Lawrence v Ciantar; Ciantar v Lawrence

[2019] NSWSC 464

Supreme Court

New South Wales

• Amendment notes

Medium Neutral Citation:

Lawrence v Ciantar; Ciantar v Lawrence [2019] NSWSC 464

Hearing dates:

4, 5 February 2019

Date of orders:

26 April 2019

Decision date:

26 April 2019

Jurisdiction:

Equity - Real Property List

Before:

Henry J

Decision:

See paragraphs [234] - [236]

Catchwords:

CONTRACTS – written terms – oral terms – construction – whether plaintiff contractually obliged to carry out and complete certain works – whether joint venture agreement or contract caught by Home Building Act 1989 (NSW)

   

CONTRACTS – interpretation – ambiguity – evidence of surrounding circumstances – evidence of prior negotiations – evidence of subsequent conduct

STATUTORY INTERPRETATION – definitions – Home Building Act 1989 (NSW) – meaning of “residential building work” – contract to do sub-division works including construction of a driveway, retention tank and drainage works – whether preparatory works under contract constituted “residential building works”

Legislation Cited:

Home Building Act 1989 (NSW) ss 4, 6, 7, 7BA, 7D, 10; sch 1 cls 1, 2, 3
Uniform Civil Procedure Rules 2005 (NSW) r 42.1

Cases Cited:

Agricultural and Rural Finance Pty Ltd v Gardiner (2008) 238 CLR 570
Bank of Credit and Commerce International SA v Ali [2002] 1 AC 251
Bayside Council v Corp Constructions Pty Ltd [2017] NSWCA 120
Boreland v Docker [2007] NSWCA 94
Brambles Holdings Ltd v Bathurst City Council (2001) 53 NSWLR 153
Casa Maria Pty Limited v Trend Properties Pty Limited [1998] NSWCA 53
Centennial Coal Company Ltd v Xstrata Coal Pty Ltd (2009) 76 NSWLR 129
Cherry v Steele-Park (2017) 96 NSWLR 548
Codelfa Construction Pty Ltd v State Rail Authority of New South Wales (1982) 149 CLR 337
Empirnall Holdings Pty Ltd v Machon Paull Partners Pty Ltd (1988) 14 NSWLR 523
Grygiel v Baine [2005] NSWCA 218
Integrated Computer Services Pty Ltd v Digital Equipment Corp (Aust) Pty Ltd (1988) 5 BPR 97,326
International Air Transport Association v Ansett Australia Holdings Limited (2008) 234 CLR 151
Johnston v Brightstars Holding Company Pty Ltd [2014] NSWCA 150
Koompahtoo Local Aboriginal Land Council v Sanpine Pty Ltd (2007) 233 CLR 115
L Schuler AG v Wickman Machine Tool Sales Ltd [1974] AC 235
Lyn International Pty Ltd v Marcolongo [2011] NSWCA 303
Mount Bruce Mining Pty Ltd v Wright Prospecting Pty Ltd (2015) 256 CLR 104
New South Wales Land and Housing Corporation v Diab [2015] NSWCA 133
PRA Electrical Pty Ltd v Perseverance Exploration Pty Ltd (2007) 20 VR 487
Ryledar Pty Ltd v Euphoric Pty Ltd (2007) 69 NSWLR 603
Shepherd v Felt and Textiles of Australia Ltd (1931) 45 CLR 359
Simic v New South Wales Land and Housing Corporation (2016) 260 CLR 85
Sunbird Plaza Pty Ltd v Maloney (1988) 166 CLR 245
Syed Ahmad Shoaib Ali Pty Ltd v Jandson Pty Ltd [2018] NSWCATAP 228
Tamanna v Zattere; Thakorlal v Zattere; Rabac Pty Ltd v Zattere (2017) 18 BPR 37,139; [2017] NSWSC 1388
Toll (FGCT) Pty Ltd v Alphapharm Pty Ltd (2004) 219 CLR 165
Trend Properties Pty Limited v Casa Maria Pty Limited (Supreme Court (NSW), Windeyer J, 20 August 1998, unrep)
Vroon BV v Foster’s Brewing Group Ltd [1994] 2 VR 32
WIN Corporation Pty Ltd v Nine Network Australia Pty Ltd (2016) 341 ALR 467

Texts Cited:

JW Carter, Contract Law in Australia (7th ed, 2018, LexisNexis Butterworths)
NC Seddon, RA Bigwood, Cheshire & Fifoot Law of Contract (11th ed, 2017, LexisNexis Butterworths)

Category:

Principal judgment

Parties:

Wayne Lawrence (Plaintiff/Cross-Defendant)
Paul William Ciantar (First Defendant/Second Cross-Claimant)
Alice Sammut (Second Defendant/First Cross-Claimant)

Representation:

Counsel:
J Kelly SC w D McDonald-Norman (Plaintiff/Cross-Defendant)
E Peden w J Mee (First and Second Defendants/First and Second Cross-Claimants)

  Solicitors:
Hedges Legal (Plaintiff/Cross-Defendant)
McLean & Associates (First and Second Defendants/First and Second Cross-Claimants)

File Number(s):

2017/336803

Judgment

Introduction

1. HER HONOUR:   The plaintiff, Mr Lawrence, is a licenced builder who has been involved in sub-divisions for over twenty years. The defendants, Mr Ciantar and Ms Sammut, are the registered proprietors of a property in Forestville, Sydney (the Property) for which they had obtained council approval for the development of a three lot sub-division.

2. In 2015 the parties entered into an agreement pursuant to which Mr Lawrence claims a one-third interest in the Property. That interest is said to arise from him having agreed to fund the cost of the demolition and sub-division works at the Property in accordance with the council development approval (DA works) and those works having been completed. Mr Lawrence also seeks relief in respect of an unregistered mortgage or, in the alternative, a charge over the Property, and an order for specific performance of the agreement and damages in lieu of or in addition to specific performance.

3. Mr Ciantar and Ms Sammut deny that Mr Lawrence is entitled to enforce any interest in the Property. They claim the agreement made Mr Lawrence responsible for carrying out and completing the DA works which involved “residential building work”. As a result, they claim the agreement is caught by the Home Building Act 1989 (NSW) and any proprietary interest Mr Lawrence purportedly holds is void. They also claim they validly rescinded the agreement under the terms of the Home Building Act.

4. In the alternative, Mr Ciantar and Ms Sammut claim the agreement should be rectified to have the effect for which they bargained, or that they were entitled to, and did, terminate the agreement with Mr Lawrence on 1 September 2017 due to his breach as he failed to complete the DA works and was not ready, willing and able to so at the date of termination.

5. It is common ground that the DA works contemplated by the council approved sub-division are now complete and a substantial portion were undertaken by a third party builder retained by Mr Ciantar and Ms Sammut after they purported to rescind or terminate the agreement with Mr Lawrence.

6. The issue now before the Court is whether, on its proper construction, the agreement entered into by the parties is a contract under which Mr Lawrence undertook to do, by himself or others, residential building work as defined by the Home Building Act. If the agreement is not caught by the Home Building Act, the issue for determination is whether it was lawfully terminated by Mr Ciantar and Ms Sammut.

7. For the reasons set out below, I find that the agreement between the parties obliged Mr Lawrence to carry out and complete the DA works at the Property by himself or under his supervision. I have also found that the agreement is a contract caught by the Home Building Act and, as a result, Mr Lawrence is not entitled to any interest in the Property, specific performance of or damages under the agreement and his summons should be dismissed.

Background

8. On 25 July 2013, Warringah Council (Council) approved development application DA 2013/0397 for a three-lot sub-division at the Property (DA) with the proposed development described as demolition works and sub-division of land. The approval required the development works to be carried out in compliance with the approved plans, which included amongst other things, the installation of drainage pipes for drainage works, the construction of a retention tank and a driveway, and the sub-division.

9. Mr Ciantar and Ms Sammut wanted to sell the Property and advertised it for sale, identifying that it had DA approval to subdivide into three blocks.

