Bristol & West Building Society v Mothew [1998] Ch 1

Codrington v Codrington (1875) LR 7 HL 854

Foran v Wight [1989] HCA 51; (1989) 168 CLR 385

Grieve & Anor v Enge & Anor [2006] QCA 213

Johnson v Agnew [1980] AC 367

Neate v Parfitt [2006] WASC 121

Peter Turnbull & Co Pty Ltd v Mundus Trading Co (Australasia) Pty Ltd [1954] HCA 25; (1954) 90 CLR 235

Suttor v Gundowda Pty Ltd [1950] HCA 35; (1950) 81 CLR 418

Wenham v Ella [1972] HCA 43; (1972) 127 CLR 454

Adams v Lindsell [1818] EWHC J59; (1818) 2 B & Ald 681; 106 ER 250

Adamson v Hayes [1973] HCA 6; (1973) 130 CLR 276

Anaconda Nickle Ltd v Tarmoola Australia Pty Ltd [2000] WASCA 27; (2000) 22 WAR 101

Australian Broadcasting Corporation v XIVth Commonwealth Games Ltd [1988] 18 NSWLR 540

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

Codelfa Construction Pty Ltd v State Rail Authority of NSW [1982] HCA 24; (1982) 149 CLR 337

Darter Pty Ltd v Malloy [1993] 2 QR 615

Elizabeth City Centre v Corralyn [1994] SASC 5138; (1994) 63 SASR 235

Erley Pty Ltd v Gunzburg Nominees Pty Ltd (1998) Aust Contract R 90-093

Gibson v Manchester City Council [1978] 1 WLR 520

Green v Sommerville [1979] HCA 60; (1979) 141 CLR 594

Hadley v Baxendale [1854] EngR 296; (1854) 9 Ex 341; (1854) 156 ER 145

Jones v Barkley (1781) 99 ER 434

Marist Brothers Community v Harvey Shire Council (1994) 14 WAR 69

Meehan v Jones [1982] HCA 52; (1981) 149 CLR 571

Nunin Holdings Pty Ltd v Tullamarine Estates Pty Ltd [1994] VicRp 3; [1994] 1 VR 74

Olympic Holdings Pty Ltd v Lochel [2004] WASC 61

Perri v Coolangatta Investments Pty Ltd (1982) 139 CLR 537

Redden v Wilks [1979] WAR 161

Rogan v Rushton [2003] QSC 9

Sansom Nominees v Meade [2005] WASC 9

Sunbird Plaza Pty Ltd v Maloney [1988] HCA 11; (1988) 166 CLR 245

Tallerman & Co Pty Ltd v Nathan's Merchandise (Victoria) Pty Ltd [1957] HCA 10; (1957) 98 CLR 93

1 TEMPLEMAN J: The plaintiffs, Justin Leslie Shepherd, and his wife Erin Jennifer Shepherd ("the Shepherds"), seek an order for the specific performance of what is claimed to be a written agreement, made on 9 August 2004, for the sale to them by the defendant, Karen Lesley Baster (Ms Baster"), of a residential property at 18 Tain Street, Applecross. The Shepherds claim damages in addition to specific performance.

2 Ms Baster denies that she entered into an agreement with the Shepherds. Alternatively, Ms Baster contends that if there was an agreement, she terminated it for failure of the Shepherds to satisfy the conditions which required them to obtain finance by 23 August 2004, and to notify her that they had done so.

3 The document on which the Shepherds rely is a standard offer and acceptance form produced by the Real Institute of Western Australia ("REIWA") for use by non-members of that organisation.

4 The offer and acceptance form was completed in handwriting. There have been some alterations which have been initialled; and it has been signed. However, the circumstances in which the document came into existence cannot be discerned from its face. It is therefore necessary to establish the sequence of relevant events in order to determine the legal effect of the document.

5 Evidence concerning these matters was given by the Shepherds and by Ms Baster. Evidence was given also by Ms Baster's brother, Paul Baster, who acted as her agent in negotiations with the Shepherds. I am quite satisfied that all the witnesses gave their evidence honestly; that is, to the best of their respective recollections. There are, however, some conflicts in the evidence. I attribute these to faulty recollection, some two years after the events in question.

6 There are issues between the parties as to their respective legal positions during the crucial period between 8 August 2004, when the offer and acceptance form was completed and 23 August 2004, when the termination notice was served.

7 I therefore set out my findings of fact and my conclusions as to the legal relationships between the parties as the matter unfolded.

8 The property at 18 Tain Street ("the property") appears from a valuation report (exhibit 2) to be a substantial brick and tile home, built in the 1960s on a 1072 square metre block.

9 The property came to Ms Baster under the Will of her late mother, who died in 2002. They lived there together for 4 years before her death, while Ms Baster acted as her mother's carer.

10 In July 2004, Ms Baster resolved to sell the property to buy a house in Nedlands. Her brother agreed to act as agent for this purpose. He had performed that role for Ms Baster on one previous occasion, in 2003, although he is a mechanical engineer by profession.

11 Ms Baster moved out of the property mid-July 2004. However, she did not then remove all her personal belongings, or those of her late mother. Neither did she clear a substantial shed at the property, which contained some asbestos sheets and a motor vehicle and other goods and chattels left there by her late mother's former partner, a motor mechanic. There was a second, smaller shed at the rear of the property. This shed was constructed of asbestos sheeting.

12 In preparation for the sale of the property, Ms Baster had a "For Sale" sign made. It gave Mr Baster's mobile telephone number as the contact.

13 In order to facilitate the preparation of a contract, Ms Baster purchased two copies of the standard form offer and acceptance from a newsagent. She gave them to her brother.

14 Further, Ms Baster obtained from Ross Hughes Real Estate Agents in Applecross a copy of the REIWA General Conditions for the sale of land. Ms Baster was aware of the existence of these conditions because she had seen them in 2003 in connection with a previous transaction. However, she did not read the general conditions; nor did she give them to her brother. She inadvertently left them in her car, where she found them some months later.

15 After the "For Sale" sign had been placed at the property, it was seen by the Shepherds. Mr Shepherd telephoned Mr Baster and expressed interest in purchasing the property.

16 At that stage, the Shepherds and their three sons were living at 57A Gairloch Street, Applecross, which they owned jointly.

17 Mr Shepherd is a key accounts manager for the Swan Brewery company. In 2004, he was investigating the possibility of purchasing a property in Applecross which might be subdivided. He knew, from his inquiries of the Melville City Council, that allotments of at least 1100 square metres could be subdivided. However, from 1 January 2005, the minimum area for subdivision would be 1300 square metres.

18 Mr Shepherd's plan was to purchase a property, and then subdivide. He would have a house built on one of the subdivided blocks, and sell the other so as to defray the cost of constructing a house on the retained block.

19 In July 2004, when driving through Applecross, Mr Shepherd noticed the "For Sale" sign at the property. He telephoned Mr Baster to inquire about the price at which it was being offered for sale.

20 Mr Baster told him that the asking price was $769,000; that the property was vacant, and that Mr Shepherd could inspect it if he wished, unaccompanied by Mr Baster.

21 Mr Shepherd inspected the property on the following day. He and Mrs Shepherd then decided to offer $740,000 for the property, subject the sale of their house at Gairloch Street.

