Laurel Star Pty Ltd v Babstock Pty Ltd
[2020] QDC 305
•3 December 2020
DISTRICT COURT OF QUEENSLAND
CITATION:
Laurel Star Pty Ltd v Babstock Pty Ltd [2020] QDC 305
PARTIES:
LAUREL STAR PTY LTD ACN 624 444 864 as trustee for the Alan and Dorothy Marburg Family Trust
(first plaintiff)
AND
DOROTHY ANN MARBURG
(second plaintiff)
v
BABSTOCK PTY LTD ACN 010 443 124 as trustee for The Kenman Real Estate Unit Trust ABN 60 266 220 872
(first defendant)
AND
WAG PROPERTY MANAGEMENT PTY LTD ACN 136 174 242 as trustee for The WAG Unit Trust
(second defendant)
FILE NO/S:
2326/18
DIVISION:
Civil
PROCEEDING:
Trial
DELIVERED ON:
3 December 2020
DELIVERED AT:
Brisbane
HEARING DATE:
11 to 15 May 2020
Last submissions received on 27 August 2020
JUDGE:
Barlow QC DCJ
ORDER:
1. Judgment for the first plaintiff against both defendants in the sum of $42,844.86.
2. The defendants pay, or cause to be paid, to the first plaintiff the sums of $41,500 and $250, respectively comprising the balance of the deposit under each contract.
3. Judgment for the plaintiffs on the counterclaim.
CATCHWORDS:
CONTRACTS – GENERAL CONTRACTUAL PRINCIPLES – DISCHARGE, BREACH AND DEFENCES TO ACTION FOR BREACH – REPUDIATION AND NON-PERFORMANCE – REPUDIATION – WHAT AMOUNTS TO REPUDIATION – contract conditional on the lessor agreeing to provide a new lease to the plaintiffs – plaintiffs contend that they validly terminated the contract, either due to not being able to secure a new lease of the premises, or because the absence of a lease was due to breach by the defendants of its obligation to secure a new lease – whether termination was valid
CONTRACTS – GENERAL CONTRACTUAL PRINCIPLES – DISCHARGE, BREACH AND DEFENCES TO ACTION FOR BREACH – REPUDIATION AND NON-PERFORMANCE – REPUDIATION – ANTICIPATORY BREACH – plaintiffs contend that they were entitled to terminate contract in anticipation that the defendant would be unable, at settlement, to provide the necessary documentation for each of the properties the management of which was to be transferred to the plaintiffs – whether the plaintiffs were entitled to rely on the circumstances one day prior to settlement as an anticipatory breach that entitled it to terminate the contract prior to settlement
CONTRACTS – GENERAL CONTRACTUAL PRINCIPLES – CONSTRUCTION AND INTERPRETATION OF CONTRACTS – one contract contained a clause which specified that it was dependent on settlement of another contract and provided rights to a non-defaulting party to terminate both contracts for default by the other party under either contract – other contract did not contain a similar clause – whether the latter contract was conditional on contemporaneous settlement of the first contract
CONTRACTS – GENERAL CONTRACTUAL PRINCIPLES – DISCHARGE, BREACH AND DEFENCES TO ACTION FOR BREACH – ALTERATION OF WRITTEN INSTRUMENT – defendants contend that the contracts were varied, partly in writing, partly by conduct – defendants contend that the variations discharged or altered their obligations – whether the contracts were varied
Property Occupations Act 2014, s 113, s 249
Residential Tenancies and Rooming Accommodation Act 2008, s 65
Butt v M'Donald (1896) 7 QLJ 68, applied
Electricity Generation Corporation v Woodside Energy Ltd (2014) 251 CLR 640, cited
DTR Nominees Pty Ltd v Mona Homes Pty Ltd (1978) 138 CLR 423, cited
Foran v Wight (1989) 168 CLR 385, cited
Jones v Barkley (1781) 2 Dougl 684, cited
Jones v Dunkel (1959) 101 CLR 298, cited
Pacific Brand Sport & Leisure Pty Ltd v Underworks Pty Ltd (2006) 149 FCR 395, cited
Park v Brothers (2005) 222 ALR 421, cited
Rawson v Hobbs (1961) 107 CLR 466, cited
Secured Income Real Estate (Australia) Ltd v St Martins Investments Pty Ltd (1979) 144 CLR 596, applied
Shepherd v Felt and Textiles of Australia Ltd (1931) 45 CLR 359, cited
Sunbird Plaza Pty Ltd v Maloney (1988) 166 CLR 245, cited
COUNSEL:
AJH Morris QC for the plaintiffs
BJ Kidston for the defendants
SOLICITORS:
Sarinas Legal for the plaintiffs
Carter Capner Law for the defendants
Table of Contents
Introduction
A brief post-contractual chronology
The contracts
Business Contract
Rent Roll Contract
Structure of reasons
The interrelationship of the contracts
Was each contract contingent on settlement of the other?
Rectification of the Rent Roll Contract
Business Contract – lease or assignment of lease?
Variation or waiver of the Business Contract obligations?
Business Contract Variation Agreement
Lease waiver/dispensation
Termination of the Business Contract – no lease of the premises
Termination for lessor’s refusal to grant lease
Termination for breach
Laurel Star’s ability to complete the Business Contract
Termination for breach of the Rent Roll Contract
Did Laurel Star validly terminate the Business Contract?
Construction of the Rent Roll Contract
Requirements for an assignment
Variation or waiver of the Rent Roll Contract?
Documentation agreement
The allegations
The evidence
Was there a Documentation Agreement?
Appointment waiver/dispensation
Termination of the Rent Roll Contract
Was Babstock in anticipatory breach of the Rent Roll Contract?
Other grounds for termination of the Rent Roll Contract
Notice and other requirements of the Rent Roll Contract
Laurel Star’s readiness, willingness and ability to complete the Rent Roll Contract
Conclusion – did Laurel Star validly terminate the Rent Roll Contract?
The plaintiffs’ misrepresentation case
The counterclaim
The result
Introduction
The first plaintiff (Laurel Star) is the trustee of the Alan & Dorothy Marburg Family Trust (the Trust). At relevant times, Alan Marburg was the sole director of Laurel Star. The second plaintiff (Mrs Marburg) was the sole director of another company, D & A Marburg Investments Pty Ltd (Marburg Investments), which was formerly the trustee of the Trust. Mr and Mrs Marburg are husband and wife.
The first defendant (Babstock) operated a licensed real estate business, trading as “Your Local Rental”. As its name suggested, the principal (if not the only) role of the business was to manage rental properties on behalf of landlords. The appointments of the business as rental agent for landlords and the details of the rented properties comprised a rent roll of substantial value. The business was conducted by Babstock from premises leased to the second defendant (WAG). It seems that Babstock in fact operated the business as undisclosed agent for WAG.[1]
[1]The exact relationship between Babstock and WAG is not clear. Their director, Mr Kenman, gave evidence (T3-29:16-29) about how the business was structured between the two that does not seem entirely consistent with the documents, but it does not seem material.
