FERRY HOLDINGS PTY LTD as Trustee for THE GORGOGLIONE FAMILY TRUST

CCK (WA) PTY LTD as Trustee for THE ET & CM ATHERTON FAMILY TRUST

Breach of contract - Meaning of the phrase 'Harvest completed'

Australian Broadcasting Commission v Australasian Performing Right Association Ltd [1973] HCA 36; (1973) 129 CLR 99

Birla Nifty Pty Ltd v International Mining Industry Underwriters Pty Ltd [2014] WASCA 180

Bottomley's Case [1880] UKLawRpCh 258; (1880) 16 Ch D 681

Cherry v Steele-Park [2017] NSWCA 295; (2017) 96 NSWLR 548

H Lunbeck A/S v Sandoz Pty Ltd [2022] HCA 4

Hillas & Co Ltd v Arcos Ltd [1932] UKHL 2; (1932) 147 LT 503; [1932] All ER Rep 494

Locke v Dunlop [1888] UKLawRpCh 140; (1888) 39 Ch D 387

Mount Bruce Mining Pty Ltd v Wright Prospecting Pty Ltd [2015] HCA 37; (2015) 104 CLR 104

Upper Hunter County District Council v Australian Chilling and Freezing Co Ltd [1968] HCA 8; (1968) 118 CLR 429

XL Insurance Co SE v BNY Trust Company of Australia Ltd [2019] NSWCA 215

1. The issue in this trial is the proper construction of the Special Conditions of Annexure A of a contract of sale between the sellers (the first and second plaintiffs) and the buyer (the defendant), for the sale of a tree farm in Jerdacuttup. The decision in this matter depends almost entirely on the meaning of the phrase 'harvest completed' as it appears in the particular Special Conditions of this contract of sale.
2. On 8 July 2021 the plaintiffs (Joseph Catenacci Pty Ltd and Ferry Holdings Pty Ltd) contracted in writing to sell to the defendant (CCK (WA) Pty Ltd) a farm, known as Mason Bay Tree Farm (the Property), which is situated at 1958 Mason Bay Road, Jerdacuttup, Western Australia for a sale price of $2.4 million (Second Contract of Sale).[1]
3. On 23 July 2021, the contract settled with $1.8 million being paid by the defendant to the plaintiffs. The balance, $600,000, was placed in trust as deferred conditional consideration to secure the performance by the plaintiffs of the special conditions of the contract[2] (withheld monies).
4. Performance entitled the plaintiffs to harvest the blue gum trees on the Property by 31 March 2022. Thereafter, funds from the withheld monies would be released to the plaintiffs according to 'every full 50 hectares of harvest completed'. The balance, if any, would revert to the defendant.
5. The parties' entitlement to receive the funds on trust was binary:[3] for 'every full 50 hectares of harvest completed', the plaintiffs would be entitled to receive $120,000 of the withheld monies; and for 'every 50 hectares or part thereof of unharvested trees left by 31 March 2022', the defendant would be entitled to receive $120,000 of the withheld monies as compensation. So, for example, if a total of 110 hectares of blue gum trees had been harvested by 31 March 2022, the plaintiffs would be entitled to receive $250,000 and the defendant would be paid $350,000.
6. As at the date of settlement, 23 July 2021, 'the parties acknowledge that approximately 252 hectares remain unharvested'.[4]
7. The plaintiffs were permitted to occupy the Property from the date of settlement, 23 July 2021, to 31 March 2022 to give them time to harvest blue gum trees on the tree farm.[5] The parties agreed that the plaintiffs forfeit their right to harvest any remaining trees after 31 March 2022.[6]
8. At as 1 April 2022, the parties agreed that the state of the approximately 252 hectares of land was as follows:

(b) 19.2 hectares had been 'hot sawed' with the trees cut down and left on the ground on the Property; and

(c) the remaining 'in excess of 150 hectares' of land had on it clusters of, or solitary, uncut blue gum trees.

1. It is the areas of (b) and (c), which are referred to collectively as 'in excess of 150 hectares' of land, which has caused the parties to dispute the proper construction of the Special Conditions of the Second Contract of Sale with particular focus on Special Condition 4. In summary, Special Condition 4 concerns the deposit, retention and release of the withheld monies, with particular focus on the meaning of the phrase 'harvest completed'. The parties have agreed that, as a result of approximately 92.2 hectares remaining uncut, the defendant is entitled to receive $240,000 of the withheld monies. Thus, the area of land 'in excess of 150 hectares', together with the release of the remainder of the withheld monies, $360,000, remains in dispute in this litigation.
2. The plaintiffs' case is that, in summary, that 'harvest' is to be given a commercial meaning, in that the plaintiffs are able to select the merchantable (blue gum) trees to cut and remove for their commercial viability, leaving behind the unmerchantable trees.[7]
3. The defendant's case, in summary, is that 'harvest' is to be given a meaning that is consistent with the unadorned text, context and commercial purpose of the Special Conditions of the Second Contract of Sale. The defendant submits 'harvest' means cutting down and removing all trees (except the pine trees which are explicitly excluded under the Second Contract of Sale) from the Property.[8]

1. At trial, Mr Joseph Catenacci gave evidence for and on behalf of the plaintiffs. The plaintiffs also called Mr Andrew Wright, the Managing Director of Ents Forestry Pty Ltd (Ents Forestry). Mr Kurt Atherton gave evidence for and on behalf of the defendant.
2. It is accepted by all parties that Mr Catenacci represented the plaintiffs in the evidence he gave at the trial as well as in the oral and written communications he had with the various parties relevant to this matter in the lead up to the dispute.
3. Mr Wright was called by the plaintiffs to give evidence about two broad areas. The first area concerned his role in the chronology of events, including how he compiled a map of the Property.[9] The second area involved the categorisation of the merchantability of the trees on the Property as well as the various industry accepted methods of 'harvesting' trees (including by hot sawing trees). In my view, this second area of his evidence is in the nature of expert opinion evidence. The defendant opposed the admission of this expert opinion evidence on the basis that they were not provided any report as to the nature and content of this expert opinion. I agree with the defendant's submission on this issue and do not accept into evidence Mr Wright's opinion on the categorisation of the merchantability of the trees on the Property or industry accepted practices as to the removal of trees. The defendant had no notice of the nature and content of this expert opinion evidence and was denied the opportunity to obtain an opinion from a suitably qualified expert. In any event, whether a tree was merchantable or not has no impact on my ultimate decision. As to the first area of Mr Wright's evidence, which does not involve expert opinion evidence, that will be evidence that I am able to have regard to.
4. Mr Atherton represented the defendant in the evidence he gave at the trial as well as in the oral and written communications he had with the parties relevant to this matter in the lead up to the dispute.

1. The Second Contract of Sale, dated 8 July 2021, is the second contract signed between the parties for the sale and purchase of the Property. The lead up to the signing of that Second Contract of Sale may be relevant to aspects of the determination of this matter and will be included in the chronology of events as set out below.
2. The defendant is a farmer who grows grain, mainly wheat and canola.[10]
3. The plaintiffs purchased the Property in 2007 as an investment property.[11] The Property is 872 hectares in size which includes a lake that is 50 hectares in size as well as some virgin forest.[12] A map of the Property was provided to the plaintiffs before they purchased the Property in 2007.[13] This map was prepared by Watershed Mapping on instructions from ITC Limited (which later became Elders Forestry Limited).[14] At the time of the purchase in 2007, the plaintiffs conducted a viewing of the Property.[15]
4. Coincidentally, in 2007, Mr Wright who was then working with ITC Limited, also viewed the Property as part of a field trip to Esperance. Mr Wright observed, at that time, that the trees on the Property were well established two-year-old trees that looked very healthy.[16]
5. At around the same time as the plaintiffs purchased the Property, they leased it to Elders Forestry Limited, who then planted 603 hectares of blue gum trees.[17]
6. In November 2013, Elders Forestry Limited terminated the lease agreement with the plaintiffs, leaving the plaintiffs with a tree farm with trees that were about 8 years old and no tenant.[18] The plaintiffs decided to keep the Property and 'take [their] chances with harvesting the trees when the trees reached maturity'.[19] The expected time for maturity of the trees was 2018.[20]
7. Sometime in 2017, Mr Sias Jordaan, a real estate agent from Ray White Real Estate, Hopetoun, approached the plaintiffs and told them that he had a buyer for the Property. However, no offer was ultimately forthcoming at that time.[21] At that time, the plaintiffs were deciding whether to sell the Property or to lease the Property to a farmer.[22] Mr Catenacci explained that if someone wanted to use the Property for cropping, the land would need to be rehabilitated.[23] Such rehabilitation would involve having the tree stumps ground down, the leaves raked up and the land re-fertilised.[24] Mr Catenacci was of the opinion that to undertake this kind of rehabilitation would cost around $1,000 per hectare.[25] Thus, to rehabilitate the Property for cropping it would have required an investment of about $600,000. In those circumstances, Mr Catenacci's evidence is that the plaintiffs would have entertained a lease arrangement where a farmer would lease the Property for, say 10 or 15 years, with the first five years rent free, which would allow the farmer to rehabilitate the land, and thereafter pay rent.[26] Mr Catenacci understood from Mr Jordaan that he was unable to locate a farmer that would be prepared to take the risk of leasing the Property on those conditions.[27]
8. In or about May 2018, the plaintiffs engaged Mr Wright, who was then working with Ents Forestry, to determine if the blue gum trees on the Property were ready for harvest.[28] As part of the assessment process, Mr Wright conducted a field inspection of the Property to see how much timber was on the Property, differentiating between commercial and non-commercial trees.[29] He then used Quantum Geographic Information System (QGIS), a mapping software package, to compile a map of the Property, setting out the approximate yields for each of the lots or compartments on the Property.[30] The assessment conducted by Mr Wright at this time revealed that the total net stocked area of trees was 603 hectares, of which 539 hectares was 'commercial' and 63 hectares was 'non-commercial'.[31] 'Non-commercial' areas were defined as being trees that were so small and of such poor form that they could never be harvested to generate a positive return for the grower.[32] Mr Wright was of the opinion that the plaintiffs could expect a yield of 128 green metric tonnes per hectare.[33] The map of the Property complied by Mr Wright at this time was provided to the plaintiffs in 2018.[34]
9. Following receipt of this assessment from Mr Wright, in September 2018, the plaintiffs engaged Ents Forestry to 'take over the whole operation'.[35] As part of that engagement, the plaintiffs negotiated a net stumpage price to be paid to them. The plaintiffs entered into a Stumpage Royalty Agreement (the Agreement) with Ents Forestry for this purpose.[36]
10. The Agreement between the plaintiffs and Ents Forestry provides that 'Ents shall Harvest the Plantation Trees, purchase the Timber, and transport the Forest Products from the Plantation on and subject to the terms and conditions herein contained and agreed to'.[37] 'Harvest' is defined in the Agreement as meaning 'the cutting down of the Plantation Trees and de-barking, de-branching, docking, bunching, skidding, chipping, transporting, storing and loading as required by Ents [Forestry] ... and also includes the administration and supervision of such activities ...'.[38] The Agreement is in relation to the harvesting of Eucalyptus globulus (or blue gum) trees only.[39] In addition to harvesting the trees, Ents Forestry are also to 'build, construct and maintain such roads and tracks'[40] on the Property 'as may reasonably be required to enable Ents [Forestry] to carry out its rights and obligations under this Agreement',[41] which includes to harvest,[42] and transport[43] the trees from the Property, process the timber in readiness for sale,[44] load and transport the timber to the port,[45] sell the timber and deduct any commission that is payable by the plaintiffs.[46] Importantly, Ents Forestry are specifically excluded from harvesting any tree or cluster of trees that are unmerchantable - that is, trees that Ents Forestry do not consider can be economically harvested and processed into forest products.[47]
11. Following the signing of the Agreement, harvesting of the blue gum trees on the Property commenced in early April 2019 and continued to the end of May 2019, by which time 114 hectares of the Property had been harvested.[48] Harvesting ceased at the end of May 2019 as a result of the plaintiffs having provided instructions to Ents Forestry to pursue the possibility of a more profitable option for the harvested timber.[49] By April 2020, a more profitable option had not come to fruition.[50]
12. Mr Catenacci recalls that by about April 2020, there was another approximately 500 hectares of trees to be harvested and no work had been done on the fences for about 15 years.[51] It was in those circumstances that the plaintiffs decided to sell the Property.[52] The Property was to be sold in an 'as is' condition.[53] The Property, at this time, had unharvested blue gum tress on it as well as the stumps from the harvested trees.[54] The plaintiffs engaged real estate agent, Mr Jordaan, to act on their behalf in the sale of the Property.[55]
13. Whilst the Property was on the market for sale, the plaintiffs instructed Ents Forestry to recommence harvesting of the Property, which they did from September 2020 through to March 2021.[56]
14. By 23 October 2020, the defendant, through the plaintiffs' real estate agent Mr Jordaan, were in negotiations with the plaintiffs for the purchase of the Property.[57] Mr Atherton's evidence is that when he was negotiating with Mr Jordaan, he informed Mr Jordaan 'the whole way through' that the defendant was going to crop the Property.[58] Mr Atherton's evidence is that he had purchased farms through Mr Jordaan prior to this occasion and that Mr Jordaan knew that the farms the defendant purchased were for cropping.[59]
15. Mr Atherton's evidence is that he knew that the plaintiffs used the Property as a tree farm and inspected the Property before the First Contract of Sale was entered into.[60] When the defendant inspected the Property, they noticed that there were areas where trees had been cut and areas where no single trees were left,[61] as well as areas where no trees were left on the ground.[62] They also noticed areas where small trees were growing.[63]
16. The defendant, in their email correspondence with Mr Jordaan on 23 October 2020, confirmed that they had looked around the Property and asserted that only about 680 hectares was viable for agriculture, and not 1,800 acres as promoted by the plaintiffs. The defendant also pointed out the presence of small trees growing on the Property which 'would need to be chained, pushed over' incurring additional costs to stump grind and fertilise. The defendant was of the view that both those matters ought to have an impact on the purchase price.[64]
17. By return email on that same day, Mr Jordaan agreed that one of the issues the plaintiffs may have to grapple with would be the cost to stump and fully clear up 'over 600 hectares or 1482 acres' of the Property. Mr Jordaan suggested, after having deducted the cost of stumping and fully clearing up the Property, as well as some other potential costs, that the plaintiffs may consider an offer of $2.4 million.[65] This figure was arrived at after having deducted, amongst other things, 'full sourced out clearing cost at $1000/ha = $600,000'.[66]
18. Mr Atherton's evidence is that Mr Jordaan's view of the value of the Property was not a factor that the defendant took into account when making an offer on the Property. They were simply trying to purchase the Property as cheap as they could.[67]
19. In late 2020 or early 2021, Mr Atherton inspected the Property again and saw that there were areas where all of the trees had been cut down, leaving an area or areas clear of all trees, including single trees, and leaving the ground clear of fallen trees.[68] He expected that this would be how the plaintiffs would continue to harvest the Property.
20. Over three months later, on 3 February 2021, the plaintiffs and the defendant entered into a contract for the sale of the Property with a sale price of $2.4 million (the First Contract of Sale).[69] This is the first contract for the sale of the Property between the plaintiffs and the defendant. The settlement of the First Contract of Sale was subject to a number of Special Conditions including:[70]
    1. Settlement shall be on or before 31 March 2021, subject to special conditions outlined below
    2. Settlement shall not take place prior to completion of the tree harvest.
    3. In the event harvest is not completed by 30 June 2021, the Buyers shall have the right to terminate this agreement, or to proceed with the settlement and receive a lease income of $100/acre per annum or part thereof for any unharvested trees.

