Metricon Homes Pty Ltd v Carbone

[2017] NSWDC 256

District Court

New South Wales

Medium Neutral Citation:	Metricon Homes Pty Ltd v Carbone [2017] NSWDC 256
Hearing dates:	24 August 2017; 1 September 2017
Date of orders:	14 September 2017
Decision date:	14 September 2017
Jurisdiction:	Civil
Before:	Dicker SC DCJ
Decision:	(1) Judgment for the plaintiff on its Statement of Claim. (2) The parties are to bring in Short Minutes of Order within seven days reflecting these reasons including any appropriate claim for interest. (3) Judgment for the cross-defendant/plaintiff on the Amended Cross-Claim. The Amended Cross-Claim is dismissed. (4) The defendant/cross-claimant is to pay the plaintiff’s costs of the proceedings as agreed or assessed. (5) Liberty to the parties to apply to vary the costs order in the preceding paragraph. (6) Exhibits to be returned after 28 days.
Catchwords:	Contract – deed of put and call option – proper construction of deed – applicable contractual principles – whether plaintiff entitled to refund of call option fees where draft plan of subdivision not registered within stipulated time – whether plaintiff entitled to retain call option fees where nominee of plaintiff breached contract for sale of land contemplated under deeds of put and call option – consequences of rescission of deeds Taxes and duties - stamp duty – whether nominations of persons dutiable – effect of an undertaking being offered under UCPR Part 31.13 – enforceability of documents not stamped
Legislation Cited:	Duties Act 1997 (NSW) Home Building Act 1989 (NSW) Uniform Civil Procedure Rules
Cases Cited:	C&P Syndicate Pty Ltd v Reddy [2013] NSWSC 643 Caringbah Investments Pty Ltd v Caringbah Business & Sports Club Ltd (In Liq) [2016] NSWCA 165 Cordon Investments Pty Ltd v Lesdor Properties Pty Ltd [2012] NSWCA 184 Electricity Generation Corporation v Woodside Energy Ltd (2014) 251 CLR 640; [2014] HCA 7 Feldman v GNM Australia Ltd [2017] NSWCA 107 HP Mercantile Pty Ltd v Hartnett [2016] NSWCA 342 JLF Corporation Pty Ltd v Matos [2016] QCA 355 Mainteck Services Pty Ltd v Stein Heurtey SA [2014] NSWCA 184 McCallum v National Australia Bank Ltd [2000] NSWCA 218 McDonald v Dennys Lascelles Ltd (1933) 48 CLR 457 MK & JA Roche Pty Ltd v Metro Edgley Pty Ltd (BC200500862) (unreported, 3 March 2005) Nguyen v Taylor [1992] 27 NSWLR 48 Perri v Coolangatta Investments Pty Ltd (1982) 41 ALR 441 Phillips Fox (A Firm) v Westgold Resources NL [2000] WASCA 85 Photios v Cousen [2015] NSWSC 336 Prudential Assurance Co Ltd v Health Minders Pty Ltd (1987) 9 NSWLR 673 Reliance Financial Services Pty Ltd v Baddock [2001] NSWSC 857 Smoothseas Pty Ltd v Lawloan Mortgages Pty Ltd [2007] QCA 445 Suttor v Gundowda Pty Ltd (1950) 81 CLR 418 Tarango Land Pty Ltd v Lyons [2005] VSC 491 Wilkie v Gordian Runoff Ltd (2005) 221 CLR 522; [2005] HCA 17 WIN Corporation Pty Ltd v Nine Network Australia Pty Ltd [2016] NSWCA 297 Zhang v ROC Services (NSW) Pty Ltd [2016] NSWCA 370
Texts Cited:	Professor P Butt, The Standard Contract for the Sale of Land in New South Wales, second edition, 1998. D Ferrands, The Law of Options, LawBook, 2010
Category:	Principal judgment
Parties:	Metricon Homes Pty Ltd (Plaintiff) Angela Carbone (Defendant)
Representation:	Counsel: L Corbett (Plaintiff) D Carbone (solicitor) (Defendant)   Solicitors: BCP Lawyers and Consultants (Plaintiff) Barclays Law Group (Defendant)
File Number(s):	2016/00352216

Judgment

1. These proceedings relate to whether the plaintiff, a company in the business of selling house and land packages, is under Deeds of Put and Call Options dated 23 June 2015:

1. Entitled to the refund of nine call option fees of $20,000 each and nine lots of $1,000 on behalf of solicitor’s costs paid to the defendant in circumstances where a draft plan of subdivision of land was not registered by a specified sunset date;

2. Entitled to three call option fees of $20,000 each paid to the defendant in circumstances where it nominated third parties who entered into contracts to purchase lots in the subdivision plan ultimately registered; and

3. Entitled to resist a Cross-Claim from the defendant for the return of two call option fees of $20,000 each to which the defendant says she is entitled in circumstances where nominated purchasers failed to complete the contracts of purchase of the relevant lots.

2. To determine these various issues the Court must construe the terms of Deeds of Put and Call Options which were entered into between the plaintiff and the defendant in relation to thirty lots being part of an unregistered plan of subdivision of land comprised in folio identifier 33/29317 known as 30 Jardine Drive, Edmondson Park, Sydney in New South Wales (“the Property”). For relevant purposes the terms of each of the thirty deeds are the same.

Background

3. It is important to set out briefly the background to the matter. The defendant owned the Property in Edmondson Park and the plaintiff, as indicated, was in the business of selling house and land packages. There was a proposal to subdivide the Property into a number of residential lots for sale and the defendant prepared a draft plan of subdivision with the assistance of consultants.

4. On 23 June 2015, the parties entered into the thirty Deeds of Put and Call Options (“the Deeds”) in relation to the thirty proposed lots. The Deeds were in similar terms. The plaintiff had earlier paid to the defendant an option fee of $20,000 for each of the thirty Deeds.

5. Clause 2.1(c) of the Deeds, which will be set out in detail later in these reasons, provided that in the event that the draft plan of subdivision and any draft Section 88B instrument (“draft plan”) were not registered within 15 months of the date of the Deed, then either party may rescind the Deed by notice in writing to the other party.

6. The date for registration of the draft plan in accordance with Clause 2.1(c) of the Deeds was 23 September 2016 being 15 months after the date of the Deeds.

7. The plaintiff issued Notices of Rescission in relation to nine of the Deeds on 26 September 2016. The plan of subdivision referred to in Clause 2.1(c) of the Deed was eventually registered on 17 November 2016. The plaintiff asserted an entitlement upon the exercise of its right of rescission under Clause 2.1(c) of the Deed to have the option fee returned in relation to each of the nine lots and the solicitor’s fees repaid. The defendant asserted that it was entitled to retain the nine option fees and the solicitor’s fees and has refused to return them to the plaintiff.

8. In relation to three lots, Lots 3310, 3315 and 3326, the plaintiff in due course exercised its options to purchase the lots and nominated third parties to enter into contracts for the sale of land with the defendant. The plaintiff asserts an entitlement to recover the three option fees for these three Deeds which were paid to the defendant. The defendant has refused to return the three option fees in question.

9. In relation to two lots, being Lots 3324 and 3328, the defendant did return the call option fees of $20,000 each. The defendant states that the nominated purchasers did not complete the contracts for sale and that she is entitled to a return of the two call option fees which she had previously repaid to the plaintiff. This is the subject of a Cross-Claim filed by the defendant.

10. The entitlements of the parties are to be determined by the proper interpretation of the Deeds.

11. In addition, there is a question about whether the three nominations by the plaintiff of the purchasers of Lots 3310, 3315 and 3326 are enforceable such that if the court was otherwise minded to order damages against the defendant, it could do so. It is submitted that the nominations are not enforceable as stamp duty has not properly been paid in relation to them by the plaintiff. A similar point is taken in relation to lots 3324 and 3328. The plaintiff, through its counsel, has given an undertaking in the usual form under Part 31.13 of the Uniform Civil Procedure Rules (“UCPR”). The defendant says that is not sufficient. This issue will also need to be determined.

The Deeds

12. It is necessary to set out the terms of the Deeds in question which are particularly relevant. As indicated above, the Deeds in question are relevantly in identical terms.

13. It is not in issue that the requirements of the Deeds in relation to the exercise of the call options under Clause 4 of each Deed have been complied with by the plaintiff.

14. Each of the Deeds is between the plaintiff and the defendant and is dated 23 June 2015. The governing law of each Deed is the law of New South Wales.

15. Relevant clauses in the Deeds include the following:

“1.  Consideration and grant of Call Options

1.1  Call Option

In consideration of the payment of the Call Option Fee by the Purchaser to the Vendor, the Vendor as beneficial owner grants to the Purchaser an Option on the terms set out in this Deed for the Purchaser to purchase the Property for the price and on the terms set out in the Contract.

