Supreme Court of WA|2007-12-21|Before: Newnes J

WACHMER -v- JAKSIC [2007] WASC 313 (21 December 2007)

JURISDICTION : SUPREME COURT OF WESTERN AUSTRALIA

CITATION : WACHMER -v- JAKSIC [2007] WASC 313

Contract - Written contract for sale of property containing market garden - Construction of contract - Relevant principles - Admissibility of evidence of deletion of term before contract signed - Admissibility of evidence of postcontractual conduct - Whether party in default entitled to terminate for breach by other party - Damages - Claim of lost opportunity - Onus of proof of existence of opportunity - Turns on own facts

1 NEWNES J: The plaintiff's claim arises out of a contract dated 3 March 2003 for the sale of the defendants' property at 356 Sixty Eight Road, Baldivis (the property) to the plaintiff for the sum of $950,000.

2 The plaintiff (Mr Wachmer) seeks specific performance of the contract, or alternatively damages for breach of contract, and, in addition, claims damages for alleged misleading or deceptive conduct on the part of the defendants (to whom I shall refer together as the Jaksics, and individually as Mr Jaksic and Mrs Jaksic respectively). The Jaksics, on the other hand, say that they lawfully terminated the contract on 16 November 2003 for breach by Mr Wachmer and deny that they engaged in the alleged, or any, misleading or deceptive conduct.

3 On 3 March 2003, Mr Wachmer, as purchaser, and the Jaksics, as vendors, entered into a contract for the sale of the property for the sum of $950,000. The contract was in the form of a standard form offer and acceptance document to which were attached two schedules, the first containing certain conditions of sale and the second containing a list of the plant and equipment that was included in the sale. The conditions of sale expressly provided, among other things, that 'transfer of authority to operate, as a primary producer must be approved prior to the settlement date' (the 'primary producer term').

4 In the statement of claim, Mr Wachmer pleads that the primary producer term meant that, prior to the settlement date of 31 July 2003, the Jaksics would have in place all necessary approvals, licences, permits and other authorities to operate the market garden and hydroponics business that had previously been conducted on the property, and that such approvals, licences, permits and other authorities would not be subject to any conditions which would prevent Mr Wachmer from immediately carrying on such a business, or which were unreasonable. In the alternative, Mr Wachmer pleads that that was a condition precedent to the contract.

5 Mr Wachmer claims that the Jaksics did not have the necessary authorities by the settlement date and that they only obtained conditional approval for the hydroponics on 3 September 2003 and did not obtain planning approval to conduct a market garden on the property until July 2006. Moreover, it is alleged, the condition attached by the local authority to the approval for the hydroponics was such as to prevent Mr Wachmer from immediately carrying on the business and/or was unreasonable and that to ensure compliance with the condition would have cost Mr Wachmer approximately $120,000.

6 Mr Wachmer says that by reason of the Jaksics' breach of the primary producer term, he has suffered loss and damage, being the increase in the value of the property which Mr Wachmer is unable to realise. The property is currently said to be worth some $3.6 million.

7 Alternatively, Mr Wachmer says that, to the extent the primary producer term was a condition precedent to the contract, Mr Wachmer waives the benefit of that condition and seeks specific performance of the contract.

8 Mr Wachmer also seeks damages under the Fair Trading Act 1987 (WA), alleging that, on 18 January 2003 and/or 26 January 2003, Mr Jaksic expressly represented that he held, and would transfer to Mr Wachmer at settlement, all approvals, licences, permits and other authorities required by Mr Wachmer to operate the market garden and hydroponics business on the property, when in fact Mr Jaksic did not, as at 26 January 2003, have all the necessary approvals, licences, permits and other authorities. Mr Wachmer says that, but for that representation, he would not have entered into the contract, but would have purchased another property in Baldivis which he could have acquired for an amount in the order of $1.3 million. That property was sold in August 2005 for the sum of $8.5 million. Mr Wachmer says he has therefore lost the opportunity to make a profit of between $7.2 and $7.5 million.

9 Mr Wachmer claims, in the alternative, that the Jaksics engaged in misleading or deceptive conduct, contrary to the Fair Trading Act, by failing to reveal to Mr Wachmer, prior to entering into the contract, that the Jaksics did not have approval to operate a market garden on the property, or to construct and use the hydroponic greenhouses and outbuildings which were on it. Mr Wachmer says that, but for that misleading or deceptive conduct, he would not have entered into the contract, but would have purchased the other property in Baldivis. On that alternative basis, he claims to have lost the opportunity to make a profit of between $7.2 and $7.5 million.

10 The Jaksics plead that under the contract Mr Wachmer took the property in the condition it was in when he inspected it. At that time the Jaksics did not have an operating market garden or hydroponics business on the property, their business having ceased to operate in about February 2002 when Mr Jaksic was injured.

11 The Jaksics say that, on its proper construction, the primary producer term meant that, prior to settlement, Mr Wachmer, or alternatively the Jaksics, would obtain any necessary approval for Mr Wachmer to operate as a primary producer on the property. In fact, the parties were mistaken and no approval was necessary to operate as a primary producer on the property.

12 The Jaksics deny that they were under any obligation to obtain any necessary approvals, licences or authorities to enable Mr Wachmer to operate a market garden or hydroponics business on the property.

13 The Jaksics plead, in the alternative, that if they were required to obtain any necessary approvals to conduct the market garden and hydroponics business, those approvals were obtained and, if they were not, the cost and effort involved in obtaining such approvals was minimal and did not justify Mr Wachmer's failure to settle.

14 Accordingly, the Jaksics plead, Mr Wachmer was in breach of the agreement in failing to settle on the settlement date and the Jaksics were entitled to, and did, terminate the agreement upon Mr Wachmer's failure to settle as required by the default notice dated 15 October 2003 which was served on him.

15 The Jaksics deny that they engaged in the alleged or any misleading or deceptive conduct.

16 Mr Wachmer is 66 years of age. He initially qualified as a mechanic and until 1971 worked in the motor vehicle industry, including owning and operating service stations and a brake and clutch business. Mr Wachmer became involved in the purchase and renovation of real estate in the late 1960s, when he purchased a property which he renovated and from which made a substantial profit. He subsequently made further property purchases including, in 1969, an 8 acre property in an outer suburb of Geraldton.

17 In about 1971, Mr Wachmer became involved in a business known as Action Waste Disposal. His duties included the procurement of suitable property and equipment for the business. In 1973, Mr Wachmer returned to the motor vehicle industry and continued in that line of work until 1984. In that period, in addition to operating three service stations, he purchased five properties which he renovated and sold to realise the capital gains and he purchased two blocks of land in Dawesville on which he had houses built. He also worked for a period of time in the 1970s as a real estate salesman.

18 In 1979, Mr Wachmer completed the subdivision of the property in Geraldton and, in 1980, he purchased two adjoining properties in Applecross and obtained development approval for them. He sold the Applecross properties in about 1984 to purchase a rundown property in Attadale, to which he made some improvements and which he then sold.

19 Between 1991 and 2000, Mr Wachmer, either alone or with others, purchased several further properties in Attadale, some of which were let to tenants and which Mr Wachmer managed, and some of which Mr Wachmer renovated and sold.

20 Mr Wachmer gave evidence that through his involvement in the Geraldton subdivision, and what he described in his evidence as 'numerous purchases, renovations and sales of properties', he acquired a good knowledge and understanding of real estate and real estate development.

21 Mr Wachmer was described in evidence by his son-in-law, Mr Phillip Mofflin (Mr Mofflin), as being 'very authoritative'. When she gave evidence of her dealings with Mr Wachmer, another witness, Ms Sindy Goodhew (Ms Goodhew), quite independently, described him as 'quite authoritative'. Mr Wachmer's daughter, Mrs Terri Mofflin (Mrs Mofflin), agreed in cross-examination that Mr Wachmer was 'authoritative'. It was clear that in each case 'authoritative' was used in the general sense of 'claiming due authority; entitled to deference or acceptance': Shorter Oxford Dictionary. It is a description that his manner in giving evidence tended to confirm.

22 Mr Jaksic is currently 62 years of age and Mrs Jaksic is 56 years of age. Both were born in Croatia and spent their early years there. Mr Jaksic left school at the age of 16 and worked in the building industry until he was 21, after which he served in the army for 17 months. He then did unskilled work until he was 24. He and Mrs Jaksic were married on 1 January 1968 and they arrived in Australia on 24 August 1968. When they arrived in Australia neither could speak any English.

23 Mr Jaksic worked at various labouring jobs until about the mid-1970s when he commenced work as a grano worker. He later started his own grano business and continued in that business until an accident on 6 February 2002 rendered him unable to continue as a grano worker or to work in the market garden on the property.

24 The Jaksics purchased the property in 1980. At that time there was a small house on it and a small bore next to the house. Between 1984 and 1986, Mr Jaksic extended the house, and the workshop, garage and office were constructed. Four hydroponic sheds were built between 1986 and about 1992. The hydroponic sheds consist of three double sheds and a small single shed. Three of the sheds have sloping floors running from north to south.

