Earnshaw v Gorman & Sons Pty Ltd
[2001] WASCA 50
•28 FEBRUARY 2001
EARNSHAW -v- GORMAN & SONS PTY LTD [2001] WASCA 50
| SUPREME COURT OF WESTERN AUSTRALIA | Citation No: | [2001] WASCA 50 | |
| THE FULL COURT (WA) | |||
| Case No: | FUL:133/2000 | 1 FEBRUARY 2001 | |
| Coram: | MALCOLM CJ WALLWORK J STEIN AJ | 28/02/01 | |
| 22 | Judgment Part: | 1 of 1 | |
| Result: | Appeal dismissed | ||
| PDF Version |
| Parties: | DENNIS CHARLES EARNSHAW GORMAN & SONS PTY LTD |
Catchwords: | Contract Contract for the sale of farm shed to be demolished by buyer and removed Agreement constituted by tender document amended by oral agreement Provision for specified time to remove shed deleted Whether time to remove shed unlimited or shed required to be removed within a reasonable time Notwithstanding express provision in written contract, time not of the essence Whether time for demolition and removal unlimited or required within a reasonable time, contract could not be terminated without prior notice by vendor requiring performance Vendor not able to deliver when buyer sought to remove Vendor liable for damages for breach of contract |
Legislation: | Nil |
Case References: | Balog v Crestani (1975) 132 CLR 289 Carr v JA Bannon Pty Ltd (1953) 89 CLR 327 Carr v JA Berryman Pty Ltd (1953) 89 CLR 327 Ciavarella v Balmer (1983) 57 ALJR 632 Codelfa Construction Pty Ltd v State Rail Authority of NSW (1982) 149 CLR 337 DTR Nominees Pty Ltd v Mona Homes Pty Ltd (1978) 138 CLR 423 Ellmore (Maitland) Pty Ltd v Tull (1995) 7 BPR 14,035 Green v Somerville (1979) 141 CLR 594 Halkidis v Bugeia [1974] 1 NSWLR 423 Investors Compensation Scheme Ltd v West Bromich Building Society [1998] 2 WLR 896 Laurinda Pty Ltd v Capalaba Park Shopping Centre Pty Ltd (1989) 166 CLR 623 Louinder v Leis (1982) 149 CLR 509 McNally v Waitzer [1981] 1 NSWLR 294 Re Ferdinando; Ex parte Australia and New Zealand Banking Group Ltd (1993) 42 FCR 243. Shevill v Builders Licensing Board (1982) 149 CLR 620 St E Promotions Pty Ltd v Tobin Bros Pty Ltd (1994) 122 ALR 637 Sunstar Fruit Pty Ltd v Cosmo [1995] 2 Qd R 214 Waltons Stores (Interstate) Ltd v Maher (1989) 164 CLR 387 Mannai Investments Co Ltd v Eagle Star Life Assurance Co Ltd [1997] AC 749 |
JURISDICTION : SUPREME COURT OF WESTERN AUSTRALIA TITLE OF COURT : THE FULL COURT (WA) CITATION : EARNSHAW -v- GORMAN & SONS PTY LTD [2001] WASCA 50 CORAM : MALCOLM CJ
- WALLWORK J
STEIN AJ
- Appellant
AND
GORMAN & SONS PTY LTD
Respondent
Catchwords:
Contract - Contract for the sale of farm shed to be demolished by buyer and removed - Agreement constituted by tender document amended by oral agreement - Provision for specified time to remove shed deleted - Whether time to remove shed unlimited or shed required to be removed within a reasonable time - Notwithstanding express provision in written contract, time not of the essence - Whether time for demolition and removal unlimited or required within a reasonable time, contract could not be terminated without prior notice by vendor requiring performance - Vendor not able to deliver when buyer sought to remove - Vendor liable for damages for breach of contract
(Page 2)
Legislation:
Nil
Result:
Appeal dismissed
Representation:
Counsel:
Appellant : Mr M S Macdonald
Respondent : Mr K S Pratt
Solicitors:
Appellant : Macdonald Rudder
Respondent : Fiocco Hopkins Nash
Case(s) referred to in judgment(s):
Balog v Crestani (1975) 132 CLR 289
Carr v JA Berriman Pty Ltd (1953) 89 CLR 327
Ciavarella v Balmer (1983) 57 ALJR 632
Codelfa Construction Pty Ltd v State Rail Authority of NSW (1982) 149 CLR 337
DTR Nominees Pty Ltd v Mona Homes Pty Ltd (1978) 138 CLR 423
Ellmore (Maitland) Pty Ltd v Tull (1995) 7 BPR 14,035
Green v Somerville (1979) 141 CLR 594
Halkidis v Bugeia [1974] 1 NSWLR 423
Investors Compensation Scheme Ltd v West Bromich Building Society [1998] 2 WLR 896
Laurinda Pty Ltd v Capalaba Park Shopping Centre Pty Ltd (1989) 166 CLR 623
Louinder v Leis (1982) 149 CLR 509
McNally v Waitzer [1981] 1 NSWLR 294
Re Ferdinando; Ex parte Australia and New Zealand Banking Group Ltd (1993) 42 FCR 243.
