Brypat Pty Ltd v Endless View Holdings Pty Ltd

[4] The contract in question provided for the sale of certain land for $3,325,000. Completion of the contract occurred on 28 May 2004 by payment of the purchase price and conveyance of the property. Attached to the contract was a plan for a proposed reconfiguration of part of the property into 26 lots, in respect of stage 1 of the development of the land. In addition to the contract price of $3,325,000, the defendant was required by the special conditions of the contract to develop the property in accordance with the attached plan and give the plaintiff title to 9 specified lots, failing which the defendant was to pay the plaintiff $900,000.

[5] The Special Conditions of the contract relevantly provide as follows:

"1. As part of the purchase price the buyer agrees to develop and give title to the seller of nine (9) of the blocks in stage 1 as depicted by the attached plan being Lots 2, 3, 4, 14, 16, 17, 23, 24 and 25. If the configuration is changed the vendor has a right to choose different blocks.

In the event that the purchaser does not develop or provide titles for the nine (9) blocks for the vendor within nine (9) months from date of contract the purchaser agrees to pay the vendor $900,000.

Buyer agrees that if Endless View Holdings Pty Ltd on sells the property the sum of $900,000 will be paid immediately upon the new purchaser's contract becomes (sic) unconditional and would be secured by a caveat. The plan attached to the contract provided for a sub division of a part only of the property."

[6] By the statement of claim, the plaintiff relies on Special Condition 7 of the contract and alleges that by 15 February 2005, being nine months after the contract date, the defendant had neither developed the land to enable nine blocks to be given to the plaintiff as part consideration of the contract, nor paid the sum of $900,000 to the plaintiff as had been agreed by Special Condition 7. The plaintiff thus claims the $900,000 as a debt together with contractual interest as well as interest under the Supreme Court Act 1995.

[7] By its defence, the defendant admits the contract dated 15 May 2004 and that the defendant agreed to "develop and give title" to the plaintiff of nine specified lots in stage 1 of the land the subject of the contract. The defendant also admits that the defendant had not developed the land and given title of the lots to the plaintiff within nine months from the date of the contract, but says that the reason for its failure to do so is that the development application lodged by it with the local authority was delayed.

[8] The defence alleges that it was an express term of the contract that, in the event that it was necessary for the defendant to pay the plaintiff the sum of $900,000, as contemplated in Special Condition 7 of the contract, the time by which the payment would be required to be made was after the development application was issued by the local authority. It is alleged that this express term was agreed to by the parties orally in the course of a discussion on 15 May 2004 between Mr Anderson (for the defendant) and Mr Elboz (for the plaintiff) prior to the execution of the contract.

[9] It is alleged that during this discussion it was said that the market value of the land at the date of the contract was approximately $3,500,000 and that the price provided for in the contract together with the provision for the payment of $900,000 was significantly more than the market value of the land. It is alleged that Mr Anderson told Mr Elboz that the value of the land would increase significantly once the development application was issued and that when this occurred, the defendant could borrow against the increased value of the land to raise funds to make the payment. It is also pleaded that Mr Anderson told Mr Elboz that without the capacity to borrow those additional funds, the defendant would not be able to make the payment. It is alleged that in the course of the discussion Mr Elboz told Mr Anderson that he understood the defendant's position and agreed to the term that payment would only be required after the approval was issued.

[10] The defence pleads in the alternative an implied term to the effect that the plaintiff would allow the defendant a reasonable time after the expiry of the nine months in which to make the payment.

[11] In the further alternative, it is pleaded that an estoppel arises based on an alleged representation by the plaintiff to the defendant that it would not call upon the defendant to make the payment until the development application had been issued by the relevant local authority and that the defendant, in reliance upon and induced by the representation, acted to its detriment.

[12] By facsimile letter dated 10 September 2004, the defendant had instructed the surveyor to prepare a 65 lot sub-division for council approval. The letter stated that if the plan was approved the plaintiff would be able to choose 9 blocks in accordance with the special condition and that if the plan was not approved, the defendant intended to proceed with the 26 lot subdivision. The letter stated that, if the defendant was unable to give title to the 9 lots by 28 February 2004, the defendant would be liable to pay $900,000. (At that stage the parties were under the misapprehension that the 9 month period in special condition 7 expired on 28 February 2004.)

