ACN 096 278 483 Pty Ltd v Vercorp Pty Ltd & Anor; Vercorp Pty Ltd v ACN 096 278 483 Pty Ltd [2011] QCA 189

SUPREME COURT OF QUEENSLAND

CITATION: ACN 096 278 483 Pty Ltd v Vercorp Pty Ltd & Anor; Vercorp Pty Ltd v ACN 096 278 483 Pty Ltd [2011] QCA 189

PARTIES: In Appeal No 12847 of 2010: / ACN 096 278 483 PTY LTD as trustee of the WILLIAMS FAMILY TRUST (appellant) v VERCORP PTY LTD ACN 010 198 268 (first respondent) HEGIRA LIMITED ACN 008 610 357 (second respondent) / In Appeal No 12868 of 2010: / VERCORP PTY LTD ACN 010 198 268 (appellant) v ACN 096 278 483 PTY LTD as trustee of the WILLIAMS FAMILY TRUST (respondent)

FILE NO/S: Appeal No 12847 of 2010 / Appeal No 12868 of 2010 / SC No 6442 of 2004

DIVISION: Court of Appeal

PROCEEDING: General Civil Appeals

ORIGINATING COURT: Supreme Court at Brisbane

DELIVERED ON: 9 August 2011

DELIVERED AT: Brisbane

HEARING DATE: 7 April 2011

JUDGES: Fraser and White JJA and Atkinson J / Separate reasons for judgment of each member of the Court, each concurring as to the orders made

ORDERS: In Appeal No 12847 of 2010: / **1.**Dismiss the appeal. / 2. Allow the cross appeal. / **3.**Declare that the contract between the first respondent and the appellant for the purchase by the first respondent of Lot 413 on SP133280 should be specifically performed and carried into effect. / **4.**Declare that the contract between the first respondent and the appellant for the purchase by the first respondent of Lot 414 on SP133280 should be specifically performed and carried into effect. / **5.**The parties are at liberty to apply in the trial division for any further or other orders relating to the specific performance of those contracts. / **6.**Order that the appellant pay the respondents’ costs of and incidental to the appeal. / **7.**Order that the first respondent pay the appellant’s costs of the first respondent’s cross appeal. / In Appeal No 12868 of 2010: / **1.**Appeal dismissed with costs.

CATCHWORDS: CONTRACTS – GENERAL CONTRACTUAL PRINCIPLES – PARTIES – GENERAL PRINCIPLES – where Hegira and Barrier Developments “and or nominee” entered into four contracts for the sale of land which contained post settlement obligations – where Barrier Developments nominated ACN as the purchaser under the contracts – where ACN and Barrier Developments were controlled by the same director – where during pre-contractual negotiations Hegira made it clear that a nominee would only be accepted if it agreed to comply with the post settlement obligations – where ACN paid further deposits in consideration of extensions of the finance approval dates and the balance purchase price – whether, objectively viewed, ACN intended to bind itself to the contracts, including the post settlement obligations / CONVEYANCING – BREACH OF CONTRACT FOR SALE AND REMEDIES – PURCHASER’S REMEDIES – SPECIFIC PERFORMANCE – GENERAL PRINCIPLES – where the contracts for sale included liquidated damages clauses and options for Hegira to repurchase the land in the event of breach of the post settlement obligations – where Hegira (and Vercorp as Hegira’s assignee) commenced proceedings in the District Court for damages pursuant to the liquidated damages clauses – where Hegira and Vercorp later commenced proceedings in the Supreme Court seeking specific performance of the repurchase contracts – whether the trial judge erred in finding that Vercorp had not waived its rights to seek specific performance by instituting proceedings for damages in the District Court / CONVEYANCING – BREACH OF CONTRACT FOR SALE AND REMEDIES – PURCHASER’S REMEDIES – SPECIFIC PERFORMANCE – GENERAL PRINCIPLES – where the trial judge made a declaration that ACN was bound to complete two of the repurchase contracts but declined to make a decree of specific performance because of allegations of misconduct pursuant to the Trade Practices Act 1974 (Cth) in ACN’s counterclaim which remained unlitigated – where a number of the allegations of misconduct had previously been struck out of the counterclaim – where it does not appear that the misconduct will be pursued – whether the trial judge erred in declining to make a decree of specific performance / CONVEYANCING – BREACH OF CONTRACT FOR SALE AND REMEDIES – VENDOR’S REMEDIES – RESCISSION OR TERMINATION – PURSUANT TO CONDITION GIVING RIGHT TO RESCIND OR TERMINATE – where in relation to two of the repurchase contracts Vercorp provided the transfer documents and valuation to ACN at about midday on the day of settlement –where ACN pleaded that Vercorp failed to comply with its obligation to provide the transfer documents “a reasonable time before the Settlement Date” allowing ACN to terminate the contract – whether the trial judge erred in finding that Vercorp had not breached its obligation because the determination of the price by valuation was a condition precedent to the performance of the obligation, and that as a result, ACN was not entitled to terminate the contracts / CONTRACTS – GENERAL CONTRACTUAL PRINCIPLES – DISCHARGE, BREACH AND DEFENCES TO ACTION FOR BREACH – CONDITIONS – CONDITIONS PRECEDENT AND SUBSEQUENT – where in relation to two of the repurchase contracts the valuations of market value had not been received by the agreed date for completion – where ACN purported to terminate the contracts on the basis that Vercorp had failed to tender the balance purchase price on the date for completion – whether the trial judge erred in finding that the valuations were a condition precedent to performance allowing either party to terminate the contracts, and that as a result, ACN had validly terminated the contracts / PROCEDURE – SUPREME COURT PROCEDURE – QUEENSLAND – PROCEDURE UNDER UNIFORM CIVIL PROCEDURE RULES AND PREDECESSORS – PLEADING – GENERALLY – where ACN did not rely upon the condition precedent as a basis for terminating the contracts or specifically plead the condition precedent in its defence and counterclaim – whether the trial judge erred in finding that ACN had validly terminated the contracts pursuant to the condition precedent / 1994 (Qld), s 184 / 1999 (Qld), r 149(1)(c), r 150(4)(a), r 150(4)(c), r 153(2) / (1990) 169 CLR 279, cited / (1982) 149 CLR 337; [1982] HCA 24, applied / (1986) 162 CLR 1; [1986] HCA 33, cited / (1972) 128 CLR 529; [1972] HCA 36, cited / (1985) 41 SASR 458, considered / [1993] 2 Qd R 640, cited / [1990] 1 Qd R 157, cited / [2002] NSWSC 17, applied / (2004) 218 CLR 451; [2004] HCA 35, cited / (1995) 5 Tas R 121; [1995] TASSC 91, applied / [1999] 2 Qd R 172; [1998] QCA 444, considered / (2003) 6 VR 466, considered / (1983) 153 CLR 153; [1983] HCA 46, distinguished / (1974) 131 CLR 634; [1974] HCA 40, cited / (1979) 144 CLR 596, cited / (1931) 45 CLR 359; [1931] HCA 21, cited / [2010] QCA 309, cited / [2010] QSC 405, considered / (2003) 200 ALR 447; [2003] HCA 48, applied

COUNSEL: A J H Morris QC, with L A Jurth, for the appellant in Appeal No 12847 of 2010 and for the respondent in Appeal No 12868 of 2010 / D R Cooper SC, with C L Francis, for the respondents in Appeal No 12847 of 2010 and for the appellant in Appeal No 12868 of 2010

SOLICITORS: Londy Lawyers for the appellant in Appeal No 12847 of 2010 and for the respondent in Appeal No 12868 of 2010 / Hynes Lawyers for the respondents in Appeal No 12847 of 2010 and for the appellant in Appeal No 12868 of 2010

1. FRASER JA: Hegira Ltd entered into four separate contracts to sell four lots of vacant land at Pacific Harbour on Bribie Island to Barrier Developments Pty Ltd “and or nominee”. Each contract conferred upon the seller an option to repurchase the lot if the buyer did not complete construction of an approved dwelling house within a specified period. Barrier Developments nominated ACN 096 278 483 Pty Ltd as trustee of the Williams Family Trust and Hegira transferred the land to it under each contract. ACN did not comply with the building covenants and Hegira purported to exercise the options to repurchase the land from ACN. ACN denied that it was obliged to sell the land.