25 After about 1986 there were two parts to the farming business on the property, a market garden where crops were grown in an open field and the hydroponics where crops were grown hydroponically in one or other of the sheds. The property was operated as a family business with the work being done by the Jaksics, with occasional help from their three children and others. A substantial amount of the lighter day to day work was done by Mrs Jaksic, with assistance from Mr Jaksic in the afternoon when he returned home from his grano business and on weekends.

26 During the 1980s and 1990s, the Jaksics grew a number of crops in the market garden, including beans, carrots, asparagus, broccoli, tomatoes, cauliflower, strawberries and lettuce. From 1998 they grew only beans and asparagus. As the price for asparagus was low, they ceased to harvest asparagus after about 1998. In about December 2001, they harvested what was to be the last crop of beans in the market garden. The market garden business ceased to operate at all in February 2002, following Mr Jaksic's accident.

27 From about 1986 the Jaksics grew cucumbers hydroponically in the sheds. Strawberries were grown hydroponically in about 1999 in one of the sheds. Only one of the four sheds was used at any one time for hydroponic crops as that was all the Jaksics could manage. The hydroponics business ceased in about December 2001.

28 In December 2001, the Jaksics separated and Mrs Jaksic moved in with her daughter in Marangaroo, where she stayed until mid-2004 when Mr and Mrs Jaksic resumed living together. While they were living apart, Mr Jaksic lived alone at the property, which Mrs Jaksic visited only rarely.

29 At the time of the trial, Mr Jaksic and Mrs Jaksic each had only a very limited ability to speak English or to understand spoken English, and had obvious difficulty in understanding anything involving even a moderate degree of complexity. They each spoke English with a pronounced accent that made it difficult at times to understand what they were saying. Both gave much of their evidence with the assistance of an interpreter.

30 I am also satisfied that Mr Jaksic, at least, has a very limited ability to read or write English, although I accept his evidence that it has improved through his involvement in this action. I am satisfied that at the time of the events in issue Mr Jaksic's ability to read or write English was very limited indeed, as was confirmed by the evidence of his book-keeper, Ms Goodhew, to whom he often resorted to assist him to understand even quite routine documents. The limits of Mr Jaksic's ability to read English are well illustrated by an incident related by Ms Goodhew where Mr Jaksic had asked her to read a letter from Reader's Digest because he thought he had won Lotto.

31 I did not have a proper opportunity to ascertain Mrs Jaksic's proficiency in reading or writing in English and I do not think it is relevant, but my impression was that Mrs Jaksic's skill was quite limited.

32 I did not find Mr Wachmer to be a reliable witness and I would approach his evidence with considerable caution. In my view, he was prepared to tailor his evidence to suit what he thought was in the interests of advancing his case. One illustration will suffice at this stage. In his witness statement, Mr Jaksic said that, in early February 2003 Mr Wachmer said he was interested in turning part of the property into a turf farm. Mr Jaksic said he took Mr Wachmer to a turf farm a couple of kilometres away where Mr Wachmer talked to the operator for about half an hour.

33 In a responsive statement, which was admitted as part of Mr Wachmer's evidence in chief, Mr Wachmer denied ever telling Mr Jaksic that he was interested in turning part of the property into a turf farm. Mr Wachmer said that on one occasion when he was on the property Mr Jaksic had told him that a person wanted to lease the property to grow turf and he should speak to this person. He said Mr Jaksic 'insisted that I drive down with him to meet the person at his turf farm'. Mr Wachmer said he had a brief conversation with the turf farm operator regarding the amount of rent he was prepared to pay, but the amount the turf farm operator was offering was so low it was not worth pursuing further. Mr Wachmer says they were at the turf farm for about 20 minutes and during that time he may have had a brief discussion with the turf farm operator regarding turf farming. He says that subsequently the turf farm operator called on him at his home to discuss a possible lease of the Jaksics' property but Mr Wachmer told him that he was not interested.

34 In cross-examination, Mr Wachmer conceded that he had investigated running the property as a turf farm, saying the discussion with the turf farm operator had ignited his interest, but said he had quickly realised it was incompatible with market gardening.

35 In their witness statements, the Jaksics' tenants at that time, Paul Maraldi (Mr Maraldi) and Michelle Maraldi (Mrs Maraldi), said that, in February 2003, Mr Wachmer had discussed with them a proposal he was considering to turn the property, or part of the property, into a turf farm and their possible participation in it. In cross-examination, Mr Wachmer described Mrs Maraldi's statements about the discussion as 'an absolute lie' and Mr Maraldi's statements as 'an absolute concoction' and 'fabricated'.

36 In the course of cross-examination, senior counsel for Mr Jaksic put to Mr Wachmer a document dated 11 March 2003 prepared by Mr Wachmer and headed 'Baldivis Grass' which, among other things, referred to some grass types and contained details of a number of suppliers of equipment relating to turf farming. Mr Wachmer's explanation for the document was that he had been investigating the possibility of starting a turf farm and 'Baldivis Grass' was the name he had come up with for it. He rejected the suggestion put to him that both before and after signing the contact he had been interested in turning part of the property into a turf farm and said 'by that time I had thrown it out of the window.'

37 Mr Wachmer's partner, Donna James (Ms James), said in cross-examination that a turf farm was one of the options that Mr Wachmer explored for the property.

38 Given the evident extent of his interest in the possibility of turf farming on the property, it is highly improbable that the subject was never raised by Mr Wachmer in his discussions with Mr Jaksic.

39 I am satisfied that Mr Wachmer's evidence in chief on this subject was deliberately misleading and designed to conceal the fact that around the time the contract was executed he was considering using the property for turf farming, the apparent objective being to pre-empt any suggestion that the expression 'primary producer' in the contract was concerned with anything other than market gardening and hydroponics. Mr Wachmer's explanations in cross-examination were unsatisfactory and, in my view, were designed to attempt to extricate him from a difficult position. So far as his emphatic and outright rejection of the evidence of Mr and Mrs Maraldi is concerned, I consider that his evidence was untruthful. I might add that the evidence of Mr and Mrs Maraldi on this point, which was so forcefully rejected by Mr Wachmer, was not seriously challenged in cross-examination.

40 I consider that Ms James attempted to give her evidence to the best of her ability but her participation in the material events was sporadic and I consider that much of her evidence had been reconstructed after discussion with Mr Wachmer and was affected by Mr Wachmer's strong views. For that reason, I would also treat her evidence with caution.

41 I consider that Mr Jaksic was an honest witness, although I think he tended to be confused as to when certain meetings and some events occurred. I am satisfied, however, that overall his version of what was discussed concerning the critical issues was reliable.

42 Ms Goodhew, who gave evidence about the circumstances in which an early version of the contract came into being, impressed me as an objective and honest witness. Mr and Mrs Maraldi also impressed me as objective and honest witnesses, although, given the nature of their involvement and the time that had passed, understandably they were vague on the specific dates on which particular events had happened.

43 The other witnesses also seemed to me generally to be reliable, although again the passage of time had inevitably blurred recollections of dates and of specific events to some extent.

44 In 2002, Mr Wachmer was looking for opportunities to acquire further property and eventually settled on Baldivis as being the area in which he was interested. Between November 2002 and January 2003, Mr Wachmer viewed a number of properties in Baldivis and said in evidence that he acquired a reasonably good knowledge of property values in the area.

45 On 15 January 2003, Mr Wachmer looked at a property at 304 Baldivis Road, Baldivis, which was for sale and spoke to the vendor's real estate agent, a Mr Henley, about it. Mr Wachmer also visited several other properties in Baldivis that day in order to enquire whether the owners were interested in selling. One of those properties was the Jaksics' property, which is the subject of this action.

46 On 15 January 2003, Mr Wachmer visited the Jaksics' property and spoke to Mr Jaksic. Mr Wachmer said in evidence that he asked Mr Jaksic if the property was for sale. Mr Jaksic told him that the property was 25 acres and it was on the market for between $970,000 and $1,100,000. Mr Wachmer said he asked Mr Jaksic why he was asking so much for the property when Mr Wachmer had seen other properties in Baldivis for much less. Mr Jaksic told him that everything on the property was included in the price. Mr Wachmer said he told Mr Jaksic that he would have to do a lot of negotiating to get him interested, as he considered the property only had a value of between $700,000 and $750,000. Mr Jaksic said he had had an offer the previous year for $800,000 and the property could be subdivided into 89 lots. Mr Jaksic reiterated that everything was included in the purchase price.

47 Mr Wachmer said that Mr Jaksic told him the property was set up as a market garden and for hydroponic vegetable growing, and that the property was able to produce an income of $138,000 per year from growing beans and cucumbers in the hydroponic sheds and the market garden. Mr Jaksic said he could teach Mr Wachmer everything and that he (Mr Jaksic) just wanted to walk out and leave everything, taking only the furniture that would fit in the back of a trailer.

