Camberfield Pty Ltd v Klapanis & Ors [2004] VSCA 104

Court of Appeal (Vic)|2004-05-21|Before: WINNEKE, P., BATT, J.A. and DODDS-STREETON, A.J.A.

Practice and Procedure - Summary judgment on merits - For defendants - Contract of sale of land and additional contract in form annexed, each supported by guarantee - Whether guarantee of former also extended to latter.

I will invite Batt, J.A. to give the first judgment in this matter.

Special Condition 13 required the company purchasers to procure the execution by each of their respective directors of a guarantee which was then set out. It read:

"We, Jim Klapanis and Rita Klapanis ... the directors of Pacific Grace Pty. Ltd. and We, Joseph Michel Cusmano and Salvatore Michael Cusmano ... the Directors of Vimplane Pty. Limited (hereinafter called 'the Guarantors') IN CONSIDERATION of the within-named Vendors described in the within Contract of Sale for the price and upon the terms and conditions therein set forth DO HEREBY for ourselves, our respective Executors, and Administrators jointly and severally covenant with the said Vendors that if at any time default shall be made in the payment of the deposit or residue of the purchase money or interest or other moneys payable by the Purchaser to the Vendors under the within Contract of Sale or in the performance or observance of any term or condition of the within Contract to be performed or observed by the Purchaser we will forthwith on demand by the Vendors pay to the Vendors the whole of such deposit, residue of purchase money, interest or other moneys which shall then be due and payable to the Vendors and will keep the Vendors indemnified against all loss or purchase money, interest and other moneys payable under the within Contract and all losses, costs, charges and expenses whatsoever which the Vendors may incur by reason any default as aforesaid on the part of the Purchaser. This Guarantee shall be a continuing Guarantee and shall not be released by any neglect or forbearance on the part of the Vendors in enforcing payment of any of the moneys payable under the within Contract or the performance or observance of any of the agreements, obligations or conditions under the within Contract or by time being given to the Purchaser for any such payment, performance or observance or by any other thing which under the law relating to sureties would but for this provision have the effect of releasing us our Executors, Administrators and Assigns."

In the statement of the consideration in Special Condition 13 some words appear to have been omitted after the word "Vendors", such as "agreeing at the request of the guarantors to sell the land". Neither party suggested that this obvious omission affected the guarantee or the appeal. That clause was on 16 June 1998 executed under seal as it stood in the contract by each of the guarantors.

The purchase has been settled by payment of $1 million (plus adjustments) to the appellant, vacant possession of the Campbellfield property given to the purchasers, and a transfer dated 10 July 1998 to them as tenants in common in unequal shares for $1 million registered on 18 February 1999. The respondents assert that their obligations under the guarantee are now at an end.

The matter is, however, as the primary judge stated in his succinct and admirable judgment (from which my statement of facts is largely taken), complicated by Special Conditions 10, 11 and 12. They provided as follows:

"10. The Purchaser shall sign an additional contract in the form annexed hereto and shall exchange parts thereof contemporaneously for the payment of the residue under this Contract on the settlement date. 11. The obligations imposed by and under the additional contract referred to in clause 10 hereof shall be guaranteed by Dimitrios Klapanis jointly and severally with the tenants in common of the property situate at and known as 24 Bonview Road, Malvern who shall each charge their right title and interest in the said property in favour of the vendor and/or its nominee so as to secure and guarantee the obligations imposed by the additional contract and shall also in order to further support and guarantee such obligations shall also procure and provide a bank guarantee from the Westpac Banking Corporation (or such other bank as may be approved by the vendors) in the sum of not less than $150,000.00 and in a form to be approved by the Vendor. Provided that the liability of the said PARASKEVI FOUSTANIS of 17 Brisbane Street, Murrumbeena, HRYSOULA KATSONOS of 65 Wheatland Road, Malvern and ANTONIA PEPPAS of 65 Wheatland Road, Malvern shall be absolutely limited to the value of their interests in the property at 24 Bond View Road, Malvern. 12. Clause 8 to 12 of this Contract shall not merge on completion of the sale of the land."

