Property Developments (WA) Pty Ltd v Lord Forrest Nominees Pty Ltd
[2024] WASC 388
•23 OCTOBER 2024
JURISDICTION : SUPREME COURT OF WESTERN AUSTRALIA
IN CHAMBERS
CITATION: PROPERTY DEVELOPMENTS (WA) PTY LTD -v- LORD FORREST NOMINEES PTY LTD [2024] WASC 388
CORAM: ARCHER J
HEARD: 29 MAY & 4 OCTOBER 2024
DELIVERED : 23 OCTOBER 2024
FILE NO/S: CIV 2250 of 2023
BETWEEN: PROPERTY DEVELOPMENTS (WA) PTY LTD
Plaintiff
AND
LORD FORREST NOMINEES PTY LTD
First Defendant
WHEILCLIFF PTY LTD
Second Defendant
Catchwords:
Summary judgment - Contract construction - Deadline defined by reference to a date without a time - Whether the deadline expired at 5.00 pm or midnight
Contract construction - When right to terminate exercised? When the notice is sent, received or deemed to be received?
Contract construction - Meaning of 'party'
Validity of signature on termination notice - Lawyer signed in firm's name
Contract construction - Whether obligation to cooperate continued after deadline expired
Legislation:
Nil
Result:
Defendants' application for summary judgment dismissed
Category: B
Representation:
Counsel:
| Plaintiff | : | S R Pack |
| First Defendant | : | R Young SC & C M Slater |
| Second Defendant | : | R Young SC & C M Slater |
Solicitors:
| Plaintiff | : | Corporate Counsel Lawyers |
| First Defendant | : | Hall & Wilcox (Perth) |
| Second Defendant | : | Hall & Wilcox (Perth) |
Case(s) referred to in decision(s):
Afovos Shipping Co SA v Pagnan [1983] 1 WLR 195
APN Funds Management Ltd v Australian Property Investment Strategic Pty Ltd [2013] VSCA 239
Aussie Invest Corporation Pty Ltd v Pulcesia Pty Ltd [2005] VSC 362
Black Box Control Pty Ltd v TerraVision Pty Ltd [2016] WASCA 219
Bond v Hongkong Bank of Australia Ltd (1991) 25 NSWLR 286
EDWF Holdings 1 Pty Ltd v EDWF Holdings 2 Pty Ltd [2010] WASCA 78; (2010) 41 WAR 23
Electricity Generation and Retail Corporation v EIT Kwinana Partner Pty Ltd [2022] WASCA 3
Ltd v Lloyd [2020] QSC 136
Mannai Investment Co Ltd v Eagle Star Life Assurance Co Ltd [1997] AC 749
Piety Constructions Pty Ltd v Hville FCP Pty Ltd [2022] NSWSC 1318
Pisano v South Metropolitan Health Service [2023] WASCA 80
Suttor v Gundowda Pty Ltd (1950) 81 CLR 418
The Mihalis Angelos [1971] 1 QB 164
Vision Eye Institute Ltd v Kitchen [2014] QSC 260
ARCHER J:
Overview
The defendants seek summary judgment against the plaintiff's claim that they invalidly terminated a contract.[1]
[1] The defendants' application also sought to strike out parts of the statement of claim, but it was common ground that that would stand or fall with the summary judgment application - see ts 2.
The first defendant operates a business trading as the 'Hotel Lord Forrest' on land in Bunbury, Western Australia. The first defendant agreed to sell the business to the plaintiff. It was a condition of the contract that the settlement was subject to the plaintiff obtaining approval for the transfer of the business' liquor licence from the first defendant to the plaintiff (Approval Condition) by the 'Conditions Completion Date' of 20 April 2022. Under the contract, the first defendant was obliged to cooperate with the plaintiff to obtain the approval. Later, by email exchange, the parties agreed to extend the Conditions Completion Date to 19 August 2022.[2] No time was specified in the emails.
[2] The emails are attachment RG‑3 to the affidavit of Rachel Giudicatti filed 12 December 2023 (Giudicatti Affidavit) (pages 75 - 76).
As at 5.18 pm on 19 August 2022, the plaintiff had not obtained approval. At that time, the first defendant sent a termination notice to the plaintiff, on the ground that the Approval Condition had not been met by the Conditions Completion Date.[3] The evidence suggests that the plaintiff received, and had actual knowledge of, the notice by no later than 8.19 pm the same day.[4]
[3] The first termination notice is attachment RG‑4 to the Giudicatti Affidavit.
[4] See the Defendant's Further Submissions filed 12 September 2024 [4] and attachment RG‑3 to the Giudicatti Affidavit (page 108).
The plaintiff alleges that the notice was invalid because the Conditions Completion Date did not expire until midnight. The defendants disagree, and say it expired at 5.00 pm.
