Rilac Pty Ltd v Chiodo Investments Pty Ltd

SUPREME COURT OF VICTORIA

COURT OF APPEAL

S EAPCI 2023 0144

RILAC PTY LTD	Applicant
v
CHIODO INVESTMENTS PTY LTD (AS TRUSTEE FOR THE CHIODO FAMILY TRUST)	Respondent

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JUDGES:	BOYCE and ORR JJA, MOORE AJA
WHERE HELD:	Melbourne
DATE OF HEARING:	20 November 2024
DATE OF JUDGMENT:	7 March 2025
MEDIUM NEUTRAL CITATION:	[2025] VSCA 27
JUDGMENT APPEALED FROM:	[2023] VSC 590 (Gorton J)

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CONTRACT – Two parties in joint enterprise for development of property – One party the registered proprietor – Parties entered contract obliging registered proprietor to sell property by particular date and share proceeds of sale – Registered proprietor failed to sell – Whether clause providing that if property not sold then other party ‘has the rights to be included and involved in the sale of the property’ conferred on other party right to force sale – Whether clause providing that registered proprietor must pay portion of rental to other party until property sold required rental payments to continue after date by which registered proprietor was obliged to sell.

LIMITATION OF ACTIONS – Date on which cause of action founded on breach of clause that other party ‘has the rights to be included and involved in the sale of the property’ accrues – Whether cause of action accrues on date by which registered proprietor was obliged to sell or on later date on which registered proprietor refused to sell.

Limitation of Actions Act 1958, s 5.

Cappelleri v Cappelleri [2024] VSCA 173; Fred IT Group Pty Ltd v Corum Systems Pty Ltd [2024] VSCA 176; Larking v Great Western (Nepean) Gravel Ltd (in liq) (1940) 64 CLR 221; Mount Bruce Mining Pty Ltd v Wright Prospecting Pty Ltd (2015) 256 CLR 104.

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Counsel
Applicant:		Mr CR Northrop
Respondent:		Mr L Virgona
Solicitors
Applicant:	Harwood Andrews
Respondent:	Marshalls + Dent + Wilmoth

BOYCE JA
ORR JA
MOORE AJA:

Introduction

In 2002, John Alessi and Sam Chiodo agreed to undertake a joint enterprise involving the purchase and development of a property at 66 River Street, South Yarra (the ‘property’). Mr Chiodo was to provide design and architectural services, with Mr Alessi providing the building services. Their intention was to sell the property after it was developed and to divide the profits equally between them.
The property was developed by the applicant (‘Rilac’), a company controlled by Mr Alessi and his wife Julie Alessi, and the respondent (‘Chiodo’), of which Mr Chiodo was the sole director. As part of the development, Rilac purchased the property and became registered proprietor. The development occurred in a familial context where Mr Chiodo was married to Mr Alessi’s daughter.
Attempts to sell the property after the development was completed were unsuccessful. In late 2006, Mr Alessi and Mr Chiodo then decided to lease the property to tenants, on the basis that they would contribute equally to outgoings and expenses and share equally in any rent received. The property was leased on this basis for a number of years. Mr Chiodo was primarily responsible for the leasing arrangements.
Over the time that the property was leased to tenants, a practice developed whereby Mr Alessi regularly sent invoices to Mr Chiodo recording expenses paid, as well as rent which Mr Alessi understood had been received. The invoices recorded an amount payable by Chiodo to Rilac.
Chiodo ceased paying these invoices in about May 2007; as a consequence, the amount payable by Chiodo to Rilac thereafter increased.
In 2012, Mr Alessi and Mr Chiodo had discussions regarding Chiodo’s indebtedness to Rilac; they acknowledged that something needed to be done to address the matter. To that end, on 10 December 2012, Mr Alessi and Mr Chiodo, in their capacities as directors of Rilac and Chiodo respectively, signed a document entitled ‘Declaration of Trust’. The document was styled as a ‘deed’, and it is convenient to refer to it as such in these reasons for judgment. The deed had been prepared by a firm of solicitors at Mr Chiodo’s request. It was signed by both men in a meeting at Mr Alessi’s home. During the meeting, Mr Alessi and Mr Chiodo made handwritten changes to various amounts referred to in it.
The terms of the relevant provisions of the deed are set out later in these reasons for judgment.[1] In summary, however, it recites that the parties had agreed to ‘alter their commercial relationship’ as provided by the following provisions:
(a)Rilac would pay Chiodo $289,525.44 (‘The Initial Payout’) (cl 6(ii));[2]
(b)Rilac agreed to sell the property within three years on the basis that, if the sale price exceeded $1.5 million (being its value as then agreed by the parties), Chiodo would be entitled to 50 per cent of any amount in excess of $1.5 million (cl 7(ii));
(c)Rilac agreed that, if it did not sell the property within three years, Chiodo ‘has the rights to be included and involved in the sale of the property and [Rilac]’s execution of this Deed is deemed consent and authority to [Chiodo] to arrange a sale’ (cl 7(iv)); and
(d)Rilac agreed to pay Chiodo 10 per cent of all rental from 1 July 2012 until the property was sold pursuant to cl 7(ii) (cl 8).
[1]See [17]–[19] below.
[2]See n [3] in relation to the amount.
After the deed was signed in the meeting on 10 December 2012, Mr Alessi drew a cheque for the amount payable to Chiodo in accordance with cl 6(ii) of the deed.[3]
[3]In its original form, the deed identified $295,775.44 as the amount to be paid by Rilac to Chiodo. A cheque in this amount was drawn by Mr Alessi and provided to Mr Chiodo at the conclusion of the meeting on 10 December 2012. The basis upon which this amount was calculated was set out in handwritten notes to clause 6(iii) of the deed. It was uncontroversial that the basis upon which this amount had been calculated was later discovered to be incorrect and that, several days after the meeting on 10 December 2012, Mr Alessi and Mr Chiodo signed a replacement page to the deed which included the correct amount ($289,525.44) to be paid by Rilac. As a result, an amount of $6,200 was refunded by Chiodo to Rilac on 12 March 2013, being the difference between the two figures, less $50.
Rilac did not sell the property within three years as provided by cl 7(ii) of the deed; nor did it make any payments to Chiodo after December 2012 for the rental of the property as provided by cl 8. This situation continued unchanged for the next seven years, over which time it would appear that nothing material was said or done about it.
On 14 November 2019, Mr Alessi wrote to Mr Chiodo asking him to withdraw a caveat which Mr Chiodo had lodged in respect of the property[4] as Mr Chiodo’s ‘family law and marital matters have now been resolved and settled’. Following correspondence between the parties’ solicitors, on 9 March 2020, Mr Chiodo’s then solicitor wrote to Mr Alessi’s solicitor stating that Mr Chiodo ‘requires the property to be sold as per the agreement’. This was followed by a further letter dated 14 April 2020 from Mr Chiodo’s solicitor in which he stated that he was ‘await[ing] details of the property being placed on the market for sale’.
[4]On 30 January 2014.
In their response dated 21 April 2020, Mr Alessi’s solicitors stated:

So that Chiodo Investments is under no doubt, we are instructed to inform you that our client has no current intention of placing the property for sale and, even if it did, does not consider it has to account to Chiodo Investments for any amount received from sale of the property.

