MAAG Developments Pty Ltd v Oxanda Childcare Pty Ltd - [2018] VSCA 289

SUPREME COURT OF VICTORIA

COURT OF APPEAL

S APCI 2018 0095

MAAG DEVELOPMENTS PTY LTD	Applicant
v
OXANDA CHILDCARE PTY LTD (ACN 166 793 004) as trustee for The Oxanda Education Services Trust	Respondent

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JUDGES:	McLEISH, HARGRAVE JJA and ALMOND AJA
WHERE HELD:	MELBOURNE
DATE OF HEARING:	5 September 2018
DATE OF JUDGMENT:	12 November 2018
MEDIUM NEUTRAL CITATION:	[2018] VSCA 289
JUDGMENT APPEALED FROM:	[2018] VSC 370 (Croft J)

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LEASES – Construction and interpretation – Applicant purchased land from related company of respondent and respondent agreed to lease land from applicant – Land to be used to build childcare centre run by respondent – Council approvals required to build childcare centre – Termination clause in agreement for lease gave either party right to terminate at certain date if: (1) approvals not obtained; and (2) settlement of sale of land not yet occurred (‘failure to settle requirement’) – Contractual scheme inconsistent with failure to settle requirement, as parties intended settlement of land to occur at same time as execution of agreement for lease – Termination clause with failure to settle requirement inconsistent with contractual intention – Whether failure to settle requirement surplus words to be ignored – Fitzgerald v Masters (1956) 95 CLR 420 applied; Update Constructions Pty Ltd v Rozelle Child Care Centre Ltd (1990) 20 NSWLR 251 considered – Appeal allowed.

APPEALS – Whether applicant able to raise new argument not expressly put to trial judge – Where basis of new argument was before trial judge – Where new argument as to contract interpretation a question of law only – Where no prejudice identified by respondent – Applicant permitted to raise argument on appeal.

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APPEARANCES:	Counsel	Solicitors
For the Applicant:	Mr P D Crutchfield QC with Mr J P Tomlinson	SBA Law
For the Respondent:	Mr M F Wheelahan QC with Ms K E Foley	Arnold Bloch Leibler

McLEISH JA
HARGRAVE JA
ALMOND AJA:

In March 2015, Oxanda Management Danke Pty Ltd (‘Vendor’) owned land in Altona Meadows, Victoria (‘the land’). The Vendor and a related company, Oxanda Childcare Pty Ltd (‘Oxanda’ or the ‘Tenant’), had obtained one or more planning permits from the local council for the purposes of a childcare centre being constructed on the land. In these circumstances, they entered into contractual arrangements with MAAG Developments Pty Ltd (‘MAAG’ or the ‘Landlord’) under which:

(1) the Vendor agreed to sell the land to MAAG under a contract of sale; and

(2) on settlement of the contract of sale, MAAG agreed to lease the land to Oxanda following construction and fitout of the childcare centre (‘agreement for lease’ or ‘Deed’).

The contract of sale was entered into on 11 March 2015. At the time of settlement of that contract, on 21 April 2015, MAAG and Oxanda entered into the agreement for lease — which provided that it was ‘executed and delivered as a Deed’ on that date. MAAG became the registered proprietor of the land on 27 April 2015.

Clause 2.1(b) of the…

Grounds of appeal

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

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

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

Consideration

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

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

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Details

Case: [2018] VSCA 289
Decision Date: 12 November 2018

CaseChat Overview and Summary

MAAG Developments Pty Ltd, the purchaser of a parcel of land, contested the validity of a termination clause in a lease agreement with Oxanda Childcare Pty Ltd, the intended lessee of the property. The dispute arose because the land, intended for the construction of a childcare centre, was to be acquired by MAAG from a company related to Oxanda. The agreement for lease contained a termination clause which allowed either party to terminate if council approvals were not obtained and if the settlement of the sale of the land had not occurred. MAAG argued that this 'failure to settle requirement' was inconsistent with the parties' intention that the settlement of the sale would occur simultaneously with the execution of the lease agreement.

The central legal issues before the court were whether the termination clause, specifically the 'failure to settle requirement', was consistent with the contractual intention of the parties and whether MAAG could raise a new argument on appeal that had not been expressly put to the trial judge. The court considered whether the clause was surplus to the contractual intention, and if so, whether it could be disregarded under the principle established in Fitzgerald v Masters. The court also considered the applicability of Update Constructions Pty Ltd v Rozelle Child Care Centre Ltd in determining the enforceability of the termination clause.

The court found that the contractual scheme was inconsistent with the 'failure to settle requirement', as the parties had intended the settlement of the land to occur at the same time as the execution of the lease agreement. This inconsistency rendered the 'failure to settle requirement' surplus to the contractual intention, and therefore it could be disregarded. The court allowed the appeal, holding that the termination clause was unenforceable. Furthermore, the court permitted MAAG to raise the new argument on appeal, as the basis of the argument was before the trial judge, it was a question of law only, and no prejudice was identified by Oxanda.

Orders