Scanlan v 2-4 McCabe Pty Ltd
[2023] WASCA 135
JURISDICTION : SUPREME COURT OF WESTERN AUSTRALIA
TITLE OF COURT : THE COURT OF APPEAL (WA)
CITATION: SCANLAN -v- 2-4 MCCABE PTY LTD [2023] WASCA 135
CORAM: BEECH JA
HALL JA
LUNDBERG J
HEARD: 8 AUGUST 2023
DELIVERED : 13 SEPTEMBER 2023
FILE NO/S: CACV 2 of 2023
BETWEEN: PAUL ANTHONY SCANLAN
Appellant
AND
2-4 MCCABE PTY LTD
Respondent
ON APPEAL FROM:
Jurisdiction : SUPREME COURT OF WESTERN AUSTRALIA
Coram: MASTER SANDERSON
File Number : CIV 1877 of 2022
Catchwords:
Practice and procedure - Appeal against refusal of pre-action discovery application - Contract to purchase a lot on a survey-strata scheme - Contract terminated by respondent seller - Whether appellant buyer may have a cause of action - Whether on a proper construction the termination power was arguably exercised in an ineffective manner - Whether termination power arguably subject to implied limits of reasonableness and good faith - Whether in the interests of justice to allow appellant to raise fresh construction argument on appeal - Whether appellant has been able to obtain sufficient information - Scope of discovery which should be ordered - Turns on own facts
Legislation:
Rules of the Supreme Court 1971 (WA), O 26A r 4
Supreme Court Act 1935 (WA), s 60(1)(f)
Result:
Leave to appeal granted
Appeal allowed
Category: B
Representation:
Counsel:
| Appellant | : | Ms R R Joseph |
| Respondent | : | Mr T Darbyshire and Ms G Lindsay |
Solicitors:
| Appellant | : | Siera Legal Pty Ltd |
| Respondent | : | McWilliams Davis Lawyers |
Case(s) referred to in decision(s):
Black Box Control Pty Ltd v Terravision Pty Ltd [2016] WASCA 219
BP Refinery (Westernport) Pty Ltd v Shire of Hastings (1977) 180 CLR 266
Brimstone Resources Ltd v Empire Resources Ltd [2018] WASCA 107
Bundanoon Sandstone Pty Ltd v Cenric Group Pty Ltd [2019] NSWCA 87
Burger King Corporation v Hungry Jack's Pty Ltd [2001] NSWCA 187; (2001) 69 NSWLR 558
BWS v ARV [No 2] [2021] WASCA 62
Central Exchange Ltd v Anaconda Nickel Ltd [2002] WASCA 94; (2002) 26 WAR 33
Codelfa Construction Pty Ltd v State Rail Authority of NSW (1982) 149 CLR 337
Electricity Generation Corp v Woodside Energy Ltd [2014] HCA 7; (2014) 251 CLR 640
Hancock Prospecting Pty Ltd v DFD Rhodes Pty Ltd [No 2] [2023] WASCA 108
Kelbush Pty Ltd v Australia and New Zealand Banking Group Ltd [2016] WASCA 14; (2016) 49 WAR 374
Mineralogy Pty Ltd v Sino Iron Pty Ltd [No 6] [2015] FCA 825
Mount Bruce Mining Pty Ltd v Wright Prospecting Pty Ltd [2015] HCA 37; (2015) 256 CLR 104
North West Pilots Pty Ltd v Daniel [2023] WASCA 122
NRW Contracting Pty Ltd v Cliffs Asia Pacific Iron Ore Pty Ltd [2020] WASCA 107
Renard Constructions (ME) Pty Ltd v Minister for Public Works (1992) 26 NSWLR 234
Revill v John Holland Group Pty Ltd [2022] FCAFC 178; (2022) 295 FCR 269
Rexha v Curtin University of Technology [2002] WASC 152
Roe v The State of Western Australia [2013] WASC 130
SMEC Australia Pty Ltd v Valentine Falls Estate Pty Ltd [2011] WASCA 138
Sovereign Grange Pty Ltd v AV Trust Services Pty Ltd [No 2] [2017] WASCA 142
The Hancock Family Memorial Foundation Ltd v Fieldhouse [No 2] [2008] WASC 147
The NSW Solicitors Mutual Indemnity Fund v The Hancock Family Memorial Foundation Ltd [No 2] [2009] WASCA 146
University of Wollongong v Metwally [No 2] [1985] HCA 28; (1985) 59 ALJR 481
Waller v Waller [2009] WASCA 61
Water Board v Moustakas [1988] HCA 12; (1988) 180 CLR 491
Westgem Investments Pty Ltd v Commonwealth Bank of Australia Ltd [No 6] [2020] WASC 302
Wilson v Metaxas [1989] WAR 285
Zerjavic v Chevron Australia Pty Ltd [2020] WASCA 40
Table of Contents
Overview
The application
Primary facts
The contract
The course of events
Documents sought by the appellant
The arguments before the master and the master's decision
Principles applicable to O 26A r 4 RSC
Grounds of appeal
Disposition - ground 1(a)(i)
Disposition - grounds 1(a)(ii) and 1(a)(iii)
Disposition - ground 1(b)
Whether the appellant may have a cause of action?
Whether the appellant has not been able to obtain sufficient information?
Scope of the discovery which should be ordered
Leave to appeal
Conclusion and orders
Attachment A
JUDGMENT OF THE COURT:
Overview
The appellant purchaser seeks leave to appeal against a decision of the master dismissing the appellant's application for pre‑action discovery against the respondent developer (Application), brought pursuant to O 26A r 4(1) of the Rules of the Supreme Court 1971 (WA) (RSC).[1]
[1] Originating summons dated 23 August 2022; BAB 7 - 9.
The appellant entered into a contract with the respondent, which is a special purpose vehicle developer, to purchase a lot on a survey‑strata scheme in North Fremantle. The contract was executed on 9 March 2021 (Contract).[2] Pursuant to that Contract, the respondent was obliged, subject to certain terms, to construct a townhouse for the appellant on that lot. The lot formed part of a larger development, consisting of 11 lots in total. The project was referred to by the parties as the Cornerstone Development and we will use that term in these reasons.
[2] Affidavit of Michael Graeme Hood sworn 26 October 2022 and Attachment MGH1, See the further comments at footnote 5 below.
Some 16 months after execution, the respondent purported to terminate the Contract, relying on express termination powers within the instrument, namely cl 2.1(a), cl 2.1(b) and cl 2.2.[3] The respondent relied primarily on cl 2.1(a) of the Contract which permitted it to terminate the Contract 'if [the respondent] in the [respondent's] absolute discretion considers that … there are insufficient sales of the proposed strata lots during the period up to' the date which is three years after execution of the Contract.
[3] All references to clauses in these reasons are to clauses of the Contract.
By the Application, the appellant indicated he wished to commence proceedings against the respondent for breach of contract, but first required documents from the respondent in order to make that decision.
The arguments on the Application before the master, as on appeal, focused on the proper construction of the contractual termination powers. The master was not satisfied the appellant may have a cause of action against the respondent, as required by O 26A r 4(1) RSC and dismissed the Application accordingly.
In our respectful view, the master erred in dismissing the appellant's contention that the termination power was arguably subject to implied limitations of reasonableness and good faith. The master ought to have found that the appellant may have a cause of action in this regard, on an arguable construction of the Contract and given the available evidence before the court.
Before this court, counsel for the appellant, who was not counsel at the hearing of the Application before the master, also articulated a new argument as to the construction of the Contract in order to sustain the existence of a possible cause of action. In essence, the appellant contends that, on a proper construction of the Contract, the respondent could only exercise the power of termination in cl 2.1(a) if it in fact considered - that is, formed an opinion - that there were insufficient sales of proposed strata lots. In all the circumstances, it is in the interests of justice that the appellant be permitted to raise the new argument on appeal. In our view, this construction is also arguable and provides a further foundation to conclude that the appellant may have a cause of action.
Further, we consider the court should exercise the discretion to grant discovery orders in favour of the appellant. The appropriate discovery orders are set out at [130] below.
For the reasons that follow, leave to appeal should be granted and the appeal should be allowed.
The application
The Application was heard on 29 November 2022. The evidence adduced on the Application was entirely by way of affidavit, with no cross‑examination. The scope of the discovery requested by the appellant is detailed at [38] below.
In support of the Application, the appellant relied on two affidavits, sworn by him on 23 August 2022 and 14 November 2022.[4] It is only necessary to refer to the first (the Scanlan Affidavit).[5]
[4] The second affidavit largely dealt with the relationship between certain representatives of the respondent and need not be detailed.
[5] Not all of the affidavit material which was before the master at first instance and which was relevant to the appeal was incorporated into the appeal books. For example, an executed copy of the Contract was before the master at first instance, but only a draft unexecuted copy of the Contract was included in the appeal books. The executed copy of the Contract is Attachment MGH1 to Hood Affidavit. Neither party objected to this court accessing documents on the court file which had not been included in the appeal books (appeal ts 17).
In opposition, the respondent relied upon the affidavit of Michael Graeme Hood sworn 26 October 2022 (Hood Affidavit) and the affidavit of Peter Maxwell Adams also sworn on 26 October 2022 (Adams Affidavit). We will explain below the role played by both Mr Hood and Mr Adams, as well as the role played by an additional representative of the respondent, Mr Harry Doyle.
Primary facts
The contract
Pursuant to the terms of the Contract, the appellant contracted to purchase one of the lots on a survey‑strata scheme (identified as Lot 11). The scheme formed part of the larger Cornerstone Development, which consisted of 11 proposed strata lots, with 10 lots being of the same size (Lots 2 ‑ 11) and Lot 1 being a 'super lot', much larger than the others. The Contract obliged the respondent to construct a townhouse for the appellant on the lot. The purchase price stipulated in the Contract was $1,469,000.[6]
[6] GAB 137.
In June 2022, the respondent purported to terminate the Contract and expressly indicated it was doing so pursuant to cl 2.1 of the Contract, which contains termination powers exercisable by the respondent.[7] Clause 2 provides three circumstances in which the respondent was permitted to give written notice of termination of the Contract to the appellant, as described in cl 2.1(a), cl 2.1(b) and cl 2.2. As will be explained, each of these provisions has been expressly relied upon by the respondent to authorise the termination of the Contract.
[7] GAB 125.
