St Barnabas Nominees Pty Ltd v Stallard Corp Pty Ltd [No 2]
[2011] WASC 289
•24 OCTOBER 2011
ST BARNABAS NOMINEES PTY LTD -v- STALLARD CORP PTY LTD [No 2] [2011] WASC 289
| SUPREME COURT OF WESTERN AUSTRALIA | Citation No: | [2011] WASC 289 | |
| Case No: | CIV:2399/2009 | 19-20 SEPTEMBER 2011 | |
| Coram: | EDELMAN J | 24/10/11 | |
| 20 | Judgment Part: | 1 of 1 | |
| Result: | Declarations made Counter-claim dismissed | ||
| B | |||
| PDF Version |
| Parties: | ST BARNABAS NOMINEES PTY LTD STALLARD CORP PTY LTD CORRIN LINDSAY CAINE |
Catchwords: | Contract Contractual construction Whether by course of dealing interest payment can run from a different date from the date provided in the contract Whether such a course of dealing existed Whether interest obligation can be payable by a person not party to the contract Irrelevance of subjective intentions Irrelevance of pre-contractual negotiations Turns on own facts Trade Practices Consumer law Misleading or deceptive conduct Whether implied representation Whether reliance on any representation |
Legislation: | Competition and Consumer Act 2010 (Cth), s 75B(1)(c), s 82, s 87, sch 2 (Australian Consumer Law) s 18 (provisions which were formerly Trade Practices Act 1974 (Cth), s 75B(1)(c), s 82, s 87, s 52) |
Case References: | Australian Broadcasting Commission v Australasian Performing Right Association Ltd [1973] HCA 36; (1973) 129 CLR 99 Byrnes v Kendle [2011] HCA 26 Chartbrook Ltd v Persimmon Homes Ltd [2009] UKHL 38; [2009] 1 AC 1101 Codelfa Construction Pty Ltd v State Rail Authority of New South Wales (1982) 149 CLR 337 Harvey v Edwards Dunlop & Co Ltd (1927) 39 CLR 302 Life Insurance Company of Australia Ltd v Phillips (1925) 36 CLR 60 Pacific Carriers Ltd v BNP Paribas [2004] HCA 35; (2004) 218 CLR 451 Taylor v Johnson (1983) 151 CLR 422 Toll (FGCT) Pty Ltd v Alphapharm Pty Ltd [2004] HCA 52; (2004) 219 CLR 165 Wardley Australia Ltd v State of Western Australia [1992] HCA 55; (1992) 175 CLR 514 |
JURISDICTION : SUPREME COURT OF WESTERN AUSTRALIA
- IN CIVIL
- Plaintiff
AND
STALLARD CORP PTY LTD
Defendant
(BY ORIGINAL ACTION)
STALLARD CORP PTY LTD
Plaintiff
AND
ST BARNABAS NOMINEES PTY LTD
First Defendant
CORRIN LINDSAY CAINE
Second Defendant
(BY COUNTERCLAIM)
(Page 2)
Catchwords:
Contract - Contractual construction - Whether by course of dealing interest payment can run from a different date from the date provided in the contract - Whether such a course of dealing existed - Whether interest obligation can be payable by a person not party to the contract - Irrelevance of subjective intentions - Irrelevance of pre-contractual negotiations - Turns on own facts
Trade Practices - Consumer law - Misleading or deceptive conduct - Whether implied representation - Whether reliance on any representation
Legislation:
Competition and Consumer Act 2010 (Cth), s 75B(1)(c), s 82, s 87, sch 2 (Australian Consumer Law) s 18 (provisions which were formerly Trade Practices Act 1974 (Cth), s 75B(1)(c), s 82, s 87, s 52)
Result:
Declarations made
Counter-claim dismissed
Category: B
Representation:
Original Action
Counsel:
Plaintiff : Ms K A Vernon
Defendant : Mr I R Freeman
Solicitors:
Plaintiff : Butcher Paull & Calder
Defendant : Haynes Robinson
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Counterclaim
Counsel:
Plaintiff : Mr I R Freeman
First Defendant : Ms K A Vernon
Second Defendant : Ms K A Vernon
Solicitors:
Plaintiff : Haynes Robinson
First Defendant : Butcher Paull & Calder
Second Defendant : Butcher Paull & Calder
Case(s) referred to in judgment(s):
Australian Broadcasting Commission v Australasian Performing Right Association Ltd [1973] HCA 36; (1973) 129 CLR 99
Byrnes v Kendle [2011] HCA 26
Chartbrook Ltd v Persimmon Homes Ltd [2009] UKHL 38; [2009] 1 AC 1101
Codelfa Construction Pty Ltd v State Rail Authority of New South Wales (1982) 149 CLR 337
Harvey v Edwards Dunlop & Co Ltd (1927) 39 CLR 302
Life Insurance Company of Australia Ltd v Phillips (1925) 36 CLR 60
Pacific Carriers Ltd v BNP Paribas [2004] HCA 35; (2004) 218 CLR 451
Taylor v Johnson (1983) 151 CLR 422
Toll (FGCT) Pty Ltd v Alphapharm Pty Ltd [2004] HCA 52; (2004) 219 CLR 165
Wardley Australia Ltd v State of Western Australia [1992] HCA 55; (1992) 175 CLR 514
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- EDELMAN J:
Introduction
1 This trial concerned a claim to interest under a $9 million contract for the sale of land dated 19 July 2007. The 19 July 2007 contract superseded an earlier contract which, in turn, followed the failure of an earlier, conditional contract.