22 Within a few days after Mr Shepherd inspected the property, he telephoned Mr Baster and made an offer of $740,000. Ms Baster said that was insufficient. There were then further negotiations which culminated in Mr Shepherd increasing the offer to $756,500. Mr Baster said he agreed to sell at that price, but that he had to seek the agreement of other people involved.

23 Later, Mr Baster telephoned Mr Shepherd. He said he would sell the property to Mr Shepherd for $756,500, conditional upon the sale of the Shepherds' house. Mr Baster said further that the contract was to give Mr Shepherd six weeks to sell his house; and that if he did not do so, the contract would provide for him to be given notice of any further offers made in respect of the property. If notice was given, Mr Shepherd would have 48 hours in which to elect to make the contract unconditional.

24 Mr Shepherd told Mr Baster that those terms were agreeable to him.

25 As I have noted above, Mr Shepherd knew that allotments of at least 1100 square metres in Applecross were potentially subdivisible. Having searched the Melville City Council website, Mr Shepherd discovered that the property was on an allotment of 1072 square metres and, thus, fell short of the minimum requirement.

26 On 23 July 2004, in an attempt to acquire some additional land to make up the shortfall, Mr Shepherd visited the owner of the land at the rear of the property, Mark Lord. Mr Shepherd told Mr Lord that he had agreed to purchase the property and that he would like to purchase 30 square metres of Mr Lord's land, immediately adjacent to the rear boundary of the property.

27 Following some further negotiations with Mr Lord, Mr Shepherd received a letter from him dated 25 July 2004, offering to sell 30 square metres of land at a price of $1000 per square metre, or for a lump sum of $30,000. The offer was conditional; and was subject to the Shepherds completing a "side by side" subdivision.

28 On or about 26 July, having obtained the offer from Mr Lord, Mr Shepherd telephoned Mr Baster and asked when they could meet in order to complete the documentation for the sale of the property. Mr Shepherd did not then, nor at any time before commencing these proceedings, tell Mr Baster about his plans for the property.

29 Mr Baster said it would not be possible to meet for a number of days because he was then working in Ravensthorpe. Mr Shepherd said he would like Mr Baster to confirm in writing that they had agreed the sale of the property conditional on the sale of the Shepherds' property within six weeks, and on 48 hours' notice thereafter. Mr Baster said they had an agreement and that he would not sell to anyone else. However, when pressed further by Mr Shepherd, Mr Baster agreed to send a fax to confirm the agreement.

30 Mr Baster did so on 29 July. The fax was addressed to Mr Shepherd and was in the following terms:

"We confirm acceptance of your offer of $756,500 for purchase of 18 Tain Street Applecross. We will give you exclusive period of 6 weeks and a 48 hour clause thereafter.

Please let me know who you want on the offer ASAP."

The fax was signed by Mr Baster "on behalf of owner".

31 That fax was not, of course, a contractual document. However, it demonstrates that Mr Shepherd and Mr Baster had reached agreement on the most important matters relating to the sale of the property. The formal documentation had to be prepared, but the negotiations had been concluded.

The completion of the offer and acceptance form

32 On or about 7 August, Mr Shepherd and Mr Baster spoke on the telephone. They agreed to meet at the Captain Stirling Hotel in Nedlands on the following day, in order to prepare the contract documents.

33 At about 5 pm on Sunday, 8 August, the Shepherds (who brought their three young sons with them) met Mr Baster at the Captain Stirling Hotel. Mr Baster produced one of the blank offer and acceptance forms he had been given by his sister and a document he had prepared, marked Annexure A, in a form he had obtained from a friend. This document provided that the offer was made subject to the unconditional sale of the Shepherds' property at Gairloch Street within 49 days after the acceptance of the offer. It is not clear why a period of 49 days was specified, there having been agreement previously that the Shepherds would be given six weeks in which to sell their property. However, nothing turns on that.

34 The annexure also contained the so-called 48-hour clause, which could be invoked after 14 September. The effect of that clause was to enable Ms Baster to terminate the contract if she received a further written offer to purchase the property, and if the contract with the Shepherds was not by then unconditional.

35 Mr Shepherd then filled in the form by inserting the terms which had been agreed thus far. He added a term for the payment of a $50,000 deposit within seven working days of acceptance and an additional special condition relating to a survey to be carried out at the Shepherds' expense.

36 The settlement date was expressed to be "30 days after offer becomes unconditional"; and the offer was made subject to finance on the conditions printed on the form. The lender was expressed to be "ANZ", and the latest time for the finance to be obtained was expressed to be "4.00 pm on the date offer becomes unconditional". The amount of the loan required was $300,000.

37 Both Mr and Mrs Shepherd signed the offer. They also signed the Annexure A.

38 Mr Shepherd had expected to have the offer accepted at that meeting. However, Mr Baster told him that the property was owned by his sister and that she would need to sign the document. Mr Baster took the documents to the Supa-Valu Supermarket, which was close to the Captain Stirling Hotel. He there obtained a copy of the documents, which he gave to Mr Shepherd. Mr Baster said he would have his sister sign the offer and would send the completed contract to the Shepherds.

39 On Monday, 9 August, Mr Baster faxed the offer and acceptance and Annexure A to Elaine Coughlin of Ronson MacKinlay Conveyancers, the conveyancers he had nominated in the offer and acceptance form. Later that day, Ms Coughlin telephoned Mr Baster and recommended that the finance clause be amended so as to provide for finance to be obtained by a definite date: she suggested 23 August 2004.

40 At 5.45 pm on 9 August, Mr Baster telephoned Mr Shepherd and told him about the advice he had received from Ms Coughlin. He asked Mr Shepherd whether two weeks would be long enough for him to obtain finance. Mr Shepherd said it would.

41 There is a conflict between the evidence of Mr Shepherd and Mr Baster about the precise words spoken in the conversation. According to Mr Shepherd, in his statement (Ex 5, par 7) Mr Baster said he wanted to alter the form to incorporate the change in the finance clause. In his cross-examination, Mr Shepherd's evidence was that Mr Baster said "he would have the contract changed" (TS 138). However, Mr Baster denied that Mr Shepherd said he was happy to have the contract changed (TS 189).

42 I do not think anything turns on this conflict. That is because there is no doubt that in the course of their conversation, Mr Baster and Mr Shepherd agreed that there would be an amendment to the finance clause. This was before the Shepherds' offer was presented to Ms Baster. At that stage, Mr Baster had not seen her (TS 189). It follows that whether or not there was express agreement that Mr Baster should make the amendment, such agreement must be implied. It was the intention of both Mr Shepherd and Mr Baster that the offer to be presented to Ms Baster would contain the amended finance clause.

The offer and acceptance is signed by Ms Baster

43 Later on 9 August, at about 8 pm, Mr Baster presented the offer to Ms Baster. He told her about the advice he had received from Ms Coughlin and his conversation with Mr Shepherd about the amendment to the finance clause. He deleted the words "offer becomes unconditional" from that clause and inserted "23 August 2004". Ms Baster then initialled the change, signed the form and Annexure A.

44 In my view, Ms Baster thereby accepted the offer.

45 On 10 August, at 8.08 pm, Mr Baster telephoned Mr Shepherd. Mr Baster's evidence was that he told Mr Shepherd that his sister had signed a counter offer with the 23 August date.

