ARNOLD EDWARD DANIELS (by his Guardian Ad Litem THE PUBLIC TRUSTEE)

Jurisdiction : DISTRICT COURT OF WESTERN AUSTRALIA

Citation : DANIELS by his Next Friend THE PUBLIC TRUSTEE -v- DANIELS [2007] WADC 118

Contract - Construction of written contract - Terms contract - Proper construction of clauses for the payment of the purchase price and other amounts - Proper construction of general conditions for the payment of interest - Whether interest payable under the contract on unpaid amounts - Whether interest payable under s 32 of the Supreme Court Act 1935 (WA) on unpaid amounts

Supreme Court Act 1935 (WA) s 32

3 BUSS JA: The respondent and the appellant are father and son, respectively.

4 At all material times before 19 June 1998, the respondent was the registered proprietor of Oldfield Locations 21, 37 and 38 (the Land). At all material times, the Land and other parcels of land in the vicinity have been worked as a farm.

5 By an agreement dated 11 September 1997 (the Lease Agreement), the respondent leased the Land to the appellant. The relevant terms of the Lease Agreement are these:

(a) The commencement date of the lease was 1 September 1997 (cl 1).

The Term of this Lease is ONE (1) YEAR AND EIGHT MONTHS commencing on the 1st day of September 1997 and expiring on 30th April 1999 with an Option thereafter on a yearly basis during the lifetime of the Lessor terminating on the 30th day of April in the year following the death of the Lessor.

(c) The rent was $20,000 per annum, payable monthly in advance by instalments of $1,667, commencing on the commencement date, with subsequent instalments due on the first day of each month throughout the term (cl 5).

If the Lessee fails to pay to the Lessor any monies which are payable by the Lessee to the Lessor under the terms of this Lease within FOURTEEN (14) DAYS from the due date for the payment thereof the Lessee shall pay to the Lessor interest thereon or on so much thereof as shall remain unpaid from the due date or dates for the payment thereof until the monies are actually paid AND also pay interest upon any judgment which the Lessor may obtain against the Lessee from the date of any such judgment until the judgment is satisfied at the rate of TWELVE PERCENT PER ANNUM (12%) for the period which any such payment remains overdue or any such judgement unsatisfied.

(e) The respondent granted the appellant a right of first refusal to purchase the Land for a price to be negotiated between the parties (cl 15).

6 Before the signing of the Lease Agreement, the appellant had carried on a farming business on the Land in partnership with his parents for about 20 years. Before the commencement of the partnership, the appellant had worked on the farm as an employee for about 10 years.

7 By an agreement dated 25 February 1998 (the Sale Contract), the respondent agreed to sell and the appellant agreed to purchase the Land. The Sale Contract was on a printed standard form which was described as a 'contract for sale of land by offer and acceptance'. A schedule in the contract set out, relevantly, the purchase price (namely, $300,000), the manner of payment of the purchase price (namely, by a deposit of $1,000 which was said to have been 'paid herewith') and the settlement date (namely, 31 March 1998).

8 By special condition 3 of the Sale Contract, the Law Society of Western Australia (Inc) and the Real Estate Institute of Western Australia (Inc) 1994 Joint Form of General Conditions for the Sale of Land (the General Conditions) were incorporated in the contract. It was stipulated that the General Conditions applied to the sale 'so far as they are not varied by or inconsistent with the express terms hereof'. There were other special conditions of relevance as follows:

1. The Vendor agrees to accept the sum of FIFTY THOUSAND DOLLARS on the 1st day of March 1998 less any deposit paid on signing this Contract and the balance of money by annual payments of Fifty Thousand Dollars on the 1st day of March 1999, 2000, 2001, 2002 and 2003 free of interest BUT it is agreed that the Purchaser can discharge the outstanding balance of money at any time prior to the 1st day of March 2003 should funds become available.
2. The Purchaser undertakes to continue the rental payments under the Lease Agreement until the total purchase price has been paid under this Contract.
3. The Vendor confirms that he wishes to sell the land and the Purchaser hereby exercises his right of first refusal.

9 The relevant provisions of the General Conditions are condition 4 (which is concerned with settlement), condition 5(1) (which is concerned with a delay in settlement for any reason not attributable to the vendor and the payment of interest), condition 6 (which is concerned with possession), condition 15 (which is concerned with terms contracts) and condition 24(1) (which is headed 'interpretation'). I will refer to some of these conditions in detail later in these reasons.

10 Settlement under the Sale Contract occurred, at the latest, on 19 June 1998. On that date, the Land was transferred to the appellant, pursuant to a memorandum of transfer dated 31 March 1998, and he became the registered proprietor of the fee simple estate under the Transfer of Land Act 1893 (WA).

11 On 24 February 2004, the respondent (as plaintiff) commenced proceedings in the District Court against the appellant (as defendant).

12 In his statement of claim dated 15 June 2004, the respondent pleaded the Lease Agreement and the Sale Contract. He then pleaded breaches by the appellant of the Sale Contract, as follows:

1. The Defendant has failed, refused and/or neglected to make payment to the Plaintiff of the sum of $21,000.00 due pursuant to [special condition 4] of the Sale Contract ... on account of the purchase price of the land.