10. Mr Lawrence inspected the Property on 2 March 2014, following which he, Mr Ciantar and Ms Sammut entered into negotiations for Mr Lawrence to purchase the Property and undertake what were described as the “sub-division works”. It was not disputed that references to “sub-division works” in this and other correspondence meant the works required to be undertaken in accordance with the DA and approved plans. Those works are also referred to as the DA works in these reasons.

11. During the negotiations in relation to a possible sale of the Property, Mr Lawrence was made aware that Mr Ciantar and Ms Sammut had a mortgage over the Property with Suncorp in the amount of $1 million, and that the costs of the demolition and sub-division works contemplated by the approved development were estimated to be around $435,000.

12. By 29 August 2014, the proposal being discussed between the parties was a form of joint venture arrangement pursuant to which Mr Lawrence offered to construct and complete the physical works of the sub-division in return for a one-third equity share in the Property.

13. Mr Lawrence prepared a draft agreement and requested his solicitors, Walker Hedges & Co, forward it to the solicitors for Mr Ciantar and Ms Sammut, T H Walker. This was done on 22 September 2014 under cover of a letter which stated that the parties had “reached agreement to enter into a joint venture for the development” of the Property.

14. What followed was an exchange of correspondence between the solicitors for Mr Lawrence and Mr Ciantar and Ms Sammut before the parties entered into a written agreement on 12 November 2014. As some of this correspondence is relevant to construing the agreement entered into on 12 November 2014, I have referred to it in some detail below.

15. On 25 September 2014, Mr Lawrence’s solicitor wrote providing more detail regarding Mr Lawrence’s proposal for a joint venture arrangement for the development of the Property by way of sub-division, and thereafter the sale of the lots created upon registration of that sub-division. The letter identified eight points regarding the proposal, including the following:

“(d) There is a development approval to a sub-division of the property into three blocks, the conditions of which development approval require certain works to be carried out on the property before the Council will release the sub-division plan. The estimated costs of those subdivision works excluding works associated with the; repositioning of a sewer man hole; upgrading of the stormwater pipe through to the back boundary of the property; and the upgrading of the existing stormwater detention tank, is approximately $445,000.000. As his contribution to the joint venture, our client [Mr Lawrence] will be responsible for the costs of the sub-division works, excluding the aforesaid three items up to the amount of $445,000.00.

(e) In consideration of our client [Mr Lawrence] paying the cost of the sub-division works up to a maximum sum of $445,000.00 our client is to be granted a one-third equitable share of ownership in the whole of the property, subject to the mortgage loan to Suncorp.”

16. The solicitor for Mr Ciantar and Ms Sammut replied on 8 October 2014 adopting the paragraph numbering in Mr Lawrence’s solicitor’s letter dated 25 September 2014 and agreeing to a number of the points made. In response to points (d) and (e), the letter stated:

“(d) The agreed estimated cost is $435,000.00.

(e) It was agreed that in consideration of your client paying the cost of the subdivision works estimated to be $435,000.00 then your client is to be granted a 1/3 share of ownership in the whole of the property subject to the mortgage loan to Suncorp. The estimated cost of $435,000.000 is only an estimate. If costs exceed $435,000.000 then your client is to bear the excess. It was agreed that it would be your client’s [Mr Lawrence’s] obligation to complete the work. Your client will achieve a 1/3 equity in the net value of the properties only on completion of all works to be specified by a Private Certifier and within a timetable to be agreed.”

17. Mr Lawrence’s solicitor replied by letter dated 17 October 2014 noting and agreeing to a number of the points made, including the estimated costs of the work being $435,000. In response to point (e), the letter said:

“(e) Noted and agreed as to the estimated costs of the works being $435,000.00 and that, in return for paying for the costs of those works, our client will receive a 1/3 share of ownership in the whole of the property subject to the mortgage to Suncorp.

In relation to the statements that our client is liable for the total costs and, if such costs exceed $435,000.00, our client will be liable for the total amount, our client instructs that he will agree to that proposition but on the basis that either the agreed sum of $435,000.00 or, if the actual cost of the works exceeds that, then the amount of the actual costs is to be a loan by him to the joint venture which is to be repaid prior to any profit distributions being made in line with the repayments to be made to your clients of the contributions to the joint venture.”

18. In response to a request for proof that Mr Lawrence had $435,000 available to pay for the costs of the sub-division works, the letter noted that Mr Lawrence had been licensed as a builder for in excess of twenty-five years and went on to say:

“He is offering to undertake performance of building work as required under the terms of development approval at his own cost and expense and is undertaking the liability for same …Our client is undertaking the liability for performing the works and, if he does not comply with that obligation, he will be in breach of his contractual obligation. Your clients will have the security of that and the fact that our client will be committing funds to performance of the works from the beginning and, therefore, your clients’ property will be enhanced by the value of those works.”

19. On 24 October 2014, Mr Ciantar and Ms Sammut’s solicitor sent a letter in response (24 October letter), summarising the agreement reached to date and outstanding points. In response to point (e), the letter stated in bold that:

“It was agreed that in consideration of your client paying the cost of subdivision works estimated to be $435,000.00 then your client is to be granted a 1/3 share of ownership in the whole of the property subject to the mortgage loan to Suncorp. The estimated cost of $435,000.00 is only an estimate. If the costs exceed $435,000.00 then your client is to bear the excess. It was agreed it would be your client’s obligation to complete the work. Your client will receive a 1/3 equity in the net value of the properties only on completion of all works to be specified by a Private Certifier and within a timetable to be agreed.

The excess is to be at the cost of Mr Lawrence but if a four lot subdivision is achieved, then the excess will be borne equally by the three parties.”

20. The letter also noted that the parties were agreed that their equity contributions would be treated as loans and specified the order of priority for repayment of those loans from the sale of properties after the sub-division was completed and funds became available. A draft joint venture agreement was enclosed with the letter for comment and identified the purpose of the venture as being to develop the Property in accordance with the DA but did not include any of the other terms that had been agreed between the parties or outstanding items that were outlined in 24 October letter.

21. On or about 29 October 2014, Mr Lawrence, Mr Ciantar and Ms Sammut met without their lawyers. They decided not to proceed with the draft joint venture agreement having identified some issues with it, including concerns about registering a business and GST, and agreed to proceed with an arrangement on the terms they discussed at the meeting.

22. At that meeting, a handwritten letter dated 29 October 2014 was prepared by the parties and then sent by Mr Ciantar and Ms Sammut to their solicitor. Mr Lawrence also received a copy of the letter. That letter stated that the parties had agreed to proceed on “the following basis in similarity to what you have set out in” the 24 October letter and then listed details of the agreement in seven paragraphs.

23. In cross-examination, Mr Lawrence could not recall why the handwritten letter was drafted by the parties in circumstances where they had been represented by lawyers. He rejected the proposition that he suggested they prepare an informal document over which he would have control. Mr Ciantar and Ms Sammut did not give any evidence on this issue. Whatever the reason, the parties proceeded on that basis and a typed version of the details contained in the handwritten letter was prepared. In his evidence, Mr Lawrence describes this typed document as a summary of the terms and conditions that had been agreed in meetings held between himself, Mr Ciantar and Ms Sammut.

24. On or around 12 November 2014, Mr Lawrence, Mr Ciantar and Ms Sammut met, reviewed and executed the typed document (the 12 November Agreement), which Mr Lawrence again describes in his evidence as a “summary”. In view of its importance in the proceedings, it is necessary to set out the terms of the 12 November Agreement in full:

“This agreement is between:

- Wayne Lawrence

- Paul Ciantar

- Alice Sammut

The parties named above have agreed to proceed on the following basis in similarity to what was set out in TH Walker’s letter dated 24/10/14.

1. A share transfer for 1/3 share of 5 Angophora crescent Forestville, that document will be executed by the above parties and the original will be jointly held by TH Walker and Steven hedges and a copy shall be provided to each party.

2. A unregistered second mortgage as to the works of $435,000 which is applicable to the existing D/A approval, which will be executed by the relevant parties.

3. A caveat is to be provided in favour of the Mortgage listed in point 2. By signing this agreement Paul Ciantar and Alice Sammut consent to the lodgement of a caveat by Wayne Lawrence on the title to the property at 5 Angophora Crescent, Forestville in support of this agreement to secure any monies by Wayne Lawrence or his nominees.