1. The First Contract of Sale specifically identified that 'Infrastructure associated with the harvest of the Bluegum plantation' was an exclusion under the contract.[71]
2. Mr Catenacci's evidence is that the plaintiffs wanted the blue gum trees as they were valuable to the plaintiffs.[72]
3. After the signing of the First Contract of Sale on 3 February 2021, Mr Catenacci gave evidence that in February and March 2021, there was unseasonably wet weather which brought the harvesting of the trees to a halt.[73]
4. On 28 May 2021, Mr Catenacci sent an email to his real estate agent, Mr Jordaan, informing him that 250 hectares of trees were required to be removed and that he was experiencing difficulty in having that done.[74] Mr Catenacci explained to Mr Jordaan that 73.3 hectares of trees could be removed 'now' and 111.1 hectares of trees could not be removed until summer when the land dried out.[75] Mr Catenacci expressed a willingness to pay rent to the defendant for 'any hectares of uncut timber until the timber was logged off'. Mr Catenacci confirms that it remains the plaintiffs '... objective to have all the trees removed as soon as possible as there is value in them' (emphasis added). He also confirms that he is happy for the buyer to place some funds in a trust account on their behalf as a surety that the plaintiffs will remove the trees.[76]
5. This email of 28 May 2021, sent by the plaintiffs to Mr Jordaan was forwarded to the defendant on 11 June 2021.[77] At the same time, Mr Jordaan proposed that the parties proceed to settlement and the plaintiffs pay rent income at $100/acre/year as well as 25% of the purchase price to remain in trust with the defendant's settlement agent until harvest is completed.[78]
6. Mr Atherton's evidence is that the defendant was not going to buy the Property until harvesting had been completed.[79]
7. The harvesting had not been completed by 30 June 2021. Consequently, on 8 July 2021, the defendant terminated the First Contract of Sale.[80] The Second Contract of Sale was drawn up on the same day, 8 July 2021.[81]
8. Mr Atherton's evidence is that before the defendant entered into the Second Contract of Sale in July 2021, the defendant had not spoken personally to the plaintiffs or written personally to the plaintiffs to inform the plaintiffs that the defendant wanted to use the Property for cropping.[82] The defendant negotiated the sale of the Property through the plaintiffs' real estate agent, Mr Jordaan, who knew that the defendant wanted to use the Property for cropping. Mr Atherton said that he had not discussed the meaning of 'harvest' with the plaintiffs prior to the contract being signed.[83]
9. Mr Catenacci's evidence is that he possibly would have known or assumed that the defendant intended to crop the Property before the second contract was signed on 8 July 2021.[84]
10. On 8 July 2021, the plaintiffs and the defendant entered into the Second Contract of Sale of the Property with a sale price of $2.4 million.[85] This Second Contract of Sale contained numerous Special Conditions in Annexures A and B. So far as is relevant to this trial, the Special Conditions in Annexure A included:[86]
    1. The parties acknowledge that approximately 252 hectares remain unharvested.
    2. The Sellers agree to pay rent to the Buyers [an] amount equal to $100/acre per annum plus GST for unharvested trees. The payment shall be made in two equal instalments at settlement and on 31 December 2021. The payment on 31 December 2021 shall be reduced by $25/acre plus GST for any trees harvested between settlement and 31 December 2021.
    3. The Parties agree that an amount of $600,000 of the purchase price will be retained in trust with the Buyer's lawyers which shall be released on the following basis:
       • For every full 50 hectares of harvest completed, $120,000 of the funds would be released to the Sellers within 7 days of receipt of confirmation from the Seller's contractors and verification by the Buyers, which verification shall be done within 3 business [days] from receiving the notification by the Sellers and which verification shall not be unreasonably withheld.
       • For every 50 hectares or part thereof of unharvested trees left by 31 March 2022, the Sellers [Buyers] shall be entitled to receive $125,000 [$120,000] as compensation.
       • For the avoidance of doubt, if a total of 110 hectares has been harvested by 31 March 2022, the Sellers will have received $250,000 and the Buyers will be paid $350,000.
    4. The Parties acknowledge that none of the Pine trees on the property form part of the trees to be harvested.
    5. In the event that any of the trees have not been harvested by 31 March 2022, the Sellers shall forfeit their right to harvest any remaining trees.
    6. The Buyers shall be able to access the property for the purpose of spraying and eventual burning of the harvested areas. The Parties shall liaise to ensure that spraying and harvesting operations can be done safely and without interference.

1. INCLUSIONS: All pipes, pumps, troughs and tanks on the land as inspected by the Buyer
2. EXCLUSIONS: Infrastructure associated with the harvest of the Bluegum plantation.
3. So far as is relevant to this trial, the Special Conditions in Annexure B included:

(d) The Buyer intends to use the Land for a farming business.

(e) The Seller warrants that the Land has been used for farming for FIVE (5) years preceding the Settlement Date.

1. It is to be noted that the parties agree that there are three errors in the Special Conditions in Annexure A and that they also agree on the correction to those errors. The errors and corrections are as follows:
   1. The first error is that the word 'days' is missing after the words '3 business' in Special Condition 4, first subparagraph.
   2. The second error is that the word 'Buyers' should replace the word 'Sellers' in Special Condition 4, second subparagraph.
   3. The third error is that the figure '$120,000' should replace the figure '$125,000' in Special Condition 4, second subparagraph.
2. In setting out the Special Conditions of the Second Contract of Sale above, corrections to the errors identified by the parties have been inserted.
3. The settlement of the Second Contract of Sale occurred on 23 July 2021.[87] At the time of settlement, $600,000 was held in trust in accordance with Special Condition 4 (withheld monies).[88]
4. Mr Atherton's evidence is that cl 7 of the Second Contract of Sale was important to the defendant because of their intention to crop the Property which required them to spray and conserve moisture, as well as burn to get rid of any green patches.[89] Spraying of the farm was intended to be done by using a 36-metre boom spray,[90] and that could only be done if the land was clear to allow the boom spray to travel up (and down) the land without any obstacles, such as trees.
5. Soon after the Second Contract of Sale was settled, the plaintiffs contacted Mr Wright at Ents Forestry to determine when Ents Forestry could recommence the harvesting of the trees on the Property. In fact, on 10 September 2021, Mr Wright sent an email to the plaintiffs[91] outlining a proposal and timetable to log the Property and transport the wood to processors in Albany. It is noted that his proposal sets out three ways in which the blue gum trees would be dealt with being:

(a) log the trees with the greatest yield to be taken to Albany processors;

(b) push over the smallest trees using a loader; or

(c) push over the smallest trees to be taken to Esperance by a chipping crew.