The terms of cl 2 are set out in full below:
2.CONDITIONS PRECEDENT
2.1Pre‑sales
The Seller may terminate this Contract by giving a written notice to the Buyer on or before the Withdrawal Date if the Seller in the Seller's absolute discretion considers that:
(a) there are insufficient sales of the proposed strata lots during the period up to the Withdrawal Date; or
(b) there is insufficient projection for the sale of the proposed strata lots.
2.2Registration of the Scheme Plan
If, at any time, the Seller forms the opinion that the Scheme Plan will not be registered by the Withdrawal Date (whether due to difficulties in obtaining any necessary approval to subdivide, complete, occupy or use the Dwelling in the manner intended by the Seller or otherwise), the Seller may terminate this Contract by giving a written notice to the Buyer of the Seller's view on or before the Withdrawal Date but prior to Settlement, and thereupon the condition in clause 2.2 shall be deemed not to have been satisfied.
2.3Notice of Termination
If the Seller gives the Buyer a written notice under clause 2.1 or 2.2, the Seller must repay the Deposit to the Buyer together with all accrued interest and all other money (if any) paid by the Buyer under this Contract without deduction except for any duty and taxes payable on interest accrued and, upon repayment, this Contract shall be at an end and cease to have effect and neither party shall have any claim against the other.
2.4 Conditions Precedent for the benefit of the Seller
The Conditions Precedent in this clause 2 are included for the benefit of the Seller and may be waived by the Seller at any time prior to the Settlement Date.
As is apparent from the above, the powers in each of cl 2.1 and cl 2.2 are exercisable up to the 'Withdrawal Date'. The term is defined to mean '5.00pm on the date which is 36 months after the Contract Date', which would in effect be 9 March 2024.[8] The Contract thus provided the respondent with a window of three years within which it was able to give written notice of termination to the appellant, subject of course to the requirements of cl 2.1(a), cl 2.1(b) or cl 2.2 being satisfied.
[8] GAB 43.
Several other clauses of the Contract were referred to on appeal as being relevant to the proper construction of the instrument, namely cl 3.1, cl 5 and cl 6 (in particular, cl 6.4). Although not referred to by either party in their submissions, cl 18 of the Contract is also relevant to the construction issues raised by the Application. Extracts of the relevant clauses are set out in Attachment A to these reasons.
The course of events
The factual circumstances outlined before the master were relatively narrow in compass: from March 2021 when the appellant executed the Contract, continuing until June 2022 when the respondent purported to terminate the Contract, and then further exchanges between the parties in July and August 2022.
The appellant dealt principally with two representatives of the respondent in connection with the Cornerstone Development, being Mr Hood and Mr Doyle. Mr Hood is a director of one of the selling agents engaged by the respondent, namely Australian Real Estate Agency Pty Ltd.[9] Mr Doyle is the development manager for Yolk Property Group, the property development company.
[9] The respondent also engaged White House Property Partners Pty Ltd as an additional selling agent for the Cornerstone Development: Adams Affidavit [11].
The appellant deposes that, at about the time he paid the required deposit on 29 March 2021,[10] he had a telephone discussion with Mr Hood. The appellant's evidence is to the effect that Mr Hood informed him that the Cornerstone Development was being withdrawn from the 'pre‑sale' market as a result of the closure of the State's borders due to the COVID-19 pandemic, with the intention of the development being put back on the market once the borders had reopened and property prices had increased.[11] In his affidavit, Mr Hood denied making these statements.[12]
[10] Scanlan Affidavit [16].
[11] Scanlan Affidavit [17].
[12] Hood Affidavit [10].
Some months later, in September 2021, the appellant deposes, he had a further telephone discussion with Mr Hood.[13] The substance of this call is disputed, save for one respect.[14] The appellant deposes that Mr Hood informed him the Cornerstone Development was then expected to complete at the end of 2022 (which is the aspect of the discussion Mr Hood accepts), and the respondent was waiting for the State borders to reopen, to relist the Cornerstone Development.
[13] Scanlan Affidavit [19] - [20].
[14] Hood Affidavit [16].
The respondent adduced evidence that the Cornerstone Development encountered some stress towards the end of 2021 and into 2022. In particular, according to Mr Adams, there were only two on‑market sales by June 2021.[15] In the second half of 2021, the respondent held concerns as to the escalating costs of construction for the project.[16] Towards the end of 2021, the buyer for Lot 1 pulled out of the development.
[15] Adams Affidavit [12] - [13].
[16] Adams Affidavit [17] - [19].
Collectively, these matters led Mr Hood to form an assessment that his expected break‑even sale price for Lot 1 would be unachievable in the market.[17] These matters also led Mr Adams to form the view in late 2021 that the Cornerstone Development could no longer proceed and an alternative development plan would be required for the site.[18]
[17] Hood Affidavit [18] - [20].
[18] Adams Affidavit [22].
An amended strata plan was then prepared by the respondent in December 2021, which split Lot 1 into two lots, creating a 12‑lot scheme.[19] Mr Adams remained hopeful that the two remaining buyers (being the appellant and the buyer of Lot 9) could be invited to participate in the alternative development 'on substantially the same terms' as they had initially contracted with the respondent, save for the timeframes.[20]
[19] Adams Affidavit [24].
[20] Adams Affidavit [23].
As matters transpired, according to the respondent's evidence, the expected construction costs continued to increase and the sale price for the remaining lots was in the order of $345,000 greater than the original sales price agreed with the appellant in 2021.[21] Very few inquiries were received for the alternative development, and no one committed to purchasing a proposed lot at the revised price, despite a new marketing campaign in the period from around February to May 2022.[22]
[21] Compare the sale price referred to in the Adams Affidavit [9], with the sale price referred to in the Hood Affidavit, Attachment MGH2; GAB 132.
[22] Adams Affidavit [9], [26] - [31]; Hood Affidavit [21] - [24], [27].
On 16 May 2022, Mr Doyle of Yolk Property Group sent an email to the appellant which informed the appellant that the construction costs of the project had increased significantly in recent months. The email noted that:
… the development would not be feasible at previous sale prices. In today's market, we would need to sell your proposed townhouse at $1.805M to break even.
Yolk Property Group would still like to continue with the Cornerstone Development and keep you in as a purchaser. Yolk Property Group can offer you a discount of $55,000 to bring your new purchase price to $1,750,000.
We are aware that you may find this upsetting, however, the development simply cannot commence at the original pricing.[23]
[23] Scanlan Affidavit [28], Attachment PAS-6.
There were subsequent email exchanges between the parties, the effect of which was that the appellant did not accept that the respondent could proceed in the manner proposed in the email sent on 16 May 2022.[24]
[24] Scanlan Affidavit [29].
On 7 June 2022, Mr Doyle of Yolk Property Group sent an email to the appellant attaching a letter dated 3 June 2022. The email described the letter as a termination letter. The substantive parts of the letter were as follows:
Lot 11, 2-4 McCabe Street, Cornerstone Project - Termination of Contract of Sale
I refer to the Contract of Sale (Contract) dated 9 March 2021 between 2-4 McCabe Pty Limited as Seller (Seller) and Paul Anthony Scanlan as Buyer in respect of proposed strata lot 11/2-4 McCabe Street, North Fremantle, Western Australia.
The Seller hereby notifies the Buyer that it has not achieved sufficient pre‑sales for the proposed strata lots at 2-4 McCabe Street, North Fremantle and accordingly elects, pursuant to clause 2.1 of the Contract, to terminate the Contract on the date of this letter.
The Seller has authorised the deposit holder to refund the whole of the deposit to you.[25]
[25] Scanlan Affidavit [33], Attachment PAS-7.
Shortly before receiving the email on 7 June 2022, a telephone conversation had taken place between the appellant and Mr Hood. The substance of that conversation was not in dispute.[26] In essence, Mr Hood informed the appellant his deposit would be refunded as the development was being changed to 12 townhouse strata lots, and as the development had changed, the Contract had been 'voided'. During the course of the discussion, the appellant resisted any suggestion that the change had voided the Contract, but Mr Hood maintained that the development was 'completely new'.
[26] Scanlan Affidavit [30] - [32]; Hood Affidavit [29].
As is apparent from the preceding paragraph, the matters discussed by the appellant and Mr Hood during the conversation on 7 June 2022 were quite different from the matters outlined in the letter which was emailed later that day.
Some weeks later, the appellant received an email from Yolk Property Group which attached a letter described as a 'Cancellation Notice'. The email was sent on 12 July 2022, but the attached letter was dated 27 June 2022.[27] The substantive terms of the email were as follows:
Attached is the Cancellation Notice in relation to your contract to purchase lot 11, 2-4 McCabe Street, North Fremantle. Please review, sign in acknowledgement and return to me as soon as possible.
[27] Scanlan Affidavit [35], Attachment PAS-9.
The substantive parts of the attached letter were as follows:
RE: LOT 11, 2-4 MCCABE STREET, NORTH FREMANTLE
We refer to your Contract of Sale dated 9 March 2021 in which you were intending to purchase the above lot/property.
As the abovementioned contact will not progress forward to settlement, we hereby mutually agreed to cancel the contract, rendering it null and voided. Further to this, the Lot has been placed back on the market.
Yolk Property Group will refund your deposit to your nominated settlement agent or financial institution within the next 10 business days.
Please sign below in acknowledgement and do not hesitate to call should you have any queries or questions.
The letter included a signature clause for the appellant to sign. The appellant refused to sign the letter.[28] The respondent has adduced evidence that this 'Cancellation Notice' was dispatched to the appellant in error.[29]
[28] Scanlan Affidavit [36].
[29] Adams Affidavit [35] - [38].
Less than a week later, on 18 July 2022, a further email was sent by Yolk Property Group to the appellant, this time from Mr Doyle.[30] The email re-attached the letter dated 3 June 2022. The terms of the email were as follows:
As per previous correspondence from myself, which included the attached termination letter, YPG has now terminated the Lot 11 contract of sale.
We are now processing the deposit to be refunded to your account.
[30] Scanlan Affidavit [37], Attachment PAS-10.
At this juncture, the appellant instructed his solicitors to correspond with the respondent to request documents in the possession, custody or control of the respondent, ahead of a formal application for pre‑action discovery. We refer to the letter from the appellant's then solicitors dated 21 July 2022.[31] Further letters of a similar nature were sent on 15 August 2022 to both the respondent and to Yolk Property Group. The requests for the respondent and Yolk Property Group to voluntarily provide documents were all either ignored or declined.
[31] Scanlan Affidavit [38], Attachment PAS-11.
