New South Wales Supreme Court CITATION : Dowidar & Ors v Bektas & Ors [2008] NSWSC 1380 HEARING DATE(S) : 11-12 December 2008 JUDGMENT DATE : 19 December 2008 JURISDICTION : Equity JUDGMENT OF : Bryson AJ at 1 (1) Upon the plaintiffs' claims give judgment for the defendants. (2) Upon the cross-claim: (i) declare that the cross claimants are entitled to repayment of their respective deposits, together with any interest accrued thereon; (ii) order that the fourth cross defendant Michael McEvoy pay: DECISION : (a) the deposit on the contract for sale of land dated 20 July 2006 and any interest thereon to Raffetin Bektas and Sahila Bektas the first and second cross claimants; (b) the deposit on the contract of sale of business dated 20 July 2006 and any interest thereon to the third cross claimant Toruns Investments Pty Limited. (3) Order that the plaintiffs pay the first, second and third defendants' costs of proceedings on the plaintiffs' claim. (4) Order that the first and second cross defendants pay the cross claimants' costs of proceedings on their cross-claim. (5) Order that the fourth defendant McEvoy pay and bear his own costs of proceedings upon the plaintiffs' claim and upon the cross claim. CATCHWORDS : VENDOR and PURCHASER – contract made settlement date depend on purchaser obtaining licence from DOCS for child care centre – purchaser's director responsible for child care centre received psychiatric treatment but this was not disclosed with application – disclosed later when (1) referee withdrew reference (2) director's daughter made adverse representations to DOCS (3) purchaser's solicitor sent DOCS a report from psychiatrist. Licence refused. In purchasers' perception, it was in their interest that licence be refused and completion not occur. Consideration of interaction of obligation in Butts v O'Dwyer (1952) 87 CLR 267 to take reasonable and proper action to obtain a licence with obligation of disclosure to licensing authority – HELD – the information was properly disclosed to DOCS and there was no breach of implied obligation. Deposit recoverable. Consideration of operation of non-standard Special Condition in purchase contract. CHILDREN and YOUNG PERSONS – application to DOCS for licence for child care centre – consideration of obligations of disclosure, relevant discretionary considerations, fit and proper person. LEGISLATION CITED : Children and Young Persons (Care and Protection) Act 1998, Chapter 12Children's Services Regulation 2004Conveyancing Act 1919, s 55(2A)Interpretation Act 1984 (WA) s 75(1) and s 76Sale of Land Act 1970 (WA), s 6(1) CATEGORY : Principal judgment CASES CITED : Alcatel Australia Ltd v Scarcella [1998] 44 NSWLR 349Burger King Corporation v Hungry Jack's Pty Ltd [2001] 69 NSWLR 558Butts v O'Dwyer (1952) 87 CLR 267 Capper v Thorpe (1998) 194 CLR 342Kheng v Secola [2001] WASCA 3Mackay v Dick (1881) 6 App Cas 251Misiaris & Another v AF Holdings Pty Limited (1988) 15 NSWLR 231Plumor Pty Limited v Handley (1996) 41 NSWLR 30Renard Constructions (ME) Pty Limited v Minister For Public Works [1992] 26 NSWLR 234Secured Income Real Estate (Australia) Limited v St Martins Investments Pty Limited (1979) 144 CLR 596 Mohamad Dowidar (First Plaintiff) Randa Dowidar (Second Plaintiff) MR & SJ Pty Limited (Third Plaintiff) PARTIES : Raffetin Bektas (First Defendant) Saliha Bektas (Second Defendant) Toruns Investments Pty Ltd (Third Defendant) Michael McEvoy (Fourth Defendant) FILE NUMBER(S) : SC SC 1357/07 COUNSEL : Jason Lazarus (Plaintiffs) Chris Stomo (Defendants) SOLICITORS : H K Husseini & Co Solicitors (Plaintiffs) Royal City Solicitors (Defendants) IN THE SUPREME COURT OF NEW SOUTH WALES EQUITY DIVISION BRYSON AJ FRIDAY 19 DECEMBER 2008 1357/07 DOWIDAR & ORS v BEKTAS & ORS JUDGMENT 1 HIS HONOUR: The plaintiffs, the vendors, seek remedies arising out of non-completion of two related contracts dated 20 July 2006 in which the first, second and third defendants who were purchasers agreed to buy land and the business named White Bunny Childcare Centre. The Contract for Sale of Land related to land in Folio identifiers 9034/730969 and 9035/730969, in Minchin Drive, Minchinbury. Mr and Mrs Dowidar were the vendors and Mr and Mrs Bektas were the purchasers. The price was $590,000 with a deposit of $59,000. 2 In the Contract for Sale of Business the vendor was the third plaintiff MR & SJ Pty Limited a company controlled by the Dowidars and the purchaser was Toruns Investments Pty Limited controlled by the Bektas. The price was $540,000 and the deposit was $54,000. The deposits were paid to the stakeholder, a firm conducted by Mr McEvoy the fourth defendant, who has not opposed the proceedings and has told me that he will comply with the court's direction relating to payment of the deposits. The deposits were to be invested at interest. 3 The Contract for Sale of Land contains Special Condition 26 Interdependent Contracts in these terms: 26. Interdependent Contracts 26.1 This contract for the sale of Land between M&R Dowidar and R&S Bektas and the contract for the sale of Business between MR & SJ Limited and Toruns Investments Pty Limited are interdependent. 26.2 Completion of either contract is dependant on the completion of the other contract. 26.3 If any of the contracts is rescinded, breached, put to an end or terminated for any reason then the other contract shall be deemed to have been rescinded, breached, put to an end or terminated in the same way. 4 It also contains printed clauses 9, 15 and 16 in the 2005 edition of the Standard Contract. These provisions relate, in familiar terms, to the obligation to complete and to what is to be done on completion, and on default. On the first page the contract states that the completion date is the 42nd day after the contract date i.e. 31 August. However this is overridden by Special Condition 26. Each contract contains a provision establishing that 14 days notice to complete is sufficient. 5 The Contract for Sale of Business is in the standard form, 2004 edition and contains printed clauses 19 and 20 dealing with completion. Printed Clause 22 relates to default by the purchaser. The Contract also contains Special Condition 8 Interdependent Contracts as follows: 8. Interdependent Contracts 8.1 This contract for the sale of Business between MR and SJ Pty Limited and Toruns Investments Pty Limited and the contract for the sale of land between M&R Dowidar and R&S Bektas are interdependent. 8.2 Completion of either contract is dependant on the completion of the other contract. 