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  •   Notable Unreported Decision

Lai v Soineva

 

[2011] QSC 247

 

 

SUPREME COURT OF QUEENSLAND

 

PARTIES:

FILE NO/S:

Trial

PROCEEDING:

Application

ORIGINATING COURT:

DELIVERED ON:

23 August 2011

DELIVERED AT:

Brisbane

HEARING DATE:

10 August 2011

JUDGE:

Dalton J

ORDER:

Application dismissed

CATCHWORDS:

Carradine Properties Ltd v Aslam [1976] 1 WLR 442

Hill v Terry [1993] 2 Qd R 640

Mannai Investment Co Ltd v Eagle Star Life Assurance Co Ltd [1997] AC 749

Sargent v ASL Developments Ltd (1974) 131 CLR 634

Scali Properties Pty Ltd v Crittenden & Anor [2009] QSC 290

Vujanovic v Musumeci & Anor [2005] QSC 382

COUNSEL:

J B Sweeney for the applicants

C Jennings for the respondents

SOLICITORS:

Hickey Lawyers for the applicants

Herbert Geer Lawyers for the respondents

[1] DALTON J:  The applicant buyers seek specific performance of a contract dated 7 June 2011 to purchase a house property on the Gold Coast.  The contract is in the REIQ standard form for houses and residential land, 8th edition.  It contains the following clause:

“4.1Building and Pest Inspection

This contract is conditional upon the Buyer obtaining a written building report from a building inspector and a written pest report from a pest inspector … on the Property by the Inspection Date on terms satisfactory to the Buyer.  …

4.2The Buyer must give notice to the Seller that:

(1)a satisfactory inspector’s report under clause 4.1 has not been obtained by the Inspection Date and the Buyer terminates this contract.  The Buyer must act reasonably; or

(2)clause 4.1 has been either satisfied or waived by the Buyer.

4.4The Seller may terminate this contract by notice to the Buyer if notice is not given under clause 4.2 by 5pm on the Inspection Date.  This is the Seller’s only remedy for the Buyer’s failure to give notice.

4.5The Seller’s right under clause 4.4 is subject to the Buyer’s continuing right to terminate this contract under clause 4.2(1) or waive the benefit of this clause 4 by giving written notice to the Seller of the waiver.”

[2] The inspection date was 28 June 2011.

[3] In a facsimile transmission sent 21 June 2011, the buyers’ solicitors communicated to the sellers’ solicitors:

“We are instructed to advise that our clients are not satisfied with their building and pest enquiries.

We have advised that it has been agreed that at settlement a bank cheque in favour of ‘Pest-a-side Pest Management’ in the sum of $4500 will be handed over.

Kindly confirm that these are also your instructions.”

Despite the words of the facsimile, there was no evidence of any agreement prior to this communication, and it was conceded by counsel for the buyers that there had not been any agreement prior to this facsimile being sent.

[4] Two minutes before the deadline fixed by cl 4.4 of the contract, i.e. at 4.48 pm on 28 June 2011, the sellers’ solicitors sent a facsimile transmission in response:

“We refer to the above matter and to your fax dated the 21st June 2011 and confirm our client does not agree to a bank cheque in favour of ‘Pest-a-side Pest Management’ in the sum of $4500.00 being handed over at settlement.”

[5] On 29 June 2011 the real estate agent for the sellers transferred $4500 into the buyers’ solicitors’ trust account as payment for a termite barrier to be placed around the subject property.  The amount was to be held on trust pending settlement.  If the contract did not settle, it was to be refunded to the real estate agent personally.  The real estate agent sent a facsimile to the buyers’ solicitors to inform them of what he had done.  There is no suggestion in the facsimile that the real estate agent was acting other than on his own account.  The sellers have sworn that they did not instruct or authorise the payment.  To the contrary, they say that on 28 June 2011, the real estate agent contacted them and asked them to consider the possibility of “an outside party” contributing money for the pest control.  The sellers swear that they told the real estate agent they were not interested in that idea.

[6] On 29 June 2011, after the facsimile from the real estate agent was sent, the buyers’ solicitors sent a facsimile to the sellers’ solicitors:

“We refer to the above matter and have been instructed to [sic] by our clients to confirm that they are satisfied with the Pest and Building Condition of the Contract.”

[7] On 30 June 2011, the sellers’ solicitors wrote, purporting to terminate the contract:

“… A buyer can no longer give an effective notice of ‘satisfaction’ under Clause 4.2 once the Inspection Date has passed.