Real Estate Dynamics Pty Ltd (RED) was appointed by one or both of the defendants as their agent to market and sell the business. Dean Yeo was an employee of RED.
At some time in 2017, Mr and Mrs Marburg became interested in buying a real estate rental agency. They came across RED, which drew the defendants’ business to their attention. Mr Yeo provided to them a copy of a business sale information booklet (the Sale Information Booklet)[2] containing information about the defendants’ business. Having read that document and after discussions with Mr Yeo, the plaintiffs offered to buy the business.
[2]Exhibit 1.45.
The plaintiffs contend that some of the information in the Sale Information Booklet was misleading or deceptive, as they were later to discover, but they relied on that information in deciding to purchase the business. The defendants contend that the information was not misleading or deceptive and, in any event, the plaintiffs did not rely on it.
On 1 December 2017, Babstock, as seller, Marburg Investments, as buyer, and Mrs Marburg, as guarantor, entered into two contracts. At that time, Marburg Investments was trustee of the Trust. The first contract was for the sale of the business (other than the rent roll) for $5,000 (Business Contract). The second contract was for the sale of the rent roll, then comprising 148 properties, for approximately $820,000 (Rent Roll Contract).[3] The buyer’s obligations under the contracts were guaranteed by Mrs Marburg pursuant to the terms of a guarantee contained within each contract (Guarantees).[4]
[3]The exact consideration for the rent roll would depend on the number of agency agreements ultimately transferred to the buyer, at a cost of $3.10 per $1.00 of annual income under each agency agreement.
[4]The Business Contract is exhibit 1.43. However, within that exhibit, as schedule 6 to the Business Contract, is the Rent Roll Contract, beginning at page 45 of the exhibit.
Subsequently, Laurel Star became the trustee of the Trust and was substituted as buyer under both contracts.[5] Consequently, although the contracts and the pleadings at times refer to the original buyer, I shall substitute Laurel Star in discussing the relevant terms.
[5]Deed of Amendment, Exhibit 1.44.
On the afternoon of 10 May 2018, with settlement of the Business Contract and the first settlement under the Rent Roll Contract due to occur on 11 May 2018, Laurel Star purported to terminate both contracts. Babstock rejected that termination, which it says constituted a repudiation, and affirmed the contracts. On 18 May 2018, the defendants say that Babstock accepted Laurel Star’s ongoing repudiation and terminated the contracts.
The plaintiffs say that the contracts were terminated as Babstock was in default, largely in three respects:
(a)first, the Business Contract required that the buyer be granted a new lease of the business premises and that had not occurred and was not going to occur;[6]
(b)secondly, there were issues with the rent roll, principally that at least 32 of the properties were not the subject of signed and completed entry condition reports (ECRs) and the defendants were therefore unable to comply with their contractual obligations under the Rent Roll Contract; and
(c)thirdly, Babstock could not and would not provide to Laurel Star, at settlement of the Rent Roll Contract, assignments to Laurel Star of existing appointments of Babstock, duly executed by the owners.
[6]The plaintiffs say that the lessor of the business premises had made it clear that a new lease would not be granted.
There were other less significant matters which the plaintiffs say also meant that Babstock was in default of the Rent Roll Contract.
The defendants contend that they did not breach the Business Contract, notwithstanding that the landlord would not grant a lease to Laurel Star, because:
(a)the contract was amended because the plaintiffs agreed that they would take over negotiations with the landlord and it was unnecessary for the defendants to secure an assignment or a lease;
(b)alternatively, the plaintiffs agreed to take over negotiations and, even though that may not have constituted a variation of the contract, the plaintiffs waived the defendants’ obligation to secure such a lease and were estopped from denying that waiver;
(c)furthermore, the landlord’s refusal to grant a lease was due to the plaintiffs’ conduct in their discussions with the landlord and therefore it was not a default on the defendants’ part for the lease not to be granted.
As for the Rent Roll Contract, the defendants contend that, although some (but not as many as the plaintiffs contend) of the ECRs and agency agreements had not been completed, or had been completed incorrectly, the defendants were in the process of having complete and correct documents executed by the tenants and the landlords and would have had those documents available by the first or the second settlement date. Also, Babstock was not obliged to obtain assignments executed by the owners, as it had agreed with Laurel Star that it need only send notices of assignment to the owners. Therefore, Babstock was not in breach of the contract.
A brief post-contractual chronology
The parties agree that the due diligence date under the Rent Roll Contract was extended from 15 to 22 December 2017[7] and the first settlement date was extended to 11 May 2018.[8] They also agree that, by a written deed on 27 March 2018,[9] Laurel Star was substituted as buyer under each contract. Notably, that deed described the contracts as “each signed contingently and contemporaneously” and as “the Contract Business Sale [sic] and the contingent and contemporaneously signed Agreement for Sale of Rent Roll.”[10]
[7]Exhibit 8, dated 14 December 2017, is the request for that extension. While there is no specific response, the defendants do not appear to have disputed that they were content to extend the date.
[8]Third further amended statement of claim, paragraph 19; Amended defence to third further amended statement of claim and further amended counterclaim, paragraph 23.
[9]Exhibit 1.44.
[10]Recital A and clause 1 respectively. These statements are relied on by the plaintiffs at paragraph 17A(c) of the statement of claim, together with paragraphs 17B to 17D. The plaintiffs seek to construe the Rent Roll Contract as contingent on the Business Contract and vice versa and, to the extent necessary, to rectify the Rent Roll Contract to contain an express clause to that effect.
On 22 December 2017, Laurel Star’s solicitors informed the defendants’ solicitors that “the due diligence provision has now been satisfied.”[11]
[11]Exhibit 18.
On 23 January 2018 the parties agreed in writing to extend the finance date to 2 February 2018 and the first settlement date to 4 April 2018, on terms that 50% of the deposits under the contracts be released to the seller and be non-refundable except on default by the seller.[12]
[12]Exhibit 24.
On 2 February 2018, the plaintiffs’ bank approved finance in the sum of $310,000 to assist with the purchase of the rent roll business.[13] Two matters should be noted about the letter of approval. The first is that it does not approve finance in an amount not less than the anticipated purchase price of $820,166.08, which was a condition of the Rent Roll Contract.[14] The second is that there was no direct evidence that Laurel Star gave notice to the defendants that the finance approval condition had been satisfied or waived by the buyer.[15] As will become apparent, nothing seems to turn on the latter, but the defendants rely on the apparent inadequacy of the finance amount and the absence of evidence that the required securities were given to the bank and that Laurel Star had sufficient other funds to complete the purchase, as constituting an absence of evidence that, when it purported to terminate the contracts, it was ready, willing and able to complete them.