The tenants in common of 24 Bonview Road, Malvern, were Dimitrios Klapanis (the same person as Jim Klapanis mentioned in Special Condition 13) and the three persons named towards the end of Special Condition 11.

In accordance with Special Condition 10 an additional contract was entered into in the form annexed to the contract of sale. As it provided, it was executed only by Dimitrios Klapanis, the respondents, Portelli and (presumably) the appellant. It, too, was dated 16 June 1998 and provided for the payment by the purchasers to the appellant of $400,000 on or before the third anniversary of the date of its execution and that was guaranteed by the four persons specified in Special Condition 11 of the contract of sale,[2] Dimitrios Klapanis and the respondents, who in addition charged their interests in the Bonview Road property to secure their liability as guarantors. The recitals to the additional contract stated amongst other things that it was noted that Vimplane Pty Ltd, one of the purchasers of the land, was not a party to this agreement; that the purchasers had requested that a consideration of no more than $1 million be indicated on the contract whereas the actual consideration for the sale was $1,400,000; and that the vendor had agreed not to require payment of $400,000 by the purchasers on completion, but had agreed to allow them to pay that sum no later than three years after the date of completion of the sale. [3]

The appellant by its amended pleading claimed that default had occurred under the additional contract in that $350,000 together with interest of $94,120.27 remained unpaid as at 28 August 2001 with further interest accruing at $117.95 per day. The appellant further claimed that the respondents were liable as guarantors with respect to that default by reason of the guarantee contained in Special Condition 13 and executed by them and demand thereunder upon them.

That claim seems to have occurred to the appellant's advisers only in early 2003, shortly before the writ and pleading were amended. (A claim against Portelli as guarantor was added at the same time.) Significantly, the proceeding had from its inception included a claim against guarantors in respect of the obligation to pay the further $400,000. But that was claim under the additional contract and against the four tenants in common of the Bonview Road property.

The respondents applied for dismissal of the proceeding or judgment under Rule 23.03 of Chapter I of the Rules or alternatively for its dismissal or permanent stay under Rule 23.01(1)(b) or (c). A judge of the Trial Division, reversing a Master, gave summary judgment for the respondents and dismissed the proceeding against them with costs. It is clear that his Honour acted under Rule 23.03, which provides, in substance, for summary judgment for a defendant if it appears that the defendant has a good defence on the merits. From his Honour's order the appellant now appeals. It was accepted on all sides that, that having been what his Honour decided, leave to appeal was not required, and the Court proceeded on that basis.

His Honour began his judgment by referring to the contention of the respondents that the claim was "absolutely hopeless", to echo the language of Dixon, J. in Dey v. Victorian Railways Commissioners[4], setting out a further and well known passage from that judgment, in which Dixon, J. said that a case must be very clear indeed to justify summary intervention under the inherent jurisdiction and that "once it appears that there is a real question to be determined whether of fact or law and the rights of the parties depend on it, then it is not competent for the court to dismiss the action". The primary judge in this case also set out the equally well known passage from the judgment of Barwick, C.J. in General Steel Industries Inc v. The Commissioner for Railways (N.S.W.) [5], in which the Chief Justice stressed the great care which must be exercised to ensure that under the guise of achieving expeditious finality a plaintiff is not improperly deprived of his opportunity for the trial of his case by the appointed tribunal, but went on to state that the exercise of the jurisdiction should not be reserved to those cases where argument was unnecessary to evoke the futility of the plaintiff's claim. I bear the principles stated in those cases steadily in mind.

His Honour after setting out the facts and the relevant provisions of the documents turned to the appellant's claim that the respondents were liable as guarantors with respect to the default under the additional contract by reason of the guarantee contained in Special Condition 13 of the contract of sale. In his Honour's view this construction of the guarantee was "simply not open". His Honour gave four reasons, namely:

(a) The default was not with respect to "the deposit or residue of the purchase money or interest or other moneys payable by the Purchaser to the Vendors under the within Contract of Sale" (his Honour's emphasis).

