DS Retirement Pty Ltd v Mann Street Enterprises Pty Ltd atf Mann Street Enterprises Trust

The competing claims

1. In essence DS Retirement and Mr Meredith seek that judgment for $600,000 be entered in favour of DS Retirement and the defendants seek that the deed be rectified, so that they will not be required to make that payment until one of three Gosford properties is sold. As it transpired, it appears that an agreement for the sale of one of the properties was entered the day before the hearing of the motions, although that this had occurred had not been verified by DS Retirement or Mr Meredith.
2. The defendants relied on this development to urge the Court not to enter judgment, in order to enable them to pay the outstanding $600,000, the sale agreement requiring the payment of the deposit within 21 days, as well as its release. That was opposed. DS Retirement and Mr Meredith contending that in the circumstances they were entitled to judgment and that its entry would permit the payment to be made within 28 days, before any steps could be taken to enforce it.
3. By their amended 3 September 2024 motion the defendants sought orders preventing the entry of any final judgment until after its determination, as well as: 2. A DECLARATION that the "Consent Orders" contained at Annexure A to the Deed of Settlement and signed by the Parties on 2 August 2023 ("the Deed") ("Annexure A") are void or voidable at the election of the Defendants and Cross-Claimants. 3. An ORDER prohibiting the Plaintiff and Cross-Defendants from filing Annexure A. 4. A DECLARATION that the Plaintiff / First Cross-Defendant and Second Cross-Claimant are in breach of clause 2 of the Deed with the effect that judgment in these Proceedings cannot be entered, in accordance with cl. 2.1(b) of the Deed or otherwise. 5. Further, or in the alternative, an ORDER for rectification of the Deed in the manner of, or a substantially similar manner to, the amended version of the Deed annexed to the written supplementary submissions of the Defendants / Cross-Claimants dated 28 August 2024 and marked "A" ("the Rectified Deed"). 6. Further, or in the alternative, a DECLARATION that the Parties have compromised or settled the Proceedings and their disputes generally on the terms of the Rectified Deed (or substantially similar terms) pursuant to s 73 of the Civil Procedure Act 2005 (NSW) ("the CPA"). 7. Further, or in the alternative, ORDERS in the nature of the rights and obligations of the Parties arising on the terms of the Rectified Deed (or substantially similar terms), in such manner as the Court sees fit. 8. An [sic] DECLARATION that the Rectified Deed (or substantially similar terms) are approved and are binding on the parties mentioned therein who are not Parties to these Proceedings, pursuant to Reg. 20.31(2) of the Uniform Civil Procedure Rules 2005 (NSW). 9. Costs.
4. Annexed to their motion was the deed which the parties had executed, marked up with proposed amendments which the defendants contended were necessary for its rectification. Those amendments were opposed, the Court's power to vary the deed to deal with developments which had not been within the parties' contemplation when they entered the deed, on which the defendants relied being disputed.
5. By their 18 September 2024 motion, DS Retirement and Mr Meredith sought a declaration that they were entitled to enter judgment against Mann Street and Mr Moses in the sum of $600,000, inclusive of costs and interest, relying on s 73 of the Civil Procedure Act 2005 (NSW) and s 63 of the Supreme Court Act 1970 (NSW). Other orders were sought in the alternative, which are not necessary to explain.
6. Both Mr Moses and Mr Meredith gave affidavit evidence. Ms Howson, the plaintiff's solicitor, also gave affidavit evidence annexing the executed form of the deed, the consent judgment and the transcript of the 2 August proceedings, when the consent orders were made.
7. None of the witnesses were required for cross examination.
8. While in the defendants' oral submissions reference was made to affidavit evidence served at the 2023 hearing of the claim and cross-claim, none of it was read on the motions. Mr Meredith's affidavit evidence had been tendered at the hearing and he was cross examined, but the proceedings settled before the defendants had led any of their evidence. The submissions advanced on the motions did not identify a particular aspect of those affidavits on which reliance was placed. In the result, nothing can be made of these submissions.