46 In cross-examination, Mr Baster said he had used the expression "counter offer" in this context (TS 190). A little later he said he believed he had used that expression. He said he would have done so because it was always his understanding that if a vendor altered an offer, this amounted to a counter offer. That was why he wanted the Shepherds to sign the document; and he asked if he could call on them that evening so that they might do so. According to Mr Baster, he did not visit the Shepherds then because it was inconvenient to them. Mr Shepherd asked him to send the documents by fax.

47 Mr Shepherd's evidence was that he had no recollection of Mr Baster asking to call at his house that evening. Neither did he recall Mr Baster referring to a counter offer.

48 I do not accept Mr Baster's evidence that he referred to a counter offer. I think his recollection is faulty. Had he done so, I think it likely that Mr Shepherd would have remembered. That is because he and Mr Baster had already agreed that the finance clause should specify 23 August 2004 as the latest date for approval. Reference to a counter offer would have been inappropriate: and therefore, memorable.

49 However, in my view, whether or not Mr Baster referred to a counter offer is immaterial. That is because, on the facts as I have found them to be, the amendment of the finance clause did not, in law, amount to a counter offer.

50 Typically, a counter offer will be made when (for example) a vendor who has received an offer at a particular price, crosses out the price on the offer document, inserts a higher price and initials the alteration before returning the document unsigned to the prospective purchaser. Only when offers and counter offers have culminated in an agreement will the vendor sign the form, signifying acceptance.

51 By contrast, in the present case, Ms Baster did not simply initial the alteration to the finance clause and return the document to the Shepherds. She signed the form, as amended, signifying her acceptance of the terms it then contained.

52 Clause 2 of the offer and acceptance form is in the following terms:

"Acceptance of this offer shall be sufficiently communicated to the Buyer if verbal or written notification is given by the Seller or Seller's Agent to the Buyer that the acceptance has been signed by the Seller."

53 I have found that Mr Baster did tell Mr Shepherd, in the course of their telephone conversation on 10 August, that Ms Baster had signed the form. That was a sufficient communication of the acceptance within cl 2. From that point on, therefore, there was a binding contract in existence between Ms Baster and the Shepherds.

54 I accept Mr Baster's evidence that it was not convenient to the Shepherds to have him call on them on the evening of 10 August: and that Mr Shepherd requested Mr Baster to fax the documents to him.

55 At 2.48 pm on 11 August, Mr Baster faxed the documents to Mr Shepherd at his workplace in Canning Vale. He did so under cover of a note in the following terms:

"Please both initial changes and return to:

P R Baster

80 The Avenue

Nedlands 6009

Any queries ring me on 9389 7471 or 0438880062."

56 Mr Shepherd received the fax later that afternoon. He took it home immediately, so that both he and Mrs Shepherd could initial the change to the finance clause. He then returned to his workplace.

57 On his return journey, Mr Shepherd stopped at the property so as to try and visualise the proposed subdivision. In the course of that visit, he noticed that there was, as he put it, "a substantial amount of personal property and refuse left on the premises".

58 On his return to work, Mr Shepherd decided to stipulate that the house and sheds at the property were to be cleared by Ms Baster. He therefore wrote an additional condition on the facsimile copy of the offer and acceptance he had received from Mr Baster. It was:

"House/sheds to have all rubbish and personal belongings removed."

59 In the belief that he would be able to send the document by facsimile to Mr Baster, Mr Shepherd obtained a Swan Brewery facsimile transmission cover sheet and addressed it to "Paul". He then realised that he did not have Mr Baster's fax number. He therefore telephoned Mr Baster. He told Mr Baster that he and his wife had initialled the finance clause and he asked for Mr Baster's fax number. Mr Baster said he did not have a fax. He asked Mr Shepherd to return the documents by post.

60 I make that finding despite Mr Baster's denial that he had a telephone conversation with Mr Shepherd (TS 194): and despite the change in Mr Shepherd's recollection. I accept Mr Shepherd's later recollection as being correct. It is consistent with Ms Baster's evidence, which I accept, that she was telephoned by her brother who told her that the Shepherds had initialled his fax and was sending it back in the post (TS 162). Mr Baster denied that he had that conversation with his sister (TS 194), but I think his recollection is imperfect. He contended that Ms Baster had been confused by counsel when giving the evidence to which I have referred above. However, that was not my impression.

61 Mr Shepherd did as he had been asked. He sent the faxed copy of the offer and acceptance he had received from Mr Baster with the additional clause relating to the removal of the rubbish written on it and initialled by him and Mrs Shepherd.

62 Mr Shepherd posted the documents under cover of the facsimile transmission sheet on which he had written:

"Paul,

Please note condition to be agreed and signed relating to removal of remaining items. Both the sheds and house still have quite a lot of items to be removed.

Can you sign and send back copies thanks."

63 It is not clear when Mr Shepherd posted the documents. However, they were received by Mr Baster on 17 August. He then became aware of the proposed additional condition. Mr Shepherd had not mentioned it in their previous telephone conversations.

64 On the evening of 17 August, Ms Baster visited her brother at his house. He showed her the faxed copy of the offer and acceptance he had received from Mr Shepherd through the post that day.

65 By then, Ms Baster was concerned that (as she perceived it) the Shepherds were delaying. She had driven past their house in Gairloch Street and noticed that there was no "For Sale" sign displayed there: nor was there any advertisement in the newspaper. Further, she had not received the documents signed by the Shepherds, which she thought should have been returned sooner.

66 When Ms Baster saw the additional clause relating to the removal of rubbish and personal belongings from the property, she misread it initially. She thought the Shepherds wanted to have the sheds removed, as well as their contents. At the time, Ms Baster was feeling unwell (she was later diagnosed as diabetic) and was exhausted. Being in a low state, being under that misapprehension and believing that the Shepherds were delaying, Ms Baster felt unable to cope with the situation.

67 She believed, as she put it, that it was her prerogative not to sign the condition proposed by the Shepherds: and that if she did not do so, there would be no contract.

68 Ms Baster therefore refused to sign the condition proposed by the Shepherds and not to deal further with them. She asked her brother to "follow it up and see where we stood" (TS 166).

69 It was submitted by leading counsel for Ms Baster that in requesting her to agree and sign the additional condition relating to the removal of rubbish from the property, Mr Shepherd was manifesting an intention not to be bound at all until such agreement had been reached.

70 I do not accept that submission. Such a finding would be inconsistent with my conclusion that the parties were already bound. And by their conduct prior to 11 August, that was their clear intention. I accept that Mr Shepherd wanted the new condition agreed, but, I infer, as an addition to the existing contract.

71 The contract which, I have found, came into existence on 10 August, incorporated the REIWA General Conditions: cl 3. The Shepherds and Ms Baster had signed that part of the offer and acceptance form which contained an acknowledgement that they had received a copy of the General Conditions. In fact, no copy had been given to the Shepherds. As I have noted above, the copy Ms Baster obtained for that purpose had remained in her car.

72 Condition 6.1(b)(2) of the General Conditions provided that:

"... the Seller must remove from the property, before possession, all vehicles, rubbish and chattels, other than Property Chattels sold to the Buyer under the Contract."

