|
|
Home
| Databases
| WorldLII
| Search
| Feedback
Supreme Court of Victoria |
Last Updated: 10 October 2024
AT MELBOURNE
COMMON LAW DIVISION
PROPERTY LIST
S ECI 2024 02100
|
|
|
|
and
|
|
|
|
|
---
|
JUDGE
|
|
|
WHERE HELD:
|
|
|
DATE OF HEARING:
|
|
|
CASE MAY BE CITED AS:
|
|
|
MEDIUM NEUTRAL CITATION:
|
CONTRACT – Summary judgment application by vendor –
Interpretation – Implied term – Condition precedent –
Whether
rezoning of property an implied term or condition precedent.
---
|
APPEARANCES:
|
Counsel
|
Solicitors
|
|
Mr D Carlile
Mr E Twomey |
Banga Legal
|
|
|
|
|
|
|
For the Defendant
|
Mr T Sowden
|
Conlan Cummings Lawyers
|
1 This proceeding concerns a dispute about
the purchase of land for $9.5 million. The plaintiff purchasers say that
settlement should
be delayed until after the land has been rezoned and, until
that occurs, the land is only worth $5 million. They say they are in
the
process of having the land rezoned from Farming Zone to Comprehensive
Development Zone or Urban Growth Zone. In the meantime,
an initial settlement
date, and then an extended settlement date, have passed without the purchasers
completing payment of the purchase
price. The defendant vendor relies on the
contract of sale, as amended by the terms of settlement (‘TOS’), and
says
there should be summary judgment in his favour. This ruling determines the
defendant vendor’s summary judgment
application.
2 For convenience, I shall refer to the
plaintiffs as ‘the purchasers’ and the defendant as the
‘vendor’.
The vendor’s summary judgment application
3 By summons filed on 6 June 2024, the vendor seeks summary judgment pursuant to s 63 of the Civil Procedure Act 2010 (Vic) (‘CPA’). In the alternative, he seeks that the Statement of Claim filed on 1 May 2024 (‘Statement of Claim’) be struck out pursuant to r 23.02 of the Supreme Court (General Civil Procedure) Rules 2015 (Vic) (‘Rules’). By his counterclaim, the vendor seeks orders that the second plaintiff remove a caveat over the subject property.
4 The central questions for determination
and their answers follow.
5 Do the purchasers have
any real prospect of success in establishing:
(a) the rezoning of the property was a condition precedent to settlement? No.
(b) the contract of sale contains an implied term that settlement is not required until after rezoning? No.
6 Orders will be made for summary judgment in favour of the vendor in respect of the claim. Consequentially, orders should be made for removal of the caveat per the vendor’s counterclaim.
7 The background to this proceeding
begins on 22 April 2022.[1] On that
date, the defendant (as vendor) entered into a contract (the ‘contract of
sale’) with the first plaintiff (as
purchaser) for the sale of 240
O’Herns Road, Epping, in the State of Victoria, being the property more
particularly described
in Certificate of Title Volume 08635 Folio 231 (the
‘Property’).[2]
8 The contract of sale included the
following:[3]
(a) A sale price of $9,500,000.
(b) Two deposits of $475,000 each. The first was to be paid upon signature, the second was to be paid three months later.
(c) A settlement date of 16 August 2023 (16 months after the date of the contract of sale), whereupon the outstanding balance, being $8,550,000, would be paid.
(d) A special condition (Special Condition 4), stipulating that the vendor provide access to the Property for the purposes of rezoning and subdivision approval prior to settlement.[4]
(e) A special condition (Special Condition 5) that the contract is conditional on the purchaser paying the deposit of $475,000 no later than 27 April 2022, and that failure to pay by that date entitled the vendor to terminate the sale.
9 The first plaintiff paid the two
deposits.[5]
10 On
15 September 2022, the first plaintiff registered a caveat on the
Property’s title, being dealing number AW066581S (the
‘Caveat’).[6] The Caveat
refers to the first plaintiff’s interest as purchaser under the contract
of sale.
11 On 11 October 2022, to progress the
rezoning and per Special Condition 4, the second plaintiff’s town planner,
Human Habitats
Pty Ltd, requested that the vendor provide access to the Property
for soil testing by another
company.[7]
12 On
13 October 2022, the second plaintiff’s conveyancer sent a follow-up email
requesting an inspection
time.[8]
13 In
or about late October 2022, the vendor advised that the second plaintiff could
be granted access on 5 November 2022. This date
was not practicable for the
second
plaintiff.[9]
14 On
18 November 2022, the second plaintiff’s hired soil tester, DRC
Environmental, attended the Property to undertake soil
testing. However, the
vendor refused access, citing wet weather conditions which may affect features
of the
Property.[10]
15 Between
November 2022 and March 2023, there were several exchanges between the
purchasers and the vendor, either through their
representatives or by proxy,
regarding access to the Property for the purposes of rezoning, testing, and
other like activities.[11]
16 On 18 March 2023, the vendor’s daughter
advised that the vendor would not want any soil testing, engineering, or other
like
work done to the Property before
settlement.[12]
17 On
4 May 2023, the purchasers’ representative, Banga Legal, sent a letter to
the vendor’s representative, Conlan Cummings
Lawyers, stating that the
second plaintiff (in this proceeding) had been attempting to seek reasonable
access to the Property for
the purposes of rezoning and subdivision approval by
surveyors and town planners since August
2022.[13]
18 On
25 May 2023, after several exchanges, the purchasers’ solicitor sent a
letter that acted as a ‘final notice’
before initiating formal
litigation, stating that it seemed the vendor was not able to act in good
faith.[14]
19 On
18 July 2023, the first plaintiff nominated the second plaintiff to be the
substitute purchaser, thereby taking the transfer
of the Property in its
place.[15] The Nomination of Real
Estate form stated:
The Buyer nominates the Nominee as substitute Buyer to take a transfer of the Property instead of the Buyer.
