Melbourne Yifang Group Pty Ltd v Guangao a Group Pty Ltd

IN THE SUPREME COURT OF VICTORIA

Not Restricted

AT MELBOURNE
COMMON LAW DIVISION
PROPERTY LIST

S ECI 2022 02771

MELBOURNE YIFANG GROUP PTY LTD (ACN 625 091 616)	Plaintiff
v
GUANGAO A GROUP PTY LTD (ACN 622 458 806) & ORS (according to the attached Schedule)	Defendants

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JUDGE:	Tsalamandris J
WHERE HELD:	Melbourne
DATE OF HEARING:	15-18, 21-25, 28 August, 18 September 2023
DATE OF JUDGMENT:	28 September 2023
CASE MAY BE CITED AS:	Melbourne Yifang Group Pty Ltd v Guangao A Group Pty Ltd & Ors
MEDIUM NEUTRAL CITATION:	[2023] VSC 577

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CONTRACT – Construction – Settlement to occur within a given year but no specific date expressed in contract of sale – Whether ambiguous date of settlement under contract – No ambiguity - Objective background circumstances relevant – Nomination deed – Whether subsequent attempt by vendor and nominee to extend settlement by two years constituted repudiatory conduct – Valuable consideration – Purchaser gave permission to nominee to seek extension – Conduct consistent with intention to be bound by and to perform contractual obligations – No repudiatory conduct established – Siemens Gamesa Renewable Energy Pty Ltd v Bulgana Wind Farm Pty Ltd [2020] VSC 126 – Pacific Brands Sport & Leisure Pty Ltd v Underworks Pty Ltd (2006) 149 FCR 395 – Koompahtoo Local Aboriginal Council v Sanpine Pty Ltd (2007) 233 CLR 115 – Lopes v Taranto [2018] VSCA 288.

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APPEARANCES:	Counsel	Solicitors
For the Plaintiff	Ms G Costello KC with Mr T Staindl	Verge Legal
For the Defendant	Mr A Rodbard-Bean	Aitken Partners
For the Second Defendant by 1^st Counter Claim	Mr W Rimmer	Pauline Madden Conveyancing Legal

TABLE OF CONTENTS

Background and contracts the subject of the proceeding.......................................................... 2

The Lands....................................................................................................................................... 2
The parties...................................................................................................................................... 3
Heads of agreement...................................................................................................................... 3
The contract of sale....................................................................................................................... 3
February 2020 email correspondence......................................................................................... 5
Substitution of Land C for Land A............................................................................................. 5
Nomination of MYG in respect of Land A................................................................................ 7
Extension of the date of settlement to 2023............................................................................. 10
The variation deed...................................................................................................................... 12
18 August 2021 and the events following................................................................................ 14
The breach notice........................................................................................................................ 18
24 November 2021....................................................................................................................... 20

Analysis of the oral evidence......................................................................................................... 21

Mr Xu’s evidence......................................................................................................................... 22
Mr Chen’s evidence.................................................................................................................... 23
Mr Cooke’s evidence.................................................................................................................. 24
Ms An’s evidence........................................................................................................................ 25
Ms Guan’s evidence.................................................................................................................... 26
Mr Sharma’s evidence................................................................................................................ 26

Submissions...................................................................................................................................... 27

MYG’s submissions.................................................................................................................... 27
GAG’s submissions..................................................................................................................... 29
Nevas’ submissions.................................................................................................................... 32

Findings and analysis...................................................................................................................... 34

Initial observations...................................................................................................................... 34
Failure to call witnesses............................................................................................................. 35
Material findings, analysis and answers to the questions asked......................................... 37
The role of Mr Chen.......................................................................................................... 37
The date of settlement in the contract of sale................................................................ 37
The date of settlement in the nomination deed............................................................. 40
Variation deed and the allegations of repudiatory conduct....................................... 41
Validity of the breach notice and rescission notice...................................................... 45
24 November 2021 and the remaining issues................................................................ 45
Answers to the questions asked...................................................................................... 46

HER HONOUR:

This proceeding relates to the sale of a parcel of land in Thornhill Park, which is currently used to operate a chicken farm. On 24 November 2017, the registered proprietor of the land and vendor, Nevas Pty Ltd, entered into a contract for the sale of the land to Guangao A Group Pty Ltd (GAG) for $13.1 million plus GST, with no fixed settlement date (the contract of sale).

In February 2021, GAG entered into a nomination deed with Melbourne Yifang Group Pty Ltd (MYG), under which MYG was to be the nominee purchaser of the land. MYG subsequently entered into a variation deed with Nevas under which it was agreed to extend the time for settlement until 24 November 2023. Under this deed, MYG paid some instalment monies and interest to Nevas.

To date, settlement of the land has not occurred. Despite the delay, Nevas still desires to proceed. The primary issue in this proceeding is whether MYG or GAG is the rightful end purchaser of the land.

GAG claims that under the contract of sale and nomination deed, the settlement date for the transfer of land had been fixed for 24 November 2021. GAG contends that MYG and Nevas’ attempt to extend this settlement date by way of the variation deed was ineffective and amounted to repudiatory conduct. Further, GAG claims that MYG breached a term of the nomination deed in that it failed to provide evidence of its financial capacity to pay the balance of the purchase price in November 2021. GAG claims that MYG’s breach entitled GAG to rescind the nomination deed. In GAG’s counterclaim against MYG and Nevas, it seeks relief in the form of specific performance of the contract of sale, with GAG as purchaser.

MYG claims that the time for settlement under the nomination deed was any time in 2021, with there being no reference to 24 November in that document. MYG disputes GAG’s ability to rescind the nomination deed and seeks to enforce its right to settle as nominee on 24 November 2023. In the alternative, and in the event that the variation deed is found to be invalid, then MYG seeks restitution relief in relation to the monies paid by it to Nevas under that deed, on the basis that they were paid by way of a mistake.

The trial of this proceeding commenced on 15 August 2023 and ran for 11 days. Several witnesses were called and numerous documents were tendered including: the relevant contractual documents; translations of numerous ‘WeChat’ messages between representatives or persons associated with GAG and MYG; and email correspondence between the parties’ solicitors.

The circumstances surrounding the settlement of the land, and the need for this proceeding to resolve which party should be entitled to settle on the land is, in my view, due to unreasonable acts and/or omissions of both GAG and MYG over a prolonged period. At times, there were poor or non-existent lines of communication between those parties. Much of the oral evidence given at trial on behalf of MYG and GAG (save for GAG’s former solicitor, Mr Adam Cooke) could be described as vainglorious, irrelevant and unreliable, such that in determining the proceeding I have given more weight to the contemporaneous documentary evidence.

Background and contracts the subject of the proceeding

To understand the parties’ respective claims, and the issues to be determined, I set out below the relevant background material. Where the parties dispute any of these facts, or the evidence led in respect of these matters differs, I note this accordingly.

The Lands

The land the subject of the proceeding is located at 742-766 Greigs Road, Thornhill Park - hereafter referred to as Land A.

Land A is located alongside two other parcels of land located at 768-792 Greigs Road (Land B), and 794-818 Greigs Road (Land C).

On the same day as the Land A purchase, Land B was purchased by Guangao B Group Pty Ltd (GBG) from a different vendor. The purchase price was $13,500,000. That settlement took place on 28 November 2022.

On 20 March 2018, Land C was purchased by Guangao C Group Pty Ltd (GCG), also from a different vendor. The purchase price was $13,005,000. Following payment of a deposit, the balance of $10,400,000 was due no later than 33 months from the date of sale.

The parties

GAG, GBG, and GCG are related companies of Grand Sanxing Investment Group Pty Ltd. Mr Wanyu Chen (Mr Chen) is the sole director of Grand Sanxing. Mr Chen’s wife, Ms Libo An (Ms An), is also involved in the related group of companies, and the property developments undertaken by these companies. Their son, Mr Mo Chen, was the sole director of GAG, GBG, and GCG until May 2022. Since that time, Ms An has been the sole director of those three companies.

MYG’s majority shareholder and director is Mr Yangdong Xu (Mr Xu). In addition, Mr Liyong Yang (Mr Yang) was also a director of MYG until 14 November 2022.

Heads of agreement

On 14 October 2017, Nevas and Grand Sanxing (and/or its nominee) entered into a heads of agreement for the purchase of Land A. This agreement was signed by Mr Sham Sharma (Mr Sharma) as director of Nevas, and Mr Chen as director of Grand Sanxing. Clause 9 of the heads of agreement stated that ‘settlement is to occur four (4) years from the signing of the formal contract of sale’. Thereafter, Grand Sanxing nominated GAG as its nominee in respect of the purchase of Land A.

The contract of sale

On 24 November 2017, Nevas entered into the contract of sale with GAG in respect of Land A. The contract was signed by Mr Sharma on behalf of Nevas, and Mr Mo Chen on behalf of GAG.

Relevant terms of the particulars of sale included:

PAYMENT

Price $13,100,000.00
PLUS GST

Deposit $60,000.00
on signing of this contract (of which $10,000.00 has been paid PLUS GST (if payable)

Residue deposit $1,905,000.00
within 28 days of signing this contract PLUS GST (if payable)

Instalment $1,965,000.00
within 2 years of signing this contract PLUS GST

Balance $9,170,000.00
PLUS GST payable at settlement

…

SETTLEMENT
Is due on 2021

Relevant terms of the general conditions included:

MONEY
10. Settlement
10.1     At settlement:
(a)       the purchaser must pay the balance; and
(b)       the vendor must:
(i)do all things necessary to enable the purchaser to become the registered proprietor of the land; and
(iii)give either vacant possession or receipt of rents and profits in accordance with the particulars of sale.

…
16. Time
16.1 Time is of the essence of this contract.
16.2Time is extended until the next business day if the time for performing any action falls on a Saturday, Sunday or bank holiday.

…
18. Nominee
The purchaser may nominate a substitute or additional purchaser, but the named purchaser remains personally liable for the due performance of all the purchaser’s obligations under this contract.

On 11 April 2018, GCG nominated MYG as the substitute purchaser of Land C.

February 2020 email correspondence

On 6 February 2020, GAG’s then solicitor Mr Adam Cooke (Mr Cooke) emailed Nevas’ solicitors, Pauline Madden Conveyancing and Legal, in relation to the option of a lease back of the property following settlement. Relevantly, the email also stated:

… I note that the counterpart version of the contract we have been provided by our client, does not specify the settlement date as being 24 November 2021, notwithstanding that the agreement between the parties was for settlement 4 years after signing. In the counterpart of the contract I have, it just says “2021”. Can you please advise if your counterpart of the contract correctly specifies the settlement date as 24 November 2021 and if not, we should each agree to authorise the other to insert the correct settlement date.

In reply, on 18 February 2020, Nevas’ solicitors stated:

We advise that our Contract is not dated but we are also of the view that settlement is 24 November 2021. We agree that we each authorise the other to insert the correct date of 24 November 2021 as the settlement date.

Contrary to the parties’ planned course of action in the February 2020 email correspondence, it would appear from the documents tendered in this proceeding that GAG and Nevas did not insert this settlement date into the copy of the contract of sale subsequently annexed to either the deed of substitution of nomination (the substitution deed) or the variation deed.