73 This condition was to precisely the same effect as that written on the offer and acceptance form by Mr Shepherd on 11 August. It therefore added nothing to the terms which had already been agreed. Even if that were not so, the proposed condition could not amount to a counter offer, because the contract was already in existence.

74 On 18 August, at 10.05 am, Mr Baster sent a fax to Ms Coughlin from a friend's house. The fax consisted of the offer and acceptance in the form Mr Baster had received it from the Shepherds and a covering letter in the following terms:

"They have countersigned the alteration to the finance latest time you recommended but have added a new clause * 8. We have not countersigned this clause. Does this mean we can walk away from this contract or put in a counter offer? Are we better off waiting for the 23rd Aug and seeing if they come up with the finance approval."

75 It appears that Ms Coughlin did not answer Mr Baster's inquiry, but that she advised him to take legal advice. He did so: from Richard Staynor, then a senior associate at MacKinlays, who are Ms Baster's solicitors.

76 I do not know precisely what instructions were given to Mr Staynor, nor is that relevant to these proceedings. However, there is evidence from Mr Staynor (a witness statement tendered by consent) that he advised Mr Baster that if his sister did not want the sale to proceed, she must inform the Shepherds as soon as possible, in writing, "in order to avoid confusion".

77 In accordance with his instructions, Mr Staynor wrote to the Shepherds on 18 August, on behalf of MacKinlays, in the following terms:

"I have been instructed by Paul Baster on behalf of his sister Karen Lesley Baster in connection with our offer to buy [the property].

I am writing to advise you that your offer is not acceptable and Ms Baster does not wish to enter into a contract with you at this stage."

78 Mr Staynor delivered the letter personally. He placed it in the letterbox of the Shepherds' house in Gairloch Street. Mrs Shepherd saw him do so. At the time, she was preparing the house for a home open that evening. Contrary to Ms Baster's suspicion that the Shepherds had been delaying, they had in fact instructed a real estate agent and placed the house on the market.

79 Later that day, in the course of conversations between Mr Staynor and Mr Shepherd and subsequently, his solicitor, Mr Staynor maintained that there was no contract in place between the Shepherds and Ms Baster.

80 Mr Staynor reiterated that contention in a letter sent by facsimile to the Shepherds' solicitors on 18 August.

81 The finance clause made the contract conditional upon the Shepherds obtaining finance approval before 4 pm on 23 August 2004. Further, the clause provided that if by that time no finance approval had been obtained, the Shepherds were immediately to notify Ms Baster or Mr Baster in writing of such non-receipt: cl 1.3(b). A failure by the Shepherds to provide that notification was a default which entitled Ms Baster to "immediately terminate the Contract by notice in writing": cl 1.5.

82 The Shepherds did make application to the ANZ Bank for finance. It is not clear when they did so. However, on 24 August, the Bank issued a Home Buyer's Certificate to the Shepherds in which they were described as "the applicants". The Certificate was to the effect that the Shepherds would be eligible for an ANZ Home Loan of an amount up to $370,000 upon formal application and subject to a number of conditions. In my view, that was a finance approval, within cl 1.7 of the finance condition: see Neate v Parfitt [2006] WASC 121 at [28] - [29].

83 Shortly after 4 pm on 23 August, Ms Baster's solicitors placed a letter and "Termination Notice" in the Shepherds' letterbox at Gairloch Street. Although, arguably, this form of delivery did not constitute proper service under the REIWA General Conditions, nothing turns on this because by Mr and Mrs Shepherd accepted that they saw the documents shortly after their delivery.

"Although we do not accept that there is in place a contract, you maintain, through your solicitors ... that there is.

If you are right, it is a term of that contract that the Latest Time for fulfilment of the finance condition was 4.00 pm today.

On the basis that you have failed to comply with Special Condition 1.5, we enclose Notice terminating the contract. This notice is served by hand and without prejudice to our client's contention that there is no contract."

The Notice was to the effect referred to in the letter.

85 It is contended on behalf of Ms Baster that if, contrary to her primary contention, she had entered into a contract with the Shepherds, this Notice took effect to terminate it.

86 I have no hesitation in rejecting that submission. As counsel for the Shepherds submitted, and as I accept, a party to a contract cannot approbate and reprobate. The proposition was stated succinctly by Lord Chelmsford in Codrington v Codrington (1875) LR 7 HL 854 at 866:

"... there is an implied condition that he who accepts a benefit under an instrument must adopt the whole of it, conforming to all its provisions and renouncing every right inconsistent with it."

87 In the present case, having elected to deny the existence of a contract, Ms Baster could not then claim to exercise a right available to her only by virtue of the contract.

88 The Shepherds rely also on the well-established proposition that a party to a contract who prevents the other party from performing cannot complain subsequently about non-performance. And, as Dixon CJ said in Peter Turnbull & Co Pty Ltd v Mundus Trading Co (Australasia) Pty Ltd [1954] HCA 25; (1954) 90 CLR 235 at 247, a party who is told that tender of performance would be pointless, is, in substance, being prevented from performing his obligations: Foran v Wight [1989] HCA 51; (1989) 168 CLR 385 at 417 - 418.

89 In the present case, no clearer intimation could have been given to the Shepherds that it was pointless to perform the contract, than to assert that it did not exist.

90 It is submitted on behalf of Ms Baster that the principle applies only to mutual agreements. That is to say, if a vendor says "I will not settle on the duty date", he cannot complain if the purchaser fails to tender payment on that date.

91 In the present case, the obligation on the Shepherds to obtain finance was unilateral. It was a condition which, if not satisfied, entitled Ms Baster to terminate the contract. However, failure to comply with the finance condition rendered the contract voidable, not void: the contract did not terminate automatically. And as the High Court made clear in Suttor v Gundowda Pty Ltd [1950] HCA 35; (1950) 81 CLR 418 at 441 - 442, a contract which is voidable cannot be avoided by a party who is responsible for the default.

92 In the present case, Ms Baster was responsible for the Shepherds' default because she denied the existence of the contract and thereby, in effect, told the Shepherds it was pointless to attempt to satisfy the finance conditions: see Grieve & Anor v Enge & Anor [2006] QCA 213 at [20] - [25].

93 In my view, all of these considerations are subsumed in Condition 24.15 of the General Conditions in any event. That provision, which applies if the seller repudiates the contract entitles the buyer to:

(1) Specific performance of the Contract; or

(2) damages for default in addition to or instead of specific performance ..."

94 A purchaser cannot maintain a suit for specific performance unless ready, willing and able to perform. It is not possible to seek specific performance "subject to finance". It must follow that a purchaser who has a contractual right to specific performance and who is therefore required to demonstrate a financial ability to settle, cannot be required, in addition, to ensure that the finance condition is satisfied.

95 In the present case, the Shepherds' solicitors gave notice to Ms Baster's solicitors at 12.04 pm on 23 August 2004 that they were instructed to commence proceedings for specific performance. The writ was issued that day, although it is not clear when it was served.

96 As I have noted above, the contract required the Shepherds to pay a deposit of $50,000 within seven working days of acceptance. That is, by 19 August 2004: the day after Ms Baster's solicitors denied the existence of any agreement.

97 The deposit was not paid. However, for the reasons given above, that is not a breach about which Ms Baster can complain. In any event, she could only have terminated for breach of that obligation by giving notice under General Condition 1.4, a course which would have been inconsistent with her denial of the contract.