[13]Exhibit 63.
[14]Exhibit 1.43, clause 4.1; schedule 2.
[15]As required by clause 4.2.2 of the Rent Roll Contract. However, the plaintiffs’ solicitors later asserted that Laurel Star had “communicated finance approval to the Seller on 2 February 2018”: exhibit 62A, p 6.
On 5 April 2018, the parties formally agreed to extend the first settlement date to 18 April 2018.[16] They later agreed to extend it to 27 April 2018[17] and finally to 11 May.[18]
[16]Exhibit 46.
[17]Exhibit 51.
[18]Exhibits 54 and 55.
On 4 May 2018, the plaintiffs’ solicitors wrote to the defendants’ solicitors attaching a list of 35 properties about which the plaintiffs were not satisfied with the paperwork and records.[19] The defendants’ solicitors responded on 9 May 2018, attaching the defendants’ response to each concern and stating that any concerns that had not been addressed by the date of first settlement would be dealt with before the second settlement date. In the same letter, the defendants’ solicitors went to say:
Instructions are to compel settlement of both transactions on the due date. If however your client maintains a view that it is entitled to rely on the standard conditions in the business contract, not to complete that transaction, then the Seller may be prepared to allow the Rent Roll sale to settle independently. Similarly, if it seeks a further short extension so as to finalise arrangements as regards business premises, the Seller may be prepared to acquiesce.
[19]Exhibit 57.
On 10 May 2018, the plaintiffs’ solicitors wrote a long letter to the defendants’ solicitors,[20] in which they reviewed the history of events leading to the contracts and since the contracts were made and to which they attached the contracts, the Sale Information Booklet and various items of correspondence. They asserted that RED had made representations that had been shown to be false or misleading, as there was no agency agreement for four properties, there was no completed and signed entry condition report for 32 properties and 19 properties were outside the represented suburbs of Moggill and Bellbowrie. They also contended that they had been unable to obtain a lease on the contracted terms. They asserted that the buyer therefore rescinded both contracts “on the basis of the false and misleading representations and misleading and deceptive conduct which induced the Buyer into entering into the Contract [sic],” or alternatively for unconscionable conduct. In the further alternative, they purported to terminate the Rent Roll Contract for breach by the seller. Furthermore, they asserted that the buyer terminated the Business Contract because no lease of the premises had been obtained and, consequently, the Rent Roll Contract was also terminated under special condition 6.4 of the Business Contract. Finally, they asserted that the Rent Roll Contract was void for uncertainty and, as the Business Contract was contingent on the Rent Roll Contract, it was also void.
[20]Exhibit 62A.
On 11 May 2018, the defendants’ solicitors responded.[21] They denied that the defendants had breached either contract or engaged in the alleged “misconduct.” They provided a Dropbox link to ECRs for 17 properties and agent appointments for five properties about which Laurel Star had complained. They said that ECRs for the balance of the properties would be available by the date of the second settlement. They said that the seller was ready, willing and able to settle that day. They asserted that Laurel Star’s purported termination of the contracts constituted repudiation. Nevertheless, they said the seller wished to settle the Rent Roll Contract promptly and nominated the following Friday, 18 May 2018, for settlement of that contract.
[21]Exhibit 62B.
On 18 May 2018, when the plaintiffs no doubt did not attend for settlement, it appears that the defendants’ solicitors wrote to the plaintiffs’ solicitors terminating both contracts for repudiation by the plaintiffs, although there is no evidence of that correspondence.[22]
[22]It is pleaded in the counterclaim, paragraph 31(b). In the plaintiffs’ reply to that paragraph of the defence, they deny that “the termination was valid”, but they do not respond to the allegation that the defendants’ solicitors sent an email terminating the contracts. That reply appears to constitute a deemed admission of the allegation that the email was sent. In any event, I do not apprehend there to be a dispute that such an email was sent and purported to terminate the contracts.
The contracts
It is convenient to set out the terms of each of the contracts that are particularly relevant to the issues.
Business Contract
The Business Contract is dated 1 December 2017.[23] The clauses most relevant to the issues are set out below.
[23]Exhibit 1.43.
The date for completion was 1 March 2018.[24] Time was of the essence.[25]
[24]Clauses 1.1, 7 & item P in the items schedule.
[25]Clause 22.
The REIQ standard conditions of sale applied, subject to the special conditions. The most relevant special conditions were clauses 5 and 6.
Due Diligence
5.1 This contract is subject to and conditional upon the Buyer conducting investigations and enquiries with respect to the Business the subject of this Contract and all matters relating to it including, but without limitation, the following: …
5.3 In the event the Buyer, in its absolute discretion, is not satisfied with the outcome of the due diligence enquiries then the Buyer may at any time up to and including 5:00pm on the day which is fourteen (14) days from the date of this Contract terminate this Contract by notice, in writing, to the Seller. In the event this Contract is terminated in accordance with this Special Condition, the Buyer shall be entitled to receive a refund of the Deposit in full without deduction.
5.4 This Special Condition is for the benefit of the Buyer and may only be waived by the Buyer.
Contemporaneous Settlement
6.1 This Contract is subject to and conditional upon the Agreement for Sale of Rent Roll for the Rent Roll of the business known as BABSTOCK PTY. LIMITED ACN: 010 443 124 THE TRUSTEE FOR KENMAN REAL ESTATE UNIT TRUST TRADING AS YOUR LOCAL RENTAL, between the Seller and the Buyer dated on the same day as this contract (“the Other Contract”) settling contemporaneously with the settlement of this Contract on the first Settlement Date.
6.2 Either party may terminate this Contract should settlement of the Other Contract not be effected other than by reason of a default of that party under the Other Contract and the deposit shall be refunded to the Buyer without deduction.
6.3 A default by the Buyer under this Contract entitling the Seller to terminate this Contract shall be deemed to be a default by the Buyer under the Other Contract entitling the Seller to terminate the Other Contract and to exercise any rights under the Other Contract with respect to that default.
6.4 A default by the Seller under this Contract entitling the Buyer to terminate this Contract shall be deemed to be a default by the Seller under the Other Contract entitling the Buyer to terminate the Other Contract and to exercise any rights under the Other Contract with respect to that default.
