessen was situated on Lot 1. The other lot, ("Lot 2") had an area of approximately 715 square metres. The old uninhabited house was situated on Lot 2. On two occasions, once in June and once in July 1993 the defendant granted to Shakibaee options to purchase Lot 1. Save for the fate of the $2000 "option fee" referred to in those documents, the option arrangements are not essentially relevant to these proceedings.

6 On 6 July 1993 the defendant formally appointed Ross Hughes and Co (Cooper) as her exclusive agent for 120 days to sell the "subdivided lots now comprised in [Lot 21]" for $243,000 (Lot 1) and $186,000 (Lot 2).

7 On 11 August 1993 Shakibaee made an offer, in his own name "or nominee", to purchase Lot 1 for $243,000. The offer was made on the standard form document issued by the Real Estate Institute of Western Australia (Inc). It included the following features.

8 1. It provided for a deposit of $5000 "of which $2000 is paid herewith and $3000 shall be paid within 28 days of acceptance". There is an issue in the proceedings as to the amount actually paid by way of deposit and the date on which it was paid.

9 2. It contemplated the payment of the balance of the purchase price "on Settlement". The offer had this provision: "Settlement Date: on or before 14 days after title is available for dealing".

10 3. It was a "cash offer", that is, the pre-printed subject to finance condition was crossed out and the word "cash" written over it.

11 4. It incorporated the Law Society of Western Australia (Inc) and the Real Estate Institute of Western Australia (Inc) 1991 Joint Form General Conditions for the Sale of Land ("the General Conditions").

12 5. It contained a number of special conditions that were handwritten on the reverse side of the offer and acceptance document. One of those conditions, numbered 7, is at the heart of these proceedings. It reads: "A formal lease is to be in place for the shop incorporating a term of (3) years and an annual rental of [$15,600]". I will call this "the Lease Condition".

13 The defendant accepted the offer on 11 August 1993. I will call the contract for sale and purchase constituted by the offer and acceptance "the Contract". There are several features of the Contract that are not in issue. First, Shakibaee nominated the three plaintiffs as the purchasers. Secondly, another special condition in the Contract, namely that it was subject to subdivision of Lot 21 "generally in accordance with" a plan that was attached to the form, was complied with by the creation of Lot 1. Thirdly, the Contract was subject to a special condition the effect of which was that the owner enter into a contract of sale for Lot 2 by 30 September 1993 at a price not less than $183,000.

14 Prior to 11 August 1993, in fact on 2 August 1993, the defendant had entered into a contract to sell Lot 2 to people named Kennedy for $186,000. The settlement date for the sale of Lot 2 was expressed in the same terms as that for Lot 1. No point is taken in these proceedings that the Contract failed for want of compliance with the third of the conditions mentioned in the previous paragraph.

15 The diagram of subdivision of Lot 21 was lodged at the Department of Land Administration ("DOLA") for checking on 15 November 1993 and on 3 December 1993 it was "certified correct". On 9 December 1993 DOLA sent a fax to Zuideveld Bennett stating:

"This is to inform you that [the diagram has] been approved by the Department of Planning and Urban Development and [was] placed in order for dealings in this office on 9-12-93. Dealings may now be lodged ... ."

16 The diagram was given the DOLA number 85591. On 14 December 1993 the defendant's solicitor sent a facsimile to the settlement agent appointed to act for the plaintiffs advising that the diagram had been placed in order for dealing on 9 December 1993.

17 On 31 December 1993 the Application for New Titles resulting from the registration of Diagram 85591 was lodged at DOLA. Settlement of the sale and purchase of Lot 2 took place on the same day. The processing of the application for new titles was "completed" on 14 February 1994. I will have more to say later about what the word "completed" means in the context of this action. It is sufficient to say for the moment that the practical consequence is that dealings (such as transfers and mortgages) could have been lodged at any time on or after 31 December 1993 but the documents being the duplicate certificates of title for Lots 1 and 2 could not have been physically collected from the DOLA until, but not before, 14 February 1994.

18 Before completing this background narrative I need to go back in time to mention two matters. The first relates to finance. Although the Contract was not conditional on obtaining approval of finance, as early as September 1993 Shakibaee had approached Mr Kenneth O'Brien of Blackburne and Dixon about obtaining finance. Nothing further was done in that respect until later in the year.

19 The second matter concerns the lease of the delicatessen. On 2 June 1993 the vendor and the proprietor of the delicatessen had executed a lease of the shop for a term of three years commencing on 1 January 1993 and ending on 31 December 1995 at an annual rental of $15,600 ("the Lease"). On 21 July 1993 the defendant, the lessee and people named Miller and Blyth executed a deed of assignment of the Lease effective from 10 June 1993. In the deed of assignment Miller and Blyth were granted an option to renew the term for a further three years. By November 1993 Miller and Blyth were in default under the terms of the Lease. On 18 November 1994 the solicitors for the defendant served a default notice on Miller and Blyth specifying as the default non-payment of rent, rates and taxes. There is in evidence a note signed by Miller and Blyth stating that "as of 3 February 1994 [they had] terminated the lease to Bateman Rd Deli".

20 During December 1993 and January 1994 correspondence and telephone calls passed between James Chong and Co ("Chong") and later Birman & Ride, solicitors for the defendant, and VIP Settlements, the settlement agency appointed by the plaintiffs, about the approval of the diagram and settlement. I will go into those exchanges in some detail later in these reasons. Again, it is sufficient to say at this stage that there were differences between the parties as to when settlement was required to be effected pursuant to the Contract. In January 1994 the plaintiffs made a formal application to a broker for finance for the purchase. Late in January the broker advised Shakibaee that finance was available. On 28 January 1994 VIP Settlements sent a transfer document to Birman & Ride so that it could be executed by the defendant. On the same day they lodged the Contract for stamping.

21 On 9 February 1994 Chong wrote to VIP Settlements saying that the tenancy of the delicatessen had been terminated and that, accordingly, there was not in place a formal lease as required by the Contract. The letter went on:

"The [defendant] has instructed us on her behalf to notify you and the purchaser that the [Contract] is terminated for non-fulfilment of [the Lease Condition]."

22 The plaintiffs then took legal advice. On 9 February 1994 the solicitors for the plaintiffs wrote to Chong maintaining that, on the proper construction of the Contract, it had not failed and that the plaintiffs wished to proceed and would waive compliance with the lease Condition. The defendant continued to take the position that the Contract was at an end. On 15 February 1994 the plaintiffs' solicitors wrote to Chong again. They said that as new titles had issued on 14 February 1994, settlement was due on 28 February 1994.

23 In March 1994 the plaintiffs lodged a caveat over Lot 1 claiming an estate in fee simple as purchaser under the Contract. In May 1994 the defendant lodged a mortgage (commonly referred to in conveyancing parlance as a "dummy dealing") to trigger a 14-day notice in relation to the caveat. The plaintiffs then commenced these proceedings and sought orders extending the operation of the caveat. They also sought injunctive relief to prevent the defendant from dealing with Lot 1 until trial or further order.

24 Eventually an accommodation was reached by which the caveat was withdrawn and the plaintiffs abandoned their claims to specific performance of the Contract without prejudice to their rights under the Contract. It left the defendant free to deal with the property. In October 1994 the defendant sold Lot 1 to an independent third party. In the circumstances, this action became one for damages. I think it is common ground that Lot 1 was sold to the third party for $330,000.

25 The plaintiffs pleaded the Contract, including the Lease Condition, and the defendant's attempt to terminate the Contract by virtue of non-compliance with that condition. They also pleaded that they had waived the Lease Condition. On the plaintiffs' pleaded case, and following the issue of new titles on 14 February 1994, settlement was due on 28 February 1994. They plead that at all material times they had been ready, willing and able to settle. The defendant had wrongfully failed and refused to complete settlement. Alternatively, if they were in breach of the Contract there had been a wrongful termination by the defendant because no default notice had been issued under cl 16 of the General Conditions. The plaintiffs say that this entitles them to damages in lieu of specific performance.

26 The defendant effectively admits the existence of the Contract but says that the lease Condition was included for her sole benefit. The Lease Condition required Lot 1 to be subject to the Lease on the date of settlement of the Contract. Performance of the Contract was subject to the Lease Condition being fulfilled and if it could not be fulfilled the parties could elect to terminate the Contract. The defendant pleads that the title for Lot 1 became available for dealing on 31 December 1993 and accordingly the last day for settlement of the Contract was 14 January 1994. The plaintiffs had failed and refused to settle as provided by the Contract on 14 January 1994.

27 As to the Lease Condition, the defendant pleads that by notice dated 3 February 1994 the lessees of the shop terminated the Lease. Accordingly, the Lease Condition was not fulfilled and the Contract was at an end. In those circumstances the solicitors letter of 9 February 1994 terminated the Contract. As the Agreement had already been terminated the plaintiffs were not able to waive compliance with the lease Condition as they purported to do in the letter of 9 February 1994. As the Contract had been terminated on 9 February 1994, the attempt by the plaintiffs in the letter of 15 February to fix 28 February as the settlement date was ineffective.