8.3 If any of the contracts is rescinded, breached, put to an end or terminated for any reason then the other contract shall be deemed to have been rescinded, breached, put to an end or terminated in the same way. 6 The Contract for the Sale of Business also contains Special Condition 11 Completion in these terms: 11. Completion 11.1 Completion shall be the later of 42 days from the date of this contract or; 11.2 When the purchaser or its nominees obtaining from the Department of Community Services (DOCS) an unconditional licence to operate the business as a child care, 11.3 Should DOCS not grant the purchaser or its nominee a licence within twelve (12) weeks from the date of this contract and upon formal request the vendor does not grant an extension of time to the purchaser to obtain the licence then either party may by notice in writing to the other party rescind this contract, 11.4 If this contract is rescinded in accordance with this Special Condition 11, then clause 23 of the standard contract for sale of business shall apply, 11.5 Completion shall be fourteen (14) days after receipt of written notification that DOCS will issue the licence. 7 The terms of cl 11.5 make it material to establish whether there was "receipt of written notification that DOCS will issue the licence". The plaintiffs contended that there has been receipt of a written notification and that this established the time for completion under Special Condition 11. The effectiveness of notices to complete, and notices of termination which followed non-compliance with the notices to complete, turned on this. 8 The provisions relating to interdependence mean that any outcome for the Business Sale Contract produced by Special Condition 11 is also produced for the Land Sale Contract. 9 The unconditional licence referred to in Special Condition 11.2 is a licence under Chapter 12 Children's Services of the Children and Young Persons (Care and Protection) Act 1998. This regulates the provision of children's services and extends to the business being sold; see the definition of "children's services" and other provisions in s 200. By s 204 it is forbidden to provide a prescribed children's service (and the business which was to be sold is one) unless the person providing the service is the licensee of the children's service. MR & SJ Pty Limited held such licence. Neither purchase was of any value to the purchasers unless Torun Investments Pty Ltd obtained a licence. 10 Chapter 12 Children's Services and the Regulation made under s 220 deal with applications for and grant of a licence. The Director-General, who is to provide services under s 16 (1) of the Act, is to decide whether or not to grant licences: see cl 22 of the Regulation. The Director-General's power may be delegated and apparently it has been. 11 The matters which the Director-General is to consider and the matters on which he is to be satisfied before granting or refusing a licence are not exhaustively prescribed by the Act or Regulation. The Regulation prescribes a wide array of documents and classes of information which are to accompany an application for a licence. If an application complies, a body of information relevant to considering whether or not to grant a licence will accompany the application. The concept of an incomplete application is referred to in cl 8(2). It appears to be the practice, as is reasonable, not to address the question whether or not to issue a licence until a complete application with the prescribed information has been lodged. References in the Regulation, for example cl 11 show that whether an applicant for a licence, and a proposed authorised supervisor is in each case a fit and proper person is relevant. References in the Act and in the Regulation show that imposition of conditions on a licence is required to be considered when an application is considered. 12 Presentation of a complete application does not bring about an entitlement to a licence. Deciding whether or not to grant a licence is a step which, in any regular course, takes place when there is a complete application. Further consideration is required and may lead to various outcomes, including decision to impose conditions, grant or refusal of the application, and further enquiries and requests for information, from the applicant or from someone else. 13 The evidence on compliance with cl 11.5 was given in the affidavit of Mrs Randa Dowidar. The second defendant Mrs Saliha Bektas confirmed Mrs Dowidar's account. Mrs Randa Dowidar made a diary entry of this meeting (Ex A/18) which is to the same general effect as her affidavit. Mrs Dowidar speaks of a meeting on 6 October 2006 when a departmental officer Ms Kestine Flanagan completed an application checklist for the application by Mrs Dowidar to be authorised supervisor when the child care centre was to be operated by the defendants. Ms Flanagan also during the meeting made a notation on a form "Application by corporation for a new licence to children's service." This document of two pages (Ex A/17) is a list of classes of information and accompanying documents against which the application by Toruns Investments Pty Limited was to be checked. There are a number of check marks on the list, and in a number of cases (at least seven), the letter "x" or the word "incomplete" indicates that at some stage the requirement had not been satisfied. Ms Flanagan made notes against each of these, and I infer she did so at the meeting of 6 October 2006 when the requirement was satisfied; her notes and tick marks with the date 6 October indicate that each outstanding requirement was then satisfied. 14 Then Ms Flanagan wrote in bold handwriting across the foot of each of the two pages the words "Complete 6/10/06" with a tick mark, and signed her name. Mrs Dowidar's evidence speaks about the part of the meeting when this took place. 19. Towards the end of the meeting there was a conversation to the following effect: Mrs Bektas: Do you still need anything from me, Kestine? Kestine: No. Everything is here. The application is complete. All we need now is a letter from the current owner stating when settlement is going to occur. On that day we will revoke the current owner's licence and issue the new, replacement licence. [At this point, Kestine wrote the words "COMPLETE 6/10/06" on both pages of the form that is annexure E and signed her name underneath those words.] Mrs Bektas: How soon can we settle? Kestine: Not within 3 weeks. Make sure that settlement occurs before 12:00 pm on the settlement day so that we have time to revoke the current owner's licence and issue you with the new licence on the same day. 15 The fact which is said to have fulfilled Special Condition 11.5 is the act of writing "Complete" with the date and a tick on these pages, during the interview when both Mrs Dowidar and Mrs Bektas could see what was being written. 