Urban Homes Pty Ltd v Emmett[2014] QDC 282

DISTRICT COURT OF QUEENSLAND

1. [1]
   The appellant is a builder. The respondents are a married couple who wanted to build a house on land purchased by them at 2 Perregreen Street, Doolandella.

2. [2]
   On 30 March 2011 the appellant and the respondents signed a contract for the appellant to build the house for $273,947.

3. [3]
   The contract provided for payment of a deposit in the sum of $13,697.

4. [4]
   Further, item 11 in the schedule to the contract provided in answer to the question “Is this contract conditional on the owner obtaining loan approval from a financial institution?” the answer “Yes.”  In this item, the loan approval date was stated to be 8 March 2011. That date was 22 days prior to the signing of the contract.

5. [5]
   There is no dispute prior to signing the contract the appellant provided the respondents with a variety of quotations, plans and other documents. Further, there is no dispute the respondents did not pay the deposit to the appellant and did not proceed with the contract.

6. [6]
   It is also not in dispute that the respondents entered into a contract with another builder, Val Eco Homes Pty Ltd. That contract was dated 6 June 2011. The price for the construction of the house with Val Eco Homes Pty Ltd as the builder was $226,000.
7. [7]
   By a claim filed in the Magistrates Court on 16 February 2012 the appellant claimed from the respondents:

   1. damages, as a liquidated debt for the unpaid deposit, the sum of $13,697; and
   2. damages pursuant to clause 22.4 of the contract, and at common law, all loss, costs, expenses and damages in connection with each of the breaches of the contract, and the termination, namely an amount equal to approximate profit on the contract price in the sum of $77,855.

8. [8]
   It is also not in dispute that in its dealings with the respondents the appellant was represented by Brian Maloney who was a director of the appellant.

9. [9]
   The appellant’s claim was heard by the learned Magistrate who concluded:

   1. it had been agreed between the parties that the deposit need not be paid until such time as finance had been approved. Therefore the respondents were not in breach of contract by not paying the deposit upon signing the contract and therefore the respondents were not in substantial breach of the contract, allowing them to terminate the contract notwithstanding clause 20.3; and
   2. the contract was subject to finance, that finance approval was not obtained, and that notice that no finance approval was obtained was given to the appellant such that the contract was thereafter at an end.

10. [10]
    The learned Magistrate dismissed the appellant’s claim against the respondents.

11. [11]
    The appellant appeals against the learned Magistrate’s decision on the grounds that:

    1. the learned Magistrate erred in law by failing to find that the respondents, by entering into a contract with the appellant that had a date for finance the performance of which pre-dated the contract, had concluded an agreement making no provision for finance;
    2. there was no basis in law, and insufficient reasons provided in the reasons, to:
       1. (a)
          support the finding that the contract between the appellant and the respondents was subject to the respondents obtaining finance;
       2. (b)
          to then imply a term into the contract that the date by which finance could be obtained was 19 May 2011;
    3. by finding that the e-mail to the appellant dated 19 May 2011 was sufficient to terminate the contract, in circumstances where:
       1. (a)
          the proper construction of this e-mail does not have this effect;
       2. (b)
          further, and in the alternative, there was non-compliance with the clause of the contract governing the same, namely clause 11.15; and
       3. (c)
          further, and in the alternative, whilst the respondents were in breach of the contract by not paying the deposit (see clause 20.3 of the contract);
    4. by allowing the court’s discretion to miscarry by finding against the weight of the evidence, and in particular the evidence of the second respondent to the effect that she accepted that the appellant did not waive the obligation to pay the deposit, that the express terms that set out the time for payment of the deposit may be varied or otherwise altered by the unilateral statement made by one of the respondents to the appellant after the contract was concluded;
    5. by failing to provide adequate reasons.

