Ten Boundary Street South Melbourne Pty Ltd v Ivanhoe Project Pty Ltd
[2016] VSC 755
•8 DECEMBER 2016
| IN THE SUPREME COURT OF VICTORIA | Not Restricted |
AT MELBOURNE
COMMON LAW DIVISION
PROPERTY LIST
S CI 2016 04851
IN THE MATTER of an application pursuant to s 49(1) of the Property Law Act 1958 (Vic)
| TEN BOUNDARY STREET SOUTH MELBOURNE PTY LTD (ACN 609 047 734) | Plaintiff |
| v | |
| IVANHOE PROJECT PTY LTD (ACN 158 486 821) | Defendant |
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JUDGE: | RIORDAN J |
WHERE HELD: | MELBOURNE |
DATE OF HEARING: | 6 DECEMBER 2016 |
DATE OF JUDGMENT: | 8 DECEMBER 2016 |
CASE MAY BE CITED AS: | Ten Boundary Street South Melbourne Pty Ltd v Ivanhoe Project Pty Ltd |
MEDIUM NEUTRAL CITATION: | [2016] VSC 755 |
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PROPERTY – Construction of a contract of sale conditional on best endeavours to obtain planning permit – Whether vendor can require settlement before fulfilment of condition.
VENDOR AND PURCHASER – Scope of jurisdiction and relief available under Property Law Act 1958 (Vic) s 49(1).
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APPEARANCES: | Counsel | Solicitors |
| For the Plaintiff | Mr D Aghion Mr P Donovan | Rockwell Olivier |
| For the Defendant | Dr O Bigos | HWL Ebsworth |
HIS HONOUR:
By a contract of sale of real estate dated 3 June 2016 (‘the Contract of Sale’), Ten Boundary Street South Melbourne Pty Ltd (‘the vendor’) agreed to sell a property at 10-16 Boundary Street, South Melbourne, Victoria, being the land described in Certificate of Title volume 09782 folios 179 and 180 (‘the Property’) to Ivanhoe Project Pty Ltd (‘the purchaser’) for the sum of $12 million. The vendor and the purchaser have each filed an originating motion seeking determination of questions arising out of the Contract of Sale pursuant to s 49 of the Property Law Act 1958 (Vic).
Section 49(1) provides as follows:
Applications to the Court by vendor and purchaser
A vendor or purchaser of any interest in land, or their representatives respectively, may apply to the Court, in respect of any requisitions or objections, or any claim for compensation, or any other question arising out of or connected with the contract (not being a question affecting the existence or validity of the contract), and the Court may make such order upon the application as to the Court may appear just, and may order how and by whom all or any of the costs of and incident to the application are to be borne and paid.
In NGL Properties Pty Ltd v Harlington Pty Ltd,[1] Kaye J adopted the following principles about the scope of the Court’s jurisdiction and the consequential relief under s 49(1), which I summarise as follows:
[1][1979] VR 92, 100.
(a) The Court may determine any short point of law or construction arising on the abstract, contract or requisitions.
(b) However, this procedure is not intended to enable the Court to summarily resolve disputed questions of fact; and cannot be used to determine claims for specific performance or rescission.
(c) The section empowers the Court to make such order as appears just, which enables the Court to give relief which is the ordinary consequence of the decision of the point submitted to it. However, such an application cannot be treated as a claim for damages.
At the return of the summons on the Originating Motion, it was agreed between counsel in substance that the question that urgently required determination was the following:
Can the vendor require settlement of the contract of sale (as defined in the Originating Motion) pursuant to the second bullet point under ‘Settlement’ in the particulars of sale on the basis of notice of a planning permit issued by the City of Port Phillip in response to the Planning Permit Application (as defined in the contract of sale), which is not on the same terms to that contained in the Planning Permit Application, in circumstances where the vendor has filed, but not prosecuted to completion, an appeal to the Victorian Civil and Administrative Tribunal in accordance with its obligations under clause 2.5 of the contract of sale.[2]
(‘the Question’)
[2]The order made on 6 December 2016 framed the question in slightly different terms; but in substance identically.
Background
On 13 November 2015, the vendor entered into contracts (‘the head contracts’) to purchase:
(a) the land described in Certificate of Title volume 09782 folio 180 from Culinart Pty Ltd; and
(b) the land described in Certificate of Title volume 09782 folio 179 from Elder Banner Pty Ltd.
