Buttsworth Trainor Pty Limited v Duncanson [2003] NSWSC 940 | Case summary

The decision of Sully J in Carr v Neill was followed by O'Keefe J in Pace v Read [2000] NSWSC 823 at para 40. 2 The Plaintiff brought its claim in the local court upon a Statement of Claim which referred to the Defendants as "First Defendants", there being also at that stage a claim against a second Defendant, a company which at some time was deregistered. A very live issue in the proceedings before the magistrate, which he determined in the Plaintiff's favour, was whether the First Defendants had entered into the contract sued upon, or only the Second Defendant. That is not an issue upon the appeal. 3 The hearing of the claim took place over a period of nearly a year, with lengthy adjournments between odd days of hearing. The case was originally opened for the Plaintiff on 16 November 2000 as arising out of a contract by which the Plaintiff was required to do certain survey and other work in respect of a proposed subdivision of land near Orange owned by the Defendants, which would first have to be re-zoned as residential land. What was put forward was that the Plaintiff was to be "paid once Council approved the subdivision and the Plaintiff was to do all the work". The payment claimed was a fixed fee, and the case was opened on the footing that the specified condition, that is to say approval by the Council, had been satisfied. Additionally, it was opened that there was a further agreement, by way of variation of the contract, "that if the land was not subdivided but was sold holus-bolus, something they anticipated in the earlier stages, then they would be paid their work from the proceeds of the sale, which subsequently occurred…but again we have not been paid." So, it was said by counsel, either "the blocks would be subdivided, or alternatively [there was] a variation" pursuant to which payment would be made upon the in globo sale. 4 But notwithstanding the way in which the case was opened for the Plaintiff, it was asserted at an early stage that there was also an "implied contractual obligation [binding the Defendants] to pursue the development to finality". Whether the Defendants could be bound by such an obligation in an unqualified form was a crucial issue upon which it was necessary for the Local Court to give close attention to the terms of the contract, and also to the precise terms of the implied obligation alleged. Indeed, as the case progressed, it became clear that this was the real issue in it (other than the question of with whom the contract was made) because the performance originally alleged in the opening was quite clearly not made out, nor did the evidence provide support for the suggested variation of the contract. The development application referred to in the contract was never approved, and underlying the dispute between the parties lay the fundamental question whether, in the peculiar circumstances that developed (the Plaintiff was inactive over a long period, during which the Defendants' financial position deteriorated so that a mortgagee's sale of the land came to be imminently threatened), that approval would or could ever have been obtained. Unfortunately, the Plaintiff's case seems to have been presented without pursuing an analysis of the contractual position sufficiently to expose this fundamental question. 5 The Statement of Claim was amended several times, but in the final amended version date stamped 22 May 2001 (that is, long after the commencement of the hearing) an agreement was pleaded which was substantially contained in a letter dated 28 August 1993. It was then pleaded (by para 7 of the pleading): An implied term of the Agreement was that the First Defendants would make the application for the development of the Estate and if approval was obtained from the Council the First Defendants would undertake the subdivision and sale of lots on the Estate. Next there was pleaded (by para 8): An implied term of the Agreement was that if the First Defendants sold the Estate subsequently to the Plaintiff obtaining the re-zoning off the Estate, but without proceedings [ sic ] to undertake the development of the Estate (being the subdivision and sale of lots), the First Defendants would pay the Plaintiff the profit costs for the work to obtain the re-zoning plus a premium of 20%. The pleading proceeded to allege that, pursuant to the Agreement, the Plaintiff carried out work preparing and lodging an application for the re-zoning which "was approved by the Council on 14 May 1995". Then it was alleged that about April 1996 "a development application was lodged by the First Defendants" (not, it will be noticed, by the Plaintiff); that about May 1996 the First Defendants entered into a contract to sell the Estate for a sale price of $450,000 subject to development application approval; and that about August 1996 development approval was given by the Council and the Estate was sold. By para 14 of the pleading it was alleged: In breach of an implied term of the Agreement, the First Defendants did not proceed to develop the Estate on obtaining development approval from the Council. And by para 15 it was alleged: In breach of the implied term of the Agreement the First Defendants sold the Estate subsequently to the Plaintiffs obtaining re-zoning approval, but without proceeding to undertake the development of the Estate, but did not pay the Plaintiff the profit costs of the work for obtaining the re-zoning plus a premium of 20%. 