28 In this respect the pleading could, I think, have been a little more clearly phrased. However, I think that what the author of the pleading intended is that the Lease Condition was included for the benefit of the defendant and could, therefore, only be waived by the defendant. The Lease was still in force until 3 February 1994 when it was "terminated" by the lessees. The defendant then elected to terminate the Contract because of non-fulfilment of the lease Condition. The Chong letter of 9 February 1994 constituted notice to the plaintiffs of termination of the Contract by the defendant.

29 The defendant then sets up an alternative contention. She says that at all times she was ready, willing and able to perform her obligations under the Contract. However, the plaintiffs repudiated the Contract by:

(a) failing to tender an executed and stamped transfer of land document to the defendant notwithstanding repeated requests to do so;

(b) failing to agree on the settlement date as provided by the Contract; and

30 The defendant pleads that she accepted the plaintiffs' repudiatory conduct either by entering into an agreement to sell Lot 1 to the third party or by the Chong letter terminating the Contract on 9 February 1994.

31 The defendant also asserts a counterclaim. In it she says that had the plaintiffs settled on 31 December 1993, as had the purchasers of Lot 2, the total proceeds of sale would have been sufficient to pay off the then existing mortgage over Lot 21 and to fund the acquisition of a property in Kelmscott that the defendant had agreed to buy. As the plaintiffs had not settled on the due date the defendant had been put to cost and expense in taking out a new loan to discharge the existing mortgage and the new purchase. She had relied on the sale of Lot 1 to finance the purchase of the Kelmscott land. She pleads that she is entitled to damages accordingly.

32 In their reply and defence to counterclaim the plaintiffs deny any repudiatory conduct or an entitlement for the defendant to obtain the relief claimed or any relief at all.

33 This is primarily a case about the proper construction of the Contract. However, it also involves questions about repudiation. At the hearing there was a general objection by the defendant to any evidence being led as to what the plaintiffs (or more particularly Shakibaee) thought the provision of the Contract specifying the settlement date meant. I indicated that I would hear the evidence and then rule on the objection in the course of the reasons for decision.

34 It is trite to say that evidence of the subjective intention of a party is not relevant in considering the proper construction of a contract: Codelfa Construction Pty Ltd v State Rail Authority of New South Wales [1982] HCA 24; (1982) 149 CLR 337 at 352. However, counsel for the plaintiffs submitted that the evidence was still admissible. He contended that if the plaintiffs construction of the Contract was found to have been wrong, the reasonableness of their conduct in arriving at that interpretation and then maintaining it would arise as an issue on the question of repudiation. The evidence was therefore admissible on the question of repudiation even though it is not admissible on the construction issue.

35 I accept that submission. In Dainford Ltd v Smith [1985] HCA 23; (1984-85) 155 CLR 342 Brennan J said, at 365 - 366:

"The next question is whether the vendor repudiated the contract by evincing an intention to perform its obligation ... only in a manner substantially inconsistent with its terms. ... Sometimes it is right to find that a party who adopts an erroneous construction of a contract and who intends to act in accordance with that construction in fulfilling the contract is not ready and willing to perform the contract and has evinced an intention to perform the contract only in a manner substantially inconsistent with its terms. But "there are other cases in which a party, though asserting a wrong view of a contract because he believes it to be correct, is willing to perform the contract according to its tenor. He may be willing to recognize his heresy once the true doctrine is enunciated or he may be willing to accept an authoritative exposition of the correct interpretation" (D.TR Nominees Pty. Ltd. v. Mona Homes Pty. Ltd. [1978] HCA 12; (1978) 138 CLR 423 at 432; and see Green v. Sommerville [1979] HCA 60; (1979) 141 CLR 594 at 600-601, 610)."

36 It is not at all uncommon to have a situation where evidence is inadmissible for one purpose and admissible for another. Thus it is, for example, that evidence of subjective intention cannot be used to assist in the construction of a contract but it is relevant if the party concerned seeks rectification of the contract: Acorn Consolidated Pty Ltd v Hawkslade Investments Pty Ltd (1999) 21 WAR 425 at 431. That is how I will approach the disputed evidence here.

The Position Before 11 August 1993 and on Formation of the Contract

37 Apart from matters relating to the options and the deposit there is not a great deal of dispute about what happened prior to the formation of the Contract.

38 The defendant says that early in 1993 she received an offer of $365,000 for Lot 21 but she rejected it. Cooper approached her and said she could get a higher price if she subdivided Lot 21 into two lots and she agreed. Cooper's evidence was to much the same effect.

39 On 6 June 1993, on Shakibaee's instructions, Cooper prepared an option document to which was attached an offer and acceptance. It is not entirely clear on the evidence whether the actual written document which was later to become the Contract was prepared in June 1993 and attached to the option or whether it was prepared on or closer to 11 August 1993. It is in the same, or a similar, form to the offer that accompanied the option document. There is no suggestion that the option was exercised and neither party relies on it as a contractual document. For that reason I do not think I need to resolve the uncertainty. The option provided for the payment of an option fee of $2000 which was to become the deposit on the contract if the option were to be exercised. A further option document was prepared on 7 July 1993, again with an option fee of $2000. Again, neither party relies on it as a contractual document.

40 I need to digress for a moment. The statement of claim asserted (and has always asserted) that the deposit of $5000 provided for in the Contract was "duly paid". When the defence was first filed in 1995 that assertion was admitted. The action was initially listed for hearing in March 1999 but a few days before the trial was due to commence the defendant applied, successfully, to vacate the trial dates. Fresh trial dates, in February 2000, were allocated. In January 2000 the defendant applied for leave to amend the defence. In that application, the defendant sought, among other things, to withdraw the admission relating to the payment of the deposit. During the hearing of the application, it became clear that the option fee of $2000 was paid on the June option but that, by arrangement between Cooper (as agent for the defendant) and Shakibaee, the $2000 was "transferred" to the July option and was later treated as part of the $5000 deposit payable under the Contract.

41 As part of the proposed amendment to the defence the defendant wished to assert that the agent, Cooper, had no authority to vary the terms of the option arrangement. Accordingly, the deposit had not been paid at all or, alternatively, that only $3000 of the $5000 had been paid and the failure to pay the full deposit was a repudiation by the plaintiffs. On 25 January 2000 I heard the application for leave to amend the defence. During the hearing an issue arose as to the exact nature of the case that the defendant wished to advance on the options. Counsel then appearing for the defendant stated unequivocally that it was not part of the defendant's case that the Contract arose from the exercise of the options or either of them or that the options were relied on as documents having contractual effect. I refused to allow the amendment on discretionary grounds. I reached this conclusion because the admission had stood for nearly five years and it would have opened up an entirely new area of investigation, namely the actual and ostensible authority of the agent. In my view it would almost certainly have resulted in another adjournment of the trial. No appeal was mounted against the refusal of leave.

42 At the hearing, counsel for the defendant pursued the question of the options and a question arose whether it was a collateral attack on the refusal of leave to amend. Counsel disavowed that notion and maintained that the options were being referred to purely as part of the factual background to the formation of the Contract and as part of an argument that the plaintiffs were never ready, willing and able to settle. That effectively put an end to any controversy about the payment of the deposit. Accordingly, and on the pleadings, the defendant could not assert the first instalment of the deposit, namely $2000, had not been paid at the time when the Contract was entered into.

43 On the first day of the hearing the defendant applied for leave to make further amendments to the defence and counterclaim. I allowed some of the proposed amendments and rejected others. One of the amendments that I did allow raised a particular aspect of the deposit. The Contract required payment of the balance of the deposit, namely $3000, by 8 September 1993. By amendment I permitted the defendant to contend that the plaintiffs had not paid the balance by that date and that the failure to do so was part of the conduct relied on as being repudiatory.

44 Finally on this aspect I should say that I saw nothing in the evidence relating to the options that would assist the defendant to establish that the plaintiffs were not ready, willing and able to settle.

45 It is common ground that Cooper prepared the Contract. Both Shakibaee and Cooper testified that Shakibaee suggested the settlement date wording in the Contract. I have no reason not to accept that evidence. Shakibaee said that he deliberately chose the wording "after title is available for dealing" so that he would not be forced to settle on a dealing number. They intended to obtain finance from a financier who did not accept settlement on a dealing number but required a title. Cooper confirmed that Shakibaee had requested the wording. He could not recall exactly what Shakibaee had said but thought it was that Shakibaee had experienced problems in that area before. I accept the evidence that the request for the wording came from Shakibaee. I do not regard as material the differences between Shakibaee and Cooper concerning the reason for the request.