16 In my finding these events including the statements made by Ms Flanagan should not be understood as a statement that DOCS was going to issue a licence. The subject of the meeting had been information required from Ms Dowidar and Mrs Bektas, and when Ms Flanagan said that everything was there and the application was complete she was dealing with what was required from the persons present in connection with the application. She said that all that DOCS needed from them was a letter from the current owner stating when settlement was going to occur, and this referred only to what was needed from the persons who were present. She referred to revoking the current owner's licence and issuing a new licence on the day of settlement, but she cannot reasonably be understood as having communicated that there was no possibility that these things would not happen because all consideration by the Department was complete. 17 There is no reason to conclude that Ms Flanagan had delegated authority to decide to grant or refuse a licence. Later events show that the decision was made by a different departmental officer Ms Gae Parmenter. It would not be reasonable to suppose that receiving the application and ensuring that all documents and information required accompanied the application completed the whole process. It would be obvious to any reasonable person that more consideration was required before there was a decision. It would be obvious to any person with any knowledge of the Act and Regulation that an appraisal had to be made whether or not persons involved were fit and proper persons, whether or not conditions should be imposed; that there was discretionary consideration which still had to take place. 18 Another document in the Department's file (EX A/19) contains information about the proposed child-care centre to be operated by Toruns Investments Pty Limited. At its head is a note by Ms Flanagan with the date 6 October 2006 and at its foot is a handwritten note which may well be hers. It says: 1 Application complete. 2 All details in CSIS. 3 Ready to print letters plus licence when final settlement document faxed through. 19 The plaintiffs' counsel contended that this note shows that a decision to issue a licence had been made, and had been made on 6 October 2006. I do not accept this. First it is not clear that the note at the foot was written on 6 October 2006. Secondly the note does not mean that all consideration has taken place; the note only says that the application is complete, and that someone was ready to print the letters and licence. This would be useful information for a person to have if that person were to decide whether or not a licence was to issue; it is not a decision to issue one. However that may be, the document at Tab 19 is not referred to in evidence as having been seen at the meeting on 6 October 2006. The plain meaning of the events is that Ms Flanagan decided that there had been a complete application, and made notes to that effect. She did not, by making notes, or by what she said at the meeting, notify that DOCS would issue the licence. 20 Even if the events had the meaning contended for, writing the word "completed" with the tick, date and signature on the Department's own file was not a written notification that DOCS would issue a licence. Further, it was not a written notification received by Toruns Investments Pty Limited, or by Mrs Dowidar or Mrs Bektas. Neither of them received any document which could be thought of as a written notification. The most that happened was that Mrs Dowidar and Mrs Bektas saw Ms Flanagan write some things on departmental papers. They received no writing: they received nothing. 21 The plaintiffs' counsel referred to a passage in Capper v Thorpe (1998) 194 CLR 342 at 353 [26] in the judgment of the High Court. The Court addressed the meaning of a phrase in s 6 (1) of the Sale of Land Act 1970 (WA) which provided to the effect that a terms contract should not be determined or rescinded on account of breach by the purchaser "… unless and until the vendor has served on the purchaser a notice in writing specifying the breach complained of …". A written notice was sent by certified mail to the purchaser at his address stated in the contract but he had moved to a new address. The breach occurred on 5 September 1995, the notice was sent by certified mail on 6 September 1995, the purchaser collected it from the post office on 3 October but received a copy in some other way at some time between 15 and 19 September. Notice of termination was served on 9 October, less than the prescribed 28 days after service of the notice to remedy, if time were counted from receipt of the copy. To uphold the notice the vendor sought to rely on provisions of the Interpretation Act 1984 (WA) s 75(1) and s 76 relating to service including service by post; but failed to do so. The High Court treated actual receipt of the copy as service for the purpose of s 6. The notice in question was a written notice directed by the vendor to the purchaser and the vendor made efforts to put it in the purchaser's possession. The facts of that case mean that that case has no analogy with the present case. If anything the passage at page 353[26] on which plaintiffs' counsel relied is adverse to him; the passage is "The ordinary meaning of ' served on the purchaser … in writing' therefore requires that the writing be brought to the attention of the purchaser by the efforts of the vendor or those acting on his or her behalf." Nothing in this case suggests that the requirement for service (or a requirement for receipt) can be met by some piece of writing which Toruns Investments Pty Limited did not receive, in original or in copy. 22 The claim that Special Condition 11.5 was fulfilled fails in fact as there were no notification that DOCS would issue a licence, no written notification and no receipt. The procedure in Special Condition 11.3 leading to rescission was not followed in this case, although no licence was granted within 12 weeks from the date of the contract. 23 Special Condition 11 did not ever operate to fix a date for completion. Special Condition 11.2 did not operate because Toruns Investments Pty Limited did not ever obtain a licence to operate the business. It would I think have been very difficult for Special Condition 11.2 to be literally fulfilled. An unconditional licence could not lawfully be issued; there are conditions which the statute provides that a licence must contain, and on a reasonable reading the reference to an unconditional licence is probably a reference to a licence not containing any other or further conditions beyond those which by law it must contain. A licence can only issue to a licensee which owns or has a leasehold of premises; see cl 7 of the Regulations. This probably explains the references in DOCS' papers to an intention to issue the licence when settlement took place. In no sense however did Toruns Investments Pty Limited ever obtain a licence; it should not be found on the material in evidence that a delegate ever decided to issue one. A note on the departmental file indicates, at a date later than 6 October, that a police screening report on Mr Bektas was awaited from the police. No note indicates whether a final decision whether or not to impose conditions other than the statutory condition was ever made. No note ever indicates satisfaction that Toruns Investments Pty Limited was a fit and proper person to hold a licence; or that the characteristics of its directors Mr and Mrs Bektas made it a fit and proper person to hold a licence. 