The factual narrative has as its bookend a letter from the respondent's solicitors to the appellant's solicitors dated 17 August 2022, which attached a letter from Mr Adams to the appellant dated 17 August 2022.[32] As explained in the solicitors' letter, the purpose of the letter from Mr Adams to the appellant was to provide further notification to him of the reasons for the termination of the Contract. The solicitors stated in the letter that if, for any reason, the letter dated 3 June 2022 'did not effectively terminate the Contract (which we deny), the Contract is terminated on the date of the enclosed letter' pursuant to cl2.1(b) and cl 2.2.
[32] Scanlan Affidavit [42], Attachment PAS-19.
The operative terms of the letter from Mr Adams which was attached to the solicitors' letter were as follows:
The Seller hereby notifies the Buyer that:
(a)pursuant to clause 2.1(b) of the Contract, the Seller considers that there are insufficient projections for the sale of strata lots and accordingly the Contract is terminated; and
(b)pursuant to clause 2.2 of the Contract, the Seller has formed the opinion that the Scheme Plan will not be registered by the Withdrawal Date described in the Contract and the Contract is terminated.
Documents sought by the appellant
By the Application, the appellant sought an order that the respondent provide discovery, to be verified by affidavit, of documents in the respondent's possession, custody or control falling within the following six categories:
(a) documents relating to all executed sales contracts for the proposed strata lots in the Cornerstone Development;
(b) documents containing marketing campaigns for the Cornerstone Development;
(c) documents relating to pricing of the Cornerstone Development;
(d) documents containing details of prospective leads as to potential purchasers of the proposed strata lots in the Cornerstone Development;
(e) documents containing details of all materials used to determine the projection for the sale of the proposed strata lots in the Cornerstone Development; and
(f) documents containing any information relating to the timing of the registration of the strata plan for the Cornerstone Development.
The arguments before the master and the master's decision
On 13 December 2022, the master gave brief oral reasons for rejecting the Application.[33] Orders dismissing the Application were made on 22 December 2022.[34]
[33] Ex tempore judgment, Scanlan v 2-3 McCabe Pty Ltd, Supreme Court of Western Australia, 13 December 2022; BAB 4 - 5.
[34] BAB 6.
In advancing the Application before the master, the appellant's then counsel focused the argument on whether there had been a proper factual basis for the exercise of the respondent's discretion under the particular provisions of the Contract to which we have earlier referred.
The written submissions filed by the appellant at first instance explained his proposed cause of action in only brief terms. The submissions referred to the need for the respondent to have a 'proper basis' for forming an opinion as to the matters in cl 2.1 and cl 2.2, so as to enliven the discretion under cl 2.[35] At the hearing before the master, counsel for the appellant described the necessity for there to be an 'underlying factual basis for the exercise' of the discretionary termination power.[36] Counsel for the appellant accepted the respondent had a 'wide discretion' but submitted that if there was no requirement for the respondent to have a factual basis for the exercise of the power then it would be tantamount to a right to 'terminate at will'.[37]
[35] Appellant's submissions dated 22 November 2022 [15]; BAB 13.
[36] ts 5.
[37] ts 5.
The appellant's position was further developed at the hearing before the master to assert that, on a proper construction of the Contract, the exercise by the respondent of the termination power was subject to obligations of honesty, fairness and good faith.[38] Counsel for the appellant expressly referred in argument to the observations of Steytler J (as his Honour then was) in Central Exchange Ltd v Anaconda Nickel Ltd[39] and to the NSW Court of Appeal's decision in Burger King Corporation v Hungry Jack's Pty Ltd,[40] as well as two decisions of courts in the United States referred to by Steytler J and the NSW Court of Appeal.
[38] ts 5 - 7.
[39] Central Exchange Ltd v Anaconda Nickel Ltd [2002] WASCA 94; (2002) 26 WAR 33 [62].
[40] Burger King Corporation v Hungry Jack's Pty Ltd [2001] NSWCA 187; (2001) 69 NSWLR 558.
In essence, counsel for the appellant submitted that a breach of an obligation to exercise contractual rights in an honest, fair and good faith manner would be established if the party, without reasonable justification, acted in relation to the contract in a manner which substantially nullified the bargained for benefits or defeated the legitimate expectations of the other party.[41]
[41] ts 5 - 6.
The dispositive part of the brief reasons delivered by the master was as follows:
The plaintiff seeks to determine if documents sought do not reveal a proper basis for the defendant to hold the views which enliven clauses 2.1 and/or clause 2.2 of the contract. Clause 2.1 enables the defendant to terminate the contract by written notice to the plaintiff [i]f the defendant considers, in its absolute discretion, [there are] insufficient presales or projections for presales, to justify proceeding. The position is that the defendant had, to use the words of the clause, 'an absolute discretion'.
The breadth of that phrase is such, I think, as to render the arguments that the plaintiff put inoperative. What the plaintiff appears to be saying is that the entitlement to rescind the contract arises only if there are insufficient presales. That seems to me to put an interpretation on the clause, which is not open in all the circumstances. It is true that effectively the result is that there is a contract which can be terminated at will by the defendant.
But that seems to me to be the natural result of the wording of the clause included in the contract. I am not satisfied, on the material available, that the plaintiff may have a cause of action against the defendant. Accordingly, I would dismiss this application and the plaintiff ought pay the defendant's costs, including any reserved costs.[42]
[42] BAB 4 - 5.
In essence, the master dismissed the Application because he was not satisfied the jurisdictional threshold for making an order under O 26A r 4(1) RSC had been demonstrated, namely that the applicant for relief 'may have a cause of action' against a potential party against whom he or she wants to commence proceedings.
Principles applicable to O 26A r 4 RSC
Order 26A r 4 RSC provides as follows:
(1)This rule applies if a person who may have a cause of action against a person whose description has been ascertained (the potential party) wants:
(a)to commence proceedings against the potential party; or
(b)to take proceedings against the potential party in the course of an action to which the person is a party,
but the person, after reasonable enquiries, has not been able to obtain sufficient information to enable a decision to be made as to whether to commence or take the proceedings.
(2)If there are reasonable grounds for believing that the potential party had, has, or is likely to have had or to have, possession of documents that may assist in making the decision, the person may apply for an order under this rule.
(3)The application shall be supported by an affidavit and a copy of both shall be served on the potential party.
(4)On the application the Court may order the potential party to give discovery of all documents that are or have been in the potential party's possession and that may assist the applicant in making the decision.
There was no substantial disagreement between the parties as to the principles applicable to applications made pursuant to the above provision. The parties' submissions properly drew attention to the principles stated in Kelbush Pty Ltd v Australia and New Zealand Banking Group Ltd[43] and BWS v ARV [No 2],[44] in particular.
[43] Kelbush Pty Ltd v Australia and New Zealand Banking Group Ltd [2016] WASCA 14; (2016) 49 WAR 374.
[44] BWS v ARV [No 2] [2021] WASCA 62.
As is apparent from the language of the provision, a party seeking pre‑action discovery orders pursuant to O 26A r 4 RSC must affirmatively establish that he or she 'may have a cause of action' against the potential defendant. This requirement has been described as jurisdictional.[45] An objective test is to be applied in assessing whether the applicant may have a cause of action against the potential defendant.[46]
[45] Kelbush Pty Ltd v Australia and New Zealand Banking Group Ltd [66].
[46] BWS v ARV [No 2] [32].
It is unnecessary for the applicant to demonstrate a prima facie cause of action against the potential party. The test is not that high. This court summarised the requirements in BWS v ARV [No 2]:
[31]… the purpose of the rule is to enable a prospective litigant to obtain documents that may assist in making a decision whether to commence proceedings. It would defeat the purpose of the rule to require an applicant to demonstrate the actual existence of a cause of action as a condition to the exercise of the power - meaning that it is incorrect in principle to approach the rule with an undue emphasis on the demonstration of the prospective cause of action.
…
[33]There must, however, be some tangible backing or objective foundation that takes the existence of the cause of action beyond a mere allegation, suspicion or assertion. The applicant 'must demonstrate more than mere assertion, conjecture or suspicion, but does not have to positively establish the existence of a cause of action. What the applicant must produce is evidence showing that he, she or it may have a cause of action'. There must be evidence objectively indicating - beyond the mere assertion, conjecture or suspicion of the applicant - that all facts necessary to give rise to a right to curial relief may be able to be established.[47] (footnotes omitted)
[47] BWS v ARV [No 2] [33].
Once the jurisdiction to order pre‑action discovery is enlivened, it remains for the court to exercise its discretion as to whether pre‑action discovery orders ought be made and, if so, the extent and scope of those orders. In this regard, the non-exhaustive factors identified in Central Exchange Ltd v Anaconda Nickel Ltd[48] must be considered by the court. Together with this, the court in BWS v ARV [No 2] emphasised the role played by the principle of proportionality, in the following sense:
Also relevant is the extent to which the cost and effort involved in undertaking the proposed discovery and inspection is proportionate to the likely value of the claim if successful. The notion of proportionality is central to the exercise of the discretion to order discovery within existing proceedings; it has no lesser role in the application of O 26A r 4. The cost and delay involved in the provision of the pre‑action discovery as sought should be proportionate to the forensic benefit likely to be derived and to the value and importance or complexity of the subject matter of the contemplated proceedings.[49] (footnotes omitted)
[48] Central Exchange Ltd v Anaconda Nickel Ltd [82]. See also Kelbush Pty Ltd v Australia and New Zealand Banking Group Ltd [120].
[49] BWS v ARV [No 2] [36].
Finally, it bears repeating that the power in O 26A r 4(4) is confined to requiring discovery of documents that may assist the applicant in making the decision whether to commence the proceedings in question, such that only 'those documents actually relevant to a cause of action which the applicant may have should be the subject of the discovery order'.[50]
[50] BWS v ARV [No 2] [37].
Grounds of appeal
The grounds of appeal are as follows:
1.The learned master erred in law on page 3 of his reasons in finding that clause 2.1 of the contract of sale between the respondent and the appellant dated 9 March 2021 (Contract) entitled the respondent to terminate the Contract 'at will', and thereby concluded that the appellant could not establish that he may have a cause of action for breach of contract.
