Bruggemann, Bruggeman & Babilda Pty Ltd v Knight & Ors [1992] QSC 158

TRANSCRIPT OF PROCEEDINGS State Reporting Bureau. 4th Floor. The Law Courts. George Street. BRISBANE. 0. 4000 Tel. (07) 227.4360 (Copyright in this transcript is vested in the Crown. Copies thereof must not be made or sold without the written authority of the Director. State Reporting Bureau.) • SUPREME tOURT OF QUEENSLAND CIVI~ JURISDICTION DEMACK J No 51 of 1991 HERBERT JOHN BRUGGEMANN and MARIE BERNADETTE BRUGGEMANN and BABILDA PTY LTD and KEITH ROBERT KNIGHT and MADELEIN DENISE KNIGHT and MARSHALL KEITH KNIGHT and RODNEY WILLIAM SCOTT trading as SPRINGSURE AGENCIES REAL ESTATE ROCKHAMPTON .. DATE 5/5/92 JUDGMENT -~---1--- ·lJ . ········ i ,. r-~;_:~":;::;, "_~: ~:z~~l \ c: : :~-,. 0 1 ~- _L?. .. ?;- .. ~·:·~~- .. ~ ..... •"-'- ..... L--······. First Plaintiffs Second Plain'tiff First Defendant Second Defendant Third Defendant Fourth Defendant -- 1 of 11 -- 10 20 30 . 40 50 (Demack J) JUDGMENT HIS HONOUR: In this action, I have reduced my reasons to writing which :t now publish. I order the plaintiffs' claims be dismissed with costs. 9n the counterclaim, I declare that the deposit moneys, namely $201,500, are forfeit to the first defendant and that the first defendant is entitled to that sum together with accrued interest. I further declare that the deposit moneys in respect of the cattle contract, namely $1,000, are forfeit to the first, second and third defendants and that the said defendants are entitled to that sum together with accrued interest. ·•. I further declare that the deposit moneys in respect of the tractor contract, namely $1,000, are forfeit to the first and third defendants and that the said defendants are entitled to that sum together with accrued interest. I .order the p:laintiffs pay the defendants' costs of the counterclaim to be taxed. In Rockhampton action number 57 of 1990, I order that the action be dismissed and that the defendants to that action pay the plaintiffs' costs to be taxed. G 214-Govt. Printer, Old. 2 10 30 40 50 60 -- 2 of 11 -- IN THE SUPREME COURT OF QUEENSLAND ROCKHAMPTON BETWEEN: AND: AND: No. 51 of 1991. HERBERT JOHN BRUGGEMANN AND MARIE BERNADETTE BRUGGEMAN First Plaintiffs BABILDA PTY LTD Second Plaintiff KEITH ROBERT KNIGHT First Defendant MADELEIN DENISE KNIGHT Second Defendant MARSHALL KEITH KNIGHT Third Defendant RODNEY WILLIAM SCOTT trading as Springsure Agencies Real Estate Fourth Defendant JUDGMENT - DEMACK J. DELIVERED the 5th -day of May 1992. CATCHWORDS: Vendor and Purchaser - Renegotiated Financing - Concluded Agreement - Repudiation - Forfeiture of Deposit. COUNSEL: Mr N SAMIOS for Plaintiffs Ms S KIEFEL, with her Mr P AMBROSE for Defendants SOLICITORS: MELROSE & KING for Plaintiffs JOHN CROSSAN & COMPANY for Defendants HEARING DATES: 2nd to 4th days of March, 1992. -- 3 of 11 -- IN THE SUPREME COURT OF QUEENSLAND ROCKHAMPTON BETWEEN: No. 51 of 1991 HERBERT JOHN BRUGGEMANN AND MARIE BRUGGEMANN First Plaintiffs AND: BABILDA PTY LTD Second Plaintiff KEITH ROBERT KNIGHT First Defendant AND: MADELEIN DENISE KNIGHT Second Defendant AND: MARSHALL KEITH KNIGHT Third Defendant BERNADETTE RODNEY WILLIAM SCOTT trading as Springsure Agencies Real Estate Fourth Defendant JUDGMENT - DEMACK J DELIVERED the 5th day of May 1992. This action is to determine whether the Plaintiffs can recover a deposit of $203 1 500 paid by them in respect of contracts to purchase a property known as "Bottletree Downs" 1 the stock on the property and a tractor used on the property. Mr and Mrs Bruggemann inspected the property on 28 May 1990 1 and Mr Bruggemann undertook a further inspection on 4 June 1990. Three contracts were signed on 22 June 1990. The first related to the sale of "Bottletree Downs" for $2 1 015 1 000. It provided for a deposit of $1 1 000 and a further deposit of $200 1 500 immediately on the approval of the Bruggemanns' application for finance. finance read:- 25. Finance The clause relating to (a) The parties agree that this Contract is subject to -- 4 of 11 -- 2 the conditions subsequent that the Purchaser obtains approval of a loan on or before the 4th day of July, 1990 in the amount of $1,000,000.00 from the Queensland Industry Development Corporation or other similar lending institution, the loan to be secured by a first registered Mortgage over the land to be sold. The Purchaser undertakes to use his best endeavours to obtain such a loan; (b) The Purchasers shall have the right to waive thebenefit of clause 25 (a) hereof at any time before the 4th day of July, 1990 by notice in writing to the Vendor and upon receipt thereof the Contract shall become unconditional. This Contract shall also become unconditional upon the Purchaser givingnotice in writing that his loan has been approved; (c) Unless the Purchaser notifies the Vendor pursuant tothis clause the Contract shall determine and the Vendor may resell at his option and all deposit monies paid hereunder shall be refunded in full to the Purchaser. Clause 15 contained detailed provisions about the obtaining of the consent of the Minister for Land Management to the transfer of the leasehold land sold. Clause 2 provided:- DELIVERY( 1 ) Delivery and possession of the said property shall be given and taken on the 15th day of August, 1990 or on that date which shall be seven days after the date on which the consent of the Minister for Land Management as hereinafter mentioned is received by the Vendor or his Solicitors whichever is the later. (2) The date so fixed is hereinafter called "the date of delivery" on which date the