12. [12]
    This appeal is by way of rehearing. Therefore the powers of this court are exercisable only where the appellant can demonstrate that, having regard to the evidence now before the appellate court, the order that is the subject of appeal is the result of some legal, factual or discretionary error (Allesch v Maunz (2000) 203 CLR 172, para 23). Further, this court is obliged to conduct a real review of the trial and, as the trial was conducted before a judge sitting alone, of that judge’s reasons. Further this court is not excused from the task of “weighing conflicting evidence and drawing [its] own inferences and conclusions, though [I] should always bear in mind that [I] have neither seen nor heard the witnesses, and should make due allowance in this respect” (Fox v Percy (2003) 214 CLR 118, para 25). Further in Fox v Percy, the High Court cited Warren v Coombes^[1] where a majority of the High Court reiterated the rule that:

“[I]n general an appellate court is in as good a position as the trial judge to decide on the proper inference to be drawn from facts which are undisputed or which, having been disputed, are established by the findings of the trial judge. In deciding what is the proper inference to be drawn, the appellate court will give respect and weight to the conclusion of the trial judge but, once having reached its own conclusion, will not shrink from giving effect to it.”^[2]

13. [13]
    Finally, in Devries v Australian National Railways Commission & Anor (1992-1993) 177 CLR 472 at 479 the majority said:

“More than once in recent years, this Court has pointed out that a finding of fact by a trial judge, based on the credibility of a witness, is not to be set aside because an appellate court thinks that the probabilities of the case are against – even strongly against – that finding of fact. If the trial judge’s finding depends to any substantial degree on the credibility of the witness, the finding must stand unless it can be shown that the trial judge ‘has failed to use or has palpably misused his (or her) advantage’ or has acted on evidence which was ‘inconsistent with facts incontrovertibly established by the evidence’ or which was ‘glaringly improbable’.”

14. [14]
    Mr Maloney gave evidence. He said regarding the deposit, “We required a deposit of 13697.”  Regarding finance, he said because he was already told finance was through, they did not need to worry about that item. He confirmed that he said to the respondents words to the effect of “finance is already approved”. He said he had had a conversation with the first respondent following a letter of 22 February that the first respondent replied to his secretary that the first respondent did not want to sign just yet. Mr Maloney said he spoke to the first respondent and asked, “Where are we at?  What are we doing?”  He replied, “I want – won’t – didn’t want to sign until the finance was approved.”  Mr Maloney said he said to the first respondent, “Fine. I understand that.”  He said this occurred in a phone call in around about 1 March. He said the first respondent said, “I don’t want to sign the contract until finance is approved.”

