Meehan v Jones

149 CLR 571
42 ALR 463

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(Decision by: MASON J)

Between: MEEHAN
And: JONES

Court:

Judges: Gibbs C.J.

Mason J.Murphy J.
Wilson J.

Subject References:
Vendor and Purchaser

Hearing date: Brisbane, 24 June 1981, 25 June 1981
Judgment date: 17 September 1982

Canberra

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Decision by:
MASON J

The issue here is whether Dunn J. at first instance and on appeal the Full Court of the Supreme Court of Queensland (Lucas and D.M. Campbell JJ., Kneipp J. dissenting) were right in refusing to make a decree in a purchaser's suit for specific performance of a written contract for the sale of land on which was conducted an oil refinery at Roma. Special condition 1 (b) of the contract, a "subject to finance clause", was the rock on which the appellant's case for specific performance foundered. Dunn J. and the majority in the Full Court thought that the clause was so vague as to be uncertain and that its presence rendered the contract void for uncertainty. The appellant's challenge to this finding is the principal question in the present appeal. The respondents support the correctness of the judgments below and, in addition argue: (1) that special condition 1(a) is also void for uncertainty; (2) that, even if the two conditions are valid, they were not complied with by 31 July 1979, the date fixed by the contract for compliance; (3) that the appellant failed to nominate International Oil Pty. Ltd. ("International") as the purchaser in whom title was to be taken - the relief sought by the appellant specifying that company as the person to take title; and (4) that, the purpose of the written contract being to enable the appellant to deceive potential lenders, the defence of illegality should prevail.

The contract was dated 14 March 1979. It provided for the sale of certain land at Mitchell Road, Roma, owned by the first respondents, members of the Jones family, on which they conducted an oil refinery under the name "Maranoa Oil and Refining" for the sum of $800,000. The contract contained an acknowledgment by the vendors that they had received $80,000 by way of deposit. In fact no deposit had been paid. The contract provided that if the deposit was paid by a cheque not honoured on presentation the vendor could "at his option cancel this Contract". It also provided that if the sale should not be completed for any reason other than the default of the purchaser the deposit should be refunded to the purchaser.

Special condition 1 was in this form:

"1.

This Contract is executed by the parties subject to the following:

(a)

The Purchaser or his nominee entering into a satisfactory Agreement or arrangement with Ampol Petroleum Limited for the supply of a satisfactory quantity of crude oil until such time as the Purchaser or his nominee has received the approval of the Federal Govt. or the appropriate empowered authority for a crude oil allocation of 500 barrels per day or better;

(b)

The Purchaser or his nominee receiving approval for finance on satisfactory terms and conditions in an amount sufficient to complete the purchase hereunder;

and should either of the above conditions not be satisfied on or before the Thirty-first day of July, 1979 (or such extended time as the parties may agree upon) then this Contract (other than for the provisions of this Clause) shall be null and void and at an end and all monies paid hereunder by the Purchaser shall be refunded in full."

The date for completion, fixed by a schedule to the contract, was "such date as may be agreed upon between the parties or failing agreement on the Thirty-first day of August, 1979". Clause 22 made time of the essence. Clause 1 and part of cl. 2 which provided for payment of the balance of the purchase price were deleted. The significance of the deletion is by no means clear; the deletion is relied upon to support the conclusion that the contract was void for uncertainty.

The written contract had been preceded by an earlier oral agreement made in December 1978, the terms of which differed in several respects from the later written contract. The vendors were in financial difficulty. They were conducting the refinery at a loss, largely due to the oil-pricing policies pursued by the Federal Government. The vendors were therefore anxious to make a sale and to complete it as quickly as possible. At the time of the making of the oral agreement in December 1978 the parties contemplated completion of that agreement at a much earlier date than the date specified for completion in the later written contract. Indeed, it was suggested that completion might take place at various times between March and May 1979. The terms of payment in the oral agreement were that the purchaser would assume all the vendors' existing liabilities in respect of the land and the business; that he would pay $250,000 by four equal annual instalments, the first such payment to be made "as soon as possible". The purchaser would have the benefit of all accounts receivable and deposits; the purchaser's obligations were conditional upon his obtaining finance and Charles Herbert Jones ("Charlie Jones") would remain to assist the purchaser for a period of three months after settlement and he would assist the purchaser in taking all necessary steps to become the lawful operator of the refinery.

