Grieve v Enge[2006] QSC 37

SUPREME COURT OF QUEENSLAND 

1. The plaintiffs seek specific performance of (or appropriate declaratory relief in relation to) a contract entered into between the plaintiffs and the first defendant on 15 July 2002 for the sale by the first defendant to the plaintiffs of land described as Lot 9720 on Crown Plan B66149 County of Herbert Parish of Pring, situated at 7 Aveccinia Street, Rose Bay, Bowen for the sum of $170,000. Alternative relief is sought in the form of damages.

2. There is a claim against the second defendant who is now a registered proprietor of the subject land seeking a declaration that she holds her interest subject to the interest of the plaintiffs. It is alleged that she took a transfer of a joint interest in the land knowing of the plaintiff’s interest and with the intention of defeating that interest.

3. According to their evidence the plaintiffs were interested in acquiring land in the Bowen area and approached real estate agents seeking suitable sites. The first plaintiff spoke to one Heywood, who on the plaintiffs’ case was at all times the agent of the first defendant (and on the first defendant’s case the agent of the plaintiffs) and were told about the subject site which was inspected with Heywood. At the same time the plaintiffs were also interested in acquiring another property. They would have needed finance to complete both transactions and in the result the valuation which was obtained did not support the sale of the other property which did not proceed. Finance was required to complete the subject transaction and was provided for in the contract.

4. The plaintiffs had sold land in Melbourne and had some available funds.

5. Heywood told the plaintiff that the first defendant would not take less than $170,000 for the land.

6. In his evidence Heywood said that he had been approached by the second defendant who had asked him to sell the land on behalf of her husband, the first defendant. He says that she informed him that they were encountering financial difficulties and did not want the land to be advertised for sale or there to be any sign relating to it in Heywood’s office. Heywood says he agreed to this and says that for this reason he did not have the first defendant sign an authority to sell, something which is contrary to the statutory requirements and places an obstacle in the way of any recovery of commission. Heywood says that he had taken another prospective buyer to the house earlier, and that the first defendant had said in front of that person he would take $170,000 for the house.

7. It is the defendants’ case that Heywood broached the question of a sale of the dwelling at some flats which he had for sale and where the first defendant was present and was told that the house was not for sale. The defendants acknowledge that Heywood brought the plaintiffs to the land and that on earlier occasions he had brought other persons and had had some discussion about what the value of the land was. The first defendant says that in such a discussion he had told Heywood that he would not accept less than $170,000 for the land but says that he at no time indicated to Heywood that the house was for sale. The resolution of this issue turns entirely upon credit.

8. On this issue I accept what Heywood said. I am satisfied that he had been approached by the second defendant acting on behalf of the first defendant and that he unwisely took the course that I have described above believing, rightly or wrongly, this to be consistent with the request of the second defendant for discretion in selling the land. The first defendant was, I am satisfied, desirous of selling the land and Heywood had been asked to do so but to do so discreetly.

9. I therefore reject the claim made by the defendants that Heywood was the plaintiffs’ agent. I am satisfied he was the first defendant’s agent.

10. The plaintiffs made an offer of $170,000 by signing a contract in standard REIQ form which showed that sum as the purchase price. Heywood was away from Bowen on the weekend in which Saturday 13 July fell. Another member of the firm, one Joycelyn Taylor, was in the office on that day. The plaintiffs approached her and told her that they wished to make an offer in the sum of $170,000. Taylor, having spoken to Heywood, prepared the contract which was signed by the plaintiffs in her presence. It provided for a deposit of $1,000. She says that she attempted to call the first defendant to inform him of this but was unsuccessful.

11. After Heywood’s return the defendants were contacted and went to his office on the afternoon of Monday 15 July where the first defendant executed the document. There was a substantial dispute as to what took place on that day in Heywood’s office.

12. In the pleading delivered on behalf of the first defendant, he alleges that he was adversely affected by alcohol and a lack of sleep and alleged a lack of capacity to contract and sought equitable relief upon the grounds that the enforcement of the contract in the circumstances would be unconscionable. Ultimately these remedies were abandoned.

