PDR Pty Ltd v Bianchi - [2009] WASC 220

JURISDICTION : SUPREME COURT OF WESTERN AUSTRALIA
IN CIVIL

CITATION: PDR PTY LTD -v- BIANCHI [2009] WASC 220

CORAM: McKECHNIE J

HEARD: 27 JULY 2009

DELIVERED : 7 AUGUST 2009

FILE NO/S: CIV 2076 of 2005

BETWEEN: PDR PTY LTD (ACN 076 027 042)
Plaintiff
AND
DAVIDE BIANCHI
Defendant

Catchwords:

Breach of contract - Termination - Whether valid - When time runs under a contract - Turns on own facts

Legislation:

Nil

Result:

Plaintiff's claim succeeds
Damages assessed

Category: B

Representation:

Counsel:

Plaintiff: P N Bevilacqua
Defendant: No appearance

Solicitors:

Plaintiff: Price Sierakowski
Defendant: No appearance

Case(s) referred to in judgment(s):

Forster v Jododex Australia Pty Ltd (1972) 127 CLR 421

McKECHNIE J: This is a claim by a vendor for damages for breach of contract over the sale of The Contacio licensed bar in the Ocean Plaza Foodhall in Scarborough. The defendant purchaser was represented by solicitors but he dispensed with their services and did not appear at the trial.

The evidence

In consequence none of the witnesses called by the plaintiff were cross‑examined. I accept their evidence as unchallenged. The witness statements contain matters of hearsay. The mere fact that a witness statement contains hearsay does not make the hearsay element admissible. As the defendant did not appear, I advised counsel for the plaintiff that I would receive the statements into evidence but exclude the hearsay portion of those statements from consideration.
Statements were given by the two directors of the plaintiff, Mr Kelvin James Fitzgerald and Mr Paul Damian Price. A supplementary statement by Mr Fitzgerald was also received.
The third witness was Mr Lee Gordon Goldstein, a business valuer who valued The Contacio licensed bar. His report tendered in evidence as Exhibit 60 sets out the facts and the valuation approach before concluding that The Contacio licensed bar would have had a value of $347,941.47 as at 30 June 2005. I accept this evidence. I accept also his oral evidence (ts 66) that the value arrived at is an average of the previous 36 months and that there would be a very minimal difference to the value between the date of the valuation (30 June 2005) and 5 September 2005 when the plaintiff terminated the contract as a result of the defendant's breach.