2 The first issue involves the construction of the 19 July 2007 contract. On its proper construction, the interest which Stallard Corp Pty Ltd asserted to be owing to it under that contract was not due. Nor, if it had been due, would it have been payable by St Barnabas Nominees Pty Ltd, which is not a party to the 19 July 2007 contract.
3 Stallard Corp Pty Ltd also brought a counterclaim for misleading or deceptive conduct by St Barnabas Nominees Pty Ltd contrary to s 52 of the Trade Practices Act 1974 (Cth) (now the Competition and Consumer Act 2010 (Cth), s 18, sch 2 (Australian Consumer Law)). A claim was also made against Mr Caine for being knowingly concerned in that breach.
4 The counterclaim was based on an allegation of an implied representation. No implied representation was made, nor was any other misleading or deceptive conduct established. Further, the relations of trust between the two protagonists in this case had broken down so significantly that any misleading or deceptive conduct would not have been relied upon by Stallard Corp Pty Ltd, or Mr Stallard, in entering the 19 July 2007 contract.
The persons involved in this case
5 There are two protagonists in this case and various associated entities. The protagonists are Mr Corrin Caine and Mr Robert Stallard. The only oral evidence was given by Mr Caine and Mr Stallard.
Mr Caine and the Caine entities
6 Mr Caine is a director of each of St Barnabas Nominees Pty Ltd (St Barnabas), Spinaway Parade Pty Ltd (Spinaway), Walworth Pty Ltd (Walworth) and Westcross Holdings Pty Ltd (Westcross Holdings).
7 St Barnabas is the plaintiff and the first defendant by counterclaim. St Barnabas is the trustee of the Falcon Unit Trust. Until April 2007
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- St Barnabas was the trustee of the CL Caine Family Trust and the CL Caine Superannuation Fund.
8 Spinaway has been the trustee of the CL Caine Family Trust since April 2007.
9 Walworth has been the trustee of the CL Caine Superannuation Fund since April 2007.
10 Westcross Holdings is the trustee of the Westcross Unit Trust. The Westcross Unit Trust was established in July 2001. The unit holders of the Westcross Unit Trust were Stallard Corp and St Barnabas in equal shares.
Mr Stallard and the Stallard entities
11 Mr Stallard is the other protagonist in this matter. He is the sole director of Stallard Corp. He was a director of Westcross Holdings until 31 March 2009
12 Stallard Corp is a unit holder of the Westcross Unit Trust in equal shares with St Barnabas.
13 Stallard Corp is the defendant in this case and the plaintiff by counterclaim.
Facts
14 The following summary is my findings of fact on the essential issues and background. Many of these facts are uncontroversial and supported by, or based upon, contemporaneous documents. Where appropriate, I have indicated the source of my finding of fact. A substantial amount of evidence was given at trial concerning the subjective understandings and beliefs of Mr Stallard and Mr Caine. As I explain below, that evidence is irrelevant to the exercise of contractual construction, although some of that evidence has relevance to the question of reliance in the counterclaim.
15 In July 2001, Westcross Holdings acquired a property on Bortolo Drive and Reynolds Avenue, Greenfields, Mandurah (the Land). At the relevant times, the Land was lot 506 on plan 23346 and being the whole of the land in certificate of title vol 2182 folio 978, and lot 509 on plan 25201 and being the whole of the land in certificate of title vol 2505 folio 92.
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16 The purchaser of the Land, Westcross Holdings, held the Land for the Westcross Unit Trust. Mr Caine set up the Westcross Unit Trust.
17 Mr Caine and Mr Stallard were the sole directors of Westcross Holdings. Their respective trustee companies each held one share in Westcross Holdings. Stallard Corp held its units in the Westcross Unit Trust as trustee for the RR Unit Trust. St Barnabas held its units in the Westcross Unit Trust with half as trustee of the CL Caine Family Trust and half as trustee of the CL Caine Superannuation Fund.
18 At the time of the purchase of the Land by Westcross Holdings, Mr Caine and Mr Stallard had known each other for many years. They had worked together, and had been engaged in a number of commercial activities together since the mid-1990s. Mr Caine was an experienced solicitor. Until trust broke down between them, Mr Caine would rely upon Mr Stallard for his greater commercial expertise and Mr Stallard would rely upon Mr Caine for his legal knowledge.
19 The purchase of the Land was part of a venture between them, through various entities with which they were involved. Settlement took place on 30 July 2001. The price paid for the Land was $750,000.