6 By para 22 of the pleading a claim is made for work done, but the only basis particularised for this claim is the same agreement. Paragraph 22 does not contain any allegation that the Defendants prevented the Plaintiff performing its agreement so as to earn the remuneration agreed in respect of the work. 7 Finally, by para 22A, a variation of the contract is alleged to have been effected "about early - mid 1994". Particulars are supplied of this claim to the effect that sale after a development approval was advised to the Plaintiff as being in contemplation, and it was stated that the Plaintiff would be paid for its work in respect of the re-zoning out of the proceeds of such a sale. 8 The letter of 28 August 1993 was written by a Mr Peter Russell (acting, as the magistrate clearly found, on behalf of the Defendants) to Mr Trainor, of and as representing Buttsworth Trainor Pty Limited. It included the following: The purpose of this letter is to confirm our mutual understanding with regard to the involvement of your firm in the development of Roy and Sally Duncanson's property (known as Honeyman's Hill) on Leeds Parade in Orange. I understand, in principal [ sic ], and as representative of the owners of the land, that your firm is to be the site managers, surveyors, engineers and planners of the proposed development of the land from rural to urban land titles such that the land is subdivided and can be sold as individual housing blocks. In doing so you will receive payment for the work based on fees that are competitively priced. Because the owners do not have the cash to pay for preliminary work, I understand that you agree that this initial work will be done on the understanding that, except for specific disbursements, you will not get paid unless the development application is approved by Council. These initial fees will be charged at a competitive rate, however a 20% premium will be added due to the risk that the development may not be approved by Council. The direct disbursements will be paid within 6 months of the completion of the work and then if the development is not approved and they will not attract a 20% premium. Where the preliminary work is completed, and the development does go ahead, the total costs incurred by you will be recovered as land is sold… The owners and I look forward to the successful completion of this work and the subsequent re-zoning and development. We are very pleased to work with you and look forward to a very fruitful relationship with your firm. (All underlining original.) 9 The letter of 28 August 1993 was in response to a proposal in writing over the name of Mr Buttsworth, a director of the Plaintiff, dated 7 May 1993. That proposal set out details of costs and disbursements for the work to be done totalling $26,310. The letter of 28 August 1993 refers (in paragraphs I have not reproduced) to this proposal of 7 May 1993 and to the figure of $26,310. The significance of this is that it confirms the plain indication in the second and third paragraphs of the letter of 28 August 1993, which I have set out, that the work to be done by the Plaintiff was to include the preparation of the development application. For the letter of 7 May 1993 includes in the details making up the calculation of the sum of $26,310 an item "Preparation of Development Application". 10 The story that unfolded in the evidence was one of continual delay. Although the letter containing the principal terms of the agreement was dated 28 August 1993, work had actually begun in January 1993, but the re-zoning approval was not finalised (as the Plaintiff's pleading acknowledges) until May 1995. There was uncontradicted evidence that this was several times longer than the reasonable time for the work. Mr Trainor, in evidence, was asked: Mr Duncanson, throughout this two and a half year period, expressed to you, didn't he, his concern as to the pace with which these steps were being carried out? and answered: He did, on two or three occasions. And each time he was reminded that that was part of the agreement, that we would do it in our spare time. Mr Trainor explained that "when we didn't have something else on we would work on this, because we had to wait for our money." He also acknowledged, by saying "I think I knew", that at least from the end of 1995 he was on notice "Mr Duncanson and his family were under pressure from the bank", their mortgagee. In re-examination, Mr Trainor told his own counsel that "there was complaint about us taking too long to get it done", and he said that it was part of the agreement that he would do the work "if and when we had spare time". Mr Trainor, in cross-examination, had been asked whether the re-zoning application had taken "about five times longer than it would have taken if a paying customer had walked in and asked for the same thing", and he replied: "I think that's a fair thing to say". Apart from the evidence about Mr Duncanson's requests to speed the process up, he also conceded in this context that Mr Russell had "on several occasions" telephoned on Mr Duncanson's behalf. In fairness, it should be noted that Mr Trainor became very ill and retired from the business in March 1996. Up till then he had no recollection of the Plaintiff lodging a development application with respect to the project. 