Substitution of Land C for Land A

Over the course of 2020, discussions took place between representatives of GCG, GAG and MYG as to whether MYG would be in a position to complete the purchase of Land C on the settlement date, being 21 December 2020. It ultimately came to be that MYG could not do so. A request by MYG to extend the settlement date was rejected by the vendor of Land C. The events and communications regarding this are not directly relevant to the matters to be determined in this proceeding, however both MYG and GAG adduced evidence in relation to when this extension was sought and the way in which it was requested. This included evidence as to the involvement of GAG’s solicitors in the request for an extension on behalf of its nominee, MYG. I also note, for completeness, that witnesses called by MYG and GAG gave differing accounts as to whether, during the course of such discussions, MYG was informed of the date of settlement on Land A, and (if it was) when this occurred.

In August 2020, Mr Xu and Mr Chen met in Shangahi, China, and discussed the possible substitution of Land C for Land A in the event that an extension of settlement was not possible on Land C. Mr Chen gave evidence that he proposed this as ‘the settlement date of [Land A] is due 24 November 2021, whereas the settlement date of [Land C] is on 20 December 2020. So there is about roughly one year gap, one year apart which would give them sufficient time to prepare funds.’

Mr Xu’s evidence was that, at that time, all that they discussed was that the settlement date for Land A would be ‘roughly a year later’ than the settlement date for Land C.

In September 2020, Mr Xu and Mr Chen met in Cangzhou City, Hebei Province, China (together with others including Mr Yang), and continued the discussions regarding a possible extension on the settlement date for Land C. In cross-examination, it was put to Mr Xu that Mr Chen specifically informed him at this time that the settlement date on Land A was 24 November 2021, but Mr Xu denied this. I note that despite the puttage to Mr Xu by GAG’s counsel, Mr Chen did not give such evidence.

There was conflicting evidence as to when Mr Xu and Mr Chen next met. Mr Chen said that there was a further meeting with Mr Xu in Shanghai in late October 2020, and that Ms An and various other family members were in attendance. Mr Xu denied that a meeting was held in late October 2020, and instead said that it was held in November 2020. Ms An gave evidence that she called for meeting in November 2020, as she wanted to get a definite answer from Mr Xu about Land C, and whether MYG had obtained funds. Ms An said that the prospect of swapping Land C for Land A was discussed at this meeting, and Mr Xu was told that the settlement for Land A was due on 24 November 2021, that being one year later than the settlement date for Land C. In cross-examination, Ms An accepted that the words ‘roughly one year’ referred to the gap between the settlement dates for Land C and Land A. She said that ‘roughly one year’ meant ‘less than one year’. In her evidence, Ms An later appeared to accept that no-one mentioned the specific settlement dates.

On 21 December 2020, under the substitution deed it was agreed between GAG, GCG and MYG, that MYG would no longer be the nominee purchaser of Land C, and that MYG would instead be the substitute purchaser of Land A. Pursuant to this deed, MYG paid $800,000 by way of compensation to GCG.

The substitution deed is silent as to the settlement date for Land A. As indicated at [22] above, the copy of the contract of sale annexed to the substitution deed had not been amended in accordance with the email correspondence of February 2020, and was identical to the contract of sale described in [17] above. The deed did not annex the heads of agreement or refer to the settlement date as being ‘four years’ after the signing of the contract of sale.

Following the execution of the substitution deed, and on the same day, GCG settled on Land C.

Nomination of MYG in respect of Land A

On 16 January 2021, Ms Pauline Madden (Ms Madden) of Nevas’ solicitors, informed Mr Sharma via email that GAG ‘may be nominating’, and it was likely that there would be a request for an extension on settlement.

At some time in January or February 2021, Mr Xu and Mr Chen attended a meeting in Shanghai. Mr Xu said that at this meeting he thanked Mr Chen for enabling the substitution of Land C for Land A. Also at this time, Mr Xu claimed that he told Mr Chen that he proposed to seek an extension on the settlement of Land A, and that in response, Mr Chen was agreeable to Mr Xu conferring with Nevas about this. However, Mr Chen’s evidence was that he was not informed of this at that time.

Over January 2021, MYG’s solicitor Mr Newton Han (Mr Han), and Mr Cooke negotiated the terms of the nomination deed, in particular the length of time under which MYG would be required to provide GAG evidence of ability to settle on Land A. GAG considered that 14 days was not enough time and ultimately 45 days was agreed to.

By 23 February 2021, both GAG and MYG had signed and executed the nomination deed (which is dated 10 February 2021), to enable MYG to take over as the nominee purchaser of Land A.

The relevant terms of the nomination deed included:

1.1 Definitions
…
Contractmeans the contract of sale of real estate between Nevas Pty Ltd (as vendor) and GAG as purchaser dated 24 November 2017, a copy of which is attached to this Deed as Annexure A.

(Clause 1.1)
…
2.1In consideration for MYG agreeing to reimburse GAG the payments made by GAG of $4,126,500.00 with respect to the purchase of the Property, comprised of:
(a)       deposit of $1,965,000.00;
(b)       instalment of $1,965,000.00; and
(c)       GST Security payment of $196,500.00

to the Vendor, GAG agrees to nominate MYG as the substitute purchaser to take a transfer of the Property in lieu of GAG subject to the terms of this Deed
(Clause 2.1)

…
2.3      GAG covenants with MYG as follows:
(a)       …
(b)       …
(c)GAG will do all acts and things, including without limitation the execution of all such documents as may be reasonably required by MYG and at the reasonable cost of MYG to give effect to the nomination contemplated by this Deed.

(Clause 2.3)

…
2.8Subject to clause 2.20, GAG agrees, warrants and represents to MYG that GAG will not do any act pursuant to the Contract (including corresponding with the Vendor or the Vendor’s Lawyers) without MYG’s prior written consent.
(Clause 2.8)

…
2.18GAG or MYG may not assign any of their rights under this Deed or the Contract or nominate any substitute or additional purchaser of the Property under the Contract without the other's prior written consent, which consent must not be unreasonably withheld if a special circumstance arises which justifies the necessity of the assignment or the onward nomination.
(Clause 2.18)
2.19If MYG breaches any of its obligations under the Contract or this Deed, which results in a default notice validly being served on GAG or MYG by the Vendor under the Contract, which is not capable of being remedied by MYG or is not remedied by MYG at least seven (7) days prior to the expiry of the default notice, or if MYG fails to comply with its obligations under clause 2.20 (which are not remedied within 14 days of being provided with a written notice), PROVIDED THAT there are no faults or breaches of Contract caused or contributed to by or due to GAG’s breach or failure to perform its obligations under the Contract or this Deed, then GAG may by giving written notice to MYG elect to immediately rescind the Nomination in favour of MYG which effect that:
(a)any rights of MYG to take a transfer of the Property in lieu of GAG are immediately terminated;
(b)any payments made by MYG to the Vendor under the Contract are assigned to and for the benefit of GAG and become GAG’s absolute property;
(c)MYG agrees to execute any document required by GAG which rescinds the nomination and by way of security MYG irrevocably appoints GAG as its attorney for the purpose of doing anything or signing any document to ensure that the Nomination is validly rescinded; and
(d)GAG will be solely entitled to exercise all its rights under the Contract to complete the settlement and purchase of the Property under the Contract.

(Clause 2.19)
2.20No later than 45 days prior to the settlement date under the Contract MYG must provide to GAG documentary evidence (for example bank statements, loan approvals) satisfactory to GAG (acting reasonably) of its ability to pay all amounts required to be paid at settlement including, but not limited to, the remainder of the purchase price, GST and adjustments (if any).
(Clause 2.20)

…
3.4 Entire Deed
This Deed constitutes the entire understanding between the parties with respect to the subject matters (unless specified otherwise) as contained herein and supersedes all prior representations, understandings, negotiations and deeds, whether written, oral, express or implied.
(Clause 3.4)

As with the substitution deed, the copy of the contract of sale annexed to the nomination deed had not been amended in accordance with the email correspondence of February 2020, and was identical to the contract of sale described at [17] above.

Under cl 2.1 of the nomination deed, MYG was obliged to reimburse GAG a sum of $4,126,500, being the amounts GAG had previously paid toward the purchase of Land A, to be paid in three instalments. The last of the instalments was for the sum of $521,500, which was payable on or before 21 June 2021 unless otherwise agreed. The total sum of those instalments payable under the nomination deed was paid by MYG.

On 18 February 2021,[1] GAG signed the sale of real estate nomination form, nominating MYG as the purchaser of Land A.
[1]The date recorded on the document is ‘18 February’. However, given the other evidence before me, I infer that it was signed on this day in 2021.

At around the same time, Nevas made enquiries with Elders Real Estate in respect of it acting on behalf of Nevas in a clearing sale of the farming equipment on the Land A.

Extension of the date of settlement to 2023

On 17 February 2021, Mr Sharma forwarded a copy of an email from Elders concerning the proposed clearing sale to Mr Qi and stated, ‘we have to plan ahead.’ In his oral evidence, Mr Sharma explained that to enable vacant possession of the land, a lead time of several months was usually required in order to shut down the chicken farm operations.

On 19 February 2021, Mr Qi wrote to Mr Sharma and sought confirmation of extension conditions with the ‘coming nomination purchaser’. These included:

(a) settlement on 24 November 2023;

(b) payment of $1,965,000 on 24 November 2021;

(c) 10% per annum interest on the balance of $7,205,000 due on 24 November 2022; and

(d) 10% per annum interest on the balance of $7,205,000 due on 24 November 2023.

On 22 February 2021, Mr Sharma emailed Mr Qi and proposed that the interest payments be paid in advance, that is, on 24 November 2021 and 24 November 2022 respectively.

On the same day, Mr Qi indicated to Mr Sharma that he had passed on the email (but did not say to whom) and queried that ‘[i]f everything goes on your advantage, would you be happy to pay me a small fee?’

Mr Sharma gave evidence that Mr Qi did not receive such a fee.

On 24 February 2021, Mr Qi emailed Mr Sharma and stated:

Mission completed, the nominated purchaser agreed to your terms, they will instruct their solicitor to prepare the deed of agreement and forward it to your solicitor.

Mr Chen’s evidence was that sometime between March and May 2021, he became aware that MYG had a ‘thought’ about an extension on the settlement of Land A. As best I could understand Mr Chen’s evidence-in-chief, he said that during this period Mr Xu requested another extension, as MYG had a funds issue, plus other issues, including as a result of COVID-19. Mr Chen said:

[Mr Xu] said he wanted an extension. I said I agreed. At the time that he said he wanted the agent to communicate with the vendor directly. I said I agreed. However, I said for the terms, please send to our lawyers in a timely manner or promptly for our lawyer to review and then it can be signed. I also said that let’s follow what was done for the extension of C land previously, let our lawyer to liaise with your lawyer as was done previously for the extension of C land…I also added that if the extension was approved, that’s okay, however the’ land must not be transferred to a third party.

However, in cross-examination Mr Chen denied that during this period Mr Xu had asked and obtained permission to approach Nevas about an extension. Mr Chen stated that at this time Mr Xu only said ‘there was a possibility that it could not settle and nothing else.’