24 The notices to complete (Ex A/43 and 45) calling for completion of the two contracts on 4 December 2006 did not have any justification in Special Condition 11. Quite otherwise, the terms of Special Condition 11.1 and 11.2 show that the notices to complete were premature. The purported notices of termination of 5 December 2006 (Ex A/51 and 53) which were based on failure to comply with the notices to complete did not have the basis which they purported to have. They were not effective. By 5 December 2006 DOCS had neither granted nor refused a licence and the time for completion had not arrived. What the notices claimed to do was to terminate the contract. They did not purport to rescind the contract, the process referred to in clause 11.4, and rescission is referred to only in clause 11.3 which had no operation. The events which happened did not make Clause 23 of the Business Sale Contract applicable. 25 As an alternative, plaintiffs' counsel sought to justify the termination by reference to breach by the defendants of an implied term, which he contended was an essential term, relating to taking reasonable steps to obtain a licence, and not taking any steps to resist or prevent the grant of a licence. 26 Section 201 states the objects of Chapter 12 which include "(a) to ensure the safety, welfare and well-being of children in children's services …" and "(c) to ensure, as far as possible, that all persons working in children's services are suitable for such work." These objects are intended to give guidance and direction in the administration of Chapter 12: see s 203. 27 Section 204 forbids providing a prescribed children's service unless the provider is a licensee; as was accepted throughout, it was essential that Toruns Investments Pty Limited obtain a licence if it was to conduct the centre. Section 206 relates to an application for a licence. An application is to be accompanied by documents and information including personal information concerning the applicant and the proposed staff as prescribed by Regulation. For an application by a company, personal information is required for each person involved in the control and management of the company, such as a director. 28 The Act and Regulation contain some indications of matters which are relevant to be considered upon the grant or refusal of a licence. Section 207(1) shows that it is relevant to consider risks to the safety, welfare or well-being of children who would attend, as well as other grounds. By s 208 a licence must specify a number of matters including who is the authorised supervisor. There must be an authorised supervisor but there may not be more than two. By section 209 a licence is subject to conditions; prescribed conditions, and other conditions which the Director-General thinks fit to impose. Section 211 indicates grounds on which a licence may be revoked, and these include grounds relating to the continued suitability of directors – see subs(1)(c). 29 The Act creates a wide power to make regulations in section 264, and the further power in section 220 special to Chapter 12. 30 The Children's Services Regulation 2004 makes detailed provisions about licencing procedure, licence conditions, probity checks of proposed licensees and supervisors; and many other matters. Clause 25 prescribes a number of conditions which a licence must contain. Of course, it is for decision by the Director-General whether there should be further conditions for each particular licence. 31 Clause 9 makes comprehensive requirements for personal information relating to persons (such as directors) involved in control and management of an applicant company, and for authorised supervisors. 32 Clause 11 requires an application to be accompanied by information to demonstrate that the applicant is a fit and proper person. This requirement extends to persons involved in the control and management of a company which is an applicant, such as directors. A number of documents relating to that subject are specified, but the specification is not exhaustive. The specified documents include qualifications in the area of children's services, character references, training and work experience. There are many further requirements for information to accompany an application. An application must be advertised – see cl 20; and the advertisement offers members of the public an opportunity to make submissions in relation to the application. 33 These references to legislation show that the question whether the applicant is a fit and proper person is central to all considerations for the Director-General when someone applies for a licence. If the applicant is a company the question relates to each of its directors. Personal suitability is of primary importance. 34 Mrs Saliha Bektas made a statement in connection with the application for a licence on her own suitability and intentions; dated 6 August 2006 (Ex A/7). This document strongly represented her own personal suitability, which was relevant as she was and is a director of Toruns Investments. 35 Mrs Bektas sent Toruns Investments' application to an officer of DOCS at Blacktown; the application was received on 19 September 2006. The form of application (EX A/11) included a statutory declaration by Mrs Saliha Bektas verifying the application. The form included the statement "It is an offence to make false and misleading statements" with a warning of possible penalty. At the same time an application was made for approval of Mrs Randa Dowidar the second plaintiff to be authorised supervisor. 36 One of the documents submitted was a personal details form relating to Mrs Saliha Bektas herself which included a personal statement of her suitability. This document was also verified by statutory declaration. The form again included a warning that it was an offence to make false and misleading statements, with a reference to possible penalty. There were consents by Mrs Bektas and also by Mr Bektas to police criminal record checks, and to a departmental record check by DOCS. 37 Both the applications were refused and the documents returned on 29 September 2006 because the information submitted was not complete. However further information was produced and consideration resumed. 38 This led to the interview on 6 October 2006 which I dealt with earlier. 39 Ms Flanagan indicated that the licence would not be issued until settlement. This was appropriate having regard to cl 7 of the Regulation, under which an application may be made by an owner or a lessee of premises, and this requirement could not be fulfilled before settlement. 