McCourt v Cranston
[2012] WASCA 60
•19 MARCH 2012
McCOURT -v- CRANSTON [2012] WASCA 60
| SUPREME COURT OF WESTERN AUSTRALIA | Citation No: | [2012] WASCA 60 | |
| THE COURT OF APPEAL (WA) | |||
| Case No: | CACV:39/2009 | 1 DECEMBER 2011 | |
| Coram: | PULLIN JA NEWNES JA MURPHY JA | 19/03/12 | |
| 23 | Judgment Part: | 1 of 1 | |
| Result: | Appeal dismissed | ||
| A | |||
| PDF Version |
| Parties: | DANIEL PATRICK REDDEN McCOURT RUTH ELLEN McCOURT SHARNE MARY CRANSTON |
Catchwords: | Contract Sale of land Whether contract subject to a condition of performance Land sold by mortgagee while vendor seeking decree of specific performance Whether damages could be awarded in lieu of specific performance |
Legislation: | Nil |
Case References: | Ankar Pty Ltd v National Westminster Finance (Australia) Ltd [1987] HCA 15; (1987) 162 CLR 549 Australian Broadcasting Commission v Australasian Performing Right Association Ltd [1973] HCA 36; (1973) 129 CLR 99 Bank of Credit and Commerce International SA v Ali [2002] 1 AC 251 BP Refinery (Construction) Pty Ltd v Shire of Hastings (1977) 180 CLR Brambles Holdings Ltd v Bathurst City Council [2001] NSWCA 61; (2001) 53 NSWLR 153 Byrne v Australian Airlines Limited (1995) 185 CLR 410 Carlton & United Breweries Ltd v Tooth & Co Ltd (1985) 6 IPR 319 Codelfa Construction Pty Ltd v State Rail Authority of New South Wales [1982] HCA 24; (1982) 149 CLR 337 Farah Constructions Pty Ltd v Say-Dee Pty Ltd [2007] HCA 22; (2007) 230 CLR 89 Franklins Pty Ltd v Metcash Trading Ltd [2009] NSWCA 407; (2009) 76 NSWLR 603 International Air Transport Association v Ansett Australia Holdings Ltd [2008] HCA 3; (2008) 234 CLR 151 Investors Compensation Scheme Ltd v West Bromwich Building Society [No 1] [1998] 1 WLR 896 Johnson v Agnew [1980] AC 367 Manufacturers' Mutual Insurance Ltd v Withers (1988) 5 ANZ Ins Cases 60-853 MBF Investments Pty Ltd v Nolan [2011] VSCA 114 Meehan v Jones [1982] HCA 52; (1982) 149 CLR 571 North Ganalanja Aboriginal Corporation v The State of Queensland [1996] HCA 2; (1996) 185 CLR 595 Ogle v Comboyuro Investments Pty Ltd (1976) 136 CLR 444 Pacific Carriers Ltd v BNP Paribas [2004] HCA 35; (2004) 218 CLR 451 Patman v Fletcher's Fotographics Pty Ltd (1984) 6 IR 471 Perri v Coolangatta Investments Pty Ltd [1982] HCA 29; (1982) 149 CLR 537 Prenn v Simmonds [1971] 1 WLR 1381 Reardon Smith Line Ltd v Hansen-Tangen [1976] 1 WLR 989 Royal Botanic Gardens and Domain Trust v South Sydney City Council [2002] HCA 5; (2002) 240 CLR 45 Secured Income Real Estate (Australia) Ltd v St Martins Investments Pty Ltd [1979] HCA 51; (1979) 144 CLR 596 Toll (FGCT) Pty Ltd v Alphapharm Pty Ltd [2004] HCA 52; (2004) 219 CLR 165 Western Export Services Inc v Jireh International Pty Ltd [2011] HCA 45 Wilkie v Gordian Runoff Ltd [2005] HCA 17; (2005) 221 CLR 522 |
JURISDICTION : SUPREME COURT OF WESTERN AUSTRALIA TITLE OF COURT : THE COURT OF APPEAL (WA) CITATION : McCOURT -v- CRANSTON [2012] WASCA 60 CORAM : PULLIN JA
- NEWNES JA
MURPHY JA
- RUTH ELLEN McCOURT
Appellants
AND
SHARNE MARY CRANSTON
Respondent
ON APPEAL FROM:
Jurisdiction : SUPREME COURT OF WESTERN AUSTRALIA
Coram : TEMPLEMAN J
Citation : MCCOURT -v- CRANSTON [2009] WASC 56
File No : CIV 1072 of 2009
(Page 2)
Catchwords:
Contract - Sale of land - Whether contract subject to a condition of performance - Land sold by mortgagee while vendor seeking decree of specific performance - Whether damages could be awarded in lieu of specific performance
Legislation:
Nil
Result:
Appeal dismissed
Category: A
Representation:
Counsel:
Appellants : Mr E J Forrester
Respondent : Mr M M Mony de Kerloy
Solicitors:
Appellants : Ranger Legal
Respondent : Mony de Kerloy
Case(s) referred to in judgment(s):
Ankar Pty Ltd v National Westminster Finance (Australia) Ltd [1987] HCA 15; (1987) 162 CLR 549
Australian Broadcasting Commission v Australasian Performing Right Association Ltd [1973] HCA 36; (1973) 129 CLR 99
Bank of Credit and Commerce International SA v Ali [2002] 1 AC 251
BP Refinery (Construction) Pty Ltd v Shire of Hastings (1977) 180 CLR
Brambles Holdings Ltd v Bathurst City Council [2001] NSWCA 61; (2001) 53 NSWLR 153
Byrne v Australian Airlines Limited (1995) 185 CLR 410
Carlton & United Breweries Ltd v Tooth & Co Ltd (1985) 6 IPR 319
(Page 3)
Codelfa Construction Pty Ltd v State Rail Authority of New South Wales [1982] HCA 24; (1982) 149 CLR 337
Farah Constructions Pty Ltd v Say-Dee Pty Ltd [2007] HCA 22; (2007) 230 CLR 89
Franklins Pty Ltd v Metcash Trading Ltd [2009] NSWCA 407; (2009) 76 NSWLR 603
International Air Transport Association v Ansett Australia Holdings Ltd [2008] HCA 3; (2008) 234 CLR 151
Investors Compensation Scheme Ltd v West Bromwich Building Society [No 1] [1998] 1 WLR 896
Johnson v Agnew [1980] AC 367
Manufacturers' Mutual Insurance Ltd v Withers (1988) 5 ANZ Ins Cases 60-853
MBF Investments Pty Ltd v Nolan [2011] VSCA 114
Meehan v Jones [1982] HCA 52; (1982) 149 CLR 571
North Ganalanja Aboriginal Corporation v The State of Queensland [1996] HCA 2; (1996) 185 CLR 595
Ogle v Comboyuro Investments Pty Ltd (1976) 136 CLR 444
Pacific Carriers Ltd v BNP Paribas [2004] HCA 35; (2004) 218 CLR 451
Patman v Fletcher's Fotographics Pty Ltd (1984) 6 IR 471
Perri v Coolangatta Investments Pty Ltd [1982] HCA 29; (1982) 149 CLR 537
Prenn v Simmonds [1971] 1 WLR 1381
