Jana Pty Ltd atf Azizi Family Trust and Anthony Azizi v Ezistripdemo Pty Ltd and Sam Sharan

[2017] NSWSC 1135

Supreme Court

New South Wales

• Amendment notes

Medium Neutral Citation:

Jana Pty Ltd atf Azizi Family Trust & Anthony Azizi v Ezistripdemo Pty Ltd & Sam Sharan [2017] NSWSC 1135

Hearing dates:

3, 4 and 11 August 2017

Decision date:

29 August 2017

Jurisdiction:

Equity - Expedition List

Before:

Sackar J

Decision:

See paras [420] – [421]

Catchwords:

CONTRACTS — Construction — Interpretation

 

CONTRACTS — Rectification — Intention — Common intention

  ESTOPPEL — Estoppel by convention — Mutual assumption — Detriment

Legislation Cited:

Environmental and Planning Assessment Act 1979 (NSW)

Cases Cited:

Allied Pastoral Holdings Pty Ltd v Cmr of Taxation (Cth) [1983] 1 NSWLR 1
Australian Broadcasting Commission v Australasian Performing Right Association Limited (1973) 129 CLR 99
Blockbuster Australia Pty Ltd v Karior Pty Ltd [2009] NSWSC 1089
Browne v Dunn (1893) 6 R 67
Codelfa Construction Pty Ltd v State Rail Authority of NSW (1982) 149 CLR 337
CSR Limited v Adecco (Australia) Pty Limited [2017] NSWCA 121
Cubillo v Commonwealth (No 2) (2000) 103 FCR 1
Ecosse Property Holdings Pty Ltd v Gee Dee Nominees Pty Ltd [2017] HCA 12; (2017) 343 ALR 58
Electricity Generation Corporation v Woodside Energy Ltd (2014) 251 CLR 640
Fox v Percy (2003) 214 CLR 118
Franklins Pty Ltd v Metcash Trading Ltd (2009) 76 NSWLR 603
Moratic Pty Ltd v Gordon [2007] NSWSC 5; (2007) NSW ConvR 56-172
Mount Bruce Mining Pty Limited v Wright Prospecting Pty Limited (S99/2015; S102/2015) (2015) 256 CLR 104
Pacific Carriers Ltd v BNP Paribas (2004) 218 CLR 451
Pukallus v Cameron (1982) 180 CLR 447
Royal Botanical Gardens and Domain Trust v South Sydney City Council (2002) 240 CLR 45
Ryledar Pty Ltd v Euphoric Pty Ltd (2007) 69 NSWLR 603
Samm Property Holdings Pty Ltd v Shaye Properties Pty Ltd [2017] NSWCA 132
Simic v New South Wales Land and Housing Corporation [2016] HCA 47; (2016) 91 ALJR 108
Thomas Bates & Son Ltd v Wyndham's (Lingerie) Ltd [1981] 1 WLR 505
Watson v Foxman (1995) 49 NSWLR 315
Wilkie v Gordian Runoff Ltd (2005) 221 CLR 522

Texts Cited:

J D Heydon, Cross on Evidence (LexisNexis Butterworths, 10th ed, 2015)

  D Hodge, Rectification: The Modern Law and Practice Governing Claims for Rectification for Mistake (Thomson Reuters, 2nd ed, 2016)

Category:

Principal judgment

Parties:

Jana Pty Ltd ATF Azizi Family Trust (First Plaintiff)
Anthony Azizi (Second Plaintiff)

  Ezistripdemo Pty Ltd (First Defendant)
Sam Sharan (Second Defendant)

Representation:

Counsel:
M Jones SC, D Hughes (Plaintiffs/Cross Defendants)
S Balafoutis, R A Jedrzejczyk (Defendants/Cross Claimants)

  Solicitors:
Colin Biggers & Paisley (Plaintiffs/Cross Defendants)
C G Gillis & Co (Defendants/Cross Claimants)

File Number(s):

2017/192006

Judgment

Proceedings

Background Facts

Legal Principles

Construction

Rectification

Estoppel

Credit of witnesses

Parties’ submissions

Credibility

Construction of the Nomination Deed

Surrounding circumstances – Plaintiffs

Surrounding circumstances – Defendants

Construction of the Nomination Deed - Plaintiffs

Construction of the Nomination Deed – Defendants

Rectification – the Defendants’ cross-claim

Mr Sharan’s subjective intention

Alleged 18 January Conversation

20 January Draft Deed

Events of 27 January 2017

Jana and Mr Azizi’s post-contractual conduct

Rectification – the Plaintiffs’ claim

Estoppel by convention

Defendants’ cross-claim

Plaintiffs’ claim

The Evidence

Mr Sharan

Mr Sam Ayache

Mr Michael Ayache

Mr Azizi

Mr Raheb

Mr Scobie

Consideration

Construction

Rectification

(a) Preliminary remarks on the evidence

(b) Established beliefs and intentions of Mr Azizi and Mr Sharan

(c) Events leading up to exchange of the Nomination Deed

1. Gateway Approval is first suggested

2. The Alleged 18 January Conversation

3. 20 January Draft Deed

4. Negotiations of 27 January 2017

Post-contractual conduct

Conclusion on rectification

Conventional Estoppel

Conclusion

Judgment

Proceedings

1. These proceedings concern the construction and effect of a deed relating to the exercise of call options over a strip of properties that are the subject of rezoning.

2. The First Plaintiff (Jana) entered into a deed with the First Defendant (Ezistrip) on 27 January 2017, where Jana was nominated to exercise Ezistrip’s options over seven properties in Bexley, in return for a nomination fee payable in three tranches (Nomination Deed/Deed). Following numerous drafts of the Nomination Deed prior to its exchange, there is a dispute over whether payment of the third tranche is conditional on the Rezoning of the properties (as pleaded by Jana), or must be made 16 weeks after Gateway Approval regardless of whether Rezoning has taken place (as pleaded by Ezistrip).

3. By way of summons, Jana seeks a declaration the proper construction of the Nomination Deed is that the steps required to be taken on the Completion Date, including payment of the third tranche of the Nomination Fee, are not required to be performed until Rezoning of the properties has occurred. Jana also seeks a declaration that, on the proper construction of the Deed, if Rezoning has not occurred by the Final Exercise Time, Jana is entitled to terminate the Deed and a return of the second tranche of the Nomination Fee, and Ezistrip is obliged to repay Jana $100,000 plus GST (Summons, Prayers [11]-[15]).

4. Ezistrip contend the proper construction of the Nomination Deed is that the steps required to be taken on the Completion Date, including payment of the third tranche of the Nomination Fee, are not conditional upon Rezoning, and that only where Completion Date has not occurred by Final Exercise Time will the parties have a right to terminate under clause 10.

5. In the alternative, by way of cross-claim, Ezistrip seek a rectification of the Deed reflecting that the actual or true common intention of the parties was for the steps required to be performed on Completion Date to be conditional upon Gateway Approval of the Rezoning, not the Rezoning itself. Further, or in the alternative, Ezistrip seek an order Jana be estopped from terminating the Nomination Deed or refusing to pay the third tranche on the grounds of conventional estoppel.

Background Facts

6. In around late 2015, Mr Sam Ayache, a real estate agent, became aware of potential rezoning over seven properties located at 8, 8A, 10, 12, 14, 16 and 18 Stoney Creek Road, Bexley (Bexley Properties). Mr Sam Ayache learnt of the rezoning proposal when accompanying a Mr Angelo Elliot, owner of the Forest Inn Hotel which adjoins the Bexley Properties, to meetings with the Rockdale City Council (Council) and the Council’s Planning Department. Mr Elliot was interested in a rezoning of his land to construct a car park for the Hotel, and asked Mr Sam Ayache to arrange and accompany him to the Council meeting for this purpose (SA1 [12]-[13]).