2. Hegira and Vercorp Pty Ltd (as assignee of Hegira’s rights under the contracts) sued ACN in the trial division for, amongst other orders, specific performance of the contracts for the repurchase by Vercorp of four lots of land from ACN. The trial judge dismissed Vercorp’s claim for specific performance of the contracts for two of the lots (Lots 411 and 412) but declared that on 7 June 2006 ACN was bound to complete the contracts in relation to the other two lots (Lots 413 and 414).¹

3. ACN has appealed against that declaration. Vercorp has cross appealed, contending that the declaration was insufficient and the trial judge should have ordered specific performance of those contracts. Vercorp has also appealed against the trial judge’s refusal of its claim for specific performance of the contracts for Lots 411 and 412.

4. The issues in the appeals and cross appeal include the questions whether ACN became contractually bound by the relevant provisions of the contracts and, if so, whether it validly terminated the contracts resulting from Hegira’s exercise of the options to purchase in the contracts. Before identifying the issues in more detail it is useful to elaborate upon the factual background.

Factual background

5. Each of the four contracts was made on 9 April 2001. The prices for the four lots varied in a range between $500,000 and $650,000. The contracts included the REIQ standard terms, special conditions 11 to 21 in Annexure A, “community development covenants” in Annexure B, a “schedule of requirements” in Annexure C, further special conditions 22 to 30 in Annexure D, and a disclosure statement and plans in Annexure E.

6. The community development covenants: obliged the buyer to construct the building in accordance with specified “community development standards” and the schedule of requirements; entitled the seller to remove structures which contravened the covenants and to recover the costs of doing so from the buyer; obliged the buyer, before selling, transferring or otherwise disposing of the land, to deliver to the seller a deed of covenant by the purchaser in favour of the seller in the form of the community development covenants; and obliged the buyer to pay liquidated damages of $25,000 for any breach of the covenants.

7. By cl 22 of the special conditions the buyer undertook to complete construction in accordance with the covenants within a specified period of the date of the contract. In the contract for the sale of Lot 411 the specified period was 30 months. For Lot 412 the specified period was 18 months, for Lot 413 it was 54 months, and for Lot 414 it was 42 months. Clause 25 of the special conditions provided:

“25.1In consideration of the payment of the sum of One Dollar ($1.00) by the seller to the buyer (the receipt of which the buyer acknowledges) the buyer grants to the seller an option to purchase the land at the price hereinafter determined and on the conditions specified herein.

25.2.1This option is binding on the buyer and in the event of his death on his estate

25.2.2The benefit of this option may be assigned and may be exercised by the seller or its duly appointed assignee.

25.3This option may be exercised at any time after [the specified period] from the date hereof in the event that the buyer has not completed construction of an approved dwelling house on the land in accordance with the terms of this contract.

25.4.1Notice of exercise of option shall be given by written notice to the buyer together with a bank cheque for $1,000 by way of deposit on account of the purchase price.

25.4.2On delivery of the Notice of Exercise of Option the buyer and the seller become immediately bound as Vendor and as Purchaser respectively under a Contract for sale of land in accordance with the terms of the Contract currently approved by the Real Estate Institute of Queensland for the sale of land.

25.4.3Settlement of the Contract shall take place within 30 days of the date of delivery of the notice of exercise of option, or such extended period as may be agreed.

25.5The purchase price to be paid by the seller to the buyer pursuant to this clause shall be the market value determined by a Valuer or Land Economist appointed by the President for the time being of the Australian Institute of Valuers and Land Economists (Queensland Division).”

8. ACN was incorporated on 21 March 2001. Mr Craig Williams was the sole director of each of Barrier Developments and ACN at the time the contracts were entered into. Mr Williams did not give evidence. The trial judge accepted the evidence of a witness called by Hegira and Vercorp, Ms Mengel, about conversations she had with Mr Williams during negotiations for the sales in about March 2001. Mr Williams advised Ms Mengel that he required accounting advice on which entity was to purchase the properties. He said that he was purchasing one of the properties for himself to live in, one for his father, one for his family to use as a holiday home, and the fourth property for his employees to use as a holiday home. Ms Mengel discussed this with her superior, Mr Russell, who said that he would accept the words “and/or nominee” in the contract but only on the condition that whichever entity purchased the land must comply with the building requirements and otherwise perform the contract. Ms Mengel passed that on to Mr Williams, telling him that Mr Russell had insisted upon the requirement that whichever entity purchased the land would have to comply with “the contract, the building covenant and especially the building time frames.” Mr Williams replied that this was “not a problem at all”.

9. The concluded contracts identified “the buyer” as Barrier Developments Pty Ltd “and or nominee” and the community development covenants defined “buyer” (in cl 11.6 of Annexure B) as “the person why [sic] buys the allotment from the developer”.

10. A letter dated 23 April 2001 from Barrier Developments’ solicitor to Hegira’s solicitor referred to ACN as the “intended purchaser” of the properties. Other correspondence between the solicitors for ACN and Hegira continued to describe the buyer of the properties as “Barrier Developments and/or nominee”, but payments made in consideration of an extension of the finance approval dates were made by ACN to Hegira on or about 2 August 2001, transfer documents were prepared naming ACN as the transferee of each property, the balance purchase price was paid by ACN on 2 November 2001, and the properties were transferred into ACN’s name.

11. Following settlement ACN failed to complete construction of the dwelling houses by the times required by the contracts. Hegira purported to exercise the options to repurchase Lots 411 and 412 by letters from its solicitor to ACN’s solicitor on 5 and 18 December 2003. By letter dated 24 February 2004, ACN’s solicitor replied in the following terms:

“We now act on behalf of ACN 096 278 483 Pty Ltd as Trustee for the Williams Family Trust. Our client has instructed us to write to you in relation to your letter of 5 December 2003 to our client’s former solicitors … and your letter of 18 December 2003 to our client’s former solicitors … .

Under clause 25.4.3 of the respective contracts of sale, the settlement of the contracts formed by the exercise of the options contained in those contracts of sale was required to:

‘take place within 30 days of the date of delivery of the Notice of Exercise of Option, or such extended period as may be agreed’.

We further note that clause 25.4.2 of the respective contracts of sale provides that:

‘On delivery of the Notice of Exercise of Option the Buyer and the Seller become immediately bound as Vendor and as Purchaser respectively under a Contract for Sale of land in accordance with the terms of the Contract currently approved by the Real Estate Institute of Queensland for the sale of land.’

As you will be aware, the Real Estate Institute of Queensland approved contract provides that if a buyer fails to comply with any provision of the contract, the seller is entitled to terminate the contract.

We note that in the case of each of the two contracts formed by the exercise of the options, your client failed to tender the balance of the purchase price on the due date for settlement. Our client regards this failure as a serious breach of each of the contracts. In the circumstances, our client elects to terminate both of those contracts.”

ACN did not then deny that it had become bound as the buyer under the original contracts of sale and as the seller under the repurchase contracts formed upon exercise of the options.

12. On 19 January 2004, Hegira commenced proceedings in the District Court against ACN seeking $75,000 as liquidated damages. In that proceeding Hegira alleged that ACN did not conduct any substantial building works on Lots 411, 412 and 413 between August 2003 and December 2003. That was alleged to constitute a breach of a clause in the community development standards which provided that:

“No building shall be left without substantial work being carried out for longer than one (1) month. Total construction time for erection of a building shall not exceed nine (9) months…”.

13. Hegira subsequently assigned all of its rights and interests in the contracts to Vercorp. The District Court proceeding was not pursued, but it was not discontinued.

14. On 8 May 2006, Vercorp purported to exercise the options to repurchase Lots 413 and 414. ACN refused to reconvey the lots, but it did not then assert that it was not bound by the options. Pursuant to cl 25.4.3 of the special conditions the due date for settlement of the repurchase contract for Lots 413 and 414 was 7 June 2006. For reasons to which it will be necessary to return, the valuation required by cl 25.5 was not provided to ACN until the day of settlement. The transfer documents, which could not be completed until the valuation had been received, were also not provided until the day of settlement. Vercorp’s solicitors faxed the valuation and the transfer documents to ACN’s solicitors at about 12.20 pm on 7 June 2006, together with a copy of the bank cheques which would be provided at settlement. Vercorp nominated 3.00 pm that day at the Titles Office as the time and place for settlement, unless ACN notified to the contrary, and noted that if further time was required to arrange releases of mortgages, a written request for an extension of the settlement date should be forwarded.

15. No representative of ACN attended at settlement. Vercorp’s solicitor sent a fax to ACN’s solicitor stating that Vercorp remained ready, willing and able to settle at any time up to 5.00 pm. In subsequent correspondence Vercorp affirmed the contracts. On 13 June 2006, ACN, by it’s solicitor’s letter to Vercorp’s solicitor, purported to terminate the repurchase contracts for Lots 413 and 414 on the ground (amongst others) that Vercorp had “failed to give [ACN] reasonable time to consider the valuation before the time for settlement expired.”

