Twinbrook Corporation Pty Ltd v Mayne

[2006] WASC 293

TWINBROOK CORPORATION PTY LTD -v- MAYNE & ORS [2006] WASC 293

Link to Appeal :       

[2008] WASCA 131

Jurisdiction:  SUPREME COURT OF WESTERN AUSTRALIA         Citation No:   [2006] WASC 293

Case No:      CIV:1616/2006        Heard:           27 & 28 NOVEMBER 2006
Coram:          MASTER SANDERSON    Delivered:     19/12/06

No of pages: 10       Judgment Part:        1 of 1
Result:          Declaration contracts still on foot
Operation of caveat extended                  
Category:      B  

PDF Version            
Parties:          TWINBROOK CORPORATION PTY LTD
WILLIAM ERNEST MAYNE
JENNIFER MAY MAYNE
TERRY ERNEST BARTER
LINDA CHRISTINE BARTER
MAYNE ENTERPRISES PTY LTD
LANSOFT ENTERPRISES PTY LTD
REGISTRAR OF TITLES

Catchwords: 
Contracts
Whether contract for sale of hotel licence validly terminated
Turns on own facts

Legislation:  
Liquor Licensing Act 1988 (WA), s 84(2)

Case References:   
BP Refinery (Westernport) Pty Ltd v Hastings Shire Council (1977) 52 ALJR 20
Gregory v MAB Pty Ltd (1989) 1 WAR 1
Meehan v Jones (1982) 149 CLR 571
Upper Hunter County District Council v Australian Chilling & Freezing Co Ltd (1968) 118 CLR 429
Gange v Sullivan (1966) 116 CLR 418
Kuper v Keywest Constructions Pty Ltd (1990) 3 WAR 419
Lysaght v Edwards (1876) 2 Ch D 499
Perri v Coolangatta Investments Pty Ltd (1982) 149 CLR 537
Sanctuary Investments Pty Ltd v St Gregory's Armenian School Inc (1999) ANZ ConvR 454
Sandra Investments Pty Ltd v Booth (1983) 153 CLR 153
Yango Pastoral Co Pty Ltd v First Chicago Australia Ltd (1978) 139 CLR 410

JURISDICTION : SUPREME COURT OF WESTERN AUSTRALIA

IN CIVIL

CITATION : TWINBROOK CORPORATION PTY LTD -v- MAYNE & ORS [2006] WASC 293

CORAM : MASTER SANDERSON

HEARD : 27 & 28 NOVEMBER 2006

DELIVERED : 20 DECEMBER 2006

FILE NO/S : CIV 1616 of 2006

MATTER : Section 138B of the Transfer of Land Act 1893 (WA)

and

Caveat J692081

BETWEEN : TWINBROOK CORPORATION PTY LTD

Plaintiff

AND

WILLIAM ERNEST MAYNE
    JENNIFER MAY MAYNE
    TERRY ERNEST BARTER
    LINDA CHRISTINE BARTER
    MAYNE ENTERPRISES PTY LTD
    LANSOFT ENTERPRISES PTY LTD
    First Defendants

REGISTRAR OF TITLES
    Second Defendant

(Page 2)

Catchwords:

Contracts - Whether contract for sale of hotel licence validly terminated - Turns on own facts

Legislation:

Liquor Licensing Act 1988 (WA), s 84(2)

Result:

Declaration contracts still on foot

Operation of caveat extended

Category: B

Representation:

Counsel:

Plaintiff : Mr G R Hancy
    First Defendants : Mr J C Curthoys
    Second Defendant : No appearance

Solicitors:

Plaintiff : Denis Meagher
    First Defendants : Slee Anderson & Pidgeon
    Second Defendant : No appearance

Case(s) referred to in judgment(s):

BP Refinery (Westernport) Pty Ltd v Hastings Shire Council (1977) 52 ALJR 20
Gregory v MAB Pty Ltd (1989) 1 WAR 1
Meehan v Jones (1982) 149 CLR 571
Upper Hunter County District Council v Australian Chilling & Freezing Co Ltd (1968) 118 CLR 429

(Page 3)

Case(s) also cited:

Gange v Sullivan (1966) 116 CLR 418
Kuper v Keywest Constructions Pty Ltd (1990) 3 WAR 419
Lysaght v Edwards (1876) 2 Ch D 499
Perri v Coolangatta Investments Pty Ltd (1982) 149 CLR 537
Sanctuary Investments Pty Ltd v St Gregory's Armenian School Inc (1999) ANZ ConvR 454
Sandra Investments Pty Ltd v Booth (1983) 153 CLR 153
Yango Pastoral Co Pty Ltd v First Chicago Australia Ltd (1978) 139 CLR 410

(Page 4)

1 MASTER SANDERSON: The Burlington Hotel is located on the corner of Victoria and Eliot Streets in Bunbury. It occupies a prime position in Bunbury's central business district and is located just to the north of the Lord Forrest Hotel. This case concerns an agreement to sell the hotel business and the land upon which it stands. The action was commenced by the plaintiff after it was served with a 21-day notice in relation to the caveat it had lodged. The matter has proceeded on the originating summons although pleadings were ordered. The fact that the action has progressed in this way has led to one unfortunate consequence. I will deal with that issue later in these reasons.

2 On 1 September 2005, the plaintiff entered into two contracts with the first defendants. One was an agreement to purchase 51 Victoria Street, Bunbury on which stood the Burlington Hotel. This contract was written up on a REIWA standard contract for sale of land or strata title by offer and acceptance. The contract contained a number of special conditions. Special condition 9 required simultaneous settlement with the purchase of the business of the Burlington Hotel. Special condition 10 allowed for due diligence within 90 days of acceptance of the contract.

3 The second agreement was an agreement to purchase a business. That contract had annexed to it special conditions. Condition 2 required simultaneous settlement with the purchase of the freehold. Condition 3 was in the following terms:

"Subject to the transfer of Liquor Licence no. 6010009852 being successfully transferred to the purchaser within 120 days".

4 Condition 7 was in the following terms:

"Settlement within 30 days of condition 3 or within 30 days of City of Bunbury approval for planning and building licences of whichever is the latest [sic]".

5 The liquor licence referred to in condition 3 was never transferred to the purchaser. At no time were any planning or building licences issued to the purchaser by the City of Bunbury. On 5 April 2006, the first defendants, by notice, purported to terminate both agreements. The plaintiff says both contracts are still on foot and as a result it has an interest in the land. It lodged a caveat. The first defendants say that both contracts have been terminated and there is no basis for the caveat being maintained. The first defendants caused the Registrar of Titles to issue a

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21-day notice. It was with the aim of preserving the caveat that the plaintiff commenced these proceedings.

6 It is the first defendants' position that the plaintiff has no right, title or interest in the land. They say this for three reasons. First, they say that the agreement to purchase the business was illegal because it did not comply with the provisions of s 84(2) of the Liquor Licensing Act 1988 (WA). It is said by the first defendants that the two sale agreements are so intimately entwined as to properly be regarded as one agreement. Therefore, if the agreement to purchase the business is void, then the agreement for sale of the land is of no force and effect. Second, it is said that the contract is void for uncertainty. In particular, it is said that condition 7 relating to the date of settlement of the transactions is uncertain and that therefore both contracts fail. Thirdly, it is said that an application for planning approval was not made to the City of Bunbury within a reasonable time, or at all, giving the first defendants the right to terminate the contracts. It is necessary to examine each of these matters in turn.

Effect of s 84(2)(a) of the Liquor Licensing Act

7 Section 84(2) of the Liquor Licensing Act is in the following terms:

"A licensee shall not purport to sell or assign the right to carry on business under the licence or to sell or assign the licence itself unless -

(a) the contract of sale or assignment is subject to a condition precedent under which the prior approval by the Director of the proposed transfer of the licence is a prerequisite to the contract taking effect; or

(b) the Director has approved the proposed transfer."

8 In my view, as a matter of contractual interpretation, condition 3 of the special conditions makes it a condition precedent to the sale agreement that the liquor licence is to be transferred to the purchaser. The condition has a temporal element, but that is neither here nor there. The simple effect of the clause is that transfer of the licence is a prerequisite to the contract taking effect. In my view, the contract complies precisely with the requirements of the Act and is in no way tainted by illegality.