Whereas the learned master ought to have:
(a) held that the appellant may have a cause of action for breach of contract in that it was at least arguable that:
(i)on its proper construction, the respondent's power to terminate the Contract in clause 2.1 could only be exercised if the respondent in fact considered that there were insufficient sales of the proposed strata lots during the period up to the 'Withdrawal Date' (as that term is defined in the Contract) or there was insufficient projection for the sale of the proposed strata lots; further and alternatively; or
(ii)on its proper construction, the respondent's discretion in clause 2.1 had to be exercised reasonably and in good faith; further and alternatively;
(iii)by implication of a term at law and, or alternatively, in fact to that effect, the respondent's discretion in clause 2.1 had to be exercised reasonably and in good faith; and
(b)made orders pursuant to O 26A r 4(4) for pre‑action discovery.[51]
[51] WAB 2.
In order to succeed on this appeal, the appellant must demonstrate the master erred in his approach to the construction of the Contract (in particular, as to cl 2.1(a) or cl 2.1(b)) and also demonstrate that, upon at least one of the constructional arguments advanced by the appellant, the material before the court supported discovery orders being made pursuant to O 26A r 4(4) RSC.[52] If that point is reached, it will be for this court to exercise afresh the discretion as to whether discovery orders should be made and, if so, the extent thereof.
[52] The appellant's inclusion of ground 1(b) recognises the need to demonstrate these matters.
Before addressing the grounds of appeal, there is a notable feature which requires mention, namely that the grounds do not expressly extend to cl 2.2. Counsel for the appellant explained at the hearing of the appeal that cl 2.2 remained relevant to the appellant's position, particularly given the terms of the respondent's letter dated 17 August 2022 which places reliance on cl 2.2 (as well as cl 2.1(b), for that matter) as an additional contractual basis for termination of the Contract.[53] There thus remains the possibility the respondent will rely upon cl 2.2 as providing an alternative basis for the termination in order to answer a breach of contract claim.
[53] Appeal ts 16 - 17 (and see Scanlan Affidavit, Attachment PAS-19).
Accordingly, the appellant maintains it is appropriate for the court to exercise its discretion to provide pre‑action discovery of documents relevant to the matters in cl 2.2 (as to which see category (f) in the originating summons),[54] assuming the court is otherwise satisfied the requirements in O 26A r 4 RSC are satisfied. We have addressed this issue in [114] and [115] below.
[54] BAB 8.
Disposition - ground 1(a)(i)
The appellant maintains the primary proposition he advanced before the master to the effect that the respondent was not entitled to terminate the Contract 'at will'. This forms the basis of the first paragraph of ground 1. The respondent does not cavil with this proposition, maintaining that the respondent has never suggested that that is the effect of the Contract.[55]
[55] Respondent's submissions [36]; WAB 25. The respondent's position is that the available evidence established that it did form the relevant opinion as to the insufficiency of sales.
The appellant now proffers the additional constructional argument at ground 1(a)(i). This argument is that it is at least arguable that the respondent's termination powers could only be exercised if the respondent in fact considered that there were insufficient sales or insufficient projected sales (or, if applied to cl 2.2, delayed registration relative to the Withdrawal Date).[56]
[56] Appellant's submissions [3]; WAB 9; appeal ts 3 - 5.
As developed, the appellant's argument on appeal concedes to the respondent a broad and absolute discretion, in the case of cl 2.1(a) and cl 2.1(b),[57] to assess whether there were insufficient sales or insufficient projected sales but contends that there is nonetheless a requirement that an actual state of mind in that regard be held.[58] Conditioning the termination power in this way, the appellant thus rejects the notion that the respondent was able to terminate the Contract at will. In the context of cl 2.1, the appellant's argument posits that the respondent's absolute discretion encompasses the consideration of the matters in pars (a) and (b) thereof, but goes no further.
[57] And, by force of the same reasoning, the ability to form the opinion referred to in cl 2.2.
[58] Appeal ts 7.
This overview of ground 1(a)(i) demonstrates that the appellant's argument on appeal has shifted somewhat, retreating from the analysis before the master which invited scrutiny of the sufficiency of the actual or projected sales (or, in the case of cl 2.2, the adequacy of the respondent's opinion as to the timing of registration of the Scheme Plan).[59] Counsel for the appellant conceded that the construction argument in ground 1(a)(i) was not, in terms, put to the master below.[60]
[59] Appeal ts 4.
[60] Appeal ts 4.
Whether this shift in the appellant's position on appeal is permissible requires a consideration as to whether the point could possibly have been met by the respondent calling evidence in the proceedings before the master at first instance.[61] The strictness of this principle has repeatedly been made clear by the High Court. Further, even if no question of further evidence arises, it may not be in the interests of justice to allow a new point to be raised on appeal. The need to ensure finality in litigation is an important consideration in assessing whether to allow a new point on appeal.[62]
[61] University of Wollongong v Metwally [No 2] [1985] HCA 28; (1985) 59 ALJR 481, 483.
[62] Zerjavic v Chevron Australia Pty Ltd [2020] WASCA 40 [66] - [67].
It has been accepted that a fresh point of construction, or of law, may be entertained on appeal where it is expedient and in the interests of justice to do so.[63]
[63] Water Board v Moustakas [1988] HCA 12; (1988) 180 CLR 491, 497.
In our view, there are three features of the case which favour allowing the appellant to raise the new argument on appeal.
First, this is an appeal against an interlocutory decision, not against a trial. Just as the public interest in finality carries less weight in the question of additional evidence on an appeal from an interlocutory decision,[64] so too do considerations of finality apply with less force in determining whether to permit a new argument on appeal from an interlocutory order.[65]
[64] Sovereign Grange Pty Ltd v AV Trust Services Pty Ltd [No 2] [2017] WASCA 142 [44] - [47].
[65] Brimstone Resources Ltd v Empire Resources Ltd [2018] WASCA 107 [32]; see also Revill v John Holland Group Pty Ltd [2022] FCAFC 178; (2022) 295 FCR 269 [94].
Second, it is most unlikely that the appellant's new argument as to construction could have been met by the respondent calling additional evidence below. The respondent had the opportunity to file evidence in opposition to the Application (and did so). No submission was made by the respondent on appeal that it would have adduced additional affidavit evidence in response to the revised construction argument, had it been put to the master.
Third, in circumstances where, as explained below, ground 1(a)(iii) is made out, and where that ground advances a contention that was put to the master as outlined in [43] above, the interests of justice favour permitting the appellant to advance the construction articulated through ground 1(a)(i). That is particularly so where the arguments on that latter ground bear upon how this court should re-exercise the discretion.
As to the merits of this ground, it is not necessary to express a final view as to whether the appellant's construction is the true construction of the clause. For present purposes, this court need only assess whether the construction is arguable. In doing so, the court must have regard to the principles of construction of commercial instruments as expressed by the High Court in Electricity Generation Corp v Woodside Energy Ltd[66] and Mount Bruce Mining Pty Ltd v Wright Prospecting Pty Ltd.[67] Those principles were distilled by this court in Black Box Control Pty Ltd v Terravision Pty Ltd[68] and we adopt the summary therein without repeating it. Whether the appellant's construction is arguable thus requires analysis not only of the text of the particular provisions within the Contract, but the context and purpose of the Contract as a whole.
[66] Electricity Generation Corp v Woodside Energy Ltd [2014] HCA 7; (2014) 251 CLR 640 [35].
[67] Mount Bruce Mining Pty Ltd v Wright Prospecting Pty Ltd [2015] HCA 37; (2015) 256 CLR 104 [46] ‑ [52].
[68] Black Box Control Pty Ltd v Terravision Pty Ltd [2016] WASCA 219 [42].
In our view, the appellant's construction is at least arguable. We have reached this view for the following reasons.
First, the appellant's construction finds a degree of support in the text of cl 2.1. The chapeau to cl 2.1 states that the power arises 'if the Seller … considers that'. The appellant submits, and we agree, that the court must give effect to these words. The appellant's construction can be seen to be consistent with the additional words, 'in the Seller's absolute discretion', in that that phrase qualifies the manner in which the respondent undertakes the assessment, not whether it must do so at all. The construction advanced by the appellant thus does not ignore these words, nor does it undermine their effect. In these respects, the language of cl 2.1 provides arguable support for the appellant's construction.
Second, there are additional features of the Contract which provide arguable support for the appellant's construction. These additional features, which are found in cl 5 and cl 6.4, demonstrate the parties' carefully circumscribed their rights to terminate the Contract for default as well as to vary the Contract, such that it would be, arguably at least, incongruous if cl 2.1 was construed so as to afford the respondent seller an unfettered right to terminate the bargain.
By its terms, cl 6.4 authorises the respondent to vary the Construction Documents, Scheme Plan, and the specifications in Annexure A, as necessary, in certain circumstances. These circumstances include where there is some matter or circumstance the respondent could not reasonably have foreseen,[69] or where the costs of materials or products in the specifications have risen so that it is reasonable for the respondent to substitute them with similar materials or products that are in the respondent's opinion of no lesser quality.[70]
[69] Clause 6.4(a)(iii).
[70] Clause 6.4(a)(v).
Further, cl 6.4(b) provides that the appellant (as buyer) cannot make any objection, claim for compensation, claim a reduction in price, or refuse to complete settlement by reason of the variations which are authorised by cl 6.4(a), including any variation in the number, size or location of any strata lot or the area of the common property created on the Scheme Plan, re-subdivision or consolidation. Similar limitations are found in cl 18(i), which precludes claims by the buyer arising from any variation or change to the overall plan of the development.
Still further, each party's right to terminate the Contract because of default is limited by cl 5 and, if the appellant is in default or repudiates the Contract, the respondent is only entitled to terminate upon giving the appellant notice and an opportunity to remedy the default.
Third, and allied to the second reason above, the terms of the Contract arguably reveal an evident commercial purpose that would not be furthered if cl 2.1 was construed to afford the respondent seller an unfettered right to terminate. The evident purpose is to enable the parties to secure the sale and purchase of the lot (including the dwelling to be constructed by the respondent) at an agreed price for a three‑year period, while the respondent continues to market and sell the other proposed strata lots that will form part of the development. The respondent can vary the development in certain ways, but the objective intention of the parties is that the Contract remains binding nonetheless. The terms of the Contract have the effect that the respondent will bear the risks associated with those increases in construction costs associated with the development, although the respondent is, within limits, entitled to mitigate the effect of any such cost increases by substituting construction materials or products. This aspect of the Contract also counts against the respondent's argument that sufficiency can relate to the costs of development and not only the number of sales or projected sales.
In these circumstances, it may be said to be an unlikely construction of cl 2.1 if it allowed the respondent to terminate the Contract by simply asserting that the matters in (a) or (b) had arisen, without it being necessary for the respondent to have in fact considered that those matters had arisen. The construction advanced by the appellant is thus arguably consistent with the commercial purposes of the Contract.
