Capitanio v PPG Developments Pty Ltd - [2018] SASC 54

SUPREME COURT OF SOUTH AUSTRALIA
(Miscellaneous Appeal: Civil)
CAPITANIO v PPG DEVELOPMENTS PTY LTD
[2018] SASC 54
Judgment of The Honourable Justice Lovell
30 April 2018
CONTRACTS - GENERAL CONTRACTUAL PRINCIPLES - DISCHARGE, BREACH AND DEFENCES TO ACTION FOR BREACH - REPUDIATION AND NON-PERFORMANCE - REPUDIATION
CONTRACTS - GENERAL CONTRACTUAL PRINCIPLES - DISCHARGE, BREACH AND DEFENCES TO ACTION FOR BREACH - REPUDIATION AND NON-PERFORMANCE - ELECTION AND RESCISSION
PROCEDURE - SUPREME COURT PROCEDURE - SOUTH AUSTRALIA - PROCEDURE UNDER RULES OF COURT - PLEADINGS
A Magistrate found the appellant, a property owner, liable for breach of contract with the respondent, a building development company, concerning a failed property subdivision project.
Held per Lovell J, dismissing the appeal:
Whether the Magistrate erred in finding the contract contained an implied term – whether the Magistrate erred in finding the contract had been repudiated and that repudiation accepted – whether the Magistrate erred in refusing to consider defence submissions on stamp duty on the basis they were not pleaded as required under Supreme Court Civil Rules 2006 Rule 98(2)(d).
1. The Magistrate did not err in finding the appellant repudiated the contract.
2. The Magistrate did not err in finding the respondent accepted the repudiation.
3. The Magistrate did not err in refusing to consider the appellant’s stamp duty defence.

CAPITANIO v PPG DEVELOPMENTS PTY LTD
[2018] SASC 54
LOVELL J:
Overview

Ms Capitanio (the appellant) approached and engaged PPG Developments (the respondent) to manage and facilitate the subdivision and redevelopment of her property. The redevelopment also included the adjacent property owned by Mr W Aslandidis and Mr E Aslandidis (the second and third defendants).
The completion of the project was subject to the respondent effecting contracts of sale for the two allotments created by the subdivision. The development did not proceed. The respondent claimed that it performed its obligations pursuant to the contract (the Agreement) but that the appellant breached the Agreement. The appellant denied that she was responsible for the failure of the subdivision project and alleged that the respondent failed to meet the milestones referred to in the Agreement.
The appellant’s neighbours, the second and third defendants, were originally also sued by the respondent but the issues were resolved prior to trial.
The respondent successfully sued the appellant in the Magistrates Court for the damages it suffered as a result of the failed land subdivision and development. The appellant has appealed the decision.
The trial
At trial, the plaintiff (the respondent) sought damages for the loss of the profit the plaintiff would have achieved had the subdivision been successful and the newly created allotments sold.
The respondent alleged that the appellant repudiated the contract and also breached an obligation to demolish a shed that straddled the proposed new boundary of the development. The appellant was required to make an application to the local council for demolition of the shed; she made no application.
The appellant denied that she was responsible for the failure of the project. She claimed that the respondent’s failure to meet any of the milestones in the contract was the reason for the failure of the sub-division. She denied that she had repudiated the contract and further that she denied she had an obligation to demolish the shed.
Two issues dominated the evidence at the trial: first, who bore the responsibility to demolish the shed on the appellant’s property and second; whether the appellant had repudiated the contract.
The evidence
Mr Michael Fabbro is the sole director and shareholder of the respondent although he “beneficially” held the shares for Mr Brooker. Mr Fabbro is also the respondent’s solicitor. Mr Brooker is a sales consultant for a building company.
Mr Brooker gave evidence that he was approached by the appellant to assist her in the property development. Mr Brooker attended the properties and assessed the project. He considered that a subdivision could be achieved. He pointed out a shed on her property would straddle the new boundary and would need to be demolished. Eventually a Deed of Agreement was executed. The relevant milestones were:
1 January 2015 Conclude sales contracts
1 March 2015 Development approval
1 April 2015 Settlement.
Mr Brooker said that during the course of the project he kept the appellant up to date with the progress, particularly in relation to proposed contracts for sale. He said the appellant was sceptical about the progress. Mr Brooker said one contract for sale was signed on 20 July 2014 and the second on 26 September 2014.
On 3 February 2015 the local council approved the development. It was a condition of the consent that the shed on the appellant’s property had to be demolished and removed. This required a separate application.
Mr Brooker received a text from the appellant on 25 February 2015. In the context of the issues at trial it was an important communication. It stated:
Shaun, the deed has over-expired and I wish not to continue. Whatever u r doing stop. Thank you from Carmela and Bill.
Mr Brooker telephoned the appellant. She told Mr Brooker “The shed is not coming down. I’m not proceeding”.[1]
[1] Transcript of Magistrates Court Trial page 20.
Mr Brooker discussed the matter with Mr Fabbro. Mr Fabbro, on behalf of the respondent, attended at the property on 12 March 2015 and spoke to the appellant. He asked her whether she was intending to proceed with the contract and “she made it clear she was not”.[2] They discussed the shed and she said she wasn’t removing it. Mr Fabbro said she was agitated and that she expressed disbelief that the contracts had actually been entered into with the subsequent purchasers. He offered to show her the contracts. As he didn’t have the contracts with him that day he arranged to return and show her the contracts.
[2] Transcript of Magistrates Court Trial page 35.
On 24 March 2015 he returned and showed her the contracts. The appellant maintained that she did intend to proceed with the development.
Mr Fabbro indicated that he was considering legal proceedings against her and he left a letter with her to that effect.[3]
[3] Exhibit P1 Tab 30.
The appellant gave evidence that nothing was mentioned about demolishing the shed until February 2015. She alleged that Mr Brooker had failed to communicate with her or keep her up to date about the project. She said that she had, in February 2015, spoken to the council and was told that she only had to demolish part of the shed which she said she had done. [4]
[4] Transcript of Magistrates Court Trial pages 75, 79.
The appellant said that she had complied with her obligations and was not responsible for the collapse of the project.