On 15 April 2021, Mr Cooke informed Ms Madden that GAG had nominated MYG as its nominee, and provided Nevas with a copy of the signed nomination.

Mr Xu said that in May 2021 he met with Mr Chen in Sydney, at which time he informed Mr Chen that the negotiation of the settlement date of Land A had been going on for ‘quite a while’, and that whilst all the terms were settled, he was waiting for an agreement to be formalised. Further, Mr Xu said that he informed Mr Chen that the key terms of the agreement with Nevas were: an extension of two years; the settlement date of 24 November 2023; and interest payments at a rate of 10% per annum payable to Nevas. When this was put to Mr Chen in cross-examination, he denied this, and said that there was ‘no mention’ of an extension at this time.

Mr Chen said that in June 2021, Mr Xu ‘formally’ informed him that MYG would not be able to settle on 24 November 2021. Mr Chen said that he agreed to Mr Xu seeking an extension from Nevas directly, and requested that the terms of the extension be sent to GAG’s solicitors promptly for review and approval, as had previously occurred on the Land C extension. I note that Mr Chen’s account of a meeting in June 2021 was not put to Mr Xu in cross-examination.

The variation deed

On 16 July 2021, Nevas and MYG entered into the variation deed, with Mr Xu and Mr Yang as guarantors. The recitals of the deed stated:

Pursuant to the Contract, there is no particular date fixed for the final settlement of the sale of the Property. However, through previous communications between Nevas and GAG, there was an intention (between those parties) to fix the settlement on 24 November 2021.

The relevant parts of the variation deed were as follows:

1. The parties hereto agree that the settlement date for the Contract of Sale a copy of which is annexed hereto together with the accepted Deed of Nomination as guaranteed by LY and YX shall be varied to extend the settlement date for the said Contract on or before 24 November, 2023 in consideration of MYG paying to Nevas the following:
a)$1,965,000.00 on or before 24 November 2021, into the trust account of Pauline Madden Conveyancing & Legal;
b)$720,500.00 on or before 24 November 2021 being interest on the balance of the purchase price as stated in Recital D hereof for 12 months payable in advance, into the trust account of Pauline Madden Conveyancing & Legal;
c)$720,500.00 on or before 24 November 2022 being interest on the balance of the purchase price as stated in Recital D hereof for 12 months payable in advance into the trust account of Pauline Madden Conveyancing & Legal;
d)The balance of the purchase price of $7,205,000.00 (plus GST) on or before 24 November 2023 as stated herein.

…
4.Confidential Information
(a)Each party (Receiving Party) agrees with the other party (Provider):
i. to maintain the confidentiality of the Confidential Information and to ensure that, without the prior written consent of the Provider, Confidential Information is not disclosed to any third party other than the Receiving Party’s legal and financial advisers (Permitted Persons);
ii.to take all such steps and do all such things as may be necessary, prudent or desirable in order to safeguard the confidentiality of the confidential Information;
iii.to require all Permitted Persons at all times to maintain the confidentiality of the Confidential Information; and
iv.to return all the Confidential Information and all copies and extracts if, for any reason, this Deed is terminated.

(b)This clause shall not apply to so much of the Confidential Information which:
i. is disclosed with the prior consent of the Provider;
ii.to any employees or profession al advisors of the Receiving Party;
iii.at the time of first disclosure to the Receiving Party, is in the public domain;
iv.after disclosure to the Receiving Party, comes into the public domain otherwise than by disclosure by the Receiving Party in breach of the terms of this Deed;
v. is in the possession of the Receiving Party at the time of first disclosure and was not acquired directly or indirectly from the Provider;
vi. is received by the Receiving Party from a third party, provided that it was not acquired by the third party directly or indirectly from the Provider or in breach of any obligation of confidence owed by the third party to the Provider;
vii. is disclosed for the purposes of exercising a right or satisfying an obligation pursuant to this Deed; or
viii. is required to be disclosed in accordance with law or an order of a court.

(c)Any rights or obligations under this clause survive the termination or expiration of this Deed.

(Confidentiality clause)
5. With the consent of NEVAS, MYG, LY and/or YX may assign their rights under this Deed or the Contract or nominate any substitute or additional purchaser of the Property under the Contract, only if the arrangement between MYG, LY and/or YX (as the assignor) and the assignee/new nominee do not vary Nevas’s rights under this Deed or the Contract.

(Assignment clause)

18 August 2021 and the events following

On 18 August 2021, Mr Xu and Mr Chen communicated with each other via WeChat. In a typed message, Mr Xu stated:

‘Got the extension, finally. But the interest rate is high. 10% annually.’

(the 18 August WeChat message)

Mr Chen said that he understood the word ‘finally’ in this WeChat message referred to the terms of the extension being finally agreed upon.

Shortly thereafter, Mr Xu and Mr Chen spoke on the phone for approximately 13 minutes. Mr Xu gave evidence that during this conversation he told Mr Chen the extension agreement was ‘done’ and that the settlement date for Land A would be in November 2023. Mr Xu said that Mr Chen did not ask for a copy of the agreement, nor did Mr Chen say anything about the extension needing to be formally agreed to via Mr Chen’s solicitors.

Mr Chen said that he was ‘happy’ with the outcome of the extension. Mr Chen said that during this conversation, Mr Xu told him of the two year extension and the terms of the interest. Mr Chen said he asked Mr Xu to send the terms of the agreement to GAG’s solicitors, so that an agreement between GAG and Nevas could be prepared. Mr Chen said that Mr Xu indicated he would send the terms promptly.

Ms An gave evidence that Mr Chen told her of the 18 August WeChat message and his subsequent conversation with Mr Xu. Ms An said that from this discussion with Mr Chen, she knew of the extension and she understood that her husband had asked Mr Xu to ‘send through the terms via our lawyers.’ Ms An said that at this time she was instructing Mr Cooke on behalf of GAG, through the assistance of her bilingual friend Ms Carey Guan. Ms An said that she asked Ms Guan to inform Mr Cooke of the contents of the 18 August WeChat message and subsequent conversation between Mr Chen and Mr Xu.

Ms Guan gave evidence that she spoke to Mr Chen on 19 August 2021. In cross-examination it was put to Ms Guan that during this phone call Mr Chen told her that he had been informed by Mr Xu that Nevas had agreed to extend the settlement date on Land A. Ms Guan’s response to this proposition was ‘I think so’, however my impression was she was not certain she was told this at the time. Ms Guan conceded that she did not have an independent recollection of thereafter informing Mr Cooke about the 18 August WeChat message. There was no evidence of a file note from Mr Cooke recording any such conversation. Mr Cooke gave evidence that it was his practice to take ‘as full as possible accurate file notes’ of any conversations or meetings with clients.

On 10 September 2021, Mr Cooke emailed MYG’s solicitor Mr Han in relation to the nomination deed and contract of sale for Land A, which was ‘due to settle on 24 November 2021.’ Mr Cooke stated that:

I understand your client has not yet paid the 21 June 2021 instalment of $521,500 – but payment of this was deferred by agreement between our respective clients.

Further, Mr Cooke stated:

I would also note for your client’s attention, that under clause 2.20 of the Nomination Deed, your client will be required to provide evidence to our client, of their readiness to settle no later than 45 days before settlement. Should your client fail to do this, our client will reserve their rights to step in and complete the settlement themselves.

On 4 October 2021, Mr Han advised Mr Cooke via email that MYG had paid the sum of $521,500 ‘sometime ago’ into a ‘nominated bank account in China’. Further, Mr Han advised as follows:

3. Settlement
Our client has successfully reached an agreement with the vendor to reschedule the settlement. Our client will comply with its obligations to provide documents evidencing its readiness to settle in accordance with the Nomination Deed, once the settlement date is confirmed. I am instructed that this has been discussed between our respective clients as well, including that given the persistent Covid situation, it is unlikely that the settlement will take place this year.

On 6 October 2021, Mr Cooke emailed Mr Han and stated that as MYG was a nominee and not a signatory to the contract of sale, any variation to the contract would need to be agreed to by GAG. Mr Cooke sought the details of any ‘proposed/agreed variations’ to the contract so that he could obtain instructions from GAG. Further, he suggested that it ‘may be appropriate in the circumstances to instead novate the contract, rather than just vary it.’

On 14 October 2021, Mr Cooke sent a follow up email (in similar terms to the 6 October 2021 email), in which he reiterated that any variation to the contract of sale would require GAG’s consent.

On 21 October 2021, Mr Han responded to Mr Cooke and advised that his client had informed him that ‘given the relationship’, MYG and GAG would discuss these matters directly ‘over the following weeks’.

On 22 October 2021, Mr Cooke emailed both Ms Madden and Mr Han and stated that, although MYG was the nominated purchaser under the contract of sale, it was not a party to the contract and it was unclear on what basis the contract ‘has or could have been varied’ without GAG being a party to the agreement. GAG stated that whilst it had ‘no objection to any proposed variations which do not create any increased liability or exposure’ to GAG, he sought a copy of the agreement so that he could seek his client’s instructions.

On 25 October 2021, Mr Mo Chen instructed Mr Cooke to notify MYG that GAG would take over the settlement, as MYG had ‘failed to provide proof of evidence’.

On 26 October 2021, Mr Xu provided Mr Chen with a portable document format (PDF) copy of the variation deed, sent on two occasions via two different WeChat accounts. The accompanying messages (on each account) were translated as follows:

Hi, Director CHEN
The extension of the land agreement is the same as what Director YANG and I previously verbally communicated to you. It should not have any impact on your part. As it was all in English, I only oversaw the major terms. I am now sending you the original document. This message is late. Please understand.

(the 26 October WeChat messages)

On the afternoon of receiving the 26 October WeChat messages, Mr Chen and Ms An arranged to meet with Ms Guan in a park. Ms Guan then opened the PDF of the variation deed and read its key terms to Mr Chen and Ms An. Ms Guan said that it was at that time (upon reading the document) that she learnt of the two year extension being granted, and that the document had been signed between three and four months prior.

Ms Guan said that she then telephoned Mr Cooke and informed him that Mr Chen had received the PDF of the variation deed from Mr Xu, which she considered to be ‘really strange’, as Mr Cooke had been requesting it ‘constantly for the last, almost 20 days’. Ms Guan said that Mr Cooke informed her that he would demand a copy of the document from Mr Han. Ms Guan said Mr Cooke told her that, following the instructions from Mr Mo Chen the previous day, he had drafted two letters to both Mr Han and Ms Madden. Ms Guan said that, on behalf of Ms An, she instructed Mr Cooke to send those emails.

The breach notice

On the same day at 4:55pm, Mr Cooke sent a letter to Mr Han, which amongst other things, alleged that MYG had breached its obligations under the nomination agreement (the breach notice). The relevant terms of the notice were as follows:

Nomination Deed
…
13.…the primary obligations of your client under the Nomination Deed include:
a) clause 2.5 – to perform the provisions of the Contract of Sale binding upon our client (as the purchaser) – which would include the payment of the balance of the purchase price at settlement; and
b) clause 2.21 – to provide our client at least 45 days prior to settlement with satisfactory evidence of your client’s ability to settle and pay the balance of the purchase price on the settlement date.