13. It was however the defendants’ evidence that the first defendant was adversely affected by alcohol and was tired having worked a night shift as a train driver the previous evening. His state of sobriety and general condition of alertness are relevant to another issue which was raised in the pleadings.

14. According to the defendants they had decided on the 17^th that they would not sign the contract and told Heywood this when they saw him.  The effect of their evidence was that they went to tell him this in person rather than doing so on the telephone.

15. It is alleged that Heywood having been told that no contract would be signed effectively browbeat the first defendant into signing it. It is alleged that the first defendant ultimately signed under pressure from Heywood and having had represented to him by Heywood that he had a cooling off period which would permit him if he wished to withdraw from the contract within five days after executing it.

16. This evidence, taken with the claim that Heywood was the plaintiffs’ agent, constituted the basis of a claim for equitable relief on the grounds of unconscionability. The finding that Heywood was the first defendant’s agent is itself fatal to this claim.

17. Heywood denies the defendants’ allegations as to what occurred at his office on 15 July. He says that the first defendant was at all times a willing seller. He denies telling the defendants that the first defendant as a vendor had a five day cooling off period and he also denies that the first defendant was obviously affected by alcohol or was in anything other than a normal condition of alertness.

18. Baker was in the office and saw the defendants when they arrived. She said there was nothing unusual about the first defendant’s condition. She says that she was about two or three metres away, working at a computer when Heywood was with the defendants. Her evidence was that she had something of an interest in the matter because of her earlier involvement and says that she neither saw nor heard any signs of Heywood harassing or browbeating the first defendant.

19. I do not accept the evidence of the defendants as to what occurred at Heywood’s office on this afternoon. I am satisfied that the first defendant at that time wished to sell the land. I should say that my impression of Heywood on the one hand and the two defendants on the other, having heard their evidence and having had the opportunity to make some assessment of each of them, is that it would be improbable that the first defendant would be vulnerable to being browbeaten by Heywood and even more improbable that the second defendant would allow such a thing to happen. I reject the evidence that Heywood browbeat the first defendant and that he represented that the first defendant had a five day cooling off period.

20. On 17 July a letter was sent to the plaintiff stating that the first defendant was not proceeding with the contract. This letter was handwritten by the second defendant and delivered by her to the plaintiffs. It is exhibit 15 and it is desirable if I set it out in full:

“17.7.02

To Mr & Mrs Grieves,

I am writing this letter to you both to explain what has happened since Saturday the 13^th of July.  On Saturday at about 11.00 am Century 21 Bob Heywood rang from Townsville and told us he had a contract for us to sign at $170,000 and it was most urgent that I contact Henry as Bob wanted it signed by ½ hours time.  I then contacted Bobs (sic) wife and told her we need the weekend to think about this offer.  When I rang her and told her this she was quite angry.  On Monday the 15^th July my husband Henry and myself decided we would not be signing the contract as we thought we could get a better price for our property.  When we turned up at Century 21 we told Bob Heywood we are not signing we want another 2 weeks to see if we could get a better price.  For the next 45 min all he did was pressure Henry into signing which I was most annoyed that was at 5.00 pm Mon.  We went home and discussed the situation, I then was very angry with my husband Henry which caused a lot of bitterness between us.  Henry is a train driver and shift worker he had not had sleep for 24 hr before he saw Bob Heywood and was feeling weak and vunerable (sic) and that’s probably why he signed.

On Tuesday morning I rang Joy at Century 21 and told her we were backing out the contract because of the pressure Bob had put on Henry.

Bob also told us we had a 5 day cooling off period if Henry signed anyway on the Monday.

I just thought that you both should know what has gone one.  We regret any inconvience (sic) to you both.  But I will not allow myhusband to be pressured into things that affect our lives greatly.

With thanks

Linda Enge

47865444”

21. On the same date the first defendant attended at Heywood’s office and prepared on the stationery of Heywood’s firm a letter which he gave to Heywood. This is exhibit 16. It is addressed to the plaintiffs. It opens with the following words: “I have made retraction of sale of my property of Aviennia (sic) St. Bowen”.  The letter then goes on to say that in the event of “personal litigation” (sic) he will make certain complaints regarding the matter to the REIQ and the banking ombudsman.  The letter goes on to apologise to the plaintiffs.