Shevill v Builders Licensing Board (1982) 149 CLR 620
St E Promotions Pty Ltd v Tobin Bros Pty Ltd (1994) 122 ALR 637
Sunstar Fruit Pty Ltd v Cosmo [1995] 2 Qd R 214
(Page 3)
Waltons Stores (Interstate) Ltd v Maher (1989) 164 CLR 387
Case(s) also cited:
Mannai Investments Co Ltd v Eagle Star Life Assurance Co Ltd [1997] AC 749
(Page 4)
1 MALCOLM CJ: This is an appeal from a judgment of Templeman J dated 18 July 2000 in an action in which the learned Judge ordered that the appellant pay the respondent damages for breach of contract to be assessed. The order was made following a separate trial of the issue of liability, pursuant to an order made by Master Sanderson on 23 July 1999.
2 The dispute the subject of the action arose out of a contract in writing between the appellant and the respondent dated 4 March 1989, by which the appellant agreed to sell and the respondent agreed to purchase a 96m x 36m shed erected on a farming property, "Manna Downs", at Darkan, then owned by the appellant, including a series of components and contents as described in a form of tender submitted by the respondent and accepted by the appellant.
3 In 1988 the appellant was carrying on the business of farming on the property. He had purchased the shed and had it erected for the purpose of producing high quality wool from Merino sheep. He ran into difficulties and realised that he would have to sell the property, which was mortgaged to his bank. The bank advised him to sell the shed separately from the farm. He was advised by his solicitors that the best way to achieve that was to ensure that the said shed was sold and removed from the property before the farm was sold and transferred to a purchaser. As the learned Judge commented, this was sound advice, but, in the result, the advice was not followed. The appellant instructed Elders to act for him in the sale of the shed. A tender document was prepared incorporating conditions of sale. It set out particulars of the shed and the fittings and plant incorporated in the sale referred to as:
"ALL those Lots described as follows:
LOT 1: The whole of the 96m x 36m shed including all Lots listed below from Lot 2 to Lot 15 (inclusive)."
4 These incorporated the walls, roof, roof trusses and other items comprising the basic structure, heavy duty galvanised steel stumps, internal penning, sheep pen panels, water troughs, feeders, tongue and groove flooring, wooden grading, a conveyor belt feeding system, together with various joints, bearers, beams and office partition framework.
5 For present purposes, it is enough to say that the original conditions of tender required tenders to be submitted accompanied by a cheque for 10 per cent of the purchase price before 12.00 noon on 22 December 1988. In the event of the tender being accepted, such sum was deemed to
(Page 5)
- be and to be retained by the appellant's agent as the first instalment of the deposit. The conditions of sale provided that in the event of a tender being accepted, the form of tender and the particulars and conditions of sale shall form a contract of sale between the purchaser and the vendor. The tender document incorporated a timetable for the removal of the lots comprising the contents of the shed by specific dates specified in January and February 1989 with the balance of the shed being removed by 17 March 1989. Clause 18 provided that:
"Time shall in all respects be deemed the essence of the contract."
7 At the time the tender was submitted, Elders was the agent instructed by the appellant to sell the shed. At that time, the manager of Elders Real Estate in Western Australia was Mr David Sinclair Jones, who was known as "Dudley" Jones. He retired in 1992. At the relevant time Elders' local agent at Darkan was a Mr Michael Dew.
8 The learned trial Judge found that on about 23 or 24 February 1989, Mr Anthony Gorman had a telephone conversation with Mr Jones. The substance of the conversation was that the shed was once again on offer. Mr Jones sought an increased offer from the respondent. Mr Anthony Gorman said that the respondent was still interested in purchasing the shed. Mr Gorman knew from the original tender documents that the shed would have to be removed by 17 March 1989. This was only two weeks away. The learned Judge found that it would not have been practicable to remove the shed by that date. Mr Gorman said that he raised with Mr Jones the issue of the removal date and told him that if the respondent was to proceed, it did not want to have a time limit. As the learned Judge put it:
"Mr Gorman's evidence, which I accept, was that he told Mr Jones, 'We did not want a time limit in which to remove the shed.' Mr Gorman said he could not remember Mr Jones' exact words in response, but the effect was that he, Mr Jones, could not see a problem with that.
(Page 6)
- As I say, I accept, Mr Gorman's evidence. It is consistent with the evidence given by Mr Jones, whose recollection was not, I think, as good as Mr Gorman's. Mr Jones said he recalled there was no date tied to the dismantling of the shed, as he put it. He said that the Gormans, for reasons known best to themselves, wanted a later dismantling and delivery date of the shed.
