ACN 096 278 483 Pty Ltd as Trustee for the Williams Family Trust v Vercorp Pty Ltd & Anor

[2012] HCATrans 20

[2012] HCATrans 020

IN THE HIGH COURT OF AUSTRALIA

Office of the Registry
  Brisbane  No B43 of 2011

B e t w e e n -

ACN 096 278 483 PTY LTD AS TRUSTEE FOR THE WILLIAMS FAMILY TRUST

Applicant

and

VERCORP PTY LTD ACN 010 198 268

First Respondent

HEGIRA LIMITED

Second Respondent

Application for special leave to appeal

FRENCH CJ
KIEFEL J

TRANSCRIPT OF PROCEEDINGS

FROM CANBERRA BY VIDEO LINK TO BRISBANE

ON FRIDAY, 10 FEBRUARY 2012, AT 10.23 AM

Copyright in the High Court of Australia

MR A.J.H. MORRIS, QC:   May it please the Court, I appear for the applicant.  With me, MR L.A. JURTH.  (instructed by Londy Lawyers)

MR P.J. FLANAGAN, SC:   May it please the Court, I appear with MR C.L. FRANCIS, for the respondents.  (instructed by Hynes Lawyers)

FRENCH CJ:   Yes, thank you, Mr Morris.

MR MORRIS:   Your Honours, this matter proceeded both at first instance and in the Court of Appeal on the footing, which we take as being incontrovertible, that the contract between A and B which has somehow transmogrified into a contract between A and C as a result of the unilateral nomination of B is a very rare and special creature.  The question of course is in what circumstances that hypothetically possible creature comes into existence.  On that point, when one reviews the decision of the Court of Appeal it, with respect, addresses that issue of concern in terms which one might not unfairly say there is less to it than meets the eye.

FRENCH CJ:   The Court of Appeal spoke of the need for clarity of contractual language in order to effectively bring the nominee in as a party to the contract, assuming its obligations.

MR MORRIS:   Everyone accepts that and yet the centrepiece in the Court of Appeal judgment – and this is at page 53 of the record, paragraph [25] – is a rejection of our proposition that the requirement in the authorities that there be very clear language ordinarily requires express terms for which we did not cite any authority and which should be rejected.  If those clear words are not to be found in the contract their Honours do not tell us where they are to be found.

FRENCH CJ:   Did the nominee in this contract fall within the definition of “buyer”?

MR MORRIS:   Only in the result, the Court of Appeal said, as a matter of construction, as a matter of interpretation.  There was not, as for example there was in the Tasmanian case of Parland a situation where the term “buyer” was defined as including both ‑ ‑ ‑

FRENCH CJ:   I think it was “purchaser” there, was it not?

MR MORRIS:   Yes, both the signatory and the nominee.  So we have a situation where the court says it is a matter of construction, one inclines against construing a contract that way and, indeed, one needs very clear language, or as has been said in other cases, compelling language or compelling terms.  Everyone accepts that and yet when the Court of Appeal comes to look at it they really deal with three matters, none of which we would respectfully suggest get the respondent to this appeal over the hump.

The first thing is the precontractual situation where their Honours refer to a communication between the man who was at the time a director of the signatory and became, after it was incorporated, a director of the nominee and a representative of the vendor.  Their Honours refer to that, as indeed the trial judge did, not in an orthodox way, for example, to identify some objective extrinsic fact which would assist in the interpretation of the contract but for the utterly heretical proposition, in our respectful submission, that one can look at that conversation to discern the actual subjective intentions of the contracting parties.

One of the things which makes this case a particularly apposite vehicle for an appeal to determine this important point of law is the fact that this was argued, relevantly, only as a matter of construction of the written contract.  The conversation that was relied on might, theoretically, have been relied on, for example, as giving rise to a promissory estoppel.  It might have been relied on, for example, as giving rise to an oral collateral contract or an oral collateral term.  It might have been relied on as a basis for rectification.  But the case was confined on the pleadings, on the submissions.  This application nailed its colours to the mast and continues to do so on the footing this is purely a question of construction of the written contract.

KIEFEL J:   Do you do likewise?  Do you say that this is resolved purely as a matter of construction?

MR MORRIS:   It is.