The Magistrate did not accept the evidence of the appellant. He said that much of her evidence was unconvincing and in parts not credible. The Magistrate specifically referred to the appellant’s evidence about the text of 25 February 2015 which he considered to be nonsensical. That finding was open to the Magistrate. The Magistrate noted that her own counsel acknowledged that there were questions over her credibility. The Magistrate considered that much of her evidence was of “recent invention” and where there was a conflict between the respondent’s witnesses and that of the appellant, he preferred the evidence of Mr Brooker and Mr Fabbro. In effect he rejected the evidence of the appellant.
Such findings were clearly open to the Magistrate. No complaint was made on appeal about the Magistrate’s assessment of the witnesses.
The Magistrate then made the following findings:[5]
[5] PPG Developments v Capitanio (Unreported, Magistrates Court of South Australia, Judgment of Magistrate J Fahey, 5 May 2017) (“Judgment”), [18].
1The appellant was aware throughout she was required to demolish the shed.
2Mr Brooker kept the appellant appraised of the progress towards a sale of the new allotments.
3On 5 August 2014 Mr Brooker informed the appellant by text message he had secured a contract for one land sale.
4On 8 September 2014 Mr Brooker he informed the appellant by text a second contract would likely be signed within a week.
5The appellant was informed by the council that she must lodge an application for demolition of the shed if the agreed development was to proceed.
6The appellant did not lodge an application for removal of the shed.
7On 25 February 2015 the appellant wrote by text message to Mr Brooker that she did not intend to continue with the development.
8Mr Fabbro attended on the appellant and showed to her the contracts for sale and also trust account statements recording payment of deposits.
9The relevant milestone dates for development approval and conclusion of the contracts were met. The appellant was asked to sign a deed which had the effect of extending the completion date and she failed to sign the deed.
10The failure to achieve the final milestone date referred to in the contract resulted from the appellant’s delays and her refusal to remove the shed.
At trial the appellant submitted that the failure to demolish the shed was not a breach of contract; it was only a condition of the development consent and in any event it was the respondent’s obligation to remove it. The appellant accepted that she was under a duty not to prevent demolition of the shed but she was not under a duty to cooperate in bringing about something which the contract did not require her to do.
The appellant also contended that she was labouring under a mistake of fact about whether the contracts were in existence and therefore her refusal was only a “qualified” one. Her refusal was not conduct which was unequivocally inconsistent with the contractual rights of the party. In any event the repudiation was not at that stage accepted and the respondent elected to proceed with the contract and not accept the alleged repudiation.
The Magistrate rejected the submissions of the appellant and found in favour of the respondent, PPG Developments. He ordered that the appellant, Ms Capitanio, pay the sum of $66,988.26 (inclusive of interest). The question of costs was deferred for submissions.
Appeal Grounds
The appellant articulated eight separate grounds of appeal.
The grounds of appeal are:
1The learned magistrate erred in law in finding that it was an implied term of the contract between the parties that the appellant was obliged to demolish the shed on her property.
2The learned magistrate ought to have found that the appellant was not in breach of the contract and was not under or in breach of any duty to co-operate in the fulfilment of the aims of the contract.
3The learned magistrate erred in law in holding that the appellant’s expressed intention not to wish to continue with the contract constituted a repudiation of the contract.
4On the evidence, the learned magistrate ought to have found that the alleged intention was equivocal and qualified by the appellant’s mistaken belief that the contract had expired.
5Further and in the alternative the learned magistrate erred in law in holding that the respondent was entitled to and has accepted the alleged repudiation.
6Further and in the alternative, on the evidence, the learned magistrate ought to have found that the respondent had elected to affirm the contract and so waived any breach arising out of the alleged repudiation and that thereafter the contract lapsed for non-fulfilment of conditions precedent.
7Further and in the alternative, the learned magistrate erred in law in holding that the plaintiff had suffered any loss by reason of any breach on the part of the appellant and further erred in finding that the evidence supported a conclusion that the second and third defendants only lost interest in the project because of the appellant’s alleged decision not to proceed, and the learned magistrate ought to have found that the contract would have lapsed in any event by reason of the intention of the second and third defendants not to extend time for performance of their own contracts with the respondent.
8Further and in the alternative, the learned magistrate erred in law in failing to bring to account in the assessment of damages the stamp duty payable by the respondent pursuant to s.68 of the Stamp Duties Act 1923 and further erred in law in holding that the appellant was precluded from raising the issue as part of the assessment of damages.
The grounds can be distilled into the following propositions:
1.    The contract was not repudiated by the appellant and even if it was the respondent elected to affirm the contract.
2.   There was no implied term requiring the appellant to demolish the shed; and
3.   The respondent did not suffer any loss and in particular did not account for stamp duty as a cost of the development.
Appeal grounds 1 and 2 deal with whether there was an implied duty on the appellant to demolish the shed; appeal grounds 3, 4, 5 and 6 deal with repudiation and election of the contract and appeal grounds 7 and 8 deal with damages.
Repudiation
Repudiation is an ambiguous word and used in various senses.[6] A valid and binding contract may be repudiated if one party renounces his or her liabilities under it - namely if he or she evinces an intention no longer to be bound by the contract or shows that he or she intends to fulfil the contract only in a manner substantially inconsistent with his or her obligations and not in any other way.[7]
[6] Heyman v Darwins Ltd [1942] 1 All ER 337, 350.
[7] Shevill v Builders Licensing Board (1982) 149 CLR 620, 625.
In Koompahtoo Local Aboriginal Land Council & Anor v Sanpine Pty Ltd & Anor Gleeson CJ, Gummow, Heydon and Crennan JJ stated:[8]
The term repudiation is used in different senses. First, it may refer to conduct which evinces an unwillingness or an inability to render substantial performance of the contract. This is sometimes described as conduct of a party which evinces an intention no longer to be bound by the contract or to fulfil it in a manner substantially inconsistent with the party’s obligations. It may be termed renunciation. The test is whether the conduct of one party is such as to convey to a reasonable person, in the situation of the other party, renunciation either of the contract as a whole or of a fundamental obligation under it…. Secondly, it may refer to any breach of contract which justifies termination by the other party.