Proceedings in the trial division

16. Vercorp and Hegira commenced proceedings against ACN in the trial division seeking specific performance of the contracts to repurchase all of the properties, damages for the cost of removing the partially erected dwellings, and liquidated damages pursuant to the community development covenants. ACN defended the proceedings. Amongst other defences, ACN contended that it was not bound by the contracts but was a mere transferee of title to the properties, or it had validly terminated the repurchase contracts, or that Hegira’s commencement and maintenance of the District Court proceedings constituted an irrevocable election to seek damages in lieu of a decree of specific performance in relation to Lots 411, 412 and 413.

17. The trial judge dismissed Vercorp’s claims for liquidated damages, and those claims are no longer in issue. The trial judge rejected ACN’s “mere transferee” and “irrevocable election” defences. The trial judge dismissed Vercorp’s claim for specific performance of the repurchase contracts for Lots 411 and 412 on the different ground that ACN had validly terminated those contracts. In relation to Lots 413 and 414, the trial judge declared that on 7 June 2006 ACN was bound to complete the repurchase contracts, holding that ACN had not validly terminated those contracts. The trial judge made that limited declaration, rather than ordering specific performance of the repurchase contracts for Lots 413 and 414, on the footing that any order for specific performance should await the determination of a counterclaim brought by ACN.

ACN’s appeal

18. In ACN’s appeal, it contended that the trial judge erred in rejecting its arguments that it was not bound by any of the contracts but was a “mere transferee” of Barrier Developments or, in the alternative, that it had validly terminated the repurchase contracts in relation to Lots 413 and 414, or Vercorp had made an irrevocable election to seek damages in lieu of a decree of specific performance in relation to Lots 411, 412 and 413.

The “mere transferee” ground

19. In its appeal, ACN substantially repeated the argument rejected by the trial judge that it had not become a party to any contract with Hegira (or Vercorp as Hegira’s assignee).

20. It is not contentious that a named purchaser’s nomination of a third party as the transferee under a contract for the sale of land to the named purchaser “or nominee” does not substitute the nominee for the originally named purchaser as a party to the contract. Numerous decisions cited by the trial judge support that proposition.²

21. The trial judge also referred to authority which supported ACN’s argument that clear words would be needed to establish an agreement that, upon the original purchaser’s nomination, the nominee would become a party to a contract with the vendor. In Harry v Fidelity Nominees Pty Ltd³ King CJ observed that: he would be “most unwilling to construe a contract as containing a provision of such unusual character … unless the language of the contract was quite clear”; not only was the notion of a vendor binding himself to accept an unknown nominee as the party to whom he must look exclusively for performance of the contract an unusual one, it was “by no means clear that such a provision could be made legally effective”; and “[t]he substitution could only occur if the nominee subsequently agreed, for fresh consideration or under seal, to perform the [original purchaser’s] obligations under the contract.” The trial judge referred also to Phillips JA’s statement in Salter v Gilbertson that:⁴

“As has been pointed out often enough, although it must be so if the context so demands, it is a strong thing to regard the words ‘or nominee’ as authorising B, unilaterally and in his or her own absolute discretion, to nominate a purchaser to stand in the place of B, with all the attendant consequences for A [the vendor]. For such a construction ‘compelling language’ is required … .” (emphasis in original)

22. After considering those matters, the trial judge discussed a case in which a nominee was found to be bound as purchaser. In Parland Pty Ltd v Mariposa Pty Ltd, Green CJ, having referred to authorities and set out a passage from Harry v Fidelity Nominees Pty Ltd, said:⁵

“Whilst accepting the above statements and also accepting that in this particular case there was evidence of the conveyancing practice referred to in those passages it must be kept in mind that every case must be determined on the basis of the circumstances and terms of the particular contract under consideration.

In my view the following circumstances militate in favour of a conclusion that the first plaintiff was not merely the transferee of the property but was a contracting party.

The contract was ‘between … the vendor of the one part and Andrew Hamilton and Andrew McGregor or their nominee [hereinafter called “the purchaser”] of the other part’. Prima facie the effect of those words is that if Hamilton and McGregor did not nominate anyone the contract was between the vendor of the one part and Hamilton and McGregor [thereinafter called ‘the purchaser’] of the other part and that if they did nominate someone then the contract was between the vendor of the one part and the person nominated [thereinafter called ‘the purchaser’] of the other part. It follows that prima facie the person nominated was a contracting party and that the word ‘purchaser’ refers to the person nominated wherever it appears in the contract. Another internal indication supporting that construction is provided by the fact that the only way in which the rezoning referred to in cl15 could have been achieved was by an objection by the owner or occupier of the property pursuant to the Local Government Act 1962, s 727(4). If the defendant’s contention is correct and for the purposes of cl15 ‘the purchaser’ should be construed as referring to the second and third plaintiffs notwithstanding that the first plaintiff was nominated as the transferee, the clause would have been unworkable from the beginning because the second and third plaintiffs were not the owners and would not have had standing to lodge the objection which was necessary to achieve the rezoning.”

23. The trial judge considered that Ms Mengel’s evidence established that when Hegira and Barrier Developments contracted, each knew that Barrier Developments intended to nominate another entity which would also be controlled by Mr Williams, but his Honour observed that the critical question involved the intention, objectively viewed, of ACN. In finding that ACN was bound by the contract, the trial judge reasoned as follows:⁶

“… If a nominee were not to become bound by the provisions which were to operate after settlement of the original sales by Hegira, how was Hegira to have had the benefit of the contracts in those respects? Moreover, if ‘the buyer’ referred to in Annexures B and D was to remain Barrier Developments, the outcome would be that it, and not the transferee, would have to construct houses upon land in which it had no interest. The more likely intention to attribute to Barrier Developments was that its exercise of its power of nomination should result in the nominee being bound in its place. And that was the likely intention to attribute also to Hegira, for otherwise the benefit of these post settlement provisions would be substantially denied to it.

In some of the authorities, it is said that the vendor would be unlikely to have agreed to the substitution of an unknown person as the purchaser. But in this case that consideration does not have the same significance. The purpose of the contract, on the purchaser’s side of the transaction, as known to both parties, was to permit an entity controlled by Mr Williams to acquire the lands and to build upon them. In any case, the post settlement provisions specifically anticipated the substitution of a subsequent owner, although such a person might be unknown to the vendor. As set out above, cl 4.1 of Annexure B required ‘the buyer’ to obtain a deed of covenant from its purchaser by which it agreed to be bound by these provisions. It is not suggested that cl 4.1 was engaged here by the nomination of [ACN] by Barrier Developments. But this provision indicates, upon an objective view, an intention that the vendor should be able to enforce these post settlement provisions against whoever was the then owner of the land.

Accordingly, the term ‘the buyer’ within these post settlement provisions should be construed as a reference to the entity which became the transferee, whether Barrier Developments or, in the event of its nomination of another transferee, that nominee. That is not inconsistent with the identification of ‘the buyer’ on the first page of each contract. Nor is it inconsistent with the definition of ‘buyer’ for Annexure B within cl 11.6, where the term was defined as the person who ‘buys the allotment from the developer’.

Ordinarily a vendor is taken to have agreed to transfer the land to the purchaser or to the purchaser’s nominee, whether or not the contract specifically provides for such a nomination: Lord v Trippe. In these contracts, by necessary implication, Hegira agreed to transfer to the nominee of Barrier Developments, but only upon the basis that the nominee agreed to be bound by the post settlement provisions.

