APN Funds Management Limited v Australian Property Investments Strategic Pty Ltd
[2011] VSC 515
•14 October 2011
| IN THE SUPREME COURT OF VICTORIA | Not Restricted | |
AT MELBOURNE
COMMERCIAL AND EQUITY DIVISION
S CI 2010 06778
| APN FUNDS MANAGEMENT LIMITED (ACN 080 674 479) (acting in its capacity as the responsible entity for the APN Property for Income Fund No. 2 ARSN 113 296 110) | Plaintiff |
| v | |
| AUSTRALIAN PROPERTY INVESTMENT STRATEGIC PTY LTD (ACN 009 110 463) (formerly known as MacarthurCook Limited) | Defendant |
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JUDGE: | RANDALL AsJ | |
WHERE HELD: | Melbourne | |
DATE OF HEARING: | 1 June 2011 | |
DATE OF JUDGMENT: | 14 October 2011 | |
CASE MAY BE CITED AS: | APN Funds Management Limited v Australian Property Investments Strategic Pty Ltd | |
MEDIUM NEUTRAL CITATION: | [2011] VSC 515 | Revised 13 December 2011 |
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PRACTICE AND PROCEDURE – Plaintiff’s application for summary judgement – Whether defendant’s defence has no real prospect of success – Proper construction of unit subscription and put option deed as to time of deemed service and actual receipt – Plaintiff called on defendant to buy units in trust before date of deemed service – Plaintiff sought settlement on basis of deemed service date – Whether that date applied when date of actual receipt was earlier – Whether time is of the essence in any event – Civil Procedure Act 2010, s 61.
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APPEARANCES: | Counsel | Solicitors |
| For the Plaintiff | Mr P D Corbett | Hall & Willcox Lawyers |
| For the Defendant | Mr T R O Boston | Shanahan Tudhope |
HIS HONOUR:
The plaintiff and the defendant entered into a deed entitled “Unit Subscription and Put Option Deed” (the “Put Option Deed”). The Put Option Deed was subsequently varied by a “Deed of Amendment and Restatement Unit Subscription and Put Option Deed” dated 25 July 2008. There was subsequently a further variation by a deed entitled “Second Deed of Amendment and Restatement of Unit Subscription and Put Option Deed” dated 2 April 2009.
The provisions of the Put Option Deed (as varied) included relevantly, that the defendant would issue units in the Macarthur Cook Office Property Trust ARSN 114263688 (“the Trust”) to the plaintiff in exchange for the plaintiff paying the subscription price of $5,150,000. The Put Option Deed further provided for the grant by the defendant of a put option (“the put option”) which was exercisable in accordance with the provisions of the Put Option Deed as varied.
On 7 November 2007, the plaintiff subscribed for 5,873,759 units in the Trust and paid the subscription price of $5,150,000.
On 18 October 2010, the plaintiff gave the defendant a put option notice by posting the same to the defendant.
At 10.00am on 5 November 2010, the plaintiff attended the defendant’s registered office with signed instruments of transfer for the APNFN units to be exchanged for the Purchase Price pursuant to the provisions of the Put Option Deed as varied.
The defendant failed to complete by paying the Purchase Price.
The plaintiff filed a summons dated 17 May 2011 seeking leave to amend the statement of claim (minor alterations) and summary judgment for the amount of $4,698,808.
The primary issue on the summary judgment application is whether or not by attending on 5 November 2010 with the signed instruments of transfer, the plaintiff had failed to adhere to the provisions of the Put Option Deed as varied.
By paragraph 9 of the defence, the defendant sets out:
… denies that the binding and enforceable agreement was to be completed by 5 November 2010 and say[s] that the completion was required to occur on either the Completion Date for Exercise (which was ten business days after the put option was validly exercised) or any other date agreed between the parties in writing …
5 November 2010 was outside the 10 business days referred to in the Put Option Deed as varied.
Provisions of the documents
Relevant provisions of the Put Option Deed are as follows:
4.2Exercise
(a)The plaintiff may exercise the Put Option at any time during the Exercise Period by delivering an Exercise Notice to the defendant.