The most relevant standard conditions, which were to be read with the items schedule, were the following:
24 Assignment of existing lease
24.1 If Item S is completed and despite Clause 15, this Contract is conditional upon the lease of the premises being in terms and conditions satisfactory to the Buyer. …
24.2 The Seller must on or before the date of Completion assign or cause to be assigned to the Buyer the lease of the premises and obtain the consent of the lessor and any mortgagee (if applicable) to such assignment …
24.3 The Contract is conditional upon the lessor and any mortgagee of the premises consenting to the assignment of the lease of the premises from the Seller to the Buyer. If those consents are not given by the date of Completion, the Buyer may by notice in writing to the Seller terminate this Contract. If so, all Deposit and other monies received by the Seller or the Deposit Holder on account of the Purchase Price shall be refunded to the Buyer by the Seller or the Deposit Holder as the case may be.
24.4 The Seller will apply for any consent referred to in Clause 24.2 and the Buyer will supply such references and do all things reasonably required by the Seller or the lessor in considering any such application, and both parties must use their best endeavours to obtain any such consents as expeditiously as possible, but in any event not later than the date of Completion.
25 New lease
25.1 If Item T is completed, this Contract is conditional upon:
(a)the lessor of the premises granting to the Buyer or executing an agreement (which may be in the form of a letter of intent) to grant to the Buyer at the expense of the party nominated in Item T(o) a new lease of the premises containing such reasonable covenants and conditions as the lessor shall require, and including the matters set out in Item T on or before the date of Completion. …
25.2 The Seller will apply for the lease referred to in Clause 25.1(a) … and the Buyer will supply such references and do all things reasonably required by the Seller or the lessor in considering any such application and both parties must use their best endeavours to obtain any such lease (which may be in the form of a letter of intent) … as expeditiously as possible, but in any event not later than the date of Completion.
25.3 If a new lease is not granted to the Buyer or the lessor does not sign an agreement for lease (which may be in the form of a letter of intent) … by the date of Completion then the Buyer may by notice in writing to the Seller terminate this Contract. If so, all Deposit and other monies received by the Seller or Deposit Holder on account of the Purchase Price shall be refunded to the Buyer by the Seller or the Deposit Holder as the case may be.
29 Buyer’s default
29.1 If the Buyer:
(a)fails to pay the balance of the Purchase Price as provided in Clause 6;
(b)fails to comply with the terms or conditions of this Contract, then the Seller may;
(c)affirm this Contract; or
(d)terminate this Contract. …
35 Guarantee and indemnity
35.1 Where Item G is completed with the name or names of any person or persons (“the Guarantor”), the succeeding provisions in this Clause 35 have effect. …
35.3 In consideration of the Seller at the request of the Guarantor entering into this Contract, the Guarantor unconditionally …
(a)guarantees the Buyer’s obligations; and
(b)indemnifies the Seller against any loss or liability the Seller incurs arising from or connected with the Buyer’s Obligations.
38 Seller’s default
38.1 If the Seller fails: …
(b) to comply with the terms or conditions of this Contract, then the Buyer may;
(c)affirm this Contract; or
(d)terminate this Contract. …
39 Entire agreement
39.1 This Contract contains the entire agreement between the parties with respect to its subject matter and supersedes all prior negotiations, understanding and agreements, whether oral or written.
39.2 This Contract shall not be modified, amended or supplemented except by an instrument in writing duly executed by the parties (any Guarantor excepted).
Item G of the items schedule provided that Mrs Marburg was the guarantor.
Item S of the items schedule was headed, “Particulars of the existing lease” and had inserted next to it the words, “See attached Schedule 3”.[26] Schedule 3[27] was a copy of a disclosure statement from the lessor that set out what were said to be the principal terms of the existing lease between the landlord and WAG. Most relevantly, it provided that the lease was for one year, expiring on 31 May 2018, at a base rent of $33,440 plus GST, with no option to renew.
[26]Exhibit 1.43, p 4.
[27]Exhibit 1.43, pp 13-27.
Item T of the items schedule was headed, “Buyer’s requirement for new lease of premises” and it was also completed.[28] Relevantly, it provided that the lease should be to Marburg Investments and should be for a term of one year at the same rent as under the existing lease to WAG and with an option period of three years.
[28]Exhibit 1.43, p 4.
Item R of the items schedule was also completed.[29] That item was headed “Lease requirement of buyer” and the words “Assignment of lease” were inserted beside it. Curiously, there appears to be no reference to item R in the standard terms of the contract.
[29]Exhibit 1.43, p 4, relied on in the amended defence to third further amended statement of claim, para 14(bb).
Rent Roll Contract
The Rent Roll Contract[30] includes the following clauses:
[30]Exhibit 1.43, starting at p 89.
1. Interpretation
1.1 Definitions[31]
[31]I quote only the most relevant definitions.
In this Agreement the following expressions having [sic] the meaning stated unless inconsistent with the context:
1.1.1“Act” means the Property Agents and Motor Dealers Act, Property Occupations Act (Qld) or any subsequent Act and includes any amendments and regulations made thereunder.
1.1.2“Adjusted Income” means the Income in respect of all Properties (ie being the Properties listed in Schedule 2 together with any further Property the subject of a new Appointment) in respect of which an Assignment is obtained before the relevant settlement date.
1.1.4“Appointment” means an appointment under the Act or under the Property Agents and Motor Dealers’ [sic] Act for the Seller to act as managing rental agent for a Property.
1.1.6“Assignment” means an assignment of the Appointment from the Seller to the Buyer notified in writing in such manner prescribed by the Act.
1.1.22“New Appointment” means any Appointment produced by the Seller in relation to a property to be added to those listed in Schedule 2, after the date of this agreement and before the last settlement date.
1.1.23“Property/Properties” means each property listed in Schedule 2 excluding any property rejected by the Buyer pursuant to Clause 3.2 or where the Appointment is withdrawn, cancelled or otherwise revoked prior to the relevant settlement date.
1.1.26“Rent Roll” means the property management business of the Seller in respect of the Properties.
1.8 Whole Agreement
The covenants and provisions contained in this Agreement comprise the whole of the agreement between the parties in relation to the Rent Roll and it is expressly agreed and declared that save as otherwise provided herein no further or other covenants or provisions whether in respect of the Rent Roll or otherwise are deemed to be implied in this Agreement or to arise between the parties by way of collateral or other agreement by reason of any promise, representation, warranty or undertaking given or made by any party to another party on or prior to the execution of this Agreement and the existence of any such implication or collateral or other agreement is hereby negatived.
3. Due diligence
3.1 Without derogating from the terms of Clause 10.7, the Buyer or the Buyer’s representative may, within fourteen (14) days from the date hereof (the Due Diligence Date), have access to the property management files relating to the Rent Roll including but not limited to a hard copy and electronic access to trust account software records for the purpose of inspection and verification of the information contained in Schedule 2. The Buyer or the Buyer’s representative must conduct such inspection in or after office hours at the Seller’s business premises at a time agreed by the Seller and in the presence of the Seller or its representative. The Buyer will keep all information obtained in the course of such inspection or as contained in this Agreement in strict confidence and shall not use such information for any purpose other than the conduct of the said due diligence examination. The Buyer shall, for the benefit of the Seller, ensure that any representative of the Buyer shall, in a like manner, keep such information confidential.