46 At the hearing much was made of the fact that the plaintiffs made a "cash" offer and yet applied for finance. On the first day of the hearing, one of the amendments sought by the defendant was to assert, as part of the plaintiffs' conduct relied on as being repudiatory, that the plaintiffs had applied "for finance when the [Contract] was expressed to be a cash agreement". I refused that particular amendment on the grounds that it could not be repudiatory. It is common commercial experience that a purchaser well knows that he or she will take out a mortgage and yet (for any one of a myriad of reasons) elects not to make the offer conditional on obtaining approval to a loan. That, of itself, cannot be repudiatory. It was the defendant's evidence that she wanted a cash offer and told Cooper so. Cooper acknowledged that but said that he did not mention it to the plaintiffs. There may be circumstances in which making a cash offer could be repudiatory, for example, if there was no real prospect of finance becoming available in time for settlement or at all. However, that is not this case and there would need to be more than the mere fact that the offer was formulated in a particular way.

47 All witnesses who were asked the question agreed that, as a general statement, vendors prefer "cash offers" to those that are subject to finance. It hardly needs evidence to establish such a proposition. But I am not sure where all of the evidence was meant to go. In the end, I think the fact that the plaintiffs made a cash offer when they knew they would be applying for finance was of no moment at all. In this respect, Shakibaee gave evidence that although the plaintiffs did not have the cash available they could have settled without obtaining finance "by restructuring some of [their] finances". If it matters, I accept that evidence.

48 What, I think, might have had some impact was whether the process and the progress of the plaintiffs' application to O'Brien for finance was material to the argument by the defendant that the plaintiffs were not, in fact, in a position to settle at the settlement date and thus were not ready, willing and able to settle. This is, I think, a different issue.

The Formation of the Contract - The Lease Condition

49 Quite a bit of evidence was led at trial as to how the Lease Condition came to be included in the Contract. Shakibaee said that before the offer was drawn up Cooper told him there was a lease in place for the delicatessen but that he had not then seen the lease document. Shakibaee asked Cooper to include a condition about the lease and that it specify the term of three years and the rent of $15,600. The defendant testified that Cooper had not known about the lease and she had raised it with him. She had insisted that a term be included so that she would not be in breach of the General Conditions, which required notification of tenancies unless vacant possession was to be delivered at settlement.

50 Cooper's evidence was that he had raised the issue with the defendant and had advised her to have a condition noted in the contract disclosing the lease so as to comply with the General Conditions. But he said he also told the defendant that the clause, as drafted, went beyond what was required for disclosure and gave the plaintiffs an additional benefit, namely, the ability to withdraw from the contract.

51 As the case was developed, I am not at all sure as to the admissibility of this evidence. There are two important questions to be resolved here. First, is the Lease Condition a "condition" properly so called? Secondly, if it is a condition for whose benefit was it included?

52 I am using the term "condition" here in the sense of a contractual term having promissory effect, the non-fulfilment of which would of itself bring the Contract to an end or would entitle one or other or both of the parties to do so. In this sense it is a little different from the word as used in the classification of contractual terms as conditions, warranties or intermediate terms because in that sense, the point of contention is usually the consequence of a breach of the term. It is not here said that one or other party was in breach of the Lease Condition. Nor is it said, I think, that the Lease Condition was a true condition precedent to the coming into existence of the Contract. Rather, it is advanced as a condition precedent to the continuing obligation on the parties to perform the Contract or, to use the shorthand phrase, a condition subsequent.

53 The second question that I have posed is important because only a party for whose benefit a condition is included in a contract can waive it. That is so if the condition is primarily for the benefit of one party even though it may affect the other party: Gange v Sullivan [1966] HCA 55; (1966) 116 CLR 418 at 430, 441; Perri v Coolangatta Investments Pty Ltd [1982] HCA 29; (1982) 149 CLR 537 at 543, 553. The law seems to be that a right to waive a condition continues beyond the expiry of the period within which the condition falls to be fulfilled so long as the contract continues on foot: Sandra Investments Pty Ltd v Booth [1983] HCA 46; (1983) 153 CLR 153 at 166; Willing v Baker (1992) 58 SASR 357 at 377. This latter point may assume importance depending on the resolution of critical questions of construction about the Lease Condition itself and as to meaning of the phrase "settlement date".

54 Whether a term is a condition in accordance with these concepts is a question of construction. It is a question of law to be decided by the court and the usual rules limiting the use of extrinsic evidence apply. The onus, which rests on the party contending for the condition, can be satisfied by pointing to an express assertion in the contract to that effect or by implication from a rule of law (neither of which apply in this case) or because the construction of the contract indicates an implied agreement that the term is to be a condition. There is no presumption, even in commercial contracts, that a contractual term is a condition. The implication must appear clearly from terms of the arrangement. The test is objective. The question is what the parties, as reasonable persons, must have intended. Some of the factors that can be looked at in making this assessment include the motivation for inclusion of the term, the form and structure of the term and the contract, the likely effect of a breach, whether the innocent party would be compensated adequately by damages and the subject matter of the term and the contract.

55 In my research I have not been able to find a clear statement that regard cannot be had to extrinsic evidence to assist in determining for whose benefit a term was included. However, in Gange and in Perri, the members of the High Court who considered the question seemed to approach it from within the four corners of the contractual document concerned. In Hutchinson v Payne [1975] VicRp 17; [1975] VR 175 there was a subject to finance clause that the Court found not to have been self executing. Finance was refused. Lush J had to decide whether either party could give notice rescinding the contract or whether the purchasers alone could do so. Lush J said, at 178:

"At the risk of repetition, this is a question of construction: see Koikas v Green Park Construction Pty Ltd [1970] VicRp 18; [1970] VR 142 at 147-49. I have to decide whether by its words - and I disregard, of course, evidence of conversations leading up to and accompanying its preparation - the contract shows an intention that both or only one of the parties should have the right to rescind in the event contemplated by the conditions."

56 In this case the Lease Condition contains no express statement that would assist in the issues of construction which I am now considering. It then becomes a matter of implication from the terms of the Contract as a whole. The Lease Condition aside, the Contract is entirely silent as to the lease and the delicatessen. Indeed the contrary is the case. Special condition 5 refers to "the proposed lot" complying with council requirements for a duplex zoned lot. The reference to "the proposed lot" is, I think, to Lot 1, not to Lot 21. It therefore contemplates a use compatible with a duplex zoning which may or may not include a delicatessen. It is therefore necessary to take a broader look at the Contract.

57 The motivation for the inclusion of the term is, it seems to me, stronger in the case of the purchaser than of a vendor. The vendor has an obligation under cl 6(1) of the General Conditions to disclose the existence of a tenancy. To that extent the vendor has an interest in the condition but once the disclosure has been made it is difficult to see how, from the perspective of the vendor there is anything much which remains to be achieved by reliance on the term. The vendor may well wish to have a lease of commercial premises in place to ensure that he or she is in receipt of rental income. But that has nothing to do with the condition or with the contract. It is purely a commercial matter between the vendor (as lessor) and the lessee and it would be in existence whether or not the vendor had decided to sell. Once settlement occurs it is a matter of complete indifference to the vendor whether the lease continues or not. On the other hand, a purchaser has a clear financial interest in the occupancy of the delicatessen and the lease of it. Even if the purchaser wishes to redevelop the site, perhaps for an entirely different use, it may be in his or her interest to have an income stream to offset holding costs until the work is undertaken.

58 In this respect the two questions that I have posed overlap. If the Lease Condition is solely for the benefit of the defendant (as pleaded in par 2(3)(b) of the defence) it is difficult to see what promissory or continuing element it possesses. On the other hand, if it is for the benefit of the plaintiffs it is promissory in the sense that it continues to operate.

59 In my view the proper construction of the Lease Condition is that it is a condition subsequent (in the sense that I have outlined) and it was included for the benefit of the plaintiffs. That being so, if waiver becomes an issue, then so long as the Contract remained on foot it is capable of being waived only by the plaintiffs.

60 If I am wrong in my appreciation of the admissibility of the evidence led concerning the inclusion of the Lease Condition in the Contract then I would have to say that my view of the evidence supports the conclusion which I have just outlined. For reasons that I will explain later, I prefer the evidence of Cooper to that of the defendant. His evidence supports the view that the term was included for the benefit of the plaintiffs. So far as the defendant was concerned the condition was designed to fulfil her obligation formally to disclose the tenancy and it did not need to go beyond that requirement for disclosure. But it did so extend, by deliberate wording chosen by the defendant's agent and to the knowledge of the defendant, and in that respect it was for the benefit of the plaintiffs. Shakibaee said in cross-examination (and I accept) that he was aware of the delicatessen lease and that it was generating an income of $15,600 per annum. This was an important factor for the plaintiffs so they could service the loan that they intended to procure.

61 I repeat that I have approached the issue as a question of construction without regard to this extrinsic evidence. I have mentioned it here in case I am wrong in my understanding of the correct approach. To that extent it is a makeweight.

