Perpetual Trustee Company Ltd v Meriton Property Management Pty Ltd - [2005] NSWSC 623

No judgment structure available for this case.

CITATION:
Perpetual Trustee Company Ltd v Meriton Property Management Pty Ltd [2005] NSWSC 623

HEARING DATE(S): 6 June 2005

JUDGMENT DATE :

29 June 2005

JURISDICTION:
Commercial List

JUDGMENT OF:
Bergin J

DECISION:
Amended Summons dismissed

CATCHWORDS:
[CONTRACT] - Construction of interest clauses in Contract for Sale of Land

LEGISLATION CITED:
Conveyancing Act 1919 (NSW)

CASES CITED:
Blair & Ors v Curran & Ors (1939) 62 CLR 464
DTR Nominees Pty Ltd v Mona Homes Pty Ltd (1978) 138 CLR 423
Foran & Anor v Wight & Anor (1989) 168 CLR 385
Green & Anor v Sommerville (1979) 141 CLR 594
McNally & Ors v Waitzer [1981] 1 NSWLR 294
Macquarie Bank Ltd v National Mutual Life Association of Australia Ltd & Ors (1996) 40 NSWLR 543
Mehmet v Benson (1965) 113 CLR 295
Neeta (Epping) Pty Ltd v Phillips (1974) 131 CLR 286
Perpetual Trustee Limited v Meriton Property Management Pty Ltd [2004] NSWSC 1258
Port of Melbourne Authority v Anshun Pty Ltd (1981) 147 CLR 589
Rawson & Anor v Hobbs & Anor (1961) 107 CLR 466
Thoday v Thoday [1964] P 181

PARTIES:
Perpetual Trustee Company Ltd (Plaintiff)
Property Management Pty Ltd (Defendant)

FILE NUMBER(S):
SC 50015/05

COUNSEL:
M. Einfeld QC and J. Stoljar (Plaintiff)
R. Weber SC and I. Pike (Defendant)

SOLICITORS:
Dibbs Barker Gosling (Plaintiff)
Richard de Carvalho - General Counsel, Meriton Apartments Pty Ltd (Defendant)

LOWER COURT JURISDICTION:

- 1 -

IN THE SUPREME COURT
OF NEW SOUTH WALES
EQUITY DIVISION
COMMERCIAL LIST

BERGIN J

29 JUNE 2005

50015/05 PERPETUAL TRUSTEE COMPANY LIMITED V MERITON PROPERTY MANAGEMENT PTY LIMITED

JUDGMENT

1 In these proceedings the plaintiff, Perpetual Trustee Company Limited, seeks declaratory relief and consequential orders in respect of interest owing and/or paid on the purchase price of Land sold to the defendant, Meriton Property Management Pty Limited.

2 On 22 July 2003 the plaintiff, as vendor, entered into a contract with the defendant, as purchaser, for the sale of land at the corner of Epsom Road and Rothschild Avenue, Roseberry (the Land), for the price of $22 million (the Contract). In May 2004 an Instrument in respect of the Land pursuant to s 88B of the Conveyancing Act 1919 (NSW) was registered (the Instrument).

Correspondence prior to Completion Date

3 By letter to the plaintiff dated 2 June 2004, the defendant raised objections under the Contract in respect of the Instrument. On 4 June 2004 the plaintiff’s solicitors responded to the defendant’s letter (in which the defendant had raised the seven objections) and contended that the objections were “minor” within the meaning of clause 41.7 of the Contract, or otherwise invalid, such that the defendant was precluded from raising them.

4 On 29 June 2004 the defendant wrote to the plaintiff maintaining that its objections were valid and that the plaintiff was unable to deliver what the defendant had contracted to buy. That letter also claimed that the defendant was ready, willing and able to complete the contract within seven days of being notified that the “obstacles to completion” outlined in the letter of 2 June 2004 had been removed.

5 The defendant wrote another letter in similar terms on 6 July 2004. The plaintiff’s solicitors responded on 6 July 2004, once again denying that the defendant’s objections were valid, and stating:

The vendor is and always has been ready, willing and able to perform its obligations under the contract and requires completion to take place on Monday, 12 July 2004, in accordance with the contract.

If settlement does not take place on the date of the completion referred to above then without prejudice to any other remedy of the vendor:

· In addition to all other amounts payable by the purchaser to the vendor under the contract, the purchaser must pay the vendor interest on the balance of the price at the rate of 8%per annum as provided in clause 38.2 of the contract; and

· Proceedings will be instituted for specific performance without further notice to you.

6 On 7 July 2004 the defendant wrote to the solicitors for the plaintiff in terms that included the following:

The purchaser remains ready, willing and able to complete the contract as stated in our letter of 2 June and 29 June 2004. We now enclose the stamped transfer as requested.

We deny that the vendor is and has always been ready, willing and able to perform its obligations under the contract due to the objections set out in our previous correspondence that have yet to be complied with by the vendor. The purchaser maintains the objections are valid.

In the event the vendor has not complied with our objections and completion does not take place by 12 July 2004, the purchaser and not the vendor will be entitled to interest under clause 39.2 of the contract. The purchaser’s entitlement to the interest is without prejudice to any other rights or remedies the purchaser may have due (sic) the vendor not completing by the completion date.

7 On 8 July 2004 the plaintiff’s solicitors wrote to the defendant once again stating that it was ready, willing and able to perform its obligations and required completion on 12 July 2004. On 12 July 2004 the defendant’s solicitors advised that they would not be attending settlement, notwithstanding it was ready, willing and able to perform its obligations under the Contract, and maintained that the objections raised prevented settlement. The plaintiff commenced proceedings for specific performance of the Contract on 22 July 2004.

