DISTRICT COURT OF QUEENSLAND

Introduction

3. [3]
   Jason Hanley is a 22-year-old man.^[1]  In June 2003 he purchased a block of land on Russell Island.  In December 2003 he entered into a contract for the construction of a dwelling on the land.  On 7 April 2004 he signed a contract of sale for the land (and dwelling) to a Richard Lueck (Lueck) and a Christian Fazikas.

4. [4]
   The settlement date in the contract was 1 July 2004.  Shortly after entering the contract, Lueck^[2] left Australia.  As the settlement day approached his solicitor, Redlands Conveyancing Service, tried unsuccessfully to contact him.  At the time Jason Hanley was living and working on the Gold Coast.  He had not retained solicitors to act on his behalf on the sale.  The settlement day came and went without any attempt by the parties to the contract to settle.  The following day Jason Hanley’s father, a Len Hanley, telephoned Redlands Conveyancing Service (Redlands) to inquire what was happening with the sale.  He was told the solicitors had lost contact with Lueck.  All Redlands knew was that Lueck was somewhere overseas.

5. [5]
   After the settlement day passed, Jason Hanley said he thought the sale had fallen through. I infer he regarded the contract at an end. At that stage he had still not obtained any legal advice.

6. [6]
   Lueck did return to Australia towards the end of July 2004.^[3]  On a day that was probably 29 July 2004 he turned up at the Russell Island property, where Len Hanley was working.  Len Hanley and Lueck are about the same age, and within the past two years, had travelled to Thailand together.  After Lueck’s return to Australia in late July 2004, events unfolded rapidly.

7. [7]
   On 3 August 2004 Jason Hanley purported to formally terminate the contract.  This was communicated to Redlands by facsimile communication by Mr Ohlson, a solicitor retained by Jason Hanley.  Lueck, however, wanted to complete the contract.  As a result, Redlands disputed the termination.  Redlands  argue that Jason Hanley, because he was in breach of a special condition of the contract, was not entitled at law to terminate the contract.

8. [8]
   In an exchange of correspondence between Redlands and Ohlson and Associates (Mr Ohlson’s firm), Redlands endeavoured to set up an action for specific performance of the contract.

9. [9]
   On Redlands’s part this involved remaking time of the essence and setting a day for completion. When settlement did not take place on the date set by Redlands (20 August 2004), Lueck and Christian Fazikas commenced the present action seeking specific performance of the contract of sale.  The plaintiffs have not advanced any claim for damages and seek only specific performance of the contract.

The issues

10. [10]
    The principal issues are whether the purported termination of the contract on 3 August 2004 brought the contract to an end.  And whether, if the contract was not terminated, Lueck and Christian Fazikas are entitled to an order for specific performance.

11. [11]
    The resolution of the first issue in turn depends on whether Jason Hanley’s own breach of the special condition means that he lost the right to terminate for Lueck’s breaches, and on whether Jason Hanley affirmed the contract in a telephone conversation on 30 July 2004 with Redlands.  Affirmation of the contract with knowledge of Lueck’s breaches would extinguish any right to later terminate the contract on account of those breaches.

The contractual arrangements between Lueck, Christian Fazikas and Jason Hanley

12. [12]
    Jason Hanley signed both a mortgage agreement and the contract of sale without first obtaining legal advice. The documents were presented to him to sign by Lueck and his father, Len Hanley. The documents had been drawn up by a Ms Debbie Brown, the office manager at Redlands.  Although Ms Brown is not legally qualified, since Redlands is an arm of Clapins Lawyers, she did have access to legal advice.  In settling the contractual arrangements between Lueck, Christian Fazikas, and Jason Hanley she did not obtain any legal advice, but instead relied on her own knowledge.

13. [13]
    The contractual arrangements had three aspects: a loan agreement secured by a mortgage, a building contract, and the contract of sale for the Russell Island land and dwelling.

14. [14]
    The loan was from Lueck to Jason Hanley. It was secured by a mortgage over the Russell Island property. The loan was repayable on 1 July 2004 (or on any later agreed settlement date for the contract of sale), unless the contract of sale was also completed on 1 July 2004 (or on any later agreed date), in which event it was not repayable.  In that circumstance it in effect became part of the purchase price.

15. [15]
    The dwelling on the land still required some finishing work, which Jason Hanley agreed to complete in accordance with a document entitled the “Schedule of Finishes”. The work specified in the “Schedule of Finishes” consisted essentially of construction of a fence and some basic landscaping externally, and some painting, polishing, and staining internally. As well as the installation of a bedroom wardrobe, a stainless steel sink in the laundry, and the completion of the kitchen cupboards. The painting, landscaping, and a carpet for a bedroom were to be completed to the satisfaction of the purchasers.

