Parry v Navaroo Constructions Pty Limited
[2013] NSWSC 249
•27 March 2013
Supreme Court
New South Wales
Medium Neutral Citation: Parry v Navaroo Constructions Pty Limited [2013] NSWSC 249 Hearing dates: 06/03/2013 Decision date: 27 March 2013 Jurisdiction: Common Law Before: Harrison AsJ Decision: (1) The appeal is upheld.
(2) The decision of his Honour Magistrate Bone dated 2 October 2012 is set aside.
(3) Judgment is entered in favour of the plaintiffs/cross respondents. The defendant/cross claimant is to pay the deposit sum of $21,200 to the plaintiffs/cross respondents with costs and interest.
(4) The defendant is to pay the plaintiffs' costs as agreed or assessed.
Catchwords: APPEAL FROM LOCAL COURT - claim for judgment to be set aside and deposit for land purchase returned to plaintiffs - purchase of land subject to lodgement of development plan - whether special condition prevailed over standard form clause - whether inconsistency between clauses relating to rescission of contract Legislation Cited: Local Court Act 2007 Cases Cited: AFC Holdings Pty Ltd v Shiprock Holdings Pty Ltd [2010] NSWSC 985
Australian Broadcasting Commission v Australasian Performing Right Assn Ltd [1973] HCA 36
Codelfa Construction Pty Ltd v State Rail Authority (NSW) [1982] HCA 24; (1982) 149 CLR 337
Dodds v Kennedy (No. 2) [2011] WASCA 131
Franklins Pty Ltd v Metcash Trading Ltd [2009] NSWCA 407
Hide & Skin Trading Pty Ltd v Oceanic Meat Traders Ltd (1990) 20 NSWLR 310
Hillas & Co Ltd v Arcos Ltd [1932] UKHL 2; (1932) 147 LT 503
Homburg Houtimport BV v Agrosin Ltd [2003] UKHL 12; [2004] 1 AC 715
International Air Transport Assn v Ansett Australia Holdings Ltd (2008) 234 CLR 151
L Schuler AG v Wickman Machine Tool Sales Ltd [1973] UKHL 2; [1974] AC 235
McCunn v Switzerland Insurance Australia Ltd [2000] HCA 65; (2000) 203 CLR 579
Maggbury Pty Ltd v Hafele Australia Pty Ltd [2001] HCA 70; (2001) 210 CLR 181
Pacific Carriers v BNP Paribus [2004] HCA 35; (2004) 218 CLR 451
Rivat Pty Ltd v B & N Elomar Engineering Pty Ltd [2007] NSWSC 638
Ryan v Fergerson [1909] HCA 47; (1909) 8 CLR 731
Swain v Waverley Municipal Council [2005] HCA 4; (2005) 220 CLR 517
Taylor v Johnson [1983] HCA 5; (1983) 151 CLR 422
Toll (FGCT) Pty Ltd v Alphapharm Pty Ltd [2004] HCA 52; (2004) 219 CLR 165
Trpkovski v Russell [2001] FCA 1871
Waterways Authority of New South Wales v Coal & Allied (Operations) Pty Limited [2007] NSWCA 276
Zhu v Treasurer of NSW [2004] HCA 56; (2004) 218 CLR 530Category: Principal judgment Parties: Peter Parry & Jennifer Ann Parry (Plaintiffs)
Navaroo Constructions Pty Limited (Defendant)Representation: Counsel:
J Masters (Plaintiffs)
Y Shariff (Defendant)
Solicitors:
Baker Deane & Nutt (Plaintiffs)
Robinson & Davies Pty Ltd (Defendant)
File Number(s): 2012/322014 Decision under appeal
- Date of Decision:
- 2012-12-02 00:00:00
- Before:
- Bone LCM
- File Number(s):
- 2012/67520
Judgment
HER HONOUR: This is an appeal of the whole of the decision of his Honour Magistrate Christopher Bone dated 2 October 2012. The appeal is brought pursuant to ss 39(1) and 41 of the Local Court Act 2007. It is common ground that this appeal involves a question of law.
By summons filed 17 October 2012 the plaintiffs seek, firstly, that the judgment entered in the Local Court of New South Wales on 2 October 2012 for the defendant/cross claimant be set aside; secondly, that judgment be entered in favour of the plaintiffs/cross respondents and the deposit be returned to the plaintiffs/cross respondents with costs and interest; and fourthly, in the alternative to Order 3, that the judgment be set aside for determination in accordance with the directions of this Court.