(b)If the Put Option is not exercised on or before the Expiry Date, the rights of the plaintiff to put the Units to the defendant under this deed will immediately cease.
4.3Sale and purchase of Units
On receipt of the Exercise Notice, the defendant agrees to purchase from the plaintiff and the plaintiff agrees to sell and transfer to the defendant the Units on the terms and conditions set out in this deed.
There is no dispute between the parties that the Put Option was validly exercised during the exercise period provided for in the Put Option Deed as varied.
Subsequent to the exercise of the Put Option, further provisions of the Put Option Deed as varied came into force. Those provisions were as follows:
5.1Completion of sale and purchase of Units
On the date of a valid exercise of the Put Option pursuant to this deed, the plaintiff and the defendant will for all purposes [to] be deemed to have entered into a binding and enforceable agreement for the sale and purchase of the Units which must be completed on the Completion Date for Exercise.
5.2 Time and place of Completion of Exercise
Completion of Exercise will take place at the registered office of the defendant on the Completion Date for Exercise at 10.00am or any other time or place agreed in writing by the plaintiff and the defendant.
5.3 Obligations of the plaintiff at Completion of Exercise
At Completion of Exercise, the plaintiff must:
(a) deliver to the defendant
(i) the unit certificates for the Units;
(ii)sign instruments of transfer of the Units in favour of the defendant that are in registrable form;
(iii)any other document that the defendant requires to obtain good title to the Units and to enable the defendant to have the Units registered in the defendant’s name; and
(b)do all other acts and execute all documents that are necessary to transfer the Units to the defendant and to complete any other transaction contemplated by this deed.
The “Completion Date for Exercise” is defined as 10 business days after the date on which the Put Option is validly exercised or any other date that the parties agree in writing. Clause 24 sets out that time is of the essence of this deed.
The plaintiff also relies upon clause 15 which deals with notices. The relevant provisions are as follows:
15.1General
Unless this deed expressly states otherwise, a notice… in connection with this deed must be in writing and signed by the sender or a person authorised by the sender. A notice may be given by hand delivery, prepaid post, facsimile to the recipient’s current address for service for notices as set out in this deed or as a mended by notice from time to time.
15.2When effective
A notice given under clause 15.1 will be deemed to be received:
(a)…
(b)if sent by prepaid post, three Business Days after the date of posting or seven Business Days after the date of posting if posted to or from a place outside Australia;
I…
Unless a notice is received after 5.00pm on a Business Day in the place of receipt or at any time on a non-Business Day, in which case, that notice is deemed to have been received at 9.00am on the next Business Day.
The plaintiff relies upon provisions of the constitution establishing the MacArthur Cook Office Property Trust. In particular, clause 4.3 sets out:
Issue of Units
Units are created and issued on the latter to occur of the Responsible Entity:
4.3.1receiving in respect of fully paid Units the Issue Price for the Units and, in respect of partially-paid Units, the initial instalment for the Units; and
4.3.2accepting the Application.
Further provisions also provide:
4.9 Deposit Advices
No certificates will be issued for Units. The Responsible Entity may send Unit Holders a Deposit Advice. The Deposit Advice is evidence of title to units only to the extent that it is consistent with entries in the Register.
5.3 Evidence to Accompany Transfer
An instrument of transfer of Units must be accompanied by such evidence (if any) as the Responsible Entity requires to prove the transferor’s title or right to transfer the Units.
The arguments
The defendant concedes that the Put Option Notice was given within the appropriate time but says:
(a)Delivery of the Exercise Notice occurred on 19 October 2010. The defendant acknowledged receipt of the Exercise Notice on 20 October 2010. Accordingly, by virtue of clause 6.1 and the relevant definition, completion had to occur on or before 3 November 2010.
(b)The deeming provision as to receipt of notices three business days after the date of posting is overridden by proof of actual receipt on 19 October and the acknowledgement of receipt on 20 October.
ITime was of the essence for the completion of the Unit Sale Agreement whether pursuant to clause 5.1, 24 or whether as a mercantile agreement. Further, the defendant submits that the use of the word “must” in the context of “must be completed on the Completion Date for Exercise” should be given its ordinary meaning and is directive of a requirement to be completed by that time or not at all.