20 Mr Caine and Mr Stallard had initially planned to develop the Land. They had a plan of subdivision approved. They engaged consultants. Over the years the Land appreciated in value substantially.
21 Some time after May 2004, relations between Mr Stallard and Mr Caine broke down. By 2005, Mr Stallard had lost trust in Mr Caine (ts 154). I discuss this loss of trust, and its consequences, in further detail below at [92] - [96].
22 The only remaining joint activity that Mr Stallard and Mr Caine had together at that time was in relation to the Land. Mr Stallard wanted to retire from that business relationship he had with Mr Caine. He considered that he and Mr Caine 'had ceased to have the necessary trust to continue in partnership and I wanted to retire [from] our joint activities' (witness statement Stallard [14]).
23 In a letter dated 21 November 2005, Mr Stallard wrote to Mr Caine referring to Mr Caine's 'aggressive and humiliating attitude' and saying that 'I will be seeking to have in the future Westcross Holdings Pty Ltd administered and audited by an independent party' (annexure CLC 3 to Mr Caine's witness statement). Mr Stallard offered his interest in the
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- Land to Mr Caine (or a third party) for $9 million. No agreement was reached.
24 Mr Caine had also lost trust in Mr Stallard. Mr Caine considered that Mr Stallard had attempted to make an agreement in principle to sell the Land to a third party, without Mr Caine's knowledge (witness statement Caine [34]).
25 By April 2006, the relations between Mr Stallard and Mr Caine were so strained that Mr Stallard asked his accountant, Mr Bizzaca, to represent Mr Stallard in his dealings with Mr Caine. Mr Stallard did not want to have any further direct contact with Mr Caine (witness statement Stallard [18]).
26 In June 2006, Mr Caine received an offer to purchase the interest which St Barnabas held in land at 30 and 32 Olive Road, Falcon WA (the Miami Holiday Park). Mr Caine realised that the funds that St Barnabas obtained from the sale of the Miami Holiday Park could be used by him to purchase the interest of Stallard Corp in the Westcross Unit Trust and Westcross Holdings (ts 98).
27 On 19 June 2006, Mr Caine wrote to Mr Stallard and offered to purchase Stallard Corp's units in the Westcross Unit Trust, the shares which Stallard Corp held in Westcross Holdings, and the $450,000 loan account of Stallard Corp. The purchase price offered was $9,500,000 (exhibit 4). The offer was conditional on completion of the sale of the Miami Holiday Park (ts 45).
28 In the 19 June 2006 letter, Mr Caine explained that the named purchaser on the contract would be St Barnabas and he explained the mechanism by which the purchase would operate. He attached a contract which provided for settlement to be within 48 hours of the settlement of the Miami Holiday Park. The settlement of Miami Holiday Park was expected to occur on 15 December 2006.
29 Stallard Corp, as vendor, and St Barnabas, as purchaser, signed this conditional contract which was dated 3 July 2006. Stallard Corp was represented for the sale by Mr Bizzaca (ts 147), whose signature and address, as the representative of Stallard Corp, also appears on the 3 July 2006 contract.
30 In August, a problem arose with the settlement of the sale of the Miami Holiday Park, upon which the 3 July 2006 contract was conditional. Correspondence and communication ensued between
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- Mr Caine and Mr Stallard (via Mr Bizzaca). Options were explored, including variation of settlement dates for the 3 July 2006 contract. But the sale of the Miami Holiday Park fell through. Mr Stallard and Mr Caine understood that the 3 July 2006 contract had come to an end (ts 148 - 149).
31 Negotiations commenced between Mr Caine and Mr Stallard (often via Mr Bizzaca) for a new contract. Mr Caine considered that the National Australia Bank would lend the money to allow a sale of the units in the Westcross Unit Trust and shares despite the failure of the Miami Holiday Park sale. Letters were exchanged between Mr Stallard and Mr Caine on 6 September and 8 September, but no agreement was reached. Mr Bizzaca, conveying Mr Stallard's words, told Mr Caine that the proposals Mr Caine had suggested were not 'clean enough' (ts 149).
32 On 9 and 10 September 2006, Mr Caine and Mr Stallard exchanged a series of text messages by mobile phone. There were negotiations about the terms of a new contract. Trust having broken down between the two men, the texts were, at times, terse with each accusing the other of 'trying to screw me' (eg 9 September 2006 text from Mr Stallard to Mr Caine, exhibit 11).
33 An agreement was reached as to the terms of a new sale. The agreement was reduced to writing and dated 13 September 2006. This 13 September 2006 contract was a sale from Stallard Corp to St Barnabas of Stallard Corp's units in the Westcross Unit Trust and Stallard Corp's loan account. The price was $9,500,000. Mr Bizzaca was the representative of Stallard Corp for the purposes of the sale.