[Hegira and Vercorp] must not only demonstrate that it was Hegira’s intention to have the transferee as the party against which it could enforce the post settlement provisions. They must also prove that [ACN] agreed to be so bound. [ACN], through Mr Williams, must be regarded as a transferee which knew of the terms of the contracts of sale. It was [ACN] which caused the contracts to be completed on the buyer’s side. In particular, it was [ACN] which paid the price in each case upon settlement. In these circumstances, in taking the transfer, by necessary implication [ACN] agreed with Hegira to be bound as ‘the buyer’ under the post settlement provisions. The consideration for [ACN’s] agreement was that transfer and Hegira’s release of Barrier, neither of which Hegira had agreed to do absent the nominee agreeing to be bound. In consequence, upon settlement of each contract, [ACN] became bound to perform the post settlement provisions … .” (citation omitted)

24. ACN challenged the trial judge’s reasoning, arguing that the authorities required “very clear language” or “compelling language” to justify departure from the “ordinary” or “usual” position that in the case of a contract for the sale of land between a vendor and a purchaser “or nominee” the nominee merely takes title to the land but does not otherwise stand in the place of the purchaser. This was submitted to be all the more so in a case, such as the present, where the relevant contractual obligations sought to be enforced against the nominee were negative covenants which could not bind the nominee in the absence of a contract between it and Hegira.⁷

25. ACN went so far as to contend that the requirement in the authorities that there be “very clear language” ordinarily required express terms, but it did not cite any authority which supported that proposition and it should not be accepted. As Green CJ observed in the passage from Parland Pty Ltd v Mariposa Pty Ltd which was quoted by the trial judge, every case must be determined on the basis of the circumstances and terms of the particular contract under consideration. The clarity of the contractual language required for a finding that a nominee is substituted for an original contracting party may be influenced by the circumstances of the particular case. So much follows from the basic principle, to which the trial judge adverted, that the construction of a contract must be undertaken with a consideration of the surrounding circumstances known to the parties and the purpose and object of the transaction.⁸

26. ACN argued that Green CJ’s statement in Parland Pty Ltd v Mariposa Pty Ltd that “prima facie the person nominated was a contracting party and that the word ‘purchaser’ refers to the person nominated wherever it appears in the contract” was not reconcilable with decisions such as Harry v Fidelity Nominees Pty Ltd and Salter v Gilbertson. That argument treated Green CJ’s statement as a proposition of law, but it was instead a conclusion derived from the distinctive facts of that case. There, the identity of the purchaser’s nominee was known to the vendor. An amended contract handed over at settlement added the words “or their nominee” to the named purchasers, so that the contractual description of “the purchaser” became the named purchasers or their nominee, and the contract also did not include any mechanism to make the post settlement provisions enforceable against a purchaser’s nominee.

27. One of the circumstances upon which Vercorp relied in support of the trial judge’s conclusion was that, following the discussions in March 2001 in which Ms Mengel made it plain to Mr Williams that the reference to a nominee would only be acceptable to Hegira on the condition that the entity which purchased the lots must comply with the building requirements and perform the contracts in accordance with the contractual building timeframes, the reference to a nominee was added to the contracts and Mr Williams signed them on 27 March 2001. A comparison between the original versions of Annexure D in each of the contracts and the revised versions (sent to Hegira from one of Mr Williams’ companies on 27 March 2001) demonstrated two additions: the words “or nominee” in the expression “Barrier Developments/or nominee (As Buyer)” in the heading of Annexure D; and Mr Williams’ initials and signature (in addition to the signature of the solicitor who had originally signed Annexure D for Barrier Developments). ACN objected to the use of that evidence for this purpose on the ground that Vercorp and Hegira’s reply admitted the allegation in ACN’s defence that the contracts between Hegira and Barrier Developments were executed by Barrier Developments, as buyer, on or about 16 March 2001.

“The buyer acknowledges that he will not sell, transfer or otherwise dispose of the allotment without firstly delivering to the Developer a Deed of Covenant duly executed by the Purchaser in favour of the Developer containing covenants in the same terms (mutatis mutandis) as are set forth in these covenants including an obligation for each purchaser to obtain a further Deed of Covenant from any subsequent purchaser.”

31. The trial judge mentioned in [29] of his Honour’s reasons that it was not suggested that cl 4.1 was engaged by the nomination of ACN by Barrier Developments, so this seems to be a new point. Clause 4.1 was not designed to meet the situation which arose in this case, because the contractual definition of the term “buyer” used in that clause comprehended ACN as Barrier Developments’ nominee (see [9] of these reasons) and the words “sell, transfer or otherwise dispose of the allotment” are naturally understood as referring to post settlement dispositions by the buyer. It was manifestly an aim of the contract that the community development covenants should be enforceable by Hegira after settlement against whoever was the owner of the land. In light of the express reference to that aim in the context of discussion about intended nominees during pre-contractual negotiations, the parties’ failure to advert to the possible use of a deed of covenant under cl 4.1 at that time tends, if anything, to supply further objective support for the conclusion that ACN was intended to be bound by the covenants as buyer.

32. ACN argued that the transfer to it could not have occurred pursuant to a fresh agreement under which it became bound as a party because Hegira gave no consideration for any such agreement, Hegira being contractually obliged to Barrier Developments to transfer title to ACN upon Barrier Developments’ nomination of ACN as the transferee. That argument overlooked the trial judge’s finding, which I would affirm, that the consideration for ACN’s agreement included Hegira’s release of Barrier Developments.

33. ACN argued that s 184 of the Land Title Act 1994 (Qld) militated against the trial judge’s conclusion. Section 184(1) provides that the “registered proprietor of an interest in a lot holds the interest subject to registered interests affecting the lot but free from all other interests”, and s 184(2) provides that the registered proprietor “is not affected by actual or constructive notice of an unregistered interest affecting the lot”. It is uncontroversial, however, that those provisions provide no obstacle to enforcing a contract against a registered proprietor who made that contract.

34. Reference was made to evidence by Mr Russell to the effect that he did not believe it was necessary for ACN to enter into the Deeds of Covenants and he assumed that there was a “pre-dated agency agreement authorising Barrier to enter on behalf of the Williams Family Trust.” Mr Russell’s subjective intentions and understanding do not assist in answering the question whether ACN became bound as a party to a contract with Hegira. That turns upon an objective analysis of what reasonable parties in the position of Hegira, Barrier Developments, and ACN would have understood to be the effect of their arrangements.⁹

35. ACN argued that the trial judge’s finding was inconsistent with the evidence that as late as October 2003 Hegira wrote to Barrier Developments complaining about delays in construction of the lots and other breaches of contract. If that amounted to an admission, it was of little weight compared to the contemporaneous objective circumstances which the trial judge analysed. Other correspondence was consistent with the trial judge’s conclusion. In the 24 February 2004 letter from ACN’s solicitor to Hegira’s solicitor, which was written in response to Hegira’s exercise of the option to repurchase Lots 411 and 412, ACN’s solicitor acknowledged that contracts had been formed between ACN and Hegira upon Hegira’s exercise of the options under cl 25 of the contracts. As the trial judge pointed out, there was no evidence which explained that inconsistency with ACN’s case at trial. Nor was there any contention in the following months in the further correspondence about the repurchase of Lots 411 and 412 that ACN had not been contractually bound to reconvey those properties when the options to repurchase were exercised.

Termination of the repurchase contracts in respect of Lots 413 and 414

37. Upon the assumption that it was bound to perform the post settlement provisions, ACN argued that it had validly terminated the repurchase contracts for Lots 413 and 414 pursuant to cl 9.1 for breach of cl 5.2(1) of the REIQ standard terms which were incorporated in those contracts. Those clauses provided:

“5.2****Transfer Documents

(1)The Transfer Documents must be prepared by the Buyer’s Solicitor and delivered to the Seller a reasonable time before the Settlement Date.

…

9.1****Seller May Affirm or Terminate

If the Buyer fails to comply with any provision of this contract, the Seller may affirm or terminate this contract.”

38. Vercorp’s solicitor did not deliver the transfer documents before the settlement date. The trial judge referred to the reasons for the delay in the following passage:¹⁰

“The construction period for lot 414 expired on 9 October 2004 and for lot 413 on 9 October 2005. On 4 November 2005, Hegira assigned to Vercorp its rights in respect of these properties.

On 8 May 2006, Vercorp gave to [ACN] notice of that assignment and notices exercising the options to repurchase lots 413 and 414. Ultimately, there was no challenge to Vercorp’s claim to be entitled to exercise those options (if the respondent had become bound by them). The date for settlement was therefore 7 June 2006. Also on 8 May, Vercorp wrote to the President of the Australian Property Institute asking for a valuer to be nominated. On the following day, Mr McNamara for the Institute replied, advising that a certain valuer had been nominated.

The valuer then contacted Mr Londy, who said that his client did not then acknowledge that the options had been validly exercised and said that it would not participate in the valuation process. Correspondence then passed between the valuer, the Institute and Vercorp’s solicitors. All of this must have caused some delay in the completion of the valuation. The valuation was not provided until the date of settlement, 7 June 2006. Lots 413 and 414 were valued at $800,000 and $600,000 respectively.

By a facsimile transmission at about 12.20pm on 7 June, Vercorp’s solicitors sent to Mr Londy a copy of the valuation and a transfer to be executed by [ACN] and handed over at settlement. They attached copies of bank cheques for $800,000 and $600,000 payable to [ACN]. Their letter concluded as follows:

We note that there is a mortgage on each Lot to NAB. We nominate settlement to take place at the Titles Office at 3:00pm today unless you notify us of the contrary in writing. However, if your client requires additional time to have the transfers executed and releases obtained from NAB then please provide us with a written request for an extension of the settlement date.

