VS Property and Holding Pty Ltd v Zurzolo
[2023] VSC 453
•4 August 2023
| IN THE SUPREME COURT OF VICTORIA | Not Restricted |
AT MELBOURNE
COMMON LAW DIVISION
PROPERTY LIST
S ECI 2022 04298
BETWEEN:
| VS PROPERTY AND HOLDING PTY LTD & ANOR (according to the attached Schedule) | Plaintiffs |
| v | |
| NICK ZURZOLO & ANOR (according to the attached Schedule) | Defendants |
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JUDGE: | Irving AsJ |
WHERE HELD: | Melbourne |
DATE OF HEARING: | 27 June 2023 |
DATE OF JUDGMENT: | 4 August 2023 |
CASE MAY BE CITED AS: | VS Property and Holding Pty Ltd & Anor v Zurzolo & Anor |
MEDIUM NEUTRAL CITATION: | [2023] VSC 453 |
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PRACTICE AND PROCEDURE – Application for summary judgment – Where defendants seek summary judgment on claims for breach of contract of sale of land and settlement deed – Defendants allege surrounding circumstances inform the proper construction of the contract of sale of land and settlement deed – Whether plaintiffs have real prospect of success on its claim and defence to counterclaim – Civil Procedure Act 2010 (Vic), ss 62 and 64 – Lysaght Building Solutions Pty Ltd v Blanalko Pty Ltd (2013) 42 VR 27 – Israfoods (2006) Ltd v J & D Consortium Pty Ltd [2019] VSC 323 – Application dismissed.
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APPEARANCES: | Counsel | Solicitors |
| For the Plaintiffs | Mr C Archibald KC | Darrer Muir Fleiter |
| For the Defendants | Mr J McKay | Best Hooper |
TABLE OF CONTENTS
Introduction.................................................................................................................................. 1
Material relied upon.................................................................................................................... 2
The plaintiffs’ statement of claim............................................................................................. 2
The defendants’ defence and counterclaim............................................................................ 3
The plaintiffs’ reply to the defendants’ counterclaim.......................................................... 6
Relevant clauses of the Contract and Settlement Deed........................................................ 7
The defendants’ submissions.................................................................................................... 8
The plaintiffs’ submissions..................................................................................................... 13
Relevant provisions and principles........................................................................................ 13
Consideration.............................................................................................................................. 17
Conclusion................................................................................................................................... 19
HIS HONOUR:
Introduction
The plaintiffs are the purchaser and nominee respectively under a contract of sale (Contract) of land made with the defendants on 4 August 2016. The plaintiffs commenced this proceeding seeking orders for specific performance for the defendants to complete the sale.
Between 2016 and 2022 there were extensive dealings between the parties as a result of the creation of an easement on the land the subject of the sale. The defendants, without notice to the first plaintiff and notwithstanding having entered into the Contract, entered into a private agreement by deed dated 12 December 2018, granting Western Water a private easement over the land in return for the payment of $400,000 (Western Water Agreement). When the first plaintiff became aware of the Western Water Agreement, it lodged a caveat on the title to the land. Eventually the plaintiffs and defendants entered into a settlement deed dated 21 July 2022 (Settlement Deed), and a deed with Western Water dated 26 July 2022 (Western Water Deed).
The Settlement Deed provided for an extension of the date for completion of the Contract to 15 September 2022 (Extended Settlement Date) and other matters. The plaintiffs did not pay the balance of the purchase price on the Extended Settlement Date, but say they were in a position to do so the next day.
The defendants refused to further extend the time for completion. The defendants’ position is that their obligations under the Contract by virtue of the operation of the Contract and the Settlement Deed have ended. They seek declarations from the Court that the Contract has been terminated and the plaintiffs’ deposit forfeited. The plaintiffs contest the construction and operation of the Contract and the Settlement Seed contended by the defendants.
The defendants have filed an application for summary judgment both in relation to the plaintiffs’ claim and the defendants’ counterclaim.
For the reasons that follow I have decided that the defendants’ application should be dismissed.
Material relied upon
In addition to written submissions the defendants relied on the affidavit of Sheryn Lee Zurzolo affirmed 12 May 2023 and the affidavit of Andrew Benjamin Vicendese affirmed 26 June 2023.
