Commercial benefit prevails - case study of Saltworks Investments FS Pty Ltd v Tueno Investments Pty Ltd [2006] VSC 466

The Supreme Court dismissed a purchaser’s application to force the vendor to settle on a contract of sale where conditions precedents were not met. Associate Justice Steffensen found that the plaintiff purchaser could not waive the unsatisfied special conditions on its own, because those conditions benefited both the purchaser and the vendor.

Background

The vendor operated early learning centres. On 9 May 2025, the parties signed a Heads of Agreement for the sale of the property. The Heads of Agreement advised settlement would occur six months after the later of two events: the planning permit being issued, or the Agreement for Lease and Lease being signed.

The Heads of Agreement also said that:

1. the conditions were for the purchaser’s benefit only, and only the purchaser could waive them; and

2. the Heads of Agreement was legally binding once signed.

The parties later signed the final Contract of Sale on 4 July 2025. Key terms of the contract included:

1. settlement was due six months after special condition 18 and special condition 19 were satisfied

2. the sale was subject to a lease agreement;

3. special condition 13 said the Contract was the entire agreement, meaning the parties could not rely on earlier written or verbal agreements;

4. special condition 18 required the vendor to use its best efforts to obtain a childcare planning permit by 30 September 2025; and

5. special condition 19 required the parties to negotiate the Agreement for Lease and Lease after the permit was obtained. This would allow the vendor to lease back and operate the childcare centre for more than 15 years.

The vendor did not obtain the planning permit by 30 September 2025.

In January 2026, the purchaser told the vendor it would not end the contract. Instead, it said it would keep the contract on foot, waive the special conditions, and require settlement on 27 July 2026. The vendor refused, saying settlement could not occur until the planning permit, and lease documents were finalised.

The purchaser argued that the special conditions were included only to protect it. It said that, because Special condition 18 was not satisfied, it could choose not to end the contract and could instead require the vendor to settle.

The vendor argued that the contract made settlement depend on the special conditions being satisfied. It also said the conditions benefited the vendor too, because the vendor expected to receive a long-term leaseback after settlement.

The Court's Findings and Decision

The Court found in favour of the vendor. Its key reasons were:

1. Conditions Precedent to Settlement - The contract said settlement was to occur six months after special conditions 18 and 19 were satisfied. As those conditions had not been satisfied, the settlement date could not be determined.

2. Mutual Commercial Benefit - This was more than a simple land sale. The vendor also expected to benefit from the leaseback arrangement. For that reason, the purchaser could not waive the conditions on its own.

3. Exclusion of Prior Agreements - The purchaser tried to rely on the Heads of Agreement, which said the conditions were for the purchaser’s sole benefit. The Court said that clause did not help, because the final contract contained an entire agreement clause and replaced the earlier agreement.

4. Common Law position - special condition 18 required the planning permit to be obtained by a set date, unless the parties agreed to extend that date. No extension was agreed and as the condition could not be satisfied, the vendor had no obligation to proceed to settlement.

Outcome

The Court dismissed the purchaser’s case. The vendor was successful and was entitled to its costs.

Key takeaways

1. Clearly identify which party receives the benefit of each condition precedent, and whether that party may vary or waive the condition unilaterally.

2. If parties intend to rely on terms from a prior agreement, those terms should be expressly incorporated into the final contract rather than left to sit outside an “Entire Agreement” clause.

3. Where property is sold subject to a leaseback, the lease particulars and special conditions should address what happens if the relevant conditions precedent is not satisfied, including whether vacant possession can be required.

Vittoria De Stefano
Principal
M 0407 091 301 | T 03 5226 8520
E vdestefano@ha.legal

Emma Buchanan
Special Counsel
M 0498 563 248 | T 03 5226 8529
Eebuchanan@ha.legal

Ashleigh Goodwin
Senior Associate
M 0400 998 552 | T 03 5226 8560
E agoodwin@ha.legal