15. [15]
    When Mr Maloney was cross-examined, he denied saying to the respondents that the date 8 March in the finance item was only there for convenience; as the contract was subject to finance, they did not need to worry about that. He agreed that he spoke to the respondents about the deposit at the end of the process of going through the contract. He denied that in terms of payment of the deposit he told the respondents that as their finance had not been approved there was no point getting the deposit yet. He denied agreeing with the first respondent that the deposit could be paid once the finance had been approved.
16. [16]
    When the first respondent gave evidence, he said he had never built a house before. Further he had never had home finance before, so he had no idea if $273,000 had a likelihood of getting approved. He said as they were going through the items in the contract with Mr Maloney when the deposit of $13,697 was reached, he said to Mr Maloney straight out how did he want to deal with that. He said he said he did not see any point in paying $14,000 when they did not know where they were at with their finance. He said they had never done it before. He made a point of saying, “I’ve never done it before.”  He said once the finance was approved and they knew they were all good, then they could roll out the $14,000 in payment to him. He said Mr Maloney did reply that it was not how it was usually done but he could definitely see the rationale of his thinking, “no problem at all”. Regarding the finance clause, he said in effect, when he looked at it, he ticked a box in his brain. He said while he was looking at it and thinking it was “fantastic”, his wife skipped ahead and she asked what the date, 8 March, was all about, because it was “long gone”. He said Mr Maloney then turned around and said, “Well, we expected you in here a couple of weeks ago. That was the date that we expected you would have finance approval. But don’t worry about it. It’s passed. Don’t worry about it.”  The first respondent said nothing more was said about that, so they ticked “yes”, they had understood because he had looked at it. The first respondent said Mr Maloney at no time said, “Do you realise that means your finance must already be approved?”  He said it was not discussed. He said it was his wife who asked the question. He said Mr Maloney said, “Don’t worry about it. We were expecting you in here two weeks earlier.”  Therefore the first respondent said he thought, “Okay. Makes sense.”  Later in the first respondent’s evidence, he said at no time did he say to Mr Maloney, or anyone else from the appellant, that he had finance approval in place.
17. [17]
    When the second respondent gave evidence, she said when they went through the contract on 30 March 2011 she specifically asked why that date 8 March 2011 was beside the loan approval date. She said she asked that question because they did not have finance. She said she was reading that as loan approval had been given. That is why she asked why there was a date in there. She said they did not have finance. She said Mr Maloney responded. She said he said, “Don’t worry about it.”  She said he said “we” put that date in there, and the end of the sentence was incomprehensible to her. She said it was slightly garbled and she did not recall the end of it, but what stuck in her mind was the “don’t worry about it”. She said what she understood from “don’t worry about it” is that when reference was made two lines above it says “Is this contract conditional on the owner obtaining loan approval?” and there is a little dot in the “yes”, and so she said, “Well, that’s correct that we needed to say ‘subject to conditional upon obtaining finance’”. She said Mr Maloney did not say anything about that. She said after the contract had been signed and they did the colour selection, they came back and the subject of the deposit came up. She did not recall how, but there was talk of it being paid, and she said, “As soon as we get the approval, you’ll have your money the next day.”  She did not recall what Mr Maloney’s response was. She believed he acknowledged her because it is a very rash promise to say that as soon as they get approval he would have his money within 24 hours. She said that she said basically as soon as they could they would pay the deposit following their loan approval. She believed he would have acknowledged her. She also said that she had never before that day said to Mr Maloney that they had loan approval nor did she say on that date they had loan approval. Further at no stage after that date did she tell him that they had loan approval.
18. [18]
    When the learned Magistrate came to dealing with the versions of the witnesses regarding the issue about the deposit and the subject to finance clause he noted that as between the respondents as to the discussions concerning the deposit that there were differences in the recollections as to when in the discussions the deposit was discussed. However he found the versions of the respondents to be more compelling to him than that of Mr Maloney. As between the two respondents the learned Magistrate noted their recollections were different although he considered that the conversation recounted by the second respondent may not have been heard by the first respondent or the first respondent did not pay particular attention to it as it had already been discussed by him with Mr Maloney and therefore the first respondent may not have recalled it for that reason. The learned Magistrate considered whether the respondents were tailoring their evidence and concluded they were not. Regarding finance the learned Magistrate said it was obvious that they did not have finance at that particular point in time. Further they did not receive finance to proceed with the project. That finding is not challenged on this appeal.

19. [19]
    On the other hand regarding Mr Maloney the learned Magistrate did not think he was a particularly compelling witness. The learned Magistrate noted that he gave his evidence in a very rushed fashion. However, that may not be reason to reject a witness’s evidence because many witnesses give their evidence in a rushed fashion. Even the first respondent was cautioned to slow down when he gave his evidence. However, the learned Magistrate found the manner in which Mr Maloney gave his evidence did not give him confidence that he was being entirely truthful. Mr Maloney’s demeanour was a matter the learned Magistrate took into account. In addition he found he lacked confidence with Mr Maloney because of the evidence he gave about his loss of profits being some $70,000 and indicated this was the normal margin in the industry implying that the industry was doing very well whereas this was contradicted by apparently statements made by Mr Maloney on television. The learned Magistrate in the end concluded he could not rely on Mr Maloney’s evidence as truthful where it was not supported by independent evidence.

20. [20]
    In addition the learned Magistrate accepted the respondents’ evidence as opposed to that of Mr Maloney in respect to the discussions concerning the contract being subject to finance. In addition the learned Magistrate accepted the evidence of the first respondent when he said he never said to anyone that he had finance approved.

21. [21]
    Having considered the evidence and the learned Magistrate’s reasons I am satisfied his acceptance of the respondents’ evidence must stand because it has not been shown the learned Magistrate has failed to use or has palpably misused his advantage or has acted on evidence which was inconsistent with facts incontrovertibly established by the evidence or which was glaringly improbable.

22. [22]
    Although a number of documents were tendered in evidence, relevant to the issues is an email from the first respondent to Mr Maloney dated 20 April 2011 the text of which is:

“Hi Brian,

Well, we have hit a fairly large hurdle in that the valuation came in at $70,000 under what we had expected and planned on.