Reardon Smith Line Ltd v Hansen-Tangen [1976] 1 WLR 989
Royal Botanic Gardens and Domain Trust v South Sydney City Council [2002] HCA 5; (2002) 240 CLR 45
Secured Income Real Estate (Australia) Ltd v St Martins Investments Pty Ltd [1979] HCA 51; (1979) 144 CLR 596
Toll (FGCT) Pty Ltd v Alphapharm Pty Ltd [2004] HCA 52; (2004) 219 CLR 165
Western Export Services Inc v Jireh International Pty Ltd [2011] HCA 45
Wilkie v Gordian Runoff Ltd [2005] HCA 17; (2005) 221 CLR 522
(Page 4)
1 PULLIN JA: This is an appeal against the judgment of Templeman J who dismissed the appellants' suit against the respondent for specific performance concerning a contract for the sale of land.
2 The respondent made an offer to the appellants to purchase 1 Agett Road, Claremont. The offer was accepted on 7 July 2008. The resultant contract provided for a purchase price of $2,875,000 payable by a deposit of $20,000 with the balance to be paid on the Settlement Date.
3 'Settlement Date' had written against it 'on or before 120 days of acceptance of this offer' by mutual agreement. The trial judge found that the 120 day period expired on 4 November 2008 [35].
4 Two boxes regarding finance marked 'Finance clause is applicable' and another marked 'Finance clause is not applicable' were marked by crossing out the first and in the second writing 'cash'.
5 There were special conditions, of which only one is relevant. It read:
The vendor agrees if necessary to an extension of time for the settlement on 1 Agett Road Claremont with the buyer - by mutual agreement. When 23 Minora Road Dalkeith is sold settlement is to be concurrent with 1 Agett Road Claremont settlement.
6 The contract incorporated the 2002 revision of the Joint Form of General Conditions for the Sale of Land (the General Conditions). On 31 October 2008, the respondent's solicitors wrote a letter which set out the respondent's view of events and circumstances leading to the contract and events after the contract was signed and then stated:
Upon our instructions … the contract of sale between you and your wife, as vendors, and our client, as purchaser, is subject to and conditional upon the sale of our client's house for $2.875 million. A court would imply into the contract terms that our client make reasonable endeavours to sell her house for that price and that the house be sold within a reasonable time. Our client has made reasonable endeavours to sell her house for $2.875 million, but has been unsuccessful. A reasonable time for selling her house has now expired. Accordingly, our client is entitled to rescind the contract on that ground.
7 The letter continued by asserting that the appellants' agent had made misrepresentations and that the respondent was induced to enter into the contract by reason of them. The letter then concluded:
In those circumstances, our client is also entitled to rescind the contract on the ground of misrepresentation.
(Page 5)
- Accordingly, our client rescinds the contract, on either or both the grounds specified. Our client requires you and your wife to refund her the deposit of $20,000 within 7 days.
8 The appellants contended that the special condition, and particularly the second sentence, meant no more than 'if' Minora Road was sold on terms such that the settlement of that sale was to take place within 120 days of the Agett Road contract, the respondent was to settle on Agett Road at the same time. The appellants also contended that if the Minora Road property was not sold within 120 days, or was sold on terms such that settlement would not take place until after the period had expired, there would be a concurrent settlement only if the vendors agreed to an extension. Thus it was submitted that the second sentence only became operational in those circumstances [39]. The appellants denied that there was any misrepresentation and denied that the respondent was entitled to terminate the contract on 31 October 2008 and claimed that the 31 October 2008 letter was in fact a repudiation of the contract.
The trial judge's reasons
9 The trial judge found:
(a) that on a proper construction of the contract, the contract was conditional on the sale of Minora Road [48];
(b) by implication that it was an implied term of the contract that the respondent would use her reasonable endeavours to sell Minora Road [91];
(c) by implication that the respondent's endeavours to sell the property had to continue for a reasonable time [91];
(d) that the respondent used reasonable endeavours to sell Minora Road [91];
(e) that a reasonable time had elapsed by 31 October 2008 [91]; and
(e) that the respondent was not induced to enter into the contract to purchase Agett Road by any misrepresentation [132].
10 As to the trial judge's conclusion that a reasonable time had elapsed by 31 October 2008, he said:
I accept Ms Gray's evidence that the normal period between the contract and settlement is 30 days. I accept also Ms Gray's evidence that although it is impossible to predict the length of time within which a property might
(Page 6)
- be expected to sell, 'the rule of real estate is 74 days': and that because of the economic downturn, it is sometimes 90 days. On that basis, I consider that 116 days (ie between 7 July and 31 October) was more than a reasonable period in which to achieve a sale, even in the then prevailing economic climate [92].