7. In December 2015, at the Council Planning Department meeting, the Council representative told Mr Elliot and Mr Sam Ayache the Council would not permit a “spot” rezoning over Mr Elliot’s Hotel, but would consider supporting a planning proposal for a block in Bexley, which included the Bexley Properties, to be rezoned for commercial and residential purposes (Bexley Site) (SA1 [16]-[18]).

8. Following this meeting, Mr Sam Ayache approached Mr Sam Sharan, the sole director and shareholder of Ezistrip (and brother-in-law of Mr Sam Ayache), asking whether he was interested in acquiring options to purchase the Bexley Properties, to which Mr Sharan replied he was (SA1 [24]-[25]; SS [5]).

9. Over the course of the following 12 months, Mr Sam Ayache negotiated with the owners of the Bexley Properties to have them enter into call option deeds, where each owner granted an option to purchase their property at an agreed price in return for an “option fee.”

10. Between 14 April 2016 and 8 December 2016, Ezistrip entered into seven separate call option deeds with the Bexley Properties’ owners (Option Deeds) (CB B tab 3 – 9). Each of the Option Deeds provided the grantee of the option (being Ezistrip) had the right to appoint and nominate a “Nominee” to exercise the call option in accordance with the terms of the Deed. Further, the options could be exercised within the “call option period” of 18 months following the commencement date, being the 43rd day after the date of the particular Option Deed. The earliest date of expiry for the Option Deeds was 27 November 2017, being the Option Deeds for 10 and 12 Stoney Creek Road, Bexley (CB B tabs 3 and 4).

11. In about August 2016, Mr Elliot provided Mr Sam Ayache a copy of the “Planning Proposal” prepared by town planning consultants regarding the amendments to the Rockdale Local Environment Plan 2011 (CB D 546-606) relating to the Bexley Site. The Planning Proposal estimated Gateway Approval or “Gateway Determination” would be issued in approximately March 2017 (CB D 604; SA1 [74]).

12. On or about 8 September 2016, Mr Sam Ayache phoned Mr Anthony Azizi, a director of Jana, to ask if he was interested in the Option Deeds after Mr Sharan had told him he was wanting to sell them (SA1 [36]). That same day, Mr Sam Ayache followed through the phone conversation with an email providing further details about the Bexley Properties (CB C 1; SA1 [37]).

13. On or about 14 August 2016, Mr Azizi phoned Mr Sam Ayache asking whether the sale of the Option Deeds was “still on the table.” According to Mr Sam Ayache, he responded saying he was finalising the Option Deeds, and that it might be possible to build 80-90 new units on the site. Mr Azizi said he “liked” the proposal and asked Mr Sam Ayache to send though a contract for the deal (SA1 [38]).

14. Mr Sharan told Mr Sam Ayache to instruct his brother and solicitor at OneGroup Legal, Mr Michael Ayache, to prepare a contract (SA1 [39]; SS [16]-[17]). After initially suggesting the contract be in the form of a put and call option agreement (SA1 [40]-[41]; CB C 19-21), Mr Sam Ayache agreed with Mr Michael Ayache’s suggestion the contract be in the form of a nomination deed (MA [12]; CB C 25).

15. On 14 November 2016, Mr Sam Ayache accepted Mr Azizi’s offer to work at Perennial Property (NSW) Pty Ltd (Perennial), a company Mr Azizi was a director and shareholder of and which is now known as Trinity Projects and Maintenance Pty Ltd, and commenced working as Site Acquisition and Project Marketing Manager (SA1 [42]; AA1 [7]).

16. On 14 December 2016, the Bayside Council passed a resolution supporting the proposal for the Rezoning of the Bexley Properties (CB C 28-41).

17. On 16 December 2016, Mr Michael Ayache commenced working on the first draft of the Nomination Deed, under which Ezistrip would appoint Jana as Nominee under the Option Deeds (MA [17]).

18. On 21 December 2016, Mr Sam Ayache delivered the first draft of the Nomination Deed in hard copy to Mr Christopher Raheb, solicitor at Oxford Legal acting for Jana on the Nomination Deed.

19. The salient terms in the first draft of the Nomination Deed (CB C 42) included the following.

20. Clause 1.1, setting out the defined terms, included:

Completion Date means the date that is the earlier of:

(a)   the date that the Nominee exercises any Option Deed; or

(b)   the date being 9 weeks after the Rezoning of the Property takes effect; or

(c)   the date that the Nominee and any Vendor enter into a binding Land Contract.

…

Final Exercise Time means 5pm on 4 October 2017.

….

Rezoning means the Rezoning of the Properties to B4 Mixed Use Zone as defined in the Rockdale Local Environmental Plan 2011.

21. Clause 9 set out the steps the parties were required to take on Completion Date:

9   Completion Date

9.1   On the Completion Date, Ezistripdemo must deliver to the Nominee:

(a)   the Nomination Notice referred to in clause 8.1(a), duly executed by the Ezistripdemo [sic] nominating the Nominee to exercise the Option;

(b)   the original Option Deed; and

(c)   a duly executed withdrawal of any caveat in registrable form to remove any caveat lodged under the title register of the Property.

9.2   On the Completion Date, the Nominee must deliver to the Ezistripdemo [sic]:

(a)   a bank cheque for the balance of the balance of the Nomination Fee specified in Item 2(c) of the Schedule payable as Ezistripdemo directs[.]

22. Clause 10 titled “Deed Conditional” provided:

10   Rezoning of Property

10.1   This deed is conditional upon the Rezoning of the Property.

10.2   If the Rezoning of the Property does not occur on or before 5 October 2017, then either party may terminate this deed, at which time:

(a)   The Nomination Fee paid in accordance with Items 2(a) and (b) of the Schedule will be refunded to the Nominee; and

(b)   Neither party shall have any Claim against the other party.

23. Item 2 of the Schedule set out the amount and timing of the payment of the Nomination Fee:

ITEM 2         NOMINATION FEE

Amount: $5,450,000 plus GST

Payable as follows:

(a)   $100,000.00 plus GST upon execution of this deed; and

(b)   $650,000.00 plus GST on or before 26 February 2017; and

(c)   $4,700,000 plus GST on the Completion Date.

24. On 22 December 2016 at 11:36am, Mr Raheb sent an email to Mr Michael Ayache attaching a marked-up version of the Nomination Deed (CB C 73; MA [21]). The solicitors continued to exchange a series of marked-up versions of the Nomination Deed over emails between 22 December and 26 December 2016 (CB C 88-119). During these dates, there were no significant amendments to the Nomination Deed beyond a change to Item 2(b) of the Schedule making payment of the second tranche of the Nomination Fee due on or before 26 March 2017 following a request from Mr Raheb.

25. On 26 December 2016 at 4:48pm, Mr Ayache attached a further marked-up version of the Nomination Deed to Mr Raheb, amending clause 9 to read (CB C 120):

9   Completion Date

9.1   On the Completion Date, Ezistripdemo must deliver to the Nominee:

(a)   the Nomination Notice referred to in clause 8.1(a), duly executed by the Ezistripdemo [sic] nominating the Nominee to exercise the Option;

(b)   the original Option Deed; and

(c)   a duly executed withdrawal of any caveat in registrable form to remove any caveat lodged under the title register of the Property.

9.2   On the Completion Date, the Nominee must:

(a)   validly exercise each Option granted under each Option Deed in accordance with the terms of each Option Deed; and

(b)   deliver to the Ezistripdemo [sic] a bank cheque for the balance of the balance of the Nomination Fee specified in Item 2(c) of the Schedule payable as Ezistripdemo directs[.]

