SSE Corp Pty Ltd v Toongabbie Investments Pty Ltd as trustee for the Toongabbie Investments Unit Trust

[2016] NSWSC 1235

Supreme Court

New South Wales

• Amendment notes

Medium Neutral Citation:	SSE Corp Pty Ltd v Toongabbie Investments Pty Ltd as trustee for the Toongabbie Investments Unit Trust [2016] NSWSC 1235
Hearing dates:	11 and 12 August 2016
Date of orders:	06 September 2016
Decision date:	06 September 2016
Jurisdiction:	Equity
Before:	Robb J
Decision:	(1) Order that the plaintiff’s summons be dismissed. (2) Order the plaintiff to pay the defendant’s costs of the claim made in the plaintiff’s summons. (3) Direct the parties to confer for the purpose of submitting to the associate to Robb J, within 14 days of the delivery of reasons for judgment on the plaintiff’s summons, short minutes of order containing directions for the further conduct of the cross claim, and if agreement cannot be reached, the parties should arrange a time for a directions hearing with the associate.
Catchwords:	EQUITY – application for rectification of two contracts for the sale of land by inserting the words “plus GST” after the statement of the purchase price – whether rectification should be allowed – communications surrounding the renegotiation of the purchase price considered – court considered factors including the fact that negotiations were previously conducted on a GST inclusive basis – conveyancer for the plaintiff was equivocal in her communication with the defendant – director of the plaintiff failed to correct the defendant’s understanding that the price was not GST inclusive when he had the opportunity – credibility of witnesses considered – held defendant’s witnesses were credible – alternatively, whether there was unilateral mistake – held no unilateral mistake established – held plaintiff’s summons dismissed – plaintiff to pay defendant’s costs   CONTRACTS – warranty given by the plaintiff – whether the clause required the plaintiff to own copyright in the construction documents, and whether it was obliged to assign to the defendant copyright in those documents – construction of special condition – held pre-contractual negotiations cannot be taken into account in this instance – held in any event, communications did not assist with proper construction of the special condition – held proper construction required the plaintiff to own copyright in the documents
Legislation Cited:	Civil Procedure Act 2005 (NSW)
Cases Cited:	Franklins Pty Ltd v Metcash Trading Ltd [2009] NSWCA 407; (2009) 76 NSWLR 603 Igloo Homes Pty Ltd v Sammut Constructions Pty Ltd [2005] NSWCA 280 Johnson Matthey v AC Rochester Overseas Corp (1990) 23 NSWLR 190 Mayo v W & K Holdings (NSW) Pty Ltd (in liq) (No 2) [2015] NSWCA 119 Permanent Trustee Australia Co Ltd FAI General Insurance Co Ltd [2001] NSWCA 20; (2001) 50 NSWLR 679 Permanent Trustee Australia Co Ltd v FAI [2003] HCA 25; (2003) 214 CLR 514
Category:	Principal judgment
Parties:	SSE Corporation Pty Ltd (plaintiff) Toongabbie Investments Pty Ltd as trustee for the Toongabbie Unit Trust (defendant)
Representation:	Counsel: M W Young SC (plaintiff) G Moore (defendant)   Solicitors: New South Lawyers (plaintiff) Grove Lawyers (defendant)
File Number(s):	2016/70341
Publication restriction:	None

Judgment

Introduction

1. In these proceedings, the plaintiff, SSE Corp Pty Ltd (SSE), seeks an order for the rectification of two contracts for the sale of land, which SSE entered into on 20 August 2015 with the defendant, Toongabbie Investments Pty Ltd, as trustee for the Toongabbie Investments Unit Trust (Toongabbie Investments).

2. The sole director and secretary of SSE is Mr Simon Elias. Mr Elias is a qualified pharmacist. He also holds a builder’s licence. He has operated a pharmacy business for some 15 years, and for a period of about 20 years he has acquired property for the purposes of development. He incorporated SSE in 2010.

3. SSE retained Mr Elias’ aunt, Ms Joanne Azar, who is a licensed conveyancer, to act for the company on the transaction.

4. Mr Elias and Ms Azar gave evidence at the hearing of these proceedings.

5. Toongabbie Investments was incorporated on 10 June 2015. Its directors are Mr Danny Basseal and Ms Carine Khoury. The shareholders in Toongabbie Investments are companies controlled by Mr Basseal and Ms Khoury. Toongabbie Investments is the trustee of the Toongabbie Unit Trust (Trust). The parties entitled to the units in the trust are the Basseal Family Trust, the Khoury Family Trust, and the trust known as the Boustany Family Trust. The Boustany Family Trust is a trust established for the benefit of the family of Mr Habib Boustany. In practical terms, the Toongabbie Investments Trust was established for the benefit of the families of Mr Basseal, Ms Khoury and Mr Boustany.

6. Although Mr Boustany is not a director of Toongabbie Investments, he was the person who represented Toongabbie Investments in its dealings with SSE. Mr Boustany’s and Mr Elias’ children go to the same school, and the opportunity for Toongabbie Investments to enter into the transaction the subject of these proceedings arose during a discussion between Mr Boustany and Mr Elias at their children’s school fete.

7. Toongabbie Investments retained Grove Lawyers to act for it on the transaction. Mr Dany Elachi, who is a paralegal and the husband of the principal of the firm, was the person responsible for Toongabbie Investments’ matter.

8. Mr Boustany, Mr Basseal and Ms Khoury gave evidence for Toongabbie Investments at the hearing. Mr Elachi did not give evidence. Mr Elachi was, however, present in court throughout the hearing.

Contracts for sale

9. The contracts for sale were for the sale of two adjoining residential allotments at No 5 and No 7A Octavia Street, Toongabbie, New South Wales. The contracts were in the same terms save that the purchase price for No 5 was $2,880,000, and the price for No 7A was $1,920,000. The total price for the two allotments was therefore $4,800,000.

10. Although each of the properties the subject of the contract was a residential property, SSE had obtained development consent from the relevant council for the erection of 24 home units and 29 parking spaces on the two properties. Both properties were sold with the benefit of the development consent, and all plans, reports and other documents connected to the development consent, so that Toongabbie Investments could construct the project the subject of the development consent on the two properties.

11. The fact that the residential properties were sold with the benefit of the development consent had the effect that GST was payable on the sale of the properties.

12. In each contract, the price was stated simply in terms of the amounts set out above, and no words to the effect of “plus GST” were included against the statement of the prices. Nor were the words “plus GST” added to the statement of the amount of the deposit, or the balance of the price payable on completion.

13. Each contract included a cl 13.2, which was in the following terms:

Normally, if a party must pay the price or any other amount to the other party under this contract, GST is not to be added to the price or amount.

14. The parties were agreed that the combined effect of the statement of the price in each contract and cl 13.2 was that Toongabbie Investments was not required to pay any additional amount on completion to cover the GST payable on the prices, and accordingly it would be a matter for SSE to pay GST equal to 1/11 of each of the prices, if the contracts had been completed.

15. Before the time for completion of the contracts arrived, SSE took the stance that the true agreement between the parties, made before the contracts of sale were exchanged, was that the GST payable on a total price of $4,800,000 was payable by Toongabbie Investments, and that by mistake the words “plus GST” had not been added to the statement of the price in each of the contracts before the contracts were exchanged.

Proceedings

16. On 4 March 2016, SSE filed a summons in which, in respect of both of the properties, SSE claimed orders rectifying the contracts to add the expression “Plus GST” to the statement of the price, the deposit, and the balance payable on completion on the first page of each of the contracts.

17. SSE also sought orders for specific performance of each of the contracts as rectified, plus consequential relief.

18. In relation to the delay in completion of the contracts that has resulted from the dispute and the present proceedings, SSE claimed damages for breach of the two contracts, and interest pursuant to s 100 of the Civil Procedure Act 2005 (NSW). However, at the hearing, counsel for SSE informed the court that SSE no longer wished to pursue its claim for damages or statutory interest, as instead it would rely upon a term of the contracts, which imposed on Toongabbie Investments an obligation to pay interest on the purchase price in the event of any delay in completion of the contracts.

19. Toongabbie Investments has filed a cross claim, in which it seeks declarations that, by its continued insistence that the prices payable under the contracts were the stated prices plus GST, together with its refusal to complete the contracts unless the prices plus GST were paid, SSE has repudiated its obligations under the contracts. Toongabbie Investments seeks declarations that it was entitled to terminate the contracts, and that it has validly done so.

20. Finally, Toongabbie Investments seeks a declaration that it holds charges over each property pursuant to cl 2.8 of the respective contracts, to secure amounts of $144,000 and $96,000 respectively. Clause 2.8 creates a charge over the properties in respect of any deposit paid.

21. The parties were in agreement that, at this stage of the proceedings, the court should only deal with the issues that arise on the summons, and that it should defer the hearing of the cross claim.

22. There is a subsidiary issue that the parties have agreed the court should deal with at this stage of the proceedings. It concerns the operation of special condition 55, which consists of a warranty given by SSE concerning its title to the development consent and the construction documents, and that upon completion, title to the development consent and the construction documents will be assigned to Toongabbie Investments. The primary issue is whether special condition 55, on its proper construction, requires SSE to own copyright in the relevant construction documents, and whether it is obliged to assign that copyright to Toongabbie Investments on completion of the two contracts. It is Toongabbie Investments’ position that the special condition requires assignment of copyright in the construction documents, other than the development consent plan. As I understand Toongabbie Investments’ position, it will accept the assignment of a licence to use the development consent plan from the architect who may have copyright in that plan. SSE’s position is that special condition 55 should be construed in a way that only requires SSE to assign to Toongabbie Investments on completion whatever entitlements SSE has in respect of the construction documents, provided what is assigned is adequate to permit Toongabbie Investments to construct the proposed development.

Legal principles

23. It will be convenient at this stage to set out the legal principles that apply to the issue of whether on the evidence that is before the court, SSE is entitled to the orders for rectification of the two contracts that it seeks in its summons. There was no real issue between the parties concerning the content of those principles.

24. The principles that govern the application of the equitable doctrine of rectification have been considered at length in a number of recent decisions of the Court of Appeal. It will be sufficient for the purposes of the present case to note, with respect, the following statement of those principles by Gleeson JA (with whom Meagher JA and Sackville AJA agreed) in Mayo v W & K Holdings (NSW) Pty Ltd (in liq) (No 2) [2015] NSWCA 119:

[55] …The authorities were considered by the court in Franklins Pty Ltd v Metcash Trading Ltd [2009] NSWCA 407; 76 NSWLR 603 (Franklins v Metcash) and in Ryledar (see also Newey v Westpac Banking Corporation [2014] NSWCA 319). It is sufficient to refer to the following principles.