11 In the meantime, according to evidence of Mr Duncanson which was neither objected to nor qualified by cross examination, and which was uncontradicted, his and his wife's financial position deteriorated to the point where it became desperate. In July 1995, the Council threatened to sue for unpaid rates and in October 1995 his bank "threatened to call up the loans and refer collection to the Bank's solicitors". After an initial attempt to find a purchaser in cooperation with the Plaintiff, cooperation which was not forthcoming, Mr Duncanson received in December 1995 an expression of interest from a Mr Johnson who wanted to purchase the property for $400,000. In January 1996, Mr Duncanson referred Mr Johnson to the Plaintiff for information about the proposed subdivision. Both in 1995 and 1996, Mr Duncanson received telephone calls, as well as correspondence, from the bank threatening to proceed against him. In January 1996, the bank wrote advising that he had "until 28 February 1996 to sell the farm and clear the mortgage." On 9 February 1996, he received a conditional offer from Mr Johnson of $450,000, subject to approval of a development application to be made by Mr Johnson. On 23 February, Mr Duncanson asked Mr Buttsworth to provide details and a quotation for further work to Mr Johnson, but over the following weeks Mr Buttsworth refused or failed to assist. Mr Duncanson claimed that "the only thing preventing the bank from selling up the farm in a mortgagee sale" was the existence of Mr Johnson as an intending buyer, so that the failure to obtain action from the Plaintiff was causing him great difficulty. He claimed that he "had no choice but to agree to the buyer preparing [the development application]". In fact, Mr Johnson who, like the Plaintiff, is a surveyor, was able to do so "within a few weeks". In this situation, Mr and Mrs Duncanson signed a letter authorising Mr Johnson on 11 April 1996 to lodge a development application with Council on their behalf. Nevertheless, there was some further delay before this letter was sent. It was not until 29 May 1996 that a signed contract and deposit were received from the buyer, and by letter of 30 May 1996 the bank "agreed to postpone any action until six weeks after 30 June 1996". Contracts were exchanged on 31 May 1996, and on 17 June 1996 the development application lodged by Mr Johnson was approved by Council. 12 Much of the evidence in the case took the form of statements, but Messrs Trainor, Buttsworth and Duncanson each gave oral evidence. Mr Duncanson was asked, "why was the property sold?" and answered without objection or contradiction: In a nutshell if the property wasn't sold when it did I'd have been bankrupted by the bank. They would have - it would be a mortgagee's forced sale and there are letters here to that effect. He also asserted that "there were material and significant differences between [the Plaintiff's] DA and the eventual buyer's DA". There was no evidence to the contrary of this last assertion, nor was there any evidence to found a conclusion that, despite the Plaintiff's failure for so long to obtain development approval, the development application which it did eventually prepare would ever have secured the Council's approval. Certainly, there was no evidence that it would have done so within a reasonable time, or before the land would have been lost to the Plaintiff by a mortgagee's sale. Indeed, Mr Buttsworth was asked in cross-examination the almost contemptuous question: Not much of a development application, was it? and responded: No, it was never looked at. 13 It was in this state of the evidence that the learned magistrate referred to Stilk v Myrick (1809) 2 Camp. 317; 170 ER 1168 where, in a footnote at 320-323; 1169 -1170, Lord Ellenborough is reported as having held that a seaman engaged to serve for an entire voyage "was not entitled to any apportionment of wages for his service during the voyage which had not been completed" and thus, the voyage having been terminated by the capture of the ship, nothing was due in respect of it. The present case, was, of course, a fortiori, since not only was the remuneration to be earned only after approval of the development for which the Plaintiff was to make application, but the price expressly included a premium "added due to the risk that the development may not be approved by Council". 14 Plainly enough, if the Plaintiff was to recover in this situation, it could only be upon proof that the circumstances preventing the fulfilment of the condition of remuneration constituted a breach by the Defendants. But on the Plaintiff's own case it was they who inordinately delayed in obtaining a re-zoning; and then during a further approximately one year they did nothing at all to obtain a development approval. The claimed right to do the work "if and when we had spare time" is not to be found in the contract, and is quite inconsistent with the contractual reward of a premium provided just because the Plaintiff was incurring the risk of a failure of payment. (Incidentally, that risk related to profit costs - the agreement also provided for the recovery of out-of-pocket expenses in any event, as to which there was no issue, the Defendants having paid an agreed maximum sum on this account of $5,000 shortly after the sale of the land.) How could the Plaintiff overcome the effect of its own inordinate delay which, on the uncontradicted evidence, at the very least raised the likelihood that the contract could never have proceeded to fruition? There was reference, at the hearing