(Changes underlined)

26. Clause 9 remained as amended on 26 December 2016 when the Nomination Deed was executed on 27 January 2017.

27. A few days after 31 December 2016, when Mr Sam Ayache had returned to Sydney from holidays, he met with Mr Sharan at a family gathering (SA1 [51]-[52]; SS [21]). At this gathering, according to the Defendants, Mr Sharan told Mr Sam Ayache he wanted the Nomination Deed “subject to Gateway Approval” instead of Rezoning, and for settlement to take place eight to nine weeks after Gateway Approval (SA1 [51]-[52]; SS [21]).

28. On 9 January 2017, Mr Raheb sent an email to Mr Michael Ayache, copying in Mr Azizi and Mr Sam Ayache which read (CB C 229):

Hi Michael I am back on board now and my client is anxious to secure an exchange how do we move forward to achieve this?

29. According to Mr Sam Ayache, on 18 January 2017 when he returned to work at Perennial, he had a conversation with Mr Azizi in the office regarding the settlement date, with words to the following effect (SA1 [53]) (Alleged 18 January Conversation):

Mr Sam Ayache:   “I spoke to the vendor and he wants the exchange to be subject to Gateway approval, with settlement to take place after nine weeks. Michael [Ayache] will be sending through an amended agreement for Chris [Raheb] to review.”

Azizi:   “I will accept Gateway approval, but I will need to discuss the settlement period with Chris. Get your solicitor to send the amended agreement through, and Chris will have a look at it.”

30. Mr Azizi denied the Alleged 18 January Conversation took place (T138/5-7).

31. According to the Defendants, following the Alleged 18 January Conversation, Mr Sam Ayache alleged he phoned Mr Michael Ayache and informed him the parties had “now agreed” the deal was “subject to Gateway Approval” (SA1 [54]; MA [39]). Mr Sam Ayache also alleged he told Mr Michael Ayache Mr Sharan had requested settlement take place nine weeks after Gateway Approval, and asked Mr Michael Ayache to amend the version of the Deed to reflect these changes to the settlement period even though Mr Azizi was still discussing the topic with his lawyer (SA1 [54]; MA [39]).

32. Mr Michael Ayache took a file note of his phone conversation with Mr Sam Ayache “probably within about ten seconds of getting off the phone” (T100/24-26). The file note provided (CB C 243) (18 January File Note):

18/01

T/o Sam

Spoke to parties + the agt is now subject to Gateway approval

V wants nine weeks after gateway app

Has P agreed? P agreed to Gateway approval but discussing period still but prepare based on gateway, plus nine weeks and will advise if any change.

33. Two days later, on 20 January 2017, Mr Michael Ayache made further amendments to the draft Nomination Deed (CB C 245) (20 January Draft Deed). The amendments included the following.

34. The definition of “Gateway Approval” was added under clause 1.1, providing:

Gateway Approval means the date that the Minister for Planning (or delegate, or any other authority with the power to approve the Rezoning of the Property) decides whether the planning proposal for the Rezoning of the Property can proceed (with or without variation) and subject to other matters including further studies being undertaken, public consultation, public hearings, agency consultation and time frames.

35. The definition of “Completion Date” provided:

Completion Date means the date that is the earlier of:

(a)   the date that the Nominee exercises the option to purchase the Property pursuant to rights to purchase granted under an Option Deed; or

(b)   the date being nine weeks after the date of Gateway Approval of the Rezoning of the Property; or

(c)   the date that the Nominee and a Vendor enter into a binding Land Contract.

(Changes underlined)

36. Further, reference to “5pm on 4 October 2017” in the original clause 10 was replaced with “Final Exercise Time” which was defined to mean “5pm on 4 October 2017.” Consequently, clause 10 provided:

10   Rezoning of Property

10.1   This Deed is conditional upon the Rezoning of the Property.

10.2   If the Rezoning of the Property does not occur on or before the Final Exercise Time 5pm on 4 October 2017, then either party may terminate this deed, at which time:

(a)   The Nomination Fee paid in accordance with Items 2(a) and (b) of the Schedule will be refunded to the Nominee; and

(b)   Neither party shall have any Claim against the other party.

37. On 20 January 2017 at 9:06am, the same day Mr Michael Ayache made the above amendments, he emailed the 20 January Draft Deed to Mr Raheb, copying in Mr Sam Ayache, with the amendments in mark-up as an attachment (CB C 244). The subject of the email was ‘Stoney Creek Road Site.’

38. In cross examination, Mr Azizi agreed he had instructed Mr Raheb he was “happy with the changes” in Mr Michael Ayache’s 20 January Draft Deed attached to the 20 January email (T143/28-34).

39. On 23 January 2017, Mr Azizi’s sister was involved in a serious car incident and taken to hospital.

40. On 23 January 2017 at 11:04am, Mr Raheb sent an email in reply to Mr Michael Ayache’s email of 20 January with the subject ‘RE: Stoney Creek Road Site,’ copying in Mr Sam Ayache, which read (CB C 271):

Michael that is fine to proceed with.

The main thing is that the provision in the agreement that it is a proviso that all of the properties transfer is still in.

41. On 23 January at 5:57pm, Mr Michael Ayache sent Mr Raheb an email attaching what was described as an “execution version” of the Deed, in reply to Mr Raheb’s email from 11:04am that day (CB C 272; MA [44]). This version accepted all the changes Mr Michael Ayache had made in the 20 January Draft Deed, which relevantly included the addition of the ‘Gateway Approval’ definition, and amendment to the definition of Completion Date as being nine weeks after the date of Gateway Approval, rather than Rezoning.

41. On 27 January 2017, Mr Raheb sent a series of emails to Mr Michael Ayache. At 10:29am, in an email with the subject ‘Amendment to the Deed,’ Mr Raheb said (CB D 301):

Dear Michael I have just received instructions from my client that they wish the Deed to be amended to reflect the following that it is conditional upon the properties being rezoned to B4 mixed use with a minimum FSR of 2:1 and the bonus of 0.5:1 as defined in the Rockdale Local Environmental Plan 2011.

The Height is to be a minimum of 16 metres with a bonus 3 metres as defined in the Rockdale Local Environmental Plan 2011.

43. Less than an hour later, on 27 January 2017 at 11:20am, Mr Raheb sent a further email to Mr Michael Ayache (subject Re: Stoney Creek Road Site) (CB D 302), in reply to Mr Michael Ayache’s email of 23 January 2017 (CB C 272). This email provided:

Michael my client seems to think that the completion date will be in October 2017 not nine weeks after the date of the Gateway Approval of the rezoning of the property. Can you please check your records.

My client is adamant that the deal was a completion date in October 2017.

44. Just over an hour later, on 27 January 2017 at 12:38pm, Mr Raheb sent a further additional email to Michael Ayache with the subject ‘Bexley,’ which opened with the following (CB D 305):

Dear Michael I apologise for my late instructions but I have been asked to press for an October 2017 settlement as well. This would mean amending the completion date to allow for this.

45. On 27 January 2017 at 1:07pm, Mr Raheb sent two emails to Mr Azizi and Mr Luke Scobie, a consultant working with Mr Azizi, forwarding the email he sent to Mr Ayache at 10:29am that morning (CB D 306), and the email he sent to Mr Ayache at 12:38pm (CB D 308).

46. On 27 January 2017 at 1:12pm, Mr Michael Ayache replied to Mr Raheb’s email sent to him at 11:20am that day (subject Re: Stoney Creek Road Site) (CB D 310). This email provided:

Dear Chris

My client will not agree to this amendment.

47. On 27 January 2017 at 1:15pm, Mr Raheb sent a further email to Mr Azizi and Mr Scobie, forwarding the chain of emails with the subject ‘Re: Stoney Creek Road Site,’ which included Mr Michael Ayache’s response of 1:12pm (CB D 314).

