City and Industrial Demolitions v Shanahan [2000] NSWSC 1197 (15 December 2000)

Last Updated: 19 December 2000

NEW SOUTH WALES SUPREME COURT

CITATION: City & Industrial Demolitions v Shanahan [2000] NSWSC 1197

CURRENT JURISDICTION: Equity Division

Commercial List

FILE NUMBER(S): 50094/99

HEARING DATE{S): 30.11.00, 4.12.00

JUDGMENT DATE: 15/12/2000

PARTIES:

City & Industrial Demolitions (NSW) Pty Ltd v Leo Peter Shanahan & Owen Douglas Tomlinson & Doncaster Holdings Ltd

JUDGMENT OF: Hunter J

LOWER COURT JURISDICTION: Not Applicable

LOWER COURT FILE NUMBER(S): Not Applicable

LOWER COURT JUDICIAL OFFICER: Not Applicable

COUNSEL:

Plantiff: G L Turner

Second & Third Defendants: J S Drummond

SOLICITORS:

Plaintiff: John L Merity Solicitors

Second & Third Defendants: Booth & Boorman Solicitors

CATCHWORDS:

Contract- construction of deed - satisfaction of condition precedent- rescission by implication - whether conduct repudiatory.

ACTS CITED:

DECISION:

Summons dismissed. Plaintiff to pay the defendants' costs of the proceedings.

JUDGMENT:

IN THE SUPREME COURT

OF NEW SOUTH WALES

EQUITY DIVISION

COMMERCIAL LIST

HUNTER J

FRIDAY 15 DECEMBER 2000

50094/99 CITY & INDUSTRIAL DEMOLITIONS (NSW) PTY LTD v LEO PETER SHANAHAN & OWEN DOUGLAS TOMLINSON & DONCASTER HOLDINGS LTD

REASONS FOR JUDGMENT

1 In these proceedings the plaintiff (City) sued Leo Peter Shanahan (Shanahan), Owen Douglas Tomlinson (Tomlinson) and Doncaster Holdings Limited (Doncaster) claiming damages arising out of the alleged repudiation by the defendants of their obligations under a deed dated 21 May 1997 (the deed), or, alternatively, claiming payment of the sum of $400,000 under the deed. City has proceeded only against Tomlinson and Doncaster.

2 At the time the deed was entered into Shanahan and Tomlinson were the directors and only shareholders of Doncaster. Parties to the deed were Shanahan, Tomlinson, Doncaster, City and Robert Kidd (Kidd). It is not disputed that City, through the instrumentality of Paul Henry Menere, and Kidd introduced Doncaster to the opportunity of purchasing property situated at Milton in Brisbane (the Milton property) from Royal Queensland Lawn Tennis Limited (the association): the Milton property having a prior use as a tennis club. It is evident from the deed that the parties contemplated the obtaining of approval by the Council of the City of Brisbane (the council) of development of the Milton property with some 200 residential units and the exploitation of that approval by sale of shares in Doncaster or by on-sale of the interest in the Milton property.

3 At the time of the execution of the deed, Doncaster had entered into a sale contract dated 27 March 1997 (the first sale contract) for the purchase of the Milton property from the association for the sum of $3,800,000. The first sale contract was subject to Doncaster obtaining Local Government consent to the rezoning of the Milton property for the purposes of its development with "not less than 200 residential townhouses/ units". It was also subject to the obtaining of such development approval "on terms ... acceptable to [Doncaster] in its absolute discretion on or before the Condition Date" which was defined as meaning "subject to clause 48, 9 months after the date of [the] contract". Both the rezoning and development approval conditions were expressed to be for the sole benefit of Doncaster which was expressly entitled to waive the benefit of those clauses. There was provision in the first sale contract for notification by Doncaster of its acceptance of the terms of the development approval and of deemed acceptance, upon notice, by the association.

4 Clause 46 of the first sale contract conferred upon Doncaster the right to terminate in the event that the rezoning and development approval conditions were not satisfied or waived by the Condition Date and for the association to terminate the contract where Doncaster failed so to do.

5 The first sale contract provided for the payment of a deposit of $232,000 by monthly instalments commencing with one of $100,000 on the date of execution of the contract followed by 9 monthly payments of $8,000 succeeded by three payments of $20,000, concluding with the last payment twelve months after the date of the first sale contract.

6 By cl 48, Doncaster was entitled to extend the Condition Date by not more than twelve months after the date of the first sale contract in the event that it had taken all reasonable steps to satisfy the rezoning and development approval conditions, where those conditions had not been satisfied or waived.

7 I think it is also reasonably clear that the parties had in contemplation, at the time of the execution of the deed, a share agreement made some five days after the deed on 26 May 1997 (the Narimar share agreement) between Shanahan and Tomlinson as vendors and Narimar Pty Ltd as purchaser of the shares in Doncaster.

8 The purchase price for the shares was expressed to be $3,460,000 in the event that the first sale contract and two other related property transactions were settled, or, alternatively, $300,000 if such settlements did not take place. The purchase price was payable, as to $200,000 by 30 May 1997, as to a further $100,000 within fourteen business days of the date of the Narimar share agreement and the balance, where applicable, on the Completion Date which was defined to be "...the date for and actual settlement of the [subject property transactions] otherwise the business day following termination or rescission of the [related sale contracts]".

9 Clause 5(h) of the Narimar share agreement required the vendors, to give a written direction to Narimar, on settlement, "to pay the amount of $400,000 to each of City ... and ... Kidd from the purchase monies payable on ... Completion".

10 In the ninth schedule to the Narimar share agreement, a similar provision was made for the deduction of $800,000 from the purchase price and for payment of $400,000 to each of City and Kidd. The reason for those provisions is made clear by the terms of the deed.

11 The recitals to the deed noted that Doncaster had entered into the first sale contract and was "negotiating to enter into an agreement for the sale of [the] shares [in] Doncaster", presumably the Narimar share agreement.

12 Recital D was in the following terms:

"D. In consideration of the services provided by City and Kidd to the Vendors and [Doncaster] in assisting in project negotiations for the purchase by [Doncaster] of 316 Milton Road, Milton, Queensland, the Vendors or [Doncaster] (as the case may be) have agreed to pay City and Kidd or their nominees $400,000 each from their sale proceeds received pursuant to a Share Agreement or pursuant to a Property Sale Agreement on the following terms and conditions."

13 Property Sale Agreement was defined to mean as follows:

"...any agreement or arrangement under which [Doncaster] sells or otherwise disposes of any of its interest in [the Milton property] ...including without limitation, a contract for the sale of the [Milton] Property.

14 Share Agreement was similarly defined as follows:

"...means any agreement or arrangement under which the Vendors sell or otherwise dispose of any of their interest in [Doncaster] including without limitation, an agreement to sell their shares in [Doncaster]."