The Events of November and December 1993 - The Contract

62 As I have already said, the offer was accepted on 11 August 1993 and the necessary formalities to achieve the subdivision were instituted. On 11 November 1993 Cooper sent a copy of the Contract and an instruction sheet to Chong, as solicitor for the defendant. On the following day he sent a copy of the Contract to VIP Settlements, the settlement agency appointed to act for the plaintiffs. Ms Gabriella Gauci, an employee of VIP Settlements, was the settlement agent who had charge of the file.

63 Gauci immediately advised Shakibaee that the three month period for presentation of the Contract for stamping had expired. She also made inquiries as to the progress of the subdivision application and learned that approval was imminent. However, it seems that the original of the Contract was not forwarded to Gauci until 23 December 1993 and was not lodged for stamping until 12 January 1994. On 9 December 1993 she received a letter from Chong stating that the diagram of subdivision was "not in order for dealing yet" but requesting that Gauci forward to him the transfer document so he could obtain the signature of the defendant. On the same day Gauci ordered a search of the title and on 13 December 1993 she prepared a purchasers' settlement statement.

64 On 9 December 1993 Zuideveld Bennett had been advised by DOLA that the diagram had been placed in order for dealings that day. On 14 December 1993 Chong sent to Gauci by facsimile a letter passing on that information and stating:

"[The defendant] has instructed us to advise you that settlement shall be due on 23 December 1993. ... We look forward to receiving the transfer of land document for the [defendant's] execution the soonest possible."

65 On 14 December 1993 the defendant had sent a fax to Chong asking him to advise both purchasers (that is, the plaintiffs and the Kennedys) that the titles were available for dealing. The fax also said:

"On or before 14 days after the date when the titles are available for dealing 9th Dec '94 will be the settlement date (9 + 14) = 23rd Dec '93. The holidays following up to 18th Dec '93. I will want to settle on 29th Dec '93 (or a few days later if agreeable to the parties.

Please send copies of this letter to the 2 purchasers informing them of the Date of Settlement 29th Dec '93.

NB Settlement was initially set on 20th Dec 1993. But both parties seemed reluctant to deal therefore I am now proposing 29th Dec or later."

66 Before continuing with the chronological narrative I wish to say something about this document. It was put to the defendant in cross-examination that the number "14" in the notation "9 + 14 = 23" was taken from the definition of the settlement date in the Contract and that at that stage the defendant believed that the contractual settlement date was 23 December 1993. She denied it. The defendant explained the reference to "9 + 14 = 23" this way. The "9" is 9 December 1993. That is the date on which the diagram was available for dealing. She said that she had then telephoned DOLA and asked when titles would be in order for dealing and was told "roughly two or three weeks". She chose 14 (two weeks) rather than 21 (three weeks) and added it to 9, arriving at the settlement date of 23 December 1993. It had nothing to do with the 14 days specified in the settlement date definition in the Contract.

67 I find this explanation difficult to accept. The wording in the fax "14 days after the date when the titles are available for dealing" mirrors almost exactly the wording of the Contract. It is a reference to the titles, not the diagram, being available for dealing. It should not be overlooked that the Chong letter of 14 December 1993, which was sent on the defendant's instructions as a result of the fax, also says that settlement is "due" on 23 December 1993. There is another relevant factor. When this writ was first issued the defendant was represented by Parker and Parker. Paragraph 4(3) of the defence and counterclaim filed on 30 January 1995 says that the titles "became available for dealing on 9 December 1993" and it is implicit in par 4(6) that the settlement date was 23 December 1993. I find it difficult to accept, as the defendant contends, that she was not aware of the terms of the defence on such a critical issue as the settlement date. I will return to the Parker and Parker defence when I am discussing the defendant's contention that by 9 February 1994 she had worked out that the correct settlement date was 14 January 1994.

68 The reference to a projected settlement date of 20 December 1993 is also curious. So far as I can recall that was not put to any other witness. The only significance of 20 December 1993 seems to be that it was the date on which the defendant instructed Birman & Ride to act for her during the absence (on holidays) of Chong.

69 I return now to the chronological narrative. On receipt of the Chong letter Gauci spoke to Shakibaee and ascertained that he was still organising finance and would not be able to settle until January 1994. On 14 December 1993 Gauci replied to the Chong letter stating:

"... our client is not in a position to settle prior to January 1994. ... We also draw your attention to settlement date as per the Contract, ie. on or before 14 days AFTER title is available for dealing."

70 I am not sure why the word after" has been emphasised in that communication. It does not affect the question of construction but I think Gauci considered that settlement date was sensitive to title availability rather than diagram availability. Perhaps she meant to emphasise "title" rather than "after".

71 Gauci testified that she spoke to someone called "Lillian" from Chong's office and repeated this information. The defendant conceded that soon after 14 December 1993 she received from Chong a copy of the Gauci letter but that she could not recall instructing Chong to respond. She also conceded in cross-examination that even after receiving the copy of the Gauci letter she was still insisting on settlement in December. She did so in telephone calls to Shakibaee and to Gauci. The latter confirmed having received repeated calls from the defendant and having passed on the information to Shakibaee but that the defendant had been insisting that the plaintiffs settle on the diagram being in order for settlement. In my view this accords with Gauci's evidence that she kept "referring [the defendant] to the offer and acceptance contract", namely that settlement was to occur when titles were available for dealing.

72 Again I find the defendant's explanation for her conduct difficult to follow. It is often said that people of commerce do not stand idly by when a proposition with which they do not agree is put. There is no evidence that Chong, or anyone else on the defendant's behalf, challenged the interpretation put in the Gauci letter. The defendant's conduct in continuing to insist on settlement in December once again places doubt on the reliability of her assertion that by February 1994 she had ascertained that the true settlement date was 14 January 1994.

73 Throughout December 1993 the defendant was making arrangements for settlement. These arrangements included a request to the solicitors for Citibank, who held a mortgage over Lot 21, to produce the duplicate certificate of title for the purpose of registering the diagram and to prepare a discharge of mortgage.

74 The defendant testified that on 29 December 1993 she telephoned Shakibaee to asked him when he was going to settle. Shakibaee informed her that he would be ready to settle on 4 or 5 January 1994. In his evidence Shakibaee's said he recalled the defendant telephoning him persisting with the demand that settlement take place before the end of the year. He told the defendant that it would not be possible to settle before the New Year. When cross-examined he was asked what his response had been to the defendant's request in that call. He said to the defendant: "It's the end of the year. I don't think it's going to happen. It's too difficult at this time of year and everything is not in order to settle". There was no evidence that the defendant challenged Shakibaee's assertion that "everything is not in order to settle". For reasons which I will outline later, I prefer Shakibaee's evidence on this issue.

75 On 31 December 1993 the duplicate certificate and a discharge of mortgage over Lot 21 was produced to DOLA by the solicitors for Citibank. The sale of Lot 2 to the Kennedys settled and the application for new titles in relation to Diagram 85591 was lodged for registration.

The Events of January and February 1994 - The Contract

76 The Contract was lodged for stamping on 12 January 1994 and Gauci received the assessment on 20 January 1994. On 21 January 1994 Gauci sent the transfer of land document to Shakibaee for execution. It was executed and returned to Gauci. On 28 January 1994 Gauci sent the transfer document to Birman & Ride with a request that it be executed by the defendant and returned for stamping. She also asked when the defendant wished to settle.

77 There was no response to that letter. On 3 February 1994 there was a telephone conversation between Natasha (of Birman & Ride) and Gauci in which Natasha had said that the Lease Condition was not in place, the tenants were not paying, and that the defendant might take the property off the market. At that stage there was nothing definite. On 4 February 1994 Gauci received another telephone call. Initially she thought it was from the defendant but later said it was from a clerk at Birman & Ride or Chong. In it the clerk had said the defendant had instructed them not to put it in writing about the Lease Condition and that the defendant was coming in "to try to put the lease together" and that they would "get her to sign the transfer". On 7 February 1994 Gauci wrote to Birman & Ride requesting that they return the transfer document for stamping and again asking when the defendant would be in a position to settle. The letter concluded: "upon the issue of the new title we are ready, willing and able to proceed to settlement".

78 The next thing was the letter of 9 February 1994 from Chong to VIP Settlements. During December 1993 or January 1994 Gauci had advised Shakibaee to obtain legal advice and had recommended a solicitor named Mark Regan. The stamp duty was paid on 11 February 1994. Apart from sending a copy of the stamped Contract and a copy of the 9 February letter to Regan, Gauci had little else to do with the matter.

