Davis Stack Capital Pty Ltd v Raj & Jai (Mudgee) Pty Ltd

[2025] NSWSC 599

Supreme Court

New South Wales

Medium Neutral Citation:

Davis Stack Capital Pty Ltd v Raj & Jai (Mudgee) Pty Ltd [2025] NSWSC 599

Hearing dates:

26-27 May 2025; further submissions 28 May 2025 and 3 June 2025

Date of orders:

13 June 2025

Decision date:

13 June 2025

Jurisdiction:

Equity - Commercial List

Before:

Peden J

Decision:

At [101]

Catchwords:

CONTRACTS — Remedies — Specific performance — Whether buyer ought be ordered to specifically perform unit sale and purchase agreement — Whether buyer’s parent ought be ordered to specifically perform guarantee and/or indemnity

GUARANTEE AND INDEMNITY — Actions to enforce guarantee — Guarantors liability — Whether guarantee on proper construction is “see to it” or primary obligation to pay money — Whether indemnity requiring buyer’s parent to pay certain amounts on demand requires payment of balance of purchase price where completion has not occurred

CIVIL PROCEDURE — Discontinuance of proceedings — Leave of court — Whether cross-claimants ought be granted leave to discontinue claims for declaratory relief at the commencement of hearing — Where claims raised by cross-claim said to be hypothetical

Legislation Cited:

Uniform Civil Procedure Rules 2005 (NSW) r 12.1(1)(b)

Cases Cited:

AFC Holdings Pty Ltd v Shiprock Holdings Pty Ltd [2010] NSWSC 985

Angas Securities Ltd v Small Business Consortium Lloyds Consortium No. 9056 [2016] NSWCA 182

Ankar Pty Ltd v National Westminster Finance (Australia) Ltd (1987) 162 CLR 549

Australian Casualty Co Ltd v Federico (1986) 160 CLR 513

Beerens v Bluescope Distribution Pty Ltd (2012) 39 VR 1

Bofinger v Kingsway Group Ltd (2009) 239 CLR 269

Canty v PaperlinX Australia Pty Ltd [2014] NSWCA 309

Charter Reinsurance Co Ltd v Fagan [1997] AC 313

Cherry v Steele-Park (2017) 96 NSWLR 548

Coles v Wood [1981] 1 NSWLR 723

Ecosse Property Holdings Pty Ltd v Gee Dee Nominees Pty Ltd (2017) 261 CLR 544

Erratt v Grills [2015] NSWSC 594

Evagelakos v UPG 318 Pty Ltd [2024] NSWSC 1179

Fonterra Brands (Australia) Pty Ltd v Bega Cheese Ltd [2025] NSWSC 395

Fountain Selected Meats (Sales) Pty Ltd v International Produce Merchants Pty Ltd [1988] FCA 202.

HDI Global Specialty SE v Wonkana No 3 Pty Ltd (2020) 104 NSWLR 634

Insurance Australia Ltd v Iuli [2014] ACTCA 50

J & P Marlow (No 2) Pty Ltd v Hayes (2023) 112 NSWLR 29

Laundy Hotels (Quarry) Pty Ltd v Dyco Hotels Pty Ltd (2023) 276 CLR 500

Luxer Holdings Pty Ltd v Glentham Pty Ltd (2007) 35 WAR 254

McDonald v Dennys Lascelles Ltd (1933) 48 CLR 457

McGrath v Sturesteps (2011) 81 NSWLR 690

McIntosh v Dalwood (No 4) (1930) 30 SR (NSW) 415

Newey v Westpac Banking Corporation [2014] NSWCA 319

Paolucci v Makedyn [2021] NSWCA 215

Parwan Investments Pty Ltd v Hooper [2024] VSCA 86

Rava v Logan Wines [2007] NSWCA 62

Re Mempoll Pty Ltd, Anankin Pty Ltd and Gold Kings Pty Ltd [2013] NSWSC 301

Ryan v UPG 322 Pty Ltd [2023] NSWSC 1293

Sunbird Plaza Pty Ltd v Maloney (1988) 166 CLR 245

Toma v Taylor Square TT Pty Ltd [2024] NSWCA 304

Trad v Harbour Radio Pty Ltd [2017] NSWCA 64

Turner v Bladin (1951) 82 CLR 463

Waterways Authority of New South Wales v Coal & Allied (Operations) Pty Ltd [2007] NSWCA 276

XL Insurance Co SE v BNY Trust Company of Australia Ltd [2019] NSWCA 215

Texts Cited:

W Courtney, Contractual Indemnities (Hart Publishing, 2014)

P Herzfeld and T Prince, Interpretation (Thomson Reuters, 3rd ed, 2024)

JD Heydon, Heydon on Contract: Particular Contracts (Sumner Publications, 2024)

Category:

Principal judgment

Parties:

Davis Stack Capital Pty Ltd (first plaintiff)
PCL Corp Pty Ltd (second plaintiff)
Enveedee Investments Pty Ltd (third plaintiff)
RKMN Holdings Pty Ltd (fourth plaintiff)
Raj & Jai (Mudgee) Pty Ltd (first defendant)
Raj & Jai Construction Pty Ltd (second defendant)
Caerleon Mudgee Pty Ltd (third defendant) (submitting appearance)

Representation:

Counsel:
A Shearer SC with D Farinha (plaintiffs)
A McInerney SC with D Robertson (first and second defendants)

Solicitors:
Dentons (plaintiffs)
Mills Oakley (first and second defendants)

File Number(s):

2024/00385624

Publication restriction:

Nil

JUDGMENT

1. Davis Stack Capital Pty Ltd, PCL Corp Pty Ltd, Enveedee Investments Pty Ltd and Caerleon Mudgee Pty Ltd (the sellers) hold units in a trust over a partially developed land estate in Mudgee, New South Wales.