(Citations omitted, my underlining).
[8] (2007) 233 CLR 115, 135 [44].
Repudiation of a contract is a serious matter and should not be “lightly found or inferred”.[9] A mere “honest misapprehension, especially if open to correction, will not justify a charge of repudiation”.[10] However repudiation is not ascertained by an inquiry into the subjective state of mind of the party in default; it is to be found in the conduct, whether verbal or otherwise, of the party in default which conveys to the other party his or her intention not to perform the contract. The test of repudiation is objective, and whether an inference of repudiation should be drawn is based largely on considerations of fact.
[9] Ross T Smyth & Co v T D Bailey Son & Co [1940] 3 All ER 60, 71.
[10] Ross T Smyth & Co v T D Bailey Son & Co [1940] 3 All ER 60, 71.
The question is would a reasonable person in the shoes of the innocent party clearly infer that the other party would not be bound by the contract or would fulfil it only a manner substantially inconsistent with that party’s obligations and in no other way?[11]
[11] Laurinda Pty Ltd v Capalaba Park Shopping Centre Pty Ltd (1989) 166 CLR 623, 648.
Election to affirm the contract
Election involves the abandonment of a right that is available. Once a party is confronted with a choice between two inconsistent legal rights he or she must, in fairness to the other party, make his or her choice. As Mr Manetta, counsel for the appellant, submitted, a party cannot “approbate and reprobate”. A party is bound to elect as between the inconsistent rights, and having elected, for example, to affirm the Agreement, is thereafter bound by that election.
The words or conduct ordinarily required to constitute an election must be unequivocal in the sense that it is consistent only with the exercise of one of the two sets of rights and inconsistent with exercise of the other.[12] The evidence must establish that the party is confronted with the necessity to make a choice.
[12] Sargent v ASL Developments Ltd (1974) 131 CLR 634, 646.
In Immer (No 145) Pty Ltd v Uniting Church in Australia Property Trust (NSW) Deane, Toohey, Gaudron and McHugh JJ stated:[13]
As Spencer Bower and Turner point out in the passage quoted earlier, at the heart of election is the idea of confrontation which in turn produces the necessity of making a choice. But in a case such as the present one, the choice is not merely one of affirming the agreement; it involved as well the abandonment of the right to rescind. Abandonment is more readily inferred in some circumstances, for instance where the choice arises once and for all …. The point is that where the right to rescind is a continuing one, it is not so readily concluded that the party entitled to rescind has abandoned that right completely as opposed to taking no action to exercise the right at the time in question.
[13] (1993) 182 CLR 26, 42.
Whether a party’s words or conduct amount to an election to continue performance is a question of fact.
Grounds 3, 4, 5 and 6
The appellant submitted that the text of 25 February 2015 was not a repudiation of the contract as, in context, it was equivocal. It was submitted that the text message was based on a mistaken assumption that purchasers had not been found, an assumption that was not corrected until the meeting of 24 March 2015 when Mr Fabbro produced the contracts.
This submission faces difficulties because of the evidence and the findings of the Magistrate. The Magistrate did not accept the evidence of the appellant. There were obvious reasons why the Magistrate took that view. In relation to the text message itself the Magistrate summarised the appellant’s evidence as follows:
In her text message of 25 February 2015 she informed Mr Brooker she did not wish to continue, but when she was cross-examined about this she said she did in fact wish to proceed with the project. She said she had always wanted the subdivision to proceed on the real meaning of her text was that she wanted Mr Brooker to get on with selling the land. That is, when she said she did not want to proceed with the subdivision she actually meant the opposite and when she directed Mr Brooker to stop she in fact meant she wanted him to continue. It was her evidence that when she was informed by Mr Fabbro he intended to issue proceedings she said to him:
“Continue what you’re doing and Bill will sign papers and I’ll be right behind Bill signing papers”
Despite this evidence, the reality was, when she was presented with a deed which purported to extend the date for settlement she failed to sign the document. On this same issue she was asked why she changed her mind and agreed to proceed after she was threatened with litigation, to which she answered she had not changed her mind.
(Transcript references omitted)
Unsurprisingly the Magistrate rejected the appellant’s evidence on this topic and preferred the evidence of Mr Fabbro and Mr Brooker.

Facing this difficulty the appellant sought to rely on the evidence of Mr Fabbro. Mr Fabrro said that at the meeting with the appellant on 12 March 2015 she had raised a “level of disbelief that contracts had actually been entered into with subsequent purchasers”. This evidence is consistent with the submission of the appellant. At this meeting Mr Fabbro offered to, at a later time, show the appellant the two contracts for sale that had been entered into by the prospective purchasers. The deposits had been paid earlier by the other parties. At this meeting Mr Fabbro also raised with the appellant the need for the shed to be removed. The appellant at this meeting said she was not removing the shed and would not be proceeding with the contract.
Mr Fabbro returned to see the appellant on 24 March 2015 and on this occasion showed her the two contracts that had been entered into. He stated that despite seeing the contracts the appellant maintained “she wasn’t going to be continuing with the development. She said that Shaun (Mr Brooker) had let her down, or upset her, or disappointed her in some way”. Mr Fabbro again raised the issue of the demolition of the shed but he was met with the response “I’m not proceeding”.[14] Mr Fabbro also gave evidence that he encouraged her to reconsider her position and he left her with the letter of 24 March 2015.
[14] Transcript of Magistrates Court Trial page 40.
The appellant relied on the evidence of Mr Fabbro in two ways. First that it established that on 12 March 2015 she did in fact have a mistaken belief about the existence of the contracts. The evidence of Mr Fabbro establishes, however, that whatever her state of mind was on 12 March 2015, when shown the contracts on 24 March 2015 she still confirmed that she did not intend to proceed with the development. Further the discussion about the demolition of the shed simply brought the response the appellant was “not proceeding”. There is no basis in fact for the submission of the appellant that as at the meeting of 24 March 2015 she was labouring under a mistake of fact. The appellant had evinced the clear intention not to proceed with the development by her statements and also her refusal to discuss the demolition of the shed irrespective of who had the responsibility for its demolition. It was reasonable for Mr Fabbro and Mr Brooker to infer that the appellant would not be bound by the contract or would fulfil it only in a manner substantially inconsistent with her obligations and in no other way.