In addition to written submissions the plaintiffs relied on the affidavit of Peter Mark Darrer sworn 22 June 2023.
The plaintiffs’ statement of claim
The plaintiffs’ statement of claim is expressed simply. The plaintiffs plead:
(a) The first plaintiff and the defendants entered into the Contract on 4 August 2017 for a price of $4 million;
(b) The terms of the Contract include that:
(i) the first plaintiff can nominate a substitute transferee;
(ii) the settlement date is 5 November 2020; and
(iii) at settlement the first plaintiff must pay the balance of the purchase price and the defendants must do all things necessary to enable the first plaintiff to become the registered proprietor and give vacant possession;
(c) By the Settlement Deed, the first plaintiff and the defendants agreed to resolve certain disputes in relation to the Contract and the property;
(d) The terms of the Settlement Deed include that:
(i) the first plaintiff and the defendants affirm the Contract and confirm they are bound by its terms (clause 1);
(ii) the parties agree to extend the settlement date recorded in the Contract to 15 September 2022 (clause 3);
(e) On 9 September 2022 the first plaintiff gave notice to the defendants that it nominated the second plaintiff as the substitute purchaser to take transfer of the property;
(f) The defendants have not settled and refuse to settle the Contract;
(g) The plaintiffs have at all relevant times been and remain ready, willing and able to perform their obligations under the Contract; and
(h) By reason of the above the plaintiffs are entitled to specific performance of the Contract.
The defendants’ defence and counterclaim
The defendants’ filed a defence and counterclaim. The defendants admit all aspects of the plaintiffs’ statement of claim other than:
(a) the nomination of the second plaintiff as substitute purchaser, which the defendants allege was not in accordance with additional special condition 13.2 of the Contract and was consequently invalid and in breach of the Contract;
(b) the defendants deny they were or are obligated to complete the Contract after 15 September 2022 for the reasons pleaded in the defendants’ counterclaim;
(c) the defendants deny the plaintiffs have at all relevant times been ready, willing and able to perform their obligations under the Contract; and
(d) the defendants deny the plaintiffs are entitled to specific performance of the Contract.
The defendants’ counterclaim alleges:
(a) The Contract contained the following relevant clauses:
(iv) A deposit of $400,000 payable by the first plaintiff;
(v) Settlement was due on 5 November 2020;
(vi) At settlement the first plaintiff was to pay the balance of the purchase price and the defendants were to do all things necessary to enable the purchaser to become the registered proprietor; and
(vii) Time was of the essence;
(b) The first plaintiff paid the deposit;
(c) On 21 July 2022 the defendants and the first plaintiff entered into the Settlement Deed;
(d) The Settlement Deed contained the following relevant terms:
(i) The defendants and first plaintiff affirmed the Contract and agreed they were bound by it (clause 1);
(ii) The defendants and the first plaintiff agreed to the Extended Settlement Date (clause 3);
(iii) The defendants and the first plaintiff were to settle the Contract on the Extended Settlement Date and the first plaintiff agreed not to make any further complaint or objection in the future regarding any breaches by the defendants;
(iv) In the event the first plaintiff failed, through default on its part, to settle the Contract on the Extended Settlement Date, the defendants and the first plaintiff agreed the Contract was immediately at an end, and all monies the first plaintiff had paid under the Contract were to be immediately and irrevocably released to the sole use, benefit and account of the defendants and the first plaintiff was to immediately withdraw any caveat it had lodged against the title to the land (clause 5);
(e) In default of the Contract and the Settlement Deed, the first plaintiff did not complete the Contract on or before the Extended Settlement Date;
(f) Accordingly, the Contract came to an end and the first plaintiff forfeited the deposit;
(g) Alternatively:
(i) by failing to complete on the original settlement date of 5 November 2020, time under the Contract ceased to be of the essence;
(ii) by agreeing to the Extended Settlement Date in the Settlement Deed, time under the Contract was made of the essence in equity, such that the Contract would be at an end if the first plaintiff failed to complete by that date;
(iii) the first plaintiff failed to complete by the Extended Settlement Date;
(iv) the Contract came to an end in equity upon the passing of the Extended Settlement Date and was thereupon terminated by the defendants;
(h) In the further alternative:
(i) By entering into the Settlement Deed and agreeing to the Extended Settlement Date, the defendants and the first plaintiff varied or supplanted the Contract so that the Extended Settlement Date became an essential deadline for the completion of the Contract;
(ii) The first plaintiff failed to complete the Contract by the Extended Settlement Date;
(iii) The first plaintiff thereby committed a fundamental or essential breach of the Contract and/or repudiated the Contract; and
(iv) The defendants elected to terminate the Contract in writing on 16 September 2022 and the Contract was thereupon terminated.