By an application for a planning permit dated 8 April 2016 (‘the Planning Permit Application’), the vendor applied to the City of Port Phillip for a planning permit for the Property for the proposed development of 30 four storey townhouses with one carpark for each of the 30 dwellings.
On 3 June 2016, the vendor and the purchaser[3] entered into the Contract of Sale. The relevant terms of the Contract of Sale are set out in [16] – [18] below.
[3]The purchaser was then named Beulah Land International Pty Ltd.
On 26 October 2016, the City of Port Phillip issued a planning permit (‘the October 2016 Planning Permit’), in response to the Planning Permit Application granting permission for the development of 30 dwellings but only 27 carparks.
By email dated 26 October 2016 to the purchaser’s solicitors, the vendor’s solicitors attached the October 2016 Planning Permit and stated:
Special Condition 2 of the contract of sale is now satisfied.
In accordance with the terms of sale, settlement is to occur on or before Friday 2nd December, 2016.
After an exchange of correspondence between the parties’ respective solicitors, on 18 November 2016 the purchaser’s solicitor sent an email to the vendor’s solicitor stating as follows:
Our client rejects your suggestion that your client has complied with its obligations under the Contract for the following reasons:
1your client has clearly not used its best endeavours to procure the planning permit on the same conditions as the planning permit application as required by SC 2.1. I have attached below a copy of an email from your client to our client which also includes an email from Contour town planners. Both your client and Contour confirm they see no reason why approval for the additional 3 car spaces should not be obtained. In these circumstances your client should not have agreed to remove the 3 spaces in its negotiations with council, which we note it did unilaterally without seeking our client's consent.
2SC 2.4 provides that notwithstanding anything to the contrary in the Contract the number of approved car parks must not be less than the number in the application which was 30.
Your client has not complied with its obligations under the Contract and there is no requirement for our client to settle this purchase until the conditions have been satisfied.
After further correspondence, on 24 November 2016 the vendor filed and served the Originating Motion in proceeding S CI 2016 04851.
By Notice of Default dated 2 December 2016 addressed to the vendor, the purchaser gave notice as follows:
The Purchaser hereby gives notice to the Landlord as follows.
A.By special condition 2.4(a) of the Contract, the Vendor and the Purchaser agreed that the number of approved carparks in the planning permit must not be less than what is contained in the ’Planning Permit Application’ (as defined in the Contract) (Application).
B.On 26 October 2016 the City of Port Phillip issued a planning permit for the proposed development on the Property pursuant to amended plans showing 27 carparks instead of 30 carparks as specified in the Application.
C.A permit allowing for only 27 carparks in the development of the Property is not acceptable to the Purchaser.
D.By special condition 2.5(a)(v) of the Contract, the Vendor agreed, at its expense, to prosecute the Application before the responsible authority and the Victorian Civil and Administrative Tribunal (‘VCAT’) in the event that the responsible authority issues a permit or gives notice of its decision to grant a permit for the proposed use of the ‘Land’ (as defined in the Contract) subject to conditions which are not reasonably acceptable to the Purchaser.
NOW TAKE NOTICE
1.The Vendor has defaulted in the performance of the above obligations under the Contract by failing to:
(a)obtain a planning permit for 30 approved carparks as contained in the Application; and/or in the alternative,
(b)prosecute the Application before VCAT on the grounds that the responsible authority has issued a permit for the proposed use of the Land subject to conditions not reasonably acceptable to the Purchaser.
2.The Purchaser requires the Vendor, within fourteen (14) days after the date of service of this Notice, to remedy the abovementioned defaults of the Contract insofar as the same are capable of remedy and to pay to the Purchaser its reasonable costs incurred as a result of the default together with interest.
3.If the Vendor fails to comply with this Notice within the timeframe specified in paragraph 2 above, the Purchaser intends to do one or more of the following:
(a)recover from the Vendor any loss the Purchaser suffers due to the Vendor's default under either or both of the Vendor's breaches of the Contract; and/or
(b) exercise any of the Purchaser's other legal rights.
On 6 December 2016, the purchaser filed its Originating Motion in proceeding S CI 2016 04983.
The final day for settlement by the vendor (as purchaser) under the head contracts is 9 December 2016.
The vendor has filed an appeal to the Victorian Civil and Administrative Tribunal (‘VCAT’) against the October 2016 Planning Permit.
The Contract of Sale
The relevant clauses of the Contract of Sale are as follows:
(a) The price is $12 million with a deposit of $1.2 million payable on the signing of the contract of sale and the balance of $10.8 million payable at settlement.