3.2 The Buyer may, at the sole discretion of the Buyer, terminate this Agreement by notice in writing to the Seller by 5.00 pm on the Due Diligence Date in the event that the Buyer is not satisfied with its due diligence conducted in accordance with Clause 3.1 in which event all Deposit monies paid to the Deposit Stakeholder on account of the Purchase Price shall be refunded to the Buyer without deduction or in the alternative the Buyer may not later than 5.00 pm on the Due Diligence Date nominate in writing to the Seller any of the Properties which the Buyer reasonably believes that the Seller and/or the Property Owner has failed to comply with any requirements of the Act or the Residential Tenancies and Rooming Accommodation Act or the Residential Tenancies and Rooming Regulations and/or any other legislative requirement applicable to the renting out of the particular Property, whereupon the Seller shall attempt to rectify such defect to the reasonable satisfaction of the Buyer, however should the Seller fail to do so the Buyer may by notice in writing to the Seller given not earlier than four (4) Business Days prior to the applicable settlement date and not later than two (2) Business Days prior to the applicable settlement date elect to exclude such Property from this Agreement. …
3.5 The Buyer may by 5.00 pm on the next Business Day following the Due Diligence date give to the Seller a written notice requiring the Seller, in the fulfilment of the Seller’s obligations as set out in Clause 5.2, either for an identified Property or Properties or all Properties to either:
3.5.1subject to the terms of the Seller’s existing Appointment, provide to the subject Property Owner/s a notice of assignment including the name and business address of the Buyer in accordance with the terms of the Seller’s Appointment or alternatively the Seller must procure from the subject Property Owner/s an agreement in writing to the assignment pursuant to the provisions of Section 113 of the Act;[32] or
[32]This appears to be referring to s 113 of the Property Occupations Act 2014, despite the fact that that section does not provide for an agreement in writing to assign an appointment.
3.5.2procure the execution of a new Appointment from the Property Owner/s.
3.6 In the event that the Buyer does not give to the Seller a notice pursuant to Clause 3.5, then the Seller shall be at liberty to fulfil the Seller’s obligations pursuant to Clause 5.2 in such manner as the Seller may determine at the Seller’s sole discretion.
5. Appointment as Agent
5.1 The Seller warrants that it has been appointed to act as Real Estate Agent by the Property Owners and that the Appointments pertaining thereto are valid and subsisting under the provisions of the Act.
5.2 After Clause 3 and Clause 4 of this Agreement are satisfied and the Buyer has notified the Seller in writing of such satisfaction … the Seller shall take all reasonable steps to obtain in writing from each relevant property Owner an Appointment or an Assignment in favour of the Buyer in respect of each of the Properties and in each case on the same terms and conditions as the Appointment presently existing in favour of the Seller.
7. Notice to tenants
7.1 On or before five (5) Business Days prior to the settlement date or the date of any assignment as referred to in Clause 2.5 the Seller shall notify in writing the Tenant of the change of management of such Property and direct such Tenant to pay all future rental payments in respect of such Property from the date of such notice to the Buyer, and such written notice should include a statement as to the date to which the Tenant has paid the current rent.
7.2 The Seller’s obligation as set out in Clause 7.1, together with those set out in Clause [sic] 10.3 and 10.4, shall be conditional upon the Buyer producing written evidence, upon terms reasonably acceptable to the Seller, that the Buyer either has the necessary financial resources ready to effect the approaching settlement or that the Buyer’s financier has completed all of its required enquiries and documentation to facilitate the advance to the Buyer of any applicable finance facility.
7.3 Should the Buyer default in providing the written evidence referred to in Clause 7.2, then the Seller may at the Seller’s discretion extend the approaching settlement for a maximum period or periods not exceeding thirty (30) days and thereafter, in the event that the Buyer fails to comply with the terms of Clause 7.2, the Buyer shall, at the election of the Seller, be deemed to be in default of this Agreement. Each of Clause 7.2 and Clause 7.3 are [sic] inserted for the benefit of the Seller and the benefit thereof may be waived by the Seller.
10. Delivery of documents
10.1 In consideration of payment of the Purchase Price, the Seller shall, on the relevant settlement date of each particular transferred Property, do everything necessary to transfer all the trust funds held by or on behalf of the Seller to the trust account nominated by the Buyer and deliver to the Buyer the following records, documents and items in relation to each particular transferred Property:
10.1.1a printed or hardcopy of each of the documents required to be held by the Seller under the provisions of the Act or the Residential Tenancies and Rooming Accommodation Act, Residential Tenancies and Rooming Accommodation Regulations or such other legislation from time to time which may govern the conduct of the management of the Rent Roll and the Seller’s property history file;
10.1.2by readable computer disk, if efficiently possible, or a printed or hard copy of all other records held by the Seller with respect to each transferred Property the subject of the Rent Roll including correspondence files, repair and maintenance details and details of payments made to the date of transfer of the transferred Property by Tenants; …
10.1.4 a new Appointment or Assignment in respect of each relevant transferred Property, duly executed by the relevant transferred Property Owner and, if applicable, in a form approved by the Buyer pursuant to Clause 6, appointing the Buyer as its managing agent for that property on terms no less favourable than the existing form; …
10.1.7an original entry condition report signed by all required parties undertaken at the commencement of the current tenancy, as required by law, in respect of each transferred Property that is tenanted as at the applicable settlement date; …
19. Default
19.5 If the Seller is in default of one of the Seller’s material obligations under this Agreement including but not limited to a breach on the part of the Seller of a warranty stipulated in Clause 11.1 then:
19.5.1the Buyer may by notice in writing require the Seller to rectify that default within seven (7) days from the date of that notice;
19.5.2if the Seller fails to rectify such default within the time prescribed the Buyer may by notice in writing to the Seller:
(a)affirm this Agreement and seek damages for that breach; or
(b)terminate this Agreement and claim damages from the Seller for that breach and upon that termination the deposit paid by the Buyer will be refunded in full to the Buyer by the Deposit Stakeholder.