The terms of the deed

1. The 2 August 2023 deed relevantly included: 2. SETTLEMENT 2.1 Mann Street Enterprises Pty Limited and James Moses consent to judgment in favour of DS Retirement Pty Limited [in] the sum of $800,000 inclusive of costs and interest. A copy of the consent to judgment signed by Mann Street Enterprises Pty Limited and James Moses is annexed to this Deed and marked "A". DS Retirement Pty Limited will hold the signed consent to judgment in escrow pending the following: (a) Mann Street Enterprises Pty Limited and James Michael Moses pay to DS Retirement Pty Limited the amount of $800,000 (Settlement Sum) by the following instalments: (i) $200,000 on or before 5PM on 15 September 2023; and (ii) $600,000 on or before 5PM on 31 March 2024 or on the completion of the sale of the of [sic] properties located at Lots 321, 325 and 331 Mann Street Gosford ("the Gosford Properties"), whichever is the earliest. Mann Street and Moses and PLD to notify DR and PM in writing: (A) The date of exchange of sale contracts for the Gosford Properties (within 48 hours of exchange); and (B) 14 days' notice in advance of the date of completion of the sale of the Gosford Properties. (b) Should Mann Street Enterprises Pty Limited or James Michael Moses fail to pay any of the instalments specified in clause 2.1(a) above strictly in accordance with clause 2.1(a) then DS Retirement Pty Limited will take immediate steps to file the consent to judgment in the Proceedings. (c) Should Mann St or JMM meet their obligations set out in clause 2.2(a) then consent to the judgment referred to in clause 2.1 is withdrawn and DSR and PM warrant that they are and will continue to be restrained from entering or otherwise taking any steps with respect to the form of consent judgment comprising Annexure A to this Deed. 2.2 In the event that Mann St or JMM fail to meet any of their obligations under cl 21(a), Painters Lane Developments Pty Ltd consents to DS Retirement Pty Ltd lodging a caveat over the Mann Street Properties, being Lots 321, 325 and 331 Mann Street Gosford, to pertain only to so much of the Settlement Sum as remains outstanding. 2.3 In the event that Mann St or JMM fail to meet any of their obligations under clause 2.1(a), James Michael Moses and The Residents Development Pty Ltd consents to DS Retirement Pty Limited lodging a caveat over properties located at 19 Painters Lane Terrigal and 10 Barnhill Road Terrigal ("the Terrigal Properties"), to pertain only to so much of the Settlement Sum as remains outstanding. 2.4 In the event that Mann St, JMM, PLD and / or TRD are required to refinance the Gosford Properties and / or the Terrigal Properties, or to enable the sale of those properties, then DSR and PM will not unreasonably withhold their consent to the removal of the said caveats, which, in the event of a refinance, Mann St, JMM, PLD and / or TRD consent to the re-lodgement, as the case may be. 3. PROCEEDINGS 3.1 On receipt of the Settlement Sum in accordance with clause 2,2(a), the parties are to cause to file a signed copy of the Order, noting a dismissal of the Proceedings and the Cross Claim, with each Party bearing its own costs.

Issues

1. There was no issue that: 1. the August 2023 deed required the payment, in total, of $800,000 to DS Retirement; 2. the executed consent orders specified that judgment for the entire settlement sum was to be held in escrow, pending breach of that obligation to pay; 3. in September 2023 the security for costs which had earlier been paid into court by DS Retirement was released to it; 4. the defendants paid the first instalment of $200,000 as the deed required, on or before 15 September 2023; 5. the remaining $600,000 was not paid by 31 March 2024; 6. on 26 March 2024, Mr Moses emailed Mr Meredith acknowledging that the due date for payment of the outstanding $600,000 was 31 March 2024 and requesting a three-month extension of time for payment; 7. further time for payment was given until 3 April 2024; 8. the $600,000 has still not been paid; 9. the Court has the power to deal with the parties' resulting motions under s 73 of the Civil Procedure Act: see Gorczynski v Bendigo and Adelaide Bank Ltd [2016] NSWCA 170 at [6]. As well as under the Supreme Court Act.
2. Nor were the applicable principles in issue.
3. What was finally in issue was whether: 1. DS is entitled to have judgment entered in its favour for $600,000; 2. the deed only permitted judgment to be entered if after 31 March 2024, the defendants were not taking genuine steps to sell the Gosford properties; 3. the deed should be rectified in the terms the defendants sought, which would preclude entry of judgment until one of the Gosford properties is sold; 4. the rectification which DS Retirement and Mr Meredith pursued in the alterative was necessary; and 5. orders should be made under s 63 of the Supreme Court Act or s 73 of the Civil Procedure Act, given s 56 of that Act.
4. There was also a dispute about the admissibility of aspects of Mr Moses' evidence.