The plaintiffs in this Court are Peter Parry and Jennifer Ann Parry (the Parrys), who were the plaintiffs/cross respondents in the Local Court proceedings. The defendant in this Court is Navaroo Constructions Pty Limited (Navaroo Constructions), who was the defendant/cross claimant in the Local Court proceedings. For convenience, I shall refer to the parties by name.
The appeal
Section 39 of the Local Court Act 2007 provides that a party who is dissatisfied with a judgment or order of the Local Court may appeal to the Supreme Court, but only on a question of law. The issue raised on appeal is the true construction of the contract between the parties (Ex 1).
Section 41 of the Local Court Act provides that this Court may determine an appeal either (a) by varying the terms of the judgment or order, or (b) by setting aside the judgment or order, or (c) by setting aside the judgment or order and remitting the matter to the Local Court for determination in accordance with the Supreme Court's directions, or (d) by dismissing the appeal. The outcome of this appeal is such that if the Parrys are correct this Court can enter judgment. It is not necessary to remit this matter back to the Local Court.
Grounds of appeal
The Parrys appeal from the whole of the decision of his Honour Magistrate Bone dated 2 October 2012 and refer to 11 grounds of appeal. I shall not reproduce all of them as they raise the same or similar issues. The main issue is whether the Magistrate erred in law in finding that cl 42, a special condition of a contract for sale of land between the parties prevailed over cl 28 of the standard form contract. Clause 28 provided an unqualified right to the purchaser, in this case the Parrys, to rescind the contract if the development plan for the land had not yet been registered with the appropriate authority within six months of the contract date.
Background to the proceedings
Navaroo Constructions owned land at Bungendore. It offered lots for sale although a development application for subdivision of the land had not yet been lodged with the appropriate body. The Parrys entered into a contract of sale in relation to one of the lots on 25 February 2011. Both parties had solicitors acting for them. The sale price was $212,000 and a deposit of $21,200 was lodged by the Parrys with Navaroo Constructions' real estate agent. The contract was in writing and consisted of the standard Law Society/Real Estate Institute contract together with a number of special conditions.
The subdivision plan had not been registered by 24 August 2011, which was six months after the contracts were entered into. By letter of 29 August 2011 (5 days after the 6 month period) the Parrys wrote to Navaroo Constructions indicating they were rescinding the contract under the terms of cl 28.3 and seeking a return of the deposit. By letter dated 1 September 2011, Navaroo Constructions wrote to the Parrys disputing their right to rescind under cl 28.3 by virtue of cl 42.1 of the special conditions.
The proceedings in the Local Court
The subdivision plan was registered and Navaroo Constructions notified the Parrys as of 10 November 2011 and served a notice to complete upon the Parrys. The Parrys did not complete the contract. In proceedings in the Local Court before Magistrate Bone, the Parrys sought the return of their deposit. Navaroo Constructions wanted the deposit forfeited. His Honour Magistrate Bone held that the provisions of cl 42.1 must prevail and entered a verdict in favour of Navaroo Constructions on the claim and cross-claim.
The relevant contractual provisions
It is necessary to refer to clauses 19, 28, 29, 33, 34, 41 and 42 of the contract.
The Standard Contract for Sale - 2005 edition is one issued by the Law Society of New South Wales and the Real Estate Institute (Ex 1). I shall refer to the provisions of this contract as the standard conditions.
Clauses 28 and 29 fall within the standard conditions of the contract. Clauses 33, 34, 41 and 42 are special conditions. They read as follows:
"28 Unregistered plan
28.1 This clause applies only if some of the land is described as a lot in an unregistered plan.
28.2 The vendor must do everything reasonable to have the plan registered within 6 months after the contract date, with or without any minor alteration to the plan or any document to be lodged with the plan validly required or made under legislation.
28.3 If the plan is not registered within that time and in that manner -
28.3.1 the purchaser can rescind; and
28.3.2 the vendor can rescind, but only if the vendor has complied with clause 28.2.
28.4 Either party can serve notice of the registration of the plan and every relevant lot and plan number.
28.5 The completion date becomes the later of the completion date and 21 days after service of the notice.
28.6 Clauses 28.2 and 28.3 apply to a plan that is to be registered before the plan is registered."
Clause 29 relevantly reads:
"29.1 This clause applies only if a provision says this contract or completion is conditional on an event.