The Buyer and the Nominee acknowledge that they are jointly and severally liable for performing the obligations of the Buyer under the Contract and for paying any expenses resulting from this nomination (including, but not limited to any stamp duty) and the Nominee is bound by the Contract as if the Contract had been entered by the Nominee and the Seller.
The Guarantor acknowledges that the nomination of the Nominee as substitute Buyer does not affect the Guarantor's obligations under the Guarantee.[16]
20 Tajinder Singh, the second
plaintiff’s sole director, signed as
guarantor.[17]
21 On 16 August 2023, the original date of
settlement, the purchasers failed to complete the purchase of the Property by
paying the
outstanding amount under the contract of sale.
22 On 30 July 2023, the second plaintiff
(in this proceeding) issued a proceeding against the vendor in the Supreme Court
of Victoria,
proceeding number S ECI 2023 03377 (the ‘first
proceeding’).
23 Notably, in the first
proceeding, the second plaintiff sought orders extending the settlement date to
23 April 2024. It also sought
an injunction restraining the vendor from
enforcing specific performance and completion of the contract until 24 April
2024.[18]
24 The
substantive allegation in the first proceeding was that the vendor had breached
Special Condition 4 by not allowing the purchasers
and their agents sufficient
access to the Property for the purpose of the rezoning and subdivision
applications.[19]
25 On
25 August 2023, the vendor’s solicitors served the purchasers’
solicitors with a notice of default and
recission.[20]
26 On
6 September 2023, Stynes J ordered that the parties attend mediation. At the
mediation, held the same day, terms of settlement
(the ‘TOS’) were
agreed upon between the
parties.[21]
27 The
TOS relevantly stated that:
Operative Part
- The contract is to be amended as follows:
(a) Special Conditions 1,2,3 and 5 are to be deleted: and
(b) The settlement date is extended to 5 April 2024,
in consideration of OHR paying Chiarelli $100,000 by 30 November 2023, $20,000 by 15 March 2024 and $30,000 at settlement.
- Time is of the essence in respect of all obligations in paragraph 1 above and for the avoidance of doubt in the event that the payments are not made in accordance with that paragraph Chiarelli will be at liberty to rescind the contract in accordance with its terms.
- Paragraph 2 is without prejudice to any rights Chiarelli may have to pursue OHR for any amounts outstanding under these terms or the contract.
- A breach of these terms will otherwise constitute a breach of the contract.
- OHR acknowledges that it is liable for and to the extent that it is necessary will indemnify Chiarelli against any land tax accruing in respect of the property from 1 January 2024.
- OHR warrants that it will not complete the rezoning process referred to in special condition 4 of the contract until at or after settlement.
- The parties will seek orders dismissing the proceeding with no order as to costs.[22]
28 On 13 September 2023, Stynes J
dismissed the first proceeding by
consent.[23]
29 The
purchasers subsequently paid further amounts due to the vendor pursuant to the
TOS.[24] However, the purchasers did
not pay the remaining monies due at settlement.
30 On 20 March 2024, the vendor’s solicitor received a letter from the purchasers’ solicitor (the ’20 March 2024 letter’), relevantly stating:
WITHOUT PREJUDICE
RE: 240 O’Herns Road Epping Pty Ltd (ACN 669 288 475) vs Chiarelli, Marino
Dear Colleague,
Our client has advised us he requires a 12-month extension on the 240 O’Herns Road Epping.
Our client seeks to continue with the purchase and in the manner most amicable to both parties, hence, at this juncture requests a 12-month extension.
Our client understands the Vendor will want assurance and has provided instructions he is willing to provide further funds upon settlement, which is open to negotiation.
At this stage, our client wanted to put their intention forward in writing, to notify the Vendor as soon as practicable of the request.
We do not wish for this matter to go to court and are hopeful we can come to an agreement.
We look forward to hearing from you within 7 days.[25]
(Emphasis original.)
31 The vendor’s solicitor sent a reply the same day (the ‘20 March 2024 letter in reply’):
Chiarelli sale to 240 O'Herns Road Epping Pty Ltd ATF 240 O’Herns Road Epping Family Trust
Thank you for your letter of 20 March 2024, which requests that my client agree a 12-month extension to the settlement date.
I am somewhat concerned by the implied threat of legal proceedings which is contained in the penultimate paragraph of your letter. My client’s position is as follows:
- There appears to be no dispute that the agreed settlement date is 5 April 2024.
- The Court is not empowered to simply extend the settlement date because it is convenient to your clients for it to do so.
- The proceeding which your clients issued with case number S ECI 2023 03377 was dismissed by consent. Consequently, they cannot re-agitate any claim against Mr Chiarelli that they made in that proceeding.
- Insofar as they seek to rely on any other allegation against Mr Chiarelli that could have been made in that proceeding, but wasn’t, they are likely to find themselves to be estopped from pursuing it (see Port of Melbourne Authority v Anshun Pty Ltd [1981] HCA 45).
- No allegation has been made by your clients to the effect that Mr Chiarelli has breached the contract since the date of the settlement of their proceeding, and I am not aware of any circumstances which could possibly give rise to any such claim.
For the avoidance of doubt, it is Mr Chiarelli’s understanding that your clients have no claim against him which would justify further intervention of the Court. However, if your clients are now alleging that they do, they should explain clearly what that claim is. They cannot realistically expect him to negotiate under a threat of proceedings if they won’t tell him what those proceedings will be alleging. Given the deadline contained in your letter I would be grateful if you would provide a full response by return.
