McGettigan v Eliran Pty Limited
[1999] NSWSC 769
•22 July 1999
CITATION: McGettigan v Eliran Pty Limited [1999] NSWSC 769 CURRENT JURISDICTION: Equity Division FILE NUMBER(S): 2517/99 HEARING DATE(S): 22/07/99 JUDGMENT DATE:
22 July 1999PARTIES :
Brian Oliver McGettigan (P1)
Lynette Anne McGettigan (P2)
Gary James Morrison (P3)
Eliran Pty Limited (D)JUDGMENT OF: Young J
COUNSEL : I M Wales SC and M Hadley (P)
J A Needham (D)SOLICITORS: Harrington Maguire & O'Brien (P)
Tonkin Drysdale Partners (D)CATCHWORDS: Conveyancing [59]- Time- Whether of essence- Commercial contract concerning investing in hotel. Words & Phrases- "Find an investor" CASES CITED: Gerlach v Pearson [1950] VLR 321
Lindsay v Mahoney (1979) 1 BPR 9584
Re R [1966] 3 All ER 613
Turnbull v Wightman (1945) 45 SR (NSW) 369DECISION: Declarations made
THE SUPREME COURT
OF NEW SOUTH WALES
EQUITY DIVISIONYOUNG, J
THURSDAY 22 JULY 1999
2517/99 - McGETTIGAN & ORS V ELIRAN PTY LIMITED
JUDGMENT
1 HIS HONOUR: The Kincumber Hotel Unit Trust is a trust of which the defendant is the trustee and, broadly speaking, there are three sets of beneficiaries, the McGettigan interests, who hold about 35 percent, the McGuinness interests who hold about 60 percent and a third person who holds 5 percent. The beneficiaries have been in dispute and earlier this year, in accordance with the trust deed, the McGettigan interests asked that their interest be redeemed.
2 In order to fund the redemption, the trustee put up for sale the only significant asset of the trust, namely the hotel, but the reserve was not met.
3 The McGettigans then sought to have a receiver appointed and to force the sale of the property. Those steps resulted in a settlement being reached on 16 June 1999, which involved a referee working out various accounting issues based on the common assumption that the hotel was worth $6.5 million gross, and the referee would come to a calculation as to the value of the McGettigans' interest. Although the referee was to be appointed within two days of 16 June, no time was laid down for his or her determination.
4 Clauses 4 to 7 of the terms of settlement were then as follows:5 The factual material on which I have to deal with the present problem is a little nebulous. On 29 June 1999 the McGuinness' solicitors wrote to the McGettigans' solicitors a letter, the first paragraph of which is as follows:
"4. The Defendant shall have until 30 June 1999 to find an investor willing and able to invest sufficient funds to enable the Defendant to pay out the Plaintiffs in accordance with clause 7 of the Kincumber Hotel Unit Trust Deed. On such funds being paid to the Defendant, the Plaintiffs shall forthwith be paid the following sums on account of their entitlements as unit holders, with any further payment or refund to be made forthwith upon the Court's adoption of the Referee's report:
First and Second Plaintiffs - $955,000 less $30,125 by way of repayment of their share of the $100,000 loan made by the Defendant to all unitholders in 1998/99.
Third Plaintiff - $150,980.90 less $7,155.00, being $4,750 by way of repayment of his share of the $100,000 loan made by the Defendant to all unitholders in 1998/99, and earlier loan of $2,405.00.
5. If no such investor is found by 30 June 1999, the Hotel shall be submitted to public auction by 31 July 1999 at a reserve price of $5,850,000. The terms of the Contract of Sale shall be submitted by the Defendant to the Plaintiffs on or before 7 July 1999. Any dispute as to the terms of the Contract of Sale shall be resolved by the President of the Law Society of NSW (or her nominee).
6. If the Hotel is sold at the said auction, the amounts set out in Paragraph 4 shall be paid to the Plaintiffs (or at their direction) on completion.
7. If the Hotel does not sell at the said auction, then the First and Second Plaintiffs (or their nominee) may purchase it, if they wish, for $6,500,000 in accordance with the said contract and they shall receive (or at their election be given credit for) $1,000,000 as being the amount payable consequent upon cancellation of their units in the Kincumber Hotel Unit Trust."
6 This was replied to by the opposing solicitors the same day, who said inter alia:
"We note that the Investors will not be in a position to invest by 30 June, 1999. They have had difficulties due to the missing documents, however, have confirmed the availability of funds and expectations of achieving investment in the next 7 - 10 days."
7 The party, for what it is worth, then proceeded to arrange an auction to occur on 29 July. However, on 13 July the McGuinness' solicitors indicated that:
"In view of the fact that your client shall be unable to pay our clients their entitlements on or before 30 June, Terms of Settlement require that the auction sale proceed."
"The proposed investors with whom the trustee have been negotiating have now confirmed that they wish to proceed with investment. We understand they wish to make this investment on Friday 23rd instant.
Accordingly, we would be pleased if you could confirm that you require the expenses of your clients to be drawn as follows ... "
8 They then suggested settlement at the Law Society settlement rooms at noon on 23 July.
9 Today a notice of motion was filed by the McGettigans seeking a declaration that in the events which have happened the McGettigans are able to reject any tender of the sums referred to in cl 4 of the terms of settlement and are entitled to require that the hotel go to auction in accordance with cl 5.