15 Those recitals and definitions evidenced an intention of the parties that the deed could operate upon a sale of the Milton property or a share agreement other than the first sale contract or the Narimar share agreement.

16 Clause 2 of the deed provided as follows:

"Completion of this Deed is subject to and conditional upon settlement of the Contract for Sale".

It is significant that the phrase Contract for Sale was identified in the recitals as the first sale contract.

17 Clause 3 of the deed upon which City particularly relied was in the following terms:

"3. NEGOTIATION AND COMPLETION OF SHARE AGREEMENT AND PROPERTY SALE AGREEMENT

3.1 In any Share Agreement or Property Sale Agreement, the Vendors or [Doncaster] (as the case may be) shall include a provision which requires the payments referred to in Clauses 3.2 and 3.3 to be made in accordance with those clauses out of the settlement proceeds.

3.2 Upon settlement of the sale of shares under any Share Agreement, the Vendors shall pay to City or its nominee the sum of $400,000 and also pay to Kidd or his nominee the sum of $400,000. These payments shall be made by bank cheque and are to be deducted from the proceeds of sale received by the Vendors upon settlement; or

3.3 Upon settlement of the sale of Property under any Property Sale Agreement, [Doncaster] shall pay to City or its nominees the sum of $400,000 and also pay to Kidd or his nominee the sum of $400,000. These payments shall be made by bank cheque and are to be deducted from the proceeds of sale received by the Company upon settlement."

18 Having regard to the definition of "Share Agreement" and "Property Sale Agreement", sub-clause 3.1 contemplated the inclusion of a provision for the payment of $400,00 to City in respect of agreements not limited to the first sale contract or the Narimar share agreement. I think the same observation applies to cll 3.2 and 3.3. That construction is reinforced by cll 4 and 5 of the deed which were in the following terms:

"4. OBLIGATIONS OF VENDORS

The Vendors shall use their best endeavours to comply with and to ensure that if a Share Agreement or Property Sale Agreement is entered into, it is completed and that the Contract for Sale is settled.

5. OBLIGATIONS OF COMPANY

[Doncaster] shall use its best endeavours to comply with and ensure that if a Property Sale Agreement is entered into, it is completed and that the Contract for Sale is settled."

19 Accordingly, I think the ordinary meaning of the words of the deed require a construction that it was subject to a condition precedent that settlement of the first sale contract occur. In the event that the condition precedent was satisfied, cl 3 of the deed would operate upon settlement of any sale of shares in Doncaster by Shanahan and Tomlinson, or of any sale of any of Doncaster's interest in the Milton property.

20 The obligations imposed under cll 4 and 5 of the deed required Tomlinson, Shanahan and Doncaster to use their best endeavours to ensure that the first sale contract was settled, that is, that the condition precedent was satisfied and also to ensure that if a "Share Agreement or Property Sale Agreement [was] entered into, it [was] completed ...".

21 I think the evidence established that the first sale contract was never settled : that it had been impliedly rescinded and was incapable of being revived at the time of the alleged repudiation.

22 In its contentions in the further amended summons City asserted, in the alternative, that the settlement of the first sale contract had taken place as at 5 May 1999, or, if settlement had not taken place at that time, that the defendants on 5 May and 11 May repudiated their obligations under the deed and that their repudiation was accepted by City on 17 May 1999.

23 The first sale contract was not completed in accordance with its terms as at May 1999. Cl 50 provided for completion one month after the conditions concerning rezoning and development approval had been satisfied, waived or deemed satisfied, or thirteen months after the date of contract, whichever was the earlier. The thirteen months had long expired and the rezoning and development approval conditions had not been satisfied, waived or deemed to have been satisfied.

24 The repudiation relied upon by City consists of two letters by the solicitors for the defendants to City's solicitor, respectively dated 5 May and 11 May 1999. It is clear that the first sale contract had not survived in its original terms at the time of the alleged repudiation. It is City's case that it survived in varied form.

25 I think on the most favourable view of the evidence relied upon by City, the first sale contract had only survived, if it survived at all, in varied form. That has given rise to an issue whether the variations to the first sale contract precluded satisfaction of the condition precedent of the deed. For the deed to operate on a varied first sale contract it would be necessary to read recital B or cl 2 of the deed as operating upon the "Contract for Sale as varied". A construction to that effect was advanced on behalf of City as an implied term. However, I do not think it is a question of implication, as distinct from a proper construction of the express terms of the deed.

26 The express terms of the first sale contract had undergone significant changes prior to the alleged repudiation of the deed. The first variation took the form of a facsimile of 30 September 1997 from the association's solicitors to the solicitors for Doncaster, the terms of which were accepted by facsimile of 3 October 1997 from Doncaster's solicitors to the solicitors for the association.

27 By that variation the Condition Date was replaced with four Condition Dates: the first being 22 September 1997: the second, seven days after Doncaster received any necessary consent of the association to Doncaster's application for rezoning of the Milton property: the third was 25 March 1998 and the fourth, 13 June 1998. The rezoning provision was replaced by another clause which geared the satisfaction of the rezoning condition to the gaining of appropriate Local Government consent by the Third Condition Date and the gazettal of the rezoning by the Fourth Condition Date. As earlier noted the Condition Date under the first sale contract was nine months after the date of the contract, or as extended under cl 48.

28 Clause 43.3 of the first sale contract required Doncaster to lodge its rezoning application within two months after the date of the contract. That was varied to provide that the application be submitted by the Second Condition Date, thereby gearing an application to the necessary consent of the association.

29 Clauses 43.3, 43.5 and 43.6 were further amended by what I regard as machinery provisions. An amendment to cl 43.8 geared waiver of the rezoning application to the Fourth Condition Date. Similarly, references in cl 44 to the Condition Date was varied to refer to the Fourth Condition Date. The effect of that was to extend the operation of the development approval condition provisions to 13 June 1998.

30 There was a significant variation to cl 44.1 which had the effect of relating the development approval to the development of the Milton property and "certain adjoining lands agreed to be acquired by [Doncaster]" and which altered the description of the subject of the development approval by adding the following words, "and for no other purpose other than incidental retail facilities of not more than 500 m²". The effect of that change, I think, was particularly significant in so far as the first sale contract now turned upon obtaining development approval in relation to the Milton property and adjoining land for a development of not less than 200 residential units and for "incidental retail facilities".

31 Clause 44.3, which required submission of the development application within two months of the date of the contract, was varied to attach that requirement to the First Condition Date.

32 A fresh clause was inserted in the form of cl 46.4 which entitled the association to terminate the contract in the event of Doncaster failing to deliver the rezoning application and the development application for the consent of the association within the time required under the contract.