48 Mr Wachmer said he told Mr Jaksic that he would talk to his family about the property to see how they felt. He said he asked if Mr Jaksic had a real estate agent. Mr Jaksic replied that he did have an agent the previous year who had caused him a lot of trouble and that he was selling the property himself.

49 Mr Jaksic, on the other hand, gave a somewhat different account of the meeting with Mr Wachmer on 15 January 2003. I should say that Mr Jaksic thought the meeting occurred on 16 January 2003. I consider, having regard to Mr Wachmer's communications with Mr Henley around that time, that it probably occurred on 15 January 2003.

50 Mr Jaksic said that he was alone on the property when he was approached by Mr Wachmer, who said a real estate agent had told him that the property might be for sale. Mr Wachmer asked the price and Mr Jaksic told him it was $1,150,000.

51 Mr Jaksic said they walked around the property and had a general discussion about it. He showed Mr Wachmer the hydroponic sheds and said that he used to grow cucumbers. He told Mr Wachmer it was not modern hydroponics. He said the operation had always been very basic, but he suggested a property in Casuarina where Mr Wachmer could see modern hydroponics.

52 Mr Jaksic said he showed Mr Wachmer the cellar and said he could not be sure whether it had been approved by the City of Rockingham. Mr Jaksic said that construction of the garage should have been approved because it was built by a builder. Mr Jaksic said he told Mr Wachmer that the 'existing workshop' with the cool room and toilet was approved and the rest of the building had not been approved. He said Mr Wachmer told him not to worry because he would make his own enquiries at the City of Rockingham as to what was approved and what approvals were required.

53 Mr Jaksic said Mr Wachmer asked him whether the soil was good enough to grow crops. Mr Wachmer said he would want Mr Jaksic to plant something to see whether it would grow before he would purchase the property, as the market garden had not been used to grow crops for some time. Mr Jaksic said he could not do the planting because of his injury, but he would buy cucumber and bean seeds and if Mr Wachmer planted the cucumbers and beans, he could keep the crop.

54 Mr Jaksic said there was no discussion of any licences on that, or any other, occasion, but he told Mr Wachmer there was a water licence which could be transferred to Mr Wachmer. He said Mr Wachmer did not discuss the purchase of the 304 Baldivis Road property on this or any other occasion, but said he had put an offer on a property in Kerosene Lane for $500,000.

55 Mr Jaksic said that in the course of the discussion that day, Mr Wachmer asked him if he had a real estate agent acting for him in relation to the property. Mr Jaksic said he did not. Mr Wachmer told him not to instruct an agent and suggested that Mr Jaksic advertise the property in the Quokka newspaper for $1,100,000. Mr Wachmer said that after the advertisement was published he would negotiate a contract with Mr Jaksic. Mr Wachmer said that Mr Jaksic would save $50,000 on agent's fees because he (Mr Wachmer) would do all the work.

56 Mr Jaksic said that as Mr Wachmer was leaving the property he again said that Mr Jaksic should put an advertisement in the Quokka and that he would come back when it was published.

57 Mr Jaksic did subsequently place an advertisement for the property in the Quokka. The advertisement appeared in the 23 January 2003 edition of that newspaper.

58 I should say that Mr Wachmer denied that the advertisement came to be published in those circumstances. He said in evidence that he simply suggested to Mr Jaksic that, as he was selling the property himself, he should advertise it in the Quokka as he could do so at no cost. Mr Wachmer also denied that he told Mr Jaksic not to instruct a real estate agent and said he simply suggested that Mr Jaksic make sure that he had withdrawn any authority he had given an agent in the past as otherwise he could still be liable for commission even if he sold it himself.

59 I prefer Mr Jaksic's evidence in relation to those matters. The advertisement appeared in the newspaper a week after Mr Wachmer had spoken to Mr Jaksic. On his own evidence, when Mr Wachmer spoke to Mr Jaksic by telephone on 24 January 2003 (a conversation to which I will come shortly), he specifically asked Mr Jaksic if the property had been advertised. In addition, in the draft terms of contract subsequently prepared by Ms Goodhew on Mr Wachmer's instructions, there is a specific statement that the Jaksics had not engaged a real estate agent in the previous 12 months. That tends to support Mr Jaksic's contention that this was a matter of concern to Mr Wachmer.

60 I am satisfied that the advertisement was placed at Mr Wachmer's instigation and that Mr Wachmer told Mr Jaksic not to engage a real estate agent.

61 On 16 January 2003, Mr Wachmer received a telephone call from Mr Henley who asked him if he would consider making an offer on the property at 304 Baldivis Road for $1 million. Mr Henley said he felt that such an offer would be accepted. Mr Wachmer asked Mr Henley to obtain further information regarding the current zoning of the property and the continuation of the existing use, which Mr Henley said he would do.

62 Mr Wachmer said in evidence that he was interested in purchasing 304 Baldivis Road because the property had two homes and horse-training facilities which were leased to a tenant whom he understood wanted to stay. The land comprised 42 acres and Mr Wachmer said that, although not ideal for him, he considered the property represented the best value he had seen in the area. He knew that a property next to 304 Baldivis Road had recently sold for $1.3 million. He considered that 304 Baldivis Road was similar, and that it had a value of about $1.3 million.

63 On 16 January 2003, Mr Wachmer made what he described in evidence as a 'verbal offer' of $1 million for the property at 304 Baldivis Road. On 17 January 2003, he followed that up with a written offer which he sent by facsimile to Mr Henley. He then had a telephone conversation with Mr Henley in which he asked Mr Henley to add to the offer conditions relating to the current zoning and use of the property.

64 Mr Wachmer said in evidence that he was prepared to negotiate upwards from $1 million for 304 Baldivis Road and that he would have been prepared to pay up to $1.3 million, depending upon the terms the vendor was prepared to agree for the payment of the balance of the purchase price in excess of $1 million.

65 Mr Wachmer said he then made an arrangement to meet the manager of 304 Baldivis Road on 18 January 2003 so that Mr Wachmer's partner, Ms James, could have a look at it. As he was going to be in Baldivis, he telephoned Mr Jaksic to see if he could call on him as well. Mr Wachmer said his intention was to advise Mr Jaksic that he had made an offer on another property.

66 Mr Wachmer said that when he and Ms James arrived at the Jaksics' property on 18 January 2003, the Jaksics and their grandchildren were there. Mr Wachmer said he told the Jaksics about the offer he had made on the property at 304 Baldivis Road.

67 Mr Wachmer said that while he was there he talked to Mr Jaksic about the property at 304 Baldivis Road and he and Ms James also asked Mr Jaksic a number of questions about the Jaksics' own property, including the growing period for the crops, the types of crops best suited to the property, how long he had been on the property, how hard it was to operate a market garden and to market the produce, what licences were required and whether he had them, what staff were required, and what was involved with payment of produce from markets.

68 Mr Wachmer said the Jaksics told them they had started the market garden 20 years previously and the hydroponics eight years previously. Mr Jaksic said he had made $138,000 each year from the market garden and hydroponics, plus $30,000 from cash sales. Mr Jaksic said that if Mr Wachmer bought the property, the Jaksics would put in 13 rows of beans and 750 cucumber plants, at the Jaksics' cost, to get Mr Wachmer's family market garden business started. Mr Wachmer could have the income from those crops.

69 Mr Wachmer said he asked Mr Jaksic what licences were required for the market garden and the hydroponics. Mr Jaksic said there was a licence for the market garden and another licence for the water. Mr Wachmer said he asked Mr Jaksic if he had the licences and Mr Jaksic said that he did. Mr Jaksic repeated that everything on the property would be included in the sale and he would only take what he could fit in a trailer.

70 Ms James gave evidence that she visited the Jaksics' property on 18 January 2003 with Mr Wachmer. Ms James said that on that occasion Mr Jaksic said he would teach Mr Wachmer how to grow crops and how to take produce to market; that it was all very easy. She said Mr Jaksic referred to a figure in excess of $100,000 plus cash sales for produce from the property. Mr Jaksic said everything would remain on the property and he only wanted a few items that would fit in a trailer.

71 Ms James said in her evidence in chief that Mr Wachmer asked Mr Jaksic what licences were required and Mr Jaksic said one for water and one for a market garden. Mr Wachmer asked 'do you have licences?' Mr Jaksic said 'yes, I got'. In cross-examination, however, Ms James retreated from that somewhat, saying that the only conversation about licences on that occasion consisted of Mr Wachmer asking Mr Jaksic 'do you have licences?' and Mr Jaksic replying 'yes, I got'.

72 Mr Jaksic, on the other hand, denied that there was a meeting with Mr Wachmer and Ms James on 18 January 2003 and said that, after the initial meeting, his next meeting with Mr Wachmer was on the morning of either 23 January or 24 January 2003, after the advertisement had appeared in the Quokka. Mr Jaksic said that at that meeting Mr Wachmer had examined Mr Jaksic's copy of the advertisement, which he took away with him. Mr Wachmer said he would make some enquiries and search the title of the property and then speak to Mr Jaksic again. Mr Jaksic said that Mr Wachmer was only on the property for about 10 minutes.