2. On 28 November 2022, the sellers agreed to sell those units to the first defendant, Raj & Jai (Mudgee) Pty Ltd (the buyer) for $70 million under a Unit Sale and Purchase Agreement (USPA).

3. Under the USPA, the buyer was to pay the first deposit of $3.5 million on the date of contract, a second deposit of $3.5 million on or before 1 October 2023, and the balance on the scheduled date of completion on 1 July 2024.

4. The second defendant, Raj & Jai Construction Pty Ltd, is the parent company of the buyer. It guaranteed the buyer’s obligations under the USPA and the payment of all sums that were or might become payable by the buyer to the sellers.

5. Completion under the USPA did not take place on the due date of 1 July 2024 due to the buyer’s default.

6. On 2 July 2024, the sellers served a notice on the buyer, which required the buyer to complete the purchase of the units within 20 business days. Further demand was made for default interest on the unpaid portion of the purchase price.

7. On 2 July 2024, the sellers also served a notice on the buyer’s parent, and demanded that the buyer’s parent “pay to the [s]ellers an amount equal to the amount of the Buyer Guaranteed Money”, referencing clause 27 of the USPA.

8. Completion did not occur within the time specified in the notice to the buyer.

9. Over several months in 2024, the sellers served notices of demand on the buyer and buyer’s parent, which, inter alia, demanded the payment of default interest due because of the buyer’s default in completing.

10. On 17 October 2024, the sellers commenced these proceedings against the buyer, the buyer’s parent and Caerleon Mudgee Pty Ltd, the trustee of the trust, which filed a submitting appearance.

11. The buyer accepted that the sellers are entitled to a judgment against it for default interest payable under the USPA from 1 July 2024 to date, and neither consents nor opposes an order for specific performance being made against it. The buyer’s parent accepted that the sellers are entitled to an order against it to indemnify the sellers for the amount of default interest payable by the buyer, but nothing else.

12. It is necessary to determine whether:

1. The buyer should be ordered to specifically perform the USPA; and/or

2. The buyer’s parent should be ordered to specifically perform the guarantee and/or indemnity to ensure completion of the sale, based on the proper construction of the guarantee and indemnity.

Construction principles relevant to the USPA

13. The USPA is a commercial contract. It was negotiated for the parties by lawyers over a period of time. The parties are sophisticated entities dealing with a land holding worth a significant sum of money.

14. The USPA’s terms are to be understood objectively, according to what a reasonable businessperson, placed in the position of the parties, would have understood them to mean, having regard to the circumstances surrounding the contract and the commercial purpose and objects to be achieved by it: Ecosse Property Holdings Pty Ltd v Gee Dee Nominees Pty Ltd (2017) 261 CLR 544 at [16] (Kiefel, Bell and Gordon JJ); Laundy Hotels (Quarry) Pty Ltd v Dyco Hotels Pty Ltd (2023) 276 CLR 500 at [27] (Kiefel CJ, Gageler, Gordon, Gleeson and Jagot JJ).

15. The commercial object of the contract cannot be used to give the words of the contract a meaning that they cannot reasonably bear: J & P Marlow (No 2) Pty Ltd v Hayes (2023) 112 NSWLR 29 at [79] (Bell CJ), citing Australian Casualty Co Ltd v Federico (1986) 160 CLR 513 at 520 (Gibbs CJ) and Charter Reinsurance Co Ltd v Fagan [1997] AC 313 at 388 (Mustill LJ).

16. Caution is required when resort is had to assertions of commercial sense (or, conversely, commercial inconvenience), as a reason for construing a commercial contract in a manner that departs from the ordinary meaning of the language the parties have in fact used. There is “no licence for ‘judicial rewriting’ of an agreement”: Newey v Westpac Banking Corporation [2014] NSWCA 319 at [91] (Gleeson JA, Basten and Meagher JJA agreeing); Cherry v Steele-Park (2017) 96 NSWLR 548 at [72]-[73] (Leeming JA, Gleeson and White JJA agreeing). The Court is not permitted to depart from the ordinary meaning of the words used by the parties merely because it regards the result as inconvenient or unjust: McGrath v Sturesteps (2011) 81 NSWLR 690 at [17] (Bathurst CJ, Macfarlan JA and Sackville AJA agreeing).

17. A doubt in the construction of a provision in a contract of guarantee should be resolved in favour of the surety or indemnifier by reason of strictissimi juris. It is implicit in this that a doubt may arise not only from the uncertain meaning of a particular expression, but from its apparent width of possible application: Bofinger v Kingsway Group Ltd (2009) 239 CLR 269 at [53] (Gummow, Hayne, Heydon, Kiefel and Bell JJ); Ankar Pty Ltd v National Westminster Finance (Australia) Ltd (1987) 162 CLR 549 at 561 (Mason ACJ, Wilson, Brennan and Dawson JJ); see also discussion in JD Heydon, Heydon on Contract: Particular Contracts (Sumner Publications, 2024) at [10.100].

18. The sellers referred to clause 2.1(m) of the USPA, where the parties had expressly provided that “no rule of construction applies to the disadvantage of a party because that party was responsible for the preparation of this agreement”. That might exclude the “contra proferentum rule”. However, strictissimi juris is not applied because one party prepared a contract, but instead, because of the nature of a surety’s obligations. Clause 2.1(m) consequently does not exclude that approach to construction.

19. Even so, “the chain [of the most appropriate construction] is limited to choosing amongst the meanings that are fairly open by reason of the application of other rules of construction”: Rava v Logan Wines [2007] NSWCA 62 at [56] (Campbell JA). Here, I consider there is a single appropriate construction of clause 27.1, as explained below.