below, to the question whether the Defendants should have given some notice equivalent to a notice to complete or a notice making time of the essence in a vendor and purchaser matter; but if a situation had been arrived at in which the condition of the contract could not be fulfilled, and the Plaintiff had not endeavoured to show that this situation was due to anything done by the Defendants but was rather the result of its own inaction, there was no basis on which the Plaintiff could recover, and there was no need for the Defendants to give any kind of notice. It is really immaterial whether this result should be justified simply on the footing that the Plaintiff could no longer show performance of what was requisite to entitle it to the contractual reward; or that it must be taken to have abandoned or repudiated the contract; or on the footing of frustration of contract not brought about by anything for which the Defendants were responsible. Nor was there any basis in the evidence for a conclusion, if some doctrine of impecuniosity be relevant, that the result was due to the Defendants' impecuniosity rather than to something different, that is to say, an impecuniosity induced by the supervening event of the Plaintiff's own failure, amounting to refusal, to perform the contract on its part. 15 The legal principle in the light of which it was necessary for the magistrate to consider the problem is of long standing. In Mackay v Dick (1881) 6 App Cas 251 at 263, Lord Blackburn stated the proposition that "as a general rule,…where in a written contract it appears that both parties have agreed that something shall be done, which cannot effectually be done unless both concur in doing it, the construction of the contract is that each agrees to do all that is necessary to be done on his part for the carrying out of that thing, though there may be no express words to that effect". And in Secured Income Real Estate (Australia) Limited v St. Martins Investments Pty Limited (1979) 144 CLR 596 at 607 Mason J (with whom Gibbs, Stephen and Aickin JJ agreed) approved an earlier statement of Griffith CJ formulating the rule in the following terms: It is a general rule applicable to every contract that each party agrees, by implication, to do all such things as are necessary on his part to enable the other party to have the benefit of the contract. It will be observed that in both of these authorities the principle is expressed in terms of an obligation owed by each of the parties. And an important question in the case was whether there was any basis on which the magistrate could be said to have erred in law in not finding that the Defendants were in breach of this implied obligation. 16 Before turning to the magistrate's reasons, which are very brief, it is necessary to see whether the implied term in question was pleaded. I have already set out those terms that were pleaded. Paragraph seven propounded a term that the Defendants would make the development application, but this is not the general obligation in question, and the magistrate, on the firm basis of the written contract, concluded that it was for the Plaintiff to prepare the development application, which it failed to do until far too late. Not only that; the application it did prepare at the heel of the hunt was not shown to have any prospect of being approved. 17 Then an implied term was pleaded in paragraph eight which, again, was of a specific nature and, in the altogether unqualified form in which it was pleaded was rejected by the magistrate. Such an unqualified obligation would plainly have been quite draconian. 18 As I have said, the case proceeded over a lengthy period, with adjournments, and on the final day of the hearing the magistrate sat, as appears from a comment made by counsel at the time, until nearly 7pm on a Friday in order to finish the matter. In those circumstances, it is perhaps not surprising that the ex tempore reasons are brief, and I have found it desirable, if not absolutely necessary, to read them in the light of the very thorough and lengthy argument that preceded them. I think his Worship was entitled to expect brief references to the issues to be so understood. At the same time, it cannot be assumed that everything said arguendo, perhaps by way merely of testing a proposition, could be taken to have been adhered to and incorporated in the ultimate decision. With these comments, I set the decision out: The Plaintiff fails. I think that so far as the last point is concerned [this was, as appears from the record of the argument, a contention by counsel for the Plaintiff that the requirement relating to the development application had been fulfilled by the late lodgement of the application which could not be approved because by then Mr Johnson's application had been lodged] that the obligation which appears in the August 1993 letter, or at least the condition of payment, is the DA being approved and it does not matter that another one was put in or, indeed, that the Plaintiffs did some work on the right one because it had to be approved, and if it had been alleged that there was a breach by the Duncansons (who I do think, by the way, were personally responsible) but if there had been a breach in the sense of pulling the plug [this was a phrase which had repeatedly been used in the argument to refer metaphorically to the taking of a step which would prevent further performance of the contract on the part of the