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[2014] NSWSC 325
Supreme Court of NSW
2014-03-18
Stevenson J
Original judgment source is linked above.
Introduction 1By a contract dated 18 August 2010 ("the Contract") the plaintiff, Mr Fu, contracted to purchase from the defendant, Bucasia Pty Ltd, a lot ("Shop 116") in a proposed commercial strata development at Eastwood for $627,000 plus GST. Mr Fu purchased Shop 116 "off the plan". 2Completion of the Contract took place on 9 January 2013, by which time the development had been completed. 3In the Contract, Shop 116 was described as: "Shop 116 located on Retail Level 1 shown on the plan annexed hereto and marked A being part of a strata subdivision of proposed stratum lot 100 in the draft plan of subdivision of lot 1 in DP 1144237." 4The draft plan of subdivision attached to the Contract showed the area of Shop 116 as 57m2. 5Clause 64 of the Contract provided for "Price adjustment" in the following terms: "The vendor and purchaser agree that in the event that the area of the lot sold pursuant to this contract is more or less than the area shown on the Strata Plan, then the purchase price specified in this contract shall be varied as follows and the revised purchase price shall be deemed to replace the purchase price specified on the front page of this contract: RPP = RA x $11,000.00 per square metre where: RPP = the revised purchase price which shall apply instead of the purchase price specified in this contract; and RA = the revised area of the lot being sold by the vendor to the purchaser pursuant to this contract which area shall be determined by a survey of the area of the lot based on the Property Council of Australia Methods for Measurement Guidelines and, in particular, the measurements of the lot will include to: (1) the front face of the premises; and (2) the middle of the dividing walls to each of the side walls where these are shared walls; and (3) the outside face of all other walls of the premises." (emphasis added) 6The Property Council of Australia Methods for Measurement Guidelines ("the PCA Guidelines") provide "Measurement Guidelines" for "Leased Premises". There are no separate guidelines for premises under purchase. 7Relevantly, the PCA Guidelines provide: "1.1 Gross Lettable Area - Retail is the aggregate of floor space contained within a tenancy at each floor level using the following rules: 1.1.1 in the case of external building walls, fire passage walls, service passage walls, standard and service facility walls and the like, measuring from the internal finished surface of the dominant portion of those walls; 1.1.2 in the case of inter-tenancy walls, measuring from the centre line of those walls; 1.1.3 in the case of shop fronts on or inside the mall line, measuring from the mall line as shown on appropriate floor plans of the tenancy regardless of whether or not the shop front is set back, in whole or part, from the mall line...". (emphasis added) 8The effect of cl 64 was that there was to be a "price adjustment" if the product of the "RA" (revised area) and $11,000 per square metre was more or less than the purchase price of $627,000. The revised area was to be calculated by a survey of the kind described in cl 64. 9Application of the PCA Guidelines themselves to Shop 116, without regard to the indices in subparagraphs (1), (2) and (3) of the definition of "revised area" in cl 64, yields an area of 55.5m2 (being the "Gross Lettable Area - Retail" as defined in the PCA Guidelines). 10On the other hand, if the indices in subparagraphs (1), (2) and (3) of the definition of "revised area" of cl 64 are applied, the area of Shop 116 is 59.3m2. 11The difference arises because the PCA Guidelines require that, relevantly, the measurement of the area of Shop 116 be from the "internal finished surface" of the rear wall of Shop 116 (see paragraph 1.1.1 of the PCA Guidelines), whereas cl 64(3) of the Contract provides, in the definition of "revised area", that the measurement be from the "outside face" of that wall. 12Mr Fu seeks a declaration that the area of Shop 116 is 55.5m2 based upon his contention as to the proper construction cl 64 of the Contract. 13The particular declaration sought by Mr Fu is as follows: "A declaration that on a proper construction of Clause 64 of the Contract of 18 August 2010 the definition of RA within that clause will be in accordance with the Property Council of Australia Methods for Measurement Guidelines namely, the measurements for the lot will include: (a) to the internal finished surfaces of permanent internal walls; (b) to the internal finished surfaces of dominant portions of the permanent outer building wall; (c) to the centreline of inter-tenancy walls; (d) to the edge of tiles adopted as the mall line; (e) and will exclude areas of the lot where the height above the floor is less than 1.5 metres." 14If Mr Fu's contentions are made out, he is entitled to a price adjustment of $41,800. That is the amount at stake in these proceedings. 15An earlier claim by Mr Fu that the Contract be rectified was abandoned.