16. [16]
    Ms Brown, when drafting the documents, decided to merge the building agreement into the contract of sale as a special condition to the standard form contract.  The relevant special conditions she drafted are as follows:

“1. This contract is subject to and conditional upon the dwelling currently being constructed on the property being completed by the date of settlement, as follows –

1. (a)
   Certificate of Practical Completion issued by Redlands Shire Council to the seller to be provided to the buyer prior to settlement;

2. (b)
   the dwelling being constructed to be in line with the Schedule of Finishes marked “A” and annexed to this contract.

2. If the dwelling being constructed on the property is not completed to the buyer’s satisfaction in any respect, the buyer may elect to terminate this contract, in which even all deposit moneys will be refunded to the buyer in full.”

17. [17]
    Ms Brown deleted the standard contract building and inspection provisions from the contract.  Presumably, however, a term is to be implied allowing the purchasers the right to inspect the dwelling in order to determine whether or not it is completed to their satisfaction by the settlement date (1 July 2004).  Under the standard terms time is of the essence (clause 6.1).

18. [18]
    Technically the special conditions are conditions subsequent.^[4]  As a consequence if the special condition is not fulfilled at settlement, the contract is voidable at the hand of the purchasers.^[5]  The time for fulfilment of  special condition 1 is specified as the date for completion of the contract.  In the event the special condition is not fulfilled on the date for completion (1 July 2004), the purchasers may terminate the contract, however, if the contract is not terminated for non‑fulfilment, it remains in force.  The purchasers therefore, in the case of any breach of special condition 1, had on the date specified for completion in the contract the option either of avoiding the contract, or of waiving the non-fulfilment of the condition and completing the contract.

The purchasers’ breaches at settlement

19. [19]
    Lueck left Australia in April 2004, a couple of weeks after signing the contract. In evidence he said he returned to Australia on 21 July 2004.  His first relevant act after his return seems to have been on 29 July 2004 when he spoke to Len Hanley at the Russell Island property.

20. [20]
    Although Christian Fazikas’ name is on the contract as a purchaser, he did not sign the contract. Nor did he give evidence at the trial. Indeed, no evidence was led about him at the trial. The pleadings reveal he is a natural person who resides at the same address supplied by Lueck in the contract. The evidence does not reveal whether he resided at the address supplied in the contract or at another address or whether he travelled abroad with Lueck at the time for completion of the contract.

21. [21]
    Under the contract the settlement procedure is initiated by the delivery of the transfer documents by the purchaser’s solicitor to the vendor a reasonable time before the settlement date (Clause 5.2).

22. [22]
    Approaching the settlement date Redlands was unable to contact Lueck, despite their efforts. Moreover, Lueck did not place Redlands in funds to enable them to complete the purchase on the settlement date. As a consequence no step was taken by Redlands to settle the contract on 1 July, or to contact the vendor.

23. [23]
    Lueck effectively turned his back on his obligations under the contract. The co‑purchaser on the contract, Christian Fazikas, as far as the evidence reveals at no stage took any interest in the contract.  The purchasers’s breaches amount to a repudiation of the contract which, in turn, entitled the vendor to terminate.^[6]

The vendor’s breaches at settlement

24. [24]
    Jason Hanley did not attend at settlement on 1 July 2004.  The day after settlement his father, Len Hanley, telephoned Redlands and spoke to Ms Brown.  He said he asked her what was happening with the moneys and the contract.  She said she had been unable to contact Lueck.  He told her he believed Lueck was in Thailand and supplied her with a telephone number.  Ms Brown said in evidence she was unable to recall the telephone conversation with Len Hanley, but she did confirm she had been unable to contact Lueck and had left messages for him to which he had not responded.

25. [25]
    Jason Hanley had not retained a solicitor to act for him on the sale. I assume he intended either to ask Redlands to act for him on the conveyance, or to retain a solicitor to act for him when necessary.  The failure to prepare and forward the transfer documents to Jason Hanley a reasonable time before the settlement date (1 July 2004)^[7], effectively prevented him from fulfilling the dependent and concurrent obligations imposed on him at settlement under the contract.^[8]  This is a case where the purchasers’s breaches prevented the vendor fulfilling his dependent and concurrent obligations under the contract.^[9]  Putting aside for the moment the legal consequences of breach of the building agreement by the vendor, I am satisfied he was ready and willing to complete the contract at settlement (1 July 2004) in the sense that he was at the time of the breaches disposed and able to complete the contract had the purchasers not repudiated the contract.^[10]

26. [26]
    As at 1 July 2004 not all of the work specified in the Schedule of Finishes had been carried out.  Although the evidence is unclear exactly what work remained to be completed at settlement (1 July 2004), the evidence suggests Len Hanley could have completed the work in a relatively short period of time.^[11]  Jason Hanley was therefore in breach of special condition 1 of the contract.  He was also in breach of the obligation to provide a Certificate of Practical Completion to the purchasers (special condition 1(a)).  Mr Redmond, who appeared for Jason Hanley at trial, submitted that as the Redland Shire Council does not issue Certificates of Practical Completion, this term of the contract is void.  The other view, put by Mr Harding, is that the reference to a Certificate of Practical Completion should be understood to refer to a final inspection certificate issued by a building certifier. For the moment all I intend to do is to note the contentions of the parties.  In drafting the special conditions, it is clear enough Ms Brown has misunderstood the nature and purpose of a Certificate of Practical Completion in building contracts^[12].