The defendants further submit that, even if the Conditions Completion Date did not expire until midnight, the notice was valid. They rely on cl 16.4, under which notices emailed after 5.00 pm are deemed to have been received on the next business day. The defendants assert that it follows that the first defendant did not exercise the right to terminate the contract prematurely. The plaintiff says that cl 16.4 did not apply to the notice. The plaintiff says further that, in any event, cl 16.4 only deems the time of receipt, not the time of sending. Therefore, says the plaintiff, even if cl 16.4 did apply to the notice, the first defendant purported to exercise its right to terminate before the right arose.
The defendants say that, if the notice was invalid, the first defendant validly terminated the contract when it sent a second termination notice.[5] The second termination notice was sent on 29 August 2022, well after the Conditions Completion Date (regardless of whether it expired at 5.00 pm or at midnight on 19 August 2022).
[5] The second termination notice is attachment RG‑8 to the Giudicatti Affidavit.
The plaintiff further alleges that both termination notices were invalid because they were not signed in the manner required by the contract. The termination notices were signed in the name of the firm that acted for the plaintiff by a partner of the firm. The plaintiff says that, under the contract, notices could only be signed by a party, an authorised officer of the party, or an entity standing in the shoes of the party. The plaintiff further says that, even if the partner was entitled to sign the notices as an agent of the party, it was not valid to sign them in the name of the firm. The defendants deny this. The defendants say further that, in any event, any non‑compliance of this kind would not invalidate the notices.
The plaintiff also says that the defendants cannot rely on the second termination notice because the first defendant had earlier breached its obligation to cooperate when it sent an email to the Director of Liquor Licensing on 23 August 2022 (Licensing Email).[6] In that email, the first defendant said that the contract had been terminated and, in the view of the defendants, the plaintiff should withdraw its application for the transfer of the liquor licence. The defendants deny that the Licensing Email breached the first defendant's obligation to cooperate, because they say that the obligation did not continue past the Conditions Completion Date. The plaintiff disputes this.
[6] Statement of Claim [19] ‑ [22] and [24] ‑ [25]. The Licensing Email is attachment RG‑6 to the Giudicatti Affidavit.
Issues
The general principles for granting or refusing summary judgment are well settled. In essence, the defendants must establish that there is a high degree of certainty that they would succeed at trial.[7] While bearing that in mind, I will describe the issues in absolute terms.
[7] PisanovSouth Metropolitan Health Service [2023] WASCA 80 [52].
The issues can be grouped into three categories: timing, signing and cooperation.
First, the timing issues are:
1.Was the extension to 5.00 pm (and not midnight)?
a.If the answer is yes, the first termination notice was not invalidated by the time it was sent.
b.If the answer is no, the second question arises.
2.If the answer to question 1 is no (so the extension was to midnight), was the purported right to terminate exercised at the time the email was sent (5.18 pm) (and not at the time it was received or, if cl 16.4 applied, deemed to be received)?
a.If the answer to question 2 is yes, the first termination notice was invalid (as the first defendant purported to exercise the right before the right arose at midnight).
b.If the answer to question 2 is no, the third question arises.
3.If the answer to questions 1 and 2 is no (so that the extension was to midnight and the purported right to terminate was exercised at the time it was received), did cl 16.4 apply to the first termination notice?
a.If the answer to question 3 is yes, the fourth question arises.
b.If the answer to question 3 is no, the first termination notice was invalid (as the notice was actually received no later than 8.19 pm, so the first defendant purported to exercise the right before the right arose at midnight).
4.If the answer to questions 1 and 2 is no and the answer to question 3 is yes (so that the extension was to midnight, the purported right to terminate was exercised at the time it was received, and cl 16.4 applied), did cl 16.4 apply so as to override evidence of actual receipt? That is, did cl 16.4 deem the first termination notice to have been received on the next business day, even if the evidence showed it was received no later than 8.19 pm on the day it was sent?
a.If the answer to question 4 is yes, the first termination notice was not invalidated by the time it was sent. The signing issues then arise.
b.If the answer to question 4 is no, the first termination notice was invalid (as the notice was actually received no later than 8.19 pm, so the first defendant purported to exercise the right before the right arose at midnight).
If the first termination notice was not invalidated by the time it was sent, the signing issues will arise in relation to that notice. If the first termination notice was invalidated by the time it was sent, the signing issues will still arise in relation to the second termination notice, as will the cooperation issue.
The signing issues are:
5.Were the termination notices signed in accordance with the contract?
a.If the answer is yes, the notices were not invalidated by the manner in which they were signed.
i.If the first termination notice was not invalidated by any of the timing issues, it would be valid and there would be no need to consider the second termination notice.
ii.If the first termination notice was invalidated by any of the timing issues, the cooperation issue would then arise in relation to the second termination notice.
b.If the answer is no, question 6 arises.
6.If the answer to question 5 is no, did the failure to properly sign the notices invalidate them?
a.If the answer is yes, both notices are invalid.
b.If the answer is no, the notices were not invalidated by the manner in which they were signed.
i.If the first termination notice was also not invalidated by any of the timing issues, it would be valid and there would be no need to consider the second termination notice.
ii.If the first termination notice was invalidated by any of the timing issues, the cooperation issue would then arise in relation to the second termination notice.