Mr Jones would not of course have been authorised, and there is no evidence that he was authorised, specifically to agree to an open-ended delivery date or indeed any particular delivery date. It was a matter about which he would have had to take instructions. Mr Jones said in broad terms, he recalled obtaining instructions from Mr Earnshaw, the [appellant], to the effect that a later delivery would be in order."
9 The learned Judge found that whatever the appellant said to Mr Jones when he took instructions between the discussion which the appellant had with Mr Anthony Gorman on about 27 or 28 February and the meeting attended by all parties on 4 March 1989, nothing was said to any of the Gormans to the effect that an open-ended contract would not be acceptable.
10 The learned Judge found that at a meeting at Manna Downs on 4 March 1989 an agreement was made for the sale of the shed by the appellant to the respondent. The meeting was attended by Mr Gorman senior, who did not give evidence, and by one of his sons, Mr Andrew Gorman. In addition to the appellant, the local Elders' agent, Mr Dew, was present.
11 On that date the agreement, in the form of the tender document with certain amendments became the contract between the parties. There were two versions of that document in evidence. Each one contained some alterations which had been initialled by Mr Andrew Gorman and by Mr Dew. Each document was signed by the appellant, whose signature was witnessed by Mr Dew. This circumstance was dealt with by the learned trial Judge as follows:
"The documents are not identical in the sense that they do not each contain the same alterations: and not all the alterations are initialled in precisely the same way. However, I am satisfied that the two documents were signed in the shed on 4 March 1989 in the following way: I find that alterations were made to
(Page 7)
- the documents as the parties worked through it so as to ensure that it reflected their true intention.
I should say that it is Mr Earnshaw's evidence that no alterations were made to the document on that day and that the only signatures which appeared on the two documents were his own and, I think, those of the two Mr Gormans appearing at the end of the document and Mr Dew's signature as a witness.
I have to decide this case on the balance of probabilities which is the basis on which I find all the material facts. If Mr Earnshaw is right then there is no explanation for the way in which the alterations were made to the documents and the initials of Mr Gorman and Mr Dew appended to them. It seems to me, with all respect to Mr Earnshaw, to be wholly improbable that the parties would have met on 4 March 1989 in the shed which was to be the subject of the sale, to reach agreement as to the conditions of sale and not then make the various amendments to the documents which gave effect to the agreement.
I note that Mr Dew did not give evidence. His absence is explained by the fact that he attended the court under subpoena from the [respondent] who did not call him to give evidence. However, he could have been called by the [appellant], to support his evidence if it were the case that no amendments were made to the document on that day. But he was not called and gave, therefore, no such evidence."
12 The learned Judge also noted that Mr Gorman senior did not give evidence although he was present when the document was completed and signed. His Honour accepted an explanation given both by Mr Anthony Gorman and Mr Andrew Gorman that Mr Gorman senior was then 80 years of age and was very frail following two strokes and three heart attacks "or the other way around". His Honour declined to draw any adverse inference from the fact that he did not give evidence.
13 The original tender document provided for the following under the heading "DEMOLITION AND REMOVAL":
"20 (a) The purchaser of Lot 1 covenants that he will remove the Lot by 17th March, 1989.
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- (b) The purchaser/s of Lot/s 4, 5, 6, 7, 10, 13 and 14 covenants that he will remove the Lot/s by 20th January, 1989.
(c) The purchaser/s of Lot/s 8, 9, 11 and 12 covenants that he will remove the Lot/s by 10th February, 1989.
(d) The purchaser of Lot 3 covenants that he will remove the Lot by 17th February, 1989.
(e) The purchaser of Lot 2 covenants that he will remove the Lot by 17th March, 1989."
14 The learned Judge found that in each of the documents signed on 4 March 1989, cl 20 was struck out by four diagonal lines. In one document the striking out was initialled by Mr Dew, in the other initialled by Mr Dew and by Mr Andrew Gorman. Not all of the amendments were initialled by both representatives, but the learned Judge found "nothing sinister in that". His Honour concluded that, in the process of passing the documents back and forth for amendment and initialling, some simply got overlooked.
15 The learned Judge then considered the significance of the deletion of cl 20. This matter was dealt with by the learned Judge as follows:
"Mr Andrew Gorman gave evidence about that. He said that during the course of the meeting he made it clear that the plaintiff's offer was directly related to their ability to be able to remove the shed when it was suitable to them to do so: that is, when they were ready to re-erect rather than dismantling the shed and taking it down for storage.
Mr Gorman said his recollection was that he discussed that with Mr Dennis Earnshaw himself. He thought it was said to Mr Earnshaw, because he recalled Mr Earnshaw saying during that conversation, that he did not want only part of the structure removed; and that once demolition had been started, he wanted the whole of the structure removed in one go.