79 Shakibaee had approached O'Brien in September 1993 about finance. O'Brien opened a file and told Shakibaee that he would need a valuation of the property. On 6 January 1994 Ross Hughes and Co produced a valuation of the property and it was sent to O'Brien. His evidence was that on 14 January he prepared a document called "Notice to Lender and Borrower" which showed the intended borrowers and the loan amount of $250,000 but that document never left O'Brien's office. It was a formal requirement under the legislation governing finance brokers and would have been sent prior to finalisation of the mortgage. On 20 January 1993 O'Brien sent a mortgage proposal to three clients whom he had selected. He said that he would first have discussed the loan proposal with the proposed lenders. By 25 January 1994 the three investors had, between them, agreed in writing to advance the funds. Between 25 and 28 January 1994 he advised Shakibaee that finance was available. Although he could not recall precise details, it was likely that he was already holding the funds from the three investors. He was later advised by Shakibaee that the defendant had refused to settle. O'Brien confirmed that funds were available had the mortgage transaction proceeded.

80 O'Brien also said that prior to this he had been involved in two finance dealings with Shakibaee. He also confirmed Shakibaee's evidence that it was the normal practice of Blackburne and Dixon to settle when a certificate of title had issued, not on a "dealing". He was not cross-examined on that evidence.

81 Prior to February 1994 Regan had acted for Shakibaee in two property transactions. The first he had to do with this matter was in a telephone conversation with Gauci on 7 February in which Gauci told him she thought the defendant was trying to get out of the Contract without giving a reason. It seems that Shakibaee did not speak to Regan until after receipt of the 9 February letter from Chong. Shakibaee confirmed to Regan that the plaintiffs wished to proceed with the transaction. On 9 February 1994 Regan replied to the Chong letter. In the reply, he said:

"My clients did not accept the purported termination of the contract and will remain ready to effect settlement as soon as the new title is available for dealing in accordance with the provision of the contract.

Condition 7 of the contract does not stipulate when the lease is to be 'in place', and the benefit of the condition is hereby waived by my clients.

.........

Kindly advise when the title for lot 1 is available in order that final settlement arrangements can be made."

82 On 10 February 1994 he contacted DOLA to find out when titles would be issued and was told they would be ready in "a couple of weeks". He asked that the matter be given priority. He passed this information on to Shakibaee and suggested that the plaintiffs should lodge a caveat to protect their interest in the property. On 15 February 1994 DOLA advised Regan that the title had issued the previous day. On the same day he wrote to Chong saying:

"My enquiries of [DOLA] indicate that the new title for lot 1 issued on 14 February and therefore, pursuant to the terms of the contract in this matter, settlement is due on or before 28 February.

Would you kindly arrange for the transfer, completed by the vendor, to be returned to this office in order that the indorsement of stamp duty can be attended to prior to settlement. Would you also forward a settlement statement as soon as possible."

83 On 16 February 1994 and again on 23 February 1994 Regan telephoned Chong and was advised that Chong was still awaiting instructions from the defendant and may not receive them until the completion of the Chinese New Year celebrations.

84 Shakibaee testified that at some point, he thought it was late January 1994, he drove past the property and saw a "for sale " sign on it. He contacted the agent (it was not Cooper) and asked him why they were selling the land as he (Shakibaee) had a contract. The agent told him that the owner had mentioned the contract but said it was null and void. Neither Gauci nor Regan could recall Shakibaee mentioning the "for sale" sign. Regan said that on or about 23 March 1994 Shakibaee telephoned him saying he believed the defendant may have got a higher offer and instructing that a caveat be lodged. Regan did so. I accept Shakibaee's evidence that he saw the "for sale" sign and that he discussed the matter with the agent. He is probably mistaken about the date. As he did not mention it to Gauci (who effectively stepped out of the picture around 11 February) it may not have been until shortly before he instructed Regan to lodge the caveat.

85 From March on there was a lot of correspondence passing between Regan and a series of solicitors who, from time to time, acted for the defendant. I do not think it is necessary to go to the events after March 1994 in any detail. I will do so as and when I think a particular incident reflects on the matters in issue.

86 The defendant's evidence of events in this period was that she had continued to press Gauci "to settle immediately". She received the letter from Gauci dated 28 January 1994 with the transfer document but refused to sign it because it was not stamped. On 8 February 1994 she advised Birman & Ride that she wanted Chong to act for her again. She heard nothing further from the plaintiffs or their solicitors after 15 February 1994. On 1 April 1994 she accepted an offer from the Whitemans for Lot 1 for $330,000. As I have already said, that contract settled later in the year.

87 The defendant confirmed that she had given instructions to Chong to send the 9 February letter. She was not able to say what other correspondence, if any, had been sent by her solicitors to Gauci or to the plaintiffs between 14 December 1993 and 9 February 1994.

88 The defendant testified that by 31 December 1993 she knew that the last day for settlement was 14 January 1994 and that she spoke to Natasha of Birman & Ride about it. She says that she came to this view because Lot 2 had settled on 31 December 1993. She also said that she telephoned Gauci, Shakibaee and Cooper about it. At another point in cross-examination the defendant said that Natasha had told her that the settlement date was 14 January 1994. She agreed that she had not instructed either her solicitors or anyone else to write to Gauci or the plaintiffs telling them that settlement was due on 14 January 1994. Her explanation was that she did not have to. It was Cooper's job to do so as he was her selling agent.

89 I think it is important to note that it was not put to Gauci, Shakibaee or Cooper that either Natasha or the defendant had mentioned 14 January 1994 to them as the stipulated settlement date. Nor is it consistent with the defence prepared by Parker and Parker on 30 January 1995 on instructions from the defendant. I find it hard to accept that had Birman & Ride formed the view that 14 January was the last day for settlement and advised the defendant accordingly they would have done anything other than put the position in writing to those acting for the plaintiffs. They did not do so and nor did anyone else on behalf of the defendant. In my view, for the defendant to say that either as at 31 December 1993 or 9 February 1994 she was of the belief that 14 January was the critical date is convenient but it does not fit with the other evidence.

90 In November 1993 Shakibaee visited the delicatessen and spoke to the lessees. They assured him that they would stay for the duration of the tenancy. They said they were short on stock but were building up the business at that stage. Shakibaee was told by Cooper that there were problems with the tenants paying the rent but he denied that he was told that a default notice had been issued. I accept the denial.

91 The defendant testified that by mid-November 1993 she had not received the instalment of rent due for November and there were arrears of outgoings. She instructed Chong to issue a default notice. He did so on 18 November 1993. The default notice says that unless the default is remedied within 14 days "the term thereby granted shall thereupon without further notice cease and determine". It is common ground that the 14-day period expired on 2 December 1993 but that the default had not then been remedied. The defendant says that she instructed Cooper to collect the unpaid rent but I cannot recall Cooper being questioned about it. There is evidence that on 25 January 1994 $1300 was received from the lessees by a debt collection agency. That sum (less charges) was paid to the defendant.

92 The circumstances leading to the receipt of the note dated 3 February 1994 from the lessees saying they were "terminating the lease" were not explained. However, the defendant did say that in January 1994 she had asked the tenants to leave the premises. She conceded that she had not told the plaintiffs or anyone acting for them that there were problems with the lease or that a default notice had been issued. Once again, she passed the responsibility to Cooper, saying it was his job to tell the plaintiffs. I am not sure why that should be so given that Cooper was her agent, not that of the plaintiffs, and she did not say that she had asked him to keep the plaintiffs informed. It is also, I think, a little curious that she did not tell the plaintiffs that a default notice had been served or that she had requested the tenants in January to vacate. If, as she says, the Lease Condition was inserted at her suggestion and at her request so as to avoid any problems about non-disclosure, it is surprising that she did not instruct those acting for her to tell the plaintiffs about something that was critical to the continued existence of the lease.

93 As I have said on a couple of occasions, counsel for the defendant attempted to keep alive the issue on non-payment of the deposit in a number of guises. The Contract called for payment of a deposit of $5000. Of that $2000 was paid by "transfer" of the option fee. The way the pleadings developed the defendant was not at liberty to challenge the efficacy of the Contract on the basis on non-payment of that sum. On a strict reading of the pleadings nor should the defendant have been permitted to raise any question of the payment of the balance of $3000 because there was an admission that the deposit was "duly" paid. However, I permitted the defendant to raise it as part of the case on repudiation and as going to the question whether the plaintiffs were ready, willing and able to settle.

94 The Contract required the balance of the deposit to be paid within 28 days of acceptance. It was common ground that the 28 days would have expired on 8 September 1994. Cooper was unable to say when the balance was actually paid and because the issue was raised at a very late stage (over six years after the event) Shakibaee was unable to locate a cheque butt. There is in evidence a copy of a Ross Hughes and Co receipt for a payment into the trust account of $3000 as the balance of the deposit on 18 November 1993. In the absence of any other evidence I will accept that the balance of the deposit was not paid until 18 November 1993.

95 I have already made some comments that reflect on the relative reliability of the testimony that I heard. I found Shakibaee, Cooper, Gauci, O'Brien and Regan to be witnesses on whom I could rely. Leaving Cooper to one side, there was nothing to cause me to doubt the reliability about the testimony of the other witnesses called by the plaintiffs. They gave their evidence in a forthright manner and, generally speaking, it was consistent.