I am speaking with the finance broker and with a few local agents to see if we can provide proof that the valuation is wrong and have it re-assessed (a battle which I am not presently winning).

A local agent informs me that the last three houses in the estate have sold for under construction and land costs and that he is aware of two other builders/purchasers that are having exactly the same issue.

Would you mind giving me a call when you have a moment to discuss some options.”

23. [23]
    The email from the respondents’ finance broker to Mr Maloney was sent on 19 May 2011 and its terms are:

“Hi Brian,

Outside of the work that Ryan and Nerissa are doing himself, they still need to kick in funds to complete as the valuation has come in low.

Cannot show funds to kick in right now to supplement the building contract.

I have a renovation loan going at the moment for construction of $500K, customer has $150K cash and loan is for $350K. Customer has shown in this case CBA the cash funds, has used all of it and now the bank is drawing down the construction loan of $350K as per signed invoice/progress payments etc, no problem.

In Ryan and Nerissa’s case we are unable to show the funds to supplement up front so we are stuck. This is not just a case of supplying thing themselves, they require cash to complete (bank won’t wear it saved over the construction period as ‘what if’ they don’t save it, go into default and the bank has to sell a partially completed property).”

24. [24]
    The email from the broker sent on 19 May 2011 followed on earlier emails from the broker to Mr Maloney about the issues involved for the respondents to obtain finance.

25. [25]
    Then on 19 May 2011 an email was sent from the first respondent to Mr Maloney in the following terms:

“Hi Brian,

Nerissa and I have spent the last 48 hours discussing and pondering our options which regards of how best to move forward with our block of land and have decided at this point in time due to the current issues with finance approval etc, not to proceed with building on the land at this time.

We are going to keep building on our deposit and re-evaluate the situation further down the track.

I had left a message with Tamara today as I wanted tell you this in person.

I really want to emphasise that this is not ‘goodbye’ more like ‘see you later’ and I will continue to sing your praises as such and keep referring people to you where possible”.

26. [26]
    Finally then there is an email from Mr Maloney to the first respondent on 26 May 2011 in the following terms:

“Ryan,

Apologies for not getting back to you earlier.

I understand your position. It is an extremely strange market at present, one I haven’t seen previously. We have your building approval etc which I will hold. If I can help any further please let me know. I will hold your price until then.”

27. [27]
    Regarding the payment of the deposit the learned Magistrate said he accepted the evidence from the first respondent that Mr Maloney accepted that the deposit not be paid until such time as finance had been approved. In my opinion that finding cannot be contradicted in this appeal having regard to the learned Magistrate’s reasons for accepting the respondents’ evidence. The learned Magistrate also said that if that had not been the case that he would have expected the appellant to have demanded the payment of the deposit from the respondents. He said there was no evidence of such a demand. In that respect in my opinion the learned Magistrate was correct to observe that there had been no demand which rightly suggested to the learned Magistrate that the first respondent was correct in his evidence that he had been told that the deposit need not be paid until such time as finance had been approved.

28. [28]
    In my opinion the invoice for the deposit is not the same as a demand for the deposit. The invoice was dated 22 February 2011 well before the contract was signed.

29. [29]
    The learned Magistrate noted in his reasons that clause 11.5 of the contract provides “The Owner must pay the Deposit to the Builder, upon signing of this Contract.” However he noted the parties are at liberty to agree to delay compliance with this clause. In that respect I am of the opinion the learned Magistrate was correct. As the learned Magistrate noted correctly in my opinion if the discussion had not proceeded as the second respondent said to the effect that the deposit could be paid after the finance was approved a different conversation would have certainly been remembered by a person in the second respondent’s position.

30. [30]
    The learned Magistrate also dealt with an argument under clause 3.2 of the contract which provides that “the parties acknowledged that the terms of this Contract are set out in the Contract and shall no be altered, varied, suspended, deleted, or affected by reference to any prior representations, conditions or agreement, whether written or verbal.”  The learned Magistrate noted the argument for the appellant that the respondents could not rely upon any supposed agreement by Mr Maloney to accept a delay in the payment of the deposit. However the learned Magistrate noted and in my opinion he was correct that clause 3.2 only talks about prior agreements. He noted in my opinion correctly that Mr Maloney’s agreement to accept the delay in the payment of the deposit was not a prior agreement. The learned Magistrate had accepted rightly in my opinion that on the second respondent’s evidence the agreement to delay the payment of the deposit occurred after the signing of the contract.

