Stojanovski v Stojanovski

[2012] NSWSC 1338

Supreme Court

New South Wales

Case Title:	Stojanovski v Stojanovski
Medium Neutral Citation:	[2012] NSWSC 1338
Hearing Date(s):	29, 30 and 31 October 2012
Decision Date:	16 November 2012
Jurisdiction:	Equity Division - Expedition List
Before:	Pembroke J
Decision:	See paragraph [21]
Catchwords:	CONTRACT - distinction between contingency and promissory condition CONTRACT - contingency - effect of expressions - "subject to and conditional upon" - and "void and of no effect" - meaning and effect when both expressions read together - "void" means "void" - contract not merely voidable at party's election CONTRACT - contingency - essentiality inherent - no issue of extension of time
Legislation Cited:	Family Provision Act 1982
Cases Cited:	Charles Lodge Pty Ltd v Menahem [1966] VR 161 Gyllenhammar & Partners International Ltd v Sour Brodogradevna Industrija [1989] 2 Lloyd's Rep 403 Jireh International Pty Ltd v Western Export Services Inc [2011] NSWCA 137 Madden-Smith v Madden [2012] NSWSC 146 MK & JA Roche Pty Ltd v Metro Edgeley Pty Ltd [2005] NSWCA 39 Perri v Coolangatta Investments Pty Ltd [1982] HCA 29; (1982) 149 CLR 537 Rudi's Enterprises Pty Ltd v Jay (1987) 10 NSWLR 568 Suttor v Gundowda Pty Ltd [1950] HCA 35; (1950) 81 CLR 418 Tricontinental Corporation Ltd v HDFI Ltd (1990) 21 NSWLR 689 Waterman v Gerling Australia Insurance Company Pty Ltd [2005] NSWSC 1066
Texts Cited:	Carter, Breach of Contract (2nd Edition, 1991) Cheshire & Fifoot, Law of Contract (10th Australian Edition, 2012) Swanton, "Subject to Finance" Clauses in Contracts for the Sale of Land (1984) 58 ALJ 633
Category:	Principal judgment
Parties:	Steven Stojanovski - plaintiff Robert Stojanovski - first defendant Jovanka Stojanovski - second defendant
Representation
- Counsel:	Counsel: C J Bevan – for the plaintiff P M Wass with C P O’Neill – for the first defendant G M Gould – for the second defendant
- Solicitors:	Solicitors: OneGroup Legal Pty Ltd – for the plaintiff Swaab Attorneys – for the first defendant Wilshire Webb Staunton Beattie  – for the second defendant
File number(s):	2012/089349
Publication Restriction:

JUDGMENT

Introduction

1. When Nada Stojanovski (the testator) died on 20 January 2006, she left a will dated 3 January 2006. That will provided for two properties to go to her son Steven, the plaintiff, and two properties to go to her other son Robert, the first defendant. However there was a complication. One of the properties destined for Steven, known as Jersey Avenue, was already owned jointly by her and her two sons. On her death, the two brothers became equal joint owners of that property by virtue of their right of survivorship. The will was therefore ineffective to give effect to her intention that the plaintiff receive the whole of Jersey Avenue.

2. On the same day that the will was signed, the first defendant signed a document declaring that he gave his share in Jersey Avenue to the plaintiff "in line with my mother's last will". However, after his mother's death, he resiled from that declaration. The plaintiff was therefore compelled to commence proceedings under the Family Provision Act 1982 in an endeavour to obtain what his mother intended. Those proceedings were settled by a Deed of Release dated 30 June 2009 between the plaintiff and the first defendant. The Deed provided for the discontinuance of the plaintiff's proceedings and the transfer to him of the first defendant's interest in Jersey Avenue. The discontinuance of the proceedings was required to take place on 30 June 2009 (on the day the Deed was signed) and the transfer of Jersey Avenue was required to take place by 30 September 2009. The transfer of the Jersey Avenue property has not taken place.