29.2 If the time for the event to happen is not stated, the time is 42 days after the contract date.
29.3 If this contract says the provision is for the benefit of a party, then it benefits only that party.
29.4 If anything is necessary to make the event happen, each party must do whatever is reasonably necessary to cause the event to happen."
Clause 33 reads:
"33.1 The parties agree that the following clauses of this Contract are amend as follows:
a. Clause 3 is deleted.
b. Clause 4.1 is deleted and replaced with "The Purchaser must serve the form of Transfer within seven (7) days after the vendor gives the purchaser notice of registration of the Plan.
c. Clause 7.1 the first line is deleted and replaced with "the vendor can rescind even if it is not reasonable to do so if in the case of claims that are not claims for delay.
d. Clause 7.1.1 is deleted.
e. Clause 7.1.3 replace 14 days with 7 days.
f. Clause 7.2.1 replaced 10% with 1%.
g. Clause 10.1 insert in line 1 after the word terminate "or delay completion".
h. Clauses 10.1.8 and 10.1.9 after the word substance insert "or exercise".
i. Clause 13 delete.
j. Clause 14.5 delete."
I interpose here to observe that Clause 28 has not been deleted nor amended under Clause 33.
Clause 34 of the contract, part of the special conditions, is as follows:
"34. COMPLETION
34.1 Completion shall take place:
a. fourteen (14) days after the Vendor notifies he Purchaser of the registration of the Plan referred to in clause 41; or
b. forty two (42) days after the date hereof,
whichever is the later.
34.2 If the Purchaser fails to complete on or before the Completion Date then, without in any way limiting the rights of the Vendor, the Purchaser agrees that it will pay to the Vendor interest, calculated at the rate of 8% per annum on a daily basis on the unpaid amount of the price outstanding hereunder, such interest to be calculated for the period from the Completion date until the date that the Purchaser completes this Contract, and the parties hereby agree that such interest represents a pre-estimate of the Vendor's loss in the event of a delay in completion."
Clause 41 is a follows:
"41. SALE SUBJECT TO REGISTRATION OF PLAN OF SUBDIVISION
41.1 Annexed hereto and marked "A" is the Plan and completion of this Contract is subject to and conditional upon registration of the Plan or such further and/or other plan by the Registrar General of Land and Property Information NSW ("the Registrar General").
41.2 The parties expressly agree and acknowledge that the Purchaser shall not be entitled to make any requisition, claim for compensation and/or delay completion in respect of:
a. any minor variation as regards the Property as shown in the Plan and the similar or like parcel in the Plan as finally approved and registered, provided however that any such minor variation including size and location has been required by the Registrar General or any other competent authority for the purposes of or in connection with the approval and registration of the proposed subdivision; and
41.3 The purchaser shall serve the form of transfer within seven (7) days after the Vendor serves notice on the Purchaser of the registration of the Plan.
41.4 The Vendor shall at its own cost and expense prepare the Plan and seek registration of the Plan by the Registrar and do all things necessary to achieve registration of the Plan as expeditiously as possible."
And cl 42 of the contract:
"42 SUNSET DATE
42.1 If the Plan has not been registered by the Registrar General within eighteen (18) months of the date of this Contract either of the parties shall be entitled by notice in writing to the other to rescind this contract on the basis that such rescission shall be deemed to be a rescission ab initio to which the provisions of clause 19 will apply.
42.2 If the Vendor is unable or unwilling to register the Plan then the Vendor is entitled to terminate this contract at any time giving the Purchaser reasonable notice and clause 19 shall apply.
42.3 Notwithstanding any other provision in this Contract, Act or Regulation the Purchaser shall not have any other right to claim compensation or damages in any other respect out of the Vendor's right to rescind or terminate pursuant to special condition 42.2 above."
The Magistrate's decision
In the hearing in the Local Court, it was agreed by both parties that if there were an inconsistency between cl 28.3, the standard clause, and cl 42.1, a special condition, the provisions of cl 42.1 would prevail.
Magistrate Bone relied on the decision of Hamilton J in Rivat Pty Ltd v B & N Elomar Engineering Pty Ltd [2007] NSWSC 638 where his Honour stated two general principles of construction.
"42 The first principle is that, to arrive at the true interpretation of a document, a clause must not be considered in isolation, but must be considered in the context of the whole of the document.
...