1. A net stumpage was determined between the plaintiffs and Ents Forestry.[92] That is not relevant to the issues between the plaintiffs and the defendant.
2. On 21 September 2021, the plaintiffs, by email, instructed Mr Wright to proceed with harvesting the trees in accordance with correspondence.[93]
3. On or about 18 October 2021, Mr Wright provided to the plaintiffs a map of the Property which set out the balance of the trees to be harvested, together with the potential tree yields.[94] The balance of trees to be harvested, at that time, was 250.04 hectares.[95]
4. It was at the end of October 2021 that Ents Forestry commenced harvesting the trees on the Property; this continued until 31 March 2022.[96] During that period of time, Ents Forestry paid stumpage monies to the plaintiffs.[97] Mr Wright's evidence is that the plan was to harvest their way through the bigger timber and then move onto the smaller timber, and to see if there was a point they reached where it was no longer commercially viable to cut down the small trees.[98]
5. By 5 January 2022, Mr Wright was expressing some doubt that Ents Forestry was going to be able to harvest the timber by 31 March 2022.[99]
6. On 5 January 2022, Mr Wright sent an email to the plaintiffs providing an update on the harvesting of the trees. Mr Wright advised that as at 1 January 2022 there was 191.6 hectares of standing forest. He included a map of the Property, using shading to show the areas that were unharvested at that time.[100] Mr Wright confirmed that they had started leaving the smaller patches of wood in anticipation that they would not have it all commercially harvested by the end of March 2022 and that they may have to push down the non-commercial bits with a loader at the 11th hour.[101] Mr Wright also advised the plaintiffs that he had been unable to organise any wood chipping companies to attend the Property to undertake any work. Mr Wright informed them that Mr Atherton had been 'hounding' him for the cutover area and that he told Mr Atherton that was a matter to be taken up with the plaintiffs. Mr Wright stated that his communications with Mr Atherton were such that Mr Atherton was elusive about agreeing to an extension beyond March 2022.[102]
7. On 7 January 2022, the plaintiffs sent an email to the defendant confirming that 54 hectares had been harvested in the last quarter and requesting that $120,000 be paid to them by the defendant. The plaintiffs further confirmed that 189.5 hectares remained under cultivation - which excluded 2.7 hectares of non-commercial harvest. The plaintiffs offered to arrange for the contractor to push those non-commercial trees over or to retain the trees on the Property at the request of the defendant. The plaintiffs also calculated rent that was payable by them to the defendant and invited the defendant to deduct rent owing out of the $120,000.[103]
8. Mr Atherton's evidence is that when he viewed the Property in late 2020 or early 2021, he saw that the plaintiffs had harvested the Property such that there were areas where trees had been cut down and areas where no trees were left standing. He assumed that was how the plaintiffs would continue to harvest the Property.[104] So, in late February 2022, when he saw single trees and clumps of trees being left behind, Mr Atherton said that it became a problem - and so he wrote to the plaintiffs about it on 25 February 2022.[105]
9. On 25 February 2022, the defendant sent an email to the plaintiffs advising that the $120,000 claimed by the plaintiffs should be reduced for outstanding lease payments resulting in the amount to be paid to the plaintiffs being $89,433.75 (at that time). The defendant pointed out that the harvesters were leaving, and continued to leave, single trees which would be a major issue for the defendant in the future and they would not release further funds until this single tree issue was resolved satisfactorily. The defendant informed the plaintiffs that they expected a 50-hectare lot to be in one piece and not broken by patches of unharvested trees. Further, the defendant advised that they declined to allow any extension of time beyond 31 March 2022.[106]
10. Mr Atherton, in cross-examination, was challenged about the truthfulness of the statement 'We also note that the harvester's are leaving single trees which will be a major issue for us in the future and are continuing to do so'.[107] Mr Atherton responded by saying that the statement was true because the single trees presented a problem in spraying and burning.[108]
11. On 28 February 2022, the plaintiffs sent an email to the defendant explaining that it had not been their intention to drag out the tree harvesting but due to a variety of circumstances beyond their control, they were unable to complete harvest as they intended by the end of December 2021. The plaintiffs acknowledged the defendant's desire to enforce the contract because they wanted to clear the land as soon as possible to plant their crop. The plaintiffs said that they were also keen to clear the trees so that they could be paid the balance of the sale price on the land. The plaintiffs said that it was likely to be uneconomical to continue to harvest the trees after the end of March 2022. Thus, to fulfil their obligations to harvest the trees by the end of March 2022, the plaintiffs said that they were looking at hiring a float saw to simply cut the trees down and leave them piled up for the defendant to burn. The alternative was that they have the harvest contractors continue harvesting the trees (at a new adjusted price given the price increases) and make no money from that harvest, but that this would require an extension until the end of May. The plaintiffs suggested that this was the better alternative for both parties as the plaintiffs would not have to pay someone to cut down the trees (and make nothing from it) and the defendant would not have to spend time and money to burn the trees as they would have done. The plaintiffs also said that they understood that, at the time, the contractors left some clumps of trees in some areas which were not economical to harvest due to their size. This included approximately 2 hectares around the lake. The plaintiffs said that they had spoken to the contractors who confirmed they would not be leaving any more trees behind. The plaintiffs would also be arranging for the trees to be cut down as soon as possible and before the end of March. The plaintiffs formally requested an extension of the Second Contract of Sale for two months being to the end of May 2022.[109]
12. Mr Catenacci accepted in his evidence that, by 28 February 2022, he knew that the defendant wanted the Property for cropping but says that he did not know when they would want to clear the land.[110]
13. On 3 March 2022, the defendant sent an email to the plaintiffs declining their request for an extension of the contract.[111] The defendant pointed out that there were unharvested single trees spread throughout the property so that there were no single hectares that had been fully harvested. The defendant suggested that this was not the intention of the Special Conditions of the Second Contract of Sale and that they believed that the plaintiffs had not acted within the guidelines of the Second Contract of Sale. The defendant reminded the plaintiffs of the following:

(a) that the defendant wanted to delay the purchase until the harvest of trees was completed; and

(b) that the plaintiffs were aware, at the time of the Second Contract of Sale, that the defendant intended to crop the land in the 2021/2022 season and therefore needed to prepare the property prior to March as the land needed work to prepare it for seeding, including stump grinding, raking, chaining, ploughing, burning etc. In that regard, the defendant asserted that the entire 254 hectares were unusable and this had caused significant cost and delay in the preparation of land for seeding.

1. Finally, the defendant requested further information about the operation of a float saw and the job that it does cutting timber.[112]
2. On 4 March 2022, Mr Wright sent an email to the defendant and the plaintiffs providing information about 'hotsaws'. Mr Wright said that the only other fast harvest method was 'chaining' and noted that the defendant had made it clear that they did not want pock marks in the paddock from stump holes. Mr Wright suggested that the hot saw was the best compromise to achieve both parties' objectives (quickest harvest to meet end-March deadline as well as the easiest and cleanest for remediation). He asked the parties to let him know if they would like him to utilise the hot saw.[113]
3. 'Hot sawing' is cutting down trees and leaving them on the ground, sometimes in piles.
4. On 5 March 2022, Mr Catenacci sent an email to the defendant and Mr Jordaan expressing his disappointment that the defendant had not agreed to an extension of the Second Contract of Sale. Mr Catenacci set out the reasons why things had not panned out as expected, none of which related to the conduct of the defendant. He advised that a float saw (from the evidence it would appear that float saw is another term for hot saw) would be coming onto the property by about the week commencing 14 March. He advised that they would continue to harvest the timber until the last day in March. He said that any timber which is not commercial to harvest, including all clumps of trees currently left behind and around the lake would be cut by the float saw. The float saw would also cut any timber that could not be cut in time by the harvesters such that 'all timber will be cut by the 31st March by either the harvesters or the float saw' (emphasis added). He suggested that the defendant 'may incur additional inconvenience and possibly additional costs in needing to burn more timber than was necessary if [the plaintiffs] were allowed to remove the trees by harvesting them with the harvester'. He further said that the defendant may also not be in a position to plant crops this year on possibly 60 - 80 hectares of land that is not harvested by 31 March.[114]
5. Mr Catenacci's evidence is that, at this point in early March 2022, he did not care what the defendant wanted to use the Property for.[115] However, he initially said in his evidence that he knew that the defendant wanted to crop the Property and he needed to get his trees off the property, but it was not material to him. His evidence is 'I got myself to 31 March to harvest the trees. If I didn't finish by then, they [the defendant] can have it with the trees'.[116]
6. On 14 March 2022, Mr Wright sent an email to the plaintiffs advising that the hot saw would be delayed and would not be onsite before 28 March 2022.[117]
7. On 16 March 2022, Mr Wright sent an email to the plaintiffs giving an update on matters concerning the logging of the Property. He advised that the price of fuel had increased, that one of the machine operators had gone broke and confirmed that the hot saw would arrive on 28 March 2022. Mr Wright said that he would contact the defendant to discuss demobilising machines on the farm.[118]
8. On 17 March 2022, the plaintiffs sent an email to Mr Wright confirming that they needed 'to continue harvesting until all timber is off the premises' (emphasis added).[119] The plaintiffs acknowledged that it was not possible to remove all the trees by 31 March and that they must mitigate as much of the damage caused to the defendant as possible. The plaintiffs suggested that leaving the timber standing would mean that the defendant would have a case for claiming that the plaintiffs did not fulfil their part of the contract. Whereas the plaintiffs said that if they finished taking off all the timber, then the defendant could only argue that the plaintiffs did not finish on time. The plaintiffs referred to the hot saw being on the property on 28 March and that the saw needed to be used to take off all of the clumps of trees remaining on the farm and around the lake first so that there were hectares cleared in full before 31 March. The plaintiffs said that they would need to know how many completely cleared hectares of land had been cleared by 31 March. The plaintiffs said that any further clumps of trees that were not commercially viable in the remaining stands of trees not yet harvested by 31 March could also be cut down by the hot saw to speed up the removal of trees. The plaintiffs observed that when on location you could see what trees were not viable and instruct the hot saw to speed up the removal of the trees. Any other commercially viable timber standing was to be harvested by the harvester until finished. The plaintiffs expressed their hope that 'all the trees will be harvested by the end of April, before the rains set [in] ... If the rains come before the harvester is finished, then the hot saw will need to finish off the job' (emphasis added).[120]
9. Mr Catenacci, in his evidence, explained that he instructed Mr Wright to cut down the non-commercial trees so that the plaintiffs could tell the defendant that they did harvest the trees, including the non-commercial trees. Mr Catenacci explained that if they did not cut down the trees then he could not say that they had harvested the trees as required by the Second Contract of Sale. Mr Catenacci said that he only needed to cut down the trees and it was then up to the defendant to clear the land.[121]
10. On 21 March 2022, the plaintiffs sent an email to the defendant, Mr Jordaan and Mr Wright, attaching an updated Harvest Cutover Map of the Property.[122] The plaintiffs confirmed that another 59.7 hectares of trees had been harvested and requested a further payment be made. The plaintiffs also observed by reference to a map, that 19.2 hectares of non-commercial timber remained standing and advised that 'a hot saw arriving on the 28 March and will be removing all of the non-commercial timber off the land. Unfortunately this was the earliest possible time that we could get a machine to come and cut the non commercial timber'.[123] He also advised that, as at 15 March 2022, there was still 113.3 hectares of commercial timber remaining to be cut. He said that he wanted to do the right thing and clear the land as best and as quickly as possible for the defendant. He advised that they would not be able to 'finish harvesting all of the timber by the 31st March' (emphasis added). He also noted that there had been no payment for the first 50 hectares harvested and attributed that non-payment to the fact that clumps of trees were left behind by the contractor. He advised that these would be cut by the hot saw contractor when they get there on 28 March. He also advised that '[s]ince we notified the harvester contractor not to leave clumps of trees behind, we believe the last 59.7 hectares are free of clumps of trees'. Therefore, he asserted that there was no reason to withhold payment for this lot of timber. The plaintiffs requested an unspecified extension of time beyond 31 March to allow the plaintiffs to complete the harvest of timber.[124]
11. Mr Atherton gave evidence that, about five days before 31 March 2022, he told the plaintiffs that he did not want hot sawing to occur on the Property.[125]
12. On 31 March 2022, Mr Wright took a series of photographs[126] and some drone footage[127] of the Property which showed the state of various locations on the farm. He also produced a map of the Property showing the areas that had been harvested since 31 December 2021 up until 31 March 2022, and the areas that had trees standing as at 31 March 2022.[128]
13. Some of the photographs taken by Mr Wright captured areas that were determined by him to be a 'cut' or harvested area and have been denoted on the map as such. In those 'cut' or harvested areas, standing trees can be seen which have been determined to be non-commercial or dead sticks.[129]
14. Other photographs taken by Mr Wright captured areas that were determined by him to be 'trees standing' areas.[130]
15. One photograph taken by Mr Wright captured an area where a half load of timber had been left behind as a result of running out of time to remove it.[131] Another photograph taken by Mr Wright captured an area where timber had been hot sawed which he determined to be 'cut' because the trees had been felled.[132]
16. The drone footage taken by Mr Wright was in three files, capturing the following areas (by reference to the map in Exhibit 13):[133]
    1. DJI_0150 - the footage commences at compartment 1 and moves to compartment 2 and then onto the area of the dam and its surrounds. Compartment 2 was an area Mr Wright identified as non-commercial trees and was an area where trees were hot sawed, felled and left on the property in bundles in readiness to burn. Both compartments 1 and 2 were identified by Mr Wright as 'cut'.[134] My own observations of compartments 1 and 2 are that trees have been cut down (by whatever means) except for standing trees that are randomly placed throughout compartments 1 and 2. I understand that these standing trees are trees that are said to be non-commercial.
    2. DJI_0152 - the footage commences at compartment 6 (area marked 15.7 hectares on the map) which is an area where lines of green can be seen. Those green lines are trees that have been felled by a hot saw and bunched together for ease of burning. Also in the footage is a barren area of the Property which is where Mr Wright said harvest of the trees had occurred some years ago and the area had been burnt and stumps ground out.[135]
    3. DJI_0153 - the footage commences at compartment 6.[136] My own observations are that there are random trees remaining standing in this area of the farm.
17. Mr Wright's evidence is that the areas where hot sawing occurred were in the hatched areas on the map, being compartment 1 (1.4 hectares), compartment 2 (1.3 hectares), and compartment 6 (15.7 hectares).[137]
18. Mr Wright's evidence is that, as at 31 March 2022, there were 92.2 hectares of blue gum trees still standing.[138]
19. Mr Atherton's evidence is that, after 31 March 2022, the defendant was not able to boom spray the Property as there were single trees left 'everywhere' on the farm, as well as areas of unharvested trees.[139]
20. On 5 April 2022, David Lenhoff of Lenhoff & Hotz Commercial Lawyers (the plaintiffs' lawyers), sent a letter to Mr Brian McCormack of WA Property Lawyers (the defendant's lawyers) advising that 'in excess of 150 hectares' had been harvested and 92 hectares remained unharvested as at midnight 31 March 2022. The plaintiffs made a demand for payment of $360,000 pursuant to the Second Contract of Sale.[140]
21. On 14 April 2022, Mr McCormack for the defendant sent a letter to Lenhoff & Hotz advising that the defendant was claiming the full amount of $600,000 for a number of reasons including that:[141]
    1. The defendant had been unable to access any of the partially harvested areas for the purpose of spraying and eventual burning (as they were entitled to do pursuant to cl 7) due to the plaintiffs incomplete harvesting operations. They raised the issue of the single trees remaining as a serious concern in relation to cl 7 and for the further farming operations that the defendant needed to undertake to convert the harvest area to an area which could be cropped. They reminded the plaintiffs' lawyers that the plaintiffs knew, at the time of offer and acceptance, that the defendant intended to convert the harvest area to an area that could be cropped in the 2022 season. They alleged that the plaintiffs' actions had precluded this happening, incurring considerable lost opportunity for income to the defendant.
    2. The plaintiffs had not harvested the blue gum trees within the definition of the word. They alleged it is not normal practice for a tree harvesting operation to leave many, many single trees standing per hectare within the so-called harvested areas and the whole of the so-called harvested areas had single trees remaining on them throughout the Property. This was an issue that was raised with the plaintiffs in January 2022 but there had been no change to the harvesting practice thereafter.
    3. Whilst the plaintiffs advised that 19.2 hectares had been cut by the hot saw method and the full trees laid in rows, this is not considered 'harvesting' by any measure of the definition of that word.
22. In mid-April 2022, Mr Wright and Ents Forestry continued to pay the plaintiffs for the harvested trees.[142]
23. On 14 July 2022, the plaintiffs sent an email to the defendant advising, by way of certification, that (1) the amount of standing timber left behind after the completion of harvesting was 92.2 hectares and (2) that 'in excess of 150 hectares' had been harvested. A demand for payment of $360,000 was made by the plaintiffs from the defendant, the former warning failure of which would result in their commencing legal action.[143]
24. Mr Atherton gave evidence that his complaint was that the plaintiffs did not take away all of the trees and that they hot sawed about 20 hectares.[144] Stumps left in the ground would require the defendant to de-stump the area before they could use it for cropping.[145] Mr Atherton said that because they wanted to grow crop, they needed to be able to spray to conserve moisture and then they needed to get a good burn to save having to do raking.[146]