I also note that your letter was headed “without prejudice.” The protection from production in Court that is given to “without prejudice” communications only extends to correspondence which is written in an attempt to resolve an existing dispute. Your letter provides no evidence of any existing dispute; it is simply a request that the time be extended. In the circumstances, it is not accepted that that letter is entitled to the protections extended to “without prejudice” communications, notwithstanding its heading.[26]
(Emphasis original.)
32 Further correspondence was exchanged
between the parties' legal representatives on 20 March 2024. The
purchasers’ representatives
stated they were not threatening Court
proceedings.[27]
33 On
27 March 2024, the vendor’s solicitor received a letter from the
purchasers’ solicitor (the ’27 March 2024
letter’). The letter
made an offer to pay the vendor $300,000 in two instalments if he would agree to
extend the settlement
date by 12
months.[28]
34 On 5 April 2024, the purchasers failed to
settle.[29]
35 On
24 April 2024, the vendor’s solicitor served a notice of default and
recission. It notified the purchasers that unless
they complied with the notice
within 14 days, the contract of sale would be
rescinded.[30]
36 The purchasers commenced this
proceeding on 1 May 2024.
37 On 5 June 2024, the
vendor filed a counterclaim seeking removal of the
Caveat.
38 On 6 June 2024, the vendor filed a
summons seeking summary judgment against the
purchasers.
39 By letter dated 6 June 2024, the
second defendant by counterclaim, the Registrar of Titles, indicated that she
did not intend to
appear in this proceeding.
40 On 5
September 2024, I heard the vendor’s application for summary judgment.
41 Section 62 of the CPA is as follows:
62 Defendant may apply for summary judgment in proceeding
A defendant in a civil proceeding may apply to the court for summary judgment in the proceeding on the ground that a plaintiff's claim or part of that claim has no real prospect of success.
42 Sections 63 and 64 of the CPA provide that:
63 Summary judgment if no real prospect of success
(1) Subject to section 64, a court may give summary judgment in any civil proceeding if satisfied that a claim, a defence or a counterclaim or part of the claim, defence or counterclaim, as the case requires, has no real prospect of success.(2) A court may give summary judgment in any civil proceeding under subsection (1)―
(a) on the application of a plaintiff in a civil proceeding;
(b) on the application of a defendant in a civil proceeding;
(c) on the court's own motion, if satisfied that it is desirable to summarily dispose of the civil proceeding.
64 Court may allow a matter to proceed to trial
Despite anything to the contrary in this Part or any rules of court, a court may order that a civil proceeding proceed to trial if the court is satisfied that, despite there being no real prospect of success the civil proceeding should not be disposed of summarily because―
(a) it is not in the interests of justice to do so; or
(b) the dispute is of such a nature that only a full hearing on the merits is appropriate.
43 I adopt the principles given by the Court of Appeal in Lysaght Building Solutions Pty Ltd v Blanalko Pty Ltd (‘Lysaght’)[31] and the test that is now well-established law:
Upon the present state of authority:a) the test for summary judgment under s 63 of the Civil Procedure Act 2010 is whether the respondent to the application for summary judgment has a ‘real’ as opposed to a ‘fanciful’ chance of success;b) the test is to be applied by reference to its own language and without paraphrase or comparison with the ‘hopeless’ or ‘bound to fail test’ essayed in General Steel;
c) it should be understood, however, that the test is to some degree a more liberal test than the ‘hopeless’ or ‘bound to fail’ test essayed in General Steel and, therefore, permits of the possibility that there might be cases, yet to be identified, in which it appears that, although the respondent’s case is not hopeless or bound to fail, it does not have a real prospect of success;
d) at the same time, it must be borne in mind that the power to terminate proceedings summarily should be exercised with caution and thus should not be exercised unless it is clear that there is no real question to be tried; and that is so regardless of whether the application for summary judgment is made on the basis that the pleadings fail to disclose a reasonable cause of action (and the defect cannot be cured by amendment) or on the basis that the action is frivolous or vexatious or an abuse of process or where the application is supported by evidence.[32]
44 The law on the construction of
commercial contracts is well settled and not in dispute.
45 Relevantly, in Electricity Generation
Corporation v Woodside Energy
Ltd,[33] the High Court
held:
The meaning of the terms of a commercial contract is to be determined by what a reasonable businessperson would have understood those terms to mean. That approach is not unfamiliar. As reaffirmed, it will require consideration of the language used by the parties, the surrounding circumstances known to them and the commercial purpose or objects to be secured by the contract. Appreciation of the commercial purpose or objects is facilitated by an understanding “of the genesis of the transaction, the background, the context [and] the market in which the parties are operating”.[34]
(Citations omitted.)
46 In Mount Bruce Mining Pty Ltd v Wright Prospecting Pty Ltd,[35] the High Court held:
In determining the meaning of the terms of a commercial contract, it is necessary to ask what a reasonable businessperson would have understood those terms to mean. That inquiry will require consideration of the language used by the parties in the contract, the circumstances addressed by the contract and the commercial purpose or objects to be secured by the contract.
Ordinarily, this process of construction is possible by reference to the contract alone. Indeed, if an expression in a contract is unambiguous or susceptible of only one meaning, evidence of surrounding circumstances (events, circumstances and things external to the contract) cannot be adduced to contradict its plain meaning.
However, sometimes, recourse to events, circumstances and things external to the contract is necessary. It may be necessary in identifying the commercial purpose or objects of the contract where that task is facilitated by an understanding “of the genesis of the transaction, the background, the context [and] the market in which the parties are operating”.[36]
(Citations omitted.)
47 As helpfully submitted by the purchasers:
(Footnotes amended.)
Is there any real prospect of the purchasers establishing that the rezoning of the property was a condition precedent to settlement?