11 In consequence, the trial judge held that the respondent had not repudiated the contract by the solicitor's letter of 31 October 2008 because she had used reasonable endeavours to sell Minora Road for a reasonable period of time and that she was entitled to terminate the contract and to demand the return of the deposit [93] - [94] and [177]. As a result, the respondent was entitled to succeed on her counterclaim for the return of the deposit and the appellants' claim was dismissed [177].
The appellants' grounds of appeal
12 There were seven grounds of appeal raising two main points. They were:
(a) that the trial judge erred in law in his construction of the contract (grounds 1, 2, 4, 5, 6 and 7). Aspects of this point were that the trial judge erred by not taking into account surrounding circumstances known to the parties when construing the contract (ground 2); that the trial judge erred in construing the contract as providing that it was conditional on the sale of Minora Road (grounds 1, 5 and 6); that the trial judge erred in concluding that the special condition was not promissory (ground 7);
(b) in effect, by way of an alternative to grounds 1, 5 and 6, ground 3 and part of ground 7 alleged that if the contract were conditional on the sale of Minora Road, the trial judge erred in construing the contract by implying that the respondent was obliged to try and sell Minora Road for a reasonable period of time and that the trial judge should have found that the respondent had promised to sell Minora Road within the period of 120 days from the date of the contract. In consequence, ground 3 alleged that the trial judge erred in finding that the respondent was entitled to terminate the contract on 31 October 2008 and instead should have found that the letter of 31 October 2008 constituted a repudiation of the contract.
(Page 7)
Disposition of ground 2
13 It is appropriate to deal with this ground first because the existence or non-existence of surrounding circumstances known to both parties is relevant to the issue about the proper construction of the contract.
14 In Codelfa Construction Pty Ltd v State Rail Authority of New South Wales [1982] HCA 24; (1982) 149 CLR 337, 352 (Mason J, Stephen & Wilson JJ agreeing) said:
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.
15 Preceding that statement (between pages 348 - 351) Mason J had referred with apparent approval to what had been said by Lord Wilberforce in Prenn v Simmonds [1971] 1 WLR 1381, 1383 - 1384 quoting Cardozo J to the effect that surrounding circumstances may 'stamp upon a contract a popular or looser meaning' than the strict legal meaning and to what Lord Wilberforce had said in similar vein in Reardon Smith Line Ltd v Hansen-Tangen [1976] 1 WLR 989, 995.
16 Subsequently, five members of the High Court (Gleeson CJ, Gummow, Hayne, Callinan & Heydon JJ) said in Toll (FGCT) Pty Ltd v Alphapharm Pty Ltd [2004] HCA 52; (2004) 219 CLR 165, that when determining the meaning of a contractual document, the meaning of the terms of the document is to be determined by what a reasonable person would have understood them to mean and that normally requires consideration not only of the text, but also of the surrounding circumstances known to the parties, and the purpose and object of the transaction [40]. Those judges cited as authority for that proposition, Pacific Carriers Ltd v BNP Paribas [2004] HCA 35; (2004) 218 CLR 451 [22] where the same five judges said:
The construction of the letters of indemnity is to be determined by what a reasonable person in the position of Pacific would have understood them to mean. That requires consideration, not only of the text of the documents, but also the surrounding circumstances known to Pacific and BNP, and the purpose and object of the transaction. In Codelfa Construction Pty Ltd v State Rail Authority of NSW, Mason J set out with evident approval the statement by Lord Wilberforce in Reardon Smith Line Ltd v Hansen-Tangen [1976] 1 WLR 989, 995 - 996:
In a commercial contract it is certainly right that the court should know the commercial purpose of the contract and this in turn
- presupposes knowledge of the genesis of the transaction, the background, the context, the market in which the parties are operating.
17 In Royal Botanic Gardens and Domain Trust v South Sydney City Council [2002] HCA 5; (2002) 240 CLR 45, Gleeson CJ, Gaudron, McHugh, Gummow and Hayne JJ, after stating that there was an ambiguity in the document under consideration in that case, said that:
In Codelfa, Mason J (with whose judgment Stephen J and Wilson J agreed) referred to authorities which indicated that, even in respect of agreements under seal, it is appropriate to have regard to more than internal linguistic considerations and to consider the circumstances with reference to which the words in question were used and, from those circumstances, to discern the objective which the parties had in view. In particular, an appreciation of the commercial purpose of a contract: 'presupposes knowledge of the genesis of the transaction, the background, the context, the market in which the parties are operating.' Such statements exemplify the point made by Brennan J in his judgment in Codelfa:
The meaning of a written contract may be illuminated by evidence of facts to which the writing refers, for the symbols of language convey meaning according to the circumstances in which they are used [10].
However few, if any, English words are unambiguous or not susceptible of more than one meaning or have a plain meaning. Until a word, phrase or sentence is understood in the light of the surrounding circumstances, it is rarely possible to know what it means. In my view evidence of surrounding circumstances will generally be admissible if it is known to both parties or sufficiently notorious to be presumed to be within their knowledge (75,343).
19 In Royal Botanic [39] the plurality said that reference had been made during the course of argument to several decisions of the House of Lords delivered since Codelfa which had not referred to Codelfa and that particular reference was made to Investors Compensation Scheme Ltd v West Bromwich Building Society [No 1] [1998] 1 WLR 896, 912 - 913 and Bank of Credit and Commerce International SA v Ali [2002] 1 AC
(Page 9)
- 251, 259, 269. In those cases, principles of contractual construction were discussed. In Royal Botanic the plurality continued at [39]:
It is unnecessary to determine whether their Lordships there took a broader view of the admissible 'background' than was taken in Codelfa or, if so, whether those views should be preferred to those of this Court. Until that determination is made by this Court, other Australian courts, if they discern any inconsistency with Codelfa, should continue to follow Codelfa [39].