1. There is no dispute between the parties concerning the principles applicable to the construction of contracts.
2. It is the 'primary duty' of a court construing a written contract to ascertain its meaning from the 'words of the instrument in which the contract is embodied'.[147]
3. The language used by the parties is the 'starting point and the ending point of the construction of a written commercial contract'.[148]
4. Both parties referred to the High Court of Australia's decision in Mount Bruce Mining Pty Ltd v Wright Prospecting Pty Ltd, where Chief Justice French, Justice Nettle and Justice Gordon set out the law in relation to the interpretation and meaning of commercial contracts in the following way:[149]
   1. The rights and liabilities of parties under a provision of a contract are determined objectively, by reference to its text, context (the entire text of the contract as well as any contract, document or statutory provision referred to in the text of the contract) and purpose.
   2. In determining the meaning of the terms of a commercial contract, it is necessary to ask what a reasonable businessperson would have understood those terms to mean. That inquiry will require consideration of the language used by the parties in the contract, the circumstances addressed by the contract and the commercial purpose or objects to be secured by the contract.
   3. Ordinarily, this process of construction is possible by reference to the contract alone. Indeed, if an expression in a contract is unambiguous or susceptible of only one meaning, evidence of surrounding circumstances (events, circumstances and things external to the contract) cannot be adduced to contradict its plain meaning.
   4. However, sometimes, recourse to events, circumstances and things external to the contract is necessary. It may be necessary in identifying the commercial purpose or objects of the contract where that task is facilitated by an understanding 'of the genesis of the transaction, the background, the context [and] the market in which the parties are operating'. It may be necessary in determining the proper construction where there is a constructional choice. The question whether events, circumstances and things external to the contract may be resorted to, in order to identify the existence of a constructional choice, does not arise in these appeals.
   5. Each of the events, circumstances and things external to the contract to which recourse may be had is objective. What may be referred to are events, circumstances and things external to the contract which are known to the parties or which assist in identifying the purpose or object of the transaction, which may include its history, background and context and the market in which the parties were operating. What is inadmissible is evidence of the parties' statements and actions reflecting their actual intentions and expectations.
   6. Other principles are relevant in the construction of commercial contracts. Unless a contrary intention is indicated in the contract, a court is entitled to approach the task of giving a commercial contract an interpretation on the assumption 'that the parties ... intended to produce a commercial result'. Put another way, a commercial contract should be construed so as to avoid it 'making commercial nonsense or working commercial inconvenience'.
   7. These observations are not intended to state any departure from the law as set out in Codelfa Construction Pty Ltd v State Rail Authority (NSW) and Electricity Generation Corporation v Woodside Energy Ltd. We agree with the observations of Kiefel and Keane JJ with respect to Western Export Services Inc v Jireh International Pty Ltd.

1. Following on from Mount Bruce Mining, the New South Wales Court of Appeal in XL Insurance Co SE v BNY Trust Company of Australia Ltd,[150] had occasion, in part, to consider and apply principles applicable to the construction of a contract where the dispute arose from an exclusion clause in a professional indemnity insurance policy. In so doing, the court summarised aspects of the applicable law as follows:
   1. As the policy is a commercial contract, the Court should, in construing it, 'ask what a reasonable businessperson would have understood [the relevant] terms to mean': Electricity Generation Corporation t/as Verve Energy v Woodside Energy Ltd (2014) 251 CLR 640; [2014] HCA 7 (Electricity Generation) at [35]. The task is an objective one; it involves identifying the imputed intention of the parties, by reference to the contractual text construed in the light of its context and purpose: Electricity Generation at [35]; Mount Bruce Mining Pty Ltd v Wright Prospecting Pty Ltd (2015) 256 CLR 104; [2015] HCA 37 (Mount Bruce) at [46]-[51] and [108]-[109]; Victoria v Tatts Group Ltd [2016] HCA 5; (2016) 90 ALJR 392 at [51]- [75]; Simic v New South Wales Land and Housing Corporation (2016) 260 CLR 85; [2016] HCA 47; (2016) 91 ALJR 108 at [18].
   2. Importantly, in their joint judgment in Mount Bruce, French CJ, Nettle and Gordon JJ said (at [48]) that:

Ordinarily, this process of construction is possible by reference to the contract alone. Indeed, if an expression in a contract is unambiguous or susceptible of only one meaning, evidence of surrounding circumstances (events, circumstances and things external to the contract) cannot be adduced to contradict its plain meaning.

Their Honours also emphasised that 'context' may be discerned from the entire text of the contract in question: at [46].

1. The applicable principles with respect to redundancy of words in a contract were summarised by Ball J in AFC Holdings Pty Ltd v Shiprock Holdings Pty Ltd [2010] NSWSC 985; (2010) 15 BPR 28, 199 at [13], as follows:

The general principle is that the words of a contract should be interpreted in a way which gives them an effect rather than a way in which makes them redundant: North v Marina [2003] NSWSC 64 at [45]; Davuro Pty Ltd v Wilkins [2000] FCA 1902, (2000) 105 FCR 476 at [152], [230]. That principle does not operate as an invariable rule. In some cases, it may be appropriate to interpret words in a way that makes them redundant. That may be appropriate where the alternative construction of the words is inconsistent with other provisions of the contract or where the alternative construction is inconsistent with the commercial purpose of the contract or where it appears that the words have been included out of abundant caution: see Re Strand Music Hall Co Ltd; Ex parte European and American Finance Co Ltd [1865] EngR 570; (1865) 35 Beav 153 at 159; [1865] EngR 570; 55 ER 853 at 856 per Sir John Romilly MR; Dryden Construction Co Ltd v New Zealand Insurance Co Ltd [1959] NZLR 1336; Beaufort Developments (NI) Ltd v GilbertAsh NI Ltd [1998] UKHL 19; [1999] 1 AC 266 at 273-4 per Lord Hoffmann.

1. ... the construction relies upon assertions of 'commercially unlikely consequences' as a reason for departing from the language the parties have in fact used ... But as Bell P emphasised in Donau Pty Ltd v ASC AWD Shipbuilder Pty Ltd [2019] NSWCA 185 at [58], caution is required when resort is had to assertions of 'commercially unlikely consequences' as a reason for departing from the language the parties have in fact used. His Honour cited: Jireh International Pty Ltd t/as Gloria Jean's Coffee v Western Exports Services Inc [2011] NSWCA 137 at [55]; Cushman & Wakefield (NSW) Pty Ltd v Farrell [2017] NSWCA 24 at [71]; Lindsay-Owen v Winton Partners Funds Management Pty Ltd [2017] NSWCA 78 at [20].
2. Bell P continued at [58]:

... 'Business commonsense' is also a topic upon which minds may differ, and what a lawyer may surmise to amount to business commonsense may be far removed from the true position, whether because of a general lack of understanding of commerce, or because of an information deficit as to the commercial positions of both parties and their larger commercial concerns. Indeed, as Spigelman CJ observed writing extra-judicially, 'when the matter comes to the level of litigation, each party remains convinced that "a business like" interpretation or "business commonsense" happens to coincide with its own commercial interests': 'From Text to Context: Contemporary Contractual Interpretation' (2007) 81 ALJ 322 at 330.