48. On 27 January 2017 at 1:18pm, Mr Raheb replied to Mr Michael Ayache’s email of 1:12pm asking what his client would agree to (subject Re: Stoney Creek Road Site) (CB D 318). Mr Michael Ayache replied at 1:19pm (subject Re: Stoney Creek Road Site) stating (CB D 322):

As is. Gateway Approval plus 9.

49. On 27 January 2017 at 1:25pm, Mr Raheb replied to Mr Michael Ayache (subject Re: Stoney Creek Road Site) stating (CB D 326):

Michael if that is your client’s stance then it will be a deal braker [sic].

50. On 27 January 2017 at 1:26pm, Mr Michael Ayache replied to Mr Raheb (subject Re: Stoney Creek Road Site) stating (CB D 331):

Noted. Best to take up with Sam as he negotiated the deal.

51. On 27 January 2017 at 1:27pm, Mr Raheb replied to Mr Michael Ayache (subject Re: Stoney Creek Road Site), stating “No problems” (CB D 301).

52. Also on 27 January 2017, Mr Sam Ayache and Mr Scobie had discussions about the timing of settlement. The substance of these discussions was disputed in the proceedings. Mr Sam Ayache alleged Mr Scobie told him he would need settlement to be 16 weeks after Gateway Approval (SA1 [57]-[58]) whereas Mr Scobie alleged he told Mr Sam Ayache he would need settlement to be 16 weeks after Rezoning (LS [18]-[20]).

53. At around 1:00pm on 27 January 2017, Mr Sam Ayache alleged he spoke to Mr Sharan, and after negotiating back and forth on various occasions with both Mr Sharan and Mr Scobie about the time period, Mr Sam Ayache and Mr Scobie agreed to dating settlement at 16 weeks after Gateway Approval (SA1 [58]-[62]; SS [23]-[24]).

54. In the afternoon of 27 January 2017, Mr Azizi paid the first tranche of $110,000 by way of bank cheque (CB D 344). The timing and location of this payment and recipient of the bank cheque was disputed in proceedings (see SA1 [63]; AA1 [37]; MA [58]).

55. Later in the afternoon of 27 January 2017, Mr Raheb and Mr Sam Ayache attended the offices of Mr Michael Ayache’s law firm, OneGroup Legal, to exchange the Nomination Deed (MA [55]-[56]; SA1 [64). Mr Raheb and Mr Michael Ayache made the following handwritten amendments to the definitions in clause 1 of the Nomination Deed:

Completion Date means the date that is the earlier of:

(a)   the date that the Nominee exercises the option to purchase the Property pursuant to rights to purchase granted under an Option Deed; or

(b)   the date being 916 weeks after the date of Gateway Approval of the Rezoning of the Property; or

(c)   the date that the Nominee and a Vendor enter into a binding Land Contract; or

(d)   the Final Exercise Time.

Rezoning means the Rezoning of the Properties to B4 Mixed Use Zone as defined in the Rockdale Local Environmental Plan 2011 with a minimum height of 16 metres, with the ability to increase height by a further 3 metres, and a minimum floor space ratio of 2:1, with the ability to increase to 2.5:1.

(Changes underlined)

56. The parties formally exchanged counterparts of the Nomination Deed.

57. On 8 March 2017, the NSW Department of Planning & Environment (DPE) granted gateway approval over the Bexley Site, in a document titled “Gateway Determination” (CB D 361) (Gateway Approval).

58. On 9 March 2017 at 2:25pm, Mr Sam Ayache forwarded an email to Mr Michael Ayache from Mr Josh Ford of Bayside Council, attaching a cover letter from the DPE to Bayside Council, informing the parties the DPE had issued the Gateway Approval for the Bexley Site, and a copy of the Gateway Approval itself (CB D 358).

59. On 13 March 2017, Mr Azizi and Mr Scobie attended their first minuted meeting with Mr Sam Ayache to discuss the Bexley Properties. Whether Mr Azizi had seen a copy of the Gateway Approval prior to or at this meeting was disputed in these proceedings (see SA 3 [7]; LS [24]).

60. The substance of discussions at the 13 March meeting was also disputed in these proceedings, but both parties agreed Mr Sam Ayache raised settlement taking place in 16 weeks since Gateway Approval had occurred (see SA1 [67]; LS [24]-[27]; AA1 [38]).

61. Minutes dated 13 March 2017 at 4:39pm were made for this meeting (CB D 364). These minutes included the following:

Discussion Topics

1. Land Acquisitions

Money for Deposit EOM $650k

Settlement 16 Weeks – approx. 9th July

2. Planning Status

a. Gateway Approval – Sam to send approval and Document Approved

…

62. On 13 March 2017 at 10:57pm, Mr Sam Ayache sent soft copies of the Gateway Approval and DPE covering letter to Mr Azizi and Mr Scobie (CB D 365).

63. On 17 March 2017, Mr Michael Ayache caused his secretary Ms Maggie Elkington to send a letter by email to Mr Raheb of Oxford Legal, informing him Jana was due to pay Ezistrip the third payment of $4.7 million on 28 June 2017, based on Completion Date falling on that day, being 16 weeks after Gateway Approval on 8 March 2017. The letter read (CB D 396-403):

We confirm that Gateway Approval was issued on 8 March 2017 and we attach a copy of the Gateway Determination.

Based on the definition [of “Completion Date” in the Nomination Deed], presently the Completion Date would [sic] fall on 28 June 2017. We confirm that on 28 June 2017 our client will be in a position to provide the documents referred to in clause 9.1 and we ask that you ensure you will be in a position to comply with clause 9.2 and exercise the Options as well as providing [sic] our office with a bank cheque for $4.7 million plus GST.

64. The Gateway Approval was attached to the letter.

65. On 21 March 2017, Mr Azizi, Mr Scobie, and Mr Sam Ayache had their second meeting to discuss the Bexley Properties. The substance of discussions regarding settlement were disputed in these proceedings (SA1 [70]; LS [30]).

66. Minutes were made at the 21 March meeting (CB D 405), and it is accepted Mr Scobie was the author of these minutes (T219/26). These minutes again note “Settlement 16 Weeks – approx. 9th July.” The minutes also include the following:

3. Planning Status

a. Gateway Approval –

b. 12 month LEP Council – 18 month Risk.

67. According to Mr Scobie, the 21 March meeting was the first time he was told Rezoning might take place between 12 and 18 months after Gateway Approval (LS [31]).

68. On 23 March 2017 at 2:25pm, Mr Raheb sent an email to Mr Michael Ayache (with Mr Sam Ayache copied in), referring to an earlier call and requesting an extension for the payment of the second tranche of the Nomination Fee, being the $650,000, to be paid on 30 March 2017 (as opposed to 26 March 2016) without penalty (CB D 409).

69. On 23 March at 5:38pm, Mr Michael Ayache replied to Mr Raheb’s email, noting Ezistrip consented to payment of the second tranche on 30 March 2017, with time being of the essence (CB D 417).

70. On 30 March 2017, Jana paid $715,000 (being $650,000 plus GST) into OneGroup Legal’s trust account as payment of the second tranche of the Nomination Fee (MA [64]; CB D 445).

71. On 14 June 2017, Colin Biggers & Paisley Lawyers, on behalf of Jana, sent a letter by email to Mr Michael Ayache in response to his letter to Mr Raheb dated 17 March 2017 (CB D 483). This letter informed Mr Michael Ayache Colin Biggers & Paisley Lawyers now acted for Jana, and unless Rezoning of the Bexley Properties occurred by 28 June 2017, Jana was not required to pay the third tranche of the Nomination Fee, pursuant to clause 10 of the Nomination Deed.

