Brad Teal Pty Ltd v EVR Group Pty Ltd [2024] VCC 485

"[the whole agreement clause] excludes what is extraneous to the written contract: but it does not in terms exclude implications arising on a fair construction of the agreement itself, and in the absence of definite exclusion, an implication is as much a part of a contract as any term couched in express words."[17]

1. Brad Teal contends that the above statement by O'Connor J was recently endorsed Edelman and Steward JJ in Hardingham[18] where their Honours further said:

"A basic source of confusion in terminology and in thought can be seen in the common statement that implied terms are terms that are "implied into" a written contract. Implied terms are not "implied into" a contract at all: they already exist in the contract. Implied terms are therefore recognised by the court, not created by the court."

1. Brad Teal concludes that, in special condition 5.1 of the Contracts, the terms "embodied herein" accordingly include the implied terms. If the clause was to defeat implied terms, it would have to expressly do so.
2. Brad Teal submits that the "no representation" part of special condition 5.1 of the Contracts is a question of interpretation. As this is an exclusion or limitation clause, in the case of ambiguity, it contends that the contra proferentem rule applies.
3. Brad Teal observes that the clause as to the exclusion of warranty regarding compliance with building regulations, states: "the Purchaser shall not be entitled in any way to rely on any representation or warranty made or claimed to have been made by the Vendor or on the Vendor's behalf [...] that any structures comply with the current or any building regulations [...]". It contends that the use of the present tense "comply" shows that the clause is directed at structures which exist on the land as at the date of the contract, not structures which are to be constructed at a later time. It says that this is consistent with the context of the clause, in particular that it follows clause 4 of the Contracts, which contains an acknowledgement that the purchaser has inspected the property and chattels and agrees to purchase the property in its "present condition and state of repair and with any defects existing at the date hereof" (emphasis added). Brad Teal argues that if the clause is ambiguous, the ambiguity is to be construed against the EVR Group.
4. As to fitness for purpose, Brad Teal notes that the precise wording of the clause is "the Purchaser shall not be entitled in any way to rely on any representation or warranty made or claimed to have been made by the Vendor or on the Vendor's behalf as to the fitness for any particular purpose or otherwise of the property". Brad Teal acknowledges that this does not contain the same temporal language, given the context and contra proferentem, and argues that the clause should be interpreted to refer only to the condition of the property as at the time of execution.

1. EVR Group submits that the parties executed two Contracts. It contends that Brad Teal agreed to purchase two commercial lots, as proposed in a proposed planning permit, and to settle upon the registration of the plan of subdivision. EVR Group states that this involved the Lots being built to what the parties are calling "shell" stage (meaning no fit-out works would occur).
2. EVR Group notes that the approved planning permit drawings were annexed to the 102A Contract and the architectural drawings and building permits were yet to come.
3. EVR Group relies on the statutory warnings contained in s9AA of the Sale of Land Act 1962 (Vic) and special conditions 5.1 (entire agreement clause) and 4.1 (no liability or obligation to carry out repairs clause) of the Contracts. It says that Brad Teal declined to negotiate additional terms to those offered in the Contracts, such as the right to "veto" EVR Group's chosen builder or that EVR Group warranted the builder's workmanship.
4. EVR Group submits that the Contracts were lengthy and detailed and the 102A Contract annexed the planning permit drawings. It comprised of 146 pages, that included 3 pages of particulars, 6 pages of special conditions, 1 page of further special conditions, 6 pages of general conditions and 130 pages of a vendor's statement which include the original contract of sale between EVR Group and the past owner together with planning permits. EVR Group contends that the Contracts are not "informal agreements" or Contracts where the parties have not attempted to reduce their agreement to writing.
5. EVR Group submits that the fact that the Contracts were for the sale of a "shell" does not mean that they were incomplete or require implication of terms because the word "shell" does not appear. EVR Group contends that in the absence of fit-out specification, it is clear what the parties agreed.
6. EVR Group concedes that the Contracts do not contain the word "shell" and the evidence before the Court does not show that the parties used the term "shell" prior to signing the Contracts.
7. EVR Group submits that the word "shell" accurately describes what the Contracts contained. That is, no fit-out specification. The registration of the plan of subdivision did not require fit-out and no fit-out obligation was agreed between the parties.
8. The issue becomes, what was required to complete the two Lots to "shell"?

1. EVR Group observes that Brad Teal seeks to imply a term into the Contracts that 'the Lots would be fit for use as a retail shop "shell", meaning that they would be ready for immediate commencement of fit-out works upon settlement and the pleaded case asserts that this term is:

(a) oral (based on the alleged statements by Mr Romero that "you'll get what you want here" or "I won't let you down");

(b) alternatively, "implied by law" (no particulars given);

(c) alternatively, "implied in fact" (either based on Hawkins[19] or BP Refinery[20], based on the argument that the Contracts do not expressly include the statement that "the lots were to be completed to the standard of retail shells"); or

(d) alternatively, "implied by a course of dealings", being the same dealings said to arise on the oral component.

1. EVR Group submits that the facts relied on by Brad Teal are minimal, and do not evidence that the parties' minds met on a term concerning "fitness for purpose": at most, the evidence shows that Mr Teal made Mr Romero aware he would use the Lots as an office. EVR Group says that that fact alone does not mean much, nor does the fact that the lots were being built "off-the-plan."
2. EVR Group contends that while Brad Teal relies on the use of the word "shell", it is of no real significance as "shell" is not a "magical legal phrase". Rather, it turns on the absence of what Mr Teal said it was agreed to mean.
3. EVR Group argues that the first implied term is unnecessary to effect a conveyance of the Lots following subdivision, or to give business efficacy to the Contracts, nor is it so obvious that it went without saying.
4. EVR Group says that Brad Teal's dissatisfaction with the quality of the Lots does not, as argued, mean it has not received the benefit of the transaction. Further, it claims that Brad Teal's arguments as to "caveat emptor" are misconceived: Mr Teal could have asked for the first implied term, but he did not.

Second implied term - compliant with legislation and building permit

1. EVR Group refers to the pleaded case for the second implied term where it is asserted by Brad Teal that this term was "implied in fact" (either based on Hawkins[21] or BP Refinery[22], on the argument the Contracts do not state "specifications of the Lots or building to be constructed").
2. EVR Group submits that Brad Teal does not identify the evidence by which it contends the parties' bargain was agreed (expressly or by inference) to include such a term, being an effective warranty by EVR Group of the third-party builder's work, for details yet to be determined, nor how such terms would satisfy the BP Refinery criteria.
3. EVR Group concludes that, being a conveyancing contract, which has been effective, compliance with legislation and a building permit is not a necessary term.

Third implied term - workmanlike standard and proper materials

1. EVR Group refers to the pleaded case for the third implied term, where it is asserted by Brad Teal that "the Lots built of proper materials and to a workmanlike standard" is an alleged term "implied by law" (no particulars given), or alternatively, "implied in fact" (either based on Hawkins[23] or BP Refinery[24], based on the argument that the Contracts do not state "the standard to which the Lots or building would be constructed").
2. EVR Group submits that Brad Teal's closing submissions conflate the legal and factual argument.
3. EVR Group contends that the Contracts are not contracts of a "certain class" by which terms are implied as legal incident of contracts being in that class (unrelated to the parties' intentions), such as the home building contracts mentioned in Cassel[25] (which Brad Teal relies on). EVR Group argues that, in seeking to make this argument, the Court is being asked by Brad Teal to take the significant step of recognising implied terms (by law) in all commercial off-the-plan real estate contracts.
4. EVR Group submits that Courts only recognise such terms if there is a concern (by the Court) that without the implication, "the enjoyment of the rights conferred by the contract would or could be rendered nugatory, worthless, or perhaps, be seriously undermined," raising a more general policy question of "necessity".[26] EVR Group says that putting aside that Brad Teal does not plead that this term should be recognised in all "off-the-plan" contracts of sale, simply pleading that a term is implied in law is not enough to properly raise a novel term in an entire class of contract, given its potential impact beyond the present case. Nor, it contends, is this case a suitable vehicle for that discussion.
5. EVR Group concludes that the contracts are off-the-plan commercial contracts of sale, not a building contract. Therefore, the factual argument for inferring or implying such a term is weak, as there is no evidence that it was agreed, nor that its implication is necessary to ensure the conveyance.

1. Brad Teal relies on the principles set out Hawkins[27] and contends that the question is not of form, but of substance. Brad Teal submits that, having regard to the substance of the contracts, it is abundantly clear that the parties agreed on two things:

(a) Firstly, they agreed on the sale of an identified plot of land by reference to a proposed plan of subdivision subject to the registration of that plan of subdivision, which, Brad Teal concedes is very well documented; and

(b) Secondly, that prior to completion, EVR Group would construct or cause to be constructed a commercial premises to the state of completion of a "shell".

1. Brad Teal argues that EVR Group admits in its defence that each Lot would be constructed as a shell, with further work to be performed by the defendant at its own discretion. However, Brad Teal submits that the state of completion is not a term contemplated in the Contracts. It says that the only reference to that agreement is the fact that only the 102A contract attaches a bundle of town planning plans. I do not accept Brad Teal's argument that this shows that the contracts are incomplete on its face, as attached in one of the contracts are drawings with no explanation as to what relevance they have to the bargain, or any terms associated with them.
2. I further do not accept Brad Teal's submission that the content of EVR Group to construct a premises to the state of a shell is necessary to "put meat on the bones". It contends that the bare words do not do enough to explain what EVR Group was selling to Brad Teal because a "shell" could mean "anything at all". Brad Teal acknowledged that the proposition for the word "shell" means four walls, a floor, a ceiling, and services connected. However, it says the characteristics of those things are not prescribed.
3. I accept EVR Group's contention that, although it admitted that each Lot would be constructed to a "shell" with further work to be performed by Brad Teal at its own discretion, it did not make any concession in its defence as to the implied terms.
4. Whist the parties' pleadings agreed that the Lots would be constructed as a "shell", I accept EVR Group's submissions that it is a matter of useful language and that reference to the definition of "shell" as set out in the Fenwick Elliot LLP Dictionary Reference distracts from the examination of the evidence of this particular case.
5. Although the word "shell" appears in Mr Teal's witness statement, cross-examination to develop the significance of the word did not occur. It is noted that the term "Shell only" was used by Mr Romero in an email to Andrew Nadinic and was also included in the Building Contract. However, Mr Romero was not cross-examined on this point, or the other contents of those emails, as to suggest what the term "Shell only" meant.
6. In my view, there is no submission made by Brad Teal that the Lots were not conveyed in accordance with the general markings on the plan of subdivision. I find that the drawings attached to the 102A contract show the layout of the planning permission and identified the land by reference to the attached plans for the purpose of the particulars of sale the description of the land pursuant to General Condition ("GC") 3 and 9 of the contracts. The registration of the plan of subdivision was effected by the Registrar of Titles under Part under Part 4 of the Subdivision Act 1998 (Vic), following certification by Council under Part 2 of that Act, following the issuance of a statement of compliance under sub-sections 20A(2)-(3) and 21. Brad Teal does not contend that the Lots as-built do not comply with configuration in the drawings in the 102A contract.
7. In my view, Brad Teal's observation that practical completion was not certified until some three months after the plan of subdivision was- granted, is not to the point. The contracts provided that, on registration of a plan of subdivision, the Lots would be conveyed to Brad Teal. Lots must (as a matter of practical reality) come into existence to trigger settlement. I, therefore, do not accept Brad Teal's submissions that the drawings were mere loose attachments to the 102A contract. The drawings were attached for a reason and that reason is specified in the contract. Because the plan of subdivision had not been lodged and there was no certificate of title in existence for the Lot at the time of the signing of the contracts, the identification of what was being sold was by reference to the plans attached to the schedule of the contracts. There is nothing to be gained in the criticism of the lack of clarity in the drawings and that they could not be used by a builder to construct. That was not their purpose. These drawings were for planning permission only.
8. I agree with EVR Group that, given the contracts contained no fit-out specification, the term "shell" accurately describes this as a matter of ordinary language. It is not necessary to include the term "shell" into the contracts as they already provide for an absence of fit out specification. The vendor had the discretion on how the building contract would be executed, including the choice of the builder. The discretion was left to the vendor to decide what comprises a "shell" for the purposes of the present contracts. Brad Teal conceded that there is nothing wrong with some discretion to the builder.
9. I further agree with EVR Group the absence of details as to what the fit‑out works contained is not solved by an implication of terms into the contracts' details. It does not mean that more detail necessarily is needed for the contracts to be effective. The conveyance of the Lots was effective, and it was effective in conveying what was contracted between the parties.