Ground 1(a)(i) is made out.
Disposition - grounds 1(a)(ii) and 1(a)(iii)
Grounds 1(a)(ii) and 1(a)(iii) are expressed to be further or in the alternative to ground 1(a)(i).[71]
[71] WAB 8.
Consistently with the position adopted at the hearing below, the appellant maintains on this appeal the contention that the exercise of the respondent's contractual termination power in cl 2.1 was conditioned by requirements of reasonableness and good faith, either as a matter of construction or implication.[72] That is, the reference to the 'respondent's discretion in clause 2.1', which appears in both grounds, is a reference to the respondent's power to terminate the contract, rather than the 'absolute discretion' identified in the chapeau of cl 2.1.[73]
[72] Appellant's submissions [3]; WAB 9; appeal ts 5 - 6.
[73] Contrary to the apparent suggestion in the appellant's written submissions that the obligations of reasonableness and good faith which are promoted by these grounds of appeal had application to the respondent's consideration of the sufficiency of the sales and the sufficiency of the projected sales: appellant's submissions [26(a)]; WAB 15.
The appellant accepts that the respondent has an absolute discretion when considering the matters in cl 2.1(a) and cl 2.1(b). The exercise of the power to terminate which is thereby enlivened is, the appellant submits, subject to the reasonableness and good faith limitations.[74]
[74] Appellant's submissions [24]; WAB 14; ts 19.
The appellant contends that these limitations may, at least arguably for present purposes, be found by a process of construction of the Contract, by implication as a matter of fact, or by implication as a matter of law as an incident of a commercial contract of this kind. Counsel for the appellant maintained all three pathways were available in the present circumstances. In this respect, the appellant relied principally on statements in Renard Constructions (ME) Pty Ltd v Minister for Public Works;[75] Central Exchange Ltd v Anaconda Nickel Ltd;[76] and Westgem Investments Pty Ltd v Commonwealth Bank of Australia Ltd [No 6].[77]
[75] Renard Constructions (ME) Pty Ltd v Minister for Public Works (1992) 26 NSWLR 234, 257 ‑ 260, 279 ‑ 280.
[76] Central Exchange Ltd v Anaconda Nickel Ltd [49] - [52] (affirming Parker J at first instance).
[77] Westgem Investments Pty Ltd v Commonwealth Bank of Australia Ltd [No 6] [2020] WASC 302 [288] ‑ [303].
On the present state of authority, a process of implication as a matter of fact provides an appropriate framework in which to evaluate whether to find conceptions of reasonableness and good faith as limitations on contractual powers and discretions. That is, in the case of a formal written contract, to undertake the traditional analysis based on business efficacy as required by the decision of the Privy Council in BP Refinery (Westernport) Pty Ltd v Shire of Hastings.[78] This analysis is an exercise in interpretation of the contract, albeit not an orthodox one.[79]
[78] BP Refinery (Westernport) Pty Ltd v Shire of Hastings (1977) 180 CLR 266, 283.
[79] Codelfa Construction Pty Ltd v State Rail Authority of NSW (1982) 149 CLR 337, 345.
While counsel for the appellant maintained it was open to imply these limitations as a matter of law as an incident of a commercial contract of this kind, there have been strong indications by Australian courts that the implication of a requirement of reasonableness and good faith depends on whether a term to that effect can be implied as a matter of fact, rather than law. We refer in this regard to the statements of Edelman J in Mineralogy Pty Ltd v Sino Iron Pty Ltd [No 6],[80] those of Tottle J in Westgem Investments Pty Ltd v Commonwealth Bank of Australia Ltd [No 6],[81] and the decision of the NSW Court of Appeal in Bundanoon Sandstone Pty Ltd v Cenric Group Pty Ltd.[82]
[80] Mineralogy Pty Ltd v Sino Iron Pty Ltd [No 6] [2015] FCA 825.
[81] Westgem Investments Pty Ltd v Commonwealth Bank of Australia Ltd [No 6] [308] - [312].
[82] Bundanoon Sandstone Pty Ltd v Cenric Group Pty Ltd [2019] NSWCA 87 [154] ‑ [159].
We therefore propose to confine our analysis for the purposes of this appeal to the appellant's contention that these limitations may be implied as a matter of fact. In the absence of full argument as to the correctness of implying these limitations as a matter of law, in circumstances where the appellant succeeds on implication in fact, and given we are presently dealing with an appeal concerning a pre‑action discovery application, we will refrain from dealing with the balance of the appellant's arguments.
The criteria established in BP Refinery (Westernport) Pty Ltd v Shire of Hastings, which must be satisfied before a term is implied as matter of fact, are as follows:
1.the term must be reasonable and equitable;
2.the term must be necessary to give business efficacy to the contract, so that no term will be implied if the contract is effective without it;
3. the term must be so obvious that 'it goes without saying';
4.the term must be capable of clear expression; and
5.the term must not contradict any express term of the contract.
These criteria are, in our view, arguably satisfied by the appellant's proposed implied term in the Contract. There are several features of the Contract, including its evident purpose, ascertained objectively, that support this conclusion, as explained below.
We begin with the final criterion, that is, whether the implied term contradicts any express term of the instrument.
This final criterion was the primary focus of the respondent's submissions as to why a term requiring that the power to terminate be exercised reasonably and in good faith was not arguable.[83] In essence, the respondent submits that to condition its discretion, expressed in the clause to be absolute, with a duty of good faith and reasonableness would contradict the intention clearly expressed in the Contract that the respondent would not be subject to someone else's views as to whether it had achieved insufficient presales.[84]
[83] Respondent's submissions [41] - [46]; WAB 26; appeal ts 47 - 50.
[84] Respondent's submissions [46]; WAB 26.
However, as explained in [58] and [78] above, the appellant's construction accepts that, in considering whether there are in fact insufficient sales, the respondent has an absolute discretion. Thus, the appellant does not seek to impose a requirement of reasonableness and good faith on the assessment of the sufficiency of sales and presales. Rather, the term sought to be applied by the appellant controls the exercise of the power, once it has arisen.
Viewed in this way, the limitations operate to preclude the respondent from asserting a right to terminate under cl 2.1 for reasons which have nothing to do with the sufficiency or otherwise of the sales or projected sales. The example identified by the appellant is that a seller might seek to take advantage of a rising market and assert a right to terminate pursuant to cl 2.1 to achieve an increased purchase price for a property that is already the subject of a contract for sale.
We accept the force of the appellant's contentions in this regard, particularly the potential for the termination power in cl 2.1, which is expressed in wide terms, to be deployed in circumstances which go beyond the protection of what might be seen as the legitimate interests of the seller. There is at least the possibility that, absent some limitations of the kind suggested by the appellant, a seller under this Contract could invoke the power in cl 2.1 in a way which undermines the apparent objective intention of the parties or by intentionally acting in a manner that attracts the operation of the clause. Such scenarios would be inconsistent with the evident commercial purpose of this Contract and likely to deprive the appellant buyer of the benefits of the bargain he has secured. These considerations provide a sound basis to conclude that, arguably at least, the implication is reasonable and equitable, necessary to give business efficacy to the contract, and is obvious in the required sense.
This conclusion is reinforced by the fact that the number of sales of lots in the Cornerstone Development is a matter which can be influenced by the conduct of the seller itself, particularly through the extent of resources it devotes to the marketing process and the strategy it adopts to the pricing of the lots. Even a reasonable seller, appropriately motivated by commercial considerations, might assess that its own position would be enhanced by an outcome which allows it to terminate the contracts with buyers where the contracts had been agreed in a more favourable economic climate for those buyers.
Finally, we should note that the provisions of the Contract and the commercial purpose referred to at [69] ‑ [74] above, which provide arguable support for the construction which is the subject of ground 1(a)(i), also assist the appellant's argument that the limitations of reasonableness and good faith should be implied.
Together, these features of the Contract and the objective purpose of the arrangement arguably sustain the implication for which the appellant contends. Accordingly, ground 1(a)(iii) is made out insofar as that ground asserts the implication as a matter of fact. It is unnecessary to consider the balance of ground 1(a)(iii), or ground 1(a)(ii) in the circumstances.
Disposition - ground 1(b)
Ground 1(b) asserts that the master ought to have 'made orders pursuant to O 26A r 4(4) for pre‑action discovery'. This ground is predicated on the court finding the master erred in his approach to the construction of the Contract as asserted in ground 1(a). Ground 1(b) raises for consideration the pre‑conditions in O 26A r 4(4) RSC, which the appellant is required to demonstrate, before the discretion to order discovery is enlivened.
In BWS v ARV [No 2], the court outlined the preconditions in the following terms:[85]
1.An applicant for an order 'may have a cause of action against' the potential party (O 26A r 4(1)).
2.The applicant wants 'to commence proceedings against' the potential party (O 26A r 4(1)).
3.The applicant has made 'reasonable enquiries' for the purpose of obtaining sufficient information to enable him or her to decide whether to commence the proceedings (O 26A r 4(1)).
4.The applicant has not been able to obtain sufficient information to enable him or her to make the decision (O 26A r 4(1)).
5.There are 'reasonable grounds for believing' that the potential party had, has, or is likely to have had or have, possession of documents that may assist the applicant in making the decision (O 26A r 4(2)).
[85] BWS v ARV [No 2] [29].
In these proceedings, only two of these preconditions were the subject of argument. First, that the appellant 'may have a cause of action' against the respondent and, second, that the appellant has not been able to obtain sufficient information to enable a decision to be made as to whether to commence or take proceedings.
Whether the appellant may have a cause of action?
We are satisfied the appellant has demonstrated that the master's approach to the construction of cl 2.1 of the Contract was in error. Given the master's conclusion, he did not undertake an analysis as to whether the available factual material provided the necessary support for the appellant's claim that the termination powers were exercised in an ineffective manner. This further step is necessary in order for the court to be satisfied the appellant 'may have a cause of action', which then engages the discretionary powers to order discovery found in O 26A r 4(4) RSC.
Although the master did not undertake this analysis, there is no difficulty with the court doing so on appeal. The material before the court below was adduced entirely on affidavit, without cross‑examination.