Additionally, other clauses provided to the following effects:
(a)the purchase price was payable by multiplying the annual income from each property accepted by the buyer by a factor of 3.1;[33]
(b)there were two settlement dates; the first was on 1 March 2018, on which date the purchase price payable in respect of each property to be included in the first settlement would be paid; the second was 14 days later, on which date the purchase price payable in respect of each property to be included in that settlement would be paid;[34]
(c)if the buyer had not received an appointment or an assignment in respect of any of the properties by the second settlement date, but such a document was received by it within a further 30 days, the parties could agree that the buyer take over the management of that property and pay an additional amount to the seller, or the seller could keep, terminate or assign to someone else the management of that property;[35]
(d)the contract was conditional on the buyer obtaining approval, by 18 January 2018 (the Finance Date), of a loan sufficient to pay the anticipated purchase price of $820,166.08;[36]
(e)two clauses dealt with the potential situation that the business was to be relocated from the current premises from which it was being conducted by the seller;[37]
(f)within 90 days of the date the buyer paid the purchase price in respect of a specific property, the buyer could require the seller to produce any of the documents required under clause 10 (in essence, full records of the business) or to rectify any defects in any of the documents within 14 days of the buyer giving notice to the seller; if the seller did not do so, then the buyer could rectify any defects or reproduce the missing document or, if the buyer could not reasonably perform its duties as managing agent in respect of that property, it could reject that property and be refunded that proportion of the purchase price;[38]
(g)if any property owner terminated the buyer’s appointment as managing agent within 90 days of the relevant settlement date, the buyer was entitled to a refund of that proportion of the purchase price;[39]
(h)time was of the essence of the contract;[40]
(i)Mrs Marburg guaranteed the buyer’s obligations under the contract.[41]
[33]Clause 1 definitions of “Adjusted Income”, “Additional Income”, “Income”, “Purchase Price” and “Supply Right Factor” and item 6 of schedule 1.
[34]Clauses 2.4.2 to 2.4.4.
[35]Clauses 2.5 and 2.6.
[36]Clause 4 and schedule 2.
[37]Clauses 10.3 and 10.4.
[38]Clause 10.7 and clause 1.1 definition of “Retention Date”.
[39]Clause 14.
[40]Clause 16.1.
[41]Clause 24 and cchedule 1, item 4.
There is no clause in the Rent Roll Contract providing expressly that it could not be amended except in writing signed by the parties.[42]
[42]Cf Business Contract, clause 39.2.
Structure of reasons
I propose to consider the issues concerning the contracts first, before dealing with the other claims. I shall start with considering the interrelationship between the two contracts. Then I shall consider the issues concerning the Business Contract, including its proper construction, whether it was varied or Babstock’s obligations under it were waived and whether Laurel Star validly terminated it. I shall then consider the issues concerning the Rent Roll Contract, including whether it was varied or any of Babstock’s obligations under it were waived by Laurel Star and whether Laurel Star validly terminated it.
The interrelationship of the contracts
Was each contract contingent on settlement of the other?
One issue is the extent of inter-dependency between the contracts. I have set out above[43] special condition 6 of the Business Contract. It clearly makes that contract dependent on settlement of the Rent Roll Contract and provides rights to a non-defaulting party to terminate both contracts for default by the other party under either contract.
[43]At paragraph [25].
There is no equivalent, in the Rent Roll Contract, to special condition 6 of the Business Contract. Therefore, on its face, although the Business Contract is conditional on contemporaneous settlement of the Rent Roll Contract, the latter is not conditional on contemporaneous settlement of the Business Contract.
The defendants submit that the absence of such an “inter-dependence” clause in the Rent Roll Contract was clearly by design. It was intended to enable (and, absent the seller’s default under that contract, to compel) the buyer to buy the rent roll even if, for whatever reasons other than the seller’s default, the Business Contract was not completed. The location of the premises was not essential to the buyer’s ability to carry on the management of the rent roll. That could be done from almost anywhere. The business name itself, which may be more important to maintaining the rent roll, was not sold under the Business Contract, but under the Rent Roll Contract.[44] Therefore, even if Laurel Star was entitled to terminate the Business Contract for any reason, it does not follow that it was also entitled to terminate the Rent Roll Contract (absent some independent right to terminate the latter).
[44]Clause 13.1.1 and item 9 of the item schedule.
In response to that submission, the plaintiffs submit that, applying the principles set out in Electricity Generation Corporation v Woodside Energy Ltd,[45] it would be “making commercial nonsense or working commercial inconvenience” to adopt a construction which has the effect that, despite lawful termination of the contract for the purchase of a business (including the right to occupy premises from which the business operated) which would enable Laurel Star to exploit the rent roll, it would still be bound to complete the contract for the purchase of the rent roll. Both parties referred to the elucidation, in the judgment of the plurality in Electricity Generation Corporation v Woodside, of the method by which one construes a commercial contract.
[45](2014) 251 CLR 640, 656-657, [35], citing Zhu v Treasurer (NSW) (2004) 218 CLR 530, 559 [82].
It is not immediately clear whether the business name was sold under the Rent Roll Contract or under the Business Contract. In the latter, the description of the business being sold was a real estate agency known as “Your Local Rental.” The Business was defined as including the Business Assets, which themselves were set out as including the “goodwill, … intellectual property … and other assets set out in any schedule attached to this Contract … .” It seems to me that the business name was intellectual property to which goodwill arguably attached and therefore the right to use it may have been sold under that contract.
On the other hand, clause 13.1.1 of the Rent Roll Contract expressly stated that the sale and purchase under that agreement did not include the transfer of any trading name except that set out in item 9 of the item schedule. Item 9 said “YOUR LOCAL RENTAL.” That indicates that the right to use that name was, as the defendants submitted, to be transferred under that contract, not the other.
Reading the two contracts together, especially given the more specific terms of the Rent Roll Contract, I find that the trading name was to be sold under the Rent Roll Contract.
It would have been possible for Laurel Star to carry on management of the rent roll from somewhere other than the defendants’ premises and under a different name. However, the latter in particular would have potentially been very inconvenient and it might well lose some of the business if the agency name changed. Continuity in the reputation of the business was clearly likely to be important to any buyer of the rent roll, given the goodwill likely to be associated with it. However, the location of the business was not so important. Within reasonable geographical limits, it would have been possible for Laurel Star to operate the business, under the same name, from premises other than those occupied by Babstock, although clearly it may be more convenient to continue in the same premises. That convenience, but lesser importance, was reflected in clauses 24 and 25 of the Business Contract, entitling the buyer to terminate the Business Contract if it did not obtain a lease of the premises.
The practical business links between, and the relative importance of, the two contracts were reflected in special condition 6 of the Business Contract, but that condition clearly showed that the more important contract was the Rent Roll Contract. Either party could terminate the Business Contract if the Rent Roll Contract did not settle, but neither party had the right to terminate the Rent Roll Contract if the Business Contract did not settle except if the latter was caused by default of one party under that contract.
Although the two contracts were separate, they were drawn and executed together. They must be construed together. They were so interwoven that the parties chose, by special condition 6, to provide each other rights in the Business Contract that might override their rights and obligations under the Rent Roll Contract. It was unnecessary to include, in the latter contract, an equivalent to special conditions 6.1 and 6.2 of the Business Contract.