Particulars

The Defendant has made payments to the Plaintiff of:

(i) $49,000.00 on 9 April 1998;

(ii) $30,000.00 on 1 June 1999;

(iii) $50,000.00 on 27 April 2000;

(iv) $50,000.00 on 26 April 2001;

(v) $100,000.00 on 10 December 2002

Being a total of $279,000.00

1. The Defendant has failed, refused and/or neglected to make payment to the Plaintiff of the sum of $98,353.00 due pursuant to the Lease in accordance with [special condition 5] of the Sale Contract ...

Particulars

Particulars of the outstanding payments and sums due pursuant to the Lease are set out in the separate document served together with the Statement of Claim pursuant to Order 20 rule 13(2) of the Rules of the Supreme Court.

1. On 19 June 1998 the Defendant became registered as the owner of the Land pursuant to a written transfer of land dated 31 March 1998 and registered with the Land Titles Office, Perth, being registered dealing number G824492.
2. Pursuant to [special condition 5] of the Sale Contract ... additional sums will continue to accrue due and payable by the Defendant to the Plaintiff in accordance with [clauses 5 and 14] of the Lease ... until such time as the amount pleaded in paragraph 6 herein is paid in full.

(a) the sum of $21,000 pursuant to the Sale Contract;

(b) interest on all such sums outstanding from time to time pursuant to paragraph (a) above at the rate of 15% per annum pursuant to the Sale Contract ... or alternatively at the rate applicable pursuant to section 32 of the Supreme Court 1935 (as amended);

(c) the sum of $98,353.00 pursuant to the Lease and Sale Contract;

(d) interest on all such sums outstanding from time to time pursuant to paragraph (c) above at the rate of 12% per annum pursuant to clause 14 of the Lease ... or alternatively at the rate applicable pursuant to s 32 of the Supreme Court Act 1935 (as amended);

(e) a declaration that until the sum of money referred to in paragraph (a) above is paid in full the Defendant is required to continue to make payment of the sum of $1,667.00 per calendar month on the first day of each month, in accordance with and to otherwise observe and perform the terms of the Lease; and

(f) costs.

14 On 3 September 2004, the respondent obtained an order for summary judgment from a deputy registrar of the District Court in respect of part of his claim. The amount for which summary judgment was obtained was $20,000, being the balance of the purchase price which, on the appellant's then defence, was admitted to be due and payable. The appellant obtained an order staying enforcement of the judgment for $20,000 until further order of the court. When the action was tried, the appellant had still not paid the $20,000 or any part of it.

15 The appellant filed a substituted defence dated 12 July 2007.

16 In par 4.1 of the substituted defence, the appellant alleged that, in addition to the $279,000 acknowledged by the respondent in par 6 of the statement of claim, the appellant had paid to Richard Thomas, the respondent's agent and solicitor, on 15 September 1997, $1,000 being the deposit payable under the Sale Contract.

17 In par 5 of the substituted defence, the appellant pleaded that:

5.1 on a proper interpretation of the Sale Contract, from settlement until the Lease expiry date, in addition to the purchase price the defendant was obliged to pay the amounts equal to the monthly rental payments (additional amounts) provided for in the Lease on the dates upon which they would have been due;

5.2 between settlement and the Lease expiry date the defendant paid the additional amounts except for $1,667 which was due on 1 April 1999; and

5.3 on this interpretation of the Sale Contract, the defendant is liable to pay to the plaintiff:

5.3.1 $20,000 in respect of which judgment has been obtained;

5.3.2 $1,667; and

5.3.3 interest

18 On 5 July 2007, the District Court action was tried before Commissioner Stevenson.

19 There were, in essence, three issues at trial. First, what was the proper construction of special condition 5 of the Sale Contract? Secondly, did the parties execute the Sale Contract on 15 September 1997 (as the appellant contended) or on 25 February 1998, being the date which the Sale Contract bears (as the respondent contended)? Thirdly, did the appellant pay the $1,000 deposit under the Sale Contract on 15 September 1997 or at all?

The learned commissioner's findings on the disputed issues of fact

20 The learned commissioner found that the appellant did not pay the deposit of $1,000 under the Sale Contract on 15 September 1997 or at all [21]. His Honour also found that the Sale Contract was signed by the parties and witnessed by Mr Thomas (who prepared the document) on the date it bears, namely 25 February 1998 [21]. These findings of fact were not challenged before this court.

The learned commissioner's construction of special condition 5 of the Sale Contract

21 The appellant did not dispute at trial that special condition 5, properly construed, contains an obligation on his part to continue to make 'additional' payments to the respondent; that is, payments in addition to the purchase price of $300,000. Also, the appellant did not dispute that the amount of the 'additional' payments was defined by reference to the 'rental payments' under the Lease Agreement, namely $20,000 per annum payable monthly in advance by instalments of $1,667 per month. The dispute between the parties was whether the appellant's obligation ceased on the expiry of the term of the Lease Agreement or whether it continued until the whole of the purchase price specified in the Sale Contract (that is, the $300,000) was paid to the respondent.

22 The learned commissioner held that the appellant's obligation to make the 'additional' payments continued until the whole of the $300,000 was paid. His Honour's reasoning was as follows:

in my opinion, the language of the contract is clear and unambiguous. It is only when regard is had to the relationship between the parties and one tries to put this against the literal and plain meaning of the language that any doubt can be seen to be created. Even then there is not sufficient doubt to create any proper ambiguity.