The focus of the factual analysis is essentially this: did the direct evidence adduced before the master, and any available inferences which can properly be drawn, demonstrate an arguable case that the appellant's exercise of the termination power was ineffective in the sense that:
(a)the respondent terminated the Contract without in fact considering whether there were insufficient sales or insufficient projected sales (which would be ineffectual under cl 2.1 as properly construed in accordance with the construction advanced through ground 1(a)(i)); or
(b)the Contract was terminated by the respondent in a manner which, in all the circumstances, was inconsistent with the implied term that the termination power would be exercised reasonably and in good faith (which would be an ineffective exercise of the termination power given the limitations implied in fact in cl 2.1 in accordance with ground 1(a)(iii)).
In the course of the appeal, counsel for the respondent submitted that the court should accept, on its face, the evidence adduced by the respondent's representatives (and the explanations proffered by the respondent), such that it should be accepted that the respondent properly complied with its obligations under the Contract.[86]
[86] Appeal ts 53 - 54, 64.
In support of this submission, counsel for the respondent submitted that it was open to the appellant to seek leave to cross‑examine the respondent's deponents below. This submission fails to recognise that this was a pre‑action discovery application, heard in chambers, which by its very nature is the type of application in which leave to cross‑examine would rarely be granted. Allowing cross‑examination on such applications would have a tendency to undermine the purpose of the application, may allow an applicant to obtain forensic advantages against the prospective respondent, and would overcomplicate what is intended to be a relatively straightforward process. Permitting cross‑examination would thus be contrary to the goal in O 1 r 4A and the objects in O 1 r 4B. Such a submission also does not reflect the relatively low threshold which attaches to such applications, and which has the effect that it is unnecessary for a judge or master hearing such applications to undertake a final fact‑finding exercise.
The proper approach in the circumstances is for this court to review the evidence adduced before the master to assess whether the appellant 'may have a cause of action' in the sense described at [98] above, applying the approach explained at [49] above. In this regard, the following aspects of the evidence are relevant:
(a)Over the period between March 2021 and August 2022, only two sale contracts were executed by the respondent in respect of the 11 lots which formed the Cornerstone Development. One of those sales was with the appellant (for Lot 11). The other sale was with the buyer of Lot 9, who agreed to cancel his contract in March 2022. Further, an interested party had been identified for the purchase of Lot 1, but that person informed the respondent in late 2021 that he could not proceed with the acquisition. By August 2022, only one lot was the subject of an executed sale contract and there had been only eight inquiries in relation to the alternative development structured by the respondent.[87]
(b)The respondent's stated reason for termination appears in the letter from the respondent dated 3 June 2022. The letter states the respondent had 'not achieved sufficient pre‑sales' and it elected to terminate pursuant to cl 2.1.
(c)However, this letter does not, in terms, make reference to either cl 2.1(a) or cl 2.1(b) and does not employ the substantive language of those provisions.[88] The reference to 'pre‑sales' appears to be something of a shorthand description by the author of the letter to actual sales (as opposed to projected sales).
(d)Not until after the appellant had sent pre‑action discovery requests (in August 2022) and after solicitors were engaged by both parties, did a letter emerge from the respondent's side which expressly referred to the full terms of cl 2.1 and cl 2.2, and which asserted reliance on cl 2.1(b) and cl 2.2 as alternative bases for the termination.
(e)The respondent held concerns as to the escalating costs of the Cornerstone Development. These concerns appear to have been sufficient to cause the respondent's representatives to make the decision in late 2021 that the Cornerstone Development could not proceed as originally structured, and an alternative development would be required. The respondent's concerns as to increased construction costs led to an email being sent by the respondent to the appellant, in May 2022, which offered to allow the appellant to remain part of the project provided he agreed to an increase in the purchase price. The respondent's concern as to escalating construction costs is arguably relevant to an assessment of the respondent's true reason for the termination and whether the respondent ought to have instead invoked the variation procedures in cl 6.
(f)There is evidence that the respondent took active steps in around late March 2021 to withdraw the Cornerstone Development from the 'pre‑sale' market as a result of the closure of the State's borders, with the intention of the development being put back on the market once the borders had reopened and property prices had increased. The respondent's conduct in withdrawing the project, for the purpose of maximising sale prices, is arguably relevant to whether the respondent's termination decision was undertaken reasonably and in good faith.
(g)The respondent prepared a price list for the alternative development, which identified five of the 12 lots as being 'sold', although it is apparent those five lots had not in fact been sold but were simply designated as off-market and not available for the selling agent to offer for sale. The explanation in the respondent's affidavits concerning this aspect of the matter can fairly be said to be opaque. The fact that several of the lots were listed as 'sold' when they were not is arguably relevant to whether the respondent's decision to terminate was undertaken reasonably and in good faith.
(h)The respondent represented to the appellant (on 7 June 2022) that the structuring of the alternative development meant the development had changed and the Contract with the appellant was voided. The appellant resisted this contention at the time. On the same day, the respondent issued the termination letter to the appellant (erroneously dated 3 June 2022) which invoked cl 2.1 to ground a termination of the Contract, but did not in terms refer to the change in the project or assert that the Contract was voided as a result. The substance of the respondent's statements to the effect the alternative development voided the Contract are arguably relevant to the assessment of the respondent's true reason for the termination and whether the decision to terminate was undertaken reasonably and in good faith.
[87] And none of those inquiries were pursued by the prospective buyers once they were informed of the proposed purchase price for the lots, according to the respondent's evidence.
[88] The clause is headed 'Pre‑sales', but this term does not appear in the body of the clause.
The matters in (a) and (b) above were emphasised by the respondent as demonstrating the validity of the termination. The remaining matters cannot, however, be ignored. These further matters are arguably relevant to the inquiries which are required by the appellant's apprehended causes of action. Fundamentally, the entire course of events must be assessed. The ultimate inquiry would need to assess the operative reason or reasons which actuated the respondent in exercising the termination power at the relevant time. Of course, as a matter of common experience, more than one reason or factor may have driven the respondent's conduct.
It is significant, in our view, that no unequivocal, direct statement has been made by either of the representatives who gave affidavit evidence for the respondent that the Contract with the appellant was terminated by reason of the respondent's satisfaction of the matters in cl 2.1(a) or cl 2.1(b), or even cl 2.2. Mr Adams, who is a director of the respondent, might be thought to have been the appropriate person to make such a statement if the respondent wished to assert, in response to the pre‑action discovery requests, that the respondent lawfully terminated the Contract in accordance with the contractual provisions. The fact he has not directly deposed to this matter does not prove the negative. There may be other explanations for the omission. However, the absence of such a statement weakens the submission made by the respondent that this court should take the affidavit evidence from the respondent on face value and conclude (at this early stage) that there is no basis for contractual claims of the kinds which have been articulated in the grounds of appeal.
On our assessment of the evidence, there is at the least some tangible backing or objective foundation that takes the existence of the appellant's apprehended causes of action beyond matters of mere allegation, suspicion or assertion. The affidavit evidence which we have summarised at [101] above does not positively establish the existence of a cause of action. But that is not required. The court need only be satisfied the appellant may have a cause of action in the sense just described.
We are satisfied the appellant may have a cause of action against the respondent.
Whether the appellant has not been able to obtain sufficient information?
There is a further requirement within O 26A r 4(4) RSC which must be met, which is that the appellant has not been able to obtain sufficient information to enable a decision to be made as to whether to commence or take proceedings. It must not be thought that an applicant for discovery under O 26A r 4 RSC is entitled to more information than is necessary for this purpose. The adequacy of the information will vary in each case, depending on the complexity of the matter. Whether an applicant has sufficient information to make a decision is to be assessed objectively.[89]
[89] The NSW Solicitors Mutual Indemnity Fund v The Hancock Family Memorial Foundation Ltd [No 2] [2009] WASCA 146 [60].
Rather than refrain from adducing any affidavit evidence in opposition to the application, the respondent filed two affidavits. The appellant has this evidence at its disposal, which includes the respondent's stated concerns as to escalating costs and the decision to create an alternative project. This material may be weighed by the appellant in assessing whether to commence proceedings, and in taking legal advice as to whether a claim may be responsibly pleaded. Nonetheless, we do not consider the appellant has sufficient information as yet. We repeat what is said at [103] above. The nature of the prospective claims is such as to require an inquiry as to the reasons which actuated the respondent to terminate the Contract. The respondent's internal documentary material, which has not yet been produced, is likely to be most relevant in this regard. This material is likely to assist the appellant to assess the prospective claim and decide whether to embark on substantive litigation.
The pre‑conditions to O 26A r 4 RSC being satisfied, it falls to this court to exercise the discretion under O 26A r 4 RSC as to whether to make an order and, if so, the categories of documents which the respondent should be ordered to discover.
Scope of the discovery which should be ordered
The discretion to order pre‑action discovery will not be exercised in favour of an applicant as a matter of course.[90] There are a range of factors that should be considered in this regard, which were identified by the court in Central Exchange Ltd v Anaconda Nickel Ltd and have been supplemented in later decisions.[91]
[90] Kelbush Pty Ltd v Australia and New Zealand Banking Group Ltd [120].
[91] Kelbush Pty Ltd v Australia and New Zealand Banking Group Ltd [120] - [124]; Roe v The State of Western Australia [2013] WASC 130 [10] - [11].
The scope of the discovery sought by the appellant in his Application did not excite any argument from the respondent that the requests were burdensome or oppressive. The challenge mounted by the respondent was that the likelihood of the causes of action being successful was very low. Further, the respondent submits that the documents sought would not assist the appellant in determining the respondent's state of mind and would have no real significance to the appellant's decision whether to commence the contemplated proceedings. The respondent submitted that it was only necessary for a confined set of documents to be made the subject of any pre‑action discovery orders.
An alternative submission in opposition was put that the materials held by the respondent contain personal information of individuals who are strangers to the dispute. That alternative submission can be easily dealt with. Any legitimate concerns as to the disclosure of sensitive or confidential information concerning such persons can be dealt with through the appropriate redaction of the documentation and, in any event, the discovery of the documents will be subject to the Harman undertaking. We therefore do not see this as an obstacle to the making of discovery orders.
Returning to the primary submission in opposition, we do not accept the respondent's objections carry much weight. As to the assertion that the apprehended causes of action have very low prospects, we consider the merits of this case are difficult to discern at this early stage. Much may turn on the additional, internal documents the respondent may have in its possession, custody or control, and which have not yet been produced. As to the respondent's second point summarised in [110] above, we repeat what is said at [107] above.