98 It is not in dispute that the Shepherds are now ready, willing and able to settle by tendering the full purchase price pursuant to an order for specific performance (TS 105). However, Ms Baster does put in issue the Shepherds' ability to settle when they commenced proceedings.

99 The uncontested evidence from Audrey Elizabeth Shepherd, Mr Shepherd's mother (whose witness statement was admitted by consent) is that in August 2004, she had in her bank account, some $1.37 million, derived mainly from the sale of two properties in Applecross in 2002.

100 Mrs Audrey Shepherd's evidence was that she was aware from conversations with her son that he was negotiating to purchase a property in Tain Street, Applecross and that he was intending to sell his property in Gairloch Street in order to facilitate that purchase. She said that had it been necessary for her son to pay for the property before the sale of his house, she would have assisted him by, in effect, providing bridging finance.

101 I am satisfied that Mr Shepherd would have availed himself of this assistance had it been necessary.

102 I accordingly find that at all material times, the Shepherds were ready, willing and able to perform the contract by paying the purchase price when called upon to do so.

103 For all these reasons, I conclude that the Shepherds are entitled to an order for specific performance of the contract.

104 The Shepherds claim damages on two bases: pursuant to s 25(10) of the Supreme Court Act 1935 (WA) and pursuant to Condition 24.15(b)(ii) of the General Conditions.

105 Section 25(10) of the Supreme Court Act enables the Court to award damages in addition to specific performance, such damages being assessed "in such manner as the Court directs". This provision enables the Court to award damages in the same way that a Court of Equity might have done, following the passage of Lord Cairns' Act. It is submitted on behalf of the Shepherds, however, that General Condition 24.15(b)(ii) entitles the Shepherds to common law damages.

106 I do not think it necessary to decide whether that is so: or whether, if it is so, the approach to the award of damages should be any different. That is because, despite the different jurisdictional bases for common law and equitable damages, it is common for the same principles to be applied: Wenham v Ella [1972] HCA 43; (1972) 127 CLR 454, Johnson v Agnew [1980] AC 367 and Bristol & West Building Society v Mothew [1998] Ch 1, where Millett LJ said (at 17):

"There is no reason in principle why the common law rules of causation, remoteness of damage and measure of damages should not be applied by analogy in such a case."

107 That proposition was stated in a different context: a claim for damages for breach of an equitable duty of skill and care. However, in my view, the rationale is of general application: see Spry on Equitable Remedies (6th ed) where it is said (647):

"This is so, however, not because the court is obliged to apply legal criteria but because the amount of compensation which is found to satisfy the loss or damage that has been suffered or is expected to be suffered, and which the court considers is just and equitable to be paid, is ordinarily found to be the same as the amount of legal damages that are appropriate."

108 I note the criticism of this approach in Meagher, Gummow and Lehane, Equity Doctrines and Remedies (4th ed) [23.020] where the distinction is drawn between common law damages and equitable compensation. But in this case, the claim is, in essence, for damages.

109 The Shepherds claim damages under three heads. I deal with each in turn.

The cost of alternative rental accommodation

110 The Shepherds sold their house in Gairloch Street and moved into rental accommodation from 8 March 2005. From then until 5 March 2006, they paid rent at the rate of $480 per week, a total of $24,960. They paid rent at an increased rate of $505 per week from 4 March 2006. By 3 September 2006, they will have paid $13,130.

111 Against that, while the Shepherds have been paying rent, they have not been paying any mortgage interest. Mr Shepherd's evidence was that he and his wife intended to borrow $370,000 (that was the amount suggested by the ANZ Bank and which appears on the Home Buyer's Certificate). Mr Shepherd expected to pay interest at 6.4 per cent per annum. No doubt, there would have been rate increases since Mr Shepherd was given that indication.

112 Further, the Shepherds have not been required to pay any outgoings in respect of the property such as rates or water rates.

113 In these circumstances, I consider that the Shepherds are not out of pocket as a result of paying rent, which, broadly, equates to the costs of servicing the proposed mortgage and other expenses associated with ownership of the property.

114 It is submitted on behalf of the Shepherds that the delay in settlement on the property has not saved interest but merely deferred it. I accept that to be so.

115 However, if damages were to be awarded, it would be necessary to prove, on the balance of probabilities, that because of the delay in settlement, the Shepherds would require the mortgage for 18 months longer than if they had settled in March 2005. That, I think, is an unrealistic proposition. Since the requirement for a mortgage is usually co-existent with ownership of the mortgaged property, for practical purposes it would involve proof that because of the delay in settlement, they will live in the property for an additional 18 months. But in all probability, the Shepherds will move on when they are ready to do so.

116 I have referred above to Mr Shepherd's plan to subdivide the property, sell one of the subdivided blocks and build the house on the other.

117 I accept Mr Shepherd's evidence that he intended to pay some $450,000 to build a house on the retained block, that being the price in August 2004.

118 There is uncontested evidence from Ian Dunlop, a quantity surveyor employed by Turner & Townsend Rawlinsons Pty Ltd, a construction and management consultancy, that between August 2004 and August 2006, the cost of building a house on a block of land in Applecross increased between 35 per cent and 45 per cent.

119 The Shepherds claim 45 per cent of $450,000, being $202,500, to compensate them for this additional cost.

120 It is well settled that in order to justify an award of common law damages, it would be necessary to prove either that the loss was of a kind which flowed naturally from the breach of contract as the usual course of things, or that it was a consequence which the parties could reasonably be supposed to have contemplated when they entered into the contract. For the reasons given above, I consider that to be the appropriate approach in equity in the circumstances of this case.

121 In my view, the claim cannot be sustained on either basis. First, I do not think it was reasonably foreseeable to Ms Baster, when she entered into the contract with the Shepherds, that they would wish to rebuild. They were buying a substantial house and might reasonably have been expected to live in it with their family. That intention could well be inferred from the fact that the Shepherds wanted the sale to include "all light fittings, window treatments, air conditioners and all fittings as inspected". They also wanted to have the property surveyed. These are requirements which appear to be inconsistent with an intention to demolish.

122 It might be thought reasonably foreseeable that the purchaser of a 1960's house in Applecross might want to re-build, as so many owners have done. However, many do not: and on the evidence referred to above, I regard the probability, viewed objectively, as no more than equal.

123 Secondly, there is no evidence that either Mr or Mrs Shepherd told Mr Baster about their plans to subdivide and rebuild when they entered into the contract. Indeed, as I have noted above, Mr Shepherd's evidence was that he did not tell Mr Baster. This is hardly surprising: it would have been foolish for Mr Shepherd, as a potential purchaser, to alert Mr Baster to the possibility that the property had subdivision potential which might enhance its value.

124 I therefore consider that the claim for increased building costs is too remote to be allowed.

125 The Shepherds rely on the uncontested evidence of Tony Gorman of Glendinning & Associates, a licensed valuer, to the effect that, as at 9 June 2006, the property was worth $1,150,000; whereas with subdivision approval it would have been worth $1,350,000. The Shepherds claim the difference, $200,000 as the value of the lost opportunity to subdivide.

126 In my view, for the reasons given in relation to the previous head of damages, this is not a loss which flowed naturally from the breach of contract.

