Hawkins, Hawkins and HF Holdings Pty Ltd v Pender Bros Pty Limited and Moran

[1995] QCA 382

[1995] QCA 382

IN THE COURT OF APPEAL

SUPREME COURT OF QUEENSLAND

Appeal No. 12 of 1995

Brisbane

[Hawkins v. Pender Bros Pty Ltd]

BETWEEN:

VICTOR STANLEY HAWKINS and OLIVE ANN HAWKINS

(First Respondents)

First Plaintiffs

AND:

H.F. HOLDINGS PTY LTD
(Second Respondent)

Second Plaintiff

AND

PENDER BROS PTY LIMITED
(First Appellant)

First Defendant

AND

DOUGLAS JOHN MORAN
(Second Appellant)

Second Defendant

Appeal No. 21 of 1995

BETWEEN:

VICTOR STANLEY HAWKINS and OLIVE ANN HAWKINS

(Respondents)

First Plaintiffs

AND

PENDER BROS. PTY LIMITED

(Appellant)

First Defendant

Macrossan CJ McPherson JA Helman J

Judgment delivered 29/08/95

Separate reasons for judgment by each member of the Court. All concurring as to the orders to be made.

APPEAL DISMISSED WITH COSTS

CATCHWORDS:	DEED OF AGREEMENT - Whether breach of obligations - whether triable issue - whether failure by developer to use "best endeavours" to secure development approvals, consents and permits - whether repudiation of contractual obligations.
Counsel:	Mr D. Andrews for the appellants. Mr R. Derrington for the respondents.
Solicitors:	Barker Gosling for the appellants. Bennett & Philp for the respondents.

Hearing Date: 18/07/1995

IN THE COURT OF APPEAL

SUPREME COURT OF QUEENSLAND

Appeal No. 12 of 1995

Brisbane

Before Macrossan CJ

McPherson JA

Helman J

[Hawkins v. Pender Bros Pty Ltd]

BETWEEN:

VICTOR STANLEY HAWKINS and OLIVE ANN HAWKINS

(First Respondents)

First Plaintiffs

AND:

H.F. HOLDINGS PTY LTD
(Second Respondent)

Second Plaintiff

AND

PENDER BROS PTY LIMITED
(First Appellant)

First Defendant

AND

DOUGLAS JOHN MORAN
(Second Appellant)

Second Defendant

Appeal No. 21 of 1995

BETWEEN:

VICTOR STANLEY HAWKINS and OLIVE ANN HAWKINS

(Respondents)

First Plaintiffs

AND

PENDER BROS. PTY LIMITED

(Appellant)

First Defendant

REASONS FOR JUDGMENT - THE CHIEF JUSTICE

Judgment delivered 29/08/1995

Having had the advantage of reading reasons prepared by Helman J. I can, like McPherson

J.A., indicate my general agreement with those reasons. However, I would base my conclusion

upon somewhat narrower grounds than those stated by Helman J.

In a case like the present there must be some concentration upon the question whether a

triable issue is shown. The clearest indication that the appellants have failed to show this is provided

by the circumstance that it was the action of the company, the first appellant, which has had the

effect that the development cannot, for the foreseeable future, receive funding and therefore cannot

proceed. The situation is that the first appellant has, by its own actions, put it out of its power to

discharge its contractual obligations. I agree with McPherson J.A. that the consequential

repudiation which is involved in this means that an entitlement to defend is not demonstrated.

I agree that the appeal should be dismissed with costs.

IN THE COURT OF APPEAL

SUPREME COURT OF QUEENSLAND

Appeal No. 12 of 1995

Brisbane

Before Macrossan C.J.

McPherson J.A.

Helman J.

[Hawkins v. Pender Bros. Pty. Ltd.]

BETWEEN

VICTOR STANLEY HAWKINS and OLIVE ANN HAWKINS

(First Respondents) First Plaintiffs

AND

H.F. HOLDINGS PTY. LTD.

(Second Respondent) Second Plaintiff

AND

PENDER BROS. PTY. LIMITED

(First Appellant) First Defendant

AND

DOUGLAS JOHN MORAN

(Second Appellant) Second Defendant

Appeal No. 21 of 1995

BETWEEN

VICTOR STANLEY HAWKINS and OLIVE ANN HAWKINS

(Respondents) First Plaintiffs

AND

PENDER BROS. PTY. LIMITED

(Appellant) First Defendant

REASONS FOR JUDGMENT - McPHERSON J.A.