31. [31]
    Therefore the learned Magistrate found that the respondents were not in breach of the contract by failing to pay the deposit upon the signing of the contract and therefore were not in substantial breach of the contract allowing them to terminate the contract notwithstanding clause 20.3 of the contract. Clause 20.3 of the contract provides “The Owner may not terminate this Contract if the Owner is in substantial breach of this Contract.”  As the learned Magistrate found the respondents were not in substantial breach of the contract and therefore could terminate the contract. In that respect I consider the learned Magistrate was correct.

32. [32]
    Regarding the issue of finance the appellant relies upon the judgment of Cullinane J in Plummer v GPD Marine Village & Ors [2011] QSC 9 where the plaintiffs entered into a contract to purchase a unit to be constructed. The contract was concluded on 13 January 2005. The contract contained a finance clause. The finance date that was specified in the clause was 12 November 2004. In April 2007 a deed came into existence its intended effect being for the transfer of the contractual obligations between the seller to another party. Cullinane J accepted what was proposed by this deed could properly be described as a novation. However the plaintiff purported to terminate the contract because of the plaintiffs’ failure to obtain finance. The new seller held the plaintiffs in breach of contract and purported to terminate the contract. The dispute between the parties involved the right to the deposit sum of $90,000. One of the grounds relied upon by the plaintiffs to recover the deposit was the failure to obtain finance. Cullinane J held that in this instance what occurred is that the parties entered into a contract for the sale of the property which was in the result unconditional as to finance. He said in paragraph 32 “By allowing the finance date to remain in the contract which was not completed until some months after the nominated finance date the parties ought to be taken as having concluded an agreement making no provision as to finance.”

33. [33]
    In the present matter the appellant submits the finance date 8 March 2011 being 22 days before the contract was signed on 30 March 2011 has the same effect as was accepted by Cullinane J in Plummer’s case. That is that the parties ought to be taken as having concluded an agreement making no provision as to finance.

34. [34]
    The learned Magistrate did not accept that argument. He did agree with Cullinane J’s view that a finance clause in a contract conditional as to finance up until completion would be an uncommercial term. That is Cullinane J said in paragraph 28 that a contract which is conditional as to finance right up until completion would not be a reasonable provision to imply. However, the learned Magistrate saw the present matter as distinguishable from Plummer because the building in the present matter would not be commenced until finance had been approved and the deposit paid and therefore the contract would not be completed until some undetermined date. What the learned Magistrate did was to imply a term that the loan approval date be 19 May 2011.

35. [35]
    The appellant submits the learned Magistrate was wrong to imply that term in this contract. The appellant submits he should have reached the conclusion the contract in this matter made no provision as to finance.

36. [36]
    The learned Magistrate also referred to Perri v Coolangatta Investments Pty Ltd (1982) 149 CLR 537. This case is authority for the proposition that what is a reasonable time for the performance of contractual obligations where there is no fixed time agreed is a question of fact and depends on the circumstances.

37. [37]
    It is correct as submitted by the appellant that the learned Magistrate did not in his reasons discuss the tests to be satisfied before a term can be implied in a contract. In BP Refinery (Westernport) Pty Ltd v Shire of Hasting (1977) 180 CLR 266, 283 these are :

    1. The term must be reasonable and equitable;
    2. The term must be necessary to give business efficacy to the contract, so that no term will be implied if the contract is effective without it;
    3. The term must be so obvious that it “goes without saying”;
    4. The term must be capable of clear expression; and
    5. The term must not contradict any express term of the contract.

38. [38]
    Having considered the evidence and the learned Magistrate’s reasons I am satisfied the learned Magistrate was correct to imply a term that finance was to be obtained by 19 May 2011.

39. [39]
    That is, I respectfully agree with the learned Magistrate that the decision of Plummer is distinguishable from the present case. In Plummer it was uncommercial to imply that finance could be obtained up to the completion date whereas in the present matter the date 19 May 2011 is well before the completion date and there are provisions of this contract that allows for the appellant to extend the time for completion of the building.