4. On completion of the works and the certificate which supports those works are completed in accordance with the D/A the original transfer will be provided to Wayne Lawrence and Registered, appointing Wayne Lawrence as 1/3 owner of the sad property [sic].

5. In reference to the other issues which we believe to be separate to paragraphs 1-4 the parties will within the 3 months of signing the documents referred to in 1-4 will be in a position to execute the document as to any variation should be agreed as to the original D/A i.e. the fourth block

6. The parties have agreed that the said works in the D/A as described in the sum of $435,000 that Wayne Lawrence shall proceed to carry out as described below prior to any major works described in the D/A.

- Removal of the carport

- Breezeway

- Removal of surplus weeds and bushes in preparation of the construction certificate and any other works that would not conflict with the issue of a construction certificate as described under councils requirements.

- Establish the requirements as to any variations in the manhole, and the 150mm drain pipe

- Wayne Lawrence to provide the first of two checks [sic] of $10,000 payable to the 5 Angophora crescent mortgage account at Suncorp bank.

7. The parties will prior to proceeding with the construction works within 3 months or at a time manually [sic] agreed upon reach any further variation or agreement.

Signed by each of the parties

Wayne Lawrence

Paul Ciantar

Alice Sammut”

25. On 23 December 2014, Mr Lawrence’s solicitor sent the caveat contemplated by the 12 November Agreement to the solicitor for Mr Ciantar and Ms Sammut. The caveat described the nature of the interest as an equitable charge of the land, which was to “secure moneys advanced…for the performance of works upon the property at the request of the registered proprietors pursuant to an oral agreement entered into between the parties to charge the property as security for payment of moneys so advanced”.

26. The letter dated 23 December also stated that a draft of an agreement setting out the proposed terms of the venture that the parties were entering into would be forwarded for review. As circumstances transpired, that draft agreement did not eventuate.

25. From 15 January 2015, Mr Lawrence’s contractor licence was under restriction which meant that he was unable to enter into contracts caught by the Home Building Act with a value over $20,000.00 (incl GST): see Home Building Act s 4.

26. On 16 January 2015, Mr Ciantar and Ms Sammut’s solicitor returned the signed caveat to Mr Lawrence’s solicitor.

27. During January and February 2015, Mr Lawrence obtained a quote for electrical work on the Property and communicated with MJM Consulting Engineers in relation to the engineering of the driveway and the drainage design required for the DA.

28. Sometime prior to 20 March 2015, Mr Lawrence submitted a principal certifying authority form to the Council notifying them that sub-division work was proposed and due to commence on 20 March 2015. The form identified Mr Lawrence as the builder.

29. On 26 March 2015, the parties met at the offices of Mr Ciantar and Ms Sammut’s solicitor and signed a document dated 26 March 2015 which was identical in terms to the 12 November Agreement. In these reasons, I refer to that document as the 26 March Agreement.

30. On that day, the parties also executed a deed of loan, a transfer for a one-third share and mortgage in relation to the Property in favour of Mr Lawrence. The mortgage was granted as security for amounts owing under the deed of loan. The deed of loan included the following term:

“2.1:    The Lender [Mr Lawrence] agrees to advance and the Borrowers [Mr Ciantar and Ms Sammut] agree to take the advance of the Principal Sum [being the amount of $435,000.00], which Principal Sum the parties agree is to be used to pay for the subdivision works to be carried out on the Property.”

33. Copies of the executed deed of loan, mortgage, transfer and 26 March Agreement were sent to Mr Lawrence’s solicitor under cover of a letter from the solicitor for Mr Ciantar and Ms Sammut dated 8 April 2015. The 8 April letter stated that minutes of the meeting of the parties held on 26 March 2015 would be prepared and record that the due date for completion of the sub-division work and registration of the plan was to be 30 November 2015 and would set out how the debt was to be repaid “on settlement of the project”. It appears that those minutes were not prepared.

34. In April 2015, Mr Lawrence was again in contact with MJM Consulting Engineers in relation to the engineering of the driveway and the drainage design required for the DA.

35. On 15 June 2015, Mr Lawrence applied to Council for a Construction Certificate in relation to the works required by the DA. In the builder’s details section, Mr Lawrence listed his name and builder’s license number. The application included copies of documents obtained by Mr Lawrence in relation to the DA for the release of the Construction Certificate, being the drainage design report and driveway plans from MJM Consulting Engineers, an email from Ausgrid Australia regarding power supply, confirmation of the supply of natural gas and an email from MGP Building and Infrastructure Services Pty Ltd regarding the s 73 Compliance Certificate requirements.

36. On 12 October 2015, Mr Lawrence’s solicitor wrote to the solicitor for Mr Ciantar and Ms Sammut seeking an extension of time for completion of the sub-division works by six months to 30 May 2016. In support of the request, the letter referred to delays as a consequence of wet weather, variations to the development terms and conditions and council delays, which in total exceeded twenty-eight weeks.

37. At the hearing, Mr Ciantar and Ms Sammut’s counsel submitted that delays of twenty-eight weeks could not be substantiated, particularly as that figure was predicated on an assertion that wet weather affected the Property for twenty-two weeks. I accept that submission. Mr Lawrence’s oral evidence on this issue was not convincing and was also inconsistent with the documentary evidence (including his diaries and a Bureau of Meteorology listing of wet weather over that period) which did not support the existence of twenty-two weeks of wet weather or delays of the type referred to which could have justified an extension of time of twenty-eight weeks as at 12 October 2015.

38. On 20 October 2015, Mr Lawrence’s solicitor wrote seeking a further six-month extension of time for the completion of the “building works” to November 2016. By letter dated 18 December 2015, Mr Lawrence’s solicitor asserted that the parties had agreed that the construction period had been extended to 30 May 2016.

39. On 22 December 2015, the Council issued Mr Lawrence with a construction certificate numbered 2015/0306 in relation to the works referrable to the DA (Construction Certificate). The Construction Certificate described the works as “demolition works and sub-division of land”.

40. There was evidence at the hearing that Mr Lawrence had done some works at the Property, including demolishing the breezeway and deck, undertaking some earthworks and had prepared to demolish a cabin, but it was not clear whether those works were commenced prior to receiving the Construction Certificate on 22 December 2015 or after that time. In his affidavit dated 23 November 2017, Mr Lawrence stated:

“I was unable to commence any works with regards to the subdivision until I had the construction certificate for the property”.

41. On 21 January 2016, the parties and their solicitors met to discuss Mr Lawrence’s request for an extension of time to complete the works. The parties agreed that Mr Lawrence would provide details and specifications of the work to be completed within the extended timetable. On 25 February 2016, Mr Lawrence provided information relating to work he had done to engage contractors, apply for a Construction Certificate and engage surveyors to draw up plans for a four lot sub-division.

42. Around this time, the parties were discussing the option of amending the DA to provide for a four-lot sub-division. Mr Ciantar and Ms Sammut applied to Warringah Council to remove a tree for this purpose. The Council refused that application on 20 April 2016.

43. At the request of Mr Ciantar and Ms Sammut, on 15 June 2016 Mr Lawrence’s solicitor wrote to Council regarding the refusal of the application to remove the tree. There does not appear to have been any further dealings with Council in relation to that matter following that letter, nor evidence that the parties were pursuing the option of amending the DA to provide for a four lot sub-division until a letter from Mr Ciantar and Ms Sammut’s lawyer sent over a year later.

44. On 21 June 2016, Mr Lawrence, as “developer”, applied to Sydney Water for a s 73 Compliance Certificate.

45. The evidence before the Court did not indicate that any works relating to the DA and approved plans had been undertaken at the Property by or on behalf of Mr Lawrence during the period from 16 June 2016 to 24 January 2017.

46. On 25 January 2017, Mr Ciantar and Ms Sammut wrote to Mr Lawrence raising concerns that “the works being undertaken [to finalise the sub-division at the Property] have been prolonged unnecessarily”. The letter also asked for accounting and other information in relation to the works undertaken to date and an outline of a schedule for any incomplete work not yet undertaken.