34 The terms of the 13 September 2006 contract provided that payment was to be as follows:
(1) a deposit of $200,000;
(2) $1 million on 19 December 2006;
(3) $1.3 million on settlement on 19 March 2007; and
(4) $7 million on or before 19 March 2012 but not before 19 March 2010 unless otherwise agreed by Stallard Corp and St Barnabas.
(5) Interest on the $7 million was payable from St Barnabas to Stallard Corp at 8.25% from 19 March 2007 until the $7 million is paid in full.
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- These conditions of the 13 September 2006 contract were typed by Mr Caine. Mr Stallard (on behalf of Stallard Corp) made some amendments to other terms in the 13 September 2006 contract.
35 In September 2006, St Barnabas paid the $200,000 deposit to Stallard Corp due under the 13 September 2006 contract (ts 110).
36 A difficulty subsequently arose. Mr Caine realised that changes to taxation laws meant that there would be significant advantages if the settlement date were delayed from 19 March 2007 to July 2007 after which date taxation changes took effect. He also realised that there would be significant advantages if the sale were of the underlying land rather than a sale of the units in the Westcross Unit Trust (ts 106).
37 A series of text messages were exchanged between Mr Caine and Mr Stallard. In two of the final text messages on 10 December 2006, Mr Stallard proposed to Mr Caine as follows (exhibit 11):
Csc [Mr Caine] Why am i nervs [nervous] We has Atipht [sic: tight] deal yr terms.however i will agree NOW u [you] buy 2.5mil share of my equity payment sept dec 06 mch 07 bal now 2.5mil next bal of
[next text continuing the message]
All my shares purchase & paid 19 jly 07 on mortg 7 mil as agrd plus portion of interest AP MY JU JUY 160k beem bisc [sic: being discounted] paid july 19 0 his is a compremise [compromise].
38 These terms are not entirely clear from the texts but they were agreed by text message. It appears that one term was the payment of $160,000 as interest on 19 July 2007. On 19 December 2006, the further $1 million, which fell due under the (unamended) terms of the 13 September 2006 contract, was paid to Mr Stallard.
39 Further letters and emails were exchanged between Mr Caine and Mr Stallard. In a facsimile on 12 February 2007 sent from Stallard Corp to Mr Caine (exhibit 13), Mr Stallard proposed that one of the additional terms in a new agreement would be that interest at 8.25% be paid on all outstanding sums during the extended settlement period. The outstanding sums would be the $1.3 million which was due on settlement as well as the $7 million which was due several years later.
40 In a letter dated 13 February 2007 (exhibit 15), from St Barnabas to Stallard Corp, reference was made by Mr Caine to the text messages. Mr Caine, on behalf of St Barnabas, proposed that in exchange for the
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- delayed settlement date, interest of $160,000 would be paid on the $7 million owing for the period from 19 March 2007 until 19 July 2007, when settlement was proposed to occur (see eg exhibit 15). No mention was made of interest to be paid on the $1.3 million which was proposed to be paid later at the delayed settlement date.
41 The 13 February 2007 letter from St Barnabas included documents, one of which was a new contract to be dated 19 July 2007.
42 On 15 February 2007, Mr Stallard, on behalf of Stallard Corp responded by facsimile, reiterating the terms of his 12 February 2007 facsimile, including the term that interest was to be paid at 8.25% on the $1.3 million payment which would be deferred as a result of the deferred settlement. Mr Stallard told Mr Caine in that letter that if Mr Caine continued with his behaviour then Mr Stallard would 'forget the whole deal'.
43 Already strained relations, and distrust, then threatened the continued negotiations. On 15 and 16 February 2007 and 1 March 2007, Mr Caine, on behalf of St Barnabas, sent facsimiles to Mr Stallard (the latter to Mr Stallard care of Mr Bizzaca) suggesting that the deal should be called off altogether, and saying that he (Caine) 'would need some incentive, what Stallard calls "lolly", to carry on further negotiations' (exhibit 19).
44 However, the negotiations toward replacing the 13 September 2006 contract did not terminate. On 1 March 2007, Mr Stallard sent a cheque to Mr Caine for land tax due for the Land, and explained that his (by which he meant Stallard Corp's) commitment to Westcross Holdings terminated on 19 March 2007 (exhibit 20). Settlement of the 13 September 2006 contract did not occur on 19 March 2007. Neither party insisted that it should. Nor did Mr Stallard demand payment on that date of the $1.3 million which would have fallen due under the unamended 13 September 2006 contract.
45 On 13 April 2007, Mr Bizzaca, on behalf of Mr Stallard, wrote to Mr Caine confirming that settlement would occur on 19 July 2007. Mr Bizzaca said '[a]s the result of the extension of the payment from 19 March 2007 to 19 July 2007, [Mr Stallard] will accept your offer of $26,000 of interest, payable on 19 July 2007'. He also confirmed that Mr Stallard (and Stallard Corp's) commitments to the Westcross Holdings' outgoings had ceased on 19 March 2007 (exhibit 24).