[13] Mr Broe's affidavit indicates that on 23 September 2004 the application for the 26 lot subdivision was withdrawn.

[14] On 23 December 2004 the plaintiff lodged a caveat over the property.

[15] By facsimile dated 30 December 2004, the defendant's solicitor confirmed that the date for special condition 7 was 15 February 2004.

[16] By facsimile letter dated 15 February 2004, from the defendant's solicitors to the plaintiff's solicitors, a 3 month extension for the payment of the $900,000 was sought, it being stated by the defendant's solicitors that their client required the extension because "they are not currently in a position to pay the $900,000 to your client". That extension was refused.

[17] Mr Elboz, the director of the plaintiff deposes to a conversation on or about 15 February 2004 with Mr Byrne, who identified himself as a director of the defendant, during which Mr Byrne also requested a 3 month extension. Mr Elboz says he indicated that he was not agreeable to the extension.

[18] Mr Anderson, who is the manager of the defendant, states in his affidavit that he understood that the $900,000 was to be paid after the development application had issued by the local authority. He states that at a meeting on 15 May 2004 attended by him and his wife, Mr and Mrs Elboz and Mr van Putten discussions were had in the terms stated in the amended defence and counterclaim. He asserts that the application plan for the 26 lot development was withdrawn on the insistence of the council, although this was apparently because the defendant had lodge the second plan for a greater development. The council apparently indicated that unless the first plan was withdrawn, neither would be considered. He states that he understood that the defendant would be allowed a reasonable time after the expiry of the 9 months after the date of the contract in which to make payment and that such a period would be eight weeks after the issue of the development application. Eight weeks was said to be the usual period of time it would be expected to take to raise the necessary finance upon the development application issuing. As this period has not expired he asserts that a reasonable time has not passed. Mr Anderson, states in his affidavit that there was no need to seek an extension for the payment of the $900,000 as it was not due until, at least, after the development application issued. He states that Mr Byrne was unaware of the agreement which is why he sought the extension.

[19] Mrs Anderson swore an affidavit briefly verifying the discussion of 15 May 2004 as set out in the amended defence and counterclaim.

[20] Mr Elboz denies that there was an agreement that the payment of the $900,000 was to be made after the development application was issued. In his affidavit, Mr Elboz states that on 15 May 2004 Mr Anderson did make the comment that once the development application issued, the defendant would have no trouble in obtaining further funding to pay the $900,000 if necessary and to also obtain the necessary borrowing to cover the development costs. However, he asserts that he indicated that he would not sign the contract on the basis that it was conditional upon the issue of a development application. Mr Elboz states that in the course of the discussions he informed Mr Anderson of another offer for the property for $4.6 million and that because of that offer, he was not prepared to give the defendant more than 9 months from the date of the contract to either deliver title to the nine blocks or pay the sum of $900,000.

[21] Mr van Putten, a real estate agent states in his affidavit that he attended to the typing of the contract and that he was present when Mr Anderson and Mr Elboz discussed the special conditions on 15 May 2004. He disputes Mr Anderson's version of the discussions on that day and that there was an oral agreement as alleged.

[22] The defendant objected to the admission of the plaintiff's affidavit material in support of the application for summary judgment on the basis that, the plaintiff not having filed a reply, the allegations in the defence were taken not in issue and to have been admitted. However, the defendant could have been under no misapprehension that the allegations were in issue, given that nature of the plaintiff's material it received in May 2004. I therefore disallow the objection.

As to the defence based on an oral term and on a collateral contract

[23] The plaintiff contends that the defence attempts to set up an oral term which contradicts the tenor of special condition 7 and amounts to an attempt to vary or qualify that term. The plaintiff, relying on the parole evidence rule, submits that oral evidence of antecedent transactions is not admissible to subtract from, add to vary or contradict the language of a written instrument, where it is intended to be the final expression of the full consensus of the parties. That the contract was intended to embody the full terms of the agreement is said to be "self evident" where, as in this case, a formal contract is required to be in writing for the sale of land.