1. Justice Edelman, sitting as part of the Full Bench of the High Court of Australia in H Lunbeck A/S v Sandoz Pty Ltd,[151] when they were required to consider the interpretation of words in a legal instrument, referred to the following principles:
   1. ... Putting to one side any issue concerning whether ambiguity is required before extrinsic circumstances and context can be considered, a constraint which does not arise in relation to the meaning of written documents or instruments generally, a simple approach is generally taken in the category where the meaning of express words is concerned. In that category, the task of interpretation is commonly said simply to be a matter of ascertaining what would have been intended by a reasonable person in the position of the parties, with inferences about that meaning to be drawn from the information reasonably available to the parties. In Chartbrook Ltd v Persimmon Homes Ltd, Lord Hoffman said that 'there is not, so to speak, a limit on the amount of red ink or verbal rearrangement or correction which the court is allowed. All that is required is that it should be clear that something has gone wrong with the language and that it should be clear what a reasonable person would have understood the parties to have meant.'
   2. By contrast, the task of interpretation is sometimes expressed as a more rigid test, requiring much greater restraint, where the meaning of a clause requires an inference that is said to involve the addition or removal of words in the instrument. So, for drawing inferences that recognise an unexpressed implication within a clause, in Fitzgerald v Masters, Dixon CJ and Fullagar J said that '[w]ords may generally be supplied, omitted or corrected, in an instrument, where it is clearly necessary in order to avoid absurdity or inconsistency'. And an even stricter approach to drawing inferences that recognise an entire implied term in a contract appears from the famous passage in Codelfa, where Mason J (with whom Stephen and Wilson JJ agreed) said that 'courts have been at pains to emphasize that it is not enough that it is reasonable to imply a term' and that there are five 'conditions necessary to ground the implication of a term'. The proposed implied term: (1) must be reasonable and equitable; (2) must be necessary to give business efficacy to the contract, so that no term will be implied if the contract is effective without it; (3) must be so obvious that 'it goes without saying'; (4) must be capable of clear expression; and (5) must not contradict any express term of the contract.
   3. ... The best approach is to recognise that implications fall on a continuum that depends upon the extent of the contribution that the general or particular circumstances of context or purpose must make to the required inference beyond the language of the provision. In contracts that are entirely in writing, like other entirely written instruments such as legislation, the larger the contribution from surrounding circumstances beyond the text that is required to recognise the implication the greater must be the relevance of those circumstances and the greater the 'force as to carry conviction to the mind' that is needed before the implication can be recognised as one that would have been intended by a reasonable person in the position of the parties.
   4. At one end of the continuum, an implication beyond the literal meaning of express words might be slight and in contractual interpretation the inference of that implied meaning can be readily drawn if that was the meaning that would have been intended by a reasonable person in the position of the parties. It does not matter if the inference is described as inserting new words. As Lord Eldon LC said in Wight v Dicksons, '[i]t had been said that it was too strong to insert a word; but the answer was, that the other words in the [contract] could not have their proper effect without it'.
   5. At the other end of the continuum, a contractual implication beyond the literal meaning of the express words might be large, requiring a high level of satisfaction by the court that the implication would have been intended by a reasonable person in the position of the parties. Hence, if the implication is properly characterised as a new, and separate, term of the contract, the present state of the law is that a court will require satisfaction of all five of the factors endorsed in Codelfa before the implication is recognised.

1. Whilst it will always be an important matter of context for the interpretation of a commercial agreement if an interpretation would be 'commercial nonsense', it will rarely assist for the interpretation of an agreement that the court considers that, from the perspective of one party, one or more clauses are not commercially wise or convenient. As Neuberger LJ said in Skanska Rashleigh Weatherfoil Ltd v Somerfield Stores Ltd:

[T]he court must be careful before departing from the natural meaning of the provision in the contract merely because it may conflict with its notions of commercial common sense of what the parties may must or should have thought or intended. Judges are not always the most commercially-minded, let alone the most commercially experienced, of people, and should, I think, avoid arrogating to themselves overconfidently the role of arbiter of commercial reasonableness or likelihood.

1. If the words used are unambiguous, the court must give effect to them, notwithstanding that the result may appear capricious or unreasonable, and notwithstanding that it may be guessed or suspected that the parties intended something different. The court has no power to remake or amend a contract for the purpose of avoiding a result which is considered to be inconvenient or unjust. On the other hand, if the language is open to two constructions, that which will be preferred will avoid consequences which appear to be capricious, unreasonable, inconvenient or unjust, 'even though the construction adopted is not the most obvious, or the most grammatically accurate', to use the words from earlier authority cited in Locke v Dunlop,[152] which, although spoken in relation to a will, are applicable to the construction of written instruments generally; see also Bottomley's Case.[153] Further, it is permissible to depart from the ordinary meaning of the words of one provision so far as is necessary to avoid an inconsistency between that provision and the rest of the instrument. Finally, the statement of Lord Wright in Hillas & Co Ltd v Arcos Ltd,[154] that the court should construe commercial contracts 'fairly and broadly, without being too astute or subtle in finding defects', should not, in my opinion, be understood as limited to documents drawn up by businessmen for themselves and without legal assistance.[155]
2. Post contractual communications are admissible to establish a relevant surrounding circumstance known to both parties at the time of entry into the contract:[156]
   1. In choosing between two constructions that are open on the text and purpose of a contract, a court will prefer that which will avoid consequences which appear to be capricious, unreasonable, inconvenient or unjust.

1. The plaintiffs' case is that, in accordance with the terms of the Second Contract of Sale, they have harvested 'in excess of 150 hectares' of blue gum trees, with confirmation of that having been done communicated to the defendant by the plaintiffs' contractors. The plaintiffs claim that the defendant failed to verify harvesting within three business days following confirmation, such verification being essential to allow for the payment to the plaintiffs of $360,000 from the withheld monies ($600,000). Accordingly, the plaintiffs claim that the defendant is in breach of the terms of the Second Contract of Sale, specifically Special Condition 4 of Annexure A, because the defendant had unreasonably withheld the verification necessary to allow the release of $360,000 from the withheld monies to the plaintiffs.
2. The defendant denies that it is in breach of the Second Contract of Sale because the confirmation provided by the plaintiffs' contractors (that the plaintiffs had harvested 'in excess of 150 hectares' of blue gum trees) was not true and correct, therefore not enlivening the obligation on the defendant to verify. That is, the defendant's submission is that their obligation to verify was subject to an implied condition that confirmation from the plaintiffs' contractors was true and correct. Consequently, the defendant argues that it has not unreasonably withheld the verification that is necessary to have the $360,000 (or any money) paid to the plaintiffs from the withheld monies.
3. The onus is on the plaintiffs to prove, on the balance of probabilities that such verification was unreasonably withheld by the defendant. In doing so, it is a critical plank of the plaintiffs' case that they harvested 'in excess of 150 hectares' of blue gum trees.

1. The Second Contract of Sale between the plaintiffs and the defendant dated 8 July 2021, was for the sale of land that was being utilised for the farming of trees. At the time of the signing of the Second Contract of Sale, both parties expressly acknowledged that the Property was being used by the plaintiffs for that purpose. Further, at the time of the signing of the Second Contract of Sale, both parties expressly acknowledged that the defendant intended to use the Property for a farming business.[157]
2. There has been some dispute as to whether the plaintiffs knew, at the time of signing the Second Contract of Sale, that the defendant intended to use the Property for farming small crops or cropping. The evidence on this issue includes the following:
   1. Mr Atherton's evidence is that when he was negotiating with the plaintiffs' agent, Mr Jordaan, from October 2020, he informed Mr Jordaan 'the whole way through' that the defendant was going to use the Property to farm crops.[158] I accept his evidence in this regard.
   2. On 23 October 2020, the defendant, by email correspondence to the plaintiffs' agent, Mr Jordaan, pointed out that he had observed the presence of small trees growing on the Property which 'would need to be chained, pushed over' and would incur additional costs to stump, grind and fertilise. The defendant was of the view that this ought to have an impact on the purchase price.[159]
   3. Mr Catenacci's evidence is that, before the Second Contract of Sale was signed in July 2021, he made an assumption that the defendant intended to crop the Property because he knew they were crop farmers.[160]
   4. Both the plaintiffs and the defendant expressly acknowledged in the Second Contract of Sale that the defendant intended to use the Property for a farming business.[161]
   5. The presence of Special Condition 7 of Annexure A of the Second Contract of Sale which grants the defendant access to the Property for the purpose of spraying and the eventual burning of the harvested areas.[162] It seems clear that the defendant had access to the Property to prepare it for farming operations, but not for tree farming operations.
   6. Special Condition 7 goes on to provide that 'The Parties shall liaise to ensure that spraying and harvesting operations can be done safely and without interference'.[163] Mr Atherton's evidence is that the defendant's preparation for cropping activities required them to spray using a 36-metre boom spray and to burn any green patches in the harvested areas. Spraying using a 36-metre boom spray would require the land to be clear of obstacles, such as trees.[164] Mr Atherton's evidence also explains why the parties would need to liaise to ensure that spraying (by the defendant) and harvesting (by the plaintiffs) would be done safely and without interference.
   7. Special Condition 11 of Annexure A of the Second Contract of Sale expressly provides that 'All pipes, pumps, troughs and tanks on the land as inspected by the Buyer' are to be included in the sale of the Property.
3. Allied to this issue is the defendant's assertions that they were not prepared to buy the Property unless the trees were removed so that they could conduct their small crop farming operations on the Property.[165] In fact, as far back as October 2023, during negotiations between the defendant and the plaintiffs, through their agent the defendant made it clear that there were trees on the Property that 'would need to be chained, pushed over' incurring additional costs to stump, grind and fertilise. The defendant was of the view that those matters ought to have an impact on the purchase price.[166] By return email, the plaintiffs' agent agreed that one of the issues the plaintiffs had to grapple with would be the cost to stump and fully clear 'over 600 hectares or 1482 acres' of the Property.[167]
4. On 3 February 2021, when the First Contact of Sale was signed, there were two special conditions in that first contract that are relevant to this issue, namely, Special Conditions 2 and 3. Special Condition 2 of the First Contract of Sale, dated 3 February 2021, provides that 'Settlement shall not take place prior to completion of the tree harvest'. In addition, Special Condition 3 of the First Contract of Sale provides that:

In the event harvest is not completed by 30 June 2021, the Buyers shall have the right to terminate this agreement, or to proceed with the settlement and receive a lease income of $100/acre per annum or part thereof for any unharvested trees.

1. On the evidence in front of me, I am satisfied, on a plain reading of the Second Contract of Sale dated 8 July 2021, alone, that the plaintiffs knew:

(a) that the defendant was intending to use the Property for farming small crops; and

(b) that the defendant required the trees to be removed from the Property.