Oral term, alternatively, implied by a course of dealings

1. First, Brad Teal contends that the "fit for purpose" term is oral. It also relies on the same conversations in support of its assertion that the term is implied by a course of dealing.
2. A course of dealing occurs when the contract at issue between the parties is preceded by a series of transactions over time, and that such a course of dealing may have the effect of incorporating or implying terms into the contract.[28] The course of dealing must be consistent and sufficiently long.[29] To rely on a course of dealing as incorporating terms , a party also does not need to show the other party had actual knowledge of terms.[30] If there is inconsistency in dealings, the Court may conclude there is no relevant course of dealing to give rise to an implied term.[31]
3. Further, in Carter on Contracts at [10-180], it is stated:

"A course of dealing occurs when the contracts between the parties is preceded by a series of transactions over time. Such a course of dealing may have the effect of incorporating terms into a contract. 1. For example, an oral contract may contain implied terms incorporated by the course of dealings. 2. The two requirements are:

(2) Conduct sufficient to justify, from an objective perspective, that the terms are to govern the contract."[32]

1. The leading English case (cited authoritatively in Hays Personnel Services (Australia) Pty Ltd v Motorline Pty Ltd[33] and La Rosa v Nudrill Pty Ltd[34]) of Harry Kendall and Sons v William Lillico and Sons Ltd[35], involved parties having numerous contractual dealings over a period of time, with each dealing effected by separate contracts. In such circumstances, it may be concluded that the terms stated in the documents should be incorporated into the parties' contracts.
2. Relevantly, in Barrymores v Harris Scarfe Ltd, Roberts-Smith J held:

"Contractual terms may be inferred from the business relationships of parties of their dealings raise the reasonable expectation that terms imposed on previous occasions will form part of the contract on a subsequent occasion. For that to be done four requirements need to be satisfied:

(1) the terms previously used must be identifiable (usually be reference to contractual documents);

(2) those previous occasions must be sufficiently numerous and frequent;

(3) the conduct must be consistent enough to constitute a regular course of dealing; and

(4) which raises the reasonable expectation that the same terms should be included in the subsequent contract."[36]

1. Brad Teal submits that the oral terms as contained in conversations between Mr Romero, as the agent for EVR Group, and Mr Teal during the period 16 November 2017 and 6 December 2017. Brad Teal contends that some, or all, of these conversations were in the presence of Mr Lynch. Mr Teal says that during these conversations, he said he wanted to purchase two retail shells that he could fit out on settlement. Mr Teal claims that Mr Romero said at various times, words to the effect "you'll get what you want here" and "I won't let you down".
2. In paragraph 20 of his witness statement, Mr Teal says that throughout the project, Mr Romero frequently said to him words to the effect "you're a local, I'll look after you". Mr Romero on the other hand says in his witness statement at paragraph 43, that he did not know Mr Teal and would never have "buttered him up" with those words. Given my anterior findings in relation to the witnesses, I prefer the evidence of Mr Romero.
3. Mr Lynch recalled there were some conversations either between Mr Teal, Mr Romero and himself where it was discussed that the ground floor tenancies would be finished to the level of a "shell". These conversations occurred post auction at Mr Teal's office. Mr Lynch said that there were no other discussions about the specifications for the build, other than it was just a "shell", and the rate per square meter that was to form the price.
4. In my view, there is no supporting evidence before the Court proving that the parties agreed to an oral term that the Lots would be fit for use as a retail shop "shell". This is at the highest said to arise from two alleged statements made by Mr Romero that "you'll get what you want here" or "I won't let you down". Even if I accepted that these statements had been made by Mr Romero, I do not accept that they evidence an agreement between the parties that the Lots would be "fit for use" as alleged by Brad Teal.
5. The evidence does not identify an offer made by Mr Romero to Mr Teal that has been accepted. The two alleged statements do not demonstrate a clear willingness by Mr Romero to be bound to a promise that the Lots would be "fit for use" as a retail shop "shell". For the same reason, I do not accept that there was an oral term that EVR Group would construct the works to a particular state of a "shell", as propounded by Brad Teal.
6. I further accept EVR Group's position that there is no evidence in support of the proposition that the "essence" of the transaction, or the "mutual understanding", in the sense that there exists outward evidence of the parties' intention that if the purchaser was not satisfied the premises was ready for fit-out, it could sue the vendor for damages or specific performance, as distinct from failing to settle.
7. Mr Teal did not give evidence that Mr Romero promised him anything in the nature of the contended terms, nor did Mr Teal ask for them. He did not identify anything in the parties' common knowledge that would validate that belief. Instead, Mr Teal only said that he "didn't need" to ask, as he "believed [Mr Teal] would be looked after by the law". He did not identify any specific statement or dealing that led him to that belief.
8. The parties had some "pre-contract" meetings before the contracts were presented and signed. However, I find that Mr Teal did not raise the contended "fit for use" term during those discussions.
9. Further, Mr Teal conceded in cross-examination:

(a) that he did not request - and did not consider necessary that he had to request - from Mr Romero specific terms in the nature of the contended terms;

(b) that he did not request time to review the Contracts, before signing, so as to identify if he wanted additional terms or assert a right (whether or not he had such a right) to end the contract in the days after signing;

(c) that he made a "conscious decision" not to send the contract to his solicitor for review, noting that Mr Teal's witness statement says he did not consider it necessary (without explaining the basis upon this belief); and

(d) he did not feel the need to do any of the above because Mr Teal had always thought that the law would "take care of him".

1. Nor, was any evidence led that Mr Teal had said anything, orally or in writing, to Mr Romero (or anyone on his behalf) before signing the Contracts, that would have suggested to Mr Romero that the Mr Teal believed the parties were agreed that the vendor-developer would be liable for the third-party builder's workmanship.
2. Further, Brad Teal contended that the evidence of the parties is that there was an understanding that the building was to be used for the purpose of being fitted out for Brad Teal's business and used as a commercial premises. Mr Lynch's evidence was that he did not recall Mr Teal telling him specifically why he was buying the ground floor tenancies. He assumed it was for Mr Teal's office for his business. Mr Romero also gave evidence that it was his understanding that Mr Teal was interested in the ground floor tenancies for his Brad Teal Real Estate Office.
3. I find that Brad Teal mentioning he would be fitting out the Lots for an office, or alleging that Mr Romero had an understanding that the ground floor tenancies would be used for Mr Teal's office, does not lead to the implication that any specific promises were made by EVR Group (as contended for by Brad Teal).
4. For the above reasons, I find that Mr Teal failed to negotiate an express oral term as alleged. In my view, the present Contracts do not expressly warrant the condition of the Lots. It was open to Brad Teal to negotiate the "fit for use" term and require that EVR Group warrant the property condition. It did not. If Brad Teal wished to get such a warranty from EVR Group, it must have been prepared to pay the price which attaches to such a warranty. Brad Teal took on the unfinished Lots without a warranty that it would be fit for purpose. He took the Lots at his own risk.
5. Similarly, the evidence set out above does not disclose a course of dealings between the parties that is preceded by a series of transactions over time in a Hays Personnel[37] sense. There is one transaction and vague discussions between the parties following the auction. It therefore cannot be concluded that the fit for purpose term can be incorporated into the contract on this ground.
6. Instead, Brad Teal's case, at its highest, seems to be that such a term must be inferred from the simple fact that the contracts were off-the-plan, and all purchasers in those scenarios require "protection" as a matter of common sense as per the "unfinished houses" authorities set out in further detail below.

1. In the alternative, Brad Teal contends that the "fit for use" term was implied "in fact". Terms implied "in fact" apply only to that particular contract, to fill a gap, implied by the terms and circumstances, by what the parties have said and done rather than being imposed by the Court.
2. The conditions for implying a term into a contract "in fact" is set out by the Privy Council in BP Refinery[38] and relied upon by Mason J in Codelfa Construction Pty Ltd v State Railway Authority (NSW)[39] as follows:

(a) the term must be reasonable and equitable;

(b) the term must be necessary to give business efficacy to the contract, so that no term will be implied if the contract is effective without it;

(c) the term must be so obvious that 'it goes without saying';

(d) the term must be capable of clear expression; and

(e) the term must not contradict any express term of the contract.

1. In adopting the BP Refinery test, Mason J stated:

"[t]hat courts are slow to imply a term" and observed that "the more detailed and comprehensive the contract the less ground there is for supposing that the parties have failed to address their minds to the question at issue".[40]

1. The BP Refinery test was considered by the Court of Appeal in Grocon Constructions (Victoria) Pty Ltd v APN DF2 Project 2 Pty Ltd.[41]
2. The Court of Appeal observed that:

(a) The BP Refinery test conditions are cumulative and import different considerations.