Mr Andrew Gorman admitted in a witness statement that he did not have a recollection of specific details of the conversation which took place on that day. That was explored with him in cross-examination when he said that he meant that he had not, for example, any recollection of what they had for lunch on that
(Page 9)
- day. However, he was quite clear in his evidence about that conversation with Mr Earnshaw. I am satisfied that that conversation did take place and I accept Mr Gorman's evidence.
It was Mr Earnshaw's evidence that he was requested by Mr Gorman (and he thought it was Mr Gorman senior) that there be an extension of time for removal of the shed of three months. He denied that there was any agreement between him and the Gormans that the time for removal of the shed was unlimited. Mr Earnshaw said he agreed to a three month extension.
It seems to me unlikely that that was the agreement. If it had been, then it would have been very easy to amend cl 20A; not by striking it out, but by simply inserting the date 4 June 1989 in place of 17 March 1989.
That was not done; and Mr Earnshaw was not able to explain why it was not done. I accept, of course, that it would have been equally possible to have written in a clause to the effect that there was no time limit for removal of the shed; and that that was not done. However, those involved on the day were not legal draftsmen and I think that the formulation of an unlimited time clause may have given more difficulty. It certainly would have given more difficulty than simply inserting one date in place of another.
I think that, on the balance of probabilities, the fact that cl 20 was deleted in its entirety reflected the intention of the parties and an agreement between the parties that the time for removal of the shed was to be unlimited.
That is consistent with the evidence of both Mr Tony Gorman and Mr Andrew Gorman that the plaintiffs did not want to have to remove the shed until they had a particular use for it. And it is consistent, as I have said, with the evidence about the discussion between Mr Tony Gorman and Mr Jones and my finding that there was nothing said to the Gormans after that discussion to the effect that no such unlimited time would be allowed.
I think that the fact that no formal response was received from Mr Jones as a result of Mr Tony Gorman's telephone conversation on 27 or 28 February was the reason for the matter
(Page 10)
- being raised when the meeting took place on 4 March. I think the Gormans raised it then because that was the only basis on which they were prepared to increase their offer from $93,000 to $100,000. And they wanted to be sure that they would have an unlimited time in which to remove the shed.
That, I find, was agreed by Mr Dennis Earnshaw: and that was then the contract between them. Mr Earnshaw, as I have said, was under some pressure, as he quite frankly accepted in the course of his evidence. The Gormans' offer of $100,000 was, he said, some $20,000 or so more than the next highest offer. The Gormans were there with their chequebook ready to pay $100,000 which Mr Earnshaw needed somewhat urgently I think that in those circumstance he was prepared to accept the unlimited term in order to ensure that he received the money on that date, which indeed he did."
16 Grounds 1 to 5 inclusive of the grounds of appeal are directed to challenge the finding by the learned trial Judge that the parties agreed that the respondent would have an unlimited time within which to demolish and remove the shed.
17 It was common ground that the respondent did not want to be bound to remove the shed within the original time frame specified in the tender document. Mr Anthony Gorman told Mr Jones that if the respondent was to increase the offer, "he wouldn't want a time limit on taking it away". In cross-examination he said that the respondent needed more than two weeks to pull down the shed and there was no time limit put on the removal. Mr Jones said that the appellant agreed that a later delivery date would be in order. In the result, the timetable for delivery in the tender document was simply deleted and nothing substituted. This produced a situation in which no time limit was specified.
18 Ground 1 of the grounds of appeal contended that, after correctly finding that the evidence of Mr Anthony Gorman was consistent with that of Mr Jones, the trial Judge "erred in law" in finding that the effect of that evidence was that Mr Jones understood that the respondent wanted an unlimited time to demolish and remove the shed. The finding, of course, was a finding of fact rather than a conclusion of law.
19 Ground 2 contended that, in the alternative to ground 1, there was no evidence or, alternatively, insufficient evidence to support the findings of the learned trial Judge that the respondent wanted to be sure that it had an
(Page 11)
- unlimited time to remove the shed. In addition, it was contended that there was no evidence to support the finding that the respondent raised the time limited for the removal of the shed because it was only prepared to increase its offer to $100,000 if it had an unlimited time within which to do so.
20 As has been seen, Mr Anthony Gorman made it clear to Mr Jones that an unlimited time was required by the respondent. At the meeting on 4 March 1989, when the appellant was present, Mr Andrew Gorman made it clear that the respondent's increased offer was, as his Honour found, directly related to the ability of the respondent to be able to remove the shed when it was suitable to them to do so. This evidence was accepted by the learned trial Judge.
21 The appellant gave evidence that he was requested by Mr Gorman senior that there be an extension of time for removal of the shed of three months, to which he agreed. As has been seen, this evidence was rejected by the learned Judge, who found that the intention and agreement of the parties was that the time for removal of the shed was to be unlimited.