72. On 21 June 2017, Mr James Neal of Colin Biggers & Paisley Lawyers sent a follow through email to Mr Ayache requesting a response to his letter of 14 June 2017 (CB D 486).

73. On 21 June 2017, Mr Michael Ayache replied to Mr Neal’s email saying it was a mistake clause 10 had not been amended to read “Gateway Approval of the Rezoning of the Property” as opposed to only referring to the “Rezoning of the Property” (CB D 488). Mr Michael Ayache further noted it was the parties’ intentions to have Completion Date take place 16 weeks after Gateway Approval, as reflected in the amended definitions, and thus Jana was obliged to pay Ezistrip the $4.7 million on 28 June 2017.

Legal Principles

Construction

74. The proper approach in construing commercial contracts was set out by the High Court (French CJ, Nettle and Gordon JJ) in Mount Bruce Mining Pty Limited v Wright Prospecting Pty Limited (S99/2015; S102/2015) (2015) 256 CLR 104 (Mount Bruce Mining) at [46] – [52]:

[46] The rights and liabilities of parties under a provision of a contract are determined objectively, by reference to its text, context (the entire text of the contract as well as any contract, document or statutory provision referred to in the text of the contract) and purpose.

[47] In determining the meaning of the terms of a commercial contract, it is necessary to ask what a reasonable businessperson would have understood those terms to mean. That enquiry will require consideration of the language used by the parties in the contract, the circumstances addressed by the contract and the commercial purpose or objects to be secured by the contract.

[48] Ordinarily, this process of construction is possible by reference to the contract alone. Indeed, if an expression in a contract is unambiguous or susceptible of only one meaning, evidence of surrounding circumstances (events, circumstances and things external to the contract) cannot be adduced to contradict its plain meaning.

[49] However, sometimes, recourse to events, circumstances and things external to the contract is necessary. It may be necessary in identifying the commercial purpose or objects of the contract where that task is facilitated by an understanding "of the genesis of the transaction, the background, the context [and] the market in which the parties are operating”. It may be necessary in determining the proper construction where there is a constructional choice. The question whether events, circumstances and things external to the contract may be resorted to, in order to identify the existence of a constructional choice, does not arise in these appeals.

[50] Each of the events, circumstances and things external to the contract to which recourse may be had is objective. What may be referred to are events, circumstances and things external to the contract which are known to the parties or which assist in identifying the purpose or object of the transaction, which may include its history, background and context and the market in which the parties were operating. What is inadmissible is evidence of the parties' statements and actions reflecting their actual intentions and expectations.

[51] Other principles are relevant in the construction of commercial contracts. Unless a contrary intention is indicated in the contract, a court is entitled to approach the task of giving a commercial contract an interpretation on the assumption "that the parties ... intended to produce a commercial result". Put another way, a commercial contract should be construed so as to avoid it "making commercial nonsense or working commercial inconvenience”.

[52] These observations are not intended to state any departure from the law as set out in Codelfa Construction Pty Ltd v State Rail Authority of New South Wales and Electricity Generation Corporation v Woodside Energy Ltd. We agree with the observations of Kiefel and Keane JJ with respect to Western Export Services Inc v Jireh International Pty Ltd. (citations omitted)

(See the judgments of Bell and Gageler JJ at [119] – [121] and Kiefel and Keane JJ at [107] – [113] which are of similar effect).

75. Mount Bruce Mining was most recently approved by the High Court in Ecosse Property Holdings Pty Ltd v Gee Dee Nominees Pty Ltd [2017] HCA 12 (Ecosse) at [73] and cited by the New South Wales Court of Appeal in CSR Limited v Adecco (Australia) Pty Limited [2017] NSWCA 121 at [154].

76. In Ecosse, the High Court (Kiefel, Bell and Gordon JJ) provided further guidance on the construction of commercial contracts at [16], citing Electricity Generation Corporation v Woodside Energy Ltd (2014) 251 CLR 640:

It is well established that the terms of a commercial contract are to be understood objectively, by what a reasonable businessperson would have understood them to mean, rather than by reference to the subjectively stated intentions of the parties to the contract (Electricity Generation Corporation v Woodside Energy Ltd (2014) 251 CLR 640 at 656 [35] and the cases at fn 58; [2014] HCA 7). In a practical sense, this requires that the reasonable businessperson be placed in the position of the parties. It is from that perspective that the court considers the circumstances surrounding the contract and the commercial purpose and objects to be achieved by it (Electricity Generation Corporation v Woodside Energy Ltd (2014) 251 CLR 640 at 656-657 [35] and the cases at fn 60).

77. In construing the objective meaning of the words of the contract, the Court may resort to surrounding circumstances where there is an ambiguity or in circumstances where the words are susceptible of more than one meaning; Codelfa Construction Pty Ltd v State Rail Authority of NSW (1982) 149 CLR 337 at 352 per Mason J.

78. However, there are strict limitations on the sort of materials going to surrounding circumstances that can be used for the purposes of detecting the objective intention of the parties. Objective evidence of the surrounding circumstances known to the parties includes their “knowledge of the genesis of the transaction, the background, the context [and] the market in which the parties are operating”; Pacific Carriers Ltd v BNP Paribas (2004) 218 CLR 451 at [22] per Gleeson CJ, Gummow, Hayne, Callinan and Heydon JJ. Allsop P expressed the following view in Franklins Pty Ltd v Metcash Trading Ltd (2009) 76 NSWLR 603 (Franklins) at [24]:

[24] The High Court authorities to which I have referred and in particular Pacific Carriers v BNP Paribas and Toll (FGCT) v Alphapharm, and the recognition of the significance of the objective theory assist in appreciating the scope of the evidence that is admissible. The evidence, to be admissible, must be relevant to a fact in issue, probative of the surrounding circumstances known to the parties or of the purpose or object of the transaction, including its genesis, background, context and market in which the parties are operating. What is impermissible is evidence, whether of negotiations, drafts or otherwise, which is probative of, or led so as to understand, the actual intentions of the parties. Such evidence might be legitimate, however, if directed to one of the legitimate aspects of surrounding circumstances. The distinction can be subtle in any particular case. As Macfarlan JA and I said in Kimberley Securities Ltd v Esber [2008] NSWCA 301 at [5]; (2008) 14 BPR 26,121:

[5] The possible subtlety of the distinction can be seen in Lord Wilberforce’s reasons in Prenn v Simmonds at 1384–1485, and the recognition that the objective commercial aim may, possibly, be ascertained from some aspect of what has passed between the parties. The distinction can also be seen in what Mason J said in Codelfa at 352 about prior negotiations and their legitimate use “to establish objective background facts which were known to both parties and the subject matter of the contract”, and their inadmissibility “in so far as they consist of statements and actions of the parties which are reflective of their actual intentions or expectations”.

79. As noted by the Defendants, various drafts of a deed have been considered by the High Court to fall within such objective evidence in construing the executed deed; Royal Botanical Gardens and Domain Trust v South Sydney City Council (2002) 240 CLR 45 at [26] and [30] per Gleeson CJ, Gaudron, McHugh, Gummow and Hayne JJ.

80. Further, in construing written contracts, it is common ground the Court is to have regard to all the words used “so as to render them all harmonious with one another”; Australian Broadcasting Commission v Australasian Performing Right Association Limited (1973) 129 CLR 99 at 109 per Gibbs J. As the plurality (Gleeson CJ, McHugh, Gummow and Kirby JJ) remarked in Wilkie v Gordian Runoff Ltd (2005) 221 CLR 522 at [16], in construing instruments such as commercial contracts “preference is given to a construction supplying a congruent operation to the various components of the whole.”