22. On 17 July the first defendant entered into a contract for the sale of the land to new purchasers (John Malcolm and Belinda Jane Sinclair) for the sum of $180,000. This contract (exhibit 5) was later abandoned.

23. On my assessment of the evidence it is plain that the defendants had a change of heart after the first defendant had signed the contract. It is unnecessary to make any finding as to the cause of this. It is not entirely clear when the possibility of a higher offer arose but this may be the explanation for the change of heart.             

24. As I have said, it was necessary for the plaintiffs to obtain finance to complete the contract. The relevant condition of the contract is in the following terms:

“3.  Finance

3.1This contract is conditional on the Buyer obtaining approval of a loan for the Finance Amount from the Financier by the Finance Date on terms satisfactory to the Buyer.  The Buyer must take all reasonable steps to obtain approval.

3.2The Buyer must give notice to the Seller that:

(1)approval has not been obtained by the Finance Date and the contract is terminated; or

(2)the finance condition has been either satisfied or waived by the Buyer.

3.3The Seller may terminate this contract by notice to the Buyer if notice is not given under clause 3.2 by 5pm on the Finance Date.  This is the Seller’s only remedy for the Buyer’s failure to give notice.

3.4The Seller’s right under clause 3.3 is subject to the Buyer’s continuing right to terminate this contract under clause 3.2(1) or waive the benefit of this clause 3 by giving written notice to the Seller of the waiver.”

The finance date was 29 July 2002.

25. It is common ground that no notice pursuant to clause 3.2 was ever given by the plaintiffs to the first defendant. The first defendant claims to have terminated the contract pursuant to his right under clause 3.3 to do so. I will return to this issue shortly.

26. The first plaintiff says that he did not receive a copy of the signed contract from Heywood and that it was not until considerably later that he obtained a copy. The second plaintiff similarly says that she did not obtain a signed copy of the contract from anyone. Heywood says that he thought that he had provided a copy to the first plaintiff but could not specifically remember doing so. He says that he thought it was likely that he had provided it to him at the garage where the first plaintiff worked. The first plaintiff says that Heywood did come to the garage and told him that the first defendant had signed the contract.

27. The first plaintiff gave evidence about this matter in December 2005. On the adjourned hearing of the trial in February 2006 he was recalled to say that he had received a folder from Heywood at the garage. He did not look in the folder at that time but took it with him when he went to the bank next day and gave it to the officer to whose evidence I will refer in a moment. He says that it was returned to him and that later in the course of the litigation when his solicitor asked him for any relevant documents he found the folder at home and contained in it were two documents which have become exhibits. One is the receipt for the deposit (exhibit 20) and the other is the notice pursuant to the Property Agents and Motor Dealers Act 2000 relating to the cooling off period.

28. Wendy Schuler was the manager of the Bendigo Bank at Bowen at that time and the plaintiffs were clients of the bank. She says that she completed the documentation relating to the application for finance and prepared a valuation request (exhibit 17) for a valuer. Her evidence was that the cross beside the words “copy of contract” which appear in that document establish that she had a signed copy of the contract when she completed that document which was dated 16 July 2002. She says that it is her virtually invariable practice to receive this from the clients and that it would be a remarkable event for her to have received it from a real estate agent, something which had occurred only on a couple of occasions in the course of her career in the bank. The implication is that she would be likely to remember such if it were the case.

29. Heywood says that he did not provide a copy of the signed contract to anyone other than the first plaintiff, who he thinks he provided it to, although he does not personally have an actual recall of doing so.

30. The evidence of the plaintiffs and particularly the first plaintiff was, I thought at the time they gave it, puzzling on this issue. However it must be borne in mind that until he was asked about this in cross-examination it is unlikely that he would have had any cause to turn his mind to the question before as the issue to which this is relevant was only raised in the course of the trial.