The cooperation issue is:
7.Did the obligation to cooperate cease to operate after the Conditions Completion Date?
a.If the answer is no, the second termination notice was invalid.
b.If the answer is yes, the second termination notice was valid (assuming it was not invalidated by the manner in which it was signed).
As I will explain, I consider that the first termination notice was invalid due to the time at which it was sent. I further consider that the obligation to cooperate did not cease to operate after the Conditions Completion Date and that, therefore, the second termination notice was invalid. Accordingly, I would dismiss the defendants' summary judgment application.
Before dealing with the issues, I will set out the relevant contractual terms.
The contractual terms
The parties entered into two contracts. The first was a contract for the plaintiff to purchase the business from the first defendant (Business Contract).[8] The second was a contract for the plaintiff to purchase the land on which the business was conducted, which was owned by the second defendant (Land Contract).[9] The Business Contract and the Land Contract both contain conditions that each is conditional upon the other settling simultaneously.[10]
[8] Statement of Claim [4]; Defence [4]. The Business Contract is attachment RG‑1 to the Giudicatti Affidavit.
[9] Statement of Claim [5]; Defence [5]. The Land Contract is attachment RG‑2 to the Giudicatti Affidavit.
[10] Statement of Claim [6]; Defence [6]; see cl 5.2 of the Business Contract (page 14 of the Giudicatti Affidavit) and cl 4 of the Land Contract (page 42 of the Giudicatti Affidavit).
Clause 4 of the Business Contract deals with the Approval Condition and is critical to the cooperation issue.
Clause 4.1 sets out the Approval Condition and the first defendant's obligation to cooperate in obtaining approval from the licensing authority. It provides:
4.1Licensing Authority Approval
(a)Completion is conditional on the Licensing Authority Approval being obtained by the Buyer by the Conditions Completion Date.
(b)The Buyer must:
(i)apply for the Licensing Authority Approval promptly after obtaining Finance Approval, and agrees that it shall not apply for the transfer of the Liquor Licence until it has obtained Finance Approval (which the Seller acknowledges may be conditional Finance Approval); and
(ii)use its best endeavours to obtain the Licensing Authority Approval as soon as possible after the Buyer has obtained Finance Approval (which may be conditional approval).
(c)The Seller will, acting reasonably and as reasonably required by the Buyer, cooperate with the Buyer in order for the Buyer to apply for and pursue the Licensing Authority Approval, including by promptly signing all applications and documents required by the Licensing Authority or as otherwise requested by the Buyer to enable it to obtain the Licensing Authority Approval.
(d)The condition in this clause 4.1 may not be waived by the Seller or the Buyer.
Clause 4.2 of the Business Contract permits either party to terminate by written notice if the Approval Condition is not complied with by the Conditions Completion Date. It provides:
4.2Non-fulfillment of condition
(a)If the Licensing Authority Approval is denied or not obtained before the Conditions Completion Date (or such later date as may be mutually agreed between the parties), either party may, by notice in writing to the other party, terminate this Agreement and each of the following applies:
(i)the Buyer is entitled to immediate repayment of any deposit moneys paid under this Agreement;
(ii)each party is released from further performing its obligations under this Agreement and the Sale of Land Contract except for:
(A)its obligations under this clause 4.2; and
(B)any confidentiality obligations imposed by this Agreement; and
(iii)no party will have any Claim against the other. arising out of such termination.
Clause 16 of the Business Contract, dealing with notices, is critical to the timing and signing issues. It provides:
16.NOTICES
16.1Requirements
All notices to be given under this Agreement must be:
(a)in legible writing and in English; and
(b)signed by the party giving the notice or an authorised officer of that party.
16.2Service of Notices
A notice will be regarded as given properly if:
(a)served personally on the party to whom the notice is given; or
(b)mailed to the party to whom the notice is given by prepaid post; or
(c)sent to the party to whom the notice is given by email,
to the address or email of the receiving party set out in this Agreement or such other addresses that has been notified by that party to the other party in writing, from time to time.
16.3Particulars for service
(a)Particulars for the service of notices are:
Seller
Contact Person: Leanne Beamish
Position:Sole director & secretary
Address:TBC
Email:c/- Emma Leys, Hall & Wilcox [email protected]
BuyerCONTACT DETAILS FOR BUYER TO BE ADVISED
Contact Person: TBA
Position:TBA
Address:TBA
Email:TBA
(b)Each party may from time to time change its address by giving notice pursuant to this clause to the other party.
16.4Receipt
Any notice given pursuant to this clause shall be conclusively deemed to have been received:
(a)in the case of personal delivery, on the actual day of delivery if delivered prior to 5.00 p.m. on a Business Day or on the next following Business Day if delivered after 5.00 p.m. on a Business Day or a day other than a Business Day;
(b)if sent by prepaid post, on the fifth Business Day following the date of posting of the notice; and
(c)if sent by electronic mail and the sender does not receive a message from its internet service provider or the recipient's mail server indicating that it has not been successfully transmitted, on the day of sending if a Business Day and prior to 5.00 p.m. or on the next following Business Day if delivered after 5.00 p.m. on a Business Day or a day other than a Business Day.