The Trial and the Judgment

8 The proceedings were heard on 8, 9 and 10 December 2004 (the trial). Judgment was delivered on 5 January 2004 dismissing the plaintiff’s application. That judgment, Perpetual Trustee Company Limited v Meriton Property Management Pty Limited [2004] NSWSC 1258 (the Judgment), should be read with this judgment.

9 The objections the defendant raised in respect of the easements imposed on the Land were claimed by the plaintiff to be invalid by reason of clause 41.7 of the Contract. That clause and clause 41.8 provided:

41.7 The purchaser must not make any objection, requisition or claim for compensation or attempt to delay completion or rescind or terminate this contract because of:

and the vendor reserves the right to make any such minor changes and variations provided that the vendor has given prior notice of and details of the proposed minor change or variation to the purchaser.

41.8 For the purposes of this contract, a minor difference, variation, alteration, change or amendment includes a variation, alteration or amendment increasing or reducing the area of the property by not more than 5%.

10 Clause 48 provided:

Roadway

48.1 The purchaser acknowledges that the Plan and the Instrument provide for rights of way 3.6 wide and variable to benefit and burden lots 3 and 4 in the Plan respectively (“ Roadway” ).

11 Paragraph 37 of the Judgment set out the objections (the seven objections) and for ease of reference the table from it is extracted below:

Easement, restriction etc Contract Property Registered Property

Right of Way 3.6 Wide and Variable to burden Lot 4 in DP1065657 and to benefit Lot 3 in DP106567 & Lot 2 in DP566811 Proposed Right of Way 3.6 Wide & Variable Width (Y) Right of Way 7.2 Wide & Variable Width (Y)

Right of Way 3.6 Wide and Variable to burden Lot 3 in DP106567 and to benefit Lot 4 in DP1065657 & Lot 2 in DP56681 Proposed Right of Way 3.6 Wide & Variable Width (Z) Not included

Easement to Park Motor Vehicles 4.5 Wide & Variable burdening Lot 4 in DP1065657 and benefiting Lot 3 in DP1065657 Not Included Easement to Park Motor Vehicles 4.5 Wide & Variable (D)

Restrictions on Use of Land burdening Lot 4 in DP1065657 and benefiting Lot 3 in DP1065657 Not included Restriction on Use of Land (E)

Easement for Repairs 11.7 Wide & Variable burdening Lot 4 in DP1065657 and benefiting Lot 3 in DP1065657 Not Included Easement for Repairs 11.7 Wide & Variable (F)

Easement for Support 4.5 Wide & Variable burdening Lot 4 in DP1065657 and benefiting Lot 3 in DP1065657 Not included Easement for Support 4.5 Wide & Variable (Z)

Vacant Possession No tenancies disclosed Property is subject to an unregistered lease to Aust Scan Pty Limited commencing 8 August 2003 and terminating on 7 August 2006.

12 The General Manager of the defendant, Mr Peter Spira, gave evidence in the trial. His evidence in cross-examination in relation to the seven objections included that, but for three of the easements, the defendant would be happy to settle the Contract. That evidence is set out in paragraph 73 of the Judgment. The three easements that were the subject of that evidence were: “E”, a restriction on use of the land; “F”, an easement for repairs; and “Z”, an easement for support.

13 The defendant’s final submissions at the trial (Ex 1) included the following submission:

51. Meriton has objected to all of the new easements included in the registered s. 88B instrument and as set out above. Meriton contends that each of these objections are valid under the Contract, in that Perpetual is no longer able to perform the contract according to its terms: see Gardiner v Orchard (1910) 10 CLR 722 at 730. None of the objections are fettered by clause 41.7(d) of the Contract – none are required by Council. The Court should make a finding to this effect.

14 In paragraphs 59 to 75 of its final submissions, the defendant dealt with the three easements in respect of which Mr Spira gave the evidence referred to above – easement “E” restriction on use, “F” for repairs and “Z for support. There was no separate section in the submissions dealing with the other four objections. The maintenance of those objections was referred to only in the general submission in paragraph 51 extracted above and in an even more general way in paragraph 91 that included the submission that the: “present situation can properly be characterized as one where Perpetual, by entering into the Ikea lease, has caused the change in the Plan and the creation of the new easements”.

15 There was some inconsistency apparent in the maintenance of all the objections by reason of the terms of paragraph 87 that was in the following terms:

now complains – namely the easement for repairs, the easement for support and the restrictions on use –

(emphasis added)

16 After exchange of the Contract the relevant Council required the southern boundary of the land to be moved further to the south as a condition of the consent to sub-division. That matter is dealt with between paragraphs 81 to 83 of the Judgment. The changes to the Instrument are set out between paragraphs 84 to 90 of the Judgment. In dealing with the easement “E”, I said:

100. In my view, for a variation to the S 88B Instrument to qualify as one “arising from a requirement of Council” in the context of this Contract, it would have to be a necessary consequence of the requirement and not merely one that the party benefiting from variation would prefer to have in place. This easement is not a necessary consequence of the requirement to move the boundary. Indeed the Council condition of consent making it a matter of choice supports such a conclusion. I am not satisfied that this easement arises from a requirement of Council. That finding means that this variation to the s 88B Instrument is one in respect of which the defendant is entitled to object. It is not precluded by clause 41.7(d) or any other provision. One does not reach the point of having to consider whether the variation is “minor” because the Contract is quite clear that the defendant is entitled to object to variations other than those precluded by the provisions of clause 41.7. That alone would put an end to the plaintiff’s application for an order for specific performance, however I shall consider the other matters raised by the parties.

17 I then dealt with the two objections to the two other easements referred to by Mr Spira, easement “F” for repairs and easement “Z” for support. I held that both easements arose from a requirement of Council (par 101 and 102) but that both were not minor (par 119 – 121), thus making the objections valid objections.