It was also unnecessary that the Rent Roll Contract had equivalent clauses to special conditions 6.3 and 6.4. Even if there was no default under the Business Contract, but there was a default under the Rent Roll Contract, if the party not in default chose to terminate the latter contract then, under clause 6.1 of the Business Contract, that contract too would come to an end. On the other hand, if the non-defaulting party chose to enforce the Rent Roll Contract, then the Business Contract would also, effectively, be enforceable by that party (subject, of course, to other rights of termination under the Business Contract).
Consequently, the manner in which the two contracts were drawn makes it clear that each was dependent on there not being default under the other. If there was default under one, then both contracts could be enforced or terminated (if the default enabled the latter consequence) by the non-defaulting party.
That deals with defaults, but one possibility in this case, that I shall consider shortly, is that the Business Contract may have been terminated simply under the buyer’s right to do so if not granted occupancy rights under a lease (whether assigned or new). If the landlord simply did not agree to grant those rights, that would not be a default on the part of the seller, but would give rise to a distinct right in the buyer to terminate that contract. In that circumstance, clauses 6.3 and 6.4 would have no application. In the absence of an express discrete right to terminate the Rent Roll Contract, it is not clear that the latter agreement could be terminated if the Business Contract were terminated simply under clause 25 or clause 26. There is nothing in either contract that makes the Rent Roll Contract conditional on the Business Contract being completed, other than in circumstances of default under the latter.
That seems to make commercial sense once one recognises that the rent roll could be managed from other premises. I find that that is the effect of the two contracts read together.
That being so, the plaintiffs could only rely on the termination of the Business Contract to terminate the Rent Roll Contract if the Business Contract was terminated as a consequence of the seller’s default, rather than as a mere consequence of not obtaining occupancy rights under a lease of the existing business premises.
The plaintiffs sought some support from the deed of amendment for the proposition that the terms of that deed, in describing the original contracts,[46] affected or reflected the proper construction of those contracts so that each was dependent on the other being completed and the termination of one would result in the termination of the other, whatever the circumstances. I do not accept that proposition. Although they were signed together and were, in some senses, contingent on each other, that deed did not purport to vary the contracts to make them contingent on each other in all respects. The sole purpose and effect of that deed was to substitute Laurel Star for Marburg Investments as buyer. Otherwise, the terms of the original contracts were expressly confirmed and they were effectively novated in those terms between the new parties. If there was a misdescription, in the deed of amendment, of the effect of the original contracts, it had no effect on the proper construction of those contracts.
[46]See [13] above.
Rectification of the Rent Roll Contract
The plaintiffs originally contended that, if the Rent Roll Contract, properly construed, does not provide that it is dependent on the Business Contract completing, that is contrary to the parties’ intentions and this court ought to order that the Rent Roll Contract be rectified to provide clauses to that effect.[47]
[47]Third further amended statement of claim, paragraphs 17 to 17D.
However, in final submissions the plaintiffs did not press that contention. Rather, they relied on their submission that it would be a nonsense to adopt a construction of the contracts having the effect that, despite lawful termination of the Business Contract, they would still be bound to complete the Rent Roll Contract.
Whatever my construction of the contracts, therefore, it is unnecessary to address the claim for rectification. In any event, it does not seem to me to be a proposition that is so undeniably clear that the plaintiffs’ case for rectification could succeed.
Business Contract – lease or assignment of lease?
It is appropriate first to determine the proper construction of clauses 24 and 25 of the Business Contract.
As I have recorded above,[48] all of items R, S and T of the items schedule to the Business Contract were completed. They appear to have enlivened both clauses 24 and 25, giving the buyer an entitlement to terminate the contract if it did not obtain either or both of an assignment of the existing lease and a new lease of the premises.
[48]At paragraphs [28] to [30].
The plaintiffs submit that the defendants’ obligation was to secure a new lease of the premises in accordance with clause 25 and on the terms set out in item T. The defendants contend that (subject to variation or waiver by the plaintiffs) their obligation was to secure an assignment of the existing lease in accordance with clause 24. That construction particularly derives from the completion of item R by inserting “Assignment of lease” as the “lease requirement of buyer”. The defendants contend that the completion of item T was obviously in error, given that election.
The contract must be construed in the light of the circumstances then existing and known to the parties. As the details of the existing lease made clear, it was due to expire on 31 May 2018, while the two contracts were due to settle on 1 March 2018 (that is, with three months to run under the existing lease). The sale under the Business Contract included the furniture and fitout in the premises. It would have been of little use (or at least a substantial inconvenience) to the plaintiffs to have the use of the premises for only three months after settlement and then to have to move premises if the landlord would not grant them a new lease. That explains the completion of both items S and T: the contract was conditional on the landlord agreeing both to an assignment of the existing lease and to the grant of a new lease from the expiration of the existing lease.
Of course, the closer that the completion date came to the expiration of the existing lease, the less important the requirement for an assignment of that lease. It would have been open to Laurel Star to waive the requirement for assignment if it could make a more informal arrangement with the seller and the lessor for the remaining term of the existing lease; for example, that it occupy the premises as licensee of the seller pending the commencement of a new lease on 1 June 2018.
I find that the proper construction of the Business Contract is that it was conditional on the lessor both agreeing to an assignment of the existing lease and granting a new lease, to commence on 1 June 2018, on the terms set out in item T or other terms satisfactory to Laurel Star.
Variation or waiver of the Business Contract obligations?
The defendants contend that each contract was varied, or that Laurel Star waived some of Babstock’s obligations, by post-contractual conduct of the parties. It is convenient to deal with the allegations concerning the Business Contract before considering other issues.
Business Contract Variation Agreement
The defendants allege that the Business Contract was varied[49] “in or about the period 13 February 2018 to 5 April 2018,” by an agreement made between Mr Kenman (a principal of the defendants) and Mr Marburg that:
(a)Babstock was no longer required to procure the landlord’s consent to an assignment of the existing lease or the grant of a new lease of the premises;
(b)Babstock would allow the buyer (initially Marburg Investments and later Laurel Star) to occupy the premises after settlement of the Business Contract; and
(c)the buyer would reimburse Babstock for the cost of the rent payable under the existing lease until its expiration.
[49]Amended defence to third further amended statement of claim, paragraphs 14(f) to 14(j).
The defendants allege that the variation agreement was made by three emails written on 13 February 2018 and by the conduct of Mr Marburg meeting with Thomas Cher (a representative of the landlord) on 5 April 2018 to discuss a new lease and the conduct of Mr Kenman refraining from approaching the landlord to secure its consent to an assignment or a new lease.
The emails relied on as the written part of the variation agreement[50] were as follows:
[50]Part of exhibit 25.