Specific performance against the buyer?

20. As noted above, the buyer neither consented to nor opposed an order of specific performance of the USPA. For the reasons that follow, I consider it appropriate to make such an order.

Relevant provisions of the USPA

21. Clause 2.1 of the USPA contains the central obligations of the sellers and the buyer. It states:

On Completion the Sellers must sell and the Buyer must purchase the Sale Units:

(a) free from all Security Interests and Encumbrances;

(b) for the Purchase Price; and

(c) on the terms of this agreement.

22. “Completion” is defined in clause 1.1 as meaning “completion of the sale and purchase of the Sale Units in accordance with clause 8”.

23. Clause 8.1 fixes the time and place for completion.

24. Clause 8.2 establishes a regime for a non-defaulting party to issue a notice to complete to the defaulting party where completion does not occur.

25. Clause 8.3 contains the sellers’ obligations at completion:

At Completion, each Seller must:

(a) do all things necessary to transfer to the Buyer the full, absolute and entire legal and beneficial interest in the Sale Units, free and clear of any Security Interest or other Encumbrance;

(b) place the Buyer in effective control of the Trust and the Business …

26. Clause 8.4 sets out the buyer’s obligations at completion:

On Completion, the Buyer must:

(a) pay to each Seller (or as the Trustee directs on behalf of the Sellers) its Respective Proportion of the Balance of the Purchase Price in immediately available funds …

27. Clause 8.7 provides:

(a) The obligations of the Buyer and the Sellers under this clause 8 are interdependent with each other.

(b) Completion will not occur unless all of the obligations of the Buyer and of each Seller under this clause 8 are complied with and are fully effective. …

28. These provisions make clear that the balance of the purchase price is payable on completion. As noted above, the buyer has breached its obligation to complete the purchase as agreed, or at all. Because completion has not yet occurred, the sellers have no accrued contractual debt in the sum of the balance of the purchase price.

Availability of specific performance

29. Specific performance in the strict sense enforces “an executory contract by compelling the execution of an assurance to complete it”: Paolucci v Makedyn [2021] NSWCA 215 (Paolucci) at [10] (Leeming JA, White and McCallum JJA agreeing). For instance, specific performance in the strict sense may be ordered compelling the vendor to execute and deliver a transfer of land to the buyer so as to enable her to become registered on title: Parwan Investments Pty Ltd v Hooper [2024] VSCA 86 (Parwan) at [55] (McLeish, Walker and Macaulay JJA).

30. Specific performance is also used in a broader sense, referring to an order requiring a party to perform a provision of an executed contract: Paolucci at [10]-[11]; Parwan at [56].

31. Specific performance in either sense will only be ordered if damages for the breach of contract would not be an adequate remedy: Waterways Authority of New South Wales v Coal & Allied (Operations) Pty Ltd [2007] NSWCA 276 at [73]-[77] (Beazley JA, as her Excellency then was, Campbell JA agreeing). That is ordinarily the case where the agreement is for the sale of land, which is regarded as unique: Dougan v Ley (1946) 71 CLR 142 at 150 (Dixon J); Parwan at [57].

32. An entitlement to specific performance extends to a vendor “where the contract is of such a kind that the purchaser can sue for specific performance”: Turner v Bladin (1951) 82 CLR 463 at 473 (Williams, Fullagar and Kitto JJ).

33. In this case, the parties’ contract was for the sale and purchase of units in a trust, where the trustee owned land, rather than a contract for the sale of land directly. I do not consider that this affects the availability of specific performance. As the sellers submitted, the units in the trust “are not traded on any market” and “together constitute the entire beneficial interest in a fund whose only real asset is land”, which is unique. In substance, the agreement was for the buyer to acquire the underlying land. Further, specific performance would also have been available to the buyer had the sellers been in default.

34. In circumstances where the buyer is in breach of its obligations under the USPA, specific performance of that executory agreement in the strict sense ought be ordered.

Specific performance of guarantee by the buyer’s parent – clause 27.1(a)?

35. The buyer’s parent agreed to a guarantee and indemnities in clause 27.1 of the USPA, which provides:

In consideration of the Sellers entering into this agreement and the Transaction Documents, the Buyer's Parent:

(a) unconditionally and irrevocably guarantees to the Sellers the due and punctual performance of all of the Buyer's obligations in connection with this agreement (Buyer Guaranteed Obligations) and the payment of all sums of money, interest, costs, expenses and charges which are or may become payable by the Buyer to the Sellers under or in connection with this agreement (Buyer Guaranteed Money); and

(b) indemnifies the Sellers and holds them harmless, as a separate, independent and principal obligation, from and against all losses, damages, costs and expenses which have now or may in the future be suffered or incurred by the Sellers in respect of the Buyer Guaranteed Money, any failure by the Buyer to perform the Buyer Guaranteed Obligations or any other breach of this agreement in respect of the Buyer Guaranteed Obligations by the Buyer, and agrees to pay to the Sellers on demand an amount equal to such loss, damage, cost or expense including the amount equal to the amount of the Buyer Guaranteed Money; and

(c) indemnifies the Sellers and holds them harmless, as a separate, independent and principal obligation, from and against any losses, damages, costs and expenses which have now or may in the future be suffered or incurred by the Sellers in respect of any of the Buyer Guaranteed Obligations and/or the Buyer Guaranteed Money being void, unenforceable or irrecoverable for any reason, as against the Buyer or as against the Buyer’s Parent under clause 27.1(a) or 27.1(b)

36. The sellers sought orders for the buyer’s parent to specifically perform the guarantee in clause 27.1(a) and the indemnity in clause 27.1(b). The parties accepted that clause 27.1(c) is not relevant to the dispute, apart from it being part of the USPA, which must be considered as a whole in the construction process.