Secondly the appellant submitted that the conduct of Mr Fabbro indicated that the repudiation by the appellant had not been accepted. She submitted that the meeting and the letter of 24 March 2015 constituted an election by the respondent to affirm the contract despite the text message and her other comments and conduct. Thus the contract was still on foot up to 1 April 2015 and thereafter lapsed.
Mr Fabbro clearly attended the appellant’s home on 24 March 2015 with the expectation that she would continue to express her intention not to proceed with the development.
It is necessary to examine the terms of the letter in conjunction with the evidence of Mr Fabbro. The letter, written on Mr Fabbro’s legal firm’s letterhead, referred to the Agreement the parties had executed and various terms and conditions of the Agreement. The letter then stated:
We understand that you have failed or otherwise refused to comply with the terms of the Agreement and are instead repudiating the Agreement. In particular, we understand that you are refusing to proceed, cooperate or take steps necessary to effect the sale of the Land to PPG. In addition you have failed to demolish a garage which encroaches on the portion of the Land that has been subdivided (as required by the Development Plan Consent). This will prevent the settlement of the Sub-Divided Properties and prohibit PPG from successfully completing the project, contemplated in the Agreement.
Please note that unless you notify the writer within 24 hours that you are not repudiating the Agreement, steps will be taken pursuant to clause 4.6 to terminate the Agreement without any further notice to you. In addition, please note that PPG will subsequently be required to terminate its agreement with respect to the sale and sub–division of the neighbouring land.
It appears no steps were taken pursuant to clause 4.6 at least not immediately. Clause 4.6 could only relate to an alleged breach of an obligation under the Agreement; it required notice of the breach to be specified and a time period in which would enable the breach to be “rectified”. It is not clear whether the letter itself was meant to be the notice under Clause 4.6. However the contractual right to terminate, whether exercised correctly or not, does not operate to prevent the common law right to terminate.
The letter is not well drafted; arguably it conflates the “intention” not to proceed (renunciation) with a breach of the obligation to demolish, or allow demolition of, the garage (shed). Whatever can be said about the letter it left the reader in no doubt that the respondent was not affirming the contract. To the contrary, termination of the Agreement due to the conduct of the appellant was clearly being threatened.
The position was that by 24 March 2015 the appellant had clearly repudiated (renounced) the contract. There was not an election by the respondent. There was a demand for performance coupled with an intimation that refusal or failure to perform would result in proceedings for damages.
I reject the submission of the appellant that the actions and words of Mr Fabbro, including the letter he delivered, demonstrated an election to affirm the contract. It could not be said that, at that stage, Mr Fabbro faced, or was confronted with, a choice between competing and inconsistent rights. Nor could it be said that his conduct and words unequivocally demonstrated an election to affirm the Agreement as termination was threatened.
The Magistrate found that:
Although the plaintiff wished to proceed with the contract when it was plain the defendant would not cooperate the plaintiff accepted the repudiation and termination by the Plaintiff was manifested by the service of the plaintiffs Form 21A notice.
This finding was not challenged by the appellant. It was clearly open to the Magistrate. The respondent was willing and able to proceed with the contract. The failure of the respondent to immediately accept the repudiation made by the appellant and terminate the contract had the effect of leaving the contract on foot.[15] That flows from a proper construction of clauses 4.5.1 and 4.5.2. It remained in force for the benefit of both parties. I reject the submission that it lapsed as at 1 April 2015. In Gange v Sullivan Taylor, Menzies and Owen JJ observed:[16]
Whilst the effect of a condition must in every case depend upon the language in which it is expressed and a decision upon the meaning of one condition cannot determine the meaning of a different condition, the authorities cited do show a disposition on the part of the courts to treat non-fulfilment of a condition such as that here under consideration as rendering a contract voidable rather than void in order to forestall a party to a contract from gaining some advantage from his own conduct in securing, or contributing to, the non-fulfilment of a condition bringing the contract to an end.
[15] Foran v Wright (1989) 168 CLR 385, 395 (Mason CJ).
[16] (1966) 116 CLR 418, 441; see also Perri v Coolangatta Investments Pty Ltd (1982) 149 CLR 537.
The contract in the circumstances of this case was voidable rather than void. The repudiation by the appellant was ongoing. The Magistrate was correct to find that the termination was manifested by the service on the appellant of the Form 21A notice.
No error of the Magistrate has been demonstrated.
I dismiss grounds 3, 4, 5 and 6 of the appeal.
Grounds 1 and 2
The appellant complained that the Magistrate erred when implying a term into the contract that she was obliged to demolish the shed on her property (ground 1). Further the appellant submits that the Magistrate ought to have found that the appellant was not under, nor in breach of, any duty to co-operate in the fulfilment of the aims of the contract (ground 2).
The Agreement stated relevantly:
5.1 Capitanio will not act in any way that would limit or undermine the success of the Project and/or the benefit to be derived by PPG hereunder;
5.2….
5.3….
5.4….
5.5 Capitanio will promptly provide all necessary information and material, and promptly execute all documents required, and otherwise co-operate fully with PPG, in order to give full effect to the successful completion of the Project as contemplated.
It was common ground that the Agreement was silent on the question of who was responsible for the demolition of the shed. The demolition of the shed was a condition of the grant of development approval and the contract itself did not impose an obligation on any party to demolish the shed. However it is also clear that both parties were aware that the shed had to be demolished for the development to go ahead and on the findings of the Magistrate the appellant was aware that it was her obligation to do so.[17]
[17] Judgment [9].
In that context the Magistrate found:[18]
The defendant understood the shed on her property needed to be demolished in order for the subdivision to proceed and I have found she knew she was responsible for the demolition of the shed. It is true the contract does not contain a clause which required Ms Capitanio to demolish the shed but the contract did require her to co-operate and not to undermine the success of the project. I am satisfied the contract implied a duty for her to remove the shed and I’m satisfied her refusal to demolish the shed amounted to a breach of that implied duty ….