Our client is ready, willing and able to settle today.

At the appointed time of 3.00pm, Mr Murdoch of the solicitors for Vercorp attended at the Titles Office to settle the contracts. No one representing [ACN] attended. A little later, Vercorp’s solicitors sent a fax to Mr Londy saying that Mr Murdoch had attended for the settlement but had left at 3.20pm, and that Vercorp remained ready, willing and able to settle at any time up to 5.00pm that day. They added that if [ACN] wanted an extension of time then Mr Londy should fax a request so that they could take Vercorp’s instructions. There was no response that day from Mr Londy.

On 8 June 2006, Vercorp’s solicitors wrote to Mr Londy, purporting to affirm the contract and advising that if Mr Londy contended that the 30 days ran from some other time, they expected that Vercorp would be ‘agreeable to settling on whatever date is the appropriate date’.

On 13 June 2006, Mr Londy replied that if Vercorp proved that the options were validly exercised by it (which Mr Londy said, [ACN] did not admit), Vercorp was not entitled to an order for specific performance for two reasons. One was that the amount of the valuations was ‘much too low’ and that ultimately the valuation report was ‘unreliable and invalid for the purposes of the present exercise’. That contention was struck out of the Defence by an order on 16 December 2008. The other ground was an alleged estoppel, apparently based upon something which had occurred at an unsuccessful mediation held in July 2005. The details of that ground need not be considered here because it is not pleaded. In that letter, there was also some complaint that the valuation had been given only two hours prior to the time for settlement, which was said to have given ‘insufficient time to properly consider our client’s position’. But [ACN’s] pleaded point, which was that an unreasonably short time was allowed for settlement of the repurchase contracts, was not raised.”

39. The trial judge accepted that cl 9.1 “is in terms by which it is engaged by any breach of the contract by the buyer, no matter how serious.”¹¹ The trial judge found, however, that Vercorp had not “failed to comply” with cl 5.2(1) because, by necessary implication, the determination of the price under cl 25.5 of Annexure D was a condition precedent to the performance of the obligation expressed in cl 5.2(1). The trial judge held that this implication satisfied the prerequisites for an implied term expressed in Codelfa Construction Pty Ltd v State Rail Authority (NSW)¹² and that the implication was necessary in the same way as a similar term was implied in Re Ronim Pty Ltd¹³ (where the Court implied a term that where, through no fault of the parties, they could not carry out the necessary checks to verify title on the day for completion, the obligation to complete should be suspended until that could be done). The trial judge reasoned as follows:¹⁴

“In the present case, by the unavailability of the valuation, which was not the fault of Vercorp, it became impossible for Vercorp to comply strictly with cl 5.2(1). It cannot be thought that the parties intended that in this circumstance, Hegira or its successor should find itself in breach of the repurchase contract, such that the unwilling vendor of the land might have all of the rights and remedies for breach of contract, including a right of termination. Clause 9.1 is engaged only where there is a failure to comply with the provision of the contract. As other parts of cl 9 confirm, it is only a breach of contract which will engage cl 9. Because Vercorp was under no obligation to deliver the transfer documents until they could be prepared, as long as the impediment to their preparation was not through its default, the obligation under cl 5.2(1) was suspended and was not breached. Accordingly, cl 9 was not engaged.

The evident purpose of cl 5.2(1) is to ensure that a seller has sufficient time to execute the transfer documents to be delivered at settlement. In the present case, if it was impossible for that to occur because the transfer documents were delivered only on the day for settlement, then [ACN] would have been excused from the obligation to settle on that day. This would have been because either performance of the contract would have become impossible, thereby discharging the contract, or because by a further implication, the contract would have remained on foot but with the settlement date extended to allow [ACN] whatever time was required. However, it is unnecessary to discuss that question, because there is no evidence that it was impossible for [ACN] to settle on 7 June. More precisely, there is no evidence that it was impossible for [ACN] to execute the transfer documents and to bring them to a settlement on that afternoon. Notably, at the time there was no complaint made by or for [ACN] that this was impossible.”

40. ACN argued that the trial judge erred in finding that the determination of the purchase price under cl 25.5 of Annexure D was a condition precedent to the performance of the obligations in cl 5.2(1). ACN also argued that the trial judge erred in finding that: the unavailability of the valuation was not the fault of Vercorp and it was thereby impossible for Vercorp to comply strictly with cl 5.2(1); the obligations in cl 5.2(1) were suspended and not breached; and Vercorp was therefore not in breach and ACN was not entitled to terminate the repurchase contracts. ACN submitted that the error was demonstrated by the trial judge’s findings, made in the course of concluding that ACN had duly terminated the contracts for the repurchase of Lots 411 and 412, that: there was no requirement for ACN to be involved in the process of appointing a valuer pursuant to cl 25.5; it was possible for Hegira (or Vercorp) to ensure that the valuation machinery was working before it was employed by obtaining the valuation under cl 25.5 prior to giving the notice of exercise of option under cl 25.4.1; and the parties had agreed (in cl 25.4.3) upon settlement of the repurchase contracts within 30 days of delivery of the notice of exercise of option rather than according to when the purchase price was determined by the valuation.

41. I would affirm the trial judge’s conclusions on these points. There could be no settlement prior to the determination of the market value, which was the purchase price of the lots. As Hegira and Vercorp pointed out, in the course of finding that ACN had duly terminated the contracts for the repurchase of Lots 411 and 412, the trial judge found that it was a condition precedent to performance of the repurchase contracts that a valuer acting under cl 25.5 determined the market value of the relevant lot by the agreed date for performance. I will explain why I reject Vercorp’s challenge to the finding when I discuss its appeal. It logically follows from that finding that the determination of the purchase price was also a condition precedent to the purchaser’s obligations to deliver the transfer documents to the seller at a reasonable time before the settlement date under cl 5.2(1). Otherwise it does not seem necessary to attempt to expand upon the trial judge’s persuasive reasons for the conclusion that the contracts were subject to the condition precedent.

42. ACN has also failed to demonstrate any error in the trial judge’s finding that the unavailability of the valuation was not the fault of Vercorp. The fact that the contract permitted Vercorp to seek the appointment of a valuer before giving the notice of exercise of option did not mean that it was obliged to do so or that it was at fault in omitting to do so. Vercorp sought the appointment of a valuer on the same day that it exercised the option. There seems to be no basis for concluding that Vercorp should have anticipated that the valuation might not be provided until the very last day of the 30 day settlement period.

43. ACN challenged the trial judge’s conclusion that it was not entitled to terminate the contracts for the repurchase of Lots 413 and 414 on the further ground that the trial judge should have found that settlement of the repurchase contracts was to occur only upon “reasonable notice by either party” or “within a reasonable time after a date and time stipulated by either party”. ACN argued that Vercorp’s facsimile transmission at about 12.20 pm on 7 June 2006, which nominated settlement to take place at the Titles Office at 3.00 pm that day, did not comply with that implied term.

“In any event, I am not persuaded that a term should be implied as [ACN] has pleaded. Such a term does not satisfy the prerequisites that it is necessary to give the repurchase contracts business efficacy. Nor is it so obvious as to go without saying. No authority was cited by [ACN] for the implication of such a term, although these contracts adopt the REIQ terms. Clause 5.1(1) of the REIQ terms provided that settlement was to occur between 9.00am and 5.00pm on the settlement date. Clause 5.1(2) provided that the place of settlement was to be the Titles Office, failing a nomination of another place by [ACN]. According to the express terms then, the parties were obliged to settle on the settlement date without any notice by one to the other of a date, time or place. There is no basis then for implying a term that any such notice was required and that it be reasonable notice or for settlement ‘a reasonable time after a date and time stipulated by either party’. Instead, each party was obliged to settle on the due date as long as that had not become impossible and by circumstances beyond that party’s control.” (footnote omitted)

46. ACN argued that the necessity for implying the alleged term arose because cl 25.4.3 of Annexure D required settlement of the repurchase contracts to take place at any time within 30 days of the date of delivery of the notice of exercise of option and that 30 day period was “at large”. No such implication was necessary. Clause 25.4.3 did not permit the buyer under the repurchase contract to require the seller to settle at any time before the last day of the 30 day period. In the absence of any nomination of an earlier time, settlement was due by 5.00 pm on the final day of the period. It was not necessary for the buyer under the repurchase contract to give any notice to that effect since it was provided for by the terms of the contract.