73 I should say that Mr Jaksic said that he had never earned anything like the amounts referred to by Mr Wachmer from the property and denied that he ever made statements to the effect claimed by Mr Wachmer. It also seems that Mr Wachmer did not make any endeavours to verify, or to require verification of, the amount of income from the property that he claims was represented to him.

The lead-up to the 26 January 2003 meeting

74 Mr Wachmer said that when he arrived home on the evening of 18 January 2003 he rang his children and asked them to come to his home on the following day, 19 January 2003. On 19 January 2003, it was agreed at a family discussion that if Mr Wachmer's offer on 304 Baldivis Road had not been accepted by the following day, Mr Wachmer would withdraw the offer in order to purchase the Jaksics' property.

75 On 20 January 2003, Mr Wachmer telephoned the real estate agent, Mr Henley, who informed him that the vendor of 304 Baldivis Road had neither accepted nor rejected Mr Wachmer's offer, but had queried why Mr Wachmer was offering only $1 million when a neighbouring property had sold for $1.3 million. Mr Wachmer informed Mr Henley that he had decided to purchase another property at the other end of Baldivis and that the offer to purchase 304 Baldivis Road was withdrawn. He called Mr Henley again later that day and received an assurance from Mr Henley that the offer on 304 Baldivis Road was 'dead'.

76 Mr Wachmer gave evidence that his family was keen to look at the Jaksics' property. He said:

I therefore telephoned Mr Jaksic on 24 January 2003 and asked if he had advertised the property. He said that he had and he suggested that my family visit the property on Sunday, 26 January 2003.

77 Mr Wachmer did not explain why he asked Mr Jaksic if the property had been advertised. I referred to the question of the advertisement earlier.

78 It is clear that Mr Wachmer and his family visited the property on 26 January 2003, but there is a dispute about what was said on that occasion and whether Mrs Jaksic was present.

79 Mr Wachmer said that he visited the property with Ms James, his son and daughter, Trevor Wachmer and Janine Wachmer, and his daughter and son-in-law, Terri and Phillip Mofflin, and the Mofflins' two children. The Jaksics and the Jaksics' granddaughter were at the property. Mr Wachmer said he went to the property with a view to negotiating its purchase. He also wanted to show the property to his children and son-in-law.

80 Mr Wachmer gave evidence that during that visit the Jaksics assured him and his family that they would teach them how to operate a market garden and the hydroponics on the property. The Jaksics also confirmed that everything would stay on the property. Mr Jaksic said he would meet the costs of the crop he would put in to prove how easy it was to grow beans in the paddock and cucumbers in the hydroponic sheds.

Mr Jaksic assured me that he had all of the licences that were necessary to operate the market garden and hydroponic business from the property and that he would provide them to me. We discussed the need to have the water licence and the licence to operate the market garden and the hydroponics.

I asked Jaksic for the licence documents on that day. He said that maybe they were somewhere in his papers or that maybe they were lost. I therefore asked Mr Jaksic if he could find the licence documents. His response was that after all these years they were probably lost and he could not provide either the water licence or the market garden and hydroponics licence document.

82 Mr Wachmer said that, both on that occasion and later during discussions about the wording of the contract, Mr Jaksic was not sure what the market garden and hydroponics licence was called.

83 Mr Wachmer said in cross-examination that the other members of his family - his daughter (Mrs Mofflin) and her husband, and his son (Trevor Wachmer) and his partner - were present when the discussion about licences took place with Mr Jaksic.

84 Ms James gave evidence that on the visit on 26 January 2003 Mr Wachmer asked Mr Jaksic for copies of the licences for the water and market garden. Mr Jaksic said 'after all this time who knows where they are, maybe lost, maybe in papers, I don't know'. Mr Wachmer asked Mr Jaksic 'have you got the licences?' Mr Jaksic said he had both licences. Ms James said Mr Wachmer asked Mr Jaksic what the licences were called and Mr Jaksic said he was not sure. Ms James said that after some discussion it was decided to refer to the licences as the water licence and the primary producer licence.

85 Ms James said that she and Mr Wachmer and his family were sitting around the table with the Jaksics at the time the subject of licences was discussed.

86 There was, however, no evidence from any of the members of Mr Wachmer's family concerning the subject of licences. Mr Trevor Wachmer and his partner did not give evidence. Mr and Mrs Mofflin gave evidence that they visited the property on 26 January 2003 and met Mr and Mrs Jaksic. They said they inspected the property with Mr Jaksic and they gave evidence about discussions concerning the operation of the market garden, but they gave no evidence regarding any discussions about licences.

87 When he was asked in cross-examination why there was no reference to licence discussions in the witness statements of Mr Mofflin or Mrs Mofflin, Mr Wachmer said 'they probably didn't place any importance on it when they read their statement.'

88 Mr Wachmer said that after his family had left the property, he and Ms James stayed behind to negotiate the purchase of the property. A verbal agreement was reached that day with Mr Jaksic.

89 Mr Jaksic gave a very different account of the meeting on 26 January 2003. Mr Jaksic said his granddaughter was with him, but that Mrs Jaksic was not present. It was Mr Jaksic's evidence that Mr Wachmer and his family planted 13 rows of bean seeds to establish that crops could be grown in the soil. That took about two hours and Mr Jaksic then made lunch, but there was no discussion about the proposed purchase of the property.

90 Mr Jaksic gave evidence that, on about 28 January 2003, Mr Wachmer showed him the first page of a title search and said that the property was only 22 acres and that Mr Jaksic did not have any approvals for the buildings on the land. Mr Wachmer said he would only pay $950,000 for the property. Mr Jaksic said he wanted $1 million. Finally, Mr Jaksic agreed to accept $950,000. No other terms were discussed.

91 Mr Jaksic said that, on about 31 January 2003, Mr Wachmer told him that he required Mr Jaksic to sign some documents. Mr Jaksic declined to do so, on the ground that he could hardly read or write English. Mr Jaksic said he told Mr Wachmer that usually his accountant, a Mr Pecotic, assisted him to read documents. Mr Wachmer said he would see Mr Pecotic first and then they would see him together.

92 Mr Jaksic said that in early February 2003, on a Sunday, Mr Wachmer and his family again came to the property. On that occasion Mrs Jaksic and their granddaughter were present. There was no discussion about the purchase of the property.

93 Mr Jaksic said that, in about mid-February, Mr Wachmer said he was prepared to purchase the property for $950,000 with $20,000 paid on signing the contract, $800,000 on 31 July 2003 and $130,000 before 19 December 2003. No other terms were discussed. Mr Jaksic said he would leave such items as tractors and certain farm equipment, but no list of the items to be left on the property was agreed. He said it was arranged that Ms Goodhew, who ran an accounting business and did the Jaksics' book-keeping, would assist Mr Jaksic with the documents.

94 I consider that Mr Jaksic is mistaken as to the dates upon which the relevant discussions occurred.

95 I am satisfied that the discussion about the terms of sale occurred towards the end of January or in early February 2003, and that it is likely that it occurred on 26 January 2003. That it occurred around that time is, I think, evident from a facsimile sent by Mr Wachmer to Mr Jaksic, on or about 3 February 2003. In that facsimile, Mr Wachmer proposed certain terms of sale of the property and asked Mr Jaksic to telephone him with a response. The terms of sale set out in the facsimile provided for a purchase price of $950,000, with payment of a deposit of $20,000 on the execution of the contract of sale, $800,000 at settlement (to be 31 July 2003), and $130,000 on or before 19 December 2003. It also included, among others, the following conditions:

The owner has stated that the property has not been listed for sale in the past 12 months with any real estate agents.

Mr Petar Jaksic has given an undertaking to act in an advisory capacity using his friends and Wachmer family members to reinstate the property to a working market garden and hydroponic operation by the planting of 13 rows of beans and in the hydroponic area 750 cucumber plants.

The crops production and income will belong to the purchaser.

Mr Peter Jaksic has given an undertaking to act in an advisory capacity. He will advise and train the Wachmer family members for a period of 12 months.

The agreed purchase price is $950,000 walk in walk out with all chattels listed and attached to this document to form part of the offer to purchase.

96 I am satisfied that it was after he received that facsimile that Mr Jaksic told Mr Wachmer he wanted his accountant, a Mr Pecotic, to assist him to understand the document. Mr Wachmer said he would speak to Mr Pecotic first. There was subsequently a conversation between Mr Wachmer and Mr Pecotic. It is unclear whether Mr Jaksic obtained any advice from Mr Pecotic about the sale. In any event, I am satisfied that, after his discussion with Mr Pecotic, Mr Wachmer asked Mr Jaksic to have someone else assist him with the document. Mr Jaksic then nominated Ms Goodhew. Mr Jaksic telephoned Ms Goodhew to say that Mr Wachmer would be calling on her.