33 A similar right of termination was conferred upon the association by cl 46.5 in the event that Doncaster failed to lodge those applications within time.

34 There was a significant variation to the deposit clause, cl 47.1, which provided for three further monthly instalments of $20,000 commencing on the thirteenth month after the date of the contract. That additional payment was, in effect, an increase in the purchase price.

35 Finally, cl 50 of the first sale contract, which provided for the date for completion, was deleted and a fresh clause substituted which, in substance, extended the date for completion to 27 June 1998, or the date when the conditions for rezoning and development application were either satisfied, or deemed satisfied, whichever was the earlier date.

36 Given the provisions in the first sale contract for the extension of the First Condition Date and the waiving of the rezoning and development approval conditions, I think the variations to the first sale contract as to the times of performance could be regarded as either non-essential variations or ones within the contemplation of the parties to the deed as falling within the concept of `Contract for Sale' under the deed.

37 The change in the subject matter of the development approval as contemplated in the first sale contract to embrace land additional to the Milton property and to include "incidental retail facilities" is not so readily accommodated. However, though significant, the changes probably enhanced the ability of Doncaster to obtain the requisite approval of 200 residential units and, for that reason, I would be prepared to treat the variation as falling within the contemplation of the original development approval clause.

38 There was a further variation of the first sale contract in the terms of a variation agreement of 29 April 1998 (the second variation) which contemplated the parties entering into a further contract described as the "Second Sale Contract". Under the second variation it was agreed to vary the first sale contract upon payment by Doncaster of a variation fee of $300,000. The First Condition Date was extended to 23 April 1998. The Second Condition Date was varied in a way that is of no particular significance and the Third Condition Date was extended to 28 August 1998. The Fourth Condition Date was deleted.

39 Of particular significance I think is the substitution of a new clause, 43.1, by providing for a condition that the contract was subject to a development approval "for the use of the Land for not less than 150 townhouses...". So far as I am aware "Land" was not defined in the variation agreement nor in the first sale contract as varied other than in the schedule of particulars of sale which included a description of "PARTICULARS OF LAND SOLD" identifying the Milton property.

40 Neither party has directed my attention to any evidence establishing the circumstances in which the subject of the proposed development was reduced to one hundred and fifty townhouses.

41 The date for completion was varied to be the earlier of 16 September 1998, or the date fourteen days after the satisfaction, waiver, or deemed satisfaction of the development approval condition. The variations were dependent upon payment of the variation fee. Provision was made for the refund of that fee on termination by Doncaster for the association's default under the first sale contract or the Second Sale Contract: otherwise, the fee was forfeited to the association. The deposit clause was further varied by making provision for two further payments of $40,000 respectively on 27 July and 27 August 1998. As with the earlier variation to the deposit clause those additional payments, in practical terms, represented an increase in the purchase price.

42 The Second Sale Contract was said by counsel for the plaintiff to have been entered into on the same date as the second variation. The exhibit copy appears to bear no date. I have proceeded on the basis that the second variation and the Second Sale Contract were executed at about the same time. There is a curious difference between the two documents in so far as one would have expected the Second Sale Contract to have mirrored the amendments to the first sale contract effected by the second variation. In substance, that is the case. However, in respect of cl 47, that being the deposit clause, the Second Sale Contract provided for payments of $40,000 on the 27th day of each of the months of September, October, November and December: whereas, the second variation called for such payments only in July and August. The intention of the parties as expressed in cl 47 of the Second Sale Contract is obscure. In order to extract that intention, I think it is necessary to trace more carefully the contractual provision relating to the payment of a deposit through the first sale contract and the intervening variations of the first sale contract.

43 Clause 47 of the first sale contract provided as follows:

"47 DEPOSIT

47.1 Subject to this clause 47, the Deposit shall be paid by the Purchaser to the Vendor as follows:

(a) $100,000.00 on the date of execution of this contract by the Purchaser;

(b) $8,000.00 on or before 1 month after the date of this contract;

(c) $8,000.00 on or before 2 months after the date of this contract;

(d) $8,000.00 on or before 3 months after the date of this contract;

(e) $8,000.00 on or before 4 months after the date of this contract;

(f) $8,000.00 on or before 5 months after the date of this contract;

(g) $8,000.00 on or before 6 months after the date of this contract;

(h) $8,000.00 on or before 7 months after the date of this contract;

(i) $8,000.00 on or before 8 months after the date of this contract;

(j) $8,000.00 on or before 9 months after the date of this contract;

(k) $20,000.00 on or before 10 months after the date of this contract;

(l) $20,000.00 on or before 11 months after the date of this contract;

(m) $20,000.00 on or before 12 months after the date of this contract;

47.2 If this contract is completed or terminated before the due date for payment of a Deposit Instalment, the Deposit Instalment shall not form part of the Deposit and shall not be payable.

47.3 Subject to clause 47.4, the Deposit is non-refundable and is the absolute property of the Vendor.

47.4 If:

(a) the Vendor fails to comply with any of the terms or conditions of this contract;

(b) the Purchaser is not in default; and

(c) the Purchaser terminates this Contract because of the Vendor's default,

the Deposit shall be refunded to the Purchaser by the Vendor."

44 Under the first variation cl 47 was amended as follows:

"18. At the end of clause 47.1 add:

"(n) $20,000.00 on or before 13 months after the date of this contract;

(o) $20,000.00 on or before 14 months after the date of this contract; and

(p) $20,000.00 on or before 15 months after the date of this contract.

19. After clause 47.4 add:

"47.5 In calculating the balance of the Purchase Price under clause 4, the Deposit Instalments paid under clauses 47.1(n) to 47.1(p) shall not be included in the calculation and shall not be deducted from the Purchase Price.""

45 As earlier noted in these reasons, the payments of $60,000 in cll 47.1(n) to 47.1(p) represented additional payments to the purchase price.

46 Under the second variation, cl 47 was varied as follows:

"(h) at the end of clause 47.1, adding:

"; and

(q) $40,000.00 on or before 27 July 1998;

(r) $40,000 on or before 27 August 1998.";"

47 The deposit clause in the Second Sale Contract was in the following terms:

"47 DEPOSIT

47.1 Subject to this clause 47, the Deposit shall be paid by the Purchaser to the Vendor as follows:

(a) $40,000.00 on or before 27 September 1998;

(b) $40,000.00 on or before 27 October 1998;

(c) $40,000.00 on or before 27 November 1998;

(d) $40,000.00 on or before 27 December 1998.

47.2 If this contract is completed or terminated before the due date for payment of a Deposit Instalment, the Deposit Instalment shall not form part of the Deposit and shall not be payable.

47.3 Subject to clause 47.4, the Deposit is non-refundable and is the absolute property of the Vendor.

47.4 If:

(a) the Vendor fails to comply with any of the terms or conditions of this contract;

(b) the Purchaser is not in default; and

(c) the Purchaser terminates this contact because of the Vendor's default,

the Deposit shall be refunded to the Purchaser by the Vendor.