Breach by Your Client of Nomination Deed
14. As settlement under the Contract of Sale is currently due on 24 November 2021, your client is in breach of its obligations under clause 2.21 of the Nomination Deed, because it has not provided our client with any evidence of its ability to settle. This evidence was due to be provided on or before 10 October 2021.
15. Your client is required to remedy this breach of clause 2.21 within 7 days of the date of this letter, by providing the necessary documentary evidence of its ability to settle under the Contract of Sale on the settlement date of 24 November 2021.
16. If your client fails to remedy the breach, our client reserves all its rights under the Nomination Deed and at common law, including but not limited to the right to terminate the Nomination Deed and our client settling under the Contract of Sale on 24 November 2021.

Settlement of Contract of Sale
17. We confirm that our client remains ready, willing and able to complete settlement under the Contract of Sale on the settlement date of 24 November 2021.
18. If your client wishes to defer the settlement date and seek a variation of the Contract of Sale, we invite your client to put forward any proposals to our client for consideration.

At 4:57pm, Mr Cooke emailed Ms Madden and stated that, as GAG had not consented to any variation of the contract of sale, the settlement date remained as 24 November 2021. Mr Cooke further stated that GAG remained ‘ready, willing and able to complete settlement’ on that day. The final paragraph of Mr Cooke’s correspondence stated that:

We have written to the Nominee and invited them to put forward any proposals for a variation of the Contract of Sale, including any variations to the settlement date. We will advise you of any proposals which are put for consideration.

On 27 October 2021, Ms Madden replied to Mr Cooke and indicated that she had asked Mr Han to contact him as she could not assist due to ‘the confidentiality of the dealings’ between MYG and Nevas.

On 1 November 2021, Mr Han wrote to Mr Cooke and alleged that his contact with Ms Madden, without MYG’s permission, was in breach of cl 2.8 of the nomination deed. In addition, Mr Han queried MYG’s allegation that GAG had breached cl 2.21. Mr Han also stated that, as the contract of sale annexed to the nomination deed did not refer to 24 November 2021 as the settlement date, GAG’s claim that MYG had failed to observe its obligation to provide evidence of its ability to settle under the contract 45 days prior to settlement, ‘naturally fail[ed]’.

Thereafter, Mr Cooke and Mr Han communicated with each other by telephone, and Mr Cooke repeated his request for a copy of the variation deed.

On 12 November 2021, Mr Han wrote to Mr Cooke and, amongst other things, advised that the shareholders of his client were to meet the following week to discuss GAG’s ‘proposals as set out in your recent emails and letters, with the possibility of reconsidering their position and reaching a fresh decision at the said meeting.’ In this letter, Mr Han also advised that Mr Chen had ceased communicating with his client, and he sought confirmation that Mr Chen was the ‘controlling mind’ of GAG, and that he had received the sum of $521,500 pursuant to cl 2.2(c) of the nomination deed.

Mr Han’s letter then stated as follows:

Please seek urgent instructions from your client and Mr Wanyu Chen in relation to the above matters, as our client is particularly concerned about having received false directions from Mr Wanyu Chen, in which case they will immediately proceed to report these matter to the Police in China in anticipation of bringing criminal charges against Mr Wanyu Chen to recover their losses.

On 16 November 2021, Mr Cooke confirmed via email that GAG acknowledged receipt of the sum of $521,500 and that MYG had complied with its obligation under cl 2.2(c) of the nomination deed.

On 22 November 2021, Mr Han advised Mr Cooke via email that MYG was ‘content’ to provide a copy of the variation deed, subject to Nevas waiving the confidentiality requirement. The email also stated that:

…the substance of the proposed arrangement with the vendor was first communicated to Mr Wanyu Chen, though orally, as early as in June this year, and the relevant Deed was already provided to Mr Chen (whilst risking breaching the confidentiality clauses) by one of our client’s directors, Mr Yangdong Xu, on 26 October 2021 via the Wechat instant messaging platform, as per the recent requests made by your client.

On 23 November 2021, Mr Han forwarded to Mr Cooke, via email, a copy of the variation deed.

24 November 2021

On 24 November 2021, MYG made payment to Nevas in accordance with the variation deed.

On the same day, GAG sent MYG a letter purporting to exercise its rights under cl 2.19 to rescind the nomination deed (the rescission notice). The relevant terms of the notice were as follows:

a) [MYG] no longer has any right to receive a transfer of the Property;
b) any payments made by [MYG] towards the purchase price of the Property under the Contract of Sale are assigned to and for the benefit of [GAG];
c) [GAG] is irrevocably appointed as attorney on behalf of [MYG] to do anything or sign any document to ensure that the nomination is validly rescinded; and
d) [GAG] is now solely entitled to exercise all rights under the Contract of Sale to complete the settlement and purchase the Property.

Also on this day, at 4:15pm, Mr Cooke wrote to Ms Madden and indicated that GAG had given notice to MYG that its rights as nominee under the contract of sale were to be rescinded with immediate effect and GAG was to step in as purchaser. Mr Cooke then stated:

Given that settlement under the Contract of Sale is due today, and that your client has not yet undertaken any of the necessary steps in preparation for a settlement to take place, we suggest that settlement be rescheduled to a subsequently agreed date to give parties time to prepare.

Thereafter, for a period of time, Mr Cooke and Ms Madden attempted to agree to a new settlement date, although no agreement was reached. At no point in time did Mr Cooke call on Ms Madden to settle on a particular date.

GAG produced evidence at the trial that it had obtained finance from Avari Capital Partners in support of its status as ready, willing and able to settle on Land A on 24 November 2021.[2]
[2]MYG did not accept GAG’s capacity to settle at that date, however as this was not raised by it in the pleadings prior to trial, I did not permit MYG to raise this as an issue, and ruled against MYG’s notice to produce documents relevant to this.

It is common ground that since that time none of the mandatory pre-settlement steps have been taken by either GAG or Nevas, namely: arranging for each party’s mortgagees to be invited to settlement; the preparation of a statement of adjustments; the initiation of a digital duties form; or the preparation of a Transfer of Land.

Analysis of the oral evidence

At trial, MYG called Mr Xu; GAG called Mr Chen, Ms An, Ms Guan, and Mr Cooke; and Nevas called Mr Sharma.[3] Each witness gave evidence as to their personal involvement in the matters set out above.
[3]Mr Xu, Mr Chen and Ms An gave evidence through an interpreter.

In closing submissions, MYG urged me to reject the evidence of Mr Chen, Ms An and Ms Guan as unreliable. GAG resisted the categorisation of their evidence in that way, and instead submitted that it was Mr Xu who was an unreliable witness, and the evidence of Mr Chen, Ms An and Ms Guan should be preferred.

I am not satisfied that a true and complete version of events was given by Mr Xu, Mr Chen, Ms An, or Ms Guan at trial. My reservation as to their reliability is not critical to my determination of this proceeding. Therefore, I need not address in detail the extensive closing submissions provided to me by opposing counsel in respect of the unreliability of these witnesses, and instead briefly outline my key findings below.

Mr Xu’s evidence

Mr Xu was cross examined at length as to when he first became aware that GAG and Nevas had agreed that the settlement date of Land A was 24 November 2021. Mr Xu denied that he was aware of this at the time Mr Chen proposed the swap of Land C for Land A – during the period from August to November 2020. Mr Xu maintained that he knew it was roughly a one year settlement, but did not know the exact date at that time. Mr Xu maintained that despite discussions with Mr Chen as to the purchase of Land A, he only knew the purchase price for it, and the compensation to be paid to GCG and GAG for the swap. Mr Xu said:

I was aware of the rough idea regarding the dates, but in terms of the specific dates, our secretaries or assistants will remind me when necessary… I’m managing more than ten projects. It is impossible for me to remember all the dates clearly on top of my head, but I do have a rough idea about the important dates.

Despite my acceptance of Mr Xu’s reliance on advisers, it seems improbable that MYG (and by extension Mr Xu as its director) would take on responsibility for a transaction of this size without knowing the date of settlement.

Mr Xu said that when he signed the nomination deed he asked his lawyer as to the date of settlement for Land A, as there was no date specified under the deed. Mr Xu said that he was told the ‘settlement date [would] happen before the end of 2021.’ In cross-examination it was put to Mr Xu that, at the time he agreed to Mr Sharma’s offer in February 2021, he must have known the date of settlement was agreed to be 24 November 2021, as it required MYG to pay instalment and interest payments to Nevas on 24 November 2021. Mr Xu denied this. Whilst he accepted that in order to calculate interest in advance on a debt it was necessary to know the starting date from when the debt falls due, Mr Xu again said that the contract terms were the business of lawyers, and the calculation of interest was the business of accountants.

Mr Xu’s evidence on this was implausible. Once again, notwithstanding that Mr Xu was a business person with multiple projects (and was no doubt reliant on lawyers and accountants to assist him), in MYG agreeing to these terms, I consider it improbable that Mr Xu was not aware, at least by this time, the extension was to run from 24 November 2021, and payments totalling $2,685,500 were to be paid from MYG to Nevas on that day.

Mr Chen’s evidence

Mr Chen repeatedly denied that he was a representative or agent of GAG, GBG or GCG throughout the period he had the relevant conversations with Mr Xu (between 2018 to 2021). Further, Mr Chen stated that he had only executed the decisions of Ms An as it was her company. However, I note that at all relevant times Ms An was not a director of the company. I also note that it was an agreed fact between the parties that, at all relevant times in his dealings with Mr Xu, Mr Chen was an agent of GAG, GBG and GCG. Mr Chen’s evidence as to the significance of the role he played in GAG’s dealings was entirely disingenuous.

Mr Chen was cross-examined as to the failure of GAG to disclose all of the WeChat messages between himself and Mr Xu in the affidavit of documents affirmed by Ms An (on behalf of GAG) on 11 January 2023. In Schedule 2 of this affidavit, GAG referred to WeChat messages between Mr Chen and Mr Xu during the period June 2020 to February 2021 which could no longer be accessed as Mr Chen had ‘changed telephone and failed to obtain data history that existed in the previous telephone’. Of significance, neither the 18 August WeChat message nor the 26 October WeChat messages were discovered in Schedule 1 or Schedule 2 of the affidavit.

Mr Chen denied that he had intentionally deregistered his WeChat account at the end of October 2021 as he did not want anyone to see the WeChat messages. Mr Chen said that he had three mobile numbers - one specifically for family business, one for his business in China, and another number for communicating with his friends and business in Australia. Mr Chen said that he stopped using one of his mobile phones as he was no longer in China, and since coming to Australia did not need that many numbers. Even if I accept there was no deliberate attempt by Mr Chen to prevent access to such WeChat messages, there was no satisfactory explanation as to why Schedule 2 only listed WeChat messages for what I consider to be a misleadingly narrow period.

