Bruggemann, Bruggemann & Babilda Pty Ltd v Knight & Ors [1992] QCA 390

1 [1992] QCA 390 COURT OF APPEAL FITZGERALD P DAVIES JA de JERSEY J Appeal No 110 of 1992 HERBERT JOHN BRUGGEMANN AND MARIE BERNADETTE BRUGGEMANN First Appellants (First Plaintiffs) and BABILDA PTY LTD Second Appellant (Second Plaintiff) and KEITH ROBERT KNIGHT First Respondent (First Defendant) and MADELEIN DENISE KNIGHT Second Respondent (Second Defendant) and MARSHALL KEITH KNIGHT Third Respondent (Third Defendant) and RODNEY WILLIAM SCOTT trading as SPRINGSURE AGENCIES REAL ESTATE Fourth Respondent (Fourth Defendant) BRISBANE ..DATE 03/11/92 JUDGMENT -- 1 of 12 -- 2 031192 THE PRESIDENT: This is an appeal from a judgment dated 5 May 1992 which dismissed the appellants' claims, allowed the respondents' counter-claims and ordered the appellants to pay the respondents' taxed costs of the action. The claims and counter-claims related to deposits paid by the appellants under 3 interdependent contracts, which the trial Judge held that the first, second and third respondents, who were the vendors under the various contracts, were entitled to forfeit and retain, together with accrued interest. On 22 June 1990 a contract was entered into between the first appellants, Herbert John Bruggemann and Marie Bernadette Bruggemann, as purchasers, and the first respondent, Keith Robert Knight, as vendor, for the sale of a property known as "Bottletree Downs" for the sum $2,015,000. A deposit of $1,000 was paid and provision was made for a further deposit of $200,500 immediately upon the approval of the first appellants' application for finance. By clause 25, the contract was subject to the appellants obtaining finance by a specified date. On the same day, 22 June 1990, a contract was entered into between the second appellant, Babilda Pty Ltd, as purchaser, and the first, second and third respondents, Keith Robert -- 2 of 12 -- 3 Knight, Madelein Denise Knight and Marshall Keith Knight, as vendors, for the sale of the cattle then depastured on "Bottletree Downs" for the sum of $550,000. The deposit paid under that contract was $1,000 and the balance purchase price was to be paid by 6 equal annual instalments of $91, 500. The third contract entered that day was between the second appellant as purchaser and the first and third respondents as vendors for the sale of a tractor then situated on "Bottletree Downs". Once again, a deposit of $1,000 was paid. The balance purchase price, $34,000, was to be paid on delivery of the tractor. The contracts for the sale of the cattle and the tractor were conditional upon the completion of the contract for the sale of "Bottletree Downs". Because of the first appellants' inability to arrange finance in accordance with clause 25 of the Contract of Sale of "Bottletree Downs", all contracts came to an end on 15 July 1990. However, the parties did not abandon the transaction, but continued to negotiate on the basis that, apart from the finance clause 25 in the contract for the sale of "Bottletree Downs", any new contracts would be on -- 3 of 12 -- 4 the same terms as those which they had previously entered into. Negotiations commenced at "Bottletree Downs" on 16 July 1990. The respondents contend, and the trial Judge held, that "... letters exchanged on 31 July 1990 set out the agreement the parties reached. The effect of this agreement was to introduce a new finance clause in the contract. Nothing else was changed and no other change was suggested." The dispute between the parties essentially turns upon the letters of 31 July 1990 and some subsequent correspondence which it is necessary to set out. The first letter of 31 July 1990 was from the appellants' solicitors, Messrs Melrose & King, and its terms are as follows: "We refer to the writer's telephone conversation with Mr Peacey this morning. We confirm that our clients have obtained approval for a loan of $300,000 from the Commonwealth Bank at Toowoomba for this purchase. We are further instructed that your clients will be providing Vendor finance by way of a First Mortgage in the sum of $700,000 over a period of five (5) years, but subject to the Commonwealth Bank being granted priority to the extent of $300,000. The loan is to be interest only at 13 per cent per annum and interest is to be paid in arrears annually, the first payment of interest therefor to be made one (1) year after the date for completion and the whole of the Principal and interest to be repaid five (5) years from the date of completion. -- 4 of 12 -- 5 Our clients are still endeavouring to obtain full finance from Mungold Pty Ltd and if that finance becomes available then they will not require either the loan from the Commonwealth Bank or your clients' finance. Would you please confirm these arrangements? Our