(My underlining)
[18] Judgment [31].
The reasoning of the Magistrate is not entirely clear. The Magistrate acknowledged that there was no express term in the contract requiring the appellant to remove the shed. However he then “implies” a duty into the contract for the appellant to remove the shed but in the context of the express term requiring the appellant to “cooperate and not undermine the project”.
The question arises as to what the Magistrate meant by these findings. Arguably it could be said that the Magistrate has implied a duty on the appellant to remove the shed. If that is correct then I would accept the submission of the appellant that the Magistrate was in error in so doing. The usual conditions necessary for the implication of such a term, where the contract on its face is complete, did not exist.[19] However the Magistrate was, in my view, expressing his satisfaction on the evidence in relation to the understanding of the parties as to who was responsible for the demolition of the shed. His assessment of the evidence led him to the conclusion that the appellant had breached the express duty to “cooperate and not undermine the project”. That is, the background and context were relevant to inform the content of the obligations contained in clause 5.5 of the Agreement.
[19] BP Refinery (Westernport) Pty Ltd v Shire of Hastings (1997) 180 CLR 266.
The subjective understanding of the parties as to their obligations is irrelevant in construing a contract.[20] The Magistrate however was not construing the contract; he was making findings on the content of the express provision to cooperate (clause 5.5). As the respondent submitted a party’s subjective understanding as to what is required of them is relevant and admissible to the question of their mode of performance of the contract.
[20] Codelfa Constructions Pty Ltd v State Rail Authority of NSW (1982) 149 CLR 337; Mount Bruce Mining Pty Ltd v Wright Prospecting Pty Ltd (2015) 256 CLR 104.
The Magistrate preferred the evidence of Mr Brooker and Mr Fabbro over the appellant’s. The appellant told Mr Brooker that “the shed would not be removed”. Mr Fabbro said that on 24 March 2015 any discussion with the appellant about the shed demolition was met with “I’m not proceeding”.[21] It is clear that not only was the appellant not demolishing the shed, she was not permitting the respondent to do so either. That was a breach of clause 5.5. The Magistrate did not accept her evidence in relation to the shed demolition.
[21] Transcript of Magistrates Court Trial page 40.
I dismiss ground 1. I find that the Magistrate did not imply a term into the contract that the appellant had an obligation to demolish the shed.
I dismiss ground 2. In my view the Magistrate was correct in finding that the appellant breached the “duty to cooperate”.
Ground 7
This ground relates to the question of damages but more specifically the contract with the second and third defendants. The appellant submitted that the Magistrate erred in finding that the second and third defendants lost “interest in the project” because of the decision of the appellant not to proceed with the project. Further the appellant submitted that the Magistrate ought to have found that the contract would have lapsed in any event given the decision of the second and third defendants not to extend time for performance. That is, the project was contingent on both deeds proceeding and that as the second and third defendant’s deed lapsed without an extension, the project failed irrespective of any breach or repudiation of the appellant.
Mr Fabbro gave evidence that he spoke to the second defendant Mr W Aslanidis on 31 March 2015 about his intentions in relation to the project. The appellant had told him that the second and third defendants were not proceeding either. Mr Fabbro said he wanted the second and third defendants to state that they would proceed to “send a clear message back to her that there was only one impediment, and that was her attitude to complying with the contract”.[22] Mr Fabbro said that he talked about some incentives to offer to him to try and get him to agree to continue including adding interest to the amount he would receive and a completion date of 30 June 2015. Mr Aslanidis said that the second defendant told him his “inclination was not to proceed” because the appellant wasn’t so it “was all a bit hopeless and he’d lost the desire to proceed.”[23]
[22] Transcript of Magistrates Court Trial page 41.
[23] Transcript of Magistrates Court Trial page 41.
This evidence was not challenged and the second defendant did not give evidence. It is clear that Mr Aslanidis would have proceeded had the appellant not repudiated the contract.
The third defendant Mr E Aslanidis gave evidence about a discussion with Mr Fabbro. Exactly when the discussion occurred is not made clear in the evidence. It may have been on 31 March or it may have been later. Mr Fabbro gave no evidence about this topic nor was he cross examined about it.
Mr Aslanidis’ evidence was that “I couldn’t work out what he (Mr Fabbro) was talking about and he couldn’t explain what he was talking about”.[24] It is not entirely clear what the context of the discussion with the third defendant was but he did say that he wasn’t going ahead unless he could get a deposit.[25] He also wanted a “finalised date”. Extension of time deeds were sent to both parties. No extension for the Aslanidis contract or the appellant’s contract was negotiated. It is clear that the respondent was ready and willing to proceed.
[24] Transcript of Magistrates Court Trial page 156.
[25] Transcript of Magistrates Court Trial page 150.
Against that background the Magistrate found:
1. That the failure to achieve the final milestone date referred to in the contract resulted from the appellant’s delays and her refusal to remove the shed.[26]
2. The second and third defendants lost interest in the project because of the appellant’s decision not to proceed. If the appellant agreed to proceed then the second and third defendants would have continued with the project.[27]
[26] Judgment [18].
[27] Judgment [32].
The appellant contended that the latter finding was against the weight of the evidence. I reject that submission. Mr Fabbro was not seriously challenged on the evidence he gave. The second defendant was not called.
I also reject the submission that the contract “would have lapsed in any event”. Any delay in the 1 April 2015 settlement was due to the respondent’s breach. She is not entitled to benefit from her breach. I have already referred to Gange v Sullivan where Taylor, Menzies and Owen JJ observed that the contract was:[28]
…voidable rather than void in order to forestall a party to a contract from gaining some advantage from his own conduct in securing, or contributing to, the non-fulfilment of a condition bringing the contract to an end.
[28] (1966) 116 CLR 418, 441.
The Magistrate made clear findings on this topic. On the evidence such findings were open.
I dismiss ground 7.
Ground 8
At trial the appellant alleged that the respondent, when putting forward its claim for damages, failed to bring to account stamp duty that would have allegedly been payable had the development proceeded. The respondent argued at trial that the issue “had not been pleaded” as required and that therefore the Magistrate should not entertain the argument. The appellant, at trial and on appeal, argued that she was not required to plead the issue, as damages generally had been denied and that was sufficient to raise the issue.