Charlie Jones expressed to the appellant his dissatisfaction with the written contract before he executed it, asserting his preference for the oral agreement. The appellant stated that the purpose of the written contract was to satisfy the requirements of potential lenders and that he would abide by the terms of the oral agreement. The respondents relied on this conversation as showing that the written contract was not intended to create binding legal relations. The primary judge rejected this contention and it no longer forms part of the respondents' case.

To the appellant's solicitors' efforts to obtain answers to requisitions on title the vendors' solicitors responded with requests that a new written contract should be executed incorporating the terms of the oral agreement. The vendors' solicitors also suggested an early date for settlement, first on 1 March, then on 1 April and subsequently on 1 May.

The appellant had commenced to make efforts to raise suitable finance as soon as the oral agreement was reached in December 1978. Despite the confident predictions of his financial adviser, Lewgold Pty. Ltd., his efforts met with no success. The continuing delay in completion became a matter of acute embarrassment to the vendors who were having very great difficulty in paying wages. It was this difficulty and the expectation that the appellant would be able to secure the necessary finance that led to the parties taking steps to enable Sunshine Oil Pty. Ltd. ("Sunshine"), a company formed by the appellant, to become the operator of the refinery before the appellant made arrangements for the necessary finance and, needless to say, before the contract was completed. Documents were brought into existence providing for the cessation of business by the vendors and the transfer of their business name to Sunshine. Necessary arrangements, including the provision of security, were made with the Customs Department and a manufacturer's licence under the Excise Act 1901 (Cth), as amended, effective from 1 May 1979, was issued to Sunshine on 28 May 1979. Other arrangements were made between Sunshine, the Workers' Compensation Board and the Roma Town Council. Increased insurance, effective from 1 July, was arranged with respect to the refinery, its operations and its vehicles. In that policy Sunshine was named as the insured. The expense involved in making these arrangements was incurred by or at the direction of the appellant and he assumed the contingent liabilities which were involved.

In April 1979 Sunshine became the paymaster of the refinery staff. It also met other necessary expenses, though the vendors met some expenses out of processing fees paid to them. The refinery business was conducted on this footing until Charlie Jones ceased to rely on the appellant's repeated assurances that finance was about to be obtained.

The primary judge rejected the contention that the vendors gave possession of the refinery to Sunshine. His finding on this point has not been challenged. He also rejected the suggestion that the expenditure incurred by Sunshine on wages and other outgoings was an agreed equivalent for the payment of the deposit under the written contract. The correctness of this finding has not been challenged.

The second respondent, Bunny Industries Ltd. ("Bunny"), a property developer, initially explored the possibility of entering into a joint venture with the appellant or Sunshine. It subsequently withdrew from negotiations with the appellant with respect to a joint venture. The appellant then began negotiations with International. These negotiations resulted in a letter of intent dated 13 July 1979 which contemplated that International would enter into a fresh agreement for purchase of the refinery business from the vendors.

However, the signing of the letter of intent coincided with a firm decision by Charlie Jones, taken on behalf of himself and the other vendors, to rescind the written contract. By a letter dated 13 July, hand delivered on 16 July, the solicitors for the vendors gave notice to the appellant's solicitors of rescission of the contract on the ground that the deposit had not been paid, claiming in the alternative that the contract was void for uncertainty. By the middle of July the refinery had ceased to rely upon Sunshine as its paymaster. Charlie Jones did not give the appellant advance notice of his intention to terminate the arrangements with Sunshine in this respect.

On 23 July the vendors entered into a contract to sell the land and the refinery to Bunny, negotiations between Bunny and Charlie Jones having commenced some time previously.

On 30 July the solicitors for the appellant and International sent a telex to the vendors in these terms:

"WE HEREBY GIVE YOU NOTICE IN RELATION TO THE CONTRACT OF SALE DATED 14 MARCH 1979 BETWEEN CHARLES HERBERT JONES, ANN CAROL JONES, CHARLES CRAIG JONES AND KEVIN CHRISTOPHER JONES AS VENDOR AND MARTIN DOUGLAS MEEHAN OR NOMINEE AS PURCHASER THAT:

1.