Was the contract terminated by the facsimile communication from Ohlsen and Associates on 3 August 2004?

27. [27]
    It is common ground that if, as the purchasers contend, Jason Hanley affirmed the contract with knowledge of the purchasers’ breaches on 30 July 2004 then, in law he lost the right to terminate the contract for those breaches.  Whether or not Jason Hanley affirmed the contract in a telephone conversation with Ms Brown is a question of fact.  Ms Brown said in evidence that he affirmed the contract. He denied he spoke with her on the telephone on 30 July (or, for that matter, on any other day).  In the event that Ms Brown’s evidence can be regarded as acceptable evidence of the conversation she alleges, a question then arises as to whether what was said amounts to an affirmation of the contract.  Both these questions will be examined in detail.

28. [28]
    The other main point argued by the parties is whether the breach (or breaches) of the special conditions by Jason Hanley deprive him of the right to terminate. This point will also be considered in detail.

Did Jason Hanley affirm the contract on 30 July 2004?

29. [29]
    To answer this question it is necessary to examine in greater detail the events leading up to the letter of termination on 3 July 2004.  This involves consideration of the events and conversations which occurred on 29 July 2004, 30 July 2004, and 2 August 2004.

29 July 2004

30. [30]
    On a day that was probably 29 July, Len Hanley said he saw Lueck for the first time since April at the Russell Island property, when they had a short conversation about the dwelling.  He said the next day Lueck returned.  Lueck, he claimed, said he (Lueck) had been to see his lawyers and he would be giving me two weeks to get the house finished.  For his part, Lueck said he saw Len Hanley once at the house during which he asked why the dwelling was not finished.  Lueck’s evidence of the conversation between the two men was quite short, limited to asking why the dwelling was not finished, whether he wanted more money, and how long it would take to finish.^[13]

31. [31]
    Two points should be noted. Firstly, the conversation (or conversations) were between Lueck and Len Hanley, not Jason Hanley; and secondly, it is unclear, in any event, whether the two men agreed on a settlement date in two weeks’ time in August, or whether Lueck simply told Len Hanley that he was allowing an extension of two weeks to settle the contract.

32. [32]
    The next relevant conversation is between Lueck and Ms Brown on 29 July.  Lueck’s account of that conversation is that he “told her about the settlement and that we discussed it that it’s going to be delayed, there’s going to be an extension”^[14] and “I spoke to Debbie in regards to the work not being completed and I suggested that we are withholding $20,000 … til the house is finished.”^[15]

33. [33]
    Ms Brown’s note of the conversation between them reads as follows:

“DB advising that settlement was actually 1/7 – he saying it should have been 31/7 – one way or the other it has been detailed in the contract as 1/7.  He saying the house is about ¾ built and Hanley has said he will probably need another week.  Richard saying he will grant him two weeks to allow a bit of extra time, but if it is not finished, he wants to pay him $20,000 less to make sure he finishes it.  DB suggesting that Richard put the whole of the settlement monies into our Trust Account and we can “retain” $20,000 rather than pay “by instalments”.  He saying that would be fine.”

34. [34]
    At the time Lueck had not spoken to Jason Hanley, so there was no agreement by Jason Hanley to a later settlement date of 13 August.  The conversation between Lueck and Ms Brown is also the first conversation in which Lueck aired the suggestion that $20,000 of the purchase price should be withheld at settlement until the house is completed. Neither Len Hanley nor Lueck said they discussed the proposed retention  when they spoke at the Russell Island property on 29 July.

35. [35]
    Ms Brown noted that she told Lueck the settlement date was 1 July.  Her note is that he said it should have been 31 July.  Lueck’s response when taxed under cross‑examination was to deny any recollection that he was told the settlement date under the contract was 1 July^[16]; and to respond “I don’t know” to the suggestion he had told her the settlement day should have been 31 July 2004.”^[17]  His responses are difficult to accept.  I was not impressed by either Lueck or Len Hanley as witnesses.  Both, I thought, were capable of placing self-interest before principle.  On this aspect of the case I have not the slightest doubt that Lueck was aware of the significance of the fact he was in default in not settling the contract on 1 July^[18], but that he was unwilling to let the contract go because of the potential profit on resale.