The issues in the proceedings 16The following issues arise in the proceedings: (a)Has cl 64 of the Contract merged on completion? (b)Is Mr Fu estopped from seeking to vary the purchase price in accordance with cl 64 or from contending that cl 64 has the construction referred to at [13]? (c)Should cl 64 should be construed as Mr Fu contends?
Decision 17In my opinion, the questions in [16] should be answered: (a)Yes; (b)Yes; and (c)No. 18Thus, the Summons should be dismissed.
Events leading to completion 19I have mentioned that contracts were exchanged on 18 August 2010. 20On 11 December 2012, Bucasia's solicitors, Hunt & Hunt, wrote to Mr Fu's solicitors, Alice Yang & Associates, notifying registration of the strata plan and enclosing a copy. The strata plan was prepared by a surveyor, Mr Alan Turner, and showed Shop 116 as having an area of 55 m2. The strata plan stated "areas are approximate". 21Mr Fu's solicitors responded: "The [plan annexed to the Contract] show[s] size of 57 square meter [sic], whilst the new plan shows size of 55 square meter [sic]. I note there is a reduction of 2 square meter [sic], which is a variance of 3.51%. I am instructed to claim a rebate of $22,000; to be adjusted on settlement ... pursuant to the attached special condition 64 of the contract. Please refer to the vendor and advise me asap." 22Evidently, the "rebate" sought was the product of $11,000 referred to in cl 64 and 2m2 (the difference between the 57m2 area identified in the draft plan annexed to the Contract and the 55m2 area identified in the strata plan). 23On 21 December 2012 Bucasia's solicitors replied: "This will be advised in a settlement statement." 24Mr Fu's solicitors did not pursue the claim for a "rebate" of $22,000. However, the assertion of an entitlement to a rebate bespeaks an understanding by Mr Fu of his potential rights under cl 64, a factor relevant to Bucasia's estoppel claim. 25On 21 December 2012 Bucasia's solicitors, Hunt & Hunt, received a letter from Mr Turner in the following terms: "As instructed I have determined the areas of each of the retail lots in the development [at Eastwood]. The area was determined using the methods stated in Clause 64 of the lease [sic] contract ... The measurement of the lot will include to:
Merger 52The doctrine of merger provides that the provisions of a contract for the sale of land merge on completion. This means that a purchaser's right to sue on the terms of the contract is extinguished upon completion: see L Stevens, "Contracts for Sale of Land - The Operation of the Merger Doctrine" (1973) 47 ALJ 631, 631. 53The principle is articulated in Allen v Richardson (1879) 13 Ch. D. 524 in which Malins VC said at 541: "I do not think there is a more important principle than that a purchaser investigating a title must know that when he accepts the title, takes the conveyance, pays his purchase-money and is put into possession, there is an end to all as between him and the vendor on that purchase. If it were otherwise, what would be the consequence? ...[T]here never would be an end to the question; whereas, by adhering to the rule, the purchaser is put into possession at once of his land, and the vendor has the purchase-money to dispose of as he thinks fit the moment after receiving it." 54Professor Butt summarises the principles in The Standard Contract for Sale of Land in New South Wales, (2nd ed, 1998, LBC Information Services) at [20.40] and [20.41] as follows: "As a general principle, provisions in a contract for the sale of land merge on completion. Once the contract has been completed, the right to sue on the provisions of the contract is lost. Strictly, in the case of Torrens title land, it seems that merger does not occur until the transfer to the purchaser is registered, on the basis that until then (even though the purchaser has paid the price and received the transfer) the vendor's obligations under the contract are not fulfilled. To the general principle of merger on completion there is an important exception: there is no merger in respect of any rights and obligations which, as a matter of construction of the contract, the parties intended to endure beyond completion." (citations omitted). 55Doubt has been expressed as to whether the doctrine of merger has application in relation to Torrens land: see Bradbrook et al, Australian Real Property Law, (5th ed) at [3.430]). However, it seems to me there can be no doubt the doctrine has application to Torrens title in New South Wales, as the Real Property Act 1900 makes specific reference to it in s 12(1)(i). That section provides that the Registrar-General has power to make a recording in the register where satisfied "an estate or interest has been extinguished by merger". 