48 The purchasers allege that because of
the TOS (clause 6) and the contract of sale (Special Condition 4), it was a
condition precedent
to settlement that the Property had been rezoned (the
‘condition
precedent’).[42] Further,
that settlement was to occur within a reasonable time after the Property was
rezoned, and the settlement date of 5 April
2024 in the TOS was subject to
the condition precedent.
49 Clause 6 of the TOS is a
warranty by the second plaintiff ‘that it will not complete the rezoning
process referred to in
special condition 4 of the contract until at or after
settlement.’
50 Special Condition 4 is for the
vendor to:
provide reasonable access to the property as mutually agreed to surveyors and town planners for the purpose of rezoning and subdivision approval prior to settlement and will provide assistance in signing all paperwork required for the council and planning authority.
51 Before turning to the parties’ submissions, I should record that it is common ground that the TOS operates as an amendment to the contract of sale.
52 By paragraph 10 of the Statement of
Claim, the rezoning of the Property was a condition precedent to settlement. It
is the underlying
premise of the whole agreement. Ms Nair, the
plaintiffs’ solicitor, deposes that it was the parties' clear intention to
enter
the contract of sale and that the rezoning would be completed before
settlement. It does not make commercial sense to settle until
the rezoning is
complete.
53 The purpose can be discerned from the
following contract of sale terms.
54 First, the
purchase price. A purchaser does not pay $9.5 million for land valued at $5
million. It makes no commercial sense.
The parties signed the contract of sale
in April 2022. The valuation in April 2023 shows the land to be worth $5
million and in
a farming zone.[43]
The land will be valued at about $9.2 million once the rezoning is
complete.[44]
55 Secondly,
the extended settlement period, being ‘16 months from contract sign
date’, does not contemplate an immediate
sale. This time frame for
rezoning should have been sufficient, but it was
not.[45]
56 Thirdly,
Special Condition 4 gives access ‘prior to settlement’. It
contemplates that a rezoned parcel of land will
be transferred on settlement.
The purpose of providing access is so that the purchaser can commence the
rezoning process.
57 Surrounding circumstances are
consistent with the commercial purpose.
58 First,
the Property is positioned within the Aurora Comprehensive Development Plan (the
‘Aurora Plan’) [46] and
is considered suitable for residential development.
59 Secondly, other properties within the Aurora
Plan have already been rezoned.
60 Thirdly, the
local government authority addressed the issue of development contributions in
relation to other properties within
the Aurora Plan, and template s 173
agreements[47] existed for private
landholdings imposing liability to pay development
contributions.[48]
61 Fourthly, the Property valuation before rezoning
was significantly less than the purchase price, so the purchasers could not
obtain
sufficient finance. It is conceded that the purchasers do not have the
finance. Ms Nair deposes that the rezoning is essential
for the purchasers to
secure the appropriate funds for
settlement.[49]
62 Given the above, the rezoning was a foregone
conclusion. The only question was when it would be completed.
63 The rezoning involves the registered proprietor
entering into a section 173 agreement. It provides for the registered
proprietor
to contribute to the cost of infrastructure required for the
development of the land. The vendor executed a s 173 agreement and
provided it
to the purchasers on 30 September
2022.[50] After the local
government authority raised concerns, the vendor executed a new s 173 agreement
on 8 September 2023.[51] The
contract of sale does not refer to the s 173 agreement.
64 After the s 173 agreement is executed, the next
procedural steps are outside the parties’ control. Ms Nair gives evidence
of these.[52] They include
consideration of the amendment by the local government authority, its decision
to propose it to the relevant Victorian
government minister, time for
submissions by affected parties on the proposed amendment, and finally,
gazetting of the amendment.
65 In light of the
potential for delays in the rezoning process outside the parties’ control,
the natural intention of the parties
emerging from the contract of sale terms
was that the rezoning of the Property was a condition precedent to settlement.
Special
Condition 3 anticipates the operation of the condition precedent as it
allows the purchaser to compensate the vendor for various
expenses to which the
vendor would be exposed if the settlement did not occur on the projected date.
66 This is not a case of a purchaser buying an
opportunity. That is, purchasing with the hope of rezoning. There is usually a
sunset
clause in such cases, and there is none here. The purchaser was not
speculating on the land but effectively buying it off the shelf
as it believed
the rezoning would go ahead.
67 The TOS preserved
the condition precedent. Mr Singh’s evidence is that shortly before the
TOS were executed, he was advised
the rezoning process would take another six to
eight months, concluding in January to March
2024.[53] The date for settlement
in the TOS was 5 April 2024, after the projected date for rezoning referred to
his affidavit of Tajinder
Singh affirmed 22 August
2023.[54] The parties have not
caused delays after April 2024. They are due to unforeseen administrative
delays by the local government authority.
The evidence of Ms Nair is that he
believes the rezoning will go ahead.
68 Special
Condition 4 remained on foot in the TOS. It refers to rezoning and subdivision
approval occurring ‘prior to settlement’.
It is referenced in cl 6
of the TOS, which appears to require the rezoning and subdivision process not to
be completed ‘until
at or after settlement’. Special Condition 4
and cl 6 are irreconcilably contradictory. The construction of cl 6 and Special
Condition 4 is an issue for trial.
69 At trial, it
will be necessary for the Court to identify the point at which the rezoning
process would be considered ‘complete’
for the purpose of cl 6. In
doing so, the Court must consider that cl 6 contemplates completed ‘at or
after’ settlement,
suggesting it is not something that can be precisely
timed. Further, cl 6 refers to settlement in the active voice, so it is
contemplated
to be an act performed by the purchasers. However, the planning
process is outside the purchasers’ control and incapable of
precise
timing. The vendor knew the rezoning process was in train at the time of the
TOS. However, cl 6 does not contemplate the
purchasers stopping the process.