43 The second principle is that, in case of inconsistency between typed provisions and printed provisions forming part of a standard form used in a written contract, the written provisions will prevail."
In the present case, the standard conditions are printed and the special conditions are typed. However, Magistrate Bone referred to Hamilton J's warning that a court must be cautious in the application of the principles, stating at [8]:
"Hamilton, J., however makes it clear that a court must be cautious in the application of the principle. He says that if it is clear that the special clause is 'really inconsistent' with the standard clause then the special clause must prevail but the special clause should not lightly or automatically prevail and the contract should be read so as to give effect as far as possible to all of its provisions."
Magistrate Bone then considered if the two clauses were "really inconsistent", stating at [10]:
"There is little doubt that clauses 28.3 and 42.1 appear to be inconsistent when looked at superficially. Clause 28.3 appears to state that if the subdivision plan has not been registered within six months of the contract date, the purchasers may rescind; clause 42.1 appears to state that if the subdivision plan has not been registered within eighteen months of the contract date, the purchasers may rescind. It is therefore appropriate, when considering the cautionary approach which must be taken in the application of the second general principle outlined by Hamilton, J, that I attempt to ascertain if the two clauses are 'really inconsistent'."
His Honour then considered the parties' arguments at [11]:
"11 The vendor submits that the clauses are completely inconsistent and cannot both stand. The purchasers submit that the two clauses are not inconsistent and their argument in support of this submission may be outlined as follows. Firstly, the parties to a contract being fully aware of clause 28.3 and knowing that there has been some delay with a subdivision application, might nevertheless consider that they both want the transaction to continue; it might then be unreasonable to allow a situation to develop whereby one party subsequently changes its mind and tries to rescind after, say, seventeen months. Clause 28.3 would give a party an opportunity to rescind shortly after the six months period had elapsed but that opportunity would diminish as time passed. Clause 42.1 is a sunset clause, an 'enough is enough' clause, and would give the parties a fresh opportunity to consider their options after eighteen months without the worry of some sort of estoppel or damages litigation. Secondly, a developer might be doing everything possible to foster a subdivision application but might meet an unexpected hurdle requiring investigation (e.g. the developer might unexpectedly come across subterranean water or ancient human bones or an endangered species of animal which would need to be reported to a regulatory authority and the enterprise might be severely delayed or even stopped). Again, clause 28.3 would give a party the opportunity to rescind without delay if it wished or to continue with the transaction if both parties agreed and clause 42.1 would, if the parties had agreed to continue with the transaction, give each party the opportunity to re-consider its position after eighteen months and then rescind without the worry of some sort of estoppel or damages litigation."
His Honour concluded at [12-13]:
"[C]lause 42.1, the 'sunset clause', does not put an end to the transaction. Had the clause indicated that if the plan was not registered after eighteen months the contract would be rescinded ab initio, the approach would be entirely logical. If, however, the clause can stand with clause 28.3 it merely provides a second, but not final, opportunity for a party to end the contract. Should the hypothetical situation mentioned in the previous paragraph come into a play at the end of eighteen months a party which, by agreement, then decided to allow the transaction to continue and then sought to rescind after, say, thirty months, might again be faced with the worry of some sort of estoppel or damages litigation.
In my opinion, the two clauses are irreconcilable - they are 'really different'. Under those circumstances the provisions of clause 42.1 must prevail and it follows that there will be a verdict for Navaroo Constructions on the claim and the cross-claim."
Proper construction of the contract
It was common ground that the following general legal principles apply to the construction of contracts:
(1) The construction and interpretation of written contracts is to be undertaken by an examination of the text of the document in the context of the surrounding circumstances known to the parties and by assessing how a reasonable person would have understood the language in that context: Maggbury Pty Ltd v Hafele Australia Pty Ltd [2001] HCA 70; (2001) 210 CLR 181 at [ 11 ]; Pacific Carriers v BNP Paribus [2004] HCA 35; (2004) 218 CLR 451 at [22]; Zhu v Treasurer of NSW [2004] HCA 56; (2004) 218 CLR 530 at [82]; Toll (FGCT) Pty Ltd v Alphapharm Pty Ltd [2004] HCA 52; (2004) 219 CLR 165 at [40] and International Air Transport Assn v Ansett Australia Holdings Ltd [2008] HCA 3; (2008) 234 CLR 151 at [8] and [53]).