Rectification

81. French CJ made observations about the distinction between rectification and construction in Simic v New South Wales Land and Housing Corporation [2016] HCA 47; (2016) 91 ALJR 108 (Simic) at [20]:

[20] There is a conceptual distinction between construction and rectification but that does not mean that there is not a close connection in their practical operation. Professor Carter has pointed to the close relationship between construction and rectification and the pragmatic view that the fundamental difference between them lies in the ability to use the prior negotiations of the parties. However, he has properly acknowledged the difference of principle between mistakes which can be corrected by construction and those for which a formal order is required, commenting that:

“The fact that rectification is a remedy informed by matters such as the prevention of unconscionable conduct must still have some relevance.” (footnote omitted)

As to that, it may be added that the relevance is considerable given the historical and doctrinal bases upon which rectification is granted.

(footnotes omitted)

82. The joint judgment (Gageler, Nettle and Gordon JJ) in Simic went on to set out the key principles of rectification at [103] – [104]:

[103]   Rectification is an equitable remedy, the purpose of which is to make a written instrument ‘conform to the true agreement of the parties where the writing by common mistake fails to express that agreement accurately’. For relief by rectification, it must be demonstrated that, at the time of the execution of the written instrument sought to be rectified, there was an ‘agreement’ between the parties in the sense that the parties had a ‘common intention’, and that the written instrument was to conform to that agreement. Critically, it must also be demonstrated that the written instrument does not reflect the ‘agreement’ because of a common mistake. Unless those elements are established, the ‘hypothesis arising from execution of the written instrument, namely, that it is the true agreement of the parties’ cannot be displaced.

[104] The issue may be approached by asking — what was the actual or true common intention of the parties? There is no requirement for communication of that common intention by express statement, but it must at least be the parties’ actual intentions, viewed objectively from their words or actions, and must be correspondingly held by each party.

(footnotes omitted)

83. Further, Kiefel J observed rectification will “overcome common mistake by making an instrument conform either to a concluded antecedent agreement or to the continuing concurrent intention of the parties to the instrument”; Simic at [32]. Her Honour went on to explain at [41]-[43]:

[41] It has for some time been settled law that the existence of an antecedent agreement is not essential to the grant of relief by way of rectification and that rectification may be granted in cases where the instrument sought to be rectified is the only agreement between the parties.57 The focus of the courts turned to the common intention of the parties up to the time the relevant instrument was made. That intention must be proved by admissible evidence and proved to a high standard. In a passage from Fowler, which has been cited with approval by this Court, Lord Chelmsford said that:

“a person who seeks to rectify a deed upon the ground of mistake must be required to establish, in the clearest and most satisfactory manner, that the alleged intention to which he desires it to be made conformable continued concurrently in the minds of all parties down to the time of its execution.”

[42] What is necessary to be shown is the actual intention of each of the parties. This has often been referred to by intermediate appellate courts as the subjective intention of the parties. A court, in determining whether the burden of proof is discharged, may be said to view the evidence of intention objectively, in the sense that it does not merely accept what a party says was in his or her mind, but instead considers and weighs admissible evidence probative of intention. It is in this sense that statements such as that of Hodgson J in Bush v National Australia Bank Ltd, that common continuing intention “must be objectively apparent from the words or actions” of each party, may be understood.

[43] It is not to be expected that parties to contractual negotiations will express themselves in terms of their intentions. It is therefore to be expected that proof to the necessary standard will usually require some manifestation of the intention of each party by their words or conduct and that the requisite common intention will be a matter of inference for the court from that evidence. As Yeldham J pointed out in Bishopsgate Insurance Australia Ltd v Commonwealth Engineering (NSW) Pty Ltd, it would not be sufficient for proof of intention to refer to a party’s state of mind which remained undisclosed in the course of negotiations.

(footnotes omitted)

84. Her Honour added at [46]:

[46]Regardless of these issues it may be said that the traditional approach of the courts, following cases such as Fowler, is to grant rectification only if the instrument in question did not reflect the actual common intention of the parties. That intention is proved in the usual way, by admissible evidence to the requisite standard. The assessment undertaken by the court may, in the sense referred to above, be described as an objective one. But the term “objective” is apt to be misunderstood because it can be applied with respect to a quite different process, as the decision in Chartbrook shows.

(footnotes omitted)

85. The Court of Appeal recently cited Simic and collected further authorities on the principles of rectification in Samm Property Holdings Pty Ltd v Shaye Properties Pty Ltd [2017] NSWCA 132 at [107]-[119] per McColl JA (with whom Gleeson JA and Sackville AJA agreed).

86. Rectification will only be granted upon “convincing proof” of the parties holding a common intention inconsistent with what is provided for in the written agreement; Franklins at [451] and [458] per Campbell JA (with whom Allsop P and Giles JA agreed); Pukallus v Cameron (1982) 180 CLR 447 at 452 per Wilson J (with whom Gibbs CJ agreed). As Brightman LJ observed in Thomas Bates & Son Ltd v Wyndham's (Lingerie) Ltd [1981] 1 WLR 505 at 521:

The standard of proof required in an action of rectification to establish the common intention of the parties is, in my view, the civil standard of balance of probability. But as the alleged common intention ex hypothesi contradicts the written instrument, convincing proof is required in order to counteract the cogent evidence of the parties' intention displayed by the instrument itself. It is not, I think, the standard of proof which is high, so differing from the normal civil standard, but the evidential requirement needed to counteract the inherent probability that the written instrument truly represents the parties' intention because it is a document signed by the parties.

87. Further, while it is the subject of some debate (see Hodge, Rectification at [3-48]), subsequent conduct may be admissible in assessing the parties’ common intention at the date of entering into the contract for the purposes of rectification. Cross on Evidence at [39290] reads:

The post-contract conduct of the parties may, of course, be relevant to matters other than the construction of the document. It may show that the parties varied the terms of the contract, or that one of them waived a right under it; it may be relied on to raise an estoppel or to expose illegality; it may be relevant to show the true intention of the party in so far as that is relevant to a claim for rectification. And where there is a dispute as to the existence of a contract, or the contract is oral or there is a question as to how the contract is to be characterised or there is a question of whether a term was incorporated into a contract, or where there is a question of an implied term, the parties’ subsequent conduct may be relied upon to establish the existence of that contract, and what the terms of the contract were, but these are not, properly speaking, cases concerning the interpretation of a document.

(my emphasis)

Estoppel

88. The elements of common law conventional estoppel are set out by Brereton J in MoraticPty Ltd v Gordon [2007] NSWSC 5; (2007) NSW ConvR 56-172 (Moratic) at [32], approved by the Court of Appeal (Tobias JA, with whom Campbell JA and Mason P agreed) in RyledarPty Ltd v Euphoric Pty Ltd (2007) 69 NSWLR 603 at [200]:

(1) that it has adopted an assumption as to the terms of its legal relationship with the Defendants;

(2) that the Defendants has adopted the same assumption;

(3) that both parties have conducted their relationship on the basis of that mutual assumption;

(4) that each party knew or intended that the other act on that basis; and

(5) that departure from the assumption will occasion detriment to the Plaintiffs.

89. As further noted by Brereton J in Moratic at [37], there is no requirement either party has induced, or acquiesced in, the adoption of the assumption by the other, and in particular there is no requirement that either know that the other may incur detriment by reliance on the assumption. Rather, since the assumption must be common to both parties, and may involve a mistaken interpretation of the contract, the possibility that either party might incur detriment by reliance on it will usually not occur to the other.

90. Further, in determining whether there is a mutual assumption, the Court must only have regard to objective conduct, as opposed to the parties’ subjective state of mind; Blockbuster Australia Pty Ltd v Karior Pty Ltd [2009] NSWSC 1089 at [87]-[88] per Price J.