37. Before considering whether the Court ought to make orders to the effect sought, it is necessary to construe clause 27.1(a) and (b) to determine the content of the buyer’s parent’s obligation.

Proper construction of clause 27.1(a)

38. The “general rule … is that a vendor of land cannot sue for the price before the contract is completed by conveyance, unless the price is expressed to be payable on a fixed day, not being the day fixed for completion”: Sunbird Plaza Pty Ltd v Maloney (1988) 166 CLR 245 (Sunbird) at 253 (Mason CJ, Deane, Dawson and Toohey JJ agreeing), discussing McDonald v Dennys Lascelles Ltd (1933) 48 CLR 457 (Dennys Lascelles) at 476 (Dixon J). The USPA was drafted in that context of that general rule. Although the USPA is an agreement for the sale of units in a trust, given that the primary asset of the trust is a residential land estate, the proposition in Dennys Lascelles must apply by analogy.

39. It was common ground between the parties that the “Buyer Guaranteed Obligations” obligation in the first limb of clause 27.1(a) (up to “and”) was a “see to it” guarantee. I agree. That conclusion is consistent with Sunbird at 256 (and Mason CJ’s second type of guarantee) and Toma v Taylor Square TT Pty Ltd [2024] NSWCA 304 (Toma) at [4] (Bell CJ, Gleeson JA agreeing) and [117]-[122] (Ward P, Gleeson JA agreeing).

40. The parties’ disagreement centred around the proper construction of the “Buyer Guaranteed Money” obligation in the second limb of clause 27.1(a) after “and”.

41. The sellers submitted the second limb could be construed in two ways:

1. The limb “contains an unconditional promise”, under which “the Buyer’s Parent undertook a ‘direct liability’ to the sellers, ‘coordinate’ with that of the Buyer”; or

2. The limb contains a “conditional promise” for the buyer’s parent to pay the balance of the purchase price on the buyer’s default.

42. I reject both constructions advanced by the sellers for the following reasons.

43. First, clause 27.1(b) and (c) expressly create “separate, independent and principal” obligations, whereas subclause (a), which immediately precedes (b)-(c), does not contain those express words. This difference in language is relevant because clause 27.1(a) must be construed in the context of the whole USPA. The “lack of reference to the guarantee being a ‘principal’ obligation compared with the indemnity clause[s]” in clause 27.1(b)-(c) “which expressly [record] that [they are] principal obligation[s]”, is a “pertinent indicator” that the guarantee is not intended to give rise to concurrent liability: see Toma at [119] (Ward P, Gleeson JA agreeing).

44. While the clause does not expressly provide the guarantor made a promise “as principal”, the sellers submitted that it was nevertheless appropriate to construe the clause as giving rise to coordinate liability between a guarantor and debtor. However, it is clear that the presence of those words may operate as a “critical factor” in persuading the Court that a guarantee clause creates a “concurrent obligation”: see Ryan v UPG 322 Pty Ltd [2023] NSWSC 1293 at [77] (Parker J). The sellers do not have the benefit of that “critical factor” here.

45. I consider the absence of the words “separate, independent and principal” and “as principal” in subclause (a) indicates that the parties did not intend the guarantee provision to impose a concurrent liability on the buyer and the buyer’s parent, whether conditional or unconditional. As Ward P pointed out in Toma at [58] and [124]:

As commercially sophisticated parties, acting with the benefit of legal advice, it would have been a simple matter to draft the sale contract expressly providing for the remedy for which the [vendors] now contend. …

The fact that the vendors are left with a remedy (in damages) which may be less palatable to them is not to the point. …

46. Secondly, provisions which are similar to the second limb of clause 27.1(a) have been construed as “see to it” obligations. One example is the clause considered by the Victorian Court of Appeal in Beerens v Bluescope Distribution Pty Ltd (2012) 39 VR 1 (Beerens), which provided (see [62]) (spacing added):

In consideration of the Supplier agreeing to supply or continuing to supply goods and services on credit to the Customer … and forbearing to sue the Customer … for any payment currently due to the Supplier, each guarantor named below (the “Guarantor”):

unconditionally and irrevocably guarantees to the Supplier the due and punctual payment of all debts and monetary liabilities, including without limitation, costs and expenses which are, or which may become, payable by the Customer to the Supplier or any related body corporate on any account and in any capacity (the “Guaranteed Moneys”) and,

as a separate and independent obligation, agrees to indemnify and keep the Supplier and any related body corporate indemnified from and against any claim, action, loss, damage, liability, cost, expense, outgoing or payment suffered, paid or incurred by the Supplier or such related body corporate in relation to the non payment or non recovery of the Guaranteed Moneys.

47. In construing that provision, the Court at [64] referred to Mason CJ’s remarks about two common classes of guarantee of the debtor’s payments of instalments in Sunbird at 256. Nettle JA (Redlich JA agreeing) characterised the “Guaranteed Moneys” obligation as being of the “second type” of guarantee, namely a “see to it” obligation: at [65] (see similarly Tate JA at [196], with whom Redlich JA also agreed).

48. The guarantee and indemnity clauses in Beerens are similar to clause 27.1 in the following respects:

1. Both clauses involve the guarantor “unconditionally and irrevocably” guaranteeing the “payment of” particular sums “which are or may become” payable by the debtor to the creditor; and

2. Both clauses include a “separate and independent” obligation on the part of the guarantor to indemnify the creditor against certain loss (etc) suffered. Clause 27.1(b) goes further by expressly providing that the indemnity obligation is “primary” in character.

49. Having regard to the analogous structure and content of the clause in Beerens to clause 27.1(a)-(b), I am supported in my conclusion that both limbs of clause 27.1(a), properly construed, impose no more than a “see to it” obligation on the buyer’s parent.