96 There were some aspects in which the credibility of Cooper was attacked and I should deal with them. It was put that Cooper was upset at losing out on the commission of $7000 that his firm would have earned had the transaction proceeded to completion. He agreed but I do not think that forms a basis to doubt his evidence. It was put to Cooper that he had previously valued the property for a Mr Alan Chan who in February 1993 had made an offer to purchase for $365,000. It was also put to him that he had valued the property for one Chong Chi Huat. Cooper denied that he had previously valued the property for those people or at all. No admissible evidence was adduced that he had done so and I have no reason not to accept his denial.

97 I think the line of questioning was probably designed to form the basis of a submission that the purchase price of $243,000 was, to Cooper's knowledge, an undervalue. In a letter dated 20 April 1994 the defendant told Ross Hughes and Co that she assumed that following notification of the termination of the Contract she assumed the deposit had been returned to the purchasers. She said:

"My main reason for reselling the property now is that I have a much higher profit. This proved that you have undervalued my property to sell for me. Any hindrance directly or indirectly from you to my present sale or if I incurred extra expenses, legal, compensation or otherwise I will hold you and Ross Hughes and Co responsible. I know you have received [Chong's] notification of termination of the sale of the said property because soon after you phoned me to ask me not to terminate the sale or Ross Hughes principal (boss) will be very angry."

98 Again, Cooper denied that he asked the defendant not to terminate the Contract. He said he may have pointed out to her that she should be careful in her dealings because they had taken legal advice on the issue. Once again, I think the defendant may have misconstrued a statement in a way that was self-serving. In cross-examination she denied the suggestion that by 9 February 1994 she had formed the view that the plaintiffs had not been paying enough for the property. She said that the letter of 20 April "had nothing to do with Mr Shakibaee". I am not confident as to the reliability of that statement.

99 On occasions both counsel and the Bench had difficulty in restricting the defendant to matters that the other participants in the trial process considered relevant. On some quite critical aspects I was left in some doubt about the reliability of the defendant's testimony. I have already mentioned some of them. That is not to say that I have rejected her evidence in its entirety. Much of it was plausible and satisfactory. But, generally speaking, where the evidence of the defendant conflicted with that of Shakibaee and Cooper, I preferred the latter. It will be apparent from what I have already said that relative reliability has contributed to some specific findings of fact. In other respects, findings will emerge in the balance of the reasons, particularly in the section dealing with repudiation.

Termination of the Contract - General Legal Principles

100 Before moving to the central question of construction and other matters relating to the termination of the Contract I wish to say something about two of the general legal principles.

101 In terminating the Contract the defendant relied on non-fulfilment of the Lease Condition. Even if I do not accept that she was entitled to do so the defendant may yet succeed if she can establish that there were other grounds on which she could properly and lawfully have brought the Contract to an end. In Sunbird Plaza v Maloney [1988] HCA 11; (1987-88) 166 CLR 245 at 262 Mason CJ said:

"Shepherd v Felt & Textiles of Australia Ltd [1931] HCA 21; (1931) 45 CLR 359 stands as authority for the general proposition that a termination of a contract may be justified by reference to any ground that was valid at the time of termination, even though it was not relied on at the time and even though the ground actually relied on is found to be without substance."

102 The statement upon which Mason CJ relied is to be found in the judgment of Dixon J in Shepherd v Felt & Textiles of Australia Ltd [1931] HCA 21; (1931) 45 CLR 359 at 377-78. I should also note that a similar principle has been applied where the terminating party relies on a repudiation by the other party: DTR Nominees Pty Ltd v Mona Homes Pty Ltd [1978] HCA 12; (1978) 138 CLR 423 at 431-33.

103 The second issue relates to par 10 of the statement of claim. There is implicit in that paragraph a contention by the plaintiffs that the defendant could not terminate the Contract without first issuing a default notice under cl 16 of the General Conditions. I do not think this is correct. Generally speaking, a right to terminate conferred by a contract must be exercised in accordance with the procedures laid down in the contract. However, an act which can trigger a contractual right of termination may also evince a repudiation giving rise to a right of termination and a right to claim damages under the general law: Shevill v Builders Licensing Board [1982] HCA 47; (1982) 149 CLR 620; Geraldton Building Co Pty Ltd v Christmas Island Resort Pty Ltd (1992) 11 WAR 40 at 53.

104 This issue has been addressed specifically in the context of cl 16 of the General Conditions. In Rigg v Lee Loy Seng [1987] WAR 333, Brinsden J said, at 354:

"It is well settled that where a contract includes a clause such as cl 16(1) but is repudiated by the promisor, the promisee need not give a 14 day notice."

The Construction Issue - The Settlement Date

105 In Acorn Consolidated at 430 - 437 I set out my understanding of the general principles governing the interpretation of contracts. I will simply adopt, without repeating, what I said in that case. The following summary is sufficient.

106 The search is for the intention of the parties as disclosed by the language they have used in the contract. It is not permissible to have regard to extrinsic evidence unless there is an ambiguity in the language. Even if regard can be had to extrinsic evidence it is never permissible (save for one exception that is not relevant here) to construe a contract by reference to the subjective intention of the parties or either of them.

107 What did the parties mean by the phrase "on or before 14 days after title is available for dealing"? I think there is an ambiguity. It could mean 14 days after the title has physically issued, as the plaintiffs contend, or it might mean 14 days after the diagram (to which the title relates) is available for dealing, which is the position for which the defendant contends. I do not think there was any relevant extrinsic evidence led in the testimony of Shakibaee, Cooper, or the defendant, who were the witnesses who spoke of the situation at the time when the Contract was formed.

108 However, I will have regard to the evidence of officers of DOLA. The plaintiff adduced in evidence an affidavit sworn on 27 January 1999 by Steven Radisich, the Manager of the Customer Information Centre at DOLA. The defendant called Roger Farmer, an Assistant Registrar of Titles at DOLA. In effect, he gave evidence about the fate of the documents lodged in this case and of DOLA practice generally. In his affidavit Radisich said that the application requesting that separate certificates of title issue for Lots 1 and 2 on Diagram 85591 was lodged on 31 December 1993 and completed on 14 February 1994. Under normal procedures available at that time the certificate of title for the lots the subject of the application would have been created and duplicate certificates of title would have been ready to issue on the day the application was completed. None of that is controversial. What is of more interest is the oral evidence that Farmer gave at the trial.

109 He said that the diagram was in order for dealings on 9 December 1993 and the application for new titles relating to the diagram was lodged for registration on 31 December 1993. Again, that is not controversial. But he gave evidence of the following matters, either in his own words or confirming the correctness of statements made by letters from DOLA to the parties.

110 1. Upon receipt of an application for new titles certificate of title numbers were allocated for the respective lots in the diagram in the course of the examination process. Certificates of title would have been created between the date of lodgement and the date of completion. The volume and folio numbers are eventually noted on the application.

111 2. It is possible to lodge further dealings affecting the new certificates of title the subject of the application at the same time as the application is lodged or at any time after the application is lodged. It is not necessary to wait for the certificate of title actually to issue for dealings to be lodged.

112 3. The certificate of title for Lot 1 was available for dealing from 31 December 1993 until issued "on a follower basis". This is a process used by DOLA to allow a dealing to be lodged which follows dealings already being processed.

113 4. The process through which the application for new titles goes can take from four days to three months depending on the pressure of work.

114 5. From 31 December 1993 it was possible to lodge a dealing on Lot 1 as a "follower dealing" but the certificate of title for Lot 1 could not have been issued to the person entitled to it until 14 February 1994.

115 6. An application for new titles can be rejected by DOLA if there is a problem with it. If the application for new titles is rejected any document that relies on the new title will be defective as well.

116 7. The word "completed" as used in this process signifies the end of the registration process by which the new title is created.

117 There is no doubt that the parties could have settled on 31 December 1993. That is what happened in relation to Lot 2 and it could have happened in relation to Lot 1. But the fact that it happened in relation to Lot 2 on similar wording is not relevant to the issue that I have to decide. There is a very real difference between a dealing physically accompanied by the certificate of title and one lodged on a follower basis. That difference is that the fate of the follower depends on the final acceptance of the primary dealing. When asked by counsel for the defendant whether follower dealings were a common process, Farmer said:

"A follower dealing is one that's not supported a lot by the financial industry ... so it's really up to the parties as to whether they'll lodge a follower or not. The process is there but it's not - you will very seldom see a follower lodged where a mortgage is involved. They will not lodge until they have a title registered and issued. ... The one condition on a follower for settling immediately with the application is that all parties are prepared to settle on that basis."

118 But neither of those positions answer the ultimate question. That question is what the parties contractually bound themselves to do. However, it does indicate that there is a real difference in practice between the respective positions of the parties.