Of particular significance to the signing issues is cl 16.1, which requires notices to be signed by the party giving the notice or an authorised officer of that party. Clause 1.2(i) provides that 'a reference to any party to this Agreement, or any other document or arrangement, includes that party's executors, administrators, substitutes, successors and permitted assigns'.
Clause 17 of the contract permits, in particular circumstances, either party to terminate the contract where the other party is in default of a provision of the contract.
Finally, I note that, by cl 1.4, headings do not affect the interpretation.
The general principles of contractual construction were set out in Black Box Control Pty Ltd v TerraVision Pty Ltd[11] and Electricity Generation and Retail Corporation v EIT Kwinana Partner Pty Ltd.[12]
[11] Black Box Control Pty Ltd v TerraVision Pty Ltd [2016] WASCA 219 [42].
[12] Electricity Generation and Retail Corporation v EIT Kwinana Partner Pty Ltd [2022] WASCA 3 [229] ‑ [247].
Was the extension to 5.00 pm? (Timing Issue 1)
The defendants submit that the extension agreement must be read with the balance of the Business Contract to understand its ordinary meaning.[13] They submit that, in the context of cl 16.4 of the Business Contract, the plaintiff's assertion that the Conditions Completion Date was extended to midnight on 19 August 2022 must fail.[14] The defendants contend that, because of the presence of cl 16.4 of the Business Contract, the agreement to extend time should be construed as having been to 5.00 pm on the day specified.[15]
No work to do?
[13] Defendants' Submissions in Support of Summary Judgment filed 9 May 2024 (Defendants' May Submissions) [22].
[14] Defendants' May Submissions [22], [25] and ts 2 - 3.
[15] Defendants' May Submissions [22], [25].
During the hearing, it became apparent that the defendants' contention relied upon the premise that a right of termination was not exercised until the termination notice was deemed to have been received by cl 16.4.[16]
[16] ts 31 ‑ 32.
Relying on that premise, the defendants contended that, if the agreement was construed as being to midnight (as contended by the plaintiff), then cl 16.4(c) (which deems notices emailed after 5.00 pm to have been received on the next business day) would have no work to do.[17] In dealing with the second issue, I will explain why I do not accept the premise. However, even if I did accept it, I would not accept that cl 16.4(c) would have no work to do.
[17] ts 29 (read with ts 31 ‑ 32).
First, as the defendants conceded, the Business Contract provided for other notices to which cl 16.4(c) could apply.[18] Second, even in relation to termination notices, cl 16.4(c) could still have work to do. It would operate on a termination notice issued for default under cl 17.[19] It would operate on a termination notice[20] issued under cl 4.2 (for a failure to obtain approval by the Conditions Completion Date) that was issued on any day after the Conditions Completion Date.[21] Further, if the premise is accepted, cl 16.4(c) would operate on a termination notice issued under cl 4.2 that was issued between 5.00 pm and midnight on the Conditions Completion Date,[22] and it would deem the right to have been exercised the following day.
Odd result?
[18] ts 29 - 30.
[19] Provided it complied with the requirements of cl 16.
[20] Provided it complied with the requirements of cl 16.
[21] The defendants accepted this - ts 30.
[22] Provided it complied with the requirements of cl 16.
In relation to that last situation, the defendants contended this would lead to an odd result. They submitted:[23]
[If] you were to physically send a notice of termination between 5 pm and midnight which would not have the conclusive deeming effect until the next business day, you would, on the plaintiff's construction, have something sent in a period in which that notice could not have effect because it was sent before the time for compliance expired. But then it would still be conclusively deemed to have been received on the next business day.
[23] ts 29.
The asserted 'odd result' was that such a notice would be valid even though it was sent before the right arose. The defendants submitted that, 'because of that complexity, the termination time should be construed harmoniously with the conclusive deeming provision as to receipt'.[24]
[24] ts 32.
However, such a notice would only be valid if the defendants' premise is accepted. If the premise is rejected, there would not be an 'odd result'. A notice sent before the right arose would be invalid. The fact it would be deemed to have been received the next day would not alter that.
If the premise is accepted, the right to terminate would have been exercised at the time the notice was deemed to have been received, being the next day.[25] It is not clear to me why, if the premise is accepted, there would be any complexity or disharmony on the plaintiff's construction. If the time expired at midnight (as contended by the plaintiff), a notice sent before midnight would have been sent before it was open to the defendants to exercise the right of termination. However, it would be deemed to have been received the following day, at a time when it was open to the defendants to exercise the right. If the defendants' premise is accepted, it was the deemed receipt of the notice that constituted the exercise of the right, not when it was sent and not when it was in fact received. As the notice would be deemed to have been received the day afterward, the right would have been validly exercised. The notice would have the same effect as a notice sent at one minute past midnight. This is neither complex nor disharmonious.
[25] ts 30 ‑ 32.