The defendant accepts that the purchase of the freehold of the Land did not merge the Lease Agreement obligation to make the monthly payments to the plaintiff and that this obligation to make what was described as 'additional payments' to the purchase price was ongoing. As mentioned the issue is when the obligation ceased. Condition 5 plainly says that the obligation to make the monthly payments of $1667 continues 'until the total purchase price has been paid'. To contend that the obligation to make the payments ceased on the expiry of the lease period would mean that this part of Condition 5 was otiose.

For these reasons, in my opinion, the construction of Condition 5 of the Sale Contract as contended for by the plaintiff is the proper construction which must be applied, and was objectively the intention of the parties at the relevant time. It follows because the defendant on his own admission has not paid the 'total purchase price' payable under the Sale Contract that he is liable to pay to the plaintiff continuing amounts of $1667 per month from 1 April 1999 being the date up to which the payments were made [33] - [35].

23 The learned commissioner entered judgment for the respondent in the sum of $99,353. That sum was in addition to the $20,000 payable by the appellant pursuant to the judgment and orders of the deputy registrar made on 3 September 2004.

(a) the sum of $20,000.00 payable by the Defendant to the Plaintiff pursuant to the judgment and orders of Deputy Registrar Hewitt made 3 September 2004; and

(b) the further sum of $1,000.00 being part of the judgment sum provided for in paragraph 1 herein,

the Defendant is required to continue to make payment to the Plaintiff of the sum of $1,667.00 per calendar month on the first day of each month from and including 1 March 2004.

25 When the learned commissioner delivered his reasons for decision, counsel for the respondent moved for judgment including an order for interest on the amounts which his Honour found were owing by the appellant at the rate of 15% per annum. The motion for interest was based in part on the appellant's admission in his substituted defence of the allegations in par 5(d) of the statement of claim. In par 5(d) it had been pleaded that it was a term of the Sale Contract that the appellant would pay the respondent interest on any outstanding amounts under the Sale Contract at the rate of 15% per annum. Counsel for the appellant acknowledged this admission but asserted it was made in error, and sought leave to amend the substituted defence to withdraw the admission. After hearing oral argument, his Honour gave the appellant that leave. The parties then provided written submissions on whether interest should be awarded.

26 The learned commissioner refused to allow the respondent interest on the amounts which his Honour found were owing by the appellant and in respect of which he entered judgment. His Honour's reasons for refusing pre-judgment interest were these:

The annual payments of $50,000 are expressed by [Special] Condition 4 to be free of interest. [Special] Condition 5 which follows on immediately after [Special] Condition 4 then provides for the payment of $1667 per month until the total purchase price has been paid. In my opinion, the proper interpretation of these provisions is that the parties did not contemplate that the defendant would, in addition to the monthly payments while the purchase price was for any amount still unpaid, also pay interest, let alone at the rate of 15 per cent per annum.

In my opinion the objective intention of the parties, according to the proper construction of the Sale Contract, was that no interest would be payable by the defendant on any unpaid purchase monies, only the fixed monthly amount of $1,667 which was payable until the total purchase price was paid [42] - [43].

27 The appellant has appealed. His grounds of appeal read:

1. The Commissioner erred in fact and law when he found special condition 5 of the sale contract to be clear and unambiguous, when he ought to have found that special condition 5 was open to alternative constructions, including that contended for by the appellant at trial.
2. The Commissioner erred in fact and law in failing to consider whether the respective constructions of special condition 5 respectively contended for by the appellant and respondent at trial would result in consequences which were capricious, unreasonable, inconvenient or unjust, when he ought to have done so.
3. The Commissioner erred in fact in failing to prefer the construction of special condition 5 contended for by the appellant at trial, when he ought to have done so.

28 The respondent has cross-appealed on these grounds:

1. The learned Commissioner erred in granting the Appellant leave to:

(a) re-open the trial following the oral delivery of the learned Commissioner's reasons for decision in the case; and thereafter to

(b) withdraw the Appellant's admission of paragraph 5(d) of the Statement of Claim, as contained in paragraph 3 of the Substituted Defence dated 5 July 2007;

1. The learned Commissioner erred in law and in fact in finding that 'the parties did not contemplate that the Defendant would, in addition to the monthly payments while the purchase price was for any amount still unpaid, also pay interest' and should have found that upon a proper construction of the Sale Contract interest was payable on the purchase price instalments of $50,000.00 (or any unpaid portion thereof) whilst the same remained unpaid beyond the respective due dates of such purchase price instalments at the rate of 15% per annum;
2. The learned Commissioner erred in law and in fact in finding that no interest was payable on the unpaid monthly instalments of rent, and should have found that upon a proper construction of the Sale Contract and Lease interest was payable on the monthly instalments of rent of $1,667.00 whilst the same remained unpaid beyond the respective due dates of such monthly instalments of rent at the rate of 15% per annum pursuant to the Sale Contract, or alternatively at the rate of 12% per annum pursuant to the Lease Agreement;
3. In the alternative to paragraphs 2 and 3 herein, the learned Commissioner erred in law in failing to find and ought to have found that interest was payable on;

(a) the purchase price instalments of $50,000 (or any unpaid portion thereof) whilst the same remained unpaid beyond the respective due dates of each such purchase price instalments; and

(b) the monthly instalments of rent of $1,667.00 whilst the same remained unpaid beyond the respective due dates of each such monthly instalments of rent,

at the rate of 6% per annum pursuant to section 32 of the Supreme Court Act 1935.