47. This was followed by a letter from Mr Ciantar and Ms Sammut’s new solicitor, McLean & Associates, to Mr Lawrence’s solicitor on 22 February 2017 noting the concern that the works Mr Lawrence had been engaged to undertake and finalise had been unsatisfactorily protracted and requested financial and other records in relation to the work undertaken at the Property.

48. On 15 March 2017, Mr Lawrence’s solicitor responded asserting that Mr Lawrence had completed all works required to be done “pursuant to the terms of the agreement with the exception of the installation of the stormwater detention [sic] tank and concrete driveway”, and that Mr Lawrence was and had been for some time ready to proceed with finishing the works but had not done so under the instruction of Mr Ciantar and Ms Sammut as they wished to pursue a four-block sub-division.

49. There was a dispute at the hearing as to whether Mr Lawrence had completed all the sub-division works with the exception of the driveway and installation of the stormwater retention tank as at the date of that letter. In cross-examination, Mr Lawrence conceded that he had not.

50. Further, there is no evidence before the Court that supports the statement in the 15 March 2017 letter that Mr Ciantar and Ms Sammut instructed Mr Lawrence not to proceed with the DA works as they wished to pursue a four-block sub-division.

51. Mr Ciantar and Ms Sammut’s solicitor responded on 20 March 2017 noting that the works had not been completed pursuant to the agreement and again asked for the supporting documents. A follow up letter was also sent on 19 April 2017.

52. On 2 May 2017, Mr Ciantar and Ms Sammut’s solicitor wrote again and noted that no response had been received to the various requests for accounting and other documents. The letter advised that Mr Ciantar and Ms Sammut were interested in pursuing a further arrangement with Mr Lawrence to facilitate a sub-division of the Property into four lots as opposed to three and stated that, while further negotiations in relation to a four lot sub-division were foreshadowed, Mr Ciantar and Ms Sammut expected Mr Lawrence to continue with his monthly contributions towards the Suncorp mortgage. No response was received to that letter.

53. On 17 May 2017, Mr Ciantar and Ms Sammut’s solicitor advised that, unless they heard back from Mr Lawrence in relation to the information and documentation requested, they would proceed to infer that the business relationship between the parties had come to an end and would require Mr Lawrence to comply with certain directions in relation to works and materials on the Property by 16 June 2017.

54. By letter dated 18 May 2017, Mr Lawrence’s solicitor responded asserting that the only agreement entered into by the parties comprised the document dated 12 November, together with correspondence passing between the firms in September and October 2014 and raised a number of points said to support that position.

55. Mr Ciantar and Ms Sammut responded on 2 June 2017 and proposed that Mr Lawrence provide the requested accounting, a proposal for removing the tree for the purposes of a four block sub-division or, if the tree could not be removed, Mr Lawrence’s position vis-à-vis a three-lot sub-division.

56. On 19 July 2017, by letter marked “without prejudice” from their solicitor to Mr Lawrence’s solicitor, Mr Ciantar and Ms Sammut indicated that they had been approached by a third party who was interested in purchasing the Property “as is” and invited Mr Lawrence to propose a payout figure or consideration for his withdrawal of the caveat. The request was made without prejudice to the defendants’ right to have a quantity surveyor assess the value of the work completed to date should that course become necessary.

57. Mr Lawrence responded on 28 July 2017 advising that he would require a sum of $1,322,500 in exchange for him terminating the arrangements, providing a discharge of the mortgage, withdrawing the caveat, and acknowledging that his one-third beneficial interest in the Property was extinguished.

58. By letter from his solicitor dated 23 August 2017, Mr Lawrence asked Mr Ciantar and Ms Sammut whether they wanted to bring the arrangement to an end (in which case the Property would either be sold and the proceeds distributed in accordance with the terms of the arrangements between the parties or Mr Ciantar and Ms Sammut could pay Mr Lawrence $1,322,500), or whether they wanted Mr Lawrence to proceed with the works for a three-block sub-division. As an alternative, Mr Lawrence offered to proceed with a four-block sub-division.

59. On 2 September 2017, Mr Ciantar and Ms Sammut served a notice of rescission dated 1 September 2017 on Mr Lawrence. The notice of rescission was purported to be given pursuant to the Home Building Act and asserted that:

1. the work required to be undertaken pursuant to the contract, being the November 2014 and March 2015 Agreements, was residential building work for the purposes of the Home Building Act;

2. the November 2014 and March 2015 Agreements did not contain cooling off warnings, which were required to be given to Mr Ciantar and Ms Sammut; and

3. on 30 August 2017, Mr Ciantar and Ms Sammut became aware that the contract should have contained a cooling off warning.

60. On 12 September 2017, Mr Ciantar and Ms Sammut, by letter from their solicitor to Mr Lawrence’s solicitor, sought to terminate the deed of loan and also requested that a lapsing notice be issued in relation to the caveat which they alleged had no further operation.

61. Mr Lawrence’s solicitor responded to that letter on 12 October 2017 asserting that Mr Ciantar and Ms Sammut’s conduct amounted to repudiation and advised that Mr Lawrence would be commencing proceedings in this Court.

62. On 7 November 2017, Mr Lawrence commenced these proceedings by way of summons. The matter first came before the Court in relation to the operation of the caveat over the Property. On 9 November 2017, Lindsay J extended the operation of the caveat until further order. On 14 December 2017, Darke J refused Mr Ciantar and Ms Sammut’s application to discharge Lindsay J’s order.

63. Mr Ciantar and Ms Sammut have filed a cross-summons seeking various declarations and an order for rectification, although it is accepted that their claims for relief are largely responsive to Mr Lawrence’s case.

64. As of the hearing date:

1. the works contemplated by the DA and approved plans have been completed, with the major works (including the construction of the driveway, retention tank and drainage works) having been undertaken by a third party builder retained by Mr Ciantar and Ms Sammut under a Home Building Contract dated 12 May 2018;

2. Lot 1 of the Property has been sold off the plan to a third party purchaser; and

3. Mr Lawrence has not advanced the amount of $435,000 to Mr Ciantar and Ms Sammut pursuant to the deed of loan or otherwise.

65. At the start of the hearing, Mr Lawrence made an application for leave to file an amended summons seeking an alternative order that Mr Ciantar and Ms Sammut hold the Property on constructive trust for him to the extent of his contributions to the development of the Property. Mr Ciantar and Ms Sammut objected, and Mr Lawrence did not pursue his application and so that alternative claim was not pressed.

Submissions of the parties

Mr Lawrence’s submissions

66. Mr Lawrence submitted that there was one contract, which comprised the 12 November Agreement and the 26 March Agreement. He stated that his obligations were limited to contributing the funds to pay for the cost of the DA works and to carrying out forms of works excluded from the definition of residential building work, which means that the contract between the parties was not caught by the Home Building Act. In consideration for contributing the funds and undertaking the limited works, he was to acquire a one-third equity interest in the Property.

67. He also submitted that the parties did not enter into a building contract, under which he was to be paid $435,000 for carrying out building work, but entered into a joint venture arrangement, under which Mr Lawrence was the “payer” rather than the “payee”.

68. Mr Lawrence referred to a number of matters in the 24 October letter, which he claimed were objective indicators that the parties intended this to be a joint venture arrangement (with Mr Lawrence contributing equity to the value of $435,000) rather than a building contact. These were:

1. the parties’ agreement that the estimated market value of the Property was $1.7 million;

2. the Property being subject to an existing mortgage to Suncorp in the amount of $1 million;

3. the parties’ agreement that the DA works were estimated to be $435,000;

4. Mr Lawrence being responsible for the cost of the DA works;

5. the agreement as to how the equity contributions of the parties would be paid out in terms of priority once funds were available from the sale of the properties after the subdivision was complete; and

6. a range of other provisions referred to which are said to be typical of joint ventures and inconsistent with a building contract.

69. Mr Lawrence also relied on the terms of the 12 November and 26 March Agreements as pointing to a joint venture rather than a building contract, including the terms that related to the preparation of an unregistered second mortgage and caveat, the provision for a transfer to Mr Lawrence upon completion of the works and the certificate supporting those works, and Mr Lawrence’s initial contribution of $10,000 towards the mortgage in favour of Suncorp.