18 There were four other objections, two of which were easement “D” to park motor vehicles, and the failure to give vacant possession. In respect of these two objections I said;

122 The defendant also submitted that the plaintiff was not in a position to convey the land with vacant possession. In reality this submission related to the easement for carparking which will not be extinguished until the expiration of the Ikea Lease in August 2006. Having regard to my findings above and to the way in which the trial was conducted this matter is not necessary to consider further.

19 The reference to the “way in which the trial was conducted” was a reference to Mr Spira’s evidence that the defendant would be happy to settle the Contract if the three easements “E”, “F” and “Z” were removed. Thus I did not deal with the validity of the objections to Easement “D” or the existence of the Lease to Ikea with the alleged inability of the plaintiff to be able to give vacant possession. The other two objections were in relation to easements “Y” and “Z” (as it was first known), both rights of way 3.6 wide and variable width. In relation to those two easements, the first of which became 7.2 wide and variable and the second of which was not included on the Instrument I said:

93. Clause 41.7(e) precludes the defendant from objecting to “any variation relating to the Roadway referred to in clause 48”. This provision, unlike the others in clause 41.7, makes no mention of “minor” variation. Clause 48.2 precludes any objection “if the Council requires any change or variation in the dimensions or location of the Roadway or requires the Roadway to be dedicated as a public road or imposes any other conditions affecting the Roadway”. The Council required the change in dimension from 7.2 metres to 20 metres and required it be located in the new position just north of the new boundary. It is true that the new boundary could not be the subject of objection by reason of the increase in the area being less than 5%, and it is also true that the new dimension and the new location of the Roadway could not be the subject of objection by reason of the clauses 41.7(e) and 48.2. But that is not a complete answer to the defendant’s objection. The defendant submitted that the new easements created, without its consent or agreement, are not “minor” variations to the Instrument as that term is used in clause 41.7(d) and did not arise from the requirements of Council.

20 The original roadway was in the position of the two easements “Y” and “Z” each 3.6 wide totalling 7.2 wide on the Instrument with the exchanged Contract. When the Council required the roadway to be in the new position and 20 metres wide the plaintiff imposed a new easement “Y” 7.2 wide and deleted easement “Z”. The validity of the objections to this new easement “Y” and the deletion of the old easement “Z” were not dealt with by me in the Judgment. As I said in the Judgment:

125 I am satisfied that the objection raised by the defendant in its letter of 2 June 2004 to the extent ultimately litigated in this suit is a valid objection and the parties should be left to their contractual bargain complying with their various obligations and exercising their various contractual rights. On reflection I am not satisfied that it just or equitable that I should craft an Order excluding certain easements that may or may not have adverse impacts on the parties, once the Council reviewed their removal.

21 The reference in this paragraph to “the extent ultimately litigated” is, once again, a reference to the approach adopted by Mr Spira in his evidence that the defendant would be willing to settle the Contract if the three easements “E”, “F” and “Z” were removed.

Post Judgment correspondence and Completion

22 After the Judgment was delivered on 5 January 2005 the parties entered into negotiations for the removal of the three easements and the settlement of the Contract. On 5 January 2005 the defendant wrote to the plaintiff. Although the correspondence appears to be between the defendant and the plaintiff’s solicitors I will simply refer to the parties. In the letter of 5 January 2005 the defendant wrote:

We refer to our facsimile of 2 June 2004 wherein we objected to the Vendor’s proposed transfer to the Purchaser of the above property and title to it on the grounds that the above property and title to it registered as Folio 4/1065657 were substantially different from the property and title to it as described in the Contract dated 22 July 2003. As you will be aware, these objections were upheld by her Honour Justice Bergin in her judgment delivered earlier today in respect of the proceedings for specific performance commenced by the Vendor.

As our objections have been outstanding since 2 June 2004, could you please urgently advise whether or not the Vendor is able or willing to comply with our objections. If the Vendor is unable or unwilling to comply with our objections, we note your client’s rights under clause 8 of the Contract.

23 On 11 January 2005 the plaintiff responded to the defendant by letter which included the following:

Your letter of 5 January 2005 seems to infer that Meriton now maintains all the original objections raised in its facsimile dated 2 June 2004. For the reasons set out in more detail below it is no longer open to Meriton to assert this position. Perpetual says that the only objections now open to Meriton are the three, which were fully in issue before and decided by her Honour and no others. Please confirm by return that your present objection is in fact limited in the way it is here suggested.

24 The plaintiff then referred to aspects of Mr Spira’s evidence and Senior Counsel for the defendant, Mr R Weber’s submissions, and various other aspects of the evidence in support of the claim that the objections were no longer available to the defendant. The letter included the following:

We confirm that Perpetual is willing and able to comply with your objections and does not propose to exercise any rights pursuant to Clause 8 of the Contract as a result of her Honour’s judgment. Perpetual will apply to the Registrar General to have the 2 easements fourthly (for support) and seventhly (for repairs) cancelled and the restriction on user in Clause 6.6 of the present registered Section 88B instrument DP 1065657 released.

Perpetual is now in the course of preparing the appropriate instruments and taking the other necessary steps to effect these specific changes. It is expected that these instruments will be able to be lodged shortly. Perpetual will take all necessary steps to ensure that these instruments are prepared and processed with appropriate expedition in the circumstances.

25 Meriton responded by letter dated 13 January 2005 claiming that the Judgment had rejected the submissions put by the plaintiff and that it had quite clearly returned the parties to their respective rights and obligations under the Contract. The letter included:

Anshun

3. In relation to your client’s willingness and ability to comply with our objections, could you please let us know when you anticipate the instruments dealing with the objections will be registered and how soon after registration your client will require completion.