other party] then that would have attracted a right to damages. That would then still have raised the problem of the mutuality of implied terms requiring a similar, or a part of the implication, that the Plaintiffs themselves not drag the chain, and they did, but I do not need to explore that because there is no such claim. This is not a court of strict pleading but the case simply did not proceed on the basis that there was such a claim and as a result the Plaintiffs fail. 19 I had the benefit of very able argument from counsel for the Appellant, who contended that no clear and satisfactory meaning could be given to the magistrate's reference to the possibility of "a breach in the sense of pulling the plug" and "the problem of the mutuality of the implied terms requiring a similar, or a part of the implication, that the Plaintiffs themselves not drag the chain". Counsel also disputed the proposition that there was "no such claim". 20 So far as the reference to mutuality is concerned, this is one of the aspects of the judgment most readily clarified by reference to the argument. Upon a reading of the transcript, it is quite clear that the magistrate was not referring to any equitable doctrine of mutuality, but was simply using the word to refer to the reciprocity of obligation expressed by Lord Blackburn in Mackay v Dick and by Griffith CJ in the passage quoted by Mason J in Secured Income Real Estate (Australia) Ltd v St. Martins Investments Pty Ltd. In my opinion, when the magistrate said "but if there had been a breach…" he was plainly enough saying by implication that there had not been a breach of the kind to which he was referring. Although his opinion seemed to have wavered in the course of the argument, and he had some difficulty with the proposition, which he plainly in the end did accept, that the Plaintiff had to show approval of the development application in order to earn its remuneration, the transcript does show he was firmly of the opinion, from which there is no sign of his retreating, that Mr Duncanson was "morally clearly in the right". If, he said, "the onus was on the Plaintiff to do the DA…, he's nudging them when he can, they're not doing it, and then in desperation, because he's broke - he has an urgent need for money because the bank is chasing him - he says, 'bugger it, I've got to settle this', and he sells it. Now, if this was a court of morals I'd say he is entirely within his right." In that passage, the magistrate plainly accepts Mr Duncanson's evidence that his position had become "desperate". But his Worship went on to indicate that he was troubled, at the same time, about what he saw as the failure of Mr Duncanson to "put the Plaintiffs on notice of his desperate financial position" and whether he was "entitled legally to pull the plug". However, he invited counsel for the Defendants to put to him "anything that will help in that regard, that will give legal effect to the moral entitlement that I've mentioned". Counsel did put matters pointing to the Plaintiff being actually on notice of the Defendants' situation, and referred his Worship to Mr Duncanson's evidence that, even at the time of the negotiation with Mr Johnson and before Mr Johnson's development application was lodged, he also "instructed, orally, the Plaintiffs to get a move on to lodge their application, that is the development application contemplated by the contract". The magistrate did acknowledge, in response, the accuracy of this submission. As I have noted earlier in these reasons, the Plaintiff's director, Mr Trainor, had in fact admitted being on notice, at least from the end of 1995, of the mortgagee's pressure on the Defendants, but he had taken the unjustified view that he was entitled to relegate the work to "if and when we had spare time"! 21 In the light of those aspects of the argument, and the strict implication to be drawn from the words of the judgment "but if there had been a breach…", it seems to me the magistrate should be understood as having held that there was not in fact a breach by the Defendants of any obligation of the kind stated in Mackay v Dick. That conclusion seems to me to have been correct, but at any rate it was open, and it involved a conclusion of fact falling squarely within the principles to which Sully J referred in Carr v Neill. 22 Furthermore, I think the magistrate was also right in his observation that the pleading of implied terms by the Plaintiff failed to identify any claim upon the relevant principle, which was not so one-sided or so rigid as to bind the Defendants to act as the Plaintiff claimed they should in the situation the Plaintiff had itself created by its inaction and insistence that the contract left it free to proceed "if and when" it had "spare time". 23 Although counsel for the Plaintiff put an argument to me that he should have succeeded upon a quantum meruit, it seems to me this claim could not have succeeded upon the pleading and in the teeth of the contract which provided for payment of an increased price in one eventuality (which did not occur) and for out-of-pocket expenses only, which were paid, in the other eventuality that did occur. 24 For these reasons, the Plaintiff's summons should be dismissed with costs.

Buttsworth Trainor Pty Limited v Duncanson

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Judgment (9 paragraphs)

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Legislation Cited (1)

Cases Cited (5)