THE NOMINEE OF THE PURCHASER (INTERNATIONAL OIL PROPRIETARY) HAS ENTERED INTO A SATISFACTORY AGREEMENT WITH AMPOL PETROLEUM LIMITED FOR THE SUPPLY OF A SATISFACTORY QUANTITY OF CRUDE OIL TO THE REFINERY UNTIL SUCH TIME AS INTERNATIONAL OIL PROPRIETARY HAS RECEIVED THE APPROVAL OF THE FEDERAL GOVERNMENT TO A CRUDE OIL ALLOCATION OF 500 BARRELS PER DAY TO INTERNATIONAL OIL PROPRIETARY.

2.

INTERNATIONAL OIL PROPRIETARY HAS ARRANGED FINANCE ON SATISFACTORY TERMS AND CONDITIONS TO ENABLE THEM TO COMPLETE THE PURCHASE. PLEASE ADVISE WHAT SOLICITORS ARE ACTING FOR YOU AS COMPLETION OF THE CONTRACT IS DESIRED BY THE EARLIEST POSSIBLE DATE AND IN ANY EVENT NOT LATER THAN 31 AUGUST 1979."

The telex was confirmed by a letter. Under cover of a letter dated 7 August the solicitors for the appellant tendered to the solicitors for the vendors a bank cheque for $80,000 as the deposit under the written contract. The cheque was returned the next day.

It is convenient to examine the validity of special condition 1(b) before turning to special condition 1(a). In the Full Court it became the critical question.

Special Condition 1(b)

The respondents' case rests on three propositions: (1) a contract which is expressed in language "so obscure and so incapable of any definite or precise meaning that the court is unable to attribute to the parties any particular contractual intention" is void for uncertainty (Scammell and Nephew Ltd. v. Ouston [1941] AC 251 , at p 268 ); (2) a contract which reserves to a party a discretion or option whether he will carry out what appears to be a promise on his part is also void for uncertainty (Thorby v. Goldberg (1964) 112 CLR 597 , at p 605 ); and (3) there can be no concluded bargain if a vital matter has been left to the determination of one of the parties (see Godecke v. Kirwan (1973) 129 CLR 629 , at p 647, per Gibbs J.).

It is argued that the concept of "finance on satisfactory terms and conditions" is altogether too uncertain and indefinite to admit of a precise meaning. The thrust of the argument is that the absence of agreement as to the amount to be borrowed, and perhaps the term of the loan and the rate of interest, make it impossible for a court to decide what finance is contemplated by the contract as being "satisfactory" (see Lee-Parker v. Izzet (No. 2) (1972) 1 WLR 775 ; (1972) 2 A11 ER 800; In re Rich's Will Trusts (1962) 106 SolJo 75 ). This point would have force if the contract left the court at large to assess what is "finance on satisfactory terms and conditions", yielding no indication as to what the parties meant by that expression. But in the context of a contract for the sale and purchase of real estate which contains a condition that the purchaser or his nominee receives approval for such finance so that the deposit is to be refunded to the purchaser if the condition is not satisfied, there can be no doubt that "satisfactory" ordinarily means "satisfactory to the purchaser or his nominee ".

Primarily the object of such a clause is to benefit or protect the purchaser (Zieme v. Gregory (1963) VR 214, at pp 216, 222; Barber v. Crickett (1958) NZLR 1057, at p 1058; Beauchamp v. Beauchamp (1972) 32 DLR (3d) 693; affd (1974) 40 DLR (3d) 160 ), by ensuring that he is not under a binding obligation to complete if he is unable to obtain finance. Here there is nothing in the contract or other materials to suggest that the object of the clause was not to protect the purchaser, though there is the question whether the condition is exclusively for his benefit, a matter to be discussed later. The primary object of the condition being the protection of the purchaser, it is sensible to treat it as stipulating for finance that is satisfactory to the purchaser or his nominee, subject to an implied obligation that he will act honestly, or honestly and reasonably, in endeavouring to obtain finance and in deciding whether to accept or reject proposals for finance.