70. While accepting that it was poorly drafted, Mr Lawrence argued that the terms of the 12 November Agreement were not ambiguous. He submitted that the only work he was required to carry out were those identified in the first four points under cl 6, being the removal of the carport and breezeway, removal of surplus weeds and bushes (and any other works in preparation for the sub-division that would not conflict with the issue of a construction certificate) and establishing requirements for the manhole and 150mm drain pipe. In these reasons, I refer to the works listed in the first four points under cl 6 of the 12 November Agreement and the 26 March Agreement as the ‘preparatory works’.

71. In Mr Lawrence’s submission, cl 6 of the 12 November Agreement prohibited him from carrying out the “major” DA works, which he accepted included the construction of a driveway, retention tank and retaining wall and drainage pipes. He also pointed to cl 7, which had the effect, in his submission, of making it the obligation of all the parties to decide what, when and by whom any future construction works were to be carried out on the Property.

72. Mr Lawrence also submitted that one must look to “what was contracted to be done, not what was done” in considering whether the 12 November and 26 March Agreements were a contract under the Home Building Act. Here, he said, Mr Lawrence contracted only to carry out the preparatory works and the Court cannot look to any work he completed after the 12 November Agreement was executed.

73. He further submitted that any conduct after the 26 March Agreement was of no value in construing the contract between the parties as it must be construed in the light of the surrounding circumstances that were known to the parties at the time it was entered into: Centennial Coal Company Ltd v Xstrata Coal Pty Ltd (2009) 76 NSWLR 129 at 147.

Mr Ciantar and Ms Sammut’s submissions

74. Mr Ciantar and Ms Sammut submitted that the relevant contract was partly oral and partly in writing. The written contract comprised a number of documents, including the 12 November Agreement and the 24 October letter to which it refers. They pointed to the caveat lodged in relation to the Property which refers to an oral agreement in support of their submission that oral terms existed between the parties. They also said that the contract was varied by the parties’ conduct over the course of their relationship.

75. Mr Ciantar and Ms Sammut submitted that the proper construction of the contract between the parties obliged Mr Lawrence to carry out and complete the demolition and sub-division works contemplated by the DA that were current at the time of the 12 November Agreement or any further or other variation thereof, with his reward upon completion being an interest in the Property.

76. They said that the terms of the 12 November and 26 March Agreements were ambiguous. To clarify that ambiguity, the Court should have regard to evidence of the surrounding circumstances to construe that document, noting that such evidence may be relied upon even in the absence of ambiguity. They relied on evidence of the negotiations leading to the formation of the 12 November Agreement as providing the context, aim and purpose of the contract between the parties.

74. They also submitted that evidence of Mr Lawrence’s subsequent conduct was admissible to determine the terms of the contract and argued that it supported their interpretation including, as it did, Mr Lawrence’s requests for extensions of time to complete the works, his repeated use of his building licence number in documentation and referring to himself as a “builder” when communicating with third parties.

75. Mr Ciantar and Ms Sammut also relied on Mr Lawrence’s evidence that he carried out building works at the Property by himself and with others, and the evidence he gave in cross-examination, including where he conceded that his role was to do the sub-division. They also point to the assertions in correspondence that Mr Lawrence had undertaken certain works and was ready, willing and able to proceed with the works necessary to obtain the sub-division, and admissions by him that the work was or would be carried out pursuant to the contact between the parties, including in the letter from his solicitor dated 18 May 2017.

76. Mr Ciantar and Ms Sammut submitted that the obligation on Mr Lawrence to carry out the DA works means that the contact was caught by the Home Building Act. This was because the agreed value of the DA works exceeded the prescribed amount and involved residential building work under the Home Building Act, including as it did electrical work, plumbing work for drainage, the construction of a retention tank, construction of a retaining wall and construction of a driveway.

Did the contract between the parties oblige Mr Lawrence to carry out and complete the DA works?

The contract between the parties

80. I prefer Mr Ciantar and Ms Sammut’s submission that the relevant contract between the parties was partly in writing, comprised of the 12 November Agreement and the 24 October letter to which it refers, and partly oral.

81. Mr Lawrence’s position that the relevant contract was limited to the terms set out in the 12 November Agreement is inconsistent with his own evidence which described both the handwritten letter dated 29 October 2015 and the 12 November Agreement as a “summary” of the terms agreed by the parties.

82. An objective review of the terms of the 12 November Agreement also supports the defendants’ submission and Mr Lawrence’s evidence that it was a summary of terms, given its poor drafting and the fact that numerous words and concepts are missing from the document. By way of example:

1. cl 1 does not identify which party was to receive a 1/3 share in the Property;

2. cl 2 does not identify the party in whose favour the second mortgage will be created, and relates this mortgage “to the works of $435,000”, which does not make sense in isolation;

3. cl 3 does not specify the value of the “monies by Wayne Lawrence” or whether they are to be paid, advanced or loaned by Mr Lawrence;

4. words are misspelt in cl 4 (as they are in cls 6 and 7) and there is no specificity as to the works or certificate being referred to;

5. cl 5 refers to other unspecified issues and is grammatically difficult to follow;

6. cl 6 refers to “works in the D/A…that Wayne Lawrence shall proceed to carry out as described below prior to any major works described in the D/A”, but does not specify what the major works described in the DA are. The clause also goes on to refer to the provision of “checks” [sic] by Mr Lawrence relating to the Suncorp mortgage, which on no view could amount to being part of the works required “in the D/A”;

7. cl 7 refers to “the construction works”, a term which is not used elsewhere in the Agreement and could encompass all the works in the DA, including the preparatory works; and

8. the document does not refer to other items referred to in the 24 October letter, including matters which Mr Lawrence accepted were agreed terms of the venture between the parties, including the manner in which equity contributions of the parties were to be treated, how funds from the sale of properties would be applied in order of priority, and the date by which the works were to be completed.

83. Mr Lawrence’s submission that the relevant contract is limited to the terms set out in the 12 November and 26 March Agreement is also not supported by other contemporaneous documents and the conduct of the parties. That evidence points to the existence of other terms, such as the order of priority for repayment of loans made and the date for completion of the work.

84. The term relating to the priority for repayment is not referred to in the 12 November Agreement but was included in the 24 October letter and was accepted by Mr Lawrence to be a term of the contract between the parties during submissions at the hearing.

85. The term relating to the date for completion is also not referred to in the 12 November Agreement but is evidenced by the 24 October letter, which refers to the completion of the works within a timetable to be agreed; the letter dated 8 April 2015 which refers to the 26 March 2016 meeting of the parties and the due date for completion of 30 November 2015; and the conduct of Mr Lawrence in seeking extensions of time for completion of the works beyond 12 months to 30 May 2016 and then to 30 November 2016.

Interpretation of the contract

86. The principles relating to the construction of a contract were set out in Mount Bruce Mining Pty Ltd v Wright Prospecting Pty Ltd (2015) 256 CLR 104 and can be summarised as follows:

1. in construing a contract, the obligations of the parties are to be “determined objectively”, by reference to the “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” (at 116);

2. in determining what a reasonable business person would have understood the terms of a contract to mean, the Court will consider “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” (at 116);

3. while this may be possible by reference to the contract alone, it may be necessary to consider “events, circumstances and things external to the contract” where they 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” (at 116-117); and

4. often construction is possible by reference to the contract alone (at 116).

87. Applying those principles to this case, the proper interpretation of the contract between the parties is that Mr Lawrence was obliged to carry out and complete the DA works, either by himself or supervising others, in return for an interest in the Property.

88. Mr Lawrence’s interpretation, which was he was only required to undertake the preparatory works and that he would obtain a one-third interest in the Property in circumstances where he had not carried out or completed construction of the DA works and had not advanced $435,000 to Mr Ciantar or Ms Sammut is not, in my opinion, consistent with the terms of the 12 November Agreement when one considers its text, context and purpose or what a reasonable businessperson would understand the terms to mean.

89. Starting with its text, it was accepted at the hearing that the 12 November Agreement was not well drafted, having been prepared by the parties themselves and without aid from their solicitors. Mr Lawrence’s counsel described the drafting as “inelegant” and having a “homemade touch”. He also accepted that cl 6 included an “amateurish garbled sentence”, a “jumble” and that the “grammar in the chapeau leaves a lot to be desired”.