The proper approach to contractual construction

29 The general principles to be applied in the construction of written contracts are set out in the judgment of Gibbs J in Australian Broadcasting Commission v Australasian Performing Right Association Ltd [1973] HCA 36; (1973) 129 CLR 99:

It is trite law that the primary duty of a court in construing a written contract is to endeavour to discover the intention of the parties from the words of the instrument in which the contract is embodied. Of course the whole of the instrument has to be considered, since the meaning of any one part of it may be revealed by other parts, and the words of every clause must if possible be construed so as to render them all harmonious one with another. If the words used are unambiguous the court must give effect to them, notwithstanding that the result may appear capricious or unreasonable, and notwithstanding that it may be guessed or suspected that the parties intended something different. The court has no power to remake or amend a contract for the purpose of avoiding a result which is considered to be inconvenient or unjust. On the other hand, if the language is open to two constructions, that will be preferred which will avoid consequences which appear to be capricious, unreasonable, inconvenient or unjust, 'even though the construction adopted is not the most obvious, or the most grammatically accurate', to use the words from earlier authority cited in Locke v. Dunlop ((1888) 39 Ch. D. 387, at p. 393), which, although spoken in relation to a will, are applicable to the construction of written instruments generally; see also Bottomley's Case ((1880) 16 Ch. D. 681, at p. 686). Further, it will be permissible to depart from the ordinary meaning of the words of one provision so far as is necessary to avoid an inconsistency between that provision and the rest of the instrument. Finally, the statement of Lord Wright in Hillas & Co. Ltd. v. Arcos Ltd ((1932) [1932] UKHL 2; 147 L.T. 503, at p. 514), that the court should construe commercial contracts 'fairly and broadly, without being too astute or subtle in finding defects', should not, in my opinion, be understood as limited to documents drawn by businessmen for themselves and without legal assistance (cf. Upper Hunter County District Council v. Australian Chilling and Freezing Co. Ltd ((1968) [1968] HCA 8; 118 C.L.R. 429, at p. 437)) (109 - 110).

30 The construction of a written contract is concerned with ascertaining what a reasonable person would have understood the parties to mean. Consideration should ordinarily be given not only to the language of the document, but also to the surrounding circumstances known to the parties, and the apparent purpose and object of the transaction. See Toll (FGCT) Pty Ltd v Alphapharm Pty Ltd [2004] HCA 52; (2004) 219 CLR 165, where Gleeson CJ, Gummow, Hayne, Callinan and Heydon JJ said:

This Court, in Pacific Carriers Ltd v BNP Paribas ((2004) [2004] HCA 35; 218 CLR 451), has recently reaffirmed the principle of objectivity by which the rights and liabilities of the parties to a contract are determined. It is not the subjective beliefs or understandings of the parties about their rights and liabilities that govern their contractual relations. What matters is what each party by words and conduct would have led a reasonable person in the position of the other party to believe. References to the common intention of the parties to a contract are to be understood as referring to what a reasonable person would understand by the language in which the parties have expressed their agreement. The meaning of the terms of a contractual document is to be determined by what a reasonable person would have understood them to mean. That, normally, requires consideration not only of the text, but also of the surrounding circumstances known to the parties, and the purpose and object of the transaction (Pacific Carriers Ltd v BNP Paribas [2004] HCA 35; (2004) 218 CLR 451 at 461 - 462 [22]) [40].

Also see Maggbury Pty Ltd v Hafele Australia Pty Ltd [2001] HCA 70; (2001) 210 CLR 181 [11]; Pacific Carriers Ltd v BNP Paribas [2004] HCA 35; (2004) 218 CLR 451 [22]; International Air Transport Association v Ansett Australia Holdings Ltd [2008] HCA 3; (2008) 82 ALJR 419 [8], [53]; Jumbo King Ltd v Faithful Properties Ltd [1999] HKCFA 38; [1999] 3 HKLRD 757, 773 - 774.

The appeal: the merits of the grounds of appeal

31 It is convenient to consider the appellant's grounds of appeal together.

32 Counsel for the appellant submitted to this court that special condition 5 of the Sale Contract, on its proper construction, imposed on the appellant an obligation to pay amounts equal to the rental payments specified in the Lease Agreement (that is, $1,667 per month), on the dates specified in the Lease Agreement for making those payments, until the earlier of:

(a) the date on which the 1 year 8 month term of the Lease Agreement was due to expire (if the Sale Contract had not been made), namely 30 April 1999; or

(b) the date on which the whole of the $300,000 purchase price under the Sale Contract was paid.

33 In my opinion, the appellant's construction of special condition 5 should be rejected.

34 The proper construction of special condition 5 must be determined as at the date on which the Sale Contract was signed (that is, 25 February 1998) and in the context of the provisions of the contract as a whole.

35 Several provisions of the Sale Contract are of particular relevance:

(a) The Sale Contract was signed on 25 February 1998 and the due date for settlement was 31 March 1998. In other words, the Sale Contract provided for the respondent to transfer the Land to the appellant within a few days after the contract was made.