4. We require your client’s urgent confirmation that it will pay to Meriton at completion the interest referred to in clause 39.2 of the Contract (as calculated from 12 July 2004 to the actual date of completion, but not including our proposed extended settlement period set out below). Our letter of 7 July 2004 raised the issue of the payment of the interest by your client in the current circumstances. We note that clause 39.4 states that payment of such interest is an essential term, and advise that we are instructed that Meriton will not complete this contract unless and until your client agrees to the payment of the interest to which we are entitled.

5. In our view the final completion date should be extended for a period of nine months from the date your client complies with the objections in order to compensate for the delays already suffered by Meriton in being unable to deal with the Council in relation to the property during the period in which its boundaries and dimensions were uncertain. In this regard we refer to Peter Spira’s affidavit of 12 October 2004, wherein he states that Meriton had anticipated being able to lodge a pre-development application within about two months from exchange (being late September 2003), whereas we were ultimately unable to do so until July 2004.

26 The reference in paragraph 2 to the letter of 13 January 2005 “particularly in light of our final submissions” was no doubt a reference to paragraph 51 of the defendant’s written submissions referred to earlier in this judgment.

27 On 18 January 2005 the correspondence continued with the plaintiff writing to the defendant in terms that included the following:

Interest Payable on Completion

We accept that Perpetual may have an obligation to pay interest to Meriton on completion under Clause 39 of the contract. How much interest Clause 39 may require to be paid will however depend upon the circumstances. Clause 39.1 defines what is a ‘non-interest day’ and Clause 39.3 excludes such non-interest days from the accruing of interest in favour of the purchaser on the outstanding balance of the purchase price.

From Clause 39.1 it appears that Perpetual does not have an obligation to pay Meriton interest at completion on the outstanding balance of the purchase price for any day or days on which “the purchaser is unable or unwilling to complete the contract and the vendor is able and willing to complete”. On our assessment, on the basis of her Honour’s judgment, this obligation will in the present case require interest to be paid by Perpetual only for the period commencing from your letter of 13 January 2005 until the issue of the new certificates of title in the near future. The reasons for this should be obvious but they are elaborated in the next paragraph.

As we have said above, we read your letter of 13 January 2005 as ultimately accepting what Mr Spira said for the first time in evidence, that Meriton is now prepared to accept on completion a title free only of the three matters that he ultimately identified in evidence as objectionable. Meriton does not now require Perpetual to remove all the matters of objection originally raised in its 2 June 2004 letter. That being so it was not until your letter of 13 January 2005 that it could fairly be said that the purchaser, Meriton, expressed that it was willing and able to complete the contract upon the terms that it will now be completed. Prior to 13 January 2005 (or at the very earliest prior to Mr Spira giving his evidence) Meriton was unwilling to complete the Contract (or alternatively had disabled itself from completing) upon the terms upon that (sic) it now accepts that it will complete. Put another way, prior to Mr Spira making the concessions that he did in evidence, Meriton’s declared position was that it would not have completed the Contract even if Perpetual had rectified the three matters now required to be addressed. Therefore, for the whole period prior to 13 January 2005, on any common sense view, Meriton was unwilling or unable to complete the Contract upon the terms upon which it is now to be completed. Therefore, that whole period should count as non-interest days and must be excluded from Meriton’s entitlement to interest.

Perpetual wishes to perform this contract strictly in accordance with its legal entitlements and obligations.

28 On 27 January 2005 the defendant wrote to the plaintiff claiming that interest was payable from the completion date to the date of actual completion. The letter included the following:

and

We therefore hereby put the Vendor on notice that if the interest claimed by Meriton is not paid, Meriton will not be required to complete until the whole of this interest is paid in accordance with clause 39.4 of the Contract.

29 On 1 February 2005 the defendant served a notice to complete on the plaintiff requiring it to complete by 3pm on 16 February 2005. On the same day the plaintiff wrote to the defendant accepting that it had an obligation to pay interest under clause 39 of the Contract, but that the obligation was “circumscribed” upon the circumstances as follows:

It was not until 27 January 2005 that Meriton became ready, willing and able to settle upon the Contract on the basis that Perpetual deal with the three objections identified in our fax. Prior to this date your position on completion was that you were not ready, willing or able to complete the Contract and accordingly interest pursuant to clause 39 of the Contract does not begin to run until such time.

By your letter dated 2 June 2004 Meriton insisted upon various objections, which were abandoned at the hearing. Meriton’s declared position was that it would not have completed the Contract even if Perpetual had rectified the three matters now required to be addressed. Therefore, for the whole period prior to 27 January 2005, Meriton was unwilling or unable to complete the Contract upon the terms upon which it is now to be completed. Therefore, that whole period must count as non-interest days pursuant to clause 39 and are to be excluded from Meriton’s entitlement to interest.

These proceedings

30 On 4 February 2005 the plaintiffs filed a Summons commencing these proceedings, seeking declaratory relief that no interest was payable by the plaintiff for the period commencing 12 July 2004 and ending 27 January 2005. On 9 February 2005 the defendant withdrew its notice to complete. On 10 February 2005 when the Summons was returnable before me, the defendant provided an undertaking to the Court that it would repay any amount found not to have been owing to it by way of interest between 12 July 2004 and the date of completion. The Contract was completed on 11 February 2005, with interest in the amount $971,133.84 paid to the defendant for the period 12 July 2004 to 11 February 2005 subject to the undertaking given to the Court by the defendant.

31 These proceedings were heard on 6 June 2005 when Mr M Einfeld QC leading Mr J Stoljar of counsel, appeared for the plaintiff and Mr R Weber SC leading Mr I Pike of counsel, appeared for the defendant. The plaintiff filed an Amended Summons on 6 June 2005 seeking an order that the defendant repay to it the amount of $971,133.84 together with interest on that amount from 11 February 2005 to the date of payment.

The interest clauses

32 The two clauses of the Contract relevant to this application are clauses 38 and 39:

Interest payable by Purchaser

38.1 In this clause “non-interest day” means any business day after the completion date during the whole of which business day the vendor is unable or unwilling to complete this contract and the purchaser is able and willing to complete.