Having considered the whole of the evidence, I am satisfied that Mr Chen did not fully disclose to GAG’s solicitor all of his dealings relevant to the settlement of Land A. Most notably, I am satisfied that Mr Chen did not cause Mr Cooke, on or around 18 August 2021, to be informed of the agreement between Nevas and MYG to extend the time for settlement. It is also apparent that Mr Cooke was not initially informed that MYG had complied with its obligations under the nomination deed to pay the sum of $521,500, and that such payment had been paid into a bank account(s) nominated by Mr Chen. In addition, the PDF of the variation deed was not provided to Mr Cooke in a timely manner. Whilst none of these matters are critical to what I must ultimately decide in this matter, such findings are relevant to explain my reservations as to the reliability of Mr Chen’s evidence.

Mr Cooke’s evidence

Mr Cooke is a partner at Brand Partners Commercial Lawyers, and the former solicitor of GAG. Mr Cooke gave evidence as to his involvement in the proposed settlement from the time he was first instructed to act on behalf of GAG, GBG and GCG in October 2017. Mr Cooke recalled that Mr Qi was ‘like an agent or advisor’, assisting both Nevas and GAG in facilitating the transaction in respect of Land A.

Mr Cooke said that in respect of the request for an extension to the settlement date on Land C, he got instructions from GAG to allow MYG to negotiate directly with the vendor, on the understanding that GAG would need to give final approval.

Mr Cooke was the solicitor who thereafter assisted in the preparation of the nomination deed.

Mr Cooke said that in approximately June 2021 Ms Guan telephoned him to ask if MYG had contacted him about seeking an extension on Land A. Mr Cooke said that he informed Ms Guan he had not been contacted by anyone in respect of this and was not aware of any discussions taking place. Mr Cooke confirmed the contents of the email he sent to Mr Han on 10 September 2021. Thereafter, Mr Cooke said:

The next major event that I can recall specifically that's in relation to this was a response from [Mr Han] telling me that the settlement date had been varied to a different date and that there was no longer any requirement to provide any of the evidence of the ability to settle, as I had indicated in my email of 10 September… I had no knowledge of any rescheduling or change to the settlement date of the A land. The first time I received anything confirming that or advising of that was this email of 4 October.

I accept Mr Cooke was a witness of truth and I have no hesitation in accepting his evidence.

Ms An’s evidence

There were several aspects of Ms An’s evidence which I considered to demonstrate her unreliability as a witness.

Ms An initially accepted that during a meeting with Mr Xu and her husband in November 2020, the discussion as to the difference between the settlement dates between Land A and Land C was ‘roughly one year’. However, she later explained that this meant ‘less than one year’. This subsequent clarification appeared self-serving, particularly in circumstances where, based on GAG’s claim, the difference between the two settlement dates was 27 days short of one year.

Ms An’s evidence that she directed Ms Guan to inform Mr Cooke of the contents of the 18 August WeChat message and her husband’s conversation with Mr Xu was not corroborated by Mr Cooke (nor by Ms Guan). In circumstances where I accept Mr Cooke’s evidence that he was diligent in keeping file notes, and was not aware of the extension on Land A being granted until he received Mr Han’s email on 4 October 2021, I am not satisfied that Ms An directed Ms Guan to convey to Mr Cooke the contents of this message. There is no reason to doubt that Ms Guan would pass on a message to Mr Cooke if asked, and Ms Guan could not specifically recall advising Mr Cooke of the contents of this WeChat message. I considered Ms An’s evidence on this to be unreliable.

The affidavit affirmed by Ms An on 11 January 2023 (as at [94] above) was clearly deficient and misleading. No satisfactory explanation was offered as to why the 18 August WeChat message and 26 October WeChat messages were not disclosed in this affidavit.

Ms Guan’s evidence

Ms Guan is a friend of Mr Chen and Ms An. She has resided in Australia since her mid-twenties and currently works in property sales. Ms Guan gave evidence in English. She said that she had provided interpreting assistance to Mr Chen and Ms An since 2017 in respect of the purchases of Lands A, B and C. Much of the tenor of Ms An’s evidence was more consistent with her being an advocate for Mr Chen and Ms An, than that of an impartial witness.

Mr Sharma’s evidence

Mr Sharma gave evidence that from September to November 2020 he had telephone conversations with Mr Qi as to the possibility of the settlement date on Land A being extended, or the possibility of a lease back arrangement. Mr Sharma said that these discussions occurred at this time as Land A was being used as a chicken farm and a long lead time was needed in the event that the farm was to cease operations. Mr Sharma said that in early 2021 he was informed by Ms Madden via email that GAG had nominated another purchaser. Mr Sharma said that he continued to have discussions with Mr Qi, but did not know whether Mr Qi was acting for the purchaser or nominee.

Mr Sharma said that an extension of the settlement date was negotiated between him and Mr Qi, and that he agreed not to insist on settlement with MYG before 24 November 2023 on the basis that he would be paid upfront payments of 10% interest over two years. Mr Sharma said that entering into the extension agreement with MYG ‘didn’t ring any alarm bells’, as MYG had been nominated by GAG. Further Mr Sharma could not recall a request from Ms Madden to not discuss the extension agreement with GAG.

In respect of Mr Cooke’s letter of 26 October 2021, in which he indicated that GAG remained ready, willing and able to complete settlement on 24 November 2021, Mr Sharma said he was ‘happy’ to hear this, as it did not matter to him who Nevas settled with. Mr Sharma said that as a businessperson he was open to the settlement occurring in 2021, and if required, he could close down the chicken farm and provide vacant possession within a two week period. However, Mr Sharma said that he did not hear anything further from GAG to proceed with the settlement in that year.

I accept Mr Sharma was a witness of truth.

Submissions
MYG’s submissions

MYG submitted that the settlement date in the nomination deed was 2021, as was the contract of sale annexed to the nomination deed. It was put that in accordance with the ‘entire deed’ clause contained in the nomination deed, the settlement date was the end of 2021 rather than 24 November 2021. Thus, the 45 day deadline to provide evidence of financial capacity to settle had not yet arrived at the time GAG sent the breach notice on 26 October 2021.

MYG referred me to the principles of construction in commercial contracts summarised by Riordan J in Siemens Gamesa Renewable Energy Pty Ltd v Bulgana Wind Farm Pty Ltd.[4] MYG submitted that as there was no ambiguity in a settlement date of ‘2021’, the evidence of surrounding circumstances was irrelevant for the purpose of construing the terms of the nomination deed.
[4][2020] VSC 126.

It was put that the evident purpose of cl 2.19 was for GAG not to be left belatedly having to settle on Land A, in the absence of MYG’s financial means to do so. The clause had no work to do when Nevas had agreed to forbear any right to insist on settlement of the contact of sale by MYG until 2023.

MYG urged me to reject GAG’s allegations that MYG had repudiated the nomination deed by entering into the variation deed with Nevas to the exclusion of GAG. MYG submitted that it had sought GAG’s permission to ask Nevas for an extension, and that Mr Chen had assented to that course and remained agreeable when Mr Xu told him in August 2021 that Nevas had finally agreed to the extension.

It was said that, to the extent cl 1(a) of the variation deed purported to vary the settlement date, it was ineffective as the contract of sale was between GAG and Nevas. Further, MYG submitted that the title of the agreement between MYG and Nevas was irrelevant. The same can be said in respect of the assignment clause which purported to grant a right to MYG to assign its rights under the contract of sale, as it was accepted that MYG, as nominee, had no such rights under the contract of sale.

MYG submitted that Nevas was bound not to exercise its rights as vendor under the contract of sale inconsistently with the terms of the variation deed. It was said that this meant that Nevas was contractually bound to forbear taking any action against GAG (or MYG) to terminate or enforce settlement before 24 November 2023.

Further, MYG submitted that it was clear to GAG that MYG and Nevas could not affect GAG’s rights without GAG’s consent. It was put that Mr Cooke repeatedly (and correctly) commented to this effect in his communications of 6, 14, 22, and 26 October 2021.[5] Further, it was claimed that the responses of Mr Han and Ms Madden did not assert otherwise.
[5]As detailed at [62]-[63], [65], [70]-[71] above.

MYG submitted that it had not evinced an intention not to be bound by cl 2.5(a) of the nomination deed, by virtue of cl 1(a) of the variation deed. It was said that it gave valuable consideration to Nevas in exchange for Nevas’ forbearance of its right to terminate the contract or enforce settlement prior to 24 November 2023. It was further submitted that MYG and Nevas’ entry into the variation deed did not deprive GAG of any benefit for which it contracted in the nomination deed, including that it received full reimbursement of the purchase monies it had previously paid for Land A.

Further, it was put that MYG’s entry into the variation deed reaffirmed its obligation to settle on Land A with Nevas, thereby evincing a (continued) intention to be bound by the nomination deed.

GAG’s submissions

GAG submitted that the date of settlement in the contract of sale was 24 November 2021. It was said that under cl 9 of the heads of agreement, the date for settlement was to be four years from the date the formal contract of sale was signed. GAG submitted that, as the contract of sale was signed on 24 November 2017, when the two documents are read together, the terms of the contract of sale can be construed to define the settlement date on Land A as 24 November 2021.

In respect of the settlement date under the nomination deed, GAG submitted that the heads of agreement was part of the surrounding circumstances to be considered in the construction of the nomination deed, notwithstanding MYG was not a party to the heads of agreement. Further, it was said that on the basis that the execution of the nomination deed was complete on 23 February 2021, the surrounding circumstances at that time included the agreement reached between MYG and Nevas, through Mr Qi, for the extension of the settlement date to 24 November 2023. In view of those surrounding circumstances, I was urged to find that the settlement date in the nomination deed was 24 November 2021.

GAG submitted that without the mutual consent of the parties to the contract of sale, the variation deed could not vary the contractual rights and obligations of the parties under the contract of sale, which included the right and obligation to settle Land A on 24 November 2021. It was put that the authorities are clear on the legal effect of a nomination, being that a substitute purchaser does not become a party to the contract of sale, and a nomination does not effect a novation of the contract.[6]
[6]Citing Little Bourke Street Pty Ltd v Lonsdale Street Café Pty Ltd & Ors [2009] VSC 133, [18]-[30]; Commissioner of State Revenue v Politis [2004] VSC 126, [11].

GAG submitted that in circumstances where the settlement date under the contract of sale remained unchanged, it followed that MYG’s obligation to provide, 45 days prior to settlement, documentary evidence of its ability to pay all amounts required to be paid at settlement, remained. GAG submitted that the failure of MYG to provide the requisite documentary evidence was a breach of cl 2.20 of the nomination deed. Further, if such failure was not remedied within 14 days of being provided with a written notice, then GAG was entitled to rescind the nomination. GAG submitted that the following had occurred: (i) MYG failed to provide documentary evidence on or before 10 October 2021; (ii) GAG gave written notice to MYG of its failure by serving the breach notice, and (iii) as MYG failed to remedy the matter within 14 days of receiving that written notice, the rescission notice was validly served. In respect of the breach notice erroneously referring to cl 2.21 and not cl 2.20, this was said to be of no consequence as a reasonable recipient of the notice would have been left with no doubt as to its meaning.[7]
[7]Citing Catley v Watson (1983) V ConvR 54-003, 62-115.