The applicable principles

1. The meaning of the disputed terms of the deed must be "determined objectively by reference to its text, context and purpose": Simic v New South Wales Land and Housing Corporation (2016) 260 CLR 85; [2016] HCA 47 at [78] citing Electricity Generation Corporation v Woodside Energy Ltd (2014) 251 CLR 640; [2014] HCA 7 at [35]. Their meaning does not depend on the parties' subjective intentions.
2. The deed being a commercial contract, its meaning must be determined by what a reasonable businessperson would have understood those terms to mean. That requires consideration of the language the parties used, the surrounding circumstances known to them and the commercial purpose or objects to be secured by the deed. Appreciation of the commercial purpose or objects is facilitated by an understanding "of the genesis of the transaction, the background, the context [and] the market in which the parties are operating": Electricity Generation Corporation v Woodside Energy Ltd at [35].
3. Unless a contrary intention is indicated, the Court "is entitled to approach the task of giving a commercial contract a businesslike interpretation on the assumption 'that the parties … intended to produce a commercial result'": Electricity Generation Corporation at [35] quoting Re Golden Key Ltd [2009] EWCA Civ 636 at [28]. Neither party suggested that such a contrary intention was indicated.
4. Such a contract must also "be construed so as to avoid it 'making commercial nonsense or working commercial inconvenience'": Electricity Generation Corporation v Woodside Energy Ltd at [35].
5. In this case the relevant context includes that the deed was agreed during the course of the hearing, while the parties were legally represented, the parties having earlier failed in their ongoing efforts to resolve their differences; that their compromise of the proceedings reflects an acceptance that the defendants had to pay the amounts agreed, notwithstanding the claimed overarching agreement pursued by their cross claim; and the parties' lawyers were involved in the negotiation of the terms of the deed.

The defendants' case

1. The case advanced for the defendants, which was disputed, was that the deed evidenced "that the common intention of the Parties was to compromise the Proceedings, to provide payment to the Claimants, to preserve the value of the Gosford Properties and the profit expected to be derived from them, to provide security to the Claimants in the interim, and to protect all Parties' interests by avoiding the financial ruin of the Defendants and their associated entities before payment could be made to the Claimants."
2. The result was claimed to be that "the Deed should not be construed in any way that would allow for a judgment to be issued and entered unless it was an absolute last resort once it was undeniable that the Defendants were absolutely unwilling or unable to pay the Settlement Sum." That was because any proposition to the contrary did not accord with a sensible commercial purpose, and would be overly adverse or prejudicial to not only the interests of the defendants, but also DS Retirement, "which totally lacks common sense."
3. What was agreed in relation to the caveats, was also claimed to lend support to the existence of this common intention. It was also argued that the parties had made a common mistake in the drafting of the deed.
4. I am satisfied that these submissions may not be accepted given what these commercial parties compromised by the deed which they entered, having had the benefit of legal advice at a time when there is no issue that they expected that the Gosford properties would be sold before 31 March 2024.
5. Given its terms it cannot be accepted that their common intention depended on all their past dealings over the years before they entered this deed and all the evidence they had led about such matters, as the defendants contended.
6. The fact that no evidence was called from the defendants' legal representatives about the parties' claimed common intention or common mistake the defendants' claim the parties made when they entered the deed, supports the conclusion that the case they advanced cannot be accepted. As does what was actually agreed in relation to the caveats for which the deed provides, to which the owners of the properties agreed.
7. While it was also submitted that the plaintiff had breached the deed in pursuing entry of judgment, that was finally not pressed. Given what the deed provided, that was properly abandoned.