Judgment delivered the 29th day of August 1995

I agree generally with the reasons for judgment of Helman J., which I have had the

advantage of reading. However, I prefer the approach that, however the matter is viewed, the first

defendant has long since put it out of its power to carry out the development and construction of the

retirement village at Greenbank envisaged in the deed, and so has repudiated its contractual

obligations to the plaintiff. That remains so whether the question is considered in the context of the

obligations specifically undertaken in cl.4 or under the general law.

The corporate first defendant is a member of a group of companies described as the Moran

Health Care Group, of which the holding company is Moran Health Group Pty. Limited. In 1990

the holding company became involved in litigation over a joint venture involving construction and

operation of a private hospital at Tugun. The dispute is said to have consumed a major proportion

of the Group's finances throughout 1990 and 1991. The litigation was settled on 1 November

1991.

The affidavit of Mr Shane Moran, a director of the second defendant, from which this

account is taken, goes on in para.78 to explain that the terms of settlement were that the Group of

companies including the first defendant should be "offered" a Facility Agreement with Westpac Bank

Corporation. The Facility Agreement was entered into in December 1991. Mr Moran's affidavit

proceeds:

"Under this Facility certain restrictions were placed on Moran Health Care Group and its subsidiaries including the limitation of development of properties other than as approved by Westpac Banking Corporation from time to time or as approved at the date of the Facility Agreement. The proposed development of the Property was not an approved development under the Facility Agreement which restricted expenditure to hospital and nursing home projects only. Accordingly no finance was available for the development and subsequent sale of the project. The Facility Agreement required security to be taken over all of the private hospitals, nursing homes, retirement villages and vacant land of Moran Health Care Group Pty. Limited and its subsidiaries, both in New South Wales and Queensland including the Property. The Facility Agreement does not provide for the release of any of these properties for the purpose of obtaining additional finance".

The "Property" referred to is the land at Greenbank on which the retirement village was to be built.

The result is plain enough. By entering into the Facility Agreement the first defendant

disabled itself from obtaining finance to carry out the development and construction of the retirement

village at Greenbank. It was not a project for which finance is available under the Agreement.

Furthermore, the Agreement provided for security to be taken over all the land of the Moran Group

including that of subsidiaries like the first defendant. Thus, the first defendant is unable to raise

finance on the security of its land at Greenbank in order to carry out the development and

construction of the retirement village there. It has, clearly enough, thus disabled itself in the

foreseeable future from performing its contractual obligations under the deed as well as under the

general law.

A party is not entitled to rely on its own acts as an excuse for failing to perform its

contractual obligations. By its actions the first defendant has therefore effectively repudiated its

contract with the plaintiff: cf. Rawson v. Hobbes (1961) 107 C.L.R. 466, 480-482. That being so,

the provisions of cl.3 of the bill of incumbrance became operative in favour of the plaintiffs, with the

consequence that they are entitled to the sum of $100,000 payable to them pursuant to cl.2 of the

deed becoming recoverable. There is no dispute about this aspect of the matter.

The case is not one in which it is possible to argue that there was or is a triable issue. The

first defendant's own material in par.70 of Mr Moran's affidavit establishes that the plaintiffs are

entitled to judgment in the action. The first defendant cannot claim to be taken by surprise by the

contents of its own material. The impact of the undisputed matters it establishes in the contractual

obligations is primarily a question of law capable of being readily resolved, as it ought to be, without

the need for a trial.

The appeal should be dismissed with costs.

IN THE COURT OF APPEAL

SUPREME COURT OF QUEENSLAND

Appeal No. 12 of 1995

Brisbane

Before Macrossan C.J.

McPherson J.A.

Helman J.