clients are obtaining the payment of the balance of deposit, a sum of $200,500 making a total deposit of $201,500 today, which amount is to be invested pursuant to clause l(b) of the Contract for Sale of land." The balance deposit under the contract for the sale of "Bottletree Downs" was payable when the first appellants had obtained finance and as the final paragraph of their solicitors’ letter of 31 July indicates, was paid that day. The respondents' solicitors, Messrs John Crossan & Company, replied on the same day: “We acknowledge receipt of your facsimile letter earlier today and we have referred its contents to our client. Our client confirms that he is willing to provide vendor finance by way of a first mortgage in the sum of $700,000 over a period of five years but subject to the Commonwealth Bank being granted priority to the extent of the $300,000 'all up'. We are further instructed to confirm that the loan is to be paid on an interest only basis at 13 per cent per annum and that interest is to be paid in arrears. However, our client is of the belief that repayments were to be six monthly in arrears and not annually in arrears. Would you please review this aspect of the proposal with your client? -- 5 of 12 -- 6 We confirm that according to our instructions the first repayment will be on that date which is six calendar months following the date for settlement and that repayments will be made six monthly thereafter. We would be pleased if you would respond to our letter at your earliest convenience." A further letter was sent on 8 August 1990 by the respondents' solicitors to the appellants' solicitors in the following terms: “Further to the writer's telephone conversation with Mr King yesterday we confirm your instructions to us to proceed to prepare vendor finance mortgage documents. However, prior to us embarking on this procedure would you please reply to our letter of the 31st July, 1990 with particular reference to the question of whether payments of interest are to be made six monthly or annually? As we have previously advised our client would prefer six monthly payments and indeed it is his belief that this was the arrangement. Please let us have your urgent advices." A telephone call from the appellants' solicitors to the respondents' solicitors on 9 August 1990 confirmed that interest would be paid 6 monthly in arrears. On 13 August 1990 the respondents' solicitors received a letter from the Commonwealth Bank in the following terms: "RE: KEITH ROBERT KNIGHT SALE TO BRUGGEMANN -- 6 of 12 -- 7 We refer to our recent telephone conversation and enclose letter of priority to $300,000 (in duplicate) for your perusal and execution. Please return same to this office as soon as possible." The Letter of Priority enclosed with the bank's letter provided for the bank to have priority for not only the principal of its loan ($300,000) but also: "(b) all interest on the said moneys at the rate or the highest of the rates provided in the Bank's Security; (c) all moneys with interest thereon as aforesaid payable or to become payable to the bank for discounts charges fees and expenses in connection with the acceptance payment discount or endorsement of Bills of Exchange by the Bank pursuant to any Bills Facility secured by the Bank's Security; and (d) all other moneys with interest thereon as aforesaid which the Bank may from time to time be entitled to debit and charge under the provisions contained in the Bank's Security with a view to protecting or maintaining the mortgaged premises or enforcing the Bank's Security. PROVIDED HOWEVER THAT THE combined amounts referred to in subparagraphs (a), (b), (c) & (d) hereof shall not exceed in total at any time and from time to time the sum of $300,000." On the same day the respondents' solicitors replied to the bank in the following terms: "RE: KEITH ROBERT KNIGHT SALE TO BRUGGEMANN We acknowledge receipt of your letter dated 8th August, 1990 enclosing letter of priority in duplicate. -- 7 of 12 -- 8 The agreement made in this matter is clear in that the total amount of the priority to be given by our client to your client is the sum of $300,000. We will therefore be recommending to our client that your letter of priority as drafted be altered in the manner as per the enclosed copy. We are presently arranging for our client to sign the amended letter and we will forward it to you as soon as possible." The altered letter of priority enclosed with that letter limited the bank's total priority to $300,000. The bank was not prepared to accept the changed letter of priority and on 16 August 1990 the appellants' solicitors wrote to the respondents' solicitors in the following terms: "RE: BRUGGEMANN FROM KNIGHT The interdependent contracts dated 22nd June, 1990, were in Clause 25 subject