31. I thought the first plaintiff was a credible witness and have no reason to doubt the evidence that he gave at the resumed trial. It seems likely to me that the concluded contract was in the folder without his appreciating that. Even without this evidence I think the conclusion that it is probable that it was the first plaintiff who gave a copy of the signed contract to Schuler would have been justified.

32. Schuler on my assessment of her was an impressive witness and I thought that her evidence that she was, in her words “99% sure” that she received the contract from the plaintiffs when they came to see her, was convincing. It is probable that had she received it from the real estate agent she would have remembered that as it was something which had rarely occurred in her experience.

33. I am satisfied that the plaintiffs received the copy of the signed contract by its delivery to the first plaintiff on the afternoon of 17 July.

34. The finding I have made as to when the first plaintiff received the signed contract is sufficient to dispose of the issue raised in the course of the trial. This is based upon s 365 of the Property Agents and Motor Dealers Act 2000.  This section provides so far as is relevant as follows:

“365 When parties are bound under a relevant contract

(1)The buyer and the seller under a relevant contract are bound by the relevant contract when –

(a)for a relevant contract, other than a relevant contract relating to a unit sale – the buyer or the buyer’s agent receives the warning statement and the relevant contract from the seller or the seller’s agent in a way mentioned in subsection (2); or

(b)for a relevant contract relating to a unit sale – the buyer or the buyer’s agent receives the warning statement, the information sheet and the relevant contract in a way mentioned in subsection (2A).

Note – See the Electronic Transactions (Queensland) Act 2001, section 11 for a requirement about consent and section 24 for rules about when an electronic communication is received.

(2)For a relevant contract, other than a relevant contract relating to a unit sale, the ways are –

(a)by fax, but only if the documents mentioned in subparagraphs (i), (ii), (iii) and (iv) are sent in the following order –

(i)a single cover page that includes a clear statement directing the attention of the buyer or the buyer’s agent to the warning statement and the relevant contract;

(ii)the warning statement;

(iii)the relevant contract;

(iv)any other documents; and

(b)by electronic communication other than fax, if the electroniccommunication contains –

(i)a message that includes a clear statement directing the attention of the buyer or the buyer’s agent to the warning statement and the relevant contract;

and

(ii)a single document, consisting only of the warning statement and the relevant contract, that is protected against unauthorised change, with the warning statement appearing as the first or top page of the document; and

Example of electronic communication –

●Email

(c)by being handed or otherwise receiving the documents mentioned in paragraph (a)(ii) and (iii) other than by electronic communication, if –

(i)the warning statement is attached to the relevant contract and appears as the first or top page; and

(ii)the seller or the seller’s agent directs the attention of the buyer or the buyer’s agent to the warning statement and the relevant contract.

Example of receipt other than by electronic communication

●Post

Examples of how attention may be directed –

●by oral advice

●by including a paragraph in an accompanying letter

(3)Without limiting how the buyer may withdraw the offer to purchase made in the contract form, the buyer may withdraw the offer at any time before being bound by the relevant contract under subsection (1) by giving written notice of withdrawal, including notice by fax, to the seller or the seller’s agent.

(4)For this section a thing sent by fax is taken to be received by the person to whom it is sent if the sender’s fax machine indicates that transmission has been successful.

(5)If a dispute arises about when the buyer and the seller are bound by the relevant contract, the onus is on the seller to prove when the parties were bound by the relevant contract.

(6)In this section –

buyer’s agent includes a lawyer or licensee acting for the buyer and a person authorised by the buyer or by law to sign the relevant contract on the buyer’s behalf.”

35. The section forms part of Chapter 11 of the Act dealing with residential property sales. The chapter provides for a number of protections for purchasers (and for the modification or waiver for some of those protections). The purposes of this chapter are set out in paragraph 363:

“363 Purposes of ch 11

The purposes of this chapter are -

(a)to give persons who enter into relevant contracts a cooling-off period; and

(b)to require all proposed relevant contracts or relevant contracts for the sale of residential property in Queensland to include consumer protection information, including a statement that a relevant contract is subject to a cooling-off period; and

(c)to enhance consumer protection for buyers of residential property by ensuring, as far as practicable, the independence of lawyers acting for buyers.”