No reference was made by the plurality to the sentiments subsequently expressed in Paribas or Toll and that appears to be because the two English cases might be read as suggesting that evidence of surrounding circumstances may be referred to in order to contradict the written terms of the contract. Read in that way, what was said in Royal Botanic at [39] was merely reaffirming what was said by Mason J in Codelfa about extrinsic evidence not being admitted to contradict the plain meaning of the contract.
20 Until recently, it was possible to read Paribas and Toll and Royal Botanic as meaning that even without ambiguity, evidence of surrounding facts and the object or aim of the transaction was admissible. This is what other intermediate courts of appeal thought they meant: see for example Franklins Pty Ltd v Metcash Trading Ltd [2009] NSWCA 407; (2009) 76 NSWLR 603 [17]; MBF Investments Pty Ltd v Nolan [2011] VSCA 114 [198] - [203].
21 However, in the brief reasons of the High Court in Western Export Services Inc v Jireh International Pty Ltd [2011] HCA 45 [5] the members of that court (Gummow, Heydon & Bell JJ), did not accept that its earlier decisions may be read in that way. Their Honours said that they did not 'read anything said' in Paribas, Toll, Wilkie v Gordian Runoff Ltd [2005] HCA 17; (2005) 221 CLR 522 [15] or International Air Transport Association v Ansett Australia Holdings Ltd [2008] HCA 3; (2008) 234 CLR 151 [8] as 'operating inconsistently' with what was said by Mason J in the passage in Codelfa on page 352 and quoted above. This is not withstanding that in Wilkie, in the paragraph referred to in Jireh's case, Gleeson CJ said:
Interpreting a commercial document requires attention to the language used by the parties, the commercial circumstances which the document addresses, and the objects which it is intended to secure [15].
- Also in the Ansett case, Gleeson CJ at the paragraph referred to ([8]), stated that in giving a commercial contract a businesslike interpretation, it
(Page 10)
- is necessary to consider the language used by the parties, the circumstances addressed by the contract and the objects which it is intended to secure.
22 None of the statements in Paribas, Toll, Wilkie or Ansett were preceded by a qualification that a contract had to be 'ambiguous or susceptible of more than one meaning' before evidence of surrounding circumstances could be received. Many judges around Australia did not appreciate that there was such a qualification. However the reasons in Jireh require courts to consider whether the statements in those cases should be read with that qualification; 'until' the High Court embarks upon 'a reconsideration' of Codelfa: see Jireh [3]. In doing so, courts will have to consider whether the pronouncements in Jireh were ratio or 'seriously considered dicta': Farah Constructions Pty Ltd v Say-Dee Pty Ltd [2007] HCA 22; (2007) 230 CLR 89 [134]. In that respect, consideration will have to be given to whether a set of reasons of the High Court dismissing an application for special leave have anything more than persuasive value: see North Ganalanja Aboriginal Corporation v The State of Queensland [1996] HCA 2; (1996) 185 CLR 595, 643 (McHugh J); Mason A, 'The Uses & Abuses of Precedent' (1988)4 Aust Bar Rev 93, 96 - 97; Wong D and Michael B, 'Western Export Services v Jireh International: Ambiguity as the gateway to surrounding circumstances?' (2012) 86 ALJ 57, 64. On the facts of this case these questions do not have to be answered.
23 In view of the pronouncements in Jireh, when an issue arises about the proper construction of a contract and there is evidence of surrounding circumstances known to the parties or evidence of the purpose or object of the transaction, that evidence will not be admissible unless the court determines that the contract is:
(a) 'ambiguous'; or
(b) 'susceptible of more than one meaning'.
24 Usually, the meaning of 'ambiguous' is taken to include 'open to various interpretations': see Macquarie Dictionary, but by using the phrase 'ambiguous or susceptible of more than one meaning' perhaps Mason J wished to emphasise that not only a contract open to more than one meaning would allow in evidence of surrounding circumstances but also one where the contract is merely 'difficult to understand'. Once evidence of surrounding circumstances is allowed in, the restrictions on such evidence are clear. Evidence of subjective opinions are not
(Page 11)
- admissible, nor is evidence of negotiations; the surrounding circumstances have to be objective facts and they have to be known to both parties.
25 If a trial judge decides that the contract under examination is not ambiguous or susceptible of more than one meaning, and rules that evidence of surrounding circumstances is not admissible, and an appeal court then decides that decision to be in error, then the case will have to be reheard, because relevant evidence will have been excluded. If, however, the trial judge receives evidence of surrounding circumstances and evidence of the object or aim of the transaction, and if the trial judge's construction is found to be in error, then the Court of Appeal will be able to remedy that on appeal without sending it back for retrial.
26 Until the High Court says more about the subject, it would be wise for trial judges, in cases where a party reasonably contends that the contract is ambiguous or susceptible of more than one meaning and there is relevant evidence of objective relevant surrounding circumstances known to both parties or objective evidence of the aim or object of the transaction, to allow that evidence in provisionally, even if the trial judge considers that his or her likely conclusion will be to reject the argument of the party contending that the agreement is ambiguous or susceptible of more than one meaning.
27 The special condition in this contract was badly drafted. The appellants contended that the following matters amounted to circumstances known to both parties which should be taken into account in construing the contract. They were:
(a) the appellants required a cash offer;
(b) 'if the respondent's offer was either subject to finance or conditional on the sale of Minora Road, the appellants would have insisted on a 48-hour clause being inserted in the contract (namely a clause that would have entitled the appellants to require the respondent to pay the whole of the purchase price within 48 hours of written notice to do so, failing which the appellants would have been at liberty to sell Agett Road to another purchaser)';
(c) that the respondent submitted an offer that was neither subject to finance nor conditional on the sale of Minora Road and thereby a 48-hour clause was not inserted into the contract;
(d) 'the respondent submitted the unconditional offer in the belief that a lengthy settlement period of up to 120 days … was ample time
- within which to sell Minora Road (being a risk the respondent was prepared to assume based on what the third party real estate agent told her)';
- (e) condition (b) did not specify that the sale of Agett Road was conditional on the sale of Minora Road.