[56] First, a written document that has been executed is presumed to be the true record of the parties’ agreement: Equuscorp Pty Lt v Glengallan Investments Pty Ltd [2004] HCA 55; 218 CLR 471 at [33]. However if there is clear evidence of a mistake in the recording of their agreement the equitable remedy of rectification is available to reform the parties’ document, but not to reform the parties’ bargain: Maralinga Pty Ltd v Major Enterprises Pty Ltd [1973] HCA 23; 128 CLR 336 (Maralinga) at 350 (Mason J); J W Carter, Contract Law in Australia, (6th ed 2013, LexisNexis Butterworths) at [21-02].

[57] Secondly, the rationale of rectification of a written document in equity is that it is unconscientious for a party to the contract to seek to apply the contract inconsistently with what that party knows to be the common intention of the parties at the time the written contract was entered into: Ryledar at [315] (Campbell JA; Mason P agreeing).

[58] Thirdly, the “intention” that is relevant to rectification of the contract is the subjective intention of the parties, sometimes called the actual intention: Ryledar at [267]. Before rectification of the contract is granted, the actual intention needs to exist in circumstances where it can be seen that there is a common intention of all those entering into the contract: Ryledar at [279].

[59] In Ryledar at [281], Campbell JA emphasised that when that intention relates to the terms upon which the parties will contract with each other, it is still necessary for them to know enough of each other’s intentions for it to be said that there is a common intention. His Honour explained that the parties might come to know each other’s intentions where those intentions are directly stated, or through the various other means by which one person’s intentions can become known to another person. Those means sometimes involve a process of conscious and deliberate inference and could also involve simply perceiving a gestalt in a series of events. His Honour also noted that negotiation of any contract takes place in a context in which various facts are known or assumed by the negotiating parties. Thus, for example, if a contract is negotiated in a context where there are well understood business practices and conventions, and nothing is said about those practices and conventions not applying, it can be legitimate to conclude that both parties to the contract intended to act in accordance with those practices and conventions, even if they did not expressly communicate to each other that they intended to act in accordance with those practices and conventions.

25. It is also necessary to consider the following observation made by McClelland J (as his Honour then was), when in Johnson Matthey v AC Rochester Overseas Corp (1990) 23 NSWLR 190, his Honour said, at 195, that the entitlement to rectification of a written contract requires “clear and convincing proof of a common intention of the parties not reflected in the written document”. The reference by Gleeson JA to “clear evidence” in par [56] in Mayo is to the same effect.

26. I have not lost sight of the fact that SSE submitted in the alternative, to its claim that the parties exchanged contracts for the sale of the two properties under a common mistake as to its terms, that there was a unilateral mistake under which SSE was mistaken, but Toongabbie Investments was aware that SSE was acting under a material mistake. I do not propose to consider the principles that may apply where a unilateral mistake of this nature is established in fact, as I do not think it is arguable on the evidence that Toongabbie Investments was actually aware that SSE was acting under a material mistake when it exchange the contracts.

27. SSE strongly put a submission contrary to the conclusion that I have expressed in the preceding paragraph, based on an email exchange that took place between Ms Azar and Mr Elachi on 19 August 2015. I will explain below in chronological context why I have not accepted that submission.

Initial draft contracts

28. Mr Boustany initially expressed interest to Mr Elias in buying the properties from SSE on about 27 March 2015, during a discussion at their respective children’s school. He had previously had a discussion with Ms Khoury’s husband about going into real estate development together, after Mr Boustany had ceased employment as a banker with Arab Bank.

29. There is a controversy between the witnesses for the two parties concerning the initial course of negotiations for Mr Boustany and his associates to buy the two properties from SSE. It is not necessary to resolve those controversies, which would require the court to make a choice between the accuracy of the recollection of events by Mr Elias and Mr Boustany, in circumstances where the objective evidence is of little assistance in achieving that resolution.

30. It is sufficient to record that in the period leading up to 5 August 2015, the parties negotiated terms for the purchase of both properties, contracts were prepared by Ms Azar, and agreed to by Mr Elachi on instructions from Mr Boustany. The deposits for the two properties were paid to Ms Azar, in anticipation of exchange of contracts. There was evidence concerning disagreements between the parties, and difficulties in making arrangements for the exchange of contracts.

31. Mr Boustany accepted in his evidence that, by early May 2015, the price Mr Elias asked for was $4 million, or alternatively, that he would accept $3.2 million plus two of the units to be constructed. Mr Boustany then spoke to Mr Basseal and Ms Khoury, and they all agreed that it would be preferable to buy the properties outright for $4 million.

32. Mr Boustany’s evidence was that he initially thought that GST would not be payable on the purchase of the properties, because they were both residential allotments. He sought advice from his accountant, and was told that GST would be payable, as the vendor had obtained development consent, and was selling the properties with the benefit of that consent. The accountant also advised that the margin scheme would not apply to the purchaser, and so the box on the contract as to whether the sale was a taxable supply should be marked “yes”, but the box concerning whether the margin scheme would be used should be marked “no”.

33. Mr Boustany discussed the fact that GST would be payable on the sale with Mr Basseal and Mr Khoury, and they agreed to make an offer to Mr Elias to purchase the properties for the amount of $4.4 million inclusive of GST. Mr Boustany understood that the GST component of $400,000 would be recovered when the purchaser submitted its business activity statement (BAS) return.

34. Mr Boustany gave evidence of having a conversation with Mr Elias at Mr Elias’ house in Westmead on about 22 May 2015. He informed Mr Elias that he and his associates would prefer to pay the whole price of $4 million in cash, and that since GST applied, the price should be $4.4 million. Mr Elias agreed. They discussed the fact that Mr Elias would provide a tax invoice for the GST, which could then be recovered, so that the effective price would be $4 million.

35. Mr Elias’ evidence concerning this conversation was consistent with the evidence given by Mr Boustany; although Mr Elias added that there was discussion concerning the application of the margin scheme, and that Mr Boustany told him that he had been given advice by his accountant to do the transaction on a plus GST basis.

36. Mr Elias’ evidence was that, after this meeting, he engaged Ms Azar to act on the conveyance, who provided him with draft contracts on about 1 June 2015. The draft contracts have not been included in the evidence.

37. On 19 June 2015, Mr Elachi sent an email to Ms Azar, in which he requested a number of amendments and clarifications concerning the draft contracts for sale. One of the requests was as follows:

3. The Purchase Price for 5 Octavia Street to be $2,500,000 and 7A Octavia Street to be $1,500,000.

38. Mr Elachi also said in point 20 that the “margin scheme” box on the front page of the contracts should be marked “no”.

39. Ms Azar responded on 19 June 2015. She stated: “3. Agreed however the price is plus GST”. She agreed with Mr Elachi’s point 20.

40. On 19 June 2015, Mr Boustany sent an email directly to Mr Elias. The email chain of which the email formed part included Mr Elachi’s email to Ms Azar of 19 June 2015, and her reply of the same date. Mr Boustany said:

I have instructed my Solicitor to acquiesce on all the Not Agreed issues below except [Issues 9, 15, 17 and 19].

41. Accordingly, Mr Boustany agreed with the position set out in point 3 of Ms Azar’s email.

42. Mr Boustany, on behalf of Toongabbie Investments, understood that contracts for the two properties would be exchanged on the basis of a total price of $4.4 million, which would include the amount of GST payable on the purchases.

Increase in price

43. However, on 5 August 2015, Mr Elias sent an email to Mr Boustany, in which he informed Mr Boustany that SSE would raise the price for the two properties. The email relevantly said:

Sorry for the delay in getting back to you I have been very busy and trying to organise a lot of things. To put it simply Habib I don’t buy anything unless I have money and second that I don’t sell anything unless I have something ready to buy.. since we started this months ago I had 7-8 sites lined up ready to buy but coudnt as exchange hadn’t happened yet due to no-fault of mine or yours just normal delays. Ive since missed out on 6 of those sites and the other two have raised their price to me by substantial amounts due to the delay. I have a shop in Parramatta and I can show you contracts from 2.4 to 2.8 M and is going up again if I don’t sign soon. I have one in blacktown which was 120k per site and are now is 150k per site (difference of 1.8M), again I cant do nothing till we exchange. if you recall the conversation we had at my place when you asked me why im selling and I told you it was to rebuy into the market I have found some new ones also and in particular in toongabbie where they are now asking 200k per site raw I have the details for this to show you and the site fits 15-16 apartments and asking 3.2 Million. It is out of control but out of my hands I simply cannot sell at the old price and buy at the new otherwise I will miss out greatly and its happened to me before. i also missed out on the four-five sites at penrith which if I got back then would have made heaps of money between then and now. The market in the last two months has gone up 20-30%. Im sure your aware of the 20 unit site in lane st da and cc approved ready to start building got 253K last Thursday at auction. If your ready to exchange now which I no you are then I can only adjust it to todays price if you are interested as long as exchange is today we can do a deal if not than Joann is itching to give you back your money. Its not all doom and gloom if the price goes up so does the sale price of the units for everyone remembering that mine is an easy build single lift single basement. If you choose to go affordable housing you can get a fsr bonus and the current height limit is 15 m which is 5 stories you currently only have 4 so I will be pushing with affordable housing an entire another floor and get another 6 units on the site to max yield and capacity and due to increase prices its really the only way to go. So I know it’s a bitter pill to swallow but absolute best I can do for you is $5.1 plus same terms as before like I said prices have gone up by that if you through in the extra 6 units youll get it back down to 170k per site if not 212k which is still feasible as prices when we started were around 550k mark they are now well into the 600k mark so its all relative to where we are in todays market, I know if you don’t take it ill prob redesign for the 30 units and get cc with it and auction it off as my emails are full of agents just waiting to take it as supply for da is slow. but I understand totally if your out of reach and not interested at all either way im still their for your family and kids and yourself as money doesn’t change me but I got to do whats right for me.

44. The most significant part of this email for the purposes of the present dispute is the sentence: “So I know it’s a bitter pill to swallow but absolute best I can do for you is $5.1 plus same terms as before like I said prices have gone up…”

45. In Mr Elias’ primary affidavit, he said that it was his understanding that the expression “$5.1 plus” conveyed the meaning $5.1 million plus GST, and that was the meaning that he intended the words to have.

46. In the course of Mr Elias’ cross-examination, the court asked him a number of questions concerning his references in the email to “170k per site if not 212k”. In substance, Mr Elias explained that those amounts were calculated by putting aside the fact that GST would be payable on the sale of the properties. According to Mr Elias, that was the appropriate course because although the sales were taxable supplies and attracted an obligation to pay GST, the amount paid would be recovered relatively quickly by the purchaser. On that basis, if the purchaser succeeded in obtaining development consent for the construction of an additional six home units, the total number of home units would be 30. Thirty times $170,000 is $5.1 million. On the other hand, if the council refused development consent for the additional home units, 24 times $212,000 is $5,088,000, or almost $5.1 million.