8

38.3 The interest accrues from day to day from (but excluding) the completion date until (and including) the date of actual completion, but no such interest is payable in respect of any non-interest day, nor in respect of any non-business day where the immediately preceding business day is a non-interest day.

38.4 It is an essential term of this contract that such interest is paid to the vendor on completion and the purchaser is not entitled to require the vendor to complete unless such interest is so paid.

Interest payable by Vendor

39.1 In this clause “non-interest day” means any business day after the Completion date during the whole of which business day the purchaser is unable or unwilling to complete this contract and the vendor is able and willing to complete.

8

39.3 The interest accrues from day to day from (but excluding) the completion date until (and including) the date of actual completion, but no such interest is payable in respect of any non-interest day, nor in respect of any non-business day where the immediately preceding business day is a non-interest day.

39.4 It is an essential term of this contract that such interest is paid to the purchaser on completion and the vendor is not entitled to require the purchaser to complete unless such interest is so paid.

33 Each party is obliged to pay interest on the balance of the price from the Completion Date to the date of actual completion, except on days that the party can establish that it was “able and willing” to complete whilst the other party was “unable or unwilling” to complete.

Clause 38 - Was the plaintiff “unable or unwilling” to complete?

34 Clause 38 requires the defendant to pay the plaintiff interest unless it can establish that the plaintiff was unable or unwilling to complete and it was willing and able to complete. It is not enough to simply establish that the plaintiff was unwilling to avoid payment of interest to the plaintiff. The defendant must also establish that it was “able and willing” to complete.

35 The plaintiff submitted that at all times it had indicated its willingness and ability to complete the Contract, once the dispute between the parties as to the correct construction and means of performance of the Contract had been resolved by the Court. It was submitted that its application to the Court for specific performance of the Contract, that included the easements to which the defendant took objection, cannot be relied upon to establish that the plaintiff was “unable or unwilling” to complete.

36 In support of this submission the plaintiff relied upon what Barwick CJ said in Mehmet v Benson (1965) 113 CLR 295 at 307:

The question as to whether or not the plaintiff has been and is ready and willing to perform the contract is one of substance not to be resolved in any technical or narrow sense. It is important to bear in mind what is the substantial thing for which the parties contract and what on the part of the plaintiff in a suit for specific performance are his essential obligations.

37 In DTR Nominees Pty Limited v Mona Homes Pty Limited (1978) 138 CLR 423 Stephen, Mason & Jacobs JJ said at 431-432:

Sweet & Maxwell Ltd v Universal News Services Ltd

“In the last resort, if the parties cannot agree, the true construction will have to determined by the court. A party should not too readily be found to have refused to perform the agreement by contentious observations in the course of discussions or arguments … “

38 In Green & Anor v Sommerville (1979) 141 CLR 594 the settlement of a sale of land was delayed. The vendor allowed the purchaser to occupy the land on payment of rent prior to settlement and the purchaser subsequently contended that the payment of rent obviated her obligation under the contract to pay interest pending completion. Barwick CJ said at 601:

The adoption by a party of an erroneous construction of the contract is not necessarily fatal to the proposition that, none the less, the party remains ready and willing to perform the contract according to its terms properly construed.

39 Mason J said at 611:

In the present case, the respondent alleged her readiness and willingness to perform the contract but, by insisting that it was agreed that the payment of interest should be waived, she was insisting on a mode of performance of the contract to which she was not entitled. What is more, she did not in her statement of claim offer to perform the contract on its true construction. However, in the circumstances of this case I do not think that these considerations are inconsistent with a finding that the respondent was ready and willing to perform the contract at the commencement of the suit. First, the respondent was, on the view which I take of the contract, ready and willing to perform her essential obligation under the contract, that is, by paying the balance of the purchase price. Secondly, it is a general principle of the law of contract that the court will not readily infer from a party’s insistence on a wrong construction of a contract that he is unwilling to perform it according to its true construction.

40 In Neeta (Epping) Pty Ltd v Phillips (1974) 131 CLR 286 the High Court held that a purchaser was entitled to maintain objections in respect of the failure by the vendor to procure registration of the surrender of the tenant’s lease prior to settlement. Barwick CJ and Jacobs J said at 305-306:

If on the objections which were being taken by the purchaser the vendor wished to bring matters to a head but did not wish to make use of the curial processes designed to deal with such disputed questions, then she was bound to give notice to the purchaser so that the purchaser might have the opportunity of waiving the objections and of completing on the vendor’s terms or of itself submitting the dispute to the Court in a suit for specific performance or on what would previously have been called a vendor and purchaser summons. Both are flexible processes which do not overcome breaches of contract where a party is insisting on substantive rights relating to the subject matter of the contract which he does not possess but which do overcome differences and difficulties on the appropriate way in which the subject matter should be transferred to him.

41 The plaintiffs submitted that conformably with these authorities it was at all times willing to complete the Contract. It was also submitted that the construction issue for the Court had been substantially whether the objections related to “minor” changes within the meaning of clause 47 of the Contract and whether such a question was one on which reasonable minds could differ. It was also submitted that the fact that on any business day during the period from 12 July 2004 until actual completion the plaintiff had not procured the cancellations of the easements, or any necessary amendment to the Instrument, nor obtained a replacement certificate of title, did not imply that it was unable to complete the Contract.

42 “Readiness or willingness imports capacity to perform as well as disposition to perform”: Foran & Anor v Wight & Anor (1989) 168 CLR 385 at 424 per Brennan J. In Rawson & Anor v Hobbs & Anor (1961) 107 CLR 466 at 481 Dixon CJ said:

One must be very careful to see that nothing but a substantial incapacity or definitive resolve or decision against doing in the future what the contract requires is counted as an absence of readiness and willingness.