(b) In Byrne v Australian Airlines Ltd, the High Court refused to imply a term that would operate in a partisan fashion as it "must be reasonable and equitable".[42] This will require a consideration of the matrix of facts in which the contract was agreed.[43]

(c) The Court must consider whether the term is necessary for the purpose of "giving to the transaction such efficacy as both parties must have intended that at all events it should have", making the agreement work or avoiding an unworkable situation so that an implied term "must be necessary to give business efficacy to the contract": Hospital Products Ltd v United States Surgical Corporation.[44] The High Court in Commonwealth Bank of Australia v Barker[45] noted that "[i]mplications which might be thought reasonable are not, on that account only, necessary".[46]

(d) The condition that an implied term must be so obvious that "it goes without saying" requires consideration of whether, at the time that the parties were making their bargain, the suggestion of insertion of the implied term into the agreement by an "officious bystander" would have been met with a common, "Oh, of course"' from the parties. [47]

(e) Gibbs J in Ansett Transport Industries (Operations) Pty Ltd v Commonwealth[48], observed that the "width and lack of precision" of a term supplied an argument against implying it under the condition that an implied term "must be capable of clear expression".[49]

(f) Their Honours held that conflation of the "reasonable and equitable" and the "necessity" conditions of the BP Refinery test may lead a court into error.[50]

1. Both parties referred to the recent High Court decision of Hardingham[51] as the most recent principal case addressing implication of terms. Hardingham concerned the construction of terms of an informal oral agreement where Mr Hardingham was a professional property photographer. An issue arose in relation to the use of his photographs supplied to real estate agencies. The Court considered whether Mr Hardingham agreed that the real estate agencies could sub-licence the use of his copyright materials to the Realestate.com.au platform on the standard terms that it used for all advertising submissions, with a right to sub-lease to store and publish the materials on a perpetual licence or whether the right was only for the duration of the marketing campaign. In applying the objective approach to contractual construction, the High Court found that the real estate agencies were permitted to sublicence on the sub-licensee's standard terms and conditions.
2. In Hardingham, Kiefel CJ and Gageler J held that:

(a) where terms of an agreement have not been articulated by the parties, it is necessary to have regard to the parties' words and conduct in identifying what a reasonable person would conclude were the terms of the agreement.[52]

(b) the Court must consider the evidence and find the relevant express terms.[53]

(c) the legal process for "inference" requires the terms sought to be both "obvious" and "necessary for the reasonable or effective operation of a contract of that nature in the circumstances of the case"[54] (being 2 of the 5 criteria set out in BP Refinery for the test for implication).

(d) the Court must have regard to the circumstances disclosed by the evidence of what was the parties' bargain.[55]

(e) the Court must take into account what might be considered to be the mutual understanding on which the parties dealt.[56]

(f) an agreement and its terms may be inferred from the acts and conduct of the parties, including the absence of their words. In light of surrounding circumstances, that absence may evidence a tacit understanding.[57]

(g) the tacit understanding between the parties may be understood to have been evident to the agencies, in light of what was taken to be part of the mutual understanding on which the parties conducted their contractual relationships.[58]

(a) the Court must take into account what the words and conduct of the parties, when judged in light of what the parties knew, have led a reasonable person to conclude were the terms of the contract between them.[59]

(b) the rights and liabilities of the parties under a contract (whether oral in writing, or partly oral and partly in writing) are determined objectively.[60]

(c) a person who signs a contractual document:

(i) conveys a representation to a reasonable reader of that document that the person has read and approved its terms or is willing to take the chance of being bound by its contents.

(ii) that on its face appears to be a complete contract, will contain the whole of the contractual terms.

(iii) cannot adduce extrinsic evidence to vary the terms except in limited circumstances.

(iv) will only imply a term if, amongst other things, it is necessary to make the contract work.[61]

(d) the approach differs when considering an informal contract:

(i) the first step is to consider the evidence and to find the relevant terms of the contract which is a question of fact.[62]

(ii) then the Court must determine the full range of circumstances that existed at the time of the contract, the evidence of witnesses as to words written or spoken by the parties (including the knowledge of relevant matters at the time of the contract) and the apparent logic of events.[63]

(e) the Court must consider what the words and conduct of the parties would have conveyed in all the circumstances to a reasonable person who had the knowledge reasonably available to the parties.[64]

(f) the line between inference and implication is sometimes difficult to draw.[65]

(g) there is a distinction between inferred and implied terms where the contract is informal, there may well be terms that are implied by reference to the BP Refinery[66] test.

but that is not the whole universe of unexpressed terms. The terms to which BP Refinery[67] directs attention are those which are not expressed but are necessary to make the contract work. That is a different question. It necessarily comes after the first task of identifying what were the terms of the contract.[68]

1. In contrast, Edelman and Steward JJ warned against an approach which treated informal contracts as being subject to different rules from formal contracts and observed:[69]

(a) for all contracts, the exercise is to identify the express terms (which can be identified from words, whether written or oral) before considering the existence of implied terms.[70]

(b) where a contract has been professionally drafted, the more difficult it will be to establish that the words chosen do not bear their ordinary meaning or that the parties have omitted to express a term in the written document.[71]

1. Unlike the facts in Hardingham, the present case does not involve an oral agreement. The present case arises from two, off-the-plan contracts of sale of commercial real estate. It is noted that Edelman and Steward J in Hardingham[72] observed that the more comprehensive a written contract appears, and the more professionally drafted, the more difficult it will be to establish that the words chosen do not appear to bear the ordinary meaning or that the parties have omitted to express a term in the document.
2. Unless agreed otherwise in a contract of sale of real estate, a vendor does not warrant the workmanship of the builder they retain. The vendor in the present case is not a builder, but a past owner. EVR Group was a "developer" who arranged the drawings, planning and building permissions, financed construction, tendered for the builder and other consultants, and secured buyers for each proposed lot.
3. To the extent that an off-the-plan purchaser can require a vendor-developer to ensure that works are completed in a certain way, unless those rights are reserved out as a collateral warranty, those rights will merge on conveyance.[73] Justice Kyrou in Simply Irresistible Pty Ltd v Couper observed that collateral rights might include the right to be paid compensation if the property was misdescribed in the particulars of sale, the right to enforce the vendor's obligation to pay for the costs of complying with local council notices, and the right to enforce the vendor's obligation to construct a building on the property in the manner set out in the contract.[74]
4. I accept EVR Group's submission that under the Contracts the parties agreed that on registration of a plan of subdivision, the retail Lots would be conveyed to Brad Teal. Mr Teal bought them off-the-plan, without waiting for the retail Lots and apartments to be built.
5. On signing the Contracts in their form, Mr Teal was guaranteed ownership of the retail lots. Mr Teal did not discuss or seek from EVR Group any other conditions of warranties as referred to above.
6. Brad Teal seeks to infer terms as express term of an unwritten nature recognised by inference (per Hardingham[75]). The Court must have regard to the circumstances disclosed by the evidence of what was the parties' bargain.
7. I accept EVR Group's submission that there is no evidential basis to suggest the Contracts are not a complete statement of the parties' bargain (i.e., there is no evidence from which further terms can be inferred), or that the bargain is ineffective without an implication as contended by Brad Teal.
8. Given the terms cannot be inferred, one turns to the five-part BP Refinery test.[76]
9. I accept that implied terms are "not implied into a contract at all: they already exist in the construct... [and] are therefore recognised by the court, not created by the court".[77] It is an exercise in construction,[78] where the Court identifies terms "which are not expressed but are necessary to make the contract work", following the first task of identifying what the terms of the contract are.[79] Under Hardingham an implied term is "sufficiently separate from the express terms communicated between the parties... [recognised] by inference from all of the circumstances". [80] In other words, a term is implied in aid of the agreement, as opposed to in addition to it.
10. I accept EVR Group's position that the Contracts are commercially effective, without the implication contended by Brad Teal. Further, it cannot be said that the Contracts are unworkable without implying terms that Brad Teal has an ongoing right to sue the vendor-developer in damages for a third-party builder's alleged incomplete or defective works.
11. The Contracts in the present proceeding are detailed contracts of sale of real estate, containing all the necessary mechanisms to effect the conveyance of the retail Lots identified in the planning permit once the plan of subdivision was registered.
12. There are no grounds for supposing that the parties failed to turn their minds to the contended terms.
13. It is not reasonable and equitable that the vendor-developer must warrant the third-party builder's workmanship. Mr Teal acknowledged that he did not seek to negotiate the implied terms, and (despite his commercial acumen in real estate) did not engage a lawyer to do so on his behalf. He merely says he "did not think there was a need to include anything in the contract specifically". Mr Romero is not a builder or a professional qualified in construction. He is a developer. Further, the parties negotiated a purchase price for the Lots founded on the relative risk allocation between them in entering into the transaction.
14. The contended terms are not so "obvious it goes without saying".[81] Vendors do not warrant builders' workmanship in the State of Victoria. This includes whether lots are sold off-the-plan (as defined under the Sale of Land Act) or for subsequent owners of residential lots (ss 8 and 9 of the Domestic Building Contracts Act 1995 (Vic) extend rights against builders contracted by the vendor-developer).
15. The contended terms are capable of clear expressions.
16. The contended terms contradict express terms of the Contracts, being special condition 5.1 that there are no representations of warranty as to the quality of the works as constructed, including its fitness for purpose or that any structures comply with current or any building regulations. The clause does not contain any temporal language and, therefore, operates at any time up to and including settlement date.
17. Similarly, the contended implied terms contradict clause 4.1. On a proper construction of clause of 4.1, I accept that the first paragraph contains an acknowledgment that the purchaser has inspected the property and chattels prior to the day of sale and that this has no work to do in an off-the-plan sale as there was nothing to inspect at the time. Similarly, the second paragraph only refers to the present condition and state of repair and any defects existing at the "date hereof" which is the condition of the property as at the time of execution. Given this is an off-the-plan buying ahead of time this part of the clause has no work to do. However, the paragraphs on a proper construction are not to be read as sequential.
18. In the third paragraph, the clause operates prospectively, and Brad Teal agrees that it accepts the property at settlement date and EVR Group is under "no liability or obligation to carry out repairs, renovations, alterations or improvements of any kind". In my view, this means that Brad Teal has agreed to accept whatever the vendor builds or causes to be built.

1. A term is implied "by law" when the Court decides that it should be implied into all contracts of a particular class. Terms implied by law are not based on the intentions of the parties, but on policy considerations.[82]
2. It is well accepted that terms in by law are "legal incidents of a particular class of contract" to which they retrospectively relate.[83] Accordingly, the requirement of whether there is a "recognised or commonly occurring class, type or kind of contract" is the preliminary inquiry to be dispensed with, as per University of Western Australia v Gray.[84]
3. As quoted in Byrne, traditional examples of established terms implied by law include:

"The implied conditions of reasonable fitness and merchantable quality on a contract for the sale of goods, the rule that payment and delivery of goods are concurrent conditions, the implied warranty of seaworthiness ..."[85]

1. If a term is deemed applicable to a certain class of contracts, the secondary inquiry becomes a test of necessity as per Byrne ("test of necessity").[86] Justices McHugh and Gummow explain that:

"[The requirement of necessity reflects] the concern of the courts that, unless such a term be implied, the enjoyment of the rights conferred by the contract would be rendered nugatory, worthless, or, perhaps, be seriously undermined."[87]

1. An application of the Byrne test of necessity was recently undergone in Barker. The joint majority judgment of French CJ, Bell and Keane JJ considered the role of the courts (in determining necessity of an implied term by law), having to "determine whether the proposed implicated is "'necessary' in the sense it would justify the exercise of the judicial power in a way that may have a significant impact upon employment relationships and the law of the contract of employment in this country".[88] Their Honours are clear that Byrne's test of necessity serves to remind the courts that "implications in law must be kept within the limits of judicial function" and are "not to made lightly".[89]
2. As discussed earlier, in implying a term in fact, courts employ a test of business efficacy under the BP Refinery[90] test. In Gray, the Full Court (Lindgren, Finn and Bennett JJ) of the Federal Court said "necessity" in the context of implying a term in law for the first time, "has a different shade of meaning for that which it has in formulations of the business efficacy test".[91]
3. In implying a term by law, a Court has to take into account more general considerations which include:

(a) The "inherent nature of the contract and the relationship thereby established";[92]

(b) issues of "justice and policy";[93] and

(c) issues of "social consequences".[94]

"Considerations of policy...can be of considerable significance in negativity the making of an implication, or else in demonstrating that the issues raised by the proposed implication are of such a character or complexity as to make it inappropriate for a court, as distinct from a legislature, to impose the obligation in question."[95]

1. French CJ, Bell and Keane JJ also observed that the creation of a new standard of that kind is not a step to be taken lightly.[96] Where the standard is embodied in a new contractual term implied in law, the bases for the implication of contractual terms must be considered as the first point of reference.
2. An implication in law may have evolved from repeated implications in fact. As Gaudron and McHugh JJ observed in Breen v Williams[97], some implications in law derive from the implication of terms in specific contracts of particular descriptions, which become "so much part of the common understanding as to be imported into all transaction of the particular description"[98]. The two kinds of implied terms tend in practice to "merge imperceptibly into each other"[99]. That connection suggests, that "more general considerations" which inform implications in law are not so remote from those considerations which support implications in fact at large.[100] They fall within the limiting criterion of "necessity", which was acknowledged by both parties in Breen. The requirement that a term implied in fact be necessary "to give business efficacy" to the contract in which it is implied, can be regarded as a specific application of the criterion of necessity.
3. Brad Teal correctly identifies that the law distinguishes between two categories of Contracts, being the sale of the completed premises (even a brand-new completed premises) and the sale of an off-the-plan contract. However, the authorities relied on by Brad Teal are instances where the conveyance involves a written contract of a dual nature: providing for the sale of land and the erection or completion of a residential dwelling. These authorities stand for the principle that the conveyance is not intended to discharge all the parties' contractual obligations on settlement. In Cassel, the defendant agreed to sell to the plaintiff land with a house that was mid-construction. The written contract of sale of land between the parties involved the following clauses:

"4. The vendor will complete the said dwelling-house in accordance with the plans of other B type houses on the estate and the house will contain sanitary fittings similar in all material particulars to the houses of this type already erected on the estate (as seen in Bentley Road).

5. Before completion the vendor will execute the following work." [The work related to painting the woodwork, providing points for electric light and meter and plugs for electric power and providing and fixing grates and mantel pieces.]"[101]

1. The plaintiff in Cassel alleged that the defendant had contracted that the builder's work would be carried out in a proper, efficient and workmanlike manner and that the materials used would be fit and proper for the purpose.[102]
2. A deed of conveyance was subsequently executed by the parties which contained no reference to the building of the house or the work to be done by the defendant in completing it.
3. The plaintiff brought an action seeking damages for the defendant's failure to complete the house in accordance with the written contract. The defendant's argument that the terms of the written contract had merged in the conveyance was rejected by the Court of Appeal on the ground that the deed was intended to cover only part of the ground covered by the written contract.
4. Scrutten LJ stated that:

"the contract contained a stipulation which was collateral to the conveyance and was therefore not merged on the execution of the deed of conveyance which said nothing about the subject of the stipulation."[103]

1. Cassel[104] has since been followed by the Australian courts in Gaut v Patterson [105] and Gibson[106].
2. The case of Patterson[107] concerned a contract for sale of land, obliging the vendor to erect a building before completion in accordance with a memorandum annexed to the contract that required the buildings to be of proper workmanship. Such an obligation was not extinguished by the conveyance. Although the conveyance did not repeat the proper and workmanlike term, the Court held that the plaintiff could recover damages for defects which had appeared in the buildings, on the ground that the conveyance was merely intended to effect a transfer of title so that collateral terms of the written contract were not extinguished by it.
3. In Gibson[108] the defendant builder agreed with the plaintiffs to sell land and erect a dwelling "in conformity with local government regulations". The defendant failed to obtain the permit required by the local town and country planning scheme, with the result that the building of the dwelling was unlawful. The Court held that the term did not merge on transfer of the land. The plaintiffs were able to recover damages.
4. The present case is distinguishable from Cassel[109] and subsequent cases set out above, as the dispute does not involve defects to a domestic dwelling and the Contracts at hand do not contain terms as to how the retail Lots were to be completed, nor does it expressly warrant the property condition.
5. The question then arises whether such terms are to be inferred or implied and as such are taken to have always existed. The above authorities are then relevant on the ground that the conveyance was merely intended to effect a transfer of title, so that collateral terms of the written contract were not extinguished by it.
6. Brad Teal relied on Miller v Cannon Hills Estates Limited[110] as well-established authority that, absent any express term to the contrary, a contract for sale of an off-the-plan dwelling has implied as a matter of law each of its contended implied terms.
7. Miller was ultimately decided on the grounds of an express warranty made by the builder-vendor. The Court commented in obiter dicta that an implied warranty of habitability could be used to find "the builder liable for the defects in the construction of the house" (emphasis added).[111]
8. The Court determined that an implied warranty of habitability could be impressed on the sale of a new house, only if the contract of sale was entered into by the parties prior to the completion of the construction. If, however, construction was complete at the time the contract was made, the warranty of habitability could not be implied.[112] This decision was applied in Perry v Sharon Development Co [113], resulting in authority for the distinction between finished and unfinished houses.
9. Brad Teal seeks to extend the authority of Miller, to circumstances that not only relate to cases involving building contracts when the purchaser contracts with the builder, but also to where the purchaser contracts with a developer who is separately engaging a builder. Brad Teal relies on the following passage in Miller:

"The position is quite different when you contract with a builder or with the owners of a building estate in the course of development that they shall build a house or you shall buy a house which is then in the course of erection by them."[114]

1. In my view, a proper reading of Miller[115] does not support Brad Teal's position. The facts in Miller[116] involved a display home transaction which is a very different sort of contract. The Court is, therefore, considering the application to a vendor-builder in a dual contract context. I do not accept Brad Teal's position that the reasoning in Miller[117] applies with equal force to the situation where a party has contracted with a developer to construct and sell a commercial premises off-the-plan.
2. In the cases relied on by Brad Teal, which involve the sale of an incomplete house, there is a contract to build as well as to sell real estate. The Court in Perry observed that in contracts to build "it is only natural and proper that there should be an implied undertaking that the building work should be done properly". [118]
3. Brad Teal further relies on the case of Vella v Ayshan[119] where the defendant was not the builder but was the developer. Brad Teal submits that the Court in Vella set out that the defendant developer had engaged a builder, and that builder was the person whose licence appears on the building permit documentation. In my view, Vella does not assist Brad Teal in the present case because it involved an application by the buyer to rescind the contract of sale on the construction of express terms contained in that contract, to cause the residence to be erected in a proper and tradesman like manner, and their obligation to cause the residence to be erected on the subject property in accordance with the terms and specifications approved by the council. Vella is a case that illustrates the operation of the principle in relation to the sale of land that the description of a property was an essential term of the contract and a buyer was entitled to reject the property on any substantial difference in the property and its contractual description.[120] That is not the present case.
4. The authorities relied on by Brad Teal involve "dual nature contracts",[121] that is, contracts for the sale of land and a building contract for the erection of completion of a house by a vendor-builder. The warranties have been implied in the "unfinished houses" (or model/display home) cases because the vendor-builders in those proceedings held themselves out as specially qualified to perform work of a particular character which impliedly warrants that the work they undertook shall be of proper workmanship, and reasonably fit for purpose. EVR Group is not a specially skilled vendor, such that Brad Teal is entitled to rely on the vendor's special skill or judgment. Sales law would not imply warranties in this situation.
5. These display home sales are examples of a warranty arising from a principle that the goods shall conform to the "sample" (or model home). These transactions are treated as a contract to sell a lot, plus, a contract to build a house. In the latter contract, there is a promise that the work should be done in a workmanlike manner and with proper and suitable materials. Even if treated as a sale and not a construction contract, there is a warranty that the house will conform to the sample and will be free from any defects rendering the house uninhabitable which would not be apparent on reasonable examination of the sample.
6. These general principles of law have led to the rule that in the sale of a house to be constructed (or in the process of being constructed) there are implied warranties by the vendor-builder. These cases discard the doctrine of "caveat emptor" and have provided the purchaser with a remedy against the vendor-builder. The policy arises from the fact that the purchaser cannot inspect the dwelling before signing the contract.
7. Brad Teal seeks to extend the scope of the implied warranties to include sales by vendor-developers, and within a commercial context. The present case is different to the above authorities as it involves an off-the-plan contract of sale of commercial real estate. The defendant is a developer, not a builder. As a developer, it is not part of a profession who owes duties of care by reason of holding itself out as specially qualified to perform works that imply warranties. A vendor-developer is a past owner and on conveyance the purchaser takes on the burden of the previous owner, including issues arising from workmanship of a third-party builder. Even in the off-the-plan scenario, the Contract is not a building contract. It is merely a contract of sale to convey land on the registration of the plan of subdivision. In the circumstances, it is not necessary to imply such terms into all contracts of a class of commercial off the plan sales.
8. Given my finding that the terms contended for by Brad Teal are not collateral terms the cases of Cassel[122], Miller[123] and Gibson[124], are not relevant in the present case as all the parties' rights and obligations have then merged on conveyance. In my view, the case before me involves contracts for the sale of land, without a separate building contract or obligations that warrant the construction on the premises and, therefore, there are no terms associated with collateral terms that has not merge into conveyance.
9. Finally, given my anterior finding that the term is not to be implied into the contracts, the entire agreement clause is engaged per SC 5.1 of the contracts.

Second implied term - compliant with legislation and building permit

1. Brad Teal claims that this term was "implied in fact" (either based on Hawkins[125] or BP Refinery[126], on the argument the contracts do not state "specifications of the Lots or building to be constructed").
2. Brad Teal submits that for the reasonable operation of the contracts, there needs to be some specification of how the walls, ceiling and services are to be constructed. Brad Teal contends that must be a breach of contract if EVR Group were to provide a structure where the walls are made from either "Lego", or "cardboard" or "gingerbread".
3. Brad Teal acknowledges that the first step is to look at the parties' objective intent, however, the problem in the present case is that there is no evidence to determine this as there were no discussions between the parties about this, nor was any objective intent of the parties indicated on the drawings attached to the 102A contract. Brad Teal argues that the answer is to be found by looking at the various building regulations which exist in the State of Victoria, such as the Building Act, Building Regulations, the BCA and the various Australian Standards. Brad Teal contends that the parties "did not need to reinvent the wheel", as the BCA sets out performance requirements that the building must be structurally sound and provides that it must prevent the entry of water.
4. Brad Teal submits that, in order to construe EVR Group's promise to construct and deliver a "shell", it promised to construct it in terms of the BCA and the relevant construction standards. Therefore, the issue of what the wall is to be made out of, is answered by use of material to a standard that complies with the performance requirements in the BCA and any of the deemed to satisfy provisions if they exist.
5. Brad Teal submits that, when it contracted with EVR Group to purchase a premises to be completed to a "shell", what it in fact contracted for was the purchase of a premises that it could fit out and use as a commercial premises. Brad Teal contends that if it cannot fit the premises out because there is moisture that leaks from the outside, which would ruin any plaster that was put up, or any carpet, or floorboards that were put down, or if the floor is so uneven that floor coverings cannot be put down - the purchaser has not gotten what they have bargained for.
6. I accept EVR Group's submissions that there is nothing to suggest that it had the right to build the Lots out of "gingerbread", or "cardboard" or "Lego". One cannot build a habitable structure out of gingerbread and be the subject of a registered plan of subdivision. For the relevant council to issue a statement of compliance, an applicant must provide written advice from a licenced surveyor following the completion of the works required for subdivision. For the subdivision of the Lots, the Lots had to be built. For the Lots to be built, there must be steps taken as prescribed by the Building Act, including the endorsement of a set of plans and the issuance of a building permit. I further accept that it is permissible for a Building Contract to leave some discretion to the builder on an off-the-plan sale.
7. In addition, I accept EVR Group's position that there is no ground for criticism that there is discretion left to the vendor to decide was compromises a "shell". The law only permits certain things to be done towards construction to ensure that materials or engineering options are used such that the building does not collapse. The lack of detail on those specifications in the Contracts does not mean that there is a need to imply terms that the Lots would be compliant with legislation and the building permit.
8. For the reasons set out above, the term is not necessary to be implied in the contracts.