50. Although the sellers sought to differentiate the clause in Beerens from clause 27.1(a) because clause 27.1(a) has two limbs rather than one, I am not convinced that this is a material difference. It would be surprising if the parties intended clause 27.1(a) to transform from being a “see to it” obligation to a primary obligation in the middle of the sentence, especially where there is no express language to that effect.

51. Further, to the extent that a “doubt” subsists after applying ordinary principles of contractual construction as to whether the second limb of clause 27.1(a) imposes a primary obligation on the buyer’s parent to pay money, as noted above, a guarantor’s liability is strictissimi juris. This would mean that the clause should be construed in favour of the buyer’s parent if necessary to remove doubt. This would also support the construction of clause 27.1(a) as a mere “see to it” obligation rather than a conditional or unconditional promise.

52. Thirdly, and relatedly, I reject the sellers’ submission that the second limb of clause 27.1(a) ought not be construed as a “see to it” obligation, as to do so would leave it with no work to do in addition to the first limb.

53. While the first limb concerns “all” the buyer’s obligations “in connection with” the agreement, the second limb does not exactly mirror that language. The second limb concerns the payment of all sums of money “under or in connection with this agreement”. While the buyer has clear obligations to pay the purchase price by way of deposits and a final settlement payment, the second limb appears to contemplate amounts the buyer may be required to pay the sellers which are not stipulated in the agreement, such as “interest, costs, expenses and charges” referred to. These terms are undefined and are not all readily found within the contract.

54. Even if this is wrong and construing the whole of clause 27.1(a) as a “see to it” obligation would render it surplusage, it does not follow that the sellers’ construction is correct. I accept that generally “the words of a contract should be interpreted in a way which gives them an effect rather than a way in which makes them redundant”. But “it may be appropriate to interpret words in a way that makes them redundant … where it appears that the words have been included out of abundant caution”: XL Insurance Co SE v BNY Trust Company of Australia Ltd [2019] NSWCA 215 at [72] (Gleeson JA, Bell P and Emmett AJA agreeing), quoting with approval AFC Holdings Pty Ltd v Shiprock Holdings Pty Ltd [2010] NSWSC 985 at [13] (Ball J, as his Honour then was).

55. That may be the case here. The second limb can be seen as confirming, out of an abundance of caution, that “the due and punctual performance of all of the Buyer’s obligations in connection with [the USPA]” (first limb) extends to “the payment of all sums of money, interest, costs, expenses and charges which are or may become payable to the Buyer to the Sellers under or in connection with [the USPA]” (second limb).

56. In any event, any presumption against words “being treated as mere surplusage, and of no effect, is not a strong one”: HDI Global Specialty SE v Wonkana No 3 Pty Ltd (2020) 104 NSWLR 634 at [44] (Meagher JA and Ball J). That being said, this observation “reflect[s] an empirical observation about the drafting of contracts rather than [being] a statement of principle”, and “where a provision is an important and bespoke provision in a small commercial contract, the presumption that the provision is not surplusage will be a strong one”: P Herzfeld and T Prince, Interpretation (Thomson Reuters, 3rd ed, 2024) at [22.50], discussing Angas Securities Ltd v Small Business Consortium Lloyds Consortium No. 9056 [2016] NSWCA 182 at [12]-[13] (Leeming JA).

57. However, clause 27.1(a) is not a bespoke provision in a small commercial contract; it is part of a lengthy and complex contract, authored by a large international law firm. Its similarity with the clause in Beerens suggests that it may be based upon a commonly used boilerplate clause. I consequently do not consider that the presumption against surplusage assists the sellers.

58. Fourthly, contrary to the sellers’ submission, I consider that clause 27.1(a) is distinguishable from cl 11 in Sunbird and cl 6 in Luxer Holdings Pty Ltd v Glentham Pty Ltd (2007) 35 WAR 254 (Luxer). Those two particular clauses were construed by Gaudron J and Buss JA respectively, as imposing primary obligations on the guarantor to pay sums of money. However, clause 27.1(a) is different in the following ways.

59. Unlike cl 11 in Sunbird, clause 27.1(a) does not provide that the guarantor “undertakes and guarantees … the due and punctual payment of … purchase moneys”: cf Sunbird at 272 (emphasis added). The buyer’s parent does not undertake to paying sums of money itself, but merely “guarantees” the buyer making those payments.

60. Additionally, unlike cl 6 in Luxer, clause 27.1(a) does not provide that the guarantor will “upon demand pay” certain amounts of money: cf Luxer at [78]. The existence of that “continuing obligation to pay” supported the finding that the guarantor “was [himself] required to pay the rent” in Luxer: at [83]. No equivalent words are contained in clause 27.1(a).

61. Fifthly, the sellers primarily sought a construction of clause 27.1(a) that would entitle them to an order for specific performance requiring the buyer’s parent to supply the remaining purchase price to enable completion. A similar argument was raised in Toma in relation to a guarantee clause 60.2, which provided:

The Guarantor guarantees to the Vendor prompt performance of all of the obligations of the Purchaser contained or implied in this Contract. If the obligation is to pay money, the vendor may immediately recover the money from the Guarantor as a liquidated debt without first commencing proceedings or enforcing any other right against the Purchaser or any other person.

62. In separate reasons, Bell CJ, Ward P and Gleeson JA all recognised from Sunbird, that a purchaser’s obligation to complete and pay the final component of the purchase price only arose at completion when the vendor transferred title. Because payment and transfer of title were dependent, the buyer’s payment obligation could not be triggered at an earlier time than transfer: see [8], [14]-[16] (Bell CJ), [83], [108], [120] (Ward P), [140] (Gleeson JA). The sellers recognised this here, and for that reason sought an order that they transfer title simultaneously when the purchase price is paid.