1. My view is fortified by consideration of the circumstances external to the Second Contract of Sale, which I have also outlined above.
2. The Second Contract of Sale settled on 23 July 2021.[168] The sale price was $2.4 million. The sum of $1.8 million was payable by the defendant to the plaintiffs on settlement - and was, in fact, paid on settlement. At the time of settlement, $600,000 was held in trust in accordance with Special Condition 4.[169] However, the effect of a combination of Special Conditions 3 and 6 of Annexure A of the Second Contract of Sale was to allow the plaintiffs to continue to harvest blue gum trees until 31 March 2022 in exchange for the payment of rent calculated on 'an amount equal to $100/acre per annum plus GST for unharvested trees'. If there were any trees that had not been harvested by 31 March 2022, then the plaintiffs forfeited their right to harvest any remaining trees. This arrangement gave the plaintiffs the right or entitlement to harvest blue gum trees on the Property until 31 March 2022. The plaintiffs were incentivised to harvest blue gum trees in two ways:
   1. Special Condition 3 of Annexure A provides that reduced rent per acre will be payable by the plaintiffs to the defendant for 'any trees harvested between settlement and 31 December 2021'.
   2. Special Condition 4 of Annexure A provides for the payment of money ($120,000) to the plaintiffs from withheld monies ($600,000) 'for every full 50 hectares of harvest completed' by 31 March 2022. Remembering that the withheld monies were part of the sale price.
3. At the time the Second Contract of Sale settled on 23 July 2021, both parties acknowledged that approximately 252 hectares of land remained unharvested.[170] As at 1 April 2022, the parties agreed that 92.2 hectares of that 252 hectares of land had not been harvested by the plaintiffs, with the consequence that the defendant was able to retain $240,000 from the withheld monies. The dispute arises over the remaining 'in excess of 150 hectares' on the Property. In relation to the 'in excess of 150 hectares' on the Property, the parties agree that there is:

(a) 19.2 hectares where the plaintiffs' contractors used a hot saw to cut down trees and left trees in piles on the ground; and

(b) 140.6 hectares where the plaintiffs' contractors removed the merchantable or commercially viable blue gum trees which could be economically harvested and processed into forest products such as timber logs and woodchips. The plaintiffs left on the Property: unmerchantable trees, parts of trees, clusters of trees, single trees and any organic matter which was biomass that could not be economically harvested and processed into forest products.

1. The plaintiffs' claim that they have harvested 'in excess of 150 hectares' of blue gum trees and are to be paid $360,000 from the withheld monies (totalling $600,000). The plaintiffs' submission is that they have the right to select, cut and move trees that are merchantable and leave behind unmerchantable trees, including any trees that have been 'hot sawed' and left behind on the Property.
2. The defendant asserts that the plaintiffs have failed to harvest any of the 'in excess of 150 hectares' of blue gum trees and are not to be paid any of the withheld monies. The defendant submits that, on proper construction, the Special Conditions to the Second Contract of Sale:

(a) obliged the plaintiffs to cut down and remove all the blue gum trees on the farm; and

(b) entitled the plaintiffs to payment of $120,000 'for every 50 full hectares' of blue gum trees cut and removed; and the defendant was entitled to retain $120,000 'for every 50 hectares or part thereof of unharvested trees left by 31 March 2022'.

1. The dispute between the parties arises out of the proper construction of Special Condition 4 of Annexure A of the Second Contract of Sale which binds both parties.

Special Condition 4 of Annexure A of the Second Contract of Sale

The Parties agree that an amount of $600,000 of the purchase price will be retained in trust with the Buyer's lawyers which shall be released on the following basis:

• For every full 50 hectares of harvest completed, $120,000 of the funds would be released to the Sellers within 7 days of receipt of confirmation from the Seller's contractors and verification by the Buyers, which verification shall be done within 3 business [days] from receiving the notification by the Sellers and which verification shall not be unreasonably withheld [referred to as 'subpar 1']
• For every 50 hectares or part thereof of unharvested trees left by 31 March 2022, the [Buyers] shall be entitled to receive [$120,000] as compensation [referred to as 'subpar 2']
• For the avoidance of doubt, if a total of 110 hectares has been harvested by 31 March 2022, the Sellers will have received $250,000 and the Buyers will be paid $350,000.

1. I should add that all references to 'trees' to be harvested are references to blue gum trees, and not pine trees.[171]
2. The parties agree that 'full' hectares means whole or contiguous.[172]
3. The rights and obligations of the parties under Special Condition 4 of Annexure A of the Second Contract of Sale are to be determined objectively by reference to the contract alone being its text, context (the entire text of the contract as well as any contract, document or statutory provision referred to in the text of the contract) and purpose.[173] However, there are occasions where recourse to events, circumstances and things external to the contract are necessary to have regard to when determining the proper construction of a right or obligation under a contract.
4. Both parties agree that this is a commercial contract and both parties have commercial interests secured by the contract of sale. It is obvious on the face of the contract that, upon settlement, the plaintiffs would sell the Property to the defendant and receive consideration for it; and the defendant will acquire ownership of the Property. After settlement, the plaintiffs will have a right to continue to harvest as many blue gum trees as possible until 31 March 2022; and the defendant will have the right to access and undertake work on the Property consistent with its intended use as a farm. There are two mutually beneficial commercial objects to the Second Contract of Sale.
5. The plaintiffs have also submitted there was a speedy settlement for the Second Contract of Sale to allow the plaintiffs to continue to commercially work the Property. Of course, that is only half the picture. The speedy settlement of the Second Contract of Sale also expressly allowed for the defendant to work the Property as farming land, in preparation for the next farming season, whilst the plaintiffs were harvesting blue gum trees. As I have said, the Second Contract of Sale was for the mutual commercial benefit of both parties until 31 March 2022.

1. The parties have concentrated on the meaning of the word 'harvest' as opposed to 'harvest completed'. I will refer more to the latter phrase later.
2. 'Harvest' is not defined in the Second Contract of Sale, even though the words 'harvest', 'harvested' and 'unharvested' are mentioned 12 times in the Special Conditions in Annexure A of the Second Contract of Sale.
3. The plaintiffs' case is that to 'harvest' means 'to cut and remove trees from the Property for their commercial purposes'.[174] That is, Special Condition 4 should be given a commercial meaning[175] such that it gives the plaintiffs the right to select, cut and remove only those trees which they have identified as merchantable to them as at the time of selection, and to be paid by the defendant for them each time a selection was made across '50 full hectares' of the farm, and to leave behind the unmerchantable trees.[176] The plaintiffs' position is that they had a right to harvest trees of merchantable quality, not an obligation to do so.[177] In addition, the plaintiffs submit that they had a right to leave on the Property 'unmerchantable' trees, parts of trees, clusters of trees and any organic matter which was biomass that could not be economically harvested and processed into forest products.
4. The plaintiffs refer to the Macquarie Dictionary Online to assist in the definition of a number of words including:[178]
   • 'harvest', as a verb, is 'to gather, as a crop'
   • 'crop' includes: '1 the cultivated produce of the ground, as grain or fruit', while growing or when gathered; 2 the yield of such produce for a particular season; 3 the yield of some other product in a season; 4 a supply, produced'
   • 'cultivate' is 'to bestow labour upon (land) in raising crops; till; improve by husbandry'
   • 'yield', as a noun, includes: 'the action of yielding or producing; that which is yielded, the quantity or amount yielded'
   • 'yield', as a verb, means 'to give forth or produce by a natural process in return for cultivation, to produce or furnish as payment, profit or interest'.
5. I do note that these definitions do not expressly differentiate between 'merchantable' and 'unmerchantable' crops, nor do they impliedly differentiate on the basis of commercial value of a crop or crops. They speak of 'gathering as a crop' and similar concepts. So, whilst those definitions are of some limited assistance in a general way, they are not determinative of the meaning of 'harvest' in the context of the Second Contract of Sale.
6. More specifically, the plaintiffs have submitted that the word 'harvest' in Special Condition 4 upon its proper construction:[179]

2.2.1. means the cutting down of merchantable trees on the Property which can be economically harvested and processed into forest products such as timber logs and woodchips ('Forest Products');

2.2.2. did not include un-merchantable trees, parts of trees, clusters of trees and any organic matter which was biomass and which could not be economically harvested and processed into Forest Products;

2.2.3. the trees, parts of trees, clusters of trees and the biomass left on the Property, including the 19.2 hectares referred to in paragraph 5.3(b) of the defence, were not merchantable trees which could be economically harvested and processed into Forest Products.

1. The plaintiffs' submission identifies phrases and concepts such as 'merchantable trees', 'economically harvested', 'forest products', 'timber logs', 'woodchips', 'Forest Products', 'unmerchantable trees', 'parts of trees', 'clusters of trees', 'any organic matter', 'biomass' and 'not merchantable trees'. A perusal of the Second Contract of Sale reveals that none of these phrases and concepts appear in that Contract. All of these phrases and concepts are foreign to the Second Contract of Sale.
2. In fact, the Second Contract of Sale only refers to 'harvested' and 'unharvested' trees. There is no distinction to be drawn between 'merchantable' and 'unmerchantable' trees, nor is there any distinction to be drawn between whole trees and 'parts' of trees. There is no subset of tree identifiable in the Second Contract of Sale. The only distinction that is drawn between trees is between 'pine trees'[180] and 'blue gum trees'.[181]
3. The phrases and concepts to which the plaintiffs have referred derive from the Stumpage Royalty Agreement between the plaintiffs and Ents Forestry.[182] That is an agreement to which the plaintiffs are a party, but the defendant is not. It is also an agreement that is for a very different purpose. Further, it is an agreement that is not referred to in the Second Contract of Sale between the plaintiffs and the defendant and which was never given to the defendant. It is significant to note that the Agreement also specifically excludes Ents Forestry from harvesting any unmerchantable tree or cluster of trees. No such exclusion provision exists in the Second Contract of Sale between the plaintiffs and the defendant.
4. In my view, the plaintiffs' submission in this regard was an attempt to inject into the Second Contract of Sale concepts foreign to its text, context and purpose. I do not derive any assistance by reference to such concepts and phrases.
5. As I have said, the concepts of 'merchantable' and 'unmerchantable' are not mentioned anywhere in the Second Contract of Sale between the plaintiffs and the defendant. There is no distinction between trees based on their commercial value or whether they are whole trees or parts of trees.
6. It seems that in making this submission, the plaintiffs are inviting the court to imply into the Second Contract of Sale a distinction between 'merchantable' and 'unmerchantable' trees. In order for that submission to succeed, the plaintiffs must establish that such a distinction is to be implied into the Second Contract of Sale because:

(b) it is necessary to give business efficacy to the Second Contract of Sale;

(e) it does not contradict any express term of the Contract.