90. It was also accepted at the hearing that cl 6 of the 12 November Agreement obliged Mr Lawrence to carry out the preparatory works. The question is, when read as a whole, did it also oblige Mr Lawrence to carry out, either by himself or through others, the major DA works in order to obtain a one-third equity in the Property? In my view, it did.

91. As a matter of construction, cl 6 should be read as requiring Mr Lawrence to carry out all the DA works, with an immediate obligation on him to carry out the preparatory works prior to the “major works” described in the DA. The clause refers to the “said works in the D/A as described in the sum of $435,000 that Wayne Lawrence shall proceed to carry out”, thereby supporting the first object of the clause being to identify who should carry out the totality of the DA works, which was Mr Lawrence.

92. Cl 6 then goes on to state “as described below prior to any major works described in the D/A”, thereby identifying the other object of the clause being to identify what works Mr Lawrence should complete first, namely the preparatory works and the payments in support of the mortgage, prior to carrying out the major DA works.

93. I accept that cl 6 does not prescribe a date by which Mr Lawrence was to carry out the major DA works and cl 7 could be interpreted as not requiring him to proceed to start the major DA works for 3 months or if the parties agreed any further variation or agreement. This does not mean, and I do not accept the submission of Mr Lawrence’s counsel that the words in clauses 6 and 7 provide that, the only works which Mr Lawrence was contractually obliged to carry out, either at that time or at all, were the preparatory works.

94. In my opinion, those clauses do not limit the scope of Mr Lawrence’s contractual obligations such that he was only responsible for completing the preparatory works and that he would receive a one-third interest in the Property once all the DA works were completed by someone other than him and he funded those DA works. The clauses simply canvass the timing of the works to be carried out and completed by Mr Lawrence, with the preparatory works to be undertaken first and the major DA works to follow after 3 months, with the possibility of a variation being agreed between the parties that the works may change. The evidence does not support there having been any variation to the nature of the works to be undertaken but indicates the parties varied the timing for completion of the DA works from 30 November 2015 to 30 May 2016.

95. I also reject Mr Lawrence’s submission that the terms of the 12 November Agreement, including cl 6, are unambiguous despite being difficult to follow. There is ambiguity in the terms of the 12 November Agreement. That ambiguity arises from the poor drafting outlined in paragraph [82] above and the difficulty in ascertaining the meaning of its terms in the absence of a consideration of the evidence of the surrounding circumstances leading up to the 12 November Agreement known to the parties. That evidence is relevant to understanding the context, aim and subject matter of the contract, and is admissible.

96. Evidence of surrounding circumstances known to the parties may, in some circumstances, be used to construe a contract: Toll (FGCT) Pty Ltd vAlphapharmPty Ltd(2004) 219 CLR 165 at 179; Cherry v Steele-Park (2017) 96 NSWLR 548 at 562. The position was summarised by Barrett AJA in WIN Corporation Pty Ltd v Nine Network Australia Pty Ltd (2016) 341 ALR 467 at 477:

“Evidence of prior negotiations is admissible to the extent that it establishes objective facts known to both parties and the subject matter of the contract. Conversely, evidence reflecting the subjective intentions of the parties is, in accordance with long-standing authority, necessarily inadmissible for the purpose of determining the meaning of the contract (unless it demonstrates knowledge of surrounding circumstances). In recent times, the High Court has revisited the distinction between impermissible recourse to the parties’ subjective intentions and expectations and permissible regard to objective matters known to the parties. In Victoria v Tatts Group Ltd(2016) 328 ALR 564; 90 ALJR 392; [2016] HCA 5 (Victoria) at [51], the Court unanimously approved the formulation of principle advanced by three members of the Court (French CJ, Nettle and Gordon JJ) in Mount Bruce Mining Pty Ltd v Wright Prospecting Pty Ltd(2015) (2015) 256 CLR 104; 325 ALR 188; [2015] HCA 37 (Mount Bruce) (at [46]-[51]) that, as a general principle of construction, the rights and liabilities of parties under a contractual provision fall to be determined by objective consideration of its text, context and purpose. The relevant enquiry is to be conducted on the footing of what a “reasonable businessperson” would have apprehended the terms to mean in light of the particular language used by the parties, the circumstances addressed by the contract and its commercial purpose. Although the Court was of the view that this process would not uncommonly be possible without reference to evidence of surrounding circumstances, it acknowledged that regard could be had to such evidence if, for example, it assisted in establishing the objective facts known to the parties and thereby elucidated with greater precision the commercial purpose or subject matter of the contract”. [Footnotes omitted.]

97. The correspondence between the parties and their solicitors during the negotiations prior to signing the 12 November Agreement, including the 24 October letter, provides evidence of objective facts known to the parties. It is also evidence of the communicated negotiating position of the parties from time to time, a reflection of the commercial purpose of the contract and constitutes “specific information as to the genesis of the transaction”. It is, therefore, admissible to assist in interpreting the contract between the parties: Cherry v Steele-Park (2017) 96 NSWLR 548 per Leeming JA at 569; Boreland v Docker [2007] NSWCA 94 per Beazley JA (as her Honour then was); International Air Transport Association v Ansett Australia Holdings Limited (2008) 234 CLR 151 per Gleeson CJ at 160.

98. Evidence of the prior negotiations relied upon by Mr Ciantar and Ms Sammut is also relevant and admissible in accordance with the principle enunciated by the High Court in Codelfa Construction Pty Ltd v State Rail Authority of New South Wales (1982) 149 CLR 337 (at 352) that:

“The true rule is that evidence of surrounding circumstances is admissible to assist in the interpretation of the contract if the language is ambiguous or susceptible of more than one meaning. But it is not admissible to contradict the language of the contract when it has a plain meaning.”

99. This is to be contrasted with evidence of a party’s uncommunicated subjective intention or understanding of what the contract meant: Toll (FGCT) Pty Ltd v Alphapharm Pty Ltd (2004) 219 CLR 165 at 179. Evidence of what Mr Lawrence believed the relevant facts to be and what he understood the contract to mean, such as the matters outlined in paragraph 68 of his affidavit sworn 6 April 2018, is not admissible.

100. The admissible evidence of the surrounding circumstances shows that the genesis of the 12 November Agreement was Mr Lawrence’s approaching Mr Ciantar and Ms Sammut in response to their advertising the Property for sale with a DA in place, in circumstances where Mr Ciantar and Ms Sammut were not themselves going to carry out the DA works.

101. The evidence also shows that Mr Lawrence was a licensed builder since at least 1973 and that, prior to entry into the 12 November Agreement, Mr Lawrence held himself out to Mr Ciantar and Ms Sammut to be a licensed builder and someone who was experienced in undertaking sub-divisions, had his own equipment and who could construct the sub-division and complete the physical works within six to twelve months. For example:

1. Mr Lawrence’s offer to purchase the Property in a letter dated 3 March 2014 (to the real estate agent acting on behalf of Mr Ciantar and Ms Sammut, Trent Brewer at Ray White Group, Terry Hills) stated that he:

“would be seeking to commence works as soon as possible and as required complete those said works within 6 months subject to weather conditions and unforeseen obstacles within the subdivision itself…

I have been conducting subdivisions and developments since 1967. I am a licensed builder but in the last 30 years have been concentrating on subdivisions. I have my own equipment to enable that there are no delays in commencing the said works forthwith”;

2. the proposal from Mr Lawrence dated 29 August 2014 provided that Mr Lawrence was to “construct the subdivision under a ‘Contract of works’ with the normal requirements that fall within those works within 12 months” and “in an amount agreed as $435,000”, with Mr Lawrence receiving a “one-third equity share in the Property on completion of the physical works of the subdivision”;

3. correspondence between the parties which referred to “Wayne to build houses or renovate on all blocks and sell” (see the email dated 4 September 2014 from Mr Ciantar which was forwarded to Mr Lawrence on 8 September 2014); it being Mr Lawrence’s obligation to complete the sub-division works (see the letter dated 8 October 2014), and Mr Lawrence offering to undertake performance of the building work as required by the DA and undertaking the liability for performing the works (see letter dated 17 October 2014); and

4. the draft agreement prepared by Mr Lawrence and sent to Mr Ciantar and Ms Sammut on 22 September 2014 which referred to Mr Lawrence as the “Builder”, the “Contract for the said works as agreed $445,000” and that the “Contract Works will form the equity 1/3 share in the” Property. It also described the works as consisting of “obtaining the Construction Certificate…commencement of all the works and completion of all the works as per the Construction Certificate”, the completion of the works was when “physical work has been completed and ready for final inspection by Council” and “the Contract for the works will be 12 months”. The draft agreement also referred to the possibility that the DA would be amended to include a fourth lot, and an amendment to the retention tank and the boundaries of each lot.