63. Bell CJ rejected the argument that the second sentence in clause 60.2 could be construed so as to require payment of the purchase price, including because “the fact that this entitlement arose ‘immediately’ upon the Purchasers’ non-performance would sever the contractual interdependence between completion and transfer for title”: at [15], [17]. Here, to adopt the sellers’ construction of clause 27.1(a) would have the same effect. However, I accept that clause 60.2 used “immediately”, which is absent in clause 27.1(a), and makes this point less persuasive.

64. Here, the sellers also placed emphasis on the fact that the second limb referred to both moneys that “are or may become payable”. The purchase price was said to be money that “may become payable”, because “if the Buyer had performed [its] obligations on completion … the units would have been conveyed to it … and the balance of the purchase price would certainly have been payable from that date”. The sellers consequently argued that the purchase price was money that the buyer’s parent was guaranteeing and that the buyer’s parent was liable to pay the purchase price.

65. Obviously, the buyer was obliged to pay the sellers money at completion. I accept that this was money that at the time of formation “may become payable”, which again, the buyer’s parent was guaranteeing. However, properly construed in view of clause 8, the guarantee was only triggered when the money was “payable” by the buyer, and not before. To hold otherwise would mean that the buyer’s parent was liable under the guarantee even before the buyer was liable to pay a given sum. That would not be a businesslike interpretation of clause 27.1(a).

66. Nevertheless, the sellers submitted that:

If the obligation of the Buyer’s Parent only arose upon conveyance to the Buyer, then the second limb of cl 27.1(a) would never attach to the balance of the purchase: it would not apply before the time for completion because the balance would not be payable yet; it would not apply after that time if the Buyer performed because there would be no outstanding moneys; and it would not apply if the Buyer failed to perform because the units would not be conveyed in that event.

67. I do not accept that submission. It appears to assume that clause 27.1(a) only has work to do if it is construed as requiring the buyer’s parent to pay the balance of the purchase price. However, even at the time of formation, the guarantee had work to do: then, the whole of the first deposit was payable, and therefore the buyer’s parent was liable under the guarantee for that payment immediately on execution.

68. The sellers also referred to a statement in Beerens at [193] by Tate JA (Redlich JA agreeing) in support of their construction of clause 27.1(a) (emphasis added):

The [guarantor’s] obligation … to pay the “Guaranteed Moneys” was, inter alia, for the payment of all debts and monetary liabilities which are, or which may become, payable. That is, the obligation was not only to pay debts that had been accrued by the company before BlueScope lawfully terminated the contract, but also those debts that would have arisen, in futuro, had the contract remained on foot. The obligation was to carry out the contract, including the payment of the debts and monetary liabilities that would have arisen had the contract for the undelivered goods been completed.

69. This passage does not assist the sellers. Beerens concerned contracts for the supply of steel that had been terminated by the seller because of the buyer’s repudiation. Tate JA stated that “but for the [buyer’s] repudiation of the contract, [it] would have incurred a debt for the price of the undelivered goods as and when those goods were delivered”: at [196]. The buyer’s failure to accept the steel and pay placed the guarantor in breach of the guarantee and the seller was entitled to sue for damages for the guarantor’s breach.

70. Beerens is different because it concerned a contract terminated following the buyers’ repudiation and a claim for damages. That is not the case here.

71. For completeness, I also note that the sellers submitted that the buyer’s parent, as guarantor, was not entitled to sit by and not take any steps to ensure the buyer performed. I reject that submission. As noted by Mason CJ in Sunbird at 256, parties are at liberty to make any agreement, but it will not be assumed that a guarantor “would willingly assume an obligation to ensure that [a debtor] performs his primary obligation”. It is a matter of construction in every case.

72. For these reasons, I do not accept the sellers’ construction of clause 27.1(a). That provision imposes no more than a “see to it” obligation.

Conclusion

73. The consequence is that the breach of clause 27.1(a) by the buyer’s parent “sounds in a remedy for damages, not an order for specific performance against the guarantor for payment of the purchase price”: see eg Toma at [126].

Specific performance of indemnity by buyer’s parent – clause 27.1(b)?

74. An agreement to indemnify another involves an independent obligation “to make good a loss”. It creates a primary liability on the part of the indemnifier, unlike a contract of guarantee under which the guarantor assumes a secondary obligation to be “answerable for the debt or obligation of another if that other defaults”: Canty vPaperlinX Australia Pty Ltd [2014] NSWCA 309 at [37]-[40] (Gleeson JA, Barrett and Emmett JJA agreeing). As noted above, clause 27.1(b) is an indemnity expressed as a “principal” obligation.

75. The sellers submitted that in the alternative to clause 27.1(a), the buyer’s parent ought to specifically perform the indemnity, and pay the purchase price to enable completion of the sale in order to hold the sellers “harmless” from the anticipated failure of the buyer to pay and complete.

76. However, the buyer’s parent promise was to hold the sellers harmless “from and against all losses, damages, costs and expenses which have now or may in the future be suffered or incurred by the Sellers”.

77. In circumstances where the USPA has not been terminated and remains on foot, and where the sellers do not have an unconditionally accrued right to the balance of the purchase price (for the reasons above), the non-payment of that amount by the buyers does not constitute a “loss, damage, cost or expense” which is payable to the sellers “on demand” under clause 27.1(b).

78. Although the reference to “loss, damage, cost or expense” is appended by the phrase, “including the amount equal to the amount of the Buyer Guaranteed Money”, I do not consider that these additional words make a difference. The language of “including” indicates that any sum must constitute a “loss, damage, cost or expense” in order for the buyer’s parent to be liable to pay it “on demand”.