GAG submitted that MYG had repudiated the nomination deed by entering into the variation deed without recourse to GAG. It submitted that MYG’s attempts to keep the nomination deed out of the hands of Mr Chen and his lawyers because of non-existent ‘confidentiality obligations’, was repudiatory conduct. GAG submitted that the confidentiality clause was ill-defined and self-serving of both Nevas and MYG.

Further, it was submitted that MYG’s conduct in entering into the variation deed, and the making of payments from MYG to Nevas under that deed (which purported to effect a novation of the contract from GAG to MYG), was also repudiatory conduct. It submitted that GAG remained liable to complete settlement under the contract of sale if MYG did not settle and therefore, if enforceable, the variation deed exposed GAG to additional payment obligations than it already had under the contract of sale.

GAG noted that under the nomination deed MYG was prohibited from assigning its rights or nominating a substitute or additional purchaser without GAG’s consent,[8] yet under the assignment clause in the variation deed, MYG reserved its right to do so without reference to GAG.[9] GAG submitted that this was in direct opposition to Mr Chen’s evidence that he informed Mr Xu that the land must not be transferred to a third party if the extension was approved by Nevas.
[8]Clause 2.18 of the nomination deed.
[9]Clause 5 of the variation deed.

It was submitted that in accordance with the principles outlined in Pacific Brands Sport & Leisure Pty Ltd v Underworks Pty Ltd,[10] the conduct of MYG both during and after its entry into the variation deed evidenced a knowing disregard of its contractual obligations to GAG under the nomination deed. For those reasons, I was urged to find that MYG had repudiated the nomination deed.
[10](2006) 149 FCR 395, [102].

GAG urged me to reject MYG’s contention that it had received an assurance from Mr Chen (on behalf of GAG) that MYG could ask Nevas to extend the settlement date. In addition, that MYG informed GAG that Nevas had agreed to the extension and that GAG did not object to the extension. It was submitted that GAG had a right to review the proposed variation deed, including to sign off on or vet the terms within it.

Further, GAG submitted that neither MYG nor Nevas sought permission to enter into the variation deed, but instead took positive steps to keep it beyond GAG’s knowledge. It was submitted that ‘such conduct is the antithesis of waiver and acquiescence which requires a transparency of the material facts.’

GAG submitted that it was implausible that someone with Mr Chen’s business experience would not have requested a copy of the agreement when informed of its existence by Mr Xu on 18 August 2021. It is equally implausible that when told of the agreement, Mr Chen would have immediately and unconditionally agreed to MYG’s entry into such an agreement with the vendor without seeing the document, and without it being reviewed by his lawyers.

GAG submitted there was no corroborative evidence of MYG’s claim of waiver or acquiescence by GAG in respect of the agreement between MYG and Nevas to extend the time for settlement. In respect of waiver, the circumstances did not support a finding that there had been ‘a voluntary or intentional relinquishment or renunciation’[11] by GAG of its rights under the deed of nomination. In respect of acquiescence, the circumstances did not support a finding that MYG might have reasonably assumed GAG would never exercise its rights, based upon its knowledge of the facts from which such rights arose.[12]
[11]Ibid [113].
[12]Citing Transview Properties Limited v City Site Properties Limited [2008] EWHC 1221 (Ch), [149].

In addition to GAG’s counterclaim against MYG, it also submitted that Nevas, by entering into the variation deed, demonstrated an intention not to be bound by its contractual obligations to GAG. Under the variation deed, Nevas accepted an additional $1,441,000 in interest payments from MYG to extend the settlement by two years and also granted MYG an option to assign its rights as nominee to a third party. GAG submitted that those rights were unavailable to MYG under the contract of sale. It was submitted that it was not to the point that Nevas now belatedly asserts that the variation deed was ineffective at law.

In view of the above, GAG submitted that an order for specific performance against Nevas was justified on the basis that Nevas had repudiated its obligations under the contract of sale.

GAG submitted that as the settlement date under the contract of sale had not been extended to 24 November 2023, it remained as 24 November 2021. It was submitted that to re-establish a new settlement date it was for the parties, acting reasonably, to negotiate and agree upon a new date.[13] GAG submitted that as the completion date of 24 November 2021 has now passed and time is no longer of the essence, GAG would not oppose a new settlement date of 24 November 2023, or any other reasonably nominated date, as long as it obtains sufficient notice so that it can arrange its finances accordingly.
[13]Citing Strickland v Grieve (1996) NSW Conv R 55-762, 55, 859.

Nevas’ submissions

Nevas submitted that whilst time was expressed to be ‘of the essence’ in the contract of sale, it was common ground that the essentiality of time had been waived.

It was put that GAG was not entitled to a declaration that the contract is binding between Nevas and GAG, as such a declaration would be otiose. Nevas accepted it is bound by the contract of sale, and submitted it has never advanced anything to the contrary.

In relation to an order that the contract be specifically enforceable against Nevas at the suit of GAG, it was submitted that Nevas’ obligation to perform its settlement obligations has not yet arisen. Nevas stated that until this proceeding is determined, Nevas cannot know whether it is to complete the contract with MYG or GAG. Once that is known, it will be a matter for the entity who is to settle on the purchase to agree with Nevas to complete on reasonable notice.

Nevas submitted that in the events that occurred leading up to and on 24 November 2021, any obligation Nevas had to settle the contract on that date was dispensed with- first, by agreement with MYG in the deed of variation, and second, on 24 November 2021 when GAG ‘stepped back in’ to the contract and the parties’ solicitors commenced discussions as to a new settlement date. It was put that GAG and Nevas had not subsequently agreed to a new settlement date and (to date) GAG has not given Nevas notice fixing a new settlement date.

Nevas submitted that there was no basis for GAG to contend that it had repudiated the contract of sale by entering into the variation deed. Nevas submitted that despite the title of the variation deed and the terminology within it, Nevas and MYG were unable to vary the contract of sale, as MYG was nominee and not a party to that contract.

Nevas submitted that its conduct in entering into the variation deed was not a renunciation of the contract of sale – as a whole or a fundamental obligation under it. It was put that at the time Nevas entered into the deed with MYG it was contractually obliged, by reason of the direction given to it by GAG on 15 April 2021, to perform its settlement obligations by settling with MYG. Thus, under the deed, Nevas would forbear exercising any remedies it had against GAG under the contract if MYG did not tender performance of GAG’s settlement obligations on 24 November 2021. Further, Nevas dispensed with GAG’s obligation to tender performance of its settlement obligations under the contract on that date. It was put that Nevas’ forbearance was an election by it not to rely on the remedy of termination (conferred on Nevas) under the contract if GAG failed to tender settlement on 24 November 2021. In addition, it was put that Nevas’ election was irrevocable, as it was made for valuable consideration.

Nevas submitted that under the variation deed a benefit was conferred on MYG that necessarily extended to GAG as the named purchaser under the contract. It could not be said that such a benefit constituted repudiation by Nevas.

Nevas submitted that its intention and understanding was that it remained bound by the contract of sale if GAG revoked the nomination. It submitted that this was evident in what occurred when GAG informed Nevas that it had revoked MYG’s nomination – it agreed to enter into further discussions to fix a new settlement date.

Findings and analysis
Initial observations

As stated previously, and is apparent from the chronology above, no party is without fault for the issues which arise in this proceeding.

The contract of sale simply stated the date of settlement was to be ‘2021’, with no mention of a day or month, despite the heads of agreement stating that it was to be four years from the date the contract of sale was signed. The substitution deed and the nomination deed were both silent as to a specific date of settlement, and annexed a copy of the contract of sale which had not been amended in accordance with the February 2020 email communication. The variation deed was entered into between MYG and Nevas, without the inclusion of GAG. The variation deed had a confidentiality clause that served no apparent purpose, and caused an unnecessary delay in the communication of the terms of that agreement to GAG. The mess created by such poor drafting of legal documents contributed to the present dispute between the parties.

There is also the unco-operative acts or omissions of both MYG and GAG in their dealings in respect of the extension on the settlement date. No reasonable explanation was provided in respect of why MYG did not instruct its solicitors to provide GAG with a copy of the variation deed at the time it was executed. The terms of this deed did not expose GAG to increased liability or exposure. Given Mr Chen was ‘happy’ when he learned that the extension had been granted in August 2021, it should be assumed that if it had been sent promptly, GAG would have provided its consent in a timely manner in accordance with its obligations to do all reasonable things required of it to give effect to the nomination.[14] Further, there was no explanation from MYG as to why, when Mr Cooke wrote to Mr Han on 10 September 2021 to remind MYG of its obligation to provide evidence of its ability to settle no later than 45 days before settlement on 24 November 2021, that Mr Han did not respond promptly. Nor is there is any explanation as to why, in Mr Han’s letter of 4 October 2021, he was evasive as to the proposed new date of settlement, given by that time the variation deed had been signed months earlier.
[14]Clause 2.3(c) of the deed. See [35] above.

Equally, based upon my findings of fact outlined above at [96], I am satisfied that it was unreasonable for GAG not to inform Mr Cooke of the two year extension when Mr Xu told Mr Chen of this on 18 August 2021 (if not before that date). I also consider that there was no reasonable explanation as to why Ms Guan (or Mr Chen or Ms An) did not promptly provide Mr Cooke with a copy of the variation deed on 26 October 2021 for advice as to whether it was necessary for GAG to vary the contract of sale with Nevas, consistent with the terms agreed upon by MYG and Nevas. Ms Guan’s suspicion as to the validity of the variation deed does not explain why she did not provide it to Mr Cooke for him to discuss with the solicitors for MYG and Nevas. In view of this calculated decision, GAG’s instruction to Mr Cooke for him to send a breach notice on the very day this document was received, was disingenuous.

Failure to call witnesses

I note that MYG did not call Mr Yang to give evidence, and GAG did not call Mr Mo Chen to give evidence. As directors of the companies at times relevant to the dispute in this proceeding, it is expected both could have given evidence as to the dealings between the parties, including when MYG knew the settlement date for Land A was 24 November 2021, and when GAG knew that MYG had been granted a two year extension on the date of settlement. Neither party invited me to draw an adverse inference from the absence of these witnesses.

GAG invited the Court to draw an adverse inference from MYG’s failure to call Mr Han.[15] It was put that Mr Han could have been expected to give evidence as to his knowledge of the date of settlement on Land A at the time MYG executed the nomination deed. GAG submitted that it ‘defied reality’ that an experienced commercial lawyer, such as Mr Han, would not have inquired about (or otherwise made himself aware of) the timing of his client’s future obligations to settle on Land A at such time. Whether or not that is so, for the reasons given below, I am not satisfied that the date of settlement contained in the nomination deed was ambiguous. There is therefore no need for me to consider the surrounding circumstances, and thus Mr Han’s knowledge and the subjective intention of his client at that time, is irrelevant.
[15]Citing Jones v Dunkel (1959) 101 CLR 298 at 308, 312, 320-21.

GAG also submitted that I should draw an adverse inference from the failure of MYG to call Mr Qi as a witness. It was put that Mr Qi was the agent acting for MYG at the time of the commercial negotiations which led to the variation deed. GAG said that, at that time, Mr Qi knew that the settlement date in the contract of sale was 24 November 2021 as he was the author of the heads of agreement, and was the real estate agent acting on behalf of Nevas at the time both the heads of agreement and the contract of sale were entered into.

