Peter Anthony HUNT & Anor v Peter KALLINICOS & Anor
JUDGMENT
1 GILES JA: I agree with Handley AJA.
2 BELL JA: I agree with Handley AJA.
3 HANDLEY AJA: This appeal arises from the mediated settlement of proceedings brought by the respondents (plaintiffs) against the appellants, the first and third defendants, (defendants) and others for the taking of the accounts of alleged partnerships or joint ventures. These related to property dealing and development, and the transactions relied on were pleaded in the further amended statement of claim of 23 January 2006 (CAB 1-10) (the statement of claim). They related to properties in Annandale, Balmain, Rozelle, Newtown, Leichhardt and Surry Hills identified in the statement of claim (CAB 3-9), and the draft Deed of Release prepared by the solicitors for the defendants (CAB 49).
4 The transactions occurred between February 1994 and March 2003 (CAB 3-9). Most were effected through the companies which were joined as the third, fourth and fifth defendants alleged to be trustees for the partnership or joint venture (CAB 4-5). The statement of claim alleged that the agreements had been terminated in November 2001. The proceedings were commenced by summons on 8 January 2003.
5 The defence filed on 20 February 2006 (CAB 14-21) denied the partnership, but admitted that a number of the properties referred to in the statement of claim had been purchased for joint ventures. In other cases this was denied, and in one case it was said there had been a full accounting (CAB 19).
6 The defence referred to a statement of cross-claim which was not included in the appeal book presumably because it was not relevant and may be disregarded. The mediation, which was conducted by the Hon Robert Hunter QC on 31 August 2007, culminated in the execution of Heads of Agreement (CAB 39-43) (the agreement).
7 Clause 1 stated that the document was legally binding, but cl 3 provided that a deed incorporating the agreement "and any other terms necessary for or incidental to the performance of the Heads of Agreement" would be prepared and executed within 14 days. The time for performance of these obligations was not expressed to be of the essence.
8 The agreement either fell within the first of the three classes identified in Masters v Cameron (1954) 91 CLR 353, 360, or more probably within the fourth class identified by McLelland J in Baulkham Hills Private Hospital Pty Ltd v G R Securities Pty Ltd (1986) 40 NSWLR 622, 628; affirmed by this Court (1986) 40 NSWLR 631. In either event the agreement was legally binding. The contrary was not argued and it was not suggested that there was invalidating uncertainty.
9 Clause 4 (CAB 40-1) provided that the defendants:
"… shall pay the sum of $900,000 to Kallinicos as follows:
(a) the sum of $450,000 by close of business on 4 February 2008;
(b) the sum of $450,000 by close of business on 7 September 2009."
10 Clause 5 provided that the defendants' liability should be joint and several and that time for payment was of the essence. Clause 6 provided for mutual releases to take effect "on and from payment in full of the Settlement Sum". Clause 9 provided for the transfer to the first defendant or his nominee of the shares held by the first plaintiff and his wife in the fourth and fifth defendants. Clause 14 provided:
"In the event that payment is not made within 3 business days of the due date, the plaintiffs may enter judgment for the sum of $900,000 or such balance is (sic) at that time outstanding and the first and third defendant consent to entry of such judgment."
11 Clauses 15, 16 and 17, which are not otherwise material, refer to payment in full of "the Settlement Sum", security for its payment, and another step open to the plaintiffs on "the failure of [the defendants] to pay a part of the Settlement Sum in accordance with the instalment arrangement".
12 The defendants' obligation to pay the Settlement Sum in the two instalments provided for in cl 4 was not expressed to be interdependent with the obligations of the first plaintiff and his wife in cl 3 to execute the Deed and in cl 9 to transfer their shares in the fourth and fifth defendants to the first defendant or his nominee. One of the arguments in support of the appeal was that this was necessarily implied.
13 On 19 September 2007 the defendants' solicitors sent to the plaintiffs' solicitors a draft deed of release and a draft mortgage together with share transfers, forms of resignation as director and draft circulating resolutions. No reply was received prior to 4 February 2008 when the first instalment of $450,000 became payable. When it was not paid within the further 3 days provided for in cl 14 the plaintiff applied on notice for judgment to be entered for $900,000 pursuant to that clause.
14 The application was heard by Brereton J on 18 February 2008. His Honour gave extempore reasons and entered judgment in favour of the plaintiffs for $900,000. A stay was granted preventing execution of the judgment for more than $450,000. This has been paid and the appeal was limited to the second amount of $450,00.
15 Mr De Buse, counsel for the appellants, had two points. The first was that the defendants' obligation to pay was interdependent with and conditional on prior or simultaneous performance by the plaintiffs of their obligations to execute and deliver the Deed of Release and the share transfers stipulated for in cll 3 and 9 of the agreement. The second was that the provision for acceleration in cl 14 was void and unenforceable as a penalty because the benefit to the plaintiffs of the acceleration bore no relationship to the damage they suffered as a result of the late payment of the first instalment and was totally disproportionate.
16 A purchaser's obligation to pay for the transfer of real or personal property and the vendor's obligation to make that transfer are normally dependent and concurrent: McDonald v Dennys Lascelles Ltd (1933) 48 CLR 457, 475-6; Foran v Wight (1989) 168 CLR 385, 417, 433, 450-1, 455. However, as Dixon J said in the earlier case at 476, quoting from a judgment of Sir John Salmond:
"The general rule … that in an executory contract for the sale of land the vendor cannot sue for the price is excluded whenever a contrary intention is shown by the express terms of the contract. And it seems established by authority that a contrary intention is sufficiently shown in all cases in which by the express terms of the contract the purchase money or any part thereof is made payable on a fixed day, not being the agreed day for the completion of the contract by conveyance. In all such cases the purchase money or such part thereof becomes, on the day so fixed for its payment, a debt immediately recoverable by the vendor irrespective of the question whether a conveyance has been executed and notwithstanding the fact that the purchaser may have repudiated the contract. Notwithstanding such repudiation the vendor is not bound to sue for damages or specific performance, but may recover the agreed purchase money."
17 That is this case. The agreement makes the instalments payable on fixed days which were not the days for performance of the plaintiffs' obligations under cll 3 and 9. The argument for an implied term making the obligations mutually dependent and concurrent fails because it would be inconsistent with the express terms of the agreement.
18 The argument that cl 14 is void or unenforceable as a penalty also fails because a line of authority here and in England has established, at least in this Court, that a clause providing for the acceleration of payment of an existing debt on default in payment of an instalment is not a penalty. In O'Dea v Allstates Leasing System (WA) Pty Ltd (1983) 152 CLR 359, 366 Gibbs CJ said:
"… if a sum of money is payable by instalments, and it is provided that in the event of one instalment not being punctually paid the whole sum shall immediately become payable, the acceleration of payment is not a penalty."