[Hawkins & Anor v. H.F. Holdings Pty Ltd & Ors]

BETWEEN:

VICTOR STANLEY HAWKINS and OLIVE ANN HAWKINS

(First Respondents) First Plaintiffs

AND:

H.F. HOLDINGS PTY LTD

(Second Respondent) Second Plaintiff

AND:

PENDER BROS. PTY LIMITED

(First Appellant) First Defendant

AND:

DOUGLAS JOHN MORAN

(Second Appellant) Second Defendant

Appeal No. 21 of 1995

BETWEEN:

VICTOR STANLEY HAWKINS and OLIVE ANN HAWKINS

(Respondents) First Plaintiffs

AND:

PENDER BROS. PTY LIMITED

(Appellant) First Defendant

REASONS FOR JUDGMENT - HELMAN J.

Judgment delivered 29 August 1995

Two appeals, nos. 12 and 21 of 1995, are before the court. They were heard together by consent of the parties. The matters of substance in dispute are the same in each appeal. The orders

appealed from were pronounced in the same action, which was begun by writ no. 939 of 1993,

issued on 22 June 1993. In each case the order was made by the learned chamber judge on an

application for summary judgment.

In appeal no. 12 of 1995 the first and second defendants appeal from an order made on 20

December 1994 that judgment for $100,000.00 be entered in favour of the first plaintiffs against the

second defendant.

In appeal no. 21 of 1995 the first defendant appeals from an order made on 18 January

1995 that judgment for $100,000.00 be entered in favour of the first plaintiffs against the first

defendant.

On 30 October 1981 the first defendant, the first plaintiffs, and the second defendant

executed a deed, in which the first defendant was referred to as "the Company", the first plaintiffs as

"the Consultant", and the second defendant as "the Guarantor". The deed recited that the first

defendant had requested the first plaintiffs to render to it consulting services in relation to the

development and construction by it of a nursing home and retirement village on land at Greenbank,

Queensland which the first plaintiffs had agreed to do on the terms and conditions set out in the

deed. It is the retirement village which is relevant to this appeal. The deed was varied by

subsequent deeds, but not in any way material to the issues before us.

Clause 2 of the deed provided that in consideration of the first plaintiffs providing the

consulting services the first defendant agreed to pay their fees as follows:-

"(a)	The sum of Five thousand dollars ($5,000.00) upon the completion of a certain Contract of Sale by the Company to H.F. Holdings Pty. Ltd. relating to part of the land comprising the second property, and
(b)	The sum of One hundred thousand dollars ($100,000.00) upon the sale by the Company of the first property or the second property or any part of either of such properties (except a sale of an individual Retirement Village Unit), provided that such fee shall not be payable if at the date of any such sale there is not in existence all approvals consents permits and licenses in favour of or held by any person relating to the land sold or relating to any rights that may be exercised by any person in respect of the land sold, that would enable such person to construct and/or operate a Nursing Home with a Commonwealth subsidy and or Retirement Village upon the land sold or upon the land sold and any other adjoining land, or
(c)	The sum of One hundred thousand dollars ($100,000.00) upon the completion by the Company of the last sale or leasing of a Unit in the said retirement village."

The first and second properties referred to in para. (b) were parcels of land in respect of which the

first defendant had entered into contracts of sale on the day the deed was executed.

Clause 4 of the deed was as follows:-

"4. The Company covenants with the Consultant as follows:-

(a)         To use its best endeavours to obtain and retain all necessary approvals, consents and permits to erect a Nursing Home and Retirement Village on the first property and/or the second property,

(b)        To proceed with all due expedition in the construction of the said Nursing Home and Retirement Village,

(c)         To use its best endeavours upon the completion of the construction of the Retirement Village to effect sales and/or leases of all the individual units."

Clause 11 concerned the second defendant's liability:

"11. The Guarantor agrees that the Consultant may treat the Guarantor in all respects as though the Guarantor was jointly and severally liable with the Company for the performance of all the obligations contained herein or under the said Bill of Encumbrance on the part of the Company, instead of merely being surety therefor."