43 In McNally & Ors v Waitzer [1981] 1 NSWLR 294, Hutley JA said at 303G-304A:

Butts v O’Dwyer

Dougan v Ley

44 The plaintiffs submitted that after 12 July 2004 it was willing and able to comply with its essential obligations under the Contract and was therefore able to complete, even if it had adopted a construction in respect of the easements that the Court did not accept. The objections in respect of the three easements “E”, “F” and “Z” were capable of rectification and it is submitted were rectified by the plaintiff after the Judgment. In those circumstances it was submitted that the defendant is unable to establish that the plaintiff was “unwilling or unable” to complete in the relevant sense.

45 Clause 8 of the Contract allowed the plaintiff to rescind the Contract if “on reasonable grounds” it was “unable or unwilling to comply with” an objection, and if it served the appropriate notice on the defendant and the defendant did not waive the objection. The fact that the plaintiff did not serve such a notice is not evidence that the plaintiff was willing or able to complete. That has to be decided on what the plaintiff did in the face of the objections.

46 As was said by Stephen, Mason and Jacobs JJ in DTR Nominess Pty Limited v Mona Homes Pty Limited (at 432), “there are cases in which a party, by insisting on an incorrect interpretation of a contract, evinces an intention that he will not perform the contract according to its terms”. This was not a case in which the plaintiff contended for a particular construction of the terms of a contract different from that for which the defendant contended. This was a case in which the plaintiff and the defendant well knew that the terms of the Contract allowed the plaintiff to make changes to the Plan and the Instrument that were minor. The case involved findings as to whether the changes were, in fact, minor.

47 The plaintiff was unwilling to complete the Contract unless the easements remained on the title. That is why it commenced the proceedings for specific performance to force the defendant to complete the Contract with the easements in place. That was the position as and from 12 July 2004, however it is necessary to determine if and when that position changed. At the conclusion of the evidence on the second day of the hearing, 9 December 2004, this exchange took place with Senior Counsel then appearing for the plaintiff (tr 130):

HER HONOUR: … Mr Slattery, that proposition that I propounded of a specific performance order on the basis that E (sic), Z and F are removed; is that within my power?

SLATTERY: I think it is, your Honour. It’s in effect, what we would contend for is the last position. But if that was the view your Honour took, that is a possible outcome.

48 Such a proposal was not embraced in the plaintiff’s final written submissions filed and relied upon on the last day of the hearing on 10 December 2004. Those submissions included the following:

Harvela Investments Ltd v Royal Trust Co of Canada (CI) Ltd

56. As the evidence has demonstrated, the defendant has made no attempt to ascertain whether or not Council will accept the easements (T84.35 and 110.33-110.53) as part of the dedication of the road and until such time as the Council’s position is ascertained in this regard, the easements ought to remain.

57. If the Council does not accept the dedication without the extinguishment of the easements then the Court would have the power to order specific performance on the contingent condition that the relevant affectations be extinguished.

49 At the conclusion of his oral submissions and after dealing with the above paragraphs of the plaintiff’s written submissions Mr Slattery QC said (tr 149):

50 Although the defendant’s letter to the plaintiff of 5 January 2005 immediately after delivery of the Judgment did not claim expressly that it required the plaintiff to remove all the easements about which the defendant had complained, the plaintiff inferred that the letter was in fact requesting that to occur. The plaintiff complained about this in its letter of 11 January 2005, in which it detailed all the reasons it thought the defendant was not entitled to maintain its objections additional to the objections to the three easements with which I dealt in the Judgment. I have found, for the reasons given below, that the defendant was entitled to maintain its objections because they were valid objections and they had not been abandoned. It was the defendant’s letter of 13 January 2005 that the plaintiff took as an agreement to complete on the basis that only the three easements, the subject of the Judgment, were to be removed. The defendant did not disagree with that proposition. I am of the view that the plaintiff was unwilling to complete until agreement was reached by the defendant’s letter of 13 January 2005. Accordingly the plaintiff was unwilling to complete from 12 July 2004 to 13 January 2005. Thereafter between 13 January 2005 and 11 February 2005 the plaintiff was unable to complete because it had to arrange for the removal of the three easements, the subject of the Judgment.

Clause 38 – Was the defendant “willing and able” to complete

51 The validity of the other four objections becomes relevant in determining whether the defendant was “willing and able” to complete between 12 July 2004 and 11 February 2005.

52 The plaintiff submitted that the defendant was precluded from relying upon those four objections in this trial because they “passed into judgment” in the Judgment and “thereby merged with” the Judgment “with the effect that such rights no longer have independent existence “. In support of this proposition the plaintiff relied upon what Dixon J, as his Honour then was, said in Blair & Ors v Curran & Ors (1939) 62 CLR 464 at 532 as follows:

res judicata

53 Reliance was also placed on the following portion of the judgement of Gibbs CJ, Mason and Aiken JJ, in Port of Melbourne Authority v Anshun Pty Ltd (1981) 147 CLR 589 at 597 as follows:

The rule as to res judicata comes into operation whenever a party attempts in a second proceeding to litigate a cause of action which has merged into judgment in a prior proceeding.

54 In Macquarie Bank Ltd v National Mutual Life Association of Australia Ltd & Ors (1996) 40 NSWLR 543, Clarke JA, with whom Priestley JA agreed on the point, said at 556:

There are, however, two observations which should be made about res judicata. The first is that the doctrine of merger in the judgment only applies in a case in which the plaintiff establishes his cause of action and it is that cause of action which merges in the judgment. Where the plaintiff fails to establish its cause of action (that is, there is a verdict for the defendant) there is nothing to merge in the judgment and the doctrine of res judicata operates as a true estoppel.