Third implied term - workmanlike standard and proper materials

1. Brad Teal claims that the term "the Lots would be built of proper materials and to a workmanlike standard" is "implied by law" (no particulars given) alternatively, "implied in fact" (either based on Hawkins[127] or BP Refinery[128]), based on the argument that the Contracts do not state "the standard to which the Lots or building would be constructed".
2. Brad Teal submits that, where EVR Group admits that each Lot would be constructed as a "shell" with further work to be performed by the defendant at its own discretion, the word "constructed" has a meaning which is informed by industry norms and practices. Brad Teal argues that, taking into account such norms, it must be constructed to a workman‑like standard.
3. Brad Teal referred to EVR Group's forensic building defects and costings report by Paul Cummaudo, from Roscon Property Services Pty Ltd ("the Roscon Report"), in support of its assertion that, there are some matters which are defects, however, the main "big ticket" items identified above are characterised by Brad Teal as issues of incomplete works having regard to a state of completion to a level of a "shell". That is, Brad Teal contends that these are works that, in bringing the structure under completion to "shell", fall within the scope of works that were not complete.
4. In particular, Brad Teal relied on item 1.1 of the Roscon Report in which Mr Cummaudo observes that he disagrees with Mr Collina's (the author of the BSS Report) finding that the concrete panel wall on the east boundary has not been waterproofed. Mr Cummaudo states that "it is clear that there has been some form of black waterproofing membrane has been installed however there were 2 precast panels that were found to be bare, 1 at the Southernmost end and 1 in the middle of this wall."
5. In relation to item 1.2 of the Roscon Report, Brad Teal contends that this item was complicated as it was a mixture of a defect and incomplete works. It claims that it is defective in the sense that the drain does not perform, but there is also an element of incompleteness where the Roscon Report states:

"No other drainage provisions were found from this strip drain beside the hole that had been made in the side of the tray into the existing drainage point, as seen in Image 3. In its current installation, it is highly unlikely that this strip drain is plumbed into the agricultural drains in the planter boxes."

1. Brad Teal concludes that the failure to properly plumb the drain is an element of incomplete works and the overall inability of the drain to perform the function may include some element of defective works.
2. In relation to item 1.4, Brad Teal relies on the Roscon Report that provides:

"The planter boxes were further examined and soil partially excavated and it was noted that there is no waterproofing membrane installed, as seen in Image 4 and Image 5."

1. Consequently, Brad Teal contends that item 1.4 of the Roscon Report is incomplete work.
2. Finally, in relation to item 1.7 of the Roscon Report, Mr Cummaudo disagrees with EVR Group's architect's report that concludes that "the shop is a shell and as such all gaps - around windows and under doors, blemishes and the like would be covered by tiling, carpets, plasterboard and the like forming part of the fitout works. - Refer MBS (Building Surveyor) report dated 16th November 2020". Instead, Mr Cummaudo says that:

"I disagree with these statements from the architect as it is not the responsibility of the lot owner to have to grind away excess concrete or fill voids where it is missing throughout the tenancy in preparation to fit out the lot."

1. Brad Teal contends that Mr Cummaudo opines that the grinding away of excess concrete and filling voids ought to have been done by the builders, and, therefore ought to have been the state of the premises upon hand over.
2. I accept EVR Group's contention that, other than the six items set out in the Undertaking, the items set out in the experts' reports did not survive merger. The key focus is on the waterproofing of the planter boxes, the side wall and the strip drain. I further agree with EVR Group that whether or not an item is a defect or incomplete works, is irrelevant to the proper construction of the Contracts. Given the experts were not called to give evidence at the trial, reference to the reports was simply extraneous material. Indeed, there are unresolved areas of dispute between the experts as to the state of the works and the scope of works that falls under the umbrella of fitout.
3. Consistent with my previous findings, the Contracts are not of a "certain class" into which a term of workmanlike and proper materials is to be implied as a legal incident of being a contract in that class.
4. Further, in accordance with my anterior findings, given the present Contracts are contracts of sale, and not a building contract, as with the other alleged terms set out above, I am not satisfied that the factual argument for inferring or implying such a term has been made out by Brad Teal, nor is it necessary to ensure the conveyance of the Lots to Brad Teal.

1. Brad Teal contends that if the more explicit unwritten terms (being its primary case), are not proven, concepts such as good faith, co-operation and a duty to act reasonably are to be implied. It submits that the reason this case is put as the "alternative" case is that the Court's findings in relation to the other implied terms is relevant to the assessment of Brad Teal's vulnerability in an Esso Australia Resources Pty Ltd v Southern Pacific Petroleum NL[129] sense.
2. Brad Teal submits that the alternative case goes to the standard of EVR Group's conduct in its discharge of its contractual rights and discretions, in contracts that on EVR Group's case is bereft of any standard at all as to the nature of a constructed building. Accordingly, Brad Teal is then at the mercy of EVR Group's selection of builder and their administration of the building contract, in circumstances where EVR Group had expressed its concerns with the builder prior to signing the Building Contract.

Obligation to engage a registered builder - terms implied in fact analysis

1. Brad Teal submits that as a practical necessity, as EVR Group was not a registered builder, EVR Group had to engage one to undertake the works. It contends that this is a necessary term for the reasonable operation of the contract.
2. Brad Teal argues that, given the regulatory overlay, a "builder" means someone that has the appropriate registration to undertake the contracted works.
3. Brad Teal says that the project was a mixed use residential and commercial building. The builder was required to have a Domestic Builder Unlimited ("DBU"). Merrion 6 did not. Nor did any of its directors, noting that Frank Nadinic was never a director of Merrion 6 (at least, as reported to Australian Security Investments Commission ("ASIC")).

1. EVR Group submits that the first alternate term that Brad Teal alleges is that it would appoint "a registered building practitioner to undertake the building works". This term is said to be "implied in fact" on the basis that the Contracts "have not made provision for the appointment of a building practitioner".
2. EVR Group contends that Brad Teal did not mention this alleged term in its closing submissions and subsequently treats it as abandoned. It argues that this is a sensible concession, given the building practitioners in the appropriate category of registration were named on the building permit. Further, EVR Group submits that this ground could lead to no more than nominal damages, as it is not said that the identity of the contracting parties in the Building Contract has led to any particular defects.
3. EVR Group denies the obligation to engage a registered builder.

1. Brad Teal submits that EVR Group agrees that there existed a duty to co-operate but contests the precise content of that duty.
2. Brad Teal notes that EVR Group concedes that it did not make its own enquiries about the builder. It contends that was made even more reckless given the concerns Mr Romero held about the Nadinic family.
3. Brad Teal submits that when EVR Group signed the contract it was met with a huge number of red flags. It was unconcerned about those red flags and instead proceeded forward because of the price. Brad Teal contends that it is open to the Court to infer that EVR Group knew at the time of executing the Building Contract that Merrion 6 was a "man of straw" which was part of the web of Nadinic family-controlled entities (such as Kingcon).
4. Brad Teal argues that Mr Romero seeks to distance himself from the responsibility of his selection of builder and wash his hands of its fallout. It relies on Mr Romero's witness statement which contains remarks such as:

(a) Paragraph 10: "I am effectively a middleman between the purchasers and the builder..."

(b) Paragraph 18: "The builder has been paid (by the purchaser, through the developer) to perform the works, and it is their responsibility towards the owners."

(c) Paragraph 28: "It is unfair for Mr Teal to blame me for his being unable to lease the premise ... where he chose not to attend to many of builder's workmanship issues until relatively recently."

1. Brad Teal contends that EVR Group thinks the plaintiff and other purchasers should bear the consequences of EVR Group's decision to engage a "man of straw" company, even though they have no contractual relationship with Merrion 6, and, had no involvement in the bidding process. Brad Teal observes that it does not share in EVR Group's profit and says that commercial risk was taken by EVR Group alone. If EVR Group wishes to push that risk to the purchasers, it owes an obligation to the purchasers - who were thus "vulnerable",(in the sense described in Esso)[130] to "act reasonably and with fair dealing having regard to the interests of the parties (which will, commonly, at times be in conflict), and to the provisions and objectives of the contract, objectively ascertained."[131]
2. Brad Teal contends that EVR Group has mischaracterised its pleadings in relation to the element of "vulnerability". It argues that, in the current context, EVR Group was required to give consideration to the interests of the purchasers in receiving premises which were fit for use and free from major defects. Brad Teal submits that the alleged obligation of EVR Group is not satisfied by engaging a "man of straw" company, particularly given the "bad reputation" of Frank Nadinic. Brad Teal suggests that even for those purchasers that have a contractual cause of action against the builder (for example, the residential lot owners), there was never any prospect of compelling the builder to return to the site or recovering damages.
3. Brad Teal submits that the only point in time when the exercise of contractual rights against the builder may have resulted in an outcome, was during the course of the works, when EVR Group had a lever in the certification of payment claims. However, it contends that there is no evidence that EVR Group (or Mr Romero in his capacity as superintendent) exercised any of their contractual rights against the builder, except for one instance concerning delays in issuing occupancy certificates. Brad Teal asserts that EVR Group appears to only have been concerned about its own interests (in that case, settling the residential lots), and had no regard for the interests of the buyers.
4. Brad Teal contends that the only act that EVR Group can point to in answer was its offer to assign a worthless right to Brad Teal (presumably in exchange for some kind of release). It says that the assignment is worthless both because the builder was a man of straw and because EVR Group had released the builder.
5. In respect of superintending of the building works regarding the Lots, Brad Teal observes that Mr Romero says that he saw that role as effectively dealing with payment claims. Further, even though Mr Romero was responsible for dealing with variations, Brad Teal argued that he subrogated this role to Mr Teal. Brad Teal relies on the fact that Mr Romero had the right to issue notices to the builder to rectify defects and to take the defect rectification works outside of the builder's hands, if it failed to comply. Brad Teal argues that there is no evidence that Mr Romero exercised this power.
6. Further, Brad Teal submits that EVR Group had a contractual right to make a claim against its chosen builder relating to the cost of rectification. However, EVR Group appears to wish to push this undertaking onto Mr Teal as well.
7. Alternatively, Brad Teal argues that EVR Group's conduct defeated its entitlement to the benefit of the Contracts, such that EVR Group has breached its duty to cooperate.