47.5 In calculating the balance of the Purchase Price under clause 4:

(a) the Deposit Instalments paid under clause 47.1 shall not be included in the calculation and shall not be deducted from the Purchase Price; and

(b) the Purchase Price shall be reduced by $232,000."

48 In order to understand that provision it is necessary to have regard to the definitions of "Deposit" and "Deposit Instalments" in the Second Sale Contract as follows:

" "Deposit" means, subject to clause 47.2, the sum stated in Item O.

"Deposit Instalments" means the payments under clause 47.1"

Item O identified the deposit as being "$160,000 (see clause 47)".

49 Consequently, as I read the changes to the deposit provisions, the payments of $40,000 provided for on the 27th of September, October, November and December 1998 represented the deposit and the arrangement proceeded on the basis that $232,000 had been paid by Doncaster: hence the provision in cl 47.5(b). However, the payments provided in cl 47.1, if made prior to completion of the Second Sale Contract, would be additional payments to the purchase price.

50 The Second Sale Contract is silent as to the operation of the first sale contract as varied. Having regard to the completeness of the terms of the Second Sale Contract, the nature of the changes effected by it and the circumstances of its execution, particularly in relation to its contemporaeity with the second variation, I am satisfied that it impliedly rescinded the first sale contract.

51 The analysis of the first and second variations and the Second Sale Contract in relation to the terms of the first sale contract in the circumstances in which those transactions took place involves the question:

"...whether the common intention of the parties [in executing the Second Sale Contract] was to "abrogate", "rescind", "supersede" or "extinguish" the [first sale contract as varied] by a "substitution" of a "completely new" and "self-contained" or "self-subsisting" agreement, "containing as an entirety the old terms, together with and as modified by the new terms incorporated",

as per Lord Sumner in British and Berringtons Ltd v North Western Cachar Tea Co (1923) AC 48 at 67, citing Morris v Baron & Co (1918) AC 1).

52 The question is always one of ascertaining the intention of the parties as disclosed by the later agreement (see Tallerman & Co Pty Ltd v Nathan's Merchandise (Vic) Pty Ltd [1957] HCA 10; (1957) 98 CLR 93 at 135 and 144.

53 The distinction between an implied rescission and mere variation was discussed in the joint judgment of Mason CJ, Brennan and Deane JJ in Dan v Barclays Australia Ltd (1983) 46 ALR 437 at 448, in the following terms:

"The distinction ... is discussed in such cases as Tallerman & Co Pty Ltd v Nathan's Merchandise (Vic) Pty Ltd [1957] HCA 10; (1956) 98 CLR 93; Morris v Baron and Co [1918] AC 1 and British and Beningtons Ltd v NW Cachar Tea Co [1923] AC 48. Variation of an existing contract, whilst it in one sense always gives rise to a new contract, does not always result in a substituted contract which, in order to operate, must necessarily rescind the contract which is varied. Variation may take the form of rescission of some of the terms of an existing contract but if that is to have the effect of rescission of the whole contract, the rescission must be express or by necessary implication and the determining factor must always be the intention of the parties as disclosed by contract when varied: see Tallerman & Co Pty Ltd v Nathan's Merchandise (Vic) Pty Ltd, supra, per Taylor J at 143-4."

54 In my view, the conclusion is inescapable that the parties intended that the first sale contract, as varied, be at an end and that the Second Sale Contract contain the entirety of the terms founding the parties respective rights and obligations in relation to the purchase of the Milton property. If it was simply a case of variation, there was no justification for the Second Sale Contract. Where variation of the first sale contract was intended, the parties had resorted to the first and second variations. Where replacement in its entirety was intended, the parties resorted to the Second Sale Contract which incorporated any executory provisions of the first sale contract, any variations to it and the further terms of the Second Sale Contract.

55 For those reasons I am satisfied that the first sale contract had been impliedly rescinded by the Second Sale Contract.

56 That construction does not fit comfortably beside the statements made on behalf of Doncaster in its solicitors' letter to the Commissioner of Stamp Duties of 28 April 1999 as follows:

"We act for Doncaster Holdings Limited and enclose herewith the following:-

1. Contract between Doncaster Holdings Limited and Royal Queensland Lawn Tennis Association Limited dated 27th March, 1997.

2. Variation Agreement first sale contract between Doncaster Holdings Limited and Royal Queensland Lawn Tennis Association Limited dated 29th April, 1998.

3. Second Sale Contract between Doncaster Holdings Limited and Royal Queensland Lawn Tennis Association Limited dated 29th April, 1998.

4. Variation Agreement Second Sale Contract between Doncaster Holdings Limited and Royal Queensland Lawn Tennis Association Limited undated.

5. Second Variation Agreement to Second Sale Contract between Doncaster Holdings Limited and Royal Queensland Lawn Tennis Associated Limited dated 3rd February, 1999.

6. Third Variation Agreement to Second Sale Contract between Doncaster Holdings Limited and Royal Queensland Lawn Tennis Association Limited dated 5th March, 1999.

7. Fourth Variation Agreement to Second Sale Contract between Doncaster Holdings Limited and Royal Queensland Lawn Tennis Association dated 18th March, 1999.

The Contract dated 27th March, 1997 has never been terminated by either party and the Second Sale Contract was entered into at the insistence of the Vendor in an attempt to avoid the Purchaser from arguing that the earlier Contract had been converted into an Instalment Contract by the Variation Agreement dated 29th April, 1998.

The Contract remained conditional upon the Purchaser obtaining satisfactory development approval from the Brisbane City Council and on 29th March, 1999, the Purchaser elected to waive the benefit of that condition and declare the Contract to be unconditional.

The Purchaser has registered a Caveat (photocopy enclosed**) claiming an interest in the fee simple pursuant on Instalment Contract dated 27th March, 1999.

Settlement of the Contract is imminent and we request that you advise urgently your assessment of stamp duty."

(emphasis added)

57 I am unable to see how the assertion that the first sale contract had never been terminated by either party could be sustained in the face of the circumstances of the execution and the nature of the terms of the Second Sale Contract.

58 A related issue arose in these proceedings, based upon the provisions of the Property Law Act 1974 (Qld) (the Act). No foreign law issue had been raised between the parties on the pleadings and no evidence was tendered on such an issue. Rather, counsel for the defendants, as part of his submissions, presented a copy of relevant sections of the Act and case law relating to it. I have marked the legislation extract as MFI 1 and the case law, MFI 2.

59 The Act, in my view, has no bearing on the contractual issues between the parties, even if it is assumed, by reason of the variations to the deposit clause of the first sale contract, that it had become an "Instalment Contract" within the meaning of the Act.