3. The reason why the transfer of Jersey Avenue has not occurred is that the second defendant, the former wife of the plaintiff, has not removed a caveat placed by her on the title to the property. Clause 3.19 of the Deed dealt with the potential complication caused by the former wife's caveat. It provided as follows:

   3.19 This Deed is subject to and conditional upon Steven procuring the removal of the Caveat or the consent of the Caveator to the lodgement of the transfer referred to in Clause 3.1 of this Deed on or before 30 September 2009:

   (a) Steven will use his best endeavours to procure the removal of the Caveat or the consent of the Caveator to the lodgement of the transfer referred to in Clause 3.1 of this Deed;

   (b) If by 30 September 2009 the Caveat is not removed or the consent of the Caveator to the lodgement of the transfer referred to in Clause 3.1 of this Deed is not obtained, this Deed will be void and of no effect.

   (emphasis added)

4. The second defendant's caveat was not removed by 30 September nor was her consent to the lodgement of the transfer referred to in Clause 3.1 obtained. There was no dispute that the caveat had not been removed and I determined separately that her consent had not been obtained for the purpose of Clause 3.19(b). My reasons on that separate question, a pure question of fact, are set out in a separate judgment. What remains is the resolution of the legal effect of the words that begin and end Clause 3.19 of the Deed, namely "This Deed is subject to and conditional upon" and "this Deed will be void and of no effect" - in circumstances where the conditions on which the operation of Clause 3.19 depended were not satisfied on or before 30 September 2009.

Scheme of the Deed

1. An understanding of the scheme and purpose of the Deed is essential to the proper interpretation to be given to the relevant words. Only then will it be possible to discern reliably the objective contractual intention of Clause 3.19 and in particular the intended effect of the relevant words. It is clear that Clause 3.19 represents a separate and freestanding regime that is designed to provide for the consequences that the parties agreed must follow if the plaintiff's former wife prevented the intended transfer taking place on or before 30 September 2009. The clause operates independently of all other provisions in the Deed. And it uses language that does not appear elsewhere in the Deed. The legal concepts of conditionality and voidness are used only in Clause 3.19 and not elsewhere, and only in connection with the possible failure to bring about the removal of the former wife's caveat or to obtain her consent to the transfer by the specified date. That date is 30 September 2009. The operation of Clause 3.19 is expressly conditioned by reference to it.

2. On the other hand, Clauses 3.2 to 3.10, which deal, broadly speaking, with the costs and expenses associated with the intended transfer of Jersey Avenue, represent an entirely separate and different regime. If there is a failure by the plaintiff to comply with his express obligations under Clauses 3.2 and 3.3, then Clause 3.10 provides that the property must be listed for sale by public auction and the net proceeds paid to the plaintiff. In the event of any failure by the plaintiff to perform or comply with his further obligations under Clauses 3.4 to 3.9, the first defendant's remedies are left to be determined under the general law of contract.

3. Each of Clauses 3.2 to 3.10 presumes the transfer of Jersey Avenue in accordance with Clause 3.1. In contrast, Clause 3.19 is predicated on that transfer not having occurred in accordance with Clause 3.1. It specifies what should follow upon the non-happening by 30 September 2009 of the specified events, namely the removal of the caveat or the obtaining of consent. It appears to have been intended by the parties to bring about the result that the Deed should be treated automatically as ineffective and no longer binding. Whether that is so is the issue for determination.

Construction of Clause 3.19

1. The relevant words in Clause 3.19 must be construed in the context of the scheme which the whole of the Deed reveals. The clause is "book-ended" by words of conditionality and voidness. The prefatory words are reasonably clear, as are the concluding words. Taken together, they are clearer still, at least at the level of broad intention. By their drafting, the parties appear to have gone out of their way to emphasise and reiterate that their agreement to the transfer of Jersey Avenue will cease to have any effect if the caveat is not removed or the consent obtained by 30 September 2009.