The deed required the first defendant to grant to the first plaintiffs a registered first bill of

encumbrance over the land. In the bill was a covenant that the first defendant would promptly and

without demand pay to the first plaintiffs all sums payable to them under the deed and would

promptly perform all its obligations under the deed. Clause 3 of the bill contained the following

covenant by the first defendant:-

"3. That if the encumbrancer shall make any default in the payment of any moneys or in the performance or observance of any covenant expressed or implied under this security or being a Company shall have a petition for winding up presented or a meeting called with a view to passing a resolution for the winding up of the Company save for the purpose of reconstruction or amalgamation or shall have a receiver or official manager appointed or shall do or suffer any act or thing which would be a ground for the winding up of the Company by the Court then immediately thereupon all moneys hereby secured and all costs charges and expenses as aforesaid shall at the option of the encumbrancee but only at such option forthwith become and be due and payable to and recoverable by the encumbrancee as if the time herein appointed for the payment thereof had arrived anything to the contrary notwithstanding."

It was common ground before his Honour that the time for payment of the $100,000.00

under paragraphs (b) and (c) of cl.2 of the deed had not arrived. His Honour, on the evidence

before him, concluded that the first defendant was in breach of its obligations under of the deed, and

he rejected the contention of the first and second defendants that there was a triable issue on that

subject. He concluded that by operation of cl. 3 of the bill of encumbrance the time for payment of

the $100,000.00 had been accelerated by the first defendant's failure to meet its obligations under

the deed, and that in consequence the first plaintiffs should have judgment for the $100,000.00

against the first defendant. The judgment against the second defendant was founded upon cl. 11 of

the deed.

In one passage of his Honour's reasons he referred to paragraph (a) of cl. 4 of the deed,

saying that the first defendant was in breach of its obligation under that paragraph to use its "best

endeavours" to advance the matter, and that that meant its breach caused an acceleration of its

lability by operation of cl. 3 of the bill of encumbrance. Reading his Honour's reasons as a whole,

however, I think it is clear that his decision was based not only on the obligations provided for in

paragraph (a), but also upon those provided for in paragraph (b). The argument proceeded before

us on the assumption both paragraphs are relevant, as they undoubtedly are.

On behalf of the appellants Mr Andrews submitted that his Honour should have concluded

that there was a triable issue on the question whether the first defendant had been in breach of its

obligations under cl. 4 of the deed. No issue was raised concerning cl. 11.

It was submitted on behalf of the appellants that it could not be said that to May, 1988 there

had been any breach by the first defendant of its obligations under cl. 4 of the deed. That was

because the first plaintiffs had sought the payment of the $100,000.00 in an action which came to

trial in May 1988 before the learned presiding judge, and in that action judgment was given for the

defendants, the plaintiffs having failed to satisfy his Honour that there had been a breach of the first defendant's obligations provided for in cl. 4. There was an unsuccessful appeal from the judgment in

that case.

While it is no doubt correct to say that the first plaintiffs could not now be heard to assert

that there had been a breach of the obligations of the first defendant under cl. 4 to May 1988 it is

not correct I think to conclude that events prior to May 1988 were irrelevant when the learned

chamber judge came to consider this matter. The first defendant's conduct must be viewed as a

whole from the time when the deed was executed. It was the delay subsequent to May 1988 but

cumulative upon what had, and had not, been done between October 1981 and May 1988 that led

his Honour to conclude that the first plaintiffs had made out their case for summary judgment. His

Honour found that "the deed was executed on 30 October 1981 and the long period of time that has

since elapsed is excessive, particularly in the absence of any explanation for the delay that would

justify it in terms of the deed." In my view that method of approaching the analysis of the facts of

this case is correct.

The evidence before his Honour showed that the first defendant had proceeded with the

project until January 1991. Mr Andrews conceded before us that "[p]robably the last thing that is

consistent with an expeditious developer" had taken place on 18 January 1991. That "last thing"

was a memorandum within the first defendant's organization concerning market values of the project

units. Since that memorandum, the project has been suspended.

From 1981 to early 1991 the first defendant took some steps to implement the project. By

1990 plans had been drawn up and revised, applications had been made, negotiations had been

carried on, agreements had been made, but no building had been begun on the retirement village.

By 18 September 1990 a revised layout for the retirement village and associated structures

came before a meeting of the local authority, the Logan City Council. The Council resolved to grant

its consent to the proposed layout provided a number of conditions were complied with. Among

them was a condition that the developer obtain "building approval and or appropriate engineering

works approval prior to any operation being commenced on the site". Building approval for the project had been sought in an application to the Council on 1 February 1989, but once the revised

layout was submitted to the Council, in February 1990, a new building approval application became

necessary. The consent was subject to review and possible revocation "unless the proposed use

[had] substantially commenced within two (2) years".