40 Arrangements were made by the lawyers acting for the parties for settlement to take place on Friday 27 October 2006 at 12 noon. The plaintiffs made several arrangements with public bodies in anticipation that this would happen. The plaintiffs' solicitors showed some concern at the lack of preparation for settlement on behalf of the purchasers and on 25 October 2006 called for compliance (Ex A/26). In response the plaintiffs' solicitor Mr El Husseini was told by Mr Kellar who was employed by the defendants' lawyers, at about 9 a.m. on 26 October, that the defendants could not settle on 27 October due to finance problems, and that they could settle on 10 November. Mr Kellar was asked, and agreed, to confirm this by letter but did not do so. Evidence of Mrs Bektas shows that there were no finance problems. The defendant's lawyers did not make preparations to complete on 10 November, although Mr El Husseini called on them to do so. The defendants took no steps towards settlement on 10 November. 41 On 27 October 2006 Ms Bestegul Tungandame telephoned Ms Flanagan. Ms Tungandame had been a referee and had given a reference dated 30 July 2006 (Ex A/40) supporting the application. However what she told Ms Flanagan on 27 October was strongly and strikingly to a different effect. She said to the effect that when she gave the reference Mrs Saliha Bektas had told her that Mrs Bektas could only be the financial supporter and that the service was being purchased for her daughter, but Mrs Bektas had since advised Ms Tungandame that Mrs Bektas would be participating in the service and managing the service on a day to day basis. Mrs Tungandame said that she had provided a reference on the basis that Mrs Bektas would be a non-teaching licensee with no participation in the management of the service which she was purchasing for her daughter. Mrs Tungandame said that she strongly objected to Mrs Bektas being considered as a licensee of a child care centre. Ms Flanagan noted "[Tungandame] stated that Bektas (proposed licensee) has mental health problem, that she is suffering from multiple mental health problems & is currently required to take very strong strong medication, to be able to carry out regular daily functions. The medication would not be sufficient for her, if she were to be responsible for a child care centre. Beste stated that Bektas' daughter has contacted Beste and disclosed that her mother has emotional & physical abused her, on numerous occasions, and that her mother is not well 'physically' and that Bektas requires constant medial intervention due to her inability to maintain control of her diabetes". 42 Ms Flanagan made notes and told Ms Gae Parmenter, a DOCS officer who had responsibility for decision on the licence, of what had happened. The evidence does not enable me to find at what time of day on Friday 27 October Ms Flanagan received this information, except that it was by or before 3:23 p.m. 43 These events set off consideration within DOCS of the department's response. An interdepartmental message from Ms Parmenter (Ex A/32) states that on 31 October "Subsequently last night we had a distraught call from the daughter Dilsat Bektas who reiterated the concerns of the referee stating that she had removed the care of her own children from her mother (who was looking after the children informally) due to her current mental health state. She has only just found out that her mother intended working at the centre. She called the helpline who referred her to the Network office." Consideration within the Department continued. A note of 6 November 2006 (Ex A/35) shows that among other things screening clearance (referring to police records) was outstanding, so that the licence application could not be processed further at that stage. This note shows that on 6 November a solicitor (which must refer to the defendant's lawyers who employed Mr Kellar) contacted Ms Flanagan "to advise that a request for an extention has been passed to vendor & is currently awaiting doctor's letter of support." 44 Ms Dilsat Karaoglu, Mrs Seliha Bektas' daughter sent Ms Flanagan a message on 7 November 2006 (Ex A/38) and made statements about her mother's health and expressed "sincere concerns surrounding her mental and physical capacity". She went on to refer to Mrs Bektas' having suffered severe depression, and having relapsed several times during her efforts to secure the licence. She referred to emotional outbursts during occasions where she was unable to progress her application. Ms Karaoglu expressed strong concerns adverse to granting the licence. 45 Ms Bestegul Tungandame sent a message in writing to Ms Flanagan dated 7 November (Ex A/39) expressing her concern and withdrawing her reference. This reference had been highly commendatory. It did not contain any statements specifically directed to conducting a child care centre. The contrast with Ms Tungandame's position as later expressed is very striking. 46 On 16 November 2006 the vendors' solicitors sent the purchasers and their solicitors notices to complete both contracts and called for settlement at 2 p.m. on 4 December 2006 at the Law Society's office in Phillip Street. 47 In November there were direct communications between Mrs Bektas and Ms Flanagan (and possibly other departmental officers – (Ex A/48-49). 48 On 22 November the lawyers then acting for the defendants sent the plaintiffs' solicitors a letter (Ex B) referring to the notice to complete, stating that the department had not issued an unconditional licence, contending that the notice to complete was defective and invalid and saying "The purchaser Mrs Saliha Bektas is under psychiatric care for depression and is incapable to undertake the running of a childcare centre. We are in the process of obtaining a condition report from Mrs Bektas's psychiatrist which will be forwarded to DOCS for their consideration. DOCS have advised the writer that they would not be issuing a licence to Mrs Bektas knowing of her psychiatric condition." The letter went on to say that DOCS had been asked for written confirmation that it would not issue a licence, and on receipt of written confirmation a notice of rescission under Special Condition 11 would be issued. 49 When cross-examined on this letter Mrs Saliha Bektas disavowed having given instructions in support of it. It is extremely improbable, in my finding, that the letter was written without instructions. In any event, it was within the general authority of the defendants' lawyers to write the letter, as what it said was true and it related to the interest of the defendants as clients. The defendants are bound by the letter as if they have written it themselves. 