The admissibility of Mr Moses' evidence

1. In his affidavits Mr Moses did not recount all of the parties past dealings, but explained not only the course of the negotiations which resulted in the deed and consent judgment being executed, but the circumstances in which he and Mann Street had entered the deed; his understanding of what was agreed; what he had then done to pursue the sale of the Gosford properties, which had been unsuccessful until the day before the hearing; and what the defendants had proposed to do, to pursue the development.
2. Objections were taken to much of his evidence, parts of which were received provisionally, there also being an issue between the parties about the Court's discretion to make the orders pressed, in the event that the defendants' case about the rectification of the deed was not accepted.
3. Its receipt must be approached in the way discussed in Franklins Pty Ltd v Metcash Trading Ltd (2009) 76 NSWLR 603; [2009] NSWCA 407 at [24]. That is, to be admissible, the evidence "must be relevant to a fact in issue, probative of the surrounding circumstances known to the parties or of the purpose or object of the transaction, including its genesis, background, context and market in which the parties are operating".
4. What is impermissible is evidence, whether of negotiations, drafts or otherwise, which is probative of, or led so as to understand, the actual intentions of the parties. Such evidence might be legitimate, however, if directed to one of the legitimate aspects of a consideration of surrounding circumstances.
5. It was also recognised in Franklins that this distinction can be subtle in a particular case. This, I consider, is such a case.
6. Bearing in mind all that is in issue, I am satisfied that Mr Moses' disputed evidence is admissible, given the cases which the parties finally advanced. Albeit some of it is of very limited relevance and can be given but little weight, given the documentary evidence which also has to be considered, some of which contradicts his evidence.
7. For his part Mr Meredith did not agree with much of Mr Moses' account of how the negotiations had resulted in the execution of the deed and consent judgment during the course of the hearing, including as to what involvement the parties' legal representatives had in the negotiations. Nor did he agree with Mr Moses' understanding of the deed. For reasons which follow I am satisfied that in the event of conflict, Mr Meredith's evidence must be preferred.

The surrounding circumstances

1. As was explained in BB Retail Capital Pty Ltd v Alexandria Landfill Pty Ltd [2015] NSWCA 319 at [65], evidence of the surrounding circumstances claimed to establish the parties' subjective intentions and expectations, cannot be relied on to resolve the parties' dispute about the objective meaning of the deed.
2. The involvement of the parties' lawyers must be taken into account as part of the relevant circumstances. That is because, as was observed in Franklins Pty Ltd v Metcash Trading Ltd at [460]: To conclude that the parties have misrecorded their common intention in that sort of situation involves the solicitors on both sides of the transaction having each failed to grasp and express the intention of his or her own client. In other words, each of the solicitors has been mistaken, and, furthermore, mistaken in the same way. There is a measure of inherent unlikelihood in such an event happening. If the words of which rectification are sought are clear in meaning on their face, that unlikelihood is compounded - one would not ordinarily expect two lawyers, each professional dealers in language, to make the same mistake about the meaning of words that are clear on their face.
3. In this case the unlikelihood of the parties' legal representatives having made the claimed mistake has to be considered in the context of the clear and simple words used in cl 2.1(a)(ii) of the deed. It required payment of "$600,000 on or before 5PM on 31 March 2024 or on the completion of the sale of the of [sic] properties located at Lots 321, 325 and 331 Mann Street Gosford ("the Gosford Properties"), whichever is the earliest."
4. Using those words to reflect their agreement makes it unlikely that the parties intended that if the properties had not been sold before 31 March 2024, final payment still did not then have to be made. But that was what the defendants contended had been agreed, but not captured by the deed.

When did the deed require the outstanding $600,000 to be paid?