2.  When to exercise the Call Option

2.1  Call Option

The Purchaser may exercise the Call Option during the period:

(a)  Commencing at 9.00 a.m. on the Business Day immediately following the day forty two (42) days after the date of this agreement;

(b)  Ending on the later of 5.00 p.m. on the fourteenth (14th) day after the Vendor provides to the Purchaser's solicitor a notice that the plan of subdivision being annexure 'A' has been lodged with Land and Property Information (LPI) NSW; and

(c)  Completion of this Deed is subject to and conditional upon the registration of the Plan of Subdivision ('Draft Plan') and any section 88B instrument ('Draft Instrument') by the Department of Lands, Land and Property Information Division (LPI). In the event that the Draft Plan and Draft Instrument are not registered within fifteen (15) months of this Deed (sunset date), then either party may rescind this Deed by notice in writing to the other party. The Purchaser's right of rescission under this clause can only be exercised within 14 days after the sunset date. If the Purchaser does not exercise the Purchaser's right to rescind within such time, the Purchaser's right of rescission immediately lapses. The Purchaser has no right arising out of the failure to register the plan of subdivision by the sunset date other than rescission of this Contract.

3.  How to exercise a Call Option

3.1  Procedures when the Purchaser exercises a Call Option

If the Purchaser wants to exercise the Call Option, the Purchaser must deliver to the Vendor's Solicitor during the period which the Call Option may be exercised according to clause 2.1 ("when to exercise the Call Option"):

(a)  a notice of exercise of option in the form of annexure "A" executed by the Purchaser; and

(b)  the Contract completed with particulars of the Purchaser and executed by the Purchaser with the 10% deposit under the Contract.

(c)  the balance of the deposit in the sum of 10% of the Purchase Price as shown on the Contract annexed to this Option agreement in the form of annexure 'C and if the Purchaser is exercising the Call Option;

(d) a Certificate under s66W of the Conveyancing Act 1919.

4.  Nominee

4.1  At the same time the Purchaser exercises the Call Option in accordance with clause 3 it may nominate a nominee ("Nominee") to enter the Contract subject to the provisions of this clause 4.

4.2  If the Purchaser wants to exercise the Call Option and nominate a Nominee and it is not in subsisting breach of this Deed the Purchaser must deliver to the Vendor's Solicitor no later than 10 business days prior to the end of the period during which the Call Option may be exercised according to clause 2.1;

(a)  a notice of exercise of option in the form of annexure "D" executed by the Purchaser;

(b)  the Contract completed with the particulars of the Nominee and executed by the Nominee;

(c)  a cheque for the 10% deposit under the Contract;

(d)  a cheque in favour of the Vendor's solicitor for $ 1,000.00 being the Vendor' s reasonable legal costs of complying with is obligations under clause 4.3; and

(e) a Certificate under s66W of the Conveyancing Act 1919

(f)  satisfactory written evidence including but not limited to the production of written finance approval of the ability of the nominee to pay the balance of the purchase price.

4.3  Within 5 business days of receipt of the documents in clause 4.2, the Vendor must acting reasonably either approve or refuse the Nominee as the purchaser under the Contract for Sale and advise the Purchaser in writing of its approval or refusal.

4.4  If the Vendor approves the nominee or otherwise fails to provide a written response to the Purchaser within the time period specified in clause 4.3, time of which is of the essence, the Call Option and appointment of nominee is deemed to have occurred on the date of submissions of the documents referred to in clause 4.2.

4.5  For the avoidance of doubt, if a Contract between the Vendor and any Nominee is lawfully rescinded or terminated by the Vendor, the Vendor is still entitled to exercise the Put Option in accordance with this Deed.

…

9.  Binding agreements

9.1  Contracts binding on Vendor

If the Purchaser or the Nominee validly exercises the Call Option, the Contract is binding on the Purchaser/Assignee and Vendor from the time the Vendor receives the items set out in clause 3.1 ("Procedures when the Purchaser exercises a Call Option").

…

10.  Call Option Fee

10.1  Forfeiture of Call Option Fee

In the event that the Purchaser and or Nominee default under the terms and conditions of this Deed then the Call Option Fee, which is paid to the Vendor pursuant to this Deed, or has been refunded to the Purchaser, is to be forfeited to the Vendor, or repaid by the Purchaser to the vendor in the event of a default by the Purchaser and/or Assignee. The Vendor shall be entitled to the Call Option Fee, as at the date of default and notwithstanding any action by the Vendor to terminate or rescind this Deed or Contract (annexure 'C').

10.2  Refund of Call Option Fee

The Vendor agrees that upon a valid exercise of the Call Option, or a valid assignment Nomination of the Call Option, the Call Option fee is refundable to the Purchaser, provided all of the conditions of Clause 2, 3 and 4 have been complied with.

10.3  Costs

The Purchaser agrees to pay the Vendor's solicitors the sum of $1,500.00 plus GST in relation to the Vendor's legal costs for the grant and assignment of the Call Option on exchange of this Deed.

10.4  Non-merger

This clause shall not merge at the expiry of either the Call or Put Option period, and the rights accruing to the Vendor shall continue until compliance with these clauses is met.

…

13. Directors' Personal Guarantee

13.1  The Purchaser agrees that the Director/s of the Purchaser Company personally guarantees the Vendor and its successors and assigns, full, complete and due performance by the Purchaser or its Assignee of all the provisions, conditions, warranties, covenants, and agreements contained in this Deed and the Contract.

13.2  The liability of the Purchaser's Director/s shall continue despite the insolvency or winding-up of the Purchaser company until such time the Purchaser or the Assignee has fully performed all the terms and conditions of this Deed and the Contract.

13.3  If the Purchaser or the Assignee fails to perform any of its obligations under this Deed or the Contract, or breaches any provision thereof, then the Director/s of the Purchaser company as guarantor undertakes to perform the obligations of the Purchaser or the Assignee and will indemnify the Vendor, against all losses, damages, costs and expenses which may be incurred and/or suffered by the Vendor together with all charges, legal fees, or disbursements incurred by the Vendor by reason of any default on the part of the Purchaser or the Assignee in performing or observing the agreements and provisions of this Deed and/or the Contract.

13.4  The obligations of this clause do not merge upon the expiry of either the Call or Put Option and the rights accruing to the Vendor shall continue until these clauses are met.

…

15.  Interpretation

15.1  Definitions

These meanings, in any form, apply unless the contrary intention appears.

Assignee means any party validly nominated by the Purchaser, who is capable of legally exercising the Purchaser's rights.

…

Assignor means the Purchaser under this Deed.

Call Option means the Call Option.

Call Option fee means the sum of Twenty Thousand Dollars ($20,000.00).

Call Option Period means:

(a)  Commencing at 9:00 a.m. On the Business Day immediate following the day forty two (42) days after the date of this agreement; and

(b)  Ending on the later of 5:00 p.m. On the fourteenth (14th) day after the Vendor provides to the Purchaser's solicitor notice that the plan of subdivision has been lodged with Land and Property Information (LPI) NSW.

Contract means the form of contract comprised in annexure "C".

Deed means this form of the Deed of Put and Call Options.

…

Plan of subdivision means the plan attached to the Contract and comprising annexure 'A'.

Property means the property described in the Contract (annexure "C") and referred to as proposed Lot 3310 in an unregistered plan of subdivision and part of 30 Jardine Drive, Edmondson Park NSW 2174 known as Folio Identifier 33/29317.”

16. Although the term “Plan of subdivision” is defined under Clause 15.1 of the Deeds as meaning the plan attached to the Contract and comprising Annexure “A”, it is clear that the document intended is not the document which is Annexure “A” to the Deed but the document which is Annexure “A” to the contract for the sale of land which itself is attached to the Deed: see Clause 31(a)(iii) to the attached Contract which seems to make this clear.

Applicable principles of contractual construction

17. It was submitted by counsel for the plaintiff that while the general principle is that a Put and Call Option should be exercised strictly in accordance with the procedure set out in the relevant Deed, the general construction of such a Deed is subject to normal contractual principles: see Phillips Fox (A Firm) v Westgold Resources NL [2000] WASCA 85 at [59]-[71] per White J (with whom Owen and Parker JJ agreed). See also Prudential Assurance Co Ltd v Health Minders Pty Ltd (1987) 9 NSWLR 673 at 677-678; C&P Syndicate Pty Ltd v Reddy [2013] NSWSC 643 at [130]-[132]; JLF Corporation Pty Ltd v Matos [2016] QCA 355 per Fraser JA at [13]-[19] (with whom Gotterson and McMurdo JJA agreed); and the plaintiff’s reply submissions at paragraphs 2-7. See also D Ferrands, The Law of Options, LawBook, 2010 at pages 9-12. I generally accept that submission.

