Lajos Horvath and Maria Horvath v General Credits Limited [1986] ACTSC 51 (20 June 1986)

SUPREME COURT OF THE ACT

LAJOS HORVATH and MARIA HORVATH v. GENERAL CREDITS LIMITED
S.C. No. 2262 of 1979
Contract

COURT

IN THE SUPREME COURT OF THE AUSTRALIAN CAPITAL TERRITORY
Gallop J.(1)

CATCHWORDS

Contract - action for breach - construction of special conditions - whether the parties intended to enter into binding obligations.

Pym v. Campbell 119 ER 903

Smith v. Butler (1900) 1 QB 695

Aberfoyle Plantations v. Cheng (1960) AC 115

Gilbert J. McCaul v. Pitt Club Ltd (1959) 59 SR 122

Meehan v. Jones [1982] HCA 52; (1982) 149 CLR 571

Wadey v. Mort's Dock (1905) 5 SR 222

Placer Development Limited v. The Commonwealth [1969] HCA 29; (1969) 121 CLR 353

Pollock on Contracts, 9th Ed., p 49

Chitty on Contracts, 25th Ed., par 160

HEARING

CANBERRA
20:6:1986

ORDER

There be judgment for the plaintiffs.

DECISION

This is an action for damages for breach of contract. At the request of the parties the trial of the action was initially confined to the question of liability and the issue of damages is to abide the issue of liability. The claim arises out of the financial relationship of the plaintiffs as borrowers and the defendant as lender in relation to a townhouse development by the plaintiffs in Christopher Crescent, Queanbeyan, in the State of New South Wales.

2. The plaintiff's claim is that on 10 November 1978 the defendant offered to lend to the plaintiffs the sum of $337,500 over a period of 12 months at an interest rate of 19% per annum reducing to 16.7% per annum on prompt payment. The loan was to be secured by way of first mortgage over Lot 8 in Deposited Plan No. 252067, situated at the corner of Christopher Crescent, Hakea Street and Donald Road, Queanbeyan, a second mortgage over Lots 10, 11 and 12, situated at the same corner, and a second mortgage over the plaintiff's home at 15 Holmes Crescent, Campbell, in the Australian Capital Territory. It is pleaded that the plaintiffs accepted the offer on 17 November 1978 and that thereby an agreement was lawfully entered into by the plaintiffs and the defendant for the making of that loan.

3. It is further pleaded that on 10 November 1978 the defendant offered to lend to the plaintiffs the sum of $91,500 over two years at 19% per annum reducing to 16.75% per annum upon prompt payment on the same securities. It is alleged that the plaintiffs also accepted that offer on 17 November 1978 and an agreement was lawfully made. The plaintiffs claim that in breach of the said agreements the defendant refused to advance the amounts agreed upon and as a result of the breaches the plaintiffs have suffered loss and damage.

4. The basic facts are not really in dispute and I make the following findings. In May 1977 the plaintiffs acquired the land in Christopher Crescent and set about completing a townhouse development in six stages with the assistance of finance from the defendant. Stage 1 of the development had been completed by October 1977 and the constructed townhouses were in the process of being sold. The defendant approved a loan to the plaintiff of $198,000 to construct the townhouses on Lot 7, at the corner of Christopher Crescent and Hakea Street, Queanbeyan. By July 1978 the project on Lot 7 had been completed and five definite sales had been effected. The plaintiffs anticipated that the remaining four townhouses would be sold within two weeks and settlements commence in another four weeks. Negotiations between the parties then commenced for loans for the next stage of the development, known as Stage 3. It is these negotiations which are the substance of the action.

5. The appropriate proposals for loan were prepared by the Canberra Office of the defendant and forwarded to the defendant's head office in Sydney on 13 July 1978. At that stage it was anticipated that the full net profits to be received from the anticipated settlements of the sale of the townhouses in the Stage 2 development would extinguish the plaintiffs' indebtedness to the defendant. The recommendation of the Canberra Office at that stage was that the defendant should approve of a loan to the plaintiffs to enable the next stage of the development to proceed. The transaction was described in the internal documents as a "work-out situation". This means a loan in which the defendant would have an interest in working the situation out. On that basis and on the basis of the plaintiffs' past performance and proven product, the loans were strongly recommended.