In general this is the view which has been taken in New Zealand (Barber v. Crickett (1958) NZLR 1057 - where the contract was made conditional on the purchaser "arranging the necessary mortgage finance to purchase the property"; Scott v. Rania (1966) NZLR 527; Gardner v. Gould (1974) 1 NZLR 426, at p 428 ); in Victoria (Zieme v. Gregory (1963) VR 214; cf. Jubal v. McHenry (1958) VR 406 ); in Queensland (Gagliardi v. Lamont (1976) Qd R 53; Bradford v. Zahra (1977) Qd R 24; cf. Hines v. Good (1951) QWN 2 ). In New South Wales a contrary view has been taken. The Court of Appeal in Moran v. Umback (1966) 1 NSWR 437 held that a contract made "subject to finance being arranged on $1000 deposit" was void for uncertainty, even though it meant finance in an amount equal to the difference between the purchase price and the deposit of $1,000. And in Grime v. Bartholomew (1972) 2 NSWLR 827 Holland J. decided that a contract with a clause "subject to finance being arranged" was void because it was "silent as to amount, term of the loan, rate of interest, conditions of repayment, class of lender, secured or unsecured or form of security" (1972) 2 NSWLR, at p 838. His Honour was influenced by Jubal v. McHenry and the comments of Macrossan C.J. in Hines v. Good. His attention was not directed to Zieme v. Gregory, the subsequent comments on Hines v. Good - see Bradford v. Zahra (1977) Qd R, at p 25 - nor to the New Zealand decisions.

To say that clauses of this kind are void for uncertainty is to ignore the traditional doctrine that courts should be astute to adopt a construction which will preserve the validity of the contract. Moreover, it is a draconian solution - one which is best calculated to frustrate the expectations of the parties, because in an increasing number of cases purchasers depend on the provision of finance in order to complete. The problems of uncertainty can be avoided by drafting a clause which specifies the details of the finance to be sought, but such a clause, by reason of its greater precision, may be too inflexible in its operation.

It has sometimes been urged that there is a relevant distinction between "subject to satisfactory finance" or "subject to suitable finance" and making the contract "subject to finance". The suggestion is that in the first case it is easier to imply that the finance is to be satisfactory to the purchaser. Even if this be so, I would have no difficulty in reading a "subject to finance" clause as requiring finance in an amount and on terms satisfactory to the purchaser, in the absence of some indication that the clause had another meaning.

To say that a "subject to finance" or "subject to finance on satisfactory terms and conditions" clause denotes finance which is satisfactory to the purchaser is not to say that he has an absolute or unfettered right to decide what is satisfactory. To concede such a right would certainly serve the object of the clause in protecting him. But it would do so at the expense of the legitimate expectations of the vendor by enabling the purchaser to escape from the contract on a mere declaration that he could not obtain suitable finance. With some justification the vendor can claim that the agreement made by the parties is not an option but a binding contract which relieves the purchaser from performance only in the event that, acting honestly, or honestly and reasonably, he is unable to obtain suitable finance.

There is in this formulation no element of uncertainty - the courts are quite capable of deciding whether the purchaser is acting honestly and reasonably. The limitation that the purchaser must act honestly, or honestly and reasonably, takes the case out of the principle that:

"... where words which by themselves constitute a promise are accompanied by words which show that the promisor is to have a discretion or option as to whether he will carry out that which purports to be the promise, the result is that there is no contract on which an action can be brought."

See Thorby v. Goldberg (1964) 112 CLR 597 , at p 605, citing Loftus v. Roberts (1902) 18 TLR 532 , at p 534, Placer Development Ltd. v. The Commonwealth (1969) 121 CLR 353 , at pp 359-361, cited by Gibbs J. in Godecke v. Kirwan (1973) 129 CLR, at p 647. The judgment of the purchaser as to what constitutes finance on satisfactory terms is not an unfettered discretion - it must be reached honestly, or honestly and reasonably.