(b) As at the due date for settlement, the appellant was bound to have paid the respondent $50,000 (including the deposit), but $250,000 of the $300,000 purchase price would remain owing (unless the appellant exercised, virtually immediately, his right of early repayment under special condition 4).

(c) By general condition 6(1), the appellant became entitled to possession of the Land (including the right to receive income derived from the Land) on the date on which settlement was effected or the date on which he was given possession, whichever was the earlier.

(d) Unless the appellant exercised his right of early repayment, the balance outstanding of $250,000 was payable by equal successive annual instalments of $50,000 on 1 March 1999, 2000, 2001, 2002 and 2003, free of interest.

(e) The appellant's right of early repayment was a right at any time, without notice or the payment of any premium or penalty, to repay the outstanding balance for the time being of the $300,000 purchase price.

36 By operation of law, on the date on which settlement was effected under the Sale Contract, the appellant's leasehold interest under the Lease Agreement would merge in his fee simple estate.

37 In my opinion, the meaning of special condition 5, when construed in the context of the provisions I have summarised at [35] above and the operation of the doctrine of merger I have mentioned at [36] above, is plain. Special condition 5 imposes on the appellant an obligation to pay amounts equal to the rental payments specified in the Lease Agreement (that is, $1,667 per month) on the dates specified in the Lease Agreement for making those payments. The additional amounts of $1,667 per month are payable on the first day of each month, commencing on 1 March 1998 and continuing until the whole of the $300,000 purchase price has been paid. The reference in special condition 5 to the appellant undertaking 'to continue the rental payments under the Lease Agreement' does not confine his obligation to those instalments of $1,667 per month which fall due before the date on which the 1 year 8 month term of the Lease Agreement would have expired (if the Sale Contract had not been made), namely 30 April 1999. That reference to rental payments 'under the Lease Agreement' identifies the additional amounts to be paid and the dates for their payment. The critical words in special condition 5 which fix the duration of the appellant's obligation to make the additional payments are the concluding words, which require him to continue those payments 'until the total purchase price [that is, the $300,000] has been paid under this Contract'.

38 In my opinion, special condition 5, construed in the context of the provisions I have summarised at [35] above and the operation of the doctrine of merger I have mentioned at [36] above, does not contain any relevant ambiguity. There is no patent ambiguity; for example, the language of the special condition is not self-contradictory, or intrinsically of doubtful meaning, or obscure as a result of grammatical or syntactical deficiencies. Also, there is no latent ambiguity; for example, no uncertainty arises upon the language of the special condition being applied to the facts. The mere existence of an arguable alternative construction does not, of itself, create ambiguity.

39 It is true, no doubt, as counsel for the appellant submitted, that in the events which have occurred, special condition 5, if construed in the manner I have indicated, operates with some harshness against the appellant. But the harshness arises from the appellant's continuing failure to pay the outstanding balance of the $300,000 purchase price. By 10 December 2002, he had paid, in total, $279,000. He has had a continuing obligation since that date to pay the additional amounts of $1,667 per month. The harshness is not attributable to the construction of special condition 5 which I prefer. It is attributable to the appellant's failure, for whatever reason, to pay the outstanding balance of the $300,000. As I have mentioned, the proper construction of special condition 5 must be determined as at the date on which the Sale Contract was signed. The appellant was entitled at any time, without notice or premium or penalty, to terminate his continuing obligation to pay the $1,667 per month by paying the outstanding balance of the $300,000. A contractual provision (such as special condition 5) does not produce a result which is capricious, unreasonable, inconvenient or unjust because a party (through inadvertence, neglect or otherwise) has failed to appreciate its proper construction or application and, as a result, is disadvantaged.

41 In Divcon (Australia) Pty Ltd v Devine Shipping Pty Ltd [1996] VicRp 58; [1996] 2 VR 79, Beach J observed:

As a matter of principle a party who has made an admission in a pleading should not be entitled to withdraw that admission without good cause, for example, that the admission was made in error by the party who prepared or gave the instructions for the preparation of the pleading, or as the consequence of a misapprehension by counsel or solicitor concerning the client's instructions (80).

42 Ordinarily, a party will be permitted to withdraw an admission if it can demonstrate:

(b) that no prejudice will be suffered by the other party as a result of the withdrawal.

See Sangora Holdings Pty Ltd v Dunstan (Unreported, WASCA, Library No 990172, 13 April 1999), 12 - 13 (Steytler J, Scott J agreeing).

43 When the appellant's trial counsel moved for leave to amend the appellant's substituted defence to withdraw his admission of the allegations in par 5(d) of the statement of claim, counsel informed the learned commissioner that the admission was made in error (ts 85 - 87).

44 Counsel for the respondent opposed leave to amend (ts 86, 91 - 92). After acknowledging that whether interest was payable under the Sale Contract involved a question of contractual construction, counsel said:

ASHDOWN, MR: Only that it is a matter of prejudice, your Honour, to now simply be trying to run an argument that is to be done at 4.15 on a Friday afternoon on two minutes' notice where, in essence, the trial has been run and finished. And it would require your Honour to consider the contractual interpretation of those four clauses that I pointed to, and reach a decision as to whether that is a correct interpretation or not.

In my submission, it is something that is too late to allow to come in. It is not an amendment which is being made to correct the pleading into a form, as to the way the trial was conducted. It's an amendment after trial to raise a new issue - to reopen a closed case. I won't press my submission any further, your Honour. I will leave that in your hands (ts 86).