28 None of these points amount to surrounding circumstances as that expression is understood in the authorities. The fact that the appellants 'required' a cash offer was entirely a matter of the appellants' desire about what was to be in the contract. The fact that the appellants might have insisted on 'a 48-hour clause' being inserted in the contract, if the contract had been in other terms is clearly not a surrounding circumstance to assist in the construction of the contract. Nor is it the fact that the respondent submitted an offer in the form that it was or that the respondent did so with a certain belief. Finally, the existence of a condition in the contract could not possibly amount to a surrounding circumstance.
29 During the hearing, the question was raised as to whether one possible piece of evidence might assist in construing the special condition (ts 52, 57). It was the evidence that the respondent told Ms Gray (the appellants' agent) that she did not have the funds to buy the Agett Road property unless she sold her Minora Road property and Ms Gray said she understood that [113] - [114]. That was knowledge imputed to the appellants. If this were an 'objective fact' known to both parties, it confirms the construction I favour which I reach without having regard to such evidence.
30 However, the evidence is no more than evidence of negotiations between the parties. In Secured Income Real Estate (Australia) Ltd v St Martins Investments Pty Ltd [1979] HCA 51; (1979) 144 CLR 596, 606, Mason J (Gibbs & Stephen JJ agreeing) referred to the fact that the respondent sought to rely on the oral testimony given by officers of the appellant and respondent as to what was said and done during the course of negotiations leading up to the making of the contract. Mason J noted that this was said to be evidence of surrounding circumstances to which recourse could be had in interpreting the contract but that, in truth, the evidence was not evidence of surrounding circumstances. It was evidence of the antecedent oral negotiations and expectations of the parties and, as such, stated that it could not be used for the purpose of construing the words of the written contract intended by the parties to comprehensively record the terms of the agreement which they had made (606).
(Page 13)
31 I would reach a similar conclusion in relation to the conversation between Ms Gray and the respondent. In any event, no party contended that the evidence of the conversation constituted evidence of a relevant surrounding circumstance. The trial judge did not hold it to be evidence of a surrounding circumstance to help construe the contract. His Honour referred to it only in the course of considering an issue about misrepresentation.
32 As a result there is no admissible evidence of relevant surrounding circumstances known to both parties or of the objective or aim of the transaction. So it is necessary to construe the contract merely by reference to its contents.
33 Ground 2 should be dismissed.
Disposition of the remaining grounds
34 The appellants contended that the trial judge erred in construing the contract as meaning that the sale of 1 Agett Road, Claremont was conditional on the sale of the Minora Road property.
35 In construing the contract, it is necessary to have regard to the contract read as a whole. The manuscript words after the printed words 'Settlement Date' mean that settlement had to occur 120 days after acceptance of the offer but that settlement could, by 'mutual agreement', occur before that date.
36 The first sentence in the special condition stated that the vendor agrees 'if necessary' to an extension of time for the settlement of 1 Agett Road, Claremont. The second provides that 'when' 23 Minora Road, Dalkeith is 'sold', settlement is to be concurrent with 1 Agett Road, Claremont settlement. At trial, the appellants submitted that the special conditions should be construed as meaning that 'if' Minora Road were sold within 120 days of accepting the offer, that settlement of that property would then be concurrent with the Agett Road settlement, and that if Minora Road was not sold within 120 days, or was sold on terms that settlement would not take place until after the period had expired, there would be a concurrent settlement only if the appellants agreed to an extension [39]. This submission was repeated on appeal.
37 'When' does not mean 'if'. The condition states that 'settlement' is to take place in relation to both properties concurrently 'when' 23 Minora Road, Dalkeith is sold. That means, by necessary implication, that the
(Page 14)
- contract was conditional upon the 'sale' of Minora Road in order that 'settlement' on both could take place at the same time.
38 The special condition did not specify a date by which the sale of Minora Road had to occur. Likewise in Perri v Coolangatta Investments Pty Ltd [1982] HCA 29; (1982) 149 CLR 537, where the court considered a contract for the sale of land which contained a condition providing that the contract was subject to the purchasers completing the sale of their property at Lilli Pilli. The condition did not state a date by which the sale had to occur. Gibbs CJ at (545) dealt with the question about whether a contract subject to a condition could be terminated without notice. In the course of that discussion he observed that where time for performance was not specified, then it must be performed within a reasonable time. Mason J held likewise at (554) in the following terms:
As the contract does not fix a time for completion it would accord with general principle to say that completion must take place within a reasonable time. In this case what is a reasonable time for completion needs to be measured with special condition 6 in mind. The clause does not specify a time within which the Lilli Pilli property is to be sold. Accordingly, it contemplates that there should be such a sale within a reasonable time. But it seems obvious that the parties envisaged that in the ordinary course of events the sale of the Lilli Pilli property would be completed before the appellants could be called upon to complete the purchase of the subject property. The mutual intention was that the appellants could only be compelled to complete if they had received the proceeds of sale of the Lilli Pilli property.
39 Brennan J at (565) also said that the purpose of the stipulation was to ensure that the purchasers should have the proceeds of the sale of their Lilli Pilli property before their obligation to pay the balance of the purchase price, until the contract became absolute. Brennan J noted at (567) that it was conceded that the stipulation required the completion of the Lilli Pilli sale within a reasonable time from the making of the contract and said that, in his view, that concession was rightly made. Stephen J agreed with Brennan J.