56In any event, there was no dispute before me that the doctrine of merger was applicable. The debate before me was as to whether the parties intended that cl 64 merge on completion. Mr Morahan accepted that if cl 64 did merge on completion, Mr Fu's claim must be dismissed. 57In this case, completion took place on 9 January 2013. The transfer was registered on 5 February 2013. 58There was no dispute before me that any merger then took effect as at completion. 59It was common ground that this is the effect of Knight Sugar Co Ltd v Alberta Railway & Irrigation Co [1938] 1 All ER 266 at 270 in which the Privy Council said (speaking of ss 50 and 51 the Alberta Land Titles Act 1906): "From the language used in these sections it seems clear that each of the transfers was a document prepared ... in order that, when registered, it should become operative according to the tenor and intent thereof, and should thereupon transfer the land mentioned therein. It is the transfer which, when registered, passes the estate or interest in the land, and it appears, for the purposes of the application of the doctrine [of merger], to differ in no relevant respect from an ordinary conveyance of unregistered land". 60Section 50 of the Alberta legislation corresponded to s 41 of the Real Property Act 1900 and provided (as does s 41) that "no instrument shall be effectual to pass any estate or interest in land" unless registered, but that once registered the "interest specified" in the instrument "shall pass" in the "manner ...specified" in the instrument. 61Clause 58.1 of the Contract provided (somewhat unhelpfully) that: "Any provision of this contract which is intended to apply after the completion date will not merge on completion". 62The question is, as a matter of construction, whether the parties intended that cl 64 merge on completion. 63As Professor Butt explains (at [20.41]), clauses which have been held to not merge on completion have been those which deal with obligations that are "collateral to the main duties of proving title, conveyance, and payment" (citing Williams, Vendor and Purchaser, (4th ed 1936) at 981-982; Pallos v Munro (1970) 72 SR (NSW) 507 at 511; Pascon Pty Ltd v San Marco in Lamis Co-op Social Club Ltd [1991] 2 VR 227 at 229-230; and Christopoulos v Angelos (1996) 41 NSWLR 700 at 706 (per Powell JA). 64Thus clauses dealing with compensation for errors or misstatements or omissions in the description of the property have been held not to merge on completion (for example Palmer v Johnson (1884) 13 QBD 351). 65Clause 16.7 of the Contract provides that: "On completion the purchaser must pay to the vendor...the price (less any deposit paid) and any other amount payable by the purchaser under this contract (less any amount payable by the vendor to the purchaser under this contract)". 66The "price" of the Contract was $627,000 subject to the "price adjustment" contemplated by cl 64. 67Clause 64 provides that "the purchase price specified in this contract shall be varied" in the circumstances there described. 68Clause 64 cannot, in my opinion, be described as being concerned with a "collateral" obligation. It deals with the fundamental matter of the price payable on completion. 69When cl 16.7 and cl 64 are read together it is clear that the parties intended that the variation of the purchase price take place and be effective "on completion". 70That language indicates, in my opinion that the parties did not intend that the mechanism for "price adjustment" would endure beyond completion. 71Although Mr Fu's solicitors told him they would seek to reserve his rights if there was any "difference" in the purchase price (see [40]) they did not do so. The email evidently intended to have this effect (see [49]) was sent after completion. It is common ground it had no relevant effect. 72In my opinion cl 64 merged on completion. That conclusion is sufficient to dispose of the plaintiff's case. 73In oral submissions, Mr Morahan suggested that Hunt & Hunt's letter of 13 February 2013 (see [51] above) showed that the parties did not intend that clause 64 merge on completion. I do not accept that submission. Although I have found that there has been a waiver of privilege in relation to that letter, the fact remains that it was a without prejudice offer to achieve a commercial resolution of the proceedings. In my opinion it has no relevance to the question of merger.