Credit of witnesses

91. For good reason, judges are not necessarily bound to accept a witness’s sworn testimony, even if the witness is not cross examined. O’Loughlin J collected the authorities in Cubillo v Commonwealth (No 2) (2000) 103 FCR 1 at [118]-[123].

92. Further, in making assessments of credibility, trial judges should refrain from drawing inferences too willingly from the demeanour of witnesses as they present in court. Contemporaneous documents will almost always be a far more reliable guide than observations of a witness’s demeanour, especially when they are created against interest. As noted by Gleeson CJ, Gummow and Kirby JJ in Fox v Percy (2003) 214 CLR 118 at [30]-[31]:

30. It is true, as McHugh J has pointed out, that for a very long time judges in appellate courts have given as a reason for appellate deference to the decision of a trial judge, the assessment of the appearance of witnesses as they give their testimony that is possible at trial and normally impossible in as appellate court. However, it is equally true that, for almost as long, other judges have cautioned against the dangers of too readily drawing conclusions about truthfulness and reliability solely or mainly from the appearance of witnesses. Thus, in 1924 Atkin LJ observed in Société d’Avances Commerciales (Société Anonyme Egyptienne) v Merchants’ Marine Insurance Co (The “Palitana”):

“... I think that an ounce of intrinsic merit or demerit in the evidence, that is to say, the value of the comparison of evidence with known facts, is worth pounds of demeanour.”

31. Further, in recent years, judges have become more aware of scientific research that has cast doubt on the ability of judges (or anyone else) to tell truth from falsehood accurately on the basis of such appearances. Considerations such as these have encouraged judges, both at trial and on appeal, to limit their reliance on the appearances of witnesses and to reason to their conclusions, as far as possible, on the basis of contemporary materials, objectively established facts and the apparent logic of events. This does not eliminate the established principles about witness credibility.

93. In respect of evidence of oral conversations, it is always salutary to refer to the observations of McLelland CJ in Equity in Watson v Foxman (1995) 49 NSWLR 315 at 318-319:

Where, in civil proceedings, a party alleges that the conduct of another was misleading or deceptive, or likely to mislead or deceive (which I will compendiously described as "misleading") within the meaning of s 52 of the Trade Practices Act 1974 (Cth) (or s 42 of the Fair Trading Act), it is ordinarily necessary for that party to prove to the reasonable satisfaction of the court: (1) what the alleged conduct was; and (2) circumstances which rendered the conduct misleading. Where the conduct is the speaking of words in the course of a conversation, it is necessary that the words spoken be proved with a degree of precision sufficient to enable the court to be reasonably satisfied that they were in fact misleading in the proved circumstances. In many cases (but not all) the question whether spoken words were misleading may depend upon what, if examined at the time, may have been seen to be relatively subtle nuances flowing from the use of one word, phrase or grammatical construction rather than another, or the presence or absence of some qualifying word or phrase, or condition. Furthermore, human memory of what was said in a conversation is fallible for a variety of reasons, and ordinarily the degree of fallibility increases with the passage of time, particularly where disputes or litigation intervene, and the processes of memory are overlaid, often subconsciously, by perceptions or self-interest as well as conscious consideration of what should have been said or could have been said. All too often what is actually remembered is little more than an impression from which plausible details are then, again often subconsciously, constructed. All this is a matter of ordinary human experience.

…

Considerations of the above kinds can pose serious difficulties of proof for a party relying upon spoken words as the foundation of a causes of action based on s 52 of the Trade Practices Act 1974 (Cth) (or s 42 of the Fair Trading Act), in the absence of some reliable contemporaneous record or other satisfactory corroboration.

…

What I have said above as to the cause of action based on s 52 of the Trade Practices Act 1974 (Cth) (or s 42 of the Fair Trading Act) is equally applicable, mutatis mutandis, to the causes of action based on contract and on equitable estoppel (with the added requirements, in the case of contract that any consensus reached was capable of forming a binding contract and was intended by the parties to be legally binding, and in the case of equitable estoppel that any representation alleged was clear and unequivocal and was relied on to the substantial detriment of the representee).

(my emphasis)

94. The rule in Browne v Dunn (1893) 6 R 67 (Browne v Dunn) may also be relevant to a judge’s assessment of a witness’s credibility. In this jurisdiction Hunt J subjected the rule in Browne v Dunn to his typically lucid analysis in Allied Pastoral Holdings Pty Ltd v Cmr of Taxation(Cth) [1983] 1 NSWLR 1 (Allied Pastoral) and concluded at 26:

I remain of the opinion that, unless notice has already clearly been given of the cross examiner’s intention to rely upon such matters, it is necessary to put to an opponent’s witness in cross examination the nature of the case upon which it is proposed to rely in contradiction of his evidence, particularly where that case relies upon inferences to be drawn from other evidence in the proceedings.

Parties’ submissions

95. The essential difference between the parties, whichever case is propounded, is the Plaintiffs submit first that the third tranche ($4.7 million) is not payable upon Gateway Approval and is only payable immediately after 5pm on 4 October 2017. Secondly, if Rezoning is not obtained by 5pm on 4 October 2017 the moneys which comprise the first and second tranches under the Deed are to be refunded. The Defendants on the other hand assert, upon Gateway Approval plus 16 weeks, the third tranche is payable and non-refundable, if it occurs before 5pm on 4 October 2017.

96. Both parties submit the evidence they have called, even if rectification is entertained, would lead to the same result they contend for on a proper construction of the Deed. A more detailed overview of their submissions follows.

Credibility

97. Issues of credibility are limited in these proceeding largely to the Alleged 18 January Conversation and thus the credit of Mr Azizi and Mr Sam Ayache.

98. The Plaintiffs submit the court should accept Mr Azizi as a reliable witness given his direct, careful and consistent evidence (Plaintiffs’ closing submissions [58]). In contrast, the Plaintiffs submit Mr Sam Ayache gave inconsistent evidence, pointing to his changing evidence on who he was acting for in negotiating the Option Deeds, and his negotiation of the purchase prices being well above market (Plaintiffs’ closing submission [57]-[61]).

99. The Plaintiffs also point to Mr Sam Ayache’s alleged inconsistent evidence about his responsibilities at Perennial, and his failure to disclose to Mr Azizi when Rezoning was likely to take place, instead telling Mr Azizi and Mr Scobie that it was likely to take place “a month or so” or “approximately 3 months” after Gateway Approval.

100. Further, the Plaintiffs submit Mr Sam Ayache had a perceived conflict of interest arising from his entitlement to receive commission from all parties, and thus it was in Mr Sam Ayache’s interest to tell all parties what they wanted to hear (Plaintiffs’ closing submission [62]-[65]).

101. The Defendants submit the attack on Mr Sam Ayache’s perceived conflict of interest is misguided as Perennial was in an agency agreement with Ezistrip pursuant to which Mr Sam Ayache was entitled to receive commission (Defendants’ closing submissions [13]). Further, the Defendants submit Mr Azizi and Mr Scobie’s claim they were unaware of Mr Sam Ayache’s position is seriously undermined by Mr Sam Ayache’s email of 14 November 2016 which expressly refers to “our commission” (Exhibit D4) (Defendants’ closing submissions [14]).

102. Further, the Defendants submit Mr Sam Ayache denied ever telling Mr Azizi or Mr Scobie Rezoning would take place around three months after Gateway Approval (SA3 [16]), and it was never put to him that he had done so (T221/14-18).

103. In relation to Mr Azizi, the Defendants submit he was an unsatisfactory witness, giving confusing, internally inconsistent and self-serving evidence (Defendants’ closing submissions [18]-[21]).