(b) The settlement provision is as follows:
SETTLEMENT
is due on a date that is the later of:
•the settlement of the Head Contract so long as the Vendor provides the Purchaser with written notice of the settlement date under the Head Contract at least 30 days prior to that date;
•30 days after the Vendor provides written notice of the issue of the Planning Permit, subject to Special Condition 2 [‘the Second Bullet Point’]; and
• 6 months after the Day of Sale.
In the Special Conditions the following relevant terms were defined as having the following meanings in the Contract of Sale unless the contrary intention appeared:
‘Planning Permit’ means a planning permit for the demolition of existing structures of the Land (if a planning permit for demolition is required), the subdivision of the Land and the construction of the Development on the Land;
‘Planning Permit Application’ means the application dated 8 April 2016 for a Planning Permit as submitted [to the City of Port Phillip] and does not include any amendments made subsequent to 8 April 2016 … ;
‘Planning Permit Sunset Date’ means a date that is 18 months from the Day of Sale (or such other period agreed to in writing between the parties);
‘Settlement Date’ means the date on which settlement occurs.
Special Condition 2 was headed ‘Planning Permit’ and provided as follows:
2.1This Contract is conditional on the Vendor using its best endeavours to obtain at its expense the Planning Permit by the Planning Permit Sunset Date on the same terms to those contained in the Planning Permit Application and on terms allowing the construction of the Development in accordance with the law save for any changes that may be otherwise agreed to by the Purchaser at its sole discretion (acting reasonably).
2.2 If Special Condition 2.1 is not satisfied, then the Purchaser may at its election:
(a)adjust the Price and Deposit in accordance with Special Condition 2.3;
(b)by no later than 14 days after the Planning Permit Sunset Date, waive the benefit of this Special Condition 2; or
(c)by no later than 14 days after the Planning Permit Sunset Date, terminate the Contract by written notice to the Vendor.
2.3The parties acknowledge and agree that the Price offered by the Purchaser commensurates (sic) with the layout of the Development as well as the number of townhouses and carparks shown in the Planning Permit Application. In the event the Purchaser becomes entitled under Special Condition 2.2 to adjust the Price and elects to adjust the Price, the parties agree that the Price and Deposit will be adjusted as follows:
(a)… [there follows the formula for reducing the price consequent on a reduction in the number of townhouses approved to be constructed on the Property]
so that as an example where there is a reduction in the number of townhouses approved to be constructed on the Land from 30 townhouses to 27 townhouses (which equates to a 10% reduction in numbers) which corresponds with a 13% reduction in a Net Sellable Area, then the New Price will be 87% (being 100% less 13%) of the Price rather than 90% (being 100% less 10%) of the Price; and
(b) …
2.4Despite anything in this Contract to the contrary, the parties agree that:
(a)the number of approved carparks and approved lifts must not be less than what is contained in the Planning Permit Application; and
(b)…
2.5The parties agree and acknowledge that the outcome of the Planning Permit Application is important to the Purchaser, and the Vendor agrees to at its expense:
(a)prosecute the Planning Permit Application before the responsible authority and the Victorian Civil and Administrative Tribunal (VCAT) if:
(i)the Planning Permit Application is refused by the responsible authority;
(ii)the responsible authority requires the Vendor to provide it or a referral authority with more information under the Planning and Environment Act 1987 (Vic) which the Vendor, using best endeavours, cannot promptly provide;
(iii)the responsible authority fails to grant the Planning Permit within the time prescribed by the Planning and Environment Act 1987 (Vic);
(iv)an objector appeals against the responsible authority's decision to grant the Planning Permit; or
(v)the responsible authority issues a permit or gives notice of its decision to grant a permit for the proposed use of the Land subject to conditions not reasonably acceptable to the Purchaser; and
(b)procure and present to the responsible authority and if necessary VCAT appropriate expert evidence to support the Planning Permit Application.
(c)keep the Purchaser informed of progress made in seeking approval of the Planning Permit Application, to cooperate with the Purchaser in amending or varying or prosecuting the Planning Permit Application and to provide the Purchaser with:
(i) copies of:
(A)all applications made to amend or vary or withdraw the Planning Permit Application including without limitation all further plans and documents lodged with or to support the Planning Permit Application;
(B)all notices of objection to the Planning Permit Application;
(C)all documents and correspondence relating to an appeal to VCAT or judicial review of a decision or failure to make a decision relating to the application for the Planning Permit;
(D)all correspondence received or transmitted by the Vendor concerning the Planning Permit Application;
(E) all amendments or variations to:
(1)the Planning Permit Application or the plans or other documents lodged with or in support of the Planning Permit Application; and
(2)a document referred to in this Special Condition 2; and
(F) the Planning Permit, and
(ii)notice that the Planning Permit Application has been approved by the responsible authority or VCAT.