50 On 23 November 2006 Dr Fatma Lowden, a consultant psychiatrist, issued a report (Ex A/46) headed "Brief psychiatric assessment report" relating to Mrs Bektas. The defendants' then lawyers sent a copy of this to Ms Flanagan on 27 November 2006 (Ex A/47). The report refers to interviews with Mrs Bektas on 28 December 2005, 7 January 2006 and 1 November 2006, and to cognitive tests and investigation results. The report gives a history on presentation (presumably on 28 December 2005) of a seven-year history of anxiety and depression at the background of work problems, a lot of anxiety depression symptoms with dissociative episodes and significant gambling problems; with no psychotic features. There was a lot of sadness and anxiety, no formal thought disorder, no delusion, and there was normal perception. The psychiatrist made significant positive observations - alert and oriented, attention memory language parietal and higher function normal, with insight and judgment. The psychiatrist said "My provisional diagnosis for Saliha Bektas is bipolar mood disorder. In terms of differential diagnosis considered organic mood disorder, chronic major depression, anxiety disorder, personality disorder and dysthymia". 51 The psychiatrist then discussed immediate management which included investigations to exclude organic mood disorder, monitoring medication side-effects, initiating lithium and lamotrigine, mood stabilisers, and haloperidol as an antipsychotic. The psychiatrist said "With the above treatment she has improved slightly in her symptoms but she is unable to carry out responsibilities required to run a business since her condition causes significant cognitive impairment as well as continuing depressed mood and lack of motivation." 52 The defendants' lawyers' letter of 27 November asked DOCS for written advice whether DOCS was prepared to issue a licence. 53 On 28 November 2006 Ms Flanagan made a file note, discussing considerations relating to the issue of a licence, including information from Mr Kellar that the psychiatrist's report would be forthcoming. Several possible courses were mentioned including withdrawing the application, refusing it on the ground of false information about being a fit and proper person and issuing a licence to her husband, who was said not to be able to read and write English. A note on this memorandum shows that screening clearance for Mr Bektas had not yet been received. 54 On 5 December 2006 the plaintiffs' solicitor sent notices of termination of each contract, relying on non-compliance with notices to complete for 4 December 2006 and asserting that the deposits had been forfeited. 55 There are a number of memoranda and internal communications of DOCS in Ex A showing that the department's consideration continued. In the course of this Mrs Bektas sent DOCS a Statutory Declaration by her husband on 29 December 2006 (Ex A/58). 56 The statutory declaration by Mr Bektas had at its foot a statement by Ms Karaoglu his daughter which said "… I wrote this declaration in direction of the information provided by him. I have also explained to him about the consequences of making a false declaration". The declaration contained statements to the effect that he had approved Mrs Bektas representing Toruns Investments in the licence application and in dealing with government authorities, that he had appointed her to run and manage the child care centre: "I had also appointed Saliha to run and manage this child care centre as I had no formal education or knowledge on government policies in general, especially in child care services. My involvement in the company was purely to provide financial backing." He went on to say that he had a limited grasp of English, many misunderstandings, inaccurate expression, a need for interpreter services when dealing with government departments, very limited reading and writing ability in English, that he had multiple health, social and educational limitations. He said that he would strongly object to a licence being granted on the ground that he was a director "… due to not being able to fulfil the requirements imposed on a manager of such an important service as this." The declaration concluded "Accordingly I am requesting the decision-makers to seriously consider my position prior to making the decision on this matter." 57 On 2 January 2007 Ms Gae Parmenter sent Mrs Bektas a letter (Ex A/59) stating her decision to refuse to grant a licence. She gave these grounds: · Ms Saliha Bektas, one of the two directors of Toruns Investments Pty Limited, proposed to be actively involved in the operation of Pink Bunny Child Care Centre has been found to be not fit and proper to be concerned in the provision of a children's service. · Mr Raffetin Bektas, the other director of Toruns Investments Pty Limited has formally submitted that neither he nor the other company director Saliha Bektas is capable of running a children's service. 58 By a letter of 15 January 2007 (Ex A/60) new solicitors acting for the purchasers asserted to the vendors' solicitors that DOCS refused to grant a licence, that the purchasers wished to rescind the Business Sale Contract and the interdependent Land Sale Contract: that the purchasers did rescind: and called for refund of the deposits. 59 In view of the information which had reached DOCS, an adverse decision, on these grounds or other grounds, was the only possible outcome. Evidence does not show whether there was an unfavourable result of the Police Department's screening process; and it should be assumed that there was not. With the withdrawal of Ms Tungandame's reference the formal requirements of the Regulations for referees were no longer complied with. There was a need for the Director-General to consider whether both directors were fit and proper persons, and a favourable outcome could not reasonably be expected. 60 The plaintiffs' counsel challenged Ms Bektas in cross-examination and made a submission criticising her for not pursuing the application further by administrative processes or appeal. Any such process would have been completely hopeless and there was no reasonable ground for criticism in this respect. 61 In her evidence, and throughout a severe cross-examination Ms Bektas maintained the position to the effect that throughout the events she had wished to press on with the application, obtain a licence and complete the purchase. She did not have any financial difficulty in completing the purchase, according to her evidence. On the other hand the case which the cross examiner sought to make, in cross-examination and in submission, is to the effect that from 27 October onwards if not earlier, she worked against the grant of the application and inspired or procured Ms Tungandame and Ms Karaoglu to make communications to DOCS adverse to the application. It was contended that she had continued this by giving Mr Kellar instructions to write his letter of 24 November and to obtain and to forward the psychiatrist's report, by participating in the preparation of her husband's statutory declaration, and by forwarding it to the department. 