60 The relevant provisions of the Act would not prevent the parties from agreeing, by means of the Second Sale Contract, to rescind the first sale contract as varied. S.72 of the Act operates to preclude the termination of an Instalment Contract, in the case of default on the part of the purchaser in payment of any instalment, without the prescribed notice being given to the purchaser. The Act says nothing about the entitlement of the parties to an Instalment Contract to rescind it by substituting a replacement contract, as happened in this case between the association and Doncaster.

61 In any event, I doubt whether the first sale contract, as varied, could ever be validly described as an "Instalment Contract" within the meaning of the Act, having regard to the definition of "Deposit" and "Instalment Contract" in that legislation.

62 Notwithstanding clear admissions by Doncaster in lodging a caveat on the title of the Milton property and instituting proceedings in the Queensland Supreme Court against the association, in each instance, relying upon the first sale contract as an Instalment Contract that had never been validly terminated, I am satisfied that the first sale contract did not survive the Second Sale Contract. I think that was the clear intention of the parties in entering into the Second Sale Contract. If it was simply intended to vary the first sale contract, that was capable of being achieved by the second variation.

63 Contrary to the assertion in the letter of Doncaster's solicitors to the Commissioner of Stamp Duties of 28 April 1999 that the first sale contract had not been terminated, I think it may be inferred from the passage emphasised in that letter that the parties intended, in executing the Second Sale Contract, to bring the first sale contract to an end. The circumstances in which that letter was sent emerge from reasons that follow.

64 It was not part of City's case that the variations to the first sale contract or that the Second Sale Contract were of no effect, nor a device to avoid satisfaction of the condition precedent of the deed, nor acts of the defendants in breach of their respective obligations under cll 4, 5 or 11 of the deed: nor was it part of City's case that the first sale contract was in some way revived or was capable of revival as at the time of the alleged repudiation.

65 For those reasons I am of the view that the condition precedent of the deed had not been satisfied and that City's case must fail. I am further of the opinion that, if it be assumed that the first sale contract in its original or varied form survived the events leading up to the alleged repudiation of the deed, the matters relied upon by City do not constitute a repudiation of the first sale contract, either in its original form, or as varied to that time.

66 There were variations to the Second Sale Contract agreed upon by the association and Doncaster, namely on 18 December 1998, 3 February 1999, 5 March 1999 and 18 March 1999, which, in substance, extended the Condition Dates under the Second Sale Contract.

67 On 22 March 1999 the council notified Doncaster of the determination of its development application by which it granted conditional approval for the development of the Milton property by the construction of 115 residential units.

68 The evidence is deficient in relation to the exchanges that occurred between Doncaster and the association immediately after the notification of the development approval by the council.

69 It is clear that on 30 March 1999 Doncaster caused a caveat to be lodged on the title of the Milton property to protect a claimed interest described as follows:

"The interest of a Purchaser under an Instalment Contract as defined by Section 71 of the Property Law Act, 1974".

70 The solicitors for the association disputed the existence of that interest and requested Doncaster to withdraw its caveat. That request was not complied with and, accordingly, on 4 May 1999, the solicitors for the association wrote to the solicitors for Doncaster in the following terms:

"We refer to our letters dated 8, 23 and 29 April 1999.

Our client elects to terminate the contract. Our client reserves its rights under the contract and at common law arising from that election.

As there is no longer a contract on foot, your client does not have any basis upon which to caveat. Our client accordingly renews its request for your client to withdraw its caveat immediately.

Finally, we advise that we have instructions to accept service of legal proceedings on behalf of your client."

71 The letters of 23 and 29 April 1999 referred to in that letter have not been put into evidence and it is not apparent on the face of the letter of 4 May 1999 which contract was the subject of the purported termination notified in that letter. However, that matter was clarified by the further letter of the association's solicitors to the solicitors for Doncaster of 27 May 1999, identifying the Second Sale Contract as the subject of the termination notice. By their further letter of 27 May 1999 the association's solicitors also purported to terminate the first sale contract in circumstances referred to in the following reasons.

72 Doncaster instituted proceedings in the Queensland Supreme Court against the association on 7 May 1999 seeking declaratory relief to the effect that the first sale contract was an Instalment Contract within the meaning of s.71 of the Act.

73 There followed a settlement of those proceedings which took the form of a discontinuance dated 27 May 1999, a litigation settlement agreement and a Third Sale Contract, each also dated 27 May 1999.

74 Under the litigation settlement agreement, Doncaster agreed to discontinue the Supreme Court proceedings instituted by it against the association on completion of a Third Sale Contract which was agreed to be executed contemporaneously with the settlement agreement : agreed to withdraw its caveat on the Milton property title and to make no claims against the association in respect of, inter alia, the first sale contract. The association agreed to terminate the first sale contract, agreed not to make any claims against Doncaster and to release it from any claims in respect of that contract.

75 The Third Sale Contract was expressed to be for the same purchase price as the first sale contract but allowed a deduction of $772,000 in calculating the balance of the purchase price.

76 By letter of 27 May 1999 the solicitors for the association notified the solicitors for Doncaster of termination of the first sale contract as follows:

"The special conditions of the first sale contract dated 27 March 1997 as amended have not been satisfied or waived. Therefore, our client terminates the contract. It is at an end."

77 Notwithstanding those steps taken by the parties, I am satisfied that the first sale contract had come to an end with the execution of the Second Sale Contract in April 1998.

78 In my view, nothing turns on the events following the execution of the Second Sale Contract which calls for a qualification of the finding that the first sale contract came to an end by mutual rescission with the execution of the Second Sale Contract.

79 In a separate judgment given at the conclusion of reply submissions on behalf of City, I dismissed an application for leave to amend to permit City to rely upon a breach of cll 4, 5 or 11 of the deed.

80 Prior to the presentation of reply submissions it had been expressly conceded on behalf of the plaintiff that City did not raise a case that the defendants were guilty of default in failing to comply with the provisions of cll 4, 5 or 11 of the deed. That concession arose in the following circumstances:

"TURNER: I have [an] application to make to reopen my case to tender three further letters. It relate to the history of the development and the reason why the project is running late. It is correspondence exchanged between my friend's instructing solicitor and our solicitor and also a letter from Brisbane City Council and the defendant, Doncaster. I have shown it to my friend.

HIS HONOUR: I grant leave to the plaintiff to reopen its case to tender the following documents.

EXHIBIT #A SUPPLEMENTED BY THE ADDITION OF A LETTER DATED 21/7/97 FROM CORRS TO JOHNSONS, A FACSIMILE FROM JOHNSONS TO CORRS DATED 25/7/97 AND A LETTER FROM THE DEPARTMENT OF DEVELOPMENT AND PLANNING TO DONCASTER HOLDINGS OF 22/8/97 WITHOUT OBJECTION.