[24] Counsel for the defendant acknowledged the difficulties posed by the parole evidence rule, but also relied on the pleaded collateral contract. However, the plaintiff contends that that plea also suffers from the difficulty that it is inconsistent with the principal contract. But counsel for the defendant, in support of his contention that the alleged collateral contract is not inconsistent with the principal contract, relies on special condition 8 as indicating an alternate date for the payment of the $900,000 in the event of an on-sale of the property and as thus supporting the view that no date was specified in special condition 7 for the payment of the $900,000.

[25] The plaintiff further contends that the defendant's case whether based on the alleged oral term or a collateral contract is inconsistent with the facsimiles of 10 September 2004 and 30 December 2004, confirming the date for special condition 7, neither of which refer to the alleged oral term or collateral contract. It was also said to be inconsistent with requests for extension sought by the facsimile of 15 May 2005 and orally by Mr Byrne of Mr Elboz, neither of which make mention of the alleged oral term or collateral contract. The plaintiff points to this evidence as suggesting that Mr Anderson's account was apparently unknown to Mr Byrne and to his solicitors as late as 15 February 2005 and unknown to them on 30 December 2004 and 10 September 2004 when the facsimiles were sent. Mr Anderson states in his affidavit that the reason Mr Byrne requested an extension was because he had not informed Mr Byrne of the agreement he had already reached with the plaintiff, even though the alleged agreement had been reached some 9 months earlier.

[26] The matters referred to by the plaintiff raise serious legal obstacles in respect of the defence based on either an oral term or a collateral contract. Furthermore, the defendant's failure to refer to such an alleged agreement when acknowledging the date by which the payment was to be made or when making the requests for an extension creates further difficulties. In my view, the defence raised on the basis of an oral term or a collateral contract is faced with serious obstacles and is only just arguable.

[27] The defence seeks to set up an implied term that the defendant be permitted a further "reasonable time" after the expiry of the nine month period in which to make the payment. The basis for the implication of a term is said to be that the reference in special condition 7 to the period of 9 months is only a reference to the time period for the obligation to develop and provide title and that the Contract is silent as to the date by which the $900,000 payment was to be made. The defendant contends that in order to ascertain what would be a reasonable time for the purposes of this case it would be necessary to have regard to the negotiations between the parties, which are the subject of dispute.

[28] It is alleged that a reasonable time after the expiry of the 9 month period would be 8 weeks after the issue of the development application, having regard to the fact that the plaintiff knew that the defendant would not be able to make the payment until it had access to the increased equity in the land, arising from the issue of the development application and the fact that, with the asset and liability position of the defendant, its capitalisation and gearing, 8 weeks would be necessary for it to identify an appropriate lender, prepare an application and obtain approval for such finance. The defendant thus contends that a reasonable period has not yet passed.

[29] The plaintiff on the other hand contends that the words "within nine (9) months of the Date of Contract" are apt to refer to the time for payment, especially since the obligation to make payment is in substitution for the obligation to develop and provide title to the 9 lots, so that the contract has business efficacy as is. It is submitted that the proposed implied term fails on all tests required to be satisfied for the implication of a term. It is argued that the implied term cannot be said to be reasonable and equitable, nor can it be said to be necessary to give business efficacy to the contract, nor so obvious that "it goes without saying".

[30] Further, the plaintiff argues that the implication of a term as pleaded allowing 8 weeks after grant of any development application (i.e. a term not limited to the development approval on foot at the date of contract, which was subsequently withdrawn) is open ended and contradicts the express term in special condition 1. Further it is said to be incapable of precise formulation and to fail the "reasonable and equitable" test.

[31] The plaintiff contends that in any event, if a term is to be implied allowing for a reasonable time in which to make the payment beyond the 9 month period after the date of the contract, that further period has now elapsed.

[32] There is a great deal of merit in the plaintiff's submissions. In my view the defence based on the implication of a term as contended for by the defendant is weak.