79. Further, the reference to “all losses, damages, costs and expenses which have now or may in the future be suffered or incurred by the Sellers” at the beginning of clause 27.1(b) cannot be read as conferring an entitlement on the sellers to demand payment of losses, which have not yet crystallised. It simply reflects the parties’ intention at the time of contract that the buyer’s parent will be liable for amounts which crystallise as “losses, damages, costs and expenses” while the indemnity operates.

80. There is a further reason why specific performance of the indemnity is not appropriate.

81. As Rees J observed in Evagelakos v UPG 318 Pty Ltd [2024] NSWSC 1179 at [50], “[e]quity may grant specific performance of a contract of indemnity before actual loss has been suffered”. Her Honour referred to McIntosh v Dalwood (No 4) (1930) 30 SR (NSW) 415 at 418, where Street CJ (Owen and Long Innes JJ agreeing) observed:

In every case the contractual obligation must first be ascertained in order that it may be seen whether an adequate remedy exists at law in the event of a breach. If the obligation is merely an obligation to indemnify a person, in the sense of repaying to him a sum of money after he has paid it, no equitable relief is needed. Damages will provide an adequate remedy. If, however, the obligation on its true construction is an obligation to relieve a debtor by preventing him from having to pay his debt, equity will in such a case give relief in the nature of quia timet relief, and, instead of compelling the party indemnified first to pay the debt, and perhaps to ruin himself in doing so, will specifically enforce the obligation by ordering the indemnifying party to pay the debt.

82. However, Street CJ’s remarks concerned an indemnity against a liability to a third party. In contrast, “[t]here appears to be no decision in which an indemnity against third party non-performance has been specifically enforced”: W Courtney, Contractual Indemnities (Hart Publishing, 2014) at [9-54] (emphasis added). The learned author further suggests that “specific performance is inapt or, at best, has a very limited role for indemnities in this form”. In any event, he suggests that the requirement of “a definite, presently accrued and enforceable liability of the indemnified party to the third party”, which is a precondition for specific performance of an indemnity against liabilities to third parties, could be transposed to indemnities against third party non-performance. The requirement would be for “the debtor [to be] under a definite, presently accrued, and enforceable liability to the indemnified creditor”.

83. Clause 27.1(b) is an indemnity against third party non-performance. The buyer’s parent is the indemnifier, having agreed to hold the sellers harmless from and against all losses (inter alia) in the event that the buyer, a third party debtor, does not perform its obligations under the USPA.

84. I have concluded above that the balance of the purchase price is not a “loss, damage, cost or expense”, which is presently payable to the sellers “on demand” under clause 27.1(b). Nor is the buyer under a present liability to pay the balance to the sellers, completion not having occurred. It follows that specific performance of the indemnity in clause 27.1(b) is not appropriate.

Discontinuance of cross-claim

85. By way of an amended commercial list cross-claim cross-summons and an amended commercial list cross-claim statement, both filed on 7 May 2025, the only substantive relief sought by the buyer and buyer’s parent was declarations about the effect of certain terms of the USPA if it was terminated. These declarations were resisted by the sellers, who submitted:

1. That the declaratory relief sought ought not be granted, because the declarations would be hypothetical or advisory in circumstances where the USPA had not been terminated;

1. The proper construction of the relevant clauses was not that proposed by the buyer.

86. At the beginning of the hearing, the buyer and buyer’s parent sought leave to discontinue their cross-claim, with an order that they pay the sellers’ costs on an ordinary basis. Their senior counsel candidly explained that he accepted the declarations would not be made, because they were hypothetical and premature, and that a discontinuance was sought rather than a dismissal because the defendants may wish to seek the same declaratory relief, if and when the USPA was terminated.

87. The sellers submitted that leave to discontinue ought be refused, because a discontinuance rather than a dismissal would “confer a forensic advantage on the defendants”. I agreed to accept further submissions on the issue of discontinuance.

88. For the reasons that follow, I consider it appropriate to grant leave for the discontinuance of the cross-claim.

Forensic advantage?

89. Rule 12.1(1)(b) Uniform Civil Procedure Rules 2005 (NSW) provides that a plaintiff may discontinue proceedings by way of a notice of discontinuance with leave of the Court, subject to any terms of the leave.

90. In Re Mempoll Pty Ltd, Anankin Pty Ltd and Gold Kings Pty Ltd [2013] NSWSC 301 (Mempoll) at [10], Brereton J observed (emphasis added):

It is a general principle that, although there may be exceptions, rarely will it be appropriate to grant leave to discontinue once the proceedings have proceeded to a contested hearing … This is because once the parties have defined their positions, prepared their cases and proceeded to a hearing it is ordinarily regarded as unfair to deprive a party who has obtained a forensic advantage of that advantage …

91. The sellers emphasised Brereton J’s reference to a “general principle”. However, I do not consider that it is correct or desirable to begin from a prima facie position that leave to discontinue should not (or should) be granted. Rather, the key question is whether the sellers have obtained any forensic advantage, of which they would be deprived, if the buyer and buyer’s parent were granted leave to discontinue their cross-claim.

92. It is difficult to see how the declarations sought are other than advisory, hypothetical and premature, and on that basis, would not have been made in these proceedings. So much is accepted by the parties. The court would consequently not have considered whether the construction of the USPA reflected in the proposed declarations was correct as a matter of law. To do so would be to provide an advisory opinion, as I observed in Fonterra Brands (Australia) Pty Ltd v Bega Cheese Ltd [2025] NSWSC 395 at [84].