The solicitors stated that they held instructions to accept service of any proceedings Chiodo may issue should it seek to enforce its alleged rights.

Chiodo then commenced a proceeding in the Supreme Court on 20 August 2021 seeking relief including declarations that Rilac held a 50 per cent share of the property on trust for it, as well as 50 per cent of all rents and profits received in respect of the property from October 2012. Chiodo also sought an order that the property be sold in accordance with the terms of the deed.
After a five day trial, the judge found that, although Chiodo ceased to have an equitable interest in the property upon entry into the deed, Rilac was bound by the terms of the deed, pursuant to which Chiodo had a right to effect the sale of the property (as well as to receive 50 per cent of the proceeds to the extent that they might exceed $1.5 million), and to receive 10 per cent of the rent received by Rilac for the six year period prior to the commencement of the proceeding.[5]
[5]Chiodo Investments Pty Ltd v Rilac Pty Ltd [2023] VSC 590, [55] (‘Reasons’). Chiodo accepted that it was barred by the Limitation of Actions Act 1958 (the ‘Limitations Act’) from claiming any portion of the rental income received prior to the six year period before the commencement of the proceeding: see [24] below.
As is relevant to the matters raised in the application for leave to appeal, the Court made the following orders to give effect to the Reasons (the ‘Orders’):
(1)The plaintiff is authorised to sell the property situate at and known as 66 River Street, South Yarra, Victoria and more particularly described in certificate of title volume 10487 folio 633 (‘the Property’).
(2)The defendant shall co-operate and execute all such documents and do all such things as may be necessary to enable the plaintiff to sell the Property and to give effect to the sale of the Property.
(3)The defendant shall pay to the plaintiff 10 per cent of the total rent received by the defendant for the Property for the period September 2015 to June 2023 inclusive, in the sum of $35,713.30, together with interest thereon (for the period August 2021 to October 2023 inclusive) in the sum of $640.13.
(4)The defendant shall account to the plaintiff for 10 per cent [of] the net rent received by the defendant for the Property from the date of this order until the date of settlement of the sale of the Property.

The deed

As already noted, the deed is headed ‘Declaration of Trust’ and purports to be a deed made on 10 December 2012 between Rilac (referred to in the deed as ‘the Trustees’) and Chiodo (who with Rilac, are referred to as the ‘Beneficiaries’). After reciting the general background to the purchase of the property, the deed contains eight clauses. The first five are uncontroversial and are in boilerplate form.
(a)Clause 1 is a declaration by the Trustees that they hold their interest in the property on trust for the Beneficiaries in the percentages of 50 per cent for Chiodo and 50 per cent for Rilac.
(b)Clause 2 requires the Trustees, upon the request of the Beneficiaries, to execute a transfer of land to reflect the intended ownership percentages of 50 per cent for Rilac and 50 per cent for Chiodo.
(c)Clause 3 contains an indemnity from the Beneficiaries to the Trustees against loss and liability while acting as trustees and a covenant from the Beneficiaries to provide the Trustees with the monies required to meet any expenditure in respect of the property, including mortgage and interest payments, in accordance with their intended ownership percentages.
(d)Clause 4 is an acknowledgement by the Trustees that their interest in the property has been registered solely pursuant to the deed and that at all times the legal and equitable ownership of the property is with the Beneficiaries as per the intended ownership percentages.
(e)Clause 5 provides that the Beneficiaries are entitled to lodge a caveat over the property to protect their interest pursuant to the deed.
The remaining three clauses of the deed are central to the disposition of this application.
Clause 6 provides:[6]
[6]Clause 6 as set out above includes the handwritten changes agreed to by Mr Alessi and Mr Chiodo after the deed was signed, referred to above at n [3].
(i) Sam[7] agrees that the value of the Property, for resolution of matters pursuant to this Deed is agreed to be valued at $1,500,000.00 (‘The Initial Price’).
[7]‘Sam’ is defined in sch 2 of the deed to mean Chiodo.
(ii) RILAC PTY LTD agrees to pay Sam the sum of ~~$327,500.00~~ $289,525.44 on the settlement date described in Schedule 7 (‘The Initial Payout’).
(iii)      The Initial Payout is calculated as follows:
A. Initial Price  $1,500,000.00
B. Less Mortgage                 $ 450,000.00
~~C. Less agreed deductions       $ 12,500.00~~
Sub Total  ~~$1,037,500.00~~          $1,050,000.00
As to 50% each                  ~~$ 537,500.00~~            $ 531,250.00
D. Less agreed deductions
by Sam  ~~$ 210,000.00~~            $241,724.56
E. Initial Payout                  ~~$ 327,500.00~~            $289,525.44
(iv) Each party shall be entitled to half the net rental up to and included [sic] 30 October, 2012.
Clause 7 provides:
(i) The Initial Payment is calculated on the basis that the Property is valued at $1,500,000.00.
(ii)RILAC PTY LTD agrees to sell the property within three (3) years of the settlement date to a genuine Third Party purchaser at the then market value, and agrees that if the sale price of the Property exceeds $1,500,000.00, then Sam shall be entitled to 50% of any excess monies above $1,500,000.00 (‘Potential Excess’).
(iii)To ensure payment of any Potential Excess, RILAC PTY LTD consents to Sam lodging a Caveat over the Property to secure its payment.
(iv)RILAC PTY LTD agrees that if it does not sell the property t [sic] within 3 years, then Sam has the rights to be included and involved in the sale of the property and RILAC’s execution of this Deed is deemed consent and authority to Sam to arrange a sale.
Clause 8 provides:
RILAC PTY LTD agrees to pay to Sam upon receipt, 10% of all rental from the settlement date until the property is sold by RILAC PTY LTD pursuant to Clause 7(ii) herein in consideration of his interest in the Property until it is sold pursuant to clause 7(ii). This is calculated as follows:
Expected Value:        $1,850,000.00
Less Payout:             $1,500,000.00
Balance:                  $ 350.000.00
Half to Sam:             $ 175,000.00
$175,000 of $1,850,000 equals to (estimated) at 10% being approximately $6,000.00 per annum.