46 In evidence, neither Mr Caine nor Mr Stallard was able to explain where the $26,000 figure in Mr Bizzaca's letter came from. On its face, it
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- might be speculated from the comments of Mr Bizzaca that the amount was an offer made by Mr Caine to Mr Stallard. But Mr Caine denied having made such an offer (witness statement Caine [82]). And Mr Stallard could not remember how he arrived at the $26,000 (ts 179). I do not consider that it has been established that the offer was made by Mr Caine.
47 The figure of $26,000 to which Mr Bizzaca referred, is slightly less than the amount of interest which would be payable for the deferred settlement period for the amount of $1.3 million. And it is considerably less than the amount of interest which would have been due on the amount of $7 million over that period or the $160,000 to which previous negotiations had referred.
48 The negotiations for settlement of a new contract on 19 July 2007 continued. Mr Caine also obtained some tax advice which he sent to Mr Bizzaca.
49 On 18 June 2007, Mr Caine wrote to Mr Bizzaca explaining that the new transaction, involving the sale of the underlying land, would lead to Mr Stallard's taxable income being reduced from $8.5 million to $4.25 million. Mr Caine also explained that St Barnabas had been replaced by Spinaway as the trustee of the CL Caine Family Trust.
50 In the 18 June 2007 letter, Mr Caine proposed a very different transaction. The new proposal involved a sale of the underlying land in a separate transaction from the sale of the units and the loan account. It is the sale of the Land in that contract which is relevant to this trial.
51 The Land would be distributed by Westcross Holdings to the shareholders. Stallard Corp would then sell its half share in the Land to Spinaway (ts 120). The Land was valued at $18 million, so the price which would be paid by Spinaway was $9 million. The value of the loan account (approximately $500,000) and units were part of a separate transaction.
52 The deposit to be paid at settlement, on 19 July 2007, by Spinaway for the sale of the Land was $2 million. The remaining $7 million was payable on or before 19 March 2012. In the 18 June 2007 letter, Mr Caine accepted that credit would be given to Stallard Corp for the $1.2 million which had previously been paid to it under the 13 September 2006 contract. Hence, for the sale of the Land, an $800,000 deposit would be paid to Stallard Corp.
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53 In the 18 June 2007 letter to Mr Bizzaca, Mr Caine explained that Spinaway would also pay $26,000 at settlement to Stallard Corp 'as per your letter dated 13 April 2007'.
54 There were some further negotiations about the new contract. Mr Stallard's solicitor reviewed the documents and made some changes, which were agreed by Mr Caine (for Spinaway ) (exhibit 31).
55 On 19 July 2007 the new contract was executed. The new contract superseded the 13 September 2006 contract. The purchaser was Spinaway. Reference is made to the 19 July 2007 contract in more detail in discussion of the question of construction below.
56 In a separate agreement, Mr Caine gave a first mortgage over the Miami Holiday Park to Stallard Corp (exhibit 28), and a guarantee to Stallard Corp for $7 million (exhibit 36). Although the mortgage was not tendered, the guarantee is a guarantee of payment of money under the first mortgage over the Miami Holiday Park, which was owned by St Barnabas (ts 119; condition 9 of the 19 July 2007 contract).
The dispute
57 This dispute concerns whether, as Stallard Corp alleges, St Barnabas is contractually required to pay interest to Stallard Corp on $7 million for the period of 19 March 2007 until 19 July 2007. St Barnabas says that it is not required to make this payment to Stallard Corp. The amount of interest is approximately $192,500 (the Disputed Amount).
58 The context in which this dispute has arisen is that Stallard Corp lodged a caveat over St Barnabas' title to the Miami Holiday Park. On settlement of the sale of the Miami Holiday Park, one condition which Stallard Corp required of St Barnabas before it would lift the caveat was that the Disputed Amount be paid to the solicitors of St Barnabas, Richard Payne and Associates, to be held on trust, earning interest, pending the determination of whether St Barnabas is required to pay the Disputed amount to Stallard Corp.
59 St Barnabas seeks a declaration that it is entitled to be paid the Disputed Amount and all interest, and an order that Richard Payne and Associates pay to St Barnabas the Disputed Amount and all interest on it.
60 In a counterclaim, Stallard Corp also claims payment from Richard Payne and Associates of the Disputed Amount. It claims against St Barnabas in the amount of the Disputed amount with interest, for
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- damages for breach of s 52 of the Trade Practices Act,now repackaged as s 18 of sch 2 (Australian Consumer Law) of the Competition and Consumer Act 2010 (Cth), the name change being operative from 1 January 2011. Stallard Corp also claims against Mr Caine for being knowingly concerned in that breach: apparently under s 75B(1)(c) of the Competition and Consumer Act 2010 (Cth), although this section was not pleaded nor referred to in submissions.
The primary action: the 19 July 2007 contract
61 The issue in the primary action concerns the construction of the 19 July 2007 contract and the pleaded 'course of conduct' leading up to it.
62 It was common ground that the 19 July 2007 contract superseded the 13 September 2006 contract. It is impossible to contend otherwise. The 13 September 2006 sale transaction had not been completed. It had been replaced by a structure which was completely different.