40 The trial judge in this case applied the same reasoning. The reasoning was correct and reveals no error. The first sentence in the special condition contemplated that, if within a reasonable time there was a sale (that is a contract for the sale of Minora Road), and if the contract for the sale of Minora Road provided a settlement date which would fall outside the 120 day period for settlement of the Agett Road sale, then the parties agreed there would be an extension. Any such extension of time for such settlement, which the appellants by the first sentence had agreed
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- to, was only an extension for a reasonable time. It is unnecessary to determine what extra time would have been reasonable, because there was no sale of Minora Road and therefore no need to consider what a reasonable extension beyond the 120 day period would have been.
41 Contrary to the appellants' alternative submission, the special condition was not promissory - meaning that the respondent did not promise she would sell Minora Road: Perri (545).The respondent was, of course, impliedly obliged to use reasonable endeavours to sell Minora Road: Perri (545), and there is no dispute that she did so. No price was specified in relation to the Minora Road property. The respondent was therefore entitled to set her own price as long as she acted honestly: Meehan v Jones [1982] HCA 52; (1982) 149 CLR 571. It is not contended that she did not act honestly in setting the sale price.
42 The trial judge held that a reasonable time for using reasonable endeavours to sell Minora Road had expired by 31 October 2008 when the respondent's solicitor terminated the contract by letter. The appellants challenged this conclusion by contending that the respondent's solicitor's letter of 31 October 2008 constituted a repudiation. However, the argument that it amounted to a repudiation was based upon either the appellants' contention that the special condition was promissory (ie that the respondent promised to sell Minora Road) and that the promise would be fulfilled within the 120 day period or, alternatively, the appellants' contention that the respondent was obliged to endeavour to sell Minora Road not for a reasonable period of time but for 120 days.
43 The conclusions I have reached is that the special condition was not promissory and that the respondent had to endeavour to sell Minora Road for a reasonable time.
44 The appellants did not have a ground of appeal contending that if the correct construction of the contract was that the special condition was not promissory and that the proper construction of the special condition was that the respondent had to use reasonable endeavours to sell Minora Road for a reasonable period of time, that such period of time had not expired by 31 October 2008.
45 In consequence, none of the grounds of appeal have any merit. The trial judge did not err in his construction of the contract, did not err in concluding that a reasonable time for selling Minora Road had elapsed by 31 October 2008 and did not err in holding that the respondent was
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- entitled to terminate the contract and to a return of the deposit. All grounds of appeal should be dismissed.
46 Shortly before the hearing of the appeal the appellants filed submissions revealing a fact that is not in dispute, namely that after judgment was entered by the trial judge the Agett Road property was sold by a mortgagee exercising powers under a registered mortgage. The appellants' submissions acknowledge that as a result, specific performance was not available as a remedy. The appellants in their submissions stated that they, therefore, sought damages in lieu of specific performance pursuant to s 25(10) of the Supreme Court Act 1935 (WA). The respondent filed supplementary submissions in response. It is not necessary to deal with these submissions in view of my conclusion that the appeal should be dismissed. However, because the matter was fully argued, I will express my opinion about the point.
47 The respondent submitted that not only was a decree of specific performance no longer possible but that, furthermore, the court could not award damages. The respondent contended that the appellants had to terminate the contract pursuant to the provisions of the General Conditions, by giving notice as required under the General Conditions, and only then could they sue for damages. The respondent submitted that because the appellants were suing for specific performance and because that meant that they had affirmed the contract and were seeking to enforce the contract, then the sale by the mortgagee made that impossible. The respondent submitted that 'when the property was sold, the appellants, having failed at any time before to terminate the contract, were themselves now in default of the contract on their own case; alternatively, a sale of the property (without a prior notice of termination) must constitute repudiation on the part of the appellants'. The respondent's submissions contended that s 25(10) of the Supreme Court Act is a discretionary remedy and that it could not apply if the appellants were precluded by their own conduct from seeking damages.
48 It is true that the appellants could have chosen to give appropriate notices under the General Conditions to terminate the contract and to sue for common law damages. However, the General Conditions provide that those rights are rights 'in addition to any other right or remedy of the seller' (general condition 24.1).
49 Thus, if the respondent had repudiated the contract, the appellants were entitled to sue for specific performance. The sale of Agett Road by the mortgagee means that specific performance could not now be decreed,
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- but damages in lieu of specific performance may be awarded. A vendor who elects to sue for specific performance is not thereby precluded from later rescinding the contract and claiming damages for the continued refusal by the purchaser to complete, if the purchaser after the institution of the proceedings, continues to evince an intention to no longer be bound by the contract. It is not necessary to obtain the leave of the court, no decree having been made: see Ogle v Comboyuro Investments Pty Ltd (1976) 136 CLR 444, and generally, Meagher RP, Heydon JD & Leeming MJ, Equity, Doctrines and Remedies (4th ed, 20-265).
50 The fact that the mortgagee exercised its power of sale did not amount to repudiation by the appellants: Johnson v Agnew [1980] AC 367 was a case similar to this. In that case the vendors were in arrears with payments due under mortgages and the plaintiff entered into a written agreement for the sale of the property. The purchaser failed to complete and the vendors obtained a summary order for specific performance. The order not having been carried out, the mortgagees enforced their security and sold the property. Lord Wilberforce commented that 'the vendors acted reasonably in pursuing the remedy of specific performance' and observed that that 'remedy became aborted (not by the vendors' fault)' (401) and the vendor was then entitled to damages in lieu of specific performance. Likewise in this case, had the appellants made out their case, they would have been entitled to damages in lieu of specific performance now that the latter remedy is no longer available; the remedy 'became aborted' not as a result of any fault of the appellants.
51 The appeal should be dismissed.
52 NEWNES JA: I agree with Pullin JA.
53 MURPHY JA: I have had the advantage of reading in draft the reasons of Pullin JA and I gratefully adopt his Honour's exposition of the relevant background for this appeal.