36. Section 365 alters the common law position of a buyer. A buyer will not be bound by a contract at the point at which it was held that a concluded contract came into existence in Rymark Australia Development Consultants Pty Ltd v Draper [1977] QdR 336.

37. Section 365 permits a purchaser to withdraw his/her offer by giving notice of withdrawal in writing to the seller or the seller’s agent prior to being bound under subsection (1), i.e. before the buyer or buyer’s agent receives a copy of the contract signed by both parties.

38. The first defendant contends that s 365 also effects the vendor’s common law position. The argument is that since s 365(1) provides for the circumstances in which “for all purposes” a vendor becomes bound it must have the effect that prior to that time the vendor is not bound and may withdraw from the contract by giving notice of his/her intention to do so to the purchasers. This would place the vendors in the same position as the purchaser notwithstanding that the express aim of the chapter is to protect purchasers. Indeed a vendor’s position may be stronger since there is nothing to indicate if this construction is correct that the vendor need give notice in writing.

39. This would seem a somewhat odd result.

40. Given the finding of fact that I have made it is sufficient if I indicate my tentative view without expressing any concluded opinion on the question. Section 365 must be read in its context. Sub-section 365(1) fixes a time at which some of the rights conferred upon purchasers pursuant to the chapter arise and the particular right for which s 365(3) provides is lost.

41. I am inclined to think that s 365(1) should not be regarded as making provision for the point at which for all purposes including a decree of specific performance a vendor becomes bound thus altering the common law position so far as the vendor is concerned. That is, in providing as it does that the parties are bound “for all purposes” at the time the buyer or his agent receives a signed copy of the contract s 365(1) should not be understood as having the effect that prior to that time the seller is not bound for any purposes such as a suit of this kind. I do not think that the legislation is intended to alter the common law position as stated in Rymark’s case so far as the vendor is concerned.  That case is indistinguishable from the present.

42. As I have said the first defendant alleges that the failure by the first plaintiff to notify the defendants that he had obtained finance by the stipulated date conferred upon him in terms of the contract a right to determine the contract. It was said that he terminated the contract by exhibit 15 sent on 17 July 2002 or at the latest by a notice of 22 December 2004 (exhibit 21). The plaintiffs say that there are two answers to this to which I will return in a moment.

43. After having been contacted by the bank the valuer, one Brett Thorne, went to the premises on 17 July for the purposes of a valuation which the bank required to consider the application for finance. Thorne says that having spoken to the agent he went to the house for the purposes of an inspection but found that nobody was there. He called on the telephone number he had been provided by the agent and the second defendant answered. She told him that she would contact the first defendant who shortly afterwards telephoned Thorne and told him that the contract was no longer on foot. Thorne left the premises. Each of the defendants say that they did not speak to Thorne on that day. However I prefer his evidence of this subject. I have no reason to doubt that what he said was correct and reject any suggestion that he invented the conversation.

44. Thorne gave evidence of the conversation at p 155:

“MR DURWARD:  So – so, do you best to say what – what – what was said to you?—Okay.  The – the call from – from Henry back to me took the – the tact of that the property’s no longer on the market and you don’t need to value it and along that sort of line.  That’s it.

Yes? – Yeah.

Did you – did you say anything about wanting to get into the house to do the valuation?—Oh, yeah.  I’ve – well, that was a previous conversation with Linda but, yeah, and obviously the agent knew and, like, everyone knew what was going on, mmm.

And, well, what – what – what was the tenor or the tone of theconversation with Mr Enge?—Oh, well, it was – it was a – it was a tone of, no, that’s it.  ‘You’re not getting in and that’s it.”

Yes, all right.  Well, did you persevere with trying to get access or give it away?— I went back to the – the agent and – just to, you know, find out what was going on.  He just sort of put his hands up in the air and – and – and left it at that.  He was really of no help to me at all.”