55 Clarke JA then referred to what Diplock LJ said in Thoday v Thoday [1964] P 181 at 197-198. In respect of the second “species” of “estoppel per rem judicatam”, ‘issue estoppel’, Diplock LJ said, as extracted by Clarke JA at 557:

There are many causes of action which can only be established by proving that two or more different conditions are fulfilled. Such causes of action involve as many separate issues between the parties as there are conditions to be fulfilled by the plaintiff in order to establish his cause of action; and there may be cases where the fulfilment of an identical condition is a requirement common to two or more different causes of action. If in litigation upon one such cause of action any of such separate issues as to whether a particular condition has been fulfilled is determined by a court of competent jurisdiction, either upon evidence or upon admission by a party to the litigation, neither party can, in subsequent litigation between one another upon any cause of action which depends upon the fulfilment of the identical condition, assert that the condition was fulfilled if the court has in the first litigation determined that it was not, or deny that it was fulfilled if the court in the first litigation determined that it was.

56 Clarke JA also dealt with the Anshun principle at 558 as follows:

(Henderson)

(Anshun),

57 To establish a plea of res judicata the plaintiff must show that the “cause of action” in the later proceedings is the same as that which was litigated in the former. The defendant is not pursuing the same cause of action by seeking to have the court determine the validity of the four objections that were not the subject of any findings in the Judgment. The defendant relied upon the four objections and although there is some ambiguity in the final submissions I am satisfied that it did not abandon the four objections at trial. I decided that it was not necessary to deal with those four objections because it was clear that the plaintiff was not entitled to its order for specific performance after I dealt with the first objection that I found to be valid, which related to easement “E”, restriction on use. I dealt with the other two of the three objections because Mr Spira had indicated that they were the ones that created the major problems for the defendant and that if they were removed the defendant would be happy to settle the Contract. Senior Counsel for the plaintiff described this position as a commercial approach (tr 155) and I am satisfied that it was seen to be without prejudice to the other four objections which were maintained, at least in a general sense, in final submissions. The defendant is not estopped from relying upon those four objections for the purpose of claiming that it was willing and able to complete the Contract.

58 This debate became rather academic because the plaintiff sought to rely upon the four objections for the purpose of establishing that they were not valid objections to prove that the defendant was not “willing and able” to complete the Contract.

59 Easement “D” relating to car parking and the objection in relation to the plaintiff’s inability to give vacant possession to the defendant: These two objections can be dealt with together. The plaintiff entered into the Lease with Ikea after the Contract was exchanged but pursuant to an agreement to lease that was apparently entered into before the Contract. The lease does not expire until 2006. The easement for car parking was a new easement post exchange. Its existence meant that the Land would not be conveyed to the defendant with vacant possession at the Completion Date.

60 The movement of the boundary to the south was a requirement of Council. Even if the imposition of the easement arose from the requirement, which I am not satisfied it did, it can hardly be a “minor” variation to the Instrument. The imposition of this new easement and the inability to convey the land with vacant possession were in my view quite major variations or changes to which the defendant was entitled to object. I am satisfied that these objections were valid objections.

61 Imposition of Easement “ Y” Right of Way 7.2 wide and the removal of Easement “Z” (as firstly known) right of way 3.6 wide: The plaintiff submitted that these easements were “variation(s) relating to the Roadway referred to in clause 48” and therefore the defendant was, by clause 41.7(e), precluded from objecting to them. Clause 41.7(e) precluded the plaintiff from objecting to the variations to the Roadway referred to in clause 48, not any variation at all to the Roadway. The defendant was specifically precluded from objecting to any “change or variation in the dimensions or location of the Roadway” (cl 48.2). The Council’s letter of 30 October 2003 advised:

Council considers the proposed boundary location shown on the plan of subdivision and the related rights of way are not acceptable as they do not support future achievement of the dedicated road required by Council's DCP 1997. Council is not seeking to achieve the dedication as part of this subdivision application only to have the boundary suitably located so that the road when it is achieved is in the appropriate location.

62 The reason for moving the boundary south was to achieve the capacity to have the dedicated roadway in a position satisfactory to Council. The agreement the parties reached, as included in the Contract, was that the defendant would have the benefit of a right of way 3.6 wide over the plaintiff's land, Lot 3, and the plaintiff would have the benefit of a right of way 3.6 wide over the defendant's land, Lot 4. That was what was acknowledged and agreed as “the Roadway”. Moving the boundary had the effect of changing the location of the Roadway as it was defined in the Contract, that is, “rights of way 3.6 wide and variable to benefit and burden lots 3 and 4 in the Plan respectively (“Roadway”)” (clause 84.1). There was no amendment to the definition of Roadway in clause 48.1 proffered to the defendant, and the imposition of the new easement “Y” could not effect that amendment. Certainly the rights of way defined as the Roadway in clause 48.1 positioned the Roadway in a very inconvenient position with a right of way 3.6 wide burdening Lot 3 and probably within the Ikea building, but that was the effect of the movement of the boundary and the terms of the Contract.

63 Clause 41.7(e) precluded the defendant from objecting to that change or variation in the location in the Roadway. But that was not the objection the defendant made. The defendant objected to the new easement “Y” that was imposed on the title in the place where the boundary used to be and where the Roadway, as defined in clause 48.1, used to be. The objection the defendant took to the imposition of easement "Y" (with consequential objection to the removal of easement “Z") was not an objection precluded by clause 47.1 (e).

64 The next question is whether the imposition of easement “Y” and the deletion of easement “Z” were variations that arose from the requirements of Council. The Council required the movement of the boundary and because of the definition of “Roadway” in clause 48.1, the change in location of the Roadway traveled with the change in location of the boundary. The Council did not require the dedication of a roadway as a condition of the consent to the DA. The Council made it clear that it was changing the boundary so that in due course when the roadway was dedicated it would be in a position that suited the Council. That would probably mean that when the dedication occurred it would include the area of the new easement “Y” but that was not a condition at that stage. I am not satisfied that the imposition of the new easement ”Y” and the deletion of the easement “Z” was a necessary consequence, or arose from, a requirement of Council at that stage.