It has often been held that, where under a contract the delivery of a ship or of goods is expressed to be subject to the buyer's approval, the buyer may disapprove so long as he acts honestly (Repetto v. Friary Steamship Co. Ltd. (1901) 17 TLR 265 ; Haegerstrand v. Anne Thomas Steamship Co. Ltd. (1904) 10 Com Cas 67, at p 70; affd 10 Com Cas 71 (CA) ). In the last case Vaughan Williams L.J. (1904) 10 Com Cas, at p 72 spoke of the relevant condition making "the view of the purchaser final if honestly arrived at". See also Diggle v. Ogston Motor Co. Ltd. (1915) WN 37; and especially Niarchos (London) Ltd. v. Shell Tankers Ltd. (1961) 2 Lloyd's Rep 496, at pp 507-509. In Canada Egg Products Ltd. v. Canadian Doughnut Co. Ltd. (1955) 3 DLR 1 the Supreme Court of Canada held that a provision in a contract which entitled the purchaser to return the goods if they were not "satisfactory" was not uncertain and that his rejection of the goods was authorized by the provision if he honestly rejected them.

There are cases in which it has been said that a capricious withholding of approval will not do (Dallman v. King (1837) 4 Bing (NC) 105, at p 109 (132 ER 729, at p 730); Repetto (1901) 17 TLR, at p 265 ). Whether "capricious" is there used in the sense of "not honestly" is uncertain, though McNair J. in Niarchos (1961) 2 Lloyd's Rep, at p 508 thought that "capriciously" was used by Tindal L.C.J. in Dallman in a different sense, perhaps signifying "arbitrarily" or "without reasonable cause" - see Secured Income Real Estate (Australia) Ltd. v. St. Martins Investments Pty. Ltd. (1979) 144 CLR 596 , at p 609. There was no suggestion in any of the cases mentioned in this and the preceding paragraph that the buyer's right to withhold approval led to invalidity of the contract on the ground of uncertainty.

In this case it is not necessary to decide whether the purchaser, in deciding whether finance is on satisfactory terms, is bound to act honestly or whether he is also bound to act reasonably. The cases already mentioned appear to support the first rather than the second alternative. And there is some ground for thinking that the parties contemplated that the question was to be left to the honest judgment of the purchaser rather than to the judgment of a court as to whether the purchaser acted reasonably in the circumstances.

On the other hand, it has been said that a condition of this type imports an obligation or promise on the part of the purchaser to act honestly and reasonably (Barber v. Crickett (1958) NZLR 1057; Scott v. Rania (1966) NZLR, at p 539, per Hardie Boys J.; Gardner v. Gould (1974) 1 NZLR 426 ). McCarthy J., who in Scott v. Rania (1966) NZLR, at p 534 preferred to base his reasoning on the principle that a party to a contract cannot be permitted to rely on his own wrong, later in Gardner v. Gould (1974) 1 NZLR, at p 428 adopted the implied promise theory. The reasoning which underlies the decisions of this Court upholding the implication of an obligation on the part of a party to a contract to do all that was reasonable on his part to obtain a statutory consent applies with equal force here. In Butts v. O'Dwyer (1952) 87 CLR 267 , at p 280, Dixon C.J., Williams, Webb and Kitto JJ. said:

"It has been held in cases too numerous to mention both before and after the classic statement of Bowen L.J. in the case of The Moorcock (1889) 14 PD 64, at p 68 that the law raises an implication from the presumed intention of the parties where it is necessary to do so in order to give to the transaction such efficacy as both parties must have intended that it should have."

Here the expressed intention of the parties was that the purchaser would obtain finance; his obtaining of finance on satisfactory terms was necessary to give the transaction its intended efficacy. The consequence would be that he had an obligation to do all that was reasonable on his part to obtain that finance. It would make for greater consistency to say that, if the purchaser is bound to act reasonably in seeking to obtain finance, he is bound to act reasonably as well as honestly in deciding whether the finance was satisfactory. So understood the special condition would preserve an even balance between the vendors and the purchaser. However, I have no need to decide the question. Here it makes no difference whether the purchaser was under an obligation to act honestly or honestly and reasonably in deciding whether the terms of an offer of finance were satisfactory.