45. After learning of what had happened Schuler called the male defendant whom she knew and was told that he had signed another contract.

46. The first response of the plaintiffs to the claim referred to in paragraph 42 of these reasons is that by exhibit 15 the first defendant repudiated the contract and in doing so intimated to the plaintiffs that it would be pointless for the plaintiffs to take any further steps to obtain finance or to do anything else pursuant to clause 3.

47. The plaintiffs primarily rely upon the judgment of the High Court in Foran and Anor v Wight and Anor (1989) 168 CLR 385.  There are passages in the various judgments to which reference was made:

Brennan J (as he then was) said at p 427:

“if an executory contract creates obligations which are mutually dependent and concurrent and, before the time for performance of the obligations arrives, one party, A, gives the other party, B, an intimation that it will be useless for B to tender performance and B abstains from performing this obligation in reliance on A’s intimation, B is dispensed from performing his obligation and A’s obligation is absolute provided that B had not repudiated the contract and he was ready and willing to perform his obligation up to the time when the intimation was given.”

Deane J said at p 433:

“The position is, however, different if one party has unambiguously informed the other party that he will not perform his obligations within the time made of the essence of the contract.  In such a case, the refusal to perform constitutes an intimation to the other party that the tender of performance of his concurrent obligations will be nugatory and futile.”

Dawson J explained the position at p 442:

“I have said that there is a qualification to the proposition that a party who elects not to accept the repudiation of a contract remains bound by the terms of the contract to perform the obligations which it imposes upon him.  Whilst the contract remains on foot for both parties, if the repudiation by one party makes it futile or pointless for the other party to attempt to perform an obligation, the law does not require him to do so.  The obligation remains – it does not disappear from the contract – but the other party is treated as if he had performed it in the limited sense that he is absolved from the consequences which would otherwise flow from his non-performance.”

48. Counsel for the defendants sought to distinguish Foran v Wight on the grounds that what was under consideration there were dependent concurrent conditions under a contract and not a conditional contract as here.

49. Counsel especially relied upon the judgment of the Full Court of Queensland in Kelly v Desnoe [1985] 2 QdR 477 and submitted that there was no distinction in principle between that case and the present.

50. He referred to the important distinction which Williams J made in that case at p 497 between dependent concurrent conditions and a condition such as the one under consideration here. (Kelly v Desnoe involved a finance condition.)

51. There is a good deal of similarity between that case and this but there are two important differences. Firstly, the first defendant here notified the plaintiffs that he was withdrawing from the contract before the time for compliance with clause 3 expired thus, it seems to me, relieving the plaintiffs of their obligation to take any further steps to obtain finance and of the need to either waive finance or notify the first defendant that finance had been obtained if they wished the contract to proceed. There was no such justification for the purchaser failing to notify the vendor of finance having been approved in Kelly’s case.  (I will return to the second distinction in a moment).

52. I do not think that the above passages in Foran v Wight are limited to the circumstances suggested by the defendant.  In Nyhuis v Anton [1980] QdR 34, Wanstall CJ (with whom the other members of the court agreed) when speaking of conditional contracts at p 41 adopted the following statement of principle in Vol 9 Halsbury (4^th ed) at para 518:

“The performance of a condition precedent is excused where the other party has prevented its performance, or has done something which puts it out of his power to perform his part of the contract or has intimated that he does not intend to perform his part.  In such cases he will have made himself liable for breach of contract and dispensed with the performance of any promise which was originally a condition to his liability.”

53. It is also worth noting that in Kelly v Desnoe Andrews SPJ at p 480 thought that the position would have been different in that case if an intimation of the kind under discussion here had been given to the purchaser.  In my view the first defendant cannot now rely upon the plaintiffs’ failure to give notice under clause 3 to terminate the contract.

54. The second distinction provides what the plaintiffs say is the second answer to the first defendant’s submission. This relates to the refusal of the first defendant to allow Thorne access for the purposes of a valuation. The evidence of Schuler suggests that finance would have been approved subject to a favourable valuation which seems to have been likely.