18. In Cordon Investments Pty Ltd v Lesdor Properties Pty Ltd [2012] NSWCA 184 Bathurst CJ (with whom Macfarlan and Meagher JJA agreed) stated at [52] as follows:

“[52] The principles underlying the construction of written contracts are well established and it is not necessary to deal with them at length. A contract is to be construed by reference to what a reasonable person would understand by the language in which the parties have expressed their agreement having regard to the context in which the words appear and the purpose and object of the transaction: Pacific Carriers Ltd v BNP Paribas (2004) 218 CLR 451 at [22]; Toll (FGCT) Pty Ltd v Alphafarm Pty Ltd [2004] HCA 52; (2004) 219 CLR 165 at [40]; International Air Transport Assn v Ansett Australia Holdings Ltd [2008] HCA 3; (2008) 234 CLR 151 at [53]. At least in the case of ambiguity, resort can be had to the surrounding circumstances known to the parties in interpreting the particular provision: Codelfa Construction Pty Ltd v State Rail Authority of NSW [1982] HCA 24; (1982) 149 CLR 337 at 352; Western Export Services Inc v Jireh International Pty Ltd [2011] HCA 45; (2011) 282 ALR 604.”

19. In Electricity Generation Corporation v Woodside Energy Ltd (2014) 251 CLR 640; [2014] HCA 7, the majority of the High Court said the following at paragraph [35]:

“[35]Both Verve and the Sellers recognised that this court has reaffirmed the objective approach to be adopted in determining the rights and liabilities of parties to a contract. The meaning of the terms of a commercial contract is to be determined by what a reasonable businessperson would have understood those terms to mean. That approach is not unfamiliar. As reaffirmed, it will require consideration of the language used by the parties, the surrounding circumstances known to them and the commercial purpose or objects to be secured by the contract. Appreciation of the commercial purpose or objects is facilitated by an understanding “of the genesis of the transaction, the background, the context [and] the market in which the parties are operating”. As Arden LJ observed in Re Golden Key Ltd, unless a contrary intention is indicated, a court is entitled to approach the task of giving a commercial contract a businesslike interpretation on the assumption “that the parties … intended to produce a commercial result”. A commercial contract is to be construed so as to avoid it “making commercial nonsense or working commercial inconvenience” [emphasis added].

20. In Mainteck Services Pty Ltd v Stein Heurtey SA [2014] NSWCA 184 Leeming JA (with whom Ward and Emmett JJA agreed) stated a number of important general principles relating to contractual construction at [73]-[85]. His Honour said as follows at paragraphs [80]-[84]:

“[80] Mason J [in Codelfa at 352] was indicating that there are very real limits to the extent to which grammatical meaning can be displaced by contextual considerations. However, in order to determine whether more than one meaning is available, it may be necessary first to turn to the context.

[81] Fourthly, what I have called “context” was formerly described as the “surrounding circumstances”, and then, influenced by Lord Wilberforce in decisions such as Prenn v Simmonds [1971] 1 WLR 1381 at 1384 and Reardon Smith Line Ltd v Yngvar Hansen-Tangen [1976] 1 WLR 989 at 997, as the “matrix of facts”. See Byrnes v Kendle [2011] HCA 26; 243 CLR 253 at [98]–[100] (Heydon and Crennan JJ) and J Carter, The Construction of Commercial Contracts (Hart Publishing, 2013), pp 8–9.

[82] Although Lord Hoffmann in Investors Compensation Scheme Ltd v West Bromwich Building Society [1998] 1 All ER 98 at 114 referred to a “fundamental change“ in the approach espoused by Lord Wilberforce, the “modern“ contextual approach had nineteenth century precursors, at least in relation to commercial contracts. Without seeking to be exhaustive, the Earl of Selborne had deprecated and rejected the “extreme literalism” in the mercantile contract construed in McGowan v Baine [1891] AC 401 at 403 (contrast the (dissenting) speech of Lord Bramwell, who had required “necessity, or [something] approaching to it” in order to displace the “primary and natural meaning of the words”: see at 409). To the same effect was Lord Herschell’s rejection of a process of construction by reference to dictionary meaning, and insistence that contractual language must be “construed in a business fashion” and “interpreted in the way in which business men would interpret them” in Southland Frozen Meat and Produce Export Company Ltd v Nelson Brothers Ltd [1898] AC 442 at 444. The approach adopted by Lords Selborne and Herschell anticipated what was popularised by Lord Wilberforce in the following century. Professor Carter has examined the evolutionary process at pp 17–20 of his book referred to in the previous paragraph.

[83] Fifthly, the approach endorsed in Woodside avoids the difficulty of identifying what is meant by “ambiguity”, itself an ambiguous term, whose perception “differs from one judicial eye to the other”: B & B Constructions (Aust) Pty Ltd v Brian A Cheeseman & Associates Pty Ltd (1994) 35 NSWLR 227 at 234. The various meanings of “ambiguity” in this context are described by M Walton, “Where now ambiguity?” (2011) 35 Aust Bar Rev 176 and D Wong and B Michael, “Western Export Services v Jireh International: Ambiguity as the gateway to surrounding circumstances?” (2012) 86 ALJ 57 at 67–69.

[84] Sixthly, the approach to construction of written commercial contracts reflected in Woodside at [35] accords with what had been said in familiar passages in Pacific Carriers Ltd v BNP Paribas [2004] HCA 35; 218 CLR 451 at [22] (construction “requires consideration, not only of the text of the documents, but also the surrounding circumstances known to Pacific and BNP, and the purpose and object of the transaction”); Toll (FGCT) Pty Ltd v Alphapharm Pty Ltd [2004] HCA 52; 219 CLR 165 at [40] (“The meaning of the terms … normally requires consideration not only of the text but also of the surrounding circumstances known to the parties, and the purpose and object of the transaction”); and the endorsement in Wilkie v Gordian Runoff Ltd [2005] HCA 17; 221 CLR 522 at [15] of the proposition that “Interpreting a commercial document requires attention to the language used by the parties, the commercial circumstances which the document addresses, and the objects which it is intended to secure”. It means also that the Australian approach mirrors that adopted in England, New Zealand, Singapore and Hong Kong: Chartbrook Ltd v Persimmon Homes Ltd [2009] UKHL 38; [2009] 1 AC 1101; Vector Gas Ltd v Bay of Plenty Energy Ltd [2010] NZSC 5 ; [2010] 2 NZLR 444; Zurich Insurance (Singapore) Pte Ltd v B-Gold Interior Design & Construction Pte Ltd [2008] SGCA 27; 3 SLR(R) 1029 (where the court’s reasons delivered by V K Rajah JA for the court survey much of the English decisions and academic literature); Fully Profit (Asia) Ltd v Secretary for Justice [2013] HKCFA 40; 6 HKC 374.”

21. In Caringbah Investments Pty Ltd v Caringbah Business & Sports Club Ltd (In Liquidation) [2016] NSWCA 165, Bathurst CJ (with whom McColl and Macfarlan JJA agreed) stated as follows at [93]:

“[93]The relevant principles of construction are well established. In Electricity Generation Corporation v Woodside Energy Ltd [2014] HCA 7; 251 CLR 640, the plurality reaffirmed that the meaning of the terms of a commercial contract is to be determined by what a reasonable business person would have understood them to mean. It requires consideration of the language used, the surrounding circumstances known to the parties and the commercial purposes or objects to be secured by the contract: at [35]; see also Mount Bruce Mining Pty Ltd v Wright Prospecting Pty Ltd [2015] HCA 37; 89 ALJR 990 at [46]–[52].”

22. In WIN Corporation Pty Ltd v Nine Network Australia Pty Ltd [2016] NSWCA 297, Barrett AJA (with whom McColl JA and Sackville AJA agreed) stated as follows at [56]-[59] in relation to pre-contractual dealings:

“[56]As a preliminary, however, there is a need to consider the extent to which evidence concerning the course of dealings and negotiations between the parties before the making of their contact may properly be taken into account in determining the commercial purpose and objects.

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

[58]In Mount Bruce Mining Pty Ltd v Wright Prospecting Pty Ltd at [48], the Court also referred with approval to the view of Mason J (Stephen and Wilson JJ agreeing) in Codelfa Construction Pty Ltd v State Rail Authority (NSW) (1982) 149 CLR 337 ; [1982] HCA 24 at 352. Mason J there observed:

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

[59]A potential tension that inheres in this proposition is that to recognise words as bearing a “plain meaning” is merely to state a conclusion arrived at by some process of interpretation which cannot, as a matter of logic, exclude context. As Leeming JA noted in Mainteck Services Pty Ltd v Stein Heurtey SA (2014) 89 NSWLR 633; [2014] NSWCA 184 at [77], to state that a legal text is “clear” does no more than recognise that “there is nothing in the context which detracts from the ordinary literal meaning”. It therefore becomes clear that the notion that it may first be necessary to consider context when construing a contract is not inconsistent with Mason J’s “true rule”. On this footing, it does not follow that the task of assessing whether a phrase or expression is ambiguous or susceptible of more than one meaning must be undertaken without regard to evidence of surrounding circumstances. This position corresponds with the approach of the High Court in Victoria v Tatts Group Ltd where the relevant contract was construed by reference to its text, context and purpose without any anterior finding of ambiguity as a precondition to a consideration of surrounding circumstances as an aid to discovering or elucidating context and purpose.” (emphasis added)

23. In Zhang v ROC Services (NSW) Pty Ltd [2016] NSWCA 370 Leeming JA (with whom Sackville AJA agreed) stated as follows at [79]-[81]:

[79]There has been a debate whether the effect of what was said in Codelfa Construction Pty Ltd v State Rail Authority (NSW) (1982) 149 CLR 337at 352 concerning the “true rule” that “evidence of surrounding circumstances is admissible to assist in the interpretation of the contract if the language is ambiguous or susceptible of more than one meaning”. The position has now been clarified by the High Court’s decision in Victoria v Tatts Group Ltd [2016] HCA 5 ; 90 ALJR 392 as was recently observed by Barrett AJA in WIN Corporation Pty Ltd v Nine Network Australia Pty Ltd [2016] NSWCA 297 at [59]:

the notion that it may first be necessary to consider context when construing a contract is not inconsistent with Mason J’s ‘true rule’. On this footing, it does not follow that the task of assessing whether a phrase or expression is ambiguous or susceptible of more than one meaning must be undertaken without regard to evidence of surrounding circumstances. This position corresponds with the approach of the High Court in Victoria v Tatts Group Ltd where the relevant contract was construed by reference to its text, context and purpose without any anterior finding of ambiguity as a precondition to a consideration of surrounding circumstances as an aid to discovering or elucidating context and purpose.