119 Counsel for the defendant sought to draw comfort from the decision in Sinnatamby v Cooper Corporation Pty Ltd [1986] WAR 36. The case concerned a contract for the sale and purchase of a strata title unit. The vendor was in the process of building four units. As originally drawn, the contract stipulated that settlement was to take place "on or before 30 days after issue of strata title". The contract was amended so that the settlement date read: "on or before seven days after issue of strata plan number". On 13 January 1982, after the building had been completed and the necessary approvals obtained, the surveyor lodged the strata plan at DOLA. It was checked by the chief draftsman, found to be in order and allocated a plan number. In order for strata titles to issue in respect of the four units it was necessary for an application to be made to register the strata plan that had already been lodged and checked. The latter document was not lodged until 23 June 1982. The defaulting purchaser argued that there could not be a strata number until the plan had been registered. The Court rejected that argument. Wallace J said, at 39:

"I cannot agree with this submission because to do so would be to ignore the plain and ordinary meaning of the word 'issue' and the effect of the amendment to the clause striking out the word 'title' and substituting therefore the words 'plan number'. "

120 Sinnatamby is quite different to this case and I do not think it provides any assistance as to the proper construction of the Contract. Had the contract in Sinnatamby remained in its original state, with a reference to "titles" rather than "plan number" the result may have been different. Had the Contract in this case been phrased in terms of "the diagram being available for dealing" it would have been closer to the fact situation in Sinnatamby. But had that been so I doubt whether this case would ever have reached the Court.

121 It seems to me that meaning has to be given to the combination of the words "title" and "available". On the face of it, this means more than that a procedural step (namely, the lodgement for registration of an application for new titles) has been taken which will eventually result in the person entitled being able to collect the certificate of title. It is interesting to compare it with the situation that applies to the diagram. The correct terminology (as appears from the DOLA fax of 9 December 1993) is that the diagram was "placed in order for dealings", rather that it was "available for dealings". This is not surprising. What occurs at that stage is a checking process and there is no physical document (akin to a title) that emerges from the diagram itself. The approval of the diagram (that is, it being placed in order for dealings) does not of itself mean that transactions affecting it (for example, a discharge of mortgage, a transfer or a new mortgage) can be processed immediately. There is an intermediate step, namely the lodgement of an application for new titles. The intermediate step is one further link in the chain that eventually results in the creation of new titles. But there is a further checking process before that occurs. It is conceivable, perhaps not common but nonetheless conceivable, that the checking process will unearth a problem which means that the titles will not then issue. As things turned out, there were no problems with the application for new titles. But the construction question has to be viewed as at the time when the Contract was formed, not in January and February 1994.

122 In my view, the intermediate step makes the diagram "available for dealings". Subsequent dealings affecting the title can be lodged but only on a follower basis. But it is nonetheless the diagram, partially perfected by the application for new titles, rather than the title itself that is available for dealings.

123 I think the proper construction of the Contract is the one contended for by the plaintiffs. On the evidence, and I did not understand this to be challenged by the defendant, the titles became available for dealings in that sense on 14 February 1994.

Termination for Non-Fulfilment of the Lease Condition

124 The next question, and it remains alive notwithstanding the conclusion to which I have come on the proper construction of the settlement date, is whether the Contract came to an end because of non-fulfilment of the Lease Condition.

125 If I am correct in construing the Lease Condition as a condition subsequent (in the sense that I have outlined) that was included for the benefit of the plaintiffs, this issue also falls to be decided in favour of the plaintiffs. So long as the Contract remained on foot, it was capable of being waived by the plaintiffs. As the settlement date had not arrived by 9 February 1994 the Contract was still on foot as at that date. Accordingly, the plaintiffs were in a position to, and did, waive reliance on the Lease Condition.

126 On the defendant's case the Lease Condition did not have any promissory effect. It was inserted purely to discharge the obligation that the defendant had under the General Conditions to disclose the existence of a tenancy. It had no other or continuing effect. In those circumstances it is difficult to see how the Lease Condition could be construed as an essential term the non-fulfilment of which conferred on the defendant a right to terminate the Contract.

127 There is another way of looking at this problem. The Lease Condition is not self-executing in the sense that it provides for automatic termination in the event of non-fulfilment. There must be an election by the party seeking to terminate: Suttor v Gundowda [1950] HCA 35; (1950) 81 CLR 418. Here the fulfilment or non-fulfilment of the condition was solely within the power of the defendant. Prior to settlement the plaintiffs had no control over the lease arrangement. There would have been a negative duty on the defendant not to prevent fulfilment of the condition: Perri at 546. In this instance the defendant took active steps to bring the lease to an end. It would be strange if the Contract could be defeated by the action or inaction of a party within whose power the fulfilment of the condition lay and yet the condition had not been inserted for that party's benefit.

128 There is a further alternative. It may be that the Lease Condition is one which is properly to be characterised as a condition only of that particular obligation and not a condition going to the obligation to perform the Contract in its entirety. If that were the case, non-fulfilment of the condition would not result in a breach of the Contract and would not bring about termination of the entire Contract: see Maynard v Goode [1926] HCA 4; (1926) 37 CLR 529 at 540.

129 In his closing submissions counsel for the plaintiffs raised a further argument. The notice of default issued on 18 November 1993 was self-executing. Unless the default was remedied within 14 days the term of the lease would "thereupon without further notice cease and determine". The default was not remedied and the lease automatically came to an end. The tenants remained in occupation but that would have been in a holding over capacity. After the termination the defendant, at least until 9 February 1994, treated the Contract as being on foot. This was clear election on her part not to terminate the Contract for non-fulfilment of the Lease Condition. It is a very attractive argument. The problem with it is that it was not pleaded.

130 In which ever way the matter is viewed, it seems to me that the purported termination of the Contract by the defendant on 9 February 1994 for non-fulfilment of the Lease Condition was not effective.

131 I think the question of repudiation arises only if I am wrong in my conclusion as to the proper construction of the settlement date. The defendant relied on two independent bases for repudiation (non-payment of the deposit and failure to tender a stamped transfer) but, for reasons that I will explain a little later, I do not think she could succeed on them alone. The main basis was the alleged failure of the plaintiffs to settle on the settlement date as provided in the Contract. I have found that there was no such failure. The settlement date according to the Contract was 28 February 1994 and that date had not arrived when the defendant purported to terminate. Nonetheless, and in case I am wrong on the construction issue, I will deal with the question of repudiation.

132 There are many authorities dealing with the nature and essence of repudiatory breach. They are conveniently summarised in Rigg at 354 - 360. See also Shevill at 626; Progressive Mailing House Pty Ltd v Tabali [1985] HCA 14; (1985) 157 CLR 17 at 33-34; Laurinda Pty Ltd v Capalaba Park Shopping Centre Pty Ltd [1989] HCA 23; (1989) 166 CLR 623 at 634, 657 - 658. For the purposes of this case it is sufficient to say that repudiation will usually involve acts or omissions by one party to a contract which:

(a) evince an intention no longer to be bound by the contract;

(b) evince an unwillingness or inability to perform the obligations imposed under the contract either at all or in a manner substantially consistent with those obligations and not in any other way;

(d) deprive the other party of a substantial part of the benefit to which it is entitled under the contract.

133 The intention of a party may be inferred from words or conduct despite a professed willingness to go on with the contract: Universal Cargo Carriers Corporation v Citati [1957] 2 QB 410 at 436 - 437. The test as to whether a party has evinced an intention no longer to be bound by the contract is not a subjective one depending on the actual intention of that party. On the other hand, it may be necessary to receive evidence of subjective intention to understand what were the respective positions adopted by the parties and the reasonableness of those positions.

134 Where a party to a contract has committed a number of breaches of contract, none of which in itself is sufficiently serious to be regarded as amounting to repudiation, the Court may look at the combined effect of the breaches as a whole to determine whether the conduct amounts to repudiation: Hudson Crushed Metals Pty Ltd v Henry [1985] 1 Qd R 202 at 205 to 206. This is because the effect of multiple breaches may be different from that of the individual breaches: Hudson at 208.

135 I am going to assume for the purpose of this section of the reasons that the true settlement date according to the Contract was 14 January 1994. A curious aspect of the case is that there was no evidence that at any time before 9 February 1994 Birman & Ride, Chong or the defendant ever brought to the attention of the plaintiffs the fact that the defendant believed the settlement date was 14 January 1994 and that the plaintiffs were wrong in asserting anything to the contrary. It goes further than that. There is no evidence that at any time before 9 February 1994 the defendant or anyone on her behalf actually told the plaintiffs that the application for new titles had been lodged. It can be assumed that Cooper knew of the lodgement of the application because he had been the agent involved in the sale of Lot 2 to the Kennedys. But Cooper was the agent of the vendor and he gave no evidence that he alerted Shakibaee to the 31 December 1993 events. On 21 January 1994 Gauci received a fax from DOLA saying that "Lot 1 on Diagram 85591 [was] in order for dealings". On 28 January 1994 she attempted to obtain a search of the title for Lot 1 but the request came back: "subject to dealing".

