Beauchum Pty Ltd (ACN 063 095 689) as Trustee for Taylor Thomas Trust v Garland 204 Pty Ltd (ACN 122 766 956) as Trustee of the Garland 204 Lofts Unit Trust

[2013] NSWDC 156

District Court

New South Wales

Medium Neutral Citation:	Beauchum Pty Ltd (ACN 063 095 689) as Trustee for Taylor Thomas Trust v Garland 204 Pty Ltd (ACN 122 766 956) as Trustee of the Garland 204 Lofts Unit Trust [2013] NSWDC 156
Hearing dates:	1 August 2013
Decision date:	16 August 2013
Before:	Judge MJ Finnane QC
Decision:	See paragraph [40]
Catchwords:	CIVIL - contract law - loan agreement - liability - whether "occupancy" is the same as "occupation" in context of proceedings - drafting of agreement - ambiguity
Cases Cited:	Codelfa v State Rail Authority of New South Wales (1981-2) 149 CLR 337 Western Export services Inc and others v Jireh International Proprietary Limited [2011] HCA 45 Australian Broadcasting Commission v Australasian Performing Rights Association Ltd (1997) 129 CLR 99
Texts Cited:	Cheshire and Fifoot 10th Australian edition Macquarie Dictionary 3rd edition The Oxford Dictionary of English 2nd edition
Category:	Principal judgment
Parties:	Beauchum Pty Ltd (ACN 063 095 689) as Trustee for Taylor Thomas Trust (Plaintiff) Garland 204 Pty Ltd (ACN 122 766 956) as Trustee of the Garland 204 Lofts Unit Trust (Defendant)
Representation:	J Doyle (Plaintiff) R Potter (Defendant) Jordan Djunda Lawyers (Plaintiff) McArdle Legal (Defendant)
File Number(s):	2012/361151

Judgment

1. Jenny Aiken and her husband, Peter are the directors of the plaintiff. Mr Aiken is a builder, and his wife is a physiotherapist.

1. The directors of the defendant are Janet Pennington and Phillip Bartlett.

1. These four people and another man, John Cardassilaris were involved in a development known as the Victoria Park development.

1. On 21st May 2007, The Council of the City of Sydney gave development consent to a Development Application (DA) no D/2006/1921.

1. The development consent was expressed in the following terms:

"Approved Development Construction of a 3 storey mixed use building including 30 residential units and 1000 sqm of ground level retail floor space and creation of a publicly accessible 'piazza' area and one level of basement car parking accessed from Gadigal Avenue"

1. The consent was to lapse on 21st May 2009.

1. Condition 1 in Schedule 1A was entitled

"APPROVED DEVELOPMENT" and gave approval to 10 separate items, each of which was identified by a plan. Each of these items referred to works in the residential units.

1. Condition 4 in Schedule 1A Conditions of Consent was in the following terms:

"(4) SEPARATE DA REQUIRED FOR RETAIL TENANCIES

A separate development application for the use and fit out of each of the ground level retail tenancies and the public piazza area must be submitted for the approval of the Council prior to the use of these areas"

1. At the date of the development consent, the units referred to in the DA had been built. The retail tenancies had not been built and the access to the car park had not been finished. One of the problems with the car park was access since it required work to be carried out on adjacent land.

1. Conditions 28 -44 in Schedule 1A are concerned with the provision of car parking, the number of spaces for residential, retail, visitors and even bicycles. Condition 33 was in these terms:

" SEALING OF CAR PARK

The surface of the car park must be sealed to allow safe and clear operation of the car park, appropriately line-marked for spaces and to aid traffic circulation, prior to an Occupation Certificate being issued." ( See also conditions 35 and 36).

1. Condition 92 of Schedule 1C is in the following terms:

"92 OCCUPATION CERTIFICATE TO BE SUBMITTED

An Occupation Certificate must be obtained from the Principal Certifying Authority and a copy submitted to Council prior to commencement of occupation or use of the whole or any part of a new building, an altered portion of, or an extension to an existing building."

1. Around May 2007, (according to the affidavit of Mrs Aiken of 27th March 2013) two separate unit trusts were established, the first being the Garland 204 Lofts Unit Trust ( the Lofts trust) and the second being the Garland 204 Retail Unit Trust ( the Retail Trust). The defendant was the trustee of the Lofts Trust and an associated company of the defendant was the trustee of the Retail Trust.