6. The head office of the defendant was less enthusiastic about the proposed loans. It was not convinced that the plaintiffs should expand their activities in view of the barely profitable result of the Stage 2 development. In support of the viability of Stage 3 the Canberra Office obtained from the real estate agents who acted as selling agents for the plaintiffs on their two previous developments a feasibility study which was in favour of the third stage of the overall development going ahead. The Canberra Office forwarded that feasibility report to head office on 3 August 1978 and recommended that the finance be made available to the plaintiffs because it was a work-out situation. Documents called "Proposal for Loan" were completed by the Canberra Office on behalf of the plaintiffs and forwarded to the head office on 25 October 1978. The amounts requested were $337,500 and $91,500 respectively.

7. By internal documents dated 8 November 1978 the Canberra Office was given approval to make the loans to the plaintiffs. The terms of the advice in relation to the application for a loan of $337,500 were:

"Advance to be in terms para general. Please advise us

when settlement proceeds to hand for 80-156-207 and we
will cancel that apn. No funds to be advanced under
fresh approval until 80-156-207 is cleared.

Fresh V/- to confirm 15 Holmes Crescent Sec 3 V/-.

Advise us should borrowers fail to service interest
commitment."

On 10 November 1978 the defendant sent letters in the form of offers for each loan. As the terms of the letters are central to the issues involved, it is desirable that the full terms of those letters be set out:

"RE: APPLICATION FOR LOAN

With reference to the above matter, we are pleased
to advise that favourable consideration has been given
to your application. Details of the loan, together
with our terms and conditions, are outlined below.

LOAN TO BE
IN FAVOUR OF: HORVATH, Lajos and Maria
80-172-370
AMOUNT TO BE
ADVANCED: $81,500:00

INTEREST: 19% reducing 16.75% per annum, payable
monthly for payment within seven (7)
days of the due date.

TERM: Two (2) years.

REPAYMENT: Interest to be calculated and payable
monthly.

SECURITY: 1. 1st R/M No: over C/T's Vol.13106,
Fols. 10, 11 and 12, being Lots 10,
11, 12 in D/P 252069 situated at
Corner Christopher Crescent, Hakea
Street and Donald Road, Queanbeyan.
N.S.W.

2. 2nd R/M No: (Indirect from Lajos
Horvath) over C/T Vol 88 Fol 87
being Block 25 Section 58 situated
at 15, Holmes Crescent Campbell,
A.C.T.

INSURANCE: To be of an adequate amount and type
with the interest of the Company
incorporated therein.

SPECIAL CONDITIONS:
1. Documentation to be prepared by our
Solicitors (Messrs. Phillips & Co.)
at your expense. All registration
fees, stamp duties, loan instrument
duties and other outgoing necessary
in connection with the preparation
and registration of securities must
be borne by you.

This offer is made without prejudice and on the basis
that the terms and conditions hereinbefore mentioned
may be varied at any time prior to the completion of
the mortgage documents and the actual advance of monies
be at the sole discretion of the Company.

Please signify your acceptance of the above terms and
conditions by signing and returning the attached copy
of this letter, together with the insurance details and
cheque for $ being our costs and outlays, to
allow the early preparation of the mortgage documents
and speedy settlement of the loan.

This offer may be withdrawn if the loan is not accepted
within fourteen (14) days from the date hereof and/or
immediately any circumstances arise, which, in our
opinion are prejudicial to the interests of our
Company.

Yours faithfully,

G.M. LEE,
MANAGER - GENERAL FINANCE."

"RE: APPLICATION FOR LOAN

With reference to the above matter, we are pleased
to advise that favourable consideration has been given
to your application. Details of the loan, together
with our terms and conditions, are outlined below.

LOAN TO BE
IN FAVOUR OF: HORVATH, Lajos and Maria
A/c No. 80-172-370
AMOUNT TO BE
ADVANCED: $337,500:00

INTEREST: 19% reducing 16.75% per annum, payable
monthly for payment within seven (7)
days of the due date.

TERM: Twelve (12) months.