Further, as pointed out by the plaintiff, the defendants' construction (including the premise) would mean that, although the time expired at 5.00 pm, it would not be possible to terminate the contract between 5.00 pm and midnight.[26] Any notice sent during that time would have been deemed to be received (and the contract terminated) after midnight.
Construction of the contract
[26] ts 43.
I do not accept that the time expired at 5.00 pm.
First, although it is a matter of construction in each case, ordinarily, where a date and not a time is specified for the fulfilment of an obligation, the time will expire at midnight.[27] The Conditions Completion Date is referred to in the Business Contract, and in the emails in which the parties agreed to extend the date, without any reference to a time.
[27] Aussie Invest Corporation Pty Ltd v Pulcesia Pty Ltd [2005] VSC 362 [313]. See also the application of that ordinary principle in Latimore Pty Ltd v Lloyd [2020] QSC 136.
Second, it could not be suggested that the reference to 5.00 pm in cl 16.4 compelled a conclusion that the time expired at 5.00 pm on the Conditions Completion Date.
Clauses 16.4(a) and 16.4(c) deem notices personally delivered or emailed after 5.00 pm to have been received on the next business day. Clause 16.4(b) deems notices sent by prepaid post to have been received on the fifth business day after the date of posting. If the reference to 5.00 pm in cl 16.4(a) and cl 16.4(c) compelled a conclusion that the time expired at 5.00 pm on the Conditions Completion Date, why would cl 16.4(b) not compel a conclusion that the time expired five business days earlier?
Third, cl 16.4 is the only clause to mention a specific time (and within cl 16.4, only subclauses (a) and (c) refer to a time). Numerous clauses refer to dates, without any reference to time.[28] Yet, in the defendants' submission, the reference to 5.00 pm in the subclauses which deem the time of receipt of a notice served personally or by email means that the Licensing Approval had to be obtained before 5.00 pm. This is not a compelling submission.
[28] See cl 4.1(a) and cl 4.2(a) in relation to the 'Conditions Completion Date' (itself defined in cl 1.1 with no reference to time). See also cl 1.3 and the definition of 'Business Day' in cl 1.1.
Fourth, as I have explained, I do not accept that, on the plaintiff's construction, cl 16.4(c) would have no work to do or would lead to odd results.
There is nothing in the text, context or purpose of the Business Contract to indicate that the time would expire at 5.00 pm. A reasonable businessperson would not have understood the time would expire at 5.00 pm.
For these reasons, I do not accept the defendants' submission that there is a high degree of certainty that the agreement was to extend time to 5.00 pm on 19 August 2022. On the contrary, I consider it was extended to midnight.
I note that the plaintiff drew my attention to Latimore Pty Ltd v Lloyd, in which a similar issue arose. While each case must turn on the particular contract under consideration, the outcome in that case is consistent with the view I have reached.
Was the purported right to terminate exercised at the time the email was sent (5.18 pm) (and not at the time it was received or, if cl 16.4 applied, deemed to be received)? (Timing Issue 2)
It was common ground that a contractual right of termination cannot be exercised until the conditions giving rise to the right are satisfied.[29]
[29] See Vision Eye Institute Ltd v Kitchen [2014] QSC 260 [236]. See also The Mihalis Angelos [1971] 1 QB 164, 200 ‑ 201 and 207 ‑ 208 and Afovos Shipping Co SA v Pagnan [1983] 1 WLR 195.
In this case, the right to terminate is contained in cl 4.2(a). That clause relevantly provides:
If the Licensing Authority Approval is denied or not obtained before the Conditions Completion Date (or such later date as may be mutually agreed between the parties), either party may, by notice in writing to the other party, terminate this Agreement.
The opening phrase of cl 4.2(a), beginning with the word '[i]f', conditions the right which follows. It was only on the satisfaction of that condition that the right became capable of exercise.
The defendants contend that, because cl 16.4(c) provides that a notice sent by electronic mail after 5.00 pm is conclusively deemed to have been received the next day, if a party sent a termination notice after 5.00 pm, the party would not be said to have exercised a right to terminate until the next day.[30]
[30] ts 31 ‑ 32.
I do not accept this.
Even if it is assumed that cl 16.4 applied to the first termination notice (which is the third issue), cl 16.4 operates to deem the time at which a notice is received. It does not operate on the time at which a right is exercised. There are a number of textual and contextual matters to support this construction.
First, the words of cl 16.4.
Clause 16.4 begins by stating that a notice 'given pursuant to this clause shall be conclusively deemed to have been received …' (emphasis added).
Clause 16.4(a) deals with personal delivery, when the giving and receiving occurs simultaneously.
Clause 16.4(b) deals with notices sent by post. It deems a notice to have been received a number of days after the date of posting.
Clause 16.4(c) deals with notices sent by email. It deems a notice sent before 5.00 pm on a business day to have been received on that day. It deems notices delivered after 5.00 pm or on a day other than a business day to have been received on the next business day.