It shows that the vendor knew there would be a change in value upon rezoning.
It supports the
contention that both parties knew there would need to be a
rezoning before settlement. The time period of the rezoning has not been
identified, so it must be a reasonable time.
70 The
Curry affidavit refers to additional facts relevant to interpretation. At
paragraph 19(c), Mr Curry deposes that cl 6 was
included to ensure the vendor
would not be liable for any windfall gains tax that might be payable if the land
was rezoned before
settlement. This is not in the contract. If the contract is
to be construed with this evidence, there should be more detail on
the windfall
tax scheme.
71 The Court should not rule on factual
disputes at the time of a summary judgment application.
72 The express terms in the TOS
contradict the purchasers’ submissions regarding the condition precedent.
It provides rezoning
is to be completed after settlement. Moreover, the
Statement of Claim alleges settlement will occur a reasonable time after
rezoning. It does not allege that the rezoning would be obtained within a
reasonable time.
73 Whilst the purchasers
anticipate the rezoning will occur, there is no guarantee that it will. What
happens if there are objections
to the
rezoning?
74 If the contract of sale is regarded as
conditional but has a fixed date for completion of the sale, then that is the
operative
date to determine whether or not the condition has been
fulfilled.[55] The TOS were
intended to operate according to their terms with settlement to occur on 5 April
2024.
75 Having entered the TOS, the purchasers
can hardly say there was an issue with access per Special Condition
4.
76 The alleged condition precedent cannot, at
law, be regarded as such. If anything, it would be regarded as a condition
subsequent
as that term is used in Zieme v
Gregory.[56]
77 If the alleged condition precedent was
operative, and rezoning did not occur or was further delayed, then the contract
would be
over at the option of the purchasers who would not need to show the
vendor they have used their best endeavours to fulfil of the
condition.
78 If there truly was a condition precedent then
the purchasers would have liberty to withdraw from the contract if rezoning did
not
occur.
79 Clause 4 of the TOS provides that a
breach of the TOS constitutes a breach of the contract.
80 The alleged condition was not
precedent to the formation of the contract. The parties treated the
contract as binding upon execution. The purchasers paid deposits. The vendor
provided
access to the Property and assisted in signing paperwork to apply for
rezoning and subdivision (eg by executing the s 173 agreements),
as required by
Special Condition 4.
81 The real question is whether
the alleged condition is precedent to performance of the contract. The
purchasers say it is, and in particular, they say the condition is precedent to
settlement.
82 In Perri v Coolangatta
Investments Pty Ltd (‘Coolangatta
Investments’),[57] Gibbs
CJ stated:
it probably does not matter in the present case whether the condition is described as “precedent” or “subsequent”, provided that it is understood that its non-fulfilment did not prevent a binding contract from coming into existence but did have the effect that the respondent was under no obligation to complete the sale unless the condition was fulfilled or waived.[58]
83 Applying this principle to the dispute
here, the question is whether there was a rezoning condition such that the
purchasers were
not obliged to complete the sale until it was fulfilled. That
is, until the rezoning had occurred.
84 For the
following reasons, there is no real prospect of the purchasers establishing the
alleged condition precedent.
85 First, the contract
of sale, as amended by the TOS, expresses no such condition. In contrast to the
alleged condition precedent,
which is not expressly contained in the contract of
sale, there is a condition expressed in the contract of sale (Special Condition
5), which states that the contract is conditional upon a deposit being paid by a
stipulated date.
86 The absence of an express clause
may be contrasted with authorities in which courts have held that there are
condition precedents.
For instance, in Coolangatta Investments, a
special condition provided that the contract was ‘entered into subject to
Purchasers completing a sale of their
property’.[59] In
Australian Mutual Provident Society v
Landsa[60] the contract
contained an express provision titled ‘Conditions Precedent to
Performance’.[61]
87 Secondly, the terms of the contract of sale and
TOS are clear. The contract of sale is in the standard form with some
unambiguous
handwritten amendments. Settlement was to occur 16 months from the
contract sign date. The price was agreed, as were the dates
of the two
deposits.
88 Special Condition 4 is titled
‘Access’. It provides for access before settlement, and assistance
with paperwork for
subdivision and rezoning. On reflection, I accept that there
is a good argument that the words ‘prior to settlement’
relate to
the words immediately before them. That is, the phrase ‘for the purpose
of rezoning and subdivision approval prior
to settlement’. It would be
superfluous if the words related to access to the Property generally (ie be read
as ‘the
vendor will provide reasonable access to the property ... prior to
settlement’). This is because the only time the vendor
could give access
is prior to settlement. After settlement, the vendor has no rights over the
Property. Accordingly, I accept that
Special Condition 4 contemplates rezoning
before settlement. However, it does not form a condition precedent. It places
an obligation
on the vendor (defendant) to provide access to the Property and
cooperate with the necessary paperwork for the purpose of rezoning
and
subdivision approval before settlement. It does not make settlement of the
contract contingent upon rezoning. Moreover, the
TOS resolved the dispute
regarding access. The purchasers concede that delays in rezoning after this
resulted from administrative
delays, not the
vendor.
89 The TOS amended the contract of sale.
Clause 6 of the TOS may be read harmoniously with Special Condition 4. It
explicitly refers
to that condition. The purchaser warrants that the rezoning
process referred to in Special Condition 4 will not be completed ‘until
at
or after settlement’. There is nothing in cl 6 contrary to the access and
cooperation for the purpose of rezoning and subdivision.