102. The material referred to above, in which Mr Lawrence refers to himself as the “builder” and paying for and doing “the subdivision works”, is consistent with the aim and purpose of the transaction being that Mr Lawrence would be responsible for carrying out and completing the DA works (which were estimated to cost $435,000) in order to receive a one-third interest in the Property. It is not consistent with Mr Lawrence having to simply put up the funds to pay for the DA works and only undertaking the preparatory works.

103. There is also the 24 October 2014 letter which included at page 3 of the letter the following:

“It was agreed that in consideration of your client paying the cost of subdivision works estimated to be $435,000.00 then your client is to be granted a 1/3 share of ownership in the whole of the property subject to the mortgage loan to Suncorp. The estimated cost of $435,000.00 is only an estimate. If the costs exceed $435,000.00 then your client is to bear the excess. It was agreed it would be your client’s obligation to complete the work. Your client will receive a 1/3 equity in the net value of the properties only on completion of all works to be specified by a Private Certifier and within a timetable to be agreed.”(emphasis added)

104. Some of the earlier correspondence between the parties, being the letters dated 8 October 2014 and 17 October 2014, may not provide for a clear acceptance of the notion that it would be Mr Lawrence’s obligation to complete the DA works. However, they do not clearly reject that possibility and the 12 November Agreement is expressed to proceed in similarity to what was set out in 24 October letter, which clearly provided for such an obligation by the statement “It was agreed it would be your client’s obligation to complete the work”. The “work” referred to, and for which Mr Lawrence had the obligation to complete, is the DA works, the estimated cost of which was $435,000.

105. An interpretation of the contract between the parties, and cl 6 of the 12 November Agreement, which provides for the obligation to carry out the DA works on Mr Lawrence in order for him to achieve a one-third equity interest is entirely consistent with, and similar to, the 24 October letter.

187. The general rule is that breach of an intermediate non-essential time term of a contract does not give rise to a right to terminate unless a party first serves a notice requiring performance within a reasonable time. The exceptions to this are where there is unreasonable delay in performance or anticipated failure to comply with a notice to perform. Unreasonable delay occurs where the delay evidences a repudiation of the obligation by the promisor: see JW Carter, Contract Law in Australia (7th ed, 2018, LexisNexis Butterworths) [30.54 – 30.56].

188. As I have found, the parties initially agreed that the date for completion of the DA works was 30 November 2015, which was extended by agreement to 30 May 2016.

189. The evidence establishes that there was significant delay on the part of Mr Lawrence in carrying out and completing the DA works in time. As at the date of the rescission notice, a period of just under three years had passed during which the DA works ought to have been completed. The delay beyond the extended completion date was a period of just over 14 months, being from 30 May 2016 to 2 August 2017.

190. That delay also needs to be considered in the context that Mr Lawrence had previously advised that the “sub-division works” could be completed within six to twelve months, the parties had initially agreed a period of 12 months (to 30 November 2015) for Mr Lawrence to compete the DA works, and the parties had then agreed to change that to a period of 18 months (to 30 May 2016) after Mr Lawrence had sought and had been given an extension of 6 months in which to complete the DA works.

191. It is also relevant that Mr Lawrence sought his initial extension of time based on delays of twenty eight weeks which could not be substantiated and appears to have been excessive.

192. The evidence also indicates that, as at the date of the rescission notice on 2 September 2017, Mr Lawrence was not in a position to complete the DA works as:

1. he had not undertaken any steps to carry out or complete the major DA works by early 2017, when Ms Ciantar and Mr Sammut wrote making enquiries as to his progress with the works;

2. as at 15 March 2017 and as confirmed by the letter from his solicitor, he had not started work on construction of the driveway or the retention tank;

3. he had not demolished the cabin or built the retaining wall: T71.20; and

4. he did not lead any evidence of any contracts for materials or with other contractors to help perform the DA works required.

197. Other than assertions in solicitors’ correspondence that he was ready, willing and able, there was no evidence from Mr Lawrence that during the period from June 2016 to the date of the notice of rescission he was working towards his end of the bargain, which was to undertake the DA works and seek to complete them within a reasonable time frame.

198. Even if his solicitor’s assertion in 2017 that the DA works had been put on hold due to an instruction relating to the possibility of a four lot sub-division was accurate (which assertion is doubtful for the reason noted in paragraph [50]), Mr Lawrence could have proceeded to complete the work on the retention tank (which he acknowledged in a letter dated September 2015 could be proceeded with before any amendment to the DA) and undertaken the drainage works. He chose not do so and could not adequately explain why during cross-examination.

199. As noted in paragraph [125], I do not consider that the letter dated 2 May 2017 operated as an affirmation of the contract by Mr Ciantar and Ms Sammut in the way Mr Lawrence contends.

200. That letter was written following correspondence in which the defendants had made it clear they were concerned about Mr Lawrence’s substantial delay in completing the DA works. The letter also repeated their request for accounting and other documents regarding the works undertaken to date, and noted that Mr Lawrence was to continue making monthly contributions to the Suncorp mortgage while the parties negotiated a possible four block sub-division. This was followed by a letter on 17 May 2017 in which the defendants’ solicitor indicated that his clients would consider their business relationship with Mr Lawrence to be over if he failed to provide certain information and documents. Rather than affirming, the correspondence put Mr Lawrence on notice of concerns about the significant delays in the performance of his contractual obligations to carry out and complete the DA works and the potential for the contract between the parties ending.

201. The relevant question is whether the evidence outlined above establishes that Mr Lawrence’s delay in completing the DA works was sufficiently unreasonable to evince repudiation by him of his obligations under the contract. I accept the submission of Mr Ciantar and Ms Sammut that it does, particularly in circumstances where Mr Lawrence did not put forward any evidence that, as at 2 September 2017, he was in a position to undertake and complete the DA works in any reasonable time.

202. Therefore, at the time they issued the notice of rescission, Mr Ciantar and Ms Sammut were entitled to terminate the contract with Mr Lawrence for breach of an intermediate term because of his unreasonable delay.

203. As Mason CJ said in Sunbird Plaza Pty Ltd v Maloney (1988) 166 CLR 245 at 262:

“Shepherd v Felt & Textiles of Australia Ltd (1931) 45 CLR 359 stands as authority for the general proposition that a termination of a contract may be justified by reference to any ground that was valid at the time of termination, even though it was not relied on at the time and even though the ground actually relied on is found to be without substance.”

204. Applying the principles from Shepherd v Felt and Textiles of Australia Ltd (1931) 45 CLR 359, even though the notice of rescission under the Home Building Act may not have been effective, it may now be relied upon by Mr Ciantar and Ms Sammut as they were entitled to terminate at that time for other reasons.

Comments on the specific performance and damages claims

205. If I am wrong about the application of the Home Building Act and the defendants’ entitlement to rely on the notice of rescission, the wrongful rescission would amount to a repudiation of contract by Mr Ciantar and Ms Sammut. Mr Lawrence has not purported to accept the repudiation and has claimed that the contract is still on foot and that he is entitled to specific performance or damages.

206. The parties’ submissions did not deal with these claims in any detailed way and so my reasons on these matters are necessarily brief.

207. In my view, an order for specific performance of the contract would not be appropriate in this case.

208. On my interpretation of the contract, Mr Lawrence is only entitled to a one-third interest in the Property if he carried out and completed the DA works. There is no dispute that he did not complete the DA works and it is accepted that they have been completed by a third party engaged directly by Mr Ciantar and Ms Sammut.