Before his Honour, counsel for the respondent did not dispute that the appellant's admission had been made in error.

45 The learned commissioner gave brief reasons for allowing the amendment. It appears, by implication, that his Honour accepted that the error asserted by the appellant's counsel had been made.

46 In my opinion, the withdrawal of the admission did not cause the respondent to suffer any relevant prejudice, in that:

(a) the point which the appellant sought to put in issue involved the proper construction of the Sale Contract, which is a question of law and was not an issue on which evidence could have been led; and

(b) the learned commissioner granted the respondent an adjournment to enable his counsel to prepare submissions on the point.

47 The power to allow the amendment was discretionary and, in consequence, the principles of law which regulate the circumstances in which an appellate court may review a primary judge's exercise of discretion apply. It is necessary for the respondent to establish an express or inferred error. See House v The King [1936] HCA 40; (1936) 55 CLR 499, 504 - 505 (Dixon, Evatt and McTiernan JJ).

48 I am satisfied that the learned commissioner's exercise of discretion, in permitting the appellant to withdraw the admission in question, did not miscarry.

50 Ground 2 of the cross-appeal relates to the respondent's claim for interest pursuant to the General Conditions at the 'prescribed rate' of 15% per annum on the outstanding balance of the $300,000.

51 In par 5(d) of his statement of claim, the respondent pleaded that it was a term of the Sale Contract that the appellant would pay 'interest on any outstanding sums due and payable pursuant to the Sale Contract at the rate of 15% per annum'.

52 Before this court, counsel for the respondent referred to general conditions 4(3), 4(4), 5(1), 5(3), 15(8) and 24(1).

The settlement of the sale and purchase shall be effected on the settlement date stated in the contract or if no such date is stated (except in the case of a terms contract, and subject to Condition 16 if applicable) the settlement date shall be a date 28 days after the date of the contract or a date 21 days after the date when the contract ceases to be subject to any condition the non-fulfilment of which terminates or gives either party the right to terminate the contract otherwise than on the ground of default whichever is the later.

At settlement, ... the Purchaser shall pay to the Vendor or to the Vendor's representative or to each person previously nominated in writing by the Vendor or the Vendor's representative by one or more bank cheques the balance of the purchase price (subject to Conditions 5(2) and 13(3)) and other moneys payable by the Purchaser on settlement in exchange for a registrable transfer of the land ... together with the duplicate certificate of title to or including the land. If for any reason a bank cheque tendered as or towards the money payable by the Purchaser on settlement is not honoured on first presentation, the Purchaser shall remain liable to pay the amount thereof.

If for any reason not attributable to the Vendor, settlement is not effected on or within 3 business days after the settlement date, the Purchaser must pay to the Vendor on settlement interest at the prescribed rate on the balance of the purchase price and other moneys payable on settlement calculated from and including the settlement date to, but excluding the actual date of payment ...

General condition 5(3) makes plain that it is unnecessary for either party to give notice to the other requiring the payment of interest under general condition 5.

56 The Sale Contract was a 'terms contract', as defined in general condition 24(1) and in the Sale of Land Act 1970 (WA). General condition 15 therefore applied to the Sale Contract. The relevant provisions of general condition 15 are these:

(5) Without affecting the rights of the Vendor under Condition 19, if the Purchaser makes default in respect of any obligations imposed by Condition 15(4), the Vendor may:-

(a) except in relation to Condition 15(4)(c), after having given to the Purchaser notice in writing specifying the default and stating the Vendor's intention to remedy it unless the Purchaser does so within the period specified in the notice (being not less than 14 days after service of the notice) and the Purchaser fails to remedy the default within that period, enter the property (with or without agents, contractors, employees or workmen) without further notice and cause the default to be remedied; or

(b) if the default relates to Condition 15(4)(c), immediately and in the same manner and without any notice cause the default to be remedied;

and the Purchaser shall pay to the Vendor on demand in writing the amount expended by the Vendor in so doing (including but not limited to costs and expenses in engaging agents, contractors, employees or workmen for those purposes and the costs incurred by the Vendor in issuing any notice) together with interest thereon at the prescribed rate computed from the date of expenditure by the Vendor until payment by the Purchaser.

...

(7) If the property is subject to any mortgage, the Purchaser may pay to the mortgagee any amount from time to time due and payable under the mortgage which is not duly paid by the Vendor and any such payment shall be in satisfaction of any instalments, interest or other amounts due and payable under the contract as they become due and the Vendor hereby authorises such mortgagee to disclose to the Purchaser the amount owing from time to time under the mortgage and the amounts repaid in reduction thereof and to receive any moneys paid by the Purchasers.

(8) Contemporaneously with the payment or tender of the final balance of the purchase price, all interest (if any) thereon and any other amount payable under the contract at or prior to final settlement, the Vendor shall deliver to the Purchaser a registrable transfer of the property in favour of the Purchaser, in accordance with the contract, together with the duplicate certificate of title to or including the land.

57 By general condition 24(1), in the General Conditions, unless the context otherwise requires, 'prescribed rate' means the rate of 15% per annum calculated on a daily basis.