54 The principal question in the appeal is whether the primary judge erred in finding that the contract for the sale of Agett Road was conditional upon the sale by the purchaser of her property in Minora Road. For the reasons given below, in my view, his Honour did so err and I would uphold the appeal in that regard.
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The primary judge's findings and reasoning
55 It appears that the primary judge reached the conclusion that the contract for sale was conditional by finding (reasons [40] - [45]), in effect, that:
(a) the contract indicated that the purchaser was intending to sell her property in Minora Road; and
(b) it is to be inferred that the parties contemplated that the purchaser would use the proceeds of sale of Minora Road to complete the purchase of Agett Road.
56 He reasoned that, therefore, there was a term of the contract that the purchase of Agett Road was conditional upon the sale of the purchaser's property in Minora Road [48].
57 It appears that his Honour found that the sale was conditional not by simply assigning a meaning to the words used in the contract, but rather by the implication of a term. This characterisation was not disputed by counsel for the respondent (ts 75). In Codelfa Construction Pty Ltd v State Rail Authority of New South Wales [1982] HCA 24; (1982) 149 CLR 337, 345 Mason J said:
When we say that the implication of a term raises an issue as to the meaning and effect of the contract we do not intend by that statement to convey that the court is embarking upon an orthodox exercise in the interpretation of the language of a contract, that is, assigning a meaning to a particular provision. Nonetheless, the implication of a term is an exercise in interpretation, though not an orthodox instance.
58 In the circumstances of this case, there are only two types of implication which his Honour could have invoked. One was an implication contained in the express words of the contract - as to which, see the first of the four classes of implied terms referred to by Hodgson J in Carlton & United Breweries Ltd v Tooth & Co Ltd (1985) 6 IPR 319, cited with approval by Heydon JA in Brambles Holdings Ltd v Bathurst City Council [2001] NSWCA 61; (2001) 53 NSWLR 153 [28] - [29].
59 The second was an implication in fact from considerations of business efficacy - see Codelfa (345 - 347), BP Refinery (Construction) Pty Ltd v Shire of Hastings (1977) 180 CLR 266, 283; Brambles [28].
60 An implication of the second kind will only arise in a written contract if the five conditions, which might overlap, referred to in BP
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- Refinery are satisfied: Codelfa (347); Byrne v Australian Airlines Limited (1995) 185 CLR 410, 422, 441 - 442.
61 As the judge gave no consideration to the criteria specified in BP Refinery, the judge could not have implied a term from considerations of business efficacy. Therefore, it is to be inferred that the judge found that the sale of Agett Road was conditional by reason of an implication contained within the express words of the contract.
62 The express words of the contract are discussed below.
63 At the outset, however, I would observe the following. The primary judge deduced the existence of the implied term from the agreement that the parties contemplated that the purchaser would use the sale proceeds on Minora Road to complete the purchase of Agett Road. This deduction does not seem to me to be necessarily self-evidently correct. An inference is equally open, on that basis, that the purchaser wished to use the proceeds of the sale of Minora Road, if at all possible, to fund the purchase of Agett Road, but was willing and able to proceed in any event. Alternatively, it could be inferred that, at the very least, the purchaser assumed that Minora Road would sell within the time allowed for settlement of Agett Road and was prepared to take the risk that it may not. The latter inferences are more readily drawn when it is recognised that the purchaser obtained, under the contract, considerable latitude in the time allowed for completion of the sale on Agett Road - four months.
The contract and the relevant principles of construction
64 The contract for sale provided relevantly that the purchaser agreed to purchase Agett Road 'at the Purchase Price on the terms set out in the Schedule, the Conditions and the Special Conditions'.
65 The Schedule provided:
Settlement date: on or before 120 days of acceptance of this offer by mutual agreement.
66 The Special Conditions included:
The vendor agrees if necessary to an extension of time for the settlement of … Agett Road ... with the buyer - by mutual agreement. When ... Minora Road ... is sold settlement is to be concurrent with ... Agett Road ... settlement.
67 It was not in dispute that 120 days from the date of the contract was 4 November 2008.
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68 For present purposes, it is sufficient to note the following principles.
69 The construction of a written contract involves ascertaining what a reasonable person would have understood the parties to the instrument to mean. The High Court emphasised the objective nature of the analysis in Toll (FGCT) Pty Ltd v Alphapharm Pty Ltd [2004] HCA 52; (2004) 219 CLR 165, by referring to Pacific Carriers Limited v BNP Paribas (2004) 218 CLR 451 in these terms at [40]:
This Court, in Pacific Carriers Ltd v BNP Paribas, has recently reaffirmed the principle of objectivity by which the rights and liabilities of the parties to a contract are determined. It is not the subjective beliefs or understandings of the parties about their rights and liabilities that govern their contractual relations. What matters is what each party by words and conduct would have led a reasonable person in the position of the other party to believe. References to the common intention of the parties to a contract are to be understood as referring to what a reasonable person would understand by the language in which the parties have expressed their agreement. The meaning of the terms of a contractual document is to be determined by what a reasonable person would have understood them to mean.
70 In Australian Broadcasting Commission v Australasian Performing Right Association Ltd [1973] HCA 36; (1973) 129 CLR 99, 109, Gibbs J said:
It is trite law that the primary duty of a court in construing a written contract is to endeavour to discover the intention of the parties from the words of the instrument in which the contract is embodied. Of course the whole of the instrument has to be considered, since the meaning of any one part of it may be revealed by other parts, and the words of every clause must if possible be construed so as to render them all harmonious one with another. If the words used are unambiguous the court must give effect to them, notwithstanding that the result may appear capricious or unreasonable, and notwithstanding that it may be guessed or suspected that the parties intended something different. The court has no power to remake or amend a contract for the purpose of avoiding a result which is considered to be inconvenient or unjust. On the other hand, if the language is open to two constructions, that will be preferred which will avoid consequences which appear to be capricious, unreasonable, inconvenient or unjust, 'even though the construction adopted is not the most obvious, or the most grammatically accurate', to use the words from earlier authority cited in Locke v Dunlop, which, although spoken in relation to a will, are applicable to the construction of written instruments generally; see also Bottomley's Case.