47. Furthermore, ACN’s contention that Vercorp gave ACN just two and a half hours notice of settlement is not accurate. ACN must be taken to have anticipated from the outset that it might be required to settle by 5.00 pm on the final day of the settlement period (7 June 2006). Vercorp did not purport to require ACN to settle before 5.00 pm: the nomination of 3.00 pm as the time for settlement in the notice given by Vercorp’s solicitor at 12.20 pm on 7 June 2006 was qualified by the words “unless you notify us of the contrary in writing”. That reflected the provisions in cl 5.1(1) and cl 6.1 of the REIQ standard terms that settlement “must occur between 9am and 5pm on the Settlement Date” and that the time of day is not of the essence. ACN was entitled to settle at any time during the four and a half hours before 5.00 pm after Vercorp’s solicitors sent to ACN’s solicitors a copy of the valuation and a transfer to be executed by the trust company. The trial judge accepted evidence that after no one representing ACN attended at the Titles Office to settle the contracts at 3.00 pm, Vercorp’s solicitors sent a facsimile to ACN’s solicitors stating that Vercorp remained ready, willing and able to settle at any time up to 5.00 pm that day. ACN referred to expert evidence to the effect that two and a half hours notice where no prior arrangements had been made to effect settlement was unreasonable, but that evidence was not inconsistent with the trial judge’s conclusion that ACN failed to establish that it could not have taken the steps required on its part to effect settlement before 5.00 pm.

Abandonment of specific performance of Lots 413 and 414 by claiming damages in the District Court

48. The trial judge rejected ACN’s contention that Hegira had abandoned a claim for specific performance of the repurchase contracts for Lots 413 and 414 by commencing proceedings against ACN in the District Court claiming liquidated damages of $75,000. (ACN’s contention that Hegira had made such an election was not limited to the contracts for Lots 413 and 414, but it was unnecessary for the trial judge to consider the contention in relation to Lots 411 and 412 because his Honour concluded that ACN had in any event duly terminated the repurchase contracts for those lots.) The trial judge considered this argument in the following passage:¹⁶

“On 19 January 2004, Hegira brought proceedings against [ACN] in the District Court claiming $75,000. The pleaded case was for $25,000 under each of the contracts for the sale of lots 411, 412 and 413, pursuant to cl 5.1 of Annexure B to the contracts, as Hegira’s solicitors had demanded on the previous day. That provision, set out above at [7], provided that in the event of any breach of any of those covenants, the Buyer was to pay to Hegira $25,000 by way of liquidated damages ‘or such greater sum as may represent the actual loss or damage suffered by Pacific Harbour by reason of such breach’. The breach complained of was that between August 2003 and December 2003, [ACN] had conducted no substantial building works on any of lots 411, 412 and 413. That was pleaded as a breach of a term within that attachment described as Community Development Standards. The relevant term was as follows:

No building shall be left without substantial work being carried out for longer than one (1) month. Total construction time for erection of a building shall not exceed nine (9) months. …

The alleged breach, in essence, was halting the progress of construction. This was not the basis for the exercise of an option to repurchase according to Annexure D, because the option could be exercised only in the event that construction had not been completed in accordance with the contract. The date for completion of lot 414 was 9 October 2004, and the date for lot 413 was a year later. The District Court proceedings were thereby commenced before the option to repurchase either of those properties was exercisable.

Accordingly, the option was not exercisable for the breach which was pleaded in the District Court proceedings and nor had the options for lots 413 and 414 become exercisable at the time that those proceedings were issued. At least for those reasons, [ACN’s] argument that the commencement of the District Court proceedings involved an election not to exercise the options to repurchase cannot be accepted. By their written submissions, counsel for [ACN] argue that ‘the right to claim damages and the option to repurchase are inconsistent rights because each would result in the Applicants being compensated for the same breach’. But there is no inconsistency. And a further problem with the submission is that the option to repurchase is not compensatory.” (emphasis in original)

49. ACN contended in its appeal that “[i]n respect of Lots 411, 412 and 413, [Hegira and Vercorp] conclusively elected to seek damages in the District Court proceedings” and “[b]y their election, … abandoned any claim to specific performance in respect of those Lots”. The argument assumed that Hegira’s right to damages under cl 5.1 of the community development covenants and its right to exercise the option for repurchase under cl 25.3 of Annexure D were “inconsistent the one with the other and … because they are inconsistent neither one may be enjoyed without the extinction of the other”.¹⁷ For the reasons given by the trial judge there was no such inconsistency. The commencement and maintenance of the District Court proceedings involved no election by Hegira or Vercorp not to maintain the right to claim specific performance of any of the repurchase contracts.

50. ACN also argued that Hegira and Vercorp’s conduct in continuing two sets of proceedings which involved overlapping issues and relief was an abuse of process which was relevant to the consideration of whether to grant equitable relief. The trial judge’s reasons for rejecting that argument were that the breaches complained of in the two sets of proceedings were different and the District Court proceedings had not been prosecuted.¹⁸ ACN did not point to any particular error in that reasoning. There was no error.

Other issues in ACN’s appeal

51. It is unnecessary to consider ground 4 of ACN’s appeal. It related only to Lots 411 and 412, in relation to which ACN succeeded. ACN abandoned ground 9 of its appeal, which challenged a decision by the trial judge to refuse leave to rely upon a proposed amended defence.

Vercorp’s cross appeal

52. In Vercorp’s cross appeal it sought an immediate decree of specific performance of the repurchase contracts for Lots 413 and 414. Grounds 1 to 6 of Vercorp’s notice of cross appeal were repeated in Vercorp’s appeal and it is appropriate to consider them in that context. As will appear, none of those grounds has merit. That leaves for consideration ground 7, in which Vercorp contended that the trial judge erred in finding that ACN’s counterclaim should be litigated before any decree of specific performance of the repurchase contracts for Lots 413 and 414 might be considered.

53. The trial judge declined to grant specific performance of the repurchase contracts for Lots 413 and 414 because part of ACN’s counterclaim sought relief under the Trade Practices Act 1974 (Cth) for misleading and deceptive conduct, said to have been engaged in by Hegira and Vercorp in obtaining the valuations for the repurchases. His Honour reasoned that those allegations might, if established, lead to a grant of relief under s 87 of the Trade Practices Act in a way which would affect the performance of the repurchase contracts. For that reason, the trial judge’s order in favour of Vercorp was limited to a declaration that on 7 June 2006 ACN was bound to complete contracts for the sale to Vercorp of Lots 413 and 414.

54. The counterclaim sought a declaration that the “[v]aluations referred to in the Defence” (which included reference to the valuations in respect of Lots 413 and 414 pleaded in paragraph 64(b) of the defence) were “invalid and of no effect by reason of the breach by [Vercorp] (and further, or alternatively, [Hegira]) of section 52 of the TPA as pleaded therein”, and consequential relief pursuant to ss 80, 82 and 87 of the Trade Practices Act. Vercorp contended in its written outline of submissions in support of its cross appeal that: the alleged misleading and deceptive conduct (which was pleaded in paragraph 144 of the counterclaim) was the failure to inform the valuers “of the Valuation Issues pleaded above in response to paragraph 64 of the current Statement of Claim”; paragraph 64 did not plead any “Valuation Issues” in relation to Lots 413 and 414; and the parts of the previous pleading which did relate to Lots 413 and 414 were struck out by an order made by the trial judge on 16 December 2008. Those contentions were consistent with the form of paragraph 64 as it appears in the record, in which subparagraphs (d)-(g) (including the only reference to “Valuation Issues” in subparagraph (f)) are struck through.

55. Because ACN’s counterclaim was stayed pending resolution of the issues determined by the trial judge, there remains the prospect that the counterclaim might be amended. It seems, however, that ACN does not wish to pursue this aspect of its counterclaim. ACN did not dispute Vercorp’s analysis. In ACN’s written outline of submissions it conceded that if its appeal was dismissed and Vercorp’s appeal was allowed, Hegira or Vercorp was entitled to specific performance of the repurchase contracts for Lots 413 and 414. That was not directly responsive to Vercorp’s argument but it suggested that there was no issue under the in relation to those lots. Vercorp made those points in its written outline of submissions in reply. It submitted that if ACN’s appeal was dismissed Vercorp was entitled to specific performance of the repurchase contracts for Lots 413 and 414 irrespective of the fate of Vercorp’s appeal. ACN did not make any submissions in response, either in writing or orally. I conclude accordingly that there is no issue on this point.

Vercorp’s appeal

58. In Vercorp’s appeal it contended that the trial judge erred in finding that ACN had validly terminated the repurchase contracts for Lots 411 and 412.