Our clients have instructed us to terminate this contract pursuant to Clause 4.4 of the Terms of Contract because of failure of your client to give the requisite notice under Clause 4.2 by 5.00 pm on the Inspection Date.

This matter is now at an end and we will authorise the Deposit Holder to refund the deposit to your client.”

[8] Counsel for the sellers submitted that the facsimile sent by the buyers’ solicitors on 29 June 2011 could be seen to result from the arrangement between the real estate agent and the buyers’ solicitors.  Seen in that context, it was submitted, the facsimile of 29 June 2011 was an expression of satisfaction with the financial result reached – a reduction in price as a result of the buyers’ enquiries as to pest inspection.  It was submitted, therefore, that the facsimile of 29 June 2011 should be construed as an expression of satisfaction given pursuant to cl 4.2(2) of the contract.  There was no evidence that the buyers knew of the arrangement effected by the real estate agent.  Furthermore, I should not determine the matter on the basis of an inference to be drawn as to the subjective intention behind the facsimile sent on 29 June 2011.  The proper course is, I think, to construe the contract, and the notices purportedly sent pursuant to it, objectively.

Construction of the Contract

[9] Clause 4.1 of the contract provides a benefit to the buyer: it will not be obliged to complete the contract where it discovers that the property is adversely affected by matters affecting the buildings on the land or pest infestation.  However, other parts of cl 4, particularly cll 4.2 and 4.4, regulate the benefit given to the buyer in recognition that the seller has an interest, “in being relieved at the earliest moment of the uncertainties inherent in provisions like these.”[1]

[10] Clause 4.2 does not provide a time by which the buyer must give notice to the seller.  In that respect it is in conformity with cl 3.2 (finance) of the contract, but in contrast to cl 4.7(3) (pool safety) of the contract.  Nonetheless, if the buyer does not by 5.00 pm on the inspection date do one of three things, namely:

(a)give notice to the seller that the buyer terminates the contract because it has not obtained a satisfactory report;

(b)give notice to the seller that it has obtained a satisfactory report in accordance with cl 4.1, or

(c)give notice to the seller that it waives the benefit of cl 4.1, the seller gains the right to terminate the contract under cl 4.4.  Of course, the seller may not immediately exercise that right.

[11] Because there is no time limit put on the notice to be given under cl 4.2, a question arises as to whether or not a buyer can give notice under cl 4.2 after 5.00 pm on the inspection date in circumstances where the seller has not terminated pursuant to cl 4.4.  In Hill v Terry (above), the Full Court dealt with a finance clause which was, in structure, similar to cl 4 in this case.  In Hill v Terry, the clause put a time limit on two of the three notices which the buyer was empowered to give the seller.  If the buyer obtained satisfactory approval, or if it wished to waive the benefit of the condition, it was to give notice to the seller by a specified date.  In contrast, there was no time limit fixed for the buyer to give notice that it terminated the contract because it had not obtained approval.  McPherson SPJ took the view that a notice that the buyer did not have approval and terminated the contract, was to be given by the same date as was provided for giving the other two notices.  The clause in Hill v Terry contained no provision comparable to cl 4.5 in the present case.  McPherson SPJ expressed the view that once the seller’s right to terminate arose, in consequence of it not having received a notice, the contract continued but, “at the sufferance of the vendor”.[2]  He described the interest of the purchasers in the land at that point as, “extremely tenuous”, or “fragile or evanescent.”[3]

[12] In this contract, cl 4.5 improves the buyer’s position, compared to the buyer discussed in Hill v Terry.  It provides that, even after a seller has accrued a cl 4.4 right to terminate, but has not terminated, the buyer can either:

(a)terminate the contract under cl 4.2(1), i.e. on the basis that it has not obtained a satisfactory report under cl 4.1, or

(b)waive the benefit of cl 4.

[13] Because cl 4.5 expressly provides what rights the buyer is to have after the seller accrues, but does not exercise, a right under cl 4.4, my view is that after 5.00 pm on the inspection date, the buyer does not have a right to give notice under cl 4.2(2).  If Vujanovic v Musumeci & Anor[4] decides to the contrary, then I think it is incorrect.  Counsel for the buyers did not submit that the buyers had a right after 5.00 pm on the inspection date to give a notice pursuant to cl 4.2(2) of the contract.  He accepted, rightly in my opinion, that for his clients to succeed, the facsimile sent by their solicitors on 29 June 2011 had to amount to a waiver of the benefit of cl 4 within the meaning of cl 4.5 of the contract.

