Kirkby v Turner - [2009] NSWCA 131

NEW SOUTH WALES COURT OF APPEAL

CITATION:
Kirkby v Turner [2009] NSWCA 131

FILE NUMBER(S):
40088/08

HEARING DATE(S):
18 May 2009

JUDGMENT DATE:
2 June 2009

PARTIES:
Brett David Kirkby (Appellant)
Noel Robert Turner (Respondent)

JUDGMENT OF:
Beazley JA Tobias JA Campbell JA

LOWER COURT JURISDICTION:
Supreme Court - Equity Division

LOWER COURT FILE NUMBER(S):
6088/06

LOWER COURT JUDICIAL OFFICER:
Nicholas J

LOWER COURT DATE OF DECISION:
31 January 2008

LOWER COURT MEDIUM NEUTRAL CITATION:
Schulz v Turner [2008] NSWSC 24

COUNSEL:
B Crowley, solicitor (Appellant)
JM White (Respondent)

SOLICITORS:
The Peoples Solicitors, Darlinghurst (Appellant)
Michael Michell & Associates (Respondent)

CATCHWORDS:
CONTRACTS - general contractual principles - agreement to negotiate - whether parties are bound to negotiate if a precondition of the obligation to negotiate has not occurred - contract preconditioned obligation to negotiate on the likelihood of rezoning being imminent - objective approach to construction of agreements to negotiate - WORDS AND PHRASES - "agreement to negotiate"

LEGISLATION CITED:
Environmental Planning and Assessment Act 1979

CATEGORY:
Principal judgment

CASES CITED:
Australis Media Holdings Pty Ltd v Telstra Corporation Ltd (1998) 43 NSWLR 104
Coal Cliff Collieries Pty Ltd v Sijehama Pty Ltd (1991) 24 NSWLR 1
Hunyor v Tilelli (1997) 8 BPR 15, 629 (NSWSC)
Schulz v Turner [2008] NSWSC 24
Suttor v Gundowda Pty Ltd (1950) 81 CLR 418
Toll (FGCT) Pty Ltd v Alphapharm Pty Ltd [2004] HCA 52; (2004) 219 CLR 165

TEXTS CITED:

DECISION:
Appeal dismissed with costs.

JUDGMENT:

IN THE SUPREME COURT
OF NEW SOUTH WALES
COURT OF APPEAL

CA 40088/08
SC 6088/06
BEAZLEY JA
TOBIAS JA
CAMPBELL JA
2 JUNE 2009

BRETT KIRKBY v NOEL ROBERT TURNER

Judgment

BEAZLEY JA: I agree with Campbell JA.
TOBIAS JA: I agree with Campbell JA.
CAMPBELL JA:
Nature of the Case
This appeal concerns whether a written agreement that the parties drafted for themselves requires the Appellant, Mr Brett Kirkby, to transfer to the Respondent, Mr Noel Turner, all his interest in a company, Upper Hunter Developers Pty Ltd (“the Company”).
Facts
The Company was incorporated in June 2004 by the Appellant and a Mr Allan Hartigan. Their plan was that the Company would acquire a particular parcel of land at Lot 30 Denman Road, Muswellbrook (“the Property”) that then had a rural zoning, obtain a rezoning of the Property, and subdivide it into residential lots. The Appellant and Mr Hartigan each held half the shares in the Company, and each was a director.
In August 2004 the Company exchanged contracts to purchase the Property from its then owner.
Soon after exchange of contracts, Mr Hartigan told the Appellant that he no longer wished to be involved in the transaction. From then on, the Appellant was in effect the embodiment of the Company, but he did not actually acquire Mr Hartigan’s shares until 9 November 2004.
The Respondent is a property consultant. In about mid October 2004 the Appellant and the Respondent met, and the Appellant told…

Grounds of appeal

[14] The appellant contends that the primary judge erred in finding that the respondent had discharged the onus of establishing the matters required under the relevant provision.

[15] It was submitted that his Honour failed to give adequate weight to the evidence of the second witness, and that the findings of fact were not reasonably open on the material before the Court.

[16] The respondent, for its part, submits that no error is disclosed, and that the conclusions reached were well within the range of outcomes available to the primary judge.

Consideration

[17] It is convenient to deal first with the question of construction, as the resolution of that issue informs the remaining grounds advanced by the appellant.

[18] For the reasons that follow, we are of the view that the appeal should be allowed in part and the matter remitted for further determination.