HIS HONOUR: I note this has been tendered without objection. What is the relevance.

TURNER: You Honour was concerned on Friday as to what were the reasons the development hadn't been done in the time specified under the original contract.

HIS HONOUR: I was just wondering what is the relevance?

TURNER: In my submission it is not going to be ultimately relevant. The issue is whether or not the variations fall within the deed or not. In my submission they will, for reasons I will articulate in reply.

HIS HONOUR: During exchanges on Thursday I expressed the view, I think, that if settlement of the first sale contract had not taken place, that an issue arose as to whether that was occasioned by the default of the defendants under the deed. But on reflection, that issue was not raised in the amended summons.

TURNER: It is not put as an --

HIS HONOUR: Just so I get it clear, you do not raise either, on your summons or the reply, an issue that any of the defendants are guilty of default in failure to comply with the provisions of clauses 4, 5 or 11 of the deed and so precludes them from relying upon them in the absence of settlement of the first sale contract.

TURNER: It is not raised in the amended summons.

HIS HONOUR: So it seems to me that the only question I have to consider is whether settlement of the first sale contract took place, and if it didn't, then that's the end of the matter. If it did, then whether the conduct of the defendants in May of 1999 represented a repudiation of the deed.

TURNER: Your Honour is looking at my submission not quite correctly. If your Honour looks at it as at 17 May, in my submission the first sale contract was still on foot at that stage.

HIS HONOUR: So the way it should be expressed, you say that as at May the first sale contract was completed or, alternatively, if it wasn't, it was still on foot.

TURNER: That is so, and the deed was capable of repudiation.

HIS HONOUR: And in either case there was a repudiation of the deed as at May 1999.

TURNER: Yes, and we then say if the repudiation is treated as being accepted, and your Honour accepts there was a termination of the deed at that date, we say damages are assessed on opportunity of lost chance.

HIS HONOUR: My main concern was to correct my analysis. I think I may have expressed it on Thursday, that an issue arose that the failure to settle the first sale contract was due to the default of any of the defendants.

TURNER: Yes.

HIS HONOUR: That's not an issue that I have to address?

TURNER: No. If your Honour then looks at the events post 17 May on a particular basis, they had a right, the deed having terminated, until they saw fit. After that they were bound by the deed. I will address on that point in due course."

(T 49:15- T 40:45) (Emphasis added and words struck out to correct errors in transcript)

81 In written submissions in reply presented later after this exchange, it was submitted as follows:

"3. The Deed provided that although the completion was subject to and conditional upon settlement of the Contract for Sale (clause 2 PB 18) there were "best endeavours" obligations on Doncaster and on its shareholders to ensure that:

(a) if a Share Agreement or Property Sale Agreement was entered into that they were completed,

(b) the "Contract for the Sale is settled".

(See clauses 4 and 5 at PB 19).

4. In addition the Deed also obliged the Defendants "to take all steps, execute all documents and do everything reasonably required by any other party to give effect to any of the transactions contemplated by this Deed." (see clause 11 at PB 21).

5. It is submitted that these clauses imposed on Doncaster obligations to take such steps as would be reasonably necessary to ensure the Contract for Sale "is settled."

6. It is submitted that this obligation required Doncaster to take positive steps to keep the Contract on foot. Further it didn't permit it to make some consensual arrangement with the vendor to terminate the Contract. The only way it could do that would be by obtaining the approval of the Plaintiff. Only once the Deed was terminated could Doncaster enter into a consensual arrangement to terminate the Contract.

7. It is submitted that this could have extended to entering into variations of the Contract of Sale if the variations were reasonably required. For instance it would be reasonable to require extensions to be negotiated and entered into by Doncaster to ensure there was sufficient time to obtain development approval depending on how it came about that the available time was insufficient."

82 As a consequence of those submissions, I raised the matter with counsel as follows:

"HIS HONOUR: I don't require further submissions on that. Just getting back to your written submissions, I fail to see the relevance of your submissions in paragraphs 3 to 7 in view of your statement earlier today that the plaintiff doesn't raise an issue of breach of clauses 4, 5 or 11 of the deed.

TURNER: It is to try and explain what the legal position between the parties was as at 17 May 1999.

HIS HONOUR: But what is the significance of any obligation to use their best endeavours to ensure settlement of the first sale contract or completion of some other agreement?

TURNER: It is to meet Mr Drummond's proposition. They say they are perfectly entitled to do what they did after 17 May and they wouldn't have been able to do that before hand, as I understand his argument, that all these variations and things took it outside the deed. My submission is, that it is all within the deed and as at 17 May, once the termination, they could do all they liked subject to the issue of damages for the repudiation.

HIS HONOUR: I can understand that. But I fail to see what their obligation to ensure completion of the first sale contract has got to do with it if in fact there is no allegation of default in terms of those obligations.

TURNER: It puts content on what was the obligation at all times immediately prior to 17 May, if there had been an opportunity for completion during that period.

HIS HONOUR: Say it again.

TURNER: It adds content to the relationship between the parties and explains what it was, the opportunity of which my client was deprived. If the contract had run on beyond 17 May unterminated, them my client could have insisted at all times thereafter, on compliance with the best endeavours obligations, compliance with positive steps to keep the contract on foot.

HIS HONOUR: I see. The only way you rely upon it is on the basis that they can't be heard to say that after termination of the deed it was open to them to terminate the first sale contract.

TURNER: That's right. We say that if the thing hadn't been terminated as at 17 May, all these other things would have bound them. So when you got to 27 May, they couldn't have done what they wanted to do."

(T 60: 15 - T 61:7)

83 It was following that, and at the conclusion of submissions in reply, that the application for leave to amend the summons was made and rejected.

84 Accordingly, I have not been required to determine whether the non-satisfaction of the condition precedent of the deed was the consequence of breach by the defendants of cll 4, 5 or 11 of the deed. Had that issue been raised, I have little doubt, from material in evidence, that it would have involved a substantial factual dispute including questions as to the suitability of part of the Milton property for development of the nature and extent contemplated in the first sale contract. Had that issue been determined in favour of City, I would remain of the view that City must fail for reasons that follow.

85 In view of my finding that the condition precedent of the deed had not been satisfied and was incapable of being satisfied by reason of the implied rescission of the first sale contract, the issue concerning the alleged repudiation of the deed does not arise. However, in the event that my reasoning is found to be erroneous, it may be of assistance to have my findings on whether the acts of the defendants, as relied upon by City, were capable of constituting a repudiation of the deed.

86 The repudiation is said to have occurred in an exchange of correspondence between the solicitors for the defendants and the solicitor for City in May 1999.