KIEFEL J:   You do not rely upon matters such as the fact that the nominee was not incorporated at the time of the contract and you do not rely upon matters such as novation, legal effects such as novation

MR MORRIS:   We do not, your Honour.  We rely simply on the proposition that clear words are needed and they do not exist.  Their Honours, I should mention for completeness, also adverted to the existence of what was described as post‑contractual conduct but was, in fact, a letter written by the solicitor for the present applicant, which expressed a view as to the legal position.  Either that view was right or it was wrong.  If that view was right then when the solicitor wrote that letter it did not become any more right as a result of it.  If that view was wrong it was not changed into a right view of the law, as a result of it. 

It is not a case of post‑contractual conduct in the traditional sense.  Indeed, the respondent, at first instance and in the Court of Appeal, attempted to mount a case of an estoppel by convention arising from the party’s conduct and that has been rejected at every stage.  There is no suggestion of a cross‑appeal or even a notice of contention to advance that argument.

KIEFEL J:   A matter which appears to have been quite influential with the primary judge, which appears, I think, at paragraph [27] of his reasons and which brought the matter close to the situation in Parland v Mariposa, appears to have been that the contractual provisions to be operative after settlement would have been unworkable if the vendor could not enforce them. 

MR MORRIS:   Indeed, your Honour.

KIEFEL J:   That went very strongly to the presumed intention of the parties, I assume?

MR MORRIS:   That was the third, as it were.  There was the pre‑contractual and the post‑contractual matters which, we submit, are entirely irrelevant to the question of construction.  That was the third basis.

KIEFEL J:   But that appears to be more important to the primary judge’s reasoning.

MR MORRIS:   Exactly, and it was one, to be fair, which the Court of Appeal adopted as well and we say that there are two fundamental problems with that approach.  The first is that a large number of contracts contemplate things occurring after settlement.  The effect would be that in every case, where it is contemplated that things will occur after settlement, the same argument would hold good that the actual transferee, rather than the signatory to the contract, might be expected to be the party who was intended to perform those things. 

So as a general principle it has little merit, but it has even less merit in the circumstances of this peculiar contract because this contract, the special conditions contained the remedies, as it were, for non‑compliance.  One of those remedies was payment of a monetary sum, the other remedy was reconveyance.  When it comes to payment of a monetary sum, that was pursued at first instance.  It failed because the learned primary judge held that the monetary sum was a penalty and therefore unrecoverable.  That aspect of his Honour’s decision was, with the deepest respect, as plain as day.

The witness effectively admitted, on behalf of the present respondent, that it was intended to operate as a penalty.  But putting that to one side, the fact that there is a written contract that says, “If X occurs, you are to pay $25,000” rather suggests that the vendor would have wanted the obligation to pay that $25,000 binding on the party with which it has contacted, which it knows and has dealt with, rather than a $2 company or a man of straw which can be nominated unilaterally by the signatory.

That is the problem with this entire approach.  It opens the door for saying that in any case where there are things left to be done post‑settlement, a purchaser who has dealt with a vendor because it trusts the vendor or because the vendor is a person or entity of substance, or because for some other reason it is convinced that the vendor is someone with whom it wishes to do business ‑ ‑ ‑

KIEFEL J:   The primary judge here pointed to, in relation to the intention of the parties at entry into contract, that the parties intended – he said that the evidence shows that the parties intended that there was to be a nomination of an entity under the control of Mr Williams and in terms of post‑contractual, I will not say “intentional knowledge,” his Honour made a specific note that the letter of termination by the trust accepted that the trust had become contractually bound upon the nomination and they seem to have been influential as well around this position of how the contract was intended to operate.

MR MORRIS:   They, with respect, are the two things which plainly cannot work; whatever else can work for this respondent, they cannot.  The fact that there were conversations which contemplated a particular contractual situation, which was not then reflected in the party’s written contract, cannot conceivably be relied upon to support an argument for construction ‑ ‑ ‑

FRENCH CJ:   Well, you reduce this case, your special leave point, do you - and I am looking at paragraph 6 of your submissions - to the proposition that there is an established clear words requirement to bring a nominee in as a party assuming the burden of a contract and that in this case the words were not clear enough?

MR MORRIS:   Well, there were no clear words at all; that is the point.

FRENCH CJ:   Is that a question of principle or is that just a debate about the characterisation of the language of this particular contract?