59. The trial judge summarised the relevant evidence in the following passage:¹⁹

“[ACN] was obliged to complete the construction of a dwelling on lot 411 within 30 months from the date of the contract of sale, ie by 9 October 2003. It was obliged to complete the construction of a house on lot 412 within 18 months, ie on 9 April 2002. It failed to do so in each case. In the second half of 2003 Mr Williams and Mr Dal Bon for [ACN] gave frequent assurances that the buildings would be completed but these were not fulfilled. Accordingly, Hegira became entitled to exercise the options to repurchase lots 411 and 412.

On 5 December 2003, Hegira’s solicitors wrote to Coyne Coyne & Towers, exercising the options in respect of lots 411 and 412 on behalf of ‘Hegira Pty Ltd’ rather than Hegira Limited. On 18 December, Corrs Chambers Westgarth for [ACN] replied, contending that the notices were ineffective because of that misnomer. On the same day, Hegira’s solicitors wrote back confirming that they acted on behalf of Hegira Limited and that their earlier notice had contained a typographical error. They asserted that the previous notices were valid. Alternatively, they said that this letter of 18 December should be taken as an exercise of the options. Bank cheques totalling $2,000 had been posted with the previous notices, consistently with cl 25.4.1 of Annexure D. They wrote, as they had earlier written on 5 December, that the purchase price was to be the market value determined by a valuer appointed according to cl 25.5 and that they would forward a form of contract in the terms then approved by the REIQ in accordance with cl 25.4.2. At the end of each of their letters of 5 and 18 December, they wrote:

We note settlement is due within thirty (30) days or such further time as may be agreed. Obviously the purchase price will need to be organised beforehand but we will attempt to expedite that matter.

On 18 December, Hegira’s solicitors wrote a further letter to Corrs Chambers Westgarth, demanding the payment of $25,000 in respect of each of lots 411, 412 and 413, in consequence of [ACN’s] failure to conduct substantial building work on each lot for a period of in excess of one month. That amount was claimed under cl 5.1 of the covenants in Annexure B.

On 19 December 2003, Hegira’s solicitors wrote to the President of the Australian Property Institute (Queensland Division), which was the body previously known as the Australian Institute of Valuers and Land Economists. They asked for the appointment by the President of a valuer or land economist to fix the market value of each of lots 411 and 412, pursuant to cl 25.5 of Annexure D. Their letter was copied to Corrs Chambers Westgarth.

On 22 December 2003, Corrs Chambers Westgarth wrote to request an extension, under the (2001) contracts of sale, of the date for completion of construction to 15 September 2005. That was rejected by a letter from Hegira’s solicitors of 29 December 2003.

On 15 January 2004, an officer of the Australian Institute of Property Valuers telephoned Hegira’s solicitors to advise that the appointment would be made by the Vice President because ‘the President is with the NAB [National Australia Bank] and a bit close to the matter’. The President was Mr Ide who, as an employee of that bank, perceived a potential conflict of duties because Hegira was a wholly-owned subsidiary of the bank. In fact, on settlement of the (2001) contracts of sale, on Hegira’s behalf he had executed the transfers to the respondent. After some further discussions between the Institute’s Executive Officer, Mr McNamara, and Hegira’s solicitors, they wrote to Corrs Chambers Westgarth on 19 January 2004, advising of the problem with Mr Ide and of his preference for the Vice President to make the nomination of the valuer. They asked for advice by 21 January of whether [ACN] had any objection to the President making that nomination. There was apparently no reply before 2 February 2004, when Hegira’s solicitors wrote to Mr McNamara requesting that the Vice President make the nomination. On 17 February 2004, Mr McNamara wrote to Hegira’s solicitors, with a copy to Corrs Chambers Westgarth, advising that ‘the Institute’ had nominated a valuer, Mr Harvey. Mr McNamara wrote that the nomination had been undertaken by the Vice President ‘on the basis that such will be acceptable to both parties’.

On 19 February 2004, Hegira’s solicitors wrote to Mr Harvey to give him instructions. On 23 February, Mr Harvey replied, giving a quotation of his fees. At the same time he wrote to Londy Lawyers, who by then were acting for [ACN].

On 24 February, Mr Londy wrote the letter referred to above at [19].²⁰ No point was there taken about the appointment of a valuer by the Vice President, rather than by the President. [ACN’s] position there stated was that Hegira had wrongly failed to tender the balance of the purchase price on the due date for settlement, which was 30 days from either 5 or 18 December 2003, and in consequence [ACN] purported to elect to terminate each contract of repurchase.

On the following day, Hegira’s solicitors wrote to dispute that contention and to argue that by an implied term, the date for settlement was to be extended to a reasonable time after receipt of the valuation.

On 27 February 2004, Hegira’s solicitors corresponded further with Mr Harvey, enclosing copies of quotations for demolition of the houses which had been partially constructed for the purposes of his valuation. On 3 March, they wrote to Mr Londy proposing that the valuer’s fees be shared equally between the parties. Mr Londy replied on 5 March saying that in view of [ACN’s] termination of the contracts, ‘the valuation exercise in which you are belatedly engaging, is entirely pointless’. Undeterred, Hegira’s solicitors wrote to Mr Harvey on 7 April 2004, confirming his engagement and offering to pay all of his fees in the event that [ACN] did not contribute to them.

After some further correspondence between the solicitors as to whether the contracts had been validly terminated, Hegira’s solicitors wrote on 19 April contending that the parties had impliedly agreed to extend time to the extent necessary in order for the prices to be fixed. They also suggested another view of the events, which was that the contracts of repurchase had been ‘terminated by frustration for the failure of the anticipated event that the independent valuer would fix a purchase price’, in which case, they contended, the options could be exercised afresh given that the houses remained uncompleted. All of that was rejected by Mr Londy in a letter of 27 April.

On 30 April 2004, Mr Harvey sent his valuation of lots 411 and 412 to Hegira’s solicitors. It appears that he did not send it also to Mr Londy. Mr Harvey valued lots 411 and 412 at $750,000 and $800,000 respectively.

On 7 June 2004,²¹ Hegira and Vercorp executed a document entitled ‘Assignment of Contract’ in relation to each of lots 411 and 412 whereby Hegira assigned to Vercorp all of its rights and interests in the repurchase contracts which were said to have resulted from the exercise of the options on 5 December 2003.

On 8 June 2004, Hegira’s solicitors again wrote to Mr Londy. Their letter made no reference to the assignment to Vercorp. But they enclosed transfer documents for lots 411 and 412 in which Vercorp was shown as the transferee. They wrote that ‘[o]ur client is now in a position to settle the purchase of the above lots’ and they nominated 16 June 2004 at 2.30pm at the Titles Office as the time and place for settlement. The consideration shown on the transfers corresponded with Mr Harvey’s valuations.

On 16 June 2004, someone from Hegira’s solicitors attended at settlement. No-one attended for [ACN]. On that day Hegira’s solicitors sent a letter to Mr Londy saying that they were ready, willing and able to settle throughout the remainder of the day and they enclosed copies of the bank cheques which they held for settlement. That afternoon, Mr Londy replied saying that he had not received copies of the valuations. He maintained that the contracts had been terminated by [ACN]. Alternatively, he contended that Hegira was in breach by failing to provide the valuations to [ACN] within a reasonable time or by failing to complete within a reasonable time after receipt of the valuations. On 25 June, Mr Londy wrote again, putting forward further reasons why [ACN] had not been obliged to settle on 16 June. It is unnecessary to consider these points which by a previous order, I struck out of the Defence.”

60. The trial judge found that: each repurchase contract was subject to a condition precedent that a valuer acting under cl 25.5 of Annexure D determine the market value for the lot by the agreed date for performance in cl 25.4.3; because that condition was not fulfilled the contracts for Lots 411 and 412 were able to be terminated by either party; and ACN terminated those contracts on 24 February 2004. The trial judge reasoned as follows:²²

“The real question here is whether the fact that the price had not been fixed within the 30 day period had the result that the contract was able to be terminated by [ACN], not for a breach or repudiation by Hegira, but for non-fulfilment of a condition precedent to performance. The contracts which came into existence upon the exercise of the options were not uncertain because the price in each case had not been fixed. They were contracts the performance of which was subject to the prices being fixed. If that was a condition which had to be satisfied within the period of 30 days, then it was open to either party to terminate the contract upon the failure of that condition and [ACN’s] termination on 24 February 2004 was valid, although its basis was misstated.

…

In the present case, the parties adopted an objective standard by which the price was to be fixed, which was the then market value of the land. That strengthens the argument for [Hegira and Vercorp] that a failure of the agreed machinery for determining that market value did not put paid to their agreement. A court could determine the then market value. Nevertheless, the question of construction remains: did the parties agree that the price must be determined by, and only by, the valuer appointed under cl 25.5?