47. Properly analysed, the references in the email to the purchase price of the properties per notional unit of either $170,000 or $212,000 is consistent with Mr Elias having the intention, when he wrote that email, that the price he was offering was $5.1 million plus GST. If the GST was not added to the $5.1 million, then the purchaser would effectively get the GST component back, so the price per notional unit would have been less, in either scenario, than Mr Elias stated in his email.

48. Mr Boustany said in his affidavit that, when he received Mr Elias’ 5 August 2015 email, he was very upset because he thought that Mr Elias had broken his word after they had shaken hands.

49. Mr Boustany said that, when he read the expression “$5.1 plus same terms as before”, he thought that the price asked for was $5.1 million inclusive of GST. He thought that the “plus” in “plus same terms” referred to all of the terms that had been included in the draft contracts for sale to that time, so that, as the $4.4 million was inclusive of GST, so was the $5.1 million.

50. Mr Boustany was cross-examined about his understanding of the relevant parts of Mr Elias’ 5 August 2015 email (T 96.38 to 97.23):

Q. When he said, "So I know it's a bitter pill to swallow. The absolute best I can do for you is 5.1 plus same terms as before. Like I said, prices have gone up by that." Then when he said, "prices have gone up by that", you understood he was talking about the 20 to 30% increase that he said had applied to the last two months of the market, is that right?

A. No, I understood that the prices have gone up from 4.4 to 5.1 which is roughly stating that he's gone up by about 700 grand.

Q. But that meaning makes absolutely no sense does it?

A. Yes it does, of course it does.

Q. Because when he says, "The best I can do for you is 5.1 plus same terms as before. Like I said, prices have gone up by that", what he is saying is that because prices have gone up by a particular amount, the best I can do for you is 5.1, is that right?

A. There was a point of reference for me which was the 4.4 and prices have gone up by that, meaning gone up from whatever the agreed price was to 5.1. That's what by that means to me.

Q. He is comparing the jump in price of the Toongabbie properties from 4 million plus GST to 5.1 to the prices that have gone up elsewhere in the market, isn't he?

A. Well I didn't see that comparison because they were all over the place, the numbers, anyway, they didn't make sense. Even in your logic today, looking at it today, they still don't make sense, that logic. So for instance 2.4 to 2.8 is not a jump of 20 to 30%, it's a lot less. The prices on the, on the, on the units for sale, he says 550 to 600, that's at best 10% maybe even less, so there's even a - around the 14 to 15% jump in Parramatta, he's saying a 10% jump in the sales. His percentages are all over the place and then he, he tried to make the claim that prices have gone up 20 to 30% in Toongabbie, in the Parramatta region, in two months. That's absurd. These percentages don't make sense. Even in hindsight today when you look at it, they still don't make sense. But I definitely didn't do an analysis like that when we looked at this, looked at this email.

51. Mr Boustany’s response was that, as the initial total price was $4.4 million inclusive of GST, he understood that the request for $5.1 million was also inclusive of GST. This understanding was reinforced by the magnitude of the increase in the asking price over a short time.

52. The following cross-examination also took place concerning whether Mr Boustany appreciated that Mr Elias’ references in the email to notional prices per unit of 170k and 210k meant that the new asking price was on a plus GST basis (T 99.26 to 100.10):

Q. So if there was another six units, then that would be 30 units, is that right?

A. Yeah, 24 plus six, yes 30.

Q. Then Mr Elias gave some figures per site, 170 per site if not a 212K, didn't he?

A. Yes, correct.

Q. And you knew that 170K multiplied by 30 units would be 5.1 million?

A. That's what it works out to yes.

Q. And you knew 2.2K multiplied by 24 units was 5,088,000. In other words, also very close to 5.1 million.

A. Sorry, 2.2?

Q. 212.

A. 212. Yes, 212 by 24 is around 5.1 yes.

Q. And you knew the figures per site that Mr Elias was referring to were figures that didn't include any GST component?

A. No how could I have known that?

Q. That's what you understood when you read those figures, isn't that right?

A. Not at all, because those figures still work if 5.1 is inclusive of GST.

Q. But you know, don't you, that when assessments of feasibility of projects are concerned, that people tend to talk about figures not including a GST component, isn't that right?

A. That's not right, no.

Q. And that he was saying that if you divide the price of 5.1 over the units you would get these amounts per unit and you understood that he was talking in feasibility terms, and that he was using figures that didn't include GST, isn't that right?

A. No, I understood feasibility terms but definitely didn't tweak on that it was anything to do with plus or inclusive of GST.

53. Mr Boustany’s position was that the amounts referred to by Mr Elias in the email were neutral as to whether or not Mr Elias was asking for GST in addition to the $5.1 million and that Mr Boustany did not “tweak” to the possibility that Mr Elias was asking for GST in addition to the price.

54. Finally, the following cross-examination occurred concerning Mr Boustany’s understanding of Mr Elias’ 5 August 2015 email (T 100.19 to 100.29):

Q. After you read the 5 August 2015 email, you understood, didn't you, that what Mr Elias wanted was 5.1 million plus GST?

A. Not at all. Didn't occur to me that he wanted 5.6 million - to go up from 4.4 to 5.6, that's ridiculous.

Q. So you say it didn't even occur to you when the man had previously been negotiating in prices are not inclusive of GST, that when he sighted a price here that it didn't even occur to you the possibility that the price he mentioned was a price not including GST?

A. No it didn't occur to me.

55. Mr Boustany gave evidence of discussing Mr Elias’ change of position with Mr Basseal, Ms Khoury and Mr Elachi. Mr Boustany spoke of the increase in the asking price to $5.1 million implicitly as if that was the final price; and that there was no question of GST being added on top.

56. Mr Basseal gave evidence that he understood that the increased price of $5.1 million would be inclusive of GST. Ms Khoury said that, after her conversation with Mr Boustany, she was not sure whether the price was inclusive or exclusive of GST; but either way, the price was too high.

57. On 5 August 2015, Mr Boustany, in the presence of Mr Basseal, prepared a number of feasibility studies for the construction of the project on the properties. That process involved the use of a feasibility study program that Mr Boustany had on his computer. The computer program assisted the user in making an estimate of the expected gross realisations from the sale of the home units following the completion of the project, as well as did the calculations necessary to estimate the profit from the project. It also enabled a sensitivity analysis to be carried out.

58. The first step was to carry out an estimate of the gross realisations from the sale of the home units. This involved the adoption of a rate per square metre of internal space that differed slightly according to the area of the home units and their height above ground level. By this means, a total of gross realisations of $14,509,675 were estimated.

59. The program provided for a number of columns, against a list in the left-hand column of different types of expenses, and steps required to be taken in estimating the total profit from the project. The program included a funding table, which assisted the user in assessing the needs for funding the project. In relation to each cost needed to be funded, the program provided for columns to the right of the left-hand column (which listed each type of cost) headed “Costs To Date”, “Equity to Come”, “Debt to Come” and “Total Cost”. The program allowed for the manual input into the available fields of the cost incurred to date for each item of cost, the equity to be contributed by the developer, and the debt to be borrowed by the developer in relation to that cost item. The program then calculated the total cost for that cost item.

60. The entry in the feasibility study for “Land EMV”, which represented the expected purchase cost of the property upon which the project was to be undertaken, reads:

Costs To Date	Equity to Come	Debt to Come	Total Cost
Land EMV	255,000	2,520,000	1,861,364	4,636,364

61. The significant figure in this line item is the Total Cost of $4,636,364. That is the amount which is 10/11 of $5.1 million. As Toongabbie Investments would expect to recover the GST component of the purchase price, if the purchase price was $5.1 million, $4,636,364 represents the net purchase price that would have to be funded by Toongabbie Investments.

62. It is thus clear (and as I understand SSE’s submissions, accepted by SSE), that this feasibility study is consistent with Mr Boustany believing that the new sale price sought by Mr Elias was $5.1 million, inclusive of GST.

63. The feasibility study also included a funding line item called “Rates & Taxes”, and provision for deducting “Applicable GST” from “Estimated Gross Realization”, in order to determine “Net Realisations”. The total estimated Rates & Taxes were $1,001,161, and the estimated Applicable GST was $423,689. Mr Boustany explained, during his cross-examination, that it would be necessary for Toongabbie Investments, as the developer, to pay GST on the sale prices of all of the completed home units, and that the GST could not be separately passed on to the purchasers. Accordingly, it was a cost of the project. However, Toongabbie Investments would be entitled to a credit for certain Rates & Taxes paid during the course of the development against the total final obligation to pay GST on the sale of the completed home units. As I understand the evidence, the figure of $423,689 represents the additional amount of GST payable, after relevant credits have been allowed. Consequently, while these figures are consistent with the regime that applies for the payment of GST, they do not allow any conclusion to be drawn about the price that Mr Boustany assumed as the purchase price of the properties.

64. The feasibility study prepared by Mr Boustany included a residual land analysis. That is a common process used by real estate valuers and developers to calculate a value for an available development site. It starts with the gross realisations of $14,509,675 calculated by Mr Boustany, from which it deducts selling costs, GST, development costs, interest payments, and stamp duty and legal costs. That calculation will yield the amount of the gross realisations that will remain after the deduction of all costs other than the purchase price of the development site. In order to assess the feasibility of the project, the person undertaking the residual land analysis will make a commercial assessment of the developer’s profit that the project must yield in order to make the risks that the developer will undertake worth the amount of profit earned. In this case, the developer’s profit was allowed at 22.50%, or $2,539,251. When that amount was deducted from the gross realisations, after all other deductions had been made, the residual land value was $4,003,400.

65. As the purchase price of the properties was in fact assumed to be $5.1 million, inclusive of GST, the residual land value analysis of $4,003,400 showed that the project was not feasible at the purchase price sought by SSE.

66. Mr Boustany’s evidence was that he and Mr Basseal produced a second feasibility analysis on 6 August 2015. The results of this second analysis were not tendered by Toongabbie Investments, as was the case for the feasibility analysis that I have discussed above.

67. SSE submitted that this absence was significant, as it may have concerned an alternative feasibility analysis in which Mr Boustany and Mr Basseal examined the feasibility of a purchase of the properties at $5.1 million plus GST.