The Reasons

The judge recorded that it was common ground that until December 2012, Rilac held a 50 per cent interest in the property on trust for Chiodo.[8] Rilac’s case was that at that time, it had, by an oral agreement, bought out Chiodo’s interest in the property. Rilac also contended that the deed was not binding on it, but said that if it was binding, it operated as a buyout, and extinguishment, of Chiodo’s interest. In response, Chiodo denied the existence of the oral agreement and contended that Rilac was bound by the deed, which it said required Rilac to continue to hold a 50 per cent interest in the property on trust for it.[9]
[8]Reasons, [2], [22].
[9]Reasons, [3], [16(a)].
Rilac’s contention that the deed was not binding upon it was based on a claim that the deed had not been executed in accordance with s 127 of the Corporations Act 2001 (Cth) because it had only been signed by Mr Alessi and not by his wife, who was the other director of the company. The judge rejected this argument and found that the deed was binding on Rilac as Mr Alessi had implied authority to enter into the deed on its behalf.[10] Rilac does not challenge this part of the judge’s decision.
[10]Reasons, [12].
The judge then addressed Rilac’s claim that the deed extinguished any interest Chiodo may have had in the property. His Honour found that the deed did extinguish Chiodo’s beneficial interest in the property, concluding that the trust relationship had come to an end from 10 December 2012 and that thereafter Rilac was the sole owner of the property, but subject to the contractual obligations contained in the deed.[11] Rilac also does not challenge this aspect of the Reasons.
[11]Reasons, [30].
The judge next considered whether Rilac held on trust for Chiodo a 50 per cent share of rental income received after 30 October 2012. His Honour stated that, as a result of his finding that the deed extinguished Chiodo’s beneficial interest in the property, Chiodo’s claim for a declaration that Rilac held on trust for it 50 per cent of all rents and profits received since October 2012 must also fail.[12]
[12]Reasons, [31].
The judge then considered Chiodo’s alternative claim that, by operation of cl 8 of the deed, it was entitled to 10 per cent of the rental income received by Rilac from 30 October 2012 to date.[13] He noted Chiodo’s acceptance that it was statute-barred from claiming for the period prior to six years before the commencement of the proceeding on 20 August 2021; as a consequence, any entitlement to 10 per cent of the rental income was for the period from 21 August 2015 to date.[14]
[13]Chiodo did not seek a declaration to this effect in its pleadings. However, Rilac did not contend that the alternative claim was not before the Court, and the judge proceeded on the basis that it was: Reasons, [33].
[14]Reasons, [32].
The judge referred to Rilac’s contention that, when read with cl 7(ii), the obligation in cl 8 to pay 10 per cent of the rent was limited to the three year period referred to in cl 7(ii). He observed that the deed anticipated that the property would be sold within three years and that Rilac would pay 10 per cent of the rental income until it effected a sale within that period. He stated that it was ‘not clear beyond argument’ whether the obligation on Rilac to pay 10 per cent of the rental income continued beyond the three years if it did not sell the property in that time, noting that the deed did not ‘in clear terms, deal with that eventuality’.[15] His Honour’s reasoning and conclusion on this particular issue of construction, which is the subject of Rilac’s proposed ground 5, was as follows:
The contention that there would be no ongoing obligation on Rilac Pty Ltd comes from the wording of cl 8 where the obligation to pay is said (twice) to continue ‘until the property is sold … pursuant to Clause 7(ii)’. In my view, however, reasonable business people would not interpret those words as limiting the obligation to pay 10% of the rental to a maximum period of three years. The wording of cl 8 does not create an obligation that is limited by a time period, but rather creates an obligation that is limited by an event, that is, a sale of the property by Rilac Pty Ltd pursuant to cl 7(ii). That limiting event did not come to pass. In my view, the better interpretation is that the obligation to pay 10% of the rental income continues because Rilac Pty Ltd did not sell the property in accordance with cl 7(ii) and thus did not bring the obligation to an end. That interpretation is more in keeping with the language used, and also avoids a situation where Rilac Pty Ltd would potentially be in a better position were it to breach the contractual obligation on it to sell the property than it would be in if it complied with its contractual obligations.[16]
[15]Reasons, [34]–[37].
[16]Reasons, [38].
The judge then considered whether Rilac was liable for the fact that it had failed to sell the property. His Honour found that under the deed Rilac was obliged to sell the property within three years of the ‘settlement date’, defined by the deed to be 1 July 2012, with the consequence that it was required to sell the property by 1 July 2015.[17] However, the judge accepted Rilac’s submission that its failure to sell the property was not a ‘continuing breach’ of the obligation, the failure being, in the language of Dixon J in Larking v Great Western (Nepean) Gravel Ltd (in liq), ‘nothing but a failure to remedy [a] past breach and not the commission of any further breach’.[18]
[17]Reasons, [41].
[18](1940) 64 CLR 221, 236; [1940] HCA 37 (‘Larking’).