127 Nor could it be said to be within the contemplation of the parties when they entered into the contract that the Shepherds might subdivide. That is because it was Ms Baster's belief that the property could not be subdivided. She had attempted to obtain approval for subdivision before placing the property on the market. However, approval had not been granted because the size of the allotment was below the minimum required for subdivision.

128 Mr Baster's evidence, which I accept, was that when considering subdivision, he did not contemplate the acquisition of land from Mr Lord, the adjacent owner to the rear of the property.

129 Ms Baster learned of the Shepherds' intentions only in November 2004 when she was told about the amendment to the Statement of Claim which introduced that head of damage. She then sought to preserve the position by making an application for subdivision, based on agreement from Mr Lord of the kind he had made with the Shepherds.

130 Ms Baster did obtain subdivision approval, conditional upon the acquisition of a small area of land from Mr Lord. However, it appears that Mr Lord has since declined to proceed (Ex 1/76).

131 Whether or not his attitude is irrevocable is impossible to determine. However, even if I considered that, in principle, the Shepherds' claim under this head was open, I would hesitate to award damages without clear evidence that this was so. Otherwise, there would be a risk of the Shepherds obtaining a windfall.

132 For all these reasons, I conclude that it would be inappropriate to award damages to the Shepherds.

133 I will invite counsel to bring in a minute of order relating to the specific performance of the contract.

JURISDICTION : SUPREME COURT OF WESTERN AUSTRALIA

CITATION : SHEPHERD & ANOR -v- BASTER [2006] WASC 176 (S)

Costs - Plaintiffs awarded specific performance but not damages - Whether offsetting appropriate - Calderbank offers by plaintiffs before amending statement of claim - Plaintiffs' case set out in correspondence - Plaintiffs claim unreasonable conduct by defendant during proceedings - Whether plaintiffs entitled to indemnity costs - Counterclaim at instigation of defendant's brother - Counterclaim abandoned - Defendant suffering chronic medical condition - Defendant's proceedings conducted generally by agency of her brother - Whether non­party costs order against defendant's brother

Defendant pay plaintiffs' costs of the action (except expert evidence) to be taxed if not agreed

Plaintiffs pay defendant's costs of this application to be taxed if not agreed

Castro v Hillery & Ors [2002] QCA 359; [2003] 1 Qd R 651

Den Hoedt & Anor v Barwick [2006] WASCA 196

Dobb v Hacket (1993) 10 WAR 532

HPM Pty Ltd v Fear [2002] WASCA 249

Koh v Tay [1999] WASC 228

NMFM Property Pty Ltd v Citibank Ltd (No 11) [2001] FCA 480; (2001) 109 FCR 77

Permanent Building Society v Wheeler (No 2) (1993) 10 WAR 569

Shepherd & Anor v Baster [2005] WASC 23

Shepherd & Anor v Baster [2006] WASC 176

Symphony Group Plc v Hodgson [1994] QB 179

Westgold Resources NL v St George Bank Ltd & Ors, unreported; SCt of WA; Library No 980717; 9 December 1998

Willoughby v Barrett-Lennard [1979] WAR 167

1 TEMPLEMAN J: In these reasons, I deal with the costs of the action Shepherd & Anor v Baster [2006] WASC 176.

2 In those reasons, I referred to the parties by their names. However, because the question of costs may be of more general interest, I shall now refer to the parties as "the plaintiffs" and "the defendant" respectively.

3 The parties have filed written submissions and supporting documents in relation to costs and have requested that I decide the matter on the basis of those papers, without further oral argument.

4 I have therefore had regard to the following materials:

(1) the plaintiffs' submissions dated 14 November 2006 entitled "Submissions in support of the plaintiffs' application for indemnity costs and an order against Paul Robert Baster";

(2) an affidavit of Stuart Kenneth Shepherd in support of costs orders in favour of the plaintiffs and annexures SKS1 to SKS10 sworn on 14 November 2006;

(3) the defendant's response to the above materials dated 24 November 2006 and entitled "Defendant's submissions as to costs", annexing the amended statement of claim dated 22 March 2005 and the defendant's submissions for trial dated 3 August 2006;

(4) an affidavit of Louise Horwood filed on behalf of the defendant and sworn 24 November 2006 together with exhibit LH1;

(5) a document entitled "Plaintiffs' submissions in reply" dated 14 December 2006;

(6) a copy of an offer of compromise made by the plaintiffs on 11 November 2004, pursuant to O 24A of the Rules of the Supreme Court 1971 (WA) ("the Rules"). This document was supplied in response to my request to the plaintiffs' solicitors.

5 The plaintiffs initiated the action by writ issued on 23 August 2004. The writ was indorsed with a claim for specific performance of a written contract for the sale of a residential property at 18 Tain Street, Applecross, made between the plaintiffs as purchaser and the defendant as vendor, at a price of $756,500. Further, or alternatively, the plaintiffs claimed damages for breach of the contract.

6 The plaintiffs' statement of claim was defective, as they acknowledged. They therefore sought leave to amend. However, the defendant contended that the proposed amendment was embarrassing because it alleged an oral agreement between the parties and a subsequent written agreement.

7 The issue was resolved in favour of the defendant by Master Sanderson who delivered a judgment on 8 March 2005: Shepherd & Anor v Baster [2005] WASC 23.

8 The Master permitted the plaintiffs to re-plead: and later in March 2005, they filed an amended statement of claim. I note from the Papers for the Judge that the amended statement of claim is said to have been filed on 9 March. This is incorrect. As appears from the date of the document annexed to the defendant's submission as to costs, the amended statement of claim was filed on 22 March.

9 In the amended statement of claim, the plaintiffs relied on a written agreement. In par 9, they alleged that if the defendant did not perform her part of the agreement, they would suffer loss and damage. They gave the following particulars:

"The plaintiffs' loss and damage includes the costs incurred in making arrangements to offer the plaintiffs' property for sale, rental of an alternative property and loss of opportunity to develop the property, full particulars of which will be provided after expert evidence and prior to trial."

10 No further particulars were given of par 9. However, at the trial, the plaintiffs obtained leave to add an additional paragraph in the following terms:

"As a result of the Defendant's delay in performing the Agreement, the Plaintiffs have suffered loss and damage and are entitled to equitable damages arising from the delay.

Particulars of Loss

(a) The costs of alternative rental accommodation for the period from 8 March 2005 to 5 March 2006 at the rate of $480.00 per week ($24,960).

(b) The cost of alternative rental accommodation for the period from 4 March 2006 to 3 September 2006 at the rate of $505.00 per week ($13,130).

(c) Such further rental costs as might be incurred from 3 September 2006 to the date of judgment.

(d) The additional cost of constructing a house in August 2006 as compared to doing so in August 2004 being 45% of an estimated cost of $450,000 ($202,500).

(e) The loss of opportunity to subdivide being the difference between the value of the subdivided blocks and the single block ($200,000)."

11 The defendant denied the existence of any agreement between the plaintiffs and herself. However, she contended that if there was an agreement, it was conditional upon the plaintiffs obtaining finance. The defendant then contended that the plaintiffs had failed to obtain finance and that she had terminated the agreement.

12 The defendant counterclaimed for damages for the allegedly wrongful action of the plaintiffs in lodging a caveat over the title to the property.