[80]The same point was also made in Calvo v Ellimark Pty Ltd [2016] NSWCA 136 at [55] and in Todd v Alterra at Lloyds Ltd (2016) 239 FCR 12; [2016] FCAFC 15 at [73]–[75]. A different view was expressed by one member of the Victorian Court of Appeal in Apple and Pear Australia Ltd v Pink Lady America LLC [2016] VSCA 280 at [91]–[138]. However (presumably because the hearing of that appeal predated it) no reference was made to Victoria v Tatts Group Ltd, and there is thus little to be gained from analysing that reasoning in any detail. Of course, on no view does it follow that the evidence of surrounding circumstances will be of assistance and therefore ultimately relevant: evidence of surrounding circumstances did not assist in Mainteck and in WIN Corporation. It is true that this may in some cases lead to an expansion of the evidence tendered on an issue of construction, although ordinarily it may be expected that parties will confine their tender to material which will bear on the meaning of the contract. Indeed, a party seeking to tender a document as evidence of surrounding circumstances and for no other purpose ought to be able, readily and precisely, to identify how it is said that its reception will bear on the process of ascertaining the legal meaning.

[81] But this is not a case where there is any legal difficulty — whatever view be taken of Codelfa and ensuing decisions — in resorting to evidence of matters extrinsic to the contract. Indeed, it is not even a question of evidence. The only question raised by the parties is whether regard may be had to the legislation governing compulsory motor vehicle insurance, as to which evidence is not necessary: Evidence Act 1995 (Cth), s 143(1)(a) read with s 5. As will be seen below, binding authority requires regard to be had to that legislation.” (emphasis added)

24. Each party in the present case submits that the meaning of the Deed is clear and unambiguous. The plaintiff submits that to the extent there is any ambiguity or as part of the surrounding circumstances, the Court is entitled to look at the clear pre-contractual negotiations between the parties on the basis that evidence of prior negotiations is admissible to the extent that it establishes objective facts known to both parties and the subject matter of the contract: WIN, above, at [57]. It was also submitted that regard to prior negotiations “elucidated with greater precision the commercial purpose or subject matter of the contract”: see also WIN at [57]. The defendant makes a similar submission in its case but for different reasons.

Evidence of prior negotiations and agreed terms

25. The defendant relied on the following pre-contractual correspondence:

1. An email dated 3 March 2015 between Mr Carbone, the defendant’s solicitor, and an agent acting on behalf of the defendant, Mr Sacco, in which the following is stated: “In relation to terms we are tying up approx. $16.256m in land, so the option fee will need to be reflective of the commercial position. A normal option fee is 1%. Secondly out of each lot, the option fee to be refunded, only in the event that the Contract is completed in time and then part of the option fee is to be retained to cover the legal fees in drawing, negotiation and exchanges of the option agreements, the review of notices of assignment and or exercise etc”;

2. Email from Mr Sacco, real estate agent acting on behalf of the defendant, to the relevant executive of the plaintiff (Mr Carter) which was copied to Mr Carbone dated 23 March 2015 in which the following is stated:

“As discussed please see below terms for put and call option.

• Call option Fee: $30,000 per lot …

• On Exchange with a purchaser/Nominee (Or assignment of option) the vendor will require unconditional release of 10% deposit, and then the vendor will refund balance of call option fee.

• If the option is not exercised by the due date it is then to be forfeited.”;

3. Email from Mr Carter, the executive of the plaintiff to Mr Sacco, the real estate agent, dated 9 April 2015 which states as follows:

“Revised offer below …

• $1500 non-refundable option fee per lot, which will cover the legals etc.”

26. The plaintiff relied on the following pre-contractual correspondence which it says is decisive on the construction point concerning Clause 2.1(c):

1. Letter dated 4 May 2015 from BCP Lawyers ( solicitors for the plaintiff) to the solicitor for the defendant to the following relevant effect:

“1.  Deed of Put and Call Option (“Option”)

…

(c)  Clause 2 – Our client requires a clause similar to clause 49.2 of the Contract for Sale. If the Draft Plan and Draft Instrument are not registered by the sunset date the Purchaser may rescind and the Call Option Fee is refunded to the Purchaser.” [emphasis added];

2. The letter in reply from the solicitor for the defendant dated 5 May 2015 is to the following effect:

“Requested Amendments to the Deed of Put and Call Option

1.  …

(c)  Agreed. The additional clause 2.1(c) will read:

Completion of this Deed is subject to and conditional upon the registration of the Plan of Subdivision ('Draft Plan') and any section 88B instrument ('Draft Instrument') by the Department of Lands, Land and Property Information Division (LPI). In the event that the Draft Plan and Draft Instrument are not registered within fifteen (15) months of the contract date (sunset date), then either party may rescind this Deed by notice in writing to the other party. The Purchaser's right of rescission under this clause can only be exercised within 14 days after the sunset date. If the Purchaser does not exercise the Purchaser's right to rescind within such time, the Purchaser's right of rescission immediately lapses. The Purchaser has no right arising out of the failure to register the plan of subdivision by the sunset date other than rescission of this Contract.”

27. There is no evidence that there was any later correspondence relevant to the discussion of Clause 2.1(c) of the Deed in the 5 May 2015 letter from the solicitor for the defendant or the defendant herself.

28. The “additional Clause 2.1(c)” referred to in the 5 May 2015 letter is in similar terms to Clause 2.1(c) that ended up being placed in the final Deed (however, I note “within fifteen (15) months of the contract date (sunset date)” in the draft became “within fifteen (15) months of this Deed (sunset date)” in the final Deed. The difference does not seem to me to be significant: cf paragraphs 45-47 of the defendant’s undated primary submissions).

29. It is submitted on behalf of the parties that the above exchange of correspondence is crucial to determining what was objectively intended by Clause 2.1(c) of the Deed by ascertaining an objective fact known to the parties in the surrounding circumstances. The plaintiff submits that the 3 March 2015 email is irrelevant as it passed only between Mr Carbone and the real estate agent of the defendant: reply submissions paragraph 39a.

General principles relating to rescission

30. Counsel for the plaintiff refers to the references in Clause 2.1(c) of the Deed to the plaintiff’s “right of rescission” and “right to rescind”. It is submitted that a distinction is being made in the clause between the right of a party to rescind where there is no fault established as a result of a breach of the Deed by the other party and a right to terminate for breach of the Deed. It is said that a clear distinction was being made in Clause 2.1(c) by using the term “right to rescind” and that this is supported by the later use by the parties in Clause 10.1 of the Deed of the two alternatives where it states “notwithstanding any action by the Vendor to terminate or rescind this Deed or Contract (Annexure “C”).” (emphasis added)

31. The plaintiff refers to the clear legal distinction between a right to rescind (which may mean in this case a right to rescind ab initio although that need not be necessarily the case) and a right of termination for breach of contract.

30. In Perri v Coolangatta Investments Pty Ltd (1982) 41 ALR 441 the High Court considered a contract to purchase a property where the contract was made conditional on the appellants completing a sale of their own property in another suburb. The High Court held that the condition relating to the sale of the appellants’ own property was a condition precedent to the performance of the contract rather than a condition precedent to the formation of a binding contract. The various members of the Court also held that either party, if that party was not in default of the contract, could elect to treat the contract as at an end if the condition precedent had not been fulfilled or waived.

31. Wilson J stated as follows at 457:

“It is important to recognize and maintain the distinction between a contract which is subject to a condition which requires for its fulfilment a decision from a person other than a party to the contract, and an unconditional contract. It is in the context of the latter that we have become accustomed to the operation of equitable principles which afford relief against the strict application of time stipulations which are not of the essence, requiring in that regard the service of a notice to perform or to complete as the case may be before rescission or specific performance will be enforced. In such cases there is necessarily one party who is in breach of an obligation under a contract which the innocent party rightly expects to proceed to completion. If the contract is not carried through to completion, then the party in default will lose the deposit and, depending on the circumstances, may or may not be liable in damages.