2. It should not be overlooked that the Deed was drafted and settled by solicitors on both sides, who also signed the Deed and witnessed its execution. The plaintiff took a commercial risk when agreeing to the terms of the Deed. He agreed to discontinue his Family Provision Act claim on the day the Deed was executed but ran the risk that, if the contingencies stipulated in Clause 3.19(b) were not satisfied, he would not receive a transfer of his brother's share of Jersey Avenue. However, such an outcome was not entirely one-sided. If the contingencies were not satisfied, the plaintiff not receive a transfer of his brother's half interest in Jersey Avenue, but he would also be relieved of his multiple financial obligations pursuant to Clauses 3.2 to 3.9. Given his undoubted impecuniosity, this was potentially advantageous to him.

3. For what it is worth, it is possible to surmise why the parties might have chosen to adopt a strict approach to the operation of the Deed if the former wife prevented a transfer by the stipulated date, but it is inappropriate to speculate, and even more so where the language is clear and cogent. I should adhere faithfully to the language which the parties have chosen and give effect to the objective intention which the language and syntax of the Deed demand: Jireh International Pty Ltd v Western Export Services Inc [2011] NSWCA 137 at [55].

4. What I think is central in discerning the parties' objective contractual intention is the combined effect of the prefatory and concluding words in Clause 3.19. Frequently the drafters of contracts use one or other of those expressions or a variation of them. It is not often that they use both. While each expression, standing alone, may sometimes give rise to ambiguity and debate depending on its particular context, the use of both in the one clause sends a powerful message that the operation and performance of the Deed is contingent - at least insofar as it remains unperformed on 30 September 2009.

Failure of Contingency

1. As a matter of legal analysis, the non-happening by 30 September 2009 of the events specified in Clause 3.19(b), constitutes the failure of a contingency: Perri v Coolangatta Investments Pty Ltd [1982] HCA 29; (1982) 149 CLR 537 at 552 and 557. See also Swanton, "Subject to Finance" Clauses in Contracts for the Sale of Land (1984) 58 ALJ 633 at 690. It is an event, the consequence of which is to terminate the contractual relationship and bring to an end the parties' obligations to perform. The language chosen by the parties is clearly the language of contingency rather than that of a promissory condition. The plaintiff did not promise to procure the removal of the caveat or to obtain his former wife's consent. He only promised to use his best endeavours to do so. But both the plaintiff and the first defendant must have recognised that ultimately, the satisfaction of the contingency might be beyond their control. The plaintiff's former wife could, as men and women in her position sometimes do, behave unreasonably, irrationally or vindictively. Her failure to remove the caveat or to provide her consent by 30 September 2009, could not therefore make the plaintiff liable in damages, unless he failed to use his best endeavours pursuant to Clause 3.19(a), which was not alleged.

2. The circumstances postulated in Clause 3.19(b) were therefore a true contingency: Tricontinental Corporation Ltd v HDFI Ltd (1990) 21 NSWLR 689 at 703-704 (Samuels JA); Cheshire & Fifoot, Law of Contract (10th Australian Edition, 2012), pp1027-1038; Carter, Breach of Contract (2nd Edition, 1991) at [429]. The inherent nature of a contingency gives it the character of essentiality: Perri v Coolangatta Investments at 554. No question of a reasonable time beyond 30 September therefore arises.

Void and of No Effect

1. When a stipulated contingency is one which lies beyond the control of either party, there is usually no justification for reading "void" in any sense other than its natural meaning: Suttor v Gundowda Pty Ltd [1950] HCA 35; (1950) 81 CLR 418 at 440; Charles Lodge Pty Ltd v Menahem [1966] VR 161 at 164 (Winneke CJ, Pape and Adam JJ). Where it is within the power of one or both parties to cause the event to happen or not to happen, such a provision is more often construed as making the contract voidable rather than void: Suttor at 441; MK & JA Roche Pty Ltd v Metro Edgeley Pty Ltd [2005] NSWCA 39 at [47]. Where the event in question is one which cannot occur without default on the part of one party, the position is clearer still. The contract will be voidable at the election of the party not in default: Suttor at 441.