93. It follows, to use the words of Moffitt P in Coles v Wood [1981] 1 NSWLR 723 at 724, that the dismissal of the defendants’ “application for declaratory relief [would not] determine the right sought to be declared, so as to prevent it being litigated in other proceedings”. The refusal to make a declaration because it is hypothetical would have “finalise[d] nothing”: Insurance Australia Ltd v Iuli [2014] ACTCA 50 at [12] (Penfold, Burns and Ross JJ). It would not have amounted to the “dismissal of an application for a declaration [which] is grounded upon a considered determination of competing claims of right”: cf Erratt v Grills [2015] NSWSC 594 at [96] (Lindsay J).

94. The parties would therefore not be precluded from later running the same arguments on the proper construction of the USPA at a time when the USPA has been terminated and when the declarations may have utility. And so there is no forensic advantage, in the form of protection against “fac[ing] any similar claims again”, that the sellers would lose by leave being granted to discontinue the cross-claim, instead of dismissing the prayers for declaratory relief.

95. The sellers otherwise did not articulate what forensic advantage they have obtained from the bringing of the cross-claim that they would lose if the cross-claim were to be discontinued. Instead, they submitted that “the Court does not need to conclude what forensic advantage the [sellers] might have had upon dismissal on the merits”, because they ought be protected “so as not to be deprived of any possible forensic advantage”.

96. This submission is contrary to authority. Mempoll and Gazal refer to a forensic advantage that has been “obtained” (noting the use of past tense) and one that has been “already gained in the litigation”.

97. For these reasons, I do not accept that the sellers have obtained any forensic advantage in the litigation that would be lost by the discontinuance of the cross-claim, particularly where they will receive a costs order in their favour.

98. I will grant leave to the cross-claimants to discontinue the cross-claim.

99. In respect of costs of the discontinuance, it is clear that “costs may be ordered on an indemnity basis where proceedings have been brought without reasonable prospects of success”: Trad v Harbour Radio Pty Ltd [2017] NSWCA 64 at [35] (Basten JA, McColl and Ward JJA agreeing), referring to Fountain Selected Meats (Sales) Pty Ltd v International Produce Merchants Pty Ltd [1988] FCA 202.

100. Here, the cross-claimants’ belated concession on the weekend before the hearing that the declarations sought in the cross-claim would be hypothetical or advisory was tantamount to an acknowledgement that the cross-claim was hopeless. I accept the sellers’ submission that the appropriate order is for the cross-claimants to pay their costs of the cross-claim on an indemnity basis.

Orders

101. In light of the above reasons, the appropriate orders are:

1. Grant leave to the cross-claimants to discontinue all of the claims for relief in the amended commercial list cross-claim cross-summons filed on 7 May 2025.

2. Order the cross-claimants to pay the plaintiffs/cross-defendants’ costs of the amended commercial list cross-claim cross-summons filed on 7 May 2025 on an indemnity basis.

3. Declare that the Unit Sale and Purchase Agreement dated 28 November 2022 between the first to fourth plaintiffs (Sellers) as vendors, the first defendant (Buyer) as purchaser, and the second defendant (Buyer's Parent) as purchaser's guarantor (USPA) is valid and enforceable.

4. Declare that the Buyer is in breach of the USPA by failing to attend to its obligations in respect of Completion as defined in the USPA and failing to pay default interest on the unpaid Balance of the Purchase Price (as defined in the USPA).

5. Declare that the Buyer's Parent is in breach of the USPA by failing to guarantee to the Sellers the due and punctual performance of the Buyer's obligations, and indemnifying them, in respect of the payment of default interest on the unpaid Balance of the Purchase Price (as defined in the USPA).

6. Order that the USPA be specifically performed by the Buyer and carried into execution.

7. Direct the Buyer to complete the purchase of the Sale Units under the USPA by not later than 10am on 28 days after the date of judgment (Settlement Date) at Dentons, Level 16, 77 Castlereagh Street, Sydney.

8. Direct the Buyer to do all things necessary to ensure completion can occur on the Settlement Date, including:

1. notifying the Sellers of its proposed entity to replace the third defendant (Trustee) as trustee of the Trust following Completion;

2. providing the Trustee with a signed Deed of Retirement and Appointment as defined in the USPA; and

3. providing to the Sellers releases of security held by the Buyer to secure monies advanced under the Loan Agreement in relation to the Sale Units and the Shares, by not later than seven days prior to the Settlement Date.

9. Direct the Buyer to pay each of the Sellers (or as the Trustee directs on behalf of the Sellers) on the Settlement Date its Respective Proportion of the unpaid Balance of the Purchase Price as defined in the USPA in immediately available funds in return for the Sellers transferring the Sale Units as defined in the USPA to the Buyer.

10. Order that the Buyer and the Buyer's Parent pay default interest to the Sellers on the unpaid Balance of the Purchase Price (as defined in the USPA):

1. from 1 July 2024 to 10 October 2024 in the amount of $2,195,283.29; and

2. from 11 October 2024 until payment of the Balance of the Purchase Price calculated in accordance with clause 1.7 of the USPA.

11. Summons otherwise dismissed.

12. On or before 4pm on 18 June 2025, the plaintiffs serve on the defendants short minutes of order containing the orders they propose in relation to costs and any necessary explanation.

13. On or before 4pm on 23 June 2025, the defendants:

1. if they agree with the plaintiffs’ short minutes of order, notify the plaintiffs and my Associate of their agreement, in which case the orders will be considered in chambers;

2. if they do not agree with the plaintiffs’ short minutes of order, serve on the plaintiffs a document (which may include alternative short minutes of order) setting out the matters on which they disagree and provide copies of the plaintiffs’ short minutes of order and their document to my Associate, in which case the matter will be listed, initially for directions, on 25 June 2025, or such other date as is agreed with my Associate, to deal with all outstanding issues.

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Decision last updated: 13 June 2025