(i) By virtue of the matters above the first plaintiff is obligated to remove the caveat from the title to the land; and
(j) In the second further alternative the defendants claim damages for loss suffered as a consequence of the first plaintiff’s failure to complete the Contract.
The defendants’ counterclaim seeks declarations that the Contract has ended or been terminated and the deposit forfeited and an order for damages in a sum assessed by the Court. The defendants also seek orders for the removal of the caveat.
The plaintiffs’ reply to the defendants’ counterclaim
The plaintiffs join issue with every allegation in the defence and say that the defendants accepted the nomination of the second plaintiff as substitute purchaser and waived compliance with special condition 13.2 of the Contract.
In response to the defendants’ counterclaim, the plaintiffs:
(a) admit certain terms of the Contract and say general condition 27 of the Contract required a party to issue a written default notice specifying the default and giving 14 days to the other party to remedy the default before that party was entitled to exercise any rights arising from the other party’s default;
(b) admit the plaintiffs did not pay the balance of the purchase price on 15 September 2022 but say the first plaintiff did not fail to settle through default on its part within the meaning of clause 5 of the Settlement Deed because the plaintiffs’ finance provider had not completed its processes for releasing the funds;
(c) deny the Contract immediately came to an end upon the passing of the Extended Settlement Date by reason of the defendants failing to give a default notice as required by general condition 27 of the Contract;
(d) admit that time ceased to be of the essence when the parties failed to complete on the original settlement date of 5 November 2020 but deny that time under the Contract was made of the essence in equity by the parties agreeing to the Extended Settlement Date in the Settlement Deed;
(e) deny that by entering into the Settlement Deed and agreeing to the Extended Settlement Date the defendants and the first plaintiff varied the Contract so that the Extended Settlement Date became an essential deadline for the completion of the Contract;
(f) deny the plaintiffs are obligated to remove the caveat; and
(g) deny the defendants have suffered compensable loss and damage as a result of the first plaintiff’s failure to complete the Contract.
Relevant clauses of the Contract and Settlement Deed
I set out below the relevant clauses of the Contract and the Settlement Deed.
General Condition 27(1) of the Contract is in the following terms:
27. Default Notice
27.1A party is not entitled to exercise any rights arising from the other party’s default, other than the right to receive interest and the right to sue for money owing, until the other party is given and fails to comply with a written default notice.
Clause 1 of the Settlement Deed states:
The Parties affirm the Contract (and they each confirm that they are bound by it) and a copy of same is annexed to this Deed at ‘Annexure 1’.
Clause 3 of the Settlement Deed provides that, ‘[t]he parties each agree to extend the settlement date recorded in the Contract to 15 September 2022 without penalty (Extended Settlement Date).’
Clause 5 of the Settlement Deed provides:
In the event that the Purchaser fails to settle, through default on its part, the Contract on the Extended Settlement Date the parties then agree that the Contract is immediately at an end and all monies the Purchaser has paid under the Contract and or this Deed shall then be immediately and irrevocably released to the sole use, benefit and account of the Vendors and the Purchaser must then immediately withdraw any caveat(s) it has lodged against the title to the Property and it fully and finally releases the Vendors from any and all claims, suits or actions, arising from, or of and incidental to, the matters raised in this Deed or in the GWW Settlement Deed.
The defendants’ submissions
The defendants submitted that the evidence establishes that the first plaintiff did not settle on the Extended Settlement Date of 15 September 2022 because it had not procured finance to enable it to complete the Contract. The defendants said there was no suggestion that they prevented the first plaintiff from completing or were otherwise in breach of the Contract so as to excuse the first plaintiff from performing its contractual obligations. According to the defendants the Contract did not contain any term excusing the first plaintiff from completing the Contract in circumstances where it was having difficulty securing finance.