68. However, in cross-examination Mr Boustany explained the inability of Toongabbie Investments to tender the second feasibility analysis in the following way. The second feasibility analysis was prepared in order to determine a price less than the asking price of $5.1 million inclusive of GST, which Toongabbie Investments may have been prepared to pay, and which could be shown to be a feasible development project. Mr Boustany said that, after agreement was reached between Toongabbie Investments and SSE whereby the former would pay a price of $4.8 million for the properties, inclusive of GST, the second feasibility analysis was updated from time to time by the entry of new figures in the various fields, during the course of the fine tuning by Toongabbie Investments of its feasibility studies. According to Mr Boustany, when that was done, most of the original data entries were overwritten, so that it became impossible for Toongabbie Investments to print out that second feasibility analysis in its original form for the purpose of the evidence. That was the only reason why the evidence includes only one of the two original feasibility analyses.

69. Toongabbie Investments tendered evidence which showed that the feasibility analysis that assumed a purchase price for the properties of $5.1 million inclusive of GST had not been modified since 7:10 AM on Thursday, 6 August 2015.

70. Mr Basseal gave evidence confirming the exercise that Mr Boustany had carried out, in his presence, concerning feasibility analysis at $5.1 million. Mr Basseal said that he took it for granted that the new asking price was inclusive of GST, because only months earlier Mr Elias had agreed to accept $4.4 million inclusive of GST, and if the $5.1 million was exclusive of GST, the asking price would be $5.61 million, an increase of $1.21 million.

71. Mr Basseal also said that when he was with Mr Boustany, Mr Boustany carried out a second feasibility analysis at the price of $4.75 million, which showed that the development was still feasible.

72. Mr Boustany gave evidence that he obtained confirmation from the council that it would not give development consent to the development including an additional six units.

61. Mr Boustany said that, on the morning of 6 August 2015, he created a PDF document out of the feasibility analysis that he had done the night before on the basis of a $5.1 million GST inclusive price. He intended to email the analysis to Mr Elias for the purpose of persuading him that a price of $5.1 million, inclusive of GST, was not feasible.

62. Mr Boustany, Mr Basseal and Ms Khoury gave evidence of agreeing that Mr Boustany would attempt to negotiate a price for the purchase of the properties at a total of $4.75 million inclusive of GST.

Negotiation of increased price

75. Mr Boustany gave evidence of having a conversation with Mr Elias at about midday on 6 August 2015, at Mr Elias’ worksite in Bogolara Road, Toongabbie. He said the conversation was as follows:

Elias:   I am very embarrassed about this situation but it is out of my hands.

Boustany:   What are you doing jumping from $4.4 to $5.1? It’s crazy! No one is very happy to be honest. $5.1 million is just way too high and not even feasible even if we wanted to give you that sort of money. You’ve got to do much better than that. I’ll cut to the chase. I’ve been authorised by my partners to split the difference and offer you $4.75 all up but not a dollar more.

Elias:      The lowest I can go is $4.8 million. That’s it, final price.

Boustany:   I’m sorry, but $4.75 is our limit and it’s all I’m authorised to agree to. If that really is your final price, I’ll have to speak to my partners again. And even assuming my partners agree, contracts won’t be exchanging today or even tomorrow. You have to give me a week or so to enquire with my bank for this new price.

Elias:      Okay.

76. Mr Boustany said that he left the meeting believing that a price of $4.8 million inclusive of GST was the offer on the table, and that he specifically recalled using the term “all up” during the conversation.

77. The cross-examination of Mr Boustany, concerning what happened at his meeting with Mr Elias on 6 August 2015, was in the following terms (T 101.35 to 103.30):

Q. A couple of days after you receive the 5 August 2015 email from Mr Elias, you attended the job site at 9 Bogalara Road and had a discussion with Mr Elias, isn't that right?

A. That's correct.

Q. And you said, "Look I know the market has shot up. I understand but the 5,100,000 is a bit excessive." You said that, didn't you?

A. No, I didn't say it like that but I did say something like that yeah.

Q. You said, "Can we meet anywhere in the middle?" didn't you?

A. No I made him an offer somewhere in the middle.

Q. And Mr Elias said, "The absolute lowest I could do would be 4,800,000 plus GST."

A. He did not say "plus GST."

…

Q. There is nothing in the email that says it's 5.1 inclusive of GST, isn't there?

A. There is nothing in the email that says it's 5.1 plus either sir.

Q. So at the very best you would've been uncertain as to whether it was plus or inclusive?

A. No, in, in my mind I was quite clear that it was 5.1 inclusive.

Q. That's not my question to you. What my question to you is, is whether it was important to you whether you entered into a price that was plus GST or inclusive of GST, was that a matter of some importance?

A. Of course it's important yes.

Q. And you thought it was very important then when you talked to Mr Elias to make that crystal clear, is that right?

A. No it was already crystal clear in my mind so I didn't need to bring it up.

Q. You thought because it was crystal clear in your mind you didn't even need to mention it to Mr Elias, is that right?

A. Well I didn't mention it, no.

Q. You were intending to put a counter offer, is that right?

A. I did put a counter offer, yes.

Q. And you thought it was very important to make it crystal clear whether that counter offer included GST or didn't include GST?

A. I did say to him it was 4.75 halfway between 4.4 and 5.1 and it was understood that 4.4 was the inclusive of GST sell price at the time.

Q. You say it wasn't important for you to spell out whether it was inclusive or plus?

A. Well I, I thought it, I thought it was spelled out sir yes.

Q. You didn't say, did you, "What are you doing jumping from 4.4 to 5.1?" did you?

A. Yes I did, hundred percent.

Q. You didn't say, "I've been authorised by my partners to split the difference and offer you 4.75 all up but not a dollar more," did you?

A. Yes I did.

Q. You agree the expression "all up" is hardly a clear indication of whether that's referring to GST or something else, don't you?

A. Fair enough yes, I will accept that.

Q. So even on your version of the conversation that took place, there was no clear indication as to whether the figure that you were putting was a figure that - how GST was treated in that figure, was there?

A. I believe the fact that I mentioned 4.4 gave a clear indication yes.

Q. You just didn't have a conversation with Mr Elias as set out in paragraph 92 of your affidavit, did you?

A. I most definitely did, yes I did.

Q. When you walked away from the meeting with Mr Elias, it was clear in your head, wasn't it, that Mr Elias was seeking a figure of 4.8 million plus GST, isn't that right?

A. Inclusive of GST.

78. Mr Elias’ version in his affidavit of what happened during this conversation was in the following terms:

Boustany:   Look, I know the market has shot up. I understand, but $5,100,000 is a bit excessive, can we meet anywhere in the middle?

Elias:      The absolute lowest I could do would be $4,800,000 plus GST.

Boustany:   I will speak to my partners and get back to you.

Elias:      Ok, just don’t take too long. I will give you a week.

Boustany:   Ok.

79. Mr Elias’s evidence therefore was that he expressly stated to Mr Boustany that his lowest price was $4.8 million plus GST.

80. Mr Elias gave the following evidence in cross-examination concerning his recollection of the conversation that took place with Mr Boustany on 6 August 2015 (T 46.4 to 48.26):

Q. Have you agreed that Habib said to you words to the effect, “You will have to find some middle ground”? In other words, the defendants won’t agree to what you are proposing?

A. Correct.

Q. So what is your best recollection of how 5.1 became 4.8?

A. On the day of the meeting, amongst other things, he was on the job site with me, he said, “Simon, you know, 5.1 is, is a bit much, can you do any better?” I told him, “Look, Habib, honestly, the absolute best I could do would be 4.8 plus GST,” so--

Q. I put it to you that you said 4.8 but not 4.8 plus GST.

A. I would have said 4.8 plus GST, and if it wasn’t GST I would have said 4.8 plus, but it was definitely a reference to the GST, that it was still plus GST.

Q. Did you mention anything on that occasion about same terms as before?

A. Yeah, I said, “We’ve already agreed to all the other terms, so it should be a quick, easy process from here,” and the next I said, “I’ll give you a week to, to make up your mind,” and he, he came back to me and after he did then we, we proceeded pretty quickly but then the same issue about 55 came up again.

Q. I put it to you that although you might have said 4.8 plus terms as previously agreed you never said 4.8 plus GST. What do you say to that?

A. As I said, if I didn’t say 4.8 plus GST I would have said 4.8 plus. In the building industry we talk plus or inc, we, we rarely talk inc, it’s always just plus.

…

Q. If you are not sure that you said 4.8 plus GST, how certain are you that the defendant was buying on that basis, or was it just an assumption on your part?”

A. I’m 100% sure he was fully aware of what the purchase price was and plus GST on top.

Q. But you never wrote that, did you?

A. I wrote that to on the email, that’s my interpretation, that’s how I expressed it to him. I expressed that to him in the conversations. I expressed that to my conveyancer on 12 August, after she asked me to confirm the prices. I the first thing I wrote back a few minutes later was, “Make sure it’s plus GST.” On 19 August, one day before exchange, I called her up and said, “Please double check it’s plus GST before you proceed.”

…

Q. In that email of 5 August what you wrote was, “5.1 plus same terms,” didn’t you?

A. “Plus” meaning plus GST.

Q. You say to this Court that, but that’s not what you wrote.

A. That’s how I wrote it in while I was typing it, that’s how I meant it, that’s how that email was perceived.

Q. By you?

A. And, and received by, by Habib.

…

Q. You previously were expecting it'd be 4.4 inclusive of GST, and you're now saying 5.1 plus terms as agreed, correct?

A. I was previously expecting 4 million plus GST, and then I was telling him it was 5.1 plus GST.

Q. But if July had proceeded, the contract would have been 4.4 inclusive, wouldn't it? In your mind it might have equated with 4 plus 400, 4 million plus 400, but the contract would have been expressed as an inclusive price, wouldn’t it?

A. Correct.

Q. So the contract that was to be exchanged, but in the end didn't, because she pulled the plug on it, was to be 4.4 inclusive, although you got there by 4 million plus 400, I understand that, and now you're writing, "It's a bitter pill to swallow, but the best I can do is 5.1 plus terms previously agreed."

A. No.

Q. You're asking the Court to assume that you meant plus the extra 510,000, the 10% on 5.1?

A. Yes.

Q. You're asking the Court that when 5.1 got negotiated down to 4.8 it was still plus?

A. Absolutely.

Q. But in any communication with the defendant you never said that, did you?

A. I said that in my email on 5 August.

Q. Because there you assumed or you invited the Court to accept that when you wrote, "plus", I'll just word it precisely, when you wrote, "plus same terms as before", that that meant plus GST plus same terms as before?

A. Well, I meant it as plus GST and the same terms as before.

Q. But you didn't write that.

A. That's how I, I wrote it.

Q. Again, when you talk to Habib and you reached an agreement that 4.8, I put it to you that again you didn't say plus GST. You might have said plus same terms as before, but you did not say plus GST.