Purchaser or his agent shall be at the principal homestead (if any) on the said land ready to take possession of the said property. In case the Purchaser or his agent shall not be at the said homestead on the date of delivery such possession may be given to some person to be then and there named by the Vendor and such last mentioned delivery shall be given and taken as herein provided in the case of delivery to the Purchaser or his agent. ( 3) Pending the payment of the balance of the purchase money and all other monies payable hereunder and the stamp duty payable on this agreement and any transfer incidental thereto such possession shall be and be deemed to be possession to the Purchaser as agent only and in trust for the Vendor. (4) The Vendor reserves to himself and his employees the use free of charge of the said property and of thegrasses pasturage water and other facilities up to the date of delivery. -- 5 of 11 -- 3 The vendor of the land was the First Defendant. The second contract related to the purchase of the cattle on "Bottletree Downs''. It provided a purchase price of $550,000, with a deposit of $1,000 and the balance payable over six years, interest free, by equal annual instalments of $91,500. (The document, ex 3, reads in clause 2 (b) "in five ( 6) annual instalments", but the arithmetic favours 6). The contract was conditional upon the completion of the contract of sale of "Bottletree Downs". The vendors of the cattle were the First, Second and Third Defendants. The third contract related to the sale of a tractor for $35,000. The deposit was $1,000, and the balance was payable on delivery of the tractor. This contract was also conditional upon the completion of the sale of "Bottletree Downs". The vendors of the tractor were the First and Third Defendants. Although the finance clause mentioned the Queensland Industry Development Corporation, Mr Bruggemann apparently did not expect that an application to the Corporation would be successful, ( p. 1 0 1. 43), although his evidence is not altogether certain. It is clear that Mungold Pty. Ltd. was his preferred source of finance. He was still endeavouring to obtain full finance from Mungold Pty. Ltd. on 31 July 1990, (ex. 8) . Finance was not extended, either to available by 11 or 15 July 4 July, 1990, 1990. Time was but by the latter date, finance was still not approved. Mr and Mrs Bruggemann did not waive the benefit of clause 25(a), so according to the terms of clause 25(c) the contract came to an end. However, the parties did not treat the contract as being at an end. On 16 July 1990 the parties, including Mr Scott, the real estate agent, met at "Bottletree Downs" to discuss the matter. The outcome of those discussions is this litigation. While much of the evidence given at the trial concerned those discussions, and their consequences, it seems to me that letters exchanged on 31 July, 1990 set out the agreement the parties reached. The effect of this agreement was to -- 6 of 11 -- 4 introduce a new finance clause in the contract. Nothing else The first was changed and no other change letter was from Melrose and King, Bruggemann, (ex. 8). It reads:- Re: BRUGGEMANN FROM KNIGHT was suggested. who acted for Mr and Mrs 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 $300,000.00 from the Commonwealth Bank at Toowoomba for this purchase. We are further instructedthat your clients will be providing Vendor finance by way of a First Mortgage in the sum of $700,000.00 over a period of five (5) years, but subject to the Commonwealth Bank being granted priority to the extent of $300,000.00 The loan is to be interest only at 13% 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 thePrincipal and interest to be repaid five ( 5) years from the date of completion. 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. 00 making a total deposit of $201,500.00, today, which amount is to be invested pursuant to Clause 1(b) of the Contract for Sale of land. John Crossan and Company, who acted for the Knight family, replied (ex. 9):- 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 $700,000.00 over a period of five years but subject to the Commonwealth Bank being granted priority to the extent of the $300,000.00 "all up". We are further instructed to confirm that the loan is to be paid on an interest only basis at 13% 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. 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. -- 7 of 11 -- 5 On 8 August 1990, John Crossan and Company transmitted the following letter (ex. 1 0) by facsimile to Melrose and King:- RE: KNIGHT SALE TO BRUGGEMANN 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 Melrose and King on 9 August 1990 confirmed that interest would be six months in arrears. On 13 August 1990, John Crossan and Company received a letter of priority from the Commonwealth Bank. The letter gave the Bank priority to the Knight's security in respect of the amount secured, interest and charges. The solicitors altered this to limit the total value of the priority to $300,000. The bank was not prepared to accept this change. Melrose and King wrote on 16 August, 1990 (ex. 13):- 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 beinggranted priority to the extent of $300,000 "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 $300,000.00 plus accrued interest. Consequently, no agreement has been reached between our clients regarding finance. 