REPAYMENT: Interest to be calculated and payable
monthly.

SECURITY: 1. 1st R/M No: over C/T Vol: 13106,
Folio 8, being Lot 8 in D/P 252069
situated at Corner of Christopher
Crescent, Hakea Street and Donald
Road, Queanbeyan. N.S.W.

2. 2nd R/M NO. over C/T's Vol.13106
Fol. 10, 11 & 12 being Lots 10, 11 &
12 in D/P 252069 situated at Cnr. of
Christopher Crescent, Hakea Street &
Donald Road, Queanbeyan, N.S.W.

3. 2nd R/M No: (Indirect from Lajos
Horvath) over C/T Vol.88 Fol.87
being Block 25 Section 58 situated
at 15, Holmes Crescent, Campbell,
A.C.T.

INSURANCE: To be of an adequate amount and type
with the interest of the Company
incorporated therein.

SPECIAL CONDITIONS:
1. Our Architects to peruse Plans and
Specifications to confirm
construction costs as reasonable.

2. Initial advance of $26,500 to
pay-out apportionment of land on
existing loan on 80-156-223.

3. Balance of advance on a cost to
complete basis against certificates
of inspection by our Architects.

4. Documentation to be prepared by our
Solicitors (Messrs. Phillips & Co.)
at your expense. All registration
fees, stamp duties, loan instrument
duties and other outgoings necessary
in connection with the preparation
and registration of securities must
be borne by you.

This offer is made without prejudice and on the basis
that the terms and conditions hereinbefore mentioned
may be varied at any time prior to the completion of
the mortgage documents and the actual advance of monies
be at the sole discretion of the Company.

Please signify your acceptance of the above terms and
conditions by signing and returning the attached copy
of this letter, together with the insurance details and
cheque for $ being our costs and outlays, to
allow the early preparation of the mortgage documents
and speed settlement of the loan.

This offer may be withdrawn if the loan is not accepted
within fourteen (14) days from the date hereof and/or
immediately any circumstances arise, which, in our
opinion are prejudicial to the interests of our
Company.

Yours faithfully,

G.M. LEE,
MANAGER - GENERAL FINANCE."

Both offers were accepted by the plaintiffs on 20 November 1978 in the manner specified by the defendant, namely by signing copies of each letter and returning them to the defendant. No insurance details or cheque for any amount accompanied these acceptances.

8. On 22 November 1978 the defendant instructed its solicitors to prepare the relevant documentation on its behalf and sought advice whether the documents could be done by way of variation or any other way of avoiding excessive stamp duty. The defendant already held security by way of registered mortgages over at least some of the real estate referred to in the offers of 10 November 1978.

9. In January 1979 it was noted by the Manager, General Finance of the Canberra Office of the defendant that all units in the Stage 2 development had to be sold and settled by 31 December 1978, and by letter of 9 January 1979 he requested the plaintiffs to attend to discuss the matter. Nothing further seems to have transpired between the parties until some discussions just prior to 3 May 1979.

10. By letter dated 3 May 1979 the Canberra Office of the defendant informed the plaintiffs that the anticipated shortfall on the Stage 2 development was $36,747 and requested payment of that amount. By further letter dated 21 May 1979 the defendant requested the plaintiffs to pay $10,000 immediately and a further $15,000 by 31 May 1979 in respect of their loan accounts. By letter dated 23 May 1979 the Canberra Office informed the plaintiffs that the balance of the shortfall was required by 30 June 1979.

11. On receipt of the profits of the final settlement of the Stage 2 development on 1 June 1979 there was a shortfall of $21,500. What had happened was that because of delays in settlement of the units in the Stage 2 development interest had accrued on the debt which was not being serviced in the meantime. Nevertheless, by internal memorandum dated 25 May 1979 the Canberra Manager of the defendant recommended to head office that the defendant go ahead with the loans of $91,500 and $337,500. By memorandum dated 30 May 1979 head office advised the Canberra Office that it would not be willing to approve further funds unless it could be clearly demonstrated that it would be in the defendant's best interests to do so. Head office suggested that the plaintiffs be made aware of their views and that the plaintiffs' reaction and the Canberra Manager's recommendations be furnished.