55. The plaintiffs contend that the first defendant in refusing to allow an inspection for the purposes of finance was in breach of an implied obligation to act reasonably so as to enable the contract to be carried into effect and by refusing entry breached this implied term.

56. I was referred to Grubb v Toomey (2003) TASSC 131 in which, in similar circumstances, it was held that a right of inspection for the purposes of a valuation should be implied.  On my reading of the judgment it was based on the need for such an implied term to give efficacy to the contract.  There were also some remarks in the judgment suggesting some reliance was placed upon a general principle of good faith.  This is an area of the law which is far from settled.

57. There is a well established line of authority generally taken as having its origin in Mackay v Dick and Anor [1881] 6 AC 251 which support the proposition that each party to a contract agrees to do all things necessary to be done to carry out the contract and to refrain from doing anything which would prevent it from being carried out.

58. The first defendant contends that to imply a term granting access for the purposes of a valuation for finance would offend the principles in BP Refinery (Westernport) Pty Ltd v Shire of Hastings (1977) 180 CLR 261.

59. In particular reliance was placed upon the fact that the contract provides for circumstances in which access would be allowed. Those circumstances do not include an inspection for finance.

60. In my view it is not necessary to imply a specific term that access for such purposes would be allowed. I think that once the first defendant became aware that the bank required a valuation for finance purposes he was, in refusing to allow the valuer entry in breach of the implied term that he would not do anything to prevent the contract from being carried into effect.

61. For these reasons also the first defendant was not entitled to terminate the contract on the grounds that he had not been given notice of waiver or notice that finance had been approved.

62. The contract remains conditional upon finance. The plaintiffs have to show as part of their cause of action that they remain ready, willing and able to perform what is required of them under the contract. This would seem at present to require them to be prepared to take all reasonable steps to obtain finance and to do what is required of them under the finance clause. I am satisfied that they have acted reasonably in that they have taken reasonable steps in seeking to obtain finance and they are in my view ready, willing and able so far as it is necessary for them to be so up until this time. In Foran v Wight it was suggested by Brennan J and Dawson J that all that would be necessary for a party in the circumstances of that case was to show that the purchaser was not incapacitated from raising the necessary funds and had not resolved against doing so.

63. I now turn to the claim against the second defendant.

64. It is alleged in the amended statement of claim and admitted in the amended defence that by transfer executed on 7 September 2004 the first defendant transferred the property to himself and the second defendant as joint tenants. It is alleged that this was done fraudulently having the express purpose of defeating the plaintiffs’ claim for specific performance of the contract.

65. In her defence the second defendant makes the following plea to this allegation:

“As to paragraph 13 of the Amended Statement of Claim, the Defendants say that the transfer was effected in circumstances where the caveat put in place over the property by the Plaintiffs had lapsed, and the Plaintiffs had not (to the knowledge of the Defendants) prosecuted the proceedings for a period in the order of fifteen (15) months, and the Defendants had thought the proceedings had come to an end.”

66. The action was commenced in March 2003. A defence and counterclaim were filed in May 2003 and a reply and answer in late May 2003 with a rejoinder in July 2003. There were a number of amended pleadings the first of which was a statement of claim which was delivered in December 2004 followed by the other amended pleadings. There was thus a significant delay between July 2003 and December 2004 in the matter.

67. However by letter of 26 August the solicitors for the plaintiffs wrote to the defendants in the following terms (exhibit 8):

“Our clients are proceeding with their application in the Supreme Court.  As part of that application it will be necessary for us to produce evidence to the Court of the value of the house.  Accordingly we seek your permission to allow a valuer to enter your property for the purposes of obtaining a valuation and taking photographs of the house.  Would you please advise of times and dates that are suitable to you so that we may check the availability of the valuer.

If you are not prepared to allow that valuation to take place it will be necessary for us to make application to the Court for Orders.  That application would include an order for costs against you.  We would prefer not to incur unnecessary costs we therefore look forward to your positive response in due course.”

68. At this time the solicitors who had previously been acting for the first defendant had ceased to act and the first defendant was acting for himself.