1. The parties' dispute concerned when payment of the second instalment of $600,000 was required to be made.
2. The defendants' case, relying on Mr Moses' evidence was that while not referred to in the parties' negotiations or the deed itself and despite what cl 2.1(a)(ii) actually provided, it had been agreed that there would be no specified date by which the $600,000 had to be paid. Rather, it was agreed that if it was not paid by 31 March 2024, it would not become payable until after the sale of the Gosford properties, so long as reasonable endeavours were pursued to sell them.
3. That is not what cl 2.1(a)(ii) provided with the result, the defendants contended, that it had to be rectified to provide for payment of the $600,000: on or before 5PM on 31 March 2024, or on the completion of the sale of the of a property(ies) located at Lots 321, 325 and 331 Mann Street Gosford ("the Gosford Properties"), whichever is thesold earliest, provided always that all reasonable endeavours were being employed by JMM, PLD and TRD to enable the sale of the Gosford Properties.
4. JMM was Mr Moses and PLD and TRD the companies which owned the Gosford and Terrigal properties. But they did not appear to support the case which the defendants advanced.
5. There are a number of other difficulties with the defendants' case, including that: 1. The Gosford properties were not owned by either defendant with the result, it must be accepted, that it made no commercial sense for the parties to agree that payment of the $600,000 was not required until after one of the Gosford properties was sold, no matter when that occurred, the outstanding sum not attracting any interest in the meantime. 2. If that had been what the parties agreed, the reference in clause 2.1(a)(ii) to 31 March 2024 was otiose and to give effect to the claimed agreement, it should really be amended to require payment of the $600,000 "on the completion of the sale of the of a property(ies) located at Lots 321, 325 and 331 Mann Street Gosford ("the Gosford Properties"), provided always that all reasonable endeavours were being employed by JMM, PLD and TRD to enable the sale of the Gosford Properties." 3. This is not the rectification which the defendants sought, the proposed retention of a reference to 31 March being consistent with an objective intention that payment was required, at the latest, by 31 March 2024. 4. That is also consistent with the defendants' oral submissions, with which no issue was taken, that at the time the deed was entered the parties expected that the properties would be sold by 31 March 2024. 5. It was Mr Moses who on 1 August 2023 had made a counteroffer by text message to Mr Meredith in which he proposed that the date for payment of the second instalment be 31 March 2024 or on "receipt of net proceeds of sale of the Mann Street properties, whichever is the earlier." His message continued, "You are then getting definite timeframes and a judgment to be held in escrow". 6. It was DS Retirement's solicitor who on 2 August 2023 conveyed to the defendants' solicitor the offer of payment of the second instalment as "600,000 on or before 5PM on 31 March 2024 or on the sale of the Mann Street Properties, whichever is to occur the earliest." That term was then included in the draft deed. 7. After the deed was executed, correspondence Mr Moses sent Mr Meredith evidenced that he had an understanding contrary to that which he now claims. 8. In his 26 March 2024 email what Mr Moses said to Mr Meredith included a request for an extension of time, because he thought the property would not be sold by 31 March 2024: As you are aware the 31/04/24 [sic] is coming up this Friday, which is the due date for the repayment of the $600.000 This date was set in the anticipation that either Gosford would be sold or Terrigal is approved in which I could refinance and pay you out. To date Gosford has not sold, the highest offer (who is actually ready to put a deposit down) is 11.2 million with a 5% deposit and a 24 month settlement, the interest over this 2 year period would be 2 million dollars, hence there would be a net loss of more than a million, and would not leave any money in the kitty to pay any out. Terrigal still has not obtained an approval yet however the good news is Terrigal is set to approved within the next 8 weeks, they are just waiting fore Fire Services Australia to approve on their end and then the planner has confirmed he will approve the development under delegated authority, then I can refinance and pull out equity out and pay everyone out. Hence I am requesting a 3 month extension at 20% pa Interest, which allows me time to obtain the approval, obtain a new valuation and take up one of the finance offers, I have already have arranged terms and will pay everyone out from the Terrigal equity. 1. In his follow up letter the next day Mr Moses said he was not able to pay the $600,000 for reasons he further explained and that: I understand this is none of your concern and you just want your money, In the light of such a short time frame and me securing Eddy's loan at the same time I feel this would be the quickest way to resolving this issue. If you want to default me, both properties will go to a fire sale, it will take 3 to 6 months by the time its dragged through the process for you to receive the funds. Although inconvenient I believe this is the quickest way for you and Eddy to get your money returned. I am trying to do this as quickly as possible, please allow me some leeway to get this finalised. 1. Other documents in evidence establish that the deed was drafted and settled by the parties' legal representatives, consistently with cl 4.13 of the deed, which provides: 4.13 Legal advice Each party warrants that it: (a) Has been afforded the opportunity to obtain independent legal advice prior to entering into this Deed and has either obtained such advice or has waived its right to obtain such advice; and (b) Has had sufficient time to consider the terms of the Deed, its implications and any advice given in respect of this Deed. 1. That no evidence was called from the defendants' legal representatives to support their case, despite the negotiations and the words which the parties adopted in the deed, having had the benefit of legal advice, they claimed that cl 2.1(a)(ii) did not reflect what had been agreed.