63 The case for Stallard Corp, as pleaded at par 19A of the Amended Defence, is that
[i]t was at all relevant times agreed, and was the common intention of the parties to the [19 July 2007 contract], that interest on the balance of [the] purchase price of $7,000,000 would run from 19 March 2007; that interest would be paid annually at the rate of 8.25% on 19 March each year; and that the term of the secured loan was 3 years from 19 March 2007. The [19 July 2007 contract] was intended by the parties, and understood by Stallard, to give effect to that intention.
64 There are three reasons why this defence must fail.
65 First, the defence is to a claim by St Barnabas that St Barnabas does not owe the Disputed Amount to Stallard Corp and is therefore entitled to be (re)paid that money from Richard Payne and Associates. But St Barnabas is not a party to the 19 July 2007 contract. The contract was between Stallard Corp and a third party, Spinaway. Since St Barnabas assumed no obligations under the 19 July 2007 contract, it cannot be liable to pay any interest under it.
66 Counsel for Stallard Corp made reference in submissions to exhibit 36 which was the guarantee given by Mr Caine, and which refers to a loan from Stallard Corp to St Barnabas. As I have explained above, at [56], that guarantee relates to the mortgage which St Barnabas gave over the Miami Holiday Park. It is not part of the 19 July 2007 contract; it
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- does not make St Barnabas a party to the 19 July 2007 contract; and it does not create any liability to pay interest by St Barnabas.
67 Secondly, even if Spinaway were a party to this litigation, or even if St Barnabas were a party to the 19 July 2007 contract, there is no provision in the 19 July 2007 contract for interest to be paid from 19 March 2007 until 19 July 2007.
68 The 19 July 2007 contract was between Spinaway and Stallard Corp. The relevant terms were as follows:
(iii) Purchase Price: $9,000,000.
(iv) Manner of Payment: A deposit of $2,000,000 of which $2,000,000 is paid herewith. The balance of the Purchase Price shall be paid on the Settlement Date.
(v) Settlement Date: 19 July 2007.
- 7. The balance of the purchase price, namely $7,000,000, shall be paid to [Stallard Corp] by [Spinaway] on or before 19 March 2012.
8. [Spinaway] shall pay to [Stallard Corp] interest on the said sum of $7,000,000 or so much thereof as shall be outstanding from time to time at the rate of 8.25% per annum calculated and payable on the 19 day of March each year until the said sum of $7,000,000 is repaid in full. The first payment of interest shall be due and payable on 19 March 2008.
69 The interest obligation imposed by these clauses is plain. At 19 July 2007, Spinaway incurred an obligation of $7 million. While that obligation remained outstanding it would accrue interest at the rate of 8.25%. In other words, interest at 8.25% ran from 19 July 2007. Where words of a contract, read in context, are unambiguous then in the exercise of construction a court must give effect to them even if the court might consider the result to be unreasonable, or even if the court were to suspect that the parties subjectively meant something else; to do otherwise would be to remake or amend a contract: Australian Broadcasting Commission v Australasian Performing Right Association Ltd [1973] HCA 36; (1973) 129 CLR 99, 109 (Gibbs J).
70 Thirdly, although reference was made by Stallard Corp to the surrounding circumstances of the 19 July 2007 contract, it was never explained how those surrounding circumstances could give the words of cl 7 and cl 8 a meaning other than their ordinary and plain meaning.
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71 Stallard Corp relied upon surrounding circumstances of the 19 July 2007 contract as establishing a 'course of dealing, altered from time to time, including at the request of Mr Caine' (written submissions [37]). An agreement can, of course, be established by a course of dealings, such as a series of documents or conversations: Harvey v Edwards Dunlop & Co Ltd (1927) 39 CLR 302, 307 (Knox CJ, Gavan Duffy & Starke JJ). But it is a wholly different matter to rely upon a 'course of dealing' in an attempt to contradict the plain terms of a detailed, written contract.
72 In my findings of fact I have set out in detail the circumstances in which the 19 July 2007 contract was established. The 3 July 2006 contract came to an end when the condition precedent (the sale of the Miami Holiday Park) failed, and the parties chose to renegotiate a new contract. The 13 September 2006 contract had been superseded by the 19 July 2007 contract. The 19 July 2007 contract involved different parties, a different structure, and a different interest provision.
73 Apart from the guarantee which I have discussed above at [66], it was also unclear which surrounding circumstances were said to establish the course of dealing which was necessarily contrary to the terms of cl 7 and cl 8 of the 19 July 2007 contract.