1. EVR Group notes that Brad Teal pleads that the vendor would "cooperate with Mr Teal ... so as to do all things necessary to enable the [Purchaser] to have the benefit of the Contracts" which is to be implied by law, alternatively, implied in fact on the grounds that the Contracts do not state the "role or obligations [of the Vendor] in respect of supervising a builder".
2. EVR Group accepted that the Contracts contain (as do all contracts) an implied requirement that each party agrees to do all that is necessary to secure performance of the contract. EVR Group cited Secured Income Real Estate (Australia) Ltd v St Martins Investments Pty Ltd.[132] However, it says that that does not mean Brad Teal succeeds, or that the nature or content of the implied term is agreed.
3. EVR Group submits that the requirement to cooperate is not a mechanism for alleviating the consequences of hard, harsh or unconscionable terms, and does not require parties to be nice or "even reasonable" to each other.[133]
4. EVR Group relies on Mason J's observations in Secured Income[134] that it is:

"... not quite so easy to make the implication when the acts in question are necessary to entitle the other contracting party to a benefit under the contract but are not essential to the performance of that party's obligations and are not fundamental to the contract... In such a case, the correct interpretation of the contract depends, as it seems to me, not so much on the application of the general rule of construction as on the intention of the parties as manifested by the contract itself."

1. EVR Group contends that this means that, as with terms implied under the BP Refinery[135] test, cooperation does not require any more from the parties than to cooperate in doing what they have agreed.
2. EVR Group argues that the highest Brad Teal's argument appears to go in relation to cooperation and "good faith", in its closing submissions is to suggest that the vendor did not cooperate by:

(a) contracting the third-party builder that it did (based on a "sins of the father" type argument, not being a common law maxim); or

(b) exercising contractual rights against the builder, although it is not said precisely what rights were not exercised, when, or how they should have been exercised.

1. EVR Group submits the matters concerning Andrew Nadinic (who was, at the time of the contract, and remains, a registered domestic builder in Victoria) and his father were "far from a crystal ball" for the defects alleged by BSS Group.
2. EVR Group notes that the Purchaser is not privy to the Building Contract, nor did the Contracts refer to it, because the Contracts were not building contracts under another name but, Contracts where the benefit was the conveyance of two retail Lots, which is what occurred.
3. In relation to the superintending of the building works, EVR Group states that Mr Romero was not a registered building professional. Nothing in the Contracts stated that he was to act as a clerk of works (involving personal supervision), and as such, cooperation does not require it.
4. EVR Group concludes that an agreement to cooperate is to cooperate in delivering what was agreed, not to supplement what was already agreed it.

1. Brad Teal submits that the present case is one where the duty of good faith is implied "to protect a vulnerable party from exploitative conduct which subverts the original purpose for which the contract was made".[136]
2. Brad Teal's submissions in relation to good faith were dealt with concurrently with cooperation set out above.

1. EVR Group refers to Brad Teal's pleading that the vendor would "act in good faith" which is said to be implied by law, alternatively, implied in fact on the same argument as the obligation to cooperate in that the Contracts do not state the "role or obligations [of the Vendor] in respect of supervising a builder".
2. EVR Group submits that it is dangerous to accept that, even though the parties did not agree that the vendor would warrant the third-party builder's work, EVR Group must nevertheless do so as a matter of "good faith". EVR Group denies the implication of the duty of good faith. It contends that completely laissez faire "off-the-plan" contracts does not present an obstacle to a developer cutting corners, looking to increase its own profit where the costs will be externalised to the purchasers.
3. EVR Group contends that is not the law of Victoria where commercial contracts are a class of contracts into which an implied term of good faith applies as a legal incident. Such a term can only be implied in accordance with the BP Refinery criteria.[137]
4. EVR Group claims that Brad Teal misunderstands Buchanan JA's suggestion in Esso that it may be appropriate to imply a term "to protect a vulnerable party" as being the same as "vulnerability" in duty of care arguments, which is where a duty is recognised because the plaintiff is unable to take steps to protect themselves from economic loss (for example, by entering into a contract to protect themselves from that loss, as opposed to not having signed a contract including what in hindsight are said to be necessary terms).[138]
5. EVR Group submits that Buchanan JA's reference in Esso to BP Refinery and use of the phrase "vulnerable party" (rather than "vulnerability") indicates no more than an obligation may be implied in the circumstances of each case.[139]
6. Further, EVR Group contends that in any event the evidence does not show that Mr Teal was vulnerable in the Perre v Apand [140] sense, given he had the opportunity to contract after negotiating terms, and was not forced to sign the Contracts under duress.
7. EVR Group further relies on Warren CJ's observations in Esso that the standard of good faith in contractual conduct is nebulous, given good faith cannot be defined with certainty.[141]
8. EVR Group argues that Brad Teal encounters the same difficulty in its Alternate Case that it did in its Primary Case, which is that unless there is evidence to suggest the Contracts were more than real estate contracts, and involved some form of covenant by the vendor that it would warrant the third-party builder's work, establishing an obligation of good faith is moot, because there is no obligation to do, in good faith, what was not already agreed.
9. EVR Group says that the sorts of covenants Brad Teal advocates for, go far beyond the standard terms in a contract of sale. Further, the fact the sales were "off-the-plan" is no reason in and of itself to say, (inter alia) that it "goes without saying" that a purchaser required more than a conveyance.[142]
10. EVR Group submits that Brad Teal relies on extremely vague facts to amount to the breach of contract - it not having been put to Mr Romero that there was anything in particular, at a particular time, that he could have done but chose not to do, goes beyond the general proposition there must have been something he did not do (which is vague and does not satisfy Browne v Dunn[143]). As such, EVR Group concludes that Brad Teal must fail on the good faith implied term.

1. EVR Group noted that although this term was pleaded separately, it is superfluous as an obligation to act "reasonably" is part of any "good faith" obligation, rather than separate duties.
2. The duty is to act "reasonably and in good faith".

1. An implied duty to co-operate in performance of a contract is well established and may be seen as an aspect of a more general duty of good faith in contract performance. It was common ground between the parties that as a matter of law there is an implied duty to cooperate.
2. In Secured Income,[144] the High Court affirmed Griffith CJ's statement in Butt v McDonald, being:

"[The duty to co-operate] is a general rule applicable to every contract that each party agrees, by implication, to do all such things as are necessary on his or her part to enable the other party to have the benefit of the contract."[145]

1. It is important to note that whilst the High Court in Secured Income broadly affirmed the Butt doctrine, Mason J (with whom Barwick CJ, Gibbs, Stephen and Aickin JJ agreed) did qualify aspects of the duty to co-operate. Particularly, Mason J stated:

"It is easy to imply a duty to co-operative in the doing of acts which are necessary to the performance by the parties or by one of the parties' fundamental obligations under the contract. It is not quite so easy to make the implication when the acts in question are necessary to entitle the other party to a benefit under the contract but are not essential to the performance of that party's obligations and are not fundamental to the contract."[146]

1. Ultimately, his Honour opined that the question as to whether the duty to co-operate is enlivened is to be addressed by reference to the "intentions of the parties, as manifested by the contract itself".[147]

1. The duty of good faith performance looks to supplement the express terms of a contract, acting to preclude certain types of unco-operative or unfair conduct in the course of performing a contract or exercising contractual powers. [148]
2. The High Court is yet to recognise a universal implied duty of good faith in contract performance. In Royal Botanic Gardens and Domain Trust v South Sydney Council, the High Court deliberately left this issue open.[149] Gleeson CJ, and Gaudron, McHugh, Gummow and Hayne JJ,[150] as well as Callinan J,[151] considered that such a case was not the appropriate test case for considering the question of whether a duty existed.
3. Later, in Barker[152], the High Court also declined to comment on whether there is an implied duty to act in good faith in the performance of contracts in Australian law.
4. Chief Justice Warren in Esso, summarised the general status of recognition, stating:

"Courts have, more often than not, decided these matters on other bases and thereby avoided the conceptual difficulty that can attend the concept of a duty of good faith.

Therefore, the current reticence attending the application and recognition of a duty of good faith probably lies as much with the vagueness and imprecision inherent in defining commercial reality. The modern law of contract has developed on the premise of achieving certainty in commerce. If good faith is not readily capable of definition, then that certainty is undermined."[153]

1. It is important to note that Warren CJ's assessment of the current state of duty of the good faith, is predicated on if a duty exists. Ultimately, Esso[154] did not feature the distinct qualities necessary (as per Warren CJ and Buchanan JA's assessment) to fully contemplate the existence of the duty in Australian contract law. As it stands, the implied duty of good faith remains undefined and unacknowledged by the High Court. Buchanan JA in Esso also expressed reluctance "to conclude that commercial contracts are a class of contracts carrying an implied term of good faith as a legal incident ... so that an obligation of good faith applies indiscriminately to all the rights and power conferred by a commercial contract".[155] However, his Honour did not need to conclude on the point, as "even if such an obligation was imposed ... it was not breached".[156]
2. In Burger King Corporation v Hungry Jack's Pty Limited[157], the Full Bench of the New South Wales Court of Appeal (Sheller JA, Beazley JA and Stein JA) considered the existence and scope of an implied obligation of good faith and reasonableness in a commercial contract. Ultimately, the court concluded that such an obligation did affix to an agreement made between parties.
3. However, the Court did not venture to define reasonableness, nor make a distinction between the obligation to act reasonably and in good faith. The Full Bench noted that "Australian cases make no distinction of substance between the implied term of reasonableness and that of good faith".[158] The Full Bench further affirmed Priestley JA's statement in Renard Constructions (ME) Pty Ltd v Minister for Public Works, being:

"The kind of reasonableness I have been discussing seems to me to have much in common with the notions of good faith. "[159]