The issue relating to the pleadings has a complicated but relevant history.
The trial commenced on 9 August 2015. The appellant completed her evidence on the 10 August 2015. A witness that she intended to call left the precincts of the Court, the appellant sought an adjournment of the trial. The adjournment was granted with the appellant ordered to pay the costs “thrown away”. At this time, despite the adjournment, no issue was raised by the appellant about pleadings. The trial was relisted to recommence on 15 September 2015.
On 15 September the appellant was represented by new counsel, Mr Manetta. Counsel applied to amend the appellant’s defence to plead a “special defence” under Supreme Court Civil Rule[29] (SCR) 100.
[29] Supreme Court Civil Rules 2006 (SA).
The appellant submitted that she “did not know” that it was part of the “construct” of the transaction that the respondent would not pay stamp duty until Mr Fabbro gave evidence on the topic.[30] For reasons explained later that is not correct. It is relevant to consider Mr Fabbro’s evidence on that topic.
[30] Transcript of Magistrates Court Trial page 126.
The topic of stamp duty arose at trial in the context of a discussion Mr Fabbro had with Mr Aslanidis after the appellant had repudiated the contract. Mr Fabbro was discussing the matter with him to try “and get him to continue on” with the agreement. Mr Aslanidis said that if Mr Fabbro gave him a cheque for $530,000 right away he would “take it”. Mr Fabbro said that he couldn’t consider that as it “would trigger off stamp duty”. Mr Fabbro was asked in evidence in chief about why the stamp duty would be an issue if the respondent settled separately with Mr Aslanidis. He said: [31]
Duty is payable on a conveyance, so if I had of had to draw a cheque for Mr Aslanidis, that would have required a transfer to be undertaken. There would have been a double transfer in a sense. A transfer to PPG, and then a transfer through to the ultimate purchases. The contracts had been specifically drafted in a way such that the contract with the defendants allowed for PPG to nominate them, or somebody else, to pay them the money essentially, and the contracts with the Hyde’s and Ly’s allowed for a nomination on the part of the vendor, so the vendor would nominate the defendants to settle with the purchaser, and PPG would then direct the purchasers, the Hyde’s or the Ly’s, to make their payments to the defendants, so there would be a direct transfer only from the defendants to the subsequent purchasers, not PPG to avoid a double transfer.
[31] Transcript of Magistrates Court Trial page 42.

The respondent’s position on stamp duty was raised in evidence but in the context of explaining why the respondent could not deal directly with Mr Aslanidis. Mr Fabbro was not challenged on this explanation. No alternative explanation was put to him. The only question asked by counsel for the appellant was for Mr Fabbro to inform the court what the stamp duty consequence would be if the property was transferred “into the name of PPG”. The topic of the operation of s 68 of the Stamp Duties Act 1923 was not raised.
Prior to the commencement of the trial the parties had discussed, by email, the issue of stamp duty. The appellant asserted that stamp duty should be brought to account when assessing the profit of the development. The respondent replied by email of 8 August 2016 that her (the appellant’s) assertions about quantum were “flawed” and that stamp duty was not payable. The explanation given, in essence, was the same as that given by Mr Fabbro in evidence.[32] It could not be said, as asserted by the appellant, that she did not know the respondent’s position on the stamp duty issue until Mr Fabbro gave evidence. It had been made clear before the trial proceeded.
[32] Exhibit ‘MAF2’ to the Affidavit of Michael Allan Fabbro dated 6 October 2015.
The application on 15 September 2016 sought to raise a new issue namely that s 70 of the Stamp Duties Act applied to this transaction and its operation would lead to the contract, the subject of the action, being held void and therefore unenforceable. The amendment if allowed, and assuming the argument was made good, would have defeated the respondent’s claim. It was common ground that this issue raised a “special defence”.
The amendment was vigorously opposed by the respondent. The Magistrate heard argument on the application. The argument included submissions on the operation of s 68 of the Stamp Duties Act.[33]
[33] Transcript of Magistrates Court Trial page 124 ff.
Mr Roberts SC, counsel for the respondent submitted, during the application to amend the defence, that:[34]
Specifically nowhere will your Honour find any pleading as related to stamp duty whether in the nature of the s 70 case or more specifically as a purported reduction of the plaintiff’s claim as to loss and damage. The plaintiff at paragraph 20 of the statement of claim identified the costs that it would have incurred in the development that are to be applied off what would otherwise be the gross revenues derived from the development… Now nowhere is there in answer to that a pleading that there has an understatement of those costs because stamp duty would have been required to be paid. That’s despite what Mr Whatson was contending back on 10 March 2016 where he was raising the contention that there would have been stamp duty payable.
[34] Transcript of Magistrates Court Trial page 132 ff.
He later submitted:
Finally as relates to the questions of both assessment and damage, that requires an amendment that hasn’t been propagated and ought not to be in light of the duty considerations that we’d need to address your Honour on and aren’t here to address your Honour on because back in March Mr Watson thought it the point that in July he didn’t want to bring it forward.
Mr Roberts SC clearly identified, on 15 September 2016, that he considered it necessary for the appellant to plead both the s 70 point and the more general stamp duty issue. He submitted that an amendment of the pleadings was required before the appellant should be allowed to ventilate either issue.
Mr Manetta accepted that the “s 70 issue” required an amendment to the pleadings and in particular it had to comply with the requirements of SCR 100. Mr Manetta, in relation to the general issue that stamp duty was payable, submitted that the pleadings, as they then stood, were sufficient. Mr Manetta submitted that in the pleadings the appellant had denied that the respondent was entitled to damages and that a denial was all that was required. The Magistrate however asked him whether he wished to amend the pleadings in relation to the more general issue. Mr Manetta submitted that he did not need to do so. No application was then before the Magistrate to amend the pleadings other than to enable the “special defence” related to s 70 of the Stamp Duties Act to be pleaded.
The Magistrate allowed the application to amend the pleadings to include the s 70 issue. The respondent appealed that decision.