(d)The defendant further argues that as unit certificates were not tendered the obligation to complete did not arise. I do not need to deal with this issue.
(e)The defendant also did not accept the calculation of the “exercise price”. I do not need to deal with this issue.
The plaintiff’s submissions
The plaintiff submits as follows:
(a)Time was not of the essence in the performance of the deemed agreement for the purchase and sale of the Units.
(b)Alternatively, clause 16.2 relevantly provide for “receipt” of the notice and did not provide for service or acknowledgment. It deemed the notice to have been received three business days after the date of posting regardless of when and if receipt actually occurred.
INo unit certificates were required to be tendered.
The plaintiff also made submissions with respect to the calculation of the Purchase Price which I do not need to deal with.
Summary judgment considerations
Save as to the calculation of the Purchase Price, there is no factual or substantial factual issue in dispute in this proceeding. The outcome of the proceeding will, in the main, turn on the construction of the Put Option Deed as varied. Prior to the introduction of the Civil Procedure Act 2010 the governing principles were such that leave to defend would be given if it appears that where there is a real case to be investigated either in fact or law, leave to defend should be given.[1] In the judgment of the Full Court, Lowe J referred to various authorities and cited Lord Esher[2] as follows:
A judge might probably, if he was clear from the documents under the defendant’s own hand that there was no defence, order judgment for the plaintiff; and if the documents showed the defence to be not hopeless, but problematical, he might probably give unconditional leave to defend.[3]
[1]Australian Can Co. Pty Ltd v Levin & Co Pty Ltd [1947] VLR 332 at 334.
[2]Australian Can at 334.
[3]Shurmur v Young [1888] 5 T.L.R. 155.
In another case,[4] Lord Esher said leave to defend should be given where there was a ‘fair dispute as to the meaning of the document’.[5]
[4]Bowes v The Caustic Soda Syndicate [1893] 9 T.L.R. 328.
[5]Australian Can at 334.
The issue in controversy before the Full Court in Australian Can was the proper construction of a clause of a tenancy agreement:
It is not suggested that there are any other facts or documents not now before the Court, which might affect the matter and which might be available on the trial. The final question, therefore, is whether there is any fair dispute that the meaning the plaintiff assigns to this clause is not correct. For this purpose it is proper to observe that there can be no fair dispute where a Court of authority has assigned a definite meaning to language which apart from the decision of such Court might be thought to be capable of bearing another meaning.[6]
[6]Australian Can at 335.
The Full Court went on to construe the meaning of the clause.
By the introduction of Part 4.4 of the Civil Procedure Act, subject to s 64, a court may give summary judgment if it is satisfied that a defence “has no real prospect of success”. Section 64 preserves an overriding discretion to allow a proceeding to go to trial if it is not in the interests of justice to summarily dispose of the same or if the dispute is of such a nature that only a full hearing on the merits is appropriate.
I refer to the judgment of Matthews v SPI Electricity Pty Ltd.[7] At [21] Justice J. Forrest referred to Swain v Hillman[8] where:
Lord Woolf, in considering the English test of “no real prospect of succeeding on the claim or issue”, said that the words do not need any amplification as they speak for themselves and accepted the use of the word “real” directs the Court to “the need to see where whether there is a realistic as opposed to a fanciful prospect of success”.[9]
[7][2011] VSC 168 per J. Forrest J.
[8][2001] 1 AII ER 91.
[9]Matthews at [21].
J. Forrest J then set out the principles which his Honour had identified in the following terms:
1.If a court determines that a particular cause of action is hopeless or bound to fail, then it should be dismissed;
2.A court may also dismiss a claim where it determines that it has no real prospect of success in the sense that such prospects are fanciful rather than realistic;
3.The less complex the issue in a case then the easier it is for a court to take the view that such a proceeding is capable of being determined on summary judgment; and
4.What ever the test to be applied, the power to order summary dismissal of a claim must be exercised with care. This is particularly so where a case may involve issues of contested fact or where its consequences may affect a large number of persons.
Date of service
Clause 11 of the deed referred to in Torrens Re-Development & Research Pty Ltd v Oakworth Developments Pty Ltd[10] contained a provision in the following terms:
[10][2008] NSWSC 1096.