In some respects, it is curious that the appellant has not sought discovery of the respondent's documents which record or evidence the respondent's consideration of the matters in cl 2.1(a) or cl 2.1(b), or the formation of the opinion by the respondent as to the matter in cl 2.2. It may be that no such documents exist, of course. It is not in every case, nor in every organisation, that a formal document is prepared to record a decision which is taken or an opinion which is formed. This issue was raised by the court during the appeal.[92] The appellant did not seek to amend the categories on appeal. The appellant continues to press for discovery of the categories identified in the originating summons. It is evident the appellant's approach is to pursue the source documents held by the respondent, which may have informed the respondent's analysis and which will assist the appellant in its assessment whether to commence proceedings against the respondent.
[92] Appeal ts 75 - 77.
The final point to make in relation to the discovery orders concerns documents which relate to the respondent's reliance on cl 2.2, which we touched on earlier.[93] Category (f) as sought in the originating process seeks documents 'which contain any information relating to the timing of the registration of the strata plan for the Development'. Although the appellant does not presently contend that it may have a cause of action arising from a breach of cl 2.2, or an ineffective exercise of the termination power therein, it is readily apparent that such a contention may need to be brought to bear in the event the respondent falls back on the power in cl 2.2 to justify the termination.
[93] See [54] - [55] above.
It is open to utilise the power in O 26A r 4 RSC to seek discovery of documents which are relevant to the defences (or responses) that may be available to the prospective defendant.[94] The possible existence of defences (or responses) would typically form part of a litigant's calculus in assessing whether to commence substantive proceedings.
[94] The Hancock Family Memorial Foundation Ltd v Fieldhouse [No 2] [2008] WASC 147 [38] ‑ [39]. See also Rexha v Curtin University of Technology [2002] WASC 152 [43].
For these reasons, we are satisfied that, subject to the question of leave to appeal, the discovery sought by the appellant in his originating summons should be ordered.
Leave to appeal
The appellant requires leave to appeal as the decision of the master is interlocutory in character.[95] In general terms, leave should not be granted unless the decision below is plainly wrong or is attended by sufficient doubt to justify the grant of leave and a substantial injustice would be done if it remains undisturbed.[96] Ultimately, leave may be granted whenever the interests of justice require it.[97]
[95] Supreme Court Act 1935 (WA), s 60(1)(f).
[96] Wilson v Metaxas [1989] WAR 285, 294; Waller v Waller [2009] WASCA 61 [8] - [10], [116], [120] ‑ [121].
[97] SMEC Australia Pty Ltd v Valentine Falls Estate Pty Ltd [2011] WASCA 138 [13].
As this court has often emphasised, leave to appeal an interlocutory decision of a procedural character will not readily be granted.[98] However, while procedural in character, a decision about pre‑action discovery raises some distinct considerations, as explained below.
[98] NRW Contracting Pty Ltd v Cliffs Asia Pacific Iron Ore Pty Ltd [2020] WASCA 107 [117]; Hancock Prospecting Pty Ltd v DFD Rhodes Pty Ltd [No 2] [2023] WASCA 108 [107] - [111]; North West Pilots Pty Ltd v Daniel [2023] WASCA 122.
Counsel for the respondent submitted that leave should be refused on the basis the master's decision to refuse the Application was open on the construction as presented by the appellant, and the appellant has shifted position on this appeal.[99] The respondent's counsel criticised the appellant for failing to present the arguments in favour of the implication of limitations of reasonableness and good faith in its written submissions filed for the purposes of the Application, and developing those arguments only at the hearing before the master. We reject the respondent's submission. As already explained, before the master the appellant advanced an argument as to the limitations of reasonableness and good faith. In any event, these contentions, which essentially focus on the manner in which the appellant presented its case before the master, are an insufficient basis to deprive an appellant of leave in circumstances where, as explained below, refusal of leave gives rise to the prospect of substantial injustice and prejudice.
[99] Appeal ts 43 - 46.
An additional argument against the grant of leave put by the respondent's counsel was the asserted lack of utility in the categories of documents requested by the appellant.[100] It was contended that the categories are not adequately connected to the matters which must be proven in order for the appellant to make good his claims of breach. Accordingly, the respondent maintained that leave should be refused because the documents would simply not assist the appellant to undertake the decision‑making exercise which is central to an O 26A r 4 RSC application. For the reasons in [107] above, the respondent's argument in this respect should be rejected.
[100] Appeal ts 51.
As we have explained above, we consider the master erred in his conclusion on the jurisdictional issue arising under O 26A r 4 RSC. That is, the master erred in concluding that the appellant was unable to establish that he 'may have a cause of action'. We are therefore satisfied the decision below is attended by sufficient doubt to justify the grant of leave.
We are also satisfied that substantial injustice would follow if the master's decision remained undisturbed. This conclusion stems largely from the nature and purpose of a pre‑action discovery application. The essence of such an application is that the appellant has identified a party against whom it wishes to commence proceedings but, given the absence of relevant documentation, has been unable to make the decision to commence the substantive proceedings.
Denial of leave to appeal would give rise to a real prospect that the appellant will be denied an effective ability to commence substantive proceedings, or at least to be able to make a final decision, in the absence of the respondent providing discovery.
The following two matters, both of which were identified in Kelbush Pty Ltd v Australia and New Zealand Banking Group Ltd[101] give rise to substantial injustice in the present case. Refusal of leave may mean that the appellant may be unable to commence proceedings because without the additional documentation, the appellant may have no adequate evidentiary basis for pleading a claim against the respondent. Allied to this, the nature of the appellant's application is such that a refusal of the application may preclude the appellant from asserting his rights against the respondent. That is more than a matter of mere inconvenience or procedural disadvantage.
[101] Kelbush Pty Ltd v Australia and New Zealand Banking Group Ltd [83], [85].
Further, it ought be borne in mind that one of the outcomes of a successful pre‑action discovery request (or application to the court, if one is required) may be that the provision of discovery by the prospective defendant allows the prospective plaintiff to form the view that he or she should not commence substantive proceedings. The procedure established by O 26A r 4 RSC does not (and should not) inevitably lead to the commencement of litigation. The procedure is designed to equip a prospective plaintiff with sufficient documentation and information such that he or she is able to make the decision whether to litigate, or not.
The inability of a prospective plaintiff to be permitted the opportunity to make that decision, with sufficient access to relevant documentation, is a real injustice. One of the scenarios which the pre‑action discovery procedure is intended to avoid is that a party in a position of information asymmetry with their counterpart may perceive they have little option but to commence substantive proceedings in order to vindicate their claim. That may be productive of unnecessary litigation and give rise to costs consequences for the litigants, including the possibility of adverse costs orders.
Leave to appeal against the master's decision should be granted.
Conclusion and orders
The master was in error in dismissing the Application and ought to have granted the application. We are satisfied the pre‑conditions to the exercise of the discretion in O 26A r 4 RSC are met in the present circumstances, including the jurisdictional requirement that the appellant may have a cause of action. We are also satisfied, as a matter of discretion, that the court should order that the respondent give discovery to the appellant of the categories which were sought in the originating summons.
As to the costs of the proceedings below, we should record the concession made by counsel for the appellant that the appellant no longer presses for an order (assuming it was successful on appeal) that it receive the costs of the proceedings before the master.[102] Rather, the appellant sought an order that the costs of the proceedings below be in the cause of the substantive proceedings to be brought. To guard against the possibility that no substantive proceedings are ultimately commenced, we have included a further order (substituted order 5) in the orders below. Pursuant to these orders, the appellant will have four months to consider whether to commence proceedings following the provision of pre‑action discovery by the respondent.
[102] Appeal ts 40.
Subject to hearing from counsel in relation to the matters in [131] below, the orders which should be made are:
1.The appellant has leave to appeal against the orders of Master Sanderson made on 22 December 2022 in action CIV 1877 of 2022.
2.The appeal is allowed.
3.The orders made by Master Sanderson on 22 December 2022 be set aside and in lieu thereof, it is ordered that:
1.Pursuant to Order 26A rule 4 of the Rules of the Supreme Court 1971 (WA), the defendant is to provide discovery within 21 days, by way of a list of documents verified by affidavit, of such of the following documents as are in its possession, custody or control:
(a)all executed sales contracts for the proposed strata lots in the development at 2-4 McCabe Street, North Fremantle (Development);
(b) documents which contain marketing material or campaigns published by or on behalf of the respondent for the Development;
(c) documents which record or evidence the pricing of the proposed strata lots in the Development;
(d) documents which contain details of any prospective leads as to potential purchasers of the proposed strata lots in the Development;
(e) documents which contain details of all materials used by the respondent or its agents to determine the projections for the sale of the proposed strata lots in the Development; and
(f) documents which contain any information relating to the timing of the registration of the strata plan for the Development.
2.The defendant is to provide inspection of the discovered documents within a further 21 days.
3.The appellant pay the respondent's reasonable costs of compliance with orders 1 and 2, to be taxed if not agreed.
4.Subject to order 5, the costs of the originating summons dated 23 August 2022 and the proceedings before Master Sanderson be in the cause of the substantive proceedings to be commenced by the plaintiff against the defendant.
5.In the event the plaintiff does not commence substantive proceedings against the defendant within four months of compliance by the defendant with both orders 1 and 2 above, the plaintiff is to pay the defendant's costs of the originating summons dated 23 August 2022 and the proceedings before Master Sanderson.
4.The respondent is to pay the appellant's costs of the appeal, to be assessed if not agreed.
The two matters in respect of which we will need to hear further from counsel before final orders are made are: (1) whether the descriptions of the documents in the discovery orders should be subject to any temporal limits; and (2) whether any additional orders are required at this stage concerning the redaction of the documents to be discovered. Both matters were raised during the course of the appeal hearing but in fairness to the parties we consider it appropriate to hear further from counsel in light of our reasons.[103]
[103] Appeal ts 38 - 39 (redaction); appeal ts 36, 37, 39 (temporal limits).
Attachment A
Extracts from the Contract
CONDITIONS PRECEDENT
2.1Pre‑sales
The Seller may terminate this Contract by giving a written notice to the Buyer on or before the Withdrawal Date if the Seller in the Seller's absolute discretion considers that:
(a) there are insufficient sales of the proposed strata lots during the period up to the Withdrawal Date; or
(b) there is insufficient projection for the sale of the proposed strata lots.
2.2Registration of the Scheme Plan
If, at any time, the Seller forms the opinion that the Scheme Plan will not be registered by the Withdrawal Date (whether due to difficulties in obtaining any necessary approval to subdivide, complete, occupy or use the Dwelling in the manner intended by the Seller or otherwise), the Seller may terminate this Contract by giving a written notice to the Buyer of the Seller's view on or before the Withdrawal Date but prior to Settlement, and thereupon the condition in clause 2.2 shall be deemed not to have been satisfied.
