James Adam Pty Ltd v Fobeza Pty Ltd

James Adam Pty Ltd (the purchaser) and Fobeza Pty Ltd (the vendor) were parties to a contract for the sale of a proposed lot. The dispute concerned the interpretation of the contract, specifically whether a discrepancy in the lot's area, as depicted in a sketch plan and as ultimately registered, could be resolved by construing the contract. The matter came before the Court of Appeal of New South Wales.

The central legal issue before the Court was whether the contract should be construed to correct an apparent mistake regarding the area of the lot. The contract stipulated that the vendor was obliged to procure a subdivision in accordance with a sketch plan showing an area of 2001m². However, the purchaser was entitled to rescind if the registered plan contained an area of 2100m² or more. The Court had to determine if the literal meaning of the contractual language created an absurdity or inconsistency, and whether the objective intention of the parties was self-evident, thereby allowing for correction by construction. The Court also considered the relationship between contractual construction and the equitable remedy of rectification.

The Court of Appeal held that the contractual provisions, when read as a whole, did not create an absurdity or inconsistency that would permit correction by construction. The Court reasoned that the language of the contract clearly established a condition that, if met, would entitle the purchaser to rescind. This was not a situation where the objective intention of the parties was so self-evident as to override the plain meaning of the words used. The Court distinguished the present case from those where rectification might be available, emphasizing that construction aims to ascertain the meaning of the contract as written, whereas rectification corrects a document to reflect the parties' true agreement.

The appeal was dismissed, and James Adam Pty Ltd was ordered to pay Fobeza Pty Ltd's costs.