9 It is worthy of note that subsection (2) anticipates two separate and distinct circumstances. First, the possibility of a licensee selling or

(Page 6)

assigning the right to carry on business under the licence. Second, the sale or assignment of the licence itself. It is not entirely clear from the agreement into which of the two categories this sale falls. By cl (A)(1) the first defendants sold the goodwill of the hotel. By cl (A)(4) they sold all licences connected with the premises or business. Presumably, the sale of the goodwill was the sale of the right to carry on the business. The sale of the licences presumably included the sale of the liquor licence. But it really does not matter into which of these two categories this contract falls. The contract is to be read as being subject to the licence being successfully transferred and that complies with the requirements of the Act.

10 During the course of the trial, there was a good deal of discussion as to whether the plaintiff had waived compliance with condition 3 of the special conditions of the business sale agreement. The argument put by the plaintiff was that some time after the contracts had been signed, the plaintiff advised the first defendants that it waived any rights it had under condition 3. I am not sure that waiver is the proper way to describe the plaintiff's argument on this point. Essentially what was said was that the effect of the notice was to no longer require the first defendants to transfer to the plaintiff the licence - presumably the licence was to be retained by the first defendants or extinguished by some other means. Rather than describe that as waiver, it seems to me to be a unilateral variation of the contract, with the effect that the first defendants did not have to yield up part of what they were to transfer to the plaintiff in the terms of the bargain.

11 But whatever the proper description of that argument, it has no bearing on the case put by the first defendants. Their case was that because the agreement to purchase the business was tainted by illegality, the contract was void. That is, it was of no force and effect from the moment it was signed. If that was so, an attempt to revive the contract by removing a part of it which had, at the moment it was signed, rendered it void, could not possibly succeed. It would be necessary to establish that as at the date the condition was waived, the formerly void contract was somehow brought into existence. Whether or not such possibility exists, it was not the plaintiff's pleaded case.

Is the contract void for uncertainty?

12 Condition 7 anticipated settlement of the agreement within 30 days of the City of Bunbury approving the planning and building licences. The first defendants said that the contract did not identify the building or the

(Page 7)

works required or the nature of the building and therefore it is impossible to determine from the contract what approvals were required. That being so, there was uncertainty and the contract was accordingly void.

13 In one sense at least, condition 7 does render the contract uncertain. It was not possible, as at 1 September 2005, to say when settlement might occur. But that uncertainty is not what the first defendants complain about. They say that the uncertainty relates to what precisely it was which was to receive planning and licence approval.

14 Courts are reluctant to find contracts void for uncertainty. They readily find meaning in language that might appear capable of a number of meanings or lack in clarity. If a clause in a contract is capable of a meaning, a court will decide its application: see Upper Hunter County District Council v Australian Chilling & Freezing Co Ltd (1968) 118 CLR 429 at 436 - 437; Meehan v Jones (1982) 149 CLR 571 at 589. A clause of the type found in condition 7 is not unusual in contracts. A similar clause was found not to be void for uncertainty in Gregory v MAB Pty Ltd (1989) 1 WAR 1. In my view, there is no uncertainty surrounding this clause.

15 Prior to the parties entering into these contracts on 1 September 2005, there had been some discussions and interaction between Mr Saulsman on behalf of the plaintiff and various of the first defendants, including Mr Barter. It is unnecessary to determine precisely what was discussed. But at the very least, Mr Barter was aware that the plaintiff was intending to redevelop the hotel and for that purpose would need planning approval from the City of Bunbury. Such approvals are notorious for the time which they take to obtain. There was no particular reason why precisely what form of approval the plaintiff had in mind should have been included in the agreement. Bearing in mind that the contracts were drawn up by the first defendants' agent, it cannot, in my view, be said that there was sufficient uncertainty to render these contracts void.

Was an application for approval not made within a reasonable time so as to bring the contract to an end?

16 The first defendants plead that it was an implied term of the contract that any approvals to be obtained by the plaintiff would be obtained within a reasonable time. The plaintiff denies that such a term can be implied in a contract. Clearly, it can. Such a term satisfies all the requirements for an implied term as set out in BP Refinery (Westernport) Pty Ltd v Hastings Shire Council (1977) 52 ALJR 20. The question,

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then, is whether this implied term of the agreement has been breached and, if so, whether that has brought the contract to an end.