Continue reading Kirkby v Turner

Details

AGLC: Kirkby v Turner [2009] NSWCA 131
Case: [2009] NSWCA 131
Decision Date: 2 June 2009

CaseChat Overview and Summary

The case of *Kirkby v Turner* concerned an appeal to the New South Wales Court of Appeal regarding a contractual dispute. The appellant, Kirkby, and the respondent, Turner, had entered into an agreement that included provisions for negotiating an extension of a rezoning timeframe. The central issue revolved around whether the parties were obligated to negotiate an extension when a precondition for such negotiation, namely the imminence of rezoning, had not been met.

The Court of Appeal was required to determine the proper construction of the agreement, specifically concerning the obligation to negotiate an extension of time for rezoning. The legal question was whether the phrase "based on the likelihood of rezoning being imminent" qualified the "extension" or the act of "negotiate," and how this impacted the enforceability of the negotiation clause when rezoning was demonstrably not imminent.

The Court applied an objective approach to the construction of the agreement, as espoused in *Toll (FGCT) Pty Ltd v Alphapharm Pty Ltd*. It reasoned that parties to a contract are presumed to intend to undertake feasible obligations. In this instance, the Court found that it would be commercially unreasonable to interpret the agreement as requiring the parties to negotiate an extension based on a rezoning that was not imminent, as such a negotiation would be futile and based on a fundamentally incorrect premise. Therefore, the Court concluded that the parties' intention was to negotiate an extension only if rezoning had not been finalised and was likely to become imminent.

The appeal was dismissed, and the appellant was ordered to pay the costs of the appeal.

Orders

Orders of the court

Appeal dismissed with costs.

Background

Background to the litigation

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Evidence

Evidence Before The Court

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Decision

Reasons for decision

In those circumstances, I shall proceed by assuming, without expressly deciding, that there is nothing inherently unenforceable about the third sentence of clause (b). Decision I do not accept the submissions that Mr Crowley puts concerning the construction of the Agreement. In my view, the question of whether the rezoning had been unsuccessful, and therefore whether clause (d) operated, needs to be decided within the frame of reference of the Agreement itself. When clause (d) talks about “the re-zoning” it is talking about not just rezoning of the Property to Rural Residential, but rezoning within the parameters that the Agreement itself sets out. That rezoning is a rezoning that has either been “finalised” within two years, or within such longer period as might arise under an extension arrived at pursuant to the final sentence of clause (b). It appears on the evidence that neither the Appellant nor the Respondent made any attempt to negotiate an extension of the two year period. Whether the failure of the Appellant to seek to negotiate an extension disentitles him from relying upon any failure of the Respondent to even try to negotiate an extension was not explored in the argument, so I put that consideration to one side: cf Suttor v Gundowda Pty Ltd (1950) 81 CLR 418 at 440-443; Hunyor v Tilelli (1997) 8 BPR 15, 629 (NSWSC). On the assumption of enforceability of the final sentence of clause (b) that I am making, it is clear that, as at 1 November 2006, the precondition for the operation of that sentence (“[i]f this time frame proves to be insufficient …”) had been satisfied. Considered just as a piece of language, there is syntactic ambiguity in the words “the parties agree to negotiate an extension based on the likelyhood [sic] of re-zoning being imminent”. The ambiguity concerns whether “based on the likelyhood [sic] of re-zoning being imminent” is an adjectival phrase that describes “extension”, or is an adverbial phrase that qualifies “negotiate”. I do not think it matters which of these alternative constructions is correct. An “extension based on the likelyhood [sic] of re-zoning being imminent” was, in the events that actually presented themselves to the parties as at 1 November 2006, something that was impossible to negotiate, because in fact a rezoning was not imminent. Similarly, for the parties to attempt to “negotiate … based on the likelyhood [sic] of re-zoning being imminent” would be to carry out a negotiation on a basis that was factually incorrect in a fundamental way. Giving a commercial construction to the Agreement, a court would be very slow to conclude that the parties have agreed to carry out impossible tasks, or to engage in a negotiation on a basis that they both know is fundamentally incorrect and would therefore be futile, if another construction is open on the language of the agreement. The “intention of the parties” to a contract is, when one is considering questions of construction, the objective intention that reasonable observers with knowledge of any surrounding circumstances would attribute to the parties from their words and actions: Toll (FGCT) Pty Ltd v Alphapharm Pty Ltd [2004] HCA 52; (2004) 219 CLR 165 at 179, [40]. When a reasonable observer would treat the contracting parties in this case as not intending to agree to a futility, or engage in a negotiation on a basis that fundamentally differs from reality, in my view the trial judge was right in finding that it was:“… the intention of the parties that they should have the opportunity to negotiate an extension if (but only if) at the end of the period rezoning had not been finalised and the likelihood was that it would be imminent”.

Ratio Decidendi

Legal Principle Established

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