1. On 25th July 2008, Mr and Mrs Aiken signed an agreement on behalf of the plaintiff and Mrs Pennington signed this agreement on behalf of the defendant. I am satisfied that the agreement was drafted by lawyers acting for the defendant. Mr and Mrs Aiken signed a document presented to them, but did not have any of their own legal advice. A copy of the agreement is annexed to this judgment.

1. The agreement has the following important matters in it.:

(1)   Loan of $100,000 unsecured

(2)   Interest rate of 20% per annum

(3)   Interest to be capitalised and to become payable "on the same date that the loan amount is due."(cl 2.2)

(4)   "The Borrower may use the Loan Amount for any purpose in the ordinary course of its business/activities, including, without limiting the foregoing, establishment, development and project management costs and expenses."(1.2)

(5)   There was provision for the offsetting of the loan amount against moneys owing by the lender for units in another two trusts. However, those units were not issued and this provision is irrelevant to the current dispute.

(6)   The loan amount was to become due and payable on or before " the date which is 3 months after Practical Completion (defined as achievement of occupancy certificate under City of Sydney DA D/2006/1921" upon demand by the lender for repayment in full.

1. On 13th July 2009, an interim occupation certificate was issued permitting occupation of the 30 units and the associated basement car parking.

1. Frequent claims for repayment were made after 13th July 2009. No payment has been made to date.

1. The plaintiff claims its entitlement to the principal sum plus interest, including capitalised interest because 3 months has expired after the issue of the interim occupation certificate. The Defendant admits a liability to repay the sum borrowed plus interest, but says that the amount has not yet become due and payable because there has been no issue of an Occupation Certificate for the whole site.

1. At the present time, the area under the units is completely empty. There are no commercial units and none in the process of being built. The defendant is attempting to arrange finance to enable the building of the commercial units and has commitments in principle from a number of businesses that have agreed to lease the commercial units when they are built.

Is occupancy the same as occupation?

1. In the Macquarie Dictionary 3rd edition defines occupancy as follows:

"occupancy 1. The fact or condition of being an occupant. 2. The act of taking possession.3. actual possession.4. the term during which one is an occupant. 5 Also, occupation. The exercise of dominion over a thing which has no owner so as to become the legal owner. 6. The rate of use, as of a telephone system. 7. The use to which a building is put: zoned for commercial occupancy"

1. "occupation" is defined, inter alia as :

"possession of a place, occupancy, the act of occupying, the state of being occupied"

1. The Oxford Dictionary of English 2nd edition defines occupancy as:

"the action or fact of occupying a place".

1. Occupation is defined, inter alia, as:

"The action of entering and taking control of a building; the action of living in or using a building or other place."

1. In my opinion, "occupancy" and "occupation" in the context of these facts have the same meaning.

1. Both parties agree.

What then is the dispute between the parties?

1. The Plaintiff says that issue of the interim occupation certificate on 13th July 2009 satisfies the requirement in the agreement for the issue of an "occupancy certificate" the

1. In my opinion, "occupancy certificate" in the agreement means "occupation certificate", a term that is used without definition in the DA to which reference has already been made.

1. An occupation certificate issued. In my opinion, that is what the agreement referred to when it used the words "occupancy certificate".

1. In my opinion, the contract was perfectly clear. The money was repayable 3 months after the issue of the "occupancy certificate". That certificate did issue and the money plus interest has been payable from the 13th December 2009.

1. The defendant has argued that there is no ambiguity, but says that "occupancy certificate" refers not to the occupation certificate issued on 13th July 2009 to permit occupation of the home units known as the Lofts Apartments, but to an occupation certificate for the whole of the building. If this submission were correct, the loan would not be repayable for some time yet, since the retail areas are not constructed and will be constructed, according to the evidence of Mr Bartlett only when finance has been approved and the necessary building work carried out.

1. The plaintiff has argued that there is no ambiguity and that "occupancy certificate" means the interim occupation certificate issued on 13th December 2009. However, if there is ambiguity then evidence of the surrounding circumstances identify "occupancy certificate" as meaning the occupation certificate issued on 13th July 2009.