58 It is apparent from the terms of the Sale Contract that:

(b) no moneys were payable by the appellant to the respondent under the contract on the due date for settlement;

(c) settlement under the contract occurred, at the latest, on 19 June 1998, when the Land was transferred to the appellant, pursuant to the memorandum of transfer dated 31 March 1998, and he became the registered proprietor of the fee simple estate;

(d) no moneys were payable by the appellant to the respondent on settlement;

(e) the due date for payment of the last instalment of the purchase price of $300,000 was 1 March 2003; and

(f) the appellant paid, in total, $279,000 of the $300,000 purchase price under the contract, but defaulted in relation to the payment of the balance (that is, $21,000, which amount includes the deposit of $1,000).

59 In my opinion, the respondent is not entitled to interest at the rate of 15% per annum (or at any other rate) under general condition 15. As I have mentioned, general condition 15 is concerned with terms contracts and the condition applied to the Sale Contract because it was a terms contract. General condition 15 does not, however, impose on the appellant (as the purchaser under the contract) an obligation to pay interest on instalments of the purchase price which are not paid on the due date for payment. General condition 15(8) merely states, relevantly, that contemporaneously with the payment or tender of the final balance of the purchase price 'all interest (if any) thereon and any other amount payable under the contract at or prior to final settlement, the vendor shall deliver to the purchaser a registrable transfer of the property'. That provision contemplates that if the contract is a terms contract, then the payment of any interest on instalments of the purchase price which are not paid on the due date will be provided for elsewhere in the contract (no doubt, in a special condition).

60 General condition 5(1) provides, relevantly, that if for any reason not attributable to the vendor, settlement is not effected on or within three business days after the 'settlement date', the purchaser must pay to the vendor 'on settlement' interest at the prescribed rate (that is, 15% per annum) on the balance of the purchase price and other moneys payable 'on settlement' calculated from and including the 'settlement date' to but excluding the actual date of payment in full settlement of any claim the vendor may have against the purchaser arising from that delay.

61 In general condition 24(1), the term 'settlement date' is defined to mean the settlement date referred to in general condition 4(3). In general condition 4(3), it is stated, relevantly, that settlement of the sale and purchase shall be effected on 'the settlement date stated in the contract'. In the present case, the settlement date stated in the contract was 31 March 1998. In the General Conditions, the concept of 'settlement date' denotes the due date for settlement.

62 In my opinion, 'settlement' in general condition 4(3) and (4), and also in general condition 5(1), refers to the completion of the sale and purchase in accordance with special condition 4(4); that is, the purchaser pays to the vendor the balance of any moneys payable by the purchaser under the contract at completion in exchange for a registrable transfer of the property in favour of the purchaser together with the duplicate certificate of title to or including the property.

63 In the present case, the appellant's obligation to pay interest under general condition 5(1) was therefore confined to any moneys payable by the appellant to the respondent under the Sale Contract at completion (that is, when the respondent delivered to the appellant the signed memorandum of transfer together with the duplicate certificate of title to or including the Land). But, in fact, no moneys were payable by the appellant to the respondent under the Sale Contract at completion (or, as expressed in general condition 5(1), on 'settlement').

64 In my opinion, the respondent is not entitled to interest at the rate of 15% per annum (or at any other rate) under general condition 5(1).

65 In the present case, no other provision of the General Conditions entitles the respondent to interest.

67 Ground 3 of the cross-appeal relates to the respondent's claim for interest pursuant to the General Conditions at the 'prescribed rate' of 15% per annum, alternatively pursuant to cl 14 of the Lease Agreement at the rate of 12% per annum on the outstanding balance of the amounts of $1,667 per month which were payable by the appellant under special condition 5 of the Sale Contract.

68 In my opinion, for the reasons I have given in the context of ground 2, the respondent is not entitled to interest under the General Conditions at the rate of 15% per annum (or at any other rate) on the outstanding balance of the amounts of $1,667 per month.

69 Further, in my opinion, the respondent is not entitled to interest under cl 14 of the Lease Agreement on the outstanding balance of the amounts in question.

70 Clause 14 imposes an obligation on the appellant to pay interest at the rate of 12% per annum on, relevantly, any moneys payable by the appellant to the respondent 'under the terms of this Lease' within 14 days from the due date for payment. The outstanding balance of the amounts of $1,667 per month were not moneys payable 'under the terms of this Lease'. Rather, they were moneys payable under special condition 5 of the Sale Contract. Neither special condition 5 nor any other provision of the Sale Contract incorporated cl 14 of the Lease Agreement or otherwise made the provisions of that clause with respect to interest applicable to unpaid amounts of the $1,667 per month.

72 Ground 4 of the cross-appeal relates to the respondent's claim for interest under s 32 of the Supreme Court Act.

73 Section 32 of the Supreme Court Act provides, relevantly:

(1) In any proceedings for the recovery of any money (including any debt or damages or the value of any goods), the Court may order that there shall be included, in the sum for which judgment is given, interest at such rate as it thinks fit on the whole or any part of the money for the whole or any part of the period between the date when the cause of action arose and the date when the judgment takes effect.

(2) This section does not -

(a) authorise the giving of interest upon interest;

(aa) apply in relation to any general damages in respect of pain and suffering or the loss of the enjoyment or of the amenities of life awarded in relation to personal injury or the death of a person;

(b) apply in relation to any debt upon which interest is payable as of right whether by virtue of any agreement or otherwise_;_ or

(c) affect the damages recoverable for the dishonour of a bill of exchange.