However, according to Mr Sharma’s evidence, when Mr Qi first approached him in respect of an extension on the settlement of Land A, he was acting on behalf of the purchaser, who I note at that time was GAG. Later in his evidence, Mr Sharma said that he was never sure whether Mr Qi was acting for MYG or GAG. In email correspondence sent to Mr Sharma on 22 February 2021, Mr Qi queried if Nevas would pay him a small fee for his assistance with the negotiations between the parties over the extension. As at 26 October 2021, when it was apparent that a dispute had arisen between MYG and GAG, Mr Qi informed Mr Cooke he was ‘trying to stay out of [the] dispute.’ I also note that Mr Cooke gave evidence that he considered Mr Qi was assisting both Nevas and GAG at the time the contract of sale was entered into.

A fair reading of the whole of the evidence, and in particular the email correspondence and telephone notes involving Mr Qi, is that, from 2017 until 2021, Mr Qi was not in any particular party’s ‘camp’. That is, given he assisted each party at different steps along the way, it cannot be said that Mr Qi was expected to have been called by one party rather than the others. There is no evidence before me as to whether or not Mr Qi was available to give evidence at the trial, nor whether any of the parties or their solicitors had spoken to Mr Qi as to the evidence he might give. In the circumstances, I am not prepared to draw an adverse inference against any party for the failure to call Mr Qi as a witness.

Material findings, analysis and answers to the questions asked
The role of Mr Chen

At all material times, Mr Chen was acting in the capacity as agent of GAG. Although not a director of the company, Mr Chen’s conduct was consistent with him having authority to act on behalf of GAG. This inference can be drawn from: Mr Chen signing the heads of agreement; his ongoing dealings and negotiations with Mr Xu via WeChat and in person regarding Lands A and C from 2017 to 2021; his communications with Ms Guan, who in turn instructed Mr Cooke in respect of the steps he should take on behalf of GAG; and in the direction provided to MYG to pay the $521,500 instalment into bank accounts nominated by Mr Chen.

The date of settlement in the contract of sale

The first question to be answered relevant to the determination of this proceeding is what is the proper construction of the date of settlement under the contract of sale for Land A. MYG contended that in stating that settlement was due on ‘2021’ this term meant a date up to and including 31 December 2021. GAG submitted that, when read together with the heads of agreement, the date of settlement was 24 November 2021.

In Siemens Gamesa, the principles of contractual interpretation were outlined as follows:

To construe the terms of a commercial contract, the Court asks ‘what a reasonable businessperson would have understood those terms to mean’. To answer that question, ‘the reasonable businessperson [is] placed in the position of the parties’, and the Court applies the following principles:
(a)The terms are construed objectively and the subjective intentions of the parties are irrelevant.
(b)The objective approach requires reference to the text and its ordinary meaning, together with:
(i)the context, being the entire text of the contract including matters referred to in the text; and
(ii)the purpose.

These matters will ordinarily be identified by reference to the contract alone, but evidence of mutually known objective background circumstances relevant to the purpose is admissible ‘no matter how clear the “ordinary meaning” of the words’. Identification of purpose may allow admission of evidence of the genesis of the transaction, the background, the context and the market in which the parties are operating.
(c)Unless a contrary intention appears in the contract, the court is entitled to approach the task of interpretation on the assumption that the parties intended to produce a commercial result, and should construe it so as to avoid a commercial nonsense. However, the court does not weigh the commerciality of the agreement, and business commonsense is a topic on which reasonable minds may differ.
(d)If, after completion of this process, the language used in the contract ‘is ambiguous or susceptible of more than one meaning’, then evidence of surrounding circumstances external to the contract (‘surrounding circumstances’) is admissible to assist with interpretation of the contract (‘the ambiguity requirement’).
(e)Surrounding circumstances are:
events, circumstances and things external to the contract which 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.

(f)However, ‘evidence of the parties’ statements and actions reflecting their actual intentions and expectations’ is inadmissible. Although evidence of prior negotiations is admissible to establish objective background facts known to both parties and the subject matter of the contract, evidence of negotiations reflective of actual intentions and expectations is not receivable.
(g)Post contractual conduct is inadmissible to construe the terms of the contract. However, the parties’ subsequent communications may be relevant to determine whether the parties intended to enter into a binding contract.[16]

[16]As above (n 4) [87].

In Lopes v Taranto,[17] the Court of Appeal further explained that:

...in every case and whether or not there is ambiguity in the language, the Court should have regard to objective evidence of facts known to both parties as to commercial purpose.[18]

[17][2018] VSCA 288.

[18]Ibid [71].

The ordinary meaning of the text, within the context of the contract of sale as a whole, invites a construction that settlement was to be on a date, yet to be agreed, in 2021. However, in taking an objective approach as outlined in Siemens Gamesa and Lopes, the date of settlement must be construed by reference not only to the text and its ordinary meaning, but also the context of the agreement, its purpose, and mutually known objective background circumstances.

I am satisfied the heads of agreement is objective background evidence. It was the genesis of the transaction between Nevas and GAG’s parent company, which in turn led to GAG being nominated to sign the contract of sale. The heads of agreement expressly stated that the settlement was to occur four years from the signing of the contract of sale. Therefore, this clause gives background to the contract of sale referring to settlement being due in 2021. It logically follows from there being a four year settlement period, that this period was likely to run from a day within the months following the execution of the heads of agreement. In circumstances where the contact of sale was signed on 24 November 2017, I am satisfied that a reasonable businessperson in the position of the parties, when also aware of the heads of agreement, would have understood the date of settlement under the contract of sale as being on 24 November 2021.

The date of settlement in the nomination deed

The construction of the date of settlement in the nomination deed is necessarily a different task, as MYG was not a party to the heads of agreement or contract of sale.

The nomination deed was silent as to the date of settlement. The deed annexed a copy of the contract of sale (outlined at [17] above) which stated that settlement was due in 2021, with no specified day.

Unlike the construction of the contract of sale, as the nomination deed was an agreement between MYG and GAG, the heads of agreement is not a mutually known objective background circumstance, and therefore cannot be taken into account in my consideration of the interpretation of this deed. Despite GAG urging me to consider the heads of agreement in my construction of the nomination deed, as MYG was not a party to this agreement, to do so would be inconsistent with the established principles outlined above.

A plain and ordinary reading of this deed is that the settlement date on Land A was to be on a day in 2021, and that a specific date had not been agreed to at the time the contract was entered into. The objective background to the nomination deed was that the contract of sale had been signed on 24 November 2017, and under that document, settlement was to occur in 2021. Given it provided a lengthy four year settlement period, the lack of specificity in a date of settlement within the contract of sale would not be surprising to an objective observer. A reasonable businessperson placed in the position of the parties, considering the nomination deed and annexed contract of sale, would understand settlement of the land was to occur on a day within 2021, until that year’s end, with the precise date not yet fixed. This reading does not result in a ‘commercial nonsense’ or ‘working commercial inconvenience’.

The substitution deed is a mutually known background circumstance relevant to the construction of the nomination deed. The absence of a specific settlement date in the substitution deed, together with the annexed copy of the contract of sale stating settlement was due in 2021, is consistent with the above construction of the nomination deed.

As the language in the deed is not ambiguous or susceptible to more than one meaning, I have not considered the ‘surrounding circumstances’. Therefore, although much was made by GAG as to when Mr Xu first knew GAG and Nevas had agreed that the date of settlement on Land A was to be 24 November 2021, Mr Xu’s knowledge and subjective intentions at that time MYG entered into the nomination deed is irrelevant to the construction of the date of settlement under that deed.

GAG’s proposition to the above construction was that the settlement time may therefore mean ‘by 11:59pm on 31 December 2021’. Whilst a settlement at that hour is not possible under the Property Exchange Australia (PEXA) system, the above construction of the term in the nomination deed provided for settlement on Land A to occur up to and including 31 December 2021.

Variation deed and the allegations of repudiatory conduct

On 16 July 2021, MYG and Nevas formally agreed to extend the settlement date to 24 November 2023, on the basis that MYG paid 10% interest per annum for each of the two years of the extension. Despite its title, and the attempt in this document to expressly extend the settlement date in the contract of sale to 24 November 2023, this deed was incapable of varying the date of settlement under the contract of sale. GAG was not a party to the variation deed, and the nomination deed did not amount to a novation of the contract of sale of Land A to MYG.[19]
[19]Little Bourke Street Pty Ltd v Lonsdale Street Cafe Pty Ltd & Ors [2009] VSC 133, [18]-[30]; Commissioner of State Revenue v Politis [2004] VSC 126, [11].

GAG submitted that the making of this variation deed constituted repudiatory conduct on the part of both MYG and Nevas.

In Koompahtoo Local Aboriginal Council v Sanpine Pty Ltd,[20] Gleeson CJ, Gummow, Heydon and Crennan JJ explained the term repudiation may be used in two senses:

First, it may refer to conduct which evinces an unwillingness or an inability to render substantial performance of the contract. This is sometimes described as conduct of a party which evinces an intention no longer to be bound by the contract or to fulfil it only in a manner substantially inconsistent with the party's obligations. It may be termed renunciation. The test is whether the conduct of one party is such as to convey to a reasonable person, in the situation of the other party, renunciation either of the contract as a whole or of a fundamental obligation under it… Secondly, it may refer to any breach of contract which justifies termination by the other party. It will be necessary to return to the matter of classifying such breaches. Campbell J said this was the sense in which he would use the word “repudiation” in his reasons. There may be cases where a failure to perform, even if not a breach of an essential term (as to which more will be said), manifests unwillingness or inability to perform in such circumstances that the other party is entitled to conclude that the contract will not be performed substantially according to its requirements. This overlapping between renunciation and failure of performance may appear conceptually untidy, but unwillingness or inability to perform a contract often is manifested most clearly by the conduct of a party when the time for performance arrives. In contractual renunciation, actions may speak louder than words.[21]

[20](2007) 233 CLR 115.

[21]Ibid [44].

Further, in Pacific Brands Finn and Sundberg JJ, described how a party’s conduct is to be judged in determining if a contract was repudiated:
(i)A party will have repudiated a contract if, by words or conduct, it evinces an intention no longer to be bound by it or if that party shows it intends to fulfil the contract only in a manner substantially inconsistent with its obligations and not in any other way: Shevill v Builders Licensing Board (1982) 149 CLR 620 at 625-626; Laurinda Pty Ltd v Capalaba Park Shopping Centre Pty Ltd (1989) 166 CLR 623.
(ii)The party’s conduct is to be judged objectively by reference to the effect it would be reasonably calculated to have upon a reasonable person: Laurinda Pty Ltd v Capalaba Park Shopping Centre Pty Ltd, above, at 658; Satellite Estate Pty Ltd v Jacquet (1968) 71 SR (NSW) 126 at 150.
(iii)A party that acts on a genuine but erroneous view of its obligations under the contract will not for that reason alone have repudiated it. That party may still be willing to perform the contract according to its tenor: DTR Nominees Pty Ltd v Mona Homes Pty Ltd (1978) 138 CLR 423 at 431-432; Woodar Investment Development Ltd v Wimpey Construction UK Ltd [1980] 1 WLR 277. But persistence in an untenable construction will ordinarily be regarded as repudiatory: Summers v Commonwealth (1918) 25 CLR 144 at 152; and see Chitty on Contracts, above, par 25-018.[22]
[22]As above (n 10).
Applying those principles to the conduct of MYG and Nevas, I am not satisfied that either party has repudiated its respective agreements with GAG. The legal inadequacies of the document prepared by MYG’s and Nevas’ solicitors, and erroneously entitled variation deed, is insufficient to constitute repudiation when the apparent intention of the deed was to achieve the following:

(a) In return for consideration paid to it, Nevas would dispense with MYG’s performance of GAG’s settlement obligations on 24 November 2021, and defer the settlement date under the contract of sale until 24 November 2023.