A. I either said plus or plus GST. The terms as before would have been a different discussion saying we've already agreed to everything else.

Q. In other words, terms as before would be a different discussion to price, is that your evidence?

A. Can you just repeat that?

Q. Yes. Any discussion about terms as before, you just said, would be a different discussion to any discussion about price. That's what you just said, did you not?

A. Yes.

Q. Yet go back to 5 August, it was part of the one discussion, if you are to be believed, when you say 5.1 plus GST plus?

A. Correct.

Q. The reality is you never communicated to Habib anything more than 5.1 plus same terms and conditions as before and then when it got negotiated down to 4.8, the same thing. Do you agree?

A. No.

(Emphasis added)

81. The emphasised portions of Mr Elias’ cross-examination that are extracted above are significant. Mr Elias did not insist that he said to Mr Boustany that the price was $4.8 million plus GST. His evidence was equivocal, and he may have said $4.8 million plus. Mr Elias’ position was that it was standard parlance in the building industry for people to say “$X plus”, in a shorthand way, when they in fact meant "$X plus GST".

82. Mr Basseal gave evidence that, later on 6 August 2015, Mr Boustany called him and said: “Simon will accept $4.8 million inclusive of GST”.

83. Ms Khoury also gave evidence that Mr Boustany called her and said that he had “managed to negotiate Simon down to $4,800,000”. Ms Khoury queried whether that figure included or excluded GST, and Mr Boustany confirmed that it included GST.

Events after 6 August 2015

84. There is evidence of an email sent by Mr Elias on 9 August 2015 to a person called Ron, who was related to Mr Elias. Mr Elias attached to the email a number of construction documents relating to the development, apparently in response to an agreement between the two men that Mr Elias would send the documents to Ron. Mr Elias stated the price as being: “Asking price $5 M plus GST”.

85. This evidence provides some support for the conclusion that Mr Elias tended to describe the price for the property in terms of an amount plus GST.

86. Mr Boustany sent an email to Mr Elachi on 12 August 2015, to give him instructions concerning the purchase of the properties. The email said:

We have renegotiated the purchase price with the vendor. This has changed to $4,800,000. All other terms are unchanged.

Could you please liaise with The (sic) vendor’s agent to effect exchange as soon as possible.

The prices on the respective contracts are as follows;

5 Octavia Street $2,880,000

7a Octavia Street $1,920,000

Could you please exchange as soon as possible even if it is via post.

87. The terms of this email provide further evidence that Mr Boustany understood that the agreed price for the two properties was a total of $4.8 million inclusive of GST.

88. On the same day Mr Elachi sent an email to Ms Azar, which began:

I have been instructed that the parties have renegotiated the purchase price as follows:

(a) 5 Octavia Street: $2,880,000

(b) 7a Octavia Street: $1,920,000

Please confirm that the above accords with your client’s instructions to you.

89. About 20 minutes after the time of this email, Ms Azar responded by iPhone to say: “Confirm prices happy to proceed soni (sic) can reply to him”.

90. This response unequivocally confirmed the instruction that Mr Boustany had given to Mr Elachi that the prices were to be $2,880,000 and $1,920,000 for the two properties, inclusive of GST.

91. Ms Azar’s email to Mr Elachi was copied to Mr Elias, who received a copy of the response, in addition to Mr Elachi’s email to which the response related. Six minutes after Ms Azar’s email was sent, Mr Elias responded to her (and not to Mr Elachi) in the following terms:

yes make sure its plus gst and deposit released I have the stamped plans with me at home so apply whatever needs to be applied in relation to this and my understanding Habib will drop of the contracts tomorrow

92. This was an instruction to Ms Azar to ensure that the contracts stated that the prices were “plus GST”.

93. Two days later, on 14 August 2015, Ms Azar wrote a further email to Mr Elachi, in which she relevantly said:

I have received instructions from my client as per follows:

1. The prices are agreed to

…

Without further delay and requests and in accordance with my instructions I request if your client is happy to proceed forward to me your clients signed Contract of Sales and post these to me so I can attend to an exchange asap

94. Ms Azar failed to require that the prices be expressed as “plus GST”, and instead confirmed again the prices as stated in Mr Elachi’s 12 August 2015 email.

95. Mr Elachi sent copies of the contracts for sale signed on behalf of Toongabbie Investments to Ms Azar on 17 August 2015, under cover of a letter of that date. The names of the purchaser and the purchaser’s solicitors, together with the price, the deposit and the balance, were written by hand on the first page of each of the contracts. The two front pages were in identical terms to the contracts that were exchanged between the parties. In each case, the expression “plus GST” was not included against the statement of the price, the deposit, and the balance.

96. Ms Azar sent an email to Mr Elachi on 18 August 2015. Ms Azar asked a number of questions concerning the mechanics of the exchange of contracts, and in relation to an issue about the amount of the deposit payable in respect of No 7A Octavia Street, Ms Azar made the following statement: “1. The Purchase price of 7a Octavia Street is 1.92 million…” That statement confirmed the price for that property.

97. Mr Elachi forwarded Ms Azar’s email to Mr Boustany on 18 August 2015.

19 August 2015 emails

98. On 19 August 2015, Ms Azar sent a further email to Mr Elachi, in which she stated that she was about to exchange contracts in the matter shortly. The email included the following statement:

3. Please note: the prices on the Contract does not include GST and my client will be issuing your client Tax invoice for the GST prior to settlement of this matter”

99. Mr Elachi replied to Ms Azar on this issue on the same day in the following terms:

3. Yes, that is our understanding also. Please ensure that the front page of the contracts are clear that the margin scheme does NOT apply.

My instructions are that the contracts must be exchanged by close of business today.

100. SSE submitted that the statement made by Ms Azar in her 19 August 2015 email could only have been understood by Mr Elachi as having the meaning that, although the purchase prices of the properties as stated on the contracts did not include a statement of an obligation on the purchasers to pay GST in addition to the purchase prices, the agreement in fact was that the purchasers would pay GST, so that prior to settlement of the contracts, SSE would deliver to Toongabbie Investments tax invoices for the amounts of the additional GST, presumably to be paid by Toongabbie Investments at the time the contracts were completed.

101. SSE relied strongly on the fact that Mr Elachi was not called to give evidence in support of Toongabbie Investments’ case, even though the evidence was that he was sitting in court beside the solicitor for Toongabbie Investments throughout the hearing.

102. In my view, the meaning of Ms Azar’s statement in her 19 August 2015 email is by no means as clear as SSE submitted it was. It is important that the court not lose sight of the immediate context in which Ms Azar’s email of 19 August 2015 was sent to Mr Elachi. That context was that Mr Elachi had, in plain terms, sought confirmation from Ms Azar that her instructions were that the prices of the properties were to be the amounts totalling $4.8 million, which were implicitly stated in Mr Elachi’s 12 August 2015 email as being on a GST inclusive basis (given the terms of cl 13.2 of the draft contracts). After Mr Elachi received an unequivocal and repeated confirmation, he caused the draft contracts to be completed by hand in which he inserted the GST inclusive figures for the price, the deposit and the balance. It will necessarily have followed that, when he received Ms Azar’s 19 August 2015 email, he read the statement in Ms Azar’s numbered paragraph 3 through the prism of a belief that it was understood by both parties that the prices were GST inclusive.

103. It is also relevant that the parties agreed that, where a vendor sells property to a purchaser, and the sale attracts GST, then even where the price for the property is inclusive of GST, it is the practice for the vendor to provide to the purchaser on completion, a tax invoice stating the amount of the GST that the vendor will be required to pay out of the purchase price. That is necessary in order to enable the purchaser to re-coup the GST under the GST legislation.

104. Thus, the part of Ms Azar’s email that read “and my client will be issuing your client Tax invoice for the GST prior to settlement of this matter” was equivocal, and was capable of being understood by Mr Elachi as referring to the tax invoice that would be handed over on completion, even though the purchase price was stated on the contract in a way that would make it GST inclusive.

105. The first part of Ms Azar’s statement, “the prices on the Contract does not include GST” is also equivocal. A person in Mr Elachi’s position, who believed that the parties had in fact agreed that the price would be “plus GST”, should have understood that Ms Azar’s reference to the prices not including GST was a statement that the draft contract was inconsistent with the agreement between the parties. However, if following the earlier communications Mr Elachi believed that the agreement was for the prices to be inclusive of GST, the natural way for him to understand the first part of Ms Azar’s statement would be that the draft contracts were in accordance with the agreement because, as was the fact, the prices did not add a requirement for the purchaser to pay GST on the prices.

106. I do not suggest that this explanation of how Mr Elachi might naturally have understood Ms Azar’s statement in the context in which it was received by him is entirely clear, or beyond counter-argument. The point is that Ms Azar’s statement is not itself clear, contrary to SSE’s submission. The statement was capable of confirming the understanding that Mr Elachi would naturally have had from the earlier recent communications, and that is the conclusion that will be proper for the court to reach, notwithstanding that Mr Elachi has not given evidence concerning his actual subjective understanding of the meaning of the statement.

100. It is also necessary to consider the effect of Mr Elachi’s response. The first part of his response was to say: “Yes, that is our understanding also”. It is exceedingly unlikely given his own instructions, and the recent communications to the effect that the prices were to be GST inclusive, that Mr Elachi would so readily have agreed with any statement by Ms Azar that had the meaning that Toongabbie Investments was to pay GST on top of the stated prices, without Mr Elachi responding in precisely opposite terms to the response that he made. At the very least, Mr Elachi would probably have required clear confirmation, and sought further instructions from his client.

101. The second part of Mr Elachi’s response also supports the conclusion that he did not understand Ms Azar’s statement to have the meaning that the purchaser was to pay GST on top of the purchase price. In fact, the response: “Please ensure that the front page of the contracts are clear that the margin scheme does NOT apply” is not apparently responsive, but it is consistent with the conclusion that the suggestion that the purchaser was to pay additional GST was so far from Mr Elachi’s mind that, in searching for an appropriate response, he found one in his memory that was the best he could do; even though Ms Azar’s statement did not rationally call for that response.

102. Contracts were exchanged on 20 August 2015 by steps taken by Ms Azar in her office.

Ms Azar’s involvement

110. The evidence included the copies of the contracts for sale that were executed by SSE. The information that Mr Elachi had written in hand on the copies of the contracts that were executed by Toongabbie Investments; including the price, the deposit, and the balance, was typed on the copies of the contracts executed by SSE. I would infer that Ms Azar caused the typing to be made on those documents. Ms Azar was therefore clearly aware of what the contracts for sale provided.