62 In my view Mrs Bektas' firm denials and endeavours throughout the cross-examination to maintain her position were unreliable. It is very improbable that the production of adverse information to DOCS and the adverse decision were events in which she had no control or influence and that the outcome was adverse to her true wishes. However I do not find that Ms Tungandame's contacting DOCS and giving information she did, and withdrawing her earlier reference, were not a true expression of Ms Tungandame's own genuine views and beliefs about Mrs Bektas' suitability. Nor do I make any such finding about views expressed by Mrs Dilsat Karagou, Mrs Bektas' daughter or about Ms Karaoglu's communicating her views and information to DOCS. It was a perfectly proper thing for persons who were not applicants to communicate their views on an application to DOCS; the provision for advertising shows that this is so. It is not possible to dispose of the present proceedings upon some view of the facts in which Ms Dilsat Karagou and Ms Tungandame were not genuinely stating their own views and positions to the department. There is no substantial evidence that they acted as they did because Mrs Bektas in some way inspired them to do so, in pursuit of her own perceived interest that the application should be refused. 63 Notwithstanding Mrs Bektas' evidence it is probable that at some point, possibly from as early as 27 October, she had the perception that it was in her own interest that the application should not be successful, that no licence should be obtained and hence that the purchase should not be completed. The interpretation made by departmental officers by early December certainly was that Mrs Bektas wanted a refusal. 64 The defendants including Mrs Bektas were under an obligation to DOCS to provide frank, complete and true information relating to the application and on whether she (and others) were relevantly fit and proper persons. Her implied contractual obligation to pursue the application for a licence was an obligation which had reasonable limits, and would not be breached by any conduct which was required in her relationship with DOCS. It would have been seriously misleading, when the report of the psychiatrist existed, not to communicate it to DOCS. It was misleading not to have communicated the facts and circumstances relating to Mrs Bektas' having seen a psychiatrist and received prescribed treatment, even before the most recent consultation referred to in the report took place on 1 November 2006. Once DOCS received that report there was in my view no real prospect that a licence would be granted. Whether or not Mr Bektas was a suitable licensee was something of a blind alley as it was necessary for the Director-General to be satisfied as to both directors. There is no basis for thinking that what he said in his statutory declaration was not true, and it is a clear demonstration that he was not relevantly a fit and proper person. 65 If facts existed which the defendants were required to disclose to DOCS so that the information they gave would not be false or misleading, the obligation to disclose it still existed, unqualified, if their perception was that it was in their own interest to disclose it, just as much as if their perception was that it was in their interest not to disclose it. 66 My approach to finding of facts and disposition of the case would be altogether different if it had been shown to me that the grounds and reasons given by Ms Tungandame, Ms Karaoglu and the psychiatrist Dr Lowden were not true, or were not sincerely believed in by then. If everything they said was a fabrication brought about by Mrs Bektas, the plaintiffs would be entitled to succeed. I am quite satisfied that none of this is the case. It accorded with what the defendants had come to perceive as their interests that what these three persons said should be passed on to DOCS; but as what they said truly was their view of the facts and their opinions, it had to be passed on to DOCS; no less so whether or not passing it on accorded with the defendants' perception of their interests. 67 The references in Special Condition 11 particularly 11.2 to obtaining a licence created an implied contractual obligation of Toruns Investments Pty Limited to apply for a licence and to take all reasonable steps available to it to obtain a licence within a reasonable period. See Butts v O'Dwyer (1952) 87 CLR 267 at 279-280; and see Plumor Pty Limited v Handley (1996) 41 NSWLR 30 at 34-35 (McLelland CJ in Eq). Making this implication is related to or perhaps an instance of the implied obligation associated with Mackay v Dick (1881) 6 App Cas 251 at 263 referred to in Secured Income Real Estate (Australia) Limited v St Martins Investments Pty Limited (1979) 144 CLR 596 at 607-608 (Mason J). 68 An implication of the same kind underlies observations in Misiaris & Another v AF Holdings Pty Limited (1988) 15 NSWLR 231 at 234 (Needham J) to which I was referred. Needham J said: The mortgagee's consent: It is clear, in my opinion, that the bank has made no decision on the question of whether it should consent to the lease. It has merely complied with the request of the defendant to write to the plaintiffs saying that consent has been refused. If that interpretation of the evidence were not correct, if seems to me that the defendant could not rely upon such a refusal. As a party to an agreement, it is its duty to take such action as is reasonably within its power to ensure that the conditions of the agreement are fulfilled. It cannot sabotage the agreement by persuading a third party to refuse its consent, such consent being a condition of the contract (clearly, in this case, a condition subsequent), and then rely upon the failure of that condition to provide it with the right to terminate the agreement. 69 As these observations show Misiaris was not a case where the mortgagee made a decision for itself whether or not to consent to the lease; the defendant asked the mortgagee to refuse consent and the mortgagee did so. Needham J's observations relating to sabotaging the agreement were clearly appropriate. Misiaris does not support a view to the effect that the contractual obligation requires relevant information to be withheld from a party whose consent is to be obtained. In my opinion a duty of good faith and fair dealing, if one exists in the present contract, would not produce, in its practical requirements, an obligation different to that required by the law as stated in Butts v O'Dwyer. See Renard Constructions (ME) Pty Limited v Minister For Public Works [1992] 26 NSWLR 234; Alcatel Australia Ltd v Scarcella [1998] 44 NSWLR 349; Burger King Corporation v Hungry Jack's Pty Ltd [2001] 69 NSWLR 558. 