(b) The purchaser had not defaulted "in the performance or observance of any term or condition of the within Contract to be performed or observed by the purchaser". The purchaser as defined (or, more accurately, one of them) did sign and exchange parts of the additional contract in accordance with Special Condition 10 of the contract of sale. Special Condition 10 had thus been performed. The breach which had occurred was with respect to the conditions of the additional contract.

(c) The respondents were not nominated as guarantors of the additional contract under Special Condition 11 of the contract of sale. Special Condition 11 was entirely consistent with the terms of the additional contract and the separate guarantees created thereunder. In short, there were two agreements and two sets of separate guarantees.

(d) The obligations created under the contract of sale merged in the transfer of land pursuant to it.

His Honour referred to the submission from the appellant that the use of the phrase "for the payment of the residue under this contract" in Special Condition 10 extended the meaning of "residue of the purchase money ... payable by the purchaser to the Vendors[6] under the within Contract of Sale" in the Special Condition 13 guarantee. He rejected that argument because Special Condition 10 required the execution and exchange of an additional contract between parties in part different from those to the contract of sale. It did not require the payment of money. The residue payable on the settlement date referred to in Special Condition 10 was $900,000 payable upon the date upon which vacant possession must be provided. The residue had been paid.

His Honour accepted a submission put to him that extrinsic evidence might be admissible to resolve the meaning of a written agreement and even that evidence as to the subjective intentions of the parties might in some circumstances be relevant. He was, however, concerned with the terms of the guarantee the language of which was unambiguous and clear. It related to the performance of the contract of sale and not to the additional contract and, by implication, extrinsic evidence could not show that it extended to the additional contract.

Leaving aside the question of merger, it might be sufficient to say that, in my opinion, his Honour was correct for the reasons which he gave. However, out of deference to the appellant's argument on the appeal I shall deal with it. But I shall first make some observations of my own on the construction of the documents.

I have already indicated that I agree with his Honour's view that there is no ambiguity. But, even if there were, that would not be enough for the appellant because, as four members of the High Court stated in Ankar Pty Ltd v. National Westminster Finance (Aust.) Ltd[7]:

"At law, as in equity, the traditional view is that the liability of the surety is strictissimi juris and that ambiguous contractual provisions should be construed in favour of the surety."

Clause 10 and clause 13 of the contract of sale required the execution of guarantees relating respectively to payment of the sum of $400,000 under the additional contract and to payment of all moneys payable under the contract of sale. The clauses also nominated different set of guarantors for the respective guarantees (save that Dimitrios Klapanis was common to both). This strongly suggests that the clauses are mutually exclusive and that liability as a guarantor of obligations under either contract is confined to the respective clause already identified. In particular, secondary liability in respect of the $400,000 is not to be found in clause 13 or the guarantee for which it provides. All this stems from the basal, and (for the appellant) ineluctable, distinction drawn in the contract of sale between "the within Contract" (or "this contract") on the one hand and "the additional contract" (or "the attached Agreement") on the other.

It follows that any arrangement between the vendor and the purchasers for the payment of a further $400,000 in accordance with clause 11 was of no concern to the respondents as guarantors pursuant to clause 13.

The appellant's argument means that Dimitrios Klapanis guaranteed the $400,000 obligation pursuant to two clauses, which might be thought unlikely to have been intended.

Further to the appellant's reliance on clause 10 of the contract of sale, the appellant might say that the words "for the payment of the residue under this Contract" in Special Condition 10 might be read as describing the "additional contract" or as denoting purpose, with the word "contemporaneously" having implied in it contemporaneity with the execution of the contract of sale. On that view "residue" would include the $400,000. But the difficulty with that reading is that, besides its straining of the order of the words, the additional contract provided for payment three years after the date of those documents, that is, well beyond the settlement date. The better view is that the word "for" is a blemish for the word "with", so that the purchaser was not obliged to sign the additional contract until paying the residue under the contract of sale, though it was in fact signed much earlier.

It will be apparent that I consider that there were two contracts, as indeed clause 10 recognises. After all, the parties were different. The form of additional contract that was bound in was naturally bound in because it was a pro forma annexed to the contract of sale, as the words "in the form annexed" (my emphasis) show. It was not executed. A separate document was. The binding in of the various documents does not make the two contracts, when executed, one. The binding in did not make the obligation to pay the $400,000 part of the contract of sale.