On appeal, before Doyle J,[35] both parties maintained their positions about the more general question in relation to stamp duty. However the only issue before Doyle J related to the “special defence” requirements of the s 70 issue. Doyle J allowed the appeal. When the trial resumed after the appeal it was accepted that the “special defence” could not be maintained.
[35] PPG Developments Pty Ltd v Capitanio (2016) 126 SASR 307.
Thus, when the Magistrate heard the final submissions, the appellant had not and could not, due to the order made by Doyle J, amend her pleadings to raise the defence under s 70 of the Stamp Duties Act. However the alleged failure by the respondent to account generally for stamp duty, as alleged by the appellant, remained an issue before the Magistrate.
Mr Roberts SC maintained in final submissions that the general issue about stamp duty had not been pleaded and it could therefore not be raised. Having made that point Mr Roberts SC made some submissions about the issue but in the context of demonstrating to the Magistrate the difficulty in dealing with an issue that was not pleaded. Mr Manetta in his submissions maintained that it was not a matter that the appellant was required to plead. Thus he submitted the Magistrate could determine the matter and further submitted that the issue should be decided in the appellant’s favour as the respondent had not met the onus of proof.
Mr Manetta submitted that:[36]
The onus is steadily on the plaintiff to prove a profit and approve the profit which is their damages – to prove the profit, they have to prove the income minus the expenses. It’s not for them to simply agree we were to pay the profit of $65,000 and for us to guess where that profit, where it might come from and what expenses might have been involved and to throw up negative items such as expenses that they haven’t thought about. So that’s not a pleading issue at all if your Honour pleases.
[36] Transcript of Magistrates Court Trial page 222.
It is common ground that at no time before judgment did the appellant seek to amend the defence to include this issue.
The Magistrate found:[37]
As for the defendant’s submissions in relation to stamp duty, this is not a defence which was pleaded by the defendant. True it is the defendant sought to amend its pleading which application was eventually refused by the Supreme Court. The defence is not pleaded and there was no evidence to confirm the defendant’s submission and so I do not intend to address the argument.
[37] Judgment [32].
However these remarks need to be read in the context of his judgment as a whole. Earlier the Magistrate had stated:[38]
The second of these defences relates to stamp duty, in particular s 68 of the Stamp Duties Act. It is alleged the plaintiff failed to bring to account the stamp duty and other expenses payable by the plaintiff in respect of the transaction. It is argued those expenses were payable by the plaintiff not by the ultimate purchases and the expenses would swallow up nearly all of the alleged profit. It follows there would be no loss suffered by the plaintiff.
[38] Judgment [24].
On appeal the appellant submitted that the Magistrate had conflated the argument about accounting for stamp duty in the ordinary course of assessing loss with the eventually unsuccessful application by the appellant to amend the pleadings to argue s 70 of the Stamp Duties Act. I reject that submission. When read in context the Magistrate has, in my view, refused to consider the question of the applicability of s 68 of the Stamp Duties Act as it was “not pleaded”. Self-evidently, implicit in the Magistrate’s finding is that he considered that the appellant had to plead s 68 of the Stamp Duties Act.
The appellant alleged that the Magistrate erred in law in failing to consider the question of the stamp duty payable.
Was the appellant required to plead s 68 of the Stamp Duties Act?
The starting point is SCR 98 which states relevantly:
General rules of pleading
(1)     A pleading—
(a)must be in an approved form; and
(b)     must—
(i)if the party is represented by a solicitor whose name appears on the Court's record as the solicitor representing the party—be endorsed with a certificate by the solicitor certifying that the pleading has been prepared in accordance with the party's instructions and conforms with these rules; or
(ii)    if the party is not represented by a solicitor—be signed by the party.
(2)     A pleading—
(a)     must be as brief as the nature of the case allows; and
(b)must state only material facts and matters relied on and not the evidence or arguments by which the facts and matters are to be proved; and
(c)must not contain matter that is—
(i) scandalous; or
(ii)evasive or ambiguous; or
(iii)frivolous or vexatious; or
(iv)an abuse of the process of the Court in some other respect.
(d)must plead such facts and matters as give fair notice of the party’s case at trial.
(My underlining).
A defence is a pleading for the purpose of SCR 98. Further requirements for the defence are found in SCR 100 which relevantly states:
Requirements for defence
(1)A defence—
(a)must raise any preliminary issue; and
(b)must indicate which (if any) allegations in the plaintiff's statement of claim the defendant admits or does not propose to challenge at the trial; and
(c)must specifically raise any special defence on which the defendant relies; and
(d)must state the basis of each special defence on which the defendant relies (including reference to any statutory provision on which the defendant relies); and
(e)must contain a short statement of the material facts and matters on which each special defence is based.
(2) …
(3)A special defence is a defence other than a denial of facts and matters alleged by the plaintiff, or a denial that facts and matters alleged by the plaintiff give rise to a cause of action.
Examples—
1An assertion that the plaintiff is estopped from maintaining the claim.
2An assertion that the plaintiff's claim is statute barred.

The appellant claimed that s 68 of the Stamp Duties Act operated such that stamp duty would have reduced the profit from the sub-division. Thus the loss and damage suffered by the respondent would have been less. The respondent submitted that such a claim amounted to a “special defence” and therefore the pleadings had to meet the requirements of SCR 100. In any event, it was submitted, the appellant was required to comply with SCR 98 and give fair notice of her case to be conducted at trial.
The respondent submitted that whenever an issue arises on the defence that is not otherwise to be positively proved by a plaintiff as part of its onus, SCR 100 requires it to be pleaded as a “special defence”. The appellant submitted that the onus in relation to damages remained at all time on the plaintiff. Any issue related to damages did not need to be pleaded as a “special defence”. Further the appellant submitted that no amendment to the pleadings was required pursuant to SCR 98 to raise the general issue of stamp duty.
Supreme Court Rule 98 deals with the general requirements, and SCR 100 with the specific requirement of a “special defence”. It is a minimum requirement that a defence plead such facts and matters as give fair notice of the defendant’s case at trial. The requirements of SCR 100 need to be considered against the general requirements contained in SCR 98. For the purpose of this case SCR 100 is only engaged if the issue of stamp duty generally would amount to a “special defence”. Often a “special defence” is one where a defendant will bear the onus of proof. Here the burden of proof remained, at all times on the question of damages, on the respondent.