(2) A commercial contract should be given a businesslike interpretation: McCunn v Switzerland Insurance Australia Ltd [2000] HCA 65; (2000) 203 CLR 579 at [22].
(3) The nature and extent of the commercial aims and purposes of the agreement or parts thereof are part of the essential background circumstances: "the genesis of the transaction, the background, the context, the market in which the parties are operating"': Codelfa Construction Pty Ltd v State Rail Authority (NSW) [1982] HCA 24; (1982) 149 CLR 337 at 350.
(4) The words should be given a construction so as "to avoid ... [making] commercial nonsense or is shown to be commercially inconvenient": Hide & Skin Trading Pty Ltd v Oceanic Meat Traders Ltd (1990) 20 NSWLR 310 at 313-314 (Kirby P) cited by the court in Zhu at 559 [82]; Franklins Pty Ltd v Metcash Trading Ltd [2009] NSWCA 407at [19].
(5) They should also be read "fairly and broadly, without [the court] being too astute or subtle in finding defects": Hillas & Co Ltd v Arcos Ltd [1932] UKHL 2; (1932) 147 LT 503 at 514 per Lord Wright cited in Australian Broadcasting Commission v Australasian Performing Right Assn Ltd [1973] HCA 36; 129 CLR 99 at 109-110.
(6) In construing written contracts it should be presumed that the parties did not intend their terms to operate unreasonably. The more unreasonable the result a party's construction would produce, the more unlikely it is that the parties would have intended it. If the parties did intend an unreasonable result it is essential that that intention be made "abundantly clear ": Waterways Authority of New South Wales v Coal and Allied (Operations) Pty Limited [2007] NSWCA 276, per McColl J at [216], quoting L Schuler AG v Wickman Machine Tool Sales Ltd [1973] UKHL 2; [1974] AC 235 (at 251).
(7) The subjective intentions of the parties are irrelevant. The underpinning legal theory in the law concerning the formation, construction and interpretation of contracts is the so-called objective theory of contract: Taylor v Johnson [1983] HCA 5; (1983) 151 CLR 422 at 428-432 per Mason ACJ, Murphy and Deane JJ; Pacific Carriers v BNP Paribus [2004] HCA 35; (2004) 218 CLR 451 at [22]; Franklins Pty Ltd v Metcash Trading Ltd [2009] NSWCA 407 at [4] per Allsop P.
It was also agreed that where there are special conditions contained in a contract which, on their face, are inconsistent with the standard conditions, the applicable principle is that specifically negotiated clauses will prevail over printed clauses forming part of a standard form to the extent of any inconsistency: Ryan v Fergerson [1909] HCA 47; (1909) 8 CLR 731 at 735 per Griffiths CJ; Trpkovski v Russell [2001] FCA 1871 at [49] per Stone J; Dodds v Kennedy (No. 2) [2011] WASCA 131 at [25] per Pullin JA.
This principle was expressed by the House of Lords in Homburg Houtimport BV v Agrosin Ltd [2003] UKHL 12; [2004] 1 AC 715 where Lord Bingham of Cornhill said at [11]:
"It is common sense that greater weight should attach to terms which the particular contracting parties have chosen to include in the contract than to pre-printed terms probably devised to cover very many situations to which the particular contracting parties have never addressed their minds."
Magistrate Bone referred in his decision to the judgment of Hamilton J in Rivat where his Honour applied the two applicable principles, which I have referred to in [20] above. More recently, in AFC Holdings Pty Ltd v Shiprock Holdings Pty Ltd [2010] NSWSC 985, Ball J held at [13]:
"In some cases, it may be appropriate to interpret words in a way that makes them redundant. That may be appropriate where the alternative construction of words is inconsistent with other provisions of the contract or where the alternative construction is inconsistent with the commercial purpose of the contract or where it appears that words have been included for abundant caution [authorities omitted]. However, in my opinion, none of those exceptions applies in this case. The relevant provision is included as a special condition of the contract. Generally, the purpose of special conditions is to alter or to supplement the standard terms. In this case, cl 13.2 of the standard terms make it clear that normally the price is GST inclusive, with the result that when the purchaser pays the purchase price it is paying an amount which includes the amount of GST for which the vendor is liable. By including special condition 4, the parties must have intended to alter that position."
Was there an inconsistency between clauses 28 and 42?
It was agreed by the parties before me that should this Court find that clauses 28 and 42 could run together, there was no inconsistency.