There can be no such firm expectation in a conditional contract. Neither party can be sure of the contract proceeding to completion, for it does not lie in the will of either party to ensure the fulfilment of the condition. This case is an instance of a conditional contract where there is to be implied a collateral promise by the appellants to make reasonable endeavour to sell the Lilli Pilli property. A breach of that implied term may entitle the respondent to an action for damages. Nevertheless, compliance with the term cannot guarantee that a buyer at a satisfactory price will be found. The completion of the contract is dependent, in the absence of a waiver, on the prior fulfilment of a condition as to which it does not lie fully within the capacity of the appellants to effect. The agreement between the parties is subject to the prior sale of the Lilli Pilli property. If, on the expiration of a reasonable time, that property has not been sold, then either party may initiate the steps which are necessary to the termination of the agreement: cf Suttor v Gundowda Pty Ltd (1950) 81 CLR 418 at 441 . There being no default, the deposit will be refunded.

In my opinion, it is to be implied from the agreement that should the Lilli Pilli property not be sold within a reasonable time, then the fate of the contract will be resolved according to the action which may be taken by either party. The purchasers may elect to waive the condition, it being one wholly for their benefit, and proceed to completion, thereby holding the vendor to its contract. Alternatively, provided that they have acted reasonably in their attempts to sell the property, they may rely on the non-fulfilment of the condition to bring the contract to an end, and recover their deposit.” (emphasis added)

34. See also the comments of Gibbs CJ at 446 and Brennan J at 465.

35. The plaintiff also relies on the comments of Professor Peter Butt in The Standard Contract for the Sale of Land in New South Wales, second edition, 1998, where he states at paragraph [1.13]:

“The distinction between “rescission” and “termination” is well settled. Strictly speaking, “rescission” is appropriate to describe bringing a contract to an end for some vitiating element in its formation; examples are fraud, duress, misrepresentation or mistake. It is also appropriate to describe bringing a contract to an end in exercise of an express contractual right not involving the default of either party. In either of these senses, when a contract is “rescinded” it is treated as if it had never existed, and the parties are restored so far as possible, to their former position – hence the term rescission “ab initio” (from the beginning).

In contrast, “termination” is appropriate to describe a party’s act in bringing the contract to an end for the other party’s breach. The termination puts an end to the prospective duties and liabilities of both parties under the contract. However, it does not discharge the offending party from liability for breaches of obligations which had accrued due for performance before the termination.” (emphasis added)

36. The plaintiff also referred to MK & JA Roche Pty Ltd v Metro Edgley Pty Ltd (BC200500862) (unreported, 3 March 2005) where the New South Wales Court of Appeal considered a situation where the appellant paid a $2m deposit on entry into an agreement to “purchase” a forty year lease of premises where there were conditions precedent to the agreement. The agreement provided for an automatic rescission of the agreement if the conditions were not satisfied by a certain date. The conditions were not achieved by the relevant date. Hodgson JA (with whom Beazley and Ipp JJA agreed) considered the High Court case of Suttor v Gundowda Pty Ltd (1950) 81 CLR 418 which held that where a contractual provision is to the effect that a contract is void upon the happening of an event that may be caused by the default of one party, then the provision is to be construed as making the contract voidable at the option of a party who is not in default: at [39]. Hodgson JA said that any rule as stated must be subject to the proper interpretation of the relevant contract: at [44]. The parties could agree that upon certain events the contract was to be regarded as void or automatically rescinded, not merely that it was voidable at the option of the party not at fault: at [47].

37. In MK & JA Roche, Hodgson JA held that the contract effected an automatic rescission with the result that the conditions precedent to the contract were never satisfied, the contractual terms never took full effect (the plaintiff submitted like Clause 10.1 in the present case) and the deposit would therefore “have to be returned”: at [49].

38. The defendant submits that these authorities are not applicable. It is submitted that what is being considered here is an option not a contract for the sale of land and each should be approached quite differently. The plaintiff responds by submitting that a deposit would have to be refunded with any contract where a condition precedent to completion of the contract had not occurred, not merely contracts for the sale of land. MK & JA Roche did not involve a contract for the sale of land.

Submissions of the parties

39. The parties provided detailed written submissions (including detailed reply submissions) and addressed the Court orally in relation to those submissions. It is unnecessary, for the purposes of this judgment, to set out the detailed submissions put by each of the parties which referred to extensive authorities. What I will do is to set out a brief summary of the main submissions relied upon.

Submissions on behalf of the plaintiff

40. The plaintiff submitted, in summary, as follows:

1. There is no issue between the parties that the plaintiff properly complied with the requirements of Clause 4 of the Deed in relation to those Deeds which were not rescinded;

2. The real issue is the proper construction of the Deed in relation to Clause 2.1(c) and Clause 10 in the context of all the provisions of the Deed read as a whole;

3. In relation to Clause 2.1(c) of the Deed, this refers to the plaintiff’s “right of rescission” in circumstances where the draft plan and draft instrument were not registered within 15 months of the date of the Deed being the sunset date. There is no suggestion in the evidence that the defendant did not take all reasonable steps to achieve the registration of the draft plan and draft instrument within the 15 month sunset period.

4. Accordingly, the defendant is not at fault. However, the express use of the phrases “right of rescission” and “right to rescind” in Clause 2.1(c) indicates that it was intended to cover a position where a party is not at fault. A right to rescind should in these circumstances be regarded as a right to rescind ab initio and this entitles the plaintiff to a return of the relevant call option fees and solicitor’s fees. Alternatively, if it is not a rescission ab initio it still should be construed as entitling the plaintiff to the refunds.

5. It should not be accepted that the call option fee is effectively the consideration to have the commercial entitlement for the option itself. That is because Clause 2.1(c) and Clause 10 contemplate certain circumstances where the call option fee will be returned.

6. Further, Clause 10 does not state that it sets out the only circumstances where the call option fee will be refunded to the plaintiff;

7. It is clear from the Deed that the parties intended in some circumstances to make a distinction between a termination and a rescission of the Deed. In Clause 10.1 there is a reference to “notwithstanding any action by the Vendor to terminate or rescind this Deed or Contract (Annexure “C”)”;

8. The reference to “this Contract” at the end of Clause 2.1(c) should properly be regarded as a reference to “this Deed”. This is made clear by the use of the word “this” and the fact that it refers to rescission which could only relate to the Deed in the context of Clause 2.1(c): reply submissions at paragraphs 8-11;

9. Clause 13.3 of the Deed indicates that the parties were conscious of making a distinction between the Deed and the Contract which is annexed to the Deed;

10. Clause 10 does not impose any limitation on Clause 2.1(c). Clause 10 merely sets out two circumstances relating to what occurs with the call option fee. Clause 10.1 indicates that the call option fee will be forfeited in certain circumstances. Clause 10.2 of the Deed sets out circumstances in which the call option fee is refundable to the plaintiff. The fact that two situations are covered in Clause 10 does not mean that they are the only circumstances in which the call option fee is to be refunded to the plaintiff. That is because Clause 2.1(c) does not need to say this expressly as that would be the normal result as a matter of law;

11. The last sentence of Clause 2.1(c) should be regarded as being limited to a restriction on the right of the plaintiff to sue the defendant for damages for a failure to take steps to register the draft plan and draft instrument which right of action would otherwise be available if a lack of reasonable efforts occurred. It should not be read as having the effect of preventing the recovery of the call option fees relating to those lots where the plaintiff exercises the right of rescission under Clause 2.1(c) of the Deed;

12. Clause 10.1 in its first line makes reference to “default under the terms and conditions of this Deed”. It does not refer to a default under the contract referred to in Clause 4.2(b) of the Deed. Once the call is made and a purchaser is nominated by the plaintiff then the defendant is restricted to the rights under the contract. The defendant can recover, in the case of default by the nominated purchaser, the deposit under the contract and may, in certain circumstances, also sue the purchaser for any loss suffered as a result of the failure to complete. The defendant therefore has its rights against the purchaser. It would not be commercially sensible to allow the defendant also to have rights against the plaintiff in circumstances where it has nominated a person under the contract which the defendant has either accepted or is deemed to have accepted. Any default by the nominee contracting party is not a default “under the terms and conditions of this Deed” but a default under the underlying contract referred to in Clause 4.2;

13. For those reasons the plaintiff is entitled to recover the nine call option fees and nine solicitor’s fees under Clause 2.1(c), is entitled to obtain the three call option fees under Clause 10.2 and is entitled to resist the Cross-Claim of the defendant as Clause 10.2 is applicable;

14. In relation to the stamp duties point, the balance of authority is that once an undertaking is given and any duty is paid the document becomes enforceable from the beginning and not only from the date the duty is paid. Accordingly, the nominations in the present case are enforceable in these proceedings.