111. Ms Azar’s explanation of why she permitted the contracts for sale to be expressed in the manner that they were, when she understood her instructions to be that the parties had agreed that GST would be payable in addition to the agreed prices, was set out in par 15 of her principal affidavit as follows:

I thought that by not marking the margin scheme as ‘YES’ on the front page, the Purchase Price on the Contracts would be on a plus GST basis. I did not think that there was any need expressly to state that the price was “plus GST”, I thought that this was automatic if the margin scheme was not marked as “YES”.

112. Ms Azar did not offer any explanation as to why she had this particular understanding; in any event, it plainly was erroneous. It is unclear how Ms Azar could have formed this understanding if she had an understanding as to how the margin scheme operated.

113. In cross-examination, Ms Azar admitted on a number of occasions that she had made a mistake.

114. Her cross-examination on the subject of whether GST was payable under the contracts for sale in addition to the prices stated was as follows (T 27.1 to 27.21):

Q. Were you aware for a number of years prior to 2015 that there was a clause in the standard form contract that provided something to the same effect as 13.2?

A. Yes that’s correct.

Q. In other words that unless you say something specific to the contrary the purchase price is inclusive of GST, is that your understanding in the years prior to August 2015?

A. My understanding is that it was plus GST. Purchase price as is and then if there was GST, you put the GST - you don’t include it in the purchase price Mr Moore. That was my understanding.

Q. So was it your understanding that the purchase price that’s on the first page if it was to be plus GST, would still only have the prices inclusive of GST written on the first pages of such contracts?

A. No you’d have the purchase then the words “plus GST”.

Q. I now understand. So in other words it was your understanding that where here you had contracts with purchase prices totalling 4.8 million, that you’d have the additional words “plus GST” against the two individual prices?

A. That’s correct.

115. It is difficult to know what to make of this evidence. It seems to be an acknowledgment that Ms Azar knew that if GST was to be payable in addition to the price, the words “plus GST” had to be stated on the contracts. It appeared to me that Ms Azar may have been confused when she gave this evidence.

116. Ms Azar also said at T 32.18 to 32.21: “I was relying on the correspondence and emails, and I was given instructions that it was always plus GST”.

117. On the subject of the 19 August 2015 email exchange, Ms Azar said (T 33.15 to 33.34):

Q. “Please note the prices on the contract does not include GST.” You wrote that?

A. That’s correct.

Q. But that didn’t say the purchase prices should be plus GST, did it?

A. I was elaborating on what Mr Elachi had provided me on the contracts, because he had not written the words “plus GST”, and if you read the following sentence it says that my client will be issuing a tax invoice for the GST on the purchase price.

Q. But whatever the purchase prices were, there would need to be a tax invoice for the GST, would there not?

A. That’s correct.

Q. Because GST would be payable on one eleventh of whatever was the amount paid by the purchasers.

A. It’s the purchase price plus GST.

Q. It would be payable on whatever was the amount payable by the purchaser. You agree with that?

A. Yes.

118. And further (T 37.34 to 38.10):

Q. Could you go to paragraph 24 of this affidavit? You agree that in your email at 11am on 19 August that you wrote that the contracts for the purchase did not include GST and that you would, SSE Corp would be issuing a tax invoice. You wrote that didn't you?

A. That's correct.

Q. You never wrote that the price would be adjusted to being, or reading, plus GST did you?

A. Yeah, I know, I wrote it incorrectly. I suppose I wasn't very clear on the – in the email.

Q. As at 20 August you knew what standing condition 13 provided, that you don't add GST unless it's specifically stated, you knew that?

A. Yes. I made a mistake.

Q. I invite you next to turn to your other affidavit, and I'll just give you the tab number of it. Behind tab 9. You agree that your email of 19 August at 11am where you asked to note that the content did not include GST and provide a tax invoice, that that was unclear in terms of clarifying the purchase price, you agree with that don’t you?

A. I think it was a bad interpretation.

Q. Because you could so easily have written “The purchase price should be amended to - plus GST”?

A. What I meant was the contracts were provided to me with just the purchase price and not the words “plus GST” so that’s what I was trying to clarify.

119. Ms Azar therefore conceded that her statement in her 19 August 2015 email was not very clear.

Mr Elias’ review of draft contracts

120. Mr Elias’ evidence as to his state of mind when he read the contracts for sale prior to the contracts being executed by SSE was given in his principal affidavit in the following terms:

43.   I executed the vendor’s counterparts of the contract for sale on behalf of SSE Corp. When I did so I had thought that the contracts for sale of 5 Octavia Street and 7A Octavia Street provided for the sale price to be plus GST rather than to have GST included in it. This was a view I held at all times up to 5 December 2015. I held this view because:

(a)   I understood from my conversations with Mr Boustany referred to earlier in this affidavit that the price was to be “plus GST”;

(b)   I had told my Conveyancer that the price was to be “plus GST”;

(c)   The fact that the price was to be “plus GST” had been confirmed in correspondence of which I was aware between my Conveyancer and the purchaser’s solicitor;

(d)   I assumed that the contracts for sale would have been drawn up to reflect the fact that the price was “plus GST”;

(e)   Nobody told me prior to the exchange of contracts that the contracts for sale had not been drawn up to reflect the fact that the price was “plus GST”; and

(f)   I did not notice for myself that the contracts for sale had not been drawn up to reflect the fact that the price was “plus GST”.

44.   [Rejected] I glanced quickly at the contracts before executing them on behalf of SSE Corp, I did not see anything in that brief examination that made me think that GST was included in the price. I did not particularly check that matter in the contracts because I did not consider that there was any issue about whether the price was plus GST, and I assumed the contracts had been drawn up to reflect the prior agreement that the price would be “plus GST”.

Consideration

121. I will first set out my findings concerning the credibility of the evidence given by the witnesses.

122. I found Mr Boustany to be an impressive witness, who appeared to have a relatively sophisticated understanding of the financial aspects of property development; particularly in relation to the use of a feasibility analysis to test the viability of the acquisition of a development site for a particular project. He responded directly and apparently candidly to questions put to him in cross-examination; and was ready to make concessions where appropriate. For example, he conceded that his use of the expression “all up” in his discussion with Mr Elias on 6 August 2015 might not clearly have indicated that the price that he offered Mr Elias was inclusive of GST, and he accepted that he did not actually use the words “inclusive of GST”.

123. As I have considered above, it is clear that, in fact, following his reading of Mr Elias’ 5 August 2015 email, Mr Boustany thought that Mr Elias’ asking price was $5.1 million inclusive of GST. That was the basis of the feasibility analysis that he undertook that evening. I accept Mr Boustany’s evidence that the other feasibility analysis was carried out on the basis of an assumed price of $4.75 million inclusive of GST; and that that feasibility analysis was no longer available to be put into evidence, because it had been overwritten during the course of Mr Boustany’s subsequent further fine tuning of the analysis.

124. It was not suggested to Mr Boustany in cross-examination that he was not telling the truth. It was put to him that the relevant conversations did not occur in the terms given by him, and that the conversations occurred consistently with Mr Elias’ evidence. If it was implicitly intended by the cross-examination to suggest that Mr Boustany was not giving truthful evidence, then I reject that suggestion. The cross-examination more appeared to challenge Mr Boustany’s recollection. However, Mr Boustany was unshaken in his evidence, and I formed the strong impression that he was speaking truthfully from recollection.

125. I have also formed the view that Ms Khoury and Mr Basseal were credible witnesses, and I accept their evidence. Their evidence is significant in two respects. First, as the two directors of Toongabbie Investments, their subjective understanding of the price for the properties that was agreed with SSE is the understanding that is relevant for the purpose of determining whether the contracts should be rectified. I am satisfied that both Ms Khoury and Mr Basseal believed that the total agreed price for the two properties was $4.8 million inclusive of GST.

126. The evidence of Ms Khoury and Mr Basseal also provides some objective corroboration for Mr Boustany’s evidence that it was his belief that he and Mr Elias had agreed upon a price of $4.8 million inclusive of GST. The evidence of Ms Khoury and Mr Basseal, which I accept, that Mr Boustany told them that the price was inclusive of GST supports Mr Boustany’s evidence. I would in any event, have accepted Mr Boustany’s evidence, supported as it was by the terms of the contemporaneous feasibility analysis that he undertook.

127. Mr Boustany’s role was more significant than merely being the agent of Toongabbie Investments in negotiating the terms of the contracts with Mr Elias, on behalf of SSE. The evidence does not disclose why only Ms Khoury and Mr Basseal were appointed as directors of Toongabbie Investments. I infer that, as the family companies of Ms Khoury, Mr Basseal and Mr Boustany were unit holders in the Trust, and in practical commercial terms, Mr Boustany had an interest in the venture on par with Ms Khoury and Mr Basseal. This inference is supported by the fact that Mr Boustany referred to Ms Khoury and Mr Basseal as his “partners” in his discussion with Mr Elias on 6 August 2015. That is an accurate practical description of the relationship between the three persons, and their families, even though they employed a corporate trustee and unit trust structure as the vehicle for their investment. I will therefore treat Mr Boustany’s participation in, and knowledge of, and negotiations with Mr Elias, as being part of the activities of the ‘guiding mind’ of Toongabbie Investments.

128. I do not accept that the absence of Mr Elachi as a witness has the significance submitted by SSE. That is principally because of the conclusions that I have set out above in my discussion of the significance of the 19 August 2015 email communications. I do not accept that any communication that Mr Elachi received from Ms Azar ought reasonably to have conveyed to him with sufficient clarity that SSE was only offering a price of $4.8 million plus GST, to create any forensic need for Mr Elachi to give evidence. It was proper and sufficient in the circumstances for Toongabbie Investments to leave the significance of Mr Elachi’s involvement to be determined on the basis of the objective evidence of the communications in which he was involved.

129. SSE put a submission that Mr Elachi was, in practical terms, part of the ‘guiding mind’ of Toongabbie Investments. In support of its submission, SSE relied upon the decision of the Court of Appeal in Igloo Homes Pty Ltd v Sammut Constructions Pty Ltd [2005] NSWCA 280. One of the issues that arose on appeal in that case was whether the intention of the vendor’s agent should be attributed to the vendor. Ipp JA, with whom Santow JA agreed, stated the relevant principle to be, at [78] and [79], “that where an agent is authorised to commit the principal to a transaction and the agent’s state of mind is relevant to that transaction, ‘the acts of the agent are the acts of the principal and the agent’s state of mind must be the state of mind of the principal as well’”, relying on Permanent Trustee Australia Co Ltd FAI General Insurance Co Ltd [2001] NSWCA 20; (2001) 50 NSWLR 679 and Permanent Trustee Australia Co Ltd v FAI [2003] HCA 25; (2003) 214 CLR 514 at [87].