6. Mr Moses' affidavit evidence of his understanding of the disputed clause included that: f. The wording of cl. 2.1(a)(ii), read in conjunction with the balance of the whole of cl. 2, and particularly cl. 2.4, meant that the deadline for the second instalment of the settlement sum was 31 March 2024, if genuine steps were not being taken to sell the Terrigal Properties or refinance (unless cl. 2.4 required cooperation to extend time), or otherwise when I received the net proceeds of sale from the earliest lot of the Gosford Properties to be sold, not that it would be 31 March 2024 at the absolute latest no matter what; g. Further time or anything reasonable I requested to achieve such a sale or refinance, were required not discretionary, and that was reflected in cl. 2 generally, cl. 2.1 in particular and cl. 4.3 of the Deed; and h. I thought the above was understood by PM also to be the only way the settlement could be achieved for the settlement sum he wanted (which well exceeds the sum claimed in these Proceedings by DSR), especially given we discussed at length verbally and in writing the difficulty with selling the Gosford Properties until the impediments with the development application had been overcome, the status of the loans and security involved, and the need to avoid a "firecracker sale" if an external administrator was appointed by LaTrobe in the event of default.
7. Mr Meredith disputed this and cl 4.3 of the deed did not support what the defendants' claimed, it providing: 4.3 Further assurances A party, at its own expense and within a reasonable time of being requested by another party to do so, must do all things and execute all documents that are reasonably necessary to give full effect to this Deed.
8. On all the evidence it must be accepted that Mr Moses' evidence was inherently improbable, as DS Retirement and Mr Meredith contended. Mr Moses' evidence departed not only from the plain and simple words of clause 2.1(a)(ii), but from his own correspondence before and after the deed was entered. That is why I am satisfied that Mr Meredith's evidence must be preferred.
9. The correspondence evidences that Mr Moses had an understanding of the meaning of the clause consistent with its simple terms and the case DS Retirement and Mr Meredith have advanced. Namely, that the latest time by which it was agreed that the $600,000 was to be paid was 5pm on 31 March 2024 and that it had to be repaid earlier, if the Gosford properties were sold before that date.
10. Neither cl 2.4 nor 4.3 of the deed permit any other conclusion, nor an acceptance of the defendants' claims about what had been agreed in relation to the payment of the $600,000.
11. That would have been entirely uncommercial, involving as it did DS Retirement compromising its claims by agreeing to defer payment of the $600,000 the parties agreed it was owed, for an unspecified period, until the sale of one of the Gosford properties, which neither defendant owned, in circumstances where no interest was accruing on the unpaid sum.
12. By way of comparison, an agreement that payment had to be made by a specified time, when the parties were anticipating a sale before 31 March 2024, failing which DS Retirement could enter judgment and lodge caveats over the properties, was entirely commercial.
13. In the result I am satisfied that the defendants' case about the surrounding circumstances in which the words used in cl 2.1(a)(ii) were agreed cannot be accepted. Nor can their case about the objective meaning of the simple words which the parties used in the deed.
14. That conclusion is supported by the defendants' failure to call any evidence from their legal representatives about what is in issue.
15. That has the result that Jones v Dunkel (1959) 101 CLR 298; [1959] HCA 8 inferences must be drawn against the defendants. Such inferences are concerned with a party's unexplained failure to call a witness, where it would be natural for the party to call that witness, or where the party might reasonably be expected to call that witness. In that event an inference may be drawn that the witness' evidence would not have helped the party's case.
16. This gives rise to three relevant considerations: RHG Mortgage Limited v Ianni [2015] NSWCA 56 at [75]-[96]. First, that the missing witness would be expected to be called by one party, rather than the other; secondly, that this evidence would elucidate a particular matter; and thirdly, that the absence is unexplained. If those conditions are satisfied, then as discussed in RHG Mortgage, the inference may then be used in two ways: at [79].
17. First, in deciding whether to accept any particular evidence given, either for or against that party, which relates to a matter about which the person not called as a witness could have spoken. Secondly, in deciding whether or not to draw inferences of fact, which are open in relation to matters about which that person could have spoken.
18. I am satisfied that in this case, it must be accepted that the failure to call supportive evidence from the defendants' legal representatives leads to the conclusion that their evidence would not have assisted the defendants' case and supports the conclusion that Mr Moses' evidence cannot be accepted.
19. In the circumstances, that those representatives were not present during direct discussions between Mr Moses and Mr Meredith, cannot lead to any different conclusion, contrary to the case advanced for the defendants.
20. That is because the construction of the critical provision of the deed must still be approached objectively, by reference to its text, context and purpose.
21. That being so, I am satisfied that the clause in issue cannot have the meaning for which the defendants contend. Had the deed intended to provide for what Mr Moses claimed had been agreed, the clause would have had to be quite differently couched.
22. If Mr Moses' evidence was accepted, it would follow that in cl 2.1(a)(ii), the reference to 31 March 2024 had no work to do. That neither the deed nor the parties' communications, while the deed was negotiated, referred to either a "changeable date" for the payment of the $600,000, or the pursuit of "reasonable endeavours" to sell the property, also advanced in the defendants' submissions, supports the conclusion that neither was in contemplation or agreed.
23. Other provisions of the deed support this conclusion, namely that: 1. the deed permitted DS Retirement to lodge caveats over the properties in the event that the $600,000 was not paid by 31 March 2024, that providing the plaintiffs with security, while judgment was entered and enforced: cl 2.2-2.3. 2. the deed reflected that the parties had received legal advice, which they had acknowledged: cl 4.13.