The defendants submitted that the case involved a narrow point of construction arising from the Settlement Deed. The defendants argued that in the circumstances described in [20] above, the first plaintiff failed to settle, through default on its part such that clause 5 of the Settlement Deed was triggered. As a consequence the Contract came immediately to an end; all money that the first plaintiff had paid under the Contract or Settlement Deed was immediately and irrevocably released to the sole use, benefit and account of the defendants; the first plaintiff was to immediately withdraw any caveats it had lodged against the title to the land; and the first plaintiff fully and finally released the defendants from liability.
The defendants submitted that this interpretation of clause 5 of the Settlement Deed and its consequences in the circumstances of this case make it ‘sufficiently clear’ that the first plaintiff has no reasonable prospect of succeeding in its claim for specific performance, or resisting the defendants’ counterclaim. More particularly, the defendants argued that the plaintiffs had not articulated a plausible alternative construction of clause 5 that would necessitate a trial. The defendants submitted that the plaintiffs had not offered any real analysis of other conditions in the Settlement Deed or the Contract that might read down or raise serious questions about the defendants’ interpretation of clause 5.
The defendants pointed to evidence that the plaintiffs had only started the process of arranging finance in the days immediately before the Extended Settlement Date and that, in correspondence on 16 September 2022 to their broker, the plaintiffs had stated ‘we have to be able to settle today to stop the vendors cancelling the sale. There is basically no margin unfortunately’. The defendants submitted that, contrary to the construction the plaintiffs sought to rely on, the correspondence does not make reference to a further 14 day grace period.
The defendants noted that the first plaintiff concedes it did not complete the Contract on 15 September 2022 due to a problem with its finance but denied that this constituted a ‘default on its part’ within the meaning of clause 5 of the Settlement Deed. The defendants submitted that the first plaintiff’s contention that the consequences of clause 5 were not triggered because its failure to settle was due to its financier and not the first plaintiff’s default is unsupported by either the language of clause 5, or the genesis and commercial purpose of the Settlement Deed. The defendants submitted that clause 5 was included in the Settlement Deed to make sure the plaintiffs were not drawn into default by some conduct of the defendants that prevented the settlement occurring on the Extended Settlement Date.
The defendants submitted the plaintiffs’ proposed construction of the Settlement Deed was untenable. The defendants said it was logically inconsistent for the plaintiffs to argue there was no default on their part while at the same time arguing that general condition 27(1), which is only triggered by a default, applied.
The defendants submitted the terms of the Settlement Deed fall to be interpreted according to the principles set out by the Court of Appeal in Adaz Nominees Pty Ltd v Castleway Pty Ltd[1] and Aventus Cranbourne Thompsons Road Pty Ltd v Home Consortium Leasehold Pty Ltd.[2] The defendants summarised those principles as follows:
[1][2020] VSCA 201, [70].
[2][2020] VSCA 199, [36]–[38].
(a) The objective approach of interpretation requires reference to the text and its ordinary meaning, together with the context, being the entire text of the contract including matters referred to in the text, and the purpose;
(b) These are ordinarily identified by reference to the contract alone but evidence of mutually known objective background circumstances relevant to the purpose is admissible no matter how clear the ordinary meaning of the words;
(c) Identification of the purpose may allow admission of evidence of the genesis of the transaction, the background, and the context in which the contract was formed;
(d) The court is entitled to approach the task of interpretation on the assumption that the parties intended to produce a commercial result;
(e) If, after this process, the language used in the contract is ambiguous or susceptible of more than one meaning, then evidence of surrounding circumstances external to the contract is admissible to assist with interpretation of the language in question; and
(f) The court must have regard to all of the words used in the agreement so as to render them all harmonious one with another, and to ensure the congruent operation of the various components as a whole.