87 On 3 May 1999 the solicitor for City wrote to the solicitors for the defendants in the following terms:

"I refer to my letter of 11th August, 1998 in which I advised that I act for City and that my client reserved its rights under the Deed made between Messrs. Shanahan and Tomlinson, Doncaster, City and Mr. Robert Kidd wherein your clients agreed to pay to City or its nominee inter alia, the sum of $400,000 ("the Consulting Fee") upon the sale of Doncaster shares by Messrs. Shanahan and Tomlinson or upon the disposal by Doncaster of any of its interest in the Milton Road property.

My client instructs me that despite repeated requests to Messrs. Shanahan and Tomlinson for confirmation that the Consulting Fee will be paid upon completion of the purchase of 316 Milton Road, Milton from the Royal Queensland Lawn Tennis Association, your clients refuse to provide such an undertaking and, if fact (sic), have rejected City's claim for payment upon completion of the purchase.

Unless your client instructs you to provide your firm's written undertaking to my client on or before 4 p.m., Wednesday, 5th May, 1999 to pay the Consulting Fee due to City under this Deed from the proceeds of sale subject to the terms thereof, I have been instructed to commence legal proceedings to seek inter alia, a mandatory injunction to ensure that the Consulting Fee is paid to my client as stipulated in the Deed without further reference to you."

88 The undertaking requested in that letter was unjustified in terms of the deed, assuming the deed to be operative. On any view of it, no monies were payable to City by any of the defendants by reason only of Doncaster's purchase of the Milton property.

89 The response of the defendants' solicitors to City's solicitor was that of the letter of 5 May 1999 in the following terms:

"We refer to your facsimile dated 3rd May, 1999 and your letter of 11th August, 1998.

We are instructed to advise you that our clients are not legally obliged to pay your client any monies either pursuant to the document which you assert is a Deed between our clients and City and Industrial Demolitions (NSW) Pty Limited or otherwise.

By way of comment, there would appear to us to be a contradiction in the first and second paragraphs of your facsimile as to when your client alleges that `the consulting fee' is payable.

Any legal proceedings commenced by your client will be strenuously defended by our clients and our clients reserve the right to tender a copy of this letter to the Court at the appropriate time."

90 In my view, that does not amount to a repudiation of the deed. Rather, it is a denial of any legal obligation to pay City any money pursuant to the deed.

91 There appears to have been a telephone conversation between the solicitors for those parties on 10 May 1999, following upon which, on 11 May 1999, the solicitors for the defendants wrote to the solicitor for City in the following terms:

" We refer to the writer's telephone conversation with you yesterday and confirm that you have received our facsimile of 5th May, 1999.

We confirm that you enquired as to whether or not there was any room for a compromise and that the writer advise you that if your client wished to make a proposal, then it should do so, and we would obtain further instructions.

We confirm that ASIC records of ACN 063 661 923 show that the Company is in liquidation.

We further confirm that it is our instructions that the acquisition of the Milton Tennis Court site was initially promoted to our client by your client, Mr Paul Menere on the basis that the site could be developed with at least 200 residential units as well as a significant commercial/ retail area.

Further, Mr Menere recommended that our client engage particular consultants who would be responsible for obtaining the required rezoning and Development Approvals from Brisbane City Council.

We confirm that our client has paid in excess of $600,000.000 in consultancy fees and even more than that in payments to Tennis Queensland and other Vendors in order to maintain contracts for the acquisition of the required properties, however to this point in time, our client's consultants have not been able to delivery (sic) satisfactory Development Approval by Brisbane City Council.

We repeat that our clients do not acknowledge the existence of any valid Agreement with your client, however in the event that it is ultimately found that such an Agreement exists then our clients certainly reserve any rights at contract or common law which they may have against your client and, of course, Mr Menere."

92 The reference to a company in liquidation in the third paragraph of that letter is accepted by both parties as an erroneous statement. It is upon the last paragraph of that letter that City relies for the contention that the defendants repudiated the deed. That was the stance adopted by City's solicitor in his letter to the defendants' solicitors of 17 May 1999 which was in the following terms:

"I refer to your facsimiles of 5th and 11th May, 1999 respectively.

Letter of 5th May

I refer to my letter of 3rd May, 1999 to which you refer and confirm that paragraphs 2 and 3 are incorrect and that the Consulting Fee is payable as set out in paragraph 1. However, my client does instruct me that your clients refuse to confirm that they are legally obliged to pay the Consulting Fee in the circumstances set out in the Deed.

These instructions are confirmed by your facsimiles of 5th and 11th May, 1999.

Letter of 11th May

Whilst the ACN number for City and Industrial Demolitions (NSW) Pty Limited set out on the first page of the Deed is incorrect and is in fact the ACN number for City and Industrial Demolitions Pty Limited the common seal for City & Industrial Demolitions (NSW) Pty Limited was affixed upon the execution page and contains the correct ACN number.

Further City and Industrial Demolitions (NSW) Pty Limited is not under administration.

Further you will note from Recital D of the Deed that by the time the Deed was executed my client had already performed the services set out in the Recital and the purpose of the Consulting Fee was to compensate my client for services that had already been rendered.

Both your letters of 5th and 11th May, 1999 together with the discussions between our respective clients is regarded by my client as a repudiation of your client's obligations under the Deed.

Accordingly, my client considers all parties discharged from performance of the Deed.

My client will institute proceedings for damages against your client's (sic) in respect of the repudiation."

93 Except to the extent that the conversations referred to in that letter are confirmed in the correspondence quoted above, there is no evidence before me of the discussions referred to in the letter of 17 May 1999.

94 In my view, the conduct of the defendants through the correspondence of its solicitors in May 1999 does not amount to a repudiation of the deed, assuming it to be still on foot at that time.

95 I think the applicable approach to circumstances such as those relied upon by City is to be found in the joint judgment of Stephen, Mason and Jacobs JJ in DTR Nominees Pty Ltd v Mona Homes Pty Ltd [1978] HCA 12; (1978) 138 CLR 423 at 431, in the following passage:

"The relevant question therefore is whether the events which we have recounted evidence an intention on the part of the appellant to repudiate or renounce the contract or more precisely whether such an intention is to be inferred from those events.

For the respondents it was submitted that such an intention should be inferred from the appellant's continued adherence to an incorrect interpretation of the contract. It was urged that the appellant, because it was acting on an erroneous view, was not willing to perform the contract according to its terms. No doubt there are cases in which a party, by insisting on an incorrect interpretation of a contract, evinces an intention that he will not perform the contract according to its terms. But there are other cases in which a party, though asserting a wrong view of a contract because he believes it to be correct, is willing to perform the contract according to its tenor. He may be willing to recognise his heresy once the true doctrine is enunciated or he may be willing to accept an authoritative exposition of the correct interpretation. In either event an intention to repudiate the contract could not be attributed to him. As Pearson L.J. observed in Sweet & Maxwell Ltd v Universal News Services Ltd :

" In the last resort, if the parties cannot agree, the true construction will have to be determined by the court. A party should not too readily be found to have refused to perform the agreement by contentious observations in the course of discussions or arguments..."