11.1Any notice to be served by one party on the other under this Agreement, must be in writing and shall be deemed to have been duly served if given:
(a)in the case of a letter, on the third day after posting …
(b)…
I…
or such earlier time as receipt may be acknowledged by the receiving parties.[11]
[11]Torrens Re-Development & Research at [4].
At [50] Windeye J said:
The option does allow for a notice by post and thus it would seem the deemed date of service as post was 20 October, although this does not mean receipt could not have been earlier if acknowledged.
It is fair to say that Windeyer J was referring to the proviso to clause 11. A similar proviso does not qualify clause 15. However, clause 15.1(b) contemplates prepaid post without specifying whether it was “ordinary” or “registered” as the case was in this instance.
In State Bank of Victoria v Voss,[12] O’Bryan J considered that a deeming clause for the purpose of service of a demand under a guarantee was sufficient to establish service even if the notice were returned. Clause 15 is a contractual term for the benefit of each of the plaintiff and the defendant. In the absence of knowledge of actual receipt, it enables the plaintiff to calculate time pursuant to clause 5 by reference to the date upon which the notice was sent. The decision in Torrens is not helpful given the form of clause 11 in that case. However, it does raise the issue of what is the meaning of “deemed” used in clause 15 of the Put Option Deed. Did the parties to the deed intend to exclude “actual receipt” when the date of “actual receipt” is communicated to the giver of a notice. Referring to the ordinary meaning of “deem”, there is a distinction between “believe to be” and “judged to be”. The other methods of “giving” referred to in clause 15 deem receipt at the time one would normally expect receipt to have been effected. The provision in clause 15.2(b) permits certainty on the part of the giver of the notice in circumstances where it would not otherwise be able to conveniently and expeditiously establish the time of receipt. However, the plaintiff has chosen to avail itself of “registered” post rather than “ordinary” prepaid post. The registered post method permits a receipt to be given which was provided to the plaintiff. Hence, the plaintiff was in a position to calculate when its obligations to complete expired.
[12]Unreported, Supreme Court of Victoria, O’Bryan J, 17 May 1991, BC 9102938.
Although I lean to the view that a construction of the contractual agreement between the parties provides for a “deemed” receipt to the exclusion of evidence of actual receipt, I cannot characterise the defendant’s submission that the Court is entitled to have regard to the time of actual receipt as being fanciful. I cannot be satisfied that the submission, and thus the defence, does not have “real” prospects of success after full argument with respect to the issue. Further argument is required at trial.
Time of the essence
The plaintiff’s position is that even if the defendant is entitled to rely upon the date of actual receipt, time is not of the essence with respect to the “deemed agreement formed under clause 5.1” (sic). After exercise of the option validly, clause 5.3 deems an agreement for the sale and purchase of the Units. The plaintiff referred to Curtis and Curtis v Tatachilla Wines.[13] Williams J said:
The general principle in relation to contracts of all types may be summarised as follows:
Time will not be considered to be of the essence unless:
(1)the parties expressly stipulate the conditions as to time must be strictly complied with; or
(2)the nature of the subject-matter of the contract or the surrounding circumstances show that time should be considered to be of the essence; or
(3)a party who has been subjected to unreasonable delay gives notice to the party in default making time of the essence.[14]
[13]66 SASR 442.
[14]Curtis at 449.
The deemed binding and enforceable agreement arising from clause 5.1 is specified by the parties to the deed as … must be completed on the Completion Date for Exercise. The defendant has argued that “must” in that context is mandatory rather than permissive. There is nothing in the deed which would exclude that contention from being realistically put. Likewise, clause 24 of the Put Option Deed provides that time is of the essence of this deed. Given that the deemed binding and enforceable agreement does not require any formality or further documentation it is “realistically” arguable that the use of the word “must” and the reference to time of the essence falls within category (1) referred to by Williams J or the circumstances leading to the creation of the deemed binding and enforceable agreement are such that it falls within category (2) as referred to by Williams J.
In those circumstances I cannot determine that the defendant does not have real prospects of successfully arguing that time was of the essence and the time limits were not adhered to.
Accordingly, there will be leave to defend.
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