I now turn to the appellant's arguments before us. It was contended that his Honour's reasoning was erroneous in that:

(i) (a) it ignored the fact that the "contract of sale" incorporated the "attached copy Agreement", which, it was said, was physically contained within the pages of the contract of sale [8]and which stated categorically that "the actual consideration for the sale is $1,400,000";

(b) it ignored the qualified nature of the statement of purchase price, which was qualified by virtue of the cross-reference to clause 10 and to the "attached copy Agreement";

(ii) his Honour proceeded on the assumption that the statement of purchase price was to be construed in isolation from the rest of the document;

(iii) his Honour assumed, without knowing what extrinsic evidence might be available, that no extrinsic evidence could affect the interpretation to be given to clause 13;

(iv) [this point was abandoned];

(v) his Honour had misunderstood the ambit of the doctrine of merger.

In elaboration, it was said that clause 13 read in the context of the contract as a whole was not clear and unambiguous, for on such a reading the purchase price was $1,400,000, the deposit was $100,000, the residue was $900,000 plus $400,000 payable as to $900,000 on or before 16 August 1998 and as to $400,000 three years after completion of the sale; that the signatories to the "attached document" guaranteed only the payment of the sum of $400,000, whereas the signatories to clause 13 guaranteed payment of the deposit, residue, interest, and "other moneys which shall then be due and payable to the Vendors", that is, "other moneys payable by the Purchaser to the Vendors under the within Contract of Sale". It was put that the sum claimed by the appellant was either part of the residue of the purchase price or "other moneys payable under the within Contract". It was contended that there were no such "other moneys" than the $400,000 since the deposit, the residue and interest were already covered. For a number of reasons, this argument cannot be accepted. First, reading the contract of sale and the additional contract together reverses and so sets at naught the very purpose of the vendor and purchasers or their principals in separating the payment of the further $400,000 from the payment of the $1 million in order that the need to give the purchasers time to pay the further $400,000 should not make the contract of sale into a terms contract with the risk of infringing the Prostitution Control Act 1994. Secondly, it is only by amalgamating the two contracts that anything can be said in favour of the view that clause 13 is not clear and unambiguous. Thirdly, to read the expression "residue" in the contract of sale as denoting $1,300,000 is to fly in the face of the specification, for the purposes of that document, of the word as being $900,000, as set out in the Particulars of Sale towards the front of the contract. The expression "residue of the purchase money" in clause 13 of that very document must have the specified meaning or denotation. Further, if the residue was $1,300,000 the "price", that is, "the purchase price", must have been $1,400,000, which, again, is contrary to the specification of Price in the Particulars of Sale. More importantly, it would mean that the purchasers were not entitled to vacant possession under the entry in the Particulars opposite "Settlement Date" until payment of $1,400,000, which is inconsistent with the object of the parties, their subsequent conduct, and indeed with the second last recital to the additional contract. Fourthly, it was natural that the signatories to the attached document guaranteed only payment of the sum of $400,000 (with certain incidental other moneys, such as interest), as the signatories to the clause 13 guarantee had guaranteed payment of all moneys payable under the contract of sale. Fifthly, the sum of $400,000 was not "other moneys payable under the within Contract" within the meaning of clause 13, both because that expression refers to moneys which are not part of the purchase price but are incidental, or ancillary or additional moneys payable and because the natural meaning of the adjective "within" was that it referred to the very contract of sale and not to a contract which the document containing clause 13 described as "attached" and "annexed". Finally, the expression "other moneys payable under the within Contract" is apt to cover adjustments of outgoings. In any event, it is a compendious expression inserted for completeness as a matter of caution. [9]