1. In Codelfa v State Rail Authority of New South Wales (1981-2) 149 CLR 337 (at 352) Mason J said:

"21. In D.T.R. Nominees Pty. Ltd. v. Mona Homes Pty. Ltd. [1978] HCA 12; (1978) 138 CLR 423, at p 429, Stephen and Jacobs JJ. and I, following Prenn, in a joint judgment said:

"A court may admit evidence of surrounding circumstances in the form of 'mutually known facts' 'to identify the meaning of a descriptive term' and it may admit evidence of the 'genesis' and objectively the 'aim' of a transaction to show that the attribution of a strict legal meaning would 'make the transaction futile' . . . " (at 351)

And in Secured Income Real Estate (Australia) Ltd. v. St. Martins Investments Pty. Ltd. [1979] HCA 51; [1979] HCA 51; (1979) 144 CLR 596, at pp 605-606 in a judgment concurred in by other members of the Court I not only accepted and applied the statement in the majority judgment in B.P. Refinery [1977] HCA 40; (1977) 52 ALJR 20 of the conditions necessary to support the implication of a term, but I also accepted and applied Lord Wilberforce's different treatment, for the purpose of construing a contract, of evidence of surrounding circumstances on the one hand and of the parties' intentions on the other hand. Having considered the topic in more detail on this occasion I see no reason to qualify what I then said. (at p352)

The true rule is that evidence of surrounding circumstances is admissible to assist in the interpretation of the contract if the language is ambiguous or susceptible of more than one meaning. But it is not admissible to contradict the language of the contract when it has a plain meaning. Generally speaking facts existing when the contract was made will not be receivable as part of the surrounding circumstances as an aid to construction, unless they were known to both parties, although, as we have seen, if the facts are notorious knowledge of them will be presumed. (at p352)

It is here that a difficulty arises with respect to the evidence of prior negotiations. Obviously the prior negotiations will tend to establish objective background facts which were known to both parties and the subject matter of the contract. To the extent to which they have this tendency they are admissible. But in so far as they consist of statements and actions of the parties which are reflective of their actual intentions and expectations they are not receivable. The point is that such statements and actions reveal the terms of the contract which the parties intended or hoped to make. They are superseded by, and merged in, the contract itself. The object of the parol evidence rule is to exclude them, the prior oral agreement of the parties being inadmissible in aid of construction, though admissible in an action for rectification. (at p352)

Consequently when the issue is which of two or more possible meanings is to be given to a contractual provision we look, not to the actual intentions, aspirations or expectations of the parties before or at the time of the contract, except in so far as they are expressed in the contract, but to the objective framework of facts within which the contract came into existence, and to the parties' presumed intention in this setting. We do not take into account the actual intentions of the parties and for the very good reason that an investigation of those matters would not only be time consuming but it would also be unrewarding as it would tend to give too much weight to these factors at the expense of the actual language of the written contract. (at p352)"

1. In Western export services Inc and others v Jireh International proprietary Limited [2011] HCA 45, the High Court of Australia in refusing special leave made it plain (see paragraphs 3-5) that the Courts of Australia were to follow this construction.

1. In the present case, in my opinion, the objective framework of facts within which the contract came into existence included the fact that only the units had been erected and it was only the units that could in the context of the discussions before this agreement have been intended to be occupied.

1. Furthermore, the loan was made to the trustee of the trust that owned the home units. That is specifically mentioned in the agreement. In my opinion, the presumed intention was to enable the defendant as the trustee for the home unit trust to use those funds for the purposes of that trust.

1. The interest rate of 20% was unusually high and the agreement provided for its capitalisation. In my opinion the presumed intention of the parties was that the funds be used for the purpose of getting occupation certificate granted to enable the units to be occupied and thus to lessen the mortgage liabilities of the defendant as soon as possible. To adopt the construction suggested by the defendant would be to impute to the parties and intention to make a loan that might not be discharged for many years since the retail units had not been built and even as at today they still have not been built.

1. Courts must attempt to give commercial contracts a sensible interpretation that would accord with commercial reality. In my opinion the defendant's construction would not accord with commercial reality.

1. The agreement was drawn up by the lawyers retained by the defendant. If the meaning of 'occupancy certificate is ambiguous, then it should be construed contra proferentem and on that basis, the construction contended for by the plaintiff must be preferred (See Cheshire and Fifoot 10th Australian edition para 10.33 and the cases cited in footnote 302; para 10.74 and the footnotes therein).

1. Another principle of importance in construing a commercial contract is to prefer the construction, if two are possible, that will avoid consequences that "appear capricious, unreasonable, inconvenient or unjust" (See Australian Broadcasting Commission v Australasian Performing Rights Association Ltd (1997) 129 CLR 99-109 per Gibbs J).

1. The words of the agreement in my opinion are perfectly clear-the loan was repayable three months after the granting of the occupation certificate. Such a certificate was obtained, the home units were occupied and in my opinion the defendant is obliged to pay the sum claimed by the plaintiff plus interest.

1. There will be judgment for the plaintiff in the sum claimed.

1. I will hear the parties on costs.

**********

Decision last updated: 27 August 2013