MR MORRIS:   Well, your Honours, in this case – and I accept that what your Honour the Chief Justice is putting to me is a very fine line – but in this case it comes down to a matter of principle.  Is it enough to mouth the words of saying there needs to be clear language or does ‑ ‑ ‑

FRENCH CJ:   What is the mechanism by which a nominee – or the minimum mechanism, if you like, by which a nominee becomes a party to the contract in place of the purchaser?  Assuming it is not a tripartite contract to begin with, which it cannot be where you have a non‑existent nominee that is incorporated after the contract is formed, is it a novation?

MR MORRIS:   Well, we would say that the minimum – being what your Honour has asked me for – the minimum would be the sort of provision that occurred in Parland where the descriptor “buyer or purchaser” is defined in one way or another to mean both the nominee and the purchaser, or to mean in the event of nominee the nominee rather than the signatory.

FRENCH CJ:   How does it work?  How does the nominee become bound into the contract?

MR MORRIS: Well, we would say that theoretically there are two possibilities: one is a novation where, as the Court of Appeal said in this case, a new contract is entered into by implication between the original vendor and the nominee with the consideration for that contract being the release of the original signatory as buyer. The other possibility is that it is treated as – under section 55 of the Property Law Act (Qld) or under principles of promissory estoppel that the nominee becomes bound because it has accepted the benefit of a contract.

KIEFEL J:   Or there has been an assignment.

MR MORRIS:   Or an assignment of its contractual rights.

FRENCH CJ:   It only takes the benefit under the assignment, does it?

MR MORRIS: Well, certainly under section 55 of the Property Law Act (Qld) it would take the burden as well as the benefits. There may be difficulties if it was a pure common law or indeed a pure equitable assignment, and that is why the novation theory is perhaps the most acceptable from a purely jurisprudential viewpoint.

Getting back to your Honour the Chief Justice’s question as to whether this is a point of principle or just an application of the principle of the facts of this case, what is dangerous about this decision is the proposition in paragraph [25] of the Court of Appeal judgment that even though one says one has to look for “very clear language” one can find it, goodness knows where, but somewhere outside the contract, and that is really exacerbated in the present case by reliance on the heretical ‑ ‑ ‑

FRENCH CJ:   That may raise a question of what you can refer to in terms of factual matrix, for example, in construing the contract.

MR MORRIS:   Indeed.  May I say, from a purely practical viewpoint, this has very serious implications.  Contracts like this are entered into in every State of the Commonwealth on every day of the week in every week of the year.  If this sort of approach is to be permitted it will have two consequences:  one is that the parties will not know what their legal position is when they use the traditional form of words.  They will not know whether the purchaser, who ultimately becomes transferee, is bound or whether it is only the signatory who is bound.

Perhaps more directly from the point of view of the courts and the legal profession, it also opens up that whole territory of what sort of evidence is admissible in order to dislodge the presumptive or usual interpretation that only the signatory is bound and this very case demonstrates that problem.  When we have discussion in the evidence about the actual terms of the parties, exchanges in the course of negotiating the contact, where you have discussion about correspondence written by solicitors in terminating the contract, what can you make use of to achieve that result?  Your Honours, I do not think I can say anything further that would not be repetitious.  May it please the Court.

FRENCH CJ:   Yes, thank you, Mr Morris.  We will not need to trouble you, Mr Flanagan.

This application for special leave to appeal from a decision of the Court of Appeal of the Supreme Court of Queensland concerns a contract for the sale of four building blocks on Bribie Island between the second respondent, as vendor, and Barrier Developments Pty Ltd and/or Nominee, as purchaser.  The first respondent was the assignee of the contract from the second respondent.  The applicant was the nominee of the purchaser, both being controlled by the same person.

The principal question on the application for special leave is whether the applicant was bound by the terms of the contract, including negative building covenants affecting the land and options in favour of the second respondent to enable it to repurchase the lots under certain conditions.

In our opinion, the question is one of the construction of the particular contract.  The term “clear language” has been used to describe the circumstances under which a nominee will be bound as a party to the contract, assuming its obligations as well as its benefits.  The decision of the Court of Appeal turns upon the construction of the contract, having regard to the circumstances in which it was entered.  In our opinion, no general question of principle warranting the grant of special leave is exposed.  The application for special leave will be dismissed with costs.

AT 10.42 AM THE MATTER WAS CONCLUDED