It followed that any claim by Chiodo for breach of contract in respect of Rilac’s failure to sell the property accrued on 1 July 2015. As s 5 of the Limitations Act required a claim founded on contract to be brought within six years from the date on which the cause of action accrued, Chiodo was statute-barred from claiming damages for Rilac’s breach of its contractual obligation to sell the property because the proceeding was not commenced until 20 August 2021.[19] No challenge is brought to this aspect of the Reasons.
[19]Reasons, [41].
The judge then considered whether Chiodo was now able to sell the property, noting that its prayer for relief included a claim for ‘an order that the property be sold in accordance with the terms of the deed of trust’.[20] His Honour found that, ‘although expressed in somewhat awkward language’, cl 7(iv) of the deed gave Chiodo the right to sell the property and necessarily required Rilac to do what was reasonably required to permit Chiodo to do so.[21] He stated that Rilac did not develop a submission against the proposition that cl 7(iv) was designed to empower Chiodo to sell the property if Rilac did not do so within the three-year period, and had instead relied on the ground that it was now too late for Chiodo to seek to enforce its right to do so.[22] His Honour referred to ss 5(1)(a) and (8) of the Limitations Act, which provide as follows:
(1)The following actions shall not be brought after the expiration of six years from the date on which the cause of action accrued—
(a)… actions founded on simple contract …
...
(8)This section shall not apply to any claim for specific performance of a contract or for an injunction or for other equitable relief, except in so far as any provision thereof may be applied by the Court by analogy in like manner as the enactment corresponding to that provision was applied before the repeal of that enactment by the Limitation of Actions Act 1955.
[20]Reasons, [42].
[21]Reasons, [43].
[22]Reasons, [44].
The judge’s reasons for concluding that Chiodo was not precluded from maintaining a claim directed at establishing its legal right to sell the property based on the operation of cl 7(iv) of the deed were expressed initially as follows:
Chiodo Investments Pty Ltd is not seeking damages for breach of contract. It is seeking an order that the property ‘be sold in accordance with the terms of the deed of trust’. If Rilac Pty Ltd were to accept (subject to the limitations arguments) that cl 7(iv) of the deed had the effect of empowering Chiodo Investments Pty Ltd to sell the property and for that purpose requiring Rilac Pty Ltd as the registered proprietor to co-operate with such a sale, then Chiodo Investments Pty Ltd would be seeking an order akin to an order for specific performance. If Rilac Pty Ltd were to dispute the meaning of cl 7(iv), then Chiodo Investments Pty Ltd would be seeking also an order akin to a declaration as to its meaning. Either way, Chiodo Investments Pty Ltd is bringing a claim for equitable relief that engages s 5(8) of the Limitation of Actions Act 1958, and so is only barred if it can be shown that the Court should impose a limitation period by analogy.[23]
[23]Reasons, [48].
His Honour concluded that the limitation period of six years did not apply by analogy for the purposes of s 5(8) of the Limitations Act:[24]
A claim for specific performance of the obligation contained in cl 7(iv) of the deed to do what is required to effect the sale of the property, or for a declaration that Chiodo Investments Pty Ltd has a contractual entitlement under cl 7(iv) of the deed to sell the property, is not analogous to the claim Chiodo Investments Pty Ltd might have been able to bring against Rilac Pty Ltd for damages for breach of cl 7(ii) of the deed, or any other like common law claim. Chiodo Investments Pty Ltd is here attempting to enforce the contract, not to seek damages for its breach. Not only are the claims conceptually different, but Chiodo Investments Pty Ltd is able to seek to establish a right under cl 7(iv) of the deed, standing alone, simply because the property was not sold within three years, without having additionally to plead or to prove that Rilac Pty Ltd was in breach of its obligations under cl 7(ii) of the deed. As Ball J observed in Alec Finlayson Pty Ltd v Royal Freemason Benevolent Institution of New South Wales Nominees Ltd:
In the case of a claim for specific performance of a simple contract, the facts giving rise to the claim for specific performance are not always the same as the facts giving rise to a claim for damages. … Plainly, an action for damages is not comparable to an order for specific performance.[25]
[24]Reasons, [49]–[50].
[25][2013] NSWSC 1168, [35]. See also [48].
However, his Honour also went on to observe that it was wrong to say that Chiodo’s cause of action accrued on 1 July 2015, on the basis that it first obtained the right to sell the property at that time.[26] He continued:
The terms of the deed gave Chiodo Investments Pty Ltd a contractual right to sell the property that was unlimited in duration; there was nothing in the contract that would have precluded Chiodo Investments Pty Ltd from exercising its right under the contract at a time of its choosing. Until such time as a dispute arose between Chiodo Investments Pty Ltd and Rilac Pty Ltd as to the meaning of the deed, there was no dispute that could form the basis of a legal proceeding, and in that sense no relevant ‘cause of action’. Where a contract creates a status relationship between two people, such as appointing one the agent for the other, the limitations legislation does not mean that that relationship only exists for six years or that a proceeding must be brought within six years of that appointment to validate it in some way. At the most, if a dispute arises as to the validity of the appointment, a party might be required to commence proceedings within six years of that dispute’s arising. But that is not this case. As noted above, this proceeding was commenced within six years of the time at which Chiodo Investments Pty Ltd asserted, and Rilac Pty Ltd denied, Chiodo Investments Pty Ltd’s right to sell the property.[27]
[26]Reasons, [51].
[27]Reasons, [51].

Proposed grounds of appeal

Rilac advanced five proposed grounds of appeal:
1.The trial judge erred in finding that clause 7(iv) of the deed gave the plaintiff a contractual right to sell the property at 66 River Street, South Yarra (the property) that was unlimited in duration.
2.The trial judge should not have had regard to s 5(8) of the Limitations of Actions Act 1958 in circumstances where:
(a)it was not raised in the pleadings or conduct of the case;
(b)the plaintiff did not make a claim for specific performance or a declaration regarding the construction of the Declaration of Trust dated 10 December 2012 (the deed).
3.Alternatively, if the trial judge was correct to consider s 5(8), the trial judge should have found that, in the circumstances of the case, a limitation period of six years would have applied by analogy to a claim for specific performance or a declaration.
4.The trial judge should have found that the cause of action founded on the deed accrued on 1 July 2015 and was barred pursuant to s 5(1)(a) of the Act.
5.The trial judge erred in finding that clause 8 of the deed entitled the plaintiff to 10% of rent received in respect of the property beyond the three year period stated in clause 7(ii).
Before turning in detail to Rilac’s submissions made in support of these proposed grounds, it is convenient to note that, common to the individual errors contended for under cover of Rilac’s proposed grounds 1 to 4, was the basal contention that the judge had erred by failing to hold that Chiodo’s cause of action was statute-barred due to it having been commenced outside the applicable time limit of six years. As we have set out above, the judge determined, at least initially, that if, as a matter of timing, Chiodo’s action was brought outside the six-year period, then the nature of the relief sought by Chiodo meant that s 5(8) of the Limitations Act operated to disapply this limitation.[28] But the judge did not cease his analysis at this point. To the contrary, the judge went on to hold[29] that, as a matter of chronological fact, Chiodo’s action had been brought within time, that is, without any need to appeal to s 5(8).[30]
[28]See the passages from the Reasons extracted at [29] and [30] above.
[29]As his Honour put it: ‘[a]dditionally, but relatedly’: see Reasons, [51].
[30]See the passage from the Reasons extracted at [31] above.
Rilac’s proposed grounds 2 and 3 impugn the judge’s utilisation or application of s 5(8). However, as will be seen below, in dealing with Rilac’s proposed grounds 1 and 4, we would uphold the judge’s conclusion that Chiodo’s cause of action was brought within time absent any need to revert to s 5(8). This being the case, it will be unnecessary for us to consider Rilac’s proposed grounds 2 and 3.