74 Part of the evidence by Stallard Corp was evidence of pre-contractual negotiations. Evidence of pre-contractual negotiations is generally irrelevant to the construction of a contract. There are difficult questions involving when evidence of pre-contractual negotiations is admissible in order to demonstrate facts which are known to both parties as part of the surrounding circumstances for interpretation of a contract, and also whether there must be ambiguity in the words of a contract (and what is meant by 'ambiguity') before that evidence is admissible: Byrnes v Kendle [2011] HCA 26 [98] - [99] (Heydon & Crennan JJ) and Chartbrook Ltd v Persimmon Homes Ltd[2009] UKHL 38; [2009] 1 AC 1101, 1117 - 1121 [33] - [42] (Lord Hoffmann); see also Codelfa Construction Pty Ltd v State Rail Authority of New South Wales (1982) 149 CLR 337, 348, 352 (Mason J); J Spigelman, 'From text to context: Contemporary contractual interpretation' (2007) 81 ALJ 322.
75 But these questions do not need to be considered in this case. For reasons I explain below at [82] - [87] the evidence of the negotiations prior to the 19 July 2007 contract in this case does not establish any implied representation. Nor does it contradict, vary or permit any different construction of the plain words of the 19 July 2007 contract.
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76 During the trial, Mr Stallard was also examined about his subjective understanding of the terms of the contract. It is well established that a contract falls to be construed by what a reasonable person would understand the terms of the contract to mean, by considering the text, surrounding circumstances known to the parties and purpose and object of the transaction: Pacific Carriers Ltd v BNP Paribas [2004] HCA 35; (2004) 218 CLR 451, 461 - 462 [22] (the Court); Toll (FGCT) Pty Ltd v Alphapharm Pty Ltd [2004] HCA 52; (2004) 219 CLR 165, 179 [40] (the Court).
77 This evidence concerning Mr Stallard's subjective beliefs has some relevance to the reliance issue considered below at [88] but it is not relevant to the construction of clauses in the 19 July 2007 contract: 'there are few principles more firmly entrenched in the law': Life Insurance Company of Australia Ltd v Phillips (1925) 36 CLR 60, 76 (Issacs J).
78 For these reasons, I conclude that St Barnabas is entitled to the Disputed Amount, and to an order that the amount, with the accumulated interest, be paid to it by its solicitors.
The counterclaim
79 Stallard Corp brings a counterclaim for misleading or deceptive conduct, or conduct likely to mislead or deceive under s 52 of the (now repealed and re-enacted) Trade Practices Act. Damages are sought by reference to s 87 (although not s 82) of that Act.
80 At pars 22 - 24 of the counterclaim, Stallard Corp pleads that St Barnabas engaged in misleading and deceptive conduct by impliedly representing that interest on the $7 million balance due under the 19 July 2007 contract would run from 19 March 2007. The implied representation is said to be 'by producing the [19 July 2007 contract]' (counterclaim [22]) and by the letter of Mr Caine dated 18 June 2007 (counterclaim [23]).
81 The claim for misleading or deceptive conduct fails for two reasons. First, there was no implied representation, or misleading or deceptive conduct, concerning any entitlement of Stallard Corp to interest, either in the 19 July 2007 contract or in the 18 June 2007 letter, or in any other conduct. Secondly, even if there were such a representation, or if conduct were misleading or deceptive, Stallard Corp, by Mr Stallard, did not rely on Mr Caine or St Barnabas. The relationship between Mr Stallard and Mr Caine had so irreparably broken down that there was no trust between
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- them and no reliance by Mr Stallard upon any conduct by Mr Caine or his companies.
Misleading or deceptive conduct: implied representations
82 Mr Caine gave unchallenged evidence, which I accept, that when he received Mr Bizzaca's letter of 13 April 2007 he accepted the reference to '$26,000 of interest' at face value and that he considered it to be Mr Stallard's effort to continue the negotiations (ts 115).
83 I have explained above that in his letter, Mr Bizzaca had referred to Mr Stallard accepting an interest payment of $26,000 as a response to an offer from Mr Caine. But no evidence was given that Mr Caine had made such an offer. Mr Caine denied having made such an offer (witness statement Caine [82]) and I am not satisfied that the $26,000 figure was derived from an offer made by Mr Caine. Nevertheless, it is clear that, from Mr Caine's point of view, $26,000 was a very attractive amount to pay for all interest, on the deferred $1.3 million as well as the $7 million.
84 It was not put to Mr Caine in cross-examination that Mr Caine knew, or even suspected, that Mr Stallard was labouring under a misapprehension that interest on the $7 million would run from 19 March 2007.
85 Not only is there no evidence of misleading or deceptive conduct to this effect but the pleaded matters of alleged implied representations do not support the alleged representations that interest on the $7 million would run from 19 March 2007. For the reasons I have explained above at [68] - [69] the 19 July 2007 contract establishes that interest is notpayable until settlement on 19 July 2007.
86 The same is true of the 18 June 2007 letter which is pleaded at [23] of the counterclaim. I have set out my findings of fact in relation to that letter above at [49] - [53]. The letter provides only for payment of $26,000 interest, by reference to Mr Bizzaca's letter of 13 April 2007.
87 Neither St Barnabas, nor Mr Caine, engaged in conduct that was misleading or deceptive or conduct that was likely to mislead or deceive.