(b) Nevas would not exercise any remedies it had against GAG under the contract of sale if MYG did not tender performance of the contract of sale on 24 November 2021; and Nevas dispensed with GAG’s obligation to tender performance of its settlement obligations on that date.

The confidentiality clause in the variation deed did not define what the confidential information was, and its application, if any, was therefore uncertain. The assignment clause was of no legal effect, as GAG was not a party to the deed. Therefore, when judged objectively, and also taking into account the matters referred to below, the execution of the variation deed and the terms of it, were insufficient to entitle GAG to conclude that MYG and Nevas would not comply with their contractual obligations to GAG.

Specifically in respect of MYG, I am not satisfied that its conduct was consistent with it no longer intending to fulfil its obligations to settle on Land A, pursuant to the nomination deed. I am satisfied that Mr Xu sought Mr Chen’s permission to seek an extension on the settlement. Mr Chen himself indicated that he was ‘happy’ when Mr Xu informed him in August 2021 that the extension had finally been agreed to. On 24 November 2021, in accordance with the variation deed, MYG paid Nevas a sum of $2,685,500. To use the words of the High Court in Koompahtoo, such ‘actions may speak louder than words.’[23] The payment of such a significant sum of money is inconsistent with MYG not intending to comply with its obligations to settle on Land A as the nominee purchaser.
[23]As above (n 20), [44].

Under the variation deed, there was no increased liability or exposure to GAG to make any additional payments than it already had under the contract of sale.

Further, in circumstances where I am satisfied that Mr Xu informed Mr Chen of the terms of the extension agreement on or before 18 August 2021, MYG’s delay in not providing GAG with a copy of the variation deed sooner in time is insufficient to contradict MYG’s other acts which were, as explained above, consistent with it intending to be bound by and perform its obligations under the nomination deed.

I am not satisfied that such acts by MYG, whether considered separately or collectively, would convey to a reasonable businessperson, in the situation of GAG, an intention by MYG to repudiate either whole or part of the nomination deed.

In respect of Nevas, I am also not satisfied that it no longer intended to be bound to the contract of sale. At the time Nevas entered into the variation deed, it was contractually obliged to settle with MYG pursuant to the direction given to it on 15 April 2021. Under that deed, Nevas agreed to extend the time for MYG to comply with its settlement obligations, in return for valuable consideration.

Further, under the variation deed, Nevas did not evince an intention not to comply with its own obligations to settle with GAG if it revoked the nomination. Indeed, that is what happened on 24 November 2021. Thereafter, Nevas’ and GAG’s solicitors attempted to agree to a new settlement date for GAG to settle on Land A. Such conduct would not have conveyed to a reasonable businessperson in the situation of GAG renunciation by Nevas, either of the contract of sale as a whole, or of a fundamental obligation under it.

It is unnecessary for me to make a finding in relation to what occurred between Mr Xu and Mr Chen during their conversation on 18 August 2021. Mr Xu denied that Mr Chen asked him for a copy of the variation deed so that it could be reviewed by GAG’s solicitors. At first blush, it would appear surprising that Mr Chen, as an experienced property developer who had regularly engaged solicitors to act on behalf of the related companies in respect of the transactions regarding Lands A, B and C, would not seek a copy of the document at this time. However, in circumstances where I am not satisfied that Mr Chen caused the news of the extension agreement to be conveyed to Mr Cooke at the relevant time, I have reservations as to whether or not Mr Chen did, in fact, ask for a copy of the agreement, or whether for some unknown reason (and contrary to the evidence of Ms An and Ms Guan) he kept this information to himself.

Validity of the breach notice and rescission notice

I accept MYG’s submission that the evident purpose of cl 2.19 of the nomination deed was for GAG not to be left belatedly having to settle the contract of sale, in the absence of MYG’s financial means to do so. Given my finding above that under the nomination deed the date for settlement was capable of being up to and including 31 December 2021, MYG was not in breach of this clause when the breach notice was sent. Therefore, the breach notice and rescission notice were both invalid and of no legal effect.

In view of this finding, it is not necessary for me to consider MYG’s claim that the rescission notice was ineffective as it erroneously referred to a breach of cl 2.21 and not 2.20, and provided seven and not 14 days to remedy the alleged default.

Further, given I reject GAG’s submission that MYG and/or Nevas entering into the variation deed amounted to repudiatory conduct, and as I am satisfied that this agreement, in the absence of a valid rescission notice, was capable of delaying the time for MYG to settle on its obligation to settle on Land A until 24 November 2023, the time upon which cl 2.19 requires MYG to provide GAG with documentary evidence of its ability to settle, has not yet arisen.

24 November 2021 and the remaining issues

On 24 November 2021, GAG gave Nevas notice of its revocation of the nomination deed, and did not demand settlement of Land A on that day. The events on this day, and the conduct of both GAG and Nevas, constituted an agreement to dispense with the requirement to settle on 24 November 2021.

Consistent with my findings above, I am not satisfied that, at any time, Nevas has not been willing, able or ready to settle on the contract of sale. There was no basis for GAG to seek the orders against Nevas which it sought in its counterclaim.

In view of these conclusions, it is not necessary for me to consider MYG’s submissions as to GAG’s implied duty to co-operate, nor whether GAG was in breach of cl 2.3 of the nomination deed. It is also not necessary for me to consider GAG’s claim that it be permitted to retain monies paid to it by MYG pursuant to cl 2.19(b) of the nomination deed.

Answers to the questions asked

The parties provided a joint proposed list of issues prior to trial. Not all of the questions included remain relevant given my findings, however, for completeness, I set out my answers (in short) to the proposed list in full below.

The settlement date
1 What was the settlement date of the contract of sale:
(a) at the time the contract of sale was entered into?
24 November 2021.

(b) at the time the nomination deed was entered into?
24 November 2021, but for the reasons explained above, this was not stated in the nomination deed, and thus under the nomination deed, the settlement date was expressed to be up to and including 31 December 2021.

(c) at the time the variation deed was entered into?
24 November 2021, save that under this deed, Nevas agreed with MYG that in return for consideration to be paid to it by MYG, the balance of settlement monies were to be paid by MYG on or before 24 November 2023.

2What effect, if any, did the variation deed have on the settlement date under the contract of sale?
None, as GAG was not a party to the variation deed.
3Has the settlement date under the contract of sale been extended to 24 November 2023 and if not, what/when is the settlement date?
Whilst the date for settlement under the contract of sale has not been varied, for the reasons explained above, due to the agreement reached between Nevas and MYG, the settlement on Land A is to occur on or before 24 November 2023.
4If the settlement date was 24 November 2021 under the contract of sale, did MYG breach the nomination deed by not showing its capacity to settle 45 days prior to that date?
For the reasons given, no.
(a)If yes, did that breach entitle GAG to rescind the nomination deed?
Not applicable.

(b) The variation deed?
Not applicable.

5Did MYG breach or repudiate the nomination deed by entering the variation deed with Nevas?
For the reasons given above, no.
(a)If yes, did that breach or repudiation entitle GAG to rescind the nomination deed?
Not applicable.

6Did Nevas repudiate the contract of sale by entering the variation deed with MYG?
For the reasons given above, no.
(a)If so, does that repudiation entitle GAG to relief by way of specific performance against Nevas?
Not applicable.

7Did MYG and Nevas enter into the variation deed under the mutual mistakes alleged in paragraphs 18B.3 and 18B.4 of the Amended Statement of Claim filed on 9 May 2023?
Not applicable.
8If MYG’s breach entitled GAG to end the nomination deed and inform Nevas that its nomination of MYG as substitute purchaser was withdrawn:
(a)Must GAG pay MYG amounts that MYG paid pursuant to the nomination deed, as pleaded at [25A] of the MYG’s reply to GAG’s defence?
Not applicable.

(b) Did MYG pay money to Nevas based on mutual mistake?
Not applicable.
(c)Would Nevas be unjustly enriched if it retained the money paid to Nevas by MYG namely $1.95 million towards the purchase price and 2 payments of $720,500 of interest?
Not applicable.
(d)Is MYG entitled to the relief sought in paragraph F of the amended statement of claim as against Nevas?
Not applicable.

9If MYG is not the novated purchaser and GAG is the purchaser and if MYG is entitled to the relief sought in paragraph F of the amended statement of claim as against Nevas, is Nevas now entitled to interest under the contract from the contract settlement date of 24 November 2021 in addition to any unpaid balance of the purchase price?
Not applicable.
10Is Mo Chen liable under the guarantee dated 24 November 2017?
Not applicable.

11 Whether MYG was aware of the settlement date of the contract of sale:
(a)At the time the nomination deed was entered into (as pleaded in [8(b)] of GAG’s defence and [8(b)] of MYG’s reply)?
Not relevant.
(b)At the time the variation deed was entered into (as pleaded in [11(b)] of GAG’s defence and [11(a)] of MYG’s reply)?
Not relevant.

12What is the settlement date of the contract of sale within the meaning of the nomination deed?
Up until and including 31 December 2021.

I will hear from the parties as to the precise form of orders to give effect to these reasons, and as to costs.

SCHEDULE OF PARTIES

S ECI 2022 02771

BETWEEN:

MELBOURNE YIFANG GROUP PTY LTD (ACN 625 091 616)	Plaintiff
- and -
GUANGAO A GROUP PTY LTD (ACN 622 458 806)	Defendant
GUANGAO A GROUP PTY LTD (ACN 622 458 806)	Plaintiff by 1^st Counterclaim
MELBOURNE YIFANG GROUP PTY LTD (ACN 625 091 616)	First Defendant by 1^st Counterclaim
NEVAS PTY LTD (ACN 116 459 539)	Second Defendant by 1^st Counterclaim
GUANGAO A GROUP PTY LTD (ACN 622 458 806)	First Third Party – 1^st Third Party Claim
MO CHEN	Second Third Part – 1^st Third Party Claim

PAYMENT
Price	$13,100,000.00	PLUS GST
Deposit	$60,000.00	on signing of this contract (of which $10,000.00 has been paid PLUS GST (if payable)
Residue deposit	$1,905,000.00	within 28 days of signing this contract PLUS GST (if payable)
Instalment	$1,965,000.00	within 2 years of signing this contract PLUS GST
Balance	$9,170,000.00	PLUS GST payable at settlement

[2023] VSC 577

28 September 2023