Second, the context supports this construction. Clause 16.2 provides (emphasis added):
A notice will be regarded as given properly if:
(a)served personally on the party to whom the notice is given; or
(b)mailed to the party to whom the notice is given by prepaid post; or
(c)sent to the party to whom the notice is given by email,
to the address or email of the receiving party set out in this Agreement or such other addresses that has been notified by that party to the other party in writing, from time to time.
Third, this construction is not a commercial nonsense.
Accordingly, the defendants purported to exercise a right to terminate at the time the email was sent - 5.18 pm. As I have found that the Conditions Completion Date was extended to midnight, the purported right to terminate was exercised before the right arose. It follows that the first termination notice was invalid.
Did cl 16.4 apply to the first termination notice? (Timing Issue 3)
The determination of Issues 1 and 2 means that Issue 3 falls away. Nevertheless, in case I am wrong about either issue, I will briefly explain why I am not satisfied to a high degree of certainty that cl 16.4 applied to the first termination notice.
While for different reasons, it was common ground that the deeming provision of cl 16.4 would only apply to a notice which complied with cl 16.1, cl 16.2 and cl 16.3.[31] However, the parties disagree in relation to several aspects of cl 16. For the purposes of this issue,[32] it is sufficient to deal only with the disagreement as to whether the first termination notice complied with cl 16.2 and cl 16.3. The plaintiff says that it did not. The defendants say that it did.[33]
[31] See ts 61 ‑ 62 (defendants) and ts 66 (plaintiff).
[32] Another point of difference is the subject of the fifth issue (a signing issue).
[33] ts 62.
It will be recalled that the particulars for service of notices in cl 16.3(a) records 'TBA' in relation to the Buyer (the plaintiff).
The defendants submit:[34]
There is no suggestion that advice requires a formal notice under clause 16 or otherwise. The advice of the plaintiff through the conduct of its agents acting on the transaction relevantly advised as to the contact details for the buyer.
[34] Defendants' Reply Submissions filed 2 October 2024 [12].
The plaintiff disagrees, and relies on cl 16.3(b). Clause 16.3(b) provides 'Each party may from time to time change its address by giving notice pursuant to this clause to the other party'. The plaintiff points out that the identification of an address for service is a serious matter. A notice served on such an address will be deemed to have been received by cl 16.4, regardless of whether it actually was. The plaintiff points out that the parties clearly recognised the importance of the particulars for service by agreeing, in cl 16.3(b), that changes to the particulars could only be given by a notice which complied with cl 16.2 and cl 16.3.[35]
[35] ts 66 ‑ 67.
The defendants say that advising of the particulars for service is not a 'change' of address and that, therefore, the advice could be given without complying with cl 16.3(b).[36] Even if I accepted this, there is no evidence that the plaintiff expressly advised the defendants of its particulars for service.
[36] ts 63.
Given the importance of those particulars, I do not accept that the plaintiff had advised of its email address for the service of notices (to which the deeming provision would apply) simply because two people had sent emails to the first defendant apparently on behalf of the plaintiff. I accept that it can be inferred that those emails were sent on behalf of the plaintiff. However, it is a much larger step to conclude that those emails implicitly advised of the plaintiff's email address (more accurately, two email addresses) for the service of notices to which the deeming provision would apply.[37]
[37] And see Bond v Hongkong Bank of Australia Ltd (1991) 25 NSWLR 286, 293 (Gleeson CJ) .
Accordingly, I am not satisfied to a high degree of certainty that the first termination notice was sent in accordance with cl 16.2 and cl 16.3. I am therefore not satisfied to a high degree of certainty that cl 16.4 applied to the first termination notice.
Does cl 16.4 override evidence of actual knowledge? (Timing Issue 4)
Following the first day of hearing, I asked if the parties wished to be heard in relation to two issues that had not been raised by the parties. The first was whether cl 16.4 operates so as to override actual knowledge or whether it is simply a facilitative evidentiary provision. I drew the parties' attention to two cases that discussed similar clauses but in different contexts.[38] Both parties filed, with leave, submissions addressing this issue. Both contended that, where cl 16.4 applies, it operates so as to override actual knowledge.
[38] APN Funds Management Ltd v Australian Property Investment Strategic Pty Ltd [2013] VSCA 239 and Piety Constructions Pty Ltd v Hville FCP Pty Ltd [2022] NSWSC 1318.
As this issue would only arise if I were wrong about the first three issues, and as the parties agree, I consider that it is unnecessary to explain why I do not share the parties' confidence about this.
Were the termination notices validly signed? (Signing Issue 5)
The defendants point out that, even if the first termination notice was issued prematurely, the second termination notice was not.[39] The plaintiff says, however, that neither termination notice was validly signed.
[39] Defendants' May Submissions [27] ‑ [28].
Clause 16.1 provides that notices 'must be' signed by the party or an authorised officer of the party.
The two termination notices were signed by Ms Leys, a partner of the firm of solicitors acting for the defendants. She signed them using the name of the firm, not her own name.[40]
[40] See the affidavit of Emma Karen Leys filed 27 May 2024 (Leys Affidavit).
Two questions arise.
1.First, did 'party' in cl 16.1 include solicitors acting on behalf of a party?