On 6 October 1992 the consent of 18 September 1990 was extended, with some

amendments, to 18 September 1994. On 6 December 1994 it was again extended, with

amendments, to 18 September 1996.

Since 18 September 1990 no steps have been taken to obtain the necessary building or

engineering works approvals. The project is now no further advanced than it was in 1990.

Paragraph (a) of cl. 4 requires the first defendant to use its "best endeavours". The proper

construction to be put upon those words was considered by the Full Court on the appeal in the

previous proceedings. Shepherdson J., with whose reasons Thomas and Williams JJ. agreed,

concluded that they imposed upon the first defendant the obligation to do all that it reasonably could

in the circumstances to achieve the contractual object, but no more. It was not required to go

beyond the bounds of reason, and was not required to act in such a way as to bring ruin upon itself -

see Hawkins v. Pender Bros. Pty Ltd [1990] 1 Qd. R. 135, at pp. 151 - 152.

A similar construction should, I think, be put upon paragraph (b): the obligation was to

proceed with all due expedition, but not beyond the bounds of reason, and not to the point of ruin.

The appellants say three matters - Mr Andrews called them "excuses" - are revealed in the

evidence which show there were questions to be tried: first, the market for retirement village units

became depressed in the late 1980s and early in the 1990s; secondly, finance became difficult to

get; and thirdly, pursuant to the settlement in November 1991 of litigation concerning a hospital to

which the holding company of the first defendant's group was a party, the Westpac Banking

Corporation acquired securities over inter alia the land on which the retirement village was to be

built, and in addition the Bank, with the agreement of the first defendant, acquired the right to restrict

the use of funds by the first defendant to projects of which the Bank approved - and it did not approve of expenditure on the retirement village. The evidence as to market prices of

retirement village units showed, it was submitted, a drop from a range of $85,000 to $135,000 to a

range of $75,000 to $100,000 at the beginning of this decade. That submission was based chiefly

on the contents on Exhibits AE and BV to the affidavit of Mr Shane Moran, a director of the first

defendant. Exhibit AE is a marketing proposal dated January 1990 prepared by a real estate agent

who said in it that the "asking prices" of the units could be in the former range. Exhibit BV is the

memorandum dated 18 January 1991 to which I have referred before. It was from the property

manager of a company called Moran Real Estate Pty Limited, and in it he said that then current

market values "would appear" to be in the latter range. Paragraph 79 of Mr Moran's affidavit

implies, it was submitted, that the units had become hard to sell. Assuming that the asking prices

referred to in Exhibit AE were market prices, there was then some evidence of a decline in market

prices. But there was, Mr Andrews conceded, no evidence that the project would have become

unprofitable. There was no evidence that the first defendant would have been facing ruin had it gone

on with the project.

In my view the first excuse is not sufficiently cogent to raise a triable issue.

The other two excuses can be conveniently taken together: in 1991 litigation which arose

out of a dispute unrelated to the project was concluded in such a way as to place a considerable

obstacle in the way of the first defendant's borrowing money for the project. There was evidence

before his Honour that the proposed development had been continuously reviewed and that those

reviews had included the continuous monitoring of sources of funds for the project. Understandably,

however, the first defendant had not found a suitable financier because the Westpac bank would not

release any security it held over the first defendant's assets.

While a contracting party is no doubt not required by a provision like cl. 4 to disregard the

party's own interests (see e.g., Hospital Products Ltd v. United States Surgical Corporation (1984)

156 C.L.R. 41 at pp. 92-93 and pp. 143-44) there must be limits to that principle, and it cannot, I

think, go so far as to allow the party to rely on an obstacle it has deliberately put in its own path as
an excuse for failure to perform its contractual obligations.

The three excuses, taken singly or together, are not sufficient to raise a triable issue. The

failure by the first defendant to use its best endeavours to obtain the necessary building and

engineering works approvals which was a condition of the consent granted on 18 September 1990

was a breach of paragraph (a) of cl. 4. The suspension of the project from at least January 1991

was a breach of paragraph (b) of cl. 4.

The appeal should be dismissed.