2.3Notice of Termination
If the Seller gives the Buyer a written notice under clause 2.1 or 2.2, the Seller must repay the Deposit to the Buyer together with all accrued interest and all other money (if any) paid by the Buyer under this Contract without deduction except for any duty and taxes payable on interest accrued and, upon repayment, this Contract shall be at an end and cease to have effect and neither party shall have any claim against the other.
2.4 Conditions Precedent for the benefit of the Seller
The Conditions Precedent in this clause 2 are included for the benefit of the Seller and may be waived by the Seller at any time prior to the Settlement Date.
PURCHASE PRICE AND SETTLEMENT
3.1Sale of Property
Subject to satisfaction of the Condition Precedent, the Seller agrees to sell and the Buyer agrees to purchase the Property for the Purchase Price on the terms of this Contract and free from Encumbrances other than the Specified Encumbrances.
…
DEFAULT
(a)Neither party may terminate this Contract because of the other party's default nor may the Seller forfeit any money paid by the Buyer or recover possession of the Property because of the Buyer's default, unless:
(i)the party not in default has given the party in default a notice specifying the default and requiring it to be remedied within the time stipulated in the notice; and
(ii)the party in default does not comply with the notice.
(b)The time stipulated for compliance in the notice referred to in clause 5(a)(i) must not be less than:
(i)14 days after the notice is given; or
(ii)if this Contract is a terms contract, the period of notice stipulated in section 6 of the Sale of Land Act 1970.
(c)The giving of a notice under clause 5(a) does not limit the right of either party to give another notice under that clause.
(d)Clause 5(a) does not apply if the party in default has repudiated this Contract.
(e)If the Buyer repudiates this Contract or is otherwise in default, the Seller may:
(i)affirm this Contract and sue the Buyer for damages; or
(ii)affirm this Contract and sue the Buyer for specific performance of this Contract and damages in addition to, or instead of, specific performance; or
(iii)if the Seller has given a notice under clause 5(a), take or recover possession of the Property; or
(iv)if the Seller has given a notice under clause 5(a) which includes a statement that the Seller may terminate this Contract if the Buyer does not comply with the notice, terminate this Contract by notice to the Buyer and:
(A)forfeit the Deposit;
(B)sue the Buyer for damages; and
(C)re‑sell the Property.
(f)Clause 5(e) does not limit any other rights of the Seller.
(g)If the Deposit is greater than 10% of the Purchase Price, under clause 5(e)(iv)(A) the Seller may only forfeit an amount equal to 10% of the Purchase Price and the surplus is deemed to be an instalment of the Purchase Price. The Seller may keep all instalments of the Purchase Price for up to 12 months after termination of this Contract in anticipation of the re‑sale of the Property.
(h)If the Seller re‑sells the Property under clause 5(e)(iv)(C):
(i)the Seller is not required to give notice of the re‑sale to the Buyer; and
(ii)the Seller has the discretion to determine the manner and terms of the re‑sale.
(i)If settlement of the re‑sale of the Property occurs within 12 months after the Seller terminated this Contract:
(i)any deficiency resulting from the re‑sale and all the Seller's expenses relating to the re‑sale (less any money forfeited) may be recovered by the Seller from the Buyer as liquidated damages; and
(ii)the Seller may apply any instalments of the Purchase Price paid to the Seller in full or partial satisfaction of any claim the Seller has for damages.
(j)Whether or not settlement of the re‑sale occurs within 12 months after the Seller terminated this Contract, the Seller may keep:
(i)the surplus from the re‑sale above the aggregate of the Purchase Price, the Seller's expenses in relation to the re‑sale and any expenses and losses incurred by the Seller as a result of the Buyer's default; and
(ii)interest paid by the Buyer.
(k)Clause 5(j) does not apply if this Contract is a terms contract and when it is terminated the Buyer has already been in possession of the Property for more than 12 months. In that case, the Seller must pay the surplus to the Buyer as soon as reasonably possible after the surplus is received by the Seller. The Seller is not required to pay interest on the surplus.
(l)If within 12 months after the Seller terminated this Contract:
(i)the Seller does not begin legal proceedings to recover damages; or
(ii)settlement of the re‑sale has not occurred,
the Seller must pay to the Buyer as soon as reasonably possible all instalments of the Purchase Price received by the Seller (but not the Deposit if it was forfeited). The Seller is not required to pay interest on those instalments.
(m)If the Seller repudiates this Contract or is otherwise in default, the Buyer may sue the Seller for repayment of all money paid by the Buyer under this Contract (except money paid to and held by the Seller's Representative as stakeholder) together with interest on that money at the Specified Rate calculated from and including the date of payment by the Buyer to but excluding the date of repayment.
(n)Clause 5(m) does not limit any other rights of the Buyer.
(o)Time limits in this Contract must be complied with. If a party does not comply with a time limit, it is not necessary for the other party to give a notice before exercising a right, unless this Contract requires a notice to be given.
CONSTRUCTION OF THE DWELLING
6.1Proper Construction
Subject to clause 2.1, the Seller shall construct the Dwelling:
(a)in a proper and workmanlike manner;
(b)to the satisfaction of the Council;
(c)substantially in accordance with the Construction Documents; and
(d)according to such standards as ordinarily are accepted as satisfactory in the building industry,
provided that no objection shall be taken, requisition made or compensation claimed (except as permitted under clause 7.4) by reason of any variation to:
(e)the Construction Documents or any difference between the Construction Documents and the Dwelling as built if such variation or difference is in accordance with:
(i)the building by‑laws of the Council; or
(ii)the recommendation of the Seller's Designer, structural engineer, mechanical engineer, electrical engineer or any other consultant and does not adversely affect the Buyer's use and enjoyment of the Property in a material way; or
(f)the schedule of indicative finishes and fittings annexed to the Contract and marked as Annexure C where such variation has arisen because an item in that schedule is unavailable (either permanently or temporarily) or, in the opinion of the Seller, unsuitable (in which case, the Seller is authorised to replace the unavailable or unsuitable item with one which, in the Seller's opinion, is of substantially the same quality and utility as the original item or better).
6.2Practical Completion of Dwelling
(a)Subject to clause 2.1, the Seller shall use reasonable endeavours to achieve Practical Completion of the Dwelling by the date which is 36 months after the Contract Date.
(b)The Buyer shall have no recourse against the Seller for delay in achieving Practical Completion of the Dwelling or in achieving registration of the Scheme Plan other than the remedies expressly stated in this Contract.
6.3No Variation of Construction Documents
(a)The Seller shall construct the Dwelling in accordance with these Special Conditions and shall not enter into any agreement or arrangement with the Buyer to vary the Construction Documents or the Property, except at the Seller's absolute discretion.
(b)If the Buyer wishes to make any minor variations to the finishes or colour scheme in respect of the Property, the Buyer shall apply in writing to the Seller specifying the desired variation in detail and requesting approval for it.
(c)If the Seller does agree to vary the Construction Documents at the request of the Buyer, the Seller will require payment in advance for the cost of any variation.
(d)If the Seller agrees to the variation requested by the Buyer (with or without conditions), then the Seller will provide a written quotation for the cost of the materials, labour and administrative charges required to complete the variation.
(e)If the Buyer accepts the quotation, then the Seller shall, upon receipt of payment in full from the Buyer for the whole cost of the variation and any GST, instruct the Builder on the Buyer's behalf to proceed to incorporate the variation during the construction of the Property.
(f)If the Seller does agree to a requested variation, that agreement shall be deemed not to be a material term of the Contract and the Seller shall not be liable to the Buyer for any failure to carry out that variation in the manner agreed or at all and the Buyer shall have no recourse against the Seller, except for a refund of variation costs if the variation is not carried out.
6.4Variations to development
(a)The Seller may vary the Construction Documents and Scheme Plan or the specifications contained in Annexure C as the Seller considers necessary if:
(i)required by any Relevant Authority;
(ii)the Seller considers the variation will enhance the Dwelling;
(iii)there is some matter or circumstance that the Seller could not have reasonably foreseen;
(iv)by reason of the requirements or the practical methods of construction;
(v)the cost of materials or products in the specifications contained in Annexure C has risen so that it is reasonable for the Seller to substitute them with similar materials or products that in the Seller's opinion is of no lesser quality; or
(vi)the availability of materials or products described in the specifications contained in Annexure C has become difficult or impossible to obtain so that it is reasonable for the Seller to substitute them with similar materials or products that in the Seller's opinion is of no lesser quality.
(b)Notwithstanding anything to the contrary in this Contract, the Buyer must not make any objection, requisition, claim for compensation, claim a reduction in the Purchase Price or refuse to complete Settlement by reason of:
(i)any variation to the Construction Documents which may be required by the Seller or any Relevant Authority where that variation does not materially prejudice the Buyer;
(ii)any variation in the construction or specifications contained in Annexure C necessary to comply with the requirements of any Relevant Authority, the industry standard or the availability of material;
(iii)any variation in the number, size or location of any strata lot or the area of the Common Property created on the Scheme Plan, re‑subdivision or consolidation;
(iv)the unit entitlement of any strata lot created on the Scheme Plan, re‑subdivision, consolidation or the re‑allocation of the unit entitlement of the Property or any other Lot on the Scheme Plan;
(v)any variation to the internal floor area of the Property (excluding balconies and car parks) where such variation is less than or equal to a 10% reduction in the internal floor area of the Property;
(vi)any variation to the floor area of any external part of the Property including but not limited to balcony or car park;
(vii)any variation to the Common Property and any other areas other than the Property;
(viii)any variation in the number, size or location of car parking spaces or storerooms; or
(ix)any variation to the location of the letter boxes,
and none of the matters in this clause 6.4(b) shall entitle the Buyer to terminate this Contract or require the Seller to enter into any supplementary agreement with the Buyer and the parties agree that none of the matters in clauses 6.4(b) will materially prejudice the Buyer.
…
LIMITATION OF LIABILITY
The Buyer will have no right to make any objection or requisition or claim against the Seller for compensation or to rescind this Contract and the Seller will not be liable to indemnify the Buyer whatsoever or howsoever arising by reason of:
…
(i)any variation or change to the overall plan of the development of the Property.
I certify that the preceding paragraph(s) comprise the reasons for decision of the Supreme Court of Western Australia.
IHN
Associate to the Honourable Justice Lundberg
13 SEPTEMBER 2023
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