Although the binding words of the special condition suggest that its effect is to make the existence of the contract conditional, it is more sensible to regard the provision as one which provides for the determination of a valid and binding contract in the event that the purchaser or his nominee is unable to obtain approval for satisfactory finance on or before the appointed date. In accordance with the principle established in New Zealand Shipping Co. v. Societe des Ateliers et Chantiers de France [1919] AC 1 and extended in Suttor v. Gundowda Pty. Ltd. (1950) 81 CLR 418 , at pp 440-442, each party has the right to avoid the contract on the non-performance of the condition, notwithstanding that non-performance may occur without default on the part of the purchaser, i.e. he may fail to procure finance despite every endeavour on his part. I say "each party" because it seems to me that, although the primary object of the condition is to protect the purchaser, it is perhaps difficult to assert that the clause is for his benefit exclusively when it states that the result of non-performance is that the contract shall be null and void, rather than null and void at the option of the purchaser. I see no justification for implying a right of avoidance on the part of the purchaser alone. In other circumstances to make this implication would be to reach a one-sided interpretation, allowing the purchaser to keep the contract on foot, despite non-performance of the condition, but denying the vendor the right to avoid. Here the vendors were protected by the fixing of the date for completion and the making of time of the essence. Even so, there is no adequate basis for concluding that the special condition authorized the purchaser alone to terminate.

Whether the condition is to be described as precedent or subsequent is an artificial and theoretical question. In one sense performance of the condition or non-avoidance for breach of it is precedent to the right of a party to call for the performance of a contract. In another sense there is a valid and binding contract which may be determined for non-performance of the condition, and in this sense the condition is subsequent, not precedent.

For the reasons I have given special condition 1(b) is valid.

Special Condition 1(a)

The attack on the validity of this condition raises considerations similar to those already examined. "Satisfactory" here again means satisfactory to the purchaser or his nominee in relation to the agreement contemplated and as to quantity, provided of course that the purchaser or his nominee acts honestly and reasonably. I reject the argument that in special condition 1(a) satisfactory means "satisfactory to both parties", together with the related submission that the contract was conditional upon the parties arriving at a further consensus as to the supply of oil by Ampol to the purchaser or his nominee.

The vendors were bound by a current processing agreement with Ampol and were indebted to that company in the sum of $200,000 (approximately). Ampol and the purchaser or his nominee, if at liberty to have exclusive regard to their own interests, might arrive at an agreement which left the vendors with liabilities still owing to Ampol. So much may be admitted without acknowledging that it constitutes a case for reading special condition 1(a) as prescribing that the agreement to be entered into should be satisfactory to the vendors as well as to the other persons named.

It is evident from the nature of the contract and the terms of special condition 1(a) that the object of the condition was to protect the purchaser or his nominee. The contract was a contract for the sale of an oil refinery; its value to the purchaser depended on an assured supply of crude oil from Ampol until the approval of a crude oil allocation of not less than 500 barrels per day. There is nothing in the contract to suggest that the parties contemplated that the vendors could legitimately look to the agreement to be made by Ampol and the purchaser or his nominee as a mode of discharging the vendors' indebtedness to Ampol. That special condition 1(a) was inserted for the protection of the purchaser is reinforced by the close association of the clause with special condition 1(b), the object of which was also to protect the purchaser or his nominee.

Clauses 1 and 2

The second respondent argues that the deletion of cl. 1 and the partial deletion of cl. 2 also results in the contract becoming void for uncertainty because there is nothing in the contract to indicate how completion is to occur. The consequence of the deletion is that there is no specific provision in the contract providing for the manner in which the balance of the purchase price is to be paid. The answer to this submission is that the law implies that in the absence of a specific contractual provision the obligations of each of the parties under the contract are to be performed on or before the completion date, 31 August 1979. The general rule is that settlement and the giving of possession are to coincide. See Travinto Nominees Pty. Ltd. v. Vlattas (1973) 129 CLR 1 , at p 12; Godfrey Constructions Pty. Ltd. v. Kanangra Park Pty. Ltd. (1972) 128 CLR 529 , at pp 536-537; Cohen v. Mason (1961) Qd R 518, at p 531.