2.6The Vendor will, immediately on the granting of the Planning Permit, notify the Purchaser in writing.
2.7The Vendor must do all things necessary to ensure that the Purchaser and/or its nominees (as directed by the Purchaser) assign the copyright of the plans …
2.8 If the Contract is terminated under Special Condition 2.2, then:
(a) the Contract is at an end;
(b)the Vendor must refund the Deposit (together with any interest earned on the deposit, if the Deposit was invested) in full to the Purchaser; and
(c)neither party shall have any claim against tile other except for any antecedent breach of this Contract.
2.9For avoidance of doubt, this Special Condition 2 is for the benefit of the Purchaser and can only be waived by the Purchaser.
Principles of Construction
The proper approach to the construction of a commercial contract is well established and was explained in Electricity Generation Corporation v Woodside Energy Ltd as follows:
[T]he objective approach [is] to be adopted in determining the rights and liabilities of parties to a contract. The meaning of the terms of a commercial contract is to be determined by what a reasonable businessperson would have understood those terms to mean. … [I]t will require consideration of the language used by the parties, the surrounding circumstances known to them and the commercial purpose or objects to be secured by the contract. Appreciation of the commercial purpose or objects is facilitated by an understanding ‘of the genesis of the transaction, the background, the context [and] the market in which the parties are operating’. As Arden LJ observed in Re Golden Key Ltd, unless a contrary intention is indicated, a court is entitled to approach the task of giving a commercial contract a businesslike interpretation on the assumption ‘that the parties … intended to produce a commercial result’. A commercial contract is to be construed so as to avoid it ‘making commercial nonsense or working commercial inconvenience’.[4]
[4](2014) 251 CLR 640, 656–657 [35] (citation omitted); recently cited with approval in Simic v New South Wales Land and Housing Corporation [2016] HCA 47 [78] (Gageler, Nettle and Gordon JJ).
Vendor’s submissions
The vendor submitted that it was entitled to require settlement of the Contract of Sale pursuant to the Second Bullet Point for the following reasons:
(a) The vendor had provided written notice of the issue of the October 2016 Planning Permit more than 30 days prior to the proposed settlement date on 5 December 2016.
(b) The words ‘Planning Permit’ in the Second Bullet Point should be read as including any permit issued by the City of Port Phillip in respect of the Property (ie. a Planning Permit as issued) for the following reason. If it was intended that ‘Planning Permit’, in the Second Bullet Point, referred to a planning permit on the same terms to those contained in the Planning Permit Application (ie. Planning Permit as applied for), it would have been so defined; and it would not have been necessary to describe it, in Special Condition 2.1, as ‘the Planning Permit … on the same terms to those contained in the Planning Permit Application.’
(c) This interpretation would allow the Contract of Sale to operate in a common-sense and businesslike manner because settlement of the Contract of Sale would not end the purchaser’s obligations to prosecute the VCAT appeal, in accordance with Special Condition 2.5.
(d) However, on the purchaser’s interpretation, if, despite the vendor’s best endeavours, the Planning Permit as applied for could not be obtained from the City of Port Phillip or VCAT prior to the Planning Permit Sunset Date, the purchaser could not terminate under Special Condition 2.2 and there was no other provision for the termination of the Contract of Sale.
(e)The requirement in Special Condition 2.4(a) that the Planning Permit must not have less carparks than contained in the Planning Permit Application does not affect the meaning of Planning Permit in the Second Bullet Point. A failure to provide the requisite number of carparks would be a breach of Special Condition 2.4(a) and would entitle the purchaser to claim damages and, possibly, to terminate the Contract of Sale. It is unlikely that the parties would have entered into a contract under which the date for completion could be perpetually extended or potentially never arise at all.
(f)The words ‘subject to Special Condition 2’ in the Second Bullet Point do not suggest a contrary interpretation because they only import those clauses of Special Condition 2 that pertain to the issue of the Planning Permit.
Purchaser’s submissions
The purchaser submitted that the vendor was not entitled to require settlement of the Contract of Sale pursuant to the Second Bullet Point for the following reasons:
(a)The ‘Planning Permit’ under the Second Bullet Point was specifically stated to be ‘subject to Special Condition 2’.