(a)At 8.16am on 13 February 2018, Mr Kenman wrote to Mr Marburg, saying:
Hi Alan,
Nice to catch up with you yesterday. One of the requirements for you moving forward is the office leases. As there will only be 2 months left in the lease from your purchase date, will you be looking at extending it?
I will need to see centre management shortly about change of owners as it takes a month or two for his solicitors. He may not be overly happy about the cost of assigning the lease for a 2 month period. If you are planning on a 3 year lease or similar, then now would be an ideal time to discuss with him.
Alternatively we can keep the lease in our name for the 2 months, until the end date (31st May 2018) and you reimburse us for the lease payments?
Please let me know your preference.
(b)At 9.28am, Mrs Marburg responded, saying:
Good Morning Andrew,
Thank you for your email about the lease.
I think the best thing to do would be to keep the lease in your name and reimburse you for the lease payments.
Seems a lot easier to do this.
(c)At 11.17am, Mr Kenman wrote:
Hi Dorothy,
Ok will do, happy for that to happen.
(d)At 3:32pm, Mrs Marburg wrote:
Hi Andrew,
We would like to renew the lease but would like to talk to you first.
(e)At 4:49pm, Mr Kenman responded:
Hi Dorothy, would be happy to meet or by phone, whatever your preference.
The following additional emails are also relevant to the defendants’ allegations, as they go to the conduct alleged to form part of the alleged variation.
On 5 March 2018, Mr Kenman and Mr Marburg exchanged the following emails:[51]
[51]Exhibit 26. I have reproduced only the relevant parts.
(a)At 9.07am, Mr Marburg wrote:
Good morning Andrew, …
Enquiring as to your suggestion when I should contact the centre management regarding taking over the lease.
Have you spoken with them as yet regarding your proposal to leave lease in your name until end of June?
(b)At 10.20am, Mr Kenman responded:
Hi Alan,
I haven’t approached them thus far. At this stage we were going to stay on the lease until May (as there was only one month until the lease end) with your business paying us accordingly for April and May.
If you have any other requirements, happy to organise a meeting with centre management to discuss. Did you want to have a fixed lease option? IE 3 or 5 years.
(c)Mr Marburg replied:
Thank you for your prompt response.
I was enquiring about the lease mainly from the point of view of discussing with centre management about “cost options”. I did not want to approach them before discussing with yourself.
On 13 March 2018, Mr Kenman wrote to the landlord’s representative, Mr Cher, saying:
I just wanted to confirm with you that I will be finalising my companies [sic] lease (WAG Property Management Pty Ltd) with you at the end of our current lease, on 31st May 2018. The new owner of our business, Alan Marburg will be in touch with you shortly to discuss a further lease option.[52]
[52]Exhibit 70.
Mr Marburg met with Mr Cher on 29 March 2018.[53] That appears to be the meeting relied on by the defendants as Mr Marburg’s conduct forming part of the alleged variation, although they have incorrectly assumed that it was on 5 April 2018.
[53]I take that date from exhibit 27, an email from Mr Marburg to Mr Cher dated 6 April 2018 that refers to having met him “on Thursday last week,” that is Thursday 29 March 2018. That is confirmed by exhibit 35.
Mr Marburg did not give clear evidence about what he and Mr Cher discussed at that meeting. It was put to him in cross-examination that he was negotiating the terms of a new lease. He denied that and said he was simply conducting research, not negotiating.[54] He provided little more detail about the conversation, only saying, in re-examination, that he was making general enquiries about what shops other than the existing premises were available, because he did not think he could conduct the business profitably from those premises if he secured only about 110 properties to manage (as he thought appeared to be likely at that stage) instead of all 148 referred to in the Rent Roll Contract.[55]
[54]T2-15.
[55]T2-46:5-14.
The defendants contend that Mr Kenman did not make or continue efforts on behalf of the defendants to obtain the landlord’s consent to a new lease. They say that that conduct formed part of the alleged agreement. In fact, as I will detail later, it seems clear to me that Mr Kenman at all times up to at least late April 2018 continued to try to persuade the landlord to grant a new lease to Laurel Star.
In any event, I do not consider that conduct of the kind alleged to have been undertaken by Mr Marburg and Mr Kenman, even if it had occurred, could possibly form part of an agreement. At most, it might be evidence of post-amendment conduct that may be demonstrative of the alleged amendment having been agreed.
But neither the exchange of emails nor the defendants’ alleged conduct in not seeking a new lease, viewed together or separately, could or did constitute or evidence any amendment to Babstock’s obligations under the Business Contract. They simply comprised conduct of both parties in accordance with their respective obligations: that is, both using their best endeavours to secure a lease of the premises for Laurel Star.[56]
[56]Business Contract, clauses 24.4 and 25.2.
Given my conclusion that the plaintiffs validly terminated both contracts, it is unnecessary to consider the counterclaim.
The result
In the result, the plaintiffs have succeeded in their claim for breach of contract and the defendants have failed in their counterclaim.
The plaintiffs claim the return of the deposit paid under each of the contracts and damages for breach of contract. In his submissions on behalf of the defendants, Mr Kidston dealt with each of the claims. Mr Morris, in his submissions, said that the plaintiffs do not take issue with the defendants’ submissions about the relief sought by the plaintiffs. The parties are therefore agreed that the deposits should be returned to Laurel Star and judgment for damages and costs should be given in its favour.
Half of each deposit was paid to Babstock, while the balance is retained by the deposit stakeholder and deposit holder under the respective contracts,[115] so it is not a simple matter of giving judgment against Babstock for the sum of the deposits. The Rent Roll Contract provided that, on termination by the buyer for default by the seller, “the deposit paid by the Buyer will be refunded in full to the Buyer by the Deposit Stakeholder.”[116] The Business Contract provided that, if a new lease was not granted to the buyer by the date of completion, all deposit and other monies received by the seller or deposit holder on account of the purchase price must be refunded to the buyer by the seller or the deposit holder as the case may be.[117] I understand that the deposit stakeholder will do as instructed by the parties. The simplest manner of enforcing return of the deposit in the circumstances is to give judgment against the defendants for the half Babstock received and to order that they cause the balance to be paid to Laurel Star. I note that RED has said that it will refund the balance deposit that it holds, without any claim for commission, when instructed to do so by the parties.[118]
[115]The deposit holder under the Business Contract and the deposit stakeholder under the Rent Roll Contract was RED.
[116]Clause 19.5.2(b).
[117]Clause 25.3.
[118]Exhibit 92.
The parties proceeded in the trial on the basis that Babstock entered into both contracts as agent for WAG. It is therefore appropriate that judgment be entered and orders be made against both defendants.
Laurel Star Pty Ltd v Babstock Pty Ltd [2020] QDC 305
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