1. Application of the plaintiffs' construction to the terms of the Second Contract of Sale would give the plaintiffs the right to select, cut and remove only those trees which they have identified as merchantable (to them) and then to be paid by the defendant for each occasion a selection of merchantable trees is made across '50 full hectares' of the Property. On that construction, the plaintiffs could exercise their discretion to select one (or no) merchantable tree in each '50 full hectare' parcel, cut and remove this tree (or no trees) and still be able to assert that they have complied with the pre-condition for payment of $120,000 'for every full 50 hectares of harvest'. On that basis, the plaintiffs could, in effect, decide that all of the blue gum trees on the Property were unmerchantable and still claim the payment of $360,000.
2. In my view, Special Condition 4, in its plain meaning, distinguishes between when the parties' entitlements to the withheld monies are enlivened. The plaintiffs' entitlement is enlivened 'For every full 50 hectares of harvest completed', whereas the defendant's entitlement is enlivened 'For every 50 hectares or part thereof of unharvested trees'. Both are to be assessed as at 31 March 2022. The defendant has submitted that the entitlements are conditional in this manner, which confirms that the plaintiffs' obligation was to harvest all of the blue gum trees in each 50 hectare parcel in order to be entitled to any of the withheld monies; and failing that, the defendant was entitled to compensation. Were it otherwise, the condition would not need the word 'full' nor the phrase 'or part thereof'. I accept this submission as it allows Special Condition 4 to be read harmoniously in its entirety.
3. The plaintiffs' focus has been on the word 'harvest' alone. The relevant wording of Special Condition 4 is 'For every full 50 hectares of harvest completed' (emphasis added). The word 'completed', in my opinion, is a significant omission. Reading 'harvest' followed by the word 'completed' removes any ambiguity that has been asserted by the plaintiffs. The phrase 'For every full 50 hectares of harvest completed' can only mean one thing, which is that all trees (and not any subset of tree) are to be cut and removed for every full 50 hectares.
4. Additionally, subpar 2 of Special Condition 4, in its plain meaning, provides that the defendant is entitled to compensation if the plaintiffs fail to complete the harvest for every full 50 hectares. This subparagraph is only relevant to Special Condition 4 if the plaintiffs are required to harvest all trees for every full 50 hectares and not some subset of tree.
5. The defendant has submitted that the plaintiffs' construction would be inconsistent with the verification regime in Special Condition 4. The verification regime is that the defendant is to be satisfied of the plaintiffs' contractor's claim to have harvested a 'full 50 hectares' before the plaintiffs are entitled to any part of the withheld monies. That the defendant, and not the plaintiffs or some other person, was to be satisfied confirms that the plaintiffs' obligation was to cut down and remove blue gum trees for the benefit of the defendant as the purchaser and next user of the farm. I accept that submission.
6. Objectively, it is difficult to see how a businessperson could have understood the plaintiffs' construction as being the proper construction of Special Condition 4. In my view, implying a subcategory or subset of tree into the Second Contract of sale:

(a) would produce outcomes, to which I have referred, that are not reasonable or equitable, and which were not intended by the parties;

(b) would not give business efficacy to the Second Contract of Sale. The Second Contract of Sale is efficient without such an implied subcategory of tree;

(c) is not obvious such that it goes without saying. Rather, it is to the contrary. The most obvious construction is one that leaves the word 'tree' unadorned;

(d) does not give the Second Contact of Sale clear expression. The expression in the contract is already clear and unambiguous; and

(e) both contradicts and renders other express terms of the Second Contract of Sale useless.

1. In addition, the plaintiffs' construction of Special Condition 4, and specifically the definition to be attributed to the word 'harvest', produces outcomes that are only to the benefit of the plaintiffs and almost ignores entirely the interests of the defendant. Most concerningly, there is a real probability of depriving the defendant of their entitlement to compensation. As I have said, the clear intention of the parties was to advance the commercial interest of both parties. The plaintiffs' construction does not allow for this to occur.
2. For all of those reasons, I am not persuaded that a subcategory of tree is to be implied into Special Condition 4.

What is the proper construction of the Special Conditions?

1. In my opinion, the language that the parties used in the Second Contract of Sale is plain and, to my mind, unambiguous.
2. The plaintiffs, however, sought to find ambiguity in the Second Contract of Sale by taking the word 'harvest' in Special Condition 4, 'For every full 50 hectares of harvest completed', to mean 'For every full 50 hectares to cut and remove merchantable trees and leave behind unmerchantable trees'. What was submitted by the plaintiffs involved the insertion of implied terms that were foreign to the text, context and commercial objects of the Second Contract of Sale.
3. This is not a case of resolving ambiguity for, in my opinion, there is none. To accept the plaintiffs' submission would require a significant shift in the language chosen by the parties to express their intention.
4. The proper construction of Special Condition 4 is that the plaintiffs are to cut down and remove all trees on any full 50 hectares before their contractors can confirm with the buyer that 'full 50 hectares of harvest completed' has occurred.
5. However, if I am wrong about that, then I turn my mind to the meaning of Special Condition 4 in this commercial contract, by asking the necessary question as to what a reasonable businessperson in the position of the parties would have understood that special condition to mean. That enquiry requires consideration of the language used by the parties in the Second Contract of Sale, the circumstances addressed by the contract and the commercial purpose or objects to be secured by the contract. It is necessary to consider the whole of the contract, recognising that the meaning of any one part of it may be revealed by other parts and giving effect to all parts and every condition so as to render them all harmonious with one another.
6. The defendant's submission is that their construction of Special Condition 4:

(a) does not require any adornment of any of the words in Special Condition 4;

(b) does not require any subcategory of tree to be implied; and

(c) allows Special Condition 4 to operate in a way that allows subpars 1 and 2 to have work to do in all eventualities.

1. The defendant's submission is that their construction also accommodates the advancement of two mutually beneficial commercial objects (for the plaintiffs and the defendant) to be secured by contract. It gives business efficacy to the Second Contract of Sale, as well as producing reasonable and equitable outcomes. Most significantly, it sits harmoniously with the other conditions of the Second Contract of Sale.
2. Looking at the text of the Special Conditions, the words 'trees' and 'harvest' are unadorned. There has been no attempt made in the Second Contract of Sale to set some subset of tree that would apply to Special Condition 4. If the parties intended to create a subset of tree - which would be a significant change to the language of the Special Conditions - then that would have been included in the contract.
3. As I have said, on the evidence before me, I am satisfied, on the plain reading of the Second Contract of Sale alone, that the plaintiffs knew, at the time of signing the Second Contract of Sale:

(a) that the defendant was intending to use the Property for farming small crops; and

(b) that the defendant required the trees to be removed from the Property.

1. The commercial purpose or objects to be secured by the Second Contract of Sale, were as follows:

(a) the plaintiffs sold the Property for consideration;

(b) the defendant acquired ownership of the Property;

(c) the plaintiffs were entitled to remain on the Property and remove as many blue gum trees as possible up to and including 31 March 2022; and

(d) the defendant received rent from the plaintiffs whilst the plaintiffs had access to the Property and were also entitled to have access to the Property to spray and burn in preparation for farming.

1. In relation to (c) and (d) above, the mutual commercial benefits to both parties are obvious on the face of the Second Contract of Sale. In my view, it was the intention of the parties when they signed this Second Contract of Sale to ensure that both parties secured and enjoyed mutually commercial benefits.
2. The parties, in negotiating this Second Contract of Sale, no doubt had their respective interests to consider. The plaintiffs' interest was to sell the Property whilst having the opportunity to take timber from the Property in the hope of making some money from it. The defendant's interest was in buying the Property to utilise as farmland for producing small crops. The parties had, in negotiating this Second Contract of Sale, clearly intended to strike a balance in securing the interests of both parties. That is, they intended to create conditions in this Second Contract of Sale that secured mutually commercial benefits to both parties.
3. The plaintiffs' construction of Special Condition 4, particularly the meaning of 'trees' and 'harvest', does not allow for mutual commercial benefit to both parties. It simply allows for the commercial benefit of the plaintiffs and almost entirely ignores the commercial benefit to the defendant. In my view, this is contrary to the intention of the parties.
4. Looking at the text of Special Condition 4 objectively, the proper construction must allow the distinction between the parties' entitlements to the withheld monies to be meaningful. The plaintiffs' construction essentially denied the defendant compensation in almost all possible scenarios. In my view, that is contrary to the intention of the parties.
5. In light of these conclusions, and to give effect to the parties' intentions, the proper construction of Special Condition 4 is that there is to be no subcategory of tree to be implied into Special Condition 4, or indeed the entire contract. 'Harvest' means to cut and remove all trees.

1. The defendant's submission is that it must be implied that the plaintiffs' contractor's confirmation must be true and correct as to the fact that a full 50 hectares of harvest needs to be completed before the need for verification is enlivened.
2. When looking at the text, context and commercial objectives of the Second Contract of Sale, to imply the words 'true and correct' immediately before the word 'confirmation' is so obvious that it goes without saying. To imply anything other than 'true and correct' would be absurd. Further, I am also satisfied that 'true and correct' is to be implied into the Second Contract of Sale because:

(b) it is necessary to give business efficacy to the Second Contract of Sale;

(d) it does not contradict any express term of the Second Contract of Sale.