97 Mr Wachmer then attended on Ms Goodhew at her offices and showed her some documents containing conditions of the proposed contract, which he said had been discussed with Mr Jaksic. Mr Wachmer asked Ms Goodhew to prepare a formal contract. He gave Ms Goodhew two blank offer and acceptance forms and asked her to type two annexures, the terms of which he dictated to her. Ms Goodhew gave evidence that Mr Wachmer was 'very insistent' about the terms of the documents he wanted. She said that the annexures she prepared contained the precise words dictated by Mr Wachmer.

98 Ms Goodhew said in her evidence that she felt pressured by Mr Wachmer, who not only dictated everything to her but was very insistent on getting it done immediately. Ms Goodhew said she eventually told Mr Wachmer she did not feel sufficiently experienced to draw up such a contract and asked him to leave the paperwork with her.

99 Ms Goodhew subsequently completed the documents and sent a completed offer and acceptance document and two annexures, marked 'A' and 'B', to Mr Wachmer by facsimile on 8 February 2003. Annexure A contained a number of special conditions. Relevantly, special condition 5 was in the following terms:

Vendor agrees to transfer the following authorities to the purchaser on settlement:

(a) authority to operate as a primary producer

(b) transfer of water rights.

Mr Petar Jaksic, subject to availability, to utilise his experience and act as a consultant to assist the purchasers in the operation of a market garden. This to be effective for a period of one (1) year from the date purchaser takes possession. This condition is solely for the purpose of utilising Mr Jaksic's intellectual knowledge and expertise in this area. No remuneration is payable.

101 Annexure B contained a list of plant and equipment. Ms Goodhew said in evidence that Mr Wachmer told her that there were still negotiations going on about the plant and equipment and the list was a draft only.

102 I should say that Mr Wachmer denied in cross-examination that he dictated to Ms Goodhew the wording of the terms that she prepared and said she got the wording from the papers he gave her. He also denied that she told him she did not feel sufficiently experienced to draw up a contract of this kind. I have no hesitation in accepting Ms Goodhew's evidence in preference to Mr Wachmer's.

103 I am satisfied that Mr Jaksic had no input into the terms of special conditions 5 and 6 in the document and that they are in the terms dictated by Mr Wachmer to Ms Goodhew.

104 On 15 February 2003, Mr Jaksic had a meeting with Ms Goodhew and one of her colleagues, a Mr Jeffrey, to discuss Mr Wachmer's proposal.

105 On 17 February 2003, Ms Goodhew wrote to Mr Wachmer saying that Mr Jaksic did not wish to proceed with the offer in its current form; he was unable to accept the special conditions associated with the offer, but was prepared to sell it on a 'walk-in walk-out' basis for $950,000 with a 28-day settlement and all equipment on site at the time of settlement becoming the property of the purchaser.

106 Ms Goodhew subsequently received a telephone call from Mr Wachmer, whom she described as obviously very angry. Mr Wachmer told her that he and Mr Jaksic had agreed on everything and it was not her place to be giving Mr Jaksic advice.

107 Some days later, Mr Jaksic entered into an arrangement with a Michelle Hunt (now Michelle Maraldi) and Paul Maraldi that they would act as caretakers of the property until it was sold or some alternative arrangement was made. It was agreed that they would clean up the property and keep the equipment in good order, and Mr Jaksic would instruct them in the operation of the equipment needed to operate the market garden and hydroponic sheds. They were to live in the house rent-free when Mr Jaksic moved out. All products grown and collected would be theirs. They started working on the property the following day.

108 On 26 February 2003, Mr Wachmer wrote to Ms Goodhew saying that he had understood the terms had been agreed between himself and Mr Jaksic and that if Mr Jaksic now wished to alter the terms of the agreement, there should be an adjustment in the price.

109 It seems that a further discussion between Mr Wachmer and Mr Jaksic took place at around this time. It is clear that at some time after Mr Wachmer received the letter from Ms Goodhew, he rang Mr Jaksic and they subsequently met at the property to discuss its sale. It is likely the meeting occurred on or about 26 February 2003. Mr Wachmer said that following that meeting he prepared a document confirming the terms that had been agreed between them and sent it to Mr Jaksic by facsimile.

110 Mr Jaksic's version of events was again different. He said that in late February 2003 Mr Wachmer visited the property and again expressed interest in buying it. Mr Jaksic said subsequently, a few days before the contract was actually signed, Mr Wachmer and Ms James visited him again. Mr Wachmer showed him a document which he said was an agreement to buy the property. He asked the Jaksics to sign it. Mr Jaksic said that Mr Wachmer told him not to deal with Ms Goodhew in relation to the sale and Mr Jaksic said he would get Ms Diane Hird of Sentinel Settlements to assist him with the document.

111 I am satisfied that Mr Jaksic's recollection is incorrect, in that he has confused the events of two meetings he had with Mr Wachmer, one on or about 26 February 2003 and the other on 2 March 2003.

112 I am satisfied, however, that at the meeting in late February 2003 Mr Wachmer told Mr Jaksic not to deal with Ms Goodhew in relation to the sale and that Mr Jaksic said he would get Ms Hird to assist him with the document. I do not accept Mr Wachmer's evidence that he did not tell Mr Jaksic not to deal with Ms Goodhew. Having sought Ms Goodhew's assistance with the first proposal, there was no apparent reason why Mr Jaksic would not have done so with this proposal. I consider that Mr Wachmer, however, saw Ms Goodhew as a potential obstacle to an agreement on terms acceptable to him and he told Mr Jaksic that he did not want her to be involved any further. It was in those circumstances that Ms Hird became involved in the matter.

113 On 28 February 2003, Ms Hird wrote by facsimile to Mr Jaksic, attaching a new 'agreement' and plant and equipment list and specifying certain information she would need when the 'Offer and Acceptance contract' was prepared. The attached 'agreement' set out certain terms, in a similar format to the earlier conditions prepared by Ms Goodhew.

114 The 'agreement' specified, among other things, that:

The parties to the contract agree that caveats may be lodged over the title and lifted on completion of this agreement.

Transfer of authority to operate as a primary producer must be approved prior to settlement date.

Transfer of water rights and entitlement must be approved prior to settlement date.

...

The purchasers and his family shall have access to the property to work with and to learn from Mr Jaksic and his friends.

115 On or about 2 March 2003, Mr Wachmer and Ms James visited the property and went through the terms of the proposed agreement with Mr Jaksic. Ms James then wrote the relevant contract details on a printed offer and acceptance form. Mr Wachmer asked Mr Jaksic to sign it. Mr Jaksic declined to do so. I accept Mr Jaksic's evidence that he told Mr Wachmer that he wanted to take the document to Ms Hird before signing it. I do not accept Mr Wachmer's evidence that Mr Jaksic simply said he would sign the contract at the offices of Sentinel Settlements.

116 On 4 March 2003, the contract was executed at the offices of Sentinel Settlements. The contract consisted of the offer and acceptance prepared by Ms James, with the 'agreement' prepared by Ms Hird as 'annexure A' and an additional 'annexure B' containing a list of plant and equipment.

117 What occurred when the contract was executed was again the subject of dispute.

118 Mr Jaksic said that, on 4 March 2003, when he attended at the offices of Sentinel Settlements, he asked Ms Hird to read the contract to him and asked her if it was 'ok'. After Ms Hird said it was 'ok', Mr Jaksic signed on it for himself and on behalf of Mrs Jaksic by a power of attorney.

119 Mr Wachmer, on the other hand, said that Ms Hird asked Mr Jaksic if he could read the contract and Mr Jaksic said he could. Ms Hird offered to read it to him but Mr Jaksic declined. Mr Wachmer said Mr Jaksic then spent approximately seven minutes reading the contract before he signed it.

120 I do not accept Mr Wachmer's evidence. There was no apparent reason for Mr Jaksic to want to sign the contract at Ms Hird's office if he did not want assistance from her in relation to it. It is also clear that Mr Jaksic had a keen appreciation of his own limitations in the English language and had relied upon Ms Goodhew to read even relatively routine documents for him. Ms Goodhew had also examined the earlier version of the terms of sale, which he had ultimately rejected. It is inherently improbable that Mr Jaksic would have been prepared to sign another version of the contract without any assistance. I am satisfied that Mr Wachmer's evidence was designed to suggest that Mr Jaksic had a greater understanding of the terms of the contract and, in particular the expression 'primary producer', than was in fact the case.

121 After the contract was signed, Mr Wachmer gave Mr Jaksic a cheque in the sum of $20,000 for the agreed deposit. At the same time, Mr Jaksic signed a form for transfer of the water licence.

122 Sentinel Settlements was nominated on the contract to act for both Mr Wachmer and the Jaksics in the settlement. After the contract had been signed, Mr Wachmer told Sentinel Settlements that he would make enquiries about what was needed to transfer the necessary licences or permits. Mr Wachmer ascertained that the Waters and Rivers Commission was the relevant authority to deal with the transfer of the water licence and from it he obtained the number of the Jaksics' water licence and a transfer form.