Submissions on behalf of the defendant

41. The defendant relied on lengthy written submissions in chief and in reply and also made extensive oral submissions. The submissions made, in summary, are as follows:

1. The call option fee was paid to secure the plaintiff’s rights under the Deed and to restrict the defendant from otherwise dealing with the relevant lots in the Property. It is inconsistent with the commercial purpose of a call option to enable the plaintiff to recover the call option fee which is the cost to the plaintiff of entering into the Deed;

2. The cases relied upon by the plaintiff in relation to rescissions are only relevant to contracts for the sale of land not put and call option deeds. Put and call option deeds are different and the call option fee is the consideration for entering into the Deed itself;

3. What occurred in the present case by the plaintiff was, on proper analysis, a termination of the Deeds for breach under Clause 2.1(c) and not a rescission of the Deeds;

4. The last sentence of Clause 2.1(c) on its proper reading has general application and prevents any entitlement to the plaintiff to recover the call option fees. The only entitlement the plaintiff has is to rescind the Deed under the sub-clause;

5. Clause 10 provides the only two circumstances relating to the refund of the call option fee. It provides a limited regime and prevents the call option fee being repaid upon rescission of the Deed under Clause 2.1(c);

6. As to Clause 10.1, a default by the Nominee under the contract should still be regarded as a default by the plaintiff under the terms and conditions of the Deed as the plaintiff nominated the Nominee pursuant to the terms of the Deed. As there was a default by the Nominee, the plaintiff is not entitled to retain the call option fees. Accordingly, the defendant is entitled to recover the two call option fees which it returned, pursuant to its Cross-Claim;

7. In relation to the duty question, the authorities make clear that the nominations are unenforceable and therefore the court cannot give the relief sought under the unenforceable nominations.

Consideration

The stamp duty issue

42. In her submissions, the defendant has raised an issue about the nominations of the purchasers from the plaintiff being unstamped and submits that the nominations are thereby unenforceable and cannot be relied upon by the Court to found a judgment concerning Lots 3310, 3315, 3326, 3324 and 3328, in favour of the plaintiff. Reliance is placed on the Duties Act 1997 (NSW), Section 304 which provides as follows:

“304  Receipt of instruments in evidence

(1)  An instrument that effects a dutiable transaction or is chargeable with duty under this Act is not available for use in law or equity for any purpose and may not be presented in evidence in a court or tribunal exercising civil jurisdiction unless:

(a)  it is duly stamped, or

(b)  it is stamped by the Chief Commissioner or in a manner approved by the Chief Commissioner.

(2)  A court or tribunal may admit in evidence an instrument that effects a dutiable transaction, or is chargeable with duty in accordance with the provisions of this Act, and that does not comply with subsection (1):

(a)  if the instrument is after its admission transmitted to the Chief Commissioner in accordance with arrangements approved by the court or tribunal, or

(b)  if (where the person who produces the instrument is not the person liable to pay the duty) the name and address of the person so liable is forwarded, together with the instrument, to the Chief Commissioner in accordance with arrangements approved by the court or tribunal.

(3)  A court or tribunal may admit in evidence an unexecuted copy of an instrument that effects a dutiable transaction, or is chargeable with duty in accordance with the provisions of this Act, if the court or tribunal is satisfied that:

(a)  the instrument of which it is a copy is duly stamped, or is stamped in a manner approved by the Chief Commissioner, or

(b)  the copy is duly stamped under section 299.”

43. The defendant, in a complex and detailed submission, submits:

1. That the nominations are dutiable; and

2. As they are dutiable and unstamped they are not enforceable in this Court and an undertaking under Section 304 of the Duties Act from the plaintiff does not assist the plaintiff. See defendant’s undated primary written submissions at paragraphs 110-132.

44. The plaintiff submits:

1. Although the nominations of persons in connection with the exercise of a put and call option to purchase land in New South Wales are prima facie dutiable, an exemption applies in the current case under Section 111 of the Duties Act as the assignment was by a person authorised to contract to do residential building work under the Home Building Act 1989 (NSW);

2. That raises complex issues which cannot be finally dealt with in these proceedings as the evidence does not allow the issue to be resolved;

3. That the plaintiff has given the usual undertaking under Section 304(2) of the Duties Act and the UCPR;

4. That the defendant’s argument about enforceability is incorrect and would render Section 304(2) of the Duties Act otiose. See paragraphs 60-69 of the submissions of counsel for the plaintiff dated 23 August 2017.

45. First, despite the detailed analysis on behalf of the defendant in paragraphs 110-119 of her primary submissions, I agree with the submission of counsel for the plaintiff that the applicability of the exemption claimed by it to duty is not a matter which this Court can deal with on the evidence but is a matter for the relevant stamp duty officers: see paragraph 63 of the plaintiff’s submissions in chief. The exemption claimed involves difficult questions of fact.

46. The plaintiff is willing to give an appropriate undertaking and that was provided to the Court through its counsel in relation to both the Deeds and the relevant nominations.

47. In relation to the issue of enforceability of the nominations, this itself raises complex questions. The defendant relies on the comments of Young J in Reliance Financial Services Pty Ltd v Baddock [2002] NSWSC 857 at [45]-[47]. That case was a case concerning the extension of a caveat where a different rule as to enforceability in the absence of a stamped document appears to be applicable.

48. The plaintiff relies on the detailed analysis by Robb J in Photios v Cousen [2015] NSWSC 336 at [94]-[150]: see paragraphs 67-69 of the submissions of counsel for the plaintiff. Although his Honour considered the question in the context of the enforceability of a mortgage, the analysis appears to me, in the absence of clear appellate authority, to be of general application. In particular, his Honour considered whether if the requisite mortgage duty had been paid, albeit late, the enforceability of the document would have been cured. I accept his Honour’s analysis that the document is enforceable once the duty is paid as the preferred approach. I also accept that the analysis applies to the nominations in the present case. There does not seem to be any good reason to adopt a different approach in relation to the nominations.

49. The defendant’s submission would lead to the inconvenient conclusion that although the nominations would be admissible and be properly stamped in due course, they would not be enforceable retrospectively: see the comments of Heydon JA in McCallum v National Australia Bank Ltd [2000] NSWCA 218 at [17]-[19]. Clear statutory language would be required for this result to be the preferred construction of Section 304.

45. Accordingly, in my view the nominations in relation to the lots in the present case may be enforceable if it were otherwise appropriate, in these proceedings. This allows the plaintiff to argue the duty point in relation to the nominations with the duty officers in due course.

46. I note, as stated above, that a different principle appears to be applicable in the case where the required mortgage duty had not been paid at the time a caveat was lodged in any subsequent extension of caveat proceedings: see the analysis by Robb J of the authorities in Photios at [126]-[146] and [156].

Early payment of the call option fees

52. The defendant raises on the pleadings the issue that it appears that the 30 call option fees were paid prior to the entry of the Deeds on 23 June 2015. See paragraphs 32-33 of the affidavit of Angela Carbone sworn 15 August 2017 and paragraph 16 of the Defence.

53. In my view, the payment of the call option fees prior to the entry into the Deeds does not affect the legal position. The surrounding circumstances show that the Deeds were contemplated well before the payment of the call option fees. It is clear that the call option fees were not intended to be a gift but to be a payment of the moneys which were to be paid under the Deeds by the plaintiff. In my view it is clear that the objective intention of the parties as inferred from the Deeds was that although the fees may have been paid early they would still be governed by the detailed terms of the Deeds.

54. In my opinion the early payment of the call option fees by the plaintiff does not affect the legal analysis in the present case.

The relevance of the Deeds being in relation to an option as opposed to another type of commercial transaction

55. It is submitted on behalf of the defendant that it is crucial in determining the proper interpretation of the Deeds that the Deeds relate to the exercise of options where it is usual for a fee to be paid for the benefit of the option which is retained by the party whose land is restricted and subject to the relevant deed irrespective of whether the option is ultimately exercised by the non-land owner: defendant’s primary submissions paragraphs 14-15.

56. Some support is gained for this submission from:

1. The very nature of an option; and

2. Clause 1.1 of the Deed which provides that the payment of the Call Option Fee for each Deed is the very consideration for the granting of the option under each Deed (although no consideration is required as the option is granted in a Deed as opposed to a contract).

57. In his submissions, the defendant’s legal representative sets out in detail the nature of an option and the fact that it is different to a contract for the sale of land: see paragraphs 31-39 of the primary written submissions and in particular Nguyen v Taylor [1992] 27 NSWLR 48.

58. I accept the oral submission made by counsel for the plaintiff that although the exercise of an option is construed strictly, particularly as to any stipulated procedural step to be followed as set out in the option deed itself, otherwise an option should be construed in accordance with the normal principles of construction applicable to a commercial contract: reply submissions at paragraphs 2-7. See also Tarango Land Pty Ltd v Lyons [2005] VSC 491 at [109]-[119]; Smoothseas Pty Ltd v Lawloan Mortgages Pty Ltd [2007] QCA 445 at [22].

59. Further, in Clause 10 of the Deed, the parties have set out certain circumstances governing either forfeiture of the call option fee or the obligation on the defendant to return the call option fee. It is accordingly not the case that the Deed is silent in relation to the refund of the call option fee. There are circumstances in which the Deed itself expressly accepts that the call option fee is returnable to the plaintiff.