[33] As to the alternative plea of an estoppel based on an alleged representation by the plaintiff "that it would not call on the defendant to make the payment until the development approval had been issued" and the allegation that the defendant moved to its detriment in reliance upon that representation and induced by it, the plaintiff points to a number of difficulties.

[34] The plaintiff points out that Mr Anderson's version as to the discussion on 15 May 2004 is contradicted by Mr Elboz and by Mr van Putten. The plaintiff also points to Mr Anderson's account being inconsistent with the circumstances of the negotiation and execution of the contract and refers to the evidence already mentioned suggesting that Mr Anderson's account was apparently unknown to Mr Byrne and to his solicitors on 10 September 2004, 30 December 2004 and as late as 15 February 2005.

[35] The plaintiff submits that even if the alleged representation is accepted, it could only have related to the development application, being the stage 1 development identified by the plan attached to the contract which was withdrawn. It is submitted that there can be no reliance on the alleged representation where the development application the subject of the representation was not pursued by the defendant and that no estoppel can arise "where the promisee has abandoned or even repudiated his side of the bargain". In such circumstances, it is submitted that there cannot be said to be any "reliance" and nor any unconscionable conduct on the part of the promisor.

[36] While there is force in the plaintiff's submissions, the issues raised by the defendant involve an assessment of disputed evidence and cannot be said to be unarguable. Nevertheless, this defence as with the other defences have significant weaknesses as identified by the plaintiff.

[37] The amended defence and counter-claim contains a set-off for damages for wrongful lodgement of caveat. The pleading asserts that the defendant entered into a loan agreement for $3,363,000 on 17 December 2004. It provided for a higher rate of interest to be paid if certain events of default occurred, which included the registration of a caveat over the property, the subject of security for the loan. It is claimed that, in the period from 28 May 2005 to 7 June 2005, the defendant was required to pay additional interest and legal costs of $179,724.04 and a claim for exemplary damages pursuant to s 130 of the Land Title Act 1994 of $50,000 is made. The claim for additional interest comprises $100,442.40 for the period from 28 May 2004 to 23 December 2005 and $72,961.64 for the period from 24 December 2004 to 7 June 2005. The total amount claimed is $229,724.04.

[38] The plaintiff submits that no evidence is given of any damage having been suffered. It is said that no attempt is made to swear up the facts underlying the alleged set off. However, Mr Anderson verifies the matters pleaded in Part D of the amended pleading. The plaintiff submitted that for the plaintiff to have incurred interest at the higher rate in the period before the caveat was lodged, the defendant must have already been in default and thus liable for the higher interest independently of the lodgement of the caveat. However, the defendant responds to that argument by asserting that by the terms of the loan agreement if an event of default occurred, such as the lodging of a caveat, the interest at the higher rate was payable retrospectively. I note that loan agreement is not annexed to Mr Anderson's affidavit and it is difficult to assess that claim.

Should summary judgment be given for the plaintiff?

[39] While the defences raised have weaknesses, they cannot be said to have no real prospect of success and will require the resolution of conflicting evidence as well as the determination of issues of law. Nevertheless, I am concerned that the evidence before the court points to the defences raised as being "shadowy", particularly as the defendant's solicitors acknowledged the date for payment and since various extensions were sought by both the defendant's solicitors and its representative without mention of way of the matters now sought to be raised by way of defence. In those circumstances, it is appropriate that the defendant make some payment into court of the disputed amount.

[40] Counsel for the defendant sought instructions as to that matter and indicated that the defendant was able to pay the sum of $200,000 into court in 60 days. The plaintiff has sought that the full $900,000 be paid into court within 21 days. In considering the amount to be paid into court it is appropriate that conditions are not imposed that stifle the litigation. I consider that it is appropriate that the defendant be required to pay the amount of $200,000 into court and that such payment be made within 30 days failing which the plaintiff be at liberty to enter judgment for the further amount of its claim plus interest. It is also appropriate that a timetable be fixed for the speedy progress of the proceeding.