22 It follows that grounds 1 and 2 fail.
23 Ground 3 contended that the learned trial Judge "erred in law" in finding that the deletion of cl 20 in its entirety "reflected an intention of the parties and an agreement between the parties that the time for removal of the shed was to be unlimited". In the circumstances, I am of the opinion the result of the deletion of cl 20 was that, both as a matter of construction and as a matter of fact, the contract specified no time within which the removal of the shed from the appellant's property was required. For these reasons ground 3 fails.
24 Ground 4 contended in effect that the learned trial Judge "erred in law" in relying on the subjective intention of the respondent (that it did not want to remove the shed until it had a particular use (for it) to construe the terms of the agreement. It was also contended that the error extended to relying on the discussion between Mr Anthony Gorman and Mr Jones, when the substance of that was never communicated to the appellant and the fact that "nothing was said to the respondent to the effect that an unlimited time would not be allowed". The essence of the relevant conversations has already been discussed in relation to ground 3. It was also contended in support of ground 4 that the learned Judge "erred in law" in relying on the fact that nothing was said to the respondent to the effect that an unlimited time would not be allowed to complete the
(Page 12)
- removal of the shed. In my opinion, the circumstances outlined, including the deletion of cl 20 of the original tender document, led inevitably to the conclusion that no time limit for removal of the shed was specified in the contract.
25 Ground 5 of the grounds of appeal contended that the learned Judge "erred in law" in finding that the appellant orally agreed with the respondent, represented by Mr Andrew Gorman, to grant to the respondent an unlimited time within which to demolish and remove the shed. In my opinion ground 5 adds nothing of substance to the earlier grounds. Ground 5(b) contends that the oral term relied upon was never pleaded. The oral term pleaded in par 4 of the statement of claim was:
"It was an oral term of the contract that the [appellant] would allow the [respondent] to remove the lots at any time from the making of the contract."
26 The general rule in the law of contract is that if a contract does not state a specific time for performance, performance by any particular time is not an essential term. Thus, a promise "to proceed with all due despatch" is non-essential: DTR Nominees Pty Ltd v Mona Homes Pty Ltd (1978) 138 CLR 423 at 430 - 431 per Stephen, Mason and Jacobs JJ. Where a contract fixes no time for performance, with the result that a reasonable time is to be implied, the obligation to perform in that time is unlikely to be held to be an essential term: Laurinda Pty Ltd v Capalaba Park Shopping Centre Pty Ltd (1989) 166 CLR 623; cf Ellmore (Maitland) Pty Ltd v Tull (1995) 7 BPR 14,035 per Mahoney JA at 14,307 - 14,308.
27 It is also significant that, if time is not of the essence of a contract or has ceased to be of the essence of a contract, the party not in default cannot terminate a contract for delay in performance without first giving notice requiring performance within a specified time. If the notice is not complied with, the contract may be terminated: Carr v JA Berriman Pty Ltd (1953) 89 CLR 327 at 348 - 349 per Fullagar J; Balog v Crestani (1975) 132 CLR 289 at 296 per Gibbs J; Green v Somerville (1979) 141 CLR 594; Louinder v Leis (1982) 149 CLR 509; Ciavarella v Balmer (1983) 57 ALJR 632; and Laurinda Pty Ltd v Capalaba Park Shopping Centre Pty Ltd, supra. The time allowed must be reasonable and the onus of proof of reasonableness is on the party giving the notice: Sunstar Fruit Pty Ltd v Cosmo [1995] 2 Qd R 214; and see Laurinda Pty Ltd v Capalaba Park Shopping Centre Pty Ltd at 638 - 640 per Mason CJ; and at 647 per Brennan J. It is important to bear in mind that this would be
(Page 13)
- the case, even if the contract between the parties in the present case were to be construed as having initially required removal of the shed within a reasonable time. In my opinion, the retention of the provision in cl 18 of the tender document that time was of the essence of the contract was of no application to the removal of the shed by reason of the deletion of the timetable for removal which was originally cl 20. It follows, in my opinion, that, given the circumstances, whether the time was unlimited or performance was required within a reasonable time, time was not of the essence of the contract, so that the contract could not be terminated by the appellant without first requiring performance within a reasonable time specified by notice clearly indicating that, if the notice was not complied with, the contract may be terminated. The party giving such a notice must be ready and willing to perform at the time: Halkidis v Bugeia [1974] 1 NSWLR 423; and McNally v Waitzer [1981] 1 NSWLR 294. It is apparent in this context that grounds 4 and 5 of the grounds of appeal cannot succeed.
28 Ground 6 contended that the learned Judge erred in law in finding that it was a term of the agreement that the shed could not be removed piecemeal, but that once removal had commenced, the task had to be completed in one exercise, on the ground that:
(a) the agreement was in writing and neither expressly nor by implication contained a provision to this effect; and
(b) such a term was not pleaded.
This aspect of ground 6 was not argued by the appellant. No doubt this was due to the fact that both the appellant and his brother, Donald Ross Earnshaw (who had become the landowner), clearly permitted or did not object to the piecemeal removal of the shed.