40. [40]
    In my opinion despite the learned Magistrate not giving reasons by reference to the tests in BP Refinery applying those tests on the facts found by the learned Magistrate as both parties intended the contract be subject to finance it is reasonable and equitable to imply a term that finance was to be approved by 19 May 2011. Further, the contract did provide “Yes” to the question that the contract was conditional on the obtaining of loan approval from a financial institution.

41. [41]
    In those circumstances to imply the term the learned Magistrate implied was necessary to give business efficacy to the contract and was necessary for the contract to be effective. In my opinion for these reasons the implied term “goes without saying” and is capable of clear expression and does not contradict any express term of the contract. In my opinion the date 8 March 2011 was meaningless. Therefore, that date can sit comfortably with the term implied by the learned Magistrate.

42. [42]
    Finally the learned Magistrate as a question of fact in the circumstances in my opinion was correct to choose 19 May 2011 as the relevant date. On the evidence that date was the date by which the respondents had gone as far as they could to obtain finance to build a house with the appellant.

43. [43]
    The answer “Yes” and the expired date are inconsistent. In my opinion this inconsistency could only be cured by the implication of the term that the approval date be 19 May 2011.

44. [44]
    Contrary to the submission of the appellant I do not accept the parties should be taken to have concluded a contract that was not subject to finance. In my opinion such a conclusion is contrary to the evidence accepted by the learned Magistrate. In my opinion in the circumstances the learned Magistrate was correct to imply the term he did imply.

45. [45]
    In my opinion the learned Magistrate was correct to find the contract was brought to an end by the email from the respondents dated 19 May 2011. Clause 11.15 of the contract provides:

“11.15 Right to cancel Contract if loan approval rejected

If, within three (3) Days after the loan approval date, the Owner gives the Builder written notice that the Owner has not obtained the loan approval, together with evidence satisfactory to the Builder that the lender has assessed and rejected the loan approval, this Contract is at an end and the Builder must refund the Deposit less any expenses incurred by the Builder in performing the Works.”

In my opinion the email on its proper construction was in the circumstances sufficient to terminate the contract. In my opinion the email was to be seen in the context of all the dealings between the parties.

46. [46]
    Therefore, in my opinion the learned Magistrate was right to find the respondents were not in breach of the contract by not paying the deposit and therefore could terminate the contract.

47. [47]
    I have found the fourth ground of appeal difficult to understand. I found nothing in the second respondent’s evidence that should have led the learned Magistrate to reach a conclusion in favour of the appellant. In my opinion the learned Magistrate’s findings in favour of the respondents were justified on the evidence.

48. [48]
    Regarding the failure to provide adequate reasons except that I accept the learned Magistrate did not deal with the tests in BP Refinery, his reasons in my opinion were adequate.

49. [49]
    If the learned Magistrate erred to imply the term that the approval date be 19 May 2011 and erred when he found the contract was rightly brought to an end in my opinion the contract is nevertheless void for uncertainty. That is so because in my opinion as item 11 stated “Yes” that the contract was conditional on finance being obtained and as the date to obtain approval had expired the court is unable to attribute to the parties any particular contractual intention (per Barwick CJ in Upper Hunter County District Council v Australian Chilling and Freezing Co Ltd (1967-1968) 118 CLR 429, 437).

50. [50]
    Alternatively on the facts found by the learned Magistrate I come to the view the parties agreed to terminate the contract. Although the first respondent said in his email to Mr Maloney on 19 May 2011 this is not “Goodbye” more like “see you later” nevertheless in my opinion this email and Mr Maloney’s email dated 26 May 2011 is conduct which when objectively viewed manifests the parties’ intention to abandon the contract (Marminta Pty Ltd v French [2003] QCA 541, [22]).

51. [51]
    In my opinion by his email Mr Maloney accepted the contract was abandoned. However, he offered if the respondents sought in the future to re-establish a contract within a reasonable time the same price.

52. [52]
    For these reasons I conclude the learned Magistrate was correct to dismiss the claim. Therefore I dismiss the appeal. I will hear the parties on the question of costs.