by Tim O’Dwyer M.A., LL.B
On 27th May Peter and Helen Kettle contracted to sell both units of their Surfers Paradise duplex (for $1.2 million and $800,000 respectively) to Milani Properties Pty. Ltd. Deposits totalling $170,000 were paid to Milani’s solicitor’s trust account. Settlement of each contract was due on 13th July, subject to finance approval by the “Finance Date” of 17th June.
The finance clause in both contracts required the buyer to give notice by the Finance Date that
approval had not been obtained and the contract terminated, or that the condition had been either satisfied or waived. If the buyer did not give this notice by 5 p.m. on the Finance Date, the seller could terminate. This termination right was subject, however, to the buyer’s continuing right to cancel the contract or waive the benefit of the clause.
Milani gave no notice about finance. Therefor at 5 p.m. on 17th June Kettles became entitled to terminate both contracts, but did not exercise this right until 2nd July when their solicitors faxed Milani’s solicitor: “Our clients have elected to terminate these contracts for failure to advise of finance approval by the finance date. We authorise you to refund the deposits to your client.”
Milani’s solicitor replied that the buyer had “no positive obligation under the contracts” to advise on finance, and settlement would be due on 13th July. Supreme Court proceedings followed soon after.
The problem for Kettles (an elderly couple) was that, between 18th June and 2nd July, considerable fax correspondence had passed between solicitors.
On 26th June Milani’s solicitor wrote: “Mrs. Kettle has been contacting our office and requesting the release of the deposit from our trust account.” Although the parties had originally discussed pre-settlement release of the deposits, the fax noted that neither contract provided for this. Milani would not release any monies before settlement.
On 29th June Kettles’ solicitors faxed that Kettles were agreeable to extending the settlement date until the 31st August (with time remaining of the essence) provided Milani released the deposits to them immediately.
On 30th June Milani’s solicitor replied that Milani had not yet given instructions on these matters, but remarked: “Part of the problem is that the clients continue to discuss matters between themselves, and it would be better for all concerned if they directed instructions through our respective selves”.
Later that day Milani’s solicitor faxed again: “Mrs. Kettle has requested that the deposits be released unconditionally.” This fax reiterated how this issue was not covered by the contracts but added that, should Milani release the deposits, settlement needed to be extended to 31st August and the contract prices changed to $1 million per unit.
Kettles’ solicitors replied straight away that the prices could not be changed because of “serious capital gains tax implications”. Kettles would extend settlement until 31st August if the deposits were released “unconditionally immediately”.
On 2nd July Milani’s solicitor faxed: “Our instructions are not to extend settlement nor to release the deposit.” Transfer documents would be forwarded for Kettles’ execution.
Later that day Kettles’ solicitors faxed that finance was due on 17th June and asked: “Please advise urgently whether your client has obtained finance… and that the contract is unconditional”.
No reply came, so later that day Kettles’ solicitors faxed to the other side their clients’ termination. (Ma and Pa Kettle had had enough).
After hearing both parties’ barristers, the Chief Justice ruled that by 2nd July Kettles had either waived their termination rights or had elected to affirm the contracts. Either position resulted, he said, from their solicitors’ letters of 29th and 30th June. In these letters Kettles’ solicitors, while contemplating a conditional settlement extension, were proceeding as if the contracts were on foot. Because the letters did not reserve Kettles’ termination right, or state whether further negotiation was “subject to” or “without prejudice” to that right , they evidenced a “clear and unequivocal intention to proceed to completion”. This correspondence was consistent only with “maintaining or affirming the contracts”, so Kettles had no right to terminate on 2nd July. Both contracts, in the Chief Justice’s words, “remained on foot and enforceable.”
Meanwhile Kettles’ solicitors are waiting to see if they get sued for negligence in failing to expressly reserve their equivocating (former) clients’ rights.