29 It was also contended in ground 6 that the learned Judge should have found that the agreement had to be amended to give the respondent a reasonable time within which to demolish and remove the shed and a construction of the agreement granting the respondent "a right in perpetuity" to enter the land to demolish and remove the shed was in error. In my opinion, this ground was misconceived because a right to do something within an unlimited time is not the equivalent of a right to do something in perpetuity. The right to do something within an unlimited time, as already explained, is a right to do the thing in circumstances where time is not of the essence.
30 Ground 7 contended that the learned trial Judge should have found that:
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- "(a) the agreement had to be amended to give the respondent (plaintiff) a reasonable time within which to demolish and remove the shed;
(b) a request that no time limit be specified is entirely different to a request that there be an unlimited time;
(c) to construe the agreement as granting to the respondent (plaintiff) a right in perpetuity to enter the land to demolish and remove the shed would be inconsistent with:
(i) the fact then known to all parties that the appellant (first defendant) had agreed to sell the land to the second defendant;
(ii) the nature of the agreement namely the right to enter upon the land for the purpose of demolishing and removing the shed;
(iii) the express term of the said agreement:
A. after clause 16 and before clause 17 as to the rights of the appellant (first defendant) arising out of delay or perceived delay by the respondent (plaintiff) in demolishing and removing the shed from the land; and
B. prior to amendment that contemplated a period of 2 months to demolish and remove the shed;
C. by clause 18 in effect that time be of the essence in all respects;
(i) the respondent (plaintiff) desire for an open ended time limit within which to demolish and remove the shed so that it could remove the shed when it was ready to re-erect rather than dismantling the shed and taking it down for storage;
(Page 15)
- (ii) the appellant (first defendant) concern that once demolition had been started he wanted the whole of the structure to be removed in one go;
(iii) the respondent's (plaintiff's) request to Mr Jones that there be no specific time limit and Mr Jones' advice to the appellant (first defendant) that the respondent (plaintiff) wanted a longer time;
(iv) the agreement for the sale of the land to the second defendant;
(v) the right of the appellant (first defendant) or his successor in title to use and enjoy the land on which the shed was constructed;
- can and should be taken into account in ascertaining what was a reasonable time to allow to the respondent (plaintiff) to remove the shed, but not so as to change the fundamental nature of the agreement;
(e) a reasonable time for the demolition and removal of the shed had expired by November 1994."
31 It was submitted on behalf of the appellant at the same time that evidence of the oral negotiations in relation to the agreement was inadmissible as an aid to its construction. In this context, reliance was placed on Codelfa Construction Pty Ltd v State Rail Authority of NSW (1982) 149 CLR 337 at 352 - 353 per Mason J. His Honour pointed out at 352 that the true rule is that evidence of surrounding circumstances is admissible to assist in the interpretation of the contract if the language is ambiguous or susceptible of more than one meaning. It is not admissible to contradict the language of the contract when it has a plain meaning. Prior negotiations will tend to establish objective background facts known to both parties. His Honour specifically pointed out at 352 that:
"If it transpires that the parties have refused to include in the contract a provision which would give effect to the presumed intention of the parties in their position it may be proper to receive evidence of that refusal,"
32 In this case, it is very significant that the parties agreed to delete cl 20 of the conditions of tender. It is also significant that the background to this was a proposal by the respondent to increase the offer from
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- $93,000 to $100,000 on the basis that there would be no time limit for removal. This was reflected in the pleading in par 4 of the statement of claim that it was an oral term of the contract that the appellant would allow the respondent to remove "the lots" at any time from the making of the contract. The particulars relied upon the conversation between Mr Anthony Gorman and Mr Jones as evidencing the agreement that the appellant would allow the respondent "to remove any of the lots at any time in the future", if the respondent agreed to purchase the lots. In the result, as has been seen, the learned Judge accepted the evidence of Mr Andrew Gorman regarding a conversation with the appellant on 4 March 1989 which established that the time for removal of the shed was unlimited. Such a conversation varied or added to the written contract.
33 The general rule is that parol evidence is not admissible to add to, vary or contradict a written contract, but there is an exception in circumstances giving rise to an estoppel: Waltons Stores (Interstate) Ltd v Maher (1989) 164 CLR 387. In that case at 406 - 407 Mason CJ and Wilson J and Brennan J at 420 held that if the promisee's reliance had been encouraged or induced by the other party, then there is unconscionable conduct if the promisor reneges. A relevant example is St E Promotions Pty Ltd v Tobin Bros Pty Ltd (1994) 122 ALR 637 in which a tenant was led to believe that there was no need formally to exercise an option to renew; see also Re Ferdinando; Ex parte Australia and New Zealand Banking Group Ltd (1993) 42 FCR 243.