Reliance
88 In any event, in order for damages to be awarded for a breach of s 52, then a claim based upon s 82 or s 87 (as pleaded) requires that the loss or damage be suffered 'by' the misleading or deceptive conduct. The word 'by' imports the causal requirement of reliance, as pleaded in [23] of
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- the counterclaim: Wardley Australia Ltd v State of Western Australia [1992] HCA 55; (1992) 175 CLR 514, 525 (Mason CJ, Dawson, Gaudron & McHugh JJ).
89 In his witness statement, Mr Stallard gave evidence in relation to these matters of reliance. He said that in his dealings with Mr Caine up to 2007, he relied entirely on Mr Caine for preparation of the necessary legal documents and he expected Mr Caine to protect the interests of them both. Mr Stallard also said that although he had been involved in legal issues over the years he had no expertise in that area and relied on Mr Caine entirely to ensure that they were complying with the law and were properly protected. Mr Stallard said that he trusted Mr Caine to do the right thing by him in a legal sense. Mr Stallard also explained his understanding of the investments with Mr Caine as partnership or joint ventures which he considered involved obligations of good faith by the parties to each other.
90 Objection was taken by counsel for Mr Caine to Mr Stallard's evidence of each of these matters. It was said that they were self-serving comments and unsupported by facts. I did not, and do not, consider that these objections can be sustained. The evidence is directly relevant to Mr Stallard's relationship with Mr Caine and his plea that he had relied upon Mr Caine.
91 In Mr Caine's responsive witness statement he accepted that he and Mr Stallard recognised an obligation to act in good faith towards each other. Mr Caine also accepted that Mr Stallard trusted him to do the right thing in a legal sense. Mr Caine added that until November 2005 he trusted Mr Stallard to do the right thing by him (Mr Caine) in a commercial sense.
92 I accept the evidence of both Mr Stallard and Mr Caine that until around November 2005 they trusted each other. However, my conclusion is that after that time, trust broke down between the two men and certainly by September 2006, Mr Stallard would not rely on Mr Caine.
93 This conclusion is reinforced by the evidence from both Mr Stallard and Mr Caine to which I have referred above in my findings of fact at [22] - [25]. Although in a facsimile dated 12 February 2007, Mr Stallard said to Mr Caine that 'I am simply trusting you now' (exhibit 13), there was no real trust between the two men at that time. In the same letter, Mr Stallard told Mr Caine that 'should any of the uncompleted documents be unfair and/or suggest a disadvantage to myself after an independent
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- opinion has been received I will terminate this entire Contract of Sale' (exhibit 13). The same day Mr Stallard also wrote to Mr Caine explaining his 'extreme disappointment' with Mr Caine and saying that he (ie Mr Stallard) had only wanted to retire. He questioned why Mr Caine treated him (Mr Stallard) with 'such venom and hatred' (exhibit 14); he referred subsequently to Mr Caine's abuse, humiliation and derogatory slurs (exhibit 16).
94 There were also points in time during the negotiations of the 19 July 2007 contract when the deal was very nearly abandoned by both parties. Mr Stallard had told Mr Caine that if Mr Caine continued 'with your disgusting behaviour towards me ... I will forget the whole deal' (exhibit 16).
95 Finally, even before these vituperative eruptions between Mr Caine and Mr Stallard, Mr Stallard's lack of trust and lack of reliance upon Mr Caine was evident by Mr Stallard taking advice from his accountant in relation to the 13 September 2006 contract (ts 150) and some minor legal advice on that contract (ts 150).
96 Mr Stallard had 30 years of experience in business (ts 154). He made amendments to previous contracts with which Mr Caine had been involved. He had entirely lost trust in Mr Caine by the time of the 19 July 2007 contract. He did not rely upon any conduct, or representation, by Mr Caine in entering that contract.
97 The counterclaim must be dismissed.
Conclusion
98 Mr Stallard explained that the reason why he did not ask for the 19 July 2007 contract to be amended (which he had done in relation to the 13 September 2006 contract) was because he had misread the 19 July 2007 contract (ts 155). I accept this evidence. Mr Stallard had considerable business experience, he was being advised by his accountant Mr Bizzaca, and he no longer trusted Mr Caine.
99 But Mr Stallard's case was not based on mistake. Mr Stallard's case did not involve any allegation of any deliberate contrivance by Mr Caine to conceal a mistake. I do not find, in any event, that there is evidence to support any such allegation or that there was knowledge by Mr Caine of a mistake made by Mr Stallard: Taylor v Johnson (1983) 151 CLR 422, 432 (Mason ACJ, Murphy & Deane JJ). Further, a unilateral mistake by Mr Stallard, based on misreading the 19 July 2007 contract, could not
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- suffice for him to claim contractual relief against a party such as St Barnabas which was not a party to the 19 July 2007 contract.
100 I have also concluded that there was no implied representation, nor any other misleading or deceptive conduct by St Barnabas or Mr Caine, nor was there reliance by Mr Stallard on Mr Caine or St Barnabas.
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