60. Therefore, I reject the submission that the very nature of the Deed in question in the present case means that the call option fees cannot be returned because they are the consideration for the option itself and the defendant’s inability to deal with her land unfettered by the option.

61. I note that in a contract for the sale of any type of property subject to a condition precedent, both parties are usually immediately bound and the vendor is limited as to its ability to deal with the property, yet there is no question that any deposit must be returned to the buyer if the condition precedent cannot be achieved.

Proper approach to construction

62. I have set out above the authorities which in my view are applicable to the proper construction of the Deed. It is clear that the Deed must be construed as a whole with a view to a legal meaning which reflects, wherever possible, a measure of internal coherence to the various components of the commercial document. All aspects of the Deed must be considered in arriving at the proper interpretation to be given: Wilkie v Gordian Runoff Ltd (2005) 221 CLR 522; [2005] HCA 17 at [16]; HP Mercantile Pty Ltd v Hartnett [2016] NSWCA 342 at [134]. In Zhang, above, Leeming JA stated as follows at [89]:

“The contract is to be read as a whole. It is not only permissible but mandatory to have regard to how the potential legal meanings fit with the other provisions of the contract.”

The proper construction of Clause 2.1(c) of the Deed

63. As stated above, the plaintiff submits that the references to “right of rescission” and “right to rescind” in Clause 2.1(c) of the Deed, suggest as a matter of construction that a rescission through the failure to achieve the registration of the draft plan through no fault of the defendant entitles the plaintiff to a return of the call option fees and the solicitor’s fees. It is said that this arises as a matter of law and accordingly there was no need for the Deed to make express reference to that entitlement in the sub-clause. The defendant in her detailed submissions says this is not the proper way to interpret the right to “rescind” and emphasis is placed on the last sentence in Clause 2.1(c) as restricting the plaintiff’s right: see paragraphs 1-15 of the defendant’s primary submissions.

64. It is submitted by the defendant that Clause 10 sets out the only scenario in which the call option fee is to be refunded to the plaintiff. See Clause 10.2. The clause, however, does not expressly state that. Further, a rescission by the plaintiff following the non-registration of the draft plan is a scenario which is outside the two scenarios set out in Clause 10.1 and Clause 10.2 of the Deed. In my view, the question of the refund of the call option fee in the case of rescission by the plaintiff is properly to be determined by interpreting Clause 2.1(c) of the Deed read in its context.

65. The defendant also submitted, somewhat surprisingly, that what occurred in the present case in relation to the nine lots was a termination by the plaintiff under Clause 2.1(c) for alleged default by the defendant not a rescission. Reliance was placed on paragraph 19 of the Statement of Claim. Counsel for the plaintiff submitted that this was not the proper way to read the Statement of Claim.

66. In my view, this argument of the defendant should be rejected. I do not read paragraph 19 of the Statement of Claim as alleging a termination of the Deeds by the plaintiff for default by the defendant. The fact that a rescission occurred for the failure of the condition of registration of the draft plan is made clear by paragraph 21 of the Statement of Claim and the facts of the case (see the Notices of Rescission behind tab 9 of the Exhibit to Ms Kitchen’s affidavit sworn 2 May 2017).

67. As indicated, the defendant then points to the last sentence of sub-clause 2.1(c) and submits that it restricts the rights which the plaintiff has arising out of the failure to register the plan of subdivision by the sunset date, only to the right to rescind. It is said that the last word in Clause 2.1(c) by referring to “Contract” is an express reference to the contract for the sale of land annexed to the Deed and not to the Deed itself: paragraph 2 of the defendant’s submissions. The plaintiff says “this Contract” at the end of Clause 2.1(c) is clearly an error and was intended to be a reference to “this Deed”: reply submissions at paragraphs 8-11.

68. In my view, the defendant’s construction should be rejected for the following reasons:

1. The use of the word “this” before the word “Contract” at the end of Clause 2.1(c) of the Deed suggests it is a reference to the Deed not the Contract annexed to the Deed. If it was intended to be the latter it would have said that expressly. It is accepted that “Deed” and “Contract” are given specific definitions in Clause 15.1 of the Deed. However, in my view the use of the word “this” suggests there is an error in the last word in the sub-clause and it should read “Deed” rather than “Contract”. This view is reinforced by the use of the term “this Deed” in other places in Clause 2.1(c);

2. Further, in relation to the Deeds rescinded, no contracts were completed or nominated by the plaintiff. Accordingly, no rights of rescission existed under any contract relating to the lots the subject of the rescission. This reinforces the argument that the last word in clause 2.1(c) should be “Deed”. After all, in the case of the nine lots there were no Contracts to rescind;

3. The last sentence in Clause 2.1(c) of the Deed seems, on its proper construction, to be directed at limiting a right to claim damages against the defendant. This is indicated by its context including its placement at the end of Clause 2.1(c) and by an apparent intention to avoid any cause of action based on an allegation that the defendant had not made reasonable endeavours within the 15 months to obtain registration of the draft plan and draft instrument.

69. The next question is whether the “right of rescission” referred to in Clause 2.1(c) of the Deed gives the right in the plaintiff to call for the return of the call option fees following the exercise of the right. The defendant says it does not because those fees are the cost of obtaining the option. The plaintiff submits that there is such an entitlement because that entitlement should be seen to be analogous to the return of a deposit where a contract for the sale of land is rescinded through the failure to achieve a condition precedent through the fault of neither contracting party.

70. The plaintiff relies on Perri v Coolangatta Investments Pty Ltd (1982) 41 ALR 441 which I have discussed above, where the High Court confirmed the right to the return of the deposit where a condition precedent did not occur. However, it was submitted by the plaintiff that such a right existed in any contract where a deposit was paid not merely a contract for the sale of land, as the principle was one of general application where no default occurred by either party.

71. I have carefully considered the defendant’s written submissions on this point: see in particular paragraphs 50-60 of her primary submissions in chief and paragraphs 77-116 of her reply submissions.

72. It is clear, as the defendant submits, that “rescind” can have different meanings including a contractual right to put an end to a contract: reply submissions paragraph 83. The real issue is whether the right to rescind in the present case, occurring where there is no fault and the non-occurrence of a condition precedent to the performance of the Deed, gave an entitlement to demand the return of the deposit whether the right to rescind was one ab initio or not. Many of the authorities relied on by the defendant in her submissions used the term “rescind” in the context of a termination for breach. See defendant’s reply submissions at paragraphs 85-101. The correct position is stated by Dixon J in McDonald v Dennys Lascelles Ltd (1933) 48 CLR 457 at 476-77 where his Honour makes a distinction between a breach situation where a contract is not regarded as being rescinded “as from the beginning” and the situation where conduct occurs which affects the contract’s formation such as fraud. The current situation fits into neither category as here there is rescission but because of the non-occurrence of a condition precedent.

73. In my view, the argument of the plaintiff on this issue should be preferred for the following reasons:

1. There is no suggestion that the failure to register the draft plan and draft instrument occurred through default by the defendant. The position may be seen to be similar to that in Perri, above, which, although it dealt with a contract for the sale of land, also considered a condition precedent which was analysed in the scenario where there was no default by either party. Wilson J clearly indicated that in those circumstances the purchaser was entitled to obtain a return of the deposit;

2. Although a contract for the sale of land is, as submitted by the defendant, different to an option, in my view the right to request the return of the call option fee arises through the plaintiff’s right of rescission referred to in Clause 2.1(c) which was exercised;

3. I also note that Clause 2.1(c) clearly indicates that the rescission is a rescission of the Deed itself not of any more limited step taken under the Deed;

4. If the defendant’s argument was correct, then the defendant could take no steps at all to obtain registration of the draft plan and draft instrument, rely on the final sentence in Clause 2.1(c) to protect her from a suit arising out of the failure to register the plan of subdivision, and keep the call option fee for each Deed. That would be a surprising commercial result particularly when 30 options are involved;

5. Further, Clause 2.1(c) contemplates that either party may rescind the Deed by notice in writing to the other party. Accordingly, if the defendant’s argument were correct, the defendant could immediately take steps following the failure to register the draft plan and draft instrument within 15 months of the Deed, to herself rescind the Deed. It would be surprising in this scenario, where the defendant prevented further action by the plaintiff, that it was intended by the parties that the defendant could keep the call option fee for each lot rescinded by her;

6. In my view, the better construction of the clause is that the right to rescind in the case where neither party is at fault should also give rise, in the case of those particular lots, to a right in the plaintiff to require the return of the call option fee for those lots the subject of the exercise of the right of rescission. That construction appears fair to the parties as neither is at fault; it recognises that the right of rescission could be exercised by either party after the sunset date; and it appears consistent with the normal contractual rights arising from a rescission of a contract where a deposit or similar payment has been made.

74. In reaching this conclusion I have taken into account the defendant’s forceful arguments that an option is different to a contract for the sale of land; that this option in particular has a limitation in Clause 10 in relation to the refund of the call option fees: that no right of refund is expressly mentioned in Clause 2.1(c) and the effect of the last sentence in Clause 2.1(c). However, taking into account all the matters, in my view the plaintiff’s construction is to be preferred.