12. On 12 June 1979 there was a discussion between the male plaintiff and officers of the Canberra Office relating to the need of the Canberra branch to satisfy its head office that the development of Stage 3 was feasible. The male plaintiff was required to furnish plans for the defendant's architects to confirm the construction costs referred to in the approval of 8 November 1978, evidence of the availability of at least $40,000 for working capital and the need to satisfy the defendant that the plaintiffs could service the new loans.

13. The plans for the architects were provided and forwarded by the defendant to its architects on 20 June 1979. On 22 June 1979 the architects reported to the defendant on the reasonableness of the plaintiffs' construction costs. That opinion was conveyed by the Canberra Office to head office on the same day.

14. On 25 July 1979 the Canberra Office requested its architects to furnish an opinion on an amended total development cost. The effect of the architects reply dated 31 July 1979 was that the reduced total development cost was not reasonable. The Canberra Manager, by memorandum of 2 August 1979, forwarded the architects' report to head office and sought instructions. On 7 August 1979 head office decided not to fund Stage 3 of the development and requested that the plaintiffs be informed accordingly. By letter of 8 August 1979 the Canberra Office informed the plaintiffs that the defendant was not willing to fund Stage 3 "due to the unsatisfactory outcome of Stage II, the depressed market for housing in the Queanbeyan district, and the possibility of further escalation in building costs".

15. The plaintiffs instituted the present proceedings by causing the writ of summons to issue on 20 November 1979.

16. By its amended defence the defendant has denied that any binding agreement between the parties was created by the offer contained in the letters of 10 November 1978 and the acceptance thereof by the plaintiffs. It says that it was a term of the offers that they might be withdrawn immediately at any time any circumstances arose which, in the opinion of the defendant, were prejudicial to the defendant, whether or not the offer had been accepted. Further it pleads that it was a term of the offer that the offer may be varied at any time prior to completion of the mortgage documents referred to in the letter of 10 November 1978. It is further pleaded that it was a term of the proposed loans that the advance of moneys was at the sole discretion of the defendant and the defendant in the exercise of that discretion decided not to advance any moneys.

17. Next it was pleaded that in accordance with the term of the offer that it was to be varied or withdrawn at any time prior to completion of the mortgage documents, the offer was varied prior to the completion of the mortgage documents in the following particulars:

(a) The offer was varied by writing and orally by
requiring that before any binding contract to lend
came into existence the plaintiffs were to pay all
arrears outstanding on the loan (for stage 2) made
to them by the defendant, No. 80-156-207
(represented by application for loan dated
2 August 1977).

(b) So far as the offer was varied in writing, the
writings were:

- Defendant's letter to plaintiffs dated
9 January 1979.
- Defendant's letter to plaintiffs dated
3 May 1979.
- Defendant's letter to plaintiffs dated
21 May 1979.
- Defendant's letter to plaintiffs dated
23 May 1979.

(c) So far as the offer was varied orally, the
conversations took place as follows:
- B.W. Crittle and L. Horvath, 25 May 1979.
- G.M. Lee and L. Horvath, 12 June 1979.

The defence then states that the condition of the offer created by the variation was not complied with before completion of mortgage documents or within a reasonable time from 9 January 1979.

18. In the alternative, it was pleaded that the existence of the discretion in the defendant to advance moneys vitiated any intention of the parties to enter into a binding contract or, in the alternative, disclosed an intention on the part of the defendant not to enter into a binding contract.

19. There was another ground of defence pleaded that it was a term of the loans that the plaintiffs would, on acceptance, provide insurance details and a cheque to cover costs and outlays to allow for preparation of mortgage documents and the plaintiffs failed to supply these details or such a cheque. The defendant did not press that ground of defence on the hearing. The failure to specify the amount to cover costs and outlays made this term impossible of compliance anyway.

20. The critical words relied upon by the defendant are set out in both letters of 10 November 1978, and for greater particularity, I repeat those words:

"This offer is made without prejudice and on the basis
that the terms and conditions hereinbefore mentioned
may be varied at any time prior to the completion of
the mortgage documents and the actual advance of monies
be at the sole discretion of the Company.

. . . . .