130. Ipp JA held at [86] that the agent was not authorised to enter into a contract for the sale of the land on behalf of the vendor, so her intention as to the terms of the contracts that were entered into could not be attributed to the vendor.

131. The same is the case with Mr Elachi in this matter. There is no evidence to suggest that Mr Elachi had any authority from Toongabbie Investments to decide the terms upon which that company would enter into the contracts for sale with SSE.

132. This is not an appropriate occasion to venture any observations as to what may have been the significance of any communication by Ms Azar to Mr Elachi, which clearly conveyed that SSE was offering to sell the properties on a plus GST basis, given that Mr Elachi was acting on behalf of the solicitor for Toongabbie Investments.

133. I have concluded that it is necessary to be guarded in relation to the acceptance of the entirety of Mr Elias’ evidence. He appeared to give his evidence with reasonable candour, although his approach was somewhat diffident (which may in part have been a consequence of the embarrassment of his position in not checking that the contract conformed with his instructions to Ms Azar). I accept that it was his general approach to ask for the price plus GST. Further, that he gave Ms Azar an instruction by email on 12 August 2015 to “make sure its plus GST”. He said in his primary affidavit that he told Mr Boustany: “The absolute lowest I could do would be $4,800,000 plus GST”. However, as I have noted above in relation to his cross-examination, he conceded on a number of occasions that he may have said “$4,800,000 plus” rather than clarifying that it was “$4,800,000 plus GST”.

134. I do not accept that Mr Elias in fact said “$4,800,000 plus GST”; and whatever he said was not sufficiently clear to cause Mr Boustany to understand at the time that the price on offer was on a plus GST basis. I accept that Mr Boustany did not understand that the price was offered on that basis.

135. I will consider the course of the correspondence and other events that occurred after 6 August 2015 below. Those events justify some concern about the reliability of Mr Elias’ evidence, given his knowledge that his conveyancer had confirmed to Mr Elachi that prices expressed are on a GST inclusive basis; his instruction to his conveyancer that the prices should be plus GST; and his failure to follow up that his instruction had been implemented, and that the contracts conformed with his instructions.

136. There is no need for the court to make any observations about the credibility of Ms Azar’s evidence. She freely conceded that she had made mistakes, and that some of her communications were not expressed as clearly as they could have been.

137. I will now turn to a consideration of the objective evidence insofar as it has a bearing on the determination of the subjective intentions of SSE and Toongabbie Investments at the time the contracts for sale were exchanged.

138. After Mr Boustany and Ms Khoury and Mr Basseal came to appreciate that the sale of the properties would be a taxable supply, and that GST would have to be paid on the purchase prices, Mr Boustany made an offer to Mr Elias of a total purchase price of $4.4 million. There was an express agreement between Mr Boustany and Mr Elias that the GST that was payable would be included in this price. Mr Boustany and Mr Elias could have agreed that the total price was to be $4 million plus GST, but the fact is that they did not do so.

139. It may well be true that some property developers tend to say “$X plus” when referring to the price for a development site intended to be “$X plus GST” (just as lawyers often say “$X incl”, when they mean “$X inclusive of costs”). I do not reject the possibility that Mr Elias may often have used the expression “$X plus” in this way. However, in Mr Elias’ email dated 9 August 2015 to a person called Ron, Mr Elias used the expression “$5 M plus GST”. He also claimed in his primary affidavit to have used the expression “$4,800,000 plus GST” in his discussion with Mr Boustany on 6 August 2015.

140. The context was that the parties had agreed to a total price of $4.4 million inclusive of GST by 22 May 2015. 5 August 2015 was only some 2 ½ months later. A price increase to $5.1 million inclusive of GST would have represented an increase of $700,000, or 16%. That increase would represent 76% per annum. Had the new price in fact been intended to be $5.1 million plus GST, the increase would have represented 27.5% over 2 ½ months, which would equate to 132% per annum. There is considerable force in the evidence given by the witnesses for Toongabbie Investments that they simply did not accept the explanation for the increase given by Mr Elias in his 5 August 2015 email, or that, the price having been agreed at $4.4 million inclusive of GST in May, Mr Elias could possibly have been asking for $5.1 million plus GST a mere three months later in August.

141. Although, as I have noted above, the parties could have formulated the original price that was agreed in a different way, they did so on a basis that it was GST inclusive. That having been done, the probability is that, when Mr Elias changed his position, and asked for a higher price expressed as “$5.1”, the natural way for Mr Boustany to understand that request was that it was a price expressed on a GST inclusive basis. The expression of the original price on a GST inclusive basis would naturally have tended to establish the framework which would govern Mr Boustany’s understanding of any claim for a higher asking price expressed simply in terms of an amount of money.

121. Mr Elias’ 5 August 2015 email expressed the new price in terms of “$5.1 plus same terms as before”. The natural meaning of that expression is that the $5.1 million referred to was intended to be inclusive of GST. The expression “plus same terms as before” would naturally be understood by Mr Boustany as applying to all of the terms of the initial draft contracts; including the basis upon which GST would be treated. As I have said, I am satisfied that Mr Boustany did understand the email on that basis.

122. For the reasons that I have given above, that conclusion is reinforced very strongly by the fact that, on the evening of 5 August 2015, Mr Boustany, in the presence of Mr Basseal, undertook a feasibility analysis on the basis that the price wanted by Mr Elias was $5.1 million inclusive of GST.

123. By the series of emails that were sent on 12 August 2015, Mr Elachi expressed his instructions as to the intended prices on a GST inclusive basis. Ms Azar confirmed those prices. Both of these emails were forwarded to Mr Elias. He did not respond by saying that Mr Elachi’s email was not consistent with the agreement that he made with Mr Boustany on 6 August 2015. He simply said “make sure its plus GST”. That difference may be of no significance, but it is significant that Mr Elias knew that Mr Elachi had been instructed that the prices were GST inclusive, and that his own conveyancer had confirmed that fact. That knowledge would have caused any competent commercial person in Mr Elias’ position to take positive steps to ensure that Mr Boustany acknowledged that the agreement was to be on a plus GST basis, and that the contracts were drafted in a way that had that legal result.

124. However, Mr Elias took no steps to ensure that Mr Boustany agreed that the price would be expressed on a plus GST basis, and he conceded that he only gave the contracts a cursory review before he executed them on behalf of SSE; and he says that he simply relied upon his conveyancer to ensure that his instructions had been implemented.

125. These circumstances justify the following findings, which I make:

1. At the time the two contracts for sale were exchanged on 20 August 2015, it was the subjective understanding and intention of Toongabbie Investments, represented by the subjective understanding and intention of all of Mr Boustany, Ms Khoury, and Mr Basseal, that the agreement between Toongabbie Investments and SSE was that the price for the two properties was a total amount of $4.8 million inclusive of GST.

2. On the objective evidence, the position taken by SSE, as conveyed to Mr Elachi on its behalf by Ms Azar was that the agreement was in fact that the total price was on a GST inclusive basis. Accordingly, the understanding and intention of Toongabbie Investments was not the result of any mistake made by its principals, but was an objectively sound understanding and intention founded upon the information provided by SSE.

3. It is not necessary in the circumstances to attempt a definitive finding as to what the subjective understanding and intention of SSE was at the time the contracts for sale were exchanged. I am not satisfied that Mr Elias had a clear subjective understanding and intention that the parties had agreed that the price was to be on a plus GST basis. I believe Mr Elias’ position was more equivocal than that. I do not accept that he had a clear and definite understanding that Mr Boustany had agreed to pay $4.8 million plus GST, and Mr Elias gave his 12 August 2016 instruction to Ms Azar on the basis that he was more hopeful that she would be able to implement his request, than a belief that it would automatically be accepted by the representatives of Toongabbie Investments.

147. I find that the parties to the contracts for sale did not make a common mistake in the recording of their agreement. Toongabbie Investments entered into the contracts for sale with a definite and clear understanding that the agreement was that the prices were to be inclusive of GST, and whatever the subjective understanding of SSE may have been, Toongabbie Investments was objectively justified in having the understanding that it did.

148. This is not a case where the party seeking rectification of a contract has failed because of the absence of clear and convincing proof of a common intention of the parties not reflected in the written document. The evidence establishes that one of the parties had a positive, objective and justifiable subjective understanding that the written contracts for sale were in accordance with the true agreement between the parties, and the subjective understanding of the other party was at best equivocal.

149. The principals of Toongabbie Investments were not aware, when the contracts for sale were exchanged, that the contracts did not reflect SSE’s understanding of the prices that were to be paid for the properties. This is not a case where SSE entered into the contracts under a unilateral mistake that was known to Toongabbie Investments.

150. Accordingly, SSE’s claim for rectification of the two contracts for sale must be dismissed.

Meaning of special condition

151. The parties are at issue concerning the proper construction of special condition 55 of the contracts for sale. That special condition provides:

(a)   The Vendor warrants that:

(i)   it holds or will hold prior to completion all interest, title and rights in and to Holroyd City Council’s Development Consent 2014/163/1 (“the Development Consent”) and the plans, reports, management plans, schedules, certificates, assessments and studies which are in any way connected to the Development Consent (“the Construction Documents”).

(ii)   all its interest, title and rights in and to the Development Consent and the Construction Documents are assignable.

(b)   All the Vendor’s interest, title and rights in and to the Development Consent and the Construction Documents are signed to the Purchaser on completion.

152. In response to a request by the court that SSE formulate the declaration that it asked the court to make concerning the proper construction of special condition 55, SSE formulated the declaration in the following terms:

A declaration that in order to comply with its obligations arising from special condition 55 of the contracts, there is no obligation for the plaintiff to hold or convey to the defendant on completion copyright in the construction documents, provided that the plaintiff holds a licence to use the construction documents for the purposes of constructing the works referred to in the construction documents upon 5 and 7A Octavia Street Toongabbie and the defendant obtains from completion the benefit of the licence.

153. The essential point made by SSE was that Toongabbie Investments’ only commercial need was to have a right to use all of the Construction Documents (as defined in the special condition), for the purposes of the construction of the particular project for which development consent was given on the two properties. For that purpose, it would be sufficient for Toongabbie Investments to be assigned a licence from whoever held copyright in the Construction Documents that permitted it to complete the project on those properties. According to SSE, it was not necessary for SSE to assign to Toongabbie Investments the copyright in all of the Construction Documents, as that would only be necessary if there was a realistic possibility that Toongabbie Investments would wish to construct the same project on numerous development sites. SSE submitted that the construction of special condition 55 that required SSE to assign copyright in all of the Construction Documents to Toongabbie Investments on completion was commercially unreasonable; as it was both unnecessary, and ignored the reality that many providers of professional services to developers in the position of SSE would, as a matter of course, retain copyright in documents prepared under the contracts by which they provided their services, and would only licence the developer to use the documents for the purposes of the particular development project.