71 Instruments will usually be read in the ordinary way a document is read, that is from the beginning onwards: Patman v Fletcher's
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- Fotographics Pty Ltd (1984) 6 IR 471, 474 - 475 per Priestley JA, Mahoney JA agreeing. That case concerned a statutory instrument, but I do not see why a similar approach would not be adopted with respect to contractual instruments.
72 There is a preference for a construction that will encourage performance rather than avoidance of contractual relations: Ankar Pty Ltd v National Westminster Finance (Australia) Ltd [1987] HCA 15; (1987) 162 CLR 549, 556 - 557.
The proper construction of the contract
The settlement date stipulated in the Schedule
73 The words 'by mutual agreement' in the Schedule with respect to the 'Settlement date' appear to serve two functions. First, they indicate that settlement should be on or before 120 days from the acceptance of the offer (ie, relevantly, on or before 4 November 2008), unless the parties were to agree to an earlier date. That function of the words 'by mutual agreement' is legally superfluous, but the phrase is not an uncommon one in agreements drawn (or more accurately in this case, 'filled in') by lay people. Secondly, the words 'by mutual agreement' appear to presage the possibility of an extended settlement date beyond 4 November 2008, in accordance with the Special Conditions.
Special condition - first part
74 The words 'by mutual agreement' in the Schedule find resonance in the Special Conditions. They appear in the first sentence of the Special Condition referred to in [66] above. The words in the Special Condition again relate to the settlement date under the contract. The first sentence of the Special Condition indicates that the vendors promised that they would 'if necessary' extend the date for settlement, 'by mutual agreement'. In this sentence, the words 'mutual agreement' would not, prima facie, be read as qualifying the substantive operation of the promise by the vendors to extend the time for settlement 'if necessary'. If the words 'by mutual agreement' at the end of the first sentence were read as qualifying the anterior promise such that the sentence conveyed no more than a statement by the vendors that they agreed to consider whether or not they would extend the time for settlement, the anterior promise would be robbed of any meaning. In my view, a reasonable person would not read the first sentence as a whole as conveying the notion that the promise given by the vendors at the start of the sentence was, in effect, then immediately nullified by the concluding words of the sentence. The better
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- construction of the first sentence, in my view, is that the vendors agreed to extend the time for settlement 'if necessary', to a date to be fixed by mutual agreement. 'Mutual agreement' refers to the precise date for extension. By construing the words 'by mutual agreement' as referring to the precise date for the extension, effect is given to the entirety of the sentence.
75 A question might then arise as to whether an agreement to extend the settlement date to a date to be mutually agreed would itself be void for uncertainty. The parties in this appeal did not contend that this provision (or any other part of the contract) was void for uncertainty. In that light, having regard to the fact that the agreed extension is only triggered 'if necessary', and that, as discussed below, necessity in this context involves an objectively ascertainable criterion, a reasonable time would be implied if the parties could not agree on the precise date for the extension contemplated by the first sentence of the Special Condition.
Special condition - second part
76 The second sentence of the Special Condition must be read in the context of the first sentence and the 'Settlement date' provision in the Schedule. It connotes, subject to the operation of those provisions, an intention that the settlement of Agett Road is to be concurrent with the settlement of Minora Road. However, concurrency does not necessarily imply conditionality. The phrase 'when ... Minora Road ... is sold' does not mean 'if Minora Road is sold'. Nor does it mean 'Minora Road must first be sold so that ...'. The imperative words in the second sentence, 'is to be', only operate upon the settlement of Agett Road, and not upon the sale of Minora Road. The word 'when', in accordance with its ordinary meaning, refers to the occasion of the sale of Minora Road, and requires concurrency of settlement with Agett Road. It does not, in its ordinary signification, denote a requirement for the sale of Minora Road. The notion of concurrence within the second sentence must accommodate itself to the requirements of the first sentence and the Schedule.
77 The second sentence of the Special Condition, read in the light of the first sentence and the Schedule, indicates that the parties intended that when Minora Road was sold, settlement should be concurrent with the settlement of Agett Road, with the latter to occur within the period provided for in the Schedule. The first sentence operates on the basis that the parties contemplated that it may be 'necessary' to extend the date for settlement of Agett Road beyond 4 November 2008 in order to allow for the two sales to be concurrently settled. Necessity implies an objective
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- criterion. The 'necessity' would arise if there had been a sale of Minora Road, but it had not reached settlement by the date specified for settlement of Agett Road; that is, 4 November 2008. If, however, Minora Road had not been sold by 4 November 2008 (in the sense that a contract of sale had not been entered into by then), the 'necessity' to extend the date for settlement of Agett Road beyond 4 November 2008 to a date to be fixed 'by mutual agreement' would not arise. In that case, settlement of Agett Road would still be required by 4 November 2008, in accordance with the Schedule.
Conclusion
78 It follows that a conditional sale could not, in my view, be extracted from the language of the Special Condition when read in the context of the other provisions of the agreement. Here, the parties never expressly said that their agreement was conditional on the sale of Minora Road. Moreover, it would be unusual if not incongruous, for a contingent condition allowing for termination of the performance of the contract to be found lying latent within a clause which, on its face, assumes performance and in terms addresses the time for performance; ie, the date for completion. The words of the second sentence of the Special Condition are not, in their context, sufficiently clear to create the implication of a conditional sale.
79 Accordingly I would uphold ground 1.
80 It is unnecessary to address the other arguments raised by the appellants save to say this. If, contrary to the view expressed above, the judge was correct in finding an implied conditional sale, the condition was clearly a contingent condition and the appellant's suggestion that the condition was promissory must be rejected.
81 I also agree with Pullin JA's observations on the respondent's submissions on damages.
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