10 One, accordingly, has to construe what is meant by cl 4. There are two major problems; (a) whether as a matter of fact the defendant has found an investor; and (b) whether the time of 30 June should be read as being of the essence, or whether it should be read liberally as 30 June 1999 or reasonable time thereafter.
11 It is to be noted in cl 4 that the duty is to find an investor. The investor is to be willing and able to invest sufficient funds to meet the payout specified to the plaintiffs.
12 It is hard to work out exactly what "such funds" in cl 4 means, but it probably means that someone has to make an estimate of what amount of money is required to pay out the plaintiffs. It cannot mean that the referee has actually determined what is due because if that were the case it would be quite otiose to make the provisional payments that have to be made forthwith after the funds are paid to the trustee.
13 As I have said, there is no time limit given for the referee's report, but cl 4 contemplates that the investor will be paying money to the trustee before that report is handed down.
14 The plaintiffs, for whom Mr Wales SC and Mr Hadley appear, say that the investor must be found and must have provided the funds so that the provisional payment could be made no later than 30 June and that that date, in the light of cll 5 to 7, was an essential date. They say that, alternatively, the investor must have been located by 30 June, who was at that date in a position to pay the funds within a reasonable time thereafter and a reasonable time has now gone.
15 On the other hand, Miss J Needham for the defendant, says that so long as the investor is found before the due date, whatever that is, the balance of the Terms cease to apply and that there is no requirement for money to be paid on or before 30 June 1999.
16 I have gained some assistance in construing the expression "find an investor" from the cases dealing with commission agents selling real estate whose commission is dependent upon them finding a purchaser. Ordinarily, that connotes "find and introduce a person able and willing to buy, with whom a binding contract with the principal is subsequently entered into, and who thereby becomes a purchaser" per Jordan CJ in Turnbull v Wightman (1945) 45 SR (NSW) 369, 371-2; Gerlach v Pearson [1950] VLR 321, 324.
17 Although I appreciate the argument of Mr Wales SC that the estate agent cases are being decided in quite a different context, I do believe that they give some assistance as to what it was that the defendant had to do before 30 June. It did not have to obtain an investment, in my view, but merely find an investor who as at that date was willing and able to provide the funds within a reasonable time.
18 What is a reasonable time is a question of fact. However, under the terms of cll 5 to 7 the matter was not to be resolved until at least the end of July. Although cl 5 talks about "by 31 July" it is clear that the auction could not be arranged before 30 June, and it would ordinarily take about three weeks for advertising, et cetera, so that the parties were contemplating that the earliest that the money would flow through would be on completion after an auction that would be held somewhere after 21 July. Accordingly, the money would probably flow through somewhere in September. This is the only guide in the document as to when, if cl 4 does not come into play, the McGettigan interests might receive cash, but it is of some value.
19 Accordingly, I find that the clause means much as Miss Needham says it means, though this is also close to Mr Wales SC's alternative position.
20 The next question is whether as a matter of fact the defendant did find such a person. The word "find" ordinarily means “meet with” or “come across”. It does not mean “discover for the first time”; see for instance Re R [1966] 3 All ER 613, 616. In the present context it means more than merely “come across” an investor. It means deal with the investor to such an extent that it is established that he or she is willing and able to invest the funds when required, the requirement being to provide them within a reasonable time after the investor is found.
21 There is no evidence from the investor. There is no strong evidence from those with whom the negotiations took place. All we have is the paragraph of the defendant's solicitors' letter of 29 June 1999, to which I have already referred, and a statement in Mr Graham McGuinness' affidavit of 20 July, that the trustee had been negotiating with Messrs Dickenson, that as at 29 June they were able to confirm their investment and that on 12 July the Dickensons indicated that they wished to proceed with the investment in the trust. It was the next day that the defendant's solicitors communicated that fact to the plaintiffs.
22 I indicated during the running of the case that I thought that that evidence was a bit thin. Nothing further, however, eventuated and I must assume that there is nothing further that can be put in the way of evidence.
23 The question then is whether on the balance of probabilities the Dickensons were people who as at 30 June 1999 were willing and able to invest “sufficient funds”. I could not be satisfied on the balance of probabilities that they were as at that date. It would seem that it was only on 12 July that the Dickensons had sufficient documentation and reached that conclusion. Up until 12 July it was not possible for anyone in either camp to know whether they were willing and able to invest sufficient funds.
24 Accordingly, although on the question of construction the defendant succeeds, on applying the facts to that construction, the event in cl 4, if 30 June is a time of the essence, does not enable the defendant to succeed.
25 One then turns to the question as to whether 30 June is an essential date.
26 Ordinarily courts of Equity read agreements in a way that dates are not essential unless the circumstances show that the parties intended that they were essential. In commercial cases the court is more likely to find that time is essential than in non commercial cases; see the matters referred to in the judgment of Rath J in Lindsay v Mahoney (1979) 1 BPR 9584, 9587-9589.
27 It seems to me on the proper construction of the present document time is essential. One finds that although the referee's decision is not caught up in a time provision almost every other provision is and the word "forthwith" appears in cl 4.
28 In my view, on the proper construction of the Terms, 30 June 1999 was an essential date and as at that date there was not an investor willing and able to invest sufficient funds, hence that provision has ceased to be of any contractual significance and one proceeds to cl 5.
29 Accordingly, I should make the declarations 2(a) and (b) in the notice of motion and order that the defendant pay the costs of the motion and reserve further consideration.
30 I note that the matter is to be listed again before the Registrar on 3 August 1999.
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