Construction of the Notice

[14] In deciding whether or not the facsimile of 29 June 2011 does amount to such a waiver, there are two points to note about cl 4.5.  The first is that the right to waive is one which is to be exercised, “by giving written notice to the seller of the waiver.”[5]  The second is that (as discussed above) at the point in time at which a notice of waiver pursuant to cl 4.5 can be given, the only remaining benefit to the buyer in cl 4 of the contract is the right to terminate.  Thus, cl 4.5 allows the buyer a continuing right to either terminate under cl 4.2(1), or waive that right to terminate.  In effect, the buyer has the right to elect between two inconsistent alternatives.  It can, of course, do nothing, but if it does, its position is vulnerable, as described by McPherson SPJ in Hill v Terry.

[15] I have already referred to the case law which recognises the interest on the part of a seller in being relieved from the uncertainty created by provisions like cl 4 – see footnote 1 above.  The authority of Sargent v ASL Developments Ltd[6] as to the unequivocal nature of words or conduct required to constitute an election is apt here.  In that case Stephen J said, “The words or conduct ordinarily required to constitute an election must be unequivocal in the sense that it is consistent only with the exercise of one of the two sets of rights and inconsistent with the exercise of the other …”[7]

[16] Counsel for the buyers referred to authorities such as Mannai Investment Co Ltd v Eagle Star Life Assurance Co Ltd[8] to the effect that in construing commercial contracts, and contractual notices, the law favours a commercially sensible approach and will interpret words in a way in which a reasonable commercial person might interpret them.  In that case Lord Steyn said, “That test can only be satisfied where the reasonable recipient could be left in no doubt whatever” as to the import of the notice.  In Carradine Properties Ltd v Aslam[9] Goulding J asked, in a landlord and tenant case, “Is the notice quite clear to a reasonable tenant reading it?  Is it plain that he cannot be misled by it?”

[17] In this case, the facsimile sent on 29 June 2011 is poorly worded.  Literally it is a rather absurd communication that the buyers are satisfied with (the drafting of?) the pest and building condition of the contract between the parties.  Turning away from such a literal approach, I think that there is a distinct ambiguity as to whether the notice purports to be one of satisfaction pursuant to cl 4.2(2) of the contract.  I would be loathe to hold that a written notice under cl 4.5 of the contract must always contain the word “waiver” or “waive” to be effective.  However, given the express requirement for written notice of “the waiver”, the words used in a cl 4.5 notice need to be an unequivocal communication of intent that the buyer chooses not to terminate the contract pursuant to cl 4.2(1) and gives up any remaining benefit it has under cl 4 of the contract.  I do not think the facsimile of 29 June 2011 does that.  Not only does it not use the word “waive” or “waiver”, it uses the word “satisfied”, the word used at cl 4.2(2) of the contract.  Further, there is no unequivocal communication of intent to give up the right to terminate the contract pursuant to cl 4 of the contract.  The facsimile of 29 June 2011 is, at best for the buyers, ambiguous.  It is not sufficient to amount to a notice pursuant to cl 4.5 that the buyers waive the benefit of cl 4 of the contract.

[18] In my view, therefore, the sellers were entitled to terminate the contract as at the time they sent the facsimile of 30 June 2011 and in my opinion, that facsimile was apt to terminate the contract pursuant to cl 4.4.  I therefore refuse the relief sought by the buyers.  I will hear the parties as to costs.

Footnotes

[1] Hill v Terry [1993] 2 Qd R 640, 643, and the cases cited there.

[2] Above p 648.

[3] Above p 648.

[4] [2005] QSC 382, [19]-[21].

[5] cf the remarks made obiter by the Chief Justice in Scali Properties Pty Ltd v Crittenden & Anor [2009] QSC 290, [10].

[6] (1974) 131 CLR 634.

[7] Above, 646.

[8] [1997] AC 749.

[9] [1976] 1 WLR 442, 444.

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Editorial Notes

  • Published Case Name:

    Lai & Anor v Soineva & Anor

  • Shortened Case Name:

    Lai v Soineva

  • MNC:

    [2011] QSC 247

  • Court:

    QSC

  • Judge(s):

    Dalton J

  • Date:

    23 Aug 2011

  • White Star Case:

    Yes

Litigation History

No Litigation History

Appeal Status

No Status