However, it does
expressly change the contemplated time frame from prior to settlement to after
settlement. Clause 6 is unsurprising
in circumstances where the purpose of the
TOS was to resolve the first proceeding. To recall, a central allegation in
that proceeding
was that access had not been provided and that this caused a
delay in the approval for rezoning. I reject the purchasers’
submission
that cl 6 is unworkable because the parties have no control over when rezoning
will occur. On the purchasers’ own
evidence, it appears they are closely
monitoring the progress of the rezoning process. On their evidence, there is no
precision
as to when that process will be completed, and there are still several
steps to occur.[62]
90 Clause 1 of the TOS deletes Special Conditions
1, 2 and 3, and extends the settlement date in consideration of the purchaser
paying
the vendor $150,000 (in three payments).
91 Clause 2 provides that time is of the essence
regarding the obligations in cl 1. It further clarifies that the vendor will be
at liberty to rescind the contract in accordance with its terms if the cl 1
payments are not made.
92 Clause 2 does not speak to
the general ‘time is of the essence’ clause in the contract of sale
because that remains
on foot. Clause 3 of the TOS provides that cl 2 of the TOS
is without prejudice to any rights that the vendor may have to pursue
the
purchaser for any amounts outstanding under the contract of sale or TOS.
Consistently with this, cl 4 of the TOS provides that
a breach of the terms
will otherwise constitute a breach of the
contract.
93 Both the contract of sale and TOS are
silent on the consequence of the local government authority refusing to rezone
the Property.
94 Clause 5 of the TOS provides that
the purchaser is liable for and, to the extent that it is necessary, will
indemnify the vendor
against any land tax accruing in respect of the property
from 1 January 2024. Given that Special Condition 3 had been deleted, and
the
TOS extended the settlement date, this clause provides
clarity.
95 Thirdly, cl 6 of the TOS is contrary to
the alleged condition precedent. The purchaser warrants that it will not
complete the
rezoning process until at or after settlement. Accordingly, even
if there was a real prospect of the purchasers establishing that
the contract of
sale contained the alleged condition precedent, it was superseded by this
clause. Both parties agree, correctly,
that the effect of the TOS is to amend
the contract of sale. Recital B of the TOS records the
same.
96 Fourthly, the purpose of the contract of
sale and TOS do not support the purchasers’ alleged condition precedent.
The purpose
of the contract of sale is evidently for the vendor (defendant) to
sell the Property and the purchaser (Angad or nominee) to purchase
the Property
for the price and on the terms set out in the
contract.
97 The purpose of the TOS is evident from
Recital B: ‘to resolve the proceeding and amend the
contract’.
98 The alleged condition precedent
contradicts the contract's purpose and that of the TOS. Both contain settlement
dates and the
dates for payments. This was necessary for completion of the
sale. On the other hand, the alleged condition precedent contains
no fixed
date.
99 I should add that although the TOS deleted
the handwritten Special Condition 5, it was moot. The vendor’s solicitor
deposes
that the purchasers paid the two deposits in the contract of
sale.[63] There was no change to
the contractual term that time is of the essence (cl 26.1). Moreover, cl 2 of
the TOS provides that time
is of the essence, ‘and for the avoidance of
doubt in the event that payments are not made in accordance with that paragraph
[the vendor] will be at liberty to rescind the contract in accordance with its
terms.’
100 Finally, I reject the
purchasers’ contention that the contract does not make commercial sense
without the alleged condition
precedent. In particular, that the purchasers
would not have paid nearly double the current value of the Property unless the
contract
of sale was subject to rezoning approval. It is evident from the
contract of sale and the TOS that the purchasers speculate that
the Property
will be rezoned. Their evidence is that at the time of the purchase,
significant portions of the surrounding land had
been rezoned, and in fact,
there was already a template s 173 agreement for privately owned properties
within the Aurora Plan.[64]
101 Reading Ms Nair’s affidavit, it is
evident that the commercial issue for the purchasers is that they cannot obtain
finance.
The valuation they rely upon was done at the request of a bank as at
18 April 2023, about a year after the purchase, and provides
a valuation of
$5,000,000.[65] It states that the
Property was sold off the market. The report states:
All things considered, the site represents a lifestyle property with future development potential subject to a successful rezoning, positioned in an emerging but attractive Epping precinct.
We would expect sound demand from a variety of local developer participants if offered to the market in the current environment, with a marketing, sale and settlement period of three to six months. However, if conditions deteriorate, more flexible terms may be required.[66]
102 It shows that the valuer’s
assessment was that the Property had a medium-high risk profile.
103 Commercial sense must be considered for both
parties. It would not make commercial sense for the vendor to wait indefinitely
for rezoning approval. It is evident that the purchasers’ venture bears
risk, as demonstrated by the valuer’s assessment.
However, to purchase a
property off-market at more than its present market value, based upon the
speculation that its value will
increase upon rezoning in circumstances where
the Property is within an area of land covered by the Aurora Comprehensive
Development
Plan, is a readily understandable commercial objective.
Is there any real prospect of the purchasers establishing the contract of sale contains an implied term that settlement is not required until after rezoning?
104 The principles for implication of a term, articulated by a majority of the Privy Council in BP Refinery (Westernport) Pty Ltd v Shire of Hastings,[67] are well-settled and agreed. For a term to be implied:[68]
(a) it must be reasonable and equitable;
(b) it must be necessary to give business efficacy to the contract;
(c) it must be so obvious that it goes without saying;
(d) it must be capable of clear expression;
(e) it must not contradict any express term of the contract.