65 However, assuming that the variation did arise from a requirement of Council, the next question is whether the change or variation in the Instrument by the inclusion of easement "Y" and the deletion of easement "Z" was a "minor" variation. I am not satisfied that such change or variation could be categorized as minor. This change impacted significantly on the definition of Roadway, as had been agreed between the parties in clause 48.1. Not only that, it made the defendant totally responsible for the whole of the Roadway whereas it had agreed to be responsible for only half of it. I regard that as a change that is not minor.

66 In all those circumstances I am satisfied that the additional four objections taken by the defendant were valid objections.

67 I am of the view that the defendant was willing and able to complete the Contract. I have found that during the whole period from 12 July 2004 to 11 February 2005, the plaintiff was unwilling or unable to complete the Contract and the defendant was willing and able to complete the Contract. These were therefore non-interest days, or days upon which the defendant did not have to pay the plaintiff interest under clause 38.

Clause 39

68 Under clause 39 it is the plaintiff who has to establish that the defendant was “unable or unwilling” to complete and that it was “able and willing” to complete to avoid the payment of interest to the defendant. By reason of my findings above I am satisfied that defendant was not "unable or unwilling" to complete the Contract and therefore there were no non-interest days under clause 39. Therefore the plaintiff is obliged to pay the defendant interest for the period 12 July 2004 to 11 February 2005.

Orders

69 The Amended Summons is dismissed. If the parties are unable to agree on a costs order they may re-list the matter for argument on a date to be fixed by arrangement with my Associate but no later than 15 July 2005.

***************************

Actions

Download as PDF Download as Word Document

Citations

Perpetual Trustee Company Ltd v Meriton Property Management Pty Ltd [2005] NSWSC 623

Cases Citing This Decision

0

Cases Cited

15

Statutory Material Cited

1

Perpetual Trustee Company Limited v Meriton Property Management Pty Limited [2004] NSWSC 1258

R v Trade Practices Tribunal; ex parte Tasmanian Breweries Pty Ltd [1970] HCA 8

Bowes v Chaleyer [1923] HCA 15

CITATION:	Perpetual Trustee Company Ltd v Meriton Property Management Pty Ltd [2005] NSWSC 623
HEARING DATE(S):	6 June 2005
JUDGMENT DATE :	29 June 2005
JURISDICTION:	Commercial List
JUDGMENT OF:	Bergin J
DECISION:	Amended Summons dismissed

CATCHWORDS:	[CONTRACT] - Construction of interest clauses in Contract for Sale of Land
LEGISLATION CITED:	Conveyancing Act 1919 (NSW)
CASES CITED:	Blair & Ors v Curran & Ors (1939) 62 CLR 464 DTR Nominees Pty Ltd v Mona Homes Pty Ltd (1978) 138 CLR 423 Foran & Anor v Wight & Anor (1989) 168 CLR 385 Green & Anor v Sommerville (1979) 141 CLR 594 McNally & Ors v Waitzer [1981] 1 NSWLR 294 Macquarie Bank Ltd v National Mutual Life Association of Australia Ltd & Ors (1996) 40 NSWLR 543 Mehmet v Benson (1965) 113 CLR 295 Neeta (Epping) Pty Ltd v Phillips (1974) 131 CLR 286 Perpetual Trustee Limited v Meriton Property Management Pty Ltd [2004] NSWSC 1258 Port of Melbourne Authority v Anshun Pty Ltd (1981) 147 CLR 589 Rawson & Anor v Hobbs & Anor (1961) 107 CLR 466 Thoday v Thoday [1964] P 181
PARTIES:	Perpetual Trustee Company Ltd (Plaintiff) Property Management Pty Ltd (Defendant)
FILE NUMBER(S):	SC 50015/05
COUNSEL:	M. Einfeld QC and J. Stoljar (Plaintiff) R. Weber SC and I. Pike (Defendant)
SOLICITORS:	Dibbs Barker Gosling (Plaintiff) Richard de Carvalho - General Counsel, Meriton Apartments Pty Ltd (Defendant)

Easement, restriction etc	Contract Property	Registered Property
Right of Way 3.6 Wide and Variable to burden Lot 4 in DP1065657 and to benefit Lot 3 in DP106567 & Lot 2 in DP566811	Proposed Right of Way 3.6 Wide & Variable Width (Y)	Right of Way 7.2 Wide & Variable Width (Y)
Right of Way 3.6 Wide and Variable to burden Lot 3 in DP106567 and to benefit Lot 4 in DP1065657 & Lot 2 in DP56681	Proposed Right of Way 3.6 Wide & Variable Width (Z)	Not included
Easement to Park Motor Vehicles 4.5 Wide & Variable burdening Lot 4 in DP1065657 and benefiting Lot 3 in DP1065657	Not Included	Easement to Park Motor Vehicles 4.5 Wide & Variable (D)
Restrictions on Use of Land burdening Lot 4 in DP1065657 and benefiting Lot 3 in DP1065657	Not included	Restriction on Use of Land (E)
Easement for Repairs 11.7 Wide & Variable burdening Lot 4 in DP1065657 and benefiting Lot 3 in DP1065657	Not Included	Easement for Repairs 11.7 Wide & Variable (F)
Easement for Support 4.5 Wide & Variable burdening Lot 4 in DP1065657 and benefiting Lot 3 in DP1065657	Not included	Easement for Support 4.5 Wide & Variable (Z)
Vacant Possession	No tenancies disclosed	Property is subject to an unregistered lease to Aust Scan Pty Limited commencing 8 August 2003 and terminating on 7 August 2006.