1. The Court in Burger King did refer to Sir Anthony Mason's suggestion that good faith "embraced" the concept of "compliance with standards of contract which are reasonable having regard to the interests of parties".[160]
2. In Renard, Priestley JA found that the fundamental purpose of the contract in dispute, was to have work completed in return for payment - as the contract could only have business efficacy if the respondent's powers were subject to a requirement of reasonableness.[161] Therefore, Priestley JA considered the law should imply an obligation of reasonableness within the duty of good faith. His Honour's approach was since applied in Burger King[162], but it does not have distinct unanimity across state jurisdictions and is yet to be approved by the High Court.[163]
3. Brad Teal submits that it was a financially advantageous arrangement for EVR Group to engage Merrion 6 as a builder, because their price was significantly cheaper than the alternative builder that they had obtained a quote from. However, now EVR Group leaves Brad Teal to deal with the fallout of dealing with the incomplete and defective works as a result of this decision with a deregistered entity.
4. Brad Teal contends that EVR Group's conduct in this case would not be consistent with acting in accordance with the duty of good faith, and alternatively a duty of cooperation, to cause, or allow Brad Teal to have the benefit of the contract which is a completed premises that it can take its fit‑out contractors into, undertake fit‑out works and then occupy it.
5. I do not accept EVR Group's submission that Brad Teal uses the term "vulnerability" in a Perre sense. [164] Brad Teal does not contend for a formation of duties of care for pure economic loss in a building case, for which there are five salient features such as in Woolcock Street v Brookfield Multiplex[165] and Bryan v Maloney[166]. Brad Teal refers to the term "vulnerability" in the context of whether an obligation of good faith is to be implied into the Contracts in an Esso[167] sense. In that case, Warren CJ expressed the view that the interests of certainty in contracts should only be interfered with when the relationship between the parties is unbalanced. Buchanan JA observed that it might be appropriate to imply such a term in circumstances to protect a vulnerable party from exploitative conduct which subverted the original purpose for which the contract was made.
6. In Esso, Warren CJ held:

"... the interests of certainty in contractual activity should be interfered with only when the relationship between the parties is unbalanced and one party is at a substantial disadvantage, or is particularly vulnerable in the prevailing context. Where commercial leviathans are contractually engaged, it is difficult to see that a duty of good faith will arise, leaving aside duties that might arise in a fiduciary relationship. If one party to a contract is more shrewd, more cunning and out-manoeuvres the other contracting party who did not suffer a disadvantage and who was not vulnerable, it is difficult to see why the latter should have greater protection than that provided by the law of contract."[168]

1. It is clear in Esso[169] that the Courts will be slow to come to the aid of a party to a contract who, absent suffering special disadvantage or vulnerability, is simply out-manoeuvred by the other party.
2. In the present case, I do not accept that Brad teal was vulnerable in an Esso[170] sense. Mr Teal is a real estate agent with more than 50 years' experience. He is a party with more experience than most parties to a real estate contract and knows the importance of the terms contained in a contract.
3. I accept EVR Group's position that not all bargains are perfect bargains. Sometimes, where there is freedom of contract, there is a "raw end of the bargain" or somebody does not necessarily get exactly what they sought. Nor does EVR Group owe warranties or have a duty to protect Brad Team because the builder has subsequently been deregistered. The Court does not fulfil the role of rewriting contracts between parties simply because one party is aggrieved.
4. In the present case, Mr Teal did not take care of his own interests in negotiating the terms of his Contracts. Mr Teal made an informed decision to purchase off-the-plan and decided what rights he wanted in the Contracts. He is an experienced vendor's agent of commercial real estate. Mr Teal is not a vulnerable party at the mercy of the vendor, such that the Court must come to his aid to ensure that he obtains the original purpose for which the Contracts was made.
5. The evidence before the Court is that the builder is a registered building practitioner who, as at the date of final submissions, was still registered with the VBA. I accept EVR Group's position, that, merely putting to Mr Romero that he was aware of the builder's father's troubles and disputes with subcontractors, does not prove that there was a failure to cooperate or act in good faith in contracting with the son.
6. Brad Teal criticises EVR Group for choosing the cheaper builder of the two prices, who had been approved by his financier who did their due diligence, to suggest that this is the cause of all the problems in respect of the Lots. I accept the position of EVR Group that when parties make promises of the nature contained in the Building Contract, the builder has the ability to fill those bargains for the price agreed to. There is no evidence before the Court from a quantity surveyor in support of Brad Teal's case to suggest that it was in some way impractical to use Merrion 6 as the builder for the project for the price quoted. I accept that there were other relevant considerations taken into account by EVR Group in engaging Merrion 6. These included the fact that Legacy Homes was smaller and were domestic builders who subsequently went into liquidation, and putting the project out for another tender would have resulted in a further delay of six months on the project resulting wasted holding costs.
7. I further accept EVR Group's submissions that arguments as to a duty of good faith or cooperation cannot contradict the express terms which state to the contrary. As set out above, clause 5.1 on its proper construction, refers to no warranty as to the quality of the works as constructed, which includes future works.
8. Mr Romero is not a builder. He performed the contractual superintending responsibilities under the building contract. However, he did not serve the function of the on-site supervisor in the nature of a foreman. Brad Teal failed to identify what Mr Romero did or failed to do in respect of a particular matter or item which was said to be a breach of the Contracts. Further, it was not put to Mr Romero in cross examination that he was aware of any of the matters raised in the BSS Report or that he wilfully chose to disregard those alleged defects or incomplete works.
9. The mere existence of alleged defects or incomplete works does not mean that if EVR Group hired a "dodgy builder" that it would be responsible for any defective work. EVR Group relied on others who were professionally qualified in construction, such as his architect and quantity surveyor reports provided on the financier's inspections.
10. Finally, the evidence before the Court indicates that EVR Group did seek to enforce its contractual rights against Merrion 6 around March to April 2020 when Mr Romero became extremely frustrated with its inability to finish the project. Mr Romero gave evidence that he had lengthy discussions with the builder as he wanted "things rectified for Brad". Mr Romero said that Coplan agreed to go on site and started fixing items. By letter dated 30 April 2020, Mr Romero wrote to Merrion 6, withholding the $190,000.00 retention moneys and stating that no monies are owing due to liquidated damages owed by Merrion 6, and the contract was settled in full.
11. In my view, even if such terms requiring the exercise of cooperation, good faith or to act reasonably were to be implied in the present case, they have not been breached in the circumstances. The terms of the Contracts did not prevent the performance of the Contracts or deny Brad Teal its contractual benefits of the transfer of the sale of land.

1. Brad Teal contends that, on a proper construction of the terms of the Undertaking, it is entitled to have the $100,000.00 held on trust released to Brad Teal for the purpose of rectifying defects, alternatively, that it is entitled to have recourse to those funds to the extent it has incurred costs rectifying defects.
2. In its closing submissions, Brad Teal's focus in terms of the Undertaking are the following two terms:

(a) The vendor's building surveyor certifies that both 102A and 104 Maribyrnong Rd have disabled access that is compliant with relevant legislation (item (a)); and

(b) The drain is installed at the front door of 102A to redirect water runoff (item (e)).

1. In relation to the disabled access term, Brad Teal contends that, given the context related to the performance of the building works (as opposed to their design), the proper construction of the term is that the Relevant Building Surveyors ("RBS") had to certify that the as built condition of the disabled access was compliant with relevant legislation. Brad Teal says that the letter relied on by EVR Group does not, on its face, reveal an inspection was undertaken or that the RBS was certifying the as built condition as opposed to the design. To the contrary, it submits that the use of the past tense phrase "has been approved" suggests that the approval the RBS refers to is the issuance of the building permit. If the RBS had inspected the 102A entrance to determine compliance of the disabled access, Brad Teal asserts it is likely he would have identified that the slope was non-compliant, as Mr Collina did. Brad Teal argues that EVR Group has chosen not to call its RBS and the Court may infer that his evidence would not assist the defendant.
2. Regarding the drain condition, Brad Teal submits that important context is that the 102A entry was at a lower level than the footpath outside, creating a fall for water to flow underneath the door and into the premises. Brad Teal contends that the Undertaking should be construed to mean that EVR Group must install a drain which meets a performance standard of "redirecting water runoff" from entering the premises, in circumstances where it is directed into the premises due to the constructed falls. Brad Teal claims that the drain did not perform to that standard, before or after the works undertaken by Coplan.
3. Brad Teal concedes that the Undertaking is not explicit about the consequences of a failure by EVR Group to comply with it. The email relevantly states as follows:

"Please see below the terms of agreement that are to be included in my undertaking for the amount of $100,000.00 being withheld in our trust account for 90 days:

The parties agree that the sum of $100,000 is held back in trust and only released to the Vendor with the Purchaser's consent when ..."

1. Brad Teal observes that email was preceded by two further emails. The first was from EVR Group's solicitor which relevantly provided that:

"We will withhold $100,000.00 in our trust account at settlement subject to the mortgagee's approval until the following items have been completed: ..."

1. The second was from Brad Teal's solicitor which set out the following:

"2. The parties agree that the sum of $100,000 is held back in trust and only released to the Vendor with the Purchaser's consent when: ..."

1. Brad Teal submits that the reference to the funds being held for 90 days must have some relevance. It says that the most sensible interpretation is that if, at the end of the 90 days, the conditions have not been completed, there is some consequence. Brad Teal observes that EVR Group appears to submit that the consequence is that the money is released to it nonetheless. Brad Teal argues that this is contrary to the express terms of the Undertaking itself, as well as the extrinsic material, which make clear that the only circumstances in which the funds could be released to EVR Group is if the items are completed (subject to Brad Teal's consent, which cannot be unreasonably withheld).
2. Brad Teal contends that the remaining alternatives are:

(a) The funds are forfeited to Brad Teal; or

(b) Brad Teal may have recourse to the funds as security for the Undertaking of rectification works itself.

1. Brar Teal submits that the first alternative set out above is consistent with the purpose of the Undertaking as being to incentivise EVR Group to complete the outstanding items. It claims that it also avoids EVR Group's conveyancer being placed in the position of having to determine competing claims or being forced to interplead.

1. EVR Group submits that the wording of the Undertaking was proposed on 30 January 2020 by Brad Teal's solicitor and accepted by EVR Group. It says that the Undertaking was expressed to the effect that on the purchaser settling on the Lots, EVR Group's solicitor would hold the sum of $100,000.00 in a trust account as security for the completion of the six items set out in the correspondence and set out above.
2. EVR Group contends that, on the evidence, the parties did not "agree" the works would be complete in 90 days (90 days was subsequently mentioned, after the agreement, by Mr Adrian Skinner, rather than by Mr Peter Guy as part of a condition of the Undertaking).
3. Further, EVR Group argues that it was not agreed that if the works were not completed by a particular time, all or any of the funds (without an assessment of the works completed) would be released to Brad Teal, or alternatively made available to Brad Teal only to attend to "rectification works" (being the works identified in the Undertaking).
4. EVR Group submits that what was provided was "no performance security" and that even if a "complete release" was agreed, in its view, it would be unenforceable as a penalty as it is not a genuine pre-estimate of Brad Teal's loss or damage if the 6 items listed in the Undertaking were not performed.
5. EVR Group contends that the words of the Undertaking have ordinary meaning and do not support either of Brad Teal's alternative interpretations. The Undertaking means that until such time as EVR Group complies, it would not get the $100,000.00.
6. EVR Group then turns to the question of whether it has fulfilled the Undertaking.
7. EVR Group observes that Brad Teal's closing submissions focusses on terms (a) and (e) of the items. It says that there is nothing in either Mr Teal's evidence or the BSS Report that suggests that the other four items are outstanding.
8. EVR Group contends that terms (a) and (e) are dealt with as BSS Group's Item 1.2, for which BSS gives a rectification sum of $18,202.00, and when the combined 27.5% for margin and GST of 10% is added, the cost is $25,428.19 (plus GST) to rectify. It is agreed by the parties that the cost of rectification at the reporting date (18 September 2020) is appropriate. EVR Group says that this estimate is its worst-case scenario.