105 In Realestate.com.au Pty Ltd v Hardingham,[69] Edelman and Steward JJ observed:
Each of the BP Refinery criteria is flexible and is assessed as at the time the contract was made. As will be seen below, it can be especially important that the criteria are not applied in an “over-rigid” way in informal contracts. “Reasonableness” and “equity” are elastic notions. Their content is assessed from the perspective of a reasonable person in the position of the contracting parties and will vary accordingly. That which is necessary for “efficacy” involves a range from highly ineffective to highly effective and “business efficacy” will depend upon the extent to which the contract concerns business. It is simply impossible to say that there is a single requirement of “necessity for business efficacy” that applies in the same way to every contract in every circumstance. So too, “obviousness” and “clarity” are concepts that describe a spectrum of possibilities which will be more demanding where the express terms of the contract are thorough and clear. Finally, although contradiction of an express term of the contract is a criterion of greater specificity, the more tension that exists between a proposed implied term and an express term, the less likely the court will recognise such an implied term.
The reason that the five criteria are flexible is important. The criteria serve only to answer the ultimate question: what would have been intended by a reasonable person in the position of the contracting parties? Hence, in Commonwealth Bank of Australia v Barker [(2014) [2014] HCA 32; 253 CLR 169 at 186, [22]], French CJ, Bell and Keane JJ rightly described the implication of terms as “an exercise in construction”. And, since the ultimate question for identifying express and implied terms is the same, as Mason J (Stephen and Wilson JJ agreeing) said in Codelfa Construction Pty Ltd v State Rail Authority (NSW) [(1982) 149 CLR 337 at 353], in identifying implied terms “the court is no more confined than it is when it construes the contract”.[70]
(Some citations omitted.)
106 In addition to the matters already
referred to above, the purchasers say the
following.
107 There is a real prospect of
establishing that the contract of sale contains an implied term that the
purchasers are not required
to settle until a reasonable time after rezoning,
and that this term persists following entry into the TOS. A reasonable person
in the position of the contracting parties would not have intended that the
purchasers be required to settle where the rezoning had
not
occurred.
108 The BP Refinery factors are in
favour of implication. The implied term is
clear.
109 The implied term is reasonable and
equitable. It protects the purchaser against unforeseen delays in the rezoning
process, and
Special Condition 3 protects the interests of the vendor by
providing the purchasers pay various expenses that may arise in the delay
to
settlement.
110 The implied term is necessary to
give business efficacy to the contract of sale. Without it, there is nothing to
ensure that
the Property is worth the purchase price at settlement and,
therefore, nothing to ensure the purchasers can arrange sufficient finance
to
settle. Without the implied term, the purchasers are exposed to loss of deposit
if there is a delay in rezoning.
111 The zoning of
the Property is a foregone conclusion. The implied term is obvious. Had the
parties turned their mind to the possibility
of delay when drafting the contract
of sale, they would have inserted the implied term to address the
possibility.
112 The implied term is consistent with
the express terms of the contract of sale. If the proper interpretation of cl 6
of the TOS
is inconsistent, then cl 6 is inconsistent with Special Condition 4
and therefore absurd and liable to be corrected or omitted.
A reasonable person
in the position of the parties would not have intended the purchasers be
required to proceed to settlement where
the rezoning had not occurred.
113 The implied term would deprive the
contract of business efficacy. It is inefficacious as the rezoning could take
months or years.
The contract can operate effectively without it. The term is
not so obvious that it ‘goes without saying’. It is incapable
of
clear expression because there is no certainty of when the rezoning will occur
and the consequences if it does not. It contradicts
an express term of the TOS
that rezoning is to occur at or after settlement and contradicts the contract of
sale terms (discussed
above).
114 The contract is
operable without the implied term. It is not complicated. It does not operate
in a manner contrary to the interests
of one party.
115 I reiterate the findings above in
respect of the alleged condition precedent.
116 I
find that the rezoning term should not be implied. As I have already explained,
it contradicts the express terms of the contract
of sale (as amended by the
TOS), and the contract terms are clear and unambiguous.
117 The rezoning term is unnecessary to give
business efficacy to the contract (as amended by the TOS). Nor would it be
reasonable
and equitable to imply the term, which would require the vendor to
wait indefinitely until a decision is made regarding rezoning.
Whilst I accept
that a reasonable period may be implied in some circumstances, this is not such
a case. As explained above, the
contract contains a time is of the essence
clause and a settlement date, which was later extended and stipulated in the
TOS. Further,
the purchasers said that in the event of delay, the vendor was
protected Special Condition 3 (payment by purchaser to vendor if the
purchaser
fails to complete on the specified date). However, Special Condition 3 was
deleted by cl 1(a) of the TOS.
118 What would
have been intended by a reasonable business person in the position of the
contracting parties? That the sale would
proceed on the terms of the contract of
sale, as amended by the TOS.
119 The purchasers have
no real prospect of success in demonstrating the implied term.
Should the matter proceed to trial per s 64 of the CPA?
120 There is no basis for proceeding to trial per s 64 of the CPA. Indeed, it would be counter to the interests of justice to so order. This is a straightforward case appropriate for summary determination.
121 Summary judgment in favour of the
vendor.
122 As I have awarded summary judgment in
favour of the vendor, I do not consider I need to deal with the alternate ground
on which
the vendor’s summons was brought; namely, that the
purchasers’ Statement of Claim be struck out pursuant to r 23.02 of
the
Rules.