36. [36]
    Lueck I thought is one of those men who, when faced with an inconvenient fact, treats it merely as an obstacle to be overcome by bluster. This approach can be observed in his reaction on being told settlement was on 1 July:  he said it should have been 31 July.  And in the repeated assertion during his evidence that he had always been ready to settle^[19] and had given a power of attorney to his solicitors to sign documents in his absence, ignoring the fact he had not maintained contact with his solicitors in the months leading up to settlement and had not placed his solicitors in funds to settle on 1 July.^[20]

37. [37]
    The meeting between Lueck and Ms Brown ended with a decision that Ms Brown would write to “Hanley” “saying we will grant an extension of settlement to 13 August”.^[21]

30 July 2004

38. [38]
    The next conversations occurred on 30 July 2004.  This was a Friday.  Len Hanley said, but Lueck denied, that the two men had a second conversation on this day.  In that conversation Len Hanley claimed Lueck informed him he had spoken to his solicitors and he, Lueck, was giving him (Len Hanley) an extension of two weeks to complete the work on the house, obtain the Certificate of Practical Completion and settle the contract.^[22]  Len Hanley said he decided to telephone Redlands later that day “to find out whether Richard was telling the truth about seeing her or not … and giving us – and extending a settlement date.”^[23]  Len Hanley said he telephoned Ms Brown on the afternoon of 30 July 2004.

39. [39]
    Ms Brown gave evidence she had a telephone conversation with Jason Hanley around midday, and a telephone conversation with Len Hanley about two hours later.  The first telephone call is in dispute as Jason Hanley denies calling her or receiving a telephone call from her.  She did not make a note of either phone conversation.  Of the first she said she could not recall whether she called Jason Hanley or whether he called her.

40. [40]
    At the time of the midday telephone conversation she said she was under the misapprehension that Len Hanley, who she had met on 7 April, was Jason Hanley.^[24]  This is a little surprising since the identity of the owner was considered on 7 April.  What happened was that when the contract of sale and mortgage agreement were drawn up it was realised that Jason Hanley, and not Len Hanley, was the owner of the property.^[25]  While Ms Brown was able to witness Lueck’s signature, the two men had to travel to the Gold Coast with the contract and mortgage agreement to obtain Jason Hanley’s signatures.  They returned the same day to Redlands with the signed documents.^[26]  In any event, Ms Brown asserted in evidence she spoke with Jason Hanley at around midday on 30 July.

41. [41]
    The evidence does not disclose any reason for her to phone Jason Hanley at that time. From her note of the conversation with Lueck on the Thursday she believed he and Jason Hanley had agreed on a settlement date in two weeks’ time. The course of action recorded in her notes was to write to Jason Hanley “granting an extension of time” while initiating internally the settlement process. Nor did she apparently know Jason Hanley’s telephone number. Jason Hanley said he did not telephone Redlands or Ms Brown, and referred to his telephone records.  He denied speaking to her on the phone.  She said she spoke on the telephone at around midday on the Friday to someone she believed was Jason Hanley.  As at that time she believed Len Hanley was Jason Hanley, presumably her belief was that the person at the other end of the telephone conversation was Len Hanley, the person she had met on the 7^th April.  She said that although her recollection is not 100 per cent, she believes the caller could have said, “I’m Jason Hanley”.^[27]

42. [42]
    On Ms Brown’s evidence, the conversation was a short one.  For her part she told the caller that her instructions were that the house was not finished and that the Certificate of Completion had not been obtained and that he and Lueck had agreed that settlement should occur two weeks down the track, and agreed to a retention of $20,000 of the purchase price if the house was not complete.^[28]  She said he, “sort of just said ‘Oh, yeah, okay.’”, which she interpreted as agreement.^[29]

43. [43]
    After the conversation with Lueck on the Friday, Len Hanley decided to phone Redlands to check on Lueck. He said he phoned in the afternoon and spoke to Ms Brown.  She also gave evidence of receiving a telephone call.  The caller, she said, identified himself as Jason Hanley’s father.  She said she then formed a belief that she was now speaking to the person she had believed was Jason Hanley, that is, Len Hanley.  It is not altogether clear why she should immediately have formed such a belief, but on her evidence she did.

44. [44]
    The conversation she deposed to was again a short one. She repeated what she had said in the earlier telephone conversation. The caller, she said, “just said ‘Oh, okay.’ And that was the end of it.”^[30]

45. [45]
    Ms Brown did not make a note of either telephone conversation.