No rectification is required

1. The defendants' claims were advanced in various ways, in relation to numerous proposed changes to the deed, including those it was claimed were needed to effect releases "in full" upon compliance with the parties' respective obligations, so as to limit the scope for any future disputes, additional proceedings and to ensure fairness.
2. It was also submitted that rectification should occur even if only on the basis of ambiguity (or incompleteness), which was advanced in various ways, by reference to what it was claimed the parties had agreed, particularly in relation to the critical clause, 2.1(a)(ii).
3. Those submissions cannot be accepted, given the principles which bind the Court's determination of what is in issue, earlier explained. They do not permit the Court to ignore the express words which the parties agreed, or to insert provisions to which the parties did not agree.
4. The defendants' case, that the evidence established that there had been a common mistake made by the parties, also had no foundation in the evidence.
5. It follows that the defendants have failed to establish that they are entitled to the rectification orders which they pursue, despite the submission that what was advanced depended on inferences being drawn. It is long settled that when rectification is sought on the basis of a common mistake as to the legal effect of particular words, "the court cannot draft an agreement for the parties, to give effect to some intention of the parties which they have totally failed to accomplish with the words they have chosen.": Bush v National Australia Bank (1992) 35 NSWLR 390 at 406.
6. In this case it is not that the words which the parties used in their deed were ambiguous, which was in issue. Meaning is a matter of construction, not rectification and the plain words used were clear and simple. As Brereton J observed in Harris v Smith [2008] NSWSC 545, the Court cannot rectify a contract to include express terms which the parties never contemplated: at [39].
7. As was accepted in the defendants' submissions, the critical words which they sought to have inserted, that reasonable endeavours to sell the Gosford properties would be pursued, were not ones which had been discussed in the parties' communications or used in draft agreements.
8. Reliance was also placed on In the matter of Jimmy's Recipe Pty Ltd (No 2) [2020] NSWSC 632, said to have been approved in Sui v Jiang [2021] NSWCA 285, but what was there observed was that neither party had cavilled with passages of principle taken from that and other cases: at [31].
9. Pertinently, in Jimmy's Recipe Leeming JA made reference to the sensible commercial purpose of one party's construction of the deed in question, as opposed to the uncommerciality of the construction urged by the other: at [52]-[53]. For reasons which I have explained, those considerations do not favour the case advanced by the defendants. The construction which they urge not only being uncommercial, but inconsistent with other provisions of the deed and the parties' correspondence before it was agreed and afterwards, when an extension of time for payment was pursued.
10. Further, if the second instalment only became payable after the sale of the properties, the property owners' consent to the caveats dealt with in the deed would also have had little work to do. Unlike the position if DS Retirement and Mr Meredith had the benefit of the owners' consents to the caveats, if the second instalment had to be paid by 31 March 2024. In that event, after non-payment the caveats would have real work to do.
11. As was also observed in Jimmy's Recipe, the Court's task is to "identify what the parties are taken to have agreed, not what they should have agreed, and that mere imprudence on the part of one party is not sufficient": at [53]. On the evidence what the defendants pursued was simply more favourable terms than those which were negotiated.
12. The rectification sought was to deal with the circumstances which unfolded after the deed was entered, which the parties had not contemplated. That they should have dealt with them, had the defendants been prudent, given the history of the development and the unsuccessful pursuit of its completion, the sale of the properties and the repayment of the loans in issue, is not a basis on which the rectification the defendants sought can be ordered. The evidence does not even establish that they raised for discussion the possibility that a sale would not eventuate by 31 March 2024.
13. What the defendants had to establish on the evidence was "clear and convincing proof" that at the time of execution of the deed the parties had an actual, common intention as to the legal effect and factual operation which the deed would have, which was inconsistent with the deed they executed, in some clearly identified way: Commissioner of Stamp Duties (NSW) v Carlenka Pty Ltd (1995) NSWLR 329 at 344.
14. The defendants having failed to furnish such proof, the rectification they seek must be refused.
15. The result is that the judgment for $600,000 which DS Retirement and Mr Meredith seek must be entered. Given that conclusion, consideration of the rectification they pursued in the alternative, is unnecessary.