Magistrate Bone concluded that clauses 28 and 42 of the contract were irreconcilable and were inconsistent with each other.
Clause 28 is headed "Unregistered plan" and is a clause in the standard form contract. Clause 28.2 asserts that the vendor must do "everything reasonable" to register the development plan within six months of the contract date. Clause 28.3 provides for the consequences if the development plan is not registered within six months and gives the purchaser an unqualified right to rescind and the vendor a qualified right of rescission subject to the terms of cl 28.2. There is no compulsion on either party to exercise its rights prior to the expiration of the six-month period.
Clause 42 a special condition is headed "Sunset date" and provides the discretionary right for either party to rescind the contract if, after 18 months from the contract date, the development plan is still not registered. Between the time of six months and 18 months after signing the contract, the purchaser retains an unqualified right to rescind the contract pursuant to cl 28.3 subject to any argument of waiver or estoppel.
Navaroo Constructions submits that the source of the inconsistency is the purported conferral of a right to rescind at two different but irreconcilable points in time. The contract cannot be rescinded after six months, it was submitted, yet also confer a right to rescind at 18 months. If rescission has occurred at the first point in time, there is no utility to the second point in time, it serves no purpose. It was further submitted that this would leave no room for the operation of the specially negotiated clause and would deprive Navaroo Constructions of the opportunity to take the benefit of the full 18-month period for registration which had been negotiated between the parties. Such a result would be inconsistent with the well-established principles that the specially negotiated terms should be given precedence.
In oral submissions, counsel for Navaroo Constructions put forward argument as to the operation of the contract. It was submitted that there are four essential elements to the way in which cl 28 works. They are firstly, that the contract is conditional on the plan being registered; secondly, that there is a duty on the vendor to register the plan; thirdly, there is a right of rescission; and fourthly, that once the plan is registered, there will be completion in accordance with cl 34. Counsel further submitted that clauses 41 and 42 of the special conditions also dealt with those same four elements and an inference could be drawn that a special regime applied to the registration of the plan which had been negotiated by the parties. While cl 33 listed the agreed changes to the clauses in the standard form contract, it did not include any change to cl 28, an inference could be drawn that there was no need to deal with cl 28 in cl 33 as they had dealt with everything necessary in relation to registration of the plan in the special conditions, that is, clauses 41 and 42.
Clause 41.4 provides that the vendor must seek registration of the plan by the Registrar General and do all things necessary to achieve the registration of the plan "as expeditiously as possible". Clause 29.1 provides that completion of the contract is conditional on an event, in this case, the registration of the plan. Emphasis was placed by counsel for Navaroo Constructions on cl 21.2 which states:
"21.2 If there are conflicting times for something to be done or to happen, the latest of those times applies."
It was submitted for Navaroo Constructions that if there is inconsistency within the contract as to the time by which something is to happen, then cl 21.2 applies. Thus, where cl 28 provides for the contract to be rescinded after six months and cl 42 provides for rescission after 18 months, by virtue of cl 21.2, the period after which the contract can be rescinded should the plan remain unregistered is 18 months.
However, neither cl 28 nor cl 42 positively assert a time by which the conditional event upon which the contract relies, the registration of the plan, is to be done or happen. Clauses 28 and 42 simply provide a mechanism to end the contract if registration of the plan has not yet occurred at two different points in time. Therefore, in my view, there is no conflicting time as referred to in cl 21.2, for which something is to be done or happen such that the later time would apply.
If a party elected to rescind the contract under either Clause 28.3 or 41 the machinery for doing so is set out in Clause 19.
Counsel for the Parrys submitted that the Magistrate held that the provisions were irreconcilable because both involved the exercise of a discretion, not that they conferred a right to rescind at two different times. It is submitted that both clauses 28 and 42 were agreed by the parties and are not irreconcilable. Special condition cl 33 amended and deleted 10 clauses of the standard form contract. It is submitted that this reflects this agreement as, if cl 28 was to be amended or excluded, it would have been included in the amendments listed in cl 33.
In oral submissions, counsel for the Parrys submitted that cl 41 could work equally well with cl 28. Clause 41.4 states that the vendor must do all things necessary to achieve registration of the plan "as expeditiously" as possible, the six-month period for registration aligning more closely with that requirement than did the 18-month period in cl 42. It was further submitted that cl 42 does not provide a positive assertion to lengthen the time available to the vendor to register the plan to 18 months.