46. [46]
    There are three features about the conversation Ms Brown alleged she had with Jason Hanley.  Firstly, if the caller was Jason Hanley he would undoubtedly have been surprised to learn he had spoken to Lueck and agreed with Lueck to a settlement date and contract variation.  In fact, there was no such conversation or agreement between Lueck and Jason Hanley.  Secondly, Ms Brown incorrectly informed the caller that agreement had been reached on the retention of the $20,000.  On the evidence, there was no agreement to this effect.^[31]  Thirdly, the conversation seems to me more one in which Ms Brown informed the caller of her instructions, which the caller acknowledged as her instructions by saying, “Oh, yeah, okay”,  than a conversation in which an agreement was reached or confirmed between Ms Brown and the caller.  Just as Ms Brown converted Lueck’s retention proposal made to her by him (29 July 2004) to an agreement between Lueck and Jason Hanley when she spoke to Jason Hanley (or Len Hanley) on 30 July, so she seems to have converted a simple recognition (or acknowledgement) of her instructions into an agreement with those instructions.

2 August 2004

47. [47]
    Over the weekend, Len Hanley and Jason Hanley discussed the situation. As a result, on the Monday (2 August 2004) Len Hanley spoke to the solicitor Mr Ohlson.^[32]  At 9.45 am^[33], Mr Ohlson spoke to Ms Brown by telephone.  Mr Ohlson’s account of the telephone call is relatively straightforward. He introduced himself as “Mr Hanley’s” solicitor.  He said he was ringing concerning a property on Russell Island, and “I asked her what was happening with the matter.  And she told me that … she wanted me to agree to another settlement date and she had mentioned that she’d spoken with Mr Hanley about that matter.”  In response, he said he would obtain instructions.  After some additional conversation, the call ended.  Mr Ohlson was definite that Ms Brown did not mention to him that Jason Hanley had agreed to a settlement date of 13 August, or to a $20,000 retention at settlement, or that she had written to Jason Hanley enclosing the transfer documentation.^[34]

48. [48]
    Ms Brown’s evidence is that she did not have a conversation with Mr Ohlson on 2 August, as she recollected.^[35]  If she did have a telephone conversation with him, she now has no recollection of it^[36], although she apparently did have a recollection of the phone call when the pleadings were settled as paragraph 6(j) of the Reply and Answer asserts she told him that Lueck “was unavailable at that particular time”.

49. [49]
    As between Mr Ohlson and Ms Brown, I prefer Mr Ohlson’s evidence.  I accept he gave a truthful and reasonably accurate account of the events and conversations affecting him.  Ms Brown, I think, acted as an advocate for Lueck throughout the transaction and in her evidence. As a non professional witness her advocacy may be understandable, although at times it produced answers which were less than satisfactory.  An example of her attitude is reflected in her statements that she was not concerned “in the slightest” by Lueck’s failure to settle on 1 July since, “The contract as far as I was concerned was really just a formality.”^[37]  She believed the contract was a formality because Lueck and Len Hanley were friends.

50. [50]
    The other relevant events in the narrative which occurred on 2 August are that Lueck paid in $58,800 to Clapins Lawyers’ trust account in preparation for settlement.^[38]  Lueck also spoke to Ms Brown.  She made a note of this conversation but not of the conversation with the solicitor Ohlson.  In the note she recites that Lueck told her he had heard “on the grapevine that Jason Hanley may be getting cold feet about selling”.  She advised him that Jason Hanley did not have a right to terminate the contract.  The reference to being informed “Jason Hanley” may be getting cold feet is also in error, as it should be a reference to Len Hanley, and to that extent the note is inaccurate.^[39]  Ms Brown said that some time after speaking with Lueck on 2 August she consulted with a solicitor.^[40]  In the afternoon she made a note of the conversation with Lueck, and added a note confirming the conversation she alleges with Jason Hanley on 30 July.  This additional note reads as follows:

“DB advising that when we spoke to Jason on Friday, he was agreeable to settlement taking place on 13/8 and also agreeable to a retention of $20,000 if he did not have the certificate from RCS – he agreed with no hesitation to these two things.”

51. [51]
    On 2 August 2004 Ms Brown also wrote to Jason Hanley.  In the letter, which, for an unknown reason, was postdated 30 July 2004, she noted that he had agreed to settlement on 13 August and to a retention of $20,000 if he did not have the certificate from Redlands Shire Council.  This letter went out of the office at 5.17 pm on 2 August 2004.  As Mr Ohlson had spoken to her by telephone at 9.45 am on the same day, it is difficult to understand why the letter was not addressed to him as the solicitor for the vendor.  Both the terms of the additional note written that afternoon^[41] and the act of postdating the letter are suggestive of an endeavour to create a paper trail confirming the alleged conversation with Jason Hanley on the Friday (30 July 2004).

3 August 2004

52. [52]
    On 3 August, after obtaining instructions from Jason Hanley, Mr Ohlsen wrote to Redlands by facsimile communication purporting to terminate the contract.

Was there an effective affirmation of the contract before the purported termination?