123 On 28 April 2003, the Waters and Rivers Commission wrote to Sentinel Settlements in connection with the transfer of the water licence, saying that the Commission required the submission of the original water licence or a statutory declaration if it had been misplaced. On 16 May 2003, Mr Jaksic on his own behalf and as attorney for Mrs Jaksic, signed a statutory declaration, prepared by Sentinel Settlements, stating that the Jaksics had misplaced the original licence. That was forwarded the same day by Sentinel Settlements to the Waters and Rivers Commission.

124 In the meantime, Mr Wachmer was endeavouring to obtain information from the City of Rockingham (the City) regarding the 'primary producer' licence, but he ran into difficulties. Mr Wachmer gave evidence that, from March 2003, he made some five approaches in person to officers of the City to obtain the necessary information, without success.

125 Eventually, on the recommendation of an officer of the City, Mr Wachmer wrote to the City by letter of 24 June 2003. In that letter Mr Wachmer said:

I have recently purchased property Lot 19, 256 Sixty Eight Road, Baldivis. Settlement is to be effected on 31st July 2003. The property has for some years operated as a market garden with Hydroponics.

My family and I wish to continue the business of a market garden with hydroponics on the above property and therefore seek your advice as to what licences are if any required, and if required would you please accept this letter as my application for such licence or transfer of an existing licence. [emphasis added]

126 Mr Wachmer wrote a second letter dated 24 June 2003 to the City, referring to a telephone conversation the previous day. In that letter Mr Wachmer said that on obtaining the approved plans for the property from the City it appeared that building approval had not been sought or given for a considerable percentage of the non-habitable buildings on the property. He asked that inspections be carried out by the City to clarify what was required of the current owner in order to obtain retrospective approval of the buildings which did not appear on City records, or whether those buildings required demolition.

127 The City responded to the latter letter on 2 July 2003, saying that it was not the function of the City to conduct inspections of that nature.

128 On 14 July 2003, the City wrote to Mr Wachmer in response to what it referred to as his letter of '9 July 2003' (there is no letter of that date in evidence, and the City's letter appears in fact to be a response to Mr Wachmer's first letter of 24 June 2003). The City said that a search of its records had revealed that the current hydroponic activities on the property had not been issued with planning approval and in fact there had been no planning approval issued for any activities on the property. The City said that the necessary application forms to apply for retrospective planning approval would be posted to Mr Wachmer shortly.

129 In the meantime, at some time in about June 2003, there was a falling out of some sort between the parties and each engaged solicitors.

130 The Jaksics' solicitors wrote on 20 June 2003 to Mr Wachmer referring to the terms of the contract. Among other things, they noted that the contract was 'subject to several conditions, three of which, namely transfer of our clients' primary producers permit, transfer of water rights and the allocation of a secure section of the sheds to you for your use, have been, we are instructed, satisfied.' In the letter the solicitors then went on to deal with a number of issues, including the list of plant and equipment, which on their instructions was incorrect, and a complaint by the tenants that Mr Wachmer had breached hygiene regulations by bringing visitors into the hydroponics sheds. They also put a proposal by the Jaksics to allow Mr Wachmer early possession of the property.

131 On 16 July 2003, Mr Wachmer's solicitors replied saying that Mr Wachmer was ready, willing and able to proceed to settlement subject to the Jaksics fulfilling their obligations under the contract. Those obligations were said to include:

the transfer by the Jaksics of their primary producer permit to Mr Wachmer;
the handover of all the fixtures and chattels on the property at the date of the contract;
confirmation that all structures on the property had been lawfully erected;
the provision of training to Mr Wachmer; and
the provision, prior to settlement, of schematics of electrical systems, reticulation systems, house water supply, market garden bore and septic systems and confirmation that the septic systems had been approved by the local authority.

132 In the letter, Mr Wachmer's solicitors said that, as the Jaksics claimed that the primary producer's permit had been transferred, Mr Wachmer required the documentation which confirmed that. They went on to say that, to the extent that the fixtures and chattels were not in good working order and condition, an appropriate portion of the purchase price should be held in trust until any necessary repairs were made. To the extent that structures on the property had not been lawfully erected, Mr Wachmer required an appropriate amount of the purchase price to be put into trust to pay for the appropriate approvals to be obtained. The solicitors also said that, as it was clear the Jaksics would not be able to provide the required training, Mr Wachmer required the Jaksics to produce, prior to settlement, a professionally prepared growing programme which included all information relevant to the growing of beans, cucumber and asparagus.

133 Two days later, on 18 July 2003, the City wrote to Mr Wachmer attaching copies of the forms to be completed and submitted to seek planning approval for commercial horticultural activities to be conducted on the property. The City required three copies of a site plan and a fee of $200 to be submitted with the application. Mr Wachmer did not submit the application to the City.

134 On 23 July 2003, the Jaksics' solicitors wrote to Mr Wachmer's solicitors saying that Mr Jaksic did not have a primary producers licence, but had understood that the contract only required that the land be approved for market gardening by the City. They said that, on their instructions, Mr Wachmer had checked the position in that respect and was satisfied with it. If anything further was required, they asked to be informed. Mr Jaksic's solicitors went on to say that the list of chattels attached to the contract had been made because not all items on the property were being left and also because Mr Jaksic had more than one of some items. The price of $950,000 for the land was agreed on the basis that only the items included in the list were to pass to Mr Wachmer with the land. They rejected the claim that Mr Wachmer had not had an adequate opportunity to learn market gardening from Mr Jaksic, saying that was because Mr Wachmer and his family had come to the property only sporadically and while Mr Jaksic remained willing to answer any reasonable questions, there was no obligation on him to provide a professionally prepared growing programme.

135 Mr Jaksic's solicitors wrote again on 24 July 2003, apparently following a telephone conversation between the respective solicitors. In that letter, Mr Jaksic's solicitors said, among other things, that Mr Jaksic was willing to make diagrams of the electrical wiring runs on the property, the reticulation layout, house water supply and the market bore. They said the septic tanks had been installed by a builder and a licensed plumber and were approved by the council at the time. They invited Mr Wachmer to check that with the City.

136 Mr Wachmer's solicitors replied by letter of 25 July 2003. They said that Mr Wachmer insisted that Mr Jaksic fulfil his obligations under the agreement. That required:

That a primary producer's permit be transferred to Mr Wachmer and if Mr Jaksic did not have one, he must obtain one or pay for Mr Wachmer to obtain one, otherwise Mr Wachmer could not lawfully carry out the business for which he purchased the property.
All chattels on the property at the time of the contract had to be handed over at settlement and any attempt by Mr Jaksic to remove any items from the property would 'sound in damages'.
All the buildings must be approved, details of the electrical system, reticulation system, house water supply, market garden bore and both septic systems must be provided, and all necessary approvals must be supplied or, if necessary, obtained.
A substitute for training must be provided and it was the Jaksics' responsibility to provide an adequate substitute.

137 Mr Wachmer's solicitors went on to say that although the Jaksics had had over three months to arrange those matters, Mr Wachmer was prepared to defer settlement, subject to a written agreement and payment of damages for the loss of the market garden income. That loss of income was calculated at $8,000 per week plus $250 per week for loss of the shed facility and $250 per week for property rental. The solicitors said that otherwise Mr Wachmer was prepared to settle on 31 July 2003 on the basis that the price was adjusted to reflect the fact that Mr Wachmer would have to pay for the outstanding matters to be attended to.

138 It is notable that the alleged damage for loss of the market garden income totals, on an annualised basis, some $400,000.

139 The Jaksics' solicitors responded to Mr Wachmer's solicitors on 30 July 2003. They said they had spoken to the Department of Agriculture and had been told there was no such thing as a primary producer permit for a market garden. Normally all that was required was a particular type of water licence - which the Jaksics had - and that the use to which the land was put be a permitted use under the local authority's town planning scheme. They said that the market garden use was a permitted use and they were instructed that Mr Wachmer had checked that with the City. They commented that the condition inserted in the contract by Mr Wachmer was therefore superfluous. The solicitors rejected the contention that the contract required that the buildings be approved. They said the Jaksics were willing to leave behind the chattels listed in the letter from Mr Wachmer's solicitors of 16 July 2003. On the subject of training, the Jaksics' solicitors said that Mr Wachmer's sporadic and irregular attendance at the property was the reason he had been unable to avail himself of the training provided for under the contract and that the Jaksics were under no obligation to provide further training. They also said that although there was no obligation under the contract for the Jaksics to provide any of the diagrams of the wiring, reticulation layout, house water supply and market garden bore, Mr Jaksic remained willing to provide those. They went on to say that the Jaksics remain willing and able to settle on the agreed settlement date.

140 On 31 July 2003, Mr Wachmer's solicitors wrote saying that Mr Wachmer was ready, willing and able to settle on the terms set out in the contract, but the Jaksics were not. They said that a default notice would be issued unless the Jaksics complied with their obligations.