209. I do not accept Mr Lawrence’s submission that he is able to perform the contract as his position is similar to that of a purchaser and all he has to do is “pay for the work”, “up to $435,000”. The bargain struck by the parties was not simply that Mr Lawrence would fund the DA works. He also had to undertake and complete them.

210. Further, and consistent with my earlier findings, I do not accept that Mr Lawrence was ready, willing and able to perform his side of the bargain as at the date of the notice of rescission. Mr Lawrence did not adduce evidence by affidavit or otherwise going to his ability to perform and the evidence outlined in paragraphs [196]-[197] indicates that he was not in such a position. Nor is he in a position to perform today.

211. Having only undertaken a small part of the obligations that he was contracted to perform, Mr Lawrence is now not in a position to complete his essential obligations to carry out and complete the DA works. In those circumstances, he should not be entitled to a specific performance order requiring the defendants to transfer an interest in the Property to him.

212. Mr Lawrence’s alternative claim for damages was submitted to be a claim to the extent of the loss of the bargain (being the one-third interest in the Property) that Mr Lawrence would have secured if not for the defective purported rescission.

213. Loss of bargain damages is an available remedy for breach of contract in lieu of specific performance. Being ready, willing and able to perform is also relevant to that inquiry and it was necessary for Mr Lawrence to prove that he was in a position to perform his obligations and secure the benefit of the bargain: Tamanna v Zattere; Thakorlal v Zattere; Rabac Pty Ltd v Zattere (2017) 18 BPR 37,139; [2017] NSWSC 1388 at [170] and [191]. As noted above, I do not accept that he has done so.

214. Mr Lawrence did not articulate the quantum of his loss of bargain damages. Nor did he address the value of his one-third interest at the relevant times for assessing damages in any substantive way.

215. There was some evidence before the Court of amounts Mr Lawrence paid to Mr Ciantar and Ms Sammut and third parties in relation to the Property; for example, $34,463 towards the Suncorp mortgage and payment of a Bolthouse Electrical invoice in the amount of $12,529. However, there was no clear figure put to the Court of the amount he had advanced or was claiming and the documentary evidence referring to amounts was very unclear. I also note that a claim for a constructive trust to the extent of the Mr Lawrence’s contributions to the Property was not pressed at the hearing and no quantum meruit claim was made.

216. In those circumstances, I am not in a position to come to a conclusion in relation to the quantum of damages Mr Lawrence would receive if I had found in his favour.

Conclusion on the summons

217. At the hearing, Mr Lawrence accepted that if I found that the contract was caught by the Home Building Act, his claimed one-third interest in the Property and his claims for specific performance and damages were unenforceable due to the operation of ss 7D and 10 of the Home Building Act.

218. Mr Lawrence also accepted that he has not advanced any of the funds said to support the mortgage in his favour (being the $435,000 referred to in the deed of loan).

219. It follows from this and my other findings that Mr Lawrence is not entitled to enforce the transfer of the one-third interest in the Property or any interest by way of the mortgage or deed of loan in respect of the Property. It also follows that the notice of rescission has legal effect and Mr Lawrence is not entitled to specific performance of the contract or to seek damages, and his caveat over the Property should lapse.

220. Accordingly, Mr Lawrence is not entitled to the relief sought, as pressed at the hearing, in paragraphs 1, 4, 5, 6, 7, 8, 9 and 10 of his summons.

Cross summons - rectification claim and other declarations sought

221. In paragraph 2 of the cross-summons, Mr Ciantar and Ms Sammut seek an order for rectification of the agreement dated 12 November 2014 and/or 26 March 2015 for works to be undertaken at the property (Agreement).

222. The rectification claim was advanced as an alternative to the primary claim made by Mr Ciantar and Ms Sammut about the proper construction of the Agreement which I have accepted by finding that the contract between the parties contractually obliged Mr Lawrence to carry out and complete the DA works. In those circumstances, there is no utility in making the rectification order.

223. Even if there was, I would not have made the rectification order in the form sought by the defendants.

224. The order sought goes beyond the scope of my conclusion on the interpretation of the contract between the parties, providing as it does for Mr Lawrence’s obligation to extend to completing the building works for “any further or other variation” of the DA. The contract between the parties contemplated that the parties might vary the DA to provide for a four block sub-division but, at the time of contracting, the parties had not agreed that Mr Lawrence would be obliged to complete any varied works (which may have costs more than $435,000), nor have I found that they agreed to vary them at some later stage.

225. Further, a party seeking rectification must adduce evidence showing the “actual or true common intention of the parties”. Evidence of both the parties’ outward expressions and the subjective states of mind is admissible in a rectification claim: Simic v New South Wales Land and Housing Corporation (2016) 260 CLR 85 at 117; see also Ryledar Pty Ltd v Euphoric Pty Ltd (2007) 69 NSWLR 603.

226. While the documentary record provides some evidence of the parties’ intentions, in the absence of direct evidence from Mr Ciantar or Ms Sammut, it would be difficult to ascertain their subjective intention to support the rectification claim in the terms of paragraph 2 of the cross-summons.

227. The declarations sought in paragraphs 1, 3, 4, 5 and 6 of the cross-summons are responsive to Mr Lawrence’s summons. Mr Lawrence has failed to obtain the relief he seeks and Mr Ciantar and Ms Sammut have, for the most part, succeeded with their arguments and are entitled to declarations to reflect these reasons.

228. However, the terms of the declarations currently proposed in the cross-summons do not currently reflect my reasons. For example:

1. the issue in relation to the rectification order also arises in relation to the declaration sought in paragraph 1 as it refers to “any further or other variation thereof”; and

2. the declaration in paragraph 4 of the cross-summons does not reflect my conclusion that the notice of rescission was not effective under the Home Building Act but may now be relied upon by Mr Ciantar and Ms Sammut as they were entitled to terminate at that time for other reasons.

229. For that reason, I will reserve making any declarations on the cross-summons at this stage and invite the parties to submit draft declarations which reflect these reasons to the Court.

Costs

230. The general rule is that costs follow the event unless it appears to the Court that some other order should be made: r 42.1 Uniform Civil Procedure Rules 2005 (NSW).

231. Mr Lawrence did not succeed with the claims he sought in his summons and he should pay Mr Ciantar and Ms Sammut’s costs.

232. Mr Ciantar and Ms Sammut have succeeded with their arguments and are entitled to declarations sought in their cross-summons, subject to some changes to reflect my reasons. Their lack of success on the rectification claim is not material in my view, as it was an alternative claim, very little time was spent on it at the hearing and Mr Lawrence is likely to have only incurred few, if any, additional legal costs in relation to the claim.

233. In those circumstances, there is no apparent reason why the general rule should also not apply with the result that Mr Lawrence should pay Mr Ciantar and Ms Sammut’s costs of the cross-summons. I will, however, reserve making any costs order in relation to the cross-summons until the relevant declarations are made.

Orders

234. For the reasons given, the Court makes the following orders:

1. Dismiss the plaintiff’s summons.

2. The plaintiff to pay the defendants’ costs of the summons.

235. I reserve on the determination of the declarations sought in the cross-summons. This is because, in some cases, the terms of the declarations sought do not reflect these reasons and, given my conclusions, the order for rectification is unnecessary. In that context, I also consider it appropriate to reserve making a cost order on the cross-summons, although my view is that the cross-defendant should pay the cross-claimants’ costs as the cross-claimants have succeeded and are entitled to declarations.

236. I invite the parties to provide draft declarations and an order in relation to costs on the cross-summons to give effect to these reasons to the Court within 14 days. If the parties cannot agree on the terms of the declarations on the cross-summons, the parties have liberty to apply to approach my associate to relist the matter for further submissions on that issue.

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Amendments

14 June 2019 - [54] – deleted “Agreement” after “November”

[82(a)] – inserted space between “and” and “1/3”

[129] – inserted “of” after “evidence”

[135] – inserted “with” after “conjunction”

[137] – deleted “the construction of” between “that” and “the driveway”

[209] – removed the words “pay for the Lawrence” between “Lawrence” and “would”

Catchwords – deleted “-“ after “conduct”

Decision last updated: 14 June 2019