13 In answer to a request for further and better particulars of the loss and damage said to have been suffered by the defendant, the defendant alleged that in anticipation of the sale of the property, she had taken out a bridging loan for $500,000, which loan was to be discharged on the sale of the property. The defendant alleged also that she had incurred interest on a loan of $35,000 secured by a mortgage over the property and that in order to discharge the mortgage she had borrowed money from her brother on the basis that she would indemnify him for any loss suffered.

14 The defendant alleged that in order to provide the finance, her brother had sold a property in North Perth. The defendant alleged that because she had agreed to indemnify her brother, she was required to pay him:

• interest on the balance outstanding at 6.7 per cent per annum;

• the loss of the capital gain which her brother's property would have achieved had it not been sold.

15 The trial took place over two days and was conducted efficiently by both counsel.

16 On the opening day, I was informed by counsel for the plaintiffs that the counterclaim had been abandoned and could be struck out (TS 115). The defendant's position was simply that if she was successful, the caveat should be removed. That was clearly an unassailable proposition.

17 The bulk of the evidence given at trial was directed to the circumstances in which the written agreement between the parties came into existence. Very little time was taken up with the plaintiffs' claim for damages. Expert valuation evidence, and other evidence relied on by the plaintiffs in support of their claim for damages was tendered by consent (exhibits 2 and 3 and documents included in the trial bundle, exhibit 1).

18 It is sufficient for present purposes to note that I held the plaintiffs to be entitled to an order for specific performance of the agreement. However, I concluded that it would be inappropriate to award them damages.

19 Section 37 of the Supreme Court Act 1935 (WA) confers a general discretion on the Court in relation to the costs of proceedings. However, O 66 r 1(1) of the Rules provides that the Court will generally order that the successful party to any action will recover his costs from the unsuccessful party.

20 The effect of O 66 r 1(2) and (3) is that a generally successful party may be deprived of all or some of his costs if he has caused costs to be incurred unreasonably, either by his conduct before or after the commencement of the litigation, or by introducing issues on which he has failed.

21 There is no doubt that in the present case, the plaintiffs were generally successful. However, the defendant contends that the plaintiffs' claim for damages accounted for "40% of the time taken and costs incurred".

22 The plaintiffs responded that "a suggestion that 40% of the hearing related solely to the damages claim is no more than fanciful".

23 It is not clear whether the defendant's contention relates to the hearing, or to the litigation generally. However, there is no material before me on which I can make any assessment other than in relation to the trial itself. As to that, I respectfully adopt the observation of Anderson J in Westgold Resources NL v St George Bank Ltd & Ors, unreported; SCt of WA; Library No 980717; 9 December 1998 that:

"The court should not get involved in an excessively detailed analysis of the various issues in an attempt to make intricate dollar-perfect costs orders. To adopt that practice would be to add an extra dimension to litigation which, by and large, is already these days complicated and expensive enough."

His Honour referred to various authorities including his own decision in Permanent Building Society v Wheeler (No 2) (1993) 10 WAR 569 at 574:

"Thus it may be that although it is strictly correct to say that different causes of action are involved, there may have been only one contest in substance. This will often be so when all causes of action arise out of the one course of dealings, the one transaction or the same fact. Where that is the situation, there will usually be one order for the general costs of the action, moulded as necessary to ensure that, however rough and ready it may be, substantial justice is done."

24 In the present case, the causes of action for specific performance and damages may be said to have arisen out of the one transaction or the same fact. However, they gave rise to different considerations and different evidence.

25 That being so, I would be inclined to deprive the plaintiffs of costs relating to their unsuccessful claim for damages, were it not for the fact that the defendant brought a counterclaim which she abandoned at the trial.

26 In these circumstances, rather than requiring the parties to identify the costs incurred in relation to the competing monetary claims, and attempting some kind of offsetting exercise, I consider that the appropriate course would be to order the defendant to pay the plaintiffs' costs of the action but to disallow the plaintiffs' costs of obtaining expert evidence.

Should the plaintiffs be entitled to costs on an indemnity basis?

27 The plaintiffs contend that their costs should be taxed on an indemnity basis because the defendant did not accept an offer they made pursuant to O 24A of the Rules or offers in the form of Calderbank letters when, it is said, she should have done so.

29 The plaintiffs' first offer was set out in a letter dated 24 August 2004 from their solicitors to the defendant's solicitors.

"Without prejudice to any of their rights under the contract of sale, our clients make the following offer:

1. Your client agrees to proceed with the sale of the property on the terms set out in the contract save that:

(a) the purchase price be increased to $760,000;

(b) the deposit of $50,000 payable 7 days after acceptance of this offer;

(c) the latest time for notice of Finance Approval to be given to your client be 24 hours after acceptance of this offer; and

(d) the date 14 September 2004 in Annexure 'A' be extended to 5 October 2004.

2. Our clients discontinue matter CIV 2083 of 2004 on the basis that there be no order as to costs."

31 I assume that the letter was written after the writ indorsed with the statement of claim, which had been issued on the previous day, had been served on the defendant or her solicitors.

32 The defendant submits that the plaintiffs should not be permitted to rely on an offer in the Calderbank form, such as this, when provision is made in O 24A of the Rules for offers to be made when the consequences prescribed by the rule is open and available. The defendant relies on the decision of Scott J in Koh v Tay [1999] WASC 228 at [8].

33 Scott J referred to a passage in Seaman on Civil Procedure at [24A.10.2] where it is said:

"It should not be assumed that the mere writing of a Calderbank letter by a plaintiff making an offer to the defendant which is not less favourable than the judgment recovered generates the same presumptive entitlement to an order for indemnity costs. The circumstances would have to take the case out of the ordinary or usual category: MGICA (1992) Ltd v Kenny & Good Pty Ltd (No 2) (1996) 70 FCR 236 at 240; 140 ALR 707 at 711."

34 That passage does not suggest that an offer in the Calderbank form cannot be made when procedures under rules such as O 24A are available. This is made clear by Murray J in Dobb v Hacket (1993) 10 WAR 532 at 539 - 540. His Honour there adopted the view expressed in earlier authority that the making of a Calderbank offer instead of an offer pursuant to some formal procedure provided by the Rules of Court, would be a factor to be taken into account in the exercise of the costs discretion. The approach taken by Murray J was approved by the Court of Appeal in Den Hoedt & Anor v Barwick [2006] WASCA 196 at [112].

35 Ultimately, in my view, the question is whether a defendant to whom a Calderbank offer has been made, thereafter acts unreasonably in the proceedings: NMFM Property Pty Ltd v Citibank Ltd (No 11) [2001] FCA 480; (2001) 109 FCR 77 at 98.

36 In the present case, I do not consider that the defendant acted unreasonably in refusing the offer contained in the letter dated 24 August 2004 from the plaintiffs' solicitors. That is because the plaintiffs' case was based on a defective statement of claim. In other words, the action as then constituted was doomed to failure.

37 The plaintiffs contend that the deficiencies in their statement of claim were irrelevant because their case was set out clearly in their solicitor's letter before action dated 19 August 2004. That letter did identify the point on which the plaintiffs succeeded. However, litigation is based on pleadings: not on correspondence between the parties or their solicitors. As Burt CJ said in Willoughby v Barrett-Lennard [1979] WAR 167 at 170:

"It is the function of pleadings to isolate and lay bare the issues of fact which are in dispute. That is not something which is to be worked out by correspondence."