2.Second, if it did, was it sufficient for Ms Leys to sign the firm name or was it necessary that she sign in her own name?
Did 'party' in cl 16.1 include solicitors acting on behalf of a party?
It will be recalled that cl 1.2(i) provides that 'a reference to any party to this Agreement, or any other document or arrangement, includes that party's executors, administrators, substitutes, successors and permitted assigns'. In short, those who effectively stand in the shoes of the party.
The plaintiff accepts that cl 1.2(i) is expressed inclusively. However, the plaintiff contends that, despite that, it should be construed as an exclusive definition.[41]
[41] ts 49.
The defendants contend that there is no reason to construe cl 1.2(i) as an exclusive definition. They contend that 'party' would extend to those who act with the authority of a party, such as an agent.[42]
[42] ts 16.
The defendants note that a party is bound by its agent's actions. They refer to s 126 of the Corporations Act 2001 (Cth), which provides that a company's power to make, vary, ratify or discharge a contract, or execute a document (including a deed), may be exercised by an individual acting with the company's express or implied authority and on behalf of the company.
The plaintiff notes that s 127 of the Corporations Act deals with the company itself executing a document, and, relevantly in the circumstances of this case, the section permits documents to be executed without the common seal if signed by the sole director and secretary. The plaintiff submits that cl 16(1)(b) is intended to limit effective signatures to 's 127 execution', not 's 126 execution'.[43]
[43] ts 47.
The plaintiff contends that there is good reason why parties may wish to limit effective signatures. It submits that it would improve certainty. It notes that, when something is signed by a purported agent, issues may arise as to the scope of the authority. The plaintiff points out that parties are free to agree to such restrictions when entering into contracts.[44]
[44] ts 46 ‑ 49.
I asked whether all types of notice contemplated by the Business Contract were important, justifying a high level of certainty. The plaintiff accepted that at least one type of notice was perhaps not of the same level of importance as a termination notice.[45]
[45] This was a notice by the Buyer to the Seller of the actions that the Buyer reasonably required the seller to take after Completion and until any Business Assets were registered in the name of the Buyer (cl 8.5). See ts 53 ‑ 54.
The plaintiff further contends that, even if cl 1.2(i) is not an exclusive definition, it would not extend beyond those standing in the shoes of the party and, in particular, would not include those acting as agents.[46]
[46] ts 49.
I would not construe cl 1.2(i) as an exclusive definition of 'party'. In my view, a 'party' would include an agent.
First, cl 1.2(i) is expressed in inclusive terms.
Second, not all of the notices contemplated by the Business Contract were important.
Third, the word 'party' is not limited to cl 16. It is used throughout the contract.
Fourth, construing 'party' so as to permit an agent (such as a lawyer) to sign notices would not be a commercial nonsense (nor did the plaintiff suggest it would be).
Fifth, I accept that, when something is signed by a purported agent, issues may arise as to the scope of the authority. I further accept it was open to the parties to agree to limit the scope of the word 'party' in the contract, so as to increase certainty. However, it was also open to the parties to agree to permit the word 'party' to include agents, so as to increase efficiency and flexibility.
In my view, a reasonable businessperson would not have understood that an agent could not sign notices.
If an agent could sign, was it valid to sign the firm name?
The plaintiff accepts that I could conclude that there is a high level of certainty that Ms Leys was acting with authority.[47] However, the plaintiff contends that, if a signature of an agent is sufficient, the signature must at least identify the actual person signing. It submits that it is not enough to sign with a generic firm name. It submits that cl 16.1(b) seeks to ensure that someone is taking responsibility for the issue of the notice and that it is very clear who that person is.[48]
[47] ts 50.
[48] ts 50 ‑ 51.
I do not accept these submissions. The solicitors for the defendants are the firm Hall & Wilcox.[49] Ms Leys is a partner of the firm. She was engaged by the defendants to provide services in relation to this matter.[50] The 'contact person' for the seller of the business (the first defendant) was identified in cl 16.3 of the Business Contract as the sole director and secretary of the seller 'c/- Emma Leys, Hall & Wilcox'. When Ms Leys signed the notices in the name of the firm, it was clear that they had been signed by the law firm acting for the defendants, as agents for the defendants.
[49] Leys Affidavit [1].
[50] Leys Affidavit [5].
In my view, the notices complied with the obligation in cl 16.1 that they be signed by the issuing party.
Was any error immaterial? (Signing Issue 6)
For completeness, I note that the defendants submit that, even if I was to find that there was non‑compliance with the notice provision, immaterial errors do not invalidate a notice. They say that there is no suggestion that the notice was not clear or did not convey the position as to termination.[51]
[51] Defendants' May Submissions [36] ‑ [37].
The issue here is not whether the termination notices conveyed what was required to be conveyed. The issue is whether a notice that was not signed by the party giving the notice or an authorised officer of that party would be invalid. This is a question of construction.[52]
[52] See Bond (293) (Gleeson CJ), (311 ‑ 314) (Kirby P) and Mannai Investment Co Ltd v Eagle Star Life Assurance Co Ltd [1997] AC 749, 776 (Lord Hoffman).