Other issues 74In light of my conclusion in regard to merger, it is not necessary for me to deal with the other issues that have arisen in the proceedings. 75However, in deference to the arguments advanced by counsel, I will deal with those issues, albeit briefly.
Estoppel 76Bucasia contends that, prior to the settlement on 9 January 2013, Mr Fu represented to it that he would attend settlement, and complete the Contract on the basis that: (a)the revised purchase price of the Contract pursuant to cl 64 was $652,300; or alternatively (b)that Mr Fu would not be contending for a different revised purchase price based on any calculations carried out or to be carried out pursuant to cl 64 and would not be relying on any accrued rights (if any) pursuant to cl 64. 77Bucasia submits that, acting in reliance on these representations and induced thereby, it acted to its detriment by attending the settlement and completing the contract. 78Mr Morahan submitted that the "main reply" to the defendant's estoppel submission (indeed, the only one advanced by Mr Morahan) was Hunt & Hunt's 13 February 2013 letter (see [51] above). Mr Morahan submitted that the letter showed that the defendant did not rely on any representation made by Mr Fu prior to completion. I do not accept that submission. As I have said (see [73] above) the letter amounts to no more than an attempt by the defendant to seek a commercial resolution of this dispute. It casts no light on the questions of whether Mr Fu made the representations for which the defendant contends or whether Bucasia acted to its detriment in reliance on those representations. 79On the morning of 9 January 2013, Mr Fu, through his solicitor, informed Bucasia, through its solicitors, that he wished to "proceed to settlement this afternoon" (see [45] above). 80He did so in the following context: (a)Mr Fu was well aware of the effect of cl 64 and, through his solicitor, had sought the "rebate" of $22,000 on receipt of the strata plan (see [21] to [22] above); (b)on 7 January 2013 Bucasia's solicitors sent Mr Fu's solicitors a settlement statement showing the revised purchase price of $652,300 and the survey of Mr Turner of 21 December 2012 showing his calculations of the area of Shop 116 at 59.3m2 (purportedly in accordance with cl 64)(see [28] to [29] above); (c)Mr Fu, through his solicitors, enquired about the "increase" in area to 59.3m2 and, on being told that the calculation was in accordance with cl 64, arranged to appoint "an independent surveyor to confirm the size of the property" (see [33] to [38] above); (d)Mr Fu, through his solicitors, notified Bucasia, through its solicitors, that he was awaiting a report from the surveyor "before he proceeds to settlement") (see [39] above); (e)thereafter Mr Fu informed Bucasia that he wished to proceed with the settlement (see [45] above); and (f)settlement took place on that basis (see [46] and [47]). 81In my opinion, in those circumstances, the representations for which the defendant contends (set out at [76]) have been established. 82Mr Fu knew that Bucasia contended the "price adjustment" to be made pursuant to cl 64 was $25,300 and that such price adjustment was in accordance with Mr Turner's survey report of 21 December 2012. 83Mr Fu then stated, through his solicitors, that he proposed to make his own enquires about that matter before proceeding to settlement. Thereafter, he stated he wished to proceed to settlement. 84It was implicit in the latter communication and by his decision to proceed to completion, that Mr Fu, having obtained an "independent survey report", was satisfied that Bucasia's proposed "price adjustment" was calculated in accordance with cl 64. 85Mr Fu thereby represented, in my opinion, that he would proceed to settlement of the basis of Hunt and Hunt's settlement statement circulated on 7 January 2013, and not otherwise. 86In reliance on those representations, Bucasia has suffered detriment by completing on 9 January 2013 without prior resolution of Mr Fu's contentions in respect of cl 64 and without having the opportunity to respond to those contentions prior to settlement. 87Accordingly, my conclusion is that if cl 64 did not merge on completion, Mr Fu is now estopped from relying on it.