The issues

The plaintiff submitted that there are two main issues to resolve:
(a)Was there an agreement for the sale of the Contacio constituted by the contract dated 14 June 2005 between the Plaintiff and the Defendant (the Second Agreement).
(b)Was the Second Agreement validly terminated by the Plaintiff?
The amended defence, by par 3, says that no contract was formed between the plaintiff and the defendant as alleged or at all. Despite the defendant not appearing, the plaintiff has the burden of satisfying me that there was a concluded contract.
The evidence discloses that the defendant was being represented by his agent Ms Angela Olifent. Mr Fitzgerald was approached in or around March or April 2005 by Ms Olifent, on behalf of Davide Bianchi, with a view to purchasing the business of The Contacio which included the licensed bar. To that end, Mr Fitzgerald and Ms Olifent met at the Blue Duck Café. During the course of their discussion Ms Olifent said words to the effect that the defendant was aware of the lease and he did not seem worried about the 5 year termination/demolition clause contained in the lease (more of this clause later). Ms Olifent asked whether the owner of the premises, Mr David Lombardo, would extend the period of the lease and Mr Fitzgerald replied to the effect that Lombardo had remarked to him positively when he had previously requested an extra 5 year period on the lease provided that the toilets were refitted.
Negotiations seemed to have continued over the next three months. The defendant appeared to have been indecisive as to whether he would purchase The Contacio in his personal capacity or through a corporate vehicle and so a number of agreements were prepared. What is described in the trial as the second agreement was signed by Ms Olifent on 10 June 2005 and by Mr Fitzgerald and Mr Price on 14 June 2005. Before signing the agreement Fitzgerald and Price made a number of amendments to the agreement. The amended second agreement was returned to Ms Olifent in or around mid June 2005.
A third agreement briefly came into effect between a company known as SBI (Scarborough Beach Investments Pty Ltd) as the purchaser but this was subsequently cancelled. Shortly after the signing of the second agreement, as amended, Mr Fitzgerald and Ms Olifent met in a café in Subiaco in or around mid June 2005. During the course of conversation Ms Olifent said, in effect, that the defendant did not intend to proceed with Vogue Pty Ltd any longer and would proceed with the second agreement in which he personally was the purchaser. After meeting with Ms Olifent, Mr Fitzgerald went to a nearby café where the defendant was involved in refitting and they spoke socially, this being their first meeting.
The plaintiff submits that the second agreement became operative when Ms Olifent, as agent for the defendant, accepted the counter offer contained in the second agreement.
Alternatively, the plaintiff asserts that assent to its terms by the defendant can be inferred through the conduct of the parties.
Although by par 5(b) of the amended defence, the defendant states that Olifent had no actual or apparent authority to accept the counter offer on behalf of Scarborough Beach Investments Pty Ltd or the defendant, no evidence was led to support the claim. Having regard to the evidence of Mr Fitzgerald about the course of dealings with Ms Olifent, I am satisfied that she had apparent authority to not only negotiate but also conclude the terms of an agreement and that she did so in the Subiaco coffee shop in or around mid June 2005 thereby binding the defendant to the contract.
I am also satisfied that the conduct thereafter indicates assent to the contract. Apart from Ms Olifent's discussions with Mr Fitzgerald there are a number of other facts:
•Payment of the deposit:
There was a deposit paid. The evidence of the plaintiff on this point does not satisfy me that a deposit was paid. The evidence establishes that a cheque drawn on the account of B A & H L Russell in the sum of $10,000 was paid into the trust account of Price Sierakowski, the plaintiff's solicitors. Both the trust ledger and the trust account receipt say the reason for the payment was 'monies deposited into trust for future costs & disbursements'. The evidence as to the cheque within the witness statements is hearsay. However, by par 6(a) of the amended defence:
the Defendant admits the sum of $10,000 was paid to the Plaintiff but denies that it was the deposit under the Agreement and that payment of that sum to the Plaintiff was or could amount to an acceptance of the Counter Offer.
The only reason for that sum to be paid was as a deposit. The second agreement prescribed the manner of payment of purchase price by a deposit of $10,000 to be paid within 48 hours of the acceptance of the offer. The cheque is dated 15 June 2005. The irresistible inference is that this was the deposit under the second agreement and is strong evidence of assent by the defendant to the contract.
•The defendant thereafter obtained and considered the lease of The Contacio premises (an important matter of which more anon) and tried to negotiate an extension of time under the agreement, albeit purportedly on behalf of Scarborough Beach Investments Pty Ltd, Ms Olifent wrote, as I find, on behalf of the defendant:
[W]e are formally withdrawing from the contract to purchase the Contacio Bar … This letter formally cancels the contract which is therefore at an end.
David Bianchi has requested his $10,000 deposit to be posted to him.
I am satisfied that not only did the defendant, through Ms Olifent, expressly accept the terms of the second agreement but through his conduct thereafter, the defendant acted in a way which is only explicable on the basis that he had affirmed the agreement.
By par 14(a) of the amended defence the defendant pleads that:
Special Condition 2 of the Agreement provided that the Offer was subject to and conditional upon the Defendant being completely satisfied with the terms and conditions of the existing Lease and giving notice of such satisfaction or otherwise within 14 days of its availability.
The defendant asserts that this was a condition precedent to the formation of any contract or a condition precedent to the performance of the agreement. I am not able to agree with that defence. The contract came into effect when Ms Olifent, on behalf of the defendant, accepted the counter offer contained by the amendment or variation of certain clauses. The contract contained conditions, in particular special condition 2, which provided a circumstance for the contract to come to an end. However, there was a valid contract until the happening of any such event.