It was then submitted that, in order to determine what was intended by the complex document which was the contract of sale in this matter (which I take to mean the two documents conflated into one), it was both proper and necessary to look at extrinsic evidence, and cases were recited. It was said that reference to extrinsic material, such as memoranda of advice, the conveyancing files of the solicitors including correspondence between them, the transfer lodged for registration and correspondence (if any) with the Stamps Office, all considered in the light of the provisions of s.75 of the Prostitution Control Act 1994, "might well have cast" some light on the objective intentions of the parties, and would have assisted in determining the meaning of clause 13. The submission was cast in the language of possibility. It was speculative. The Court was not referred to any specific passage in the documents catalogued. There was no suggestion that they were not available for use before his Honour, if necessary on subpoena and no doubt subject to any claim for legal professional privilege. It is not, in my opinion, open to a plaintiff faced with an application by a defendant for summary judgment on the merits under Rule 23.03 to claim to be entitled to defer to trial production of extrinsic material available to it that might show that its case is not hopeless. It might have been different if counsel then appearing for the appellant had sought, and been refused, an adjournment or a reference from the Practice Court (where the application was heard) into a list in order to procure particular documents or groups of documents or to cross-examine deponents. But we were informed without objection that this had not occurred. In fact, as Mr Bevan-John stated, his Honour was being asked by the parties to act on the material they had chosen to put before him, to some of which counsel took this Court.

Finally, it was pointed out that summary judgment should be given in favour of the defendant only if it is inevitable that a trial court after a full hearing would find for the defendant, reference being made to Webster v. Lampard [10] and Lindon v. The Commonwealth [No.2] [11] in addition to cases referred to earlier. As will be

apparent, I accept the proposition. It follows from what I have already said, however, that I do not accept the appellant's concluding submission that on no view of the material could it be said either that his Honour had before him the requisite material and the necessary assistance from the parties to reach a definite and certain conclusion; or that it was inevitable that a trial court after a full hearing would find against the appellant; or that the plaintiff's case was hopeless. His Honour was, I consider, entitled to reach "a clear decision which could not be altered by any evidence which could be adduced at the trial", to adopt the language of Latham, C.J. in Dey[12]. Leaving aside merger, for the reasons I have given the suggested errors in his Honour's reasoning enumerated earlier were not made. I do not find it necessary to consider whether his Honour was correct on the question of merger, but I point out that the anti- merger clause did not relate to clause 13.

For these reasons, in my judgment the appeal should be dismissed

I agree, for the reasons given by Batt, J.A., that the appeal should be dismissed. In particular, I agree with his Honour and endorse his Honour's conclusion that this was an application where the trial judge was entitled "to reach a clear decision which could not be altered by any evidence which could be adduced at the trial", to adopt the words of Latham, C.J. in Dey v. Victorian Railways Commissioners.

I agree with Batt, J.A. that the appeal should be dismissed for the reasons his Honour has given.

The formal order of the Court is that the appeal is dismissed.

The formal order of the Court is that the appeal is dismissed with costs.

[1] Alongside the price so stated in the Particulars of Sale were the words "Refer to Special Condition 10 and attached copy Agreement"

[2] They were described as Dimitrios Klapanis jointly and severally with the tenants in common of 24 Bonview Road, Malvern. Dimitrios Klapanis was in fact one of those tenants in common. This was but one of the blemishes, or worse, in the documents. A further guarantor of the payment of the $400,000 was Andrew Portelli, but he was also primarily liable as one of the purchasers. Again, Vimplane Pty Ltd, though included in the definition of "the purchaser" in the additional contract, was not a party to it, as indeed a recital noted. Nor was it executed by Pacific Grace Pty Ltd.

[3] Although Special Condition 10 of the contract of sale, on the interpretation I adopt below, only required execution of the additional contract on the date of completion of the sale, the latter was in fact executed on the same day as the contract of sale, so that time for payment of the $400,000 was two months shorter than the recital contemplated.

[8] More accurately, the following were stapled and taped together in the following order: The contract of sale, the pro forma annexed or attached additional contract, the inventory, and the vendor's statement. The totality was intituled "Contract of Sale of Real Estate", but clearly that description could not be decisive, for the vendor's statement is not contractual, as opposed to representational.

[9] The appellant attempted to raise an ambiguity by reason of the variance between "the within Contract of Sale" and "the within Contract". There is none. Although in a well- drawn document different expressions prima facie have different meanings, this document does not qualify as a document to which that principle is applicable and the two expressions mean the same.

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Judgment (50 paragraphs)

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