The proper construction of cl 64 88In view of the conclusions to which I have come, it is not necessary for me to decide this question. 89However, the conclusion to which I have come is that, on its proper construction, cl 64 required that the survey be conducted upon the basis of each of the three indices referred to in cl 64(1), (2) and (3) of the definition of "revised area". In particular, in my opinion, it required that Shop 116 be measured from the "outside face" of the relevant wall. 90The language of cl 64 is unfortunate. Nonetheless, my task is to ascertain the intention of the parties from the language they have used. 91The High Court has recently reaffirmed that: "...[T]he objective approach to be adopted in determining the rights and liabilities of parties to a contract. The meaning of the terms of a commercial contract is to be determined by what a reasonable business person would have understood those terms to mean." (Electricity Generation Corporation v Woodside Energy Ltd [2014] HCA 7 at [35] per French CJ, Hayne, Crennan and Kiefel JJ (citations omitted). 92The clause requires that the survey be "based on" the PCA Guidelines. It does not provide that the survey was to be "in accordance with" those guidelines. 93Confusingly, the clause goes on to say that "in particular" the measurements of Shop 116 were to be in accordance with subparagraphs (1), (2) and (3). 94On one view of the clause, the words "in particular" bespeak an intention of the parties (not achieved by the actual words used) to set out in subparagraphs (1), (2) and (3) of cl 64, key aspects of the PCA Guidelines. 95On the other hand, the specification by the parties of the matters in those subparagraphs (particularly in subparagraph (3): the "outside face" of the relevant wall) points to the conclusion that the parties were intending to set out the aspects of measurement that they intended would be applied, whether or not they were to found in the PCA Guidelines. 96The authors of The Interpretation of Contracts in Australia (2012, Lawbook Co) observe at [9.01]: "[A]s a part of the process of construction the court has power to correct obvious mistakes in the written expression of the intention of the parties". 97The power extends to supplying or omitting words where "necessary in order to avoid absurdity or inconsistency" (per Dixon and Fullagar JJ in Fitzgerald v Masters (1956) 95 CLR 420 at 437). 98In Bowler v Hilda Pty Limited (in liq) [2001] FCA 342; (2001) 112 FCR 59 Drummond J said at [12]: "The principle is not limited in its application to overcoming only minor verbal infelicities". 99In Chartbrook Ltd v Persimmon Homes Ltd [2009] 1 AC 1101 Lord Hoffman said at [25]: "[T]here is not, so to speak, a limit to the amount of red ink or verbal rearrangement or correction which the court is allowed. All that is required is that it should be clear that something has gone wrong with the language and that it should be clear what a reasonable person would have understood the parties to have meant". (Cited with approval in McGrath v Sturesteps; Sturesteps v HIH Overseas Holdings Ltd (in liq) [2011] NSWCA 315; (2011) 81 NSWLR 690 per Bathurst CJ at [18]; see also Horsell International Pty Limited v Divetwo Pty Ltd [2013] NSWCA 368 at [154] per McColl JA). 100It is clear that, in cl 64, "something has gone wrong with the language". 101Mrs Whitaker, who appeared for Bucasia, submitted that the clause should be construed as if the word "however" appeared in place of the words "in particular". 102Mr Morahan contended for the construction to which I have referred at [13]. In substance, Mr Morahan's submissions involved the proposition that cl 64 should be construed so that the word "outside" in subparagraph (3) was "inside". 103In my opinion, Mrs Whitaker's submission should be preferred. It does less violence to the language used by the parties and accords due weight to the specification by the parties, in subparagraphs (1), (2) and (3), of the three matters to be taken into account in the survey. 104The result is that the calculations performed by Mr Turner on 21 December 2012 (see [25] and [26] above) and again on 9 January 2013 (see [41] and [42] above) are correct. The area of Shop 116 calculated in accordance with cl 64 is 59.3m2.
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: 25 March 2014
Fu
Bucasia Pty Ltd
(2001) 112 FCR 59
(1996) 41 NSWLR 700
(1956) 95 CLR 420
(2011) 81 NSWLR 690