Was the second agreement validly terminated by the plaintiff

The plaintiff submits that the critical issues in relation to termination are:
(a)whether there was a breach of Special Condition 2 through the failure of the Defendant to provide written notice of satisfaction or otherwise with the lease within 14 days of its availability; and
(b)whether the agreement was thereafter validly terminated by the Plaintiff.
In the letter dated 8 July 2005 the defendant purported to formally cancel the contract. This brings me back to the second agreement and the special condition.
Special condition 2, as amended in handwriting, is as follows:
This offer is subject to and conditional upon:
2.The Purchaser being completely satisfied with the terms and conditions of the existing lease document and giving written notice of such satisfaction or otherwise within 14 days of its availability.
Clause 22, (Default) of the General Conditions of the contract provided:
(a)Time shall be of the essence in this Agreement in all respects but unless stated otherwise in this Agreement, neither party shall be at liberty to enforce any rights or remedies (other than the right of the Vendor to sue for any monies already fallen due) arising out of the default of the other unless one party gives to the other a written notice specifying the default and stating their intention to enforce their rights and remedies unless the default is remedied and the proper legal costs (if any) occasioned by the default to the party giving the notice are paid both within the period of not less than seven (7) days from the date of the giving of the notice and the other party fails in that period to remedy the default and pay those costs.
The letter of 8 July 2005 reads as follows:
8th July 2005
PDR INVESTMENTS
10‑12 SCARBOROUGH BEACH RD
SCARBOROUGH WA
Attention Kalvin Fitzgerald
On behalf of Scarborough Beach Investments we are formally withdrawing from the contract to purchase the Contacio bar.
On receiving the lease on the 23rd June 2005 we saw a problem with the termination and demolition clause 1123 of the lease. This was discussed at a meeting with David Lombardo, Kalvin Fitzgerald, Davide Bianchi and myself.
I requested an extension of time so the conditions for the proposed renovation could be approved by Council. Kalvin stated he would discuss this issue with his partner but he didn't think it would be viewed favourably by his partner. I explained to him that without the extension for the conditions we wouldn't proceed. Kalvin contacted me and cancelled all negotiations on the 24th of June 2005. The contract then became null and void.
I received a call from Kalvin on the 28th June asking me if we could recommence and renegotiate the conditions on the contract. I presented the new conditions to Davide Bianchi with Bruce Russell on the 7th July 2005 who rejected the conditions outright and wished to terminate formally the contract.
This letter formally cancels the contract which is therefore at an end.
Davide Bianchi has requested his $10,000 deposit to be posted to him within 5 working days. Davide's new address is C/- Cico's Restaurant, 1 Rokeby Rd, Subiaco. WA. 6008.
Yours faithfully
Angela Olifent Consultant for
Davide Bianci
Scarborough Investments
The letter posits two reasons for the cancellation of the contract. The first was a problem with the termination and demolition clause 1123 of the lease and the second was an assertion that the contract had terminated on 24 June through the actions of Mr Fitzgerald.
Mr Price, in his written statement, comments on this letter as follows:
15.My reaction to this letter was that Olifent on Behalf of Bianchi provided notice of dissatisfaction of the lease through the operation of special condition 2, however, that notice was out of time, and under the Agreement time was of the essence. Bianchi was to provide the notice of his dissatisfaction by no later than 6 July 2008.
The plaintiff's submissions (at 12 e)) concede that the defendant, through Olifent, did give notice of non‑satisfaction although not within the required period.
The issue for determination then is whether the notice given on 8 July 2005 was within time or not, time being of the essence of the contract. The first matter to be decided is when the lease was made available under special condition 2.
The plaintiff's evidence is hearsay. Mr Price's witness statement at par 16 is that the notice was out of time based on Mr Price's understanding of a meeting held between Mr Lombardo and the defendant. Mr Price's understanding of the purpose of the meeting is not evidence of the actual purpose, he not being present. He relies on an email from the owner, Mr Lombardo, (Exhibit 35 page 229) but that email is silent as to whether the lease document was made available on that date.