This offer may be withdrawn if the loan is not accepted
within fourteen (14) days from the date hereof and/or
immediately any circumstances arise, which, in our
opinion are prejudicial to the interests of our
Company."

21. It was submitted on behalf of the plaintiffs that the power to vary set out in the first of the two paragraphs set out above could only be exercised up to the time of acceptance of the offer as upon acceptance an agreement to lend was created. It was conceded by the plaintiffs that otherwise the agreement between the parties is illusory and has no commercial efficacy. It was submitted that the court should strain to give the transaction between the parties some efficacy and accordingly should find that the power to vary the terms and conditions as expressed by the paragraph relates only to the matter of performance under the agreement and not to variation of the terms and conditions of the agreement itself after acceptance.

22. On the other hand it was submitted on behalf of the defendant that there is nothing in the letters of 10 November 1978 which limits the power of variation to the detail of performance rather than essential matters. The power to vary includes the power to add a condition and extends expressly to all the terms and conditions of the offer. The word "vary" connotes that something still remains of the original after the variation but it also would embrace something being added to the original. It was submitted that what was added by the defendant in the facts of this matter was the requirement that the plaintiffs' account in relation to Stage 2 of the development be cleared before any further loans were advanced.

23. It is necessary to return to the evidence about whether a term that the Stage 2 development was to be paid out was ever added i.e. whether the offer was varied or not.

24. In the proposals for loan dated 13 July 1978 the Canberra office informed the head office of the current position in relation to the sale of units in Stage 2 and said that the full net profits totalling $255,000 would pay out account 80-156-207 (including capitalised interest May to August) and stated that in view of the fact "that this is a 'work-out' situation applicants past performance with GCL and excellent product applicants build, application is strongly recommended and will not be advanced until profits of sale of all units on A/C 80-156-207 are received". Its proposals for loan were brought up to date by further proposals dated 25 August 1978. Using the proposals of 13 July 1978 as a draft, the same paragraphs appeared in the final proposals of 25 October 1978.

25. Head office approval of 8 November 1978 clearly stated that no funds were to be advanced under the fresh approval for loan of $337,500 until account 80-156-207 (the Stage 2 development loan) was cleared. The offers of 10 November 1978 did not expressly contain that condition. The plaintiffs' case was that the condition was never imposed either initially or as a variation.

26. The male plaintiff gave evidence that to the best of his recollection the officer of the defendant company with whom he was dealing mentioned that the defendant was anxious that the Stage 2 loan be cleared before any further loans were advanced. But the defendant never specified that as a condition of the loan. On the contrary, his recollection was that in all discussions with the defendant's officers it was contemplated that the balance of the Stage 2 loan would be paid out of the loans advanced for the purposes of Stage 3. He was quite positive that it was never laid down as a condition that all moneys owing on the Stage 2 development had to be satisfactorily reduced before any moneys were advanced for Stage 3. That condition only arose, according to the male plaintiff, at the stage when the loan was refused.

27. In amplification of his evidence he said that he stopped making interest payments on the Stage 2 loan by agreement with Mr Crittle because they were to be incorporated into the loan for Stage 3. The Stage 3 development was the cream of the whole project and would have eliminated any shortfall on Stage 2. His understanding was that the returns from Stage 3 would not only repay all loans but would make a profit. He understood that the Canberra Manager was to put those matters to head office including the submission that any shortfall on Stage 2 would be overcome by the profit from Stage 3.

28. I accept the evidence of the male plaintiff. It is not necessarily inconsistent with the evidence of Mr B.W. Crittle, Canberra Branch Manager at the time, who gave evidence on behalf of the defendant. It is apparent from all the internal memoranda that the defendant did not propose to advance any moneys for the Stage 3 development until the proceeds of sale of all the units in Stage 2 had been received. At least by October 1978 it is clear that it was the defendant's intention that the balance of the loans owing in respect of the Stage 2 development be cleared before any moneys were advanced for Stage 3. Certainly when the approval was given by head office for the advance of further loans for the Stage 3 development on 8 November 1978, head office specified that no funds were to be advanced until the Stage 2 account had been cleared. However, there was no term to that effect included in the offers of 10 November 1978. Nor was such a term added in the letters to the plaintiffs dated 9 January 1979, 29 March 1979, 3 May 1979, 21 May 1979 and 23 May 1979.