(b)The significance of the 30 carparks sought in the Planning Permit Application is underlined by Special Conditions 2.3, 2.4 and 2.5. In particular, Special Condition 2.4(a) requires (among other things) that the number of approved carparks must not be less than what is contained in the Planning Permit Application.[5]
(c)The purchaser was required by Special Condition 2.1 to use its best endeavours to obtain a Planning Permit as applied for by the Planning Permit Sunset Date and Special Condition 2.5 makes it plain that best endeavours included prosecuting an appeal to VCAT to its completion.
[5]The purchaser contended that it was not necessary to interpret whether this required there to be 30 approved carparks or at least one approved carpark for each approved unit.
Disposition
Special Condition 2.1, in the Contract of Sale is expressed to be ‘conditional on the vendor using its best endeavours to obtain at its expense the Planning Permit [as applied for] by the Planning Permit Sunset Date’. Special Condition 2.2 provides the purchaser with specified rights ‘[i]f Special Condition 2.1 is not satisfied’.
It is arguable that Special Condition 2.1 will not be satisfied if the vendor fails to:
(a)use its best endeavours;
(b)obtain the Planning Permit as applied for; or
(c)use its best endeavours and obtain the Planning Permit as applied for.
It is not necessary, at this time, to determine which of the above is the proper construction of Special Condition 2.1; but it is explicit that the date by which the condition is to be fulfilled is the Planning Permit Sunset Date being 3 December 2017.[6]
[6]See category 3 of conditional contracts referred to in Aberfoyle v Cheng [1960] AC 115, 124–5 (Jenkins LJ).
I consider that Special Condition 2.1 is a precondition to the performance of the Contract of Sale.[7] Accordingly, it would be most unusual if the parties intended that the vendor could require settlement, under the Second Bullet Point, prior to the vendor satisfying its condition precedent obligations under Special Condition 2.1.
[7]See the discussion by Mason J in Perri v Coolangatta Investments Pty Ltd (1982) 149 CLR 537, 551–552.
In my opinion, consideration of the terms of the Contract of Sale supports an interpretation that the vendor could not require settlement, under the Second Bullet Point, prior to the vendor satisfying its obligations under Special Condition 2.1. In particular, the words ‘Planning Permit subject to Special Condition 2’ in the Second Bullet Point are most readily interpreted as being a reference to the Planning Permit obtained by the vendor upon it satisfying its obligations under Special Condition 2 and, in particular under Special Condition 2.1.
The adoption of the vendor’s construction that the vendor can require a settlement, under the Second Bullet Point, after obtaining a Planning Permit as issued would have the following effects:
(a)The vendor would be required to settle the purchase of the Property on the issue of any planning permit. There is no indication in the Contract of Sale that the purchaser was prepared to accept any permit, other than the Planning Permit applied for, unless it agreed to the change under Special Condition 2.1 or it elected to adjust the Price or waive the benefit of Special Condition 2 under Special Condition 2.2. In particular, in my opinion, Special Condition 2.4(a) makes it plain that the purchaser could not be required to agree (for example under the requirement to act reasonably pursuant to Special Condition 2.1) to a reduced number of approved carparks.
(b)The obligation on the vendor, under Special Condition 2.5, to prosecute a VCAT appeal would be rendered virtually inutile. Prior to an appeal to VCAT, the City of Port Phillip would always have made the determination with respect to the Planning Permit Application. Accordingly, if any planning permit is issued by the City of Port Phillip (as might be expected), the vendor would be entitled to require settlement within 30 days. I do not consider that is consistent with Special Condition 2.5, which requires the vendor, for the purpose obtaining a Planning Permit as applied for, to prosecute an appeal to VCAT. I reject the submission made on behalf of the vendor that the parties provided, in the Second Bullet Point, for the settlement to be 30 days after notice of the Planning Permit, to allow the vendor the opportunity to complete the prosecution of a VCAT appeal in that period.
(c)The purchaser would lose the benefit of Special Condition 2.2 because the purchaser could be required to settle before the date the condition precedent had to be fulfilled (being 3 December 2017) or the terms of the Planning Permit had been finalised by VCAT. Counsel for the vendor did not submit that the purchaser could retain its rights under Special Condition 2.2.
In my opinion, these effects would not be consistent with the apparent commercial purpose of the Contract of Sale nor the demonstrated intention of the parties
Accordingly, I will answer the Question, no.
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