38 Further, the issue whether an offeree has acted unreasonably, "must be decided on material disclosed in the proceedings": Castro v Hillery & Ors [2002] QCA 359; [2003] 1 Qd R 651 at [72], per Williams JA, with whom Wilson J agreed.

39 On 11 November 2004, the plaintiffs, by their solicitors, served a notice pursuant to O 24A of the Rules. The notice was in the following terms:

"TAKE NOTICE that the plaintiffs make an offer to compromise in the sum of $100,000 to be paid by the defendant to the plaintiffs.

The said $100,000 is in satisfaction of all causes of action in respect of which the plaintiffs claim specific performance and damages.

The said offer remains open for acceptance for a period of 28 days.

This offer is made without prejudice."

40 The significance of an offer made pursuant to O 24A of the Rules, lies in r 10(4). It provides that:

"Where an offer is made by a plaintiff and not accepted by the defendant, and the plaintiff obtains judgment on the claim to which the offer relates no less favourable to him than the terms of the offer, then, unless the Court otherwise orders, the plaintiff shall be entitled to an order against the defendant for his costs in respect of the claim from the date on which the offer was made, taxed on an indemnity basis in addition to his costs incurred before that date, taxed on a party and party basis." (emphasis supplied)

41 The plaintiffs contend that the judgment for specific performance they obtained was more favourable to them than the terms of the offer and that r 10(4) should therefore apply.

42 I do not accept the plaintiffs' submission for two reasons. First, although I accept that as at the date of judgment, the property the subject of the contract had increased in value by more than $100,000 (so that the judgment was more favourable to them than the offer) there is no evidence that was the position as at 11 November 2004, when the offer was made.

43 Secondly, is the fact that the offer was also made when the plaintiffs' case rested on a defective statement of claim.

44 As the author of Seaman on Civil Procedure in Western Australia says at [24A.10.2]:

"It is the obvious intention of rule 10(4) to oblige a defendant who receives an offer of compromise to give serious thought to the risk of losing the proceedings and then being ordered to pay costs subsequent to the offer on an indemnity basis."

It follows, that in order to give an offer the required consideration, the defendant must be in a position to understand the case he or she has to meet. As was held in Castro v Hillery (supra), at 663 - 665, if that is not so, there is good reason to refuse an order for indemnity costs.

45 In my view, that was not so in the present case. I repeat that having regard to the deficiencies in the statement of claim, the defendant was entitled to assume, as at 11 November 2004 (and for the period of 28 days thereafter), that the action against her was doomed to failure. In those circumstances, in my view, she did not act unreasonably in declining to accept the plaintiffs' offer.

46 The plaintiffs' third offer was set out in a letter dated 11 February 2005 from their solicitors to the defendant's solicitors. The letter, which was marked "without prejudice", was written when the parties were awaiting the decision of Master Sanderson on the defendant's application to strike out parts of the statement of claim. The plaintiffs' solicitors referred to the fact that the owner of a property which abutted the rear of the subject property was considering the sale of his own property. This was significant because the plaintiffs had previously received an offer from the owner of the adjoining property, to sell a small parcel of his land to the plaintiffs. This addition to the subject property would have made it subdivisible: see [25] - [28] of my earlier reasons.

47 In those circumstances, the plaintiffs proposed that the matter be settled on the basis that the defendant pay the plaintiffs the sum of $75,000 (inclusive of legal costs) either upon the settlement of the subject property or of either of the properties created by a subdivision of that property, or on 1 May 2005, whichever was the sooner.

48 The offer was to remain open until 5 pm on 25 February 2005.

49 In my view, although this was an informal offer, there was no change in the circumstances which existed at the time of the first and second offers. I therefore consider that the defendant did not act unreasonably in refusing to accept the third offer.

Did the defendant act unreasonably in the proceedings?

50 The plaintiffs submit that the defendant (and her brother) acted unreasonably in the proceedings by:

• refusing to convey the subject property to the plaintiffs;

• failing on numerous occasions to attend properly to discovery obligations and delaying in the service of witness statements;

51 In my view, these are not matters which justify an order of indemnity costs. The consequences of the first and third of the matters referred to above are simply that costs follow the event. The consequence of the second matter (if the relevant failures resulted in applications being made by the plaintiffs) will have been the making of appropriate costs orders against the defendant in those applications. If the conduct complained of was not the subject of any application by the plaintiffs it may be assumed that they did not incur any additional costs as a result of that conduct.

Should a special costs order be made against the defendant's brother?

52 The plaintiffs contend that the jurisdiction which undoubtedly exists to make a costs order against a person who is not a party to the proceedings, should be exercised in the present case so as to make a costs order against the defendant's brother, Paul Baster.

53 The plaintiffs' contention is based on the fact that Mr Baster was closely involved, on behalf of the defendant, at every stage of the transaction and the subsequent litigation. It was Mr Baster who negotiated the agreement for the sale of the subject property on behalf of the defendant and who dealt with all matters subsequently, albeit acting on the advice of her solicitors.

54 The circumstances in which the Court will award costs against a non-party were considered by the Full Court in HPM Pty Ltd v Fear [2002] WASCA 249. There, the Court adopted an analysis of the English authorities compiled by Balcombe LJ in Symphony Group Plc v Hodgson [1994] QB 179 at 191 - 192. The analysis showed that the decisions might conveniently be classified under six heads, three of which involve considerations which might be thought relevant to the present case. They are:

(1) where the non-party has the management of the action;

(2) where the non-party has maintained or financed the action;

55 As to (1) above, the example given in the analysis is of a director of an insolvent company who causes the company improperly to prosecute or defend proceedings. In such a case, the director stands to derive some benefit from the litigation but without being exposed to the risk of an order for costs.

56 By contrast, in the present case Mr Baster's involvement was as a brother concerned to safeguard the interests of his sister (the defendant) who suffered from a chronic debilitating medical condition.

57 The plaintiffs contend that the counterclaim "appears to have been the creation of Paul Baster who, through it, was endeavouring to obtain a personal benefit".

58 I have referred above to the counterclaim. I do not see it as an attempt by Mr Baster to obtain a personal benefit: rather, as an attempt to ensure that he did not suffer any loss as a result of the financial assistance he gave to the defendant so as to enable her to discharge a mortgage over the subject property.

60 The typical case in which an order for costs will be made against a non-party under head (2) above, is one in which the non-party has been maintaining or funding an action in which he has no involvement, with a view to profiting by it. For the reasons given above, I am satisfied that Mr Baster's involvement was not of that kind.

61 Nor do I consider that head (3) above is applicable in the present case. I do not think it could be said that Mr Baster caused the litigation. Although the defendant undoubtedly relied on Mr Baster, who acted, in substance, as her agent, the defendant nevertheless proceeded in accordance with the legal advice she had received.

62 In all the circumstances, I am not persuaded that it would be appropriate to make an order for costs against Mr Baster.

63 For the reasons given above, I consider that the appropriate order should be that the defendant pay the plaintiffs' costs of the action (other than the costs of obtaining expert evidence), such costs to be taxed if not agreed.

64 Having regard to these conclusions, I consider that the plaintiffs should pay the defendant's costs of this application, to be taxed if not agreed.