In my conclusion, that last question must be answered “yes”, mainly because the parties agreed that settlement should take place within 30 days of the exercise of the option. It may be accepted that the parties could have reasonably anticipated some failure of the agreed machinery which would have left the price undetermined at the end of that period. But notwithstanding the difficulties which were experienced in this case in the appointment of a valuer, the risks of the machinery failing were relatively small. After all, Hegira was under no express time limit to exercise the option. And it was not precluded from asking the President of the Institute to appoint a valuer and from obtaining that valuation prior to exercising its option. There was no requirement for [ACN] to be involved in the appointment process. It was possible then to ensure that the machinery was working before it was to be employed. On the other hand, it could not have been anticipated that there would be any prospect of a determination of the market value of the land by a court within the period of 30 days.

Young J saw the same problem in GPI Leisure Corporation Ltd v Herdsman Investment Pty Ltd (No 1). In that case, the fact that the property there would have to be valued and traded “in a relatively short period of time” was in his view relevant in considering whether a clause should be construed as requiring a sale of certain property at a fair market price.

The time limit of 30 days is important in this way, regardless of whether it was a term of the repurchase contracts that time should be of the essence. Clause 25.4.2 of Annexure D incorporated into the repurchase contracts the terms of the then REIQ form of contract (which were also those which the parties had employed in the 2001 contracts of sale). By cl 6.1 of those terms, time was of the essence of the contract (except regarding any agreement between the parties on a time of day for settlement). [Hegira and Vercorp] argue that such a term was so inconsistent with the purpose of the options to repurchase that by necessary implication, that standard term should be excluded. I do not accept that submission. If anything, the purpose of the option to repurchase would be promoted by a term making time of the essence, for it would tend to expedite the repurchase of the land so that Hegira could put paid to the impact of the purchaser’s default in complying with the building covenants. But regardless of whether time was made of the essence, it is clear that the parties agreed upon a settlement of the repurchase contract within 30 days. They did not agree, for example, upon a settlement which was to occur according to when the price was determined. Nor did they simply agree that a settlement should occur within a reasonable time. They agreed upon a settlement at the end of a period, within which there was no real prospect that the price could be determined other than by the machinery of a valuation expressed within cl 25.5.

It follows that the relevant condition precedent to performance was the determination of that market value by a valuer acting under cl 25.5 and that this condition had to be satisfied by the agreed date for performance. Because that condition was not fulfilled, the contract of repurchase was able to be terminated by either party.

That is not an unlikely intention to attribute to the parties. It broadly accords with the position in contracts for the sale of goods, for which s 12 of the Sale of Goods Act 1896 (Qld) (and its equivalents in other jurisdictions) provides that where there is an agreement to sell on terms that the price is to be fixed by the valuation of a third party, and the third party cannot or does not make the valuation, the agreement is avoided. In cases such as the present, the contract would be voidable by either party for failure of the condition, it being a condition precedent to performance and not to the existence of the contract itself. But that difference is of no practical consequence here, where [ACN] unequivocally terminated the contracts on 24 February 2004.”

61. I accept ACN’s argument that this analysis was correct.

62. Vercorp objected that this argument was not open to ACN because the condition precedent found by the trial judge was not within ACN’s pleaded defence that ACN terminated the contracts because of Hegira’s alleged breach in failing to complete the contracts within 30 days of its exercise of the options. The trial judge rejected that defence on the ground that there was no obligation on either party to complete the contracts unless and until the price was fixed and Hegira had not promised that the land would be valued within the 30 day period.²³ Vercorp cited the requirement in r 153(2) of the Uniform Civil Procedure Rules 1999 (Qld) (“UCPR”) that a party who denies the occurrence of a condition precedent must specifically plead that denial, and the general rules of pleading in the UCPR rr 149(1)(c), 150(4)(a), and 150(4)(c). Vercorp also argued that a passage in the judgment of Mason CJ and Gaudron J in Banque Commerciale SA (In liq) v Akhil Holdings Ltd²⁴ established that it was not open to the trial judge to decide the case on the basis of the condition precedent because ACN had not pleaded such a condition precedent.

63. I accept ACN’s argument that the question whether the repurchase contracts included the condition precedent found by the trial judge was an aspect of the contractual construction issue raised by the pleadings. ACN pleaded that: the repurchase contracts provided that settlement was to take place within 30 days of exercise of the option, with time of the essence; Hegira did not effect settlement by that time; and ACN terminated the contracts on or about 24 February 2004 by its solicitor’s letter of that date.²⁵ The pleading attributed the termination of the contracts to Hegira’s failure to complete rather than to the absence of the valuation required by the contract, but the significance of that distinction is reduced by the fact that the failure to complete was itself plainly attributable to the absence of the valuations fixing the prices. Furthermore, Vercorp’s own statement of claim dealt with the proper construction of the contract. It pleaded the facts upon which the trial judge’s analysis depended, including that the prices had not been fixed by valuations within the 30 day period specified by the express terms of the contracts. Vercorp sought to overcome that apparent obstacle to its claim by alleging that, by a process of construction or implication, “the parties agreed that settlement [of the contracts for the repurchase of Lots 411 and 412] would be extended by agreement for a period necessary to allow the purchase price to be determined in accordance with clause 25.5 of Annexure D if for any reason it could not be determined within 30 days of delivery of the notice of exercise of the option.” That necessarily comprehended a case that upon the proper construction of the contracts, or by a process of implication, performance of the contracts was conditional upon the prices being fixed by valuations before the specified time for settlement. ACN specifically denied the allegation. For these reasons, the trial judge’s findings that the contracts were subject to the condition precedent and that it was not fulfilled were not outside the pleadings.

Proposed orders

78. In my opinion the appropriate orders are:

(a) In Appeal No 12847 of 2010:

(i) Dismiss the appeal.

(ii) Allow the cross appeal.

(iii) Declare that the contract between the first respondent and the appellant for the purchase by the first respondent of Lot 413 on SP133280 should be specifically performed and carried into effect.

(iv) Declare that the contract between the first respondent and the appellant for the purchase by the first respondent of Lot 414 on SP133280 should be specifically performed and carried into effect.

(v) The parties are at liberty to apply in the trial division for any further or other orders relating to the specific performance of those contracts.

(vi) Order that the appellant pay the respondents’ costs of and incidental to the appeal.

(vii) Order that the first respondent pay the appellant’s costs of the first respondent’s cross appeal.

(b) In Appeal No 12868 of 2010, dismiss the appeal with costs.

[79] WHITE JA: I have had the benefit of reading the reasons for judgment of Fraser JA. I agree with those reasons and there is nothing which I can usefully add. I agree with the orders proposed by his Honour.

[80] ATKINSON J: I agree with the orders proposed by Fraser JA and with his Honour’s reasons.

Footnotes

1. [2010] QSC 405. ↩

2. Tonelli v Komirra Pty Ltd [1972] VR 737; Jenkins v Smyth [1973] VR 441 at 447; Lambly v Silk Pemberton Ltd [1976] 2 NZLR 427; Lord v Trippe (1977) 14 ALR 129 at 143; Hurrell v Townend [1982] 1 NZLR 536; Harry v Fidelity Nominees Pty Ltd (1985) 41 SASR 458; Karangahape Road International Village Ltd v Holloway [1989] 1 NZLR 83; Salter v Gilbertson (2003) 6 VR 466 at 473; Commissioner of State Revenue v Politis [2004] VSC 126 at [16]; David Deane & Associates P/L v Bonnyview P/L [2005] QCA 270 at [30]; Avzur Hotels Pty Ltd v Ivanhoe Entertainment Pty Ltd (2009) 257 ALR 498 at 501; CPG01 Pty Ltd v Kourinos [2010] WASC 92. ↩

3. (1985) 41 SASR 458 at 460. ↩

4. (2003) 6 VR 466 at 473. ↩

5. (1995) 5 Tas R 121 at 128. ↩

6. [2010] QSC 405 at [28]-[32]. ↩

7. ACN cited Norton v Kilduff [1974] Qd R 47 at 54. ↩

8. Codelfa Construction *Pty Ltd v State Rail Authority (*NSW) (1982) 149 CLR 337 at 350; Pacific Carriers Ltd v BNP Paribas (2004) 218 CLR 451 at 462; and International Air Transport Association v Ansett Australia Holdings Ltd (2008) 234 CLR 151 at 160. ↩

9. See Pacific Carriers Ltd v BNP Paribas (2004) 218 CLR 451 at 461-462 [22].