2. In all cases, however, the question ultimately remains one of construction: MK & JA Roche at [44] (Hodgson JA); Waterman v Gerling Australia Insurance Company Pty Ltd [2005] NSWSC 1066 at [50] (Brereton J); Gyllenhammar & Partners International Ltd v Sour Brodogradevna Industrija [1989] 2 Lloyd's Rep 403 at 415-416. The word "void" will not be read as "voidable" if the contract, as it does in this case, expressly or inferentially excludes such an interpretation: Rudi's Enterprises Pty Ltd v Jay (1987) 10 NSWLR 568 at 579 (Samuels JA, Priestly and McHugh JJA concurring); Charles Lodge at 164; Gyllenhammar at 416.

3. In this particular case, the intended legal effect of the failure of the contingency is, in my view, made pellucid by the words which begin and end Clause 3.19. Even if it were within the plaintiff's capacity to bring about the satisfaction of the contingencies in Clause 3.19(b), I would not treat the words "void and of no effect" as meaning "voidable" having regard to my view as to the proper construction of the whole of the clause and the clear objective which it reveals. In my opinion, the parties intended that if the plaintiff's former wife proved to be intractable, their agreement should go no further and should be unwound as far as it was possible to do.

Orders

1. Against the possibility that I found that Clause 3.19 took effect in the manner that I have explained, the parties agreed on the outcome that should follow. The first defendant consented to the following orders propounded by the plaintiff:

   5B In the event that the Court determines that the Deed is rendered null and void by operation of clause 3.19, or is otherwise not capable of complete performance:

   (a) an order that accounts be taken by a Judge or an Associate Judge in respect of the benefits derived by the first defendant by reason of the part-performance of the terms of the Deed by the plaintiff and the third defendant; and

   (b) such other orders as the Court thinks just by way of restitution to restore the parties to their positions quo ante the making of the Deed or to give restitution for the unjust enrichment of the first defendant in consequence of the part-performance of the terms of the Deed by the plaintiff and the third defendant.

2. Notwithstanding the parties' agreement, I am not convinced that such an elaborate and potentially costly process is appropriate. With one qualification, it is not immediately obvious that the first defendant has received any material benefit pursuant to the Deed for which he should give restitution. However, the discontinuation of the plaintiff's family provision claim is in a separate category. It clearly provided a benefit to the first defendant. I have already mentioned that on 30 June 2009, pursuant to the Deed, the plaintiff discontinued his proceedings under the Family Provision Act. When the hearing commenced, the summons claimed an order that, if the plaintiff failed in his case on the construction of the Deed, he should be granted an extension of time within which to bring, or reinstate, his family provision claim. This was necessary because, absent special circumstances, a family provision claim must be commenced within twelve months of the date of death of the deceased.

3. For reasons that I do not understand, the plaintiff amended his summons during the hearing, among other things, to abandon his alternative claim for an extension of time within which to bring a family provision claim. This may possibly have occurred because I drew to counsel's attention in opening the observations that I made in Madden-Smith v Madden [2012] NSWSC 146 about the policy reasons behind the twelve month time limit. However the circumstances of that case that led me to make those observations bear no resemblance to the facts of this case. The same result would not necessarily follow.

4. I should say no more than that I would be prepared if necessary, in the particular circumstances of this case, to entertain an application by the plaintiff to further amend the summons to reinstate his claim for an extension of time within which to bring a family provision claim. The abandonment of that claim on the third day of the hearing may well have proceeded on a misapprehension.

5. For the time being, the only order that I will make is to dismiss the claims sought by prayers 5 and 5A of the Amended Statement of Claim filed on 31 October 2012. The proceedings should stand over for further directions before me on 30 November 2012. The parties should consider these reasons. In particular the first defendant should carefully consider his position. This litigation has only become necessary because he resiled from the solemn promise that he made to his mother and his brother on 3 January 2006. If the ultimate outcome is that the plaintiff receives the half interest in Jersey Avenue which the first defendant has denied to him, I will hear submissions about an appropriate costs order against him that reflects that final result.