The defendants said the evidence of the parties’ commercial purpose in entering into the Settlement Deed, the genesis of the Settlement Deed, and its context included:
(a) that one of the defendants was diagnosed with cancer in 2018 and so the defendants had a strong practical reason to obtain an expeditious outcome to the dispute, and the fact that timing was critical to the defendants was communicated to the first plaintiff’s solicitors by the defendants’ solicitor on 23 March 2022, while the parties were negotiating the terms of the Settlement Deed;
(b) the Contract was formed in August 2017 and completion was to occur in November 2020, meaning that by the time the Settlement Deed was being negotiated, the delay in completion was very substantial and so the defendants had strong and self-evident commercial reasons to seek terms that avoided further delay;
(c) the defendants’ solicitor had written to the first plaintiff’s solicitor on 27 April 2022 noting that the price of the land the subject of the Contract had risen substantially since the original date for completion with the defendants locked into a contract and unable to purchase anything else, and expressing the defendants’ intention to proceed to settlement and issue a default notice if the first plaintiff was not willing to agree to the defendants’ negotiation proposal;
(d) the defendants’ solicitor also stated in an email to the first plaintiff’s solicitor on 14 April 2022, that:
[I]f settlement does not proceed on 15 September 2022, your client would then forfeit its deposit in full and any other monies it has paid, it would immediately withdraw its caveat, and it would walk away from the deal. This must be crystal clear, there can be no further delays or extensions (no matter the justification). We will not proceed to an extended settlement on 15 September 2022 only to be met with some other or further argument that the section 32 is somehow deficient, if you have any issue with the documentation, now is the time to raise them.
(e) the wording of clause 5 of the Settlement Deed corresponded with the defendants’ intentions as expressed in their solicitor’s email dated 14 April 2022; and
(f) the first plaintiff’s commercial purpose was evident in its attempts to secure an extension of the completion date to secure finance as communicated in its solicitor’s correspondence of 31 March 2022 and 27 April 2023.
In summary, the defendants said the proper construction of clause 5 of the Settlement Deed had to be considered in light of the parties’ commercial objectives and purposes, which were:
(a) the first plaintiff was seeking to obtain as long an extension as possible, even if it had to purchase that extension in cash and abandon its claims in relation to the easement; and
(b) the defendants were willing to grant an extension but wanted to ensure the first plaintiff had no further capacity to delay settlement if the final deadline was not met, and the defendants wanted to ensure any further failure to settle by the first plaintiff would allow the defendants to terminate the Contract, with forfeiture of the deposit and removal of the caveat, without further delay.
The defendants submitted that the words ‘through default on its part’ in clause 5, viewed objectively, must have been inserted to make it clear that if the first plaintiff failed to settle in circumstances where it had not committed a breach, the consequence of clause 5 would not be triggered. That is, if the first plaintiff’s failure to settle was due to the defendants’ unreadiness, unwillingness, or inability to perform its obligations, the first plaintiff would not suffer the consequences stated in clause 5.
The defendants argued that the plaintiffs’ defence to counterclaim suggested the plaintiffs contend that a neglect or delay on the part of their financier did not constitute a default by the first plaintiff.
The defendants argued the plaintiffs’ construction should be rejected for the following reasons:
(a) it does violence to the language of clause 5 by conflating the word default, suggesting a breach of legal obligation, with fault, which carries a broader meaning;
(b) if ‘default’ is construed to mean ‘fault’, the broader concept of fault is unanchored to a breach of the Contract and would be so uncertain as to be unworkable and uncommercial; and
(c) the plaintiffs’ proposed construction is an attempt to reframe the clause to merely require the first plaintiff to use reasonable endeavours to complete the Contract by 15 September 2022, which is not supported by the evidence of the defendants’ commercial objective of achieving a hard deadline.
The plaintiffs’ submissions
The plaintiffs submitted that their claim has a real prospect of success. They said the disputed issues involve:
(a) the correct construction of the Contract and the Settlement Deed in the context of contested antecedent circumstances and negotiations;
(b) contested facts, both as to the contextual circumstances sought to be relied upon by the parties for construction, and as to whether certain matters fall within the terms of a contractual provision properly construed; and
(c) matters which are in the interests of justice and of such a nature that only a full hearing on the merits is appropriate.
Relevant provisions and principles
The defendants’ application for summary judgment of the plaintiffs’ claim and the defendants’ counterclaim is made pursuant to ss 62 and 63(1) of the Civil Procedure Act 2010 (Vic) (CPA) and rr 22.16 and/or 23.01 of the Supreme Court (General Civil Procedure) Rules 2015 (Vic) (Rules).