17 It is convenient to say something first about whether or not breach of the implied term would bring this contract to an end. The contract for the sale of land is said to be subject to the 2002 General Conditions. Perhaps surprisingly, these conditions were not put into evidence. The agreement to purchase the business does contain the conditions. By cl 17.1 time is made the essence of the contract, but neither party is entitled to enforce any rights or remedies under the contract at common law or in equity until a default notice has been issued. The default is to be specified and demand for rectification of the default is to be made. Only after a failure to comply with the default notice is a party in a position to terminate the contract.

18 These default provisions doubtless apply to breach of implied terms just as they apply to breaches of the express terms of the contract. In this case, there is no evidence of a default notice having been issued. Rather, the first defendants simply purported to terminate the contract. In fact, the letter of termination makes no reference at all to any breach by the plaintiff of the implied term that approval will be obtained within a reasonable time: see exhibit 37. So there is no basis upon which the first defendants could properly have brought the contract to an end.

19 Furthermore, I am not satisfied that the plaintiff was in breach of the implied term. The date from which the contract operates is the date upon which it was signed - 1 September 2005. It is true that the plaintiff and the first defendants had been in discussion for some months prior to the signing of the agreements, but for the purposes of interpreting the sale agreements, the pre-contractual negotiations can be put to one side. The plaintiff then had 90 days to undertake due diligence. It did not emerge during the course of the trial precisely what was meant by the phrase "due diligence". As I understand it, the plaintiff was permitted to consider the economics of undertaking the development it proposed. This initial period of 90 days was, by agreement, extended until 9 December 2005. On 6 December 2005, the plaintiff advised the first defendants that it waived any rights it had under the due diligence provision. The contract then gives the plaintiff a further 28 days to obtain finance. So, by any realistic assessment of the position, it was not until the first week of January that the first defendants could reasonably have expected the plaintiff to be in a position to take steps to obtain planning approval.

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20 In fact, the plaintiff had commissioned an architect, Mr Perrine, to assess the site and prepare preliminary plans. By early December Mr Perrine had prepared some preliminary drawings and was in a position to discuss the matter with planners at the City of Bunbury. He and Mr Saulsman met with a favourable response and the plaintiff and Mr Perrine were confident enough to move to the next stage. That next stage was an application for a development approval.

21 The application for the development approval required Mr Perrine to undertake certain work, but it also required the plaintiff to have completed a survey of the Burlington Hotel site and a heritage assessment. Mr Perrine says he could not complete his tasks until he was provided with the further information. There is nothing in the evidence to suggest that between mid-December 2005 and the end of March 2006 the plaintiff progressed planning at all. There is a suggestion in correspondence passing between Mr Perrine and the plaintiff that an application for development approval would be ready by early April. But no documents evidencing how far advanced the project was were put into evidence. In reality, the plaintiff appears to have been idle for about three months.

22 It must always be a question of degree as to whether or not there has been compliance with a provision in a contract requiring steps to be taken within a reasonable time. What was actually proposed on the Burlington Hotel site by the plaintiff was a substantial building. It was to be 20 storeys in height and Mr Perrine estimated the building cost at $30 million dollars. It is not clear how much the first defendants knew about what was proposed by the plaintiff. But if they were in ignorance, it was self-imposed - they took no steps to find out what the plaintiff had in mind so as to allow them to assess how long any approval process might take. Both Mr Saulsman and Mr Mason, the real estate agent acting for the first defendants, say that they advised the first defendants that the approval process may take 12 months or more.

23 I would accept that the fact the plaintiff was idle for some three months at the beginning of 2006 suggests that the plaintiff did not move with the dispatch that might have been expected. However, I am not satisfied that this amounted to a breach of the implied term of the contract. In the overall context of a development of this scale, delays were to be expected. In my view, it would have taken a failure to act over a longer period of time before it could be said that the implied term had been breached.

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Conclusion

24 I am satisfied that the contracts for the sale of the hotel premises and the business are still on foot and give the plaintiff a proprietary interest sufficient to allow it to maintain a caveat. That then leads on to the difficulty I mentioned at the outset of these reasons.

25 If this matter had proceeded by way of writ, the plaintiff would presumably have sought specific performance of the contracts. While in these proceedings it has sought, and in my view is entitled to, a declaration, that does not directly resolve the dispute between the parties. A practical solution will need to be found to this problem either through negotiation or some alternative process.

26 I will hear the parties as to the proper approach to adopt and as to costs.