96 The letters of the defendants' solicitors of 5 May and 11 May 1999 should be read in the context of the terms of the deed. I think it is quite clear from the deed that the commercial sub-stratum to it was the prospect of a successful acquisition of the Milton property by Doncaster subsequent upon obtaining development approval for some two hundred residential units and the on sale of the property, or of an interest in the property, or the sale of shares in Doncaster reflecting the benefit of that acquisition. Neither of those commercial objectives had been achieved as at May 1999 and I think that is the substance of what was being conveyed in the letters of 5 May and 11 May 1999 by the defendants' solicitors. In particular, the last paragraph of the second letter I think should be treated as a statement that the condition precedent of the deed and, inferentially, that those commercial objectives had not been satisfied and could not be satisfied.

97 For those reasons I am of the view that the conduct of the defendants relied upon by City was not capable of amounting to a repudiation of the deed and that consequently the letter of City's solicitor of 17 May rescinding the deed was itself unjustified.

98 There was a subsidiary issue raised by City arising out of the sale by Shanahan of his shares in Doncaster to Tomlinson by Share Sale Agreement of 6 May 1999 (the Shanahan share sale).

99 Under the Shanahan share sale, Shanahan sold his shares in Doncaster to Tomlinson for $796,500. It was submitted on behalf of City that the Shanahan share sale fell within the definition of "Share Agreement" in the deed with the consequence that it triggered the operation of cl 3 of the deed. Involved in that argument is the proposition that, although the proceeds of sale would be received by Shanahan the obligation fell upon Tomlinson to pay City the sum of $400,000 under cl 3.2 of the deed upon settlement of the sale of shares by Shanahan. It was argued that this obligation arose, in part, out of the provision in the interpretation clause of the deed (cl 1.2) which provided, inter alia, as follows:

"In this Deed headings are for convenience only and shall not affect interpretation and unless the context otherwise requires:

...

(e) Where a party is comprised of more than one person the provision of this Deed apply to those persons both jointly and severally."

100 It was argued that Shanahan and Tomlinson were "a party ... comprised of more than one person" rendering Tomlinson liable for the obligation of the vendors under cl 3.2 of the deed.

101 There is little doubt that such a transaction as the Shanahan share sale was not contemplated by the parties as falling within the operation of cl 3 of the deed. I think the terminology of cl 3.2 makes it clear that the deed was not intended to operate in the manner contended for on behalf of City. The deed called for payment to City of $400,000 by deduction of that sum from the proceeds of a "Share Agreement" or a "Property Sale Agreement".

102 Recital D recited an agreement by Shanahan, Tomlinson or Doncaster "[as the case may be] ... to pay City ... $400,000 ... from sale proceeds received pursuant to a Share Agreement or pursuant to a Property Sale Agreement".

103 The definition of Share Agreement contemplated a sale of shares by both Shanahan and Tomlinson, not a sale by one to the other.

104 Finally in cll 3.2 and 3.3 the obligation is cast upon the recipient of proceeds of sale to pay City and to do so by deduction from the proceeds so received.

105 I think it is clear that on the proper construction of those provisions, they do not respond to a transaction such as the Shanahan share sale. That consequence is fortuitous when it is seen that City's construction of the deed would call for the defendants to pay out $800,000 from the proceeds of a sale for less than that amount and to require Tomlinson to pay such a sum notwithstanding he was the payer of the proceeds of sale, not the recipient.

106 On the basis that, the first sale contract, as varied, was executory at the time of the alleged repudiation and that the conduct of the defendants was repudiatory of the deed, City sought damages for the lost opportunity of having the varied first sale contract completed and a Share Agreement or Property Sale Agreement, within the meaning of the deed, effected by the defendants.

107 To reach that position it would be necessary to find that the first sale contract as varied fell within the ambit of cl 2 of the deed. Given the significant changes as to time of performance, the substantial additional payments required of Doncaster by way of fees and additional deposit instalments, and the reduction of the development concept from two hundred to one hundred and fifty residential units and "incidental retail facilities", I would be unable to conclude that settlement of the varied contract fell within the ambit of "settlement of the Contract for Sale", as contemplated by the condition precedent of the deed: unless constrained to find that the condition precedent was so satisfied by recourse, for example, to estoppel founded on breach of cll 4,5 or 11 of the deed.

108 Neither estoppel nor breach of cll 4,5 or 11 was an issue before me. Had that been an issue and one decided in favour of City, and had I found that the first sale contract was not rescinded by the Second Sale Contract, and had the defendants' conduct been found to have been repudiatory of the first sale contract as varied, then I think there would still have been a significant difficulty confronting City's claim for damages. That claim, in my view, would have to take account of the fact that the development approved by the council was for one hundred and fifteen units and of the apparent effect of that reduced level of approval in terms of the Third Sale Contract.

109 In order to reach the conclusion that City was entitled to damages for the defendants' repudiatory conduct, I think one would have to assess the probability that the condition precedent of the deed would have been satisfied but for that repudiation of the deed. That, in my view would require a conclusion that Doncaster would have settled the first sale contract, as varied, taking the Second Sale Contract and the several variations to it, as variations of the first sale contract. That would have involved Doncaster waiving the condition of development approval being obtained for one hundred and fifty residential units, and completing on the terms of the varied first contract. I think that would be a very large step, having regard to the terms of the litigation settlement agreement and the Third Sale Contract. It is not one I would be prepared to make.

110 I think the probability is that Doncaster would only have been prepared to complete on terms consistent with the Third Sale Contract. That would then require treating the settlement of a contract on those terms as within the ambit of "settlement of the Contract for Sale" within the meaning of the condition precedent of the deed. For reasons earlier given I could not reach that conclusion, having regard to the extent of the departures from the original terms of the first sale contract.

111 These matters aside, I think there was ample evidence before me to conclude that there was a high probability of Doncaster deriving a benefit from the council's development approval by disposing of its interest in the Milton property either by on-sale or through joint venture arrangements for its development and sale of interests in the developed property. If, contrary to my views, such a transaction fell within the meaning of a Property Sale Agreement as defined by the deed, then I would regard a ten per cent discount as the maximum reduction of City's prospects of deriving an entitlement to the fee as contemplated by the deed. In view of the extent of my findings adverse to City, I see little utility in a closer examination of the `lost opportunity' evidence.

112 Accordingly the summons is dismissed and the plaintiff is to pay the defendants' costs of the proceedings.

*************

LAST UPDATED: 19/12/2000