Failure to Comply with Special Conditions 1(a) and (b)

The respondents began by submitting that it is necessary for the appellant to show that the purchaser, as distinct from his nominee, made satisfactory arrangements with Ampol and satisfactory arrangements for finance. This argument is based on the proposition that when a contract provides for a sale to the purchaser or his nominee, the purchaser's nominee does not become a contracting party; the vendor and the purchaser continue to be the sole contracting parties, the nominee being the person who takes title by the conveyance or transfer - see Lord v. Trippe (1977) 51 ALJR 574, at p 582; 14 ALR, at pp 143-144; Tonelli v. Komirra Pty. Ltd. (1972) VR 737. This does not, however, justify an interpretation which is at variance with the language in which the special condition is expressed. What the condition requires is something that is satisfactory to the purchaser or his nominee. If arrangements satisfactory to the nominee are made then the condition is satisfied.

Special condition 1(a) was satisfied by a letter of intent dated 17 July 1979 made by International, the purchaser's nominee, and Ampol. By this document Ampol agreed to "use its best endeavours to maintain continuity of crude oil and condensate" to the refinery until such time as the refinery received its own allocation of crude oil. Special condition 1(b) was satisfied by reason of International having available to it at 30 June 1979 cash at bank in the sum of $124,703 and a short term deposit of $750,000, both of which could be offered as payment of the purchase price under the contract.

Notice of fulfilment of both conditions was given to the vendors by a telex dated 30 July 1979 and a confirmation letter of the same date. The primary judge found that the telex was sent by Messrs. Tully & Wilson, solicitors for the appellant and International, with the authority of the appellant.

Nomination of International

The telex and the letter dated 30 July 1979 also gave notice that the appellant had nominated International for the purposes of the contract as his nominee. The validity of this nomination is attacked on the ground that the appellant had earlier nominated Sunshine.

I put to one side the question whether the contract permitted the appellant to make more than one nomination or to substitute a second nominee for a nominee already appointed under the contract. I incline to the view that the appellant was at liberty to substitute a second nominee for one already appointed provided that substitution did not prejudice the vendors.

But in any event the evidence does not establish that the appellant ever nominated Sunshine as its nominee for the purposes of the contract. The first respondent did not plead that the appellant nominated Sunshine and there was no finding of fact by the primary judge that such a nomination had taken place. The first respondent now relies on the acts which I have earlier recited on the part of Sunshine as amounting to a nomination by the appellant of that company. It will be recalled that Sunshine became the operator of the refinery and that documents were brought into existence providing for the transfer of the vendors' business name to Sunshine. A manufacturer's licence was issued to Sunshine and arrangements were made between it and various authorities. No doubt these steps indicated an intention on the part of the appellant to nominate Sunshine, but I do not consider that they amounted to an actual nomination. Nor does the evidence establish that the vendors were prejudiced by the subsequent nomination of International. No such prejudice was pleaded and no finding to that effect was made by the primary judge. It seems that the vendors were financially unable to continue to operate the refinery at the time when Sunshine commenced to operate it. Although the arrangements made for participation by Sunshine appeared to have conferred an advantage on the vendors, they suffered no detriment when International was nominated. The vendors, following the withdrawal of Sunshine and the nomination of International, incurred no expense in making and carrying out the new arrangements. What is more, it seems that the vendors unilaterally resumed operation of the refinery in July 1979. The arrangements previously made did not provide any serious obstacle to this resumption.

Illegality

This defence is based on the proposition that the appellant entered into the contract with the intention of using it to persuade potential lenders that the deposit had been paid, whereas in fact it had not been paid. The answer to it is that the primary judge expressly declined to make a finding that when the appellant entered into the contract with the first respondent he had no intention of paying the deposit. His Honour came to this conclusion having had the advantage of assessing the appellant's credibility as a witness. There is no basis on which we can disturb this conclusion of fact.

The second respondent puts an alternative submission that the appellant "by means of" the written contract falsely represented to various persons that the deposit for which the contract provided had been paid. The only evidence that any such representation was made was that given by McGuiness, an officer of the second respondent. The learned judge found that the appellant did make this representation to McGuiness. But in the absence of a finding that the appellant intended or contemplated when he entered into the contract that he would use it for this purpose the case of illegality fails. The mere circumstance that the appellant made a false representation, by means of the contract, to a third party does not provide any ground for concluding that the contract was illegal or unenforceable by the appellant as purchaser against the first respondent as vendor.

In the result I would allow the appeal and make an order for specific performance of the contract.