to finance. An extension to the 11th July, 1990, was granted. Our clients did not obtain finance by that date and did not give notification pursuant to Clause 25(c). Therefore, the Contracts determined and everything subsequent has been mere negotiations towards a fresh agreement. Part of the negotiations since have involved the provision of finance which by your letter of 31st July, 1990, was made subject to finance from your client of $700,000.00 and subject to the Commonwealth Bank being granted priority to the extent of $300,000.00 'all up'. The Commonwealth Bank's. approval to our clients for $300,000 was subject to the Bank's usual conditions which included 'priority of $300,000.00 from the Vendor and acceptable to the Bank'. The Bank requires priority of $300,000 plus accrued interest. Consequently, no agreement has been reached between our clients regarding finance. -- 8 of 12 -- 9 Any offers our clients have made are hereby withdrawn and we are instructed to give you notice that the negotiations are at an end. Please direct the Agent to refund the Deposit. If there has been an agreement between our clients which we say there was not it has been subject to finance of $300,000.00 'all up' from the Commonwealth Bank and as the Commonwealth Bank has not approved such finance we give notice that any agreement between our clients is at an end. Again please direct the Agent to refund the deposit." The reply dated 17 August 1990 from the respondents' solicitors to the appellants' solicitors was as follows: “RE: KNIGHT SALE TO BRUGGEMANN We refer to your letter of the 16th August, 1990 the contents of which we have discussed with our clients. Your assertion that the contract is determined and that everything subsequent has been mere negotiations is rejected. Your alternative assertion that finance has not been approved such as to entitle your clients to rescind is also rejected. Should your clients fail to settle in accordance with the agreement on the 22nd August, 1990 we are instructed our clients will enforce all their rights under the contract." The appellants sued unsuccessfully for the return of the deposits and the respondent successfully sought declarations that the deposits "are forfeit" and that the respondents are entitled to retain the deposits and any accrued interest. -- 9 of 12 -- 10 The appellants' major contention, indeed - as the matter was advanced in oral argument - only contention, is that there was no further contract for the sale of "Bottletree Downs" concluded between the parties. This submission is not based upon any alleged absence of authority on the part of the solicitors to bind their respective clients; any lack of writing with respect to one or more terms; any want of form or formality in the documents or any assertion that the parties did not intend to be bound until formal contracts were executed and exchanged. The sole foundation for the proposition that there was no further contract concluded for the sale of "Bottletree Downs" is an assertion that the communications exchanged by the parties' solicitors between 31 July and 9 August, left matters in a state of negotiation. The appellants' solicitors' letter of 31 July recorded that they had made the necessary arrangements for finance with $300,000 to be borrowed from the bank and the balance to be lent by the first respondent on the terms which were set out. One of those terms was that the bank was to be provided with a limited priority “to the extent of $300,000",that being the amount of the bank loan; i.e. the principal which the bank had agreed to lend. -- 10 of 12 -- 11 In their reply on the same day the respondents' solicitors referred to the bank being granted priority to the extent of $300,000 "all up" and that was accepted as correct by the appellants even as they sought to escape the contract. In the letter from their solicitors dated 16 August 1990 they said: “... If there has been an agreement between our clients which we say there was not, it has been subject to finance of $300,000 'all up', from the Commonwealth Bank ..." It is unnecessary to say more of this matter than that a perusal of what was written and said in the period from 31 July to 9 August 1990 demonstrates quite plainly that the parties had, by the latter date, concluded a further contract for the sale of "Bottletree Downs" which included new terms concerning finance. Other matters raised in the written submissions were not pressed on the Court in the oral argument and accordingly it is unnecessary that the Court should express a view on those matters. In the circumstances the appeal should be dismissed with costs. -- 11 of 12 -- 12 DAVIES JA: I agree. de JERSEY J: I agree. THE PRESIDENT: The order of the Court is appeal dismissed with costs. ___ -- 12 of 12 --