34 Counsel for the appellant relied upon the observations of Lord Hoffman in Investors Compensation Scheme Ltd v West Bromich Building Society [1998] 2 WLR 896 at 912 - 913 (with whom Lords Goff, Hope and Clyde concurred), namely:
"(1) Interpretation is the ascertainment of the meaning which the document would convey to a reasonable person having all the background knowledge which would reasonably have been available to the parties in the situation in which they were at the time of the contract.
(2) The background was famously referred to by Lord Wilberforce as the 'matrix of fact', but this phrase is, if anything, an understated description of what the background may include. Subject to the requirement that it should have been reasonably available to the parties and to the exception to be mentioned next, it includes absolutely anything which would have affected the way
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- in which the language of the document would have been understood by a reasonable man.
- (3) The law excludes from the admissible background the previous negotiations of the parties and their declarations of subjective intent. They are admissible only in an action for rectification. The law makes this distinction for reasons of practical policy and, in this respect only, legal interpretation differs from the way we would interpret utterances in ordinary life. The boundaries of this exception are in some respects unclear. But this is not the occasion on which to explore them.
(4) The meaning which a document (or any other utterance) would convey to a reasonable man is not the same thing as the meaning of its words. The meaning of words is a matter of dictionaries and grammars; the meaning of the document is what the parties using those words against the relevant background would reasonably have been understood to mean. The background may not merely enable the reasonable man to choose between the possible meanings of words which are ambiguous but even (as occasionally happens in ordinary life) to conclude that the parties must, for whatever reason, have used the wrong words or syntax: see Mannai Investments Co Ltd v Eagle Star Life Assurance Co Ltd [1997] AC 749.
(5) The 'rule' that words should be given their 'natural and ordinary meaning' reflects the common sense proposition that we do not easily accept that people have made linguistic mistakes, particularly in formal documents. On the other hand, if one would nevertheless conclude from the background that something must have gone wrong with the language, the law does not require judges to attribute to the parties an intention which they plainly could not have had."
35 It is apparent that the limitation of the exception to an action for rectification is too limited as it does not extend to circumstances giving rise to an estoppel, for example.
36 In the present case, but for the alleged oral agreement regarding the absence of the time limit, the striking out of the time clause 20 would
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- have the effect that it would be implied that the shed would have to be removed within a reasonable time. What would be a reasonable time must depend upon the circumstances and the conduct of the parties. Not long before the appellant entered into the contract for the sale of the shed to the respondent on 4 March 1989, the appellant had also entered into a contract to sell the Manna Downs property to his brother, Donald Ross Earnshaw ("Ross"). That contract was in the form of an offer and acceptance dated 19 February 1989 on a standard form completed in the appellant's handwriting. The subject matter of the sale was described by hand as follows:
"Land, house, plus two by 500-tonne silos, excluding 36-metre by 96-metre sheep shed, plus 30-tonne silo."
38 The learned Judge did not find it necessary to make any finding about what passed between the appellant and Ross. Settlement of the sale of "Manna Downs" to Ross took place on 14 June 1989. Subsequently, various members of the Gorman family went to the farm from time to time to remove the contents of the shed and a substantial part, if not all, of the flooring. Substantial work of this nature was done in 1990 or 1991. During that period the Gormans kept a caravan on the farm in which they camped while working and left their tools in it when they were not present. The learned Judge found that the caravan was removed some time in 1991, but no further work was carried out after that. What then happened was described by the learned Judge as follows:
"It was Mr Andrew Gorman's evidence, which I accept, that he did from time to time call in on the property to see Mr Ross Earnshaw, the second defendant. He did so to maintain some kind of presence and to inform Mr Earnshaw that the plaintiffs were still around, as he put it. Before each visit by the plaintiff or their representatives, one of the Gorman sons would telephone to Mr Ross Earnshaw to say that they would be coming and that they would be wanting to carry out work. That was done, Mr Gorman said, as a matter of courtesy rather than
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- to obtain permission, because the plaintiff was of the view that no permission was required because of the terms of the contract between it and Mr Dennis Earnshaw."
39 Nothing then happened until the latter part of 1994 when Mr Andrew Gorman put up a proposal to the other members of the family who were shareholders in the respondent regarding the removal of the shed and its re-erection on a site at Midvale near Midland Junction. In November 1994 he decided to visit Manna Downs to take some photographs of the shed for the purpose he had in mind. What then happened was described by the learned trial Judge as follows:
"As was his practice, he telephoned in advance and then called in at the property, this being, I think the evidence was, in November of 1994.
Mr Ross Earnshaw on that occasion told him in substance that the plaintiff had had long enough time in which to remove the shed and that he would not permit any further access to Manna Downs for that purpose.
That attitude was maintained subsequently. A letter was written by Mr Gorman senior on 20 December 1994 to Mr Ross Earnshaw, seeking permission to enter the property between then and the end of February to remove the shed. There was a response on 9 January 1995 from Mr Earnshaw, saying that the plaintiff had no permission whatsoever to enter the property.