123 Unless there is a good reason that the
ordinary rule should not apply, costs should follow the event. I will allow the
parties
to make submissions as to costs.
|
|
|
|
|
S ECI 2024 02100
|
|
|
|
|
|
|
|
BETWEEN:
|
|
|
|
|
|
|
|
|
ANGAD TRANS PTY LTD (ACN 633 888 221) ATF ANGAD FAMILY TRUST
|
First Plaintiff |
|
240 O’HERNS ROAD EPPING PTY LTD (ACN 669 228 475) |
Second Plaintiff |
|
|
|
|
- and -
|
|
|
|
|
|
MARINO CHIARELLI
|
Defendant
|
|
|
|
|
AND BETWEEN:
|
|
|
|
|
|
MARINO CHIARELLI
|
Plaintiff by Counterclaim
|
|
- and -
|
|
|
|
|
|
ANGAD TRANS PTY LTD (ACN 633 888 221) ATF ANGAD FAMILY TRUST
|
First Defendant by Counterclaim
|
|
REGISTRAR OF TITLES |
Second Defendant by Counterclaim |
[1] Plaintiffs’ Statement of Claim (‘SOC’), filed 1 May 2024; Affidavit of Simon Paul Curry, sworn on 6 June 2024, [7] (‘Curry affidavit’).
[2] Curry affidavit, [4]; Exhibit “SPC-2” to the Curry affidavit, 1–12; Affidavit of Hirani Nair, affirmed on 3 September 2024, [5] (‘Nair affidavit’); for Contract of Sale, see Exhibit “HN-1” to the Nair affidavit, 1–38.
[3] Curry affidavit, [7]; see also Exhibit “HN-1” to the Nair affidavit, 41–2.
[4] Nair affidavit, [9].
[5] Curry affidavit, [8].
[6] Exhibit “SPC-2” to the Curry affidavit, 57.
[7] Exhibit “HN-1” to the Nair affidavit, 42.
[8] Ibid, 43.
[9] Ibid.
[10] Ibid.
[11] Ibid, 43–4.
[12] Exhibit “HN-1” to the Nair affidavit, 44.
[13] Exhibit “HN-1” to the Nair affidavit, 44.
[14] Ibid, 45; see also 124.
[15] Ibid, 42.
[16] Exhibit “SPC-2” to the Curry affidavit, 59.
[17] Ibid, 61.
[18] Exhibit “SPC-2” to the Curry affidavit, 76.
[19] Curry affidavit, [13].
[20] Exhibit “SPC-2” to the Curry affidavit, 82–4.
[21] Curry affidavit, [18]; Nair affidavit, [6]–[7].
[22] Exhibit “SPC-2” to the Curry affidavit, 89–90; Exhibit “HN-1” to the Nair affidavit, 39–40.
[23] Curry affidavit, [20].
[24] Ibid, [21].
[25] Exhibit “SPC-2” to the Curry affidavit, 94.
[26] Exhibit “SPC-2” to the Curry affidavit, 97–8.
[27] Curry affidavit, [24].
[28] Ibid, [25].
[29] Ibid, [26].
[30] Exhibit “SPC-2” to the Curry affidavit, 106–8.
[32] Lysaght Building Solutions Pty Ltd v Blanalko Pty Ltd [2013] VSCA 158 (‘Lysaght’), [35] (Warren CJ and Nettle JA).
[33] [2014] HCA 7; (2014) 251 CLR 640.
[34] Ibid, 656-57 [35] (French CJ, Hayne, Crennan and Kiefel JJ).
[35] [2015] HCA 37; (2015) 256 CLR 104.
[36] Mount Bruce Mining Pty Ltd v Wright Prospecting Pty Ltd [2015] HCA 37; (2015) 256 CLR 104, 116-17 [47]-[49] (French CJ, Nettle and Gordon JJ).
[38] Ibid, [70] (Whelan JA and Riordan AJA), citing Lopes v Taranto [2018] VSCA 288, [66]-[72] (Kyrou, McLeish and Hargrave JJA).
[39] [2017] HCA 12; (2017) 261 CLR 544.
[40] Ibid, 551 [17] (Kiefel, Bell and Gordon JJ).
[41] Ibid, 562 [51]-[52] (Gageler J).
[42] SOC, [10].
[43] Exhibit “HN-1” to the Nair affidavit, 283.
[44] Nair affidavit, [24].
[45] Ibid, [21].
[46] Ibid, [10].
[47] A reference to s 173 of the Planning and Environment Act 1987.
[48] Nair affidavit, [11]-[12].
[49] Nair affidavit, [11]-[12], [25].
[50] Nair affidavit, [13].
[51] Ibid, [16].
[52] Ibid, [17]-[20].
[53] Nair affidavit, [27]; see also Singh affidavit contained in Exhibit “HN-1” to the Nair affidavit, 46 [44].
[54] Singh affidavit contained in Exhibit “HN-1” to the Nair affidavit, 46 [44]; see generally: Exhibit “HN-1” to the Nair affidavit, 41–47.
[55] Australian Mutual Provident Society v Landsa [1997] 1 VR 564, 564, 573-74 (Ormiston J; McDonald and Hansen JJ agreeing).
[56] [1963] VicRp 34; [1963] VR 214.
[58] Ibid, 543 (Gibbs CJ).
[59] Perri v Coolangatta Investments Pty Ltd (1982) 149 CLR 537, 540 (Gibbs CJ).
[61] Ibid, 565 (Ormiston J).
[62] Nair affidavit, [18]-[20], [28].
[63] Curry affidavit, [8].
[64] Nair affidavit, [12].
[65] “Exhibit HN-1” to the Nair affidavit, 132–35.
[66] “Exhibit HN-1” to the Nair affidavit, 134.
[67] (1977) 180 CLR 266.
[68] Ibid, 283 (Viscount Dilhorne, Lord Simon and Lord Keith).
[69] [2022] HCA 39; (2022) 277 CLR 115.
[70] Realestate.com.au Pty Ltd v Hardingham [2022] HCA 39; (2022) 277 CLR 115, 155–56 [114]-[115] (Edelman and Steward JJ).
AustLII:
Copyright Policy
|
Disclaimers
|
Privacy Policy
|
Feedback
URL: http://www.austlii.edu.au/au/cases/vic/VSC/2024/622.html