53. [53]
    Mr Harding argued at trial that Jason Hanley affirmed the contract in the conversation with Ms Brown on 30 July.  No other conduct is relied on to establish an affirmation of the contract.  The conclusion I have reached on this aspect of the case is that if there was a telephone conversation between Jason Hanley and Ms Brown on 30 July, Jason Hanley did not agree to a new settlement date or otherwise affirm the contract.  I will endeavour to explain why I have reached this conclusion.

54. [54]
    Firstly, whether the telephone conversation Ms Brown deposed to was with Jason Hanley is unclear.  On the evidence, she had no plan to contact Jason Hanley by telephone, and, in any event, at that stage she believed Len Hanley was Jason Hanley, and she, apparently, did not have a contact telephone number for Jason Hanley.  Jason Hanley denied any telephone conversation.  His telephone records apparently confirm his claim that he did not telephone her.  Although it is possible he used another telephone to contact Redlands, the evidence as a whole is far from clear.

55. [55]
    Secondly, Ms Brown did not make a contemporaneous note either of the fact of the telephone call or the content of the conversation.  The absence of any note of the conversation may increase the probability of error in her later recall of exactly what was said.  It may be that at the time of any telephone conversation she did not attach any importance to it, and only after Lueck told her on the following Monday (2 August 2004) that he had heard that Jason Hanley did not want to proceed with the sale that she attached importance to the conversation.

56. [56]
    Thirdly, she did not mention the agreement to settle the contract in two weeks’ time when Mr Ohlson telephoned her on the Monday morning (2 August 2004).  Why would she not tell him of the arrangement to settle; that was, after all, the purpose of his inquiry.  His evidence is on its face inconsistent with an existing agreement to settle.^[42]

57. [57]
    Ms Brown’s evidence that she has no recollection at all of speaking to Mr Ohlson is surprising.  I have no doubt that Mr Ohlson did speak to Ms Brown on the Monday morning.  The identity of the solicitor acting for the other party to a conveyance would always be important to know.  In this case there was an even more compelling reason for her to remember Mr Ohlson’s call: Lueck had told her the vendor might not want to go ahead with the contract.  I find it difficult to understand why Ms Brown did not connect the information, received later on the Monday from Lueck, that the contract may be disputed, with a telephone inquiry from a solicitor acting on behalf of the other party.  Her note of 2 August makes no reference to the telephone call from Mr Ohlson, although it includes reference to the legal advice she gave Lueck.

58. [58]
    Fifthly, it is also difficult to understand why the letter which Ms Brown wrote on 2 August was post-dated to make it look as if it had been written on 30 July.  The internal records of Redlands show the letter went to the post at 5.17 pm on the Monday (2 August 2004).  I think there is an element of attempting to create a paper trail in both the additional note (see paragraph 48 above) and the act of postdating of the letter of 2 August 2004.

59. [59]
    And, finally, the misapprehensions in Ms Brown’s notes and statements tend to undermine the reliability of her account of the telephone conversation she alleges with Jason Hanley.  The references to Jason Hanley in the notes on 2 August and 5 August are wrong because on each occasion Lueck was relating information about Len Hanley, not Jason Hanley^[43].  How such a confusion of identity between the Hanleys persisted after she mentally sorted out who was who when she received the phone call from Len Hanley on 30 July is again difficult to understand.  More importantly, she misconstrued what she was told by Lueck during their meeting on 29 July in later asserting her instructions were that agreement had been reached on the retention of $20,000 at settlement.  Apart from the fact that Lueck had spoken to Len Hanley, not Jason Hanley, I am satisfied Lueck had not told her during their discussion on 29 July that he had reached agreement on the retention of purchase moneys at settlement. 

60. [60]
    On all of the evidence I am uncertain whether Ms Brown did have a telephone conversation with Jason Hanley on 30 July.  If she did speak to him on the telephone, I do not believe he agreed to another settlement date or to the proposed retention.  The conversation was a short one in which she informed him of her instructions as she asserted them to be, and in which he merely acknowledged he understood her position.

61. [61]
    Nor do I believe his conduct overall amounted to an affirmation of the contract. I have already referred to the evidence that after the contract failed to settle on 1 July 2004, Jason Hanley said he thought the contract was at an end.  During that time he did nothing to affirm or terminate the contract until Lueck reappeared at Russell Island at the end of July 2004.  Within a few days of Lueck’s revived interest in the contract, it was formally terminated (3 August 2004).  A party is not bound to elect immediately, provided he (or she) does not affirm the contract and provided the delay is not unreasonable.^[44]

62. [62]
    Mr Harding, in his written submissions, additionally argued Jason Hanley, by his conduct, waived the stipulation that time is of the essence. He summarised the conduct he relied on to support the submission as follows: (1) the absence of an election to terminate for approximately a month (1 July to 3August 04); (2) the enquiry to Redlands by Len Hanley on or about 3 July 04 about what was happening with the money and the contract; (3) the discussions at the property between Len Hanley and Lueck on 29,30 July 04; (4) the phone conversations alleged between Ms Brown and both Jason and Len Hanley on 30 July 04.