Whether the issue required a pleading under SCR 100 or not, the appellant was at least was required to comply with SCR 98. She had to, at least, give fair notice of her case at trial. This required the appellant to plead the “facts and matters” putting the respondent on notice of the issue for the purpose of the trial. She did not do so. A simple denial of “damages” did not put the respondent on notice of the issue at trial.
I did not hear full argument on the question of what amounts to a “special defence” for the purpose of SCR 100. Given my finding that there was a breach of SCR 98 it is not strictly necessary for me to decide whether there was also a breach of SCR 100. However I have doubts about whether the issue here, as articulated by the appellant, would require compliance with SCR 100.
Consequences of not complying with SCR 98
The objects of the rules are contained in SCR 3 which relevantly states:
The objects of these Rules are—
(a)to establish orderly procedures for the just resolution of civil disputes; and
(b)to facilitate and encourage the resolution of civil disputes by agreement between the parties; and
(c)to avoid all unnecessary delay in the resolution of civil disputes; and
(d)to promote efficiency in dispute resolution so far as that object is consistent with the paramount claims of justice; and
(e)to minimise the cost of civil litigation to the litigants and to the State.

It is important to bear in mind the objects of the rules when considering the effect of SCR 103 which relevantly states:
Effect of pleadings
(1)A party must not, without the Court's permission—
(a)introduce at the trial of an action evidence of facts that should have been, but were not, alleged in the party's pleadings; or
(b)raise at the trial of an action issues of which notice should have been, but was not, given in the party's pleadings.
(2)However—
(a)the Court's permission is not required to introduce evidence, or to raise issues, relevant to credit; and
(b)the Court will not exercise its discretion to exclude relevant evidence, or to prevent relevant issues from being raised, unless satisfied that—
(i)the default was deliberate; or
(ii)the default was in the circumstances so prejudicial or embarrassing to another party that permission should be refused in the interests of the proper administration of justice.
(3)In deciding whether its permission is required under subrule (1) and, if so, how to exercise its discretion to grant or refuse that permission, the Court should—
(a)avoid captious or unduly technical interpretation of pleadings; and
(b)have regard to material that was available to the parties apart from the pleadings; and
(c)seek to achieve substantial justice between the parties.
(My underlining).
Earlier in these reasons I set out the history of the pleadings issues. While the issue of stamp duty was discussed by the parties prior to trial, at trial there was no challenge to Mr Fabbro’s evidence about the stamp duty issue. The issue was not pleaded and then not raised in cross examination. The respondent was entitled to complete its case on the assumption that stamp duty was not an issue at trial.
The s 68 “issue” was not straightforward. It involved the operation of the particular provision of the Stamp Duties Act. In my view it is precisely the type of issue SCR 98 is aimed at; fair notice of the issues at trial, a bare denial with respect to damages was not, in this matter, sufficient even though the respondent bore the onus of proof on the same. The pleading rules are designed to prevent this type of issue arising.
If the appellant wanted to raise the matter as a trial issue she was required at least to put the issue squarely to Mr Fabbro. Objection by the respondent may have been made at that time on the basis that the issue was not pleaded. The Magistrate would then have ruled on the issue. As mentioned earlier the fact that the issue had, prior to trial, been raised between the parties, would have been relevant to any application to amend. The application would have been made before the respondent closed its case.
Discussion
The application to amend the defence to include the “special defence” issue pursuant to s 70 of the Stamp Duties Act occurred after the respondent had completed its case. At that time the failure of the appellant to plead the general issue of stamp duty was raised by the respondent. Despite being put on notice of the respondent’s position, the appellant chose not to apply to amend the defence. The appellant made the decision that such an application was not required. Given that there was an application to amend the defence anyway it is unfortunate that a further application was not made.
During the course of final addresses the respondent again made the submission that the general issue of stamp duty did not arise as it was not pleaded.
The respondent made submissions about the point but in the context of explaining to the Magistrate why the matter needed to be pleaded. In response the appellant submitted that it was “not a pleading issue” and the matter therefore had to be decided.
The difficulty facing the appellant is that the issue was not pleaded nor raised during the respondent’s case. This is not a case where evidence was given at trial on an issue that was not pleaded without objection being taken. A party does not fail by being refused leave to amend or through failure formally to apply for amendment where the evidence has disclosed a case in the cause of action fit to be determined by the tribunal of fact.[39]
[39] Leotta v Public Transport Commission (NSW) (1976) 9 ALR 437, 446.
As Doyle J observed in Sunlight Nominees v Zotti and Zotti:[40]
There is no doubt that pleadings play an important role. They define the issues in the case, and in so doing provide the other party with notice of the case they have to meet. However, the pleadings are ultimately a means to an end. If the parties, in fighting their legal battles, choose to depart from the pleadings by shifting or expanding the battleground, then the parties will not usually be held to their pleadings. While prudence suggests that the parties should seek to amend their pleadings to reflect movements in their case, that is not always practical and does not always happen. Given the importance of the way in which the trial has been conducted, a failure to amend will not always be fatal to a party obtaining relief justified by the evidence at trial.
[40] [2017] SASC 176, [116].
Here the only evidence given related to an explanation as to a conversation Mr Fabbro had with Mr Aslanidis. The issue was not pleaded. The respondent did not address the issue in its case. The appellant submitted that the respondent was “on notice” of the issue because of the pre-trial discussions. The issue was raised pre-trial but not pursued at trial nor raised until almost all the evidence was completed. Counsel made a decision not to seek to amend the pleadings. I am unable to say that there is no or very little prejudice to the respondent in the issue being raised in this way. It may have called further evidence and/or made further submissions. The appellant is bound by the way that she ran her case at trial.
It was open to the Magistrate to take the view that, in the circumstances of this case, the issue should have been pleaded. No error has been shown. I would dismiss this ground of appeal. Even if that decision involved the exercise of a discretion no error has been demonstrated.[41]
[41] House v The King (1936) 55 CLR 499.
Order

I dismiss the appeal.