Section 62 of the CPA provides that a ‘defendant in a civil proceeding may apply to the court for summary judgment in the proceeding on the ground that a plaintiff’s claim or part of that claim has no real prospect of success’.
Section 63(1) of the CPA empowers the Court to ‘give summary judgment in any civil proceeding if satisfied that a claim, defence or a counterclaim or part of the claim, defence or counterclaim, as the case requires, has no real prospect of success’.
Section 64 of the CPA is in the following terms:
Court may allow a matter to proceed to trial
Despite anything to the contrary in this Part or any rules of court, a court may order that a civil proceeding proceed to trial if the court is satisfied that, despite there being no real prospect of success the civil proceeding should not be disposed of summarily because—
(a) it is not in the interests of justice to do so; or
(b)the dispute is of such a nature that only a full hearing on the merits is appropriate.
A defendant making an application under s 62 of the CPA must follow the procedure in Part 2 of Order 22 of the Rules. Rule 22.16 provides that a defendant shall make an application for summary judgment under s 62 of the CPA, and r 22.17 provides that the application is to be made by summons. The affidavit in support of that summons may contain a statement of fact based on information and belief if the grounds are set out and, having regard to all the circumstances, the court considers that the statement ought to be permitted.[3]
[3]Supreme Court (General Civil Procedure) Rules 2015 (Vic), r 22.18.
Rule 23.01 authorises the Court to give judgement to a defendant or plaintiff where any claim in a proceeding is scandalous, frivolous or vexatious or an abuse of the process of the Court. Evidence by affidavit is admissible on such an application.[4]
[4]Ibid r 23.04(1).
The Court of Appeal in Lysaght Building Solutions Pty Ltd v Blanalko Pty Ltd,[5] set out the test to be applied in determining an application for summary judgment brought under ss 61 and 63 of the CPA:
(a)[T]he test for summary judgment under s 63 of the [CPA] is whether the respondent to the application for summary judgment has a “real” as opposed to a “fanciful” chance of success;
(b)[T]he test is to be applied by reference to its own language and without paraphrase or comparison with the “hopeless” or “bound to fail test” essayed in [General Steel Industries Inc v Commissioner for Railways (NSW) (1964) 112 CLR 125];
(c)[I]t should be understood, however, that the test is to some degree a more liberal test than the “hopeless” or “bound to fail” test essayed in General Steel and, therefore, permits of the possibility that there might be cases, yet to be identified, in which it appears that, although the respondent’s case is not hopeless or bound to fail, it does not have a real prospect of success;
(d)at the same time, it must be borne in mind that the power to terminate proceedings summarily should be exercised with caution and thus should not be exercised unless it is clear that there is no real question to be tried; and that is so regardless of whether the application for summary judgment is made on the basis that the pleadings fail to disclose a reasonable cause of action (and the defect cannot be cured by amendment) or on the basis that the action is frivolous or vexatious or an abuse of process or where the application is supported by evidence.
[5](2013) 42 VR 27, 40 [35] per Warren CJ and Nettle JA, Neave JA agreeing in part.
Section 9 of the CPA requires the Court to have regard to the overarching purpose in making any order or giving any direction in a civil proceeding. The overarching purpose, set out in s 7(1) of the CPA, is to facilitate the just, efficient, timely and cost-effective resolution of the real issues in dispute.
In Israfoods (2006) Ltd v J&D Consortium Pty Ltd,[6] Sloss J considered the authorities in summary judgment applications where the construction of a contract was in issue:
[6][2019] VSC 323 [52]–[60].
In cases which involve the disputed construction of an agreement, it has been often found that summary judgment may not be appropriate, particularly where evidence of surrounding circumstances is sought to be relied upon to resolve an asserted ambiguity.