29. In fact the memorandum from the Canberra Office to head office dated 25 May 1979 proposes that the loan for Stage 3 be advanced so that work can commence and from the first progress payment moneys "be appropriated firstly to reduce the existing account to the agreed limit with the balance paid back to the builder for payment of trade creditors".

30. Mr Crittle said in his evidence in chief that he could not remember what he had said to the male plaintiff about the requirement to discharge the Stage 2 loan before the Stage 3 loan was made available. That aspect would as a matter of practice have been discussed before the proposals for loan were forwarded. When it was realised that there was going to be a shortfall on Stage 2, discussions took place with a view to exploring ways and means of having the shortfall paid out. Mr Crittle himself did not make any decision as to the fate of the loan for Stage 3 in view of the problems in respect of the trading loan for Stage 2 as it was not within his provision to make a decision.

31. I am satisfied on Mr Crittle's evidence that when the defendant ultimately decided not to advance the loans to the plaintiffs, as communicated to the plaintiffs by letter dated 8 August 1979, the reasons for that decision were that, whereas the plaintiffs' original proposal in October 1978 was that the profits of sale of the Stage 2 development would be available within a reasonably short time, the final proceeds did not become available in full until 1 June 1979 and that result put in question the feasibility of Stage 3. Furthermore, interest had continued to accrue on the outstanding debt. The debt increased accordingly and resulted in a shortfall which had not been part of the basis upon which the loans for Stage 3 had originally been approved. Lastly, the defendant became apprehensive of the plaintiffs' ability to construct the Stage 3 development within the cost structure proposed. It consulted its architects and confirmed that construction costs had increased.

32. Mr Crittle never said in evidence that the offers contained in the letters of 10 November 1978 were varied by the addition of a term that the plaintiffs were to pay all arrears outstanding on the loans for Stage 2 before the loans for Stage 3 were advanced. Furthermore, the diary note made by the Manager, General Finance, of the Canberra Office, in respect of a discussion with the male plaintiff at the Canberra Office on 12 June 1979 makes no mention of the imposition of such a term by variation or otherwise to the offers of 10 November 1978. Crittle himself said in evidence that right up until August 1979 he maintained the view that it was in the best interests of the defendant to advance the loans for Stage 3 to the plaintiffs. Head office did not ultimately share that view, but if Crittle's opinion had been otherwise, the variation of conditions contended for by the defendant would no doubt have been imposed quite explicity. It never was. I therefore reject the grounds of defence as pleaded in paragraph 14 of the defence.

33. Notwithstanding the rejection of the defendant's case that the offer contained in the letters of 10 November 1978 was varied prior to the completion of the mortgage documents, the question still remains whether the offer contained a condition that it could be varied or withdrawn at any time and, if so, whether the acceptance of such an offer, in the circumstances of the case, gave rise to the creation of contractual obligations. In so far as the offer is said to contain a term that it may be varied at any time prior to completion of the mortgage documents, the court has to arrive at the proper construction of the first special condition set out above. In so far as the offer is said to contain a term that the offer may be withdrawn when any circumstances arise which, in the opinion of the defendant, are prejudicial to the interests of the defendant, the court has to arrive at the proper construction of the second special condition set out above.

34. It was submitted on behalf of the defendant that the first special condition gives the defendant the power to vary the offer even after acceptance and that such an agreement is too uncertain to give rise to a binding obligation. Likewise, the defendant submitted that the second condition gives the defendant power to withdraw the offer even after acceptance provided the withdrawal is done immediately any circumstances arise which, in the opinion of the defendant, are prejudicial to its interests. Counsel referred to Pym v. Campbell 119 ER 903 per Erle J and Crompton CJ at 905; Smith v. Butler (1900) 1 QB 695 at 698-699; Aberfoyle Plantations v. Cheng (1960) AC 115 at 124, 126, 128 and 129; Gilbert J. McCaul v. Pitt Club Ltd (1959) 59 SR 122 at 125; Meehan v. Jones [1982] HCA 52; (1982) 149 CLR 571 at 593; Wadey v. Mort's Dock (1906) 6 SR 222.