70 In Butts v O'Dwyer (1952) 87 CLR 267 at 279-280 the majority said, of a transfer entered into "… subject to a condition that it is not to become effective unless the Minister's consent has been obtained. Prima facie this would import an obligation on the part of the person giving the transfer to do all that was reasonable on his part to the end that the Minister's consent might be obtained." Later when their Honours applied this rule their formulation was a little different: (282-283) "We think that there should be a declaration that the defendants … are bound by an obligation implied in the transaction … to do all such acts and execute all such documents as may be reasonable and proper on their part to unable the plaintiff to apply to the Minister for his consent to the transfer …". The reference to such acts and documents" as may be reasonable and proper" was incorporated in the High Court's order: see page 289. 71 It was contended that Mrs Bektas took every action available to her to persuade DOCS not to grant a licence, and that her actions commenced on 27 October 2006, the date when completion was to take place. It was contended that Mrs Bektas "procured the psychologist, the psychiatrist, her daughter, her husband and the lawyer to write or speak to the Department with a view to persuade the department not to grant the licence." 72 I am not satisfied that Mrs Bektas procured the intervention of Ms Tungandame or of Ms Karaoglu. I infer that Mr Kellar obtained the psychiatrist's report with the object of making it known to DOCS, fully understanding that doing so it was adverse to the grant of a licence. Similarly Mr Bektas obtained the statutory declaration from her husband, and must have fully understood that the statutory declaration was adverse to the grant of a licence. However it does not follow that these steps were unreasonable. They were not improper things to do; frank presentation and pursuit of the application, in circumstances which were not misleading, required them to be done. These things should not be interpreted as breaches of an implied contractual obligation. 73 Mrs Bektas was challenged in cross examination and criticised in submission for not withdrawing the application, but leaving the application in existence until the Department refused. It is likely that not withdrawing the application was a product of the perception, by her, by Mr Kellar or by both, that the purchasers' interests would be better served if the Department refused a licence. In my opinion compliance with the implied obligation did not require her to act against her perceived interests, which would be better served by refusal than by withdrawal. 74 I do not find any assistance on the decision of the Full Court of the Supreme Court of Western Australia in Kheng v Secola [2001] WASCA 3. It was established by the decision at first instance and was not disputed on appeal that it was an implied condition of a sale of land that the purchaser would do all things reasonable on her part to obtain approval of the Foreign Investment Review Board, and had failed to do so. The decision is incapable of providing any assistance on the question whether there was a failure to comply with an implied condition in the present case. 75 There was no breach of the implied condition in making proper disclosures to DOCS and in taking action which avoided misleading DOCS. If the disclosures were matters which it was proper to disclose to DOCS, the perception that the defendants' interests were assisted by making the disclosures does not make the conduct unreasonable for the purposes of the implied condition. 76 It was contended that the plaintiffs' notices of termination, if not justified on the grounds expressed relating to non-compliance with notice to complete, were justified by breach by the defendants of an essential term, that is of the implied condition. In my view there was no breach of the implied condition, essential or not, and the notice of termination cannot be shown to have been effective on this ground. 77 When DOCS refused the licence on 2 January 2007 the position emerged that no completion date for the Business Contract would ever be established in the working of Special Condition 11, that that contract would never be completed, and the Sale of Land Contract could not be completed either because of its interdependence. References in Special Condition 11 or elsewhere in the contract to rescission did not strictly apply to the situation which emerged, but whether or not the reference to rescission was correct, the contracts could go nowhere, and could not be completed. Both parties were maintaining that there was no further obligation to complete, the plaintiffs asserting that there had been a termination and the defendants that there had been a rescission. If no other interpretation is available, the contract had been abandoned by both sides. There had been a complete failure of the consideration for which the deposits were paid, with the result at common law that the defendants were entitled to recover their deposits. If this were not a correct understanding of the position, their claim for discretionary orders for return of deposits under section 55(2)(A) of the Conveyancing Act 1919 would in the circumstances be overwhelmingly strong. 78 In their amended cross-claim the defendants claimed declarations establishing that the contracts were validly rescinded or terminated on 15 January 2007, and return of the deposits. For reasons stated I am satisfied that the defendants were entitled to return of the deposits, with any interest accrued thereon, and I will make orders accordingly. 79 My orders are: (1) Upon the plaintiffs' claims give judgment for the defendants. (2) Upon the cross-claim: (i) declare that the cross claimants are entitled to repayment of their respective deposits, together with any interest accrued thereon; (ii) order that the fourth cross defendant Michael McEvoy pay: (a) the deposit on the contract for sale of land dated 20 July 2006 and any interest thereon to Raffetin Bektas and Sahila Bektas the first and second cross claimants; (b) the deposit on the contract of sale of business dated 20 July 2006 and any interest thereon to the third cross claimant Toruns Investments Pty Limited. (3) Order that the plaintiffs pay the first, second and third defendants' costs of proceedings on the plaintiffs' claim. (4) Order that the first and second cross defendants pay the cross claimants' costs of proceedings on their cross-claim. (5) Order that the fourth defendant McEvoy pay and bear his own costs of proceedings upon the plaintiffs' claim and upon the cross claim. ********** DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. The onus remains on any person using material in the judgment or decision to ensure that the intended use of that material does not breach any such order or provision. Further enquiries may be directed to the Registry of the Court or Tribunal in which it was generated.