The position of the owners of the property

1. In written submissions the defendants also relied on r 20.31 of the Uniform Civil Procedure Rules 2005 (NSW), to advance a submission that the Court could approve proposed changes to other parts of the deed, even though the real issue between the parties was the construction of cl 2.1(a)(ii). That rule was said to be relevant because the only issue on the motions is the construction of the deed: r 20.31(1)(c).
2. That submission may not be accepted, concerned as the Rule is with the Court's approval of a compromise "that affects other persons (not being parties) having the same interest or liability, but only if the court is satisfied that the compromise will be to the benefit of those other persons": r 20.31(2).
3. The Court is not, however, here being asked to approve any compromise.
4. Further, while the owners of the properties were parties to the deed, they were not parties to the proceedings and did not seek to be heard on the construction of the deed. Nor is it evident that the compromise of the proceedings contained in the deed, or proposed in the defendants' rectified deed, is of benefit to the owners. They having already consented to the plaintiff lodging caveats over their properties, if the defendants failed to pay the agreed instalments.
5. There is also no issue that despite this, DS Retirement has not lodged any caveats over either property.
6. In the result it cannot be accepted that the Rule relied on provides any basis for the rectification of the deed, or any other order sought by the defendants, or that what arises to be decided might affect the rights of the owners of the properties. Were orders which did affect their rights to be entertained, the owners would undoubtedly have a right to be heard.
7. Rule 20.31 thus does not provide any basis for any of the orders which the defendants pursued.

Judgment for $600,000 must be entered

1. It follows that justice requires that judgment for $600,000 must now be entered in favour of DS Retirement. Further, that in all the circumstances, justice does not require that any other order be made, there being no issue that once entered, the judgment is not enforceable for 28 days.
2. It was submitted that other orders should be made, to allow the defendants a further opportunity to pay the $600,000, before judgment was entered. That was opposed.
3. Vague submissions were also made about potential adverse consequences for Mr Moses as the result of the entry of such a judgment, which are unnecessary to consider further. I am not satisfied that adverse consequences other than those which necessarily flow from entry of a judgment were established by the evidence.
4. Mr Moses had ample opportunity to put on his evidence before the hearing, of which he took advantage and then he also served another affidavit at 5 am on the day of the hearing, to which objection was taken. Evidence about the sale of the property was still received. The defendants were thus given a fair opportunity to advance their case, as justice required. The Court cannot ensure that parties make best use of such an opportunity.
5. The result is that I am not persuaded that justice permits any further delay in entry of judgment for the outstanding $600,000, or even an order delaying enforcement of the judgment for a period, which was also floated at the hearing. In the circumstances the practical effect of entry of the judgment is, in any event, that it cannot be enforced for 28 days after entry. That will permit the defendants to pay what is outstanding, before steps can be taken to enforce the judgment.

Costs

1. The usual order under the Rules is that costs follow the event. In this case that is an order that the defendants bear the plaintiff's and second cross-defendant's costs of the motions.
2. That is the order which the plaintiff and second cross-defendant sought. The defendants' written submissions urged a different order, given the claims they had pursued.
3. I am satisfied that unsuccessful as they have been, no just basis for any departure from the usual order has been established.

Orders

1. For these reasons I order that: 1. Judgment for $600,000 be entered in favour of the plaintiff; 2. The defendants' motion filed on 3 September 2024 is dismissed; and 3. The defendants are to bear the plaintiff's and second cross-defendant's costs of both motions, as agreed or assessed.

Amendments 22 October 2024 - Spacing. DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. The onus remains on any person using material in the judgment or decision to ensure that the intended use of that material does not breach any such order or provision. Further enquiries may be directed to the Registry of the Court or Tribunal in which it was generated. Decision last updated: 22 October 2024