In Matthews v SPI Electricity Pty Ltd, J Forrest J identified several principles applicable to the determination of applications for summary judgment:
1.If a court determines that a particular cause of action is hopeless or bound to fail, then it should be dismissed;
2.A court may also dismiss a claim where it determines that it has no real prospect of success in the sense that such prospects are fanciful rather than realistic;
3.The less complex the issue in a case then the easier it is for a court to take the view that such a proceeding is capable of being determined on summary judgment; and
4.Whatever the test to be applied, the power to order summary dismissal of a claim must be exercised with care. This is particularly so where a case may involve issues of contested fact, or where its consequences may affect a large number of persons.
In JBS Southern Aust Pty Ltd v Westcity Group Holdings Pty Ltd, Croft J applied those principles in an appeal from a summary judgment application granted by Daly AsJ. Croft J observed that ‘one might add to the fourth point: “or the construction of complex documents”’.
Ultimately, Croft J allowed the appeal and dismissed the summary judgment application. In delivering his reasons, his Honour referred to the ‘length and complexity of the provisions of the [document in question]’, and stated that he was of the opinion that ‘even if the Court had doubts as to the prospect of success of a defendant’s claims in circumstances like the present in terms of the s 63 test, the proper course would be to exercise the discretion under s 64 and to require a full trial of the claims’.
The approach taken by Croft J was endorsed by the Court of Appeal in Manderson M & F Consulting (A Firm) v Incitec Pivot Ltd. In their joint judgment, Redlich JA and Judd AJA drew attention to the need for courts to give separate consideration to the discretion under s 64 when determining applications for summary judgment, stating:
The authorities reviewed by Croft J in JBS Southern Aust v Westcity Group Holdings, which disclosed the underlying rationale for s 63 of the [CPA], make it clear that an inquiry as to whether a case has “no real prospects of success” involves considerations extending beyond an analysis of the sufficiency of the statement of claim to plead a cause of action. The new power under s 63 is not one to be exercised by reference only to the sufficiency of the pleading. For as Croft J said in JBS Southern Aust v Westcity Group Holdings, “even if the Court had doubts as to the prospect of success of a defendant’s claims…in terms of the s 63 test, the proper course would be to exercise the discretion under s 64 and to require a full trial of the claims”. The same may be said of a plaintiff’s claim in this case.
In APN Funds Management Ltd v Australian Property Investments Strategic Pty Ltd, Bell J determined an appeal from an application for summary judgment which was refused by Randall AsJ. The application required consideration of the proper construction of a unit subscription and put option deed. His Honour dismissed the appeal on the basis that:
…[T]he defence in this case can only properly be evaluated upon a full consideration of the provisions of the deed at trial. While the plaintiff’s case seems strong on the law and indeed on the merits, there is a material risk that the court would do a serious injustice to the defendant by giving summary judgement against it.
More recently, in Amcor Ltd v Peter J Ramsay & Associates Pty Ltd, Kennedy J considered an application for summary judgment brought by the defendant in that proceeding. The claims related to the retention of the defendant by the plaintiffs as a consultant to identify and cost a contamination at a site owned by one of the plaintiffs. One of the issues which arose for determination was which of the plaintiff entities had contracted with the defendant for the purposes of engaging him to undertake the site investigation and assessment.
Kennedy J found that, given the ambiguity as to the identity of the contracting party, and the fact that counsel for the respective parties had both sought to make reference to evidence of surrounding circumstances, summary judgment was inappropriate. Her Honour adopted the reasoning of Bell J in APN Funds Management Ltd, finding that:
[73] It is not appropriate for a court to resolve a question of construction in these circumstances without hearing appropriate evidence at trial. To make orders for summary dismissal in such circumstances gives rise to a risk of a serious risk of injustice to the plaintiffs.
[74] I am therefore unable to be satisfied that the plaintiffs have no real prospect of success in identifying Amcor Ltd as the contracting party without a hearing on the merits.
These cases demonstrate that where the proper construction of a contract is at issue in a proceeding, it will not ordinarily be appropriate to grant summary judgment, particularly where the contract under consideration is complex.
(citations omitted).
Consideration
The central issue in dispute between the parties is the proper construction of the Settlement Deed. The process of construction is made complex because, by clause 1 of the Settlement Deed, the parties affirm the Contract and confirm they are bound by it. General condition 27 of the Contract requires a notice of default to be issued before a party is entitled to exercise any rights arising from the other party’s default. Clause 5 of the Settlement Deed, on its face, provides for certain consequences to flow in the event the purchaser fails to settle ‘through default on its part’ but does not explicitly mention default notices or refer back to the relevant provisions of the Contract.