69. He responded by an undated letter (exhibit 9) which in effect rejected the claim of the plaintiffs and denied that they had any rights under the contract. He made specific reference to what he said was his intoxicated state.

70. The first defendant in evidence said that the interest in the land was transferred to the second defendant “with what if something ever happened to me to protect my wife’s interest rather than---”

71. For the plaintiffs it was contended that in taking her interest in the circumstances in which she did the second defendant was guilty of fraud as that term is used in s 184(3) of the Land Title Act and the matter comes within exceptions to the indefeasibility provisions of s 184 and s 185(1) of the Act.

72. These provisions are respectively as follows:

“184 Quality of registered interests

(1)A registered proprietor of an interest in a lot holds the interest subject to registered interests affecting the lot but free from all other interests.

(2)In particular, the registered proprietor –

(a)is not affected by actual or constructive notice of an unregistered interest affecting the lot; and

(b)is liable to a proceeding for possession of the lot or an interest in the lot only if the proceeding is brought by the registered proprietor of an interest affecting the lot.

(3)However, subsections (1) and (2) do not apply –

(a)to an interest mentioned in section 185; or

(b)if there has been fraud by the registered proprietor, whether or not there has been fraud by a person from or through whom the registered proprietor has derived the registered interest.

185 Exceptions to s 184

(1)A registered proprietor of a lot does not obtain the benefit of section 184 for the following interests in relation to the lot –

(a)an equity arising from the act of the registered proprietor;”

73. These provisions, their predecessors and counterparts in other states and elsewhere have been the subject of much authority. In Tara Shire Council v Garner [2003] 1 QdR 556 the Court of Appeal appears to have taken a more  expansive view of the area of operation of these provisions (particularly s 185) than appears to have been taken in earlier judgments.

74. I think that I should proceed upon the basis that a purchaser who takes with notice of an antecedent interest and who becomes registered under the Act without fraud takes free of the interest notwithstanding his/her knowledge of the interest and of the fact that it would be defeated. See Bahr v Nicholay (No 2) (1987-1988) 1 64 CLR 604 at 653.

75. On the other hand the statement by Lord Buckmaster speaking on behalf of the Privy Council in Waimiha Sawmilling Company Limited (in liq) v Waione Timber Company Limited [926] AC 101 at 106 has on many occasions been adopted as stating the law:

“If the designed object of a transfer be to cheat a man of a known existing right, that is fraudulent ---.”

76. In my view the circumstances of this case justify the conclusion that the purpose of the transfer to the second defendant was to defeat the plaintiffs’ interest in the land. It occurred in the course of litigation and within days of being informed that the plaintiffs were proceeding with the litigation. I do not accept the evidence that the second defendant believed that the contract had been terminated pursuant to a right to do so in a cooling off period. I do not accept there was any other explanation for the transfer. The plaintiffs are entitled to a declaration that the first defendant holds her interest subject to the plaintiffs’ equitable interest in the land.

77. In my view the appropriate remedy is specific performance. It is true that the first defendant cannot at present transfer the interest he contracted to. The plaintiffs are nonetheless entitled to enforce the contract to the extent he can perform it (see Basma v Weekes [950]AC 441).  By this means and appropriate relief against the second defendant they seek to obtain the title they contracted to purchase.

78. I will give the parties the opportunity to be heard as to the details of the orders to be made.

79. The formal orders at this time are:

1. I declare that there is a valid and binding contract between the plaintiff and the first defendant for the sale by the first defendant to the plaintiffs and the land described as Lot 9720 on Crown Plan B66149 County of Herbert Parish of Pring dated 15 July 2002 and that such contract should be specifically enforced and carried into effect.

2. Further consideration of the steps to be taken pursuant to the finance clause and more generally reserved.

As against the second defendant:

1. I declare that the second defendant holds her interest in the said land subject to the plaintiffs’ equitable interest in the said land arising from the said contract.

2. Further consideration of the steps to be taken in the course of the said finance clause being carried into effect or otherwise reserved.

80. I order the defendants pay the plaintiffs’ costs of and incidental to the action to be assessed.