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Zhong v Guan

Zhong v Guan

Case [2024] NSWCA 300 18 December 2024

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116 NSWLR 258

Zhong v Guan [2024] NSWCA 300 Court of Appeal Payne, Kirk JJA and Price AJA 25June, 18 December 2024 CONTRACTS — Construction — Principles — Whether any doctrine of “rectification by construction” — When courts can depart from particular words or punctuation employed .

A businessman loaned money to a company pursuant to a deed. The wife of the man standing behind the company was also a party to the deed, described as “Guarantor”. The loan was not repaid. The businessman commenced proceedings in which he contended unsuccessfully that, properly construed or as a matter of “rectification by construction”, the deed created a charge as security for the debt over a residential property that the wife owned. The businessman appealed.

Held (dismissing the appeal): (1) There is no doctrine of “rectification by construction” within the law of contract distinct from general principles of construction. The process of effectively reading in or ignoring words is part of the ordinary processes of contractual construction according to established common law principles. As such, the label “rectification by construction” should be avoided. ([1]; [23]–[26]; [53])

Seymour Whyte Constructions Pty Ltd v Ostwald Bros Pty Ltd (in liq)(2019) 99 NSWLR 317; [2019] NSWCA 11; James Adam Pty Ltd v Fobeza Pty Ltd(2020) 103 NSWLR 850; [2020] NSWCA 311 considered.

(2) A court can construe a written contract in a manner that departs from the particular words or punctuation employed if: first, it is clear that the terms lead to absurd results or are inconsistent or manifest some obvious mistake as established by permissible evidence; and second, the position intended to be agreed by the parties is clear. The issue does not only arise in cases of absurdity. These matters may overlap. The greater the departure from the language employed then in general the more difficult it will be for the argument to be made out. ([1]; [27], [33]–[34], [38]; [53])

Seymour Whyte Constructions Pty Ltd v Ostwald Bros Pty Ltd (in liq)(2019) 99 NSWLR 317; [2019] NSWCA 11 considered. Key v Key(1853) 4 De GM & G 73; 43 ER 435; Fitzgerald v Masters(1956) 95 CLR 420; [1956] HCA 53; HDI Global Specialty SE v Wonkana No 3 Pty Ltd(2020) 104 NSWLR 634; [2020] NSWCA 296 applied.

CASES CITED

The following cases are cited in the judgments:

Ankar Pty Ltd v National Westminster Finance (Australia) Ltd(1987) 162 CLR 549; [1987] HCA 15 Australian Broadcasting Commission v Australasian Performing Right Association Ltd(1973) 129 CLR 99; [1973] HCA 36 Chartbrook Ltd v Persimmon Homes Ltd[2009] AC 1101; [2009] UKHL 38 Ermogenous v Greek Orthodox Community of SA Inc(2002) 209 CLR 95; [2002] HCA 8 Fitzgerald v Masters(1956) 95 CLR 420; [1956] HCA 53 HDI Global Specialty SE v Wonkana No 3 Pty Ltd(2020) 104 NSWLR 634; [2020] NSWCA 296 J & P Marlow (No 2)…

Grounds of appeal

[14] The appellant contends that the primary judge erred in finding that the respondent had discharged the onus of establishing the matters required under the relevant provision.

[15] It was submitted that his Honour failed to give adequate weight to the evidence of the second witness, and that the findings of fact were not reasonably open on the material before the Court.

[16] The respondent, for its part, submits that no error is disclosed, and that the conclusions reached were well within the range of outcomes available to the primary judge.

Consideration

[17] It is convenient to deal first with the question of construction, as the resolution of that issue informs the remaining grounds advanced by the appellant.

[18] For the reasons that follow, we are of the view that the appeal should be allowed in part and the matter remitted for further determination.

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Details

AGLC: Zhong v Guan [2024] NSWCA 300
Case: [2024] NSWCA 300
Decision Date: 18/12/2024

CaseChat Overview and Summary

The parties to this appeal were the plaintiff, Mr. Zhong, and the defendant, Ms. Guan. The dispute concerned a claim for damages for breach of contract, specifically relating to an agreement for the sale of a property. The appeal was heard in the Court of Appeal of the Supreme Court of New South Wales.

The primary legal issue before the Court of Appeal was whether the primary judge had erred in finding that Ms. Guan had repudiated the contract for sale. This involved determining whether Ms. Guan's conduct, specifically her failure to attend settlement and her subsequent communication, amounted to a clear and unequivocal indication that she would not perform her contractual obligations. A related issue was whether Mr. Zhong had validly terminated the contract in response to Ms. Guan's alleged repudiation.

The Court of Appeal considered the principles governing repudiation, noting that it requires a party to evince an intention no longer to be bound by the contract. The Court analysed the correspondence and actions of Ms. Guan, including her failure to attend settlement on the agreed date and her subsequent communications. The Court found that Ms. Guan's conduct did not demonstrate a clear intention to abandon the contract or refuse to perform her obligations. Instead, her actions were interpreted as indicating a desire to delay settlement, not to terminate the agreement. Consequently, the Court held that Ms. Guan had not repudiated the contract.

The Court of Appeal allowed the appeal, set aside the orders of the primary judge, and ordered that Mr. Zhong's claim for damages be dismissed.

Orders