154. Toongabbie Investments opposed the court making the declaration sought by SSE, but did not oppose the court making a declaration in the following terms:

A declaration that in order to comply with its obligations arising from special condition 55 of the contracts there is no obligation for the plaintiff to hold or convey to the defendant on completion copyright in the Development Consent Plan.

155. As I understand Toongabbie Investments’ position, its preparedness to accept a declaration in these terms is not meant as a concession that the expression “all interest, title and rights in and to… the Construction Plans” does not encompass copyright in the Development Consent Plan. Rather, Toongabbie Investments is simply prepared to make a concession in favour of SSE on this point. Toongabbie Investments claims that special condition 55 requires that SSE assign to it, on completion, copyright in all other relevant documents falling within the definition of Construction Documents.

156. The issue of construction depends upon the meaning of the words “all interest, title and rights in and to” the Construction Documents. That expression would extend to the Construction Documents as chattels. Special condition 55 required that SSE have sufficient title to the Construction Documents to be able to assign them to Toongabbie Investments without putting Toongabbie Investments at risk of common law actions, such as detinue or conversion.

157. As the words “interest” and “title” are apt to refer to the Construction Documents as chattels, the question becomes what, if any, additional meaning is to be found in the expression “rights in and to”. In my view, those words, according to their natural and ordinary meaning, would extend to copyright in the Construction Documents, to the extent that copyright resided in any of those documents. The use of the word “all” in special condition 55(a)(i) would naturally encompass the entirety of the rights that may be had in documents falling within the definition of Construction Documents.

158. SSE’s submission is, in practical terms, that the words “all … rights in and to” should be read down, or implicitly qualified, to mean “a right to use all … rights in and to”, which is essentially the nature of a licence. I do not accept that it is proper to construe the words used in special condition 55 by adding this gloss to the actual words used.

159. In particular, I am not satisfied that it would be a proper construction of the words of special condition 55 to find that they were intended to be confined to a licence to use all relevant intellectual property rights in the Construction Documents, based upon no more than an argument put in submissions, that construing the special condition in this way would give to Toongabbie Investments all of the rights that it would need in order to effectively implement the development project, being the subject of the development consent.

160. SSE submitted that the court should construe special condition 55 having regard to communications between the parties that occurred before the exchange of the contracts for sale.

161. On 19 June 2015, Mr Elachi wrote an email to Ms Azar in which, in point 19, he asked for a special condition to be added to the contracts in the same terms as special condition 55.

162. Ms Azar responded on 19 June 2015 by saying: “Not Agreed”.

163. On 19 June 2015, Mr Boustany sent an email to Mr Elias in which he said that there was still an issue about point 19, and:

Issue 19 is in respect of the assignment of the DA, Plans and approvals pertaining to the site and we require a clause that these will be assigned to us on settlement.

164. Ms Azar sent an email to Mr Elachi on 24 June 2015, in which she responded to Mr Boustany’s statement: “You requested copyrighted (sic) plans assigned to your client, which we will not do. Not Agreed”.

165. Mr Elachi responded on 25 June 2015 by saying:

19. This point is absolutely essential to the bargain. In practical terms, the purchaser needs to be satisfied that it will be able to use and rely on the (already approved) DA consent and the plans and other associated documents connected to the consent. I understand that this may require your client to obtain certain permissions from his architect etc. In fact, I anticipate that on settlement I will require evidence that your client has sought and obtained the consent of the various relevant parties.

166. The references to “certain permissions” and “consent” are probably consistent with Toongabbie Investments being satisfied with licences to use intellectual property rights.

167. On 26 June 2015, Ms Azar sent an email to Mr Elachi, in which she inserted into a copy of Mr Elachi’s 19 June 2015 email the following responses to point 19. At the end of sub-point (i) she inserted: “Not Agreed The Vendor will not provide a Construction Certificate”. At the end of sub-point (ii) she inserted: “Not Construction Certificate”. At the end of point 19(b) she inserted: “Not Construction Certificate”.

168. Notwithstanding this correspondence, on 17 August 2015, Mr Elachi provided to Ms Azar contracts for the sale of the two properties, which had been executed by Toongabbie Investments, which included special condition 55 in its present terms (which were the terms originally requested by Toongabbie Investments).

169. Ms Azar responded by email on 18 August 2015 at 11:37 AM, saying: “3. 55. Vednor (sic) warranty AND not accepted”.

170. Mr Elachi responded to Ms Azar, at 11:39 PM on 18 August 2015, by saying:

In any case, I confirm that the special conditions I have attached to letter dated 17 August 2015 have been previously agreed (please refer to your emails to me dated 26 June 2015). I merely typed up and attached them to my 17 August letter as a courtesy, and to make things a little easier from your end. Again, there’s nothing in there that has not already been agreed between the parties.

171. Ms Azar then said in an email on 19 August 2015 at 11:01 AM: “2. Clause 55: is to be rewritten as the following: ‘the vendor will assign all documentation in relation to the DA’”.

172. At 1:17 PM on 19 August 2015, Mr Elachi responded in an email to Ms Azar that said:

2. It is my understanding that your client is concerned because he is unable to assign copyright in the DA plans. That being so, you may amend clause 55 to read: “Except for copyright in the Development Consent plans…” but the rest of the clause is to remain as drafted (and which, incidentally, was agreed weeks ago).

173. Ms Azar sent an email to Mr Elachi on 19 August 2015 at 2:49 PM in which she said:

The clause shall be re-written as follows:

55. the (sic) purchaser warrants that it has already to date received all the documentation required and as such nothing will be required or provided on settlement

174. This amendment was not made to the contracts for sale before they were exchanged on 20 August 2015.

175. Toongabbie Investments accepted that any declaration made by the court should exclude the obligation on SSE to assign copyright in the Development Consent plans, because of the terms set out in Mr Elachi’s 19 August 2015 email at 1:17 PM. It did so on the basis that it was reasonable to take that course, without accepting that the court could act upon the email in determining the proper construction of the contracts for sale.

176. In my view, the court is not entitled to have regard to the pre-contractual negotiations for the purpose of determining the proper construction of special condition 55.

177. It is sufficient for the court to note the following statements of the relevant principle by Allsop P (as his Honour then was) in Franklins Pty Ltd v Metcash Trading Ltd [2009] NSWCA 407; (2009) 76 NSWLR 603:

[24] The High Court authorities to which I have referred and in particular Pacific Carriers v BNP Paribas and Toll, and the recognition of the significance of the objective theory assist in appreciating the scope of the evidence that is admissible. The evidence, to be admissible, must be relevant to a fact in issue, probative of the surrounding circumstances known to the parties or of the purpose or object of the transaction, including its genesis, background, context and market in which the parties are operating. What is impermissible is evidence, whether of negotiations, drafts or otherwise, which is probative of, or led so as to understand, the actual intentions of the parties. Such evidence might be legitimate, however, if directed to one of the legitimate aspects of surrounding circumstances. The distinction can be subtle in any particular case. As Macfarlan JA and I said in Kimberley Securities Ltd v Esber [2008] NSWCA 301 at [5]:

The possible subtlety of the distinction can be seen in Lord Wilberforce’s reasons in Prenn v Simmonds … at 1384–1485, and the recognition that the objective commercial aim may, possibly, be ascertained from some aspect of what has passed between the parties. The distinction can also be seen in what Mason J said in Codelfa at 352 about prior negotiations and their legitimate use “to establish objective background facts which were known to both parties and the subject matter of the contract”, and their inadmissibility “in so far as they consist of statements and actions of the parties which are reflective of their actual intentions or expectations” …

(Emphasis added)

178. Further, his Honour said:

[51] Regard cannot be had to evidence of “the antecedent oral negotiations and expectations of the parties” in order to construe the contract: Secured Income Real Estate (Aust) Ltd v St Martins Investments Pty Ltd [1979] HCA 51; (1979) 144 CLR 596 at 606, taken up by Mason J in Codelfa Construction Pty Ltd v State Rail Authority (NSW) at 352. His Honour there said, in part of a passage cited by Campbell JA—

… Obviously the prior negotiations will tend to establish objective background facts which were known to both parties and the subject matter of the contract. To the extent to which they have this tendency they are admissible. But in so far as they consist of statements and actions of the parties which are reflective of their actual intentions and expectations they are not receivable. The point is that such statements and actions reveal the terms of the contract which the parties intended or hoped to make. They are superseded by, and merged in, the contract itself. The object of the parol evidence rule is to exclude them, the prior oral agreement of the parties being inadmissible in aid of construction, though admissible in an action for rectification.

Consequently when the issue is which of two or more possible meanings is to be given to a contractual provision we look, not to the actual intentions, aspirations or expectations of the parties before or at the time of the contract, except in so far as they are expressed in the contract, but to the objective framework of facts within which the contract came into existence, and to the parties’ presumed intention in this setting. We do not take into account the actual intentions of the parties and for the very good reason that an investigation of those matters would not only be time consuming but it would also be unrewarding as it would tend to give too much weight to these factors at the expense of the actual language of the written contract.

[52] This was preceded by his Honour’s observation that evidence of surrounding circumstances is not admissible to contradict the language of a contract when it has a plain meaning. Although ambiguity need not be found before going to context and purpose in the construction of the contract, I do not think that what his Honour said in the words extracted above has been displaced.

179. In my view, the correspondence that I have summarised above concerning special condition 55 constituted negotiations concerning the drafting of that special condition, and does not provide any relevant evidence of surrounding circumstances known to the parties that may legitimately be taken into account in the construction of the special condition.

179. Furthermore, even if the court were entitled to take into account the correspondence, I do not see how it is capable of shedding light on the objectively intended meaning of the special condition, in any way that would assist in its proper construction. The parties merely took different stances as to whether there should be such a special condition and if so what its terms should be. The course of the negotiation does not demonstrate that the parties had any particular common intention as to what performance of the special condition would require.

180. I add that, in any event, I am not satisfied that it would be appropriate for the court to make a declaration on the present evidence in the general terms sought by SSE.

Orders

182. I make the following orders:

1. Order that the plaintiff’s summons be dismissed.

2. Order the plaintiff to pay the defendant’s costs of the claim made in the plaintiff’s summons.

3. Direct the parties to confer for the purpose of submitting to the associate to Robb J, within 14 days of the delivery of reasons for judgment on the plaintiff’s summons, short minutes of order containing directions for the further conduct of the cross claim, and if agreement cannot be reached, the parties should arrange a time for a directions hearing with the Associate.

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Amendments

09 September 2016 - Par [129] "is the principal" to "of the principal"

Decision last updated: 09 September 2016