The six-month deadline for registration was 24 August 2011. On 29 August 2011, the Parrys informed Navaroo Constructions that they were rescinding the contract under the terms of cl 28.3. At this time, cl 42.1 was not operative, it only becoming operative if: (a) 18 months had passed since signing the contract; and (b) the plan was still not registered.
If, at any time between six and 18 months the plan remained unregistered, only cl 28 operated to provide a mechanism to rescind the contract because registration had not yet occurred. If the plan was registered between six and 18 months from the date of the contract, cl 34, which details the mechanism for completion, became operative and the right to rescind under either cl 28.3 or cl 42.1 expired. Once the plan was registered, neither clause 28 nor 42 had any further operation. Neither party argued that Clause 42.2 may have provided a way out for the vendor after the six month period had elapsed. But as 42.2 appears under the heading "Sunset Clause" it would seem to be effective only after 18 months had passed, as referred to in 42.1.
Magistrate Bone placed emphasis on the fact that cl 42.1 did not put an end to the transaction as by agreement both parties could continue the contract beyond 18 months if the plan was still unregistered. His Honour stated that if cl 42.1 could stand with cl 28.3, it merely provided a second, but not final, opportunity for either party to end the contract. As a result, his Honour found that clauses 28 and 42 were inconsistent and cl 42 should prevail. It is true that under the terms of this contract if neither party took steps to rescind the contract it would remain on foot. But I do not think that makes it inconsistent.
Counsel for Navaroo Constructions submitted that the operation of clauses 28 and 42 together make the operation and performance of the contract uncertain and would leave a vendor such as Navaroo Constructions in a position where it would not know whether to perform the contract within six months or I8 months. However, cl 41.4 places the onus on the vendor to do everything necessary to achieve registration of the plan as soon as possible. Completion of the contract cannot take place until the plan is registered and until that occurs, the operation and performance of the contract would necessarily remain uncertain. Once registration occurs, the right to rescind either under cl 28.3 or cl 42.1 can no longer be exercised by either party.
In my view, clauses 28 and 42 operate at different points in time. However, this does not make them inconsistent. The fact that after a period of 18 months has passed and the plan remains unregistered, the contract may continue if neither party chooses to rescind the contract under cl 42.1, also does not make them inconsistent. Clauses 28 and 42 are capable of operating together and do different work. In Rivat at [47], his Honour Hamilton J said:
"[W]hilst clearly inconsistent provisions of the printed form must be treated as excluded by the typed provisions, the operation of the printed clauses should be preserved so far as is possible. The Court should not lightly accede to a submission that the typed provision covers the field and excludes in whole the corresponding printed clause, if parts of that provision can coexist with the typed clause and still be given effect."
Clause 28 provides that the purchaser is not locked in to the purchase beyond six months. The vendor can also get out of the contract at six months if, despite having done all it reasonably could, the plan is not registered. Clause 42 allows both parties a second chance to exit the contract if the plan remains unregistered after 18 months or the vendor finds themselves in a position such that they are unable or unwilling to register the plan.
The fact that the contract included cl 33 that specifically amends the printed clauses and did not include any amendment to cl 28 also lends weight to the conclusion that cl 28 was intended to continue to operate.
Conclusion
It is my view that there is no inconsistency between clauses 28 and 42 of the contract. Consequently, the applicable principle of construction that special conditions prevail over standard clauses where there is inconsistency does not come into operation.
The result is that the appeal is upheld. Magistrate Bone erred in finding that the two clauses were irreconcilable and that as a consequence, cl 42 should prevail. This is an error of law. The decision of his Honour Magistrate Bone dated 2 October 2012 is set aside. Judgment is entered in favour of the plaintiffs/cross respondents and the deposit of $21,200 is to be returned to the plaintiffs/cross respondents with costs and interest.
Costs are discretionary. Costs usually follow the event. The defendant is to pay the plaintiff's costs as agreed or assessed.
The Court orders that:
(1) The appeal is upheld.
(2) The decision of his Honour Magistrate Bone dated 2 October 2012 is set aside.
(3) Judgment is entered in favour of the plaintiffs/cross respondents. The defendant/cross claimant is to pay the deposit sum of $21,200 to the plaintiffs/cross respondents with costs and interest.
(4) The defendant is to pay the plaintiffs' costs as agreed or assessed.
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Decision last updated: 28 March 2013
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