Mr Fitzgerald's evidence at par 22 of his statement:
On 17 June 2005, Lombardo sent Pinkerton an email attaching an application for assignment of lease. That email also advised in effect that Lombardo had intended to meet with Bianchi on 17 June 2005 regarding the assignment of the lease. However, as Bianchi cancelled the meeting Lombardo sent him a memo dated 17 June 2005 attaching amongst other things the lease. A copy of the email to Pinkerton can be found in the Book of Document as an attachment to document 35 at page 233 and a copy of Lombardo's memo to Bianchi can be found as an attachment to document 35 at page 242. I have seen these documents as they form part of the business records of PDR.
However, the email and memo to which he refers do not prove that the lease was made available on that date. The email of 17 June 2005 says relevantly:
Attached is a standard Application for and Assignment of Lease form.
Attached also was my memo for a meeting with the Purchaser today, which was cancelled by the Purchaser, to be rescheduled. You will note that a copy of the Lease will be provided to the Purchaser.
I will keep you informed. (TB 233)
The memo at 242 is dated 17 June 2005:
Meeting with David Bianchi, and Angi Ollifent, regarding an application for assignment of Lease for Contacio, Shop 18 Ocean Plaza Centre, Scarborough, at Subiaco 12.00 pm.
As requested by the Lessee, enclosed is a copy of the following:
1.Lease, dated 25 May 2005, stamped 11 April 2001.
Various other documents were also itemised as being attached. The document concluded:
Please acknowledge receipt of the above by signing, and dating below.
The document is not signed or dated and the meeting was cancelled. The inference I draw is that the documents probably would have been handed to the defendant at the meeting if it had taken place. I can draw no inference that they were made available to the defendant on 17 June 2005 because the meeting was cancelled.
The plaintiff also relies on an email from Mr Lombardo to Mr Pinkerton. I have considerable doubt whether this email constitutes a business record but, in the absence of argument from the defendant, will accept it as evidence.
In the email Mr Lombardo said:
Yes I did meet with the proposed purchasers on 22 June 2005. (TB 229, Exhibit 35)
But if that is a business record then so also is the letter of 8 July 2005 which puts the date of receipt of the lease at 23 June 2005.
In the absence of any other evidence on the matter I am unable to be satisfied on the balance of probabilities that the lease was made available to the defendant on 22 June 2005, the competing inference of 23 June 2005 being equally available.
In Forster v Jododex Australia Pty Ltd (1972) 127 CLR 421 the court held that where a written instrument requires a period of time to be computed 'from' a specified date it depends on the true construction of the instrument whether the date specified is to be included in the period. Generally speaking, however, the day from which the period runs is excluded, although there is no rigid rule to that effect and 'from' is capable of having an inclusive effect in an appropriate context.
In my opinion, the proper construction of special condition 2, which would give business efficacy to the arrangement, is that the defendant should have had 14 clear days in which to consider his position. There is no evidence as to the time at which the lease was made available to the defendant on the 23 June 2005 and so calculation of 14 days should commence at midnight on that date.
Fourteen days from midnight on 23 June 2005 expires at midnight on 7 July 2005. The letter purporting to terminate the contract is therefore out of the time of special condition 2 and time shall be of the essence in the contract.
The evidence satisfies me that the plaintiff thereafter complied with the terms of the contract by giving notice under cl 22 when the defendant did not remedy the breach.

Assessment of damages

The contract was for $400,000 and as I have said I accept the evidence of Mr Goldstein that the value of the business at the time that settlement would have taken place was $347,941.47.
Upon the indication by the defendant that he no longer regarded himself as bound by the contract, the plaintiff issued a notice to remedy the default. The Contacio was listed for sale and was on the market for approximately four months before being withdrawn because of a recommendation that The Contacio should be taken off the market and to try again.
I am satisfied that the plaintiff reasonably tried to mitigate its loss. I am also satisfied that it is entitled to recover loss of bargain damages because of a repudiation of the contract by the defendant in the sum of $52,058.53 and interest.