35. It seems to me that the bargain struck between the parties is that the defendant made a promise to the plaintiffs that it would advance the amounts referred to in the letters of 10 November 1978 on terms as to interest, the period of the loan, the calculation of interest and time of payment, and security over the properties referred to. The plaintiffs in their turn promised to the defendant to repay the loans at the calculated interest rate payable monthly over the period of the loan and would give security in the manner sought by the defendant.

36. The offer was made without prejudice, meaning that if it was not accepted within the time stipulated the plaintiffs would not be able to rely upon the fact of the offer having been made and having lapsed.

37. It was a term of the offer that the terms and conditions could be varied by the defendant at any time prior to the completion of the mortgage documents. I have already held that no such variation was ever made. In the circumstances of this case, I do not think that the agreement containing a term that the terms and conditions may be varied at any time prior to the completion of the mortgage documents is too uncertain to give rise to a binding obligation. The power related to the terms and conditions previously mentioned. Those terms and conditions were the amount to be advanced, the interest rate, the term of the loan, the repayment term and the security. I construe the first special condition as enabling those matters to be varied at any time prior to acceptance. The power to vary was not exercised even after acceptance and the substantive terms of the agreement were capable of being put into effect.

38. It was a further term of the offer that the actual advance of the respective amounts set out in the letters was to be at the sole discretion of the defendant. Such a provision would be quite appropriate in an agreement to lend money for the purpose of development of 13 townhouse units. In my opinion the proper construction of this part of the first special condition is that the defendant was to remain in control of the amounts advanced under the agreement for loan from time to time. The defendant obviously wanted to ensure that the moneys advanced were covered from time to time by the securities held. It would not be a proper construction of the special condition that the defendant reserved to itself the right whether to advance any moneys at all under the agreement.

39. The second special condition set out above was, in my view, an endeavour to ensure that the offer did not remain open indefinitely. It was a term of the offer that it might be withdrawn if not accepted within 14 days or immediately upon any circumstances arising which in the opinion of the defendant were prejudicial to its interests. It does not seem to me to be a reasonable construction of this special condition that the defendant had the right to withdraw the offer even after it had been accepted. The use of the conjunctive and disjunctive words "and/or" are unfortunate as they add an unnecessary complication to the matter. It would have been sufficient if simply the disjunctive "or" had been used.

40. I accept the submission of counsel for the defendant that the use of "and/or" means that the right to withdraw the offer was not confined to a period of 14 days after the making of the offer. It means that the offer might be withdrawn within 14 days if not accepted within that time. Alternatively, it might be withdrawn if not accepted within 14 days and the necessary circumstances had arisen within the 14 days or, as a last alternative, if not accepted after 14 days, at any time after the 14 days had expired and the necessary circumstances had arisen. In my view it is not a reasonable construction of the special condition that the offer might be withdrawn at any time after acceptance.

41. It would no doubt be correct, as counsel for the defendant asserted, that if the offer could be withdrawn after acceptance because circumstances had arisen which, in the opinion of the defendant, were prejudicial to its interests, the parties would not have entered into an agreement at all. He referred to the well settled principle which was expressed as follows by Kitto J. in Placer Development Limited v. The Commonwealth [1969] HCA 29; (1969) 121 CLR 353 at 356:

". . . wherever words which by themselves constitute a
promise are accompanied by words showing 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 at all."

(See also per Taylor and Owen JJ at 360-361 and per Windeyer J. at 369-370 who referred to the principle as "unquestionable").

42. In my judgment that is not the proper construction of the second special condition set out above. It is a term setting the time limits within which the offer may be accepted.

43. The special conditions do not make the offer an illusory promise (as to which see Pollock on Contracts, 9th Ed., p 49; Chitty on Contracts, 25th Ed., par 160). They do not amount to a promise to do something "if I feel like it" or "unless I change my mind". The offers are real offers in a real commercial setting.

44. Accordingly, I hold that none of the defences has been made out. There will be judgment for the plaintiffs for breach of contract. I shall hear counsel on any further directions sought to complete the hearing of the action.