The action was commenced sometime in 1995. For reasons which have not been explained the matter has now, some nearly 5 years later, come to trial."
40 The learned trial Judge rejected a contention on the part of the appellant and Ross that it was an implied term that the shed would be removed within a reasonable time and that, on any view, that time had expired. His Honour held that that defence could not stand as between the appellant and the respondent in the light of his conclusion that the contract between them was for the removal of the shed:
"… without any time limit being imposed. The result is therefore that as between the [respondent] and the [appellant], the [respondent] is entitled to enter on the land and remove the shed."
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41 In my opinion, the circumstances of this case were such that, as between the appellant and the respondent, either the time for the removal of the shed was unlimited or the respondent was required to remove the shed within a reasonable time. In either case the circumstances were clearly such that time was not of the essence of the contract, so far as removal of the shed was concerned. As has already been seen, in such a case a party not in default cannot terminate a contract for delay in performance without first giving a notice requiring performance within a specified time, which must be reasonable. The appellant gave no such notice. The action by Ross to prevent access by the respondent to Manna Downs was an exercise by him of his right as the owner of the land. It did not put him in breach of any obligation. There is no appeal against the dismissal of the respondent's action against him.
42 It follows from this that, in my opinion, the decision of the learned Judge was correct, whether the time for performance was unlimited or whether performance was required within a reasonable time. In either case, the appellant could not terminate without first giving notice requiring performance within a reasonable time. At material times after the conclusion of the sale of Manna Downs to Ross the appellant had no basis on which to compel Ross to permit the respondent to have access to the land to remove the shed. A party giving a notice requiring another party to perform within a reasonable time must be ready, willing and able to perform the contract. When the respondent was refused access by Ross, the appellant was not in a position to compel him to give access to the respondent. That was unfortunate, because it left him in a position in which he was unable to perform his contract with the respondent.
43 While the time lapse between 1990 or 1991 and November 1994 when access was sought to complete the removal of the shed was substantial, it was not contended that the respondent's failure to take steps to complete the removal of the shed constituted an implied repudiation of the contract or otherwise evidenced an inability or unwillingness to perform, so as to give rise to a right on the part of the appellant to terminate the contract without notice: Laurinda Pty Ltd v Capalaba Park Shopping Centre Pty Ltd, supra; and Shevill v Builders Licensing Board (1982) 149 CLR 620. It has been accepted that procrastination may be so gross as to amount to repudiation. In Carr v JA Berriman Pty Ltd at 349 Fullagar J gave an example which is relevant to the present case where one party says, in effect:
"I am not going to do the thing at all unless and until I find it convenient to do it."
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44 The present case may well have been a case of that kind, but no steps were taken by the appellant to procure performance by the respondent within a reasonable time or otherwise.
45 The appellant's relevant defences to the respondent's claim for damages were, first, that on the proper construction of the agreement, the right to demolish and remove the shed expired upon the date of settlement (i.e. completion) of the sale of Manna Downs to Ross on 3 April 1989. Clearly, on any view, that defence failed. Alternatively, the appellant pleaded that it was an implied term of the agreement that the respondent had a reasonable time from the date of the agreement, namely, 4 March 1989, within which to enter the land to demolish and remove the shed. It was pleaded that a reasonable time was within three months, alternatively six months, alternatively not more than 67 months after the date of the agreement, i.e. by 4 October 1996. As previously indicated, the difficulty with this defence is that the time for performance was not in the end limited by the appellant giving a notice specifying a reasonable time by which the respondent should demolish and remove the shed. In the circumstances, the contract remained on foot as between the appellant and the respondent. The inevitable result of that was that the appellant was in breach of the agreement and liable to the respondent for damages for breach of contract to be assessed, as his Honour found.
46 Finally, ground 8 contended that the learned Judge erred in failing to find that in or about 1994 the respondent assigned any right it had in the shed to Mr Andrew Gorman.
47 Mr Anthony Gorman accepted that Mr Andrew Gorman had made a statement to the effect that "the family" had agreed "to give the shed to him". The evidence of Mr Anthony Gorman was that Mr Andrew Gorman said he wanted to take down the shed and re-erect it in Midland for another party and he would pay the family back the $100,000 so that the shed was his. The evidence of Mr Andrew Gorman makes it clear that there was an oral agreement that he have the opportunity to find a purchaser for the shed to put it on an industrial block in the metropolitan area, he could do that and pay the family back "what it owes" and develop the property.
48 Clearly this was a preliminary agreement in principle which did not amount to or constitute an assignment of the respondent's rights under the contract with the appellant. There is no substance in ground 8.
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49 For these reasons, I am of the opinion that the appeal should be dismissed.
50 WALLWORK J: I agree with the reasons for judgment of Malcolm CJ and to the order which is proposed by his Honour. There is nothing I wish to add.
51 STEIN AJ: I agree with the reasons for judgment of the Chief Justice which I had the benefit of reading in draft. The appeal should be dismissed.
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