141 That led to a response from the Jaksics' solicitors of the same day saying that the Jaksics were ready, willing and able to settle in accordance with the contract, but they were not willing to settle in accordance with the interpretation of the contract asserted by Mr Wachmer. They also said that they were instructed to issue a default notice should Mr Wachmer not proceed to settlement on the terms of the contract.

142 A default notice dated 6 August 2003 was issued on behalf of Mr Wachmer. It stated that the Jaksics were in breach of the contract in that they had failed to:

provide or transfer to Mr Wachmer the permits required by the local or other authorities necessary for the carrying on of the market gardening business;
train Mr Wachmer and/or his family in respect of the business;
keep all equipment in good working order and condition;
keep the land and chattels in the same state and condition as inspected by Mr Wachmer immediately before the date of the contract; and
settle on the due date.

143 The notice required the defaults to be remedied within 14 days.

144 There were then discussions between the solicitors for the parties, in the course of which it was agreed that they would meet on 13 August 2003 to discuss a resolution of the matter.

145 On 13 August 2003, Mr Wachmer's solicitors wrote to the Jaksics' solicitors setting out the alternative bases upon which Mr Wachmer was prepared to resolve the matter. Those bases were as follows:

(a) the Jaksics provide retrospective approval at their own cost for all non-approved buildings prior to settlement;

(b) all permits and licences necessary to operate the market garden and hydroponics be provided prior to settlement;

(c) all chattels and fixtures be provided and be inspected prior to settlement to ensure they are in good working order and condition by neutral inspectors;

(f) the Jaksics pay damages for the loss of income, for failure to settle and for loss of rent on the house; or

the same terms, except in place of damages the price be reduced by $150,000 and settlement occur before 31 December 2003; or
that settlement occur within seven days, the price be reduced by $220,000, that the property be inspected before settlement to ensure no damage is done and that the chattels remain on the property and are in good working order, and that after the inspection the property be secured at the Jaksics' expense with new locks and other security measures.

146 Mr Wachmer said in evidence that he arrived at the monetary amounts stated in the letter after some brief research into what he expected it would cost him, and the time it would take, to obtain the approvals. In cross-examination, he described them as 'ballpark [figures] from some quick assessments' which were 'an attempt to make the [Jaksics] go and get the licences'.

147 The Jaksics' solicitors responded immediately saying that, in the circumstances, the proposals were entirely unrealistic and there was no point in the meeting proceeding. It did not proceed.

148 The Jaksics' solicitors wrote on 15 August 2003 in respect of the notice of default, reiterating that the Jaksics were ready, willing and able to settle in accordance with the terms of the original contract, but not on the basis of Mr Wachmer's interpretation of it, which, they said, involved variations to the terms of the contract. They said the Jaksics denied the breaches set out in the default notice. It was neither necessary nor possible to transfer an authority to Mr Wachmer 'to operate as a primary producer'. The land was zoned 'rural' and could be used to operate a market garden. Mr Wachmer had already made arrangements for the transfer of the water licence. They said that Mr Wachmer had been given basic training in the growing and marketing of cucumbers and beans, which were the vegetables that the Jaksics had previously been growing, and that the Jaksics had done more than they were obliged to do in that respect under the terms of the contract. The equipment was in the same working order and condition as inspected, as were the land and chattels. They said the Jaksics were ready, willing and able to settle in terms of the contract.

149 On 15 August 2003, a default notice was served on behalf of the Jaksics on Mr Wachmer. The default notice stated that Mr Wachmer had failed to settle on the settlement date and required that the default be remedied within 14 days.

150 The solicitors for Mr Wachmer wrote to the Jaksics' solicitors on 19 August 2003 saying that Mr Wachmer had been informed by the City that the current hydroponic activities on the property did not have planning approval. They asked to be provided with any relevant documentation if the Jaksics contended otherwise. They also denied that Mr Wachmer had been provided with basic training by the Jaksics. They said that the condition of the chattels, land and fixtures could be resolved by inspection, and observed that the Jaksics' solicitors had not addressed the issue of building approvals. They stated that Mr Wachmer remained ready, willing and able to conclude the contract according to its terms.

151 On 19 August 2003, Mr Jaksic went to the offices of the City and completed an application for planning approval for the use of the land. The handwritten entries on the form are not easy to follow and refer both to a market garden and hydroponics, although the proposed use appears to be identified as hydroponics.

152 On 3 September 2003, the City wrote to the Jaksics saying that the proposed hydroponic greenhouses had been approved subject to certain conditions. Only one of those conditions is relevant for present purposes, that being the condition that 'waste water and surface drainage from the proposed hydroponic uses being either reused within the irrigation system or "nutrient stripped" on site'. I will come back to the significance of that condition in due course.

153 In the meantime, Mr Wachmer's solicitors had written to the Jaksics' solicitors on 22 August 2003 saying that Mr Wachmer had been told it was likely to take approximately a month to obtain building approvals and three to six months to obtain the permits for the hydroponic use. The solicitors said that Mr Wachmer would not settle for the full purchase price unless those approvals were obtained. They said that the Jaksics were liable for damages which would increase according to the length of time it took them to remedy the defaults. The solicitors invited the Jaksics to reconsider Mr Wachmer's proposals of 13 August 2003.

154 A few days later, on 27 August 2003, Mr Wachmer wrote to the City to 'put [it] on notice in respect to applications for approvals or retrospective approvals' in relation to the land. In the letter, Mr Wachmer said he believed the applications were for retrospective building approval for substantial buildings with septic tanks, plus hydroponic tunnels and a hydroponic system, and an additional application for the commercial operation of horticulture and hydroponics. Mr Wachmer went on:

I request both applications be performed in full and complete accordance with accepted and established standards and that no shortcuts or shortcomings are permitted that may impact or result in damages to me at a later date. Please note however that this statement should not be taken to indicate that I wish undue delay.

155 The applications referred to by Mr Wachmer were applications that he understood had been lodged by the Jaksics, following his stipulation that he would not settle unless all necessary approvals had been obtained. Mr Wachmer said in evidence that he wrote the letter because his solicitors had been informed by the Jaksics' solicitors that they had applied for the licences and would have them within a matter of days, whereas he had been told that it would take three months.

156 In fact, sewerage approval was obtained by the Jaksics on 29 August 2003 and, as I have mentioned, approval of the hydroponics was received on 3 September 2003.

157 On 4 September 2003, the City wrote to Mr Jaksic in relation to his application for retrospective approval of the buildings on the land and said that, subject to certain conditions which are not presently relevant, it would permit the buildings to remain as constructed.

158 The Jaksics' solicitors wrote to Mr Wachmer's solicitors on 4 September 2003, saying that, although there was no obligation on the Jaksics' part to do so, the Jaksics had now arranged for formal approval by the City of the buildings and the hydroponic growing of vegetables. They sought confirmation that Mr Wachmer would proceed to settlement, failing which a notice of termination of the contract would be served.

159 Mr Wachmer's solicitors responded the next day saying that the approvals had several shortcomings; in particular, the approval to commence development still required building and health approval which would have to be obtained by Mr Jaksic, and Mr Wachmer required certificates of compliance with all of the requirements set out in the approvals; the approval for the hydroponic greenhouses required a certificate of compliance with the metropolitan region scheme, it was potentially subject to approval from the Department of Environmental Protection, and there was no certificate of compliance; in respect of the application for treatment of sewerage, there was no permit to use apparatus and no sign that a final test has been conducted by the City's environmental health services; in respect of the building approvals, there was no indication the electrical wiring had been certified.

160 Mr Wachmer's solicitors described the approvals obtained by the Jaksics as 'a preliminary step' and said it was necessary for Mr Jaksic to obtain all the necessary approvals, and certificates to show that he had complied with all of the requirements of those approvals.

161 On 11 September 2003, the Jaksics' solicitors replied, inviting Mr Wachmer to say precisely what, on his construction of the contract, he believed the Jaksics were legally obliged to do prior to settlement and what the Jaksics were entitled to receive at settlement. The solicitors asked that Mr Wachmer state the approvals he required Mr Jaksic to obtain and to identify the exact document or documents that were sought, why such approval or approvals were required, and why it was said the Jaksics were the parties who were to obtain them. They also asked what chattels Mr Wachmer was expecting to receive at settlement, other than the items specifically mentioned in the annexure to the contract, what consideration Mr Wachmer would be paying at settlement, and what access to the property and what training prior to settlement were sought.

162 Mr Wachmer's solicitors responded by letter of 18 September 2003. They said that the contract expressly provided that the Jaksics would provide the transfer of authority to operate as a primary producer and that the market garden would be provided as an ongoing business on a 'walk-in walk-out' basis. They said it was clear, therefore, that the Jaksics had to provide all approvals necessary for the business to operate as a going concern. Before settlement could proceed, the Jaksics had to obtain approval for development, approval of horticultural and hydroponic greenhouses and outbuildings, building approvals, approval to construct or install an apparatus for the treatment of sewerage, and water rights. They went on to say that the approvals

must be fully obtained. This means that your client will have to obtain the necessary approvals from the stated government departments and then obtain the certificate from the Rockingham Shire Council to show that he has fully complied with all of the necessary requirements. If an approval is given 'subject to' other requirements [the Jaksics] must meet those other requirements. If work has to be done to obtain the final approvals [the Jaksics] must do it ... [emphasis in original]

As already stated, the agreement expressly provides that our client has purchased the land and business on a 'walk-in walk-out' basis. Your clients must therefore hand over all chattels and fixtures that were on the property at the day of the agreement ...