63. [63]
    Although it is true the vendor did not immediately elect to terminate the contract I do not believe an inference of waiver should be drawn from the vendor’s conduct. The immediate reason settlement did not take place on 1 July was the failure of the purchasers to initiate the settlement process^[45] . But beyond that the actions of the parties must be viewed in context. The inference can be drawn the vendor knew Lueck was overseas and was not going to settle the contract.  Lueck’s absence and failure to communicate with his solicitors (Redlands) had also totally sidelined them from acting in the transaction. In these circumstances the fact Jason Hanley did not communicate with Lueck, Christian Fazikas, or Redlands in the period of about a month up to 29 July is neutral in the sense that his conduct does not support an inference he had elected to waive the requirement that time is of the essence. I am inclined to accept his comment he believed the contract had fallen through. If it is necessary to place a label on his conduct it is conduct consistent with the deferment of any decision to formally terminate the contract. Once Lueck reappeared on the scene expressing an interest in completing the contract to Len Hanley (29 July 04), then any enquiry to Redlands by Jason Hanley (if he made such an enquiry) to ascertain what was happening is a neutral act in the circumstances. In discussing the nature of waiver Isaacs J said:

A waiver must be a distinct, intentional act with knowledge, such as either expressly or by imputation of law indicates intention to treat the matter as if the condition did not exist or as if the forfeiture or breach of condition had not occurred. It is a conclusion of law when the necessary facts are established. It looks, however, chiefly to the conduct and position of the person who is said to have waived, in order to see whether he has ‘approbated’ so as to prevent him from ‘reprobating’^[46].

64. [64]
    In this case, in my opinion there was no distinct, intentional act by Jason Hanley ‘approbating’ the purchasers repudiation of their contractual obligations, or otherwise waiving the requirement that time is of the essence.

65. [65]
    Mr Harding’s reliance on Len Hanley’s conduct to draw the conclusion of waiver is, in any event, questionable. The case pleaded by the purchasers was confined to Jason Hanley’s conduct (see the amended reply and answer para 3 (b) (ii)). And as far as the evidence is concerned the issue of authority is uncertain. I do not think there is any clear evidence Len Hanley was authorised by Jason Hanley to waive any term in the contract.

Did the vendor’s breach of special condition 1 negate the purported termination on 3 August 2004?

66. [66]
    Special conditions 1 and 2 were drafted to protect the purchasers. If, at the time for completion, special condition 1 was not fulfilled by the vendor^[47], the purchasers were entitled to elect to terminate the contract under special condition 1.  Or, if the dwelling was not completed to their satisfaction in any respect, the purchasers were entitled to elect to terminate the contract under special condition 2.  In law, if, when the time for completion arrived, the purchasers did not then choose to exercise any of their powers to terminate the contract, they were bound to fulfil it.^[48]

67. [67]
    The purchasers argue that Jason Hanley’s breach of special condition 1 deprives him of the right to terminate.  Mr Redman, in response, argues that the building obligations are not essential terms of the contract; and, not being essential terms, do not necessarily deprive him of the right to terminate.  One problem with Mr Redman’s argument is that the building agreement is made an essential term by the contract.^[49]  The answer to the question whether the contract was effectively terminated is, I think, found in an examination of the terms and operation of the contract as a whole rather than in an endeavour to characterise particular terms as essential or non essential.

68. [68]
    Adopting this approach it is important to note that at no stage from the revival of Lueck’s interest in the property (29 July 2004) to the commencement of the proceedings for specific performance did Lueck want to exercise the right to terminate the contract conferred by the special conditions.  His first response was to attempt to vary the terms of the contract to enable him to hold back $20,000 of the purchase price on settlement.^[50] His second response was to insist on settlement but reserve any right under the contract to sue for damages.^[51]  In doing so, and in commencing the action for specific performance, he waived any reliance on the right to terminate reserved to the purchasers by the special conditions.

69. [69]
    At common law the fact a party is in breach of a term of the contract, or not ready and willing to perform contractual obligations at a relevant time, does not necessarily prevent an election to terminate.^[52]  In argument before me the purchasers relied on the decision of the Court of Appeal in Jeppesons Road P/L v Di Domenico and Anor [2005] QCA 391 as support for an argument the vendor’s breach of the special condition prevented him from terminating the contract.