104. The Defendants draw particular attention to Mr Azizi’s understanding of the operative effect of the Completion Date. Mr Azizi initially thought payment of the final tranche was due on Completion Date which included nine weeks after Rezoning (T130/3-29), then recalled Completion Date was to occur nine weeks after payment of the second tranche of the Nomination Fee (T130/45-50), then said only payment of the third tranche, rather than Completion Date, was to take place nine weeks after payment of the second tranche of the Nomination Fee (T131/23-30). The Defendants also point to further transcript references where Mr Azizi gave different views as to the timing of Completion Date and payment of the final tranche of the Nomination Fee (eg T140/35-43; T153/1-2; T139/20-37; T139/10-11) and Mr Azizi’s concession he was “a little bit confused” about the Completion Date (T139/10-11) as evidence his current understanding of the Nomination Deed should not be relied upon (Defendants’ closing submissions [18]-[19]).

105. In relation to the remainder of the Plaintiffs’ witnesses, in summary the Defendants submit Mr Raheb is not an independent witness, Mr Scobie’s evidence on overlooking the reference to Completion Date being 16 weeks after Gateway Approval “strained credulity” and Mr Neal’s evidence is irrelevant as he did not communicate to either party his understanding of planning law (Defendants’ closing submissions [24]-[29]).

Construction of the Nomination Deed

106. Both parties accept the Nomination Deed in its final form is sufficiently ambiguous for the Court to take into account surrounding circumstances (Plaintiffs’ closing submissions [7]; Defendants’ closing submissions [94]). The first point of distinction in submissions is the ambit of those surrounding circumstances.

Surrounding circumstances – Plaintiffs

107. The Plaintiffs submit the surrounding circumstances the Court should take into account in construing the Nomination Deed are limited to the following:

1. The parties were aware of Gateway Approval being a step on the path to Rezoning, but not Rezoning;

2. Certain Option Deeds would expire in November 2017;

3. The Nomination Fee amount was agreed to by reference to the development potential of the Bexley Properties, and at a time where the risk of Rezoning was being discussed as being borne by Ezistrip; and

4. The Nomination Fee ($5.45 million plus GST) was to be paid in addition to the payment of the “Land Fee” of $9.55 million, being the sum of the purchase prices for the Properties under the land contracts.

5. (Plaintiffs’ closing submissions [14]).

108. The Plaintiffs maintain evidence of negotiations, whilst sometimes admissible, does not assist in this case since Mr Azizi and Mr Sharan were not involved in, and hence have no actual knowledge of, the negotiations regarding the wording of the Deed (Plaintiffs’ closing submissions [11]).

Surrounding circumstances – Defendants

109. The Defendants submit the Court may take into account a broader range of materials going to surrounding circumstances in construing the Nomination Deed. In addition to the circumstances set out by the Plaintiffs, the Defendants point to the negotiations between the parties and various drafts of the Nomination Deed as relevant and admissible material going to construction (Defendants’ closing submissions [94]-[95]; T209/4-6).

110. In particular, the Defendants include the fact the initial proposal for Completion Date was nine weeks after Rezoning, and that this changed from 18 January 2017, as a surrounding circumstance the Court should have regard to (Defendants’ closing submissions [95](c) – (d)). The Defendants submit this evidence is admissible because Mr Azizi had knowledge of those matters, being copied in on emails and in communication with Mr Raheb. Similarly, Mr Sharan had knowledge of those matters, albeit at a higher level, as reflected in his sworn evidence he knew the initial form of the Deed had the Completion Date at nine weeks after Rezoning (SS [17]) and his participation in the conversations about changing the Completion Date to 16 weeks after Gateway Approval (SS [21], [22], [24]). Further, the Defendants submit Mr Michael Ayache, as Mr Sharan’s lawyer and agent, had full authority to act on Mr Sharan’s behalf and thus his knowledge should be imputed to Mr Sharan (T209/9-20).

414. I accept the failure of Jana to provide a timely response to the Defendants’ letter of 17 March 2017 requesting payment of the third tranche by 28 June 2017 since Gateway Approval had taken place (CB D 396) is consistent with the Plaintiffs not believing the Deed to be conditional upon Rezoning. The same goes for Mr Scobie’s minutes of the meetings of 13 March (CB D 364) and 21 March (CB D 405), both of which Mr Azizi attended, recording “settlement” as taking place in 16 weeks. However, neither pieces of evidence, in my view, carry much more evidentiary weight than simply fitting in with the Defendants’ claim. Mere silence and delay is not, in and of itself, determinative nor necessarily supportive of a belief the Deed was conditional upon Rezoning. There is evidence lawyers were first instructed about a month after receipt of the 17 March Letter (T192/18-47), and in my view Mr Azizi’s delay in raising an issue with the Deed appearing to not be conditional upon Rezoning after exchange was not properly explored in evidence.

415. Further, I am not satisfied the post-contractual activity the Plaintiffs undertook in progressing the development before Rezoning is necessarily indicative of any intention for the Deed to not be conditional upon Rezoning. There is no evidence of actual expenditure by the Plaintiffs. Further, as submitted by the Plaintiffs, such activity would be in line with prudent business practice given the scope of the development. For these reasons the Plaintiffs’ post-contractual conduct does not, in my view, strengthen the Defendants’ already well formed case on rectification.

Conclusion on rectification

417. In my view, I am satisfied the words and conduct of the parties up to and including the date of the Deed provide clear and convincing proof of an intention to make the Deed conditional upon Gateway Approval. Specifically, I am satisfied Mr Azizi and Mr Sharan shared a common intention at the date of executing the Deed that the performance of the steps required to be taken on the Completion Date was conditional only on the issuance of Gateway Approval, and not Rezoning, and as a corollary, the right to terminate the Deed arose only where Gateway Approval had not occurred by the Final Exercise Time.

418. Thus, even if I had not construed the Deed in such a way as to make the steps required to be taken on the Completion Date conditional only upon the issuance of Gateway Approval, I would be satisfied in ordering the Deed be rectified to read as follows:

10   Rezoning of Property

10.1   This Deed is conditional upon the Gateway Approval of the Rezoning of the Property.

10.2   If the Gateway Approval of the Rezoning of the Property does not occur on or before the Final Exercise Time, then either party may terminate this deed, at which time:

(a)   The Nomination Fee paid in accordance with Items 2(a) and (b) of the Schedule will be refunded to the Nominee; and

(b)   Neither party shall have any Claim against the other party.

(Changes underlined)

Conventional Estoppel

419. I am not satisfied the Defendants would otherwise succeed in a claim for conventional estoppel. While the claim played, at best, a peripheral role in the proceedings, the Defendants did not lead evidence of any reliance or detriment they suffered as a result of any common intention they may have shared with the Plaintiffs. For these reasons in my view there are insufficient grounds to find that in the alternative, the Plaintiffs are estopped from terminating the Deed or refusing to perform the steps required under clause 9 should Rezoning not take effect before the Final Exercise Time.

Conclusion

420. For the above reasons, in my view the Deed, objectively construed, is not conditional upon Rezoning. Rather, the terms and surrounding circumstances of the Deed make plain that should 16 weeks after Gateway Approval be the earliest of the events set out under the definition of Completion Date, then the parties are required to undertake their obligations required on Completion Date once those 16 weeks expired. These obligations only become conditional upon Rezoning in the sense described in clause 10.2, that is, when Completion Date has not occurred by Final Exercise Time.

421. In the alternative, I am satisfied the parties subjectively intended the steps required to be undertaken on Completion Date to be conditional upon Gateway Approval, not Rezoning, and thus an order for rectification of the kind set out in [418] would have been granted had the Defendants not succeeded on construction. I am not, however, satisfied there are sufficient grounds to establish a claim for conventional estoppel.

422. In light of my reasons, I invite the parties to prepare short minutes and, if the need arises, to be heard on the question of costs.

**********

Amendments

29 August 2017 - Correction in case name

Decision last updated: 29 August 2017