The agreement expressly provided that your clients provide our client with training. Your client did not do so properly ... our client has retained a consultant to properly instruct him and your client is liable for the costs of this consultant. Your client should, however, provide details of the electrical system, reticulation system, house water supply, market garden bore and septic systems.

163 The Jaksics' solicitors responded on 19 September 2003, observing that there was no reference in the contract to the sale of 'a business', nor was there any reference in the contract to approvals other than the water rights and the primary producer permit. They asked why Mr Wachmer contended that the onus was on the Jaksics to obtain the necessary approvals. They also noted that Mr Wachmer's solicitors had not identified the exact documents they were seeking in respect of the approvals. They pointed out that Mr Wachmer claimed to be entitled to all chattels, plant, equipment and fixtures as inspected, whereas the contract contained a list of the plant and chattels to which Mr Wachmer was entitled under the contract. The Jaksics' solicitors expressed the view that in light of the latest approval from the City, Mr Wachmer had all the approvals that he might properly seek, which approvals had been obtained by the Jaksics although they were not obliged to do so. They said the Jaksics were ready, willing and able to settle on the terms of the contract.

164 On 15 October 2003, the Jaksics issued a further default notice requiring settlement of the contract by Mr Wachmer within 30 days. Mr Wachmer did not do so.

165 On 18 May 2006, the Jaksics applied for retrospective approval of the market garden and that was granted by the City on 26 July 2006.

166 Mr Wachmer now seeks specific performance of the contract or damages for breach, in addition to damages for what he alleges was misleading or deceptive conduct by the Jaksics. The Jaksics say that they lawfully terminated the contract by reason of Mr Wachmer's failure to settle as required by the default notice of 15 October 2003 and he is not entitled to any relief.

167 The general principles to be applied in the construction of a written contract are set out in the judgment of Gibbs J in Australian Broadcasting Commission v Australasian Performing Right Association Ltd [1973] HCA 36; (1973) 129 CLR 99, as follows:

It is trite law that the primary duty of a court in construing a written contract is to endeavour to discover the intention of the parties from the words of the instrument in which the contract is embodied. Of course the whole of the instrument has to be considered, since the meaning of any one part of it may be revealed by other parts, and the words of every clause must if possible be construed so as to render them all harmonious one with another. If the words used are unambiguous the court must give effect to them, notwithstanding that the result may appear capricious or unreasonable, and notwithstanding that it may be guessed or suspected that the parties intended something different. The court has no power to remake or amend a contract for the purpose of avoiding a result which is considered to be inconvenient or unjust. On the other hand, if the language is open to two constructions, that will be preferred which will avoid consequences which appear to be capricious, unreasonable, inconvenient or unjust, 'even though the construction adopted is not the most obvious, or the most grammatically accurate', to use the words from earlier authority cited in Locke v Dunlop ((1888) 39 Ch D 387, at p 393), which, although spoken in relation to a will, are applicable to the construction of written instruments generally; see also Bottomley's Case ((1880) 16 Ch D 681, at p 686). Further, it will be permissible to depart from the ordinary meaning of the words of one provision so far as is necessary to avoid an inconsistency between that provision and the rest of the instrument. Finally, the statement of Lord Wright in Hillas & Co Ltd v Arcos Ltd ((1932) [1932] UKHL 2; 147 L.T. 503, at p 514), that the court should construe commercial contracts 'fairly and broadly, without being too astute or subtle in finding defects', should not, in my opinion, be understood as limited to documents drawn by businessmen for themselves and without legal assistance (109 - 110).

168 As the construction of a written contract is concerned with ascertaining what a reasonable person would have understood the parties to mean, it is clear that regard may be had to evidence of surrounding circumstances known to the parties where the language of the contractual document is ambiguous: State Rail Authority of New South Wales v Codelfa Construction Pty Ltd [1982] HCA 51; (1982) 150 CLR 29. The question is whether regard can be had to such evidence in the absence of ambiguity.

169 In Pacific Carriers Ltd v BNP Paribas [2004] HCA 35; (2004) 218 CLR 451, a case concerning, among other things, a question of the construction of letters of indemnity, the High Court said (462):

The construction of the letters of indemnity is to be determined by what a reasonable person in the position of Pacific would have understood them to mean. That requires consideration not only of the text of the documents, but also the surrounding circumstances known to Pacific and BNP, and the purpose and object of the transaction. In Codelfa Constructions Pty Ltd v State Rail Authority of NSW [1982] HCA 24; (1982) 149 CLR 337 at 350; [1982] HCA 24; 41 ALR 367, Mason J set out with evident approval the statement by Lord Wilberforce in Reardon Smith Line Ltd v Hansen-Tangen [1976] 1 WLR 989 at 995-6; [1976] 3 All ER 570 at 574:

'In a commercial contract it is certainly right that the court should know the commercial purpose of the contract and this in turn presupposes knowledge of the genesis of the transaction, the background, the context, the market in which the parties are operating.'

170 In Toll (FGCT) Pty Ltd v Alphapharm Pty Ltd [2004] HCA 52; (2004) 219 CLR 165, Gleeson CJ, Gummow, Hayne, Callinan and Heydon JJ said (179):

This Court, in Pacific Carriers Ltd v BNP Paribas [2004] HCA 35; (2004) 218 CLR 451, has recently reaffirmed the principle of objectivity by which the rights and liabilities of the parties to a contract are determined. It is not the subjective beliefs or understandings of the parties about their rights and liabilities that govern their contractual relations. What matters is what each party by words and conduct would have led a reasonable person in the position of the other party to believe. References to the common intention of the parties to a contract are to be understood as referring to what a reasonable person would understand by the language in which the parties have expressed their agreement. The meaning of the terms of a contractual document is to be determined by what a reasonable person would have understood them to mean. That, normally, requires consideration not only of the text, but also of the surrounding circumstances known to the parties, and the purpose and object of the transaction (Pacific Carriers Ltd v BNP Paribas [2004] HCA 35; (2004) 218 CLR 451 at 461-462 [22]).

171 In Lion Nathan Australia Pty Ltd v Coopers Brewery Ltd [2006] FCAFC 144, Kenny J said:

As their Honours recognised in Toll, in some cases, though not normally, it may be unnecessary to consider the attendant circumstances, because, for example, the language of the document admits of only one meaning ... Normally, however, the meaning of a commercial contract will be judged by reference not only to the text but also to the relevant circumstances known to the parties. It is also clear from Pacific Carriers and Toll that, generally speaking, it is permissible to have regard to the surrounding circumstances from the outset of the process of construction. The view that once had some currency - that one must first find some ambiguity in the text of the document before looking to extrinsic circumstances - no longer holds sway [100].

172 The judgments of Weinberg and Lander JJ in that case were to similar effect.

173 A similar approach has been taken in the Court of Appeal of New South Wales: see, for instance, Redowood Pty Ltd v Mongoose Pty Ltd [2005] NSWCA 32, Gardiner v Agricultural and Rural Finance Pty Ltd [2007] NSWCA 235, Waterways Authority of New South Wales v Coal and Allied (Operations) Pty Ltd [2007] NSWCA 276; and in the Full Court of the Supreme Court of South Australia: Campbell v The University of Adelaide [2006] SASC 92.

174 The position in this State does not appear to have been clearly and finally determined: see, Investments (WA) Pty Ltd v Hatton [2007] WASCA 110, Home Building Society Ltd v Pourzand [2005] WASCA 242 [36] (McLure JA), Chemeq Ltd v Shepherd Investments International Ltd [2007] WASC 16, Rio Tinto Exploration Pty Ltd v Graphite Holdings Pty Ltd [2007] WASCA 276.

175 In my view, whether or not there is an ambiguity, the proper construction of the contract is to be determined by consideration, not only of its text, but also of the surrounding circumstances known to the parties, and the purpose and object of the transaction. But evidence of the actual intentions and expectations of the parties prior to the contract is not admissible.

WACHMER -v- JAKSIC [2007] WASC 313 (21 December 2007)

At a glance

Court

Decision date

Before

Catchwords

Source

Catchwords

Judgment (322 paragraphs)

WACHMER -v- JAKSIC [2007] WASC 313 (21 December 2007)

The lead-up to the 26 January 2003 meeting

Did the existing hydroponics comply with the condition of approval?

The approval of the operation of a market garden

Was the failure to obtain approval for the market garden a material breach?

Legislation Cited (1)

Cases Cited (12)