75. I reach this conclusion without taking into account the extrinsic email correspondence relied upon by the parties. The current appellate authorities are not in my view entirely clear as to whether I am entitled to take into account such correspondence in assessing the proper meaning to be given to a clause such as Clause 2.1(c). In particular, it is unclear to me whether this constitutes evidence of surrounding circumstances admissible to assist in the interpretation of the contract or “evidence of prior negotiations [which establish] … objective facts known to both parties and the subject matter of the contract” within WIN Corporation, above, at [57]. In my view the later email correspondence relied upon by the plaintiff would appear to be the most reliable. The earlier correspondence was while the parties were still determining the framework of the transaction. There is no evidence that any different approach was later taken and it is noted that Clause 2.1(c) proposed in the 5 May 2015 letter is in similar terms to that which appeared in the final Deed. If I was allowed to rely on this correspondence in the proper construction of the meaning of Clause 2.1(c), in my view it provides support for the construction put forward by the plaintiff in that the 4 May 2015 letter which was agreed to, said that where the plaintiff rescinds, the call option fee is refunded to it. I accept the submission of counsel for the plaintiff that there is no evidence of any change in the agreed position of the parties after 5 May 2015.

76. However, in my view, it is unnecessary to turn to this correspondence to decide the matter.

77. I had initially considered that there was also a question whether the comments of the defendant’s solicitor should be attributed to her and whether the plaintiff’s agent had the relevant authority: See Feldman v GNM Australia Ltd [2017] NSWCA 107 at [98]-[110] per Beazley P (with whom McColl JA agreed). However, both parties made formal concessions to the following effect: (a) in relation to the correspondence relied on, Mr Carbone and Mr Sacco had authority to bind the defendant; and (b) Mr Carter and Mr Driscoll (solicitor for the plaintiff) had authority to bind the plaintiff.

The proper construction of Clause 10.1

78. The next issue to be determined is the proper construction of Clause 10 of the Deed.

79. The plaintiff contends that it is entitled to a refund under Clause 10.2 in relation to those Deeds where there has been a valid exercise of the call option and that this determines the matter in relation to Lots 3324, 3328 as well as Lots 3310, 3315 and 3326. In relation to the latter lots, the plaintiff’s case is that it exercised its options and that the Deed expressly provides in Clause 10.2 that the option fee is refundable to it. It is also submitted that there is no issue that the plaintiff has complied with the requirements in Clause 4.2 of the Deeds (the defendant conceded this); that there was a deemed approval of the Nominees and that accordingly it is entitled to the return of the call option fees. It is said in the submissions of counsel for the plaintiff, that the plaintiff does not understand what the defendant’s case is in relation to these three agreements; see paragraph 49. The solicitor for the defendant confirmed in the course of submissions that the only point taken in relation to these three lots is the stamp duties point.

80. In the light of the evidence, the concession made by the defendant and the failure to raise any particular disentitling matters in paragraphs 103 to 109 of the defendant’s primary written submissions, in my view the plaintiff is entitled to a refund of the call option fees for Lots 3310, 3315 and 3326. As set out above, in the part dealing with the duty issue, the Deeds and the nomination are enforceable.

Solicitor’s costs

81. The plaintiff seeks the return of the solicitor’s costs paid in relation to the nine rescinded lots where the rescission occurred under Clause 2.1(c) of the Deed.

82. The defendant asserts an entitlement to retain these costs: see paragraphs 83 to 85 of the defendant’s written submissions. It is unclear to me the basis upon which the defendant asserts an entitlement to keep the costs. The evidence establishes that the costs were not paid to the defendant but to her solicitors Barclays Law Group: see Kitchen affidavit sworn 2 May 2017 paragraphs 15-16 and Exhibit tabs 6 and 7. I note that Clause 4.2(d) of the Deed states that the fees are the defendant’s “reasonable legal costs of complying with its obligations under clause 4.3”. However, in relation to the nine rescinded lots no steps were taken under Clause 4.3 of the Deed by the defendant. Therefore, it seems uncertain how the relevant amount can be retained.

81. In my view, the plaintiff is not entitled to recover this amount from the defendant. The amount was not paid to the defendant but to Barclays Law Group/Mr D Carbone. This is confirmed not only by the remittance advice but also by the account into which the money was deposited which apparently from the tax invoice is in the name of D Carbone, the solicitor acting for the defendant at Barclays Law Group. That firm or Mr Carbone should have been the relevant party against whom the relief was sought.

82. Although there appears to be no basis to retain the nine amounts of $9,000 where the services were never provided as referred to in Clause 4.2 of the Deed, I cannot determine the matter as the relevant person/s are not parties to the proceedings and have not been given any opportunity to make submissions.

83. Accordingly, I reject the plaintiff’s claim for the return of the $9,000.00.

The determination of the defendant’s Cross-Claim in relation to Lots 3324 and 3328

86. In her Cross-Claim, the defendant has sought the return of the call option fees paid by the plaintiff in relation to Lots 3324 and 3328 which the defendant says she wrongly returned to the plaintiff in circumstances where she was entitled to keep the fees.

87. The plaintiff submits that the defendant/cross-claimant is not entitled to the return of the $20,000 call option fee in relation to each of those two lots. This matter turns on the proper construction in particular of Clause 10.1 of the Deed.

88. The plaintiff submits that the first line of Clause 10.1 of the Deed is decisive because there has not been a default by the plaintiff or a Nominee (as defined in Clause 4.1 of the Deed) “under the terms and conditions of this Deed”. It is submitted that any default by a Nominee has occurred in relation to the contract for sale of land which was completed (as to the details) by the plaintiff under Clause 4.2 of the Deed. Thus there was not a default under the Deed but only a default under the Contract. In relation to the two lots, it should be noted that the defendant received a cheque for the 10% deposit pursuant to Clause 4.2(c) and, in the event that the purchaser did not complete on the Contract, as apparently occurred, the defendant also had her rights to retain the deposit and/or to sue the purchaser for any loss that was suffered by her.

89. The defendant submits that there was a default by the plaintiff or the Nominee under the terms and conditions of the Deed because the Deed itself contemplated that a Contract would be proposed under Clause 4.2(b). The defendant submits that in these cases there was an assignment of the option itself not simply a nomination of the contracting party: defendant’s reply submissions paragraphs 62-64. That appears not strictly to be the case despite the vague wording of the so-called Notice of Assignment (see for example Annexures 20 and following of the affidavit of Ms Carbone sworn 15 August 2017) as the plaintiff also exercised the call option and the process occurred under Clause 4.2 of the Deeds.

90. It is noted that while the term “Nominee” is used in the first line of Clause 10.1 of the Deed the term “Assignee” is used in the fourth line of Clause 10.1. The term “Assignee” is defined in Clause 15.1 of the Deed as meaning “any party validly nominated by the [plaintiff], who is capable of legally exercising the [plaintiff’s] rights.” It is somewhat unclear whether this means an assignee of the option itself or is intended to have the same meaning as “Nominee” referred to in Clause 4.1 of the Deed. It is also difficult to determine how the “Purchaser” could rescind the contract which is annexed to the Deed in circumstances where it has put forward a Nominee under clause 4. One possibility is that the words “or Contract” have been wrongly omitted after the word “Deed” in the first line of Clause 10.1 but this is not clear.

91. In the end, in my view the clause should be applied in the terms set out and the reference to “Deed” in the first line of Clause 10.1 does not include a contract to which a Nominee is a party. That is because the defendant has her remedies under the nominated contract to pursue against the Nominee. Once the plaintiff nominates someone and the procedure in Clause 4.2 is followed, then the defendant looks to the nominated purchaser for its remedies not to the plaintiff. There is no suggestion that the plaintiff itself has defaulted under the terms and conditions of the Deed.

92. An implied term is pleaded in paragraphs 6ci and 7ci of the Amended Cross-Claim. This seems to be an implied term as a matter of law rather than of fact. I cannot see that there is evidence establishing a breach by the plaintiff of the term alleged.

93. For these reasons the court accepts the written submissions of the plaintiff in paragraphs 57 to 59 of the outline of submissions in chief of counsel for the plaintiff.

94. It is also unclear precisely why the contracts for the purchase of Lots 3324 and 3328 were not completed. See the limited evidence in paragraphs 48, 57 and 109 of Ms Carbone’s affidavit.

95. Accordingly, for these reasons the Cross-Claim should be dismissed.

96. I thank the legal representatives for the parties for their helpful and detailed submissions.

Disposition

97. Having regard to my reasons set out above I make the following orders:

1. Judgment for the plaintiff on its Statement of Claim.

2. The parties are to bring in Short Minutes of Order within seven days reflecting these reasons including any appropriate claim for interest.

3. Judgment for the cross-defendant/plaintiff on the Amended Cross-Claim. The Amended Cross-Claim is dismissed.

4. The defendant/cross-claimant is to pay the plaintiff’s costs of the proceedings as agreed or assessed.

5. Liberty to the parties to apply to vary the costs order in the preceding paragraph.

6. Exhibits to be returned after 28 days.

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Decision last updated: 15 September 2017