Clause 1 and clause 5 of the Settlement Deed are, on their face, inconsistent. The inconsistency arises because clause 1 confirms the obligations of the parties under the Contract, which on its face includes the obligation to issue a default notice under general condition 27(1), while clause 5, on its face, provides for the Contract to end immediately on default.
I cannot accept the defendants’ submission that this raises a narrow issue of construction that is readily resolved by reference to the clear wording of clause 5 and the defendants’ commercial purpose of entering into the Settlement Deed to ensure the sale was completed without further delay. This is particularly the case because the plaintiffs’ commercial purpose for entering into the Settlement Deed is contested by the plaintiffs.
On its face clause 1 does not carve out general condition 27(1) from the contractual obligations confirmed by the parties to the Settlement Deed. The defendants argue that the terms of clause 5 are so clear that their meaning is obvious. Such an argument is clearly open to the defendants to make. It does not follow, particularly when considered against the contested evidence of commercial purpose and context, that the plaintiffs’ proposed construction of clause 5 has no real prospect of success.
The defendants urge a construction of clause 5 of the Settlement Deed that is, at least in part, informed by the defendants’ asserted commercial purpose as evidenced by circumstances and facts, some of which are said to arise in some of the correspondence between the parties’ solicitors. The plaintiffs assert that, on an examination of all of the facts of the case, the defendants’ asserted commercial purpose has not been made out. I accept the plaintiffs’ submission that, on its face, some of the evidence of the defendants granting extensions to settlement is capable of being construed as contrary to the defendants’ asserted commercial purpose. Similarly, the plaintiffs’ assertion that the defendants were, at least partially, motivated to enter into the Settlement Deed to resolve the dispute that had arisen as a result of their agreement with Western Water over the easement, appears to me to be arguable. The fact that the parties are in conflict about the effect of the available evidence suggests that a full hearing of that evidence is appropriate.
While there is no issue that settlement did not occur on the Extended Settlement Date, there is an issue about whether the failure of the plaintiffs’ financier to provide the funds in time constitutes a default on the plaintiffs’ part within the meaning of that phrase in clause 5 of the Settlement Deed. While I question the strength of this aspect of the plaintiffs’ case, it was apparent that the parties were not in agreement about when the plaintiffs commenced the process of obtaining funding. Bearing in mind the caution the Court should exercise in granting summary judgment and the dispute over the evidence relevant to this issue, it is appropriate that there be a full trial in which the evidence can be fully tested.
On the material before the Court I am not satisfied that the plaintiffs’ claim or their defence to counterclaim have no real prospect of success. It appears to me that the evidence the defendants rely upon can only be properly evaluated against all of the evidence at trial. To grant summary judgment would risk the Court doing a serious injustice to the plaintiffs.
I am also satisfied that summary judgment should not be granted to the defendants because it is not in the interests of justice to do so. The dispute, involving contested evidence affecting the correct construction of commercial agreements. It is of such a nature that only a full hearing on the merits is appropriate.
Conclusion
For the reasons given above, I will dismiss the defendants’ summons filed 17 May 2023.
I request the parties confer on the issue of costs. If the parties are unable to reach agreement on costs within 7 days of the date of this judgment, the matter will be listed for an oral costs argument.
SCHEDULE OF PARTIES
| S ECI 2022 04298 | |
| BETWEEN: | |
| VS PROPERTY AND HOLDING PTY LTD | First Plaintiff |
| DEANSIDE LAND PTY LTD | Second Plaintiff |
| - v - | |
| NICK ZURZOLO | First Defendant |
| SHERYN ZURZOLO | Second Defendant |
| NICK ZURZOLO | First Plaintiff by 1st Counterclaim |
| SHERYN ZURZOLO | Second Plaintiff by 1st Counterclaim |
| VS PROPERTY AND HOLDING PTY LTD (ACN 619 774 088) | First Defendant by 1st Counterclaim |
| DEANSIDE LAND PTY LTD (ACN 662 312 825) | Second Defendant by 1st Counterclaim |
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