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 -- 8 of 11 -- 6 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 asthe 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. This letter defines the area of dispute. It also, it seems to me, provides the answer. If the two letters of Melrose and King ( exs . 8 and 1 3 ) are compared, it becomes clear that the second letter is attempting to add a further term to the agreement the parties had made about finance. The letter of 31 July 1990 makes it clear that finance to the extent of $1,000,000 was to be provided in part by vendor finance secured by first mortgage to the extent of $700, 000, and with the balance of $300, 000 by way of loan from the Commonwealth Bank secured in priority "to the extent of $300, 000". I cannot comprehend how those latter words can mean anything other than priority to the extent of $300,000. The letter from John Crossan and Company, which added the gloss "all up", added nothing to the plain meaning of the words. There was no suggestion in the letters that priority was to be given to an extent in excess of $300,000, which is the contention in the letter of 16 August 1990. In a sense the concept of a loan for $300,000 from a Bank which is to be given priority to the extent of $300,000 raises obvious problems. One might reasonably expect that the lending Bank would not want to see any unpaid interest effectively secured by a second mortgage. However, the finance required by the Bruggemanns was a matter within their knowledge, and it appears from ex. 30, the Bank's diary memorandum of 26 July 1990, that the sum of $300,000 was not needed to complete the purchase. What is clear is that the setting of a limit on the extent of the priority was very important to the Knight family which was financing the entire transaction to the extent of $1,250,000. The contract in respect of the stock purchase included security by way of stock mortgage, but no interest was payable over a six year -- 9 of 11 -- 7 period. It is clear from the letter of 31 July 1990, that the Bruggemanns accepted that in their request for finance from the Commonwealth Bank the priority that was to be given was "to the extent of $300,000". This may have limited the amount they could borrow, if the Bank insisted on priority in respect of interest and charges to a total value beyond $300, 000. However, in the light of the clear limit on the extent of the priority in the agreement expressed in exhibit 8, they could not try to enlarge the priority beyond $300,000. In effect this is what is done in the letter of 16 August 1990. There a new term "acceptable to the Bank" is added. That rather misinterprets the nature of the priority. permitted by the Knights to their detriment. cannot go beyond the agreement and seek detriment. The priority was The Bruggemanns to enlarge that This action was very generously pleaded. It is possible to refer to a number of cases which raise issues like the ones here. However, in my opinion, that is not helpful. Here the parties entered into three necessary or interrelated contracts. The contract for the sale of "Bottletree Downs" had a finance clause the terms of which were not fulfilled, but the parties did not treat the contract as discharged. They renegotiated the finance clause and reached a concluded agreement which is expressed in exhibit 8 and in the subsequent letters and telephone call which established that interest was to be paid six monthly in arrears. The purchasers then paid the balance of the deposit, which was payable "immediately upon the approval of the Purchaser's Application for finance as hereinafter provided for" (ex. 2 cl 1 [a] [ ii]). Thereafter the purchasers' solicitors instructed the vendors' solicitors to proceed to prepare the substantial documentation required. The parties had a concluded agreement. The renegotiated finance clause enabled the parties to proceed to settlement of the contract of 28 May 1990. The subsequent actions of the Bruggemanns constituted a -- 10 of 11 -- 8 repudiation of the agreement. This entitled the Knight family to forfeit the deposits. I have not made any findings on the conversations which were given in evidence, because of the view I have taken of the letters. If a different view were to be taken, and issues of credibility were relevant, my finding on the question of credibility is to prefer the evidence of the Defendants where it is in conflict with the evidence of the Plaintiffs. This is based on the impression made in the witness box. Mr Knight appeared to me to be more forthright and reliable than Mr Bruggemann. In this action, I order that the Plaintiffs' claims be dismissed with costs. On the counter claim I declare that the deposit monies, namely $201,500, are forfeit to the First Defendant, and that the First Defendant is entitled to that sum together with accrued interest. I further declare that the deposit monies in respect of the cattle contract, namely $1000, are forfeit to the First, Second and Third Defendants, and that the said Defendants are entitled to that sum together with accrued interest. I further declare that the deposit monies in respect of the tractor contract, namely $1000, are forfeit to the First and Third Defendants, and that the said Defendants are entitled to that sum together with accrued interest. I order that the Plaintiffs pay the Defendants' costs of the counter claim to be taxed. The Defendants also commenced proceedings in Rockhampton raising the same issues as in this action. The actions were not consolidated. I order that the Rockhampton Action No. 57 of 1990 be dismissed and that the Defendants in that action pay the Plaintiffs' costs to be taxed. -- 11 of 11 --