70. [70]
    Jeppesons involved a technical breach by the purchaser (five minutes late at settlement) which the vendor attempted to take advantage of by terminating the contract.  Unfortunately the vendor was itself in breach of its “dependent and concurrent” obligations.  In denying efficacy to the vendor’s election to terminate the contract, the court applied the rule that in the case of dependent and concurrent obligations (that is, where “the performance of each is conditional upon the performance of the other”), the vendor could only charge the purchaser with actual breach in failing the pay the purchase price if it was ready, willing and able to perform all of its “dependent and concurrent” obligations on that date.^[53]

71. [71]
    In this case the vendor’s breach in failing to complete his building obligations was not a breach of a “dependent and concurrent” obligation. Certainly under the contract the purchasers had the additional option of terminating the contract if the dwelling was not finished to their instructions or satisfaction. But the building obligations were not “dependent and concurrent” obligations of the contract. In my respectful opinion, the reasoning of the court in Jeppesons does not resolve the question here.

72. [72]
    In Roadshow Entertainment P/L v CEL Home Video P/L and Anor (1997) 42 NSWLR 462 the New South Court of Appeal in the course of its judgment formulated the following statements:

“A party in breach of non-essential terms who has not repudiated may rescind for fundamental breach.  See Hongkong Fir Shipping Co Ltd v Kawasaki Kisen Kaisha Ltd [1962] 2 QB 26; State Trading Corporation of India Ltd v M Golodetz Ltd [1989] 2 Lloyd’s Rep 277 at 286-7.  A party in breach of an essential but independent term may also rescind for fundamental breach.  See State Trading Corporation of India Ltd v M Golodetz Ltd at 285-7.  Compare Geraldton Building Co Pty Ltd v Christmas Island Resort Pty Ltd (1992) 11 WAR 40 at 50-1.  Roadshow, we consider, was not, by reason of its conduct, unable to terminate on the ground of CEL/Vision’s repudiation.”

73. [73]
    Applying the statement of principle in Roadshow Entertainment the important considerations in this case are:

1. (i)
   The building obligations merged into the contract as special condition 1 are not “dependent and concurrent” obligations of the contract.

2. (ii)
   Although the building obligations are an essential term of the contract, once the right to terminate conferred by the special condition is waived by election (or lost through non-exercise) the building obligations ceased to be an essential term of the contract, their breach merely giving rise to an action for damages.

3. (iii)
   In this case the purchasers waived any right to terminate the contract under the special condition.  This is an important consideration. In Mehmet v Benson 113 CLR 295 Windeyer J observed that “a defendant cannot rely upon the unreadiness of the plaintiff to perform what he, the defendant, has waived.”^[54]  Here there was no election to waive the right to terminate before settlement; and, at the time for settlement, because no election to terminate was made, the right to do so was lost.^{[55] [56]}

4. (iv)
   The reason the contract failed to settle on the 1 July is because of the purchasers default.  At settlement I believe the vendor was ready and willing to settle in the sense that he was disposed and able to complete the contract^[57], although in breach of his building obligations, had the purchasers not turned their back on the contract.

74. [74]
    The election to terminate by the vendor is technically an acceptance of the purchasers’ repudiation of the contract. In electing to terminate the contract the vendor did not seek damages or seek to retain the deposit. In the case of an action for damages, a vendor would be required to establish that he was ready and willing to settle the contract in order to establish damages. The distinction between an election to terminate unaccompanied by a claim for damages and an election coupled with a claim for damages was regarded as a potentially relevant one by members of the court in Foran v Wight.^[58]  The building obligations under the contract are an independent set of obligations which were written into the contract as a special condition to protect the purchasers, and to provide them with an additional remedy of termination if the vendor defaulted in any respect on the building agreement.  In my opinion, the vendor’s breach of the building agreement does not operate to prevent him accepting the purchasers’ repudiation of the contract.  I therefore hold the contract was terminated by the notice given by Mr Ohlsen on 3 August 2004.  Such a conclusion is, I think, consistent with the reasoning in Foran v Wight, Roadshow Entertainment P/L v CEL Home Video P/L and Anor, and Kelly v Desnoe.^[59]

Specific performance

75. [75]
    Although it is strictly unnecessary to consider specific performance in view of the conclusion the contract was brought to an end on 3 August 2004, I think I should indicate the view I have reached on this aspect of the action.

76. [76]
    Specific performance is a discretionary remedy and an order for specific performance of a contract will not be made as a matter of course without consideration of the conduct of the applicant.

77. [77]
    The purchasers in this case effectively turned their backs on the contract, until almost a month after the date for settlement. Their conduct amounted to a repudiation of their obligations under the contract and a fundamental breach of the contract. Only in exceptional circumstances will specific performance be granted after such a breach of an essential term of a contract. In this case the conduct of the vendor in seeking to terminate the contract, was not unconscionable, and I do not think the case is one in which it would be appropriate to grant specific performance.^[60]

Orders

78. [78]
    It is declared the contract of sale dated 7 April 2004 between Jason Hanley as vendor and Richard Lueck and Christian Fazikas as purchasers was terminated by the vendor on 3 August 2004.

79. [79]
    The claim for specific performance of the said contract by the purchasers Richard Lueck and Christian Fazikas is dismissed.