The question of construction must be determined in the context of the contract as a whole. The answer may be different depending on the breadth of the word 'party'.
For example, if, as I have found, 'party' includes an agent, I consider that a notice that was not signed by the party, an authorised officer of the party, or an agent, would be invalid. In cl 16.1, the word 'must' is used. Further, there is a clear commercial purpose in requiring a notice to be legible, in English and signed by the party giving the notice or an authorised officer or agent of that party. In my view, a notice that did not meet those requirements would be invalid.
The answer is less obvious if 'party' did not include an agent. Would a reasonable businessperson have understood that the parties' solicitors could not sign notices under the contract? As I have found that 'party' did include an agent, and as the question is purely one of construction, it is unnecessary to consider this further.
Did the obligation to cooperate cease to operate after the Conditions Completion Date? (Cooperation Issue, Issue 7)
If the second termination notice complied with cl 16.1, the plaintiff pleads that the defendants could not rely on the plaintiff's failure to obtain the licensing authority's approval, because the first defendant materially contributed to that failure by sending the Licensing Email. The plaintiff pleads that the sending of that email breached the reasonable cooperation clause in relation to assisting the plaintiff to obtain the approval.[53]
[53] Statement of Claim [9], [21] and [24].
The defendants contend that the plea that the first defendant breached the reasonable cooperation clause is so weak that it should be dismissed summarily. The defendants contend the claim is weak for two reasons.
First, the defendants assert that the Business Contract had been terminated by the first termination notice before the first defendant sent the Licensing Email. They assert that, therefore, when the first defendant sent the email, the obligation to cooperate no longer existed.[54] As I have found that the first termination notice was invalid, I do not accept this contention.
[54] Defendants' May Submissions [42], [45] ‑ [46].
Second, the defendants assert that, as the plaintiff had not obtained approval prior to the Conditions Completion Date, the obligation to cooperate no longer applied.[55] The defendants say that, therefore, sending the Licensing Email was not wrongful.
[55] ts 4 ‑ 5.
This second basis was not apparent to the plaintiff from the defendants' written submissions. It was explained by the defendants on the first day of hearing in response to a question from me.[56] Ultimately, the parties sought to resolve the difficulty by filing further written submissions after the hearing.
[56] ts 4 ‑ 5.
The parties have asked that I deal with the issue as a pure question of construction. That is, I am not asked to consider the impact, if any, of the parties' conduct after the Conditions Completion Date expired.
In my view, as a pure question of construction, the obligation to cooperate would continue after the Conditions Completion Date while the contract remained on foot.
The defendants point out that an obligation to cooperate does not rise above the promises made by the parties to the contract.[57] They submit that the obligation to cooperate in cl 4.1(c) must be read together with cl 4.1(a) (which provides that completion is conditional on the licensing authority's approval being obtained by the Conditions Completion Date).
[57] Defendants' Submissions in Reply to the Plaintiff's Submissions, filed 14 June 2014 (Defendants' June Submissions) [12], citing EDWF Holdings 1 Pty Ltd v EDWF Holdings 2 Pty Ltd [2010] WASCA 78; (2010) 41 WAR 23 [109].
The defendants submit that there is nothing in the Business Contract that would require the first defendant to cooperate to achieve an outcome other than approval by (at the latest) midnight on 19 August 2022.[58] They submit that it makes no commercial sense for an obligation to cooperate in order to apply for and pursue the licensing authority's approval to continue after the time for the fulfilment of the Approval Condition has ceased.[59]
[58] Defendants' June Submissions [14].
[59] Defendants' June Submissions [8].
I do not accept this.
If the licensing authority's approval was not given by the Conditions Completion Date, the Business Contract would not be automatically terminated. Rather, by cl 4.2(a), either party could elect to terminate the contract. If neither party did so, the contract would continue. If the plaintiff subsequently obtained approval, the defendants would no longer have a right to elect to terminate the contract. It would, by that point, be too late.[60]
[60] And see Suttor v Gundowda Pty Ltd (1950) 81 CLR 418 (Suttor), 441 ‑ 442 (Latham CJ, Williams and Fullagar JJ).
On the defendants' construction, after the Conditions Completion Date, the plaintiff could spend time and money seeking to obtain approval, but the first defendant would not be obliged to cooperate with the plaintiff in that endeavour. If, for example, the licensing authority was going to give approval subject only to a signature from the first defendant, the first defendant could, on their construction, capriciously[61] refuse to sign. In my view, a reasonable businessperson would not have understood cl 4.1(c) to operate in that way.
[61] The defendants did not contend that the terms of the contract included any implied term of good faith or cooperation.
I reiterate this conclusion is purely one of construction.
Conclusion and orders
For these reasons, I would dismiss the defendants' application for summary judgment.
I certify that the preceding paragraph(s) comprise the reasons for decision of the Supreme Court of Western Australia.
ADR
Associate to the Honourable Justice Archer
23 OCTOBER 2024
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