1. Brad Teal relies on the following two terms of the Undertaking provided on 31 January 2020:

(a) The vendor's building surveyor certifies that both 102A and 104 Maribyrnong Rd have disabled access that is compliant with relevant legislation (item (a)); and

(b) The drain is installed at the front door of 102A to redirect water runoff (item (e)).

1. For the reasons already given in the Alternative Case, I find that there is no express good faith term and, in a commercial transaction such as the Undertaking, the Court will not imply one. In the present case, I have found that Brad Teal is a sophisticated party (and for the negotiation of the Undertaking, both parties were legally represented) and Brad Teal does not suffer from "vulnerability" in an Esso sense. In addition, in my view, the obligation of good faith does not require a party to subordinate its own interest to those of the counterparty to the contract.[171]
2. In relation to contractual terms implied by law, per Barker, I do not accept that a good faith term ought to be implied into the Undertaking as a particular class of contracts in accordance with the test of "necessity". A duty of good faith is not needed for the effective working of the Undertaking as a contract of that class. Considerations of justice and policy are not relevant in the inquiry in relation to the Undertaking. Further, for the reasons that follow, the elements of BP Refinery have not been met to imply a term of good faith in the Undertaking.
3. The first issue for determination is whether these two items in the Undertaking have been completed in accordance with the terms. This is separate and distinct from whether they are free from defects or not of expected quality.
4. In my view, the Undertaking was to incentivise the EVR Group to undertake the Outstanding Works within a reasonable period of time, with the assurance that the sum of $100,000.00 was sitting in EVR Group's solicitor's trust account and waiting completion. Reasonably, the 90-day time period establishes both a time frame for completion of the six items and the time frame for Brad Teal's monies to be held in trust and, therefore, inaccessible to EVR Group. This is a commercial interpretation of the terms of the Undertaking as evidenced by the relevant emails that articulated it.
5. If the Outstanding Works had not been completed within the 90-day period and further had not been completed within a reasonable time, then the no performance security should have been returned to Brad Teal until the Outstanding Works had been completed (subject to Brad Teal's consent, which cannot be unreasonably withheld). Here, the evidence before the Court is that EVR Group did complete the works by 9 July 2020 for item (a), and by 3 July 2020 or at the latest by mid-2021 for item (e), which in my view, is a reasonable period of time in the context of the then existing COVID restrictions in Victoria. There is no breach of any good faith term in EVR Group relying on the letters of 9 July 2020 in relation to the disabled access and 3 July 2020 in respect of the strip drain as evidence of compliance with items (a) and (e) of the Undertaking.
6. The terms of the Undertaking do not provide for an interpretation that the $100,000.00 was to be held indeterminately on account of covering Brad Teal's future rectification costs. I further agree with Brad Teal that EVR Group's contention that the full release of the monies to Brad Teal so it may have recourse to the funds for the rectification works itself, is an unenforceable penalty that was not pleaded in the defence and cannot be raised in closing submissions. However, given my construction of the Undertaking, there is no need to go further.
7. Brad Teal seeks to rely on its expert, Mr Collina's report, to contend that the two items above were not completed. However, in relation to item (a) above, the terms of the Undertaking are that it was for the RBS to consider in his sole discretion and not for a building consultant to provide an opinion on.
8. By letter dated 9 July 2020, the RBS stated that the relevant item had been completed as follows:

"Disabled Access - The Retail 1 and Retail 2 "Shell" tenancies have been approved and Disabled Access to and within the open tenancy floor area/s, via the two Street footpath/s. Retail 2 (ie. No. 102a) has its Disabled Access via its door opening directly to the Maribyrnong Road footpath. Retail 1 (ie No. 104) has it Disabled Access via its rear Entry door, and the Common Property corridor access from Union Rd footpath. Retail 1 has an internal Step Ramp near its rear Entry door, to address the internal difference in floor level RL. There is no Disabled Access linkage between the two Retail tenancies, as Council has approved them as separate tenancies."

1. In my view, on a proper reading of the 9 July 2020 letter, the RBS certified that the built condition of the disabled access was compliant with relevant legislation. Indeed, the RBS has not subsequently refused an occupancy permit or applied conditions to the permit.
2. Item (e) concerned the drain outside the front door, which involved existing drainage completed by the third-party builder. EVR Group acknowledged that it seems to be accepted that there was a strip drain installed at or about the time of conveyance (being Item 1.2 of Mr Collina's expert report dated 18 September 2020), but that it was not properly installed. Mr Romero arranged for this to be rectified by mid-2021 by Coplan as noted in the Defect Inspection Report dated 19 July 2021. There is no updated expert report in relation to the drainage after the Defect Inspection Report. There was only lay oral evidence at trial from Mr Teal that he has observed water ingress into the property after these works to the strip drain had been completed "to this day". However, Mr Teal's evidence on the effectiveness of the drainage or whether it was built in accordance with the builder's workmanship obligations under the building contract or the approved plans, is not how the term of the Undertaking is worded.
3. Ultimately, where EVR Group has satisfied the conditions for the release of the no performance security, then the monies ought to be released to EVR Group. Until such time that EVR Group complies with the terms of the Undertaking, it would not get the sum of $100,000.00.

1. For the forgoing reasons, I find that there is judgment for EVR Group, with costs.

I certify that these 89 pages are a true copy of the judgment of her Honour Judge Burchell delivered on 22 April 2024.

[2] Hawkins v Clayton (1988) 164 CLR 539 per Deane J.

[3] BP Refinery (Westernport) v Shire of Hastings (1977) 180 CLR 266 ("BP Refinery").

[4] Branir Pty Ltd v Owston Nominees (No 2) Pty Ltd [2001] FCR 424 at [440]-[441]

[5] Lawrence v Cassel (1930) 2 KB 83; Miller v Cannon Hills Estates Ltd (1931) 2 KB 113; Perry v Sharon Development Co Ltd (1937) 4 All ER 390; Jennings v Tavener [1955] 1 WLR 932; Lynch v Thorne (1956) 1 All ER 744; Dean v Gibson [1958] VicRp 90; [1958] VR 563; Streeter v McLennan [1959] Qd R 136; Hancock v B. W. Brazier (Anerley) Ltd [1966] 1 WLR 1317; Lowden v Lewis [1989] TasR 254; Vella v Ayshan [2008] NSWSC 84, [18]; Sterling Estates Development Corporation Pty Limited v Malouf [2003] NSWCA 278, [63] - [71]; Cremean, Whitten & Sharkey, Brooking on Building Contracts (6th ed LexisNexis 2019), [4.13]; J D Heydon, Heydon on Contract (Thomson Reuters 2019) [10.300] - [10.310].

[8] Fenwick Elliot LLP, Dictionary of Construction Terms, p 251.

[9] [2022] HCA 39 ("Hardingham").

[11] [1958] VR 564 at [571] ("Gibson").

[12] [1930] 3 KB 83, at [83] - [89] ("Cassel").

[13] [1910] HCA 13; (1910) 10 CLR 417 ("MacDonald").

[15] [1910] HCA 13; (1910) 10 CLR 417 at [421].

[18] [2022] HCA 39 at [110]- [112].

[25] [1930] 3 KB 83.

[26] Byrne v Australian Airlines (1995) 185 CLR 411 at [73].

[28] Eezypak Pty Ltd v Byron Bay Superfoods Company Pty Ltd [2020] NSWLC 7 at [43].

[29] Halsbury's Laws of Australia, [110-2090].

[30] Halsbury's Laws of Australia [110 - 2090].

[32] Carter on Contracts at [10-180].

[33] [2008] QCA 375 ("Hays Personnel").

[34] [2013] WASCA 18.

[35] [1968] UKHL 3; [1969] 2 AC 31.

[36] [2001] WASC 210; (2001) 25 WAR 187, cited in Premium Grain Handlers Pty Ltd v Elite Grains Pty Ltd [2005] WASC 103, at [81].

[39] (1982) 149 CLR 337 at 347.

[40] (1982) 149 CLR 337, at [6].

[41] [2015] VSCA 190 ("Grocon").

[42] (1995) 185 CLR 410 at [442] ("Byrne").

[44] [1984] HCA 64; (1984) 156 CLR 41 at [66].

[45] [2014] HCA 32; (2014) 312 ALR 356 at [28]- [20] ("Barker").

[47] at [143], quoting BP Refinery at [283-284].

[48] [1977] HCA 71; (1977) 139 CLR 54 at [62].

[73] Simply Irresistible Pty Ltd v Couper & Ors [2010] VSC 601 at [246]- [247] per Kyrou J.

[83] Codelfa Construction Pty Ltd v State Rail Authority of NSW (1982) 149 CLR 337, at [4] cited by Lindgren, Finn and Bennett JJ in [2009] FCAFC 116 at [136] ("Gray").

[85] Williams, "Language and the Law IV" (1945) 61 Law Quarterly Review 384, 403, quoted in Byrne at [448].

[97] [1995] HCA 63; [1996] 186 CLR 71 ("Breen").

[105] [1931] NSWStRp 40; (1931) 31 SR (NSW) 612 ("Patterson").

[110] (1931) 2 KB 113 ("Miller").

[112] Williams Jr, RO, "Developments in Actions for Breach of Implied Warranties of Habitability in the Sale of New Houses" 10 Tulsa Law Review 445, 446.

[113] (1937) 4 All ER 390 ("Perry").

[119] [2008] NSWSC 84 ("Vella").

[121] McLauchlan DW, "Merger in the Conveyance and the Effect of Settlement" VUW Law Review 412, 415-416.

[129] [2005] VSCA 228 at [25] ("Esso").

[130] [2005] VSCA 228 at [25].

[131] Masters Home Improvement Australia Pty Ltd v North East Solutions Pty Ltd [2017] VSCA 88 at [99].

[132] [1979] HCA 51; (1979) 144 CLR 596 at [607]-[608] per Mason J ("Secured Income").

[133] Council of the City of Sydney v Goldspar Australia Ltd [2006] FCA 472 at [162] per Gyles J.

[138] Perre v Apand [1999] HCA 36; (1999) 198 CLR 180 at [225] per McHugh J ("Perre").

[145] (1896) QLJ 68at [607] ("Butt").

[148] 14.90, 348. Principles of Contract Law Jeannie Paterson, Andrew Robertson, Arlen Duke Fifth Edition

[149] (2002) 240 CLR 45.

[157] [2001] NSWCA 187 ("Burger King").

[159] (1992) 26 NSWLR 234 at [263] ("Renard").

[163] See Service Station Association Ltd v Berg Bennett & Associates Pty Ltd (1993) 45 FCR 84 at [96]-[97]; Jobern Pty Ltd v BreakFree Resorts (Victoria) Pty Ltd [2007] FCA 1066 at [134]- [136].

[164] [1999] HCA 36; (1999) 198 CLR 180.

[165] [2013] HCA 36 (see also Woolcock Street Investments Pty Ltd v CDG Pty Ltd [2004] HCA 16; (2004) 205 ALR 522).

[171] Marmax Investments Pty Ltd v RPR Maintenance Pty Ltd [2015] FCAFC 127; (2015) 237 FCR 534 at [149].