74 The learned commissioner did not deal with the respondent's claim for interest under s 32 of the Supreme Court Act in his reasons for decision.

75 The general contractual principle is that the innocent party suing for breach of contract is to be placed in the same position, so far as money can do it, as if the contract had been performed. Compensation is the fundamental concept. Cognate with this concept is the rule that the innocent party cannot recover more than it has lost. See Commonwealth v Amann Aviation Pty Ltd [1991] HCA 54; (1991) 174 CLR 64, 80 (Mason CJ and Dawson J); Haines v Bendall [1991] HCA 15; (1991) 172 CLR 60, 63 (Mason CJ, Dawson, Toohey and Gaudron JJ); Wenham v Ella [1972] HCA 43; (1972) 127 CLR 454, 471 (Gibbs J).

76 Where judgment is entered for the payment of an amount owing under a contract, or damages are awarded for breach of contract, interest may be awarded under s 32 of the Supreme Court Act to ensure that the innocent party is properly or completely compensated for being kept out of its money or otherwise for its loss and damage. In Haines, Mason CJ, Dawson, Toohey and Gaudron JJ said, in the context of s 94 of the Supreme Court Act 1970 (NSW), which is materially comparable to s 32 of the Western Australia Act:

The power to award interest on damages for the period between the date when the cause of action arose and the date on which a judgment takes effect is conferred by s 94 of the Supreme Court Act. The section confers power on the Supreme Court to order that there shall be included, in the sum for which judgment is given, interest at such rate as it thinks fit on the whole or any part of the money between the date when the cause of action arose and the date when the judgment takes effect.

An award of interest up to the date of judgment is an award of interest in the nature of damages: Fire and All Risks Insurance Co Ltd ((1978) 140 CLR, at p 431). This statement acknowledges that the award of interest is an integral element in the attainment of the object of damages, namely, to compensate a plaintiff for injury sustained. Hence the award of interest is compensatory in character. While '[i]nterest should not be awarded as compensation for the damage done' (emphasis added) (Jefford v Gee ([1970] 2 QB 130, at p 146)), the award of interest is nevertheless an essential element in the achievement of true compensation for that damage. In Thompson v Faraonio ((1979) 54 ALJR 231, at p 233; [1917] HCA 36; 24 ALR 1, at p 7), the Privy Council stated that '[t]he reason for awarding interest is to compensate the plaintiff for having been kept out of money which theoretically was due to him at the date of his accident' (emphasis added): see also Batchelor v Burke ((1981) 148 CLR, at p 455), per Gibbs CJ; MBP (SA) Pty Ltd v Gogic ((1991) 171 CLR, at pp 663 - 665); cf Ruby v Marsh ((1975) [1975] HCA 32; 132 CLR 642, at pp 652 - 653), per Barwick CJ. The award of interest for the period of delay in payment between the date of accrual of the cause of action and judgment affords the fair legal measure of compensation: Pheeney v Doolan ([1977] 1 NSWLR 601, at p 613), per Reynolds JA. Thus, it is the award of damages and, where appropriate, interest awarded on damages for the period up until the judgment takes effect which allows the plaintiff to be placed in or restored to the situation, as far as money can do, in which he or she would have been but for the defendant's negligence.

Section 94(1) of the Supreme Court Act confers a wide discretion on a court awarding interest. That discretion must, however, be exercised in accordance with legal principle: Cullen v Trappell ((1980) 146 CLR, at p 17), per Gibbs J. That means that the discretion must be exercised in conformity with the general principles governing the award of damages so that an award of interest on damages for personal injury should do no more than assist in the restoration of a plaintiff to the position in which he or she would have been but for the defendant's negligence (66 - 67).

Also see Grincelis v House [2000] HCA 42; (2000) 201 CLR 321 [16] (Gleeson CJ, Gaudron, McHugh, Gummow and Hayne JJ).

77 The power to make an award of interest pursuant to s 32 of the Supreme Court Act is discretionary.

78 The learned commissioner's conclusion that the intention of the parties was that no interest would be payable by the appellant on any amounts owing and unpaid under the Sale Contract [43], was not based on any admissible (or inadmissible) evidence. In my opinion, it was a speculative conclusion which was not reasonably open on the terms of the Sale Contract or their proper construction.

79 In my opinion, the respondent should be awarded interest under s 32 of the Supreme Court Act on:

(a) the outstanding balance of the $300,000 purchase price (that is, the sum of $21,000); and

(b) the outstanding balance of the amounts of $1,667 per month pursuant to special condition 5,

from the respective dates on which each component amount became due and payable, up to the date of judgment, at the rate of 6% per annum.

80 The respondent has been deprived of the use of the outstanding amounts and there is no proper basis for refusing interest or awarding interest at a lower rate or for a more limited period. At all material times, the appellant has been in possession of the Land and has been entitled to receive the income derived from it. There is no foundation in the evidence for concluding that the additional amounts of $1,667 per month were, either wholly or in part, payments in the nature of interest on the $300,000 purchase price. For example, there was no evidence as to the market value of the Land as at the date on which the parties signed the Sale Contract (in particular, no evidence that $300,000 was the then current market value of the Land).

82 I would dismiss the appeal and allow the cross-appeal in part. Counsel should be heard as to the precise form of the orders in relation to the award of interest and the orders generally.