Ground 1

Proposed ground 1 raises the proper construction of cl 7(iv) of the deed, which provides:
RILAC PTY LTD agrees that if it does not sell the property t [sic] within 3 years, then Sam has the rights to be included and involved in the sale of the property and RILAC’s execution of this Deed is deemed consent and authority to Sam to arrange a sale.

Rilac’s submissions

Rilac submitted that cl 7(iv) did not expressly, or by any process of construction, give Chiodo the right to sell the property. Rather, properly construed, the clause gave Chiodo a right to remedy any breach by Rilac of cl 7(ii) in failing to sell the property within three years as required by that clause. It did this by permitting Chiodo ‘to be included and involved in’ and ‘to arrange’ a sale of the property. The clause did not, however, authorise Chiodo itself to sell the property. To ‘arrange a sale’ was not synonymous with ‘sell’; instead, it included matters such as the engagement of real estate agents and attending to matters such as advertising and decisions about the method by which the property would be sold. Chiodo could enforce its rights by seeking an order for specific performance to, in substance, require Rilac to allow Chiodo to arrange a sale by taking steps of the type described above.
Rilac submitted that cl 7(iv) was not independent of cl 7(ii) because it was only engaged if Rilac breached cl 7(ii) by not selling the property within three years. The proposition that cl 7(iv) was independent to cl 7(ii) and provided for a separate and distinct promise was said to be contrary to the words in cl 7(iv) — ‘if [Rilac] does not sell the property … within 3 years’ — which could only be understood as a reference back to cl 7(ii).
Furthermore, Rilac submitted that cl 7(iv) does not provide for what is to occur in relation to the sale of the property and, in particular, what is to occur in relation to any excess above a sale price of $1.5 million; only cl 7(ii) provides for what is to occur in that event, which is consistent with cl 7(iv) not having an independent operation. The primacy of cl 7(ii) was also highlighted by cl 8, which was expressed by reference to when the property was ‘sold pursuant to Clause 7 (ii)’.
Rilac submitted that its approach to the construction of cls 7(ii) and (iv) was also consistent with the need to give effect to the terms of the deed as a whole which, given the generic nature of its other provisions, in substance meant cls 6 to 8. The overall arrangements provided by those terms were for an initial payment by Rilac to Chiodo to bring the trust relationship to an end, but with an obligation on Rilac to sell the property within three years and then, depending upon the sale price, the making of a further payment to Chiodo. Until the property was sold within that three-year period, 10 per cent of the rent would be paid to Chiodo. If the property was not sold within the three-year period, Chiodo had the right to arrange a sale and to be involved in the sale. In the overall scheme of the deed, cl 7(ii) contained a single promise by Rilac, with cl 7(iv) being ancillary to that promise.
Rilac submitted that any rights conferred by cl 7(iv) arose on 1 July 2015 as a result of the breach of cl 7(ii) and, at most, allowed Chiodo to take steps to remedy that breach. As the judge had correctly found, the failure to sell the property within the three-year period was a ‘once and for all’ breach and any continuing failure to sell the property was only a failure to remedy the past breach. Rilac relied on the statement by Dixon J in Larking to which the judge had referred:
If a covenantor undertakes that he will do a definite act and omits to do it within the time allowed for the purpose, he has broken his covenant finally and his continued failure to do the act is nothing but a failure to remedy his past breach and not the commission of any further breach of his covenant. His duty is not considered as persisting and, so to speak, being for ever renewed until he actually does that which he promised.[31]
[31](1940) 64 CLR 221, 236; [1940] HCA 37. See Reasons, [41].
Rilac also relied upon the consideration of Larking by this Court in Fred IT Group Pty Ltd v Corum Systems Pty Ltd.[32] This Court there concluded that:
… an obligation that has been characterised as ‘once and for all’ … can only be breached once. Upon breach of such an obligation, the rights and obligations of the parties are crystallised and set for all time. The trial judge’s finding that Corum’s giving of notice in 2019 constituted a second breach of the obligation imposed by cl 15.5 of the SSA for which a measure of damages was recoverable (which measure would have differed from that for the breach in 2013) was inconsistent with Larking. And it negated the effect of the statute of limitations, which Dixon J appears to have contemplated would operate in respect of claims on ‘once and for all’ obligations.[33]
[32][2024] VSCA 176, [27]–[31] (Kennedy, Macaulay and Orr JJA) (‘Fred IT’).
[33][2024] VSCA 176, [32] (Kennedy, Macaulay and Orr JJA).
Rilac submitted that the effect of the construction of cls 7(ii) and (iv) adopted by the judge was to treat the latter provision as if it gave Chiodo an unlimited time in which to sell the property. This approach was inconsistent with the terms of the deed as a whole, which unambiguously made clear that Chiodo’s rights under cl 7(iv) arose on 1 July 2015, with the objective purpose of the deed being to bring to an end the relations between the parties in respect of the property.
Chiodo’s submissions
Chiodo drew attention to the judge’s observation that Rilac ‘did not develop a submission against the proposition that [cl 7(iv)] was designed to empower Chiodo Investments Pty Ltd to sell the property if Rilac Pty Ltd did not do so within the three-year period’.[34] Chiodo submitted that the critical language in cl 7(iv) was Rilac’s conferral of authority on Chiodo ‘to arrange a sale’ of the property. From the perspective of a reasonable businessperson, ‘authority to … arrange a sale’ was more than the opportunity to engage with Rilac about arrangements for a sale to be decided upon by Rilac. In the commercial context of the deed, the words could only be intended to mean that Chiodo had the right to have the property sold and could do all things necessary to that end, up to the signing of a contract of sale, an action which was only capable of being done by Rilac as registered proprietor. Save for that, Chiodo could take all of the usual steps involved in the sale of real property including, for example, engaging a real estate agent, determining a reserve price, making decisions in relation to marketing and deciding the manner of sale.
[34]Reasons, [44].
In this way, cl 7(iv) provided for a process whereby Chiodo could arrange for the sale of the property and Rilac would be bound to agree to and participate in the process decided upon independently by Chiodo, about which it had no such rights under cl 7(ii). Clause 7(iv) therefore fundamentally shifted the parties’ rights and obligations and went well beyond affording an opportunity for Chiodo to remedy a breach by Rilac in failing to sell the property within three years as provided by cl 7(ii). The commercial purpose served by cl 7(iv) was to effectively give Chiodo the authority to stand in the shoes of the registered proprietor and to have the property sold, in circumstances where Rilac had failed to do so under cl 7(ii). It was submitted that Rilac’s construction would deprive the ‘authority to … arrange a sale’ conferred on Chiodo by cl 7(iv) of any utility in the intended circumstances of its operation: where Rilac had not effected a sale under cl 7(ii).
Chiodo submitted that the operative provisions of the deed were not properly viewed as a single promise to be performed at a specific time. Chiodo adopted the judge’s analysis that the parties’ rights and obligations in cl 7(iv) were separate and distinct to those in cl 7(ii). In the absence of cl 7(ii), cl 7(iv) still conferred rights on Chiodo. Clause 7(iv) was not to be construed as relating only to a breach of cl 7(ii).
Chiodo submitted that this construction avoided cl 7(iv) being rendered superfluous, and gave effect to the apparent commercial purpose of the deed. Rilac’s submission was inconsistent with the presumption against surplusage: that, where possible, effect should be given to every word in a document, and no part should be treated as redundant. The principle had heightened significance in the context of the deed because, in substance it was comprised of only three bespoke clauses, the rest being in boilerplate form. The deed should be construed to give operative effect to each separate part of cl 7; on that approach the separate work of cl 7(iv) was to grant Chiodo the right to arrange for and implement the sale of the property if Rilac had not sold it within the three-year period.