1. Put another way, the words 'true and correct' should have been included but were not.

1. If I am wrong in ascertaining the proper construction of Special Condition 4 by reference to the Second Contract of Sale itself, then I go on to consider the proper construction of the Special Conditions by recourse to events, circumstances and things extraneous to the contract.
2. It is significant to note that the Second Contract of Sale signed by both parties on or about 8 July 2021, was the second contract signed by both parties for the sale of the Property.
3. In my view, the surrounding circumstances that commence sometime in 2017, assist in informing the parties' states of mind and intentions leading up to the signing of the Second Contract of Sale on or about 8 July 2021.
4. On the evidence of Mr Catenacci, there is no doubt that, as far back as 2017, he knew about the significant volume of rehabilitation work that needed to be done on the Property, and the significant associated costs, before the Property would be fit for cropping. This was at a time when the possibility of a buyer for the Property did not eventuate, and the plaintiffs were considering the possibility of leasing the Property to a farmer. This rehabilitation work included grinding the stumps down, raking up the leaves and re-fertilising the land and would cost something in the order of approximately $1,000 per hectare. Thus, to rehabilitate the Property would have required an investment of about $600,000.
5. Then, on 23 October 2020, when the defendant was in negotiations to purchase the property from the plaintiffs, the defendant pointed out that only about 680 hectares of the Property was viable for agriculture. However, the presence of small trees growing on the Property which 'would need to be chained, pushed over' would incur additional costs to stump, grind and fertilise. The defendant suggested that those matters ought to impact on the purchase price. In response, the plaintiffs' agent said that the plaintiffs may have to grapple with the costs to stump and fully clear up 'over 600 hectares...' of the Property. The plaintiffs' agent suggested that 'full sourced out clearing cost at $1,000/ha = $600,000'.
6. That Special Condition 4 in the Second Contract of Sale concerns the deposit, retention and release of the amount of $600,000 is, in my opinion, no coincidence; with $600,000 being the amount of money that was estimated by the plaintiffs' agent likely to be needed to remediate the Property in readiness for a farmer to use the land.
7. On 3 February 2021, being the date of the signing of the First Contract of Sale between the plaintiffs and the defendant, the First Contract of Sale expressly stipulated that settlement of the contract would not take place prior to the completion of the tree harvest. Mr Catenacci's evidence is that the plaintiffs also had an interest in the blue gum trees as they were valuable to the plaintiffs. It is interesting to note that there was no condition in the First Contract of Sale similar to Special Condition 4 in the Second Contract of Sale. Similarly, there was no subset of tree in the First Contract of Sale.
8. Not long after 3 February 2021, the plaintiffs started to experience difficulties in having the blue gum trees harvested by Ents Forestry. Those difficulties started as the result of adverse weather conditions halting harvesting of the trees. Those difficulties in harvesting the trees continued through to late May 2021. Notwithstanding those difficulties, Mr Catenacci reiterated the plaintiffs' objectives were 'to have all the trees removed...' and Mr Catenacci told his agent that he was happy for the buyer to place some funds into a trust on their behalf as a surety that the plaintiffs would remove the trees.
9. Harvesting of the blue gum trees had not been completed by 30 June 2021. On 8 July 2021, the First Contract of Sale was terminated because harvesting of the trees had not been completed.
10. On 8 July 2021, the Second Contract of Sale was signed by both parties which included Special Conditions relating to the harvesting of trees and the retention of $600,000, with Special Condition 4 to govern the deposit, retention and release of those retained funds.
11. On 25 February 2022, the defendant, by email correspondence to the plaintiffs, complained about the harvesters leaving single trees behind which would be a major issue for the defendant. The defendant asserted that he expected a 50 hectare lot to be done in one piece not broken by patches of unharvested trees.
12. On 28 February 2022, by way of email, the plaintiffs acknowledged the defendant's desire to clear the land as soon as possible so they could plant their crop. The plaintiffs said they were also keen to clear the trees so that they could be paid the balance of the sale price of the land. In my view, this captures the intention of the parties as it existed at the time both contracts of sale were entered into, and it remained the intention of the parties throughout the time up to 31 March 2022.
13. On 17 March 2022, the plaintiffs, in an email to Mr Wright, instructed Mr Wright to continue harvesting until all timber was off the Property. The plaintiffs went on to suggest that leaving the timber standing would mean that the defendant would have a case for claiming that the plaintiffs did not fulfil their part of the contract. The plaintiffs said that they would need to know how many completely cleared hectares of land had been cleared by 31 March.
14. Mr Catenacci's evidence in this court is that he had instructed Mr Wright to cut down the non-commercial trees so that the plaintiffs could tell the defendant that they did harvest the trees as required by the contract. Mr Catenacci was of the view that he only needed to cut down the trees and it was up to the defendant to clear the land.
15. On 21 March 2022, the plaintiffs, by way of email, told the defendant that they wanted to do the right thing and clear the land as best and as quickly as possible for the defendant. The plaintiffs reported to the defendant that they would not be able to harvest all of the timber by 31 March.
16. Looking at the lead up to the signing of the Second Contract of Sale, there can be no doubt that the plaintiffs appreciated the importance of having all of the trees harvested from the Property. After all, the basis of the termination of the First Contract of Sale was the plaintiffs' failure to have the trees harvested from the Property, whilst harvesting the trees from the Property also had commercial value to the plaintiffs. There is also no doubt that the plaintiffs knew that the cost of rehabilitating the land for farming purposes was estimated to be approximately $600,000. So, it is no coincidence that $600,000 was the amount of money to be withheld from the plaintiffs as deferred conditional consideration to secure the performance by the plaintiffs of the Special Conditions of the Second Contract of Sale.
17. Yet, after the Second Contract of Sale was signed on or about 8 July 2021 and settled on 23 July 2021, harvesting of trees on the Property did not commence until the end of October 2021. From that time, the plaintiffs were unable to get on top of harvesting the trees at the Property.
18. By early January 2022, Mr Wright from Ents Forestry began expressing some doubts about their ability to harvest the trees by 31 March 2022. It was as early as 5 January 2022, that Mr Wright started to communicate thoughts of altering the harvesting strategy as he felt that time was running out. On 28 February 2022, the plaintiffs explained that the harvesting was dragging out for a variety of circumstances beyond their control and that they had been unable to complete the harvest by end of December 2021. Then on 28 February 2022, the plaintiffs told the defendant that it was likely to be uneconomical to continue to harvest the trees after the end of March 2022 and put forward a variety of proposals to minimise any loss of money. They also said that they had told their harvesting contractors not to leave any more trees behind.
19. On 3 March 2022, the defendant, by way of email to the plaintiffs, again pointed out the unharvested single trees spread throughout the property such that there were no single hectares that had been fully harvested. The defendant reminded the plaintiffs that they knew, at the time of the Second Contract of Sale, that the defendant intended to crop the Property in the 2021/2022 season and needed to prepare the Property prior to March. On 5 March 2022, the plaintiffs advised the defendant, by email, that a float saw would be coming onto the property to cut down any timber that was not commercial to harvest, including all of the clumps of trees currently left behind. The plaintiffs told the defendant that all of the timber would be cut down by 31 March 2022. The plaintiffs told the defendant that they would not be in a position to plant crops in 2022.
20. On 17 March 2022, the plaintiffs sent an email to Mr Wright telling him that he needed to continue harvesting until all timber was off the Property. The plaintiffs acknowledged to Mr Wright that it was not possible to remove all the trees by 31 March and that they must mitigate as much damage caused to the defendant as possible. As at 31 March 2022, photographs and drone footage taken by Mr Wright reveal that trees had been removed and trees had been left standing, randomly, around the Property.
21. When one looks at the conduct of the parties, particularly the plaintiffs, in my view, the plaintiffs always intended to remove all of the trees from the Property. The plaintiffs knew that harvesting all of the trees from the Property was important to the defendant's intended use of the Property. However, as time went on, the plaintiffs realised that they were running out of time to harvest all of the trees. Particularly by early January 2022, there was an identifiable shift in the plaintiffs' strategy in terms of harvesting the trees. It seems that the plaintiffs' decisions in relation to harvesting the trees became a financial one. That is, the plaintiffs made decisions that were driven by commercial returns, or more relevantly, diminishing returns, on the harvesting of the trees.
22. Finally, the $600,000 making up the withheld monies was money that was part of the sale price. In my view, there can be no doubt that the plaintiffs knew that the deferred payment of those monies was security for them to 'stump and fully clear' the Property, or in the words of the Second Contract of Sale, to 'harvest'.
23. In my view, there is nothing in the matters external to the contract itself that would cause me to arrive at a different conclusion than when looking at the Second Contract of Sale alone. In fact, matters external to the contract confirm my previously stated view.

1. I have determined that the proper construction of subpar 1 of Special Condition 4, Annexure A of the Second Contract of Sale is that the plaintiffs are to harvest all trees on any full (or whole or contiguous) 50 hectares of the Property before they are entitled to any of the withheld monies; 'harvest' meaning 'to cut down and remove all blue gum trees' from the Property. If the plaintiffs do not do that, then subpar 2 has work to do and provides for the entitlement of the defendant to compensation 'for every 50 hectares or part thereof of unharvested trees' to be paid out of the withheld monies.
2. I have also determined that 'hot sawing' - that is, cutting down the trees and leaving them on the Property - by its very nature, does not amount to harvesting the trees.
3. On the evidence in front of me, there are no full, that is contiguous or whole - 50 hectares of the Property which have been harvested, that is, all trees cut and removed from the Property, that would justify the plaintiffs' contractor providing a true and correct confirmation to the defendant that harvesting had occurred. As a consequence, the defendant has not unreasonably withheld verification.
4. Accordingly, the plaintiffs have failed to prove, on the balance of probabilities, that the defendant was in breach of the terms of the Second Contract of Sale by unreasonably withholding verification referred to in Special Condition 4 of Annexure A. Accordingly, the plaintiffs' claim fails.

1. I find in favour of the defendant.
2. Accordingly, I order that the $600,000 held in trust be released to the defendant.
3. I order the plaintiffs pay the defendant's costs.

I certify that the preceding paragraph(s) comprise the reasons for decision of the District Court of Western Australia.

[2] Amended Statement of Claim dated 28 December 2022, pars 3.3 and 4.3; Reply dated 3 July 2023 (Further Amended Defence and Counterclaim), pars 2 and 4.

[3] Second Contract of Sale, Annexure A, Special Condition 4.

[4] Second Contract of Sale, Annexure A, Special Condition 2.

[5] Second Contract of Sale, Annexure A, Special Conditions 3 and 6.

[6] Second Contract of Sale, Annexure A, Special Condition 6.

[7] Plaintiffs' Outline of Opening Submissions dated 5 September 2023, pars 8, 28 - 55 (particularly par 52).

[8] Defendant's Outline of Opening Submissions dated 21 September 2023, pars 21 - 35.

[28] ts 37 (Mr Catenacci); ts 100 (Mr Wright).

[30] ts 98 (Mr Wright); Exhibit P17, formerly MFI1.

[38] Exhibit D1, Definitions and Interpretations.

[42] Exhibit D1, Introduction B; Definitions and Interpretations 'Harvest'.

[43] Exhibit D1, Introduction B; Definitions and Interpretation 'Harvest'; cl 4.1(b).

[46] Exhibit D1, cl 2.1; sch 1 cl 3 and cl 4.

[47] Exhibit D1, cl 10.4; Definition and Interpretation 'Unmerchantable'.

[68] ts 141 - ts 142, ts 161 (Mr Atherton).

[87] Amended State of Claim dated 28 December 2022, par 4.1; Further Amended Defence and Counterclaim dated 3 July 2023, par 4.

[88] Amended Statement of Claim dated 28 December 2022, pars 3.3 and 4.3; Reply dated 3 July 2023 (Further Amended Defence and Counterclaim), pars 2 and 4.

[94] Exhibit P18 (MFI 2); ts 102 (Mr Wright).

[105] ts 154 - ts 155 (Mr Atherton); Exhibit P14.

[129] ts 112 - ts 120 (Mr Wright); Exhibit P20, Photographs 1, 2, 6, 13 (in part), 14 (in part).

[130] ts 112 - ts 120 (Mr Wright); Exhibit P20, Photographs 3, 8, 9, 10, 13 (in part), 14 (in part).

[131] ts 112 - ts 120 (Mr Wright); Exhibit P20, Photograph 5.

[132] ts 112 - ts 120 (Mr Wright); Exhibit P20, Photograph 12.

[147] Australian Broadcasting Commission v Australasian Performing Right Association Ltd [1973] HCA 36; (1973) 129 CLR 99, 109 (Gibbs J).

[148] Cherry v Steele-Park [2017] NSWCA 295; (2017) 96 NSWLR 548 [72] (Leeming JA, Gleeson & White JJA agreeing).

[149] Mount Bruce Mining Pty Ltd v Wright Prospecting Pty Ltd [2015] HCA 37; (2015) 104 CLR 104, 116 (Mount Bruce Mining).

[150] XL Insurance Co SE v BNY Trust Company of Australia Ltd [2019] NSWCA 215.

[151] H Lunbeck A/S v Sandoz Pty Ltd [2022] HCA 4.

[152] Locke v Dunlop [1888] UKLawRpCh 140; (1888) 39 Ch D 387, 393.

[153] Bottomley's Case [1880] UKLawRpCh 258; (1880) 16 Ch D 681, 686.

[154] Hillas & Co Ltd v Arcos Ltd [1932] UKHL 2; (1932) 147 LT 503, 514; [1932] UKHL 2; [1932] All ER Rep 494.

[155] See: Upper Hunter County District Council v Australian Chilling and Freezing Co Ltd [1968] HCA 8; (1968) 118 CLR 429, 437.

[156] Birla Nifty Pty Ltd v International Mining Industry Underwriters Pty Ltd [2014] WASCA 180 [51] (McLure P, with whom Buss & Newnes JJ agreed).

[157] Second Contract of Sale dated 8 July 2021, Special Condition (d) of Annexure B.

[161] Exhibit P4, Annexure B, Special Condition (d).

[162] Exhibit P4, Annexure A, Special Condition 7.

[163] Exhibit P4, Annexure A, Special Condition 7.

[168] Amended State of Claim dated 28 December 2022, par 4.1; Further Amended Defence and Counterclaim dated 3 July 2023, par 4.

[170] Contract of Sale dated 8 July 2021, Special Condition 2 of Annexure A.

[171] Exhibit P4, Annexure A, Special Condition 12.

[172] Plaintiffs' Outline of Opening Submissions dated 5 September 2023, par 53; Defendant's closing submissions, ts 134 - ts 135.

[174] Plaintiff's Outline of Opening Submissions dated 5 September 2023, par 8.

[175] Plaintiff's opening address, ts 7.

[176] Plaintiff's opening address, ts 7 - ts 8.

[177] Plaintiff's closing address, ts 199.

[178] Plaintiff's Outline of Opening Submissions dated 5 September 2023, pars 3 - 36.

[179] Further Amended Reply and Defence to Counterclaim dated 10 July 2023, par 2.2.

[180] Exhibit P4, Annexure A, Special Condition 5.

[181] Exhibit P4, Annexure A, Special Condition 12.