136 It must also be viewed against the background that the defendant (or those acting for her) had made previous assertions about settlement that had no foundation. I have found that the defendant initially believed the settlement date was 23 December 1993 and Chong advised Gauci accordingly. Gauci responded in writing saying (in effect) that calculation of the settlement date proceeded on a wrong basis. There is no evidence that Chong or the defendant sought to disabuse the plaintiffs of the notion that was implicit in Gauci's letter of 14 December 1993. On the evidence of the defendant's fax to Chong (not otherwise supported) the defendant had suggested that the settlement should take place on 20 December 1993. It is clear that she was then suggesting 29 December 1993 and the prospect of a settlement before the end of the year was canvassed in a telephone conversation between the defendant and Shakibaee. On the defendant's evidence she made repeated calls to Gauci and Shakibaee during January asking for immediate settlement but there is no evidence that she stipulated a date.

137 It is not as if the plaintiffs were simply sitting on their hands stringing out the whole process. Late in December 1993 Shakibaee told the defendant the plaintiffs could settle "in January". He arranged for the property to be valued to support the application for finance. The valuation was provided to the finance broker and the application proceeded. It was successful in the sense that funds were approved. The Contract was lodged for stamping. Gauci continued to attend to the conveyancing aspects necessary to complete the transaction.

138 In Rigg the purchaser had, on the stipulated settlement date, sent a letter to the vendor stating that it would be impossible for the purchaser to settle that day and as things stood they could "give no commitment as to when settlement may take place or whether settlement will take place at all". The vendor immediately, and without giving a notice under cl 16 of the General Conditions, rescinded the contract on the grounds that the purchaser had repudiated. The Court held that the vendor was entitled to do so. However, Brinsden J had this to say, at 355 - 356:

"But every failure will not of course amount to repudiation. ... In this case, however, we are not concerned with a failure to perform an unsubstantiated portion of the agreement for there was undoubted failure to perform a substantial part by the failure to pay the purchase price and settle on [the settlement date]. But such a failure need not of itself amount to repudiation. ... What is necessary to look for in the circumstances of the case is whether the failure of [the purchaser] to settle on [the settlement date] was accompanied by more than the mere failure so as to make it clear that they had made it plain that they were unwilling or unable to complete on the [the settlement date] or at all."

139 I do not think his Honour meant to suggest that it could not be a repudiation unless the innocent party established that the defaulting party had evinced an intention never to settle. It would not be difficult to imagine circumstances in which an expressed intention to settle late, perhaps very late, would not be performance substantially in accordance with the obligations imposed on the party by the contract. Those circumstances might also lead to a conclusion that late settlement would deprive the other party of a substantial part of the benefit to which it is entitled under the contract. Each case has to be assessed on its merits and according to its own facts.

140 In my view the circumstances of this case are peculiar. The Contract did not specify a fixed settlement date. Rather, it depended on certain events occurring. Those events were peculiarly under the control of, and within the knowledge of, the defendant. In those circumstances, I think the defendant bore some responsibility to advise the plaintiffs, clearly and unequivocally, that the events had occurred. On the defendant's case the event that triggered settlement was the lodging of the application for new titles. As I put it, somewhat euphemistically, to counsel for the defendant in closing, if the finger on the trigger is that of the vendor, I would have thought that there was an onus (using that word in a non-technical sense) on the defendant to advise the other party that the trigger had been pulled. This will not always be the case. However, in the circumstances that I have outlined and in the absence of advice from the defendant that there was a fixed and certain date for settlement under the terms of the Contract, it was not unreasonable for the plaintiffs to have proceeded on the (mistaken) impression that the time for settlement had not yet arrived.

141 On the evidence I do not think it could be said that by failing to settle on 14 January 1994 the plaintiffs had evinced an intention no longer to be bound by the contract. Nor do I think that that plaintiffs had evinced an unwillingness or inability to perform the obligations imposed under the contract in a manner substantially consistent with those obligations and not in any other way.

142 I can deal very briefly with the other two bases on which the case for repudiation rested. On 28 January 1994 the plaintiffs submitted to the defendant a signed, but not stamped, transfer document. The defendant says that it should have been stamped. Clause 4(1) of the General Conditions certainly supports the view that the plaintiffs should have attended to stamping of the transfer before sending it to the defendant. But once again, there was no communication from the defendant's solicitors to Gauci about this matter. The problem could very easily have been cured, either by requesting that the stamped Contract be forwarded to the defendant to enable her to stamp the transfer or by sending the transfer document back for the formality to be completed. In the circumstances of this case, I do not think the failure of the plaintiffs to present a stamped transfer document is, either alone or in combination with the other factors, repudiatory in nature.

143 Counsel for the defendant submitted that it should count against the plaintiffs that, between 23 February 1994 and 4 May 1994 they made no real effort to arrange settlement. I have already indicated that I do not regard events after February 1994 as being particularly significant. The fact is that the defendant had purported to terminate the Contract. I have already outlined the steps taken by Regan in response to 9 February letter up to 23 February 1994. There was no substantive response from anyone on behalf of the defendant. Even after the caveat was lodged towards the end of March 1994 there was no contact from the defendant. The plaintiffs, through Regan, initiated further contact on 4 May 1994. By this time, the defendant had entered into a contract to sell Lot 1 to the Whitemans. There is no evidence that she, or anyone on her behalf, made a substantive response to the plaintiffs solicitors until she took steps to remove the caveat. In those circumstances I do not think the plaintiffs can be criticised for their relative inaction over that period.

144 I take the same view in relation to late payment of the deposit. The Contract was entered into on 11 August 1993. It must have been obvious to the parties that there would be some delay before the transaction proceeded. The proposed subdivision had to run the gauntlet of Local Authority, Planning Commission and DOLA approvals. The defendant's agent was aware of the position with payment of the deposit. In the grand scheme of things, I do not think the late payment of part of the deposit (representing 1.23 per cent of the sale price) is, either alone or in combination with the other factors, repudiatory in nature.

145 Even if I am wrong in my conclusion as to the proper construction of the settlement date in the Contract I would find that the plaintiffs had not repudiated the Contract.

146 The evidence is clear. By 25 January 1994 finance had been approved. By 28 February a transfer document had been prepared, signed by the plaintiffs and sent to the defendant. By 4 February 1994 stamp duty formalities had been completed. The stamp duty assessment was paid on 11 February 1994. In my view the plaintiffs were ready, willing and able to settle at the relevant time. Counsel for the defendant raised the issue of late payment of the deposit as a matter suggesting that the plaintiffs never had the resources to complete the transaction. I simply do not accept that this is the case.

147 At the hearing there was very little controversy about the quantum of damages should the plaintiffs succeed in establishing liability. They lost the opportunity to acquire the property for $243,000. In April 1994 it was sold to the Whitemans for $330,000. The difference between the two figures is the appropriate measure of damages. I did not understand counsel for the defendant to argue to the contrary.

148 The plaintiffs also led evidence that they had paid expenses, such as stamp duty, brokerage, settlement agents fees and the like. However, they are expenses that would have been incurred had the transaction proceeded to settlement. They are not recoverable as damages.

149 The damages to which the plaintiffs are entitled amount to $87,000.

150 For the sake of completeness I will say something very briefly about the defendant's counterclaim. This would only arise if I were wrong on all points that I have found in favour of the plaintiffs.

151 The defendant's case is that the Contract required the plaintiffs to settle on 14 January 1994. On 9 February 1994 the defendant terminated the Contract because the plaintiffs had not then settled or because the plaintiffs had repudiated the Contract. In either event the defendant would be entitled to damages. I should add that if the true (and only reason) for the termination of the Contract was the non-fulfilment of the Lease Condition no question of damages would arise except by way of compensation for the wrongful maintaining of a caveat.

152 I can see no reason why the defendant, had she been successful on the liability issue, would not have been entitled to the declaratory relief sought in items (i), (ii) and (iii) of the prayer for relief in the counterclaim.

153 In par 20 of the counterclaim the defendant gave details of the pecuniary loss said to have been suffered. Item (1) is a claim for $1717 being the amount incurred in setting up a new loan with Citibank following the discharge on 31 December 1993 of the existing mortgage over Lot 21 and the sale of Lot 2. I do not think the ground was established to claim this amount. There was no obligation on the plaintiffs to settle before 14 January 1994. There was no evidence that had the plaintiffs indicated they would settle on 14 January 1994 that the defendant would have delayed the settlement of Lot 2, thus obviating the necessity to take out the new loan.

Shakibaee & Ors v Chan [2001] WASC 60

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Judgment (207 paragraphs)

Shakibaee & Ors v Chan [2001] WASC 60 (9 March 2001)

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Cases Cited (24)