Analysis

Proposed ground 1 raises the proper construction of the deed and, in particular, whether cl 7(iv) confers contractual rights and obligations (including, in essence, a power exercisable by Chiodo to enforce the sale of the property after a certain period) which are separate and distinct to those provided by cl 7(ii).
As noted above, although the judge considered that cl 7(iv) of the deed was ‘expressed in somewhat awkward language’, his Honour accepted Chiodo’s case concerning the meaning that ought be attributed to cl 7(iv) and concluded therefore that this clause gave Chiodo ‘the right to sell the property, and necessarily requires [Rilac] to do what is reasonably required to permit [Chiodo] to do so’.[35] The judge observed, significantly, that Rilac did not ‘develop a submission against’ this aspect of Chiodo’s case.[36]
[35]See [28] above.
[36]See Reasons, [44].
We do not consider that the judge erred in his construction of cl 7(iv). Our reasons are as follows.
The general principles which apply to the construction of commercial contracts are uncontroversial. They were summarised by French CJ, Nettle and Gordon JJ in Mount Bruce Mining Pty Ltd v Wright Prospecting Pty Ltd as follows:
Applicable legal principles in these appeals
The rights and liabilities of parties under a provision of a contract are determined objectively, by reference to its text, context (the entire text of the contract as well as any contract, document or statutory provision referred to in the text of the contract) and purpose.
In determining the meaning of the terms of a commercial contract, it is necessary to ask what a reasonable businessperson would have understood those terms to mean. That inquiry will require consideration of the language used by the parties in the contract, the circumstances addressed by the contract and the commercial purpose or objects to be secured by the contract.
Ordinarily, this process of construction is possible by reference to the contract alone. Indeed, if an expression in a contract is unambiguous or susceptible of only one meaning, evidence of surrounding circumstances (events, circumstances and things external to the contract) cannot be adduced to contradict its plain meaning.
However, sometimes, recourse to events, circumstances and things external to the contract is necessary. It may be necessary in identifying the commercial purpose or objects of the contract where that task is facilitated by an understanding ‘of the genesis of the transaction, the background, the context [and] the market in which the parties are operating’. It may be necessary in determining the proper construction where there is a constructional choice. The question whether events, circumstances and things external to the contract may be resorted to, in order to identify the existence of a constructional choice, does not arise in these appeals.
Each of the events, circumstances and things external to the contract to which recourse may be had is objective. What may be referred to are events, circumstances and things external to the contract which are known to the parties or which assist in identifying the purpose or object of the transaction, which may include its history, background and context and the market in which the parties were operating. What is inadmissible is evidence of the parties’ statements and actions reflecting their actual intentions and expectations.
Other principles are relevant in the construction of commercial contracts. Unless a contrary intention is indicated in the contract, a court is entitled to approach the task of giving a commercial contract an interpretation on the assumption ‘that the parties ... intended to produce a commercial result’. Put another way, a commercial contract should be construed so as to avoid it ‘making commercial nonsense or working commercial inconvenience’.[37]
[37](2015) 256 CLR 104, 116–17 [46]–[51]; [2015] HCA 37 (citations omitted).

It is apparent that the judge was aware of these principles of construction and applied them to the task of construing the deed.[38] It is apparent also — in line with the judge’s recognition that cl 7(iv) finds expression by means of language that is ‘awkward’ — that a degree of ambiguity may be thought to bedevil the terms of cl 7(iv); perhaps most prominently in the meaning to be attributed to the phrase ‘arrange a sale’.
[38]See Reasons, [17].
The deed reflects the arrangements by which the parties agreed to effect a change in the commercial relationship which they established for the purposes of developing the property. As the judge stated, the elements of this re-casting of the parties’ commercial relationship were clear: Rilac would pay Chiodo $289,525.44; Rilac would sell the property within three years, with Chiodo receiving half of any amount received in excess of a sale price of $1.5 million; and, in the meantime, Chiodo would receive 10 per cent of the rental income from the property.[39]
[39]Reasons, [15].
Clause 7 of the deed makes clear that the parties considered the sale of the property to be central to the orderly uncoupling of their commercial relationship. Self-evidently, Rilac’s promise to sell the property within three years is the subject matter of cl 7(ii) of the deed. In cl 7(iv), the parties directed themselves to the situation where that event did not come to pass. The opening words of cl 7(iv), ‘if [Rilac] does not sell the property … within 3 years’, make clear that it is only upon the expiration of three years, and the absence of the property being sold by Rilac within that time, that cl 7(iv) operates. In this way cls 7(ii) and (iv) have different fields of operation. At a general level, this feature of cl 7 is more consistent with a construction of the clause in which sub-cls (ii) and (iv) are the source of separate and distinct contractual rights and obligations.
If Rilac does not sell the property within three years, pursuant to cl 7(iv) it ‘agrees’ that Chiodo ‘has the rights to be included and involved in the sale of the property’, with Rilac’s execution of the deed ‘deemed consent and authority to [Chiodo] to arrange a sale’. Although expressed in ‘awkward language’, as the judge observed, he was, with respect, correct to construe this clause as conferring upon Chiodo the right to sell the property by requiring Rilac to do what is reasonably required to permit Chiodo to do so.[40]
[40]Reasons, [43].
The fact that the clause does not, in terms, give Chiodo the right ‘to sell’ the property is unsurprising: Chiodo is not the registered proprietor of the property. With that fact in mind, the use of indirect language authorising Chiodo ‘to arrange a sale’ is more explicable. The clear and unqualified nature of Rilac’s authorisation for Chiodo to do this is conveyed by Rilac’s execution of the deed being its ‘deemed consent’ for that to occur.
The expression ‘to arrange a sale’ is to be construed by reference to what a reasonable businessperson would have intended it to mean having regard to the deed’s commercial purpose. In entering into the deed, the parties are presumed to have intended to produce a commercial result. Cognisant of those principles, a construction of cl 7(iv) which only obliged Rilac to permit Chiodo to be included and involved in the sale of the property, without giving Chiodo the right to sell the property by requiring Rilac to do what was reasonably required to permit Chiodo to do so, is artificial: it is not apparent how such a construction would confer any meaningful commercial advantage on Chiodo, being the party to whose interests cl 7(iv) is evidently directed. The commercial benefit to Chiodo in only being entitled to seek that Rilac remedy its breach by, for example, applying for specific performance permitting Chiodo to do things such as engaging real estate agents and deciding how the property was to be sold, but short of requiring a sale to occur, appears hollow. It is a construction which reasonable businesspeople are unlikely to have intended having regard to the nature of the parties’ commercial relationship.
A construction of cl 7(iv) that only affords Chiodo a right to remedy any breach by Rilac of cl 7(ii) in the limited way contended for is also discordant with the arrangements established by the deed as a whole and the circumstances it was intended to address, namely, the parties’ intention to alter their commercial relationship. The development of the property had been completed many years earlier. It had then been leased and Chiodo had accrued a debt to Rilac which the parties agreed needed to be addressed. They determined to deal with that debt by Rilac paying Chiodo an amount calculated on the basis that the property was worth $1.5 million, and Rilac promising to sell the property within three years (over which time it would pay Chiodo 10 per cent of the rental income from the property until it was sold) and then pay Chiodo 50 per cent of the sale proceeds in excess of $1.5 million. It is in this manner and through these steps that the parties resolved to disengage from the commercial relationship they had forged for the purposes of the development of the property.
As for Rilac’s reliance on Larking and Fred IT, it is misguided. The passages Rilac referred to explain the consequences of breaching a ‘once and for all’ obligation, and that the proper characterisation of a continuing failure to perform such an obligation is a ‘failure to remedy [a] past breach’. However, the question is not what consequences flow from a breach of cls 7(ii) or (iv), nor what is the proper characterisation of a continuing failure to comply with those clauses. The question is what is the proper construction of cl 7(iv). Does it confer a right to sell? If so, for long how does that right subsist?[41] The passages referred to are not directed towards such inquiries. At best, if Rilac’s construction is correct, and cl 7(iv) provides a remedy for a breach of cl 7(ii) in the way Rilac contends, then the scheme of cls 7(ii) and (iv) would be consistent with Dixon J’s words in Larking. But it by no means follows that Rilac’s construction of cl 7(iv) is correct. Indeed, for the reasons we have expressed, we reject Rilac’s construction and prefer Chiodo’s construction.
[41]This latter inquiry we will address below under proposed ground 4.
Accordingly, proposed ground 1 must fail.

Ground 4

Having determined the disputed question of construction concerning cl 7(iv) of the deed, it is convenient next to consider proposed ground 4. Proposed ground 4 is that:
The trial judge should have found that the cause of action founded on the deed accrued on 1 July 2015 and was barred pursuant to s 5(1)(a) of the [Limitations Act].

Submissions

Consistent with its submissions in relation to the proper construction of the deed under proposed ground 1, Rilac submitted that the correct analysis was that a cause of action for breach of contract accrued when cl 7(ii) was breached, on 1 July 2015. Chiodo’s right to remedy Rilac’s failure to sell the property under cl 7(iv) likewise accrued upon Rilac’s failure to sell the property by 1 July 2015 and was not dependent upon any refusal by Rilac to comply with a request made by Chiodo under the provision. The later disagreements between the parties after 1 July 2015 were properly viewed as disputes about whether certain steps could be taken under cl 7(iv); they did not operate to extend the time in which an action founded on breach of contract could be brought.
The proceeding, which was filed on 20 August 2021, was accordingly commenced about seven weeks outside the limitation period of six years prescribed by s 5(1)(a) of the Limitations Act, which commenced on 1 July 2015.
Chiodo submitted that, although a cause of action for breach of contract arose when cl 7(ii) was breached on 1 July 2015, Rilac’s submissions failed to address the separate and distinct rights provided for by cl 7(iv). Whether or not a breach of cl 7(ii) had been established was not relevant to whether Chiodo was entitled to seek an order enforcing its rights under cl 7(iv). The clauses stood apart and a breach of one did not limit a party’s right to seek orders in respect of the other. Rilac’s submissions proceeded from the false premise that cl 7(iv) did not create separate rights and obligations to those provided by cl 7(ii).
On its construction of the separate rights and entitlements established by cls 7(ii) and (iv), Chiodo submitted that the final element in the cause of action for breach of contract in respect of cl 7(iv) accrued on 21 April 2020 when, having received Chiodo’s demand that the property be sold, Rilac informed Chiodo that it had no intention of selling the property.[42] This was the first occasion when Rilac impeded Chiodo’s attempt to exercise its asserted rights under cl 7(iv) and was pleaded as a breach of the deed.
[42]See [10]–[11] above.

Analysis

To the extent that Rilac’s submission is premised on the contention that cls 7(ii) and (iv) create a single promise — such that they cannot be breached separately, at different times — we reject that premise for the reasons we have given under proposed ground 1. Indeed, as we have observed,[43] the two sub-clauses have different fields of operation. Clause 7(ii) operates during the three years following the settlement date. Clause 7(iv) operates thereafter.
[43]See [53] above.
In relation to Chiodo’s right to sell the property under cl 7(iv) by requiring Rilac to do what was reasonably required to permit Chiodo to do so, the correspondence from Rilac’s solicitors referred to at [11] above establishes that Chiodo’s cause of action for breach of cl 7(iv) accrued on 21 April 2020.[44] This was the first occasion when Rilac denied or rejected Chiodo’s rights under that clause. It follows that, if s 5(1)(a) of the Limitations Act applied, the limitation period of six years had not expired when the proceeding was commenced some 16 months later on 20 August 2021. As indicated above,[45] in this conclusion, we respectfully agree with the judge’s analysis set out in [51] of the Reasons.
[44]As this Court said in Cappelleri v Cappelleri [2024] VSCA 173, a cause of action accrues on the occurrence of the last fact necessary to establish an entitlement to relief: at [76] (Emerton P, McLeish and Macaulay JJA).
[45]See [33] and [34] above.
It follows that proposed ground 4 must fail as it asserts that the cause of action accrued on 1 July 2015.

Grounds 2 and 3

Detailed submissions were made in respect of these proposed grounds. Those submissions were directed to issues such as: whether the judge was correct to have had regard to s 5(8) of the Limitations Act in light of the parties’ pleadings, as well as the submissions made by the parties before the judge; whether Chiodo had in fact brought a claim for equitable relief within the meaning of s 5(8) of the Limitations Act; and whether — given Chiodo was bringing a cause of action founded on contract — any claim by Chiodo for declaratory relief must be considered to have accrued at the time of a purported breach committed by Rilac on 1 July 2015.[46]
[46]In the course of these submissions reference was made to reasoning in authorities such as Cappelleri and Waddington v Victoria [2018] VSC 746.
As foreshadowed above,[47] in light of our rejection of proposed grounds 1 and 4, and our conclusion that the judge was correct to hold that Chiodo’s proceeding was commenced within the six-year period of limitation prescribed by s 5(1)(a) of the Limitations Act, it is unnecessary for us to consider the potential operation of s 5(8) of the Limitations Act and, therefore, the matters raised by proposed grounds 2 and 3. We therefore turn to proposed ground 5.
[47]See [33] and [34] above.

Ground 5

Proposed ground 5 is that:
The trial judge erred in finding that clause 8 of the deed entitled the plaintiff to 10% of rent received in respect of the property beyond the three year period stated in clause 7(ii).

Submissions

By proposed ground 5, Rilac challenged the judge’s construction of cl 8 of the deed. Rilac submitted that the judge fell into error by failing to give effect to the temporal limitation in the clause regarding payment until the property is sold ‘pursuant to cl 7(ii)’. It was submitted that cl 8 contemplated a sale within the stipulated three year period, after which time Chiodo would have no further entitlement to rent. The construction adopted by the judge gave no meaning to the phrase ‘pursuant to cl 7(ii)’ appearing in cl 8, which was rendered superfluous.
Chiodo sought to defend the judge’s construction of cl 8. Chiodo submitted that it demonstrated that he had approached the task of construction from a commercial and purposive approach and correctly addressed himself as to how a reasonable businessperson would have interpreted the clause.

Analysis

To repeat, cl 8 of the deed states relevantly:
RILAC PTY LTD agrees to pay to Sam upon receipt, 10% of all rental from the settlement date until the property is sold by RILAC PTY LTD pursuant to Clause 7(ii) herein in consideration of his interest in the Property until it is sold pursuant to clause 7(ii). This is calculated as follows:
…
We reject Rilac’s complaint made under cover of this proposed ground. As the judge stated in the Reasons, cl 8 of the deed, in its terms, does not create an obligation that is limited by a time period, but instead creates an obligation to pay 10 per cent of the rental that is limited by the occurrence of an event: the sale of the property pursuant to cl 7(ii). Thus, as the primary judge observed, a construction of cl 8 which required Rilac to continue to pay 10 per cent of the rent unconstrained by any time limit ‘is more in keeping with the language used’ in cl 7(ii) of the deed.[48]
[48]See the extract from the Reasons at [25] above.
Nevertheless, and notwithstanding any ambiguity that may be thought to lurk within the terms of cl 7(ii),[49] the judge was obliged in construing cl 8 of the deed (and cl 7(iv)) to ask what a reasonable businessperson would have understood the terms of that clause to mean (having regard to the commercial purpose of the deed and the need to avoid the deed ‘making commercial nonsense or working commercial inconvenience’).[50]
[49]The judge was prepared to allow that it was ‘not clear beyond argument’ that Rilac was obliged to pay 10 per cent of the rental income beyond the three years if it did not sell the property in that time: see [25] above.
[50]See the extract from Mount Bruce Mining Pty Ltd v Wright Prospecting Pty Ltd in [50] above.
In this respect it is apparent that the judge adopted a construction of cl 8 which is consistent with the centrality of the obligation on Rilac to sell the property pursuant to cl 7(ii).[51] Moreover, the construction adopted by the judge ‘avoids a situation where Rilac Pty Ltd would potentially be in a better position were it to breach the contractual obligation on it to sell the property than it would be in if it complied with its contractual obligations’.[52] The ‘situation’ avoided by the judge’s construction seems a commercially unacceptable one from Chiodo’s perspective; it is one where Rilac would appear to enjoy an undeserved windfall at Chiodo’s expense. A construction giving rise to such a ‘situation’ may be thought unlikely to have been adopted by reasonable businesspeople, especially if, as is the case here, a rival interpretation redolent of greater commercial sense was open.
[51]As to the commercial purpose of the deed see the reasoning at [53]–[58] above.
[52]See the extract from the Reasons at [25] above.
The judge was correct to construe cl 8 in the manner that he did. It follows therefore that proposed ground 5 must fail.

Conclusion

None of the applicant’s proposed grounds of appeal possess merit